1. This appeal emanates from the judgement and decree of Hon. V. M. Mochache Resident Magistrate/Adjudicator delivered on 9th June, 2023 in Milimani SCCCOMM No. 669 of 2022 Inspire Credit Limited v David Njoroge.
2. The grounds of appeal presented by the Appellant vide the memorandum of appeal dated 19th June, 2023 upon which he seeks to upset the judgement and decree of the lower court are as follows:
1. The learned trial Magistrate erred in law and fact by misdirecting herself on several matters of law.
2. The learned trial Magistrate erred in law and fact by finding that the Appellant owed the Respondent Ksh.120,000/-.
3. The learned trial Magistrate erred in law and fact by not appreciating that the Appellant had paid a director of the Respondent the sum of Ksh.120,000/- on the sum of Ksh.100,000/- advanced which was admitted.
4. The learned trial Magistrate erred in law and fact by failing to appreciate that the jurisdiction of trial court was time bound and ceased by effluxion of time on the 6th day of April 2022, being the last date and day the courts by dint of Section 34(1) of the Small Claims Court Act.
5. The learned trial Magistrate erred in law and fact that the moment 60 days ended the jurisdiction of the court also ended.
6. The learned trial Magistrate erred in law and fact in dismissing the counterclaim with costs and at the same time ordering return of the Respondent’s title, a prayer not sought by the Claimant.
7. The learned trial Magistrate erred in law and fact by failing to take cognizance of the legal fact that the judgment rendered and returned outside times was without jurisdiction ergo a nullity benefit of any force of law.
3. The Appellant proposes that the appeal be allowed and that this court sets aside the trial court’s judgement.
4. This being the first appellate court, I am required under Section 78 of the Civil Procedure Act and as was espoused in the case of Selle v Associated Motor Boat Co. Ltd [1969] E.A. 123 to re-assess, re-analyze and re-evaluate the evidence adduced in the trial court and draw my conclusions while bearing in mind that I did not see or hear the witnesses when they testified.
5. In Selle, Sir Clement De Lestang observed that:
“This Court must consider the evidence, evaluate it itself and draw its own conclusions, though in doing so it should always bear in mind that it neither heard witnesses and should make due allowance in this respect.
However, this Court is not bound necessarily to follow the trial judge’s findings of fact if it appears either that he had clearly failed on some point to take account of particular circumstances or probabilities, materially to estimate the evidence or if the impression based on the demeanour of a witness is inconsistent with the evidence in the case generally.”
6. The duty of the first appellate court was also discussed by the Court of Appeal for East Africa in the case of Peters v Sunday Post Limited [1958] EA 424 in which it was held that the appropriate standard of review established in cases of appeal can be stated in three complementary principles:
“i. First, on first appeal, the Court is under a duty to reconsider and re-evaluate the evidence on record and draw its own conclusions;
ii. In reconsidering and re-evaluating the evidence, the first appellate court must bear in mind and give due allowance to the fact that the trial court had the advantage of seeing and hearing the witnesses testify before her; and
iii. It is not open to the first appellate court to review the findings of a trial court simply because it would have reached different results if it were hearing the matter for the first time.”
7. Notably however, this is an appeal from the Small Claims Court and Section 38 of the Small Claims Court Act provides that a person dissatisfied with a decision or order of the Small Claims Court may appeal to the High Court only on matters of law, not on questions of fact, and that once the High Court determines such an appeal, its decision is final.
8. I will proceed to re-assess, re-analyze and re-evaluate the evidence adduced before the trial court and reach my own findings while abiding by the principles set in Selle. While doing so, I will keep in mind the jurisdiction of this court under Section 38 of the Small Claims Court Act.
9. The matter before the trial court, based on contract arising out of a loan agreement said to have been entered into between the Appellant (the Respondent before the trial Court) and the Appellant (the Claimant before the trial Court) on 5th July, 2022.
10. The Respondent pleaded in the statement of claim dated 27th January, 2023 that the Appellant borrowed from it Ksh.100,000/- on 5th July, 2022 which the Respondent disbursed to the Appellant and which the latter was to repay within a period of one month together with interest of 20%. The Appellant executed the requisite loan agreement.
11. The Respondent further pleaded that the Appellant defaulted on his obligations in the agreement and failed to pay the loan and the agreed interest, effectively breaching the loan agreement, necessitating the suit for the recovery Ksh.120,000/- being the loaned amount together with interest and a further Ksh.34,500/- incurred by the Respondent towards recovery of the amount.
12. The Respondent further sought 10% of the amount claimed, which it pleaded was damages or legal fees incurred, costs of the suit and interest.
13. In his response to claim and counterclaim, the Appellant averred that he only received a sum of Ksh.100,000/- from one Nathaniel Mwangi, whom he described as an agent. He denied any knowledge of the Respondent as a legal entity licensed to operate as a lender.
14. The Appellant further disputed liability for Ksh.34,500/- allegedly claimed as administration fees, debt recovery charges and legal costs. The Appellant contended that these sums were not contractually justified and required strict proof. He further denied liability for interest at the rate of 20% per month on the Ksh.100,000/-, asserting that there was no contractual relationship between himself and the Respondent that could give rise to such an obligation.
15. The Appellant denied entering into any binding agreement with the Respondent. He further challenged the validity of the suit on procedural grounds, asserting that the same was incompetent and lacked merit due to the absence of a demonstrated contractual relationship.
16. The Appellant admitted that upon receiving the Ksh.100,000/-, he deposited his title deed for Title No. Nyandarua/Motonyora/466 as security but stated that no transfer documents or land control consents were executed. He demanded the unconditional return of the title deed. He also denied the jurisdiction of the trial court, arguing that the title deed related to land valued at approximately Ksh.5,000,000/- and therefore fell outside the pecuniary and subject-matter jurisdiction of the Small Claims Court. He maintained that the matter ought to have been filed before the appropriate court with jurisdiction over land disputes.
17. Additionally, the Appellant contended that the suit was defective because another entity, Soludel Enterprises Limited, had also laid claim to having advanced him a similar sum of Ksh.100,000/-, thereby creating confusion as to the true lender. While he admitted receipt of a demand and notice of intention to sue, he maintained his objection to the trial court’s jurisdiction and indicated that a preliminary objection would be raised at the hearing.
