Background
1. This is an Appeal from the judgment delivered on 17th August 2023 by the lower court in Milimani CMCC No. 4710 of 2018, in which the court allowed the Respondent’s suit and awarded a sum of Kshs. 3,621,731.75cts.
2. The background of the dispute is that the Respondent filed a suit against the Appellant in the High Court. Subsequent to the filing of the suit, the defendant failed to enter appearance or to file a defence, and on 29th May 2013, an interlocutory judgement was entered in favour of the Respondent for the sum of Kshs.7,578,262.25 together with interest accruing at the prevailing interest rates from 1st February 2008 until payment in full.
3. Following entry of the interlocutory judgment, the Appellant filed an application to set aside the judgement and on 4th November 2013, the court (Kamau J) granted a stay of execution on condition that the Appellant pays the Respondent a sum of Kshs.7,758,262.25 within 30 days. The Appellant complied and paid the said amount.
4. On 24th January 2017, the High Court (Sewe J) directed that the matter proceed to formal proof. Thereafter, the matter was adjourned on many occasions to enable parties to negotiate. However, no settlement was reached by the parties. When the matter came up on 9th May 2018, the court transferred the suit to the Chief Magistrate’s Milimani Commercial Court for hearing and final disposal.
5. On 17th August 2023, Hon. H.M. Ng'ang'a, Principal Magistrate, who was seized of the matter in the Magistrates court (Milimani CMCC No. 4710 of 2018 ) delivered a judgement and found that the issue of the defendant’s liability on the principal amount advanced had already been settled upon entry of the interlocutory judgement of Kshs.7,578,262.25 and that the remaining issue for determination was whether the plaintiff is entitled to payment of the accrued interest as of 1st February 2008 until payment in full.
6. On the issue of interest, the magistrate, having considered the evidence and submissions adduced, found that the Respondent had proved its case on a balance of probability and awarded the sum of Kshs.3,621,737.75 together with interest accruing at the prevailing interest rates from the date of the judgment until payment in full.
7. Aggrieved by the lower court’s finding, the Appellant lodged an appeal to this Court vide his Memorandum of appeal dated 30th August 2023 on the following grounds: -
“1. THAT the Learned Magistrate erred in law by failing to appreciate that, as a matter of law, the Court, having issued a decree on 2nd July 2013 which decree was subsequently executed by the Respondent by way of Garnishee proceedings commenced by a Notice of Motion dated 16th September 2013, was functus officio and lacked the jurisdiction to engage in any factual inquiry in the matter.
2. THAT the Learned Magistrate erred in law by failing to appreciate that, as a matter of law, upon issuance of the decree on 2nd July 2013, the Court became functus officio and any substantive proceedings subsequent to the issuance of the decree by the
Court on 2nd July 2013 were a nullity.
3. THAT the Learned Magistrate erred in law in by failing to appreciate that, as a matter of law, the process of formal proof/ assessment of interest that took place on 9th July 2019, subsequent to the issuance of a decree by the court, was a nullity as the Court was functus officio
4. THAT the Learned Magistrate erred in law in proceeding to conduct a factual enquiry and thereafter delivery judgement on 17th August 2023 without jurisdiction.
5. THAT in the alternative and without prejudice to the above, the Learned Magistrate erred in law in awarding interest to the Respondent when the interest allegedly due to the Respondent had not been specifically pleaded by the Respondent in the Plaint dated 18th April 2013.
6. THAT the Learned Magistrate erred in law in failing to appreciate that Section 44 of the Banking Act required the Court to determine the exact amount of interest allegedly accrued and only thereafter award an amount, as interest, not exceeding the principal amount.
7. THAT the Learned Magistrate erred in law as there was no basis in law for invoking Section 44 of the Banking Act in the absence of an arithmetical determination of the interest allegedly accrued on the principal amount.
8. THAT the Learned Magistrate erred in law by arbitrarily awarding the Respondent the sum of Kshs. 3,621,737.75, as interest which amount did not arise from an arithmetical computation, by the Court, of the amount of interest accrued but merely represented the difference between the principal sum of Kshs. 5,600,000/- doubled, that is Kshs. 11,200,000/-, and the amount that the Appellant had paid the Respondent, which was Kshs. 7, 578,262.25
9. THAT the Learned Magistrate erred in law in failing to appreciate that the court lacked jurisdiction to entertain this matter as the exact interest on the principal loan facility, if calculated, exceeds the pecuniary jurisdiction of the Principal Magistrate Court as established by Section 7 (c) of the Magistrates Court Act. ”
8. Based on the foregoing, the Appellant prayed for the orders that:
“1. This Appeal be allowed.
