Rose Wangari Ndegwa v Housing Finance Company of Kenya Ltd & 3 others

II. Description of the parties 3. The Plaintiff, Rose Wangari Ndegwa, was described as an adult female of sound mind & understanding, working for gain within Mombasa, and the registered proprietor of Title Number C.R. 18132, Plot No. 3160/1/MN, Mombasa (Hereinafter referred to as “The Suit Land”). She instituted these proceedings to safeguard her proprietary rights over the suit premises following the contested charge and subsequent sale of the said property. 4. The 1st Defendant, Housing Finance Company of Kenya Limited, was described as a limited liability company duly incorporated under the provisions of the Companies Act, Cap. 486 with its registered offices in Nairobi and branches elsewhere in the Republic of Kenya, engaged in the business of mortgage finance and lending. 5. The 2nd Defendant, Francis Nyamai Mwanzia, was described as an adult male of sound mind & understanding residing in Nairobi, who together with the 3rd Defendant was registered as transferee of the suit premises pursuant to the contested private treaty sale. 6. The 3rd Defendant, Tabitha Muthio Mwanzia, was described as an adult female of sound mind & understanding residing in Nairobi, who jointly with the 2nd Defendant acquired the suit premises under the impugned transfer and simultaneously charged the property back to the 1st Defendant. JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 2 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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7. The 4th Defendant, The Registrar of Titles, Mombasa, was described as a public officer charged with the custody, registration, and maintenance of land records under the Registration of Titles Act, Cap 281 (now repealed), sued in his official capacity for having registered the charge and subsequent transfer complained of. III. Court directions before the hearing 8. Upon confirming that all parties had fully complied with the provisions of the provision of Order 11 of the Civil Procedure Rules, 2010, the Honourable Court directed that the matter be set down for hearing. 9. Consequently, on 16th December, 2022, the Honourable Court fixed the hearing date, and the matter proceeded by way of adducing viva voce evidence. The Plaintiff called her first witness, PW - 1 – Maina Chege, a duly appointed Valuation Surveyor, who testified and produced a Valuation report admitted as Plaintiff’s Exhibit Number 1. 10. On 27th September, 2022, the Plaintiff called her second witness, PW - 2 – Wilfred Abincha Onono, an Accountant and Consultant with a legal entity trading in the name and style of “Interest Rates Advisory Centre (IRAC)”, who testified and produced recalculation reports admitted as Plaintiff’s Exhibits Numbers 2 and 3. PW - 2 was recalled on 30th May, 2023 for further testimony. 11. On the same day, 30th May, 2023, the Plaintiff herself, PW - 3 – Rose Wangari Ndegwa, testified, adopted her witness statement dated 2nd July, 2015, and produced her bundle of JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 3 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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documents admitted as Plaintiff’s Exhibit Numbers 4, 5 and 6. The Plaintiff thereafter marked her case as closed. 12. The Defendants, represented by various Learned Counsels, thereafter opened their case. The 1st Defendant called its witness, DW - 1 – Paul Nyamari, who testified and produced documentary evidence in support of the Defence. The 2 nd and 3rd Defendants similarly relied on the transfer and charge documents dated 30th April, 2007. The 4th Defendant, the Registrar of Titles, marked his case closed in his official capacity. 13. Upon closure of all parties’ cases, the Honourable Court directed that written submissions be filed and exchanged, and subsequently reserved judgment to be delivered on notice. IV. The case by the Plaintiff 14. From the filed pleadings, at all material times relevant to the suit, the Plaintiff, Rose Wangari Ndegwa, was the legal and absolute registered proprietor of Title Number C.R. 18132, Plot No. 3160/1/MN, Mombasa - “the Suit Property”. By documents entitled “Offer to Advance” dated 24th August, 1992 and 18th January, 1993 respectively, (Hereinafter referred to as “the Offer”) the 1st Defendant had offered to advance to the Plaintiff a loan for the sum of Kenya Shillings Two Million (Kshs. 2,000,000/-) repayable in twenty (20) years at the interest rate of 20% per annum, to be secured by a Charge on the suit land/premises. The Plaintiff had accepted and took up that offer by duly executing the relevant legal instruments thereof. JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 4 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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15. Further to the averments made under Paragraph 7 above, the Offer to Advance as read with the 1 st Defendant’s Loan Conditions, 1978 Edition had provided that the Charge over the suit land/premises must be drawn by the Law firm of Messrs. Bryson, Inamdar & Bowyer Advocates. In fulfilment of that condition, the Plaintiff had paid a deposit of a sum of Kenya Shillings Fifteen Thousand Nine Hundred & Eighty Nine (Kshs. 15,989/-) as required by the 1st Defendant to Messrs. Bryson, Inamdar & Bowyer Advocates. 16. The Plaintiff averred that the interest rate contained in the Offer to Advance dated 18th January, 1993 was illegal and unlawful. The Plaintiff’s contention was that the allowed maximum rate of interest by that time or duration under the provisions of Section 39 of the Central Bank of Kenya Act was 19% per annum. According to her, this was not the case here. There was a drastic departure from the authentic/recognized legal standard. 17. Further to the averment made under Paragraph 9 above, the Plaintiff stated that she had accepted the Offer in ignorance of the provisions of the Central Bank of Kenya Act, and added that the contract to pay a higher rate of interest than allowed by law was unlawful, illegal and unenforceable. According to her, it did not confer any right upon the 1st Defendant to charge interest at a rate higher than 19% per annum. 18. By a document purporting to be a Charge dated 7 th September, 1993 and registered as number CR 18132/9 on 14 th September, 1993, the suit premises were purportedly charged to the 1 st JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 5 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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Defendant to secure the payment of the sum of Kenya Shillings Two Million (Kshs. 2,000,000/-) together with interest thereon. The Plaintiff stated that the document dated 7 th September, 1993 had not been drawn by the law firm of Messrs. Bryson, Inamdar & Bowyer Advocates, and that the 1 st Defendant had not refunded to the Plaintiff or credited her mortgage account with the sum of Kenya Shillings Fifteen Thousand Nine Hundred & Eighty Nine (Kshs. 15,989/-) together with interest thereon from 31st August, 1992. 19. The Plaintiff stated that the document dated 7 th September, 1993 and registered as CR No. 18132/9 on 14th September, 1993 was not a valid Charge and was not capable of conferring any statutory right of sale or any other right or interest upon the 1st Defendant, by reason that the document was incompetent, illegal, fraudulent, unlawful, and null and void. 20. The Plaintiff relied on the following particulars that:i. The document was not signed or executed by the 1 st Defendant, though it purported to be a Charge between the Plaintiff and the 1st Defendant. ii. The document grossly violated the provisions of Sections 34 and 35 of the Advocates Act, in the sense that it did not contain an endorsement of the name and address of the Advocate who purported to draw it. iii. The document did not contain a signature or any acknowledgment by the Plaintiff that the provision of Section 69 (1) of the Transfer of Property Act, 1882 had been explained to her and that she understood it. iv. The document provided for the payment of interest at a rate or rates higher than the maximum rate then allowed under the provisions of the Central Bank of Kenya Act. JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 6 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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v. The Plaintiff was not explained the effect of Section 69 (1) of the Indian Transfer of Property Act, 1882. vi. It was unreasonable for the 1st Defendant to have written to the Plaintiff a letter dated 28 th December, 1993 and posted that letter at Nairobi on or after that date, and to have expected the letter to be received by the Plaintiff at Mombasa on or before 31st December 1993. vii. The document was in severe conflict with the Offer to Advance and with the 1 st Defendant’s Loan Conditions, 1978 Edition. 21. Further to the contents made out under Paragraphs 12 above and for the matters stated therein, the Plaintiff averred that the document purporting to be a Charge did not confer any statutory power of sale upon the 1st Defendant. 22. The Plaintiff stated that she had executed the document purporting to be a Charge in the presence of one Sally Mahihu of the law firm of Messrs. Bowyer Mahihu & Co. Advocates. The Plaintiff added that Sally Mahihu Advocate had not explained to her the effect of Section 69 (1) of the Indian Transfer of Property Act, 1882. The Plaintiff averred that she had executed that Charge without reading it and believing in good faith that the Charge reflected the terms and conditions contained in the Offer to Advance and in the 1 st Defendant’s Loan Conditions (1978 Edition). The Plaintiff specifically stated that she had been informed by Sally Mahihu Advocate, that the Charge was on the same terms as the Offer to Advance. 23. Further to the averments made out under Paragraphs 14 above, the Plaintiff stated that she would not have executed JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 7 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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the Charge were it not for the fraudulent misrepresentation by Sally Mahihu Advocate, that the Charge was a contract in similar terms with the Offer to Advance. For particulars of fraudulent misrepresentation, the Plaintiff referred to paragraph 14 above. The Plaintiff stated further that she would not have executed the Charge if she had been informed that the Charge gave to the 1 st Defendant the unilateral rights to Charge any rate of interest without any upper limit and without recourse to the maximum rate of interest allowed by law. 24. The Plaintiff stated further that her indebtedness to the 1 st Defendant, if any, extended to the principal sum borrowed of a sum of Kenya Shillings Two Million (Kshs. 2,000,000/=) together with any interest accruing lawfully under the provisions of the 1st Defendant’s Offer to Advance as read with its Loan Conditions, 1978 Edition, the Central Bank of Kenya Act, the Banking Act, and the Central Bank of Kenya (Amendment) Act, 2000. 25. The Plaintiff averred that in violation of the provisions of the 1 st Defendant’s Offer to Advance as read with its Loan Conditions, 1978 Edition, the Central Bank of Kenya Act, the Banking Act, and the Central Bank of Kenya (Amendment) Act, 2000, the 1 st Defendant had charged interest at a rate higher than that allowed at various times by those statutes. The Plaintiff added that any amount of interest charged by the 1 st Defendant at a rate or rates higher than that allowed by law was not recoverable and did not constitute a debt upon her. JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 8 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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26. Further to the averments made out under Paragraphs 17 above and without prejudice to the Plaintiff’s plea that the Offer and the purported Charge were null and void, the Plaintiff stated that the 1st Defendant had levied charges and penalties that it was not entitled to levy under the provisions of the Offer and the Charge. 27. Further to the contents of Paragraphs 18 above and without any admission that the document dated 7 th September, 1993 was a valid Charge (Hereinafter referred to as “The Charge”), the Plaintiff stated that the said document prohibited the increase of interest rate unless prior notice of the intention to increase interest rate had been given by the 1 st Defendant to her. In breach of the provisions of the Charge, the 1 st Defendant had increased the rate of interest without giving notice of its intention to do so. 28. The Plaintiff stated that the 1 st Defendant and the Plaintiff had covenanted under condition 15 (a) of the 1 st Defendant’s Loan Conditions (1978 Edition) that it was only the Plaintiff who had the right to require the sum insured to be increased. In breach of this condition, the 1 st Defendant had unilaterally increased the sum insured in relation to the suit premises. The Plaintiff averred that those increases had in turn led to the debiting of the mortgage with higher amounts of insurance premiums. 29. Further to the contents made Paragraph 19 above, the Plaintiff stated that the increase of the sum insured without notice to the Plaintiff and without the Plaintiff's consent amounted to a JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 9 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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breach of trust and a breach of the 1 st Defendant’s duty to act fairly. The Plaintiff relied on the following particulars of breach:a. The 1st Defendant had on numerous occasions debited the account with higher rates of premiums than those originally contracted for. b. The 1st Defendant had benefited unfairly and made secret profits as it had acted as an insurance agent in the matter of insurance of the premises. c. The 1st Defendant had not supplied to the Plaintiff, up to that date, a copy of the policy or policies together with receipts for payment of premiums. 30. In the alternative and without prejudice to any of the foregoing, the Plaintiff averred that the illegal interest rates charged, the penalty interest charge and the unauthorized charges and levies severely curtailed the Plaintiff’s right to redeem the suit premises and that those charges and levies amount to fraud, illegality and unjust enrichment. The Plaintiff relied on the following particulars:i. The 1st Defendant did not have the approval of the Minister to levy the charges it levied upon the Plaintiff. ii. The interest charged contravened the express provisions of the law. 31. On diverse dates, the 1st Defendant had debited the Plaintiff’s account with various amounts including a sum of Kenya Shillings Eighty One Thousand Five Twenty Six Hundred and Fifteen Cents (Kshs. 81,526.15/=), Kenya Shillings Fifty Three Thousand Eight Thirty Four Hundred and Fourty Cents (Kshs. 53,834.40/=), Kenya Shillings Fifty Seven Thousand Four JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 10 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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Hundred & three and Twenty Cents (Kshs. 57,403.20/=), and Kenya Shillings Seventy Thousand Eight Hundred (Kshs. 70,800.00/=), which it then proceeded to pay to its Advocates and Auctioneers. The Plaintiff averred that the Statutory Power of Sale not having accrued to the 1 st Defendant, such debits were unauthorized, improper, unlawful, and incompetent and therefore the 1st Defendant ought to have reversed those debits together with the interest accruing thereon, and credited the Plaintiff’s account with those amounts retrospectively to the dates when the debits had been effected. 32. Further to averments made under Paragraphs 22 above, the Plaintiff stated that the 1st Defendant had been charged legal fees by Messrs. Bowyer Mahihu & Co. Advocates in the sum of Kenya Shillings Seventy Thousand Eight Hundred (Kshs. 70,800.00/=) and had proceeded to debit her mortgage account with fees it had paid to its own Advocate. The Plaintiff stated that that debit was illegal and unlawful. 33. The Plaintiff further stated that the 1 st Defendant had operated the account fraudulently, had falsified records, and had withheld material information relating to that account from her. The Plaintiff relied on the following particulars:i. By letter dated 25th September, 1993, the 1st Defendant had written to the Plaintiff demanding payment of the first monthly loan repayment in the sum of Kenya Shillings Fourty Thousand Six Hundred and Five (Kshs. 40,605.00/=). The 1st Defendant knew that the first monthly repayment under the Offer to Advance had been a sum of Kenya Shillings Thirty Five Thousand Seven Eighty Five Hundred JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 11 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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(Kshs. 35,785.00/=) and not Kenya Shillings Fourty Thousand Six Hundred and Five (Kshs. 40,605.00/=). ii. By letter dated 28th December, 1993, the 1st Defendant had informed the Plaintiff that it had increased the interest rate to 29% per annum, which had resulted in an increase of monthly repayment to a sum of Kenya Shillings Fifty Thousand Three Fifty One Hundred (Kshs. 50,351.00/=). The 1st Defendant had not stated what interest rate it had been charging before the increase. iii. By letter dated 10th March, 1994 addressed to the Plaintiff, the 1st Defendant had falsely stated that its letter dated 28 th December, 1993 had changed the interest rate from 23% per annum to 29% per annum. iv. The 1st Defendant had not issued any notice of its intention to increase the interest rate from 20% per annum to 23% per annum or from 21% per annum to 23% per annum. v. The covenanted ledger fees under the Offer to Advance had been a sum of Kenya Shillings Fifty (Kshs. 50.00/=). The 1 st Defendant had increased that sum to a sum of Kenya Shillings One Hundred (Kshs. 100.00/=), Kenya Shillings One Hundred and Fifty (Kshs. 150.00/=) and eventually to a Sum of Kenya Shillings Two Hundred and Fifty (Kshs. 250.00/=) without the consent of the Plaintiff or the permission of the Minister. vi. By letter dated 10th May, 2002, the 1st Defendant had informed the Plaintiff that it had debited her account with a sum of Kenya Shillings Seventy Thousand Eight Hundred (Kshs. 70,800.00/=), which the 1st Defendant had itself paid to its own Advocates. JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 12 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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vii. By letter dated 16th March, 2000, the 1st Defendant had advised the Plaintiff that it had debited her mortgage account with the sum of Kenya Shillings Eighty One Thousand Five Twenty Six Thousand and Fifteen cents (Kshs. 81,526.15/=) in settlement of a fee note by the law firm of Messrs. Bowyer Mahihu & Co. Advocates. viii. The Plaintiff had demanded a fully itemized auctioneer’s bill for all the monies paid by the 1 st Defendant to auctioneers out of the mortgage account. By letter dated 13 th December, 2001, the 1st Defendant’s Managing Director had assured the Plaintiff that the fully itemized bill would be delivered to her. To that date, that bill had not been delivered. ix. By letter dated 26th June, 2007 addressed to the 1st Defendant, the Plaintiff had requested the 1 st Defendant to supply a copy of the statement of the mortgage account up to 30th April, 2007, but the 1st Defendant had refused to supply that statement to that date. 34. In the further alternative, and without prejudice to the Plaintiff’s plea that the purported Charge did not create any Statutory Power of Sale, the Plaintiff stated that accounts ought to have been taken of the amount of interest and other charges lawfully accruing on the sum of Kenya Shillings Two Million (Kshs. 2,000,000/=) together with all monies paid by her to the 1st Defendant in repayment thereof. On 1st March, 2007 and 2nd March, 2007, the 1st Defendant had sent valuers and other agents to the suit premises. The Plaintiff was apprehensive that the purpose of sending valuers to the suit JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 13 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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premises had been to have those premises valued in preparation for selling them, and she therefore filed this suit. 35. Without prejudice to any of the foregoing, and without admitting that the document registered as a Charge on 14 th September, 1993 and dated 7th September, 1993 had created any interest in favour of the 1st Defendant, the Plaintiff averred that she had not received a valid statutory notice, a valid 45 days’ notice, or any valid notification of sale, and that therefore the right to exercise any statutory power of sale had not accrued. 36. By a letter dated 10th April, 2007, and with a view to avoiding unnecessary costs, the Plaintiff’s Advocates had written to the 1st Defendant’s Advocates requesting confirmation that the Plaintiff need not file any application for an order of injunction. By letter dated 16th April, 2007, the 1st Defendant’s Advocates had informed the Plaintiff’s Advocates that they were seeking instructions from the 1st Defendant and would revert upon receiving those instructions. The Plaintiff stated that she had understood this representation to mean that the 1 st Defendant would communicate to her Advocates either that it would not proceed with the sale complained of or that it would notify her Advocates of its intention to sell the suit premises. The Plaintiff stated further that the 1 st Defendant’s Advocates had not written to her Advocates as to whether they had received the 1st Defendant’s instructions or not. 37. Further to the contents made out under Paragraph 29 above, the Plaintiff stated that she would immediately have filed and JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 14 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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prosecuted an application for an order of injunction to preserve the suit premises if the 1 st Defendant had indicated its intention to sell the suit premises before this suit was heard and determined. Therefore, the Plaintiff averred that she had relied on the 1st Defendant’s fraudulent misrepresentation that it would not sell the suit premises. 38. The Plaintiff relied on the following particulars of fraud and misrepresentation: a. The 1st Defendant had been represented by a Law firm of Advocates who were bound to act ethically and courteously towards other Advocates and correspondents. b. The 1st Defendant’s Advocates’ letter dated 16 th April, 2007 had been copied to the 1st Defendant, and the 1st Defendant therefore had known of the representation. c. All that the 1st Defendant and its Advocates had to do was to inform the Plaintiff’s Advocates that it would sell the suit premises before the determination of the suit. d. The 1st Defendant had not informed its own Advocates of its intention to sell the suit premises after 16 th April, 2007. e. The suit premises had been sold privately at a gross undervalued amount. f. The 1st Defendant had secretly sold the suit premises to the 2nd and 3rd Defendants. 39. On 21st June, 2007, the Plaintiff had received a letter dated 13 th June, 2007 addressed to her by the 1st Defendant, informing her that the 1st Defendant had sold the suit premises in April, JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 15 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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2007 through a Private Treaty. The Plaintiff added that the 1 st Defendant had not disclosed the date of the purported sale or the names and addresses of the purchasers. The 1 st Defendant also had given the Plaintiff thirty (30) days to vacate the suit premises to enable the unnamed purchasers to take them over. Furthermore, in addition to the purchase price of a sum of Kenya Shillings Eight Million Five Hundred Thousand (Kshs. 8,500,000.00/=), the 1st Defendant had still demanded from the Plaintiff a sum of Kenya Shillings One Sixty Nine Thousand Seven Fourty Nine Hundred and Ninety Cents (Kshs. 169,749.90/=) as at 13th June, 2007. 40. Further to averments made under Paragraph 31 above, the Plaintiff stated that the suit premises had not been sold to the 2nd and 3rd Defendants in April, 2007. The Plaintiff added that the 1st Defendant had continued to levy interest and other charges until 13th June, 2007. The Plaintiff stated that on 22 nd June, 2007 she had obtained certified copies of the Grant, the Charge dated 7th September, 1993, a Transfer dated 30th April, 2007, and a Charge dated 30th April, 2007, and had learnt that:i. The suit premises had been transferred to the 2 nd and 3rd Defendants by private treaty under a Transfer dated 30 th April, 2007 executed by the 1 st Defendant on purported exercise of Statutory Power of Sale. ii. The consideration for the Transfer to the 2 nd and 3rd Defendants had been a sum of Kenya Shillings Eight Million Five Hundred Thousand (Kshs. 8,500,000.00/=) JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 16 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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allegedly paid to the 1st Defendant on or before 30th April, 2007. iii. The 2nd and 3rd Defendants had simultaneously charged the suit premises to the 1st Defendant for a sum of Kenya Shillings Four Million Five Hundred Thousand (Kshs. 4,500,000.00/=). 41. Further to the contents of made out under Paragraph 33 above, the Plaintiff averred that the purported sale and transfer of the suit premises by the 1st Defendant to the 2nd and 3rd Defendants, and the Charge on the suit premises by the 2 nd and 3rd Defendants to the 1st Defendant, had been illegal, fraudulent, unlawful, incompetent, invalid, and null and void. 42. The Plaintiff relied on the following particulars of fraud and illegality:a. The 1st Defendant had not had a statutory power of sale. b. The Charge dated 7th September, 1993 had not been a Charge or a valid instrument within the meaning of Section 35 of the Advocates Act. c. The amount sought to be recovered by the 1st Defendant had not been due or payable. d. The Charge dated 7th September, 1993 had contravened the Central Bank of Kenya Act and the Banking Act, and was therefore illegal, and the 1st Defendant could not have benefited from an illegality. e. The Charge dated 30th April, 2007 had contravened of the provision of Section 35 of the Advocates Act and was JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 17 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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therefore invalid, as it had not had an endorsement of the name and address of any Advocate who had prepared it. f. The 1st Defendant had purported to sell the suit premises to the 2nd and 3rd Defendants to recover, among other things, legal fees and auctioneers’ charges when they had not been recoverable. g. The 1st Defendant had fraudulently misrepresented to the Plaintiff by letter dated 16th April, 2007 that it would not sell the suit premises while these proceedings were pending or without notice to the Plaintiff. h. The 4th Defendant had been expressly prohibited under the provision of Section 35 (2) of the Advocates Act from recognizing or accepting any instrument which was not endorsed with the name and address of an Advocate or a firm of Advocates that had prepared it. The Charges dated 7th September, 1993 and 30th April , 2007 had not had that endorsement. i. The 1st Defendant had not served a valid statutory notice upon the Plaintiff under the provision of Section 69A (a) of the Transfer of Property Act, 1882. j. The effect of Section 69 (1) of the Transfer of Property Act, 1882 had not been explained to the Plaintiff. k. There had been no default in the operation of the mortgage account entitling the 1 st Defendant to exercise any Statutory Power of Sale. l. The 1st Defendant had sold the suit premises through a Private Treaty after instructing and paying auctioneers. JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 18 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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43. Further to the averments made out under Paragraph 34 (xii) above, and without prejudice to any of the matters pleaded, the Plaintiff averred that the purported sale of the suit premises by private treaty, after the 1st Defendant had debited her mortgage account with vast amounts of money towards auctioneers’ charges and legal fees with regard to purported auctions, had been designed to escape the provisions of the Auctioneers Act, 1996 and the Auctioneers Rules, 1997, while having derived benefits under that Act and Rules and having debited her account with monies under them. The Plaintiff therefore averred that: i. Sale by private treaty in the circumstances had been both fraudulent and criminal. ii. The 1st Defendant had not had a valid professional valuation report upon which it could determine the true value of the suit premises and the reserve price. iii. As a result of refusal to comply with the Auctioneers’ Rules, 1997, the suit premises had been sold at a gross undervalue. iv. The 1st Defendant had had no legitimate means of testing the true value of the suit premises, as it had not offered the premises for sale in the open market through advertisement. v. Having elected to sell the suit premises by auction and having expended funds from the Plaintiff’s mortgage account in that regard, the 1 st Defendant could not JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 19 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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lawfully have sold the suit premises through a Private Treaty. vi. The Plaintiff had been denied her right to redeem the suit premises at any time before the fall of the hammer when the 1st Defendant had opted to sell the premises secretly. vii. The 2nd and 3rd Defendants had been approached privately by the 1st Defendant, or vice versa, for them to purchase the suit premises, which conduct amounted to collusion between the 1st Defendant and the 2nd and 3rd Defendants. viii. By selling the suit premises by private treaty without having first offered them for sale by public auction, the 1 st Defendant had not acted fairly or diligently and had not exercised the care and attention required from a Chargee to ensure that the suit premises were sold for the best price obtainable. 44. Further and without prejudice to any of the above, the Plaintiff stated that by constantly threatening to sell the suit premises by auction, sending notices to her, instructing auctioneers to serve 21- and 45-day notices informing her that the premises would be advertised for auction, paying auctioneers and its Advocates vast sums of money from her mortgage account on various occasions to finance purported auctions, and by letter dated 16th April, 2007, the 1st Defendant had represented to her that it would exercise its purported statutory power of sale through a public auction rather than through a Private Treaty . 