https://new.kenyalaw.org/akn/ke/judgment/keelc/2026/4301

**REPUBLIC OF KENYA** **IN THE ENVIRONMENT AND LAND COURT AT EMBU** **ELC LAND APPEAL NO. E046 OF 2024** **JACOB NJERU NDERI…………......…………………APPELLANT** **VERSUS** **DAVID MWANIKI IRERI…….…………………...1ST RESPONDENT** **ROSE WANJA NJAGI………...…….................2ND RESPONDENT** **JAMES IRERI PETER……………………………..3RD RESPONDENT** **JUDGMENT** 1. The Appellant filed the plaint dated 10/1/2023 before the Chief Magistrate’s Court at Embu claiming that on 15/5/2018 he entered into an agreement with the 1st Respondent vide which he was loaned money and was to pay interest at 30%. From the plaint, it would seem that the Appellant was advanced some money by the 1st Respondent and he offered his title over Ngandori/ Kirigi/14267 (the suit land) as security. The Appellant denied that he sold his land and pleaded that in actual sense, he was only advanced the sum of Kshs. 300,000/= by the 1st Respondent. 2. The Appellant averred that on 20/9/2018, the 1st Respondent threatened to change ownership of the suit land, following which the Appellant’s son registered a caution against the suit land. The caution was withdrawn following discussions between the Appellant and the 1st Respondent. The Appellant claimed that his son found a buyer for the suit land but when he went to do a search to verify ownership, he found that the suit land had been transferred to the 1st Respondent name. Subsequently, the 1st Respondent transferred the land to his wife. The Appellant claimed that the transfer of the suit land was illegal because he did not go to the Land Control Board (LCB) for consent. 3. The matter was referred to arbitration and vide the mediation settlement agreement dated 18/7/2023, the Appellant and the Respondents agreed that the Appellant would refund the sum of Kshs. 1,000,000/= to James Ireri Peter , the 3rd Respondent, so that the suit land could be transferred to his name. That sum was to be paid within 6 months and if by 18/1/2024 the Appellant had not paid that sum, the land would be registered in the name of James Ireri Peter. 4. The trial court adopted the consent on 10/8/2023. Through the application dated 20/3/2024, the Appellant sought to set aside the mediation agreement. Vide the ruling dated 25/9/2024, the Learned Magistrate found that the application was bereft of merit and dismissed it. The Learned Magistrate found that there was no mention of mistake, misrepresentation, coercion or any other vitiating factors. The court found that there was no evidence of wrong doing by the mediator or the Respondents that would warrant the setting aside of the mediation agreement. 5. Being aggrieved by the decision of the Learned Magistrate, the Appellant filed the memorandum of appeal dated 14/10/2024. He faulted the trial court for failing to look at the circumstances under which the suit land changed hands from his name to that of the 1st Respondent and the subsequent transfers. He also challenged the time it took for the suit land to be transferred from the 1st Respondent to the 2nd Respondent. Further, he challenged how the sum of Kshs. 1000,000/= was arrived at in the mediation settlement. 6. The appeal was canvased through written submissions. The Appellant submitted that his land was stolen and registered in the name of the 1st Respondent on 30/4/2019 without his knowledge and that 30 days later, the suit land was transferred to Rose Wanja Njagi, the 1st Respondent’s wife. On 9/11/2022 the land was registered in the name of James Ireri Peter. He submitted that he applied to have the mediation agreement set aside because he “could not reason out wisely and carefully”. 7. The Appellant submitted that his prayer was to have the transfer and titles canceled so that the suit land could revert to his name. He accused the 1st Respondents of taking advantage of the transfer documents which he had signed with the intention of transferring the land to a third party. The Appellant submitted that nobody should grow rich overnight and that riches come slowly and that it was wrong for the 1st Respondent to register his land in his name. 8. The Appellant maintained that he did not attend any Land Control Board and faulted the mediator for not summoning the 2nd Respondent. He added that the mediator failed to verify the agreement and the transfers for the land. The Appellant filed further submissions raising questions. 