Daniel Kabiru Ndungu & another v Molyn Credit Limited & 3 others

1st Defendant’s Application 2. 3. The 1st defendant under order 37 rule 4 led an originating summons dated June 27, 2022 supported by an adavit sworn by Moses Anyangu on the same date seeking for the following orders; a) That the property known as title Ngong/Ngong/34016 charged by the chargor /respondent to the chargee /applicant under an informal charge dated March 12, 2015 be sold to recover outstanding loan balance of Kshs 5,368,933/- as at September 21, 2021 as per court judgement in HCCC at Nairobi ELC No 658 of 2016 together with interest at court rates from September 21, 2021 until payment in full. b) An order for vacant possession do issue over property known as title number Ngong/ Ngong/34016 to enable the chargee/applicant to sell the suit property. c) Cost of this application be borne by respondents. The summons was premised on the grounds inter alia; a) that the 1st plainti entered into a loan agreement dated March 12, 2015 with the 1st defendant/ applicant for a loan facility in the sum of Kshs 1,000,000 secured by a charge over the property registered in his name and deposited the title with the applicant and b) the loan facility was to be repaid in 72 equal consecutive monthly installments of Kshs 46,975/each, inclusive of interest at 4.5 per month, starting on May 20, 2015 and totaling 3,382,200/ if no default occurred. c) The applicant stated that the 1st plainti defaulted in paying the loan amount and as of when the judgement delivered in court on September 23, 2021 the outstanding amount was Kshs 5,368,933/- which continues to accrue interest. d) That the applicant is desirous of recovering the outstanding loan amount and to do so, he needs to exercise its statutory power of sale with leave of the court. e) That under section 79(9) of the Land Act, an informal charge may only take possession or sell the land subject of an informal charge by obtaining an order of the court. 4. In opposition to this application, the 1st plainti led a replying adavit sworn by Daniel Kabiru Ndungu on September 2, 2022 stating that an informal charge is only created where a chargee accepts a written document and witnessed undertaking from a chargor, the clear intention of which is to charge the chargor’s land or interest in land with the repayment of monies obtained from the charge. In the instant case, there exist no charge between the 1st defendant and the applicant. The plaintis argued that the court held the property had been illegally transferred to the 1st defendant’s/applicant’s name hence the 1st defendant cannot purport to claim existence of a charge as at March 12, 2015. 5. The 1st plainti continued that there was no informal charge as alleged by the applicant because the consents under section 76(3) of the Land Act and section 6(1)of the Land Control Act were not obtained and that sometime on June 10, 2016, the 1st defendant/applicant through their agents, Wiskam Auctioneers had fraudulently attached his household goods which were undervalued and underquoted in attempt to illegally redeem the un-paid debt despite the plaintis servicing the loan by paying the due instalments for about four months. https://new.kenyalaw.org/akn/ke/judgment/keelc/2023/16338/eng@2023-03-16 2