45. Further to the averments made out under Paragraph 36 above, and without prejudice to any of the foregoing, the Plaintiff, acting and relying fully on the aforesaid representations, had JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 20 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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only been concerned to peruse daily newspapers in the event the suit premises were advertised for sale and to file an application for an order of injunction to restrain the auction sale. The Plaintiff therefore did not consider that the 1 st Defendant would, in light of those representations, sell the suit premises by private treaty, and for that reason did not file any application for an order of injunction against the 1 st Defendant. 46. The Plaintiff stated that she would suffer irreparable loss and damage, and that she could not obtain similar premises if the 1st Defendant had sold the suit premises, unless the unlawful, fraudulent, and illegal sale of the premises to the 2 nd and 3rd Defendants was cancelled and nullified, and unless the Charge dated 30th April 2007 was cancelled or deleted from the title. 47. The Plaintiff stated that due to the complexity of the matter, she had engaged the services of Messrs. Interest Rates Advisory Centre and claimed the costs of recalculation of interest rates and other charges. Further to the averments of Paragraph 39 above, and without prejudice to any of the averments relating to the nullity and incompetence of the Charge and to the fraud and illegality of the sale of the suit premises, the Plaintiff stated that there had been no default of payment of the loan facility and lawful interest and charges, and that therefore the statutory power of sale had not accrued. 48. The Plaintiff averred further, and without prejudice to any of the above, that there had been no actual sale of the suit premises to the 2nd and 3rd Defendants in April, 2007, and that the 1st Defendant’s letter dated 13th June, 2007 had itself JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 21 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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amounted to fraud. The Plaintiff relied on the following particulars of fraud:a. The 1st Defendant had continued to charge interest and levy other charges on the Plaintiff’s mortgage account up to 13th June, 2007. b. The Plaintiff’s mortgage account had not been credited with the full purchase price of a sum of Kenya Shillings Eight Million Five Hundred Thousand (Kshs. 8,500,000.00 in April, 2007. c. The 1st Defendant had not disclosed the name and identity of the purchaser or purchasers. d. The 1st Defendant had withheld the date of sale of the suit premises. e. The 1st Defendant had transferred the suit premises to the 2nd and 3rd Defendants when those Defendants had not paid to the 1st Defendant at least a sum of Kenya Shillings Four Million Five Hundred Thousand (Kshs. 4,500,000.00/=). f. The suit premises had themselves been used as security by the 2nd and 3rd Defendants for a loan to purchase those premises. g. To the extent that the Transfer dated 30 th April, 2007 had attested to the payment by the 2 nd and 3rd Defendants of the purchase price in full, the Transfer had been false. 49. The Plaintiff averred, without prejudice to any of the foregoing, that the 1st Defendant had known that the sale of the suit premises by private treaty to the 2 nd and 3rd Defendants in JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 22 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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April, 2007 had been illegal and unlawful. The Plaintiff relied on the following particulars of knowledge:a. The 1st Defendant had already been served with the Plaint in this suit challenging the validity, competence, and legality of the Charge dated 7th September, 1993. b. The 1st Defendant had on 2nd March, 2007 filed and got an application for injunction in “Milimani Commercial & Tax Division Civil Case No. 522 of 2006 (Amos Kanyru Kinani – Versus - Housing Finance Company Limited and Isaac Kinuthia Kibe)”, dismissed in which the 1st Defendant had sold charged property by Private Treaty. c. The 1st Defendant was deemed to have known the law, including the provision of Section 52 of the Transfer of Property Act, 1882. 50. The Plaintiff averred that she had filed Civil case of “Mombasa High Court Civil Suit No. 83 of 2002 (Wangare Ndegwa – Versus Housing Finance Company of Kenya Limited)” and, by a Notice of Withdrawal dated 2nd March, 2007 and served on 6th March, 2007, had withdrawn that suit. With that exception, there had been no other suit pending, and there had been no previous proceedings in any Court between the Plaintiff and the Defendants over the same subject matter. 51. The cause of action had arisen in Mombasa within the jurisdiction of this Honourable Court. 52. The Plaintiffs prayed for Judgment to be entered against the 1 st, 2nd, 3rd & 4th Defendants jointly and severally for Orders that:- JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 23 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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a. A declaration that the interest rate provided for in the Offer To Advance dated 18th January, 1993 was unlawful, illegal, unenforceable and irrecoverable. b. A declaration that the interest rate provided for in the document dated 7th September, 1993 and registered as a Charge on 14th September, 1993 on Title Number C.R. 18132 Subdivision No. 3160/MN was unlawful, illegal, unenforceable and irrecoverable. c. A declaration that the document dated 7 th September, 1993 and registered as a Charge on 14 th September, 1993 purporting to be a Charge is incompetent, illegal, unlawful, null and void and is incapable of conferring any interest upon the defendant. d. A declaration that the 1st Defendant has no statutory power of sale over Title Number C.R. 18132 subdivision No. 3160/MN. e. A declaration that all legal, auctioneers and other charges debited by the 1st Defendant from the Plaintiff’s account in purported enforcement of the provisions of the charge dated 7th September, 1993 were unlawful and incompetent. f. An order for accounts as to what amount, if any, is lawfully due from the Plaintiff to the 1st Defendant on the principal sum of Kshs. 2,000,000.00 together with lawful and incompetent. g. An order for accounts as to what amount, if any, is lawfully due from the Plaintiff to the 1st Defendant on the principal sum of Kshs. 2,000,000.00 together with lawful interest and lawful charges less all deposits made by the Plaintiff towards repayment. h. A perpetual injunction restraining the defendants by itself themselves, their its directors, managers, auctioneers, employees or agents from selling or offering for sale or advertising for sale or charging, leasing, subdividing, pledging or in any manner disposing of any interest in Title JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 24 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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Number C.R. 18132 subdivision No. 3160/1/MN and from evicting the plaintiff from the said property and from trespassing thereon. i. A declaration that it was illegal, unlawful and a breach of contract as contained in the Offer to Advance dated 18 th January, 1993 for the defendant to increase ledger fees from Kshs. 50.00 per month to Kshs. 250.00 per month and to charge and levy other charges, fees and levies not contained in the Offer to Advance dated 18th January, 1993. j. A declaration that the interest charged beyond the maximum allowed by law, the charges, levies and fees charged contrary to the Offer to Advance dated 18 th January, 1993 and the increase in charges, levies, fees and interest rate without the permission of the Minister clogged and fettered the Plaintiff's right of redemption and the 1st defendant thereby forfeited any statutory power of sale it may have had over the suit premises. k. General, aggravated and punitive damages. l. A declaration that Clause 4 of the-Charge dated 7 th September, 1993 is in breach of the contract-contained in the Offer to Advance dated 18th January, 1993. m. A mandatory injunction or an order directing the 4 th Defendant to cancel the registration of the Transfer dated 30th April, 2007 and the Charge dated 30th April, 2007. n. Nullification and cancellation of the registration of the purported charge and release of the original title documents of Sub - division No. 3160/I/MN to the Plaintiff at the Defendant’s expenses. o. A declaration that the sale of Title Number No. C.R. 18132 sub - division No. 3160/1/MN and the transfer and charge dated 30th April, 2007 are illegal, fraudulent and null and void. JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 25 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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p. A re-conveyance of the suit premises to the Plaintiff by the Defendants jointly and severally and at their costs. q. Costs and interest. 53. On 16th December, 2022 at 3.30 pm, the Plaintiff called their 1 st witness who testified as follows:A. Examination in Chief of PW - 1 by Mr. Kinyua Advocate. 54. PW - 1 swore and testified in the English language. He was called MAINA CHEGE, a citizen of Kenya and a holder of the national identity card with all the particulars shown to Court during the hearing of the case. PW - 1 stated that he was a Valuation Surveyor and that he valued all landed properties. PW - 1 testified that he practiced within the Coast Province. PW - 1 further stated that he held a Bachelor of Arts degree in Land Economics, obtained in the year 1977 from the University of Nairobi, and that he was a registered valuation practitioner with a current Licensing Certificate. PW - 1 testified that he had attained professional qualifications to become a member of the Institute of Surveyors. PW - 1 stated that he had worked for the Municipal Council of Mombasa and also with Kenya National. PW - 1 referred to page 463 and recognized the Valuation report for Property LR No. MN/I/3160, New Nyali, Mombasa Municipality. PW - 1 testified that he had been commissioned to value the property and that he valued it at a sum Kenya Shillings Twelve Million (Kshs. 12, 000, 000.00/=) as at 30 th June, 2007. PW - 1 confirmed that the report was admitted and marked as Plaintiff’s Exhibit Number 1. JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 26 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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55. PW - 1 testified that he had visited the land and the building and that he had entered the building. PW - 1 referred to the List of Documents filed on 24th July, 2017, specifically pages 126 and 127 at the bottom. PW - 1 stated that in this case the materials of the building showed that the walls were already plastered. PW - 1 further testified that in the second last paragraph of the report, the problem was not specified as to which area was parquetry and which was terrazzo, and he referred to page 128 of the same List of Documents. 56. PW - 1 testified that he was questioning the accuracy and specification of the Valuation report prepared by Tysons. PW 1 stated that Tysons had valued the property at a sum of Kenya Shillings Ten Million (Kshs. 10, 000, 000.00/=). PW - 1 further testified that there was a variation of Kenya Shillings Two Million (Kshs. 2, 000, 000.00/=) between his valuation and that of Tysons. PW - 1 stated that the difference arose from the parameters applied in relation to the recent prices of items within the market. B. Cross Examination of PW - 1 by M/s. Sharon Advocate. 57. PW - 1 testified that his Licensing Certificate was not part of the documents filed, though he had the number but did not have the certificate with him. PW - 1 stated that by the year 2007 he was duly licensed. PW - 1 further testified that in the normal circumstances valuation instructions are not given in writing, and in this case the instructions were verbal. PW - 1 stated that he was to advise on the current value of the property. PW - 1 confirmed that there was no costs valuation, JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 27 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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explaining that such valuations are only relevant for borrowing purposes but not necessary for an individual. PW - 1 testified that it was not necessary to access the property internally, and that he had obtained consent from Rose Wangari Ndegwa to access both internally and externally. PW - 1 stated that he did not have to measure internally, and that for external purposes the inspection was sufficient when undertaking the valuation. PW - 1 further testified that the comparable were not in court. PW - 1 confirmed that he did not undertake the valuation for court purposes, and that there was no evidence in his report to show the parameters or the variations of Kenya Shillings Two Million (Kshs. 2, 000, 000.00/=) C. Cross Examination of PW - 1 by Mr. Nyandieka Advocate. 58. PW - 1 informed Court that valuation was a science. PW - 1 stated that his report was an opinion, but that an opinion was a science as it dealt with land and buildings. PW - 1 testified that in valuation one had to measure and consider the costs. For comparison purposes one had to compare with other existing properties within the vicinity. PW - 1 stated that whether a property had a Title was not a science. PW - 1 further testified that the situation of a property, including its distance from a shopping or commercial centre, was a science. PW - 1 stated that encumbrances mattered a lot, though he was not sure whether they constituted a science. PW - 1 further testified that the services near a property mattered, but he was not sure what was meant by science in that context. JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 28 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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59. PW - 1 testified that the rental value of a property mattered in valuation process and exercises. PW - 1 stated that his report did not show the market value of the property. PW - 1 was referred to the Tysons Valuation Report and stated that on page 130 the market value was shown. PW - 1 testified that his report could not be used by a financial institution for selling or mortgage purposes, as it was limited to open market value which was for general purposes. PW - 1 further stated that in the Tysons Valuation Report consisted of several categories. These included open market value, mortgage value, forced sale value, and rental value. PW - 1 testified that the persons who signed the report for Tysons were professionals. However, Mr. R.M. Kiambi, who signed his report, was his friend and a highly qualified person. 60. PW - 1 testified that he was led to a bath tub and confirmed that it was there. PW - 1 stated that he had at times come across Valuation reports which appeared to be the same but which differed on occasion. PW - 1 further testified that when there were differences and variations in valuation reports, that did not necessarily render the reports unprofessional. A. Re - Examination of PW - 1 by Mr. Kinyua Advocate. 61. PW - 1 testified that he had received instructions from Rose Wangari Ndegwa. PW1 stated that he had been asked to give an opinion on rental value at Kenya Shillings Fourty Five Thousand (Kshs. 45,000.00/=). PW - 1 further testified that from the Tysons Report he was not shown any Sale Agreements or Tenancy Agreements. PW - 1 stated that JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 29 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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although he had gone through a degree course at the University, that did not necessarily make his profession or what he did a science. 62. The Plaintiff called PW - 2 on 27 th September, 2022 at 3.30pm wherein the witness testified as follows:- A. Examination - in - Chief of PW - 2 by Mr. Kinyua Advocate. 63. PW - 2 testified and swore in the English language. He was called WILFRED ABINCHA ONONO, a citizen of Kenya and holder of the national identity card bearing all the details as shown to Court during the hearing of the case. He was born on 8th February, 1953. He resided in Nairobi South “C” Estate. PW 2 stated that he had been an Accountant since the year 1976. 64. PW - 2 testified that he was currently working as a consultant with the firm M/s. Interest Rates Advisory Centre. PW - 2 stated that their line of business was to assist people who had borrowed from banks and had disputes with financial institutions. PW - 2 testified that they received complaints and requests to re - check financial statements and reports, which were then used to discuss with the financial institutions to determine whether there was room for agreement. PW - 2 stated that if no agreement was reached, the matter was brought before court. PW - 2 testified that they relied on bank statements, and that clients would provide them with Letters of Offer, Statements, JUDGMENT: ELC. CASE NO. 147 OF 2018 Charge Page 30 of 146 documents, and any HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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correspondence between the bank and the client. PW - 2 stated that they would then undertake an interest re - calculation report based on the terms received from the bank. By applying those terms they would prepare the recalculation report. PW 2 testified that depending on the findings, the client would then make a decision on whether to proceed to court or not. 65. PW - 2 testified that he knew the Plaintiff well. PW - 2 stated that in connection with this case, the Plaintiff had come to their office with an account held with H.F.C.K. PW - 2 testified that she had a statement showing that she had borrowed a sum of Kenya Shillings Two Million (Kshs. 2,000,000/-) on 23 rd September, 1993. That at the time of borrowing, the rate of interest was 21% as indicated in the Offer Letter dated 18 th January, 1993. He further testified that the loan had a repayment period of 20 years. PW - 2 stated that there was a contention whereby the interest rate was indicated as 20%. 66. PW - 2 testified that he had examined the bank statement and that all the data had been captured into their system electronically. His testimony was that he looked at the rate of the charges dated 7th September, 1993, and referred to page 18, Clause 1 of the Charge, which showed the interest rate of 21%. PW - 2 testified that he had used the rate of 19% interest, as that was the rate calculable in Kenya according to the Kenya Gazette Notice Number 1617 of April, 1990. He informed Court that the Gazette Notice had provided the maximum rate of loans of a term exceeding 19%, and since the loan in question was for 20 years, he applied that rate. PW - 2 testified that the JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 31 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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Gazette Notice had been issued by the Governor of the Central Bank of Kenya in exercise of powers under the provision of Sections 39 and 41 of the Central Bank of Kenya Act, Cap 491. 67. He had noted at some point the Plaintiff’s account was in arrears. PW - 1 stated that they were dealing with the legal report dated 3rd February, 2015. PW - 1 further testified that there existed another report dated 22 nd August, 2006, covering the period from years 1993 to 30th June, 2006, which had been signed and was on IRAC’s letterhead. PW - 2 stated that the report dated 3rd February, 2015 was neither signed nor on IRAC’s letterhead. 68. The witness was stood down on 27 th September, 2022 and recalled on 30th May, 2023 at 12 noon wherein he testified that: A. Examination in Chief of PW - 2 by Mr. Kinyua Advocate. 69. PW - 2 testified that his witness statement was dated 23 rd July, 2021, and that it bore his signature on page 4. PW - 2 stated that on page 6 of the statement there was a Legal Report which extended up to page 8, and that page 8 bore his signature. PW - 2 further testified that there was a Re Calculation Statement running from Pages 9 to 23, which also bore his signature. PW - 2 stated that he wished to rely on his witness statement together with the Legal Report and the Re Calculation Statement. PW - 2 confirmed that the Legal Report and the calculation were admitted and marked as Plaintiff’s JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 32 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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Exhibit 2, covering pages 6 to 8 inclusive, and Plaintiff Exhibit Number 3, covering pages 9 to 23 inclusive. 70. PW - 2 clarified that on page 3 of his witness statement there was reflected a figure of a sum Kenya Shillings Four Eighty Six Thousand Five Seventy Eight Hundred and twenty four cents (Kshs. 486,578.24/=), which he stated should not be charged. PW - 2 further testified that on page 23 of the statement there was a list of items queried. These items amounted at a sum Kenya Shillings Four Sixty Four Thousand Two Ninety Eight Hundred and twenty five cents (Kshs. 464,298.25/=). PW - 2 stated that he wished to amend his witness statement so that the figure on page 3 would be corrected to reflect this sum as shown on page 23. 71. He was referred to the witness statement filed on 4 th October, 2022. On page 9 of the statement, the facility amount was for a um of Kenya Shillings Two Million (Kshs. 2,000,000/=), with a facility duration of 240 months. PW - 2 testified that the monthly repayment was Kenya Shillings 33,976.49. PW2 further stated that the total amount due was Kenya Shillings Eight Million One Fifty Four Thousand Three Fifty Eight Hundred and twelve cents (Kshs. 8,154,358.12/=). According to him, this was the total sum the Plaintiff should have paid for the entire period of 240 months. 72. PW - 2 was further referred to the Charge on page 35. It reflected a monthly instalment of Kenya Shillings Thirty Five Thousand Seven Eighty Five Thousand (Kshs. 35,785/=). Indeed, according to his witness statement under Paragraphs JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 33 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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8.2, 8.3, 8.5.1 and 9.10 this figure appeared. According to the PW – 2, he had obtained the figure of Kenya Shillings Four Million Nine Twenty Eight Thousand Six Hundred and Five and Eighty cents (Kshs. 4,928,605.80/=) as the total re - payments already made by the borrower. This figure had been derived from the HF statement. 73. However, PW - 2 testified that according to HF the outstanding balance as at 30th June, 2006 was a sum of Kenya Shillings Eight Million Fifteen Thousand Nine Fifty Nine Hundred and Eighty Cents (Kshs. 8,015,959.80/=). PW - 2 stated that, on the contrary, IRAC’s balance at the same date was a sum of Kenya Shillings Seven Twenty Six Thousand Five Fourty Five Hundred and Seventy Five Cents (Kshs. 726,545.75/=) leaving a difference of Kenya Shillings Seven Million Two Eighty Nine Thousand Four Fourteen Hundred and Five Cents (Kshs. 7,289,414.05/=) in favour of the mortgagor. 74. His testimony was that this difference arose from the application of the 19% interest rate. This was what HF had used to charge. PW - 2 referred to his witness statement at paragraph 8.5.1. He stated that under the provision of Section 39 of the Central Bank of Kenya Act, the legal maximum rate of 19% per annum was applicable up to 17th April, 1997. He referred to the Charge at pages 313 to 314, specifically Clauses 7 and 16 to Page 315 of the Charge on Interest on Advances by Instalment. B. Cross Examination of PW - 2 by M/s. Maina Advocate. JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 34 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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75. PW - 2 was referred to page 1, paragraph 3 of his witness statement. He indicated that the majority of IRAC’s clients were borrowers. It constituted to about 80%. PW - 2 stated that the borrowers used and relied on IRAC’s reports in support of their cases. His evidence was that the report in issue was prepared on 23rd July, 2021, long after the case had been filed, and that it was prepared in support of the Plaintiff’s case. 76. PW - 2 was further referred to page 132 of he Plaintiff’s bundle. This is where there was a letter dated 5 th September, 2002, written by IRAC to the Plaintiff requesting her to join a class action lawsuit. PW - 2 informed Court that he had staff who prepared reports but that he supervised them and confirmed the final version. PW - 2 was further referred to a letter dated 16th July, 2021. He testified that the instruction by the Plaintiff was not part of the report, as indicated in paragraph 2. These were the documents in the said report. (a) HF’s Statement of Account Period 23rd September, 1993 to 30th June, 2006. (b)Legal Charge dated 7th September, 1993 (c) Offer to advance dated 18th January, 1993 are not part of the report. 77. With regard to the amendment, he stated never having written to HF. The content of Paragraph 2 on page 8 of his report confirmed he had no business writing to the bank. PW - 2 was further referred to page 19 of the report and stated that the ledger fee from 1st October, 1993 to 1st June, 2006 had been JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 35 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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omitted. PW - 2 testified that he did not consider the ledger fee on the basis of the provisions of Section 44 of the Banking Act. 78. PW - 2 averred that he referred to page 312 of the document where the ledger fees were indicated. PW - 2 further referred to the 1st Defendant’s Bundle at page 27, which contained a letter dated 28th December, 1993, showing ledger fees of Kenya Shillings One Hundred (Kshs. 100/=). PW - 2 asserted that he had not considered those ledger fees. PW - 2 also referred to page 54 of the Defendant’s Bundle, which contained a letter dated 22nd December, 1997, showing ledger fees of Kenya Shillings One 120. PW - 2 stated that he had not referred to that letter either. 79. PW - 2 testified that, on interest rate, he referred to Paragraph 8.4 of his witness statement regarding variations in interest. PW - 2 stated that in his report he had not referred to any letter, although he was aware that such letters did exist. PW - 2 further testified that on page 9 of his statement he had referred to Section 39 of the Central Bank of Kenya Act, which was already in existence, and that the amendment recalculation was a mathematical issue. PW - 2 stated that he was not qualified to provide a legal report but that he had an Advocate in his office, and he referred to page 23 of the Legal Report in that regard. 80. PW - 2 testified that they had queried the fire insurance charge of Kenya Shillings One Hundred and Twenty Thousand (Kshs. 120,000/-), stating that it was without justification. PW - 2 explained that the charge had moved from a sum of Kenya JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 36 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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Shillings Seven Hundred and Fifty (Kshs. 750/-), as reflected on page 2, and that he required an explanation for the increase. PW - 2 clarified that his issue was not that fire insurance should not be charged, but rather it was the amount levied. PW - 2 further testified that he was not aware of auctioneers’ fees. However, he admitted being aware that legal and auctioneers’ fees were chargeable to the borrower. 81. PW - 2 admitted that his report did consider arrears and default. PW - 2 referred to page 30 of the 1 st Defendant’s documents dated 12th September, 1994, specifically paragraph 2 was on arrears. PW - 2 was further referred to page 42, which contained a letter by the Plaintiff dated 26 th November, 1996. PW - 2 informed Court that he was undertaking the re calculation exercise based on the documents available, notwithstanding the arrears. PW - 2 was referred to the statement at page 10 dated 30 th November, 1996. According to him, it showed a total cumulative arrears of a sum of Kenya Shillings One Hundred and Eighty Thousand Nine Fifty Eight Hundred (Kshs. 180,958.00/=), whereas the Plaintiff’s letter reflected arrears of Kenya of a sum of Kenya Shillings Three Twenty Nine Thousand Nine Thirty Six Hundred and Ten cents (Kshs. 329,936.10/-). PW - 2 testified that his calculation therefore had to be different. 82. PW - 2 was referred to page 9 of his witness statement, where it was indicated that at the time the property was sold on 1 st July, 2007, the 1st Defendant was demanding from the Plaintiff a sum of Kenya Shillings Seven Million (Kshs. 7,000,000/=). JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 37 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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However, according to his calculations, instead the actual amount owing ought to have been a sum of Kenya Shillings Seven Hundred and Fourty Three Thousand Seven Seventy Seven Hundred and Fourty Five cents (Kshs. 743,777.45/=). To the PW – 2 this was a wide variation in amounts allegedly owed. PW - 2 testified that he had undertaken the calculation for every month on the amounts paid. Hence, what was redeemable was provided for in his statement. PW - 2 further testified that he had neither seen the redemption documents nor statement as contained on page 91 of the 1 st Defendant’s Bundle. C. Cross Examination of PW - 2 by M/s. Mboku Advocate. 83. PW - 2 re – affirmed being a Certified Public Accountant and not a banker nor an Information Technology software expert. PW 2 stated that what he had been relying on was found on page 150. PW - 2 explained that while looking at this figure he was referring to the Letter of Offer and the Charge. PW - 2 informed Court that the total monthly repayment was for a sum of Kenya Shillings Thirty Five Thousand Seven Eighty Five Hundred (Kshs. 35,785.00/-) as was reflected on page 35 and paragraph 8.3 of his witness statement. PW - 2 further stated that HF would debit other levies such as insurance and so forth against this repayment. 84. PW - 2 testified that in his re - calculation he did not include the advocate’s fees or insurance charges. PW - 2 stated that on the relevant page of his report he had included credits, debits and other entries reflecting the Plaintiff’s payments. PW - 2 JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 38 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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informed Court that the Plaintiff made regular payments. For example, credits of a sum of Kenya Shillings Twenty One Thousand One Twenty Hundred (Kshs. 21,120.00/-) on 31st October, 1993, Kenya Shillings Fourty Thousand (Kshs. 40,000/-) and Kenya Shillings Fourty Thousand Six Hundred and Five Hundred (Kshs. 40,605/-). PW - 2 admitted that the repayments by the Plaintiff were never regular. There were months when she would make payments while others when she would not. PW - 2 stated that, ideally, the Plaintiff was meant to be making her payments on the 7 th day of each month. On this aspect, PW - 2 was referred to paragraph 4 of his witness statement. 