REPUBLIC OF KENYA

PRUDENTIAL FINANCE LIMITED........................... PLAINTIFF

VERSUS

JOHNSON  NGANGA  MBUGUA............................DEFENDANT

JUDGEMENT

The cause of action in this suit arises out of financialadvances made to the defendant for the purchase of a motorvehicle a Mercedes Benz imported into the country and locallyregistered as KZN 660.  The plaintiff is seeking judgmentagainst the defendant for Shs. 316. 581/ 75 together with interestthereon at 19 % p.a. from 1st March, 1990 till full repayment.The plaintiff is also asking for costs of the suit togetherwith interest.

The defendant does not only dispute the plaintiff's claimbut has put in a counter-claim.The plaintiff's case is based on the evidence of Mr.Hosea Kiprono Bunei (PWI) and Mutisya Mutua (PW2) together withthe documents produced as exhibits.

Mr. Bunei (PWI) testified how the plaintiff company (Prudential Finance Limited) granted loan facilities to thedefendant (Johnson Nganga Mbugua) to assist him (defendant)purchase a Mercedes Benz 200 from abroad.  The letters of offerand acceptance were produced as Exhibits 1 and 2 respectively.First disbursement was effected on 11th November, 1987 and thiswas for Shs.461,467/- which was paid to Barclays Bank.  Thesecurity for this loan of Shs.600,000/- was the vehicle whichwas being imported.  Further disbursements were made asfollows: On 15th March.. 1988 Shs. 25,000/-, on 26th May, 1988Shs.20,000/- and on 18th October 1988 Shs.189,600/-.  Thesefigures are reflected in the credit card produced as Exhibit 4.

The vehicle eventually arrived in Kenya and the defendant wasagain assisted by the plaintiff company in paying clearingcharges.  This was in December, 1988.  The defendant wassupposed to start repayment but this was not forthcoming.  On1st March, 1989 the plaintiff wrote to the defendant asking himto make good the account but the defendant did not respond.

On 16th March, 1989 the defendant company sent arepossessing agent to make a humble request to obtain payment orthe surrender of the vehicle.  On 22nd March, 1989 thedefendant issued repossession orders so that the vehicle couldbe traced.  The following day (23rd March 1989) the defendantcalled on the plaintiff company and reported his inability tosell the vehicle due to restrictions imposed on the log book.The defendant offered to sell his Lavington property andinstructed a firm of lawyers (Ndungu Njoroge & Kwach Advocates)to act for him.  The lawyers were to remit the proceeds of thesale to the plaintiff company in settlement of the loan.  TysonLtd., was requested to look for a suitable buyer but theproperty could not be sold immediately as there wereattachments involving City Commission rates.  This forced theplaintiff company to go back to the vehicle as security.  On8th August, 1989 the, plaintiff company wrote to the defendantgiving him seven days in which to execute the sale of hisLavington property or they repossess the vehicle.  This letterwas produced as Exhibit S.  Since the defendant did not respondthe plaintiff company instructed the repossessor on 6thOctober, 1989 to proceed and repossess the vehicle.  Thevehicle was repossessed and valued by the Automobile Association of Kenya (AA) on 25th October, 1989, forShs.935.000/-  as per Exhibit 9.  The defendant then approachedthe plaintiff company and said that he had identified a buyerwilling to pay Shs.1.3 million for the vehicle.  The plaintiff company was willing to release the vehicle provided they  'received an irrevocable instructions but on 17th October, 1989the defendant's advocates wrote a letter (Exhibit 11) to theeffect that Diplomatic Vehicles were unable to sell the vehicle

In view of the above the plaintiff company proceeded toadvertise the vehicle by tender.  The advertisement appeared inthe "Daily Nation" of 7th and 10th November, 1989 and the"Standard" of 8th and 13th November 1989 as per Exhibit 12.The advertisement attracted three buyers - M. Raffiq & Co Ltd.,- 900,000/- (Exhibit 13) Snack Products Ltd., 701,5000/-(Exhibit 14) and Karim Karachiwalla - 850,000/- (Exhibit 15).There was a further offer of Shs 1. 1 million from one DavidKamau Kariuki (Exhibit 16).  The tender was awarded to DavidKamau Kariuki and a letter was written to Mr. Kariuki (Exhibit17) but Mr. Kariuki failed to show up.  The plaintiff companyre-examined the offers available and on receipt of an offer of950,000/- they decided to accept it.  The defendant wasimmediately contacted and advised of this sale by letter dated24th January, 1990 (Exhibit 18).  The vehicle was bought byMessrs. Nicholas Kiwi Kenya Limited for Shs. 950,000/=.  As at24th January, 1990 the defendant's outstanding balance was shs.1,236,577/80.  The proceeds from the sale of the vehicle havingbeen credited to the defendant's account there was anoutstanding balance of shs. 286,577/80.  The plaintiff companyadvised its lawyers to recover the shortfall from the defendant.  By 14th February, 1990 the plaintiff's lawyers hadnot received any response from the defendant.  On 1st March,1990 the defendant's advocates wrote to the plaintiff companyquestioning the sale of the vehicle at shs. 950,000/= while thevalue was shs. 1.3 million.  According to the plaintiff thevehicle was valued at shs. 935,080/= hence they sold it for thebest price.  Mr. Bunei concluded his evidence in Chief byconfirming that the balance as at the end of January, 1993 was542,058/35 which the plaintiff company was demanding from thedefendant.  This figure was supported by Mutisya Mutua (PW2)the Chief Manager of the plaintiff company.  Mr. Mutua producedthe statement (Exhibit 21).