2. An order declaring that in Principal Magistrate’s Court Civil Case No.4710 of 2018 between Prime Bank Limited - vs- Paul Otieno Nyamodi T/A V.A Nyamodi & Co. Advocates the Court became functus officio upon the issuance of a Decree on 2nd July 2013.
3. The judgement of the Principal Magistrate Court in Civil Case No.4710 0f 2018 between Prime Bank Limited — vs- Paul Otieno Nyamodi T / A V.A Nyamodi & Co. Advocates delivered on 17th August, 2023 be set aside and substituted with an order declaring the proceedings before the Magistrate Court of 19th July 2019 and the Judgement delivered on 17th August 2023 a nullity.
4. An order dismissing Civil Case No.4710 of 2018 between Prime Bank Limited — vs- Paul Otieno Nyamodi T/A V.A Nyamodi & Co. Advocates.
5. Costs of this Appeal be granted to the Appellant.”
The Cross-Appeal
9. The Respondent, on its part, filed a Cross-Appeal vide its memorandum of Cross-Appeal dated 15/9/2023. The Respondent contended that the impugned decision ought to be varied or reversed on the following grounds: -
“1. THAT the Learned Magistrate erred in law and in fact by failing to award interest at Court rates from the date of filing suit as the Appellant ought reasonably to have settled the Respondent's claim.
2. THAT the Learned trial Magistrate erred in law and in fact in his interpretation of the in Duplum Rule and thereby unlawfully denied the Respondent the right to the interest pleaded including payable after filing of the suit and before total default by the Appellant.
3. THAT the Learned trial Magistrate erred in law and in fact in deciding on issues of in Duplum Rule when the Appellant did not file any Defence, make any legal case and or tender any evidence leading to the conclusions by the Learned trial Magistrate.
4. THAT the Learned trial Magistrate erred in law in making an assumption and finding that the in Duplum Rule ousts the running of interest when a claim is pending before Court.”
10. Based on the foregoing the Respondent prayed for the orders that:-
“a) This Honourable Court be pleased to rectify the judgment of the Chief Magistrate's Court to specify and to reflect that the interest at Court rates on the award of Kshs. 3, 621, 737.75 cts begin to accrue from the date of filing the suit i.e. on 2/04/2013 until payment in full.
b) This Honourable Court be pleased to rectify the judgment of the Chief Magistrate's Court to specify and to reflect the rate of interest as presented in Court during the hearing to apply from 1st February, 2008, to 1st April, 2013.
c) The Appellant be ordered to pay costs of this Appeal.”
11. The Appeal was canvassed by way of written submissions. The Appellant filed his submissions dated 6th November 2024, whilst that of the Respondent is dated 14th March 2025.
Analysis and determination:
12. I have carefully considered the Appellant’s Record of Appeal dated 30/8/2023, the Supplementary Record of Appeal dated 6th November 2024 as well as the Appellant’s submissions herein in support thereof. I have equally judiciously considered the Respondent’s Record of Cross-Appeal and the submissions in support thereof. I opine that the issues that arise for this Court.
13. The duty of the first appellate court remains as set out in the Court of Appeal for Eastern Africa in Pandya v Republic [1957] EA 336 is as follows:-
“On a first appeal from a conviction by a Judge or magistrate sitting without a jury the appellant is entitled to have the appellate court’s own consideration and views of the evidence as a whole and its own decision thereon. It has the duty to rehear the case and reconsider the witnesses before the Judge or magistrate with such other material as it may have decided to admit. The appellate court must then make up its own mind not disregarding the judgment appealed from but carefully weighing and considering it. When the question arises which witness is to be believed rather than another and that question turns on manner and demeanor, the appellate court must be guided by the impression made on the Judge or magistrate who saw the witness but there may be other circumstances, quite apart from manner and demeanor which may show whether a statement is credible or not which may warrant a court different.”
14. I believe that from the grounds of Appeal in both the Appellant’s Memorandum of Appeal, as well as the Respondent’s cross Appeal, the issues that arise for this Court’s determination are: -
i. Whether the lower court was functus officio upon the issuance of the decree on 2/7/2013, and thereby lacked jurisdiction to entertain subsequent proceedings.
ii. Whether the lower court erred in awarding interest and in applying the in duplum rule in calculating the interest
Issue 1: Whether the trial court was functus officio upon the issuance of the decree on 2/7/2013, and thereby lacked jurisdiction to entertain subsequent proceedings .
15. On this issue, the Appellant submitted that the judgment in default having been entered in the High Court, the decree extracted and executed and the decretal amount settled by the Appellant herein, then the magistrate court was functus officio and that it lacked the ability to engage in a process akin to formal proof for assessment of interest.