85. PW - 2 stated that he had decided to use the interest rate of 19% per annum as provided for by law. However, PW - 2 admitted that and was referred to page 312 of the Charge document whereby the interest rate agreed between HF and the Plaintiff was 21% per annum instead. 86. Indeed, PW - 2 was further referred to paragraph 7 of his witness statement and to page 311 of the Charge. PW - 2 confirmed that the 1st Defendant was working on an interest rate of 21% per annum, while he had used 19% per annum in his re - calculation. PW - 2 testified that the 19% rate had been repealed. The Governor had indicated it would be repealed. PW - 2 further stated that the Minister repealed the provision in the year 1997. PW - 2 testified that under the provision of Section 39 of the Central Bank of Kenya Act the maximum rate of 19% per annum had applied until it had been repealed, and that the JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 39 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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provision of Section 44 of the Banking Act governed the imposition of small charges. 87. PW - 2 testified that the interest rate of 19% per annum which he had used was based in law. PW - 2 stated that in his re calculation he had factored in every change from one financial year to another. PW - 2 further testified that in the course of his re - calculation he had even applied an interest rate of 26% per annum where appropriate. 88. PW - 2 admitted being aware of the insurance charges. PW - 2 stated that he had never queried the charges from HF, but only pointed out what he and his team thought was excessive. PW 2 testified that they left it to the party to deal with the issue. According to him, if the bank had explained the omissions to their satisfaction, it would have changed their report. PW - 2 clarified that his work was a report and not an opinion. D.Re - Examination of PW - 2 by Mr. Kinyua Advocate. 89. PW - 2 held that the interest rate chargeable in year 1999 was 19% as reflected at page 9 of his witness statement. According to him the interest rate per annum kept on fluctuating. From 23rd September, 1993 to 30th April, 1997 the applicable rate was 19%, thereafter it moved to 20%. PW - 2 testified that in April 1999 the rate rose to 22%, and in December 1999 it rose once more to 26%. PW - 2 further stated that from the year 2000 the rate dropped, and in the year 2001 it was at 15.2%. 90. PW - 2 referred to page 13 of his witness statement where the rate was shown as being as low as 12.30%. PW - 2 testified that hence the rate was not tied to 19% throughout as may JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 40 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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have been alleged. PW - 2 further testified that he considered whether there were auctioneers’ charges, and that in year 1993 there were insurance charges, as reflected at page 312, showing a sum of Kenya Shillings Seven Fifty (Kshs. 750/-) for fire insurance. PW - 2 stated that if any other third party were to use the same figures and data, they would arrive at the same conclusion. E. Clarification of some issues from the PW - 2 by the Court:91. PW - 2 informed Court that he had noted that IRAC had no good relationship with the banks. PW - 2 stated that there had been no discussion between IRAC and the banks. 92. The Plaintiff called PW - 3 on 30 th May, 2023 who testified as follows: A. Examination in Chief of PW - 3 by Mr. Kinyua Advocate. 93. PW - 3 was sworn and testified in English language. She identified herself as being ROSE WANGARI NDEGWA, a citizen of Kenya and holder of the national identity card bearing all the particulars as shown to Court during the hearing of the case. She was the Plaintiff in the case. PW - 3 stated that she had recorded and signed her witness statement on 2 nd July, 2015. PW - 3 further testified that she had filed a list of documents at page 770, comprising of 82 items running from pages 26 to 208, and that the bundle was to be marked as Plaintiff’s Exhibit No. 4. She produced them as Plaintiff Exhibits Number 1 to 82 in that order. Additionally, she had also filed a Supplementary JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 41 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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bundle of documents dated 29th July, 2016, to include pages 5 to 40, which had already been produced by PW - 2. PW - 3 testified that hence they remained with the balance of the documents for production: (a) Document on Pages 1 and 3 Plaintiff Exhibit No. 5. (b) Document on Pages 4 Plaintiff Exhibit No. 6 94. PW - 3 informed Court that there was a bundle filed by the 1 st Defendant which mainly comprised demand letters issued by HFCK. PW - 3 stated that she had responded to those demand letters. There were also letters she wrote to HFCK – the 1 st Defendant. She admitted that they had written to her regarding the arrears and she had written back requesting time to clear the arrears. PW - 3 referred to Page Nos. 122 to 131 of the 1st Defendant’s bundle – it was a Report by Tyson Limited. It referred to her house. On Page 125 – it was a photograph of her residential house at Nyali Estate in Mombasa taken from a distance – there was a perimeter wall. This was not the wall that was on the property. 95. On Page No. 126 – the title was referred to as Freehold. That was wrong as her title was a Leasehold land tenure. Under Encumbrances there was a charge dated 17 th July, 1987 to HFCK for a sum of Kenya Shillings Two Million (Kshs. 2,000,000/-). She refuted it as she never had that said Charge. According to PW – 3 this Charge document had numerous discrepancies. For instance, she had not acquired the property by then. She acquired the property in the year 1988. Further, JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 42 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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on Page 127 the floor was described as “being concrete slab” – yet hers was wooden parquet. Her house was not a two (2) bedroomed. Instead, it was a four ( 4 ) bedroomed - one was on the ground floor and three were on the 1 st floor. But Tyson Ltd. stated on Page 129 that it was a two-bedroom house. She refuted that. On Page 130 the value of the property was given as being a sum of Kenya Shillings Ten Million (Kshs. 10,000,000/-), being the open market value. She refuted that as well. 96. She referred to a Report by Mr. Maina Chege, Valuer – Plaintiff’s Exhibit 1 – and to the offer to advance dated 19 th January, 1993, where the rate of interest was indicated as 10%. 97. PW - 3 stated that the rate agreed to be charged with the Bank was 20%. On Page 134 of the 1 st Defendant’s letter dated (not provided), written by Amesnet Enterprises Ltd. to the Manager, Recoveries & Realizer, HF, she was not involved in those negotiations. On Page 135, the letter was copied to several people, but her name was not included. On Page 139, there was an Agreement for Sale in which the vendor was HFCK and the purchasers were Francis Nyamai Mwanzia and Tabitha Muthio Mwanzia. It was signed by Julus Monzi Mula, Attorney for HF. From the bundle of the 1 st Defendant, she saw the Watts Auctioneers. They had been appointed by HF and she knew they had been paid. 98. PW – 3 stated that the Advocates and Auctioneers had been paid by HF to auction her house. The money used to pay the Advocates and Auctioneers to auction her house had been JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 43 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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debited into her account by HF. She averred that the house was never auctioned. Instead, it was sold through Private Treaty. She referred to the witness statement of the 1 st Defendant – Paul Nyamari – paragraph 9. Sally Muchoki Advocate had never explained to her the contents of the Charge, though she admitted she had signed it at the Advocates’ office. She found the documents ready and she signed them. 99. According to PW 3, Mr. Paul Nyamari was not present. She stated that she did not know him as per paragraph 10. But she confirmed that she knew Sally Muchoki very well. Sally Muchoki was an Advocate, and she knew that she operated in Mombasa and Nairobi. Up to that point, she had not seen Sally Muchoki’s witness statement. B. Cross Examination of PW - 3 by M/s. Maina Advocate. 100. PW - 3 confirmed that from year 1992 she had approached HF for a loan facility. The purpose of the loan was for her personal use. She had offered her property as a collateral security. To this end, the bank had issued a Letter of Offer dated 24 th August, 1992 for a sum of Kenya Shillings One Million Two Ninety Six Thousand (Kshs. 1,296,000/-) at an interest rate of 19% per annum. This was contained at Page 1 of the 1 st Defendant’s bundle. That letter was changed to one dated 18 th January, 1993 at Page 2. It was amended to a sum of Kenya Shillings Two Million (Kshs. 2,000,000/-) and the interest rate to 21%. She accepted this as per Clause 7. This offer cancelled the previous offer at Page 7. The 1 st letter of advance was at JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 44 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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Page 7 and the 2nd letter was at Page 9. The Advocates fees was a sum of Kenya Shillings Sixteen Thousand One Hundred and Seventy Five Hundred (Kshs. 16,175/-). She could not recall whether there was any cheques made. 101. With reference to Paragraph 7 of the documents, the PW 3 stated that they had not been prepared by the Law firm of Messrs. Bryson Inamder & Bowyer Advocates. Instead, the Charge had been prepared as shown at Page 15 of the 1 st Defendant’s bundle. The names appearing there were the law firm of Messrs. Bowyer Mahihu & Company Advocates. She did not know them. She observed that the name of Bowyer was present. Her contestation was that the Charge had been done by a different law firm than the one she expected. The Charge had been registered. She had never written any letter of change of Advocates. She had changed Advocates from Mahihu Advocate to Gikandi Advocates. Paragraph 9 Sally Mahihu Advocate never explained the Charge to her. Page 17 of the 1 st Defendant Bundle. The amount for the Charge was a sum of Kenya Shillings Thirty Five Thousand Seven Eighty Five Hundred (Kshs. 35,785.00/=). This never changed. Page 18 of the 1st Defendant’s Bundle – 21% at the top. Page 2- Interest rate was 21%. 102. With reference to the Letter of Offer, the witness stated that Page 5, Clause 16 and Page 18 of the Charge – Paragraph (iii) – the Company had stated that it might require an increase in the rate. In other words, there was a Variation. During the proceedings, she JUDGMENT: ELC. CASE NO. 147 OF 2018 had never Page 45 of 146 summoned Sally Mahihu HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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Advocate. She stated that she did not think the Bank had the right to increase or decrease the interest. 103. On Page 18 of the Charge document – Paragraph (ii) – it was stated “to increase or reduced” rate. As shown from Page 153 of the Plaintiff’s bundle, she confirmed that she had received letters from the Bank on the Variation. She did not write to the Bank on the Variation of the increase or decrease of interest. 104. On Page 153, the letter talked of the increase of the ledger fees. On Page 132, the letter dated 20th December, 1999 indicated that the ledger fees had changed together with insurance. The witness had never written a letter of protest, and the witness’s accounts were in arrears. The witness confirmed that the witness had received many letters from HF and that the witness had responded to them. On Page 44 of the 1st Defendant’s bundle, the witness had requested more time to repay, as shown in the letter dated 16 th December, 1996. The witness had also requested to offer the property to offset the loan. 105. The witness remembered offering tenant income to offset the loan. The witness had given that offer and had informed HF that the Kenya Navy were to become tenants and that the rent would be used for offsetting the loan. The witness also remembered stating that the witness would sell her daughter’s car to offset the loan. On Page 56 of the 1 st Defendant’s bundle, the witness confirmed that the car fetched a sum of Kenya Shillings Eight Hundred Thousand (Kshs. 800,000/-) and that a Motor Vehicle Registration Book JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 46 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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(log book) for the vehicle had been enclosed. According to her and on Pages 57 and 58 she did not know there was an auction. 106. According to PW - 3, on Page 55, HF’s Advocates had been asked to carry out the auction and the letter had been copied to the witness. The witness referred to Page 62 – the Notifications of Sale by Watts Enterprises. The witness stated that the notification of sale had not been served upon her, i.e., the notification of sale was never served to the witness. The witness further stated that the letters on Pages 63 and 73 were not legible. 107. The witness did not write to the Bank after the expert had conducted the exercise. The witness had requested from HF the receipts and invoices issued by the Advocates and Auctioneers, and HF had agreed to send them to the witness. The witness then forwarded those documents to IRAC for re examination. The witness did not write to the Bank as they had requested. After this, the witness decided to go to IRAC/Experts. The witness referred to the letter dated 4 th March, 2004. It contained proposals by HF on the settlement, but by that time the witness had already gone to the IRAC expert. Besides, the witness stated that the witness had never seen that letter. The witness also referred to a Certificate of Insurance. C. Cross Examination of PW - 3 by M/s. Mboku Advocate. JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 47 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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108. PW - 3 confirmed that this was not the first loan the witness had taken from different banks, but it was the first one the witness had taken from HF. The witness was aware that the property had been sold. The witness confirmed being aware that the property had been transferred to the 2 nd and 3rd Defendants. The witness informed the Court that that she was still in occupation of the premises but was not paying any rent to them. 109. On 31st May, 2023, the Plaintiffs marked their case closed through their legal representative Mr. Kinyua Advocate. V. The 1st Defendant case Opening Remarks by M/s. Maina Advocate. 110. The Learned Counsel for the 1st Defendant provided the Court with some brief opening remarks on the main substratum of its case. She stated that pursuant the application made by the Plaintiff, the 1st Defendant through a duly executed Charge, offered and indeed provided her with a Loan facility of a sum of Kenya Shillings Two Million (Kshs. 2, 000, 000.00/=), terms and conditions stipulated thereof. 111. As a collateral security, she gave a security – the title to the suit premises. However, after the loan was disbursed, she fell in arrears. She gave various proposals on how to off – set it. She was accommodated and the account fell into further arrears. Eventually, the 1st Defendant had the property sold procedurally. The Learned Counsel averred that the bank would make a case and that there were no irregularities in the process. JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 48 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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112. The 1st Defendant called their witness on 19th November, 2024 at 12.30 pm A. Examination in Chief of DW - 1 by M/s Maina Advocate. 113. DW - 1 was sworn and testified in the English language. He was called RICHARD MUNYUA KIAMBI, a citizen of Kenya holding the national identity card bearing all the particulars as shown to court during the hearing of the case. He was a Land Valuer. He had worked with Tyson Limited. He was a graduate and held a Diploma from ISK. He had undertaken the valuation exercise and prepared the Valuation report in March, 2007, as contained at Pages 122 to 133 of the 1 st Defendant’s bundle. He wished to produce the Land Valuer’s Report as evidence – 1st Defendant’s Exhibit 1. B. Cross Examination of DW - 1 by Mr. Lijode Advocate. 114. According to the witness the first value of the suit premises , being the open market value, had been assessed at a sum of Kenya Shillings Ten Million (Kshs. 10,000,000/-). The second value, being the mortgage value, had been assessed at a sum of Kenya Shillings Nine Million (Kshs. 9,000,000/-). While the third value, being the forced sale value, had been assessed at a sum of Kenya Shillings Eight Million (Kshs. 8,000,000/-). C. Cross - Examination of 1st Defendant – DW - 1 by Mr. Kinyua Advocate. 115. DW - 1 confirmed that he had taken photographs of the suit premises as seen at Page 125. This was done from outside the property, and that was why they did not show the ground JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 49 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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floor. The witness had entered the property and had found a worker – either a domestic or gardener – who had let him in. The witness entered the house having been let in by the worker/gardener after which he went upstairs. 116. The witness stated that he had never seen the third room. He had seen two (2) rooms on the first floor. He had seen the family room with terrace, the study room, and two ( 2 ) double bedrooms, as shown at Page 129. The witness stated that he had never taken the photographs from inside, as there was a dispute on distress, and he had avoided doing anything that might raise suspicion. He stated that the photographs would not have added any value. The witness confirmed that he had seen the valuation report by Mr. Maina – who was not late – and that there was nothing in its contents with which he disagreed with. D.Re - Examination of DW - 1 by M/s. Maina Advocate. 117. The witness reiterated that his report had captured all the rooms he had seen on the first floor. That was all. 118. The 1st Defendant called DW - 2 who testified that: A. Examination in Chief of DW - 2 by M/s. Maina Advocate. 119. DW - 2 was sworn and testified in English language. He was called PAUL MABEYA NYAMARI, a citizen of Kenya and holder of the national identity card bearing all the particulars as shown to court during the hearing. He had signed a witness statement on 27th March, 2023 consisting of 102 Paragraphs. He had filed a List of Documents dated 21 st July, 2017 JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 50 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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comprising 1 to 87 documents. The witness confirmed that the 1st Defendant’s Exhibits 2 to 88 had been produced. B. Cross Examination of DW - 2 by Mr. Lijoode Advocate. 120. DW - 2 told the court that the valuers valued the report. With reference to the Defendant’s bundle pages 122 to 131, the witness told the court that the report and valuation were by Tyson Limited. The witness referred to Page 69 by Maina Chege & Company Valuers. The witness stated that he had never seen the said report. The witness stated that he knew the Bank had sold the property. It had been meant to be sold through public auction, but it had later been sold through private treaty. 121. The witness referred to Page 139 of the Defendant’s documents – a Sale Agreement. The sale agreement showed that the consideration had been a sum of Kenya Shillings Eight Million Five Hundred Thousand (Kshs. 8,500,000/=). On Page 142, it was the Transfer from the 1 st to the 2nd Chargee. Pages 146 to 150 contained the title entries. C. Cross examination of DW - 2 by Mr. Kinyua Advocate. 122. The witness referred to Page 139 of the 1 st Defendant’s bundle, which showed HFCK selling the house (Suit premises). The property was LR No. MN Section 1/3160, New Nyali Estate. The witness stated that HFCK had not been the registered proprietors of the property. The witness further stated that the whole document did not mention the name Rose Wangari Ndegwa. The agreement did not mention a Charge anywhere. It did not mention the Statutory Power of JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 51 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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Sale, although ideally such details would have been mentioned in the legal instrument. 123. The witness concluded that, looking at the sale agreement, it appeared that the property had been owned by HFCK – but only with the assistance of other documents. The witness referred to Page 134, which showed Amesnet Enterprises Ltd. as the Real Estate agents. The witness stated that if one used security and the Chargor defaulted, the property reverted back to the Bank. The witness referred to the witness statement and noted that there was no letter by the auctioneer stating that they had tried to sell by public auction but had failed, and there was no proof of advertisement by auction. The witness explained that one of the purposes of public auction was to test the level of knowledge of sale, and that through public auction the audience was larger. 124. The witness referred to Page 130, which showed the value at at a sum of Kenya Shillings Ten Million (Kshs. 10,000,000/-) as the open market value, but the property had been sold at a sum of Kenya Shillings Eight Million (Kshs. 8,000,000/-). The witness stated that the Bank could decide to sell the property for less than the market value. The witness emphasized that Rose Wangari Ndegwa had never been involved in the process. The witness referred to the 1st Defendant’s Exhibit number 84, being the bank statement, and stated that had the property not been sold, the reflected balance would not have appeared. The witness referred to Page 134 and stated that he did not know the Directors of Amesnet Enterprises Ltd. JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 52 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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He confirmed that the property had been sold at a sum of Kenya Shillings Eight Million Five Hundred Thousand (Kshs. 8,500,000/-) and that it was the Bank which had made that decision. 125. DW - 2 referred to Page 48, being the letter dated 23 rd May, 1997 by Bowyer Mahihu & Company Advocates. The witness stated that they had been paid for their services rendered. They had issued a 21-days’ notice, which was a regular notice. The fees had been charged from Rose Wangari Ndegwa’s accounts. From the letter, it did not imply whether the property was to be sold by public auction. 126. The witness referred to Page 76 and stated that he did not know who had made the decision to sell the property through a Private Treaty and not by public auction. He stated that he had also questioned this. The witness stated that he did not know why the auctioneers had been paid yet they had never executed the job. He stated that he had also questioned why the money had been paid when the property had never been sold by public auction. DW - 2 referred to the Land Valuers’ reports in the Plaintiff’s bundle at Pages 69 to 75. He stated that he had just seen the report in court. The report indicated a value of a sum of Kenya Shillings Twelve Million (Kshs. 12,000,000/-), but Tyson Limited had valued the property at a sum of Kenya Shillings Ten Million (Kshs. 10,000,000/-). Tyson Limited had been hired by the Bank and had given the actual values. The witness stated that Tyson Limited never undervalued. JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 53 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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127. The witness stated that he had worked with other banks and had reviewed property values, and that it was common to have photographs. The witness referred to Page 1 of the 1 st Defendant’s bundle and stated that the property had been charged at 21%, which had been the market value. DW - 2 referred to Page 3. The witness referred to Page 5, clause 16, and stated that the interest had been to be charged annually, but it had been charged monthly. He explained that, to him, it had been compounded monthly, but he agreed that in that case it would not have been the same or commensurate. He referred to Page 34, where that had been explained. 128. The witness referred to Page 2. The witness referred to Page 8 of the Defendant’s documents and stated that Rose Wangari had been instructed to pay the lawyers, M/s. Bryson Inamdar and Bowyer, a sum of Kenya Shillings Fifteen Thousand Nine Eighty Nine Hundred (Kshs. 15,989/-). The witness referred to Page 48 and stated that Bowyer, Mahihu & Company had never been called to give evidence in this matter, yet they had prepared the Charge. He noted that Sally Mahihu Advocate was still practicing. The witness stated that it would have been fair to give the client a Land Valuer’s Report. He emphasized that the owner of the property had a right to redeem the property and to be notified. He stated that under Section 96 she had not been informed of the price of the sale, as HFCK had by then become the owners of the property. D.Re - Examination of DW - 2 by M/s. Maina Advocate. JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 54 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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129. DW - 2 referred to Page 1 and questioned why the interest there had been 18% yet it had been charged at 21%. The witness referred to Page 4, clause 7, which confirmed that the interest had been on a monthly basis. The witness referred to Page 5, clauses 10 and 11. The witness referred to Page 17, the second last paragraph from the bottom, and to Page 18(iii) on the fees paid to the Law firm of Messrs. Inamdar & Company Advocates, which had to have prepared a Charge. The witness referred to Page 9, being the letter dated 9 th February, 1993, and stated that no additional legal fees deposit had been paid. 130. The witness referred to Page 51, being the letter dated 7 th August, 1997, which had indicated that the sale was to be by public auction and private treaty. DW - 2 referred to Page 67, being the letter by the auctioneers dated 7 th October, 1998, informing the Bank that the auction had been suspended. The witness stated that the right of the Bank in case of default was to take possession of the property and sell it. He referred to Page 142, being the Transfer by the Chargee, which did not refer to Rose Wangari Ndegwa as she had never signed it. 131. DW - 2 referred to Page 130, being the values of the property by Tyson, Limited and stated that the Bank had sold the property at the forced sale value of Kenya Shillings Eight Million Five Hundred Thousand (Kshs. 8,500,000/=). 132. M/s Maina Advocate on 19th November, 2024 marked the 1st Defendant’s case closed. VI. The case by the 2nd and 3rd Defendants JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 55 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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133. The 2nd and 3rd Defendants called their witness on 2 nd December, 2024 who testified that: A. Examination in Chief of 2 nd Defendant Witness by Mr. Lijoode Advocate. 134. DW - 3 was sworn and testified in English language. She was called SHEYLA ANNE KASYOKA MWANZIA. She lived in Carolina, U.S.A. She was present to give evidence on behalf of the 2nd and 3rd Defendants, who were her parents. She had a Power of Attorney dated 7th June, 2021. She referred to the 1st Defendant’s documents, Defendant’s Exhibit Number 1. The witness stated that the 2nd Defendant had recorded statements dated 2nd March, 2021. She was aware that they had filed documents dated 2nd March, 2021, comprising six documents. She referred to the 2 nd and 3rd Defendants’ Exhibits Numbers 2 to 7. The witness stated that she had recorded her witness statement dated 11 th December, 2021. She confirmed that she knew the house in question was occupied by the Plaintiff. B. Cross Examination of 2nd Defendant by M/s. Maina Advocate. 135. The witness stated that her parents had issued a banker’s cheque and that the balance had been to be paid through the loan. She stated that they had not been servicing the loan as the Plaintiff had failed to provide vacant possession. C. Cross Examination of 2nd Defendant by Mr. Kinyua Advocate. JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 56 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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136. The witness stated that her mother had been receiving care. She did not have a Power of Attorney from her mother. She stated that they had considered the Counter-Claim. The witness recalled that they had tried to get Rose Wangari Ndegwa out of the land and house and had filed a case. She stated that she had not been aware of the law to obtain possession of the suit property. The witness stated that she had not seen any agreement for sale by HFCK. From the best of her knowledge, the Bank had been selling the property as it had the right, and her parents had been ready to buy the land. 137. The witness stated that her parents had come to know about the property as they had been looking for property at the Coast. It had been advertised and they had therefore engaged. The witness stated that she strongly believed it had been public and not an in-house arrangement. She stated that she did not know whether there had been an advertisement of the sale of the property in the newspaper. The witness stated that she did not know whether they had executed the charged documents. She stated that she did not know any further information from HFCK. D.Re - Examination of the 2 nd Defendant Witness by Mr. Lijoode Advocate. 138. The witness stated that she knew of a case her parents had filed over the property, but she did not know whether it had proceeded further. JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 57 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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139. The 2nd and 3rd Defendant closed their case through their counsel Mr. Lijoode Advocate on 2nd December, 2024. VII. Submissions 140. Upon the closure of the case, the Plaintiff and the 1 st, 2nd, 3rd and 4th Defendants were directed by the Honorable Court to file written submissions within stipulated time – lines. 