https://new.kenyalaw.org/akn/ke/judgment/kehc/2026/9388

Kagwanja v Industrial and Commercial Development Corporation (Civil Appeal 13 of 2017) [2026] KEHC 9388 (KLR) (25 June 2026) (Judgment) Neutral citation: [2026] KEHC 9388 (KLR) Republic of Kenya In the High Court at Murang'a Civil Appeal 13 of 2017 CW Githua, J June 25, 2026 Between John Mwangi Kagwanja Appellant and Industrial and Commercial Development Corporation Respondent (Being an appeal from the judgement of Hon. J. J. Masiga, (SRM) dated 17th March 2017 in Murang’a Civil Case No. 244 of 2015) Judgment 1.The genesis of this appeal is a suit instituted by the appellant against the respondent in the lower court in which the appellant sought a declaration that he had fully serviced the respondent’s loan facility as at 3rd March 1999 and that he was entitled to a refund of Kshs. 39,365 being the amount he had overpaid the respondent. He also prayed for an order directing the respondent to sign a discharge of charge and release of title for land known as LOC. 19/Rwathia/1262, costs of the suit and interest. 2.In his plaint dated 26th June 2015, the appellant stated that he entered into a loan agreement with the respondent on 8th July 1994 for the sum of Kshs. 50,000 to facilitate him start a furniture business. The express terms of the agreement were that the loan facility was to be repaid within sixty (60) months at the rate of Kshs. 1,381 per month translating to Kshs. 82,860 in five years (60 Months). He was given a moratorium of three (3) months during which period he was to pay interest on the principle amount in the sum of Kshs. 2,750 per month. 3.It was the appellant’s case that by 3rd March 1999 which was within the loan repayment period, he had paid the respondent a total of Kshs. 124,966.55 which amounted to an overpayment of Kshs. 39,356; that despite the overpayment, the respondent had failed or neglected to execute a discharge of charge in his favour. Instead, the respondent had demanded Kshs. 621,528.56 which it claimed was the outstanding balance as at 30th June 2015 which in his view was outrageous and ridiculous. 4.The respondent in its statement of defence dated 21st July 2015 denied all the allegations contained in the plaint but admitted having advanced the appellant a loan of Kshs 50,000 on 8th July 1993. The respondent averred that it was an agreed term of the loan agreement that the interest rate would be revised at the respondent’s discretion and that the appellant would pay additional interest on any outstanding arrears and interest remaining unpaid on the due date. 5.Further, the respondent asserted that in July 1995, the appellant started defaulting in payment of the agreed monthly instalments and had been in arrears ever since; that pursuant to issuance of a statutory notice threatening to realize the security over the unpaid loan arrears, the appellant admitted owing the respondent Kshs. 243,255.97 in loan arrears and proposed to pay Kshs. 100,000 in full and final settlement which proposal the respondent accepted on a without prejudice basis but which the appellant failed to act upon; that by 30th June 2015, the outstanding loan balance was Kshs. 629,528.56 which continued to accrue interest at the rate of 16% per annum until payment in full. 6.The court record shows that on 26th September 2016, the parties recorded a consent that the suit be prosecuted by way of written submissions and that parties rely on the documents they had filed together with their pleadings. From the record, it is apparent that only the appellant filed his submissions. The respondent did not file its submissions. 7.In its judgement delivered on 17th March 2017, the trial court made a finding that the appellant had been informed of the decisions made by the respondent revising interest rates; that from 28th February 1999, the appellant had been in loan arrears which amounted to Kshs. 629,528.56 which continued to accrue interest and the respondent had a right to retain the security offered by the appellant until the outstanding loan was paid. Based on the above findings, the learned trial magistrate dismissed the appellant’s suit with costs. 8.Being dissatisfied with the trial court’s judgment, the appellant proffered an appeal to this court vide a Memorandum of Appeal dated 5th April, 2017. In his memorandum of appeal, the appellant relied on four grounds in which he principally faulted the learned trial magistrate for failing to find that he had proved his claim against the respondent to the required standard and for dismissing his suit with costs. 9.The appellant also complained that the learned trial magistrate erred in his finding that he owed the respondent Kshs. 629,528.56 in the absence of a counter claim by the respondent. 10.The appeal was prosecuted by way of written submissions. The appellant’s submissions dated 10th February 2025 were filed on his behalf by his advocates on record M/S Owang & Associates Advocates while those of the respondent dated 10th March 2025 were filed by its advocates M/S Lazarus M. O. Odongo Advocate. The submissions were highlighted before me on 21st October 2025 by Learned counsel Mr. Owang who represented the appellant and learned counsel Mr. Odongo who appeared for the respondent 11.Briefly, in both his written and oral submissions, the appellant reiterated the averments in his pleadings before the trial court and maintained that he had overpaid his loan by Kshs. 39,356; that the respondent’s exercise of its statutory power of sale to recover about Kshs. 700,000 came as a surprise to him. 12.The appellant also submitted at length on the application of the in duplum rule and relying on the authority of John Kamunye & Another V Safari M Park Motors [2013]eKLR , he argued that the alleged outstanding loan arrears ran afoul of the rule as codified in Section 44 A of the Banking Act which provides that the maximum amount recoverable from a defaulted loan should not exceed double the principle amount. 