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The Plaintis’ Application 6. The plaintis led a notice of motion dated July 20, 2022 seeking for the following orders; 1. Spent 2. That vide a consent dated July 20, 2022 leave be granted to the rm of Kabene & Co Advocates to come on record and act for the applicant/plaintis herein in the place of the rm of Karanu Kanai Advocates. 3. Spent 4. That the honourable court be pleased to review/vary and or set aside its judgment entered on September 23, 2021 and the orders/decree thereof. 5. That costs of this application be provided. 7. The grounds of the motion relied on were outlined in the supporting adavit sworn by Daniel Kabiru Ndungu on July 20, 2022 inter alia, that he had retained the rm of Karanu Kanai & Co Advocates to represent the plaintis in this suit and a judgment was entered and a decree issued on November 16, 2021 and now wish the rm of Kabane & Co Advocates to take up the matter. 8. The applicant stated that the plaintis took a facility of one million secured by a charge over land reference number Ngong/Ngong/34016 in his name from the 1st defendant in the year 2015 and which loan attracted a 4.5 % interest on reducing balance basis. That he was served with a notice of entry of judgement where the 1st defendant intends to attach the suit property to satisfy the decree issued on November 16, 2021 for a sum of Kshs 5,368,933 which amount escalated as a result of interest accrued and the said attachment is illegal as no statutory notice has been served upon them. 9. The applicant contended that he 1st defendant has applied punitive penalties and there is an apparent error on the face of the record thus necessitating an application for review/setting aside the courts judgement entered on September 23, 2021 and the ensuing orders/decree. It is further averred by the 1st plainti that it was imperative that the court consider the in duplum rule to protect the plaintis as borrower from interest accumulating to astronomic gures as in the instant case, thus safeguarding their equity of redemption as they have been servicing the loan for a period of time. 10. The applicant also stated that no current valuation report had been served upon him by the 1st defendant and he had conducted a valuation of the property which valuation posted a value of Kshs 7,900,000. The plaintis stated that they had not been accorded an opportunity to redeem the property, having not been served with the 90 days’ statutory notice, 40 days’ notice to sell and 45 days of redemption notice and that if the 1st defendant is allowed to attach the property, they will suer irreparable loss and damage. 11. The 1st defendant fervently opposed the application vide the replying adavit sworn by Moses Namayi Anyangu on September 30, 2022 stating that it has not commenced any realization of the debt by attachment of the applicant’s property and that they have only served the plaintis with a notice of entry of judgment. 12. The 1st defendant stated that it endeavors to initiate the process to procedurally have the property realized as security which precipitated the ling of its application dated June 27, 2022 and that the debt continues accruing with the 1st plainti not making any eorts to settle the outstanding sum since November 2015. https://new.kenyalaw.org/akn/ke/judgment/keelc/2023/16338/eng@2023-03-16 3

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13. The 1st defendant avers that the applicant’s application for review orders or setting aside of judgement entered on September 23, 2021 is frivolous as the same was not done timeously and it is an afterthought as both parties advanced their arguments before the court which considered them before delivering the judgement. Consequently, raising the the in-duplum rule which does not apply in this case is intended to waste the court’s time and to frustrate the 1st defendant from recovering the loan. 14. The 1st defendant stated that following the service of notice of entry of judgement upon the plaintis, the plaintis wrote a letter dated February 24, 2022 asking to be given 60 days to pay the decretal amount yet eight months later they have not made any payment. That they have admitted that the situation is beyond salvage and are ling frivolous applications with no evidence to circumvent due process by attaching the property while the 1st defendant continues to suer immensely due to the failure of the 1st plainti to clear the loan that is in arrears for the last over seven years. Submissions. 15. 16. 17. The plaintis led submissions dated November 2, 2022 with regard to both applications setting out the issues or determination to include; i) whether the plaintis have established grounds to warrant review/setting aside of the court’s judgement made on September 23, 2021, ii) whether the 1st defendant has redeemed himself by attaching the plainti’s movable goods and whether the said attachment was legal and procedural and iii) whether the was any informal charge between the plainti and the 1st defendant and if yes, whether the said contract can be cautioned as a result of exorbitant interest rates under the induplum rule. The plaintis submitted that they have demonstrated an apparent error on the face of the judgement and discovery of new evidence as follows; a) The court in rendering its judgement at paragraph 1, of its conclusion found that the property was illegally and fraudulently transferred to the 1st defendant, who at all material times at the hearing of the suit held the title (security) in his name. As such, the plainti could not be expected to service and pay interest on a loan, which security (title) was not in his name as it had already been illegally transferred. b) The court in awarding a judgement award of Kshs 5,368,933 to the 1st defendant against the plainti, failed to take cognizance of the principle loan amount, the in-duplum rule and the fact that the plainti had partly serviced the loan. c) The court in awarding a judgement award of Kshs 5,368,933 to the 1st defendant against the plainti, there is discovery of new material and nondisclosure by the 1st defendant to the extent that the 1st defendant had attached the plainti’s movable properties. The plaintis cited the case of Leposo Ole Koila & another v Isaac Kireu [2018]eklr where the court held that an interest rate of 25% per month is by all means oppressive unreasonable and fraudulent, submitting that the court can interfere even where parties have agreed on a rate of interest if it is shown that to be illegal unconscionable or fraudulent. That the 1st defendant being a registered micronance https://new.kenyalaw.org/akn/ke/judgment/keelc/2023/16338/eng@2023-03-16 4

