Faulu Microfinance Bank Limited v Obiero (Commercial Claim E9210 of 2024) [2025] SCC 61 (KLR)

Through the Response to the Statement of Claim dated 11 th December 2024, the Respondent denied owing the Claimant Kshs. 144,168.53/=. The Respondent pleaded that he settled the loan advanced to him by the Claimant on 09th April 2023 through a cheque that was cleared by the Claimant, who credited his account with Kshs. 312,307/=. He added that the Claimant deducted Kshs. 112,307/= from Kshs. 312,307/= that was credited in his account in full settlement of the loan advanced to him. In the circumstances, the Respondent urged this court to dismiss this claim. The summary of the evidence placed before this court is set out below. Claimant’s Case CW1 Fredrick Nyabuti; the Claimant’s Legal Officer, adopted his witness statement herein as his evidence in chief. He produced all the documents filed by the Claimant as exhibits. His testimony reiterated the contents of the Claimant’s Statement of Claim. He conceded during cross-examination that the loan advanced to the Respondent was to be repaid through monthly instalments of Kshs. 17,958/=. He denied knowledge of the Faulu Bank account number that the Kshs. 200,000/= deposited in the Respondent’s Mpesa number on 14 th April 2023. He added that the cheque the Respondent presented to the Claimant to clear his loan bounced, hence this claim.

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RW1 Simon Juma Obero adopted his witness statement filed in this matter as his evidence in chief. He reiterated the contents of his response to the this claim that he fully settled the loan advanced to him by the Claimant through a cheque of Kshs. 312,307/= dated 09th April 2023. He produced a loan statement for his loan account AA222103JY5Y for the period up to 24th January 2023, a copy of a cheque for Kshs. 312,307/= dated 09th April 2023, and his Mpesa Statement for mobile phone number 07133167061 for the period 11th April 2023 – 30th April 2023, and the Claimant’s demand letter dated 19th August 2024 as exhibits. ANALYSIS & DETERMINATION This court has duly considered the pleadings, written statements, documents, written submissions and authorities placed before this court by each party. There is no contest that the Claimant advanced a loan facility of Kshs. 200,000/= less processing fees to the Respondent on 29th July 2022 with an understanding that the said loan be repaid in twelve (12) through monthly instalments of Kshs. 17,958/= at an interest rate of 32.51%. The Respondent reiterated that he settled the loan advanced to him. He added that the amount of money the Claimant was seeking from him was a violation of the in duplum rule set out under section 44 A of the Banking Act, and that this court lacked the jurisdiction to hear and determine this matter by dint of section 34 (1) of the Small Claims Court Act.

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It is against this backdrop that this court is of the considered view that the issues that commend to it for determination are:a) Whether the Respondent settled the loan of Kshs. 200,000/= advanced to him by the Claimant b) Whether the amount the Claimant seeks to recover from the Respondent violates the in duplum rule c) Whether this court has the jurisdiction to hear and determine this claim by dint of section 34 (1) of the Small Claim’s Act In determining the issues above, this court is reminded that the legal burden of proof lies with the person who alleges. Section 107 (1) of the Evidence Act, Cap 80 Laws of Kenya provides that: ‘’Whoever desires any court to give judgment as to any legal right or liability dependant on the existence of facts which he asserts must prove that those facts exist.’’ In Anne Wambui Ndiritu –vs- Joseph Kiprono Ropkoi & Another [2005] 1 EA 334, the Court of Appeal stated as follows regarding the burden of proof and the evidential burden: “As a general proposition under Section 107 (1) of the Evidence Act, Cap 80, the legal burden of proof lies upon the party who invokes the aid of the law and substantially asserts the affirmative of the issue. There is however the evidential burden that is case upon any party the burden of

