https://new.kenyalaw.org/akn/ke/judgment/kehc/2026/9943

Kenya Women Microfinance Bank v Kang'ethe & another (Civil Appeal E001 of 2024) [2026] KEHC 9943 (KLR) (2 July 2026) (Judgment) Neutral citation: [2026] KEHC 9943 (KLR) Republic of Kenya In the High Court at Malindi Civil Appeal E001 of 2024 BK Njoroge, J July 2, 2026 Between Kenya Women Microfinance Bank Appellant and Josphat Mwangi Kang'ethe 1st Respondent Virginia Kanugu Baranya 2nd Respondent (An appeal from the Judgment and Decree of the Chief Magistrate’s Court at Malindi (Hon. E. K. Usui, CM) in Civil Suit No. 97 of 2018 delivered on 12th February 2024) Judgment 1.This Judgment arises out of the judgment of the Learned Chief Magistrate, Hon. E. K. Usui, delivered on 12th February 2024. The Trial Court ruled in favour of the 1st Respondent (the Plaintiff below). It granted a permanent injunction stopping the Appellant Bank from selling his goods. It also discharged him from any liability regarding a Ksh. 300,000 loan facility. 2.The Appellant Bank being aggrieved by this decision has filed this appeal. Despite being served, the Respondents did not file any opposition or submissions to the Appeal. The 1st Respondent’s participation appears limited to responding to the interlocutory application that sought a stay pending appeal. The orders of stay of execution granted on 12th march, 2024 were confirmed on 9th July, 2024. This appeal is therefore unopposed. Background Facts 3.The 1st Respondent, Josphat Mwangi Kang'ethe, and the 2nd Respondent, Virginia Kanugu Baranya, were married in 1999. In 2014, they approached the Appellant Bank and successfully applied for a business loan of Ksh. 300,000. The 2nd Respondent held an account with the Appellant Bank. The 1st Respondent guaranteed this first loan using his shop merchandise and household assets as collateral. This first loan was fully and successfully paid back by June 2016. 4.Trouble began later in 2016. The Respondents are said to have separated and gone separate ways. The 2nd Respondent went back to the Bank and applied for a second "top-up" loan of Ksh. 300,000. The Bank disbursed the money into her account in August 2016. The 2nd Respondent defaulted on the instalments. 5.In April 2018, the Bank’s recovery agents went to the 1st Respondent’s shop. They threatened to attach and sell his merchandise to recover the outstanding loan balance. He was shocked. He insisted he never applied for, knew about, or signed any paperwork to guarantee his estranged wife's second loan. He claimed his signature on any loan documents or Chattels Mortgage was a pure forgery. 6.He sued both his estranged wife and the Bank. The Bank filed a Statement of Defence and a Counterclaim for Ksh. 216,082.53.It asserted that he had willingly signed a Chattels Mortgage dated 1st November, 2017 to secure the second loan. 7.The Trial Court heard the testimonies of Josphat Mwangi Kangethe (PW1) and the Bank's Branch Manager, Umazi Chaka (DW1). 8.Upon evaluating the evidence, the Trial Court made crucial findings from the Bank’s own documents:i.The Loan Application Form: On cross-examination, DW1 admitted that the 1st Respondent’s name and signature did not feature anywhere as a guarantor on the actual loan form. Instead, the form listed one Gitonga Kawira Jerusha as the guarantor.ii.The Chattels Mortgage: The front page listed Josphat's items, but the execution page of the document did not bear his signature at all. 9.Based on these fatal findings, the Learned Trial Magistrate held that the 1st Respondent was a complete stranger to the second loan contract. The Trial Court allowed his suit, granted the permanent injunction, and dismissed the Bank's Counterclaim. 10.This has triggered this Appeal. 11.The Bank filed seven grounds of appeal, as follows;a.That the Learned Trial Magistrate erred in both law and fact by holding that the Respondent had established a prima facie case disregarding the fact that the Respondent had not tendered any evidence to support the particulars of fraud and had not discharged his burden of proof to establish fraud at the requisite standard so as to vitiate a valid Chattels Mortgage Instrument.b.That the Learned Trial Magistrate erred both in law and fact by failing to appreciate that a Chattels Mortgage Instrument is an independent self executing security instrument creating binding obligations between the parties and erred by holding that the Plaintiff did not execute the said instrument as a basis for dismissing the Appellant's counterclaim against the Respondent.c.That the Learned Trial Magistrate erred both in law and fact by failing to consider the totality of the evidence on record including the 1st Respondents' admission in its Statement of Defence dated 21st May 2018 which corroborated the Appellant's position that the 1st Respondent willingly consented to guarantee the second loan by allowing his goods being to be used as collateral.d.That the Learned Trial Magistrate erred in law and fact and misdirected herself by failing to appreciate the rights of the Appellant under the Chattels Mortgage Instrument and thus issued a manifestly unjust decision.e.That the Learned Trial Magistrate erred in law and fact by considering extraneous matters of unproven marital separation between the 1st Respondent and his wife, the 2nd Respondent as a basis of determining the loss allegedly suffered by the 1st Respondent hence arriving at an erroneous finding with the effect of rewriting terms of a consensual bargain to discharge the Respondents from a debt.f.That the Learned Trial Magistrate erred in law and fact in delivering judgment on 12th February 2024 in the absence of the Appellant and without prior notice of the delivery of judgment to the Appellant after previously indicating that the Judgment would be delivered on November 1, 2023.g.That the Learned Trial Magistrate erred in law and fact by placing greater weight on the 1st Respondent's uncorroborated claims of matrimonial strife and pre-contractual documentation while failing to place greater weight on the evidence on record which pointed to the clear and irrefutable fact that the Respondents jointly and severally stood to benefit by colluding and concocting a matrimonial strife and the judgment of the court unfairly and unjustly