https://new.kenyalaw.org/akn/ke/judgment/scc/2026/22

Factorhouse Ltd v Mwaura (Commercial Case E84053 of 2025) [2026] SCC 22 (KLR) (22 May 2026) (Judgment) Neutral citation: [2026] SCC 22 (KLR) Republic of Kenya In the Milimani Small Claims Court Commercial Case E84053 of 2025 GW Kiamah, RM May 22, 2026 Between Factorhouse Limited Claimant and Ian Kamau Mwaura Respondent Judgment 1.The claimant instituted this suit via a statement of claim dated 23/5/2025 seeking judgment against the claimant for Kshs. 988,335/= on the basis that on 24/12/2024, he issued the respondent a loan of Kshs. 400,000/= and the same was repayable on 3/2/2025 with an interest rate of 17% per month and default penalty rate of Kshs. 25% per month. The claimant also claimed debt collection costs of Kshs. 25,000/=, bounced cheque charges of 5,000/= and administration fee of Kshs. 1,200/=. 2.The respondents filed a response dated 15/12/2025 and pleaded that there needed a reconciliation of the loan account to find the correct outstanding balance. 3.The claim proceeded under section 30 of the Act and the parties filed submissions which I have seen and considered alongside the pleadings and evidence before court. The main issue for determination is whether the claimant has proven its case as against the respondent. The standard of proof in civil claims is on a balance of probabilities. See the Court of Appeal in Mumbi M'Nabea v David M.Wachira [2016] eKLR. 4.Sections 107, 108 and 109 of the Evidence Act, Chapter 80 of the Laws of Kenya places the burden of proof of a fact on the person who wishes the court to believe in the existence of such fact. 5.There was on record loan agreement dated 24/12/2024 proving the loan and loan terms as pleaded. There was also email correspondence to show that the respondent had indeed applied for the loan, and that the same had been demanded before filing of the claim. Though the respondent requested for a reconciliation of accounts, there was nothing on record to show that any amount had repaid so at so necessitate such reconciliation, or to proof any payment. However, the claimant admitted payment of Kshs. 20,000/= vide the account statement dated 21/8/2025. 6.As such, I do find that the claimant successfully proved that it loaned the claimant a total of Kshs. 400,000/= and the respondent had only repaid Kshs. 20,000/=. 7.However, a glaring issue comes up that ought to be addressed before final determination of the claim. I do note that the claimant was loaned a total of Kshs. 400,000/=. The claimant charged interest at 17% per month which is translates to approximately 204% per annum. The claimant further charged a penalty rate of 25% per month on default. I do find that the interest and penalty rates charged are highly inordinate and unconscionable. 8.Indeed, the total amount claimed is more than two times the principle sum offending the in duplum principle due to application of the excessive interest and penalty rates. The object of the rule is to restrain excessive accumulation of interest and penalties to prevent unfair enrichment of a lender at the expense of the borrower. 9.While parties are generally bound by the terms of their contract, this court retains discretion to decline enforcement of terms that result in unjust, oppressive, or unconscionable outcomes. In the circumstances, the court finds the claimed interest rates to be disproportionate and inequitable. The court therefore declines to enforce them. 10.The court shall allow interest on the principal amount of Kshs. 400,000/= at 18% per annum for a period of four (4) months from 24/11/2024, less Kshs. 20,000/= already paid by the respondent. 11.The decretal sum shall thereafter attract interest at court rates from the date of judgment till payment in full. 12.The claim for bounced cheque is denied as there was nothing to show that the respondent had written a dishonoured cheque in the name of the claimant. The claim for debt collection is also denied as it remained unproven. 13.The claimant is awarded disbursements of the claim. 14.The respondent is granted 30 days stay of execution.It is so decreed. DATED AND DELIVERED AT NAIROBI VIA CTS THIS 22ND DAY OF MAY 2026.HON. GLADYS .W. KIAMAHRESIDENT MAGISTRATE/ADJUDICATOR