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JudgmentMARY MUGURE MWANGI VS PROGRESSIVE CREDIT LIMITED21 min read

MARY MUGURE MWANGI VS PROGRESSIVE CREDIT LIMITED

High Court at Kiambu High Court · · Andayi W.F.


(Being an Appeal from the Judgment and Decree of Honourable C. A Omondi Senior Principal Magistrate delivered and dated 6th February, 2023 in SPMC Civil Case No. E526 of 2021 at Ruiru)

  1. This is an appeal by the appellant Mary Mugure Mwangi arising from the judgment of the learned trial magistrate delivered on 6/2/2023 in which the suit by the appellant against the respondent was dismissed.
  2. The trial court heard and considered the pleadings and the evidence of the appellant Mary Mugure Mwangi, PW 1 by way of testimony as well as her witness statement dated 15/11/2021 together with various documents she produced in support of her case as well as the respondent’s case through its statement of defence and testimony of its witness Kristine Gathoni Mugo, DW 1, her witness statement dated 12/2/2022 and supporting documents produced as exhibits.
  3. According to the pleadings and evidence tendered before the trial court, the appellant herein Mary Mugure Mwangi is a business lady. On various occasions in the year 2019 she obtained loans from the respondent to finance and expand her business. According to the respondent, the appellant obtained three loans, the first two were repaid but she defaulted on the third one.
  4. The appellant contested the amount of the third loan so obtained. It is the respondent’s position that the appellant offered by way of security her property land parcel No. Ruiru Kiu Block10 (Mahiira)/818 by way of a charge and two motor vehicles registration numbers KCU 348C and KCV 763P both Suzuki Altos by way of chattels mortgage which the respondent had assisted her to purchase by way of asset financing. The appellant faults the manner in which these securities were charged to the respondent. In the case of the vehicles, she contends that a third party was registered alongside her as a co-owner without her knowledge while in the case of the land she contends that the charge was defective and that it was never meant to cover the third loan but only the initial ones.
  5. Along the way the respondent repossessed the two vehicles and sold them to offset the loan claiming that the appellant was in default of repayment. The respondent was in the process of realizing the charged property when the appellant filed a suit in the trial court challenging the respondent’s actions as having an underlying ill intention by the respondent to defraud the appellant of her property. 
  6. According to the appellant on 21/8/2019 the respondent advanced her a loan of KShs 200,000/=.
  7. It is her case that although her intention was to obtain a loan of KShs 20,000,000/= for purposes of construction, the respondent informed her that she had been accepted into their loan program for up to a limit of KShs 1.5 million.
  8. Her position is that she handed over to the respondent her title deed for the land in the guise of using it to appraise her for a loan of KShs 20,000,000/= for construction. She went to the respondent’s advocates and was made to sign some forms but at that time the appellant was not in a proper mental state to appreciate the terms thereof as she was either admitted or just from hospital being treated for hypertension. That she was not allowed to get someone to read for her the terms and the contents of the loan offer and she was made to hurriedly sign the same without comprehending the contents.
  9. On 20/9/2019 the respondent deposited KShs 292,473/= and that was the last amount of money she ever received from the respondent into her account.
  10. The respondent enticed her into asset financing whereby it financed her to acquire the two vehicles registration numbers KCU 348C and KCV 763P from Al-Rahim Trading Limited. KShs 900,000/= was paid directly to the seller as the cost of the vehicles, KShs 510,268/= went towards car valuation, loan application and credit evaluation fee, credit life insurance fee, witnessing fee, disbursement charge, tracking, insurance and legal fees. The respondent therefore advanced to her KShs 1,392,473/=.
  11. The two vehicles were however repossessed in January, 2020 without any information to her at a time when she was admitted to hospital, Efforts by her to find out the reasons for the repossession were futile and to-date she has never been informed and yet the proceeds of sale of the vehicles, if at all were not applied to offset the loan.
  12. Her pleas to the respondent to return her title deed for the land, to restructure the loan due to the effects of the Covid 19 pandemic and her illness were not heeded to by the respondent.
  13. On 30/9/2021 Purple Royal Auctioneers sent her a redemption notice for her property and that is when she came to learn that in fact it had been charged. She was required to pay KShs 3,037,798.11. She could not comprehend this figure as what she knew as a loan to her from the respondent was KShs 1,392,474/= out of which she had repaid KShs 677,570/= by 23/12/2019.
  14. The appellant denies that she was advanced any other loan by the respondent and contests the entries in her statement of account showing that she was advanced further loans of KShs 1,508,124/= on 6/6/2020, KShs 427,954.11 on 24/6/2020 and another entry of KShs 4,000/= in her statement of account. Upon requesting to be supplied with data on her loan from 21/8/2019 she was informed that the data no longer existed in the respondent’s system. This according to her is an indication that the respondent is out to defraud her.
