[2014] KEHC 4699 (KLR)
The court found that the plaintiff was entitled to the penalty interest rate of 32% per annum as stipulated in the loan agreement, since the 1st defendant was in arrears and the contractual provision was clear and not unreasonable. The court relied on the express terms of the letter of offer and relevant case law to...
Source-derived case information.
- Citation
- [2014] KEHC 4699 (KLR)
- Parties
- Plaintiff: Consolidated Bank (K) Ltd; Defendant: Thika District Tea Growers Sacco Society Limited; Defendant: Thomas Macharia Githinji Samuel; Defendant: Gichihi Mbogo; Defendant: John Mukoi Z. Kinyanjui
- Court
- High Court
- Court Station
- High Court at Nyeri
- Jurisdiction
- Kenya
- Case Number
- Civil Case 98 of 2010
- Procedural Posture
- Civil Case / Judgment After Formal Proof on Interest
- Outcome
- Judgment entered for the plaintiff against the 1st defendant for interest at 32% per annum from the date of filing suit to the date of judgment. No orders against the 2nd and 3rd defendants.
- Legal Topics
- Loan Facility Disputes, Default Interest Rates, Formal Proof Procedure, Service of Process
- Source Language
- en
Source-derived case record
Summary, issues, holding and outcome
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Parties
Consolidated Bank (K) Ltd
Plaintiff
Thika District Tea Growers Sacco Society Limited
Defendant
Thomas Macharia Githinji Samuel
Defendant
Gichihi Mbogo
Defendant
John Mukoi Z. Kinyanjui
Defendant
Procedural Posture
Civil Case / Judgment After Formal Proof on Interest
Legal Issues
- 1 Whether the plaintiff is entitled to interest at the penalty rate of 32% per annum as stipulated in the loan agreement.
- 2 Whether proper service of hearing notice was effected on the 2nd and 3rd defendants for the formal proof hearing.
Ratio Decidendi
The court found that the plaintiff was entitled to the penalty interest rate of 32% per annum as stipulated in the loan agreement, since the 1st defendant was in arrears and the contractual provision was clear and not unreasonable. The court relied on the express terms of the letter of offer and relevant case law to support the enforceability of the penalty rate. However, the court declined to make any orders against the 2nd and 3rd defendants due to irregular service of the hearing notice, as they had entered appearance through an advocate and were not properly served for the formal proof hearing.
Court Disposition
Judgment entered for the plaintiff against the 1st defendant for interest at 32% per annum from the date of filing suit to the date of judgment. No orders against the 2nd and 3rd defendants.
Orders
- Judgment for the plaintiff against the 1st defendant for interest at 32% per annum from the date of filing suit to the date of judgment.
- No orders made against the 2nd and 3rd defendants due to improper service of hearing notice.
Full Case Text
Judgment text and source record
25 paragraphs
REPUBLIC OF KENYA
IN THE HIGH COURT OF KENYA AT NYERI
CIVIL CASE NO. 98 OF 2010
CONSOLIDATED BANK (K) LTD.............................................PLAINTIFF
versus
THIKA DISTRICT TEA GROWERS SACCO
SOCIETY LIMITED & OTHERS …......................................DEFENDANTS
JUDGMENT
By a plaint dated 18th August 2010 the plaintiff sued the defendant in respect of a loan facility of Ksh. 4,000,000/- as working capital in March 2008. The terms of the said facility provided for an interest of 18% pa and 32 % pa in case of default.
The summons to enter appearance was served upon the defendant on 25th August 2010 and on 3rd May 2011 the plaintiff filed an amended plaint in which she added THOMAS MACHARIA GITHINJI SAMUEL, GICHIHI MBOGO and JOHN MUKOI Z. KINYANJUI as 2nd to 4th defendants in their capacity as chairman, treasurer and secretary of the 1st defendant's management committee.
On 6th September 2011 Ms DN MBURU & Co Advocates entered appearance for the 2nd and 3rd defendants and on 28th September 2011 the plaintiff requested for judgment in default which judgment was entered on the same date.
On 29th February 2012 the plaintiff bill of cost was taxed at Ksh. 188,033. 68. From the court record it seems that the initial judgment was entered on 30th September 2010 as prayed in the plaint but matter ordered to proceed for formal proof for interest. It is not clear to this court what the Deputy Registrar meant with the said order having entered judgment as prayed in the plaint.
This matter was therefore fixed before me for formal proof on the issue of interest when P.W.1 JULIUS GIKONYO testified on oath and produced documents including letter of guarantee, letter of offer, letter of undertaking, letter of set off, security and minutes of the executives management committee.
I must however point out that the 2nd and 3rd defendant having entered appearance through an advocate service of hearing notice upon them directly was irregular.
Interlocutory judgment having been entered against the defendant herein the only issue for the courts determination is whether the plaintiff is entitled to interest at the rate of 32% pa. In this I have before me the letter of offer wherein clause 3 in respect of interest and the charges provided for are interest rate of 18% pa on the authorized facility and a penalty rate of 32% pa for the amount in arrears.
As at the time when the plaintiff amended its plaint the 1st defendant was in arrears to the tune of Ksh. 5,388,245. 30 and by the provisions of clause 3 of the letter of offer the plaintiff is entitled to penalty rate of 32% pa for the amount in arrears and therefore no unreasonableness in awarding the same as was stated by WAKI JA in KENINDIA ASSURANCE Co LTD v ALPHA KNITS LTD & ANOTHER CIVIL APPEAL NO. 330 OF 2001.
In the final analysis I now enter judgment in favour of the plaintiff against the 1st defendant in respect of interest at the rate of 32% p.a from the date of filing suit to the date of this judgment.
Having found that the 2nd and 3rd defendants were not properly served with the hearing notice for the formal proof I decline to make any order against them.
Dated, signed and delivered at Nyeri this 30th day of May 2014.
J. WAKIAGA
JUDGE
judgment read in open court in the absence of the parties and their advocates.
J. WAKIAGA
JUDGE
30/5/2014