Did you know that according to law your property cannot be auctioned if you have paid more than 75 percent of the cost?
A court in Mombasa has offered some reprieve to besieged Kenyans whose property is being auctioned left and centre after defaulting on payments.
In a landmark ruling, the court ordered a car dealer to refund a buyer after the company repossessed and sold a car for which she had paid more than 75 percent. The complainant was also awarded Sh400,000 in general damages.
It all started in 2017, when Gladys Karimi bought a car in Mombasa, but little did she know that the agreement she signed allowed the dealer to repossess the vehicle without notice if she defaulted on payments.
Also unknown to her was that the agreement with Fahari Cars Ltd did not comply with the Consumer Protection Act, 2012, thereby exposing her to potential loss of money.
This law protects consumers from unfair trade practices, where repossession of goods or services upon default on payment by the consumer can only be enforced by the High Court.
The sale agreement had a clause that expressly said that should she default on paying any of the monthly instalments, the dealer was entitled to repossess the car without notice.
Under the agreement, Ms Karimi bought a vehicle worth Sh3.5 million. She paid Sh2 million upfront, leaving a balance of Sh1.5 million, which was to be paid in 10 equal monthly instalments of Sh155,300.
She then drove her new car to Kiambu. But the woman did not have any peace while using the vehicle, because traffic police were on her neck.
Ms Karimi was harassed by traffic police, who questioned the validity of the vehicle’s documents.
It is also then that she discovered that the vehicle was a 2009 model.
“I had intended to buy a 2010 model but what was delivered to me was a 2009 one,” she says.
Tired of police harassment, she stopped paying the monthly instalments and sought clarification from Tricky Nzaka and Muhammad Imran, who had sold her the vehicle.
She did not get any help, as the sellers were uncooperative. She then decided to travel to Mombasa to sort out the problem.
But before she could travel, she was accosted by Express Agency Auctioneers in Kiambu and the vehicle was repossessed and sold off by public auction.
This happened on December 6, 2017, about eleven months after she bought the vehicle. She had already paid Sh2.7 million and had a balance of Sh776,100.
Irked by the repossession, Ms Karimi sued Fahari Cars and the auctioneer in a Mombasa court.
She demanded a refund and an additional Sh500,000 in exemplary and punitive damages.
She said the vehicle had been sold to third parties and she could not get it back.
She defended her decision to halt monthly payments, saying she had been harassed by traffic police and the sellers had failed to help her when she reached out to them.
“I was constantly being stopped by the police with inquiries about the authenticity of the documents and the vehicle’s number plate. I became apprehensive that I had got a raw deal,” she said.
Ms Karimi also lamented that she had been duped and sold the wrong vehicle model, contrary to what had been agreed to on paper.
“I tried to sort out these issues with the sellers but to no avail,” she told the court.
She said that upon coming to Mombasa to sort out the issues, she found that the vehicle had been sold.
She said she could not continue paying for a vehicle that had been repossessed and sold, and that she had been sold the wrong model.
She argued that the vehicle was specifically protected from repossession under the law unless the High Court had sanctioned it.
She said that because she had paid more than two thirds of the purchase price, the repossession was invalid.
“The option for repossession was not available in this case, and, therefore, the actions of the defendants were illegal, null, and void,” she argued.
The car dealers defended themselves, arguing that the agreement with the customer provided for repossession without notice if she defaulted on payment.
They said that as of November 22, 2017, Ms Karimi had a debt of Sh776,100, and because she had not made any attempts to clear it, they instructed the auctioneer to advertise the vehicle for sale through a public auction.
“Ms Karimi was in breach of a contract and cannot allege illegal repossession of the vehicle. She had defaulted on payment as had been agreed hence we proceeded to repossess the vehicle,” Mr Imran said.
The sale agreement, he said, was not guided by the Consumer Protection Act because there was a clause to the effect that if she defaulted, the vehicle would be repossessed.
The dealers insisted that what they did was provided for in the agreement, and that normally if a customer has paid 90 per cent of the purchase price, it is in the dealer’s discretion to choose whether or not to repossess the vehicle.>
“I am aware of the Consumer Protection Act, but I don’t know that an item cannot be repossessed once a customer has paid two-thirds of the purchase price,” he said.
The dealers said the sale agreement was governed by law and that they do not engage in business that violates the laws of Kenya.
“The agreement did not include the Consumer Protection Act. The same was not excluded deliberately. I did not get any permission from the court before repossession,” he said.
After three years in court, Ms Karimi has breathed a sigh of relief after Justice Anne Ong’injo ordered Fahari Cars to refund her the money after declaring the sale agreement null and void because it did not comply with the Consumer Protection Act, 2012.
“It will be unfair to let the defendant benefit from illegalities. It is only just and equitable that she is refunded the money because there is no car available for her to recover and or repossess,” she said
The judge based her findings on Section 20 of the Consumer Protection Act, where the law forbids the repossession or reselling of goods once a buyer has paid two thirds or more for them unless such repossession is sanctioned by the High Court.
The judge declared null and void the agreement, noting that it had been crafted and drawn up so as to ensure that the dealer gets unmitigated advantage over the customer.
“It was unfair for the defendant to have sold the wrong model of car to Ms Karimi and then ignored her efforts to resolve the matter,” the judge said.
“In essence, she has been left with nothing, no money, and no car, which only shows that the dealer must be discouraged from being an unconscionable business practitioner.”
The court also awarded Ms Karimi Sh400,000 in damages after finding that the repossession and reselling of the vehicle were illegal.