  15. It is the appellant’s contention that the respondent is bound by the CBK rules on lending and at the time the loan was advanced to her the rules capped the interest rates at 4% p.a. on all loans.
  16. It is also her contention that the proceeds from the two vehicles, which she was never informed were sufficient to offset any outstanding loan she had with the respondent, if at all, but they were never applied for that purpose.
  17. She thus prayed for orders for:
    1. a permanent injunction to restrain the respondent from auctioning, alienating, transferring and/or selling Ruiru Kiu Block 10 (Mahira) 818.
    2. an order directing the respondent to discharge the said property forthwith.
    3. an order directing the respondent to release the appellant’s title deed for the property.
    4. an order directing the respondent to reimburse any extra money received from the appellant once accounts are reconciled.
    5. costs of the suit.
  18. She contested the whole loan arrangement and disbursement to her by the respondent on grounds that was made to sign some forms but at that time the appellant was not in a proper mental state to appreciate the terms thereof as she was either admitted to or just from hospital being treated for hypertension. That she was not allowed to get someone to read for her the terms and the contents of the loan offer and she was made to hurriedly sign the same without comprehending the contents.
  19. In a statement of defence dated 12/5 2022 the respondent denied the appellant’s claim in most parts. Its position is that the appellant was granted a loan of KShs 1,508,124/= through a letter of offer dated 16/10/2019. The same was voluntary and without coercion. On 15/11/2021 the appellant’s property Ruiru Kiu Block 10 (Mahira)/818 was charged as security together with motor vehicle registration numbers KCU 348C and KCV 763P together with business and household chattels. The respondent maintained that the appellant defaulted in the loan repayments and the respondent had a right to recover the loans due. That six demand notices or letters were served upon the appellant to clear her loan arrears.
  20. The respondent therefore prayed that the appellant was not entitled to any of the reliefs sought and her suit be dismissed.
  21. The suit was heard by the learned trial magistrate on 5/9/2022 where each party made available one witness who adopted their respective witness statements, testified and were cross-examined. The respondent stood down its witness to provide further documents and she concluded her testimony on 10/11/2022.
  22. Upon listening to the appellant and the respondent’s cases, the learned trial magistrate in a judgment dated 6/2/2023 dismissed the appellant’s suit holding that the loan of Kshs 1,508,214/= was outstanding and the charge created against Ruiru Kiu Block 10 (Mahira)/818 in favour of the respondent covered all outstanding amounts and due and that there was no evidence that there were payments made and not reflected in the loan statement.
  23. Dissatisfied with the decision the appellant filed this appeal through a memorandum of appeal dated 23/2/2023. She has listed 15 grounds of appeal. Ground No. 11 has to be struck out as it seems to have been lifted from another document without care being taken to ensure that it was applicable to this case. The other grounds that the honourable learned Magistrate erred in law and in fact:
    1. in taking into considerations matters irreverent (sic) to the issues in the suit before the court.
    2. in failing to appreciate that the Loan Account had a lot of discrepancies and/or abnormalities.
    3. in failing to consider the securities offered by the Respondent were sold and where never accounted for in the loan statements which should have persuaded her.
    4. in failing to find that the Appellants motor vehicles property was charged while it was duly-registered with a 3rd party by the Respondent meant that it was never owned by the Appellant before the alleged loan was dispatched.
    5. in failing to find that the Appellants suit property Ruiru Kiu Block 10(Mahira)/818 was charged even before the alleged loan was dispatched.
    6. when she failed to find and hold that the Appellant’s Charge on the suit property Ruiru Kiu Block 10(Mahira)/818 was already paid and cleared-discharged.
    7. by not appreciating that there was a defective charge against the suit property Ruiru Kiu Block 10(Mahira)/818.
    8. the Statutory Notices issued were invalid and unsupported by law (this sentence seems incomplete).
    9. in proceeding to decide on issues not before the court and relying in extraneous matters in dismissing the Appellants suit therefore not exercising her discretion judiciously.
    10. in failing to appreciate that the suit property being Ruiru Kiu Block 10(Mahira)/818 needed a further charge that was never registered.
    11. in failing to prove “collusion” as alleged between the 1st and 2nd appellants herein and relying on other extraneous circumstances (this ground is irrelevant to this appeal).
    12. in making a finding on the issue of a “continuing security” that was never pleaded which had not been proved to the required standard as required by the law.
