Mohammed Asif Rei-iman v Succeed Capital Limited

The Appellant's Case; 2. The general rule is that a party of full age and sound understanding is bound by their signature on a document whether or not they have read it. However, where a contract is illegal by virtue of statute or public policy, such agreement is void and unenforceable in law. 3. The Appellant respectfully submits that the learned trial Magistrate erred both in law and in fact in entering judgment in favour of the Respondent on the basis of an ambiguous and illegal loan agreement. 4. The agreement purported to impose an interest rate of 20% without disclosing the applicable period, and further stated the loan period simply as "2" without specifying whether it referred to days, months, or years. 5. Contracts must be clear and certain in their terms to be enforceable. Where fundamental terms such as interest rate and repayment period are ambiguous, the contract is void for uncertainty. 6. Further, the Appellant submits that the Respondent is not a licensed bank, microfinance, or financial institution under the Banking Act or the Microfinance Act. 7. Section 3 of the Banking Act (Cap 488) requires all persons or entities carrying out banking or financial business in Kenya must be licensed by the Central Bank of Kenya. 8. The trial Magistrate failed to consider that the agreement was illegal as formed. 9. In Joel Njema Waruiru& Another v Robert Kibinja (2013) eKLR, Justice Ouko (as he then was) made clear that unlicensed lending operations are unlawful and courts ought not to aid their enforcement. 10. The Appellant's defence before the trial court was that: a. He borrowed Kshs. from the Respondent; b. He agreed to a 20% total interest bringing it to a total of Kshs.140,000. c. He repaid a total of Kshs. 103,250/=; d. The Respondent nevertheless demanded Kshs. 172,250/=, which was wholly comprised of interest; e. The interest was unlawful and unconscionable; f. The Respondent was not licensed to issue loans or impose interest. 11. The Appellant submits that the trial court failed to consider this defence in substance, and instead adopted the Respondent's position without interrogating the legal capacity of the Respondent to lend money or the enforceability of such interest. 12. Moreover, even if the agreement were deemed valid which is denied, the terms contained in the loan application form dated 27/2/2020 are self-limiting: a. The interest rate is stated as "20%" but does not indicate whether that is monthly, annual, or otherwise. The trial court erroneously presumed it to mean monthly, which is a grave factual and legal error; https://new.kenyalaw.org/akn/ke/judgment/kehc/2025/19316/eng@2025-12-17 2

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b. The loan repayment period is listed only as 2 — again without unit or clarity. Is it 2 days, 2 months, or 2 years? The ambiguity ought to be interpreted against the drafter. The enforcement of the agreement is thus premature, if not entirely void. 13. The learned Magistrate failed to apply the established legal principles on illegality, unconscionability, and public policy, which bar courts from assisting parties seeking to benefit from unlawful contracts. 14. The appellant seeks the orders that: 1. The appeal be allowed. 2. The judgment and decree of Hon. Philemona Makokha, Resident Magistrate, delivered virtually in the Small Claims Court at Nairobi, Milimani Commercial Courts SCCOMM/ NO.4938 OF 2023 on 18th October 2024 be set aside and the same be substituted with an order dismissing the respondents suit with costs. 3. Costs of the appeal and magistrates court case be borne by the Respondents. The Respondents Case; 15. The general rule of contracts is that they require mutual assent. The appellant herein approached the Respondent and requested a loan facility. The Respondent agreed to the request, offered terms of the loan agreement and then the parties executed a loan application form. Subsequently, the loan was disbursed to the Appellant in tranches of KShs. 100,000/= and Kshs. 20,000/=. 16. The loan facility was for a fixed period of two months at and in default, to accrue interest at a rate of 20% per month until payment in full. 17. The Respondent disbursed the loans on 2nd March 2020 and 5thMarch 2020. The Appellant embarked on a piecemeal repayment of the advanced sums, which was against the fixed term of the loan. The outstanding amounts continued to accrue interest. 18. In Charles Mwirigi Miriti v Thananga Tea Growers Sacco Ltd & another [2014] KECA 538 (KLR), the Court of Appeal held that “it is trite that there are three essential elements for a valid contract that is an offer, acceptance and consideration” 19. The respondent submits that the three elements of the loan were met and that the Appellant ought to settle his obligation as provided for in the agreement. 20. In conclusion, the Respondent invites the honourable court to find that the elements of a valid agreement have been established and the dismiss the Appeal and award the Respondent costs of the appeal. 21. The Appellant attempts to rewrite the contract to be dismissed. Analysis and determination: The issues for determination are; 1. Whether the appeal has merit. 2. Who shall bear the costs. https://new.kenyalaw.org/akn/ke/judgment/kehc/2025/19316/eng@2025-12-17 3

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First issue is whether the appeal has merit. 22. Section 38 of The Small Claims Act provides thus; 1. A person aggrieved by the decision or an order of the Court may appeal against that decision or an order to the High Court on matters of law; 2. An appeal from any decision or order referred to in sub section (1) shall be final. 23. Being a first, appeal, this court can review, re-look at and analyze the evidence and the case that was before the trial court, and arrive at its own finding. 24. This must however, be within the framework of the principles as enunciated in Selle & Another vs. Associated Motor Boat Co Ltd & Others [1968] EA where the court therein held that the appellate court was not bound by the findings of fact of the trial court but that in re-considering and reevaluating the evidence so as to draw its own conclusions, it always had to bear in mind that it neither saw nor heard the witnesses and thus make due allowance in that respect. 25. The court has noted that the submissions by the respondents are not signed. 26. Section 3 of the Banking Act (Cap 488) requires all persons or entities carrying out banking or financial business in Kenya to be licensed by the Central Bank of Kenya. 27. The Appellant submitted that the Respondent is not a licensed bank, microfinance, or financial institution under the Banking Act or the Microfinance Act. 28. The Respondent lacks the legal standing or the locus stand or the capacity to institute or file a suit or in any way engage the court for redress. 29. Doing business, contrary to the Banking Act and without a licence is illegal. It even amounts to an economic risk like is the case here since moving the court for purposes of recovering the losses therefrom is not achievable. 30. Allowing an unlicenced person to conduct businesses like banks would be against public policy, and this court has a duty to ensure that such does not happen. 31. The upshot of the forgoing is that the suit that was filed by the respondent in the lower court was a nonstarter since the Respondent lacked the legal capacity to sue. 32. Consequently, the judgment emanating therefrom is a nullity. Determination: 33. The appeal has merit. Order: a. The appeal be allowed. b. The judgment and decree of Hon. Philemona Makokha, Resident Magistrate, delivered virtually in the Small Claims Court at Nairobi, Milimani Commercial Courts SCCOMM/NO.4938 OF 2023 on 18th October 2024 is hereby set aside. c. The same is substituted with an order dismissing the respondents suit with costs. d. Costs of the appeal to the appellant. https://new.kenyalaw.org/akn/ke/judgment/kehc/2025/19316/eng@2025-12-17 4

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DATED, SIGNED AND DELIVERED AT NAIROBI THIS 17TH DAY OF DECEMBER 2025. …………………………………… J. CHIGITI (SC) JUDGE https://new.kenyalaw.org/akn/ke/judgment/kehc/2025/19316/eng@2025-12-17 5

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