Buyechero v Soita (Commercial Case E105 of 2024) [2024] SCC 12 (KLR)

to the a 20% compound interest on any amount advanced to him by the Claimant. 5. Parties herein led evidence before this court to support their respective cases. Issues for Determination 6. This court has duly considered the parties pleadings, documents, oral evidence , and submissions placed before this court. The issues that commend for determination are: a) Whether the WhatsApp messages extracts filed by the Claimant are inadmissible b) Whether only licensed money lenders are supposed to charge interest on money lent c) Whether the Claimant proved her claim to the required standards Whether the WhatsApp messages extracts filed by the Claimant are inadmissible 7. The Respondent pleaded at paragraph 12 of the Response to the Claim herein that the WhatsApp messages extracts filed by the Claimant offended section 106 B of the Evidence Act hence do not meet the threshold for Certificate of Electronic Record. 8. It would appear that the Respondent’s counsel mistook proceedings before a Small Claims Court for proceedings before the mainstream Civil Courts. Section 32 of the Small Claims Court provides as follows in part: 32. Exclusion of strict Rules of evidence (1) The Court shall not be bound wholly by the Rules of Evidence. (2) Without prejudice to the generality of subsection (1), the Court may admit as evidence in any proceedings before it, any oral or written testimony, record or other material that the Court considers Kitale SCC CC. No. E105 of 2024 Page 2 of 9 Judgment

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credible or trustworthy even though the testimony, record or other material is not admissible as evidence in any other Court under the law of evidence.(Emphasis added) 9. A plain reading of section 32 of the Small Claims Court Act set out above shows that the Respondent’s counsel’s argument on the inadmissibility of the WhatsApp messages extracts filed by the Claimant is misplaced hence this court’s holding that the WhatsApp messages extracts filed herein are properly before this court. Whether only licensed money lenders are supposed to charge interest on money lent 10. The Respondent’s counsel purported to advance an argument that only lenders licenced by the Central Bank of Kenya ought to charge interest on money lent. Counsel did not cite any authority to that effect. Despite this court’s diligence, no such authority came to its attention. 11. It is given that parties autonomy is the cornerstone of contracts and agreements signed or executed by parties. It follows that no one can prevent parties from voluntary agreeing on terms including interest rates on money lend between the parties. The courts can only step in where a contract is unconscionable. 12. In the circumstances, this court finds and holds that the Claimant, being a non licenced money lender, is not precluded from charging interest on money lent to a debtor who voluntary agrees to pay interest on money lent. Whether the Claimant proved her claim to the required standards 13. The Claimant’s oral testimony largely supported her averments in her Statement of Claim. She claimed to have agreed with the Respondent that Kshs. 300,000/= lent to him would earn 20% interest. She added that at the time of filing this suit, the Respondent owed her Kitale SCC CC. No. E105 of 2024 Page 3 of 9 Judgment

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Kshs. 2,600,000/= but she was only claiming Kshs. 1,000,000/= per this court’s pecuniary jurisdiction. 14. The Respondent simply denied receiving Kshs. 300,000/= from the complaiant. He also denied being Titi referred to the WhatsApp messages correspondences (Cexh.2) produced by the Claimant. However, the Respondent admitted that the mobile phone number and the profile picture appearing on Cexh.2 belonged to him. He distanced himself from those converstaions. 15. Interestingly, despite having been duly served with Cexh.2, the Respondent did not plead any forgery or fraud with respect to those WhatsApp messages (Cexh.2). He simply denied having any WhatsApp conversation with the Claimant. The Respondent even denied knowing the Claimant only to admit later on that the Claimant was his spouse’s relative. The Respondent was just evasive; an untruthful witness whose credibility was found wanting by this court. 16. The Respondent having owned up to the mobile phone number and the profile photo in the WhatsApp messages (Cexh.2) and having not pleaded fraud or forgery to impeach the authenticity of those messages, it follows that the contents of Cexh.2 are credible and trustworthy in terms of section 32 (2) of the Small Claims Court Act. 17. A keen reading of Cexh.2 leaves no doubt in the mind of this court that the Claimant lent the Respondent Kshs. 300,000/= on diverse dates in the month of February 2023. With regard to the interest of 20% to be charged on the amount lent to the Respondent, the contents of Cexh.2 shows that the parties herein did not conclusively agree on that. 18. However, the WhatsApp conversation of 13th April 2023 between the parties herein show that the parties herein had a meeting of the minds on that day to the effect that the Respondent owed the Claimant Kshs. 432,000/= as at 13 th April 2023. On that day the Respondent Kitale SCC CC. No. E105 of 2024 Page 4 of 9 Judgment

