(Being an appeal from the judgment and decree of Hon. E. O. Wambo - Principal Magistrate delivered on 16/1/2020 in Kerugoya Magistrates Court Civil Case No. 113 of 2016)
Background
1. This appeal arises from a suit by the respondent Michael Muriithi against the appellants, Mercy Wacuka Kangoro and Francis Mwangi Komu in the trial court in a plaint dated 8/4/2016. The respondent’s claim in the suit was for the appellants to repay him KShs 364,000/= together with interest of 40% said to have been advanced to them by the respondent through an agreement dated 10/5/2012. The appellants failed to repay the money on or before 31/12/2012 as per the agreement and the respondent filed suit to recover the same.
2. In a judgment dated 16/1/2020 the trial court allowed the claim but for a sum of KShs 267,000/= with interest at 40%. The trial court found that the respondent had failed to prove the claim for an additional KShs 97,000/= which was not part of the initial agreement as there was no other written agreement between the parties in relation thereto.
Grounds of appeal
3. The appellants were aggrieved by the judgment and now appeal against that decision in their memorandum dated 20/1/2020 raising the following grounds:
a. the learned trial magistrate erred in law and in fact in giving judgment for payment of KShs 267,000/= plus costs and interest of 40%.
b. the learned trial magistrate erred in law and in fact in addressing issues and not addressing the issue of the defendant to get evidence for fraud from investigating officers (DCI).
c. learned trial magistrate erred in law and in fact failing to direct the matter be investigated on grounds of fraud and failing to evaluate the defendant’s evidence.
d. learned trial magistrate erred in law and fact that consider the said advocate D. N. Gitonga was proper served with the order dated 18/6/2019 and served on 22/6/2016 affidavit sworn by Asiimwe Davis and dated 26/6/2019 where the said advocate refused to attend court because he knew it’s a fraud.
e. the plaintiff is not a registered entity to loan like bank.
f. judgment was against the weight of the evidence and fact.
4. I have reproduced the grounds verbatim because sometimes, like in this case, one cannot do better than that without losing the meaning of the statement.
Submissions
5. The appeal was disposed of by way of written submissions which were filed by both parties.
6. In their joint submissions, the appellant set out the issues for determination as follows:
a. whether there was breach of an agreement dated 10/5/2022.
b. whether the monies were given to the appellants by the respondent and if so, did he bring documents to prove so?
c. whether all the witnesses were supposed to come on board to give their testimonies concerning the matter.
d. whether the respondent presented the amended on new agreement of the said KShs 97,000/= that he claims to have given the appellants as added soft loan.
7. The respondent raised only one issue for determination, whether the appeal has merit?
8. The submissions by both parties are considered more extensively in the analysis following.
Duty of appellate court
9. This being a first appeal, the duty of the court is to re-evaluate, re-analyze and re-consider the evidence and draw its own conclusions, bearing in mind that it did not see witnesses testifying and therefore give due allowance for that. See for example Selle & another vs. Associated Motor Boat Co. Ltd & others [1968] E.A 123 where it was held as follows:
“An appeal to this Court from a trial by the High Court is by way of retrial and the principles upon which this Court acts in such an appeal are well settled. Briefly put they are that this Court must reconsider the evidence, evaluate it itself and draw its own conclusions though it should always bear in mind that it has neither seen nor heard the witnesses and should make due allowance in this respect. In particular, this court is not bound necessarily to follow the trial judge’s findings of fact if it appears either that he has 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 demeanor of a witness is inconsistent with the evidence in the case generally (Abdul Hameed Saif v Ali Mohamed Sholan (1955), 22 E.A.C.A. 270)”.
Case before the trial court
10. The respondent filed suit against the plaintiffs claiming KShs 364,000/= on grounds of breach contract. He averred that he had lent the two plaintiffs KShs 364,000/= upon a written agreement dated 10/5/2012 that they would repay the same on or before 31/12/2022 with interest at KShs 40%. That the first agreement was for KShs 267,000/= and subsequently at their request an additional KShs 97,000/= was made to the appellants. The appellants had failed to honour their part of the bargain to repay the money as promised leading the respondent to file the suit.
11. The appellants filed an amended joint statement of defence dated 28/9/2018 and pleaded that the respondent with intent to defraud acted in deceit and made the appellants execute the loan agreement and Gitonga D.N. Advocates attested in without seeing the money pass. They denied that they subsequently received KShs 97,000/= from the respondent. They set out the particulars of fraud against the respondent and averred that the respondent was not entitled to the amount claimed as he was the one who breached the loan agreement dated 10/5/2012.
12. The respondent and the appellants testified in the case the respondent giving his side of the story that he gave out the money to the appellants while the appellants gave their common story denying that they ever received the money. The parties adopted their respective witness statements filed in the suit. Each was cross-examined largely upon the lines of their pleadings.
13. The respondent’s evidence that the appellants are the ones who approached him and sought a friendly loan of KShs 267,000/=. He told them that it had to be put in writing and so on 10/5/2012 they all went to the offices of D.N. Gitonga advocate where an agreement for the purpose was prepared in the terms agreed upon as appearing in the agreement. They all signed and the advocate attested it.
14. The respondent stated that at various dates thereafter the appellants again approached him and sought more money from him as per the earlier agreement. He agreed and he lent them the money in bits making a total of KShs 97,000/= making a total of KShs 364,000/= to be rapid with an interest of 40% should the appellants breach the agreement.
15. The date of repayment was 31st December 2012 and the appellants failed to repay the money and due to the default, the interest thereon.