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cannot claim that the institution is not subject to the in duplum rule as was the case in Mwambeja Ranching Company Limited and another v Kenya National Capital Corporation [2019]eKLR. 18. The plaintis further submitted that the 1st defendant had engaged in an illegality of transferring the plaintis title in his name and un-procedurally attached his movable property hence should not be allowed to continue freezing the plainti. 19. The 1st defendant led two sets of submissions both dated December 5, 2022, one for the application dated June 27, 2022 and the other for application dated July 20, 2022.I will start with the submissions for application dated June 27, 2022. 20. The 1st defendant outlined the background of the matter and outlined the orders given in the judgement delivered on September 23, 2021. The 1st defendant submitted that the security created was in the nature of a charge and that following the delivery of the judgement, the 1st defendant served a notice of entry of the judgement upon the plaintis and also sought payment of the outstanding loan balance. The plaintis through their advocates then, Karanu Kanai & Co Advocates, wrote a letter dated February 24, 2022 to the 1st defendant’s advocates asking to be given 60 days to pay the decretal amount but they are yet to make any payment. 21. The 1st defendant submitted on the issue of whether this court should grant the orders allowing the sale of the property in view of the informal charge created between the 1st defendant/applicant and the 1st respondent/plainti to recover the outstanding debt due and the cost of the suit. The 1st defendant argued that the terms and conditions agreed between the parties in the loan agreement stipulated the event of actions to be undertaken upon default. Therefore, they should be allowed to realize its security by way of an informal charge, in exercise of statutory power of sale. In support of their argument, the 1st defendant cited the case of Jamii Bora Bank Limited v Wapak Developers [2018] eKLR where the court pronounced itself on what entails an informal charge as per section 79(6) and section 2 of the Land Act and also the legality of such agreements as spelt out in section 79 of the Land Act. 22. The 1st defendant also relied on the case of Tassia Coffee Estate Limited and another v Milele Ventures Lirnited [2014] eKLR in which the court stated that by depositing the title deed with the plainti, the defendant created an informal charge in favour of the plainti over the suit property as security for payment of the balance of purchase price and other parcels of land, therefore the plaintis became chargees of an informal charge over the suit property and enjoyed a lien by deposit of the documents. 23. In respect to the plaintis’ application dated July 20, 2022, the 1st defendant submitted that the plaintis/applicants did not provide any evidence to support the allegations that the 1st defendant had commenced the attachments of property illegally. That their seeking for review of the delivered judgement on the grounds that the court erred in failing to appreciate the provisions of section 44 of the Banking Act did not form the issue for determination before the court thus casting doubt on the question of whether an order of review lies therein. 24. The 1st defendant contended that they had entered into a loan agreement for a loan facility of Kshs 1,000,000 which was secured by deposit of the title to the property. The terms spelt out in the loan facility agreement was that the facility was to be repaid in 72 equal consecutive monthly installments of Kshs 46,975/- each, inclusive of interest at 4.5% per month, starting on May 20, 2015, and totaling 3,382,200/= if no default occurred. That following the judgement delivered on September 23, 2021, the 1st defendant served notice of entry of judgement upon the plaintis seeking for payment of the outstanding loan balance but the same is yet to be settled. 25. The 1st defendant submitted that review lies on a mistake or error not matters of law as the 1st plainti/ applicants seeks. That, if the applicant wanted to raise questions on the issues of law then an appeal https://new.kenyalaw.org/akn/ke/judgment/keelc/2023/16338/eng@2023-03-16 5

