Diamond Trust Bank (DTB) has been given the green light to repossess 20 trucks from a contractor that defaulted on a Sh58 million hire purchase facility by the lender.
High Court Judge Francis Gikonyo said it was improper for Gab International Construction Company, to retain the trucks when it defaulted on repaying the loan from DTB.
“On the balance of convenience, the subject matter in dispute involves trucks whose value depreciates with time. The amount remains unpaid and the interest continues to escalate. As such, the outstanding amount continues to increase and might outstrip the value of the trucks, and with time, the plaintiff will not be in apposition to recover the amount due from the defendants” the judge ruled on February 3.
“The balance of convenience clearly lies in favour of the plaintiff and allows the repossession of the trucks to realise the security,” the judge added.
DTB entered into a hire purchase agreement with Gab International in February 2018 and handed the construction firm Sh58 million for the purchase of 20 units of the Ashok Leyland brand of tipper trucks.
DTB told court that the construction firm defaulted in the payment of its debt, which, as of July 18, 2023, stood at Sh101,346,064 and continued to accrue interest. The bank told court that the construction company had failed to repay the money and had also refused to return the trucks.
It added that it could not trace the trucks to repossess them as the construction company had deactivated or removed the tracking system.
The bank sought the court’s intervention to compel the construction company to release the trucks so that it could inspect, preserve, and store them. The bank said that it worried that if the orders were not granted, it would suffer loss as the trucks may be sold, damaged, or subjected to depreciation.
In their defence, Dab Construction Company told the court that it made payments until the trucks broke down, forcing it to default on the payments. It argued that the bank was not entitled to the orders sought because it had sold its defective trucks.
Justice Gikonyo noted that the construction company had failed to provide evidence proving that DTB had sold it defective trucks. He added that the hire purchase agreement clearly stated that in the case of default, DTB had the right to terminate the contract and repossess and sell the financed motor vehicles.
“The agreement clearly spelt out the consequences of default by the defendant, the Plaintiff was at liberty to terminate the agreement and immediately repossess and dispose of the financed motor vehicles. The court’s duty is to protect and respect the contracts entered into by the parties and not to rewrite the contract” the Judge said.
“In my view, the defendant cannot fail to meet its financial obligation and still expect to retain the motor vehicles. The defendant is expected to pay the money failure to which its right of redemption would fail and the plaintiff rights to sell the property will crystalise” Justice Gikonyo added.
The court further faulted the construction company’s actions for being dishonest.
“The defendant’s actions amount to dishonesty. If the defendant was acting in good faith, it ought to have approached the plaintiff and renegotiated the terms of the agreement. However, it failed to do so and in the end, decided to defeat the plaintiff rights to the motor vehicles and disabled the tracking devices,” the court said.