16. In cross-examination by the 1st appellant the respondent said that he gave them KShs 300,000/= in cash.
17. In cross-examination by the 2nd appellant, the respondent said he did not go to the appellants but they were the ones who went to him for the money. He said they first met at Gitonga’s place and that they went to his home with one Mose. He said that they were the ones who told him that they would take the money in Gitonga’s office. He said he gave them the money, they signed for it and left at around 1300 Hours. He said that the security of the loan was the land. He said that he did not know whether D.N. Gitonga went to court and that the appellants are the ones who used to pay the lawyer. He also said that the advocate told him that he no longer works in the office any more.
18. Further cross-examination by the 2nd appellant was for some reason adjourned and at the resumed hearing, the respondent said that his security for the loan was the lawyer. He denied that he said he would bring the money the next day as he had the money with him.
19. Each of the appellants made a written statement which he or she adopted as evidence in chief. The evidence therein is common. They both assert that the respondents claim and written statement was full of falsehoods. They have explained in detail how they came to have the agreement, the subject of the case made and signed between them and the respondent. It is their evidence that the respondent was the one who approached them with a proposal to finance them by paying the advocates fees in Civil case No. 76 of 2010 which they were facing in court as he had full knowledge of the case. The respondent took them to the office of D.N. Gitonga advocates and informed them that the advocates fees would be KShs 100,000/= and it would accrue and interest of KShs 27,000/= and a further advance of KShs 100,000/= which would accrue interest of KShs 40,000/=. They made the agreement past 5.00 p.m. and told the appellants and the advocate that he would remit the money the following morning which he never did. They later asked the advocate about it and he told them the respondent had paid him only KShs 20,000/=. They asked the respondent for the balance of the money including the legal fee for the advocate but he told them not to deal with the advocate. The advocate never attended to their case and they lost it any more as according to him, he was not competent.
20. The appellants were shocked when the respondent served them with the suit in this case. It is therefore their case that the respondent set out to defraud them of their money from the word go.
21. Each of the appellants also testified at the hearing and elaborated on their witness statements.
22. Upon considering the evidence and submissions of parties, the learned trial magistrate found that it may be that the appellants executed the agreement before they were advanced any money by the respondent, but was left wondering how they could have executed an agreement regarding money before seeing and/or receiving the money. He noted that the purported advocate before whom the parties executed the agreement would have assisted the court a great deal if he had testified. He found that in the absence of the advocate what remained was the word of the respondent against the appellants. He found that on a balance of probability the respondent had proved his claim for KShs 267,000/= but not the additional KShs 97,000/=. He thus entered judgment for the respondent for the sum of KShs 267,000/= together with interest at 40%.
Analysis
23. I have considered the grounds of appeal, the submissions by learned counsels for the parties and reviewed and reexamined the case before the trial court including the pleadings, the evidence and the judgment.
24. I will start by addressing first, the submissions by the appellants relying on the Contract Act of 1872 of India to point out that the same does not apply in Kenya today except to contracts made before 1st January 1961. The present agreement having been made on 10/5/2012, it follows that the Contract Act of 1872 of India does not apply thereto.
25. The other preliminary issue raised by the appellants is for this court to determine whether the respondent presented any new agreement to show that KShs 97,000/= that he claims to have given the appellants as added soft loan was proved. That issue does not fall for determination because the learned trial magistrate correctly found that there was no evidence to support it and so the claim for that sum was dismissed. There was no cross-appeal by the respondent against the dismissal.
26. There is no dispute that the appellants and the respondent made a written agreement for the respondent to loan some money to the appellants. The agreement dated 10/5/2012 indicates that the amount was KShs 267,000/= refundable on or before 31/12/2012 and in default that the borrowers would refund the principal amount together with interest of 40%.
27. The respondent’s case is based on the terms of the agreement and he asserts that he indeed gave out the money at the time of execution and that the appellants failed to honour the agreement to refund the money on or before 31/12/2012. That they were therefore in breach and contract and so the court should cause them to pay the principal sum with interest.
28. On their part, the appellants have sought to explain that agreement, beginning with how it came to be and then that the respondent did not fulfill his part of the bargain. That he only paid KShs 20,000/= towards the advocates fees which services the advocate never rendered and in fact they lost the case. The appellants put up a case of fraud against the respondent. That he never paid out all the money and that after signing the agreement he became evasive and even advised them to drop the advocate he had recommended for them alleging that he was incompetent. It is the appellant’s case that the respondent was in breach of the agreement. They have cited the case of Gatobu M’Ibuutu Karatho v Christopher Muriithi Kubai [2014] KEHC 7202 (KLR) where the case of Nakana Trading Co. Ltd v Coffee Marketing Board 1990 – 1994 EA 448, is cited. In that case, the High Court of Uganda at Kampala held that in determining the issue whether or not there was a breach of contract:
“In contract, a breach occurs when one or both parties fail to fulfill the obligations imposed by the terms since the contract between the parties was reduced into writing, the duty of the court is to look at the documents itself and determine whether it applies to existing facts. No evidence can be adduced to vary the terms of the contract if the language is plain and unambiguous. Support for the proposition can be found in Sarkar on Evidence at 849 where the author said.”
29. In this case, each of the parties alleges that the other breached the contract.
30. The learned trial magistrate found that the case rested on the word of the responded against that of the appellant as the advocate who prepared and attested the agreement and would have been of much assistance to the court in resolving the case had failed to attend court to testify.
31. It is true that as found by the learned trial magistrate that the case rests on the word of the respondent as against that of the appellants. It is difficult to understand how human beings can decide to take completely contradictory stances on an issue to which they both participated which then would seem so obvious and therefore uncontested yet they make it almost an unresolvable puzzle. Unresolvable because, as found by the learned trial magistrate, it is the word of one against the other and no more. Between the parties, there is obviously one who is telling the truth and yet the other is telling a plain lie even after swearing upon the Holy Book to tell the truth and nothing but the truth. Luckily for the court, it goes by the rule of the book to resolve such conundrums.