    13. in stating the rule in Clayton’s case (Devaynes vs Noble (1816) applied in this case which wasn’t.
    14. in making a finding that Respondent frustrated the Appellant in redeeming her property by non-disclosure of loan material facts.
    15. in arriving at a decision that had no legal basis, and which amounted to a travesty of justice against the appellants. 
  24. The appeal was canvassed by way of written submissions filed by learned counsels for both parties and subsequently highlighted upon.
  25. The appellant’s initial submissions are on the duty of this court as a first appellate court to re-evaluate, reanalyze and re-consder the evidence tendered by the parties and make its own conclusions, bearing in mind that it did not see witnesses testifying and therefore give due allowance for that. She cites several cases among them the cases of Selle & another vs. Associated Motor Boat Co. Ltd & others [1968] E.A at page 126 and Peters vs. Sunday Post Limited (1958) E.A page 424 to underscore that duty. The other decisions cited on that issue reiterate the position as enunciated in the two cases above.
  26. I have considered the grounds of appeal raised in the memorandum of appeal, the record of appeal and the submissions by learned counsels for the parties. I consider and evaluate them in the analysis and determination below.
  27. The appellant listed the following issues for determination in her submissions:
    1. was the legal charge defective in the first instance?
    2. was the suit property legally charged within the law?
    3. was the second charge in the suit property legal and properly done?
    4. was there security of the other alleged assets – motor vehicles – properly done within the law?
  28. The respondents on their part identified two issues for determination as follows:
    1. whether there is a valid charge existing and outstanding debt.
    2. whether the respondent has a right to recover their dues owed by the appellant.
  29. From the issues listed above by the appellant, it would appear that even though the appellant was contending in her suit in the trial court that she was not aware of the loan of KShs 1,508,124/= and that according to her, she had serviced all her loans granted by the respondent, these do not appear in her issues for determination here. This means that she has no issue to be determined on whether or not she was granted the loan of KShs 1,508,124/=by the respondent. Indeed, that was not an issue before the trial court.
  30. One issue that is common to both the appellant and the respondent in this appeal is with the propriety of the securities offered for the said loans.
  31. The issues for determination are:
    1. whether the learned trial magistrate erred in law and in fact in finding that the appellant offered as security her property land parcel No. Ruiru Kiu Block10 (Mahiira)818 by way of a charge and two motor vehicles registration numbers KCU 348C and KCV 763P both Suzuki Altos as well as business and household goods by way of chattels mortgage a loan for a of KShs 1,508,124/= by the respondent on 16/10/2019.
    2. whether the trial magistrate erred in law and in fact in finding that the appellant was in default of repayment of the loan.
    3. whether the learned trial magistrate erred in law and in fact in finding that the respondent was entitled to realize the securities in order to recover the monies advanced to the appellant, if at all.
  32. There are issues that the court should dispose of immediately before going further because the same have been extensively argued upon by learned counsel for the appellant but they were neither pleaded or raised at all in the trial court or even raised in the grounds of appeal herein.
  33. Learned counsel for the appellant has made a submission that there was no spousal consent to creation of the charge on property land parcel No. Ruiru Kiu Block10 (Mahiira)818 and therefore there could be no proper legal charge over that property. That issue was not raised in the pleadings in the trial court or even the evidence of the appellant in her written statement or testimony in court. It is not even contained in the grounds of appeal. Even then not all property owned by a spouse in a marriage is matrimonial property as defined under section 6 of the Matrimonial Property Act, (Cap. 152) Laws of Kenya. Where property is not shown to be matrimonial property it will not require spousal consent to be used as security. The issue therefore cannot be raised at this point on appeal through submissions. The same applies to the submissions that no consent of the Land Control Board was obtained for the transaction. Again, that issue was not pleaded and it is not part of the grounds of appeal herein.
  34. The third issue raised in submissions but never pleaded or litigated at the trial court or made a ground of appeal is the violation of section 44 of the Banking Act commonly referred to as the in-duplum rule. It is apparent that the issue was raised for the first time in the appellant’s submissions.
  35. It is trite law that parties are bound by their pleadings and as such, the appellant having not pleaded the issues indicated above in the plaint the same cannot be raised on appeal and through submissions. This point was made clear in the case of Joshua Mungai Mulango & another v. Jeremiah Kiarie Mukoma (2015) eKLR where the Court of Appeal held thus:

“Parties are bound by their pleadings. The court is bound to determine a dispute on the basis of the pleadings filed by the parties and the evidence adduced on the basis of such pleadings. In an adversarial system such as ours, it is the parties who set the agenda for the trial by their pleadings. The need for this cannot be gainsaid. For the purpose of ensuring certainty and finality, a party cannot be allowed to resile from its pleadings without due amendment. Each party knows the case he has to meet and cannot be taken by surprise. The purpose and importance of the rules in this regard clearly is to ensure that litigation is conducted in a framework that will guarantee fair play without prolixity and needless escalation of litigation costs”

  1. Consequently, I consider the submissions on these issues to be surplusage and therefore not relevant to the determination of the issues herein.
  2. The next issue is the fact of the two motor vehicles registration numbers KCU 348C and KCV 763P both Suzuki Alto not being “owned” by the appellant allegedly because they were not registered in the name of the appellant but in the name of a third party. The appellant has not named who this alleged third party was. I have looked at the Motor Vehicle Copy of Records produced in evidenced as at 10/11/2021 and I do not see the third party in whose name the vehicles were registered at the time when they were owned by the appellant. The appellant appears in the records as a previous owner as several other people. Being previous owners like her does not mean that the vehicles were registered in their names at the same time as hers. She would need further information from NTSA to ascertain at what point these other persons were registered as owners of the vehicles. 
  3. In any case, the appellant in her pleadings and evidence in trial court said that she was advanced a loan totaling to KShs 1,392,473/= for the purchase of the two vehicles. She took possession and begun running her taxi business using them until they were repossessed a few months later. She cannot approbate and reprobate at the same time. I am satisfied that she purchased the two vehicles through asset financing from the respondent using the two vehicles as security and she was aware of the fact that they were previously registered in the names of other people.
  4. The appellant challenges the propriety of the charge created against her property land parcel No. Ruiru Kiu Block10 (Mahiira)818 on several reasons. First it is her contention that the sum of KShs 1,508,124/= was not wholly dispatched to the appellant. However, she concedes that she was advanced KShs 1,392,473/=.
  5. I have seen the letter of offer dated 16/10/2019 for a facility which was not to exceed the aggregate sum of KShs 1,508,124/= to be utilized to offset a loan and for asset financing. The appellant does not dispute the authenticity of that letter of offer even as she maintains that only a sum of KShs 1,392,473/= was advanced to her and was applied towards the asset financing of purchase of the two motor vehicles. She does not however mention the issue of offsetting another loan as contained in the letter of offer. It is apparent that the balance of the money for the loan went towards offsetting the loan outstanding at the time.
  6. The second issue raised by the appellant on the propriety of the charge is that it was registered on 12/9/2019, a month before the letter of offer dated 16/10/2019. I would not find any impropriety in that aspect seeing that the charge created on the property is a continuing security, there were prior advances of loans made to the appellant by the respondent and the debt has been acknowledged by the appellant who has been aware of the charge and the debt all along. The learned trial magistrate was correct in her so finding that section 82 of the Land Act was applicable to the transaction as the charge document explicitly provided that the charged property was offered as a continuing security. This issue was considered in the case of Equip Agencies Limited v I & M Bank Limited [2017] eKLR where it was held that:

“The continuing guarantee clause is a continuing obligation of the guarantor despite completion of payment of the sum guaranteed, the guarantee remains in full force and effect for so  long as the Borrower has any liability or obligation to the creditor under the charge and until all of those liabilities and obligations have been fully discharged thus this clause is inserted with the sole intention of enabling the security to cover all future advances and thus overcome the rule in Clayton’s Case (Devaynes vs Noble (1816).  Without this clause any future credits to the account would reduce the amount secured/guaranteed and any further advances (or debits) would be new debts and not covered.  Therefore, in the instant case, the Applicant can only be released upon settlement of all liabilities to which the guarantee relates.”

  1. Even though the court in the cited case above was considering the case of a guarantee whereas in the present case it is the owner of the property offering it herself as a security for advances of credit made to her by the respondent, I am satisfied that the principle applies equally as provided for under section 82(1) of the Land Act.
  2. One of the issues raised by the respondent for determination is whether the respondent has a right to recover their debts owed by the appellant. In order to show that the appellant had an outstanding debt the respondent wrote a first demand letter to the appellant dated 16/2/2020 in terms that “…Your loan of KShs 1,508,124/= obtained through offer letter dated 16th January 2020 is currently in arrears amounting to KShs 130,805/=….” The appellant was then required to regularize the same. This demand letter is faulty on the date of the letter of offer as the same was dated 19/10/2019 and not 20/1/2020. However, the amount of the loan advanced is correctly stated as 1,508,124/=. At this time the arrears in payment were indicated as KShs 130,805/=.
  3. A week later on 23/2/2020 a final reminder letter was sent to the appellant and in this case, the date the loan was offered was not indicated. The amount of the loan advanced is correctly stated as KShs 1,508,124/= but the arrears had now reduced to KShs 125,805/=.
  4. on 23/6/2020 the respondent sent another demand letter referenced as “First Demand Letter-Outstanding Loan Arrears” indicating that the account was in arrears of KShs 60,000/=. This letter did not make reference to the two earlier letters. The appellant was asked to settle the arrears in seven days.
  5. Both parties provided a common statement of account for the appellant dated printed on 13/10/2021 at 14.38 Hours. The first date of entry of transactions on this statement is 6/6/2020 and the last date is 15/12/2021 which I suppose was the date when the debt ought to have been cleared.
  6. I note that there is no statement of account for the period from the time when the loan was disbursed to 6/6/2020. This issue coupled with the discrepancies on the arrears allegedly outstanding as per the two demand letters shown above lead to the conclusion that it would have been difficult for the appellant to appreciate the arrears of loan outstanding and how the same had arisen and which she would have been expected to pay in order to bring the loan account to serviceable or active status.
  7. Be that as it may, it is a fact that the loan account was in arrears and the appellant has not offered evidence to rebut that position. Instead there is evidence of her various correspondences with the respondent requesting for further accommodation to settle her indebtedness. All that time, she never questioned or raised any issue with the respondent over the propriety of her security offered for the loan.
  8. The next demand letter by the respondent to the appellant is dated 1/7/2020 which indicates the total outstanding amount (not arrears in repayment) as KShs 2,007,944/=. The letter demands full settlement of the loan balance together with interest within 7 days failure to which inter alia the appellant indicates that it will proceed with the process of realizing the securities pledged.