The foregoing is the summary of the plaintiff's case.  Wemust now consider the defendant's case.

The defendant, Johnson Nganga Mbugua (DW1) testified thathe requested for a loan of shs. 600,000/= from the plaintiffcompany in order to purchase a vehicle.  He said that he didnot commence repayment because other matters occured in hislife which changed his ability to repay.  He pointed out thatwhen he applied for this loan he was the town Clerk of NairobiCity Commission and was under contract with Kenya Government tohold that position for three years from 1st February, 1987 andthe contract was renewable.  He held the office upto 31stDecember, 1987.  Mr. Mbugua narrated how, in the course of hisduties, he discovered the methodology used by people insideand outside City Hall to siphon money out of the City Hail andso he took necessary measures by interdicting three officers.  Thisnecessary measures, according to Mr. Mbugua had the backing ofthe Head of State.  However those interdicted officers usedinfluence of their godfathers to twist the story and so it wasMr. Mbugua who was sent on a compulsory leave under theprovisions of Local Authority Act.  He was sent on compulsoryleave on 31st December, 1987.  He continued receiving his duesuntil October, 1988 when the City Commission stopped his salarywithout following proper procedure.  Mr. Mbugua took the matterto court and on 18th May,1989 Hon.Justice Dugdale issued acourt injunction.  The defendant explained that Mr. WilsonKipkoti the Managing Director of the plaintiff company was aCommissioner of Nairobi City Commission and also the Chairmanof Finance Committee of the Nairobi City Commission, and hecontinued in that position up to 1990s.  Hence Mr. Kipkoti wasaware of the defendant's predicament.

Coming back to the vehicle the defendant testified thathe was given special permission to import the vehicle inquestion.  The vehicle finally arrived in the country in 1988.To get money to clear the vehicle the defendant mortgaged oneof his shambas to get a loan from National Bank of Kenya.According to the defendant the plaintiff company gave him partof the money while he contributed a part of it.  The defendanthad decided to sell the vehicle even before it could beregistered.  He intended to settle his liabilities with theplaintiff company by using proceeds from the sale of this vehicle but the defendant found it difficult to sell thevehicle due to conditions imposed in the log book to the effectthat he should not transfer the vehicle until after fouryears.  The defendant then decided to sell his matrimonialhome in Lavington.  He instructed his lawyer Ndungu Njoroge &Kwach (Exhibit B).  He then handed over the vehicle toDiplomatic Motors Ltd to sell it on his behalf.  Then thedefendant was informed that the vehicle had been seized on 9thOctober,.1989 by auctioneers acting on instructions ofPrudential Finance Company Ltd (the plaintiff company).  Thedefendant spoke to Mr. Bunei (PWi) about this matter and Mr.Bunei (PW1) said that the vehicle would not be released unlessthe amount was paid.  The defendant then informed his lawyerswho took up the matter with the plaintiff company.  On 12thOctober, 1989 the defendant's lawyers wrote to the plaintiffcompany (Exhibit E).

The defendant pointed out that when he received the logbook for the vehicle he took the log book to the plaintiffcompany and signed a blank transfer form.  The defendanttestified that the buyer who had been identified by DiplomaticMotors had found another vehicle although Diplomatic Motorsthought that they could get another buyer quite easily.  Thenext thing that the defendant saw was a letter of demand fromMunene Co. Advocates.  The defendant then came to know that hisvehicle had been sold vide a letter dated 24th January, 1990 '(Exhibit G).  The defendant was told that the vehicle had been sold for shs. 950,000/= but they were demanding about shs.286,377/80 on top of shs. 950,000/=.  The defendant deniedowing the plaintiff this money.  The defendant went to D.T.Dobie where he paid shs.2000/= and D.T. Dobie gave a valuationof a similar vehicle similar description and same date ofmanufacture at shs. 1,762,610/=.  This was the valuation giventhis year (1993) and the defendant produced the valuationreport (Exhibit H).  The defendant said that he had insuredthis vehicle for shs. 1.5. million with Lion of Kenya InsuranceCompany (Exhibit I).  The defendant produced a bundle ofadvertisements showing prices of similar vehicles.