16. In response, the Respondent submitted that Sewe J directed that the formal proof hearing be handled by the lower court as it had the jurisdiction to hear the matter and that the only outstanding issue for determination was the matter of interest accruing at the prevailing rates from 1/2/2008 only. Therefore, the Respondent asserted that the court rightfully exercised its mandate to hear and determine this matter contrary to the Appellant’s assertions.
17. As noted above, the Respondent instituted a suit against the Appellant in this court seeking the sum of Kshs.7,578,262.25 cts together with interest accruing at the prevailing interest rates from 1/2/2008 until payment in full.
18. The Appellant did not enter an Appearance, leading to default judgement to be entered against him on 29/5/2013. From the record, it is evident that the judgment was set aside but only in respect of the interest accruing on the principal sum. The Appellant settled the principal sum of Kshs.7,578,262.25 cts, which was not disputed. It therefore follows that the issue of interest was still alive and remained unresolved at the High Court. It is this aspect of the case that the High Court (Sewe J), taking into account the pecuniary jurisdiction, directed to be transferred to the lower court for trial and final disposition.
19. An examination of the Record of appeal reveals that Sewe J ordered the transfer of this matter to the Chief Magistrate, Milimani Commercial Courts for final determination. The directions were issued on 9/5/2018 as seen in the letter dated 15/5/2018 from the deputy registrar of this court to the Milimani Chief Magistrates Court produced on page 295 of the record of Appeal.
20. It is clear from the foregoing that the sole issue for determination was the matter of interest accruing as the principal had already been settled, and that this court transferred the file to the lower court to settle the remaining issue of interest.
21. The Court of Appeal in Telkom Kenya limited v John Ochanda (suing on his own behalf and on behalf of 996 former employees of Telkom Kenya limited) [2014] eKLR, court held -
“Functus officio is an enduring principle of law that prevents the re-opening of a matter before a court that rendered the final decision thereon.”
22. The Supreme Court of Kenya in the case of Raila Odinga & 2 Others v Independent Electoral & Boundaries Commission & 3 Others [2013] eKLR, cited with approval an excerpt from an article by Daniel Malan Pretorius entitled, “The Origins of the Functus Officio Doctrine, with Special Reference to its Application in Administrative Law” (2005) 122 SALJ 832 which reads: -
“The functus officio doctrine is one of the mechanisms by means of which the law gives expression to the principle of finality. According to this doctrine, a person who is vested with adjudicative or decision making powers may, as a general rule, exercise those powers only once in relation to the same matter...The [principle] is that once such a decision has been given, it is (subject to any right of Appeal to superior body or functionary) final and conclusive. Such a decision cannot be reviewed or varied by the decision maker.”
23. In the present case, the record clearly indicates that the decree issued on 2nd July 2013 was varied at the instance of the Appellant through a Notice of Motion application dated 9th July 2013, pursuant to which the Court set aside the portion of its judgment relating to the award of interest.
24. In any event, it is the considered view of this Court that the Appellant, having successfully applied for the setting aside of the interlocutory judgment dated 29th May 2013 and the consequent decree in so far as it related to interest, cannot now be heard to argue that the Court had become functus officio.
25. Consequently, it is the finding of this Court that the trial court had jurisdiction to deal with the matter since the issue of interest was still alive for determination. Furthermore, the Learned Magistrate was properly seized of the matter pursuant to an order issued by this Court (Sewe J), which transferred the case from the High Court to the lower court.
Issue 2: whether the lower court erred in awarding interest and in applying the in duplum rule in calculating the interest
26. The Appellant submitted that the Respondent, having failed to plead interest in its plaint as required by law in the instant matter, the learned magistrate lacked a legal basis upon which it could assess accrued interest on the principal loan amount and award the same to the Respondent.
27. In response, the Respondent supported the trial court’s judgment and submitted that the court was right in coming to the conclusion that the Respondent was entitled to the contractual accrual of interest.
28. I have looked at the lower court judgment and note that the magistrate applied the contractual interest rate of 15% plus the default penalty of 9% used the outstanding amount of Kshs.7,578,262.25, as of 22/4/2013, and found that the interest was well over the Kshs.5.5 million which meant that the amount owing was over Kshs.13,000,00 as at the time of filing the suit.
29. The magistrate then took into account the in duplum rule under section 44 of the Banking Act, which stipulates that interest accrued should not exceed the principal loan facility of Kshs.5,600,000/-. This meant that the principal plus interest should not exceed Kshs.11,200,000. If the already paid sum of Kshs.7,578,262.25 is subtracted, it would mean that the Appellant would only be liable to pay an amount of Kshs.3,621,737.75/-.
