' JUDGEMENT
1. This is a Judgement in respect of an Appeal arising from a Ruling of the Deputy Registrar Hon. Deputy Registrar (M/s.) E.Tanui SPM delivered on 24th October, 2023.
Background Facts
2. The Deputy Registrar on or about the 24th October 2023 made a decision reconciling the accounts between the Decree Holders (Appellant) and the Judgement Debtor (Respondent). Subsequently, the Appellant filed a Memorandum of Appeal dated 31st October 2023 challenging the reconciliation of accounts.
3. The Appellants/Decree-Holders appealed against the Ruling of the Hon. Deputy Registrar (M/s.) E.Tanui SPM in the above matters delivered on the 24th October 2023 on the following grounds;
a) The Deputy Registrar erred in law and fact in stating that she proceeded on a practice adopted by our legal system where payments done towards settlement of accounts are made towards settling of the principal amount and calculating the amount due on reducing balance without elaborating on what the practice says about settling of the interest accrued nor referring to any statute or legal/judicial precedents to support or locate the existence of said practice which in fact is not a known practice in law.
b) The Deputy Registrar erred in law and fact by disregarding the common law principle applicable to settlement of accounts which provides that where both principal and interest are due, the sums paid on account must be applied first to interest. That rule, where it is applicable is only common justice.
c) The Deputy Registrar erred in law and fact by failing to address her mind to the principle of appropriation and completely disregarding the submissions and authorities filed on behalf of the Decree-Holders and Judgement-Debtors thereby occasioning an injustice to the Decree Holders by making a ruling without considering the Decree-Holders submissions which she had requested the parties to file and thereby abdicated her role to fairly adjudicate on the issue before her.
d) The Deputy Registrar erred and misdirected herself in law and fact by failing to find that the Judgement-Debtor had in its submissions abandoned the objection based on the allegation of compound interest having been applied in the ruling dated 7th July 2023 and there was therefore no basis to set aside the said ruling when the calculations were not based on compound interest as demonstrated in the Decree-Holders submissions.
e) The Deputy Registrar erred in law and fact by irregularly amending the decree in her ruling dated 24th October 2023 whereby she indicates several different figures for the Principal Amount to calculate the interest yet the decree dated 17th September 2019 only has the sum of Kshs.102,812,405.27 as the Principal Amount on which the interest was to be charged at 12% from 12th May 2014.
4. The Appellants/Decree-Holders pray that:
a) This Appeal be allowed and the Ruling dated 24th October 2023 be set aside, varied and vacated by finding that the Deputy Registrar ought to have applied the principle of appropriation in settling the accounts and that there is no overpayment made to the Decree-Holders.
b) The Court to allow the Appeal on the grounds stated above and to set aside the Ruling dated 24th October 2023 with an Order/Ruling reinstating the Ruling dated 7th July 2023 but with a correction that the Deputy Registrar''s calculation contained in the Ruling dated 7th July 2023 were not based on compound interest.
c) The Costs of this Appeal be borne by the Judgement-Debtors.
d) Any other relief that the Court may deem fit and just to grant.
Issues for determination
5. The Court has carefully considered the Appeal and the submissions by the parties and frames the following issue for determination;
a) Whether the Ruling dated 24th October 2023 should be set aside, varied or vacated .
Analysis
6. The Court acknowledges that the present Appeal is properly before the Court as provided for under the provisions of Order 49 Rule 7 (2) & (3) of the Civil Procedure Rules , which states as follows;
(2) An appeal from a decision of the registrar under the Orders referred to in sub rule (1) shall be to a judge in chambers.
(3) The memorandum of the appeal, setting out the grounds of the appeal shall be filed within seven days of the decision of the registrar.
7. It was the Appellants’ submission that once the Judgement Debtor abandoned the objection alleging that compound interest had been applied in the ruling dated 7th July 2023 then the Deputy Registrar ought to have found that the Judgment Debtor had no basis of alleging that she had applied compound interest in view of the principle of appropriation.
8. On this issue regarding compound and simple interest, the Court notes that in the Deputy Registrar’s Ruling dated 7th July 2023 at paragraph 7 stated that;
In his Order issued on the 04/05/2023 the Honourable Judge calculated the amounts due based on compound interest. Consequently, I take the same to mean that accruing sum includes interest that is due and owing. I will therefore settle the accounts due by levying compound interest….”
9. On 10th July 2023, from the Court proceedings, Justice Mabeya stated;
“Let the parties appear before DR on 21/7/2023 for her to clarify her judgment as I did not apply compound interest in my order of 4/5/2023.”