18. In his counterclaim, the Appellant sought the return and release of his title deed for Title No. Nyandarua/Mutonyora/466 from the Respondent or its alleged agent, Nathaniel Mwangi. He contended that the title deed had been deposited as security and was demanding its unconditional release.
19. In the alternative, and by way of compromise, the Appellant expressed willingness to refund the principal sum of Ksh.100,000/- without interest. He further stated that he had issued a demand and notice of intention to sue in relation to the continued holding of the said title deed by the Respondent and its agent.
20. The Appellant prayed that the Respondent’s suit be dismissed or struck out, and that the counterclaim be allowed with costs.
21. The Respondent called two witnesses – Nathaniel Mwangi (CW1) and Robert Chomba (CW2). The two witnesses adopted their respective witness statements as their evidence in chief.
22. In his witness statement, CW1 explained that on 6th July 2022, the Appellant approached the Respondent seeking a loan facility. CW1 conducted a thorough assessment of the Appellant’s financial position on behalf of the Respondent, noting his involvement in the transport and rental business and his strong ability to repay. CW1 stated in his statement that he confirmed that the Appellant had previously borrowed from the Respondent and repaid with interest.
23. CW1 stated that the Appellant submitted a loan application for Ksh.100,000/- on 5th July, 2022, which was approved and disbursed by the Respondent from its account to the Appellant’s mobile number. The loan was to be repaid by 6th August, 2022 with 20% monthly interest.
24. CW1 further explained that the Respondent had prior to that transaction requested another loan of Ksh.100,000/- on 24th June, 2022, which was declined because he still owed Ksh.120,000/- from an earlier loan, which he cleared on 4th July 2022. CW1 added that he had referred the Appellant to Soludel Enterprises Limited, which granted him a separate loan of Ksh.100,000/- in respect of which the Appellant insisted on paying interest through CW1’s phone number rather than Soludel’s paybill number.
25. CW1 recounted that instead of repaying the principal amount as agreed, the Appellant chose to service interest only, effectively rolling over the principal. This continued until January, 2023, when he stopped making payments entirely. After repeated follow-ups, a demand letter was issued on 10th February 2023, to which the Appellant responded on 12th January, 2023, acknowledging the debt and promising to pay Ksh.120,000/- by 28th February, 2023. The witness noted that this payment was never made, leaving the Appellant indebted to the Respondent.
26. In his further averment in his statement, CW1 refuted the Appellant’s claim that the loan was advanced via his (CW1’s) phone number alone and asserted that the same was directly paid to the Appellant from the Respondent’s account. The witness emphasized that a signed loan agreement existed with clear terms, including the 20% agreed monthly interest.
27. CW1 further disputed the Appellant’s claim that he had never dealt with the Respondent, noting multiple in-person visits and signed loan documents. The witness further stated that the Appellant’s alleged payments totaling Ksh.120,000/- only represented interest servicing and were spread between the Respondent and Soludel Enterprises Limited, with no excess payments to the Respondent, leaving additional interest of Ksh.40,000/- accrued for the months of February and March, 2023.
28. CW1 concluded that the Appellant’s account was misleading and incomplete, intentionally obscuring that he was servicing interest only and rolling over the principal. He stated that all evidence, including Mpesa statements and loan agreements, supported the Respondent’s claim for repayment of the principal and accrued interest.
29. CW1 stated in his further statement that he initially disbursed the money from his mobile number to that of the Appellant, but for the particular loan in this matter, the funds were transferred from the Respondent’s Sidian Bank account directly to the Appellant’s mobile number. The Appellant deposited his title deed as security, and a formal contract was signed on 5th July 2022.
30. CW1 emphasized that the Respondent was authorized to lend money, operated under the law of contract and was duly registered. He further noted that the Appellant had also received Ksh.100,000/- from Soludel Enterprises, to whom he had been referred and that the title deed would be released upon full settlement of the debt.
31. In his witness statement CW2 stated that he was a director at Soludel Enterprises Limited and explained that on or about 24th June, 2022, he received a customer referral from CW1, a director of the Respondent, regarding the Appellant, who was an existing repeat customer of the Respondent who needed urgent funding for a project.
32. CW2 stated that he met the Appellant, conducted an appraisal of his financial capacity and confirmed that the Appellant had income from rental, farming and public transport activities. The witness stated that the Appellant disclosed that the Respondent was holding a title over his land, which could be used as collateral for the loan.
33. CW2 stated further in his statement that after consulting with Soludel’s loan committee, the loan request by the Appellant was approved and Ksh.100,000/- was disbursed from Soludel’s bank account to the Appellant’s mobile phone number on 24th June, 2022. The parties orally agreed that the loan would carry 20% monthly interest and be payable by 24th July, 2022.
34. CW2 further stated that on the due date, the Appellant did not pay the full loan but sent Ksh.20,000/- as interest only through CW1’s mobile phone. This arrangement continued as the norm until December, 2022 when the Appellant stopped making payments entirely. CW2 further stated that Soludel Enterprises had made repeated attempts to recover the loan, including sending demand letters, but the Appellant denied knowledge of the company.
35. The following documents were produced in support of the Respondent’s case:
- Loan/debt acknowledgement agreement dated 5th July, 2022 executed by the Appellant as borrower and the Respondent as lender in which the Appellant acknowledged indebtedness of Ksh.100,000/- and interest thereon of Ksh.20,000/-, binding himself to pay before 5th August, 2022.
- Demand letter dated 10th January, 2023 from the Respondent’s Advocates to the Appellant.
- Respondent’s Sidian Bank account statement indicating that Ksh.100,000/- was disbursed to the Appellant on 5th July, 2022.
36. In his witness statement and further statement, the Appellant recalled a time when he needed funds to complete a project and approached CW1, whom he believed was an agent of the Respondent, to advance him Ksh.100,000/- via M-Pesa from CW1’s phone number to his own mobile number. He stated that he deposited his title deed for Title No. Nyandarua/Motonyora/466 as security with CW1, without executing any demand agreement, consent or transfer documents. The Appellant offered to refund the Kshs.100,000/- without interest, characterizing it as a friendly loan.
37. The Appellant contended that the Respondent and its agents were attempting to obtain the Ksh.100,000/- without returning his title deed. He alleged that the Respondent was pursuing additional sums of Ksh.34,500/- as administration, debt recovery and legal fees which were not provided for in any agreement.