141. Pursuant to that, only both the Plaintiff and the 1 st Defendant filed their written submissions. The Honorable Court was never able to access the submissions by the other parties either from the Judiciary CTS Portal nor the ELC Registry as it were. 142. The court reserved the delivery of the Judgment on notice. Eventually, the Judgement was delivered on 25 th September, 2026 accordingly. A. The Written Submission by the Plaintiff 143. Through the Law firm of Messrs. F. Kinyua Kamundi & Muyaa Advocates, the Plaintiff filed her written submissions dated 18th January, 2025. Mr. Kinyua Advocate commenced his submissions by providing a brief background of the matter. According to the Learned Counsel, the Plaintiff was the absolute and legal registered owner and in possession of plot known as Land Reference No.3160/1/MN registered at the registry of titles, Mombasa as CR No. 18132 - the suit premises. She approached the 1 st Defendant for a loan of a sum of Kenya Shillings Two Million (Kshs. 2,000,000.00/=) in the year 1992 and the loan was approved resulting into an “Offer to Advance” dated 24th August, 1992 at a concessionary JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 58 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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rate of interest of 18% per annum. The loan was repayable in 20 years. It appeared that the offer to advance was abandoned midway and replaced with another “Offer to Advance” dated 18th January, 1993 at a concessionary rate of interest at 20% per annum. That offer was on the terms therein stated and incorporated the 1st Defendant’s Loan Conditions, 1978 Edition. 144. It was the Plaintiff's case that she actually serviced the loan and lawful interest as well as other lawful charges and she was not in arrears. She had in fact pre - paid the instalments on the capital and interest and still had 7 years remaining to complete the lawful balance then standing at a sum of Kenya Shillings Seven Twenty Six Thousand Five Fourty Five Hundred and Seventy Five Cents (Kshs. 726,545.75/=) as the Court could see from the witness statement by Mr. Wilfred Abincha Onono, the Plaintiff's expert witness, dated 23 rd July, 2021. He was the Managing Consultant at a legal entity trading in the names and style of “ Interest Rates Advisory Centre (IRAC)”. The Plaintiff averred in her Amended Plaint, her witness statement and her testimony that the 1 st Defendant's advocate Ms. Sally Mahihu never explained to her the effect of the proviso of Section 69 (1) of the Indian Transfer of Property Act 1882 and therefore the Certificate endorsed on the Charge was false meaning that the 1 st Defendant had no Statutory Power of Sale. Although Ms. Sally Mahihu still practised as an Advocate but never provided a witness statement and was not called to testify on behalf of JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 59 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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the 1st Defendant. Therefore, the Plaintiff's evidence on that issue was uncontested. 145. The Learned Counsel submitted that the Plaintiff learnt of the 1st Defendant's intention to sell the suit premises and filed this suit in the High Court (Commercial Case No. 8 of 2007) on 12 th March, 2007. The 1st Defendant entered appearance to the suit and filed its Defence but unknown to the Plaintiff, the 1 st Defendant, falsely claiming to the owner of the suit premises sold and transferred it to the 2 nd and 3rd Defendants through Private Treaty vide an undated agreement of sale signed on 30th April, 2007 and a transfer of even date. At that time, this suit was pending as it had been filed only 49 days earlier. All transactions concerning the suit premises were governed by the Indian Transfer of Property Act, 1882 (repealed in 2012). 146. The 1st Defendant knew of the filing of this suit because it filed the Memorandum of Appearance dated 28 th March, 2007 and Defence dated 11th April, 2007 through the Law firm of Messrs. Ahmednasir, Abdikadir & Company Advocates. The sale and transfer of the suit premises on 30 th April, 2007, only 19 days after the 1st Defendant filed its Defence violated the doctrine of lis pendens as provided for under the provision of Section 52 of the Transfer of Property Act (Now Repealed). On discovering the sale of the suit premises the Plaintiff sought and obtained leave to amend the Plaint to join the 2 nd, 3rd and 4th Defendants to this suit. The Plaint was amended on 4 th July, 2007. JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 60 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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147. The loan granted by the 1st Defendant to the Plaintiff was secured by the Plaintiff's dwelling house. The 1 st Defendant is a Mortgage Finance Company and under the Mortgages (Special Provisions) Act Cap. 304 the 1 st Defendant was obliged to commence proceedings to evict the Plaintiff so as to give vacant possession to the 2 nd and 3rd Defendants and in special condition number 6 of the agreement it undertook to meet the legal and all other incidental costs for procuring vacant possession. There was no suit nor Counter - Claim by the 1st Defendant against the Plaintiff for vacant possession of the suit premises. 148. According to the Learned Counsel, by a Plaint dated July, 2007 the 2nd and 3rd Defendants filed a civil suit “ Mombasa HCCC No. 158 of 2007” against the Plaintiff seeking vacant possession and an order for eviction of the Plaintiff from the suit premises, general damages for trespass, damages for loss of rent at a sum of Kenya Shillings Ten Million (Kshs. 10,000.00/=) per month from 1st June, 2007 until the Plaintiff delivers vacant possession, costs and interest. That suit should, over the overriding objective be determined by this suit because the Plaintiffs in that suit are the 2 nd and 3rd Defendants in this suit and the subject matter and the alleged cause of action were the same. It was not heard separately, according to the Learned Counsel it may have been consolidated with this suit. 149. Under the Mortgages (Special Provisions) Act, the power and authority to file suits for vacant possession of property sold in JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 61 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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exercise of statutory power of sale is vested in the Chargee / Mortgagee and not in the Purchasers when there has been a proper exercise of statutory power of sale. The 1 st Defendant did not file any suit nor Counter - Claim for possession because the sale was fraudulent. There was no statutory power of sale and if there was, the power had not arisen as the Plaintiff had neither been in arrears nor defaulted. Such a suit would have had no merit and would have been dismissed. That is why the 1st Defendant covenanted to finance the suit by the 2nd and 3rd Defendants for vacant possession. The 2nd and 3rd Defendants filed their Statement of Defence dated 14 th September, 2007 to this suit. 150. According to the Learned Counsel, the Plaintiff testified and relied on her witness statement and Lists and Bundles of Documents. She called Mr. Onono who relied on his witness statement and his report and Mr. Chege (since deceased) who produced his valuation report of the suit premises. The Defendants with the exception of the 4th Defendant called their witnesses who relied on their witness statements and lists and bundle of documents. 151. The Learned Counsel submitted that the reliefs sought in the Amended Plaint were as follows:i. A declaration that the interest rate provided for in the Offer to Advance dated 18th January, 1993 was unlawful, illegal, unenforceable and irrecoverable. ii. A declaration that the interest rate provided for in the document dated 7th September, 1993 and registered as a Charge on 14th September, 1993 on Title Number C.R. JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 62 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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18132 Subdivision No. 3160/MN was unlawful, illegal, unenforceable and irrecoverable. iii. A declaration that the document dated 7 th September, 1993 and registered as a Charge on 14th September, 1993 purporting to be a Charge is incompetent, illegal, unlawful, null and void and is incapable of conferring any interest upon the Defendant. iv. A declaration that the 1st Defendant has no statutory power of sale over Title Number C.R. 18132 subdivision No.3160/MN. v. A declaration that all legal, auctioneers and other charges debited by the 1st Defendant from the Plaintiff's account in purported enforcement of the provisions of the Charge dated 7.9.1993 were unlawful and incompetent. vi. An order for accounts as to what amount, if any, is lawfully due from the plaintiff to the 1st defendant on the principal sum of Kshs. 2,000,000.00 together with lawful interest and lawful charges less all deposits made by the Plaintiff - towards repayment. vii. A perpetual injunction restraining the defendants by itself themselves, their its directors, managers, auctioneers, employees or agents from selling or offering for sale or advertising for sale or charging, leasing, subdividing, pledging or in any manner disposing of any interest in Title Number C.R. 18132 subdivision No. 3160/1/MN and from evicting the plaintiff from the said property and from trespassing thereon. viii. A declaration that it was illegal, unlawful and a breach of contract as contained in the Offer to Advance dated 18 th January, 1993 for the defendant to increase ledger fees from Kshs. 50.00 per month to Kshs. 250.00 per month and to charge and levy other charges, fees and levies not contained in the Offer to Advance dated 18 th January, 1993. JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 63 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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ix. A declaration that the interest charged beyond the maximum allowed by law, the charges, levies and fees charged contrary to the Offer to Advance dated 18 th January, 1993and the increase in charges, levies, fees and interest rate without the permission of the Minister clogged and fettered the Plaintiff’s right of redemption and the 1st Defendant thereby forfeited any statutory power of sale it may have had over the suit premises. x. General, aggravated and punitive damages against the 1st defendant for breach of contract and for selling or purporting to sell the suit premises to the 2nd and 3rd Defendants. xi. A declaration that clause 4 of the Charge dated 7 th September, 1993 is in breach of the contract contained in the Offer to Advance dated 18 th January, 1993. A declaration that the 1st defendant had not served a valid Statutory Notice under Section 69A (a) of the Transfer of Property Act, 1882 upon the plaintiff and that therefore it could not exercise any statutory power of sale over title Number C.R. 18132 subdivision No.3160/1/MN. xii. A mandatory injunction or an order directing the 4th Defendant to cancel the registration of the Transfer dated 30th April, 2007 and the Charge dated 30th April, 2007. xiii. Nullification and cancellation of the registration of the purported charge and release of the original title documents of subdivision No.3160/I/MN to the plaintiff at the defendant’s expenses. xiv. A declaration that the sale of Title Number No. C.R. 18132 sub - division No.3160/1/MN and the transfer and charge dated 30.4.2007 are illegal, fraudulent and null and void. xv. A re-conveyance of the suit premises to the plaintiff by the defendants jointly and severally and at their costs. xvi. Whether the 2nd and 3rd Defendants’ suit against the Plaintiff is competent and merited. JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 64 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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xvii. Costs on the 2nd and 3rd Defendants’ suit against the Plaintiff. xviii. Costs and interest. 152. The Learned Counsel submitted that the Plaintiff had filed her own Statement of Issues dated 27th November, 2010, identifying twenty distinct and separate issues. She had found it more convenient to address each of the reliefs sought, which she treated as the issues for determination, instead of setting out the issues and then repeating them when dealing with the remedies. 153. The Learned Counsel on the submissions on reliefs sought and a declaration that the interest rate provided for in the Offer to Advance dated 18th January, 1993 was unlawful, illegal, unenforceable and irrecoverable submitted that interest was regulated by the Central Bank of Kenya Act. The interest rate in that offer was 20% per annum while the then legal maximum was 19% per annum. See the report and witness statement of Mr. Onono. Indeed in the first offer to advance dated 24 th August, 1992 interest rate was fixed at 19% per annum and the Plaintiff was offered a concessionary rate of 18% per annum. 154. On the declaration that the interest rate provided for in the document dated 7th September, 1993 and registered as a Charge on 14th September, 1993 on Title Number C.R. 18132 Sub - division No.3160/MN was unlawful, illegal, unenforceable and irrecoverable. JUDGMENT: ELC. CASE NO. 147 OF 2018 The Learned Page 65 of 146 Counsel reiterated his HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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submissions above that the maximum legal interest was 19% and the 1st Defendant ought not to have levied interest at 21% per annum which it kept revising upwards with the result that the monthly instalment short up exponentially. As interest was excessive beyond the maximum legal limit the 1 st Defendant could not reap benefits in violations of the law as it then stood. It is the levying of excessive interest that created an artificial default. 155. Under the 1st Defendant’s published Loan Conditions, 1998 Edition interest was to be calculated on annual rests but under the charge interest was compounded monthly meaning that the 1st Defendant charged more in terms of compound interest. This alteration of the Loan Agreement should have been explained to the Plaintiff before she signed the charge. 156. On the relief of a declaration that the interest rate provided for in the document dated 7th September, 1993 and registered as a Charge on 14th September, 1993 on Title Number C.R. 18132 Sub - division No.3160/MN was unlawful, illegal, unenforceable and irrecoverable, the Learned Counsel reiterated their submissions above. The maximum legal interest was 19% and the 1st Defendant ought not to have levied interest at 21% per annum which it kept revising upwards with the result that the monthly instalment short up exponentially. As interest was excessive beyond the maximum legal limit the 1st Defendant could not reap benefits in violations of the law as it then stood. It is the levying of excessive interest that created an artificial default. JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 66 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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157. Under the 1st Defendant's published Loan Conditions, 1998 Edition interest was to be calculated on annual rests but under the charge interest was compounded monthly meaning that the 1st Defendant charged more in terms of compound interest. This alteration of the Loan Agreement should have been explained to the Plaintiff before she signed the charge. 158. On the remedy for the declaration that the document dated 7th September, 1993 and registered as a Charge on 14 th September, 1993 purporting to be a Charge was incompetent, illegal, unlawful, null and void and is incapable of conferring any interest upon the Defendant. The Learned Counsel contended that the particulars were given in paragraph 12 of the Amended Plaint. According to the Learned Counsel, it was not drawn by an advocate. The name of Law firm of Messrs. Bowyer Mahihu & Co. appeared as a cover paper but it was not part of the Charged document. The name and address of an advocate drawing any conveyancing document ordinarily appeared at the bottom of the document and should be part of the document. 159. There was no signature by the Plaintiff acknowledging that she understood the effect of the provision of Section 69 (1) of the ITPA as that Section was not explained to her. The document was in severe conflict with the offer to advance and with the 1st Defendant’s Loans Conditions, 1978 Edition. In particular it provided for interest beyond the legal maximum allowed by law at the time and, for calculation of interest monthly instead of monthly. This meant that interest accruing JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 67 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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on one month would itself earn interest on subsequent months. 160. On the declaration that the 1st Defendant had no statutory power of sale over title number C.R. 18132 sub - division No.3160/MN. It was the contention of the Learned Counsel that when the 1st Defendant executed the Sale Agreement on 30th April, 2007 it did so as purported owner and not as a bank or mortgage institution exercising statutory power of sale. In the absence of an explanation and valid Certificate under the provision of Section 69 (1) of the Indian Transfer of Property Act (now repealed) the Charge never created a Statutory Power of Sale over the suit premises. That had been an issue from the original Plaint and was repeated in the Amended Plaint. The person who issued the Certificate on Section 69 (1) in that Charge was M/s. Sally Muchoki Mahihu who still practiced as an advocate. If she had explained that section, nothing would have been easier for her to provide a Witness Statement and to attend Court to testify. When a party to civil proceedings withholds material evidence the Court should infer that the evidence so withheld was against the interests of that party. 161. According to the Learned Counsel, in the absence of statutory power of sale the 1st Defendant had no authority or power to sell the suit premises whether neither public auction nor through Private Treaty. The Plaintiff had pre - paid her monthly instalments and was not in default in spite of the illegal interest and other charges. If the Plaintiff was in arrears JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 68 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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as alleged or defaulted in any instalment, the remedy available to the 1st Defendant was a suit against the Plaintiff. 162. Further on the relief for the declaration that all legal, auctioneers and other charges debited by the 1 st Defendant from the plaintiff's account in purported enforcement of the provisions of the Charge dated 7th September,1993 were unlawful and incompetent. The Learned Counsel submitted that it was a common ground that the property was never advertised for sale by public auction and was not sold by public auction even though the 1st Defendant had on multiple occasions instructed auctioneers and paid them from the Plaintiff's account. Every cent paid by the 1st Defendant to the auctioneers and the Law firm of Messrs. Bowyer Mahihu & Co. Advocates and debited in the Plaintiff's account in purported auction sale of the suit premises was fraudulent and was recoverable. 163. According to the Learned Counsel whenever a bank debits the Chargor’s account with monies that were not due and payable and with illegal charges, the Chargee makes it difficult for the Chargor to redeem the property. Therefore it constituted a fetter on the equity of redemption. 164. The Learned Counsel submitted on the order for accounts as to what amount, if any, is lawfully due from the Plaintiff to the 1st Defendant on the principal sum of a sum of Kenya Shillings Two Million (Kshs. 2,000,000.00/=) together with lawful interest and lawful charges less all deposits made by the Plaintiff towards repayment, the Learned Counsel submitted JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 69 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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that he referred to the provision of Order 20 of the Civil Procedure Rules, 2010. The Amended Plaint contained a prayer for an account. There was no preliminary question to be tried on the question of accounts particularly because of the illegal charges and excessive rates of interest. In the circumstances the Court had the jurisdiction to grant this order. 165. On the order for perpetual injunction restraining the Defendants by itself themselves, their its directors, managers, auctioneers, employees or agents from selling or offering for sale or advertising for sale or charging, leasing, subdividing, pledging or in any manner disposing of any interest in Title Number C.R. 18132 sub - division No.3160/1/MN and from evicting the plaintiff from the said property and from trespassing thereon. The Learned Counsel submitted that if the Court agreed that there was no statutory power of sale or that it had not accrued, that the charge was unenforceable and that the agreement for sale was null and void, then it should grant this prayer particularly because of the evidence of the 1st Defendant’s manager during cross examination that upon any default the property charged to a bank automatically became the property of the bank/Chargee with no equity of redemption. 166. The 1st Defendant knowingly foreclosed the Plaintiff's equity of redemption when it assumed ownership of the suit premises consequent to the artificial default. They know from evidence of the 2nd and 3rd Defendant’s witness that the 2 nd and 3rd JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 70 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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Defendants no longer serviced the loan. The Court would recall that the 1st Defendant partially financed the 2 nd and 3rd Defendants to purchase the suit premises. That was why the suit premises were charged by the 2nd and 3rd Defendants to the 1st Defendant. To the Learned Counsel, the 1 st Defendant may sell the suit premises to third parties upon refusal by the 1st and 2nd Defendants to service that facility. 167. On the declaration that it was illegal, unlawful and a breach of contract as contained in the Offer to Advance dated 18 th January, 1993 for the Defendant to increase ledger fees from a sum of Kenya Shillings Fifty (Kshs. 50.00/=) per month to Kenya Shillings One Hundred and Fifty (Kshs.250.00/=) per month and to charge and levy other charges, fees and levies not contained in the Offer to Advance dated 18 th January, 1993. The Learned Counsel averred that no charges by way of legal fees or other fees could be levied or increased against a mortgagor without the written authority of the Minister for Finance as the law then was. These may seem to be nominal but in the year 1993, Kenya Shillings Fifty (Kshs. 50.00/=) could buy a lot. Additionally, this was not a one off debit but continued for over a decade. The 1st Defendant never produced any written authority from the Minister for Finance to increase ledger and other fees. 168. The Plaintiff and the 1st Defendant had agreed on the insurance value of the property for purposes of premiums. That value could not be increased without the Plaintiff’s written consent. The 1st Defendant kept on increasing the JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 71 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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value because it was benefitting from higher premiums it continued debiting from the Plaintiff’s account. The 1 st Defendant was an insurance broker. Increasing the insurance value at the property led to the raising of premiums which in turn burdened the Plaintiff with premiums she had not covenanted to pay. The Learned Counsel relied on Clause 15A of the 1st Defendant’s Loan Conditions 1978 Edition requiring the Plaintiff to advise the 1st Defendant by letter if she required the sum insured to be increased. 169. On the declaration that the interest charged beyond the maximum allowed by law. The charges, levies and fees charged contrary to the Offer to Advance dated 18 th January, 1993 and the increase in charges, levies, fees and interest rate without the permission of the Minister clogged and fettered the Plaintiff's right of redemption and the 1 st defendant thereby forfeited any statutory power of sale it may have had over the suit premises. The Learned Counsel reiterated his submissions in the proceeding paragraphs. In answer to something so serious concerning the rate of interest the 1st Defendant stated in Paragraph 96 (3) of its witness statement that it did not require the permission of the Minister for Finance to vary the rate of interest. Such was the power that banks, financial and mortgage institutions had allocated to themselves in those days enabling them to operate outside the law. By the unlawful interest and unauthorized charges the 1st Defendant fettered the Plaintiff's equity of redemption. JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 72 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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170. A discussion on the rate of interest cannot be complete without determining the manner in which interest is to be compounded. It was his submission that under the 1 st Defendant’s published Loan Conditions interest was calculated on annual rests and not only monthly rests. This was an issue distinct and separate from the dispute on the rate of interest. 171. On the general, aggravated and punitive damages against the 1st Defendant for breach of contract and for selling or purporting to sell the suit premises to the 2 nd and 3rd Defendants. The Learned Counsel asserted that they proposed on this head a sum of Kenya Shillings Three Million Six Hundred Thousand (Kshs. 3,600,000.00/=) for the reason that the 1st Defendant must be reminded that it could only profit within the law and that an alleged default in payment of any instalment does not extinguish the equity of redemption and does not operate of a transfer of charged property to the Chargee so as to enable the Chargee to sell the property as registered proprietor. He referred to Paragraph 42 (ii) of the Amended Plaint. The 1st Defendant had on 2nd March, 2007 lost an application for injunction in the civil case of “ Milimani Commercial and Tax Division Civil Case No. 522 of 2006 “ in which it had sold charged property by private treaty. Less than 2 months later it repeated the same impunity when it sold the suit premises in a similar manner describing itself as owner. JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 73 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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172. The Learned Counsel further submitted that the 1 st Defendant knew that the sale was unlawful as it took place when these proceedings were pending in violation of provision of Section 52 of the Indian Transfer of Properties Act (now repealed). Applying the rule of law as one of the National values and principles of governance, the Learned Counsel urged the Court to hold that sale of the suit premises only 19 days after it filed the defence violated that law. The Learned Counsel could not over emphasized the fact that the 1 st Defendant had already delivered its Defence before it sold the suit premises by private treaty 19 days later. It sought to prevent the Plaintiff from seeking orders of injunction from Court and the best way to do that was to sell the property by private treaty. The speed at which the property was sold after the 1 st Defendant read the Plaint should leave no doubt in the mind of the Court that the 1st Defendant knew that the suit would succeed. This is gross misconduct by a bank against an elderly woman in poor health that must be replicated and punished. 173. The 1st Defendant sold the property by private treaty without a valuation. The 1st Defendant had not tested the market by advertising the property for sale in the daily newspapers of nationwide circulation. In the 1 st Defendant’s Further List of Documents dated 15th December, 2021 and filed on 20 th April, 2022 the Court could see the Mortgage Account Statement up to 31st December, 2007 by which the 1st Defendant still demands capital in the sum of Kenya Shillings Four Seventy JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 74 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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Three Thousand Nine Sixty Eight Hundred and Ninety Cents (Kshs. 473,968.90/=) and arrears of a sum of Kenya Shillings One Million Two twelve Thousand Nine Eighty Four Hundred (Kshs. 1,212,984.00/=). Assuming that the 1 st Defendant had any statutory power of sale and had valued the property and sold at a minimum of a sum of Kenya Shillings Twelve Million (Kshs.12,000,000.00/=) it would still not be demanding money from the Plaintiff. 174. The Plaintiff could not use the property as security for any other loan as the title was still held by the 1 st Defendant on the charge by the 2nd and 3rd Defendants. The property was in new Nyali 3rd Avenue which had for over 10 years become a high density area. In accessing these damages, the Learned Counsel urged the Court to consider that factor. Damages are proposed in that sum because the Plaintiff was not in arrears and had pre - paid her monthly instalments while she still had 7 years to pay off the balance of the loan 175. On the declaration that clause 4 of the Charge dated 7 th September, 993 was in breach of the contract contained in the Offer to Advance dated 18th January, 1993. A declaration that the 1st Defendant had not served a valid Statutory Notice under the provision of Section 69A (a) of the Transfer of Property Act, 1882 upon the Plaintiff and that therefore it could not exercise any statutory power of sale over title Number C.R. 18132 subdivision No. 3160/1/MN. The Learned Counsel reiterated his submissions in the preceding paragraphs. A statutory notice must be a notice demanding JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 75 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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monies lawfully due if any installment is in arrears. The Plaintiff had pre - paid the instalments. There was no statutory power of sale. 176. On the mandatory injunction or an order directing the 4 th Defendant to cancel the registration of the Transfer and Charge respectively both dated 30 th April, 2007. The Learned Counsel asserted that as the 1 st Defendant had no statutory power of sale, that any such power had not accrued, that it sold the property to recover monies that were not due and it purported to sell the suit premises as the owner having unlawfully extinguished the equity of redemption this order is merited. There was no need to maintain the Charge as the 1 st Defendant had refused to render accounts. Any claim by the 1st Defendant for any money under the charge is now time barred as with the nullification of the charge what remains is the contract dated January, 1993. Alternatively the Charge operated as a contract from September, 1993 and the 1 st Defendant’s interest under that contract became time barred in September. 