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proving any particular fact which he desires the court to believe in its existence which is captured in Sections 109 and 112 of the Act.” Whether the Claimant settled the loan advanced to him by the Claimant The Claimant placed before this court a loan statement for the loan account AA222103JY5Y as at 22nd March 2024, showing the amount overdue as Kshs. 136,164.90/=. The said loan statement also shows that as at 22 nd March 2024, the Respondent had repaid the loan advanced to him to the tune of Kshs. 150,090.22/=. The Respondent sought to rely on his loan statement for the period up to 24 th January 2023, a copy of a cheque for Kshs. 312,307/= dated 09 th April 2023, and his Mpesa Statement for the period 11 th April 2023 – 30th April 2023 to prove that he settled the loan advanced to him by the Claimant. Interestingly, the loan statement relied upon by the Respondent did not indicate the status of the loan advanced to him by the Claimant as at the time of filing this claim. That loan statement was not of any evidential value. The Respondent testified that he deposited a cheque in his bank account for the settlement of the loan advanced to him by the Claimant. He did not state the account number that his cheque dated 09th April 2023 was cleared. Further, whereas his M-Pesa transaction of 14th March 2023 shows that he received Kshs. 200,000/= from Faulu Bank, the said transaction’s details do not disclose the Faulu account number from which the funds originated.

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In the absence of details of the Faulu bank account number that the Claimant’s cheque dated 09th April 2023 was cleared through, in the absence of the Faulu bank account number that Kshs. 200,000/= received by the Claimant through Mpesa originated from, and in the absence of the account statement of the account that the Respondent’s cheque was reportedly cleared through, this court cannot tell if the Claimant fully settled the loan advanced to him by the Claimant through the cheque dated 09th April 2023. The information above could have easily been made available to the Respondent and this court if the Claimant had taken out a Notice to Produce against the Claimant, requiring the Claimant to produce before this court the account statement for the account number that the Respondent allegedly used to clear his cheque dated 09th April 2023. The absence of that information was akin to the Respondent inviting this court to take a journey of surmises and imaginations. That is an invitation that this court declines to honour. The foregoing shows that the Claimant’s evidence that the Respondent’s cheque dated 09th April 2023 bounced, and that the Respondent was indebted to the Claimant to the tune of Kshs. 144,168.53/= as at the time of filing this claim was uncontroverted. Therefore, this court finds and holds that at the time of filing this claim, the Respondent had not settled the loan of Kshs. 200,000/= advanced to him by the Claimant.

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Whether the amount the Claimant seeks to recover from the Respondent violates the in duplum rule The Respondent stated in his witness statement herein that the amount of Kshs. 144,168.53/= that the Claimant was seeking to recover from him violated the in duplum rule set out in section 44A of the Banking Act. Section 44A (6) of the Banking Act provides as follows in part:‘…the maximum amount referred to in subsection (1) shall be the following(a) the principal and interest owing on the day this section comes into operation; and (b) interest, in accordance with the contract between the debtor and the institution, accruing after the day this section comes into operation, not exceeding the principal and interest owing on the day this section comes into operation; and (c) expenses incurred in the recovery of any amounts owed by the debtor.” The section of the law reproduced above demands that where a loan becomes non-performing, the maximum amount recoverable from a customer is as computed under that section.

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None of the parties herein computed the amount due in line with the in duplum rule for this court to make a finding of whether or not the sum of Kshs. 144,168.53/= sought by the Claimant in this claim was in contravention of the in duplum rule. When faced with a similar situation that this court finds itself in, the Court of Appeal in James Muniu Mucheru v National Bank of Kenya Limited [2019] KECA 1058 (KLR) expressed itself as follows:“…It is therefore evident that in computing the actual amount that is due and payable by the appellant to the respondent, the provisions of Section 44A of the Banking Act must be borne in mind and factored in the computation. It is not for this Court to do the calculation. The respondent must adjust the sum Liquidation) V. David payable in accordance with the law…” In Daima Bank Limited (In Musyimi Ndetei [2018] eKLR Civil Appeal No.171 of 2010 the Court directed that; “26. As all these involve reconciliation and tabulation, we are not in a position to establish how much is owing between the parties taking into account the payments made. Having established the basis for the calculation of the interest as above, it is incumbent upon the parties to reconcile the position in order to tabulate the exact figures conclusively. This reconciliation should take into account the various