38. The Appellant denied in his statement the Respondent’s assertion of a 20% monthly interest on the loan, stating that he had dealt only with CW1 as an agent and never agreed to any interest in writing.
39. The Appellant claimed that the suit was invalid because the Respondent had not filed a consent to sue and that the Respondent lacked authorization to conduct money lending, having no banking license or registration as a financial institution. He further indicated that Soludel Enterprises Limited had allegedly advanced him the same sum and he reserved the right to join them as a third party if necessary.
40. The Appellant prayed that the claim be dismissed or struck out, or alternatively, that an order be made for the release of his Title No. Nyandarua/Mutonyora/466 by the Respondent with costs and interest.
41. Further, the Appellant contended that the court lacked jurisdiction because the claim’s value exceeded the Ksh.1,000,000/- jurisdictional limit, while the property Title No. Nyandarua/Mutonyora/466 was worth over Ksh.5,000,000/-. He also challenged the authenticity of the Sidian Bank statement produced by the Respondent, noting that it corresponded to CW1’s number and not that of the the Respondent.
42. The Appellant further stated that he had fully repaid a total of Ksh.120,000/- to CW1’s mobile line in six instalments, comprising the principal of Ksh.100,000/- and an excess of Ksh.20,000/-, detailing the payment schedule.
43. The Appellant produced the following documents in support of his case:
- The Respondent’s demand letter dated 10th January, 2023 sent to the Appellant.
- Letter dated 12th January, 2023 from the Appellant’s Advocates to the Respondent’s Advocates offering to pay Ksh.100,000/- and “the disputed interest” of Ksh.20,000/- on or before 28th February, 2023 and requesting that the Appellant’s title deed be released upon such payment.
- Letter dated 31st January, 2023 from the Respondent to the Appellant demanding payment of Ksh.140,000/- loan balance and interest and Ksh.14,000/- recovery fee.
- Letter dated 2nd February, 2023 from the Appellant’s Advocates to the Respondent’s Advocates, in response to the Respondent’s Advocate’s letter dated 31st January, 2023 in which the Appellant states that the he has no outstanding loan.
44. Upon considering the pleadings and evidentiary material before her, the learned Adjudicator went on to set out the issues for determination as follows:
“7. From the pleadings and submissions, it is the court's view that the issues that crystallize for determination are the following:
a) Whether the court has jurisdiction to entertain the claim?
b) Whether the Claimant is authorized to lend money?
c) Whether the Claimant has proved its claim on a balance of probabilities.
d) What order the court should make.”
45. The learned Adjudicator then proceeded to analyze the evidence and reached the determinations on the issues, as follows:
“8. Starting with the first issue, the Respondent alleged that since the value of the land whose title he claims to have given to the Claimant as security values at around Kshs. 5,000,000.00; then the court lacks jurisdiction. The court does not agree. The dispute before the court arises from the loan said to have been advanced to the Respondent. It does not arise from the land itself. If it did, the court would not have jurisdiction to deal with matters to do with land. In any case, the value of the land was not proved by the Respondent as to suggest that the same exceeds the pecuniary jurisdiction of the court.
9. On the second issue, the court does not agree with the Respondent that the mere fact that the Claimant is not licensed to offer Banking services, then it cannot lend to third parties. Lending is not a regulated business. Any person can lend; whether natural or juristic.
10. Turning to the third issue, the court finds that on 6th July 2022, a sum of Kshs. 100,000.00 was sent to the Respondent through mobile money from the Claimant's Bank. The question is whether the said sum is outstanding and whether it attracted interest and recovery charges.
11. The Claimant relies on the Debt Acknowledgment Agreement10 dated 5th July 2022 to support the terms. The stated agreement provides that a sum of Kshs. 100,000.00 was to be lent to the Respondent. Interest is indicated at 20% per month. In addition, there is a default rate of 3%. The agreement bears what appears to be a signature of the Respondent.
12. The Respondent denies having executed the agreement. However, when cross examined, he was at pains to explain himself save for a mere denial. He did not allege that the signature in the agreement was a forgery and did not show any attempts to take legal action if at all the signature was not his. In the end, the court was-20 satisfied that the agreement was duly executed by the Respondent.
13. Therefore, the court is satisfied that the agreed interest rate wąs 20% per month. The interest was negotiated at arm's length and cannot be said to be illegal and usurious or unenforceable.
14. The next issue is on whether the loan was repaid. The Claimant avers that he paid a total sum of Kshs. 120,000.00; which he claims to be excess by Kshs. 20,000.00. On its part, the Claimant claims that the Respondent used to repay through its director Nathaniel Mwangi. However, he only paid interest and rolled over the principal. In addition, the Claimant told the court that the Respondent also had a loan owed to a company called Soludel Limited of Kshs. 100,000.00 which loan was advanced to him on referral by the Director of the Claimant.
15. It was stated that the Respondent would pay both loans through Mpesa to PW1. Out of the Kshs. 120,000.00 paid, it was his testimony that both companies had been paid interests of Kshs. 60,000.00 each.
16. From the evidence, I am satisfied with the Claimant's version as-10 the truthful one. From the evidence adduced, it is clear that a sum of Kshs. 100,000.00 was advanced to the Respondent by Soludel Limited on 24th June 2023 which is, however, not the dispute before the court.
17. The Respondent's denial was a mere denial as he did not explain the exhibit showing money being sent to him from the said company.
18. From the agreement above, I am also satisfied that the Respondent had a duty to pay the sum of Kshs. 20,000.00 in interest per month; until payment of the facility in full.
19. In addition, the court finds that in his witness statement, the Respondent admitted the sum of Kshs. 100,000.00 which he indicates that he was willing to pay without interest, once his title deed was released.
20. The court is, therefore, satisfied that the Claimant has proved the sum of Kshs. 120,000.00. However, the court is not satisfied that the administration charges and debt recovery fees were due and payable.
21. With regards to the counterclaim, the Respondent title deed prays that his be released by the Claimant. CW1 told the court that the confirmed title deed was given to the claimant as a simple deposit. This was by the Respondent but who argued that the Respondent had not capacity to take security.
22. From the evidence, it is clear that the return of the title deed would be tied to the Respondent paying the loan due in full and per as the agreement. It is only then that the security document can be putting released back to its depositor. Doing the reverse would amount to the cart before the horse.