1999. 177. There was no legitimate valuation of the property before the sale. The valuation report relied upon by the 1 st Defendant was prepared by a valuer who never entered the property. He falsely alleged that he was let into the property by the Plaintiff's domestic worker but it defeated logic that he did not take any photographs from within the property and the house. Photographs taken from the road only serve to identify that there was a physical structure on the plot but never assisted JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 76 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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in the valuation of the development. The Court would recall the serious discrepancies not only on the value but on the description of the property in the two conflicting reports. The 1st Defendant’s valuer had confirmed that he had no issues with the valuation report prepared by Maina Chege. The difference in value was substantial. 178. On the nullification and cancellation of the registration of the purported Charge and release of the original title documents of sub - division No. 3160/I/MN to the Plaintiff at the Defendant’s expenses. The Learned Counsel asserted that the Plaintiff pleaded violation of the provision of Section 52 of the Indian Transfer of Property Act (Now repealed). Under that section the sale and transfer of the suit premises was null and void. They heard from the 2 nd and 3rd Defendants’ witness that the 2nd and 3rd Defendants stopped servicing the loan they obtained from the 1st Defendant after they were unable to obtain vacant possession. No prejudice would be suffered by those Defendants as they could recover the monies they paid to the 1st Defendant. Part of the Plaintiff's evidence was the letter addressed by the 1st Defendant to the Plaintiff demanding that she pays arrears of annual rates to the County Government of Mombasa. According to the Learned Counsel, the preceding Paragraphs in this order were merited. 179. On the declaration that the sale of title number No. C.R. 18132 sub - division No.3160/1/MN and the transfer and charge dated 30th April, 2007 were illegal, fraudulent and null and void. The Learned Counsel averred that in the preceding JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 77 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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paragraphs this order was merited. The property was sold by private treaty at less than the market value. In a sale by Private Treaty the 1st Defendant stepped into the shoes of the Plaintiff. Assuming, without deciding, that the 1 st Defendant had any statutory power of sale, it should have sold the property at or more than a sum of Kenya Shillings Twelve Million (Kshs. 12,000,000.00/=) which was the value assessed by Maina Chege (deceased) on 30th June, 2007. 180. The 1st Defendant claimed to have had the suit property valued by Tysons Limited. The so called Valuation Report was full of errors as the Plaintiff was able to show when they cross examined the 1st Defendant’s valuer. He never entered the suit premises. His valuation report is what was known in the industry as a “drive by” valuation. The photographs attached to that report were taken from the road as they captured part of the upper floor and the roof of the house. Recalling that the suit premises was sold in the year 2007, the Learned Counsel guided the Court to the provisions of the auctioneers’ rules 1997. The 1st Defendant had appointed and paid auctioneers to sell the suit premises by public auction. They did not do so because the 1st Defendant had not had the property valued. To circumvent the auctioneers’ rules requiring valuation of the property the 1st Defendant sold it by private treaty to its preferred purchasers. The Learned Counsel relied the court to a letter by the Law firm of Messrs. Bowyer Mahihu & Co. Advocates to addressed Watts Enterprises Auctioneers on 16 th July, 1998 with instructions to sell the suit premises by public JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 78 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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auction. That law firm stated that it had enclosed the conditions of sale and copy of the description of the property (page 59 of the 1st Defendant’s List of Documents). The letter concluded on page 60 and a sentence in it could be seen stating that “the reserve price will be advised to you on the date of the auction by the company's representative who will attend the auction”. Even though there was no auction, the letter proved that the 1st Defendant had no intention of complying with the Auctioneers Rules which required the Chargee to include the reserve price in its instructions to the auctioneer. It was impossible to instruct an auctioneer on the reserve price without a valuation report. 181. On re – conveyance of the suit premises to the Plaintiff by the Defendants jointly and severally and at their costs. The Learned Counsel submitted that as the sale and transfer of the suit premises by the 1 st Defendant to the 2nd and 3rd Defendants was null and void this remedy was well deserved and merited. 182. On whether the 2nd and 3rd Defendants’ suit against the Plaintiff was competent and merited. The Learned Counsel opined that in special condition number 6 of the undated agreement for sale by the 1st Defendant as Vendor and 2 nd and 3rd Defendants as purchasers and under the Mortgages (Special Provisions) Act Cap. 304 the 2nd and 3rd Defendants had no capacity to file the suit for vacant possession. Parliament gave that capacity to Purchasers could not obtain vacant JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 79 of 146 the 1 st Defendant. possession of a HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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mortgaged property unless the mortgagee proved to the satisfaction of the Court that the sale was lawful. The capacity, power and authority given to the 1 st Defendant under Cap. 304 could not be delegated to or shared with the 2nd and 3rd Defendants. 183. Therefore, the 2nd and 3rd Defendants’ suit against the Plaintiff should be struck out with costs. The 1 st, 2nd and 3rd Defendants ought not to have agreed amongst themselves that the 1 st Defendant was only responsible for meeting legal costs in regard to a suit for vacant possession. They now had evidence of collusion between the 1st Defendant on the one hand and the 2nd and 3rd Defendants on the other. It was the 1 st Defendant that was paying legal fees to the advocates for the 2nd and 3rd Defendants. 184. On the costs of this suit and interest. The Learned Counsel averred that Costs follow the event. The Plaintiff was entitled to costs of this suit together with interest on all sums awarded and on costs. The Plaintiff was entitled to her costs in defending HCCC No. 158 of 2007 to be paid to her by the 2 nd and 3rd Defendants. 185. In conclusion, the Learned Counsel urged this Honourable Court to allow the Plaintiff’s suit with costs and strike out the 2nd and 3rd Defendants’ suit against the Plaintiff with costs. B. The Written Submissions by the 1st Defendant 186. The 1st Defendant through the Law firm of Messrs. Issa & Company Advocates filed their written submissions dated 21 st JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 80 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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February, 2025. M/s. Maina Advocate told the court that the before this Honourable Court is a suit filed by the Plaintiff instituted by way of an Amended Plaint dated 4 th July 2007. The Plaintiffs sought Judgment against the Defendants as stated above. 187. The Learned Counsel submitted that the 1 st Defendant filed its Statement of Defence on 13th April, 2007 as amended on 14th September, 2007 and a witness statement sworn by Paul Nyamari on 27th March, 2023. The Defendant’s list and bundle of documents were filed in court on 24 th July, 2017 and a supplementary list of documents on 15 th December, 2021. The hearing proceeded by way of adducing “Viva Voce” evidence which commenced with the Plaintiff's case on 2 nd February, 2023 and concluded with the Defence case on 2 nd December, 2024. 188. On the evidence tendered specifically on the Plaintiff’s case. The Learned Counsel submitted that the Plaintiff called PW - 1, Maina Chege, a Valuer who produced his Valuation Report as Plaintiff's Exhibit Number 1 as his evidence in chief. During cross-examination he testified that he was not sure of his license number, that the instructions given to him were verbal. That his valuation did not provided a forced sale value. That he did not provide comparable in his Valuation report. That although he was given access to enter the house but he did not provide internal measurements only the external features were provided. The location of the property, whether it had encumbrances were important when considering the JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 81 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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value. That the rental value was not an indicator of valuation. That as his report did not contain a forced sale value, it could not be used by a financial institution. 189. The Learned Counsel averred that his report was limited to market value and that he was aware that the 1 st Defendant's report by Tysons Limited provided for a forced sale value. That he personally knew Tysons Limited as Mr. Kiambi was his friend. He admitted that there could be variations on opinion and it never become unprofessional if the opinion differs. 190. The Plaintiff called PW – 2, Mr. Onono, the Managing Director of IRAC who testified that he was an Accountant by training since year 1976 and was currently a consultant at IRAC. He stated that their work was to assist people who had difficulties on discrepancies emanating from acquired loans from financial institutions. That he started with Donde Act to recalculate interest and relied on bank statements, letter of offer, charge document. He applied the rate of 19% as it was applicable per Gazettte Notice No. 1617 April, 1990 for a facility of twenty (20) years. He produced his report dated 16 th July, 2021 as Plaintiffs Exhibit Number 2. During cross examination, he testified that he never personally prepare the report but he approved it. Most of his clients were borrowers and they used the report in support of the claims filed against banks. That he wrote to the Plaintiff asking her to join a class action suit he was filing against Housing Finance. At the time of preparing his report the Plaintiff had already filed the suit. JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 82 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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191. That his report provided at paragraph 7 that pending clarification by the 1st Defendant Bank, the amount he provided could be amended. However, he did not reach out to the 1st Defendant Bank for their clarification. That he did not consider the admissions by the Plaintiff on default, the actual events of default by the Plaintiff in servicing the loan and the various variation letters by the 1 st Defendant Bank. He did not consider the redemption statement by the 1 st Defendant Bank and did also not consider the recovery expenses of legal and auctioneer fees were provided in the charge. His report was titled ‘legal report’ and contained and interpretation of law applicable even though he was not a qualified legal practitioner. Instead, he was a Certified Public Accountant, not a banker or a software engineer. The software used by IRAC was not ISO certified. That he fed the software with the information and it generated a report. 192. The Learned Counsel asserted that he looked at the Charge and the Letter of Offer. He admitted only having considered monthly instalment of a sum of Kenya Shillings Thirty Three Thousand Nine Seventy Five Hundred (Kshs. 33,975.00/= and not Kenya Shillings Thirty Five Thousand Seven Eighty Five Hundred (Kshs. 35,785.00/=) as provided in the Letter of Offer. He did not consider that insurance was to be paid with loan payment as well as advocates fees or any other charges. According to PW – 2, the report showed the Plaintiff was making regular payment. However the Plaintiff was not making payment by 7th of every month. He did not provide for JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 83 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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the default rate in the report. That although the objective of the contracts was that the parties unanimously agreed on 21% he decided to adopt a different rate of 19% in his report. It stated that the Letter of Offer provided for a rate of 21% he did not have any evidence to support the rate of 19% as it was based on legal advisors. PW – 2 never attached the changes to law he referred to. On clarifications from the Court, he testified that there was no link between IRAC and the Bank as he had indicated that if explained he would amend the report as he tried at formation of the bank to discuss. Further that his reports was used by borrowers to support cases because they were stressed and tormented by auctions or to negotiate with the bank. 193. The Plaintiff called its last witness PW – 3 – M/s. Rose Wangari Ndegwa who adopted her witness statement dated 2 nd July, 2015 as evidence in chief and her bundle of documents dated 2nd June, 2008 were produced as Plaintiffs Exhibit Number 3, Supplementary bundle of the rates from County Government of Mombasa as Exhibit Number 4 and letter from Housing Finance as Exhibit Number 5. She admitted she had received several demand letters from the 1st Defendant on the accrued arrears from the advanced loan and confirmed she authored all the letters in response to the bank admitting default and asking to clear the arrears. That the 1 st Defendant's valuation contained photographs taken but only showing the outside of the house. That the house was not two-bedroomed but a four bedroomed House as wrongly depicted by the 1 st Defendant’s JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 84 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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Valuer – M/s. Tysons Ltd. That she was not involved with the transaction with Amesenet. The money to pay auctioneers was from her account even though the property was not sold by public auction. 194. The Learned Counsel submitted that during cross- examination, M/s. Ndegwa testified that she first approached the bank for a loan in the year 1992 and the interest rate was 19%. It was to be advanced an amount of Kenya Shillings Two Million (Kshs. 2, 000, 000.00/=). The offer was cancelled by a letter dated 18th January, 1993 and the amount was revised to a sum of Kenya Shillings Three Million (Kshs. 3,000,000.00/=) and with interest at 21%. That she was required to pay legal fees to advocates shown on letter. She never could remember the cheque in favour of the Law firm of Messrs. Bryson & Inamdar & company Advocates. That the letter dated 9th February, 2009 by the Bank stated that it did not collect additional legal fee deposit. Her lawyers changed from Murimi Advocates to Gikandi Advocates. The charge provided for repayment by monthly installments of Kenya Shillings Thirty Five Thousand Seven Hundred and Eighty Five Hundred (Kshs. 35,785.00/=) and interest at 21%. That the charge provided that the Bank had a right to increase or reduce interest and she would be notified on the effect on monthly installments. 195. According to her, the charge was prepared by the Law firm of Messrs. Bowyer Mahihu Advocates. Her claim for refund was that Inamdar and Bryson were no longer in the Law firm that JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 85 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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prepared the Charge. She acknowledged having paid a sum of Kenya Shillings Fifteen Thousand Eight Ninety Eight Hundred (Kshs. 15, 898.00/=) for the preparation of a Charge and a Charge was prepared and registered. She had no evidence that she protested the registration of the Charge by lawyers appointed by the Bank/change of partnership. She admitted the account was in arrears and she received several demands from the bank, she testified that she gave various proposals to clear the arrears. She testified that she received the various letters on reviewal of the interest rate and charges. That the bank clarified to her in its letter dated 19th December, 2001 the particulars of the legal fees and auctioneer charges. That the lawyers had issued a statutory notices and Watts Auctioneers had served notification of sale. She had previously filed another suit on 2nd March, 2007, the Court declined to give an injunction. She thereafter withdrew and filed this suit on 12th March, 2007. 196. It was not her first loan. She was aware of the how loans worked. She was aware that the property was sold to the 2 nd and 3rd Defendants and property transferred to them. She was still in possession and had not paid rent to the 2 nd and 3rd Defendants. 197. On the defense case. The Learned Counsel submitted that the 1st Defendant called its first witness IDW-1 Mr. Richard Kiambi, a valuer with Tysons Limited. He testified that he was a graduate of Land Economics, a practicing Valuer. He prepared a report in 2007 and produced the report dated 2 nd March, JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 86 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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2007 as his evidence in chief. During cross-examination, he testified that the open market value of the property was a sum of Kenya Shillings Ten Million (Kshs.10,000,000.00/=), the mortgage value was a sum of Kenya Shillings Nine Million (Kshs. 9,000,000.00/=) and forced sale value was a sum of Kenya Shillings Eight Million (Kshs. 8,000,000.00/=). That he took photographs outside the home. He entered the property having been given access to it by the gardener/domestic worker. He went upstairs. He stated that there were 2 double bedrooms and the third room he provided for it as family room. He didn’t describe it as a bedroom as there was no shower facility. 198. Photographs were intended to reinforce; the description was the necessary part. He had seen the valuation by Maina Chege. He never disagreed with it. The 1st Defendant called DW - 2 Paul Mabeya Nyamari. He was the branch manager, Mombasa and adopted his witness statement filed on 28 th March, 2023 together with the list and bundle of documents filed on 24th July, 2017 and supplementary list dated 15th December, 2021. During the Cross - examination, he testified that he was aware that the 2nd and 3rd Defendants undertook their own valuation. That the bank wanted to sell the property as the Plaintiff had defaulted and it intended on recovering the loan. The bank initially intended to sale by auction but later it was sold it by Private Treaty. 199. The Bank found an interested purchaser, and a sale agreement was signed on 30 th April, 2007 for a sum of Kenya JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 87 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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Shillings Eight Million Five Thousand (Kshs. 8,500,000.00/=) and a transfer was registered. It was a transfer by Chargee to the 2nd and 3rd Defendants and the Bank recovered the amount lent. That the bank was not the registered owner of the property, but it had a Charge and when default occurred the bank became the legal owners of the suit premises. The sale agreement with the 2nd and 3rd Defendants never provided for M/s. Rose Wangari Ndegwa. It never mentioned the Charge, the exercise of statutory power of sale. The transaction between the 1st Defendant and 2nd and 3rd Defendants was done properly. Amesnet Enterprises Limited were real estate agents involved in buying and selling property. Watts Enterprises were auctioneers who had been instructed to sell the property and their fees were debited in the account. That one could sell by private treaty when a buyer was not successful from the public auction. There was no advertisement of sale. The lawyers were paid because they were instructed by the Bank. The difference in the values was because Tysons Limited were appointed by the Bank and Maina Chege by the Plaintiff. Naturally, the Plaintiff would exaggerate by puting a higher figure. The bank valuers gave the actual value. 200. The 2nd and 3rd Defendants called Kasyoki Mwanzia – DW – 1. She testified that she was giving evidence on behalf of the 2 nd and 3rd Defendants who were her parents. She had a Power of Attorney from the 2nd Defendant. She adopted the 2nd and 3rd Defendants witness statement and list of documents dated 2 nd JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 88 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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June 2021. During cross -examination she testified that the 2 nd and 3rd Defendants paid a deposit through a cheque and the balance was financed by a loan with the 1 st Defendant. The 2nd and 3rd Defendants were no longer servicing the loan as they never obtained vacant possession. That she never had the Power of Attorney for her mother. She was not aware when the 2nd and 3rd Defendants stopped servicing the loan. They had not considered a Counter - Claim as HF was to deliberate with Plaintiff to obtain the property and not for return of the money. She was aware the 2nd and 3rd Defendants have their own case against the Plaintiff to remove her from the property. Not aware of law that provided for the bank to file proceedings to get possession. 201. The Learned Counsel submitted that the sale agreement was because the 2nd and 3rd Defendants were purchasing from the Plaintiff as it had a right to do a forced sale due to default by the Plaintiff. They were looking for property and had engaged several estate agents and were informed the property was in the market. Her parents made inquiries by examining the charge document. She was not aware whether her parents knew a suit had already been filed. 202. The Learned Counsel relied on the following issues for determination:a) Whether the Plaintiff was in default? JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 89 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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b) Whether the Defendant lumped up and capitalized Insurance Premiums and other charges into the loan facility? c) Whether the Defendant charged interest illegally? d) Whether the Charge document is valid? e) Whether the Defendant issued Statutory Notices to the Plaintiff and if the same was valid? f) Whether the forced sale of the property to the 2 nd and 3rd Defendants was proper? 203. The Learned Counsel submitted that by an offer to advance dated 4th August, 1992, the 1st Defendant offered and the Plaintiff accepted a mortgage facility in the sum of Kenya Shillings One Million 1,296,000.00/=). The Two Ninety offer to Six Thousand advance (Kshs. provided the repayment period was twenty (20) years and the total monthly repayment being a sum of Kenya Shillings Twenty One Thousand Four and Six Hundred (Kshs. 21,406.00/=) The first offer was revised at the request of the Plaintiff. By a revised offer to advance dated 18th January, 1993, the 1st Defendant offered and the Plaintiff accepted a facility in the sum of Kenya Shillings Two Million (Kshs. 2,000,000.00/=). The offer provided that the repayment period was twenty (20) years and the total monthly repayment was for a sum of Kenya Shillings Thirty Five Thousand Seven Eighty Five Hundred (Kshs. 35,785.00/=). The 1st Defendant submits that by a letter dated 28th December, 1993 which was sent by JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 90 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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post, the 1st Defendant informed the Plaintiff the following that:i) The rate of interest chargeable had been revised to 29% per annum with effect from 1st January, 1994 due to the increase in the cost of funds in the market. ii) A penalty interest of 1.5% per month would be charged on the outstanding arrears. iii) The total monthly loan repayment had been increased to a sum of Kenya Shillings Fifty Thousand Three Fifty One Hundred (Kshs. 50,351.00/=). iv) The total monthly loan repayment included monthly loan repayment of a sum of Kenya Shillings Fourty Eight Thousand Four Ninety One (Kshs.48,491.00/=), life and fire premiums of Kenya Shillings One Million and Ten (Kshs. 1,010.00/=) and Kenya Shillings Seven Fifty (Kshs. 750.00/=) and a ledger fee of Kenya Shillings One (Kshs. 100.00/=). 204. As at 1st January, 1994, the Plaintiff was in arrears of a sum of Kenya Shillings Sixty Seven Thousand Two Fourty Two (Kshs. 67, 242.00/=). At that time, they were under an obligation to pay monthly instalments of a sum of Kenya Shillings Fifty Thousand Three Fifty One Hundred (Kshs. 50, 351.00/=) but failed to honour this obligation. The Plaintiff was given a concession on interest and was to pay a sum of Kenya Shillings Fourty Five Thousand Four Fourty Five Hundred (Kshs. 45,445.00/=) but the account still fell on high arrears. A perusal of the mortgage loan facility statements at page 92 to JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 91 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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119 of the Defendant's list and bundle of documents confirmed the following; i) The Plaintiffs paid less than the required monthly instalments in the year 1994 as sampled below:Date Instalment paid Arrears (Kshs) 1st February, 40,605.00 77, 897.65 1994 1st March, 1994 40,605.00 88, 912.60 1st April 1994 40,605.00 90,106.70 3rd May, 1994 40,605.00 96,298.30 ii) The Plaintiffs as at 1 st January, 1995 was is arrears of Kshs. 60,411.355. iii) In the year 1995, the Plaintiff only credited the loan account on three occasions. Consequently, the Plaintiff as at 1st January 1996 was in arrears of Kshs. 178,877.706. iv) In the year 1996, only 5 credits were made to the loan account, as a result the Plaintiff as at 1st January 19977 was in arrears of Kshs. 429, 758.15. v) In the year 1997, only 2 credits were made to the loan account, as a result the Plaintiff as at 1 st January, 1998 was in arrears of Kshs. 999, 082.00. vi) In the year 1998, only 7 credits were made to the loan account, as a result the Plaintiff as at 1 st January. 1999 was in arrears of Kshs.736, 936.05. vii) From the years 2000 – 2006 to 10, the Plaintiff's failed to make payment as required and the arrears are as follows; Period Arrears Against Capital JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 92 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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2000 2001 2002 2003 2004 2005 2006 1,261,532.25 1,690,233.33 2,993,640.53 4,392,912.30 5,182,191.80 5,736,068.95 6,339,937.70 3,087,081.94 3,046,405.06 2,977,110.06 2,879,069.16 2,692,661.50 2,268,898.35 1,807,192/50 viii) At the time of service of the statutory notice on 24 th March, 2006, the Plaintiffs mortgage account was in arrears of Kshs. 5, 784, 903.45 against an outstanding sum of Kshs. 8,007, 589.20. ix) On 4th March 2002, when the Plaintiff filed the first suit being HCCC No.83 of 2002, to, the Plaintiffs mortgage account was in arrears of Kshs.2,993,640.53. x) After the Chamber Summons application seeking injunctive orders was dismissed, the Plaintiffs had not/did not pay a single cent towards the mortgage account. 205. The Learned Counsel submitted that on 14 th September, 1993, a charge dated 7th September, 1993 was registered against the suit property in favour of the 1 st Defendant as security of the mortgage facility advanced to the Plaintiff. By a letter dated 22nd August, 1994, the 1st Defendant informed the Plaintiff that her mortgage account was in arrears of Kshs.137,587.25.The Plaintiff was informed that she had failed to remit the monthly loan instalment of Kshs.45,445.00 and was informed that if the amount was not settled within fourteen (14) days of the letter, the 1 st Defendant would commence recovery proceedings. During the hearing PW - 3, JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 93 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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the Plaintiff admitted that she issued several letters admitting the debt and proposing to clear the arrears. The particulars of admission of debt by the Plaintiff were as follows:i) By a letter dated 12th September, 1994,the Plaintiff informed the1st Defendant that she had settled the arrears and had paid the sum of Kshs. 200,000.00/= by way of a cheque on 22nd August, 1994. ii) By a letter dated 5th October, 1994, the 1st Defendant informed the Plaintiff that the payment of Kshs. 200,000.00/= had reduced the arrears in her account to Kshs. 28,477.25/= as at 31st October, 1994. The Plaintiff was advised to continue remitting the monthly sum of Kshs. 45,455.00/=. iii) By a letter dated 26th November. 1996/=, the Plaintiff admitted that her mortgage account was in arrears and requested for an extension to pay the arrears of Kshs. 329,936.10/=. The Plaintiff informed the 1 st Defendant that she was in the process of selling another property to settle the arrears. iv) By a letter dated 5th December 1996, the 1st Defendant requested the Plaintiff to specify how the arrears would be settled before considering her request in her letter dated 26th November, 1996. v) By a letter dated 16th December 1996, the Plaintiff requested for ninety (90) days to settle the arrears in the mortgage account vi) By a letter dated 26th May, 1997, the Plaintiff acknowledged receipt of letter dated 1 st April, 1997 and requested the 1st Defendant to forestall any legal action JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 94 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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until 3rd June, 1997 when she would have cleared the loan amount. vii) By a letter dated 4th June, 1997, the Plaintiff requested for three (3) months to clear the loan amount. viii) By a letter dated 15th January, 1999, the Plaintiff requested the[s Defendant to consider her proposal for payment of the arrears. ix) By a letter dated 29th July, 1999, the Plaintiff admitted that her mortgage account was in arrears in the sum of Kshs. 832,415.55/= and requested the 1 st Defendant for accommodation and indulgence. x) By a letter dated 18th August, 1999, the 1st Defendant requested the Plaintiff to give a proposal on the schedule of payment of the mortgage arrears before any recovery action was taken. xi) By a letter dated 8th August, 2000, the Plaintiff requested the 1st Defendant to give her three (3) months to liquidate the arrears. 