  9. At this point the respondent had already instructed The Ale Auctioneers by letter dated 2/3/2020 to repossess and sale the two motor vehicles registration numbers KCU 348C and KCV 763P to recover a sum of KShs 1,798,459/=. There is no indication as to when the repossession and sale was done and the proceeds realized therefrom. Again, in the absence of a statement of account around this date to show how the proceeds of sale were applied, it is difficult to know when the sale took place.
  10. However, on 9/11/2020 there are some credit transactions in the statement of account. The same are not explained but it will not be far from correct to suppose that they were the proceeds of sale of the two vehicles since all along from 6/6/2020 the statement shows that the account was not being serviced. There is no indication that the appellant contested the sale of the vehicles due to default in repayment of the loan at all. This is so because on 19th November the appellant wrote to the Registrar of Motor Vehices NTSA on change of ownership of the vehicle registration number KCU 348 C from Mary Mugure Mwangi and Progressive Credit Limited indicating that the same had been sold by public auction/private treaty to Vinay Nilesh Kerai.
  11. On 27/1/2021 the respondent issued to the appellant a 3 months statutory notice under section 90(1) of the Land Act over legal charge over Ruiru Kiu Block 10 (Mahira)/818 indicating that her loan was in arrears of KShs 759,671.64 as at that date and the outstanding amount was KShs 2,321,236.11. They demanded payment of the arrears of KShs 759,671.64 within 3 months failure to which they would exercise their statutory power of sale. There is no indication that the appellant made any payment or contested the validity of the charge in any way. Therefore, her allegation that she was not aware that a charge had been created over her said property cannot be true and I find that it is only a way of seeking the court’s sympathy. The certificate of official search dated 28/9/2021 clearly shows that a charge was created over the land parcel No. Ruiru Kiu Block 10/818 registered in the name of Mary Mugure Mwangi in favour of Progressive Credit Limited.
  12. On 11/8/2021, the respondent issued the appellant with a notice to sale her charged property under section 96(2) of the Land Act. She was given 40 days within which to regularize her account by payment of the outstanding sum of KShs 2,781,416.11 as at that date failure to which the charged property would be sold. Again, there is no indication that any payment was made.
  13. I find no irregularity in any of the notices issued or the procedure adopted by the respondent to realize the security charged.
  14. Other than the issue of there being no statement of account for the period 16/10/2019 to 6/6/2020, I find no other irregularity with the appellant’s account with the respondent to warrant this court’s interference with the contract entered into by the parties. That irregularity is not material given that there is no dispute that indeed the account was not being serviced as required and that the appellant was in default of repayment of her loan to the respondent. I have not seen any unconscionable terms in the contract by the appellant and the respondent, largely constituted by the letter of offer which was duly signed by the appellant. The demand letters issued to the appellant clarified any issue that was lacking from the statement of account.
  15. I find no fault in the learned magistrate’s appraisal of the evidence tendered, her findings and conclusions thereon to warrant this court to interfere and the same are upheld. The respondent is free to exercise its rights under the contract as determined by the learned trial magistrate.
  16. Consequently, I find the appeal has no merit and it fails. The order of the learned trial magistrate is affirmed in its entirety.
  17. The respondent shall also get the costs of this appeal. The same will be assessed by the Deputy Registrar on the submissions made herein by learned counsels for the parties.
  18. Delivered, dated and signed at Kiambu on the Virtual Platform, Teams this 19th day of September 2024.


In the presence of:

Kibathi for the Appellant.

Munene for the Respondent.

Etropia Court Assistant.


    MARY MUGURE MWANGI VS PROGRESSIVE CREDIT LIMITED MARY MUGURE MWANGI VS PROGRESSIVE CREDIT LIMITED