23. Accordingly, effect the Claimant's claim partially succeeds with the Respondent that judgment is entered for the Claimant against the in the sum of Kshs. 120,000.00. have cost The Claimant will also counterclaim and interest at court rates from filing until paid in full. The security fails. However, upon payment of the judgment sum, any held by the Claimant is to be released forthwith.”
46. With that, the trial court entered judgement for the Respondent for Ksh.120,000/- and dismissed the Appellant’s counterclaim. Costs of the suit and the counterclaim were awarded to the Respondent.
47. Now to the present appeal, the same proceeded by way of written submissions, which I have had the occasion to peruse.
48. In his submissions, the Appellant challenges the judgment of the trial court principally on grounds 1, 2, 3 and 6 of the Memorandum of Appeal, while leaving grounds 4, 5 and 7 for this Honourable Court’s determination regarding whether the Small Claims Court acted outside its statutory jurisdiction.
49. In appellate practice, if an Appellant fails to argue or make submissions on certain grounds of appeal that are set out in the memorandum of appeal, those grounds are ordinarily regarded as abandoned and are not considered by the court.
50. The rationale behind this approach is that an Appellant must present legal arguments in support of each ground if it is to be entertained. Mere inclusion in the memorandum is insufficient without advocacy at the hearing.
51. Unargued grounds, especially those without distilled issues or submissions, do not form part of the appeal and are effectively removed from consideration. Hence, where an Appellant does not argue some grounds of appeal, those grounds are typically treated as abandoned and the appellate court confines its decision to those grounds that were properly and actively argued (see Mokono v Maranga (Civil Appeal 121 of 2022021) [2024] KEHC 1157 (KLR). Thus then. I will treat grounds 4, 5 and 7 as abandoned.
52. The appeal, which proceeded by way of written submissions, contests both the finding that Ksh.100,000/- remained outstanding and the propriety of the court’s assumption of jurisdiction in a matter allegedly touching on title to land. The Appellant maintains that the trial magistrate erred in fact and in law in holding that any sum was due to the Respondent.
53. The Appellant submits that although the Respondent was not a licensed financial institution authorized to advance credit or levy interest at the alleged rate of 20%, the Appellant nonetheless repaid the entire principal sum of Ksh.100,000/= through instalments made between 6th September, 2022 and 7th Decembe,r 2022, totaling Ksh.120,000/-. According to the Appellant, this constituted an overpayment of Ksh.20,000/-, particularly in view of what is termed as illegal and unconscionable interest.
54. It is argued by the Appellant that the Respondent merely produced a letter from the Central Bank of Kenya indicating no objection to registration of the company, which did not amount to authorization to conduct banking business or charge interest. Consequently, the Appellant contends that the claim was at most a simple debt claim devoid of lawful interest and that the trial court erred in entering judgment for Ksh.100,000/- without evidential basis.
55. On jurisdiction, the Appellant submits that the Small Claims Court lacked authority to entertain the dispute because the Appellant had deposited the original title deed for Land Parcel No. Nyandarua/Motonyora/466, valued at more than Ksh.5,000,000/-, with the Respondent’s director as security. The Appellant had filed a counterclaim seeking release of the title. Although the trial court dismissed the counterclaim, it nonetheless ordered release of the title deed.
56. The Appellant argues that this amounted to the court dealing with issues touching on title to land, a matter expressly excluded from the jurisdiction of the Small Claims Court and reserved for the Environment and Land Court.
57. The Appellant relies on Section 12 of the Small Claims Court Act, which limits jurisdiction to specified civil claims and imposes a pecuniary limit of Ksh.1,000,000/-, and on Section 13(5), which excludes claims founded upon disputes over title or possession of land. It is contended that because the title deed was held as security and the claim was intertwined with rights over land, the dispute fell outside the statutory mandate of the Small Claims Court.
58. The Appellant submits that jurisdiction cannot be conferred by interpretation where statute is clear and that any proceedings conducted without jurisdiction are null.
59. In support of this position, the Appellant relies on the locus classicus decision in Owners of the Motor Vessel “Lillian S” v Caltex Oil (Kenya) Limited [1989] KECA 48 (KLR) where Nyarangi JA stated:
“Jurisdiction is everything. Without it, a court has no power to make one more step… A court of law downs tools in respect of the matter before it the moment it holds the opinion that it is without jurisdiction.”
60. The Appellant invokes this authority to argue that once the Small Claims Court entertained a matter touching on title to land, it acted without jurisdiction and its proceedings were a nullity.
61. The Appellant further relies on Palms Resort Limited v Mohammed Mateen Quresh, Kieran Mwash Mwazo and Margaret Njeri Ndungu, Civil Appeal E167 of 2022 (Mombasa), to reinforce the argument that courts must operate strictly within the jurisdiction conferred by statute. It is urged that this Honourable Court, sitting as an appellate court from the Small Claims Court, has the mandate to determine that the lower court exceeded its jurisdiction and to set aside its decision.
62. In conclusion, the Appellant prays that the appeal be allowed, the Respondent’s claim be dismissed with costs, and the Appellant’s title deed be returned unconditionally, on the basis that the alleged debt was fully repaid and that the proceedings before the Small Claims Court were conducted without jurisdiction and are therefore void ab initio.
63. The Respondent submits that on 5th July, 2022 the Appellant applied for and executed a written loan agreement for Ksh.100,000/-, agreeing to repay the same within one month at an interest rate of 20% per month, making the total due Ksh.120,000/- by 5th August, 2022. The funds were disbursed to the Appellant’s mobile number from the Respondent’s bank account at Sidian Bank, a fact admitted during trial. The Appellant deposited his title deed as a simple security pending compliance with the loan terms; however, no transfer documents were executed and no intention to transfer ownership of the land was ever expressed. The Respondent emphasizes that the transaction was purely contractual and concerned money lent and received.
