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Small ClaimsPartially AllowedNot stated in the judgment· [2026] SCC 22 (KLR)

Factorhouse Ltd v Mwaura (Commercial Case E84053 of 2025) [2026] SCC 22 (KLR)

Small Claims Court
22 May 2026
GKGladys W. Kiamah
657 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
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The bottom line

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A Nairobi court enforced a Kshs 400,000 loan but threw out punishing interest rates it called unconscionable, replacing them with modest 18% annual interest.

What this practically means

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Executive summary

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The claimant sued in the Small Claims Court, Nairobi, for Kshs. 988,335/= arising from a loan of Kshs. 400,000/= advanced on 24/12/2024, repayable on 3/2/2025 with contractual interest of 17% per month and a default penalty of 25% per month, plus debt collection costs, bounced cheque charges and an administration fee. The respondent filed a response seeking reconciliation of the loan account. The Adjudicator framed the sole issue as whether the claimant had proved its case on a balance of probabilities, citing the Court of Appeal in Mumbi M'Nabea v David M.Wachira and sections 107-109 of the Evidence Act. On the evidence - a loan agreement, email correspondence showing application and demand, and the claimant's account statement - the court found the loan of Kshs. 400,000/= proved and only Kshs. 20,000/= repaid. However, the court held the contractual interest and penalty rates inordinate and unconscionable, engaging the in duplum principle since the amount claimed exceeded twice the principal, and declined to enforce them. It substituted interest at 18% per annum on the principal for four months from 24/11/2024, less the Kshs. 20,000/= paid, with post-judgment interest at court rates. The claims for bounced cheque charges and debt collection costs failed for want of proof, disbursements were awarded, and the respondent received 30 days stay of execution. The suit was therefore only partially allowed.

Key legal issues

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01

Whether the claimant proved the loan and outstanding balance

Holding

Proved: Kshs. 400,000/= lent, only Kshs. 20,000/= repaid

Reasoning

A loan agreement dated 24/12/2024 and email correspondence showed the loan application, terms and demand. The respondent requested reconciliation but adduced no evidence of any repayment. The claimant's own account statement showed payment of Kshs. 20,000/=, which was deducted.

p. 2
02

Enforceability of the 17% monthly interest and 25% monthly penalty rates

Holding

Unenforceable as unconscionable; court substituted 18% per annum for four months

Reasoning

17% monthly equated to about 204% per annum, and the total claimed exceeded twice the principal, engaging the in duplum principle. The court held it may decline enforcement of unconscionable terms and awarded modest interest instead.

p. 2

Legal principles established

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  • A court retains discretion to decline enforcement of contract terms producing unjust, oppressive or unconscionable outcomes notwithstanding freedom of contract
  • The in duplum rule restrains interest and penalties from exceeding the principal to prevent unfair enrichment of the lender
  • The burden of proof in civil claims lies on a balance of probabilities, on the party asserting a fact

Court orders

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  1. 1.Interest on the principal of Kshs. 400,000/= at 18% per annum for four (4) months from 24/11/2024, less Kshs. 20,000/= already paid
  2. 2.Decretal sum to attract interest at court rates from date of judgment till payment in full
  3. 3.Claim for bounced cheque charges denied
  4. 4.Claim for debt collection costs denied
  5. 5.Claimant awarded disbursements of the claim
  6. 6.Respondent granted 30 days stay of execution

Authorities

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Legislation

  • Small Claims Court Actsection 30
  • Evidence Act, Chapter 80 of the Laws of Kenyasections 107, 108 and 109

Cases cited (1)

  • Mumbi M'Nabea v David M.Wachira
    [2016] eKLR
Jurisdiction invoked
Small Claims Court Act - claim proceeded under section 30 of the Act (unstated case number)

Key timeline

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Practical implications

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Frequently asked questions

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Cite this brief

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Cite this brief

Caselaw, "Factorhouse Ltd v Mwaura (Commercial Case E84053 of 2025) [2026] SCC 22 (KLR)", Case Analysis (2026). Not stated in the judgment. Source: https://new.kenyalaw.org/akn/ke/judgment/scc/2026/22/eng@2026-05-22

Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.