9. The 1st and 3rd Respondents submitted that the subject of this appeal is a mediation agreement dated 18/7/2023 and adopted by the court on 10/8/2023. That the agreement was signed by the Appellant, 1st and 3rd Respondents as well as the mediator Julius Kitavi. The Respondents submitted that the Appellant failed to seek an order for setting aside court orders of 10/8/2023 and only applied to have the mediation agreement set aside. 10. They submitted that clause 4 of the Mediation Agreement stipulated that the Appellant was to pay the 3rd Respondent Kshs. 1,000000/= following which the 3rd Respondent would transfer the suit land to the Appellant. The agreement gave the period for payment as 6 months and if the Appellant failed to pay the money by 18/1/2024, the 3rd Respondent was to remain registered as the owner of the suit land. The Respondents submitted that the Appellant failed to make the payment and clause 5 of the Mediation Agreement therefore took effect. 11. The Respondents submitted that setting aside a Mediation Agreement requires similar grounds as those for vitiating a contract. They cited Rule 39 of the Civil Procedure (Court Annexed Mediation) Rules of 2022 which stipulates that an application to set aside an order or degree arising from a mediation settlement is to be filed with the leave of the court. 12. They urged that the grounds for setting aside a settlement are misconduct, fraud or a fundamental mistake by the mediator; fraud, collusion or misrepresentation by any party to the mediation or witnesses who took part in the proceedings and whose participation materially affected the outcome. Other grounds are fundamental mistake by the parties to the mediation as to the existence or state of the subject matter or set of facts that materially affected the party’s decision to enter into the subject agreement, which rendered the agreement unfair and inequitable. 13. The other grounds are legal incapacity to take part in the mediation proceedings or to execute a binding settlement or where the agreement is invalid under Kenyan law or International law or where the settlement has become incapable of enforcement under a Kenyan Law. 14. The Respondents submitted that the Appellant did not seek leave before filing the application to set aside the mediation agreement. Further, that the Appellant did not raise any of the grounds stipulated in Rule 39. They urged the court to dismiss the appeal with costs to the 1st and 3rd Respondents. 15. The issue for determination is whether the court should allow the appeal and set aside the Mediation Agreement. Although the Appellant did not plead his case with particularity and clarity, seemingly because he was acting in person, it is apparent that he is challenging transfer of his land by the 1st Respondent when he defaulted in the repayment of a loan. The transfer formed the basis of the impugned mediation settlement. 16. The Appellant filed Embu CM ELC Case No. E002 of 2023 seeking cancellation of the transfer of his land. He pleaded that on 15/5/2028, he entered into a money shylock agreement with the 1st Respondent with the interest rate of 30%. According to him, the first instalment was Kshs. 92,000/= and the 1st Respondent continued lending him money in instalments until the loan plus interest got to Kshs. 500,000/=. 17. He averred that when he deposited his title with the 1st Respondent, the assumption was that he was selling the suit land to the 1st Respondent at Kshs. 500,000/= and yet the value of his land was actually Kshs. 3,500,000/=. In the defence dated 15/2/2023, the 1st Respondent averred that he purchased the suit land from the Appellant vide two sale agreements at the value of Kshs. 1000,000/=. He pleaded that he was forced to pay an extra Kshs. 500,000/= for the Appellant’s son to remove the restriction he had placed against the suit land. 18. The matter was referred to mediation on 24/5/2023. The mediation settlement agreement dated 18/7/2023 was adopted by the trial court on 10/08/2023. Under that agreement, the Appellant was to refund the sum of Kshs. 1,000,000/= to the 3rd Respondent within 6 months, who in turn was to transfer the suit land back to the Appellant. The money was payable by 18/1/2024 and if the Appellant defaulted, the 3rd Respondent would retain ownership of the suit land. 19. The Appellant did not pay the sum of Kshs. 1,000,000/=. He filed the application dated 1/4/2024 seeking to set aside the agreement dated 18/7/2024. The 3rd Respondent opposed the application and urged that the mediation agreement was valid, had been adopted and became a judgment of the court. In its ruling dated 25/9/2024, the trial court found that the mediation agreement did not merit being set aside while noting that the Appellant had been granted time to pay the sum stipulated in the mediation agreement. 