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JudgmentTiny Bees Credit Kenya Limited VS Rama Salim Fundi9 min read

Tiny Bees Credit Kenya Limited VS Rama Salim Fundi

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

  1. This appeal arises from a claim by the respondent against the appellant in a statement of claim dated 12/9/2022. The respondent’s claim was that the appellant financed the respondent to purchase a motor vehicle. The respondent repaid the loan in three months and yet the appellant was still claiming more money from the respondent. The respondent therefore prayed for a declaration that he had paid off the loan and did not owe the appellant any money.
  2. The appellant filed a response to the claim dated 7/11/2022 and averred that the respondent owed the appellant KShs 271,093/= out of the loan advanced to him. The appellant counter-claimed for this sum. 
  3. The case proceeded by way of documents filed, witness statements and submissions filed by parties as provided for under section 30 of the SCCA.
  4. The learned trial Adjudicator having considered the claim and counter-claim allowed the claim and dismissed the counterclaim and awarded costs to the respondent.
  5. Arising out of that decision, the appellant filed the present appeal through a memorandum of appeal dated 15/2/2023 which contains some 6 grounds of appeal as follows:
    1. the learned trial magistrate erred in law and in fact by finding that the respondent was not liable to pay for the vehicle comprehensive insurance already paid by the appellant under asset financing.
    2. the learned trial magistrate erred in law and in fact in dismissing the appellant’s counterclaim whereas the respondent has not met the terms and conditions of the early settlement clause in the loan agreement between the parties.
    3. the learned trial magistrate erred in law and in fact in finding that the claimant has fully repaid the loan between the parties.
    4. the learned trial magistrate erred in law by disregarding the account statements produced by the appellant in support of its case.
    5. the learned trial magistrate erred by relying on extraneous matters which never formed part of the pleadings filed in court.
    6. All in all the learned magistrate misdirected herself on matters of both law and fact as to occasion a miscarriage of justice against the appellant.
  6. The appeal was canvassed by way of written submissions filed by both parties. I have considered the grounds of appeal raised in the memorandum of appeal, the record of appeal and the submissions by learned counsel for the parties.
  7. As can be seen most of those grounds bear the standard phrase of “…the learned magistrate erred in law and in fact…” To begin with, claims before the SCC are not heard by a magistrate but by an Adjudicator as per section 5(a) of the SCCA (Cap. 10A) Laws of Kenya, the fact that an Adjudicator is a magistrate notwithstanding. Therefore, the jurisdiction to preside over a SCC is conferred by statute upon an Adjudicator and not a magistrate.
  8. Secondly, appeals from the SCC to this court are only on points of law only as provided for under section 38 of the SCC Act and not on issues of fact as put forth by the appellant herein. Therefore, use of the standard byline of “… erred on matters of law and fact…” can only mean that either the learned counsel for the appellant has not fully acquainted herself with the workings of the SCCA or did not take time to go through the memorandum of appeal once prepared by her juniors. I believe she is now well advised.
  9. Learned counsel may wish to refer to and be guided in drafting the grounds of appeal from the SCC on points of law only by the wise counsel of their Lordships of Appeal in the case of Independent Electoral and Boundaries Commission & another v Stephen Mutinda Mule & 3 others [2014] eKLR that:

“Those points in an appeal of the kind before us, being from an election court’s decision, are further circumscribed by Section 85A of the Elections Act which limits appeals to the Court of Appeal to matters of law only. It is therefore quite strange and improper that each of the seventeen grounds, without exception, commences with a standard expression “the judge erred in fact and law” or “the learned Judge erred in law and in fact.” Clearly the drafters of the memorandum did not have the legal provision in active contemplation. Had they done so, they would have found that by invoking factual errors, they were inviting jurisdictional objections to their entire appeal.”

  1. This court can therefore only proceed on points of law, if any, brought out in the memorandum of appeal. This court is guided by the Court of Appeal in decision in M’Riungu v. Republic [1983] KLR 455, on how to proceed to determine an appeal on points of law only, thus:

“where a right of appeal is confined to question of law, an appellate court has loyalty to accept the findings of fact of the lower court(s) and resist the temptation to treat findings of fact as holdings of fact and law and it should not interfere with the decision of the trial court or the first appellate court unless it is apparent that on evidence, no reasonable tribunal could have reached that conclusion, which would be the same as holding that the decision is bad in law”.