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advices on interest changes advised by the appellant from time to time as noted above”. In the absence of the computation of how the amount the Claimant seeks to recover from the Respondent offends section 44A of the Banking Act, this court declines to make a finding on whether or not the amount the Claimant seeks to recover from the Respondent offends the in duplum rule. Whether this court has the jurisdiction to hear and determine this claim by dint of section 34 (1) of the Small Claim’s Act The Respondent submitted that this court lacked the jurisdiction to hear and determine this matter, given that, as at the time this matter was being scheduled for judgment, sixty days from the date of filing this claim had already lapsed. The Respondent cited several authorities in support of the position that he had taken. This court has duly considered those authorities. This court is also aware of several authorities from the High Court to the effect that section 34(1) of the Act is only directory or aspirational. (See Shikami v Magati (Civil Appeal E184 of 2023) [2024] KEHC 16710 (KLR)). Where there are conflicting decisions from the High Court on an issue, a lower court has the discretion to follow the school of thought it subscribes to.

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The operational words under section 34(1) of the Act are ‘as far as is practicable’. Those words, in this court’s view, anticipate the existence of some other factors that may cause a court to handle a claim beyond the aspirational perfect sixty (60) days. This court takes judicial notice of several facts: The Small Claims Court has a shortage of adjudicators. The adjudicators are entitled to leave days. The adjudicators in some court stations handle both criminal and civil cases in their court stations. The adjudicators, just like any other human beings, may require time off duty to attend to personal matters or seek medical attention due to illness. The adjudicators may also, from time to time, need time to attend to training as part of continuous professional development, and for those adjudicators handling deputy registrar duties, they may require time out of their stations to attend to administrative duties. This begs the question: In instances where an adjudicator is away from the station, does time to adjudicate claims stop running? The answer is in the negative since the Act does not take care of the scenarios highlighted above. Therefore, this court is of the considered view that dismissing a claim under section 34 (1) of the Act due to acts beyond the Claimant’s control defeats the Constitution’s and the Act’s overriding objective or spirit of access to justice.

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This court subscribes to the reasoning by Justice Kizito Magare in Biosystems Consultants v Nyali Links Arcade (2023) KEHC 21068 (KLR) where he held as follows:‘The purpose of the Small Claims Courts Act is to facilitate expeditious disposal of the disputes while at the same time respecting the right to be heard. The net result is that balancing the two may result at times to overshooting the 60 days. The 60 days do not have the penal consequences for good reasons. They are aspirational. This is part of having access to justice over amounts that need not be in the normal system. Allowing the application will open floodgates that will eventually defeat the purpose of the Act. It is my take that the noncompliance goes to the court’s performance and is answerable internally. It cannot affect parties who are in court and ready to be heard. I have seen defendants use various gimmicks to have matters adjourned and thereafter turn around to say, 60 days are over.’ It is against this backdrop that this court holds and finds that the sixty (60) days period under section 34 (1) of the Act can only be directory or aspirational; therefore, this court had the jurisdiction to hear and determine this claim even after the lapse of sixty (60) days from the date of its filing. DISPOSITION The upshot of the foregoing is that:

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a) Judgment is entered against the Respondent for the sum of Kshs. 144,168.53/= b) The sum in (a) above will earn interest at court rates from the date of this judgment till payment in full c) In the event that the amount in (a) above offends the provisions of section 44A of the Act, the Claimant is directed to adjust the sum due accordingly d) The Claimant will have the costs of this claim assessed at Kshs. 30,000/= Judgment accordingly. Certificate of Costs and decree to issue forthwith File closed. READ, SIGNED and DELIVERED in open court at Bungoma this 02 nd day of September 2025 T.O. OMONO ADJUDICATOR In the presence of: Yala for the Claimant

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Kisia for the Respondent C/A: Rioba

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