32. The appellants state that the court ought to have ensured that D.N. Gitonga advocate who prepared and attested the agreement attended court to confirm whether or not they had received the money from the respondent on the date they signed the agreement or at all. I have seen in the proceedings that the court summoned the advocate severally but he failed to attend. It is therefore not true as stated by the appellants that the trial court failed in its duty to summon him. In any case, even if he attended, it is not obvious that his evidence would have been favourable to the appellants and adverse to the respondent.
33. On who to believe between the parties, this court would defer to the findings of the trial court which had the advantage of hearing the witnesses testify, assess their demeanor and come to a conclusion of who between the was telling the truth. I am guided by the case of Makube v Nyamiro [1983] KLR 403, where the court stated that;
“… a Court of Appeal will not normally interfere with a finding of fact by the trial court unless it is based on no evidence, or on a misapprehension of the evidence, or the judge is shown demonstrably to have acted on wrong principles in reaching the findings he did.”
34. And in Kiruga v Kiruga & Another [1988] eKLR the court reiterated the principles above. Apaloo JA stating thus at pp 22:
“An appeal court cannot properly substitute its own factual finding for that of a trial court unless there is no evidence to support the finding or unless the judge can be said to be plainly wrong. In the oft-cited case of Peters vs. Sunday Post [1958] EA 424, this Court accepted the principle laid down by the House of Lords in Watt vs. Thomas [1947] 1 All ER 582”.
35. In the case referred to above of Watt v Thomas the principles to be applied by an appellate court when required to review a trial court’s findings of fact are discernible from the opinions of their Lordships as below. In general terms, Viscount Simon said:
“… an appellate court has, of course, jurisdiction to review the record of the evidence in order to determine whether the conclusion originally reached on that evidence should stand, but this jurisdiction has to be exercised with caution. If there is no evidence to support a particular conclusion (and this is really a question of law), the appellate court will not hesitate so to decide, but if the evidence as a whole can reasonably be regarded as justifying the conclusion arrived at the trial, and especially if that conclusion has been arrived at on conflicting testimony by a tribunal which saw and heard the witnesses, the appellate court will bear in mind that it has not enjoyed this opportunity and that the view of the trial judge as to where credibility lies is entitled to great weight. This is not to say that the judge of first instance can be treated as infallible in determining which side is telling the truth or is refraining from exaggeration. Like other tribunals, he may go wrong on a question of fact, but it is a cogent circumstance that a judge of first instance, when estimating the value of verbal testimony, has the advantage (which is denied to courts of appeal) of having the witnesses before him and observing the manner in which their evidence is given.”
36. On his part, Lord Thankerton expressing his opinion in cases where the appellate court is disposed to differ from the trial court’s findings had this to say at page 587:
“I do not find it necessary to review the many decisions of this House, for it seems to me that the principle embodied therein is a simple one, and may be stated thus:
I. Where a question of fact has been tried by a judge without a jury and there is no question of misdirection of himself by the judge, an appellate court which is disposed to come to a different conclusion on the printed evidence, should not do so unless it is satisfied that any advantage enjoyed by the trial judge by reason of having seen and heard the witnesses could not be sufficient to explain or justify the trial judge's conclusion.
II. The appellate court may take the view that, without having seen or heard the witnesses, it is not in a position to come to any satisfactory conclusion on the printed evidence.
III. The appellate court, either because the reasons given by the trial judge are not satisfactory, or because it unmistakably so appears from the evidence, may be satisfied that he has not taken proper advantage of his having seen and heard the witnesses, and the matter will then become at large for the appellate court…
It may be well to quote the passage from the opinion of Lord Shaw in Clarke v. Edinburgh & District Tramways Co., (15) (1919 S.C. (H.L.), 35, 37] which was quoted with approval by Lord Sankey, L.C., in Powell v. Streatham Manor Nursing Home (1) ([1935] A. C. 250). Lord Shaw said:
In my opinion, the duty of an appellate court in those circumstances is for each judge to put it to himself, as I now do in this case, the question, Am I - who sit here without those advantages, sometimes broad and sometimes subtle, which are the privilege of the judge who heard and tried the case - in a position, not having those privileges, to come to a clear conclusion that the judge who had them was plainly wrong? If I cannot be satisfied in my own mind that the judge with those privileges was plainly wrong, then it appears to me to be my duty to defer to his judgment.”
37. I am well guided by the principles enunciated in the cases above and find that the case of the respondent was to be believed as the learned trial magistrate did.
38. The appellants challenge the trial courts finding that the respondent gave the KShs 267,000/= to them. They put up a spirited case of fraud against the respondent. That he never paid out all the money and that after signing the agreement he became evasive and even advised them to drop the advocate he had recommended for them alleging that he was incompetent. However, the allegations of fraud against the respondent were not established. There was no evidence that the appellants took any step to report the alleged fraud for investigation. They did not even raise a counterclaim against the respondent in this case. I am left wondering whether this could have been a case of sour grapes, the appellants having lost in the case where the respondent had sought to assist them with the services of a counsel?
39. The position in law is that under section 107 of the Evidence Act (Cap. 80) Laws of Kenya, the burden of proof was upon the respondent to prove his case on a balance of probability as held in the case of Manyinsa v Lavington Security Limited [2023] KECA 1376 (KLR). However, under section 109 of the Evidence Act, the burden of proof to demonstrate fraud on the part of the respondent and that the full loan amount was not disbursed by the respondent to them rested with the appellants.
40. The position in law is that parties are bound by the terms of their agreement and the courts are not permitted to vary them where they are clear and unambiguous. The Court of Appeal in the case of Pius Kimaiyo Langat v Co-operative Bank of Kenya Limited (2017) eKLR rendered the position thus:
“We are alive to the hallowed legal maxim that it is not the business of courts to rewrite contracts between parties. They are bound by the terms of their contracts, unless coercion, fraud or undue influence are pleaded and proved.”