30. It is trite that parties are bound by their pleadings and that any evidence led by any party which does not support the pleadings, or which is at variance with the averments of the pleadings, are of no issue and must be disregarded. See The Supreme Court of Kenya in a ruling in Raila Amolo Odinga & Another –vs- IEBC & 2 Others (2017) e KLR cited by the Appellant herein, where the Court stated that:-
“In the absence of pleadings, evidence, if any, produced by the parties, cannot be considered. It is also a settled legal proposition that no party should be permitted to travel beyond its pleadings, and parties are bound to take all necessary and material facts in support of the case set up by them. Pleadings ensure that each side is fully alive to the questions that are likely to be raised, and they may have an opportunity of placing the relevant evidence before the court for its consideration. The issues arise only when a material proposition of fact or law is affirmed by one party and denied by the other party. Therefore, it is neither desirable nor permissible for a court to frame an issue not arising on the pleadings…...”
31. In the present case, while the trial court had jurisdiction to hear and determine the issue of interest, the learned magistrate erred in awarding interest at rates that were not pleaded. It is not disputed that in the Plaint dated 18th April 2013, the Respondent only prayed for “the sum of Kshs. 7,578,262.25 with interest accruing at the prevailing interest rates until full payment.” The Plaint was never amended, and there is no part of the Plaint in which the specific interest rates of 15% and 9% are mentioned, indicated, or pleaded. As such, the award of interest at those rates, in the view of this court, was without a proper legal foundation.
32. In the circumstances, and guided by the Supreme Court’s reasoning in Raila Amolo Odinga & Another (supra), this Court finds that the trial court erred in law by awarding interest at the rates of 15% (as the prevailing interest rate) and 9% (as the default interest rate), which were not specifically pleaded. I agree with the Appellant's submissions that a claim at a specific interest is in the nature of a special damages claim, which must be specifically pleaded and strictly proved. This principle was affirmed by the Court of Appeal in Hahn v. Singh, Civil Appeal No. 42 of 1983 [1985] KLR 716, where the Court held:-
“Special damages must not only be specifically claimed (pleaded) but also strictly proved …. for they are not the direct natural or probable consequence of the act complained of and may not be inferred from the act. The degree of certainty and particularity of proof required depends on the circumstances and nature of the acts themselves.”
33. It is not in dispute that in its Plaint dated 18th April 2013, the Respondent prayed for a sum of “Kshs. 7,578,262.25 with interest accruing at the prevailing interest rates until full payment.” However, no specific rate of interest was pleaded in the Plaint, nor was any rate mentioned in the body thereof. In the absence of a specifically pleaded contractual or agreed rate, the only rate of interest the trial court had discretion to award is that provided under Section 26 of the Civil Procedure Act, which stipulates as follows:-
“(1) Where and in so far as a decree is for the payment of money, the court may, in the decree, order interest at such rate as the court deems reasonable to be paid on the principal sum adjudged from the date of the suit to the date of the decree in addition to any interest adjudged on such principal sum for any period before the institution of the suit, with further interest at such rate as the court deems reasonable on the aggregate sum so adjudged from the date of the decree to the date of payment or to such earlier date as the court thinks fit.
(2) Where such a decree is silent with respect to the payment of further interest on such aggregate sum as aforesaid from the date of the decree to the date of payment or other earlier date, the court shall be deemed to have ordered interest at 6 per cent per annum.”
34. In view of the above, I set aside the trial court’s decision awarding interest at the rates of 15% and 9%. In its place, I substitute that decision with a judgment of this Court awarding interest at the court rate of 12% per annum, to be applied from the date of filing the suit to the date on which the principal sum of Kshs. 7,578,262.25, as demanded in the Plaint, was paid by the Appellant to the Respondent.
35. In light of the Court’s finding on the applicable rate of interest, it is the considered view of this Court that the remaining issues raised in the Appellant’s memorandum of appeal, as well as those raised in the Respondent’s memorandum of cross-appeals, are rendered moot and need not be determined.
Disposition
36. The upshot is that I find no merit in the Cross-Appeal and the same is hereby dismissed. The appeal is partially merited and is hereby allowed in the following terms:-
i.The trial court’s judgment dated 17th August 2023, awarding prevailing interest at the rates of 15% and a default interest rate of 9%, is hereby set aside and substituted with a judgment of this court awarding interest at the rate of 12%.
ii. The interest awarded in (i) above is to be applied from the date of filing the suit (1/2/2008) until the date on which the principal sum of Kshs. 7,578,262.25, as demanded in the Plaint, was paid by the Appellant to the Respondent.
iii. Each party to bear their own costs of this Appeal.
37. It is so ordered.
SIGNED, DATED, and DELIVERED IN VIRTUAL COURT THIS
19TH DAY OF JUNE 2025
ADO MOSES
JUDGE
In the presence of: -
C/A – Moses
………………………..for the Appellant
……………………....for the Respondent
1. This is an Appeal from the judgment delivered on 17th August 2023 by the lower court in Milimani CMCC No. 4710 of 2018, in which the court allowed the Respondent’s suit and awarded a sum of Kshs. 3,621,731.75cts.
