[2020] KEMSET 83 (KLR)
The tribunal found that the claimants had proved, on a balance of probabilities, that the respondent borrowed Kshs. 15,000 and failed to repay. However, the contractual interest rate of 10% per month (120% per annum) was deemed unconscionable and contrary to public policy, and thus unenforceable. The tribunal...
Source-derived case information.
- Citation
- [2020] KEMSET 83 (KLR)
- Parties
- Applicant: Joyce Rasugu; Applicant: Abel Kebaso Ototo; Respondent: Alice Mosoti
- Court
- Micro and Small Enterprises Tribunal
- Jurisdiction
- Kenya
- Case Number
- Claim 15 of 2019
- Procedural Posture
- Liquidated Claim / Judgment After Formal Proof
- Outcome
- Judgment for the claimants for Kshs. 15,000 with interest at 14% per annum from date of borrowing until payment in full; costs awarded at Kshs. 7,000.
- Legal Topics
- Loan Agreements, Self Help Groups, Interest Rates, Default Judgment
- Source Language
- en
Source-derived case record
Summary, issues, holding and outcome
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Parties
Joyce Rasugu
Applicant
Abel Kebaso Ototo
Applicant
Alice Mosoti
Respondent
Procedural Posture
Liquidated Claim / Judgment After Formal Proof
Legal Issues
- 1 Whether the respondent is liable to repay the principal loan amount advanced by the claimants.
- 2 Whether the interest rate of 10% per month claimed by the claimants is enforceable or unconscionable.
- 3 Whether the claimants are entitled to costs and at what rate interest should be awarded.
Ratio Decidendi
The tribunal found that the claimants had proved, on a balance of probabilities, that the respondent borrowed Kshs. 15,000 and failed to repay. However, the contractual interest rate of 10% per month (120% per annum) was deemed unconscionable and contrary to public policy, and thus unenforceable. The tribunal exercised its discretion to award interest at the ordinary court rate of 14% per annum from the date of borrowing until full payment. The respondent was also ordered to pay the costs of the claim, assessed at Kshs. 7,000. The claimants were not entitled to the excessive contractual interest but succeeded on the principal and reasonable interest.
Court Disposition
Judgment for the claimants for Kshs. 15,000 with interest at 14% per annum from date of borrowing until payment in full; costs awarded at Kshs. 7,000.
Orders
- The respondent shall pay the claimants Kshs. 15,000 as principal loan amount.
- Interest at 14% per annum from 6th October 2017 until full payment.
Full Case Text
Judgment text and source record
24 paragraphs
REPUBLIC OF KENYA
IN THE MICRO AND SMALL ENTERPRISES TRIBUNAL AT KISII
CLAIM NUMBER 15 OF 2019
1. JOYCE RASUGU
2. ABEL KEBASO OTOTO [SUING AS THE LEGAL
REPRESENTATIVES OFMOSIABANO SELF HELP GROUP].....CLAIMANTS
VERSUS
ALICE MOSOTI.................................................................................RESPONDENT
JUDGEMENT
1. The Claimants herein commenced this claim on behalf of Mosiabano Self Help Group.The two are members and officials of the group. According to the Claimants the Respondent was at all material times a member of the group.
2. Through a statement of claim dated 10th July 2019, the claimants on behalf of their afore-stated group claims against the Respondent fora liquidated sum of Kshs. 15,000/- interest and costs.As can be discerned from the affidavit of service filed herein by the Claimants, a notice of claim, statement of claim, list of exhibits and witness statement were served upon the Respondent. The claimants also filed an affidavit of service evidencing the service of the hearing notice on the respondent.
3. The Respondent did not enter appearance and or file a response to the claim. The Claimants took a decision to set this matter down for formal proof instead of requesting for final judgement in default of appearance since the claim herein was a liquidated claim. When the matter came up for hearing before us on the 19th December 2019, we allowed the formal proof proceedings to be undertaken instead of allowing the Claimant to request us to enter a final judgement in default of appearance. We had noted something in the Claimant’s pleadings that pricked our conscience. The Claimants are seeking for an award of interest at the rate of10 percent per a monthtranslating to 120 percent per annum.We needed to take evidence on this, reason why we thought a formal proof was necessary. On this interest rate, we shall make a comment shortly hereunder.
4. The second Claimant testified in fortification of the claim. His witness statement dated 10th July 2019 was deemed his evidence in chief. According to this witness, on or about the 6th October 2017 the group at the instance of the Respondent lent the latter a sum of Kshs. 15,000/-. TheLoan Agreements were executed to this effect by the parties. The Loan Agreement dated 6th October 2017 was produced as Exhibit 1,in evidence before the Tribunal.
5. The witness stated in their statement of claim that they had sought for interest for the period 6th October 2017to 2nd April 2019 at a rate of 10% per a month, an amount that totals to Kshs. 20,055/- for the loan.The claim was prompted by the fact that the Respondent failed to repay the amount that she had borrowed plus the agreed interest as per the Loan Agreements.
6. The Respondent did not challenge the Claimants’ claim by entering appearance and filing a response nor did she challenge the Claimants’ testimony by cross- examining the Claimants’ witness to test credibility of his evidence, and adduce his evidence in defense to rebut the Claimants’. We have considered the evidence before us and have come to a conclusion that the Claimants’ have proved their case on a balance of probabilities, on the principal figure as prayed for in the statement of claim.
7. Yes, the Claimant’s case was unchallenged. However, that does not mean that the Claimant should be awarded each relief sought; even those that appear to be unconscionable, unreasonable and against public policy. This is the very reason why we would not award interest at the rate of 10% per monthas this would in our view be unconscionable and against public policy.
8. We are glad that counsel for the Claimant saw this, and made a submission that we award interest at the ordinary court rates.
9. In the upshot we are inclined to enter judgement in favor of the claimant in relation to the total loan amount of Kshs. 15,000/- with interest at the rate of 14% per annum.Interest is to be charged from the date of borrowing till full payment. The Respondent shall bear the costs of this claim.
10. We assess the party and party costs at Kshs. 7,000/-.
11. Orders accordingly.
Dated at Kisii this 7th day of January, 2020.
Joseph M. Were.................................................Chairperson
Ocharo Kebira...........................................................Member
Annette Gikuya..........................................................Member