It was the defendant's evidence that the seizure of thisvehicle by Triple One Auctioneers was wrongful and that thesale at shs. 950,000/= was undervalue.

The defendant conceded that he owed certain monies butcomplained that the plaintiff company did not send statementsshowing the amount owing.  The defendant testified that as faras he was concerned he owed Prudential Finance Company Ltd.shs. 1.0 million.

The defendant's counter-claim is the difference betweenthe amount he could have realized from the sale of the vehicleand the amount due to Prudential Finance Co. Ltd. at the dateof repossession.  The defendant is asking for interest on thissum together with costs of the counter-claim.

Looking at the evidence on record we find that the areaof dispute is rather narrow.  It is not in dispute that in 1987the defendant approached the plaintiff company for financialloan to purchase an imported Mercedes Benz.  It was quite clearthat the defendant intended to service the loan from theproceeds of his salary and other sources.  It is important tonote here that when the defendant ordered for the vehicle andmade arrangement for this loan he was the Town Clerk of NairobiCity Commission.  One Mr. Wilson Kipkoti was the ManagingDirector of the plaintiff company and at the same time holdingan important position of Chairman of Finance Committee withinNairobi City Commission.  It is not unreasonable to concludethat Mr. Kipkoti and the defendant were friends and hence thefinancial facilities were being arranged in a most friendlyatmosphere.  The defendant was appointed Town Clerk in 1987.He was on a contract of three years with effect from 1stFebruary, 1987.  Unfortunately things took a turn that was mostunexpected.  The defendant did not even complete a year beforehe was abruptly sent on a compulsory leave in December of 1987 .'Hence when the vehilce finally arrived in 1988 the defendant'sposition had changed.  He was no longer the Town Clerk.  Itwould appear that this change of events was the root of thedefendant's problems as far as repayment of this loan wasconcerned.  The defendant had to turn to his matrimonial homein Lavington but as usual selling a property of that nature takes a long time.  The Plaintiff company was seeking repaymentof the loan and quite rightly so.  The defendant on the otherhand was making efforts to raise funds but to no avail.Although evidence on record shows that the defendant at timesadopted "ostrich policy" of burying his head it should beappreciated that this is a person who had been suddenly droppedfrom his high office of a Town Clerk and so had many war frontsto deal with.  In this case he has admitted receiving the loanbut his problem was sudden predicament of being unable to repaydue to abrupt changes in his life.  The defendant has even gonefurther and admitted that he owes the plaintiff company shs.1.0. million.  It is the defendant's contention that thevehicle should have been sold for shs. 1.3 million which wouldhave meant that the loan would have been repaid in full with abalance to his credit in the sum of shs. 3000,000/=.  But theplaintiff company would not hear of this.  The plaintiffcompany contends that even after selling the vehicle at shs.950,000/= the defendant still owes it shs. 316,581/75 at thetime the suit was filed but as at January, 1993 this amount hasshot up to shs. 542,058/35.  This is the bone of contention.We must then go back to the sale of the vehicle.

Miss Chege for the plaintiff company states in herwritten submission that the defendant had assumed a veryevasive attitude as far as repayment of the loan wasconcerned.  As already stated I do not think the defendant wasevasive. He was equally concerned but found it difficult tohonour his earlier commitments in view of his changed status.

He had to sell his Lavington property in a bid to clear theloan.  But one does not sell a house in Lavington as easily asone would sell a bag of maize.  The defendant then madearrangements with Diplomatic Motors so that they could get abetter price for his vehicle.  But as experience has shown onewho sets out in desperation to sell his property always ends upmore desperate and frustrated.  This is what happened with thedefendant.  This then meant that the plaintiff company had tofall back to the vehicle as security for this loan.  Thisvehicle had then to be sold.  It is the selling of this vehiclethat has been challenged by the defendant.  It is thedefendant's contention that this vehicle ought to have beensold for about Shs.1.3 million and not shs.950,000/-.  In thewritten submission by the defendant's advocate it is statedthat the conduct of the plaintiff company revealed malice.  (Inote that during the hearing of this case the defendant wasrepresented by Mr. Ngugi but the written submissions presentedto court shows that the same was the efforts of one Nganga R.W. - whether male or female it was not stated).