10. Subsequently, the Deputy Registrar in her Ruling dated 24th October 2023, at paragraph 3, clarified as follows
“This particular Ruling arose out of an erroneous assumption that I made. In Paragraph 7 of the Ruling of 7th July 2023, I proceeded on an erroneous assumption that the learned trial Judge had based the calculations done on 4th May 2023 on Compound Interest. The Honourable Judge has since clarified that he did not apply compound Interest, and to that extent, I hereby recall and set aside the entire paragraph 8 of my Ruling of 7th July 2023.”
11. The Court finds that it is on the basis of this error that the Deputy Registrar wrote the Ruling dated 24th October 2023 to correct the error initially made on the calculation of interest based on compound interest. She then went ahead to do fresh calculations based on simple interest.
12. The principle of appropriation - On ground no. 1 of the Appeal, the consequence of the Deputy Registrar failing to address her mind to the principle of appropriation led her to err in law and fact, whereby in her Ruling dated 24th October 2024 she stated that she proceeded on a practice adopted by our legal system where payments done towards settlement of accounts are made towards settling of the principal amount and calculating the amount due on reducing balance.
13. On the principle of appropriation, the Court in West Bromwich Building Society v Crammer [2002] EWHC 2618 (Ch) stated as follows;
The law relating to appropriation of payments was considered authoritatively in The “Mecca” [1897]
AC 286, where Lord Macnaghten said at 293, that:
“There can be no doubt what the law of England is. When a debtor is making a payment to his creditor, he may appropriate the money as he pleases, and the creditor must apply it accordingly. If the debtor does not make any appropriation at the time when he makes the payment, the right of application devolves on the creditor.”
[14] He then went on to consider the cases where the law presumes, at least in the absence of an express election, as to how the payment of money is to be treated. In particular, he made reference to Clayton''s Case, 1 Mer, 585 at 608, which dealt with unappropriated payments in respect of a bank account.
[15] The textbooks to which I have been referred seem to support Miss Tozer''s contention, where the debtor owes both capital and interest to the creditor, Chitty on Contracts 20th Ed Vol 1 para 22‑067 states:
“Appropriation as between principal and interest. Where there is no appropriation by either debtor or creditor in the case of a debt bearing interest, the law will (unless a contrary intention appears), apply the payment to discharge any interest due before applying it to the earlier items of principal.”
[16] The suggestion that there can be appropriation, but if it does not occur, the presumption is that the money is applied to repay interest.
[17] To a similar effect in Fisher and Lightwood''s Law of Mortgage, 11th Ed, one finds this, at para 28.47:
“Where the debtor claims to be discharged by reason of payments which were not specifically allocated as between principal or interest, the rule is that such a payment should be applied in the first place to reduce the interest, before any part of the principal is discharged.”
14. The Appellant took the position that the Respondent/Judgment Debtor did not provide any evidence or communicate any appropriation when making payments on 10th January 2018 or 13th May 2018, nor at any time during the pendency of the suit. The Respondent’s submissions on apportionment were a belated afterthought made only after realizing on 21st July 2023 that its earlier objection was baseless. In any case, the Decree Holders retain the right to appropriate payments at any time, even after payment, and have consistently maintained that the sums paid were applied first to interest in line with the principle of appropriation.
15. In contrast, the Respondent argued that it communicated with the Appellants at the time of payment of the first sums, indicating that the sums were to be used to defray the undisputed sums. This resulted in the Appellants responding vide their letter of 11th January 2018. In the said letter, the Appellants did not dispute the payment of the principal sum. This was further supported by the letter of 16th May 2018 written to the Appellant’s advocates then on record. In this letter, the Appellants are informed unequivocally that the payments have been made towards settlement of the principal sum plus interest on the uncontested sum as at 10th January 2018.
16. Additionally, vide the affidavits of Lucky Rono of 24th May 2018 and 7th May 2018 and paragraph 8 of the Affidavit of Sharon Tugee of 30th August 2018, it was clear that the first instalments were paid towards clearing of the principal to avoid of interest.
17. It is notable that the payments were made from January 2018 and it is only until 16th May 2018 that the Respondent informed the Appellant that the payments have been made towards settlement of the principal sum. It is the court’s considered view that this information ought to have been communicated from the time the Respondents made their first payment.
18. The Court is therefore called to consider the principle of appropriation and whether it is applicable to this case. The Court having considered the rival submissions as well as the authorities cited, finds favour in the decision in West Bromwich Building Society v Crammer [2002] EWHC 2618 (Ch). This is simply to the effect that when parties do no elect or make appropriation in paying a debt, the payment towards settling an interest paying debt will first go towards repaying the interest before later defraying the interest.