13.The appellant also submitted that the unilateral revision of the interest rates from 22% to 33% after he had executed the loan agreement increased the monthly instalments from Kshs. 1,381 to Kshs. 1,711; that the said increase was usurious, excessive, oppressive and unconscionable and the same was against the principles of equity and fairness. To support these submissions, the appellant relied on the case of Margaret Njeri Muiruri vs Bank of Baroda (Kenya) Limited [2014] eKLR in which the Court of Appeal held that while parties were bound by terms of their contracts, courts should not shy away from interfering with contracts that were unconscionable, unfair or oppressive. 14.On its part, the respondent submitted that the loan agreement contained provisions allowing variation of interest rates at the respondent’s discretion based on market conditions; that the appellant was fully aware of terms of the loan agreement when he voluntarily executed it; that there was no evidence that the appellant executed the agreement under any duress or undue influence. The respondent relied on the authorities of National Bank of Kenya Limited vs Pipeplastic Samkolit (K) Limited & Another [2001] eKLR, Bethany Village Africa vs Bank of Africa Kenya Limited (Civil Appeal E648 of 2021) [2023] KEHC 21550 (KLR) and Pius Kimaiyo Langat vs Co-operative Bank of Kenya Ltd [2017] eKLR for its submission that courts should not rewrite contracts voluntarily entered into by the parties unless fraud, coercion or undue influence was pleaded and proved. 15.The respondent further submitted that the interest rate of between 22% and 33% was not usurious as it was within commercially acceptable limits especially in private lending arrangements; that courts only intervene where the agreed interest rate was excessively harsh, oppressive and commercially unreasonable as was in the cases of Piccadily Holdings Limited vs Anwar Hussein & 2 others [2021] KEHC 12741 (KLR) and Margret Njeri Muiruri V Bank of Baroda ( K) [2014] eKLR where the interest rates were set between 45% and 48% per annum which the court found to be unconscionable and outside commercial lending practices. 16.Regarding the in duplum rule, the respondent submitted that the rule only applied to banks and financial institutions regulated under the Banking Act and not to state corporations like itself; that in any event, the appellant’s reliance on this rule was misplaced as it was never pleaded nor argued before the trial court. 17.Lastly, the respondent argued that since the appellant had failed to discharge his burden of proving that he had fully repaid the loan amount, the trial court was right in dismissing his suit and the appeal should be dismissed for want of merit. 18.As this is a first appeal to this court, I am enjoined to exhaustively analyse and reconsider the evidence presented before the trial court to arrive at my own independent conclusion regarding the soundness or otherwise of the trial court’s decision. - See: Abok James Odera T/A A.J Odera & Associates versus John Patrick Machira T/A Machira & Co. Advocates (2013) eKLR; Selle & Another V Associated Motor Boat Company& Others (1968) EA 123. 19.I have carefully considered the grounds of appeal, the parties rival written and oral submissions together with all the authorities cited. I have also read the entire court record and the judgement of the learned trial magistrate. Having done so, I find that the key issue arising for my determination is whether the learned trial magistrate erred in dismissing the appellant’s suit on grounds that he had failed to prove his case to the required legal standard. 20.As a preliminary issue, I wish to note that the manner in which the appellant’s suit was prosecuted in the lower court was unprocedural and left a lot to be desired. The record shows that the trial court adopted the parties consent to have the suit disposed of by way of written submissions on the basis of the documents filed by the parties together with their pleadings. And whereas there is no law stopping parties from coming up with such agreements, courts should discourage this practice and should insist on having suits prosecuted through trials in the usual manner especially in matters like the instant one which was highly contested. 21.Be that as it may, my reading of the court record and the party’s submissions reveals that it is not contested that the parties executed a loan agreement through which the respondent advanced to the appellant a loan facility of Kshs. 50,000; that the appellant offered title for his land known as Loc. 19/ Rwathia/1262 (the property) as collateral and the respondent registered a charge against it to secure payment of the loan. 22.It is also not disputed that the terms of the agreement, were that, inter alia, the appellant would repay the loan in monthly instalments of Kshs. 1,381 for sixty (60) months at an interest rate of 22% per annum which was subject to revision at the discretion of the respondent. The court record shows that the interest rate kept fluctuating as the respondent kept varying them by either increasing or decreasing them justifying the variations on market trends. It is also not contested that by letter dated 13th October 1993, the respondent increased the interest rate from 22% to 33 % per annum. 23.Bearing in mind the above undisputed facts and considering the evidence on record in its entirety, the question which this court must now answer is whether the appellant proved his claim against the respondent to the required legal standard which is on a balance of probabilities. 24.To answer the above question, I have carefully scrutinized the evidence presented to the trial court including the bank statements produced by the appellant and the provisional statement of account contained at page 85 of the record of appeal which was relied upon by both parties. 25.In my considered view, the bank statements exhibited by the appellant for the Month of October and November 1994 did not add any value to his case as they did not reflect any payment made to the respondent. 