20. The Appellant’s claim is that he entered into a shylock agreement with the 1st Respondent and gave his title deed over the suit land as some form of security and that the 1st Respondent unlawfully transferred the suit land to his name. The foundation of the impugned mediation settlement is the shylock agreement vide which the 1st Respondent advanced a loan to the Appellant and the Appellant surrendered his title deed over the suit land to the 1st Respondent as some form of security. 21. It is worthwhile to trace the origin of the term *shylock*. According to Wikipedia, ***The Merchant of Venice*** is a play by [William Shakespeare](https://en.wikipedia.org/wiki/William_Shakespeare), believed to have been written between 1596 and 1598. A merchant in Venice named [Antonio](https://en.wikipedia.org/wiki/Antonio_%28The_Merchant_of_Venice%29) defaulted on a large loan taken out on behalf of his friend, [Bassanio](https://en.wikipedia.org/wiki/Bassanio), and provided by a moneylender named [Shylock](https://en.wikipedia.org/wiki/Shylock). Shylock advanced Antonio the loan of 3000 ducats on condition that if Antonio did not repay the loan on its due date, Shylock would take a pound of Antonio’s flesh. Antonio guaranteed the loan to assist his friend, Bassanio to woo Portia. Bassanio succeeded and married Portia. 22. When Antonio could not repay the loan after his ships got lost at sea, Shylock refused the offer of 6000 ducats and demanded a pound of Antonio’s flesh. The lawyer (Portia) demanded that Shylock remove only the pound of flesh and not the blood of Antonio and if he shed a drop of Antonio’s blood, he would forfeit his land and goods. The argument was that the contract did not give Shylock a jot of blood and only gave him a pound of flesh. Since this was not possible, Shylock backed out. 23. The court has looked at the shylock agreement dated 15/5/2018 between the Appellant and the 1st Respondent. It stated that the Appellant wished to sell the suit land to the 1st Respondent for Kshs. 500,000/= and that Kshs. 92,000/= was payable on execution of the agreement. According to the second term of the agreement, the balance of Kshs. 408,000/= was to be paid on or before 15/6/2028. One of the terms stipulated that whoever breached the terms of the agreement would pay to the other 30% of the purchase price. 24. Despite the 1st Respondent’s contention that he purchased the suit land from the Appellant, no transfer documents were presented before the court to show how the suit land was transferred from the Appellant’s name to the 1st Respondent. The 1st Respondent did not produce evidence to show that he paid the balance of the purchase price mentioned in the agreement dated 15/5/2018. He did not demonstrate that the suit land was legally transferred to his name. 25. The copy of the land register indicates that the suit land was transferred to the 1st Respondent on 30/4/2019 and a title deed was issued to him on 2/5/2019. The land was transferred to the 2nd Respondent on 30/5/2019 and a title issued to her on 12/6/2019. It was transferred to the 3rd Respondent on 11/4/2022 and a title deed was issued to him on 14/4/2022. No consideration is given on the land register for all these transactions. 26. The Land Registration Act governs transfers of land and charges. Section 2 of the Land Registration Act defines a borrower as someone who obtains an advance of money or money’s worth or agrees to fulfil a condition on the security of a charge of that person’s interest in land or lease. A lender is defined to mean a person to whom a charge has been given as security for the repayment of an advance of money or money’s worth or to secure a condition and ‘transfer’ means passing of an estate or interest in land or lease, whether for valuable consideration or otherwise. 27. Part v of the Land Registration Act deals with charges. Section 56 (5) provides that a charge shall have the effect as a security only and shall not operate as a transfer. Section 80 of the Land Act stipulates that a charge has the effect of a security only and does not operate as a transfer of any interests or rights in the land from the chargor to the chargee subject to that provision. The shylock transaction between the Appellant and 1st Respondent was not a charge under the law, despite the fact that the Appellant surrendered his title to the 1st Respondent when he advanced him the loan. 28. Shylocks are not regulated by the Central Bank of Kenya and are not governed by the Banking Act. The law as it is does not address the consumer protection of borrowers who obtain loans from shylocks and are exposed to usurious rates of interest as was the case in this matter. Such borrowers are exposed to the risk of having their land sold and transferred in unclear circumstances. 