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would have suced at the appropriate time. Additionally, that the applicant have not presented/ demonstrated to this court the discovery of new and important matter or evidence which, after the exercise of due diligence, was not within their knowledge or could not be produced by them at the time of trial or when decree was made. 26. The 1st defendant also submitted that parties are bound to the terms of their contract therefore courts cannot vary the terms of the contract or restructure the facilities by restraining them from exercising its legal remedies as this would amount to rewriting the parties' bargain as is held in the case of Kenlink Global Limited & 2 others v Paramount Universal Bank Limited [2021] eKLR where the court echoed the position in the case of Muigai Enterprises Limited v Kenya Commercial Bank Limited [2016] eKLR and Elite Intelligent Transport Systems Limited v Gulf Africa Bank Limited & another ML civil case No E240 of 2020 [2020]eKLR. Analysis 27. I have looked and considered the two applications led, responses thereto and submissions rendered. Consequently, I frame these issues condensed for determination of both. a) Whether the court should review/vary and set aside its judgment entered on September 23, 2021 and orders/decree thereof b) Whether the 1st defendant should be granted liberty to exercise statutory power sale of the suit property to recover the outstanding loan balance of Kshs 5,368,933/- c) Cost 28. In answering the question of whether the court should to review/vary and set aside its judgment entered onSeptember 23, 2021 and orders/decree thereof, I will look at the grounds set in law upon which an order for review can be granted and in particular, grounds pleaded by the 1st plainti in their application. The 1st plainti pleaded that there was an apparent error on the face of the judgement because the learned judge failed to consider the in duplum rule while arriving at his decision. The plaintis also relied on the ground of discovery of new evidence as was outlined in their submissions. 29. Order 45 rule 1 of the Civil Procedure Rules, 2010 sets the grounds upon which a court can allow review. It states as follows: “ 45 rule 1 (1) Any person considering himself aggrieved- 30. (a) By a decree or order from which an appeal is allowed, but from which no appeal has been preferred; or (b) By a decree or order from which no appeal is hereby allowed, and who from the discovery of new and important matter or evidence which, after the exercise of due diligence, was not within his knowledge or could not be produced by him at the time when the decree was passed or the order made, or on account of some mistake or error apparent on the face of the record, or for any other sucient reason, desires to obtain a review of the decree or order, may apply for review of judgement to the court which passed the decree or made the order without unreasonable delay.” For a review of the ruling to be granted, the mistake or error on the judgement should be self -evident and should not require an elaborate argument to establish it. The 1st plainti has submitted that there https://new.kenyalaw.org/akn/ke/judgment/keelc/2023/16338/eng@2023-03-16 6

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was discovery of new and important matter or evidence, outlining the deductions from the court’s determination delivered on the led suit. The determination made by court cannot be interpreted to be new evidence as the same was arrived at after an evaluation of the evidence presented by both parties to the court. 31. Discussing the scope of review, the Supreme Court of India in the case of Ajit Kumar Rath v State of Orisa & others, 9 Supreme Court cases 596 at page 608 had this to say:“ the power can be exercised on the application of a person on the discovery of new and important matter or evidence which, after the exercise of due diligence, was not within his knowledge or could not be produced by him at the time when the order was made. The power can also be exercised on account of some mistake or error apparent on the face of the record or for any other sucient reason. A review cannot be claimed or asked merely for a fresh hearing or arguments or correction of an erroneous view taken earlier, that is to say, the power of review can be exercised only for correction of a patent error of law or fact which stares in the face without any elaborate argument being needed for stabling it. It may be pointed out that the expression “any other sucient reason” ............... means a reason suciently analogous to those specied in the rule” 32. The meaning of that phrase “sucient cause” was considered in the case FWNM v SMM [2019] eKLR as follows: “ I again repeat the question what does the phrase "sucient cause" mean. The Supreme Court of India in the case of Parimalv Veenaobserved that: sucient cause" is an expression which has been used in large number of statutes. The meaning of the word "sucient" is "adequate" or "enough", in as much as may be necessary to answer the purpose intended. Therefore, the word "sucient" embraces no more than that which provides a platitude which when the act done suces to accomplish the purpose intended in the facts and circumstances existing in a case and duly examined from the view point of a reasonable standard of a curious man. ……the facts and circumstances of each case must aord sucient ground to enable the court concerned to exercise discretion for the reason that whenever the court exercises discretion, it has to be exercised judiciously’”. 33. The court made a determination that indeed there was a loan agreement between the 1st plainti and the 1st defendant which is credit company for a facility of Kshs 1,000,000 using the title to the property as security and went ahead to make an order that the 1st plainti make a payment of Kshs 5,368,933/being the amount loaned and the interest that had accrued. The amount awarded to the 1st defendant was pleaded in the counter-claim hence the plainti was aware of this sum before the case was heard and determined on merits. The plaintis did le a reply to the defence and counter-claim dated July 10, 2018 and nowhere in that replying pleading did they invoke the in duplum principle. The same principle was also not pleaded in the original plaint nor submitted on at the close of the hearing. 34. It is an established principle of law that parties are bound by their pleadings and there is a reason for it to provide a level playing eld where parties in a suit know what case to prepare for. Similarly, courts are bound to determine issues raised before it or that come up for the determination of the court during the trial. In the prayers contained in the plaint, none sought the court to make a declaration that the sum claimed by the 1st defendant was in contravention of in duplum rule. Neither did the plaintis seek an order for taking of accounts. It behoves logic for the plainti to now bring an application for https://new.kenyalaw.org/akn/ke/judgment/keelc/2023/16338/eng@2023-03-16 7

