https://new.kenyalaw.org/akn/ke/judgment/kehc/2026/7734

Faulu Microfinance Bank Ltd v Mbae (Civil Appeal E360 of 2024) [2026] KEHC 7734 (KLR) (2 June 2026) (Judgment) Neutral citation: [2026] KEHC 7734 (KLR) Republic of Kenya In the High Court at Meru Civil Appeal E360 of 2024 HM Nyaga, J June 2, 2026 Between Faulu Microfinance Bank Limited Appellant and Douglas Kiogora Mbae Respondent (Being an appeal from the judgment of the Adjudicator Habrovinah Nyamweya dated 3rd December 2024 in Small Claims Commercial Case No. E348 of 2024) Judgment Background: 1.The appellant filed suit before the small claims court at Meru seeking judgment for Kshs.518,148.12 being the balance of a loan advanced to the respondent at the respondent’s request which the respondent defaulted on. 2.The respondent denied the claim. 3.After hearing the parties, the lower court dismissed the appellant’s claim with costs. The Appeal: 4.Aggrieved by the judgment of the lower court, the appellant filed a Memorandum of Appeal dated 11th December, 2024 listing the following grounds:a.That the learned adjudicator erred in law and in fac t in failing to find that the claimant had proved its case to the required standard and that the respondent is indebted to the claimant in the sum of Kshs.518,148.12/=b.That the learned adjudicator erred in law and in fact in dismissing the claimant’s case.c.That the learned adjudicator erred in law and in fact in awarding the respondent costs of the suit.d.That the learned adjudicator erred in law and in fact, when in making judgment, failed to consider and/or disregarded the appellants pleadings, evidence and submissions.e.That the learned adjudicator erred in law and in fact in coming to the conclusions and the judgment contrary to the evidence, the law and the submissions urged before her. 5.The appellant sought the following orders:a.That the appeal be allowed.b.That the judgment by Honourable Adjudicator Habrovinah Nyamweya dated 3rd December 2024 be set aside and or varied and this court do substitute with its own judgment.c.That this Honourable court sets aside the award for costs in favor of the respondent.d.That costs before this court and the lower court be awarded to the appellant. Appellants Submissions: 6.It was submitted that there was no dispute that the appellant had advanced the respondent the loan in question. That it was true that Equity Bank Limited took over the loan and deposited money into the Respondent’s accounts to clear the loan, but the respondent went ahead and withdrew the said amount before the appellant could utilize the money to offset the outstanding loan. That the respondent acknowledged that he withdrew a total sum of around Kshs.500,000/= which amount was deposited by Equity Bank. 7.Citing Esther Muthoni Mungai vs AMACO Insurance Co. Ltd (2021) KEHC 5966 (KLR) the appellant urged the court to find that indeed it had proven its case on a balance of probability. 8.The appellant faulted the trial court for not considering its evidence and argument basing its decision on the letter it had issued, confirming that the loan had been repaid, despite glaring evidence that the respondent had not approached the court with clean hands. Respondents Submissions: 9.It was submitted that the appeal does not disclose any proper question of law as required under section 38 of the Small Claims Act but instead it opened arguments on factual findings which the lower court was entitled to make. Cited in support of this submission was Attorney General vs Zinj Ltd (2021) eKLR, Paul Wanjohi Mathenge vs Duncan Gichane Mathenge (2013) eKLR and the Court of Appeal decision in Kenya Breweries Limited vs Godfrey Odoyo (2010) eKLR. 10.It was further submitted that the learned adjudicator correctly arrived at the decision that the respondent was not indebted to the appellant. That the respondent had produced a letter dated 20th July 2023 by the appellant which expressly confirmed that the respondent had cleared his outstanding loan. Analysis and Determination: 11.Being an appeal from the Small Claims Court, the same is to be looked at from the term of section 38 of the Small Claims Act which provides as follows:1.A person aggrieved by the decision or an order Appeals. of the Court may appeal against that decision or order to the High Court on matters of law.2.An appeal from any decision or order referred to in subsection (1) shall be final.” 12.A matter of law or issue of law is a question of law as defined in Black’s Law Dictionary, 9th Edition, as follows:“An issue to be decided by the judge, concerning the application or interpretation of the law; or A question that the law itself has authoritatively answered, so that the court may not answer it as a matter of discretion; orAn issue about what the law is on a particular point; an issue in which parties argue about, and the court must decide, what the true rule of law is.” 13.In Kenya Breweries Limited v Godfrey Odoyo (supra) the Court of Appeal discussed what constitutes a point of law. It was held as follows;“In a second appeal however, such as this one before us, we have to resist the temptation of delving into matters of facts. This Court, on second appeal, connes itself to matters of law unless it is shown that the two courts below considered matters they should not have considered or failed to consider matters they should have considered or looking at the entire decision, it is perverse.”We hasten to observe, however, that failure on the part of the first appellate court to re-evaluate the evidence tendered before the trial court and as a result, arriving at the wrong conclusion is a point of law. We note that indeed, learned counsel for the appellants did submit that the learned Judge failed to consider most of the documents that were produced in evidence, and therefore arrived at the wrong conclusion. 