64. The Respondent further submits that the Appellant was not a first-time borrower. He had previously borrowed Ksh.100,000/- on 2nd June, 2022 at the same 20% monthly interest rate, repaid Ksh.120,000/- in full on 4th July, 2022 and thereafter sought the facility forming the subject of this suit. Due to internal policy restrictions, the Respondent at one point referred the Appellant to Soludel Enterprises Limited for an additional facility. The Appellant thus had two distinct loans of Ksh.100,000/- each, one from
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2. The grounds of appeal presented by the Appellant vide the memorandum of appeal dated 19th June, 2023 upon which he seeks to upset the judgement and decree of the lower court are as follows:
1. The learned trial Magistrate erred in law and fact by misdirecting herself on several matters of law.
2. The learned trial Magistrate erred in law and fact by finding that the Appellant owed the Respondent Ksh.120,000/-.
3. The learned trial Magistrate erred in law and fact by not appreciating that the Appellant had paid a director of the Respondent the sum of Ksh.120,000/- on the sum of Ksh.100,000/- advanced which was admitted.
4. The learned trial Magistrate erred in law and fact by failing to appreciate that the jurisdiction of trial court was time bound and ceased by effluxion of time on the 6th day of April 2022, being the last date and day the courts by dint of Section 34(1) of the Small Claims Court Act.
5. The learned trial Magistrate erred in law and fact that the moment 60 days ended the jurisdiction of the court also ended.
6. The learned trial Magistrate erred in law and fact in dismissing the counterclaim with costs and at the same time ordering return of the Respondent’s title, a prayer not sought by the Claimant.
7. The learned trial Magistrate erred in law and fact by failing to take cognizance of the legal fact that the judgment rendered and returned outside times was without jurisdiction ergo a nullity benefit of any force of law.
3. The Appellant proposes that the appeal be allowed and that this court sets aside the trial court’s judgement.
4. This being the first appellate court, I am required under Section 78 of the Civil Procedure Act and as was espoused in the case of Selle v Associated Motor Boat Co. Ltd [1969] E.A. 123 to re-assess, re-analyze and re-evaluate the evidence adduced in the trial court and draw my conclusions while bearing in mind that I did not see or hear the witnesses when they testified.
5. In Selle, Sir Clement De Lestang observed that:
“This Court must consider the evidence, evaluate it itself and draw its own conclusions, though in doing so it should always bear in mind that it neither heard witnesses and should make due allowance in this respect.
However, this Court is not bound necessarily to follow the trial judge’s findings of fact if it appears either that he had clearly failed on some point to take account of particular circumstances or probabilities, materially to estimate the evidence or if the impression based on the demeanour of a witness is inconsistent with the evidence in the case generally.”
6. The duty of the first appellate court was also discussed by the Court of Appeal for East Africa in the case of Peters v Sunday Post Limited [1958] EA 424 in which it was held that the appropriate standard of review established in cases of appeal can be stated in three complementary principles:
“i. First, on first appeal, the Court is under a duty to reconsider and re-evaluate the evidence on record and draw its own conclusions;
ii. In reconsidering and re-evaluating the evidence, the first appellate court must bear in mind and give due allowance to the fact that the trial court had the advantage of seeing and hearing the witnesses testify before her; and
iii. It is not open to the first appellate court to review the findings of a trial court simply because it would have reached different results if it were hearing the matter for the first time.”
7. Notably however, this is an appeal from the Small Claims Court and Section 38 of the Small Claims Court Act provides that a person dissatisfied with a decision or order of the Small Claims Court may appeal to the High Court only on matters of law, not on questions of fact, and that once the High Court determines such an appeal, its decision is final.
8. I will proceed to re-assess, re-analyze and re-evaluate the evidence adduced before the trial court and reach my own findings while abiding by the principles set in Selle. While doing so, I will keep in mind the jurisdiction of this court under Section 38 of the Small Claims Court Act.
9. The matter before the trial court, based on contract arising out of a loan agreement said to have been entered into between the Appellant (the Respondent before the trial Court) and the Appellant (the Claimant before the trial Court) on 5th July, 2022.
10. The Respondent pleaded in the statement of claim dated 27th January, 2023 that the Appellant borrowed from it Ksh.100,000/- on 5th July, 2022 which the Respondent disbursed to the Appellant and which the latter was to repay within a period of one month together with interest of 20%. The Appellant executed the requisite loan agreement.
11. The Respondent further pleaded that the Appellant defaulted on his obligations in the agreement and failed to pay the loan and the agreed interest, effectively breaching the loan agreement, necessitating the suit for the recovery Ksh.120,000/- being the loaned amount together with interest and a further Ksh.34,500/- incurred by the Respondent towards recovery of the amount.
12. The Respondent further sought 10% of the amount claimed, which it pleaded was damages or legal fees incurred, costs of the suit and interest.
13. In his response to claim and counterclaim, the Appellant averred that he only received a sum of Ksh.100,000/- from one Nathaniel Mwangi, whom he described as an agent. He denied any knowledge of the Respondent as a legal entity licensed to operate as a lender.
14. The Appellant further disputed liability for Ksh.34,500/- allegedly claimed as administration fees, debt recovery charges and legal costs. The Appellant contended that these sums were not contractually justified and required strict proof. He further denied liability for interest at the rate of 20% per month on the Ksh.100,000/-, asserting that there was no contractual relationship between himself and the Respondent that could give rise to such an obligation.
15. The Appellant denied entering into any binding agreement with the Respondent. He further challenged the validity of the suit on procedural grounds, asserting that the same was incompetent and lacked merit due to the absence of a demonstrated contractual relationship.
16. The Appellant admitted that upon receiving the Ksh.100,000/-, he deposited his title deed for Title No. Nyandarua/Motonyora/466 as security but stated that no transfer documents or land control consents were executed. He demanded the unconditional return of the title deed. He also denied the jurisdiction of the trial court, arguing that the title deed related to land valued at approximately Ksh.5,000,000/- and therefore fell outside the pecuniary and subject-matter jurisdiction of the Small Claims Court. He maintained that the matter ought to have been filed before the appropriate court with jurisdiction over land disputes.
17. Additionally, the Appellant contended that the suit was defective because another entity, Soludel Enterprises Limited, had also laid claim to having advanced him a similar sum of Ksh.100,000/-, thereby creating confusion as to the true lender. While he admitted receipt of a demand and notice of intention to sue, he maintained his objection to the trial court’s jurisdiction and indicated that a preliminary objection would be raised at the hearing.
18. In his counterclaim, the Appellant sought the return and release of his title deed for Title No. Nyandarua/Mutonyora/466 from the Respondent or its alleged agent, Nathaniel Mwangi. He contended that the title deed had been deposited as security and was demanding its unconditional release.