2. The background of the dispute is that the Respondent filed a suit against the Appellant in the High Court. Subsequent to the filing of the suit, the defendant failed to enter appearance or to file a defence, and on 29th May 2013, an interlocutory judgement was entered in favour of the Respondent for the sum of Kshs.7,578,262.25 together with interest accruing at the prevailing interest rates from 1st February 2008 until payment in full.
3. Following entry of the interlocutory judgment, the Appellant filed an application to set aside the judgement and on 4th November 2013, the court (Kamau J) granted a stay of execution on condition that the Appellant pays the Respondent a sum of Kshs.7,758,262.25 within 30 days. The Appellant complied and paid the said amount.
4. On 24th January 2017, the High Court (Sewe J) directed that the matter proceed to formal proof. Thereafter, the matter was adjourned on many occasions to enable parties to negotiate. However, no settlement was reached by the parties. When the matter came up on 9th May 2018, the court transferred the suit to the Chief Magistrate’s Milimani Commercial Court for hearing and final disposal.
5. On 17th August 2023, Hon. H.M. Ng'ang'a, Principal Magistrate, who was seized of the matter in the Magistrates court (Milimani CMCC No. 4710 of 2018 ) delivered a judgement and found that the issue of the defendant’s liability on the principal amount advanced had already been settled upon entry of the interlocutory judgement of Kshs.7,578,262.25 and that the remaining issue for determination was whether the plaintiff is entitled to payment of the accrued interest as of 1st February 2008 until payment in full.
6. On the issue of interest, the magistrate, having considered the evidence and submissions adduced, found that the Respondent had proved its case on a balance of probability and awarded the sum of Kshs.3,621,737.75 together with interest accruing at the prevailing interest rates from the date of the judgment until payment in full.
7. Aggrieved by the lower court’s finding, the Appellant lodged an appeal to this Court vide his Memorandum of appeal dated 30th August 2023 on the following grounds: -
“1. THAT the Learned Magistrate erred in law by failing to appreciate that, as a matter of law, the Court, having issued a decree on 2nd July 2013 which decree was subsequently executed by the Respondent by way of Garnishee proceedings commenced by a Notice of Motion dated 16th September 2013, was functus officio and lacked the jurisdiction to engage in any factual inquiry in the matter.
2. THAT the Learned Magistrate erred in law by failing to appreciate that, as a matter of law, upon issuance of the decree on 2nd July 2013, the Court became functus officio and any substantive proceedings subsequent to the issuance of the decree by the
Court on 2nd July 2013 were a nullity.
3. THAT the Learned Magistrate erred in law in by failing to appreciate that, as a matter of law, the process of formal proof/ assessment of interest that took place on 9th July 2019, subsequent to the issuance of a decree by the court, was a nullity as the Court was functus officio
4. THAT the Learned Magistrate erred in law in proceeding to conduct a factual enquiry and thereafter delivery judgement on 17th August 2023 without jurisdiction.
5. THAT in the alternative and without prejudice to the above, the Learned Magistrate erred in law in awarding interest to the Respondent when the interest allegedly due to the Respondent had not been specifically pleaded by the Respondent in the Plaint dated 18th April 2013.
6. THAT the Learned Magistrate erred in law in failing to appreciate that Section 44 of the Banking Act required the Court to determine the exact amount of interest allegedly accrued and only thereafter award an amount, as interest, not exceeding the principal amount.
7. THAT the Learned Magistrate erred in law as there was no basis in law for invoking Section 44 of the Banking Act in the absence of an arithmetical determination of the interest allegedly accrued on the principal amount.
8. THAT the Learned Magistrate erred in law by arbitrarily awarding the Respondent the sum of Kshs. 3,621,737.75, as interest which amount did not arise from an arithmetical computation, by the Court, of the amount of interest accrued but merely represented the difference between the principal sum of Kshs. 5,600,000/- doubled, that is Kshs. 11,200,000/-, and the amount that the Appellant had paid the Respondent, which was Kshs. 7, 578,262.25
9. THAT the Learned Magistrate erred in law in failing to appreciate that the court lacked jurisdiction to entertain this matter as the exact interest on the principal loan facility, if calculated, exceeds the pecuniary jurisdiction of the Principal Magistrate Court as established by Section 7 (c) of the Magistrates Court Act. ”
8. Based on the foregoing, the Appellant prayed for the orders that:
“1. This Appeal be allowed.