206. The Learned Counsel submitted that the said letters were admissible as evidence for the Plaintiff’s admission of outstanding debt owed to the 1 st Defendant. To buttress on this legal preposition, the Learned Counsel relied on the case of: “Guardian Bank Limited – Versus - Jambo Biscuits Kenya Limited [2014] eKLR” where Justice F. Gikonyo held as follows:- JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 95 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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“The said letter does not contain any denial whatsoever of the plaintiff's claim. There is no ambiguity in the letter as the letter not only admitted the balance is Kshs. 10,000,000 but also made express intention to provide a letter of comfort to cover the balance; a clear intention to admit the debt..The letter did not involve disputations on usury or disputed interest or compromises as alleged by the defendant...The letter is an admission that the defendant owes a balance of Kshs. 10,000,000.” 207. The Learned Counsel averred that the Plaintiffs had been in default since February, 1994 prompting the issuance of the statutory notices on various occasions. On this point, the Learned Counsel cited the case of:- “George Muritu Gathecha – Versus - Family Bank Limited [2017] eKLR” where a Plaintiff had made similar claims, the court held as follows:“The Plaintiff herein charged his suit property to secure a loan facility of Kshs.10,000,000/=. He defaulted in loan repayment and he has not made any offers on how he intends to repay the loan. He now wants the Court to restrain the Respondent from exercising its right under the charge which right has not crystalized without offering a proposal on how to repay the loan. The Plaintiff has also denied that he was served with the Notice under Section 90(1) of the Land Act whereas, it is clear that the said Notice was sent to him through a Registered Post. The Plaintiff also alleged that he repaid the monthly loan without fail until April 2017. That is not the position as the Bank Statement shows that he was in default immediately after receiving the loan. The Plaintiff has therefore not come to court with clean hands. The Court finds that the Plaintiff herein had an obligation to pay the loan facility and in default, the charge document was very clear that the Respondent had a right to seek for remedies and one of such remedies is exercise of its Statutory Power of Sale as provided by Section 96 (1) of the Land Act. In the case of Jopa Villas LLC...Versus -...Private Investment Corp & 2 Others, Machakos HCCC No.215 of 2008, the Court held that:JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 96 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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“I am clear in my mind that the applicant is running away from the obligations lawfully imposed and with its knowledge and participation court should not aid in that quest but will instead uphold the rights of the 1 st Defendant to recover the monies lawfully advanced.... Our courts must uphold the sanctity of lawful commercial transactions”. 208. The Learned Counsel averred that it had proved that the Plaintiff defaulted in her obligation to pay their contractual monthly instalment. In light of the admission of default by the Plaintiff as set out, above that the mortgage account that was in arrears, the 1st Defendant prayed that this Honourable Court determined the first issue in the affirmative and hold that it the Plaintiff was in default and the 1 st Defendant was lawfully and rightfully exercising its statutory powers. 209. On the insurance premiums and other charges. The Learned Counsel asserted that the Plaintiff had at Paragraphs 20 & 21 of the Plaint pleaded that the 1 st Defendant had without authorization increased the sum insured in relation to the suit property, a right it did not have as it was a reserve of the Plaintiff and that the 1st Defendant benefitted unfairly as an insurance agent. The Plaintiff further pleaded at Paragraph 25 (v) that the 1st Defendant increased the ledger fees without the consent of the Plaintiff and at Paragraphs 23 and 24 that the Plaintiff's account was debited with legal and auctioneer fees that were improper. 210. It was the contention of the Learned Counsel that it was an express term of the Letter of Offer under the particulars of advance that the Plaintiffs would take out life and fire JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 97 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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insurance policies to insure the charged property. The monthly premiums payable would be at the initial monthly arrears of a sum of Kenya Shillings One Million and Ten Thousand (Kshs. 1,010.00/=) and Kshs. 750.00 and the annual premium being a sum of Kenya Shillings Nine Million (Kshs.9,000.00/=) and Kenya Shillings Twelve Thousand One Twenty Hundred (Kshs. 12,120.00/=) respectively. Clause 15 of the Letter of offer provides as follows:‘The security document will provide for the property charged to be insured from the time the advance is made (see clause 6) by the Company through its agency for house owner’s comprehensive risks with an insurance company. Details of the amount insured, the annual premium and the additional monthly repayment in respect of the annual premium is as shown on the letter of offer. Please advise the Company by letter if the Applicant requires the sum insured to be increased.’ 211. On cross examination and re – examination, PW - 3 confirmed that she read the Letter of Offer. She further confirmed, that the loan facility was inclusive of insurance premiums initially for fire insurance at Kshs.750 and life insurance at Kshs. 1,010.00. The Learned Counsel submitted that Clause 6 (iii) of the Charge provided as follows:'That at times during the continuance of this security, the Company many in its own or some other agency and at the expense of the borrower insure or keep insured for such amounts in such names and with such insurers as the company may from time to time select any buildings improvements fitting of an insurable nature(whether affixed to freehold or leasehold or not) being or forming part of the said land: a) Against loss or damage by fire b) Against such other risks as the Company from time to time think expedient JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 98 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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212. Clause 6 (v) of the Charge provided for life assurance as follows: ‘That at all times during the continuance of this security the Company may in its own or some other agency and at the expense of the borrower assure the life of the borrower for such amount and with such assured as the company may from time to time select.’ 213. The Plaintiff had admitted that reading of the Charge confirmed it that was contractually permitted to be an agent, its duty was to link borrowers to insurance companies. No complaint was raised on this issue. The complaint that the right to require the sum insured to be increased was preserve of the Plaintiff is a lack of proper understanding of the effect of condition 15, it was the duty of the 1 st Defendant Bank through its agency to keep the security insured, the option to increase was made available on election to the Plaintiff who upon receipt of the estimate premium could elect to insure the property at a higher figure. The 1 st Defendant’s letter dated 22nd December, 1997 confirms this position and provided at Paragraph 2 that:‘As this is an estimate it does not indicate that your property is then insured for its correct replacement cost. It is your duty to ensure that your property is sufficiently insured at all times and if you wish your house to be insured for a higher figure you should kindly let us know and I we shall be too pleased to make appropriate arrangements for you’ 214. On the legal fees and auctioneer charges, the Learned Counsel submitted that Clause 7 of the Charge provided that: “upon default by the borrower on payment of any monthly instalment or other payments hereby covenanted, the company JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 99 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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may...from time to time make such payments as it may consider expedient to any person whether the borrower or anyone acting at the borrowers request...any costs or expenses incurred by the company for enforcement protection or improvement of the security. The expenses in clause 727 are defined to include all costs and disbursements (legal or otherwise) properly incurred or paid by the Company incidental to this Charge or the collection of any moneys due or to become due hereunder which if not agreed shall be taxed between Advocate and Client. 215. The Learned Counsel opined that that it was not disputed that the Plaintiff defaulted in payment of the monthly instalments and advocates and auctioneers were instructed to proceed with enforcement as provided under clause 7 of the Charge. At the Plaintiff's instance and request the 1 st Defendant by its letter dated 19th December, 2001, provided particulars of invoices by the Advocates and Auctioneers. 216. The Learned Counsel posited that requesting for an auction/ statutory notice to be suspended does not negate that the liability to pay costs incurred as alluded to by the Plaintiff. On ledger fees, the 1st Defendant submitted that the increase was necessitated by the increase in administration costs of the mortgage account and the figures represent a small increase over the 13 years. The Plaintiff was at all times through notified of the increase. In view of the foregoing, the Learned Counsel submitted that on the second issue, the Plaintiffs’ allegation lacked merit and that the Plaintiffs had committed to pay for fire, life insurance premiums and costs incurred in recovery. Any debits to the mortgage account were therefore valid and contractual. JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 100 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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217. On the alleged interest overcharge. The Learned Counsel averred that at Paragraphs 17 and 22 of the Amended Plaint, the Plaintiff alleged that the 1st Defendant illegally changed and charged its interest rate in contravention to the provisions of the Central Bank of Kenya Act and Central Bank of Kenya (Amendment) Act and that there was no ministerial approval. The Plaintiff further contended that it was not notified of the variations of interest. The initial contractual interest as per the Letter of Offer and Charge was 21% and the interest chargeable was variable pursuant to Clause 1 (iii) of the Charge and the varied interest was payable the first month next after notification. Condition 16 of the Loan Conditions further provided for the right to increase or decrease the rate of interest by giving notice. 218. On this limb, the Plaintiff relied on the report by IRAC. In that report, PW - 1 confirmed during cross-examination that even though he had the Charge document, he applied the rate of 19% from 23rd September, 1993 until 31st March, 1997 because of the provision Section 39 of the Central Bank of Kenya Act. Section 39 (1) of the CBK Act (now repealed) provided as follows:“The bank may from time to time acting in consultation with the Minister. determine and publish the maximum rates of interest which specified banks or specified financial institutions may payfor the deposits and charge for loans or advances....” 219. The Governor of CBK published Gazette Notice No. 1617 of 1990 with a commencement date of 1st April, 1990 which JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 101 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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prescribed a maximum interest rate of 19% for a period of three years. However, this was revoked through Gazette Notice 3348 of 23rd July, 1991 before the lapse of the three years. 220. The Learned Counsel submitted that the offer to advance was dated 18th January, 1993 and the facility was disbursed on 23 rd September, 1993. The Supreme Court in the case of:- “Stanbic Bank Kenya Limited – Versus - Santowels Limited [2018]KEHC 9599” held as follows:‘Nonetheless, where we depart with the two superior courts below is on their finding that the capped interest rate of 16.5% per annum as prescribed by Gazette Notice No.1617 of 1990 was applicable to the facilities advanced to the respondent. It is worth reiterating that the foregoing Gazette Notice was revoked by Gazette Notice No. 3348 of 23 rd July, 1991. The meaning of revocation was a cancellation of the Gazette Notice which no longer had any effect. See Black’s Law Dictionary 8th Edition (2008) p.4116. On its part, the High Court got it right by finding that Gazette Notice No.1617 of 1990, which prescribed capped interest rate of 16.5% per annum, was properly revoked by Gazette Notice No. 3348 of 23rd July, 1991.The court went on to correctly find that Section 39 of the CBK Act which gave the Governor discretion to cap interest rates also entailed the power not to set any limits on interest rates. As to why it later found the very same capped rate of 16.5% was applicable to the facilities which were advanced between 1993 and 1997,after the said revocation, is not clear. It is our finding however that contrary to the respondent’s argument, once the capped rate of 16.5% was revoked, and no other capped rate was provided despite Section 39of the CBK Act being in force, meant that the said rate of interest was not applicable and so to speak there was no capped rate of interest by the Governor of CBK.’ 221. Therefore, the Learned Counsel submitted that the report by IRAC in so far as it refers to a cap that did not exist is JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 102 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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erroneous and has no probative value. Once the capped rate was revoked, and no other capped rate was provided despite the provision Section 39 of the CBK Act being in force, the said rate of interest was not applicable and there was no capped rate of interest by the Governor of CBK. Contrary to the report by IRAC, the capped rate did not apply from date of draw down year 1993 until 1997 as alleged. The Learned Counsel relied on the case of “Jamii Bora Bank Limited – Versus - Wapak Developers [2018] KEHC 9599” where the Court held as follows:‘I entirely agree with approval to the above statements of law. Section 33B (1) (a) and (b) of the Banking Act sets out the maximum interest rate which a banking institution can charge for a credit facility and the minimum interest rate which a banking institution should pay on the deposits held in an interest earning account. In light of the above authorities, it is common cause that the aforementioned section does not expressly provide that it is intended to apply retrospectively. In this particular case, there is no dispute that the loan agreement between the Plaintiff and the Defendant which provided for the interest rate payable by the Plaintiff to the Defendant on the loan amount that was advanced by the Plaintiff to the Defendant was entered into before the enactment of the Banking (Amendment) Act, 2016. Going by the case of Municipality of Mombasa (supra), in the instant case, there is no doubt that the Banking Act is not a procedural legislation. It affects substantive rights of lenders and borrowers. Therefore, in my view, it was the intention of the legislature that the Act does not apply retrospectively, since the same was not expressly provided in the said Act. There is no indication in the Act that that was the intention of the legislature. In view of the fact that the Banking Act affects substantive rights as I have indicated above, it's the court's finding that the law as regards capping of interest rates does not apply retrospectively. In that regard, this court finds that the Defendant is bound by the JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 103 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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agreement it entered into with the Plaintiff on the interest that was to be paid on the loan amount that was advanced to it by the Plaintiff. It is instructive to note that the court has no jurisdiction to vary the rate of interest that was agreed upon by the parties as much as the court cannot also vary the period within which the Plaintiff was to repay the loan.” 222. The Learned Counsel averred that the report by IRAC had no probative value and the same is not objective/ independent for the following reasons:i) During cross - examination Mr. Onono testified that in year 2002 through the letter by IRAC dated 5th September, 2002 he informed the Plaintiff that he was co - ordinating a class action suit against HFCK, the 1 st Defendant herein and invited the Plaintiff to participate. ii) He further testified that his clientele consists mostly of borrowers who intend to either negotiate or file suits against banks. iii) He testified that his report is titled legal report and he is not qualified to give a legal opinion iv) His report did not consider that there was default in payment by the Plaintiff and what was agreed by the parties in charge and letter of offer. v) Even though the report indicated that he would seek further clarifications from HFCK, he testified that he never did. The report was prepared taking into account one side, the Plaintiff's account of events and was therefore biased. JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 104 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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223. The Learned Counsel relied on the case of:- “Kenya Commercial Bank Limited – Versus - Rupa (K) Limited & 2 others [2014] eKLR” where the Court held as follows:‘It is noted that he comes to court fully paid by the Defendants to testify. His testimony is partly based on documents and narratives given to him by the Defendants. He testified that he did not have the input of the Plaintiff while he prepared his Report, and that he did not have enough time to get more records from the Plaintiff for verification of those document provided to him by the Defendant. This kind of evidence is one which a court must take very cautiously. The evidence must be capable of objective verification because the witness arrives in court satisfied that he is correct and his account statements and findings are beyond reproach. What I have not agreed with, however, is the recalculation by the IRAC witness which stated that the 1st Defendant had overpaid the bank by Kshs.339,466/= and which led to their claim of the Kshs.3,386,863.16 in the counterclaim. There was absolutely no proof that the Defendant had overpaid the claim. Indeed, the only evidence of clear payment by the Defendant were three cheques which were deposited and never reduced the account. These cheques amounted to Kshs.118,253.95. The other payments which were not expressly determinable on the statement of accounts but which I inferred on account of evidence were payment of Kshs.100,000/= by Ms. Crop Care Limited and a further Kshs.50,000/=by the 2nd Defendant. All these payments, after giving the Plaintiff the benefit of the doubt in the above two later payments, amounted to a maximum sum of Kshs. 268,253.95. This was the maximum amount ever paid by the Defendants, against a claim of Kshs.770,000/- as at 1st September 1997. Where, then, is the evidence that the Defendants had overpaid the claim? The testimony and the Report by Mr. Onono of IRAC, apart from shedding light in relation to applicable Gazette Notices on interest rates during the relevant period was very unrealistic. Regardless of what mathematical JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 105 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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accounts may suggest, they must conform to reason. No one can reap from where they have not sowed. For the Defendants to claim that they overpaid the account, without providing the actual entries or evidence of payment, and without showing at what period in time the account balanced and then tilted into over payment, is acting in bad faith. The Defendants were obligated to prove a series or systematic record, of payments, leading to overpayment, leading to a claim of Kshs.3,386,863.16. The IRAC witness cannot treat the court to calculation of interest rates alone, without showing the actual deposits in cash or in cheque which the Defendants made during that period. If the Defendants themselves cannot show any proof of actual payments-save the said three cheque deposits, and the persuasion that some money, which was not reflected in the accounts amounting to Kshs.150,000/= was paid on their behalf - from where then will the IRAC witness manufacture deposit entries to reach the conclusion in their Report? It is clear to me that the Defendants have taken advantage of the fact that the Plaintiff did not keep proper records of the account, and they have exploited this to the maximum. But to go beyond, and make a counter-claim as stated above is quite simply unreasonable.’ 224. The Learned Counsel further relied on the case of:- “Jamii Bora Bank Limited – Versus - Wapak Developers (Supra)”, the Court held that: “In light of the above, it is important to note that expects are now being abused by those that hire them. For them to be paid or to be seen as if they have done a good job, they have to work in the best interests of their clients. That explains why the reports IRAC report herein are far from being objective and reasonable as far as the value of the suit business is concerned. I agree that the report acts as a guide but it doesn't go too far to fix the dispute between the chargor and the chargee. The position I hold is that Expert evidence sometimes taken as whole depending on the facts of the case can be misleading in assisting the court to address the underlying issues in the dispute particularly mortgage contracts. The evidence of the expert report is less JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 106 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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precise on how the parties account stood at the time when an excess of 11000000 interest was occasioned. Therefore, I take the position that the IRAC report produced by the Defendant herein cannot be given much weight. This court also takes judicial notice of the fact that in every case that IRAC has handled, they have always failed to give an objective report. Their reports are always in favour of the client who have hired or contracted them. Their presence in court proceedings should be able to guide the in the administration of justice. Even though the IRAC report was to be given weight herein, that cannot be used by the defendant to discredit and impeach the contract they entered into with the Plaintiff. It terms of the fundamentals of the said contract, the dispute on interest charged is a nonissue. It does not change the fact that the Defendant failed to perform his obligations as per the contract between it and the Plaintiff.” 225. During Cross - examination, PW - 1, Mr. Onono confirmed that the Plaintiff did not provide him with the notices of variation of interest served upon her and they did not form part of his report. Clause 4 of the Charge instrument expressly provided as follows: ‘It is hereby further agreed that the rate of interest payable on all money hereby secured shall be determined as follows; i) Until the service of such a notice as is hereinafter referred to interest shall be at the rate of Twenty-one per centum (21%) per annum. ii) The Company may from time to time serve on the Borrower a demand notice requiring payment of interest at such increased or reduced rate as shall in the decision of the Directors of the Company fairly represent the rate of interest commonly chargeable in Kenya having regard to such circumstances as they consider to be relevant and the decision of the Directors of the Company in this behalf shall not be questioned on any account whatsoever; iii) In the event of the company requiring an increase in the rate of interest under the provision of sub-clause (ii) of this Clause the Company will notify the Borrower of the amount of the resulting increased monthly instalments payable under JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 107 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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the provisions of Clause 2 hereof and the first of such increased monthly instalments shall become due and payable on the first day of the month next after notification of the amount thereof to the Borrower; iv) All the covenants and provisions contained herein relating to the payment of interest shall be construed and have effect as referred to interest as fixed or altered by the provisions of this clause. 226. The Learned Counsel submitted that that in line with clause 4 of the charge, by a letter dated 28th December, 1993 which was sent by post, the 1st Defendant informed the Plaintiff that:i. The rate of interest chargeable had been revised to 29% per annum with effect from 1st January, 1994 due to the increase in the cost of funds in the market. ii. A penalty interest of 1.5% per month would be charged on the outstanding arrears. iii. The total monthly loan repayment had been increased to Kshs. 50,351.00. iv. The total monthly loan repayment included monthly loan repayment of Kshs.48,491.00, life and fire premiums of Kshs. 1,010.00 and Kshs. 750.00 and a ledger fee of Kshs. 100.00. 227. The Learned Counsel submitted that by a letter dated 15 th December, 1994, the 1st Defendant informed the Plaintiff that:i) The rate of interest chargeable on the mortgage account had been adjusted from 26% per annum to 22% per annum with effect from 1st January, 1995. JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 108 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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ii) A penalty interest of 1.5% per month would be charged on the outstanding arrears. iii) The total monthly loan repayment would be to Kshs. 41,044.00 with effect from 1st February, 1995; iv) The total monthly repayment included the monthly loan repayment of included monthly loan repayment of Kshs. 39,184.00 life and fire premiums of Kshs. 1,010.00 and Kshs. 750.00 and ledger fees of Kshs. 100.00 228. By a letter dated 17th August, 1995 sent by post, the 1st Defendant informed the Plaintiff that:i) The rate of interest chargeable on the mortgage account had been adjusted from 22% to 26% per annum with effect from 1st September, 1995. ii) The Plaintiff was further informed that a penalty interest of 1.5% per month would be charged on the outstanding arrears. iii) The total monthly payment was adjusted to Kshs. 47,134.00 with effect from 1st September, 1995. iv) The total monthly repayment included the monthly loan repayment of Kshs. 45,254.00/=, life and fire premiums of Kshs. 1,010.00 and Kshs. 120.00 respectively. 229. By a letter dated 20th December, 1999 sent by Post to the Plaintiff, the 1st Defendant informed the Plaintiff that the money markets have necessitated the need to review the interest from 22% to 26% effective January, 2000 and that the monthly instalment will now be Kshs. 71,368.00/=. The Learned Counsel therefore submitted that there was no JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 109 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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breach of the provision of Section 44 of the Banking Act as the variation of interest was agreed upon in the Letter of Offer, Charge instrument and the terms agreed upon by the parties. In addition, the Learned Counsel submitted that the Plaintiffs duly signed the Charge and confirmed that they understood the instrument and its contents. In any event, and without prejudice to the above, the Learned Counsel relied on the provision of Section 52 of the Banking Act which provides that:‘For the avoidance of doubt, no contravention of the provisions of this Act or the Central Bank of Kenya Act (Cap. 491) shall affect or invalidate in any way any contractual obligation between an institution and any other person.’ 230. On this point, the Learned Counsel relied on the case of “James Mamboleo & Another – Versus - Consolidated Bank of Kenya Limited & Another [2017] eKLR” where the court held as follows:“The Plaintiffs have claimed that this amount is erroneous in that it comprises of interest wrongly charged by the 1st Defendant. I am unable at this stage to make any conclusive findings on the issues raised by the Plaintiffs. What I can say is that there is no evidence that the 1 st Defendant varied interest rate outside the contractual arrangement it had with the Plaintiffs and that the variation required ministerial approval under Section 44 of the Banking Act. Clause 3.1 of the charge permitted the 1st Defendant to vary the interest that had been agreed at 14.25% per annum at its own discretion without any notice to the Plaintiffs. Clause 3 of the letter of offer of the loan which was accepted by the Plaintiffs also allowed the 1st Defendant to charge interest at 18% per annum above the 1st Defendant's then base rate of 13.75% per annum for the loan amount in arrears. It is clear from the statement annexed to the 1st Defendant's affidavit JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 110 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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that the Plaintiffs were not paying their loan monthly instalments as and when the same fell due. At times, the Plaintiffs would go for several months without making any payment. For the foregoing reasons, I am not satisfied that the Plaintiffs have established a prima facie case against the 1st Defendant based on the alleged illegal variation of interest rate. In any event, as I have stated earlier, the mere fact that there is a dispute of over the mortgage amount is not a ground for restraining a mortgagee from exercising its statutory power of sale. 231. Additionally, the Learned Counsel cited the case of “Daima Bank(in liquidation) – Versus - David Musyimi [2018] eKLR” where the Learned Judges of the Court of Appeal held as follows:‘We are also mindful that the course of action arose out of events that occurred between the years 1994 and 2000 during which time the financial services industry was characterized by high lending rates without much legal intervention to reign in on the lenders’ discretionary and unilateral power to vary interest rates and generally lend on unconscionable terms. We find it necessary to point this out owing to the fact that there have been developments in the law since that time including the promulgation of the Constitution in 2010 and the enactment of what is commonly known as the new Land laws and prominence given to consumer protection. We have considered the law as it obtained at the time. The court of appeal in Nancy Kahoya Amadiva - Versus - Expert Credit Limited & another [2015] eKLR has taken this position in relation to the situation obtaining in the late 1990s, around the same time as the one subject to this dispute. As the respondent does not dispute the loan and acknowledges that he experienced difficulties meeting his repayment obligations from time to time, it is clear in our minds that the court has a duty to uphold the rights of parties who have negotiated in a commercial transaction and as a result one party acquires or achieves some benefits JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 111 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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which he/she/it does not wish the other party to recover or enforce through the instrument that created the relationship. 