19. It has been submitted in these submissions that such an appropriation had earlier been made by the Judgement debtor and letters introduced by way of Affidavits. That these Affidavits were filed without leave. Certainly, there is no evidence presented before the Court to demonstrate that the Deputy Registrar Hon. Tanui had been notified of these letters of appropriation prior to her decision. The Decree Holder is correct in taking the position that such claim as to appropriation cannot be raised at this point in time. From the authorities cited, clear communication of the appropriation between the debtor and the creditor is key.
20. As matters stand it is evident to this Court that the objection that the Deputy Registrar applied compounded interest has not been seriously challenged in these proceedings. The Court has pronounced itself on the principle of appropriation and its applicability in this Appeal.
21. It follows therefore that the Appeal succeeds and the Court proceeds to set aside the decision of the Deputy Registrar delivered on 24th October, 2023.
22. Having said so, the Decree holder urges the Court to reinstate the earlier Ruling by the Deputy Registrar of 7th July, 2023. The Court notes that both parties have presented different sets of calculations arising from the principle of appropriation.
23. The Court is of the opinion that this matter can best be resolved by remitting it back to the Deputy Registrar with appropriate directions that the Court applies the principle of appropriation in recalculating and settling of accounts. That payments made first be applied towards settling the interest and the balance towards defraying the principal debt.
Determination
24. The Appeal is allowed in the following terms;
(a) This Appeal is HEREBY allowed and the Ruling dated 24th October 2023 be and is HEREBY set aside, varied, and vacated by finding that the Deputy Registrar ought to have applied the principle of appropriation in settling the accounts.
(b) The matter is remitted back to the Deputy Registrar (other than Hon D. Tanui) with directions to recalculate and settle the accounts between the parties by applying the principle of appropriation whereby the payments made by the Judgement debtor first be applied towards repayment of interest and the balance towards defraying the principal.
(c) That the parties do appear before the Deputy Registrar for directions on how the recalculation and settling of accounts will proceed.
25. It is so ordered.
DATED, SIGNED AND DELIVERED AT MILIMANI THIS 16TH DAY OF OCTOBER, 2025.
NJOROGE BENJAMIN K.
JUDGE
In the presence of;
Mr. Thuo Kanai for Appellant/Applicant
Miss Rachier holding brief for Mr. Akwaya for the Respondent.
Mr. Peter Wabwire - Court Assistant.
'
1. This is a Judgement in respect of an Appeal arising from a Ruling of the Deputy Registrar Hon. Deputy Registrar (M/s.) E.Tanui SPM delivered on 24th October, 2023.
Background Facts
2. The Deputy Registrar on or about the 24th October 2023 made a decision reconciling the accounts between the Decree Holders (Appellant) and the Judgement Debtor (Respondent). Subsequently, the Appellant filed a Memorandum of Appeal dated 31st October 2023 challenging the reconciliation of accounts.
3. The Appellants/Decree-Holders appealed against the Ruling of the Hon. Deputy Registrar (M/s.) E.Tanui SPM in the above matters delivered on the 24th October 2023 on the following grounds;
a) The Deputy Registrar erred in law and fact in stating that she proceeded on a practice adopted by our legal system where payments done towards settlement of accounts are made towards settling of the principal amount and calculating the amount due on reducing balance without elaborating on what the practice says about settling of the interest accrued nor referring to any statute or legal/judicial precedents to support or locate the existence of said practice which in fact is not a known practice in law.
b) The Deputy Registrar erred in law and fact by disregarding the common law principle applicable to settlement of accounts which provides that where both principal and interest are due, the sums paid on account must be applied first to interest. That rule, where it is applicable is only common justice.
c) The Deputy Registrar erred in law and fact by failing to address her mind to the principle of appropriation and completely disregarding the submissions and authorities filed on behalf of the Decree-Holders and Judgement-Debtors thereby occasioning an injustice to the Decree Holders by making a ruling without considering the Decree-Holders submissions which she had requested the parties to file and thereby abdicated her role to fairly adjudicate on the issue before her.
d) The Deputy Registrar erred and misdirected herself in law and fact by failing to find that the Judgement-Debtor had in its submissions abandoned the objection based on the allegation of compound interest having been applied in the ruling dated 7th July 2023 and there was therefore no basis to set aside the said ruling when the calculations were not based on compound interest as demonstrated in the Decree-Holders submissions.
e) The Deputy Registrar erred in law and fact by irregularly amending the decree in her ruling dated 24th October 2023 whereby she indicates several different figures for the Principal Amount to calculate the interest yet the decree dated 17th September 2019 only has the sum of Kshs.102,812,405.27 as the Principal Amount on which the interest was to be charged at 12% from 12th May 2014.