41. The Court of Appeal while considering how contracts should be construed in the case of Fidelity Commercial Bank Limited v Kenya Grange Vehicle Industries Limited [2017] eKLR held that:
“So that where the intention of parties has in fact been reduced to writing, under the so called parol evidence rule, it is generally not permissible to adduce extrinsic evidence, whether oral or written, either to show the intention, or to contradict, vary or add to the terms of the document, including implied terms. Courts adopt the objective theory of contract interpretation, and profess to have the overriding aim of giving effect to the expressed intentions of the parties when construing a contract. This is what sometimes is called the principle of four corners of an instrument, which insists that a document's meaning should be derived from the document itself, without reference to anything outside of the document (extrinsic evidence), such as the circumstances surrounding its writing or the history of the party or parties signing it.
In Prudential Assurance Company of Kenya Limited V Sukhwender Singh Jutney and Another, Civil Appeal No. 23 of 2005 the Court citing a passage in Odgers Construction of Deeds and Statutes (5th edn.) at p.106 emphasized that in construing the terms of a written contract;
“It is a familiar rule of law that no parol evidence is admissible to contradict, vary or alter the terms of the deed or any written instrument. The rule applies as well to deeds as to contracts in writing. Although the rule is expressed to relate to parol evidence, it does in fact apply to all forms of extrinsic evidence.”
The supporting rationale for this rule is that, since the contracting parties have reduced their agreement to a single and final writing, extrinsic evidence of past agreements or terms should not be considered when interpreting that written contract agreement, as the parties had consciously decided to ultimately leave them out of the contract. In other words, one may not use evidence made prior to the written contract to contradict the ultimate contract that has been reduced into writing.”
42. The Court went further to state that:
“The principle undergirding this rule flows from the notion of freedom of contract that is central to the law of contract; that it would be perverse and directly inconsistent with the intention of the parties after reaching a bargain and choosing to record that bargain in writing, for any court to resort to the prior history of exchanges and negotiations in order to resolve a dispute arising from the interpretation of the terms of the written bargain; and that the parties by consensus have themselves chosen not to give their prior negotiations contractual force and instead they have reached an agreement, and documented it.”
43. On when the court can look beyond the written agreement, the Court of Appeal went on to explain that:
“The rule of exclusion of negotiations prior to entry of a contract as well as the parole evidence rule are subject to a number of exceptions. For instance, evidence of surrounding circumstances will be admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible to more than one meaning, but not to contradict the language of the contract when it has a plain meaning. Extrinsic evidence of terms additional to those contained in the written document will be admitted if it is shown that the document was not intended to express the entire agreement between the parties. If the parties intend their contract to be partly oral and partly in writing, extrinsic evidence is admissible to prove the oral part of the agreement. In Gillepsie Bros. & Co. v Cheney, Eggar & Co. (1896) 2QB 59 Lord Russell C.J. expressed this as follows;
“…although when the parties arrive at a definite written contract the implication or presumption is very strong (sic) and such contract is intended to contain all the terms of their bargain, it is a presumption only, and it is open to either of the parties to allege that there was, in addition to what appears in the written agreement, an antecedent express stipulation not intended by the parties to be excluded, but intended to continue in force with the express written agreement.”
Today, it cannot therefore be argued that the mere production of a written agreement, however complete it may look, will as a matter of law render inadmissible evidence of other terms not included expressly or by reference in the document. In other words, it must first be determined that the terms of the parties’ agreement are wholly contained in the written document. Whether the parties did so agree or intend is a matter to be decided by the court upon consideration of all the relevant evidence. See Savings and Loan Kenya Limited V. Mayfair Holdings Limited Civil Appeal 152 of 2006 and Twiga Chemicals Industries Limited V. Allan Stephen Reynolds Civil Appeal No. 300 of 2006.”
44. In the present case, the terms of the agreement were that the appellants acknowledged receipt of KShs 267,000/= upon execution of the agreement. They executed the agreement knowing that once that was done, they were bound. In court, the appellants brought in oral evidence to explain several things about the agreement and especially how they had purportedly negotiated before writing and signing the contract.
45. First that the full amount of KShs 267,000/= was not being received by them wholesome as such but that KShs 100,000/= was to be paid by the respondent directly to the advocate D.N. Gitonga as fees for representing them in a case that they had pending in court and another KShs 100,000/= was payable to them directly. This breakdown of how the money was to be applied was not contained in the agreement. These explanations being meant to explain the agreement, they would be acceptable if they did not seek to vary the terms of the agreement. In this case, the explanations sought to vary the terms by the appellants assertion that first the money was not to be paid directly to the appellants at once but in two bits, one to the advocate and the other to the appellants, yet the agreement simply stated that the appellants acknowledged receipt of the money KShs 267,000/=.
46. Secondly on the rate of interest applicable, the appellants explain that the amount payable to the advocate was to attract interest of KShs 27,000/= and the amount directly to the appellants KShs 40,000/=. This would mean two things, first that the interest was applied differently on the split sums and not uniformly as per the agreement and secondly that it had already been factored in the amounts payable and not as provided in the agreement that it would be payable only on default to pay on or before 31/12/2012.
47. However, that is not what the plain words of the agreement provided. The agreement was that the appellants were receiving the entire sum and that the uniform interest of 40% would only be applicable on default. How could they not have noticed this when signing the agreement?
48. I have considered the evidence on record and I find that both parties produced and relied on the terms of the agreement and it is not disputed that the agreement was arrived at and signed by the parties herein. The terms of the agreement appear to me clear and unambiguous. I therefore find that this case does not fall in any of the exceptions to the parole evidence rule. If the appellants had any contrary or additional issues to be captured they could have addressed all their concerns in the said agreement. They failed to do so and for now they are estopped from trying to vary the signed agreement.