232. On the third issue. The Learned Counsel submitted that the evidence on record would affirm that the Plaintiffs' claim that there was interest overcharge was without any basis and the issue should be determined in favour of the 1 st Defendant. 233. On the validity of the charge. The Learned Counsel opined that at Paragraphs 11 the Plaintiff contended that the Charge was invalid as it was not drawn by Messrs. Bryson, Inamdar & Bowyer Advocates as contained in the Letter of Offer and that the Plaintiff was not refunded the legal fees. At Paragraph 12, the Plaintiff contends that the Charge had not been signed by the 1st Defendant, never contain the name of the Advocate who prepare it and that it has no signature or acknowledgment that the Plaintiff was explained to the effect of Section 69 (1) of the Indian Transfer of Property Act. 234. The 1st Learned Counsel submitted that by a letter dated 31 st August 1992, the 1st Defendant instructed the Law firm of Messrs. Bryson, Inamdar & Bowyer Advocates to prepare a Charge over the property L.R No. M.N/1/3160 to secure the facility being advanced to the Plaintiff. A cheque of Kshs. 15,989.00 being a deposit of the legal fees was enclosed in the letter. By a letter dated 9th February, 1993, the 1st Defendant informed the Law firm of Messrs. Bryson, Inamdar & Bowyer Advocates that the earlier instructions in the letter dated 31st August, 1992 to prepare the Charge had been rescinded. The 1st Defendant issued fresh instructions to the JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 112 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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firm to prepare a Charge to secure the advance of Kenya Shillings Two Million (Kshs. 2,000,000.00/=). By a Charge dated 7th September, 1993, the Plaintiff as the proprietor of all that piece of land known as L.R No. M.N./1/3160 Mombasa (Hereinafter referred to as “The Suit Property”) charged the said property to the 1st Defendant in consideration of the 1 st Defendant lending and advancing to the Plaintiff the sum of Kenya Shillings Two Million (Kshs. 2,000,000.00/=) together with interest as provided for in the Charge. 235. The provision of Sections 34 and 35 of the Advocates Act, required that the documents be prepared by an Advocate who had valid practicing certificate and that the documents bears the name and address of the advocate. 236. The Learned Counsel submitted that claim that the Charge document was in contravention of the provisions of Sections 34 and 35 of the Advocates Act has no basis as the cover page confirms that the Charge was drawn by the Law firm of Messrs. Bowyer Mahihu & Company Advocates, the successor to the Law firm of Messrs. Bryson, Inamdar & Bowyer Advocates and contains their address. PW - 3 confirmed during cross - examination that a change of partnership was not unusual and that by a letter dated 9 th February, 1999, the 1st Defendant informed her that no additional legal fees had been collected. The Plaintiff obtained the full benefit of the facility and was advanced the sum of Kenya Shillings Two Million (Kshs. 2,000,000.00/=), she offered the suit property as security. It would be an extreme injustice for the Plaintiff to JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 113 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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turn around and discredit the Charge. The 1 st Defendant was at liberty to choose Advocates of its choice, the Charge did not become less legal because of the change of partnership. The Learned Counsel relied on the case of “Anjanaben Anil Shah – Versus - Akiba Bank Limited [2005] eKLR” , where the Court held that: “I agree with the Plaintiff that a charge is one of the documents (refer Section 34 (1)(e)of the Advocates Act as read together with the third scale of the first schedule of the Advocates Remuneration Order) which should be drawn or prepared by a qualified person. There is no evidence in the case at hand that the charge in question was drawn by an unqualified person. There is an endorsement of the firm of Mohamed Madhani & Co. Advocate’s whose address is furnished. What is missing is the phrase “Drawn by”. The instant case is therefore in my view in a different category from the case of JAMBO BISCUITS (K) LTD – Versus BARLCAYS BANK OF KENYA LTD (SUPRA) which completely lacked the endorsement of the person who had drawn or prepared the debentures. There is no doubt in my mind that the charge in the case at hand was drawn by the firm of Mohamed Madhani & Co. Advocates. In my view the omission of the words “Drawn by” does not invalidate the charge. The charge is validly endorsed with the name and address of the Advocates who drew or prepared the same. The charge in my view does not offend sections 34 and 35 of the Advocates Act. Imagine a party who has executed a charge or debenture later turning around and seeking to invalidate the charge or debenture after taking full benefit thereof on the basis that the advocate who drew the charge and debenture omitted to endorse the words “Drawn by”Such a result would offend our sense of justice.” 237. The Plaintiff's claim that the Charge was not signed by the 1 st Defendant was futile and a lack of understanding of the land law regime in force at that time. The Learned Counsel JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 114 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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submitted that a reading of the Registration of Lands Act, specifically the First Schedule, confirmed that the Act provided for the form/precedent of a Charge as Form J, the form confirmed that at the time only signature by the borrower was required. On whether the Plaintiff was explained to the effect of the provision of Section 69 (1) of the Indian Transfer of Property Act, the Learned Counsel submitted that as the Charge document stated, the Plaintiff received proper explanation on the full effect and contents of the Charge and certification made to that effect by Mrs. Sally Muchoki Mahihu Advocate. The Plaintiff never claimed that she had not been explained the effects of the Charge in her various correspondences with the bank cited above and no demand letter was ever issued to Mrs. Sally Mahihu if the Plaintiff was sincere about her allegations. PW - 3 confirmed during the hearing that it was her signature that appeared in the charge and did not dispute appearing before Mrs. Mahihu to sign. 238. On this issue, the 1st Defendant relied on the case of “Clesoi Holdings Limited – Versus - Prime Bank Limited [2020] eKLR” where the Court in dealing with similar issues relating to the validity of a charge held as follows; ‘In the instant case, it is evident that, the Plaintiff's directors are also the directors’ of the principal borrower’s. Therefore, they directly benefitted from the facilities advanced. In that case, the guarantee was not manifestly disadvantageous to them. Similarly, there is no evidence that, the Defendant gave Mr. Shah, (as its agent). the charge documents to take home to his wife, Nipti Shah to sign. To the contrary, there is evidence that, she signed the charge documents in the presence of a lawyer, who attested to her signature. Therefore, there is no evidence that the Defendant, had JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 115 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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actual or constructive knowledge of the alleged undue influence. I also find, there is evidence that, Nipti Shah did not just sign one charge but signed a total of four charge documents. Therefore, she cannot have signed all of them as a formality, without inquiring as what these series of documents she was signing were all about. She has not disputed her signatures on the charge documents. But even more so, as aforesaid, she chaired all the meetings that deliberated and passed resolutions to charge the suit property to secure the borrowing by the principal debtors. I therefore find that, Nipti Shah was not unduly influenced and/or misled to sign the charge documents in issue, as alleged. The Plaintiff also raised further that, the charges do not comply with the provisions of; section 46 of the Registration of Titles Act (Repealed). I have considered the arguments by the parties in relation to the subject issue find that, the subject provisions states that: Whenever any land is intended to be charged or made security in favour of any person other than by way of deposit of documents of title as provided for by section 66, the proprietor or lessee or, if the proprietor or lessee is of unsound mind, the guardian or other person appointed by the court to act on his behalf in the matter shall execute a charge in form J (1) or J (2) in the First Schedule, which must be registered as hereinbefore provided. (2) The charge when registered shall (subject to any provisions to the contrary therein contained) render the property comprised therein subject to the same security, and to the same powers and remedies on the part of the chargee, as are the case under a legal mortgage of land which is not registered under this Act". Having considered these provisions. I concur with the Plaintiffs submissions that, these provisions are couched in mandatory terms by use of the word “shall” in relation to the use of the relevant forms. However. I have reproduced the sample of Form J (1)here below, for ease of understanding and particularly to appreciate the content thereof. "Form J (1) Charge (section 46) I. being registered as the proprietor [lessee],subject to such charges as are notified by memorandum written hereon, and JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 116 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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:AE·-pled ONËOpelS to the annual rent of Sh..............cts............of that piece of land containing [state area] or thereabouts, and situated in [if the land to be dealt with contains all that is included in an existing grant or certificate of title or lease, refer thereto for description or diagram; otherwise set forth the boundaries in feet, and refer to plan thereof on margin of or annexed to the charge, or deposited in the .......]in consideration of the sum of Sh.............cts............lent to me by .... of [insert description], the receipt of which sum I hereby acknowledge, do hereby agree: First that I will pay to him the said.........................the above sum of Sh............ on the............day of.............. Secondly that I will pay interest on the said sum at the rate of Sh.............. per centum per annum by equal payments of Sh............ cts........, on the ....... day of every [insert month or quarter or half-year or year], the first of such payments to be made on the.......... day of ............. next: Thirdly [set forth special stipulations if any]. And, for the better securing to the said......................the repayment in manner aforesaid of the principal sum and interest. I hereby charge the land above described with such principal sum and interest. In witness whereof I have hereunto signed my name this .......... day of ....,19.... Signed by the said......... in the presence of? [ Signature] [Endorse memorandum of charges]” The contents of; Form J (2) are generally similar to those in Form J (1). Be that as it were, the salient information required in these forms include; particulars of; the proprietor of the land charged, the surface area, the location or situation of the land, the consideration, the particulars of the lender, the commitment by the chargor to pay the principal sum plus interest, the events when the liability to pay ceases and the signature of the chargor. In the given circumstances I find that, the charges conform with the requirements of section 46 of the Registration of Tiles Act, cap 281 of the laws of Kenya (Repealed),in so far as the content is concerned. In addition, the charges were registered as required by sub section 46 (2), thus conferring rights upon the chargee. Finally, taking into account the provisions of: Article 159 (2)(d) of the constitution, which JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 117 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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requires that the courts should uphold substantive justice and surpasses the statutory provisions of: section 46, the charges herein cannot be declared null and void for want of form. 239. The Learned Counsel submitted that at paragraph 35 of the Amended Plaint, the Plaintiffs allege the 1st Defendant did not serve a statutory notice and that there was no default entitling the 1st Defendant to exercise its statutory power of sale. The Learned Counsel submitted that there was never any compliance by the Plaintiff. In her various letters set out at paragraph 55 of this submissions, the Plaintiff acknowledged and/or admitted that the facility was in arrears and requested to clear the outstanding amount and made several proposals which bore no fruit. By a letter dated 1 st April, 1997, the 1st Defendant instructed the Law firm of Messrs. Bowyer Mahihu & Company Advocates to issue the Plaintiff with a Statutory Notice as the Plaintiff's arrears stood at a sum of Kenya Shillings Five Ninety Nine Thousand Eight Twenty seven Hundred and Fifty Cents (Kshs. 599,827.50/-) and total outstanding loan amount was a sum of Kenya Shillings Two Million Seven Thirty Three Thousand Two Fifteen Hundred and Thirty Cents (Kshs. 2,733,215.30/=). The letter was copied to the Plaintiff. 240. By a letter dated 23rd May, 1997, the Law firm of Messers. Bowyer, Mahihu & Company Advocates on behalf of the 1 st Defendant issued a demand to the Plaintiff. The 1 st Defendant demanded the repayment of the whole mortgage sum of Kenya Shillings Two Million Seven Thirty Three Thousand Two JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 118 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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Fifteen Hundred and Thirty Cents (Kshs. 2,733,215.30/=) within twenty (21) days. The Learned Counsel submitted that by a letter dated 26th May,1997, the Plaintiff acknowledged receipt of letter dated 1st April, 1997 and requested the 1st Defendant to forestall any legal action until 3 rd June, 1997 when she would have cleared the loan amount. By a letter dated 4th June, 1997, the Plaintiff requested for three (3) months to clear the loan amount. The Plaintiff did not clear the loan amount within the three (3) months as suggested and by a letter dated 7th August, 1997, the 1st Defendant through its Advocates the Law firm of Messrs. M/s Bowyer Mahihu & Company Advocates issued a Statutory Notice to the Plaintiff. The 1st Defendant informed the Plaintiff that she had failed to regularly service her mortgage account and that there was an outstanding balance of a sum of Kenya Shillings Two Million Seven Thirty-Three Hundred Two Fifteen Hundred and Thirty cents (Kshs. 2,733,215.30/=) as of 1 st April, 1997. The 1st Defendant demanded payment of the outstanding balance together with interest and legal fees of a sum of Kenya Shillings One Thousand Five Hundred (Kshs. 1,500.00/-) within ninety (90) days failure to which the 1 st Defendant would exercise its statutory power of sale. 241. By a letter dated 26th August, 1997, the Plaintiff acknowledged receipt of the Statutory Notice and admitted that there was an outstanding balance of a sum of Kenya Shillings Two Million Seven Thirty Thirty Three Thousand Two Fifteen Hundred and Thirty Cents (Kshs. 2,733,215.30/=) on JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 119 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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here mortgage account and proposed to rent out her house so that the rent of a sum of Kenya Shillings Fourty Thousand (Kshs. 40,000.00/=) could be remitted on a monthly basis directly to the mortgage account. 242. The claim by the Plaintiff in the suit that she was never served or issued with a statutory notice was therefore without any legal basis at all. On this assertion, the 1 st Defendant relied on case of: “Njoroge Wa Kairo – Versus - Housing Finance Co. of Kenya Limited[2006] eKLR” where the Court held as follows with regard to validity of service:“The Plaintiff's argument that he was not served with the statutory notice is defeated by the letter annexed to the Defendant's Replying Affidavit dated 28th August, 2003. That statutory notice was sent to the plaintiff's address P O BOX 30063 Nairobi. The Defendant proved postage by Registered post of that letter which was posted on 29th August, 2003. The Plaintiff's argument is defeated by Section 3 (5) of the Interpretation and General Provisions Act, Cap. 2 which provides “Where any written law authorizes or requires a document to be served by post, whether the expression “serve” or “give”' or “sent” or any other expression is used, then, unless a contrary intention appears, the service shall be deemed to be effected by properly addressing to the last known postal address of the person to be served, prepaying and posting, by registered post, a letter containing the document, and, unless the contrary is proved, to have been effected at the time at which the letter would be delivered in the ordinary course of posts.” It was incumbent on the Plaintiff to prove that he did not receive that statutory notice of 28th August, 2003. That is, the evidential burden was on him. The courts finding therefore is that on a prima facie basis the Plaintiff has been served with legally valid statutory notices.” JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 120 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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243. The Learned Counsel relied on the case of “Emmre Global Investors Limited – Versus - Housing Finance Company of Kenya Ltd [2014] eKLR” where Justice Kamau held as follows:“In the instant case, the 1st and 2nd Defendants relied upon the address that had been issued by the Plaintiff in the Charge Instrument to send all the statutory notices. The Plaintiff cannot now turn and claim the postal address used by the Defendants to have been the incorrect address. The burden was on it to prove that it did not receive the statutory notices due to some omission by the 1 st Defendant. This evidentiary burden was placed on the chargor in the case of Kamunyori & Co. Advocates – Versus - Cannon Assurance (K) Ltd [2006] eKLR that was relied upon by the 1 st Defendant and which this court finds itself in agreement with. The Statutory Notice dated 12th November, 2012 adequately informed the Plaintiff of the nature and extent of its default, the amount that must be paid within three (3) months so as to rectify if the default, the consequence of not rectifying the default and its right to apply to court for certain remedies. While the Plaintiff denied of having been notified of being in arrears of the said amount, it is obvious to the court that its proposal was an implied admission that there were arrears. A borrower is at all material times presumed to be aware of its default so long as it does not effect payments and need not be notified of such a fact. The purpose of a notice is merely to give a reasonable opportunity to a borrower to regulate its financial position before the lender can commence recovery proceedings of the monies due and owing to it. In the absence of any evidence to the contrary, and which the Plaintiff did not provide, the court was satisfied that the 1 st Defendant issued the Plaintiff with the mandatory Statutory Notices that were properly addressed and posted to it.” 244. By a letter dated 28th October, 1999, Watts Enterprises served the Plaintiff with a Notification of Sale informing her that the suit property would be auctioned if the sum of Kenya Shillings Four Million Two Sixty Six Thousand Three Fourty Four Hundred and Fourty One cents (Kshs. 4,266,354.41/=) was JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 121 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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not settled within forty (45) days. The sale was postponed at the request of the Plaintiff. However, after that the account once again fell into arrears prompting the 1 st Defendant to issue another Statutory Notice dated 24 th March, 2006, the 1st Defendant informed the Plaintiff that the outstanding loan amount together with interest due in the mortgage account stood at a sum of Kenya Shillings Eight Million Seven Thousand Five Eighty Nine and twenty Cents 8,007,589.20/=) as at 31st March, 2006. The 1st (Kshs. Defendant notified the Plaintiff that if the amount due and owing was not settled within three (3) months, the 1 st Defendant would proceed to exercise its statutory power of sale. The ninety-day (90) notice crystallized on 24th June, 2006. On this issue, the Learned Counsel urged the Court to find that at the time the suit was filed, the bank was properly exercising its statutory power of sale to recover the sum outstanding on the account and the bank as well as the auctioneers had served their respective notices. 245. The Learned Counsel submitted on the sale to the 3 rd and 4th Defendant’s that the Plaintiff at Paragraphs 35 of the Plaint contend that the sale by private treaty to the 3 rd and 4th Defendants was improper as the 1st Defendant had debited the account with auctioneer costs and thus represented that the property would be sold by public auction. The Plaintiff further contends that the property was sold at a gross undervalue and that the mortgage account was not debited JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 122 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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with the full purchase price of a sum of Kenya Shillings Eight Million Five Hundred Thousand (Kshs. 8,500,000.00/=). 246. The Learned Counsel submitted that under Clause 7 of the Charge, the Plaintiff was responsible for meeting the costs and expenses incurred in enforcement upon default. It was not true that the 1st Defendant represented that the sale would be by public auction. In fact, the evidence confirmed in the year 1998, Watts Enterprises, the Auctioneer were advised to hold on for fourteen (14) days to allow the Plaintiff to settle the arrears. But still, the Plaintiff’s account fell into arrears again and in year 1999, Watts Enterprises issued another forty - five (45) days notice to redeem the property. The Plaintiff paid the sum of Kenya Shillings Nine Hundred and Fifty Thousand (Kshs.950,000.00/=) and was informed by a letter dated 11th November, 1999 that legal action was suspended as the account was still in arrears of a sum of Kenya Shillings Two Thirty One Thousand (Kshs. 231,000.00/=). That by a letter dated 18th January, 2000, Watts Enterprises were instructed by the 1 st Defendant to cancel the auction scheduled for 28th January, 2000. 247. The sale by public auction was cancelled to allow the Plaintiff to clear the outstanding arrears. However, in an effort to restrain the 1st Defendant from exercising its statutory power of sale, the Plaintiff filed suit by way of a Plaint dated 4 th March, 2002 in Mombasa HCCC No.83 of 2002 in case of “Rose Wangari Ndegwa – Versus - Housing Finance Company of Kenya Limited” contesting the details of the loan accounts and the re JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 123 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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- payments. She sought inter alia for a declaration that the interest rates charged by the 1 st Defendant were illegal and unconscionable and that she had full discharged her obligation under the terms of the Charge dated 7 th September, 1993. The Plaintiff filed a Chamber Summons application dated 16 th June, 2006 in Mombasa HCCC No. 83 of 2002 seeking an order of temporary injunction to restrain the 1st Defendant from advertising, auctioning, transferring or taking any steps to realize the sale of the suit property. The application was heard and, in a ruling, delivered on 12th February, 2007, Honourable Justice Sergon dismissed the application and held that the Plaintiff had not set out a prima facie case. 248. By a Statutory Notice dated 24 th March, 2006, the 1st Defendant informed the Plaintiff that the outstanding loan amount together with interest due in the mortgage account stood at a sum of Kenya Shillings Eight Million Seven Thousand Five Eighty Nine Hundred and Twenty Cents (Kshs. 8,007,589.20/=) as at 31st March, 2006. The 1st Defendant notified the Plaintiff that if the amount due and owing was not settled within three (3) months, the 1 st Defendant would proceed to exercise its statutory power of sale. The 1st Defendant instructed Tysons Limited to carry out a valuation on the suit property. By a valuation dated 2 nd March, 2007, Tyson Limited issued a valuation report with the open market value of a sum of Kenya Shillings Ten Million (Kshs. 10,000,000.00/=), the mortgage value was given at a sum of Kenya Shillings Nine Million (Kshs.9,000,000.00/=) and the JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 124 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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forced sale value at a sum of Kenya Shillings Eight Million (Kshs. 8,000,000.00/=). 249. The 2nd and 3rd Defendants made an offer to purchase the suit property by a letter dated 2 nd April, 2007 through the real estate agents known as Amesnet Enterprises Limited. By a letter dated 3rd April 2007, the 1st Defendant informed the 2nd and 3rd Defendants that their offer to purchase the suit property at a sum of Kenya Shillings Eight Million Five Hundred Thousand (Kshs. 8,500,000.00/=) had been accepted. The 1st Defendant requested the 2nd and 3rd Defendants to furnish it with a bankers cheque of a sum of Kenya Shillings Four Million (Kshs.4,000,000.00/=) being the part payment of the purchase price. The balance of the purchase price of a sum of Kenya Shillings Four Million Five Hundred Thousand (Kshs. 4,500,000.00/=) was to be paid within ninety (90) days. The 2nd and 3rd Defendant’s paid a deposit of a sum of Kenya Shillings Four Million One Seventeen Thousand Two Hundred and Eight (Kshs. 4,117,208.40/=) on 11th April, 2007 towards the Purchase of the suit property by a Bankers Cheque number 01384 from Diamond Trust Bank Limited and the Balance was financed by a loan advanced by the 1 st Defendant. By an agreement for Sale in writing executed on 30th April, 2007 the suit property was sold to the 2nd and 3rd Defendant by Private Treaty for the sum of Kenya Shillings Eight Million Five Hundred Thousand (Kshs.8,500,000.00/=). JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 125 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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250. The suit property was transferred to the 2 nd and 3rd Defendants by a Transfer by Chargee dated 30 th April, 2007 and registered on 22nd May, 2007. In view of foregoing, the Learned Counsel submitted that the sale to the 2 nd and 3rd Defendants was proper for the following reasons:i) After the public auction was cancelled in 18 th January, 2000 at the behest of the Plaintiff, no other auctioneer charges were incurred that would give rise to a representation that the sale would be by way of public auction. ii) There was no gross valuation as the forced sale value which guided the bank was a sum of Kenya Shillings Eight Million (Kshs. 8,000,000.00/=). The open market value was not applicable as the sale was in exercise of statutory power of sale. iii) The proceeds of sale of a sum of kenya Shillings Four Million Three Eighty Two Thousand Seven Ninety One Hundred and Sixty Eight Cents (Kshs. 4,382, 791.68/=) and Kenya Shillings Four Million Five Hundred Thousand (Kshs. 4,500,000.00/=) were credited to the loan account, the statement at the end of 1 st December 2007 confirms a credit of a sum of Kenya Shillings Eight Million Five Hundred Thousand (Kshs.8,500,000/=) was deposited into the account. 251. The Learned Counsel submitted that the sale of the property was by private treaty in exercise of its statutory power of sale, there was nothing clandestine and secretive about it. An offer was made which was in accord with the forced sale value, it was accepted and transfer by Chargee was registered. The JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 126 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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Learned Judges of the Court of appeal when dealing with a similar claim as this in the case of “Francis Mogaka Maranya – Versus - National Bank of Kenya Limited & another [1997] KECA 200” held as follows:“In this regard, the provisions of Section 69 of the Act are clear and entitle the Bank to effect sale by private treaty. This right, in our view, is not taken away merely because at an early stage, the Bank had advertised to sell the property by public auction. There was no plea of estoppel nor can one succeed as there is no estoppel against the statute. Mr. Kowade for the Appellant eventually conceded and, in our view rightly, this ground of appeal and abandoned it.” 252. Therefore, the Learned Counsel urged this Honourable Court to find that on this issue the sale to the 2nd and 3rd Defendants. 253. In conclusion, the Learned Counsel submitted that the Plaintiffs have not established or proved any of the claims in the suit and the 1st Defendant was lawfully and validly exercising its statutory power of sale. The Plaintiffs defaulted and failed to honour her various proposals to pay. The Learned Counsel therefore prayed that the Plaintiff’s suit as pleaded in the Amended Plaint dated 4 th July, 2007 be dismissed with costs. VIII. Analysis and Determination 254. I have keenly assessed the filed pleadings by all the Plaintiffs and 1st, 2nd, 3rd and 4th Defendants herein, the oral testimonies adduced in court, the documentary evidence tendered, the written submissions filed by the respective Counsels, the cited myriad of authorities, JUDGMENT: ELC. CASE NO. 147 OF 2018 the Page 127 of 146 relevant provisions of the HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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Constitution of Kenya, 2010 and the statutes governing land ownership and registration. 