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review on the ground of error/mistake on the face of the record premised on an issue that was neither pleaded nor raised in evidence. 35. In the event that indeed the in duplum principle was a matter that came for determination before judgement was rendered and in the plaintis view the judge failed to take it into consideration then such failure is a point which can only be challenged by way of appeal and not under the remedy of review. I have concurrent jurisdiction with the judge whose nding is being questioned and I am least qualied to re-evaluate his judgement to reach a dierent conclusion as is being urged. 36. It is my considered opinion and i so hold that the plaintis application does not meet the threshold for review. The same is dismissed for want of merit with costs to the 1st defendant respondent. 37. The court now proceeds to determine whether the 1st defendant should exercise statutory power sale of the property to recover outstanding loan balance of Kshs 5,368,933/- as prayed for in their application. There is no dispute that the 1st defendant has a judgement in their favour for the claimed sum. It is also not disputed that the judgement directed that the suit title be deposited with the 1st defendant on the terms of their initial transaction with the 1st plainti. In support of their motion the 1st defendant relied on the provisions of section 79 of the Land Act. 38. Section 79 (6) provides thus; (6) an informal charge may be created where: (a) a chargee accepts a written and witnessed undertaking from a chargor, the clear intention of which is to charge the chargor’s land or interest in land, with the repayment of money or money’s worth, obtained from the chargee plus interest as agreed by the chargor and the charge; (b) the chargor deposits any of the following— (9) (i) a certicate of title to the land; (ii) a document of lease of land; (iii) any other document which it is agreed evidences ownership of land or a right to interest in land. A chargor shall not possess or sell land whose title documents have been deposited by a chargee under an informal charge without an order of the court. 39. The plaintis argued that the orders cannot be granted because the issue of an informal charge cannot be raised at this stage, the court having rendered itself on the dispute between the parties. Justice Okongo held in paragraph 2 of the orders made thus; the land registrar, Ngong and or Kajiado shall issue a new title deed for the suit property in the name of the 1st plainti but the same shall be handed over to the 1st defendant who shall hold the same in the terms on which the same was handed over to it by the 1st plainti. 40. In essence, the judge allowed the 1st defendant to hold the suit title on the terms before ling of the suit. Those terms in their view created an informal charge between it and the 1st plainti and as stated in section 79 quoted above, an informal charge is not entered in the register of the suit title. Although the plainti denied the creation of an informal charge, the judge found that the 1st defendant had given the 1st plainti a loan (as per the loan agreement executed and produced in evidence) on the basis of which he deposited title of the suit property with the 1st defendant to hold as security. The plaintis argue that the 1st defendant had not served them with a statutory notice. However, they did not refer https://new.kenyalaw.org/akn/ke/judgment/keelc/2023/16338/eng@2023-03-16 8

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this court to the relevant section of the law that provided for service of notice. It is my considered view that the ling of this application is in itself a notice on the plaintis to either pay the debt or the suit property be sold by the 1st defendant to recover the debt. 41. Lastly, the 1st defendant holds a decree and is permitted under order 22 of the Civil Procedure Rules to apply for leave to sell the immovable property of the judgement debtor (1st plainti) in realisation of the decree. Thus, whether the 1st defendant is applying for leave of the court to sell the suit title under the terms of an informal charge or in execution of the decree, the outcome remains the same. 42. In conclusion, I nd that the 1st defendant’s application dated June 27, 2022 is merited and is allowed as presented. However, the plaintis application dated July 20, 2022 did not meet the threshold for review. The same is dismissed for want of merit with costs to the 1st defendant respondent DATED, SIGNED AND DELIVERED AT NAIROBI THIS 16TH DAY OF MARCH 2023 A. OMOLLO JUDGE In the presence of Mr Beyo Advocate for the 1st Defendant N/A for Kabene for the Plaintis https://new.kenyalaw.org/akn/ke/judgment/keelc/2023/16338/eng@2023-03-16 9

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