19. In the alternative, and by way of compromise, the Appellant expressed willingness to refund the principal sum of Ksh.100,000/- without interest. He further stated that he had issued a demand and notice of intention to sue in relation to the continued holding of the said title deed by the Respondent and its agent.
20. The Appellant prayed that the Respondent’s suit be dismissed or struck out, and that the counterclaim be allowed with costs.
21. The Respondent called two witnesses – Nathaniel Mwangi (CW1) and Robert Chomba (CW2). The two witnesses adopted their respective witness statements as their evidence in chief.
22. In his witness statement, CW1 explained that on 6th July 2022, the Appellant approached the Respondent seeking a loan facility. CW1 conducted a thorough assessment of the Appellant’s financial position on behalf of the Respondent, noting his involvement in the transport and rental business and his strong ability to repay. CW1 stated in his statement that he confirmed that the Appellant had previously borrowed from the Respondent and repaid with interest.
23. CW1 stated that the Appellant submitted a loan application for Ksh.100,000/- on 5th July, 2022, which was approved and disbursed by the Respondent from its account to the Appellant’s mobile number. The loan was to be repaid by 6th August, 2022 with 20% monthly interest.
24. CW1 further explained that the Respondent had prior to that transaction requested another loan of Ksh.100,000/- on 24th June, 2022, which was declined because he still owed Ksh.120,000/- from an earlier loan, which he cleared on 4th July 2022. CW1 added that he had referred the Appellant to Soludel Enterprises Limited, which granted him a separate loan of Ksh.100,000/- in respect of which the Appellant insisted on paying interest through CW1’s phone number rather than Soludel’s paybill number.
25. CW1 recounted that instead of repaying the principal amount as agreed, the Appellant chose to service interest only, effectively rolling over the principal. This continued until January, 2023, when he stopped making payments entirely. After repeated follow-ups, a demand letter was issued on 10th February 2023, to which the Appellant responded on 12th January, 2023, acknowledging the debt and promising to pay Ksh.120,000/- by 28th February, 2023. The witness noted that this payment was never made, leaving the Appellant indebted to the Respondent.
26. In his further averment in his statement, CW1 refuted the Appellant’s claim that the loan was advanced via his (CW1’s) phone number alone and asserted that the same was directly paid to the Appellant from the Respondent’s account. The witness emphasized that a signed loan agreement existed with clear terms, including the 20% agreed monthly interest.
27. CW1 further disputed the Appellant’s claim that he had never dealt with the Respondent, noting multiple in-person visits and signed loan documents. The witness further stated that the Appellant’s alleged payments totaling Ksh.120,000/- only represented interest servicing and were spread between the Respondent and Soludel Enterprises Limited, with no excess payments to the Respondent, leaving additional interest of Ksh.40,000/- accrued for the months of February and March, 2023.
28. CW1 concluded that the Appellant’s account was misleading and incomplete, intentionally obscuring that he was servicing interest only and rolling over the principal. He stated that all evidence, including Mpesa statements and loan agreements, supported the Respondent’s claim for repayment of the principal and accrued interest.
29. CW1 stated in his further statement that he initially disbursed the money from his mobile number to that of the Appellant, but for the particular loan in this matter, the funds were transferred from the Respondent’s Sidian Bank account directly to the Appellant’s mobile number. The Appellant deposited his title deed as security, and a formal contract was signed on 5th July 2022.
30. CW1 emphasized that the Respondent was authorized to lend money, operated under the law of contract and was duly registered. He further noted that the Appellant had also received Ksh.100,000/- from Soludel Enterprises, to whom he had been referred and that the title deed would be released upon full settlement of the debt.
31. In his witness statement CW2 stated that he was a director at Soludel Enterprises Limited and explained that on or about 24th June, 2022, he received a customer referral from CW1, a director of the Respondent, regarding the Appellant, who was an existing repeat customer of the Respondent who needed urgent funding for a project.
32. CW2 stated that he met the Appellant, conducted an appraisal of his financial capacity and confirmed that the Appellant had income from rental, farming and public transport activities. The witness stated that the Appellant disclosed that the Respondent was holding a title over his land, which could be used as collateral for the loan.
33. CW2 stated further in his statement that after consulting with Soludel’s loan committee, the loan request by the Appellant was approved and Ksh.100,000/- was disbursed from Soludel’s bank account to the Appellant’s mobile phone number on 24th June, 2022. The parties orally agreed that the loan would carry 20% monthly interest and be payable by 24th July, 2022.
34. CW2 further stated that on the due date, the Appellant did not pay the full loan but sent Ksh.20,000/- as interest only through CW1’s mobile phone. This arrangement continued as the norm until December, 2022 when the Appellant stopped making payments entirely. CW2 further stated that Soludel Enterprises had made repeated attempts to recover the loan, including sending demand letters, but the Appellant denied knowledge of the company.
35. The following documents were produced in support of the Respondent’s case:
- Loan/debt acknowledgement agreement dated 5th July, 2022 executed by the Appellant as borrower and the Respondent as lender in which the Appellant acknowledged indebtedness of Ksh.100,000/- and interest thereon of Ksh.20,000/-, binding himself to pay before 5th August, 2022.
- Demand letter dated 10th January, 2023 from the Respondent’s Advocates to the Appellant.
- Respondent’s Sidian Bank account statement indicating that Ksh.100,000/- was disbursed to the Appellant on 5th July, 2022.
36. In his witness statement and further statement, the Appellant recalled a time when he needed funds to complete a project and approached CW1, whom he believed was an agent of the Respondent, to advance him Ksh.100,000/- via M-Pesa from CW1’s phone number to his own mobile number. He stated that he deposited his title deed for Title No. Nyandarua/Motonyora/466 as security with CW1, without executing any demand agreement, consent or transfer documents. The Appellant offered to refund the Kshs.100,000/- without interest, characterizing it as a friendly loan.
37. The Appellant contended that the Respondent and its agents were attempting to obtain the Ksh.100,000/- without returning his title deed. He alleged that the Respondent was pursuing additional sums of Ksh.34,500/- as administration, debt recovery and legal fees which were not provided for in any agreement.