49. The appellants have tried to put up a fairly persuasive case of how the respondent could have defrauded them into believing that he was out to assist them in their cas
[...truncated]
Background
1. This appeal arises from a suit by the respondent Michael Muriithi against the appellants, Mercy Wacuka Kangoro and Francis Mwangi Komu in the trial court in a plaint dated 8/4/2016. The respondent’s claim in the suit was for the appellants to repay him KShs 364,000/= together with interest of 40% said to have been advanced to them by the respondent through an agreement dated 10/5/2012. The appellants failed to repay the money on or before 31/12/2012 as per the agreement and the respondent filed suit to recover the same.
2. In a judgment dated 16/1/2020 the trial court allowed the claim but for a sum of KShs 267,000/= with interest at 40%. The trial court found that the respondent had failed to prove the claim for an additional KShs 97,000/= which was not part of the initial agreement as there was no other written agreement between the parties in relation thereto.
Grounds of appeal
3. The appellants were aggrieved by the judgment and now appeal against that decision in their memorandum dated 20/1/2020 raising the following grounds:
a. the learned trial magistrate erred in law and in fact in giving judgment for payment of KShs 267,000/= plus costs and interest of 40%.
b. the learned trial magistrate erred in law and in fact in addressing issues and not addressing the issue of the defendant to get evidence for fraud from investigating officers (DCI).
c. learned trial magistrate erred in law and in fact failing to direct the matter be investigated on grounds of fraud and failing to evaluate the defendant’s evidence.
d. learned trial magistrate erred in law and fact that consider the said advocate D. N. Gitonga was proper served with the order dated 18/6/2019 and served on 22/6/2016 affidavit sworn by Asiimwe Davis and dated 26/6/2019 where the said advocate refused to attend court because he knew it’s a fraud.
e. the plaintiff is not a registered entity to loan like bank.
f. judgment was against the weight of the evidence and fact.
4. I have reproduced the grounds verbatim because sometimes, like in this case, one cannot do better than that without losing the meaning of the statement.
Submissions
5. The appeal was disposed of by way of written submissions which were filed by both parties.
6. In their joint submissions, the appellant set out the issues for determination as follows:
a. whether there was breach of an agreement dated 10/5/2022.
b. whether the monies were given to the appellants by the respondent and if so, did he bring documents to prove so?
c. whether all the witnesses were supposed to come on board to give their testimonies concerning the matter.
d. whether the respondent presented the amended on new agreement of the said KShs 97,000/= that he claims to have given the appellants as added soft loan.
7. The respondent raised only one issue for determination, whether the appeal has merit?
8. The submissions by both parties are considered more extensively in the analysis following.
Duty of appellate court
9. This being a first appeal, the duty of the court is to re-evaluate, re-analyze and re-consider the evidence and draw its own conclusions, bearing in mind that it did not see witnesses testifying and therefore give due allowance for that. See for example Selle & another vs. Associated Motor Boat Co. Ltd & others [1968] E.A 123 where it was held as follows:
“An appeal to this Court from a trial by the High Court is by way of retrial and the principles upon which this Court acts in such an appeal are well settled. Briefly put they are that this Court must reconsider the evidence, evaluate it itself and draw its own conclusions though it should always bear in mind that it has neither seen nor heard the witnesses and should make due allowance in this respect. In particular, this court is not bound necessarily to follow the trial judge’s findings of fact if it appears either that he has 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 demeanor of a witness is inconsistent with the evidence in the case generally (Abdul Hameed Saif v Ali Mohamed Sholan (1955), 22 E.A.C.A. 270)”.
Case before the trial court
10. The respondent filed suit against the plaintiffs claiming KShs 364,000/= on grounds of breach contract. He averred that he had lent the two plaintiffs KShs 364,000/= upon a written agreement dated 10/5/2012 that they would repay the same on or before 31/12/2022 with interest at KShs 40%. That the first agreement was for KShs 267,000/= and subsequently at their request an additional KShs 97,000/= was made to the appellants. The appellants had failed to honour their part of the bargain to repay the money as promised leading the respondent to file the suit.
11. The appellants filed an amended joint statement of defence dated 28/9/2018 and pleaded that the respondent with intent to defraud acted in deceit and made the appellants execute the loan agreement and Gitonga D.N. Advocates attested in without seeing the money pass. They denied that they subsequently received KShs 97,000/= from the respondent. They set out the particulars of fraud against the respondent and averred that the respondent was not entitled to the amount claimed as he was the one who breached the loan agreement dated 10/5/2012.
12. The respondent and the appellants testified in the case the respondent giving his side of the story that he gave out the money to the appellants while the appellants gave their common story denying that they ever received the money. The parties adopted their respective witness statements filed in the suit. Each was cross-examined largely upon the lines of their pleadings.
13. The respondent’s evidence that the appellants are the ones who approached him and sought a friendly loan of KShs 267,000/=. He told them that it had to be put in writing and so on 10/5/2012 they all went to the offices of D.N. Gitonga advocate where an agreement for the purpose was prepared in the terms agreed upon as appearing in the agreement. They all signed and the advocate attested it.
14. The respondent stated that at various dates thereafter the appellants again approached him and sought more money from him as per the earlier agreement. He agreed and he lent them the money in bits making a total of KShs 97,000/= making a total of KShs 364,000/= to be rapid with an interest of 40% should the appellants breach the agreement.
15. The date of repayment was 31st December 2012 and the appellants failed to repay the money and due to the default, the interest thereon.
16. In cross-examination by the 1st appellant the respondent said that he gave them KShs 300,000/= in cash.
17. In cross-examination by the 2nd appellant, the respondent said he did not go to the appellants but they were the ones who went to him for the money. He said they first met at Gitonga’s place and that they went to his home with one Mose. He said that they were the ones who told him that they would take the money in Gitonga’s office. He said he gave them the money, they signed for it and left at around 1300 Hours. He said that the security of the loan was the land. He said that he did not know whether D.N. Gitonga went to court and that the appellants are the ones who used to pay the lawyer. He also said that the advocate told him that he no longer works in the office any more.