29. Nonetheless, Consumers enjoy certain rights under Article 46 of the Constitution. These include the right to goods and services of reasonable quality; information necessary for them to gain full benefit from the goods and services; protection of their economic interests and compensation for loss or injury arising from defects in goods and services. As a consumer, the Appellant received financial services from the 1st Respondent in the form of an informal moneylender or shylock and was entitled to legal protection. 30. The Appellant challenges the validity of the mediation settlement in this agreement. The Respondents’ contention is that the mediation agreement is valid and that it was adopted as a decree of the court. Further, that the Appellant did not apply to set aside the decree that was issued following the adoption of the mediation settlement. 31. Rule 39 of the Civil Procedure (Court Annexed-Mediation) Rules deals with the setting aside of the decree following the adoption of the mediation settlement agreement by the court. An applicant is required to seek leave of court. The grounds for setting aside the decree include where the settlement agreement is invalid under Kenyan law; where there was a fundamental mistake as to the existence or state of the subject matter or any set of facts that materially affected the parties’ decision to enter the subject agreement and which has rendered such agreement unfair and inequitable. 32. The substratum of the mediation settlement was illegal because it was based on an unconscionable shylock agreement that is contrary to public policy and contravenes consumer rights. The 1st Respondent was not a licensed moneylender and illegally transferred the title over the suit land to his name. 33. While it is trite law that courts do not rewrite contracts for parties and that parties are bound by their agreements, it is also trite that courts cannot enforce illegal contracts or contracts that are contrary to public policy. Section 26 of the Land Registration Act gives the grounds upon which a title can be challenged. These include titles acquired illegally, unprocedurally or through a corrupt scheme. The transfer of the suit land by the 1st Respondent to his name was illegal. He did not pass a good title to the other Respondents. 34. In **Mbobu & Another v Hypac Investments Limited & Another (2025) KEHC 16564 (KLR)** the High Court declared a loan agreement unconscionable, illegal and unenforceable and directed the discharge of the title and retransfer of the land to the Appellant. In that case, there was a charge over the suit land that had been offered as security. 35. What this case demonstrates is that there is need for transparency, accountability and consumer protection to safeguard citizens from exploitation. Shylocks thrive in Kenya because of lack of consumer protection of borrowers and the fact that the business of shylocks is not regulated. There is need for regulation of the informal moneylending sector to protect vulnerable members of society from predatory lending for otherwise, as consumers of financial services, they will not enjoy the rights enshrined in the Constitution and safeguarded by other laws. 36. The transfer of the suit land to the Respondents’ names was illegal and is hereby cancelled. The title over Ngandori/Kirigi/14267 will revert to the Appellant. The Land Registrar is directed to cancel the titles issued to the Respondents and reinstate the Appellant’s title over Ngandori/ Kirigi/14267. 37. The appeal is allowed. The Ruling of the Honourable J. Otieno delivered on 25/9/2024 is set aside. The Mediation Agreement adopted on 10/8/2023 is set aside. 38. The 1st Respondent is at liberty to file suit for recovery of the loan sum which he advanced to the Appellant. 39. The Appellant is awarded the costs of the appeal. Delivered virtually at Bungoma this 30th day of June 2026. **K. BOR** **JUDGE** **In the presence of: -** Mr. Jacob Nderi- the Apellant Ms. W. Kamochu holding brief for Ms. M. Ndeke for the Respondents Court Assistant- Diana Kemboi