38. The Appellant denied in his statement the Respondent’s assertion of a 20% monthly interest on the loan, stating that he had dealt only with CW1 as an agent and never agreed to any interest in writing.
39. The Appellant claimed that the suit was invalid because the Respondent had not filed a consent to sue and that the Respondent lacked authorization to conduct money lending, having no banking license or registration as a financial institution. He further indicated that Soludel Enterprises Limited had allegedly advanced him the same sum and he reserved the right to join them as a third party if necessary.
40. The Appellant prayed that the claim be dismissed or struck out, or alternatively, that an order be made for the release of his Title No. Nyandarua/Mutonyora/466 by the Respondent with costs and interest.
41. Further, the Appellant contended that the court lacked jurisdiction because the claim’s value exceeded the Ksh.1,000,000/- jurisdictional limit, while the property Title No. Nyandarua/Mutonyora/466 was worth over Ksh.5,000,000/-. He also challenged the authenticity of the Sidian Bank statement produced by the Respondent, noting that it corresponded to CW1’s number and not that of the the Respondent.
42. The Appellant further stated that he had fully repaid a total of Ksh.120,000/- to CW1’s mobile line in six instalments, comprising the principal of Ksh.100,000/- and an excess of Ksh.20,000/-, detailing the payment schedule.
43. The Appellant produced the following documents in support of his case:
- The Respondent’s demand letter dated 10th January, 2023 sent to the Appellant.
- Letter dated 12th January, 2023 from the Appellant’s Advocates to the Respondent’s Advocates offering to pay Ksh.100,000/- and “the disputed interest” of Ksh.20,000/- on or before 28th February, 2023 and requesting that the Appellant’s title deed be released upon such payment.
- Letter dated 31st January, 2023 from the Respondent to the Appellant demanding payment of Ksh.140,000/- loan balance and interest and Ksh.14,000/- recovery fee.
- Letter dated 2nd February, 2023 from the Appellant’s Advocates to the Respondent’s Advocates, in response to the Respondent’s Advocate’s letter dated 31st January, 2023 in which the Appellant states that the he has no outstanding loan.
44. Upon considering the pleadings and evidentiary material before her, the learned Adjudicator went on to set out the issues for determination as follows:
“7. From the pleadings and submissions, it is the court's view that the issues that crystallize for determination are the following:
a) Whether the court has jurisdiction to entertain the claim?
b) Whether the Claimant is authorized to lend money?
c) Whether the Claimant has proved its claim on a balance of probabilities.
d) What order the court should make.”
45. The learned Adjudicator then proceeded to analyze the evidence and reached the determinations on the issues, as follows:
“8. Starting with the first issue, the Respondent alleged that since the value of the land whose title he claims to have given to the Claimant as security values at around Kshs. 5,000,000.00; then the court lacks jurisdiction. The court does not agree. The dispute before the court arises from the loan said to have been advanced to the Respondent. It does not arise from the land itself. If it did, the court would not have jurisdiction to deal with matters to do with land. In any case, the value of the land was not proved by the Respondent as to suggest that the same exceeds the pecuniary jurisdiction of the court.
9. On the second issue, the court does not agree with the Respondent that the mere fact that the Claimant is not licensed to offer Banking services, then it cannot lend to third parties. Lending is not a regulated business. Any person can lend; whether natural or juristic.
10. Turning to the third issue, the court finds that on 6th July 2022, a sum of Kshs. 100,000.00 was sent to the Respondent through mobile money from the Claimant's Bank. The question is whether the said sum is outstanding and whether it attracted interest and recovery charges.
11. The Claimant relies on the Debt Acknowledgment Agreement10 dated 5th July 2022 to support the terms. The stated agreement provides that a sum of Kshs. 100,000.00 was to be lent to the Respondent. Interest is indicated at 20% per month. In addition, there is a default rate of 3%. The agreement bears what appears to be a signature of the Respondent.
12. The Respondent denies having executed the agreement. However, when cross examined, he was at pains to explain himself save for a mere denial. He did not allege that the signature in the agreement was a forgery and did not show any attempts to take legal action if at all the signature was not his. In the end, the court was-20 satisfied that the agreement was duly executed by the Respondent.
13. Therefore, the court is satisfied that the agreed interest rate wąs 20% per month. The interest was negotiated at arm's length and cannot be said to be illegal and usurious or unenforceable.
14. The next issue is on whether the loan was repaid. The Claimant avers that he paid a total sum of Kshs. 120,000.00; which he claims to be excess by Kshs. 20,000.00. On its part, the Claimant claims that the Respondent used to repay through its director Nathaniel Mwangi. However, he only paid interest and rolled over the principal. In addition, the Claimant told the court that the Respondent also had a loan owed to a company called Soludel Limited of Kshs. 100,000.00 which loan was advanced to him on referral by the Director of the Claimant.
15. It was stated that the Respondent would pay both loans through Mpesa to PW1. Out of the Kshs. 120,000.00 paid, it was his testimony that both companies had been paid interests of Kshs. 60,000.00 each.
16. From the evidence, I am satisfied with the Claimant's version as-10 the truthful one. From the evidence adduced, it is clear that a sum of Kshs. 100,000.00 was advanced to the Respondent by Soludel Limited on 24th June 2023 which is, however, not the dispute before the court.
17. The Respondent's denial was a mere denial as he did not explain the exhibit showing money being sent to him from the said company.
18. From the agreement above, I am also satisfied that the Respondent had a duty to pay the sum of Kshs. 20,000.00 in interest per month; until payment of the facility in full.
19. In addition, the court finds that in his witness statement, the Respondent admitted the sum of Kshs. 100,000.00 which he indicates that he was willing to pay without interest, once his title deed was released.
20. The court is, therefore, satisfied that the Claimant has proved the sum of Kshs. 120,000.00. However, the court is not satisfied that the administration charges and debt recovery fees were due and payable.
21. With regards to the counterclaim, the Respondent title deed prays that his be released by the Claimant. CW1 told the court that the confirmed title deed was given to the claimant as a simple deposit. This was by the Respondent but who argued that the Respondent had not capacity to take security.
22. From the evidence, it is clear that the return of the title deed would be tied to the Respondent paying the loan due in full and per as the agreement. It is only then that the security document can be putting released back to its depositor. Doing the reverse would amount to the cart before the horse.