4. The Appellants/Decree-Holders pray that:
a) This Appeal be allowed and the Ruling dated 24th October 2023 be set aside, varied and vacated by finding that the Deputy Registrar ought to have applied the principle of appropriation in settling the accounts and that there is no overpayment made to the Decree-Holders.
b) The Court to allow the Appeal on the grounds stated above and to set aside the Ruling dated 24th October 2023 with an Order/Ruling reinstating the Ruling dated 7th July 2023 but with a correction that the Deputy Registrar''s calculation contained in the Ruling dated 7th July 2023 were not based on compound interest.
c) The Costs of this Appeal be borne by the Judgement-Debtors.
d) Any other relief that the Court may deem fit and just to grant.
Issues for determination
5. The Court has carefully considered the Appeal and the submissions by the parties and frames the following issue for determination;
a) Whether the Ruling dated 24th October 2023 should be set aside, varied or vacated .
Analysis
6. The Court acknowledges that the present Appeal is properly before the Court as provided for under the provisions of Order 49 Rule 7 (2) & (3) of the Civil Procedure Rules , which states as follows;
(2) An appeal from a decision of the registrar under the Orders referred to in sub rule (1) shall be to a judge in chambers.
(3) The memorandum of the appeal, setting out the grounds of the appeal shall be filed within seven days of the decision of the registrar.
7. It was the Appellants’ submission that once the Judgement Debtor abandoned the objection alleging that compound interest had been applied in the ruling dated 7th July 2023 then the Deputy Registrar ought to have found that the Judgment Debtor had no basis of alleging that she had applied compound interest in view of the principle of appropriation.
8. On this issue regarding compound and simple interest, the Court notes that in the Deputy Registrar’s Ruling dated 7th July 2023 at paragraph 7 stated that;
In his Order issued on the 04/05/2023 the Honourable Judge calculated the amounts due based on compound interest. Consequently, I take the same to mean that accruing sum includes interest that is due and owing. I will therefore settle the accounts due by levying compound interest….”
9. On 10th July 2023, from the Court proceedings, Justice Mabeya stated;
“Let the parties appear before DR on 21/7/2023 for her to clarify her judgment as I did not apply compound interest in my order of 4/5/2023.”
10. Subsequently, the Deputy Registrar in her Ruling dated 24th October 2023, at paragraph 3, clarified as follows
“This particular Ruling arose out of an erroneous assumption that I made. In Paragraph 7 of the Ruling of 7th July 2023, I proceeded on an erroneous assumption that the learned trial Judge had based the calculations done on 4th May 2023 on Compound Interest. The Honourable Judge has since clarified that he did not apply compound Interest, and to that extent, I hereby recall and set aside the entire paragraph 8 of my Ruling of 7th July 2023.”
11. The Court finds that it is on the basis of this error that the Deputy Registrar wrote the Ruling dated 24th October 2023 to correct the error initially made on the calculation of interest based on compound interest. She then went ahead to do fresh calculations based on simple interest.
12. The principle of appropriation - On ground no. 1 of the Appeal, the consequence of the Deputy Registrar failing to address her mind to the principle of appropriation led her to err in law and fact, whereby in her Ruling dated 24th October 2024 she stated that she proceeded on a practice adopted by our legal system where payments done towards settlement of accounts are made towards settling of the principal amount and calculating the amount due on reducing balance.
13. On the principle of appropriation, the Court in West Bromwich Building Society v Crammer [2002] EWHC 2618 (Ch) stated as follows;
The law relating to appropriation of payments was considered authoritatively in The “Mecca” [1897]
AC 286, where Lord Macnaghten said at 293, that:
“There can be no doubt what the law of England is. When a debtor is making a payment to his creditor, he may appropriate the money as he pleases, and the creditor must apply it accordingly. If the debtor does not make any appropriation at the time when he makes the payment, the right of application devolves on the creditor.”
[14] He then went on to consider the cases where the law presumes, at least in the absence of an express election, as to how the payment of money is to be treated. In particular, he made reference to Clayton''s Case, 1 Mer, 585 at 608, which dealt with unappropriated payments in respect of a bank account.
[15] The textbooks to which I have been referred seem to support Miss Tozer''s contention, where the debtor owes both capital and interest to the creditor, Chitty on Contracts 20th Ed Vol 1 para 22‑067 states:
“Appropriation as between principal and interest. Where there is no appropriation by either debtor or creditor in the case of a debt bearing interest, the law will (unless a contrary intention appears), apply the payment to discharge any interest due before applying it to the earlier items of principal.”
[16] The suggestion that there can be appropriation, but if it does not occur, the presumption is that the money is applied to repay interest.
