Civil Appellate Division v Meg Wambui Muhia

JACKLINE MWIKALI MUNYANZI………….……...……… RESPONDENT JUDGMENT A. Introduction 1. This Appeal challenges the Judgment/decree of Hon C.A Okumu, Resident Magistrate/Adjudicator dated 23rd February 2024, delivered in Milimani Small claims court in SCCC No E5620 of 2023 wherein the learned Magistrate entered judgement in favour of the respondent for the sum of Kshs.400,000/= and allowed the appellant to settle the same by paying installment of Kshs.80,000/= commencing the end of February 2024 until payment of the said amount in full. The respondent was also awarded costs of the primary suit. 2. The background hereto was that the respondent filed her statement of claim dated 31st July 2023, where she averred that on or about the 9th November 2022, the appellant did approach and she acceded to her request to be advanced a personal loan of Kshs.200,000/= to be refunded with interest at 20% by 9th December 2022 and in the event of default the interest on the said loan amount would be calculated at 30% per month until repayment in full. 3. The appellant had defaulted in paying the sum owned and thus requested that judgment be entered in her favour for the sum of Kshs.685,464.00/=, General damages for HCCA NO. E387 OF 2024 2

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delay, inconvenience and breach of contract and costs of the suit plus interest o n the sum claimed. 4. In response the appellant did file her statement of response dated 9th November 2023 where she averred that the loan agreement relied on by the respondent was illegal, irregular, null and void ( or voidable) on account of excessive , unconscionable unjust, oppressive and untenable application of interest at 360% per annum charged under the said agreement. She further averred that the respondent had moved court with unclean hands in equity and had failed to disclose that she had repaid part of the loan advanced of Kshs.50,000/= and was therefore underserving of the orders sought. 5. Be that as it may, she was willing to repay the balance of the principal sum of Kshs.150,000/= if given time since she had experienced financial constrain which had forced her in the 1st instance to seek the loan from the respondent. She reiterated that the interest charged was oppressive and urged the court to reject the same. 6. Both parties consented that the matter could proceed under Section 30 of the Small claims court Act, filed their respective submissions, which upon consideration, the trial court did find that; a) Allowing the respondent to recover Kshs.685,464/= would be unconscionable and proceeded to apply the principal of induplum in equity. HCCA NO. E387 OF 2024 3

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b) The claim for General damages in for breach of contract had no basis ( See; Kenya Power & lighting Company Ltd Vrs Abel Momanyi Birundu (2015) eKLR) c) Applying the principal of restitutio in integrum, the court awarded the respondent a global sum of Kshs.400,000/=, which the appellant was allowed to settle in installments of Kshs.80,000/= commencing end of February 2024 until payment in full. d) The respondent was awarded costs of the primary suit. B. THE APPEAL 7. The Appellant, being dissatisfied with the said Judgment, raised four (4) grounds of appeal, namely: a) That parties having elected to proceed by way of documents only under Section 30 of the small claims court Act, the trial court erred in law by failing unchallenged to consider evidence of the part Appellants payment of Kshs.50,000/= towards the loan balance. b) That the trial court erred in law by misdirecting itself to the principal of “restitution in integram” which if properly applied would have entitled the Kshs.150,000/= claimant and to not the sum of Kshs.400,000/= awarded by the trial court. HCCA NO. E387 OF 2024 4

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c) That having applied the “in duplum principal in equity” the trial court erred in law by proceeding to award the respondent herein a sum in excess of double the outstanding loan amount. d) That the trial court erred in law by failing to set aside the subject agreement despite finding it to be ‘harsh, unconscionable and oppressive” 8. The Appellant thus prayed that the appeal be allowed and the judgment of the trial court be set aside and the respondent claim be dismissed and/or in the alternative the respondent be awarded a sum of Kshs.150,000/= as the rightful sum, which is due and owning. C. ANALYSIS AND DETERMINATION 9. I have considered the entire record of Appeal and pleadings filed, submissions filed the by grounds the of appeal Appellant, and raised, the the cited authorities. This being an appeal from the Small Claims Court, it is important to point out that Section 38 of the Small Claims Court Act provides that appeals from the said court shall be only on issues of law. An appeal limited to matters of law does not permit the appellate court to substitute the tribunal's decision with its own conclusions based on its own analysis and appreciation of the facts. See John Munuve Mati Vr The returning officer, Mwingi North Constituency & 2 others (2018) HCCA NO. E387 OF 2024 5