2. An order declaring that in Principal Magistrate’s Court Civil Case No.4710 of 2018 between Prime Bank Limited - vs- Paul Otieno Nyamodi T/A V.A Nyamodi & Co. Advocates the Court became functus officio upon the issuance of a Decree on 2nd July 2013.
3. The judgement of the Principal Magistrate Court in Civil Case No.4710 0f 2018 between Prime Bank Limited — vs- Paul Otieno Nyamodi T / A V.A Nyamodi & Co. Advocates delivered on 17th August, 2023 be set aside and substituted with an order declaring the proceedings before the Magistrate Court of 19th July 2019 and the Judgement delivered on 17th August 2023 a nullity.
4. An order dismissing Civil Case No.4710 of 2018 between Prime Bank Limited — vs- Paul Otieno Nyamodi T/A V.A Nyamodi & Co. Advocates.
5. Costs of this Appeal be granted to the Appellant.”
The Cross-Appeal
9. The Respondent, on its part, filed a Cross-Appeal vide its memorandum of Cross-Appeal dated 15/9/2023. The Respondent contended that the impugned decision ought to be varied or reversed on the following grounds: -
“1. THAT the Learned Magistrate erred in law and in fact by failing to award interest at Court rates from the date of filing suit as the Appellant ought reasonably to have settled the Respondent's claim.
2. THAT the Learned trial Magistrate erred in law and in fact in his interpretation of the in Duplum Rule and thereby unlawfully denied the Respondent the right to the interest pleaded including payable after filing of the suit and before total default by the Appellant.
3. THAT the Learned trial Magistrate erred in law and in fact in deciding on issues of in Duplum Rule when the Appellant did not file any Defence, make any legal case and or tender any evidence leading to the conclusions by the Learned trial Magistrate.
4. THAT the Learned trial Magistrate erred in law in making an assumption and finding that the in Duplum Rule ousts the running of interest when a claim is pending before Court.”
10. Based on the foregoing the Respondent prayed for the orders that:-
“a) This Honourable Court be pleased to rectify the judgment of the Chief Magistrate's Court to specify and to reflect that the interest at Court rates on the award of Kshs. 3, 621, 737.75 cts begin to accrue from the date of filing the suit i.e. on 2/04/2013 until payment in full.
b) This Honourable Court be pleased to rectify the judgment of the Chief Magistrate's Court to specify and to reflect the rate of interest as presented in Court during the hearing to apply from 1st February, 2008, to 1st April, 2013.
c) The Appellant be ordered to pay costs of this Appeal.”
11. The Appeal was canvassed by way of written submissions. The Appellant filed his submissions dated 6th November 2024, whilst that of the Respondent is dated 14th March 2025.
Analysis and determination:
12. I have carefully considered the Appellant’s Record of Appeal dated 30/8/2023, the Supplementary Record of Appeal dated 6th November 2024 as well as the Appellant’s submissions herein in support thereof. I have equally judiciously considered the Respondent’s Record of Cross-Appeal and the submissions in support thereof. I opine that the issues that arise for this Court.
13. The duty of the first appellate court remains as set out in the Court of Appeal for Eastern Africa in Pandya v Republic [1957] EA 336 is as follows:-
“On a first appeal from a conviction by a Judge or magistrate sitting without a jury the appellant is entitled to have the appellate court’s own consideration and views of the evidence as a whole and its own decision thereon. It has the duty to rehear the case and reconsider the witnesses before the Judge or magistrate with such other material as it may have decided to admit. The appellate court must then make up its own mind not disregarding the judgment appealed from but carefully weighing and considering it. When the question arises which witness is to be believed rather than another and that question turns on manner and demeanor, the appellate court must be guided by the impression made on the Judge or magistrate who saw the witness but there may be other circumstances, quite apart from manner and demeanor which may show whether a statement is credible or not which may warrant a court different.”
14. I believe that from the grounds of Appeal in both the Appellant’s Memorandum of Appeal, as well as the Respondent’s cross Appeal, the issues that arise for this Court’s determination are: -
i. Whether the lower court was functus officio upon the issuance of the decree on 2/7/2013, and thereby lacked jurisdiction to entertain subsequent proceedings.
ii. Whether the lower court erred in awarding interest and in applying the in duplum rule in calculating the interest
Issue 1: Whether the trial court was functus officio upon the issuance of the decree on 2/7/2013, and thereby lacked jurisdiction to entertain subsequent proceedings .
15. On this issue, the Appellant submitted that the judgment in default having been entered in the High Court, the decree extracted and executed and the decretal amount settled by the Appellant herein, then the magistrate court was functus officio and that it lacked the ability to engage in a process akin to formal proof for assessment of interest.