[17] To a similar effect in Fisher and Lightwood''s Law of Mortgage, 11th Ed, one finds this, at para 28.47:
“Where the debtor claims to be discharged by reason of payments which were not specifically allocated as between principal or interest, the rule is that such a payment should be applied in the first place to reduce the interest, before any part of the principal is discharged.”
14. The Appellant took the position that the Respondent/Judgment Debtor did not provide any evidence or communicate any appropriation when making payments on 10th January 2018 or 13th May 2018, nor at any time during the pendency of the suit. The Respondent’s submissions on apportionment were a belated afterthought made only after realizing on 21st July 2023 that its earlier objection was baseless. In any case, the Decree Holders retain the right to appropriate payments at any time, even after payment, and have consistently maintained that the sums paid were applied first to interest in line with the principle of appropriation.
15. In contrast, the Respondent argued that it communicated with the Appellants at the time of payment of the first sums, indicating that the sums were to be used to defray the undisputed sums. This resulted in the Appellants responding vide their letter of 11th January 2018. In the said letter, the Appellants did not dispute the payment of the principal sum. This was further supported by the letter of 16th May 2018 written to the Appellant’s advocates then on record. In this letter, the Appellants are informed unequivocally that the payments have been made towards settlement of the principal sum plus interest on the uncontested sum as at 10th January 2018.
16. Additionally, vide the affidavits of Lucky Rono of 24th May 2018 and 7th May 2018 and paragraph 8 of the Affidavit of Sharon Tugee of 30th August 2018, it was clear that the first instalments were paid towards clearing of the principal to avoid of interest.
17. It is notable that the payments were made from January 2018 and it is only until 16th May 2018 that the Respondent informed the Appellant that the payments have been made towards settlement of the principal sum. It is the court’s considered view that this information ought to have been communicated from the time the Respondents made their first payment.
18. The Court is therefore called to consider the principle of appropriation and whether it is applicable to this case. The Court having considered the rival submissions as well as the authorities cited, finds favour in the decision in West Bromwich Building Society v Crammer [2002] EWHC 2618 (Ch). This is simply to the effect that when parties do no elect or make appropriation in paying a debt, the payment towards settling an interest paying debt will first go towards repaying the interest before later defraying the interest.
19. It has been submitted in these submissions that such an appropriation had earlier been made by the Judgement debtor and letters introduced by way of Affidavits. That these Affidavits were filed without leave. Certainly, there is no evidence presented before the Court to demonstrate that the Deputy Registrar Hon. Tanui had been notified of these letters of appropriation prior to her decision. The Decree Holder is correct in taking the position that such claim as to appropriation cannot be raised at this point in time. From the authorities cited, clear communication of the appropriation between the debtor and the creditor is key.
20. As matters stand it is evident to this Court that the objection that the Deputy Registrar applied compounded interest has not been seriously challenged in these proceedings. The Court has pronounced itself on the principle of appropriation and its applicability in this Appeal.
21. It follows therefore that the Appeal succeeds and the Court proceeds to set aside the decision of the Deputy Registrar delivered on 24th October, 2023.
22. Having said so, the Decree holder urges the Court to reinstate the earlier Ruling by the Deputy Registrar of 7th July, 2023. The Court notes that both parties have presented different sets of calculations arising from the principle of appropriation.
23. The Court is of the opinion that this matter can best be resolved by remitting it back to the Deputy Registrar with appropriate directions that the Court applies the principle of appropriation in recalculating and settling of accounts. That payments made first be applied towards settling the interest and the balance towards defraying the principal debt.
Determination
24. The Appeal is allowed in the following terms;
(a) This Appeal is HEREBY allowed and the Ruling dated 24th October 2023 be and is HEREBY set aside, varied, and vacated by finding that the Deputy Registrar ought to have applied the principle of appropriation in settling the accounts.
(b) The matter is remitted back to the Deputy Registrar (other than Hon D. Tanui) with directions to recalculate and settle the accounts between the parties by applying the principle of appropriation whereby the payments made by the Judgement debtor first be applied towards repayment of interest and the balance towards defraying the principal.
(c) That the parties do appear before the Deputy Registrar for directions on how the recalculation and settling of accounts will proceed.
25. It is so ordered.
DATED, SIGNED AND DELIVERED AT MILIMANI THIS 16TH DAY OF OCTOBER, 2025.
NJOROGE BENJAMIN K.
JUDGE
In the presence of;
Mr. Thuo Kanai for Appellant/Applicant
Miss Rachier holding brief for Mr. Akwaya for the Respondent.
Mr. Peter Wabwire - Court Assistant.
'