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committed to pay the amount due with an interest of Kshs. 1,000/= per day. 19. The law in this jurisdiction is that not all agreements need to be in writing. An agreement need not be in any special form or in writing unless a statute expressly provides for it: see for example the Law of Contract Act (Cap 23), the Hire Purchase Act (Cap 507), the Bills of Exchange Act (Cap 27) and the Marine Insurance Act (Cap 390). The money lending agreement that gave rise to this claim is not one that needs to be in writing for it to be enforceable. 20. On how to determine whether there is a binding contract between parties, the Supreme Court of the United Kingdom in RTS Flexible Systems Ltd v Molkerei Alois Müller GmbH & Co KG (UK Production) [2010] UKSC14,[45] stated as follows : “The general principles are not in doubt. Whether there is a binding contract between the parties and, if so, upon what terms depends upon what they have agreed. It depends not upon their subjective state of mind, but upon a consideration of what was communicated between them by words or conduct, and whether that leads objectively to a conclusion that they intended to create legal relations and had agreed upon all the terms which they regarded or the law requires as essential for the formation of legally binding relations…” 21. The WhatsApp correspondences (Cexh.2) between the parties herein show that the parties herein for all intents and purposes intended to create legal relations and agreed upon all terms regarding the Kshs. 300,000/= that the Claimant lent the Respondent. 22. The Respondent did not place before this court any WhatsApp correspondence between him and the Claimant denying owing the Claimant Kshs. 432,000/= as at 13 th April 2024 as set out in Cexh.2. He did not also place before this court any evidence disputing having Kitale SCC CC. No. E105 of 2024 Page 5 of 9 Judgment

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agreed to pay an interest of Kshs. 1,000/= per day with effect from 14 th April 2024 on the Kshs. 432,000/= he owed the Claimant as at 13 th April 2024. Further, the Respondent did not plead and prove any vitiating factors to defeat his contractual liability towards the Claimant. 23. It is against this background that this court finds and holds that as at 14th April 2024, the Respondent owed the Claimant Kshs. 432,000/= that was to earn an interest of Kshs. 1,000/= per day till payment in full. 24. This claim was filed on 06th June 2024. The parties herein having agreed on an interest of Kshs. 1,000/= per day from 14 th April 2023 on the outstanding debt of Kshs. 432,000/=, it would seem that the Claimant’s claim for Kshs. 1,000,000/= against the Respondent is not farfetched. 25. Where parties reach an agreement on all the terms of contract they regard (or the law requires) as essential, a contract is deemed to have been formed. What is essential is the legal minimum to create a contract. These are the intention to create legal obligations and consideration. Other terms are secondary as far as formation of a contract is concerned. The reason is that the law does not require commercially sound terms or sensible terms. Parties may agree to any terms and the court will, once it is shown that the parties agreed and valid consideration exists, always hold the parties to their bargain. The parties are bound by the terms of their contract, unless coercion, fraud or undue influence are pleaded and proved. The court will not seek rewrite the contract for the parties: (see National Bank of Kenya Ltd v Pipe Plastic Samkolit (K) Ltd & Another [2002] EA 503 and Centurion Engineers & Builders Limited v Kenya Bureau of Standards (Civil Appeal [2023] KECA 1289 (KLR)). Kitale SCC CC. No. E105 of 2024 Page 6 of 9 Judgment E398 of 2021)