18. Further cross-examination by the 2nd appellant was for some reason adjourned and at the resumed hearing, the respondent said that his security for the loan was the lawyer. He denied that he said he would bring the money the next day as he had the money with him.
19. Each of the appellants made a written statement which he or she adopted as evidence in chief. The evidence therein is common. They both assert that the respondents claim and written statement was full of falsehoods. They have explained in detail how they came to have the agreement, the subject of the case made and signed between them and the respondent. It is their evidence that the respondent was the one who approached them with a proposal to finance them by paying the advocates fees in Civil case No. 76 of 2010 which they were facing in court as he had full knowledge of the case. The respondent took them to the office of D.N. Gitonga advocates and informed them that the advocates fees would be KShs 100,000/= and it would accrue and interest of KShs 27,000/= and a further advance of KShs 100,000/= which would accrue interest of KShs 40,000/=. They made the agreement past 5.00 p.m. and told the appellants and the advocate that he would remit the money the following morning which he never did. They later asked the advocate about it and he told them the respondent had paid him only KShs 20,000/=. They asked the respondent for the balance of the money including the legal fee for the advocate but he told them not to deal with the advocate. The advocate never attended to their case and they lost it any more as according to him, he was not competent.
20. The appellants were shocked when the respondent served them with the suit in this case. It is therefore their case that the respondent set out to defraud them of their money from the word go.
21. Each of the appellants also testified at the hearing and elaborated on their witness statements.
22. Upon considering the evidence and submissions of parties, the learned trial magistrate found that it may be that the appellants executed the agreement before they were advanced any money by the respondent, but was left wondering how they could have executed an agreement regarding money before seeing and/or receiving the money. He noted that the purported advocate before whom the parties executed the agreement would have assisted the court a great deal if he had testified. He found that in the absence of the advocate what remained was the word of the respondent against the appellants. He found that on a balance of probability the respondent had proved his claim for KShs 267,000/= but not the additional KShs 97,000/=. He thus entered judgment for the respondent for the sum of KShs 267,000/= together with interest at 40%.
Analysis
23. I have considered the grounds of appeal, the submissions by learned counsels for the parties and reviewed and reexamined the case before the trial court including the pleadings, the evidence and the judgment.
24. I will start by addressing first, the submissions by the appellants relying on the Contract Act of 1872 of India to point out that the same does not apply in Kenya today except to contracts made before 1st January 1961. The present agreement having been made on 10/5/2012, it follows that the Contract Act of 1872 of India does not apply thereto.
25. The other preliminary issue raised by the appellants is for this court to determine whether the respondent presented any new agreement to show that KShs 97,000/= that he claims to have given the appellants as added soft loan was proved. That issue does not fall for determination because the learned trial magistrate correctly found that there was no evidence to support it and so the claim for that sum was dismissed. There was no cross-appeal by the respondent against the dismissal.
26. There is no dispute that the appellants and the respondent made a written agreement for the respondent to loan some money to the appellants. The agreement dated 10/5/2012 indicates that the amount was KShs 267,000/= refundable on or before 31/12/2012 and in default that the borrowers would refund the principal amount together with interest of 40%.
27. The respondent’s case is based on the terms of the agreement and he asserts that he indeed gave out the money at the time of execution and that the appellants failed to honour the agreement to refund the money on or before 31/12/2012. That they were therefore in breach and contract and so the court should cause them to pay the principal sum with interest.
28. On their part, the appellants have sought to explain that agreement, beginning with how it came to be and then that the respondent did not fulfill his part of the bargain. That he only paid KShs 20,000/= towards the advocates fees which services the advocate never rendered and in fact they lost the case. The appellants put up a case of fraud against the respondent. That he never paid out all the money and that after signing the agreement he became evasive and even advised them to drop the advocate he had recommended for them alleging that he was incompetent. It is the appellant’s case that the respondent was in breach of the agreement. They have cited the case of Gatobu M’Ibuutu Karatho v Christopher Muriithi Kubai [2014] KEHC 7202 (KLR) where the case of Nakana Trading Co. Ltd v Coffee Marketing Board 1990 – 1994 EA 448, is cited. In that case, the High Court of Uganda at Kampala held that in determining the issue whether or not there was a breach of contract:
“In contract, a breach occurs when one or both parties fail to fulfill the obligations imposed by the terms since the contract between the parties was reduced into writing, the duty of the court is to look at the documents itself and determine whether it applies to existing facts. No evidence can be adduced to vary the terms of the contract if the language is plain and unambiguous. Support for the proposition can be found in Sarkar on Evidence at 849 where the author said.”
29. In this case, each of the parties alleges that the other breached the contract.
30. The learned trial magistrate found that the case rested on the word of the responded against that of the appellant as the advocate who prepared and attested the agreement and would have been of much assistance to the court in resolving the case had failed to attend court to testify.
31. It is true that as found by the learned trial magistrate that the case rests on the word of the respondent as against that of the appellants. It is difficult to understand how human beings can decide to take completely contradictory stances on an issue to which they both participated which then would seem so obvious and therefore uncontested yet they make it almost an unresolvable puzzle. Unresolvable because, as found by the learned trial magistrate, it is the word of one against the other and no more. Between the parties, there is obviously one who is telling the truth and yet the other is telling a plain lie even after swearing upon the Holy Book to tell the truth and nothing but the truth. Luckily for the court, it goes by the rule of the book to resolve such conundrums.