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eKLR & Charles Kipkoech Leting Vs Express (K) Ltd & Another NKU CA Civil Appeal No 40 of 2016 (2018) eKLR 10. It was admitted by the Appellant in her statement of defence that based on a contract dated 9 th November 2020, the respondent had advance her a loan of Kshs.200,000/= out of which she had only refunded Kshs.50,000/=. The said contract did provide that the loan was to be repaid within one month with interest thereon pegged at 20%, but in event of further default after the said date, the loan would attract interest at the rate of 30% P,M until the said amount was pay in full. It is on this basis that the respondent filed her claim of Kshs.685,464.00/= plus costs and interest. 11. The trial court did find that the interest demanded by the respondent was unconscionable and used its equitable jurisdiction to set aside the said bargain. Applying the, “principal of restitutio in integrum” the trial court proceed to award the respondent a global sum of Kshs.400,000/= to cover the outstanding principal and reasonable interest thereon. The only legal issue which arises in this appeal is whether the said approach by the trial court was proper in law. HCCA NO. E387 OF 2024 6

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12. The learned trial magistrate cannot be faulted for holding that the stipulated loan interest was unconscionable and rightly reverted the courts equitable jurisdiction to set aside the said bargain. See Kenya Finance Company Ltd Vs Ngeny & Another (2002) Eklr & Margaret Njeri Muiruri Vs Bank of Baroda (K) Ltd (2014) Eklr. Be that as it may, this finding only related to setting aside punitive contractual interest and did not waive away the appellants responsibility to repay the sum borrowed plus interest thereon at commercial rates. 13. “ The learned magistrate then applied the principal of restitution in integram” which translates to “ restitution to the original position”. The measure of damages or extent of restitution is in accordance with the rule is established in the case of Hadley v Baxendale (1854) 9. Exch. 341 , where it was held that the measure of damages is such as may be fairly and reasonably be considered arising naturally from the breach itself or such as may be reasonably contemplated by the parties at the time the contract was made and a probable result of such breach . Also see Standard Chartered Bank Limited v Intercom Services Ltd & Others NRB CA Civil Appeal No. 37 of 2003 [2004] eKLR), Kenya Industrial Estates Ltd v Lee Enterprises Ltd NRB CA Civil Appeal No. 54 of 2004 [2009] eKLR, & Kenya Breweries Ltd v Natex HCCA NO. E387 OF 2024 7

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Distributors Ltd Milimani HCCC No. 704 of 2000 [2004] eKLR). 14. The Appellant was granted a commercial loan and naturally was expected to repay back the said loan with reasonable commercial interest attached thereon. The trial Magistrate considered this fact and arrived at a sum of Kshs.400,000/= which award is fair when considering the unpaid sum, and interest due thereon. C. DISPOSITION 1. The upshot therefore, is that i do hold that the Appeal filed lacks merit and the same is dismissed with Costs. 2. The costs herein are assessed at Kshs.120,000/= all inclusive. 3. Stay of execution 45 days. 4. It is so ordered. Dated, signed, and delivered in open court at this 11TH day of MAY 2026. FRANCIS RAYOLA OLEL JUDGE HCCA NO. E387 OF 2024 8

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Delivered on the virtual platform, Team this 11TH day of MAY 2026. In the presence of: N/A……………………………..Appellant N/A…………………………. Respondent JARSO……………………….Court Assistant HCCA NO. E387 OF 2024 9

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