23. Accordingly, effect the Claimant's claim partially succeeds with the Respondent that judgment is entered for the Claimant against the in the sum of Kshs. 120,000.00. have cost The Claimant will also counterclaim and interest at court rates from filing until paid in full. The security fails. However, upon payment of the judgment sum, any held by the Claimant is to be released forthwith.”
46. With that, the trial court entered judgement for the Respondent for Ksh.120,000/- and dismissed the Appellant’s counterclaim. Costs of the suit and the counterclaim were awarded to the Respondent.
47. Now to the present appeal, the same proceeded by way of written submissions, which I have had the occasion to peruse.
48. In his submissions, the Appellant challenges the judgment of the trial court principally on grounds 1, 2, 3 and 6 of the Memorandum of Appeal, while leaving grounds 4, 5 and 7 for this Honourable Court’s determination regarding whether the Small Claims Court acted outside its statutory jurisdiction.
49. In appellate practice, if an Appellant fails to argue or make submissions on certain grounds of appeal that are set out in the memorandum of appeal, those grounds are ordinarily regarded as abandoned and are not considered by the court.
50. The rationale behind this approach is that an Appellant must present legal arguments in support of each ground if it is to be entertained. Mere inclusion in the memorandum is insufficient without advocacy at the hearing.
51. Unargued grounds, especially those without distilled issues or submissions, do not form part of the appeal and are effectively removed from consideration. Hence, where an Appellant does not argue some grounds of appeal, those grounds are typically treated as abandoned and the appellate court confines its decision to those grounds that were properly and actively argued (see Mokono v Maranga (Civil Appeal 121 of 2022021) [2024] KEHC 1157 (KLR). Thus then. I will treat grounds 4, 5 and 7 as abandoned.
52. The appeal, which proceeded by way of written submissions, contests both the finding that Ksh.100,000/- remained outstanding and the propriety of the court’s assumption of jurisdiction in a matter allegedly touching on title to land. The Appellant maintains that the trial magistrate erred in fact and in law in holding that any sum was due to the Respondent.
53. The Appellant submits that although the Respondent was not a licensed financial institution authorized to advance credit or levy interest at the alleged rate of 20%, the Appellant nonetheless repaid the entire principal sum of Ksh.100,000/= through instalments made between 6th September, 2022 and 7th Decembe,r 2022, totaling Ksh.120,000/-. According to the Appellant, this constituted an overpayment of Ksh.20,000/-, particularly in view of what is termed as illegal and unconscionable interest.
54. It is argued by the Appellant that the Respondent merely produced a letter from the Central Bank of Kenya indicating no objection to registration of the company, which did not amount to authorization to conduct banking business or charge interest. Consequently, the Appellant contends that the claim was at most a simple debt claim devoid of lawful interest and that the trial court erred in entering judgment for Ksh.100,000/- without evidential basis.
55. On jurisdiction, the Appellant submits that the Small Claims Court lacked authority to entertain the dispute because the Appellant had deposited the original title deed for Land Parcel No. Nyandarua/Motonyora/466, valued at more than Ksh.5,000,000/-, with the Respondent’s director as security. The Appellant had filed a counterclaim seeking release of the title. Although the trial court dismissed the counterclaim, it nonetheless ordered release of the title deed.
56. The Appellant argues that this amounted to the court dealing with issues touching on title to land, a matter expressly excluded from the jurisdiction of the Small Claims Court and reserved for the Environment and Land Court.
57. The Appellant relies on Section 12 of the Small Claims Court Act, which limits jurisdiction to specified civil claims and imposes a pecuniary limit of Ksh.1,000,000/-, and on Section 13(5), which excludes claims founded upon disputes over title or possession of land. It is contended that because the title deed was held as security and the claim was intertwined with rights over land, the dispute fell outside the statutory mandate of the Small Claims Court.
58. The Appellant submits that jurisdiction cannot be conferred by interpretation where statute is clear and that any proceedings conducted without jurisdiction are null.
59. In support of this position, the Appellant relies on the locus classicus decision in Owners of the Motor Vessel “Lillian S” v Caltex Oil (Kenya) Limited [1989] KECA 48 (KLR) where Nyarangi JA stated:
“Jurisdiction is everything. Without it, a court has no power to make one more step… A court of law downs tools in respect of the matter before it the moment it holds the opinion that it is without jurisdiction.”
60. The Appellant invokes this authority to argue that once the Small Claims Court entertained a matter touching on title to land, it acted without jurisdiction and its proceedings were a nullity.
61. The Appellant further relies on Palms Resort Limited v Mohammed Mateen Quresh, Kieran Mwash Mwazo and Margaret Njeri Ndungu, Civil Appeal E167 of 2022 (Mombasa), to reinforce the argument that courts must operate strictly within the jurisdiction conferred by statute. It is urged that this Honourable Court, sitting as an appellate court from the Small Claims Court, has the mandate to determine that the lower court exceeded its jurisdiction and to set aside its decision.
62. In conclusion, the Appellant prays that the appeal be allowed, the Respondent’s claim be dismissed with costs, and the Appellant’s title deed be returned unconditionally, on the basis that the alleged debt was fully repaid and that the proceedings before the Small Claims Court were conducted without jurisdiction and are therefore void ab initio.
63. The Respondent submits that on 5th July, 2022 the Appellant applied for and executed a written loan agreement for Ksh.100,000/-, agreeing to repay the same within one month at an interest rate of 20% per month, making the total due Ksh.120,000/- by 5th August, 2022. The funds were disbursed to the Appellant’s mobile number from the Respondent’s bank account at Sidian Bank, a fact admitted during trial. The Appellant deposited his title deed as a simple security pending compliance with the loan terms; however, no transfer documents were executed and no intention to transfer ownership of the land was ever expressed. The Respondent emphasizes that the transaction was purely contractual and concerned money lent and received.
64. The Respondent further submits that the Appellant was not a first-time borrower. He had previously borrowed Ksh.100,000/- on 2nd June, 2022 at the same 20% monthly interest rate, repaid Ksh.120,000/- in full on 4th July, 2022 and thereafter sought the facility forming the subject of this suit. Due to internal policy restrictions, the Respondent at one point referred the Appellant to Soludel Enterprises Limited for an additional facility. The Appellant thus had two distinct loans of Ksh.100,000/- each, one from
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