32. The appellants state that the court ought to have ensured that D.N. Gitonga advocate who prepared and attested the agreement attended court to confirm whether or not they had received the money from the respondent on the date they signed the agreement or at all. I have seen in the proceedings that the court summoned the advocate severally but he failed to attend. It is therefore not true as stated by the appellants that the trial court failed in its duty to summon him. In any case, even if he attended, it is not obvious that his evidence would have been favourable to the appellants and adverse to the respondent.
33. On who to believe between the parties, this court would defer to the findings of the trial court which had the advantage of hearing the witnesses testify, assess their demeanor and come to a conclusion of who between the was telling the truth. I am guided by the case of Makube v Nyamiro [1983] KLR 403, where the court stated that;
“… a Court of Appeal will not normally interfere with a finding of fact by the trial court unless it is based on no evidence, or on a misapprehension of the evidence, or the judge is shown demonstrably to have acted on wrong principles in reaching the findings he did.”
34. And in Kiruga v Kiruga & Another [1988] eKLR the court reiterated the principles above. Apaloo JA stating thus at pp 22:
“An appeal court cannot properly substitute its own factual finding for that of a trial court unless there is no evidence to support the finding or unless the judge can be said to be plainly wrong. In the oft-cited case of Peters vs. Sunday Post [1958] EA 424, this Court accepted the principle laid down by the House of Lords in Watt vs. Thomas [1947] 1 All ER 582”.
35. In the case referred to above of Watt v Thomas the principles to be applied by an appellate court when required to review a trial court’s findings of fact are discernible from the opinions of their Lordships as below. In general terms, Viscount Simon said:
“… an appellate court has, of course, jurisdiction to review the record of the evidence in order to determine whether the conclusion originally reached on that evidence should stand, but this jurisdiction has to be exercised with caution. If there is no evidence to support a particular conclusion (and this is really a question of law), the appellate court will not hesitate so to decide, but if the evidence as a whole can reasonably be regarded as justifying the conclusion arrived at the trial, and especially if that conclusion has been arrived at on conflicting testimony by a tribunal which saw and heard the witnesses, the appellate court will bear in mind that it has not enjoyed this opportunity and that the view of the trial judge as to where credibility lies is entitled to great weight. This is not to say that the judge of first instance can be treated as infallible in determining which side is telling the truth or is refraining from exaggeration. Like other tribunals, he may go wrong on a question of fact, but it is a cogent circumstance that a judge of first instance, when estimating the value of verbal testimony, has the advantage (which is denied to courts of appeal) of having the witnesses before him and observing the manner in which their evidence is given.”
36. On his part, Lord Thankerton expressing his opinion in cases where the appellate court is disposed to differ from the trial court’s findings had this to say at page 587:
“I do not find it necessary to review the many decisions of this House, for it seems to me that the principle embodied therein is a simple one, and may be stated thus:
I. Where a question of fact has been tried by a judge without a jury and there is no question of misdirection of himself by the judge, an appellate court which is disposed to come to a different conclusion on the printed evidence, should not do so unless it is satisfied that any advantage enjoyed by the trial judge by reason of having seen and heard the witnesses could not be sufficient to explain or justify the trial judge's conclusion.
II. The appellate court may take the view that, without having seen or heard the witnesses, it is not in a position to come to any satisfactory conclusion on the printed evidence.
III. The appellate court, either because the reasons given by the trial judge are not satisfactory, or because it unmistakably so appears from the evidence, may be satisfied that he has not taken proper advantage of his having seen and heard the witnesses, and the matter will then become at large for the appellate court…
It may be well to quote the passage from the opinion of Lord Shaw in Clarke v. Edinburgh & District Tramways Co., (15) (1919 S.C. (H.L.), 35, 37] which was quoted with approval by Lord Sankey, L.C., in Powell v. Streatham Manor Nursing Home (1) ([1935] A. C. 250). Lord Shaw said:
In my opinion, the duty of an appellate court in those circumstances is for each judge to put it to himself, as I now do in this case, the question, Am I - who sit here without those advantages, sometimes broad and sometimes subtle, which are the privilege of the judge who heard and tried the case - in a position, not having those privileges, to come to a clear conclusion that the judge who had them was plainly wrong? If I cannot be satisfied in my own mind that the judge with those privileges was plainly wrong, then it appears to me to be my duty to defer to his judgment.”
37. I am well guided by the principles enunciated in the cases above and find that the case of the respondent was to be believed as the learned trial magistrate did.
38. The appellants challenge the trial courts finding that the respondent gave the KShs 267,000/= to them. They put up a spirited case of fraud against the respondent. That he never paid out all the money and that after signing the agreement he became evasive and even advised them to drop the advocate he had recommended for them alleging that he was incompetent. However, the allegations of fraud against the respondent were not established. There was no evidence that the appellants took any step to report the alleged fraud for investigation. They did not even raise a counterclaim against the respondent in this case. I am left wondering whether this could have been a case of sour grapes, the appellants having lost in the case where the respondent had sought to assist them with the services of a counsel?
39. The position in law is that under section 107 of the Evidence Act (Cap. 80) Laws of Kenya, the burden of proof was upon the respondent to prove his case on a balance of probability as held in the case of Manyinsa v Lavington Security Limited [2023] KECA 1376 (KLR). However, under section 109 of the Evidence Act, the burden of proof to demonstrate fraud on the part of the respondent and that the full loan amount was not disbursed by the respondent to them rested with the appellants.
40. The position in law is that parties are bound by the terms of their agreement and the courts are not permitted to vary them where they are clear and unambiguous. The Court of Appeal in the case of Pius Kimaiyo Langat v Co-operative Bank of Kenya Limited (2017) eKLR rendered the position thus:
“We are alive to the hallowed legal maxim that it is not the business of courts to rewrite contracts between parties. They are bound by the terms of their contracts, unless coercion, fraud or undue influence are pleaded and proved.”