14.In Twaher Abdulkarim Mohamed v Independent Electoral and Boundaries Commission (IEBC) & 2 others, (2014) eKLR, the court addressed the same issue and held as follows:“Although the phrase ‘a matter of law’ has not been dened by the Elections Act, it has been held in Timamy Issa Abdalla Vs Swaleh Salim Swaleh Imu & 3 Others, Malindi Civil Appeal No. 39 of 2013 (Court of Appeal), (Okwengu, Makhandia & Sichale, JJA) of 13.01.2014 that a decision is erroneous in law if it is one to which no court could reasonably come to, citing Bracegirdle vs Oxney (1947) 1 All ER 126.” 15.On the same issue in J N & 5 Others -vs- Board of Management, St. G School Nairobi & Another [2017] eKLR, while addressing what constitutes a point of law and a point of fact, the stated thus:“In law, a question of law, also known as a point of law, is a question that must be answered by applying relevant legal principles to interpretation of the law. Such a question is distinct from a question of fact, which must be answered by reference to facts and evidence as well as inferences arising from those facts. In law, a question of fact, also known as a point of fact, is a question that must be answered by reference to facts and evidence as well as inferences arising from those facts. Such a question is distinct from a question of law, which must be answered by applying relevant legal principles. The answer to a question of fact (a "finding of fact") usually depends on particular circumstances or factual situations.” 16.In the case of Wanjiru v Kiilu (Civil Appeal 90 of 2023) [2024] KEHC 8881 (KLR) (19 July 2024) (Judgment), the High Court appreciated its appellate jurisdiction in respect of appeals emanating from decisions of the Small Claims Court as follows:“It therefore follows that appeals originating from the Small Claims Court to this court can only on the points of law. Consequently, this court cannot, in appeals emanating from that Court, entertain an invitation to interfere with the factual findings of the trial court. The duty of this court when dealing with such appeals, is therefore equivalent to that of the Court of Appeal in its capacity as a second appellate court.” 17.I have looked at the Memorandum of Appeal in view of the authorities cited. In my opinion, the interpretation by the learned adjudicator that the loan had been settled with no evidence of actual payment was a finding in law. This court is thus entitled to look at the evidence and determine whether it was correct or not. 18.From the evidence adduced before the lower court, the appellant’s witness admitted that Equity Bank Ltd paid off the loan. That the amount was deposited into the respondent’s account. That however before the appellant could utilize the amount to pay off the loan, the respondent withdrew the money. 19.The respondent claimed that he held two accounts, the loan account and the other account from which he withdrew the funds. That the funds he withdrew were his. 20.From the available evidence it is evident that the respondent held two accounts with the appellant. 21.The first account held by the respondent was account No. AA20xxxxxx012, to which a sum of Kshs.592,778/= was credited as loan disbursement on 2nd June 2025. 22.The 2nd account held by the respondent was account No. 1010320654. It shows that on 20th July 2023, a cheque No. 062821 for Kshs.458,000/= was deposited into that account. It is obvious that this this was the amount paid by Equity Bank Ltd to offset the loan. 23.This is where the drama began. 24.Ordinarily to credit the loan account, the amount deposited into the respondent’s other account had to be debited. Looking at the two accounts there is no such transaction. The appellant’s witness explained what transpired and that appears to have been exactly what happened. 25.The respondent claims that he cleared the loan and relies on the letter from the bank to support this claim. The letter from the bank was issued after Equity Bank Ltd deposited the sum into the respondent’s account. However, that amount was never credited to the loan account. Indeed, the loan account has no entry to show that such payment was made. 26.It is clear that the respondent was cheeky. He knew that the amount received from Equity Bank into his account with the appellant was meant to clear the loan account yet he went ahead to withdraw the said amount. 27.The appellant appears to have been indolent in that it did not credit the loan account with the amount paid by Equity Bank to buy off the loan immediately it received the same. This is how the respondent took advantage of the situation. 28.Having considered the evidence, I find that the trial adjudicator erred when she found that the loan amount had been paid. She should have looked at the accounts of the respondent and not just the letter she relied on. That would have showed clearly that the loan had not been actually repaid. 29.Consequently, I set aside the order dismissing the appellant’s suit. It is substituted with an order that the appellant proved its claim against the respondent in the lower court and judgment is entered accordingly as prayed in the claim together with costs. 30.The appellant shall have costs of this appeal. 31.It is so ordered. DATED, SIGNED & DELIVERED AT MERU THIS 2ND DAY OF JUNE, 2026.H.M. NYAGAJUDGE