  1. The appellate court may however interfere with the findings of the trial court where it is demonstrated that there was no evidence at all upon which such findings were based or that the evidence relied upon was of such a nature that no reasonable tribunal, properly addressing its mind on it, could have made such findings as has been held in numerous decisions. (see for instance Bashir Haji Abdullahi v Adan Mohammed Nooru & 3 others [2014] eKLR.
  2. In this case, the learned Adjudicator found that it was not clear what the basis for insurance premium of KShs 58,593/= was. That finding is not correct because Clause 6 on disbursement provided that KShs 52,315.23 was disbursed to Cintani Insurance Agency to cater for insurance premium funding. It means that the respondent’s insurance premiums were funded by the Lender. This makes it a part of the loan to be repaid within the loan period of 24 months or any shorter period that the Borrower chose to repay the loan. However, from the Lender’s document on early settlement, insurance premium is captured as KShs 58,593/=meaning it was being calculated separately and was not loaded on the KShs 600,000/= so as to attract the interest payable thereon. The argument by the Borrower that he was informed that the insurance premiums would not attract any interest is without substance because this assettion is not contained in the contract. Secondly, unless otherwise expressly stated in the terms of the contract there is no commercial loan that would not attract interest. That is the normal business practice between lenders and borrowers.
  3. In this case, the initial disbursement for the insurance premiums was KShs 52,315.23. The amount repayable, according to the early settlement schedule provided by the Lender was KShs 58,593.00. This would make the interest charged KShs 6,277.77. There is no indication that the insurance premiums kept accruing interest as submitted by learned counsel for the Borrower. It is then clear that in making the payment of KShs 60,000/= in the 4th month, the Borrower was clearing this sum. The finding by the learned Adjudicator that the Lender should have produced the insurance policy taken out is not correct. Once the Lender had directly paid the insurance premiums to the insurance company, the same would be issued in the name of the vehicle owner, the Borrower. It was upon him to collect the insurance policy. There is no dispute that the insurance premiums were not paid or that the car was not covered for the two years the loan was to run. In making that payment without question, the Borrower conceded that he was obliged to make it and consequently that the vehicle was covered for the period.
  4. According to the Borrower, he repaid the loan amount (principal plus accrued interest) KShs 700,000/= within 3 months and then the insurance premiums of KShs 60,000/= in the fourth month. Assuming that his calculation of the loan repayable in 3 months was correct (and that is not correct because I will move to it shortly) then he had an outstanding loan of KShs 58,593/= being the insurance premiums, to pay. Since this amount had not been settled within the 3 months this would disentitle him from enjoying the 1st option in the clause on early settlement of 3 months early repayment, that is, 8% of the principal for the loan period. So that in case he was still desirous to benefit from the early settlement clause his calculation of the loan due would move to the second option of the early settlement clause which was pay interest for the loan period (as at that time) and 50% of the interest of the remainder of the period. These are clauses in the contract which bind the parties. Perhaps a proper explanation was not made to the Borrower by the Lender.
  5. In this case therefore, the Borrower did not have the benefit of the 3 months early settlement clause. He could therefore only calculate the loan due to early settlement using the second option.
  6. Now going back to the early settlement within 3 months as contended by the Borrower, his calculation was that he ought to and did pay KShs 760,000/= in settlement of the loan. The Borrower has not in his witness statement explained how he arrived at this figure. However, in the submissions, his advocate says that KShs 700,000/= was paid in the first three months to settle the loan and KShs 60,000/= paid in the 4th month as insurance premiums. I have found above that this kind of proceeding was faulty. The correct calculation is provided by the Lender in the schedule of early retirement settlement for 3 months and 4 months. I find this calculation to be rather obvious and clear. The only item I find not explained in that schedule and which is not contained in the contract is Log Book charges. Unless expressly stated, which I have not seen, these charges, if at all there were, should be contained under paragraph 6 on disbursement where KShs 43,200/= was deducted from the loan for legal formalities including perfection and registration of securities and the balance paid to Al Fadil Motors Ltd. I am persuaded to follow the decision of the High Court in Isiye & 2 others v African Banking Corporation Ltd (Commercial Case 2 of 2018) [2024] KEHC 158 (KLR) (16 January 2024) (Judgment) where the Court in considering this issue said:

“…if a Bank seeks to impose certain charges or interest, then it must make that intention clear in the contract it enters into with the customer. There must be clarity on what the charges and interest are and how they are to be imposed.”

  1. The sum of KShs 3,000/= should not therefore be included in the calculations of the amount due.
  2. Now, going by the correct calculation of the outstanding loan as per the schedule, it follows that upon payment of KShs 700,000/= after three months, the Borrower still had a balance to pay. The Lender says and I agree this balance was KShs 110,593.00 which he should have paid within the same three months if he wished to benefit from the 3 months early settlement option. He did not and therefore the calculation of the outstanding loan reverted to the normal interest of 2.5% as per the second table of the schedule provided by the Borrower. The loan not having been cleared in the 4th month, again that table became inapplicable. In order to clear the loan early, the Borrower had to calculate the outstanding loan using the second option of the early settlement clause.
  3. The consequences of it are that after the 3rd months when he stopped repaying the loan, the Borrower had an outstanding loan to repay the Lender as per the normal terms of the agreement and not on early settlement. That loan continued to attract interest as per the terms of the loan agreement. This is what raised the counter-claim made against him by the Lender.
  4. I therefore find that on the evidence tendered, no reasonable court properly exercising its mind would arrive at the same findings as did the learned Adjudicator. She therefore erred on points of law and so this court has a right to interfere with her findings and conclusions on the evidence tendered.
  5. Consequently, I find that the appeal has merit and I allow the same. The judgment of the learned Adjudicator is hereby set aside and substituted with a judgment dismissing the case by the respondent against the appellant and entering judgment for the appellant against the respondent on the counterclaim together with interest and costs.
  6. The appellant gets the costs of the appeal assessed at KShs 20,000/=.

Dated, Signed and Delivered at Kiambu this 19th day of September 2024.


    Tiny Bees Credit Kenya Limited VS Rama Salim Fundi Tiny Bees Credit Kenya Limited VS Rama Salim Fundi