255. Prior to proceeding any further, it is instructive to observe that the Doctrine on “the Burden of Proof” is critical here. Specifically, I am guided by the provision of Section 107 (1) of the Evidence Act, cap. 80 which provides that: “Whoever desires any court to give judgement as to any legal right or liability dependent on the existence of facts which he asserts must prove that those facts exist.” 256. Section 108 provides: “The burden of proof in a suit or proceedings lies on that person who would fail if no evidence at all were given on either side.” 257. And section 109 provides: “The burden of proof as to any particular fact lies on the person who wishes the court to believe in its existence, unless it is provided for by law that the proof of that fact shall lie on any particular person.” 258. In order to reach an informed, reasonable, and just decision in the subject matter, this Honourable Court crafted the following nine (9) salient issues for its determination. These were: a) Whether the Charge dated 7th September, 1993 was valid and enforceable by law. b) Whether the interest rates charged against the Charge by the 1st Defendant were lawful, valid and proper. c) Whether the Plaintiff was in default under the mortgage; JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 128 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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d) Whether valid statutory notices were served upon the Plaintiff; e) Whether the 1st Defendant had a valid Statutory Power of Sale as per the prerequisites of the Law; f) Whether the sale of the suit premises through Private Treaty to the 2nd and 3rd Defendants was lawful; g) Whether “the Doctrine of Lis Pendens” applied to the sale; h) Whether the Plaintiff is entitled to the reliefs sought; and i) Who bears the costs of this suit. ISSUE No. a). Whether the Charge dated 7th September 1993 was valid and enforceable by Law. 259. Under this sub-title the Honourable Court shall examine whether the Charge document dated 7th September, 1993 was valid and enforcement by Law. The Plaintiff's attack on the validity of the Charge is multifaceted. She contends that the Charge was not drawn by the Law firm of Messrs. Bryson, Inamdar & Bowyer Advocates as required by “ the Offer to Advance” that it contravened the provision of Sections 34 and 35 of the Advocates Act for want of an endorsement of the name and address of the Advocate who drew it; that it did not contain an acknowledgment that the provision of Section 69 (1) of the Transfer of Property Act was explained to her; and that it provided for interest at rates above the statutory maximum. 260. From the record and the documents filed, the evidence reveals that indeed the Charge was drawn by the Law firm of JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 129 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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Messrs. Bowyer Mahihu & Company Advocates, which the 1 st Defendant contends was the successor Law firm to Messrs. Bryson, Inamdar & Bowyer Advocates following a change of partnership. The Plaintiff herself confirmed during crossexamination that she had changed advocates from M/s. Mahihu Advocate to Gikandi Advocates, and that a change of partnership was not unusual. In the Conveyancing legal practice, this is an expected ordinary and usual occurrence. 261. On the question of the endorsement under Section 35 of the Advocates Act, the Court of Appeal and High Court have drawn a distinction between a document which completely lacks the endorsement of the Advocate who drew it, and one which bears the name and address of the Law firm but omits the phrase “Drawn by”. On this legal assertion, I have sought refuge from the decision of:- “Anjanaben Anil Shah – Versus Akiba Bank Limited [2005] eKLR”, where the High Court held that a charge which bore the name and address of the firm of advocates but omitted the words “Drawn by” was nonetheless validly endorsed, and that the omission of those words did not invalidate the Charge or a legal Conveyancing instrument. The Court reasoned that it would offend one’s sense of justice for a party who has executed a charge and taken full benefit thereof to later seek to invalidate it on the basis of such a technical omission. 262. In the present case, the evidence shows that the Charge was drawn by the Law firm of Messrs. Bowyer Mahihu & Company Advocates, whose JUDGMENT: ELC. CASE NO. 147 OF 2018 name and Page 130 of 146 address appear on the HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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document. The Plaintiff herself admitted signing the Charge in the presence of Sally Mahihu, an Advocate of that Law firm. Subsequently, the Plaintiff obtained the full benefit of the loan for a sum of Kenya Shillings Two Million (Kshs. 2,000,000.00) advanced by the 1st Defendant. In my view, applying the reasoning in the case of “Anjanaben Anil Shah (Supra), the Charge was validly drawn and executed, and the Plaintiff cannot now be heard to impugn its validity on technical grounds after enjoying the full benefit of the facility. Certainly, this is double speak for convenience sake. It is unacceptable. 263. Regarding the Certificate under the provision of Section 69 (1) of the Transfer of Property Act, the Charge bears a certification by Sally Muchoki Mahihu Advocate, that she explained the effect of the section to the Plaintiff. The Plaintiff contends that no such explanation was given. Suffice it to say, it is instructive to note that this transaction took place in the year 1993 prior to the legislation of the Land Registration Act, No. 3 of 2012 which introduces the issue of Certification. However, the Plaintiff admitted that she signed the Charge in the presence of the Advocate at her offices. Evidently, the Plaintiff being the one alleging, never called Sally Mahihu Advocate whom is still practicing law to testify or otherwise challenge the certificate through any contemporaneous complaint. Based on the provision of Sections 107, 108 and 109 of the Evidence Act, Cap. 80 on “the Principle of the Burden of Proof” it lied on her. I emphasize that the burden was on the Plaintiff to prove that the certificate was false, and JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 131 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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she has not discharged that burden. Therefore, by and large, I discern that the Charge dated 7 th September, 1993 was legal, valid and hence enforceable by law. ISSUE No. b). Whether the interest rates charged on the Charge document by the 1st Defendant were lawful 264. Under this sub-title the Honourable Court shall examine the interest rates charged by the 1 st Defendant were lawful. The Plaintiff's central contention on this issue is that the 1 st Defendant charged interest at rates exceeding the statutory maximum of 19% per annum prescribed under the provision of Section 39 of the Central Bank of Kenya Act, Cap. 491 as read with Gazette Notice No. 1617 of 1990. The evidence establishes that Gazette Notice No. 1617 of 1990, issued under Section 39 of the CBK Act, prescribed a maximum interest rate of 19% per annum for loans exceeding three years. However, that Gazette Notice was revoked by Gazette Notice No. 3348 of 23rd July, 1991, before the Plaintiff's facility was advanced in September, 1993. 265. The Supreme Court of Kenya in the case of “Stanbic Bank Kenya Limited – Versus - Santowels Limited, Petition No. E005 of 2023 [2024] KESC 31 (KLR)” authoritatively settled this question. The Supreme Court held that Gazette Notice No. 1617 of 1990, which prescribed a capped interest rate, was properly revoked by Gazette Notice No. 3348 of 23rd July, 1991. The Court further held that Section 39 of the CBK Act, which gave the Governor discretion to cap interest rates, also entailed the power not to set any limits on interest rates. JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 132 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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Consequently, once the capped rate was revoked and no other capped rate was provided, there was no capped rate of interest by the Governor of CBK applicable to facilities advanced after the revocation. 266. The Court of Appeal in the case of:- “National Bank of Kenya Ltd & 2 others – Versus - Asam-Con Limited [2025] KECA 504 (KLR)” similarly acknowledged that Gazette Notice No. 3348 of 1991 effectively removed the 19% cap prescribed by Gazette Notice No. 1617 of 1990. Applying these authorities to the present case, the Plaintiff's facility was advanced on 23 rd September, 1993, more than two (2) years after the revocation of the 19% interest rate cap. The interest rate of 21% per annum stipulated in the Charge was therefore not in contravention of any statutory maximum. The IRAC report prepared by PW - 2, which applied a 19% rate on the erroneous basis that the cap remained in force, is therefore of no probative value on this issue. 267. Furthermore, the Plaintiff's own expert, PW - 2, conceded under cross-examination that the interest rate was not tied to 19% throughout, and that he had applied rates from 12% up to 26% in his re - calculation. The fluctuation and variations in the interest rate were provided for under Clause 4 of the Charge, which permitted the 1st Defendant to vary the rate upon notice to the Plaintiff. The evidence shows that the 1 st Defendant issued numerous letters to the Plaintiff notifying her of the variations in the interest rate and the resultant changes in the monthly instalments. JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 133 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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268. In a nutshell, I therefore find that the interest rates charged by the 1st Defendant were lawful, Valid and contractual by all legal standards. ISSUE No. c). Whether the Plaintiff was in default under the mortgage 269. Under this sub-title the Honourable Court shall examine whether the Plaintiff was in default under mortgage. The evidence on this issue is overwhelming. Evidently, the Plaintiff herself admitted, in a series of letters addressed to the 1 st Defendant spanning from the years 1994 to 2000, that her mortgage account was in an outstanding arrears and requested accommodation to clear it. I hold that the Doctrine of Estopel” under the Law of Evidence, Cap. 80 comes in here handy. These admissions include: i) A letter dated 12th September, 1994 in which she informed the 1st Defendant that she had settled arrears by paying a sum of Kenya Shillings Two Hundred Thousand (Kshs. 200,000.00/=); ii) A letter dated 26th November, 1996 in which she admitted that her account was in arrears of a sum of Kenya Shillings Three Hundred Thousand Nine Thirty Sixe Hundred and Ten Cents (Kshs. 329,936.10/=) and requested an extension to pay; iii) A letter dated 16th December, 1996 requesting ninety (90) days to settle the arrears; JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 134 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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iv) A letter dated 26th May, 1997 requesting the 1st Defendant to forestall legal action until 3rd June, 1997; v) A letter dated 4th June, 1997 requesting three months to clear the loan; vi) A letter dated 29th July, 1999 admitting arrears of a sum of Kenya Shillings Eight Thirty Two Thousand Four Fifteen Hundred and Fifty Five Cents (Kshs. 832,415.55/=); and vii) A letter dated 8th August, 2000 requesting three (3) months to liquidate the arrears. 270. The 1st Defendant's mortgage account statements, which were produced in evidence, show that the Plaintiff's account was in arrears from February, 1994 and that the arrears escalated over the years. By the time of service of the statutory notice on 24th March, 2006, the Plaintiff's account was in arrears of a sum of Kenya Shillings Five Million Seven Eighty Four Thousand Nine Hundred and Three (Kshs. 5,784,903.45/=) against an outstanding sum of Kenya Shillings Eight Million Seven Thousand Five Eight Nine Hundred and Twenty Cents (Kshs. 8,007,589.20/=). 271. The Court of Appeal in the case of:- “Daima Bank Limited (In Liquidation) – Versus - David Musyimi Ndetei [2018] eKLR” recognized that the financial services industry in the year 1990s was characterized by high lending rates, and that courts have a duty to uphold the rights of parties who have negotiated commercial transactions. In the present case, the Plaintiff's repeated admissions of default and requests for JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 135 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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accommodation are inconsistent with her claim that she was not in arrears and had pre - paid her instalments. 272. Thus, it’s the finding of this Honorable Court that the Plaintiff was in substantial default of the loan advanced monies under the mortgage, and that the 1st Defendant was entitled to commence recovery proceedings based on the legal principles of exercising its Statutory Power of Sale as provided for in law. ISSUE No. d). Whether valid statutory notices were served upon the Plaintiff 273. Under this sub – title, the Honourable Court shall examine whether valid statutory notices were served upon the Plaintiff. The applicable law at the material time was the provision Section 69A (1) of the Indian Transfer of Property Act, 1882 (as applied to Kenya), which provided that a mortgagee shall not exercise its statutory power of sale unless and until notice requiring payment of the mortgage money has been served on the mortgagor, and default has been made in payment for three months after such service. 274. The evidence shows that by a letter dated 1 st April, 1997, the 1st Defendant instructed the Law firm of Messrs. Bowyer Mahihu & Company Advocates to issue a statutory notice to the Plaintiff. By a letter dated 23 rd May, 1997, the Advocates issued a demand to the Plaintiff requiring payment of the outstanding sum of Kenya Shillings Two Million Seven Thirty Three Thousand Two Fifteen Hundred and Thirty Cents (Kshs. 2,733,215.30/=) within twenty - one (21) days. The Plaintiff acknowledged receipt of this letter on 26th May, 1997 and JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 136 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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requested time to clear the loan. By a letter dated 7th August, 1997, the 1st Defendant, through its Advocates, issued a further statutory notice requiring payment of the outstanding balance within ninety days. The Plaintiff acknowledged receipt of this notice by a letter dated 26 th August, 1997, in which she admitted the outstanding balance and proposed to rent out her house to service the loan. 275. The Court of Appeal in “Trust Bank Limited – Versus - Kiran Ramji Kotedia [2000] eKLR” held that a mortgagee's statutory power of sale only accrues after a valid statutory notice has been served. However, in the present case, the evidence establishes that the Plaintiff was served with statutory notices on multiple occasions, and that she acknowledged receipt of those notices in writing. Furthermore, the Court of Appeal in the case of:- “Trust Bank Limited – Versus - Eros Chemists Limited & Another [2000] eKLR” held that the three-month notice period is a mandatory requirement. In the present case, the statutory notice dated 7th August, 1997 required payment within ninety (90) days, which satisfied the three (3) months requirement. 276. The 1st Defendant also issued a further statutory notice dated 24th March, 2006, informing the Plaintiff that the outstanding amount stood at a sum of Kenya Shillings Eight Million Seven Thousand Five Eighty Nine Hundred and Twenty Cents (Kshs. 8,007,589.20/=) as at 31st March, 2006, and that if the amount was not settled within JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 137 of 146 three months, the 1 st HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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Defendant would exercise its statutory power of sale. This notice crystallized on 24th June, 2006. 277. Hence, the Honourable Court strongly holds that valid statutory notices were served upon the Plaintiff and that the 1st Defendant’s statutory power of sale had accrued. ISSUE No. e). Whether the 1st Defendant had a valid statutory power of sale 278. Under this sub-title the Honourable Court shall examine whether the 1st Defendant had a valid statutory power of sale. Having found that the Charge was valid, that the Plaintiff was in default, and that valid statutory notices were served, it follows that the 1st Defendant's statutory power of sale had accrued and was exercisable. 279. The Plaintiff’s contention that the 1st Defendant had no statutory power of sale because the Charge was invalid has been rejected above. The Plaintiff's further contention that the 1st Defendant sold the property “as owner” rather than as Chargee is a mischaracterization of the evidence. The Transfer dated 30th April, 2007 was expressly a “Transfer by Chargee” in exercise of the statutory power of sale. ISSUE No. f). Whether the sale of the suit premises through Private Treaty to the 2nd and 3rd Defendants was lawful, proper and valid 280. Under this sub-title the Honourable Court shall examine whether the sale of the suit premises by private treaty to the 2nd and 3rd Defendants was lawful. The Plaintiff contends that JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 138 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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the sale of the suit premises by private treaty, after the 1 st Defendant had instructed and paid auctioneers for a public auction, was unlawful and fraudulent. The evidence shows that the 1st Defendant initially instructed auctioneers to sell the suit premises by public auction. However, the auctions were postponed or cancelled on several occasions at the request of the Plaintiff, who was seeking time to clear the arrears. The last auction was cancelled on 18 th January, 2000. 281. Thereafter, the 1st Defendant obtained a valuation of the suit premises from Tysons Limited dated 2 nd March, 2007, which assessed the forced sale value at a sum of Kenya Shillings Eight Million (Kshs. 8,000,000.00/=). The 2nd and 3rd Defendants made an offer to purchase the property for a sum of Kenya Shillings Eight Million Five Hundred (Kshs. 8,500,000.00/=) through the real estate agents, Amesnet Enterprises Limited. The offer was accepted by the 1 st Defendant and the sale was completed by an Agreement for Sale and a Transfer by Chargee dated 30th April, 2007. 282. The provision of Section 69 (1) of the Transfer of Property Act, 1882 expressly empowered a mortgagee to sell the mortgaged property “by public auction or by private contract.” The Court of Appeal in the case of:- “Francis Mogaka Maranya – Versus - National Bank of Kenya Limited & another [1997] KECA 200” held that the right of a mortgagee to sell by private treaty is not taken away merely because, at an earlier stage, the bank had advertised to sell the property by public auction. It is evident, there were efforts to under take the auction JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 139 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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through public but kept on being postponed for a reason or the other. The Court stated: “The provisions of Section 69 of the Act are clear and entitle the Bank to effect sale by private treaty. This right, in our view, is not taken away merely because at an early stage, the Bank had advertised to sell the property by public auction.” 283. Additionally, the Court of Appeal in “Nancy Kahoya Amadiva – Versus - Expert Credit Limited & another [2015] eKLR” similarly affirmed that under the Registration of Titles Act, the mortgagee has power to sell either by private treaty or public auction. 284. On the question of undervalue, the evidence shows that the property was sold at a sum of Kenya Shillings Eight Million Five Hundred Thousand (Kshs. 8,500,000.00/=), which exceeded the forced sale value of a sum of Kenya Shillings Eight Million (Kshs. 8,000,000.00/=) assessed by Tysons Limited. The Plaintiff's valuer, Maina Chege, assessed the open market value at a sum of Kenya Shillings Twelve Million (Kshs. 12,000,000.00/=), but his report did not provide a forced sale value. The Court of Appeal in the case of:- “Kenya Commercial Bank Limited – Versus - Osede [1982] eKLR” held that a mortgagee is not a trustee of the power of sale for the mortgagor, but owes a duty to take reasonable precautions to obtain the true market value of the mortgaged property at the date of the sale. In the present case, the sale price of a sum of Kenya Shillings Eight Million Five Hundred Thousand (Kshs. 8,500,000.00/=) was above the forced sale value and within a reasonable range of the open market value. JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 140 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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285. Therefore, I hold that the sale through the Private Treaty was not only lawful, rightful but also the most appropriate means available in the given circumstances and which was not at a gross undervalue. ISSUE No. g). Whether “the Doctrine of Lis Pendens” applied to the sale 286. Under this sub-title the Honourable Court shall examine whether the doctrine of lis pendens applied to the sale. The Plaintiff contends that the sale of the suit premises on 30 th April 2007, while this suit was pending, violated the doctrine of lis pendens under the provision of Section 52 of the Transfer of Property Act, 1882. 287. The provision of Section 52 of the Transfer of Property Act, 1882 provided that during the pendency of a suit in which any right to immovable property is directly and specifically in question, the property cannot be transferred or otherwise dealt with by any party to the suit so as to affect the rights of any other party thereto. However, the Court of Appeal in the case of:- “Co - operative Bank of Kenya Limited – Versus Patrick Kangethe Njuguna & 5 others [2017] eKLR” held that the mere institution of a suit does not automatically trigger the doctrine of lis pendens to restrain a Chargee from exercising its statutory power of sale. The Court held that the doctrine does not operate as an automatic injunction and does not extinguish or suspend lawful rights, including the statutory power of sale of a Chargee. An express Court order JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 141 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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restraining any such transaction from taking place has to be issued by Court for the Doctrine to be enforceable or applicable thereof. No such Court order existed. 288. Indeed, the Court of Appeal in the case of:- “Bank of Africa Kenya Limited & another – Versus - TSS Investment Limited & 2 others [2024] KECA 410 (KLR)” further held that the exercise of a Chargee’s statutory power of sale is not fettered by the mere filing or pendency of a suit seeking to challenge the sale, unless and until a court expressly issues an order to restrain the sale. 289. In the present case, the Plaintiff had previously filed Mombasa HCCC No. 83 of 2002 against the 1st Defendant, and had sought an injunction to restrain the sale of the suit premises. That application was heard and dismissed by Justice Sergon in a ruling delivered on 12th February, 2007, on the ground that the Plaintiff had not established a prima facie case. The Plaintiff thereafter withdrew that suit and filed the present suit on 12th March, 2007. However, no injunction was issued in the present suit to restrain the 1 st Defendant from exercising its statutory power of sale. 290. In the circumstances, the 1st Defendant was entitled to proceed with the sale of the suit premises notwithstanding the pendency of this suit, as no court order had been issued restraining such sale. Certainly, “the Doctrine of Lis Pendent” was never breached at all in the given circumstances. ISSUE No. h). Whether the Plaintiff is entitled to the reliefs sought JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 142 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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291. Under this sub-title the Honourable Court shall examine whether the Plaintiff was entitled to the reliefs sought. Having found that the Charge was valid, that the interest rates were lawful, that the Plaintiff was in default, that valid statutory notices were served, that the 1 st Defendant had a valid statutory power of sale, and that the sale by private treaty was lawful, it follows that the Plaintiff is not entitled to the reliefs sought in the Amended Plaint. 292. The Plaintiff's claims for declarations that the interest rates were unlawful, that the Charge was null and void, that the 1 st Defendant had no statutory power of sale, and that the sale was fraudulent and null and void, all fail. The Plaintiff's claim for an order for accounts also fails, as the 1 st Defendant has demonstrated that the Plaintiff was in substantial arrears and that the sale was necessary to recover the outstanding debt. The Plaintiff's claim for general, aggravated and punitive damages fails for want of proof of any breach of contract, fraud, or illegality on the part of the 1st Defendant. 293. The Plaintiff’s claim for re-conveyance of the suit premises fails, as the 2nd and 3rd Defendants acquired valid title with all indefeasible rights, title and rights vested to them by law to the suit premises through the lawful exercise of the 1 st Defendant’s statutory power of sale. The Plaintiff remains in occupation of the suit premises without paying any rent to the 2nd and 3rd Defendants, who are the registered proprietors of the property. The Plaintiff's continued occupation of the suit JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 143 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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premises without the consent of the 2 nd and 3rd Defendants constitutes trespass. ISSUE No. i). Who bears the costs of this suit 294. Under this sub-title the Honourable Court shall examine the question of liability for costs in both the Plaintiffs’ suit. The issue of costs are are the discretion of the Court. Costs are awarded to the successful party as compensation for the expense incurred in litigation, not as a penalty to the losing party. The general principle under Section 27 of the Civil Procedure Act, Cap. 21 is that costs follow the event, unless the Court for good reason orders otherwise. 295. See the cases of “Harun Mutwiri – Versus - Nairobi City County Government [2018] eKLR and “Kenya Union of Commercial, Food and Allied Workers – Versus - Bidco Africa Limited & Another [2015] eKLR, the court reaffirmed that the successful party is typically entitled to costs, unless there are compelling reasons for the court to decide otherwise. In the case of “Hussein Muhumed Sirat – Versus - Attorney General & Another [2017] eKLR, the court stated that costs follow the event as a well- established legal principle, and the successful party is entitled to costs unless there are other exceptional circumstances. 296. In “Machakos ELC Pet No. 6 of 2013 Party of Independent Candidate of Kenya & another – Versus - Mutula Kilonzo & 2 others [2013] eKLR” quoted the case of “Levben Products – Versus -Alexander Films (SA) (PTY)Ltd 1957 (4) SA 225 (SR) at 227” the Court held; JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 144 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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“It is clear from authorities that the fundamental principle underlying the award of costs is two-fold. In the first place the award of costs is matter in which the trial Judge is given discretion (Fripp vs Gibbon & Co., 1913 AD D 354). But this is a judicial discretion and must be exercised upon grounds on which a reasonable man could have come to the conclusion arrived at….In the second place the general rule that costs should be awarded to the successful party, a rule which should not be departed from without the exercise of good grounds for doing so.” 297. In the present matter, the Plaintiff shall pay the costs of this suit to the 1st, 2nd and 3rd Defendants jointly and severally. IX. Conclusion and Disposition 298. Ultimately, having undertaken such an in-depth analysis of the framed issues herein, the Honourable Court, on the preponderance of probabilities and guided by the balance of convenience, finds that the Plaintiff's suit fails and is hereby dismissed. The 1st Defendant lawfully exercised its statutory power of sale, and the 2 nd and 3rd Defendants validly acquired title to the suit premises. The Plaintiff's continued occupation of the suit premises, which she no longer owns, cannot be permitted to continue indefinitely. The 2 nd and 3rd Defendants, as the registered proprietors, are entitled to vacant possession of the suit premises. Accordingly, I make the following orders: (a) THAT Judgement entered to the effect that the Plaintiffs’ claim through the Amended Plaint dated 4th July, 2007 be and is hereby found to lack merit and hence it is dismissed. JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 145 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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(b) THAT an order be and is hereby made to the effect that the 2nd and 3rd Defendants be granted vacant possession of all that parcel of land known as Title Number C.R. 18132, Plot No. L.R. No. 3160/1/MN, Mombasa. (c) THAT in accordance with the provision of Section 152E of the Land Act No. 6 of 2012, the Plaintiff herein be and hereby ordered to vacate and deliver vacant possession of the suit premises WITHIN NINETY (90) DAYS from the date of this Judgment. (d) THAT in default of the Plaintiff vacating the suit premises within the period stipulated in order (c) above, the 2nd and 3rd Defendants be at liberty to lawfully evict the Plaintiff from the suit premises. (e) THAT the costs of the suit shall be borne by the Plaintiff to be paid to the 1st, 2nd and 3rd Defendants jointly and severally. IT IS SO ORDERED ACCORDINGLY JUDGMENT DELIVERED THROUGH MICROSOFT TEAMS VIRTUAL MEANS, SIGNED AND DATED AT MOMBASA THIS … 25TH ……DAY OF ……SEPTEMBER…….2026. ….………….........………….. HON. JUSTICE L.L. NAIKUNI ENVIRONMENT AND LAND COURT AT MOMBASA. Judgement delivered in the presence of: a) M/s. Firdaus Mbula – the Court Assistant. b) M/s. Muyaa & Mr. Kinyua Advocates for the Plaintiff. c) M/s. Maina Advocate for the 1st Defendant. d) No appearance for the 2nd , 3rd & 4th Defendants. JUDGMENT: ELC. CASE NO. 147 OF 2018 Page 146 of 146 HON. JUSTICE L.L. NAIKUNI (ELC JUDGE)

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