26.A study of the aforesaid provisional statement which runs from 28th February 1994 to 31st July 2021 clearly shows that the appellant did not service his loan on a monthly basis as agreed upon by the parties in their loan agreement. The statement shows the appellant made six payments of various amounts long after the monthly loan payments had become due. 27.The payments were quite sporadic and scattered over long periods of time. For instance, though according to the 2nd schedule of the loan agreement the first instalment was required to be paid on 15th March 1994, the appellant’s first payment was made in October 1994, about seven months later. The provisional statement shows that there was a follow up payment in November 1994 but the next payment was made several years later in February 1996. The other payments followed in August 1997, November 1997 and an year later in November 1998. The last payment of Kshs. 30,000 was made in March 1999 and until suit was filed, the appellant had not made any further payment. 28.Given the above irregular payments which were not contested, it is clear that the appellant did not fulfil his obligations under the loan agreement regarding monthly servicing of his loan facility. His loan therefore accumulated interest not only on the principle amount but also penalty interest on the arrears as per clause 6 of the loan agreement which provided as follows;“ 6.The Borrower shall repay to the corporation the amount of the said advance with interest added thereto by the instalments in the manner and at the rate or rates of interest set out in the Second Schedule hereto and shall pay additional interest at the rate mentioned in the said Second Schedule on any instalment of capital or interest unpaid on the due date for payment thereof without prejudice whatsoever to the rights and remedies of the Corporation hereunder or under any of the security documents to follow hereon or by law implied.” 29.Although the appellant has in his submissions claimed that the respondent unilaterally increased the rate of interest from 22% to 33 % which was extremely high as to be oppressive and unconscionable, the evidence on record shows that this was done pursuant to terms of the loan agreement and the appellant was informed about the intended increase in the letter dated 13th October 1993. The letter shows that the appellant was given an option of either accepting or declining the new interest rate and opting out of the loan arrangement. The appellant chose to continue with the loan arrangement and executed the loan agreement. The record shows that the interest rate was however revised downwards to 24% on 1st November 1994. 30.It is trite law that parties are bound by terms of their contracts and courts will not readily interfere with such terms unless coercion, fraud, undue influence, or material mistake is pleaded and proved. The Court of Appeal expounded on this principle in the case of Magut v National Bank of Kenya [2026] KECA 610 (KLR) when it held as follows;“……A court of law cannot re-write a contract between parties. The parties are bound by the terms of their contract, unless coercion, fraud, undue influence, or material mistake are pleaded and proved. It is ordinarily no part of equity's function to allow a party to escape from a bad bargain however, Courts have never been shy to interfere with or refuse to enforce contracts which are unconscionable, unfair or oppressive. In the present matter, the appellant has pleaded and proved none of these exceptional circumstances. The contracts stand on their terms. The appellant is bound by these contracts and must honour them as written. [See National Bank Kenya Ltd vs. Pipeplastic Samkolit (K) Limited and another [2002] 2EA 503” 31.It is noteworthy that in this case, the appellant did not allege leave alone prove fraud or mistake or that he had executed the loan agreement under duress or undue influence. 32.It is also important to note that the appellants claim that the increase of interest rate from 22% to 33% was excessive, oppressive and unconscionable was made for the first time in his written submissions in support of his appeal. He did not make that claim in his pleadings or in his submissions before the trial court. The same case applies to his claim that the in duplum rule was applicable in his case. 33.It is a settled principle of law that parties are bound by their pleadings and matters which had not been pleaded or raised before the trial court cannot be determined for the first time on appeal-See: Kenga & 12 others v Mohamed [2025] KECA 2219 (KLR); Floriculture International V Central Kenya Ltd & 3 Others [1995] KECA147. 34.As the in duplum rule and the claim that the variation of interest rate from 22% to 33% per annum was oppressive and unconscionable were not matters that were pleaded or raised before the trial court, the trial court did not have an opportunity of considering them in making its determination and they cannot therefore be canvassed on appeal. 35.Given the foregoing and although from the provisional statement it is impossible to establish the exact balance of the loan that was outstanding given that it is not clear how the amount allegedly owed was computed, I am satisfied that the appellant totally failed to discharge his burden of proof by adducing credible evidence proving on a balance of probabilities his claim that he had actually cleared and overpaid his loan facility by Kshs. 39,356. The fact that the respondent did not file a counterclaim for the amount owed in loan arrears did not absolve the appellant from the burden of proving his claim to the required standard. 36.Having found as I have above, I am unable to fault the learned trial magistrate’s decision dismissing the appellant’s suit with costs. It is thus my finding that this appeal lacks merit and it is hereby dismissed. 37.Although as a general rule costs follow the event, they are awarded at the discretion of the court. Considering the circumstances surrounding this appeal, I will not make any order as to costs of the appeal. 38.It is so ordered. DATED, SIGNED AND DELIVERED AT NAIVASHA THIS 25TH DAY OF JUNE 2026. C.W GITHUAJUDGEIn the Presence of:Mr.Owang for the AppellantMr. Lazarus Ondongo for the respondentMs. Hannah Mbugua, Court Assistant