16. In response, the Respondent submitted that Sewe J directed that the formal proof hearing be handled by the lower court as it had the jurisdiction to hear the matter and that the only outstanding issue for determination was the matter of interest accruing at the prevailing rates from 1/2/2008 only. Therefore, the Respondent asserted that the court rightfully exercised its mandate to hear and determine this matter contrary to the Appellant’s assertions.
17. As noted above, the Respondent instituted a suit against the Appellant in this court seeking the sum of Kshs.7,578,262.25 cts together with interest accruing at the prevailing interest rates from 1/2/2008 until payment in full.
18. The Appellant did not enter an Appearance, leading to default judgement to be entered against him on 29/5/2013. From the record, it is evident that the judgment was set aside but only in respect of the interest accruing on the principal sum. The Appellant settled the principal sum of Kshs.7,578,262.25 cts, which was not disputed. It therefore follows that the issue of interest was still alive and remained unresolved at the High Court. It is this aspect of the case that the High Court (Sewe J), taking into account the pecuniary jurisdiction, directed to be transferred to the lower court for trial and final disposition.
19. An examination of the Record of appeal reveals that Sewe J ordered the transfer of this matter to the Chief Magistrate, Milimani Commercial Courts for final determination. The directions were issued on 9/5/2018 as seen in the letter dated 15/5/2018 from the deputy registrar of this court to the Milimani Chief Magistrates Court produced on page 295 of the record of Appeal.
20. It is clear from the foregoing that the sole issue for determination was the matter of interest accruing as the principal had already been settled, and that this court transferred the file to the lower court to settle the remaining issue of interest.
21. The Court of Appeal in Telkom Kenya limited v John Ochanda (suing on his own behalf and on behalf of 996 former employees of Telkom Kenya limited) [2014] eKLR, court held -
“Functus officio is an enduring principle of law that prevents the re-opening of a matter before a court that rendered the final decision thereon.”
22. The Supreme Court of Kenya in the case of Raila Odinga & 2 Others v Independent Electoral & Boundaries Commission & 3 Others [2013] eKLR, cited with approval an excerpt from an article by Daniel Malan Pretorius entitled, “The Origins of the Functus Officio Doctrine, with Special Reference to its Application in Administrative Law” (2005) 122 SALJ 832 which reads: -
“The functus officio doctrine is one of the mechanisms by means of which the law gives expression to the principle of finality. According to this doctrine, a person who is vested with adjudicative or decision making powers may, as a general rule, exercise those powers only once in relation to the same matter...The [principle] is that once such a decision has been given, it is (subject to any right of Appeal to superior body or functionary) final and conclusive. Such a decision cannot be reviewed or varied by the decision maker.”
23. In the present case, the record clearly indicates that the decree issued on 2nd July 2013 was varied at the instance of the Appellant through a Notice of Motion application dated 9th July 2013, pursuant to which the Court set aside the portion of its judgment relating to the award of interest.
24. In any event, it is the considered view of this Court that the Appellant, having successfully applied for the setting aside of the interlocutory judgment dated 29th May 2013 and the consequent decree in so far as it related to interest, cannot now be heard to argue that the Court had become functus officio.
25. Consequently, it is the finding of this Court that the trial court had jurisdiction to deal with the matter since the issue of interest was still alive for determination. Furthermore, the Learned Magistrate was properly seized of the matter pursuant to an order issued by this Court (Sewe J), which transferred the case from the High Court to the lower court.
Issue 2: whether the lower court erred in awarding interest and in applying the in duplum rule in calculating the interest
26. The Appellant submitted that the Respondent, having failed to plead interest in its plaint as required by law in the instant matter, the learned magistrate lacked a legal basis upon which it could assess accrued interest on the principal loan amount and award the same to the Respondent.
27. In response, the Respondent supported the trial court’s judgment and submitted that the court was right in coming to the conclusion that the Respondent was entitled to the contractual accrual of interest.
28. I have looked at the lower court judgment and note that the magistrate applied the contractual interest rate of 15% plus the default penalty of 9% used the outstanding amount of Kshs.7,578,262.25, as of 22/4/2013, and found that the interest was well over the Kshs.5.5 million which meant that the amount owing was over Kshs.13,000,00 as at the time of filing the suit.
29. The magistrate then took into account the in duplum rule under section 44 of the Banking Act, which stipulates that interest accrued should not exceed the principal loan facility of Kshs.5,600,000/-. This meant that the principal plus interest should not exceed Kshs.11,200,000. If the already paid sum of Kshs.7,578,262.25 is subtracted, it would mean that the Appellant would only be liable to pay an amount of Kshs.3,621,737.75/-.