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26. Having found that the Claimant and the Respondent entered into a money lending agreement and thereafter agreed on an interest of Kshs. 1,000/= daily on the amount borrowed, absent any coercion, fraud or undue influence, the parties herein must be bound by the terms of the money lending agreement that they agreed on. 27. From the foregoing, it would seem on the face of it that the Claimant is entitled to the claim of Kshs. 1,000,000/= against the Respondent. Should this court blindly enforce the money lending agreement between the parties herein? Does it make economic sense for one to pay interest of over Kshs. 700,000/= on a loan of Kshs. 300,000/=? 28. Shah JA in Fina Bank Limited vs Spares & Industries Limited (Civil Appeal No 51 of 2000) (unreported) held thus: “It is clear beyond peradventure that save for those special cases where equity might be prepared to relieve a party from a bad bargain, it is ordinarily no part of equity’s function to allow a party to escape from a bad bargain”. 29. In Ajay Indravadan Shah Vs. Guilders International Bank Ltd Civil Appeal No. 135/2001 [2002] 1 EA 269, the Court of Appeal held that the provisions of Section 26 (1) of the Civil Procedure Act (on interest at court rate on any money owed) are applicable only where the parties to a dispute have no, by their agreement, fixed the rate of interest payable. If the parties by their agreement have fixed the rate of interest, then the Court has no discretion in the matter and must enforce the agreed rate unless it is shown in the usual way that either that agreed rate is illegal or unconscionable or fraudulent. 30. The authorities above show that equity can set in to save a party from a bad bargain or an unconscionable interest rate. An interest of Kshs. 700,000/= is no doubt unconscionable as it amounts to over Kitale SCC CC. No. E105 of 2024 Page 7 of 9 Judgment

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double the amount advanced to the Respondent. It is this court’s considered view that such interest is excessive, oppressive and unenforceable in law. This is a proper case where this court must hesitate to enforce the contract before it even though the said contract was voluntarily entered into by the parties herein. 31. In view of the foregoing, what is the interest rate applicable on the Kshs. 300,000/= lent to the Respondent by the Claimant? 32. The law in this jurisdiction is that the in duplum rule applies to loans advanced by banks and other money lenders (see Mugure & 2 others v Higher Education Loans Board (Petition E002 of 2021) [2022] KEHC 11951 (KLR)). 33. This court is well aware of other authorities to the effect that the induplum rule only applies to banks as set out in the Banking Act. However, these authorities must be considered in line with the history leading to the introduction of the in duplum rule in Kenya. The rule was to tame predatory lenders. It was enacted out of public interest. Public interest is a national value and a principle of administration of justice asset out under article 10 and article 158 of the Constitution. Therefore, the in duplum rule must be applied in this case out of public interest. 34. Guided by the Mugure case (supra) , and the reasons above, it follows that the Claimant herein can only claim the outstanding principal of Kshs. 300,000/= plus accrued interest not exceeding Kshs. 300,000/= making the total allowable claim to be Kshs. 600,000/=. DISPOSITION 35. The upshot of the foregoing is that: a) Judgment is entered against the Respondent for the sum of Kshs. 600,000/= Kitale SCC CC. No. E105 of 2024 Page 8 of 9 Judgment

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b) The sum of Kshs. 600,000/= in (a) above shall earn interest at court rate from the date of filing this claim until payment in full c) The costs due to the Claimant are assessed at Kshs. 30,000/= 36. Judgment accordingly. 37. Decree and Certificate of Costs to issue forthwith. Read, signed, and delivered in open court at Kitale this 07th day of October 2024 …………………. T.O. OMONO ADJUDICATOR In the presence of: Kitale SCC CC. No. E105 of 2024 Page 9 of 9 Judgment

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