41. The Court of Appeal while considering how contracts should be construed in the case of Fidelity Commercial Bank Limited v Kenya Grange Vehicle Industries Limited [2017] eKLR held that:
“So that where the intention of parties has in fact been reduced to writing, under the so called parol evidence rule, it is generally not permissible to adduce extrinsic evidence, whether oral or written, either to show the intention, or to contradict, vary or add to the terms of the document, including implied terms. Courts adopt the objective theory of contract interpretation, and profess to have the overriding aim of giving effect to the expressed intentions of the parties when construing a contract. This is what sometimes is called the principle of four corners of an instrument, which insists that a document's meaning should be derived from the document itself, without reference to anything outside of the document (extrinsic evidence), such as the circumstances surrounding its writing or the history of the party or parties signing it.
In Prudential Assurance Company of Kenya Limited V Sukhwender Singh Jutney and Another, Civil Appeal No. 23 of 2005 the Court citing a passage in Odgers Construction of Deeds and Statutes (5th edn.) at p.106 emphasized that in construing the terms of a written contract;
“It is a familiar rule of law that no parol evidence is admissible to contradict, vary or alter the terms of the deed or any written instrument. The rule applies as well to deeds as to contracts in writing. Although the rule is expressed to relate to parol evidence, it does in fact apply to all forms of extrinsic evidence.”
The supporting rationale for this rule is that, since the contracting parties have reduced their agreement to a single and final writing, extrinsic evidence of past agreements or terms should not be considered when interpreting that written contract agreement, as the parties had consciously decided to ultimately leave them out of the contract. In other words, one may not use evidence made prior to the written contract to contradict the ultimate contract that has been reduced into writing.”
42. The Court went further to state that:
“The principle undergirding this rule flows from the notion of freedom of contract that is central to the law of contract; that it would be perverse and directly inconsistent with the intention of the parties after reaching a bargain and choosing to record that bargain in writing, for any court to resort to the prior history of exchanges and negotiations in order to resolve a dispute arising from the interpretation of the terms of the written bargain; and that the parties by consensus have themselves chosen not to give their prior negotiations contractual force and instead they have reached an agreement, and documented it.”
43. On when the court can look beyond the written agreement, the Court of Appeal went on to explain that:
“The rule of exclusion of negotiations prior to entry of a contract as well as the parole evidence rule are subject to a number of exceptions. For instance, evidence of surrounding circumstances will be admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible to more than one meaning, but not to contradict the language of the contract when it has a plain meaning. Extrinsic evidence of terms additional to those contained in the written document will be admitted if it is shown that the document was not intended to express the entire agreement between the parties. If the parties intend their contract to be partly oral and partly in writing, extrinsic evidence is admissible to prove the oral part of the agreement. In Gillepsie Bros. & Co. v Cheney, Eggar & Co. (1896) 2QB 59 Lord Russell C.J. expressed this as follows;
“…although when the parties arrive at a definite written contract the implication or presumption is very strong (sic) and such contract is intended to contain all the terms of their bargain, it is a presumption only, and it is open to either of the parties to allege that there was, in addition to what appears in the written agreement, an antecedent express stipulation not intended by the parties to be excluded, but intended to continue in force with the express written agreement.”
Today, it cannot therefore be argued that the mere production of a written agreement, however complete it may look, will as a matter of law render inadmissible evidence of other terms not included expressly or by reference in the document. In other words, it must first be determined that the terms of the parties’ agreement are wholly contained in the written document. Whether the parties did so agree or intend is a matter to be decided by the court upon consideration of all the relevant evidence. See Savings and Loan Kenya Limited V. Mayfair Holdings Limited Civil Appeal 152 of 2006 and Twiga Chemicals Industries Limited V. Allan Stephen Reynolds Civil Appeal No. 300 of 2006.”
44. In the present case, the terms of the agreement were that the appellants acknowledged receipt of KShs 267,000/= upon execution of the agreement. They executed the agreement knowing that once that was done, they were bound. In court, the appellants brought in oral evidence to explain several things about the agreement and especially how they had purportedly negotiated before writing and signing the contract.
45. First that the full amount of KShs 267,000/= was not being received by them wholesome as such but that KShs 100,000/= was to be paid by the respondent directly to the advocate D.N. Gitonga as fees for representing them in a case that they had pending in court and another KShs 100,000/= was payable to them directly. This breakdown of how the money was to be applied was not contained in the agreement. These explanations being meant to explain the agreement, they would be acceptable if they did not seek to vary the terms of the agreement. In this case, the explanations sought to vary the terms by the appellants assertion that first the money was not to be paid directly to the appellants at once but in two bits, one to the advocate and the other to the appellants, yet the agreement simply stated that the appellants acknowledged receipt of the money KShs 267,000/=.
46. Secondly on the rate of interest applicable, the appellants explain that the amount payable to the advocate was to attract interest of KShs 27,000/= and the amount directly to the appellants KShs 40,000/=. This would mean two things, first that the interest was applied differently on the split sums and not uniformly as per the agreement and secondly that it had already been factored in the amounts payable and not as provided in the agreement that it would be payable only on default to pay on or before 31/12/2012.
47. However, that is not what the plain words of the agreement provided. The agreement was that the appellants were receiving the entire sum and that the uniform interest of 40% would only be applicable on default. How could they not have noticed this when signing the agreement?
48. I have considered the evidence on record and I find that both parties produced and relied on the terms of the agreement and it is not disputed that the agreement was arrived at and signed by the parties herein. The terms of the agreement appear to me clear and unambiguous. I therefore find that this case does not fall in any of the exceptions to the parole evidence rule. If the appellants had any contrary or additional issues to be captured they could have addressed all their concerns in the said agreement. They failed to do so and for now they are estopped from trying to vary the signed agreement.
49. The appellants have tried to put up a fairly persuasive case of how the respondent could have defrauded them into believing that he was out to assist them in their cas
[...truncated]