30. It is trite that parties are bound by their pleadings and that any evidence led by any party which does not support the pleadings, or which is at variance with the averments of the pleadings, are of no issue and must be disregarded. See The Supreme Court of Kenya in a ruling in Raila Amolo Odinga & Another –vs- IEBC & 2 Others (2017) e KLR cited by the Appellant herein, where the Court stated that:-
“In the absence of pleadings, evidence, if any, produced by the parties, cannot be considered. It is also a settled legal proposition that no party should be permitted to travel beyond its pleadings, and parties are bound to take all necessary and material facts in support of the case set up by them. Pleadings ensure that each side is fully alive to the questions that are likely to be raised, and they may have an opportunity of placing the relevant evidence before the court for its consideration. The issues arise only when a material proposition of fact or law is affirmed by one party and denied by the other party. Therefore, it is neither desirable nor permissible for a court to frame an issue not arising on the pleadings…...”
31. In the present case, while the trial court had jurisdiction to hear and determine the issue of interest, the learned magistrate erred in awarding interest at rates that were not pleaded. It is not disputed that in the Plaint dated 18th April 2013, the Respondent only prayed for “the sum of Kshs. 7,578,262.25 with interest accruing at the prevailing interest rates until full payment.” The Plaint was never amended, and there is no part of the Plaint in which the specific interest rates of 15% and 9% are mentioned, indicated, or pleaded. As such, the award of interest at those rates, in the view of this court, was without a proper legal foundation.
32. In the circumstances, and guided by the Supreme Court’s reasoning in Raila Amolo Odinga & Another (supra), this Court finds that the trial court erred in law by awarding interest at the rates of 15% (as the prevailing interest rate) and 9% (as the default interest rate), which were not specifically pleaded. I agree with the Appellant's submissions that a claim at a specific interest is in the nature of a special damages claim, which must be specifically pleaded and strictly proved. This principle was affirmed by the Court of Appeal in Hahn v. Singh, Civil Appeal No. 42 of 1983 [1985] KLR 716, where the Court held:-
“Special damages must not only be specifically claimed (pleaded) but also strictly proved …. for they are not the direct natural or probable consequence of the act complained of and may not be inferred from the act. The degree of certainty and particularity of proof required depends on the circumstances and nature of the acts themselves.”
33. It is not in dispute that in its Plaint dated 18th April 2013, the Respondent prayed for a sum of “Kshs. 7,578,262.25 with interest accruing at the prevailing interest rates until full payment.” However, no specific rate of interest was pleaded in the Plaint, nor was any rate mentioned in the body thereof. In the absence of a specifically pleaded contractual or agreed rate, the only rate of interest the trial court had discretion to award is that provided under Section 26 of the Civil Procedure Act, which stipulates as follows:-
“(1) Where and in so far as a decree is for the payment of money, the court may, in the decree, order interest at such rate as the court deems reasonable to be paid on the principal sum adjudged from the date of the suit to the date of the decree in addition to any interest adjudged on such principal sum for any period before the institution of the suit, with further interest at such rate as the court deems reasonable on the aggregate sum so adjudged from the date of the decree to the date of payment or to such earlier date as the court thinks fit.
(2) Where such a decree is silent with respect to the payment of further interest on such aggregate sum as aforesaid from the date of the decree to the date of payment or other earlier date, the court shall be deemed to have ordered interest at 6 per cent per annum.”
34. In view of the above, I set aside the trial court’s decision awarding interest at the rates of 15% and 9%. In its place, I substitute that decision with a judgment of this Court awarding interest at the court rate of 12% per annum, to be applied from the date of filing the suit to the date on which the principal sum of Kshs. 7,578,262.25, as demanded in the Plaint, was paid by the Appellant to the Respondent.
35. In light of the Court’s finding on the applicable rate of interest, it is the considered view of this Court that the remaining issues raised in the Appellant’s memorandum of appeal, as well as those raised in the Respondent’s memorandum of cross-appeals, are rendered moot and need not be determined.
Disposition
36. The upshot is that I find no merit in the Cross-Appeal and the same is hereby dismissed. The appeal is partially merited and is hereby allowed in the following terms:-
i.The trial court’s judgment dated 17th August 2023, awarding prevailing interest at the rates of 15% and a default interest rate of 9%, is hereby set aside and substituted with a judgment of this court awarding interest at the rate of 12%.
ii. The interest awarded in (i) above is to be applied from the date of filing the suit (1/2/2008) until the date on which the principal sum of Kshs. 7,578,262.25, as demanded in the Plaint, was paid by the Appellant to the Respondent.
iii. Each party to bear their own costs of this Appeal.
37. It is so ordered.
SIGNED, DATED, and DELIVERED IN VIRTUAL COURT THIS
19TH DAY OF JUNE 2025
ADO MOSES
JUDGE
In the presence of: -
C/A – Moses
………………………..for the Appellant
……………………....for the Respondent