The law on this point is as stated in the case ofCuckmere Brick Co  V  Mutual Finance Ltd. (1971) 2 All E R 633at p.646 where Salmon LJ said:-

"I accordingly conclude both on principle and authoritythat a mortgagee in exercising his power of sale does oweduty to take reasonable precautions to obtain the truemarket value of the mortgaged property at the date on which he decides to sell it.  No doubt in decidingwhether he has fallen short of that duty, the facts mustbe looked at broadly and he will not be adjudged to be indefault unless he is plainly on the wrong side of theline"

The above authority received support in our local case ofKenya Commercial Bank Ltd.,-  v  James Osebe (1982 -88) I KAR 48in which it was held that while a bank had no duty to wait fora rising market it was unrealistic for a bank to see its onlyduty as covering its own outstanding debt:

In our present case the plaintiff company advertised thesale of the vehicle.  There were four prospective buyers - M.Raffiq &  Co. Ltd. - 900,000/- Snack Products Ltd - 701,500/-,Karim Karachiwalla - 850,000/- and David Kamau Kariuki -Shs.1.1 million.  The plaintiff company quite properly acceptedMr. Kariuki's offer since this was the highest.  But Kariukiappears to have developed cold feet since he never showed upwhen contacted.

The other buyers were rejected and so the matter had to bereconsidered.  The vehicle was eventually bought forShs.950,000/-.  It is important to note that according to avaluation report (Exhibit 9) by the Automobile Association ofKenya the vehicle was valued at Shs.935,000/- Hence the priceof Shs.950,000/- could not be described as undervalue.

Evidence on record shows that the plaintiff company tried itsbest in identifying a buyer.  Indeed even the defendant wasallowed to look for a buyer through Diplomatic Motors but hedid not succeed.  There is no evidence to show that theplaintiff ignored a buyer who was offering more thanShs.950,000/-.  Evidence clearly shows that the best priceoffered was Shs.950,000/-.

The defendant admitted that he owed the plaintiff aboutone million shillings and so it was on this understanding thathe put in a counter-claim.  He was of the view that the vehicleought to have been sold for more than one million shillings.His efforts to establish this fact took him to D.T. Dobie whogave a valuation of Shs.1, 762,610/- for a similar vehicle.(See Exhibit H). But that is unrealistic approach since D.T.Dobie were giving the current market value of a similar vehicleand not the vehicle KZN 660.  We must go by the valuation of AAwho inspected the vehicle KZN 660.  Whichever way we look at itwe find that the plaintiff company was entitled to sell thatvehicle for Shs.950,000/- as that was the best price offered atthe material time.  We are talking about 1989 and not 1993.Since the plaintiff was perfectly entitled to sell that vehiclein December.. 1989 at Shs.950,000/ - I am satisfied that the salewas proper.  Even accepting for a moment that the defendantowes the plaintiff company Shs.one million then the defendantis not entitled to a counter-claim.  He still owes theplaintiff company some money as the proceeds from the sale of the vehicle could not clear the outstanding loan.  But evidenceof Mr. Bunei (PWI) and Mr. Mutua (PW 2) clearly shows that whenthis suit was filed the defendant's outstanding balance wasShs.316,581/75 and this suit was for recovery of this money.Clearly the defendant has nothing to claim from the plaintiffcompany.  Therefore, the defendant's counter-claim is dismissedwith costs.  It is of course disappointing in that thedefendant obtained a loan of Shs.6000,000/- to purchase theMercedes Benz 200 registration number KZN 660.  He used the vehicle for a very short time when problems started.  He hasnow lost the vehicle and still having the burden of paying moremoney to the financial institution that was so kind to himiniatially as to make the loan facilities available to him.But that is how financial world operates.

Now that the defendant's counterclaim has been dismissedwith costs we must conclude the plaintiff's case.  We havefound that the sale of the vehicle for Shs.950,000/- was properand that even after the sale the loan was not cleared. Theplaintiff filed the suit claiming Shs.316,581.75 together with "interest.  It has been shown that this figure has gone up but Iam reluctant to give judgement for a higher figure than theamount sought in the plaint. Clearly the sum of shs.316,581.75has been proved.  I therefore enter judgment for the plaintiffin the sum of Shs.316,581.75 together with interest at 19% p.a.from 1st

March, 1990 till payment in full.  The plaintiff will have thecosts of this suit. Order accordingly. Delivered at Nairobi this 21st day of September,1993.

E.  OKUBASU                              

JUDGE