deprived the Appellant loan funds contrary to equity and the law. 12.The grounds can be summarised into five (5) main complaints:i.The Learned Trial Magistrate erred by holding that the 1st Respondent had established a case of fraud without producing a forensic document examiner's report.ii.The Learned Trail Magistrate failed to recognize that a Chattels Mortgage is a self-executing contract and erred in finding that the 1st Respondent did not sign it.iii.The Learned Trial Magistrate relied on extraneous family issues (matrimonial strife) to release the Respondents from a commercial debt.iv.The Learned Trial Magistrate erred in failing to reach a finding that the Appellant had proved its Counterclaim.v.The Learned Trial Magistrate erred in delivering the Judgement other than on the scheduled date. 13.The Appellant seeks the following reliefs in this Appeal;a.The Appeal be allowed;b.The Judgment delivered by the Learned Magistrate on the 12th February 2024 be set aside in totality and in its place, Judgment be made allowing the Appellant's counterclaim as against the 1st Respondent as prayed;c.The Appellant be awarded costs of this Appeal; andd.Any other suitable relief. Issues for Determination 14.The Court has considered the Memorandum of Appeal, the Record of Appeal and the submissions filed by the Appellant in absence of any submissions by the Respondents. 15.The Court frames four (4) issues for determination.a.Whether Josphat Mwangi Kang'ethe executed the Chattels Mortgage or stood as a guarantor for the second loan facility.b.Whether the 1st Respondent was entitled to a mandatory injunction.c.Whether the Bank proved its Counterclaim to entitle it to recover the loan arrears from Josphat Mwangi Kang'ethe.d.Whether delivering a judgement on a date other than that scheduled affected the outcome thereof. Analysis 16.This is a first appeal. The duty of a first Appellate Court is now well settled. It must reconsider the evidence, evaluate it afresh and draw its own conclusions. This is all the while bearing in mind that it neither saw nor heard the witnesses testify. See Selle & Another v Associated Motor Boat Co. Ltd & Others [1968] EA 123 and Peters v Sunday Post Ltd [1958] EA 424. Whether Josphat Mwangi Kang'ethe executed the Chattels Mortgage or stood as a guarantor for the second loan facility. 17.A contract of guarantee is a serious legal obligation. It makes a third party secondarily liable if the primary borrower defaults. For a bank to enforce a guarantee or a chattels mortgage against a party, it must show that the party actually signed the contract. That goes back to the essential elements of a contract. 18.Looking at the record, the Bank's own witness, DW1 (Umazi Chaka), said the following during cross-examination;“The chattels instrument was executed on 1/11/2017. It was one and a half year after the loan was taken....Her guarantor is herself and Gitonga and not the 1st Defendant. The loan agreement was witnessed by Elizabeth Wangari. The Plaintiff is not the guarantor on the loan.From page 26 the loan agreed states the name of person who was to guaranteed the loan. It was Virginia and Gitonga. The Guarantors signed the loan agreement for execution of the Chattels mortgage.The borrowers were present even agreement was signed. It is her witness. The witness is not in Court." 19.If the Bank's own Manager explicitly states under oath that the loan application form does not name the 1st Respondent as a guarantor, on what basis can the Bank turn around and demand the money from him? 20.The Bank submits that the Lower Court should have thrown out the 1st Respondent’s case because he did not bring a forensic handwriting expert to prove forgery. The Bank misses the point. The primary argument by the 1st Respondent before the Trial Court was not just that his signature was forged, but that he was entirely absent from the transaction. 21.The Learned Trial Magistrate physically looked at the documents produced by the Bank. The Trial Court observed that the 1st Respondent’s signature was completely missing from the critical execution pages of the security documents. A fact finder does not need a handwriting expert to see a blank signature space or absent signatures. Forgery only needs to be proved when there is an existing signature suspected to be fake. Where there is no signature at all, there is nothing to examine. 22.In George Ndege Okello v K-Rep Bank Limited & Another [2012] eKLR, it was held that for a Chattels Mortgage to be valid and enforceable, it must be validly executed by the parties. The 1st Respondent maintained that he did not execute this document. 23.This Court notes that there were two transactions. The first loan was disbursed and fully repaid. The 1st Respondent owns up to this. However, as to the second loan the 1st Respondent maintains he did not sign up for it. He also did not allow his name to be used or his property to be the collateral. 24.The Bank also complains that the Learned Trial Magistrate allowed matrimonial separation stories to dilute a commercial bargain. This Court notes that the 1st Respondent’s separation from his wife was not an excuse to evade a debt. It was strong circumstantial evidence. It explained why he would have no earthly reason to walk into a bank and pledge his livelihood for a woman he was no longer talking to. The contract was simply non-existent as far as he was concerned. 25.This Court has taken note of the submissions made in this Appeal that the Chattels Mortgage document bears a wet or physical signature of the 1st Respondent. That it was witnessed by an Advocate. However, in view of the admission by DW1 that this Chattels Mortgage document was signed a year and a half after the disbursement of the loan, this Court cannot fault the Trial Magistrate. An independent review of the evidence leads this Court to a conclusion that this Chattels Mortgage document may as well have been for the 1st loan which was fully repaid. 26.In view of the denial by the Plaintiff of the loan, it was incumbent upon the Appellant to have led evidence to show that the Plaintiff did sign the document and it related to the second loan. This Court warns itself that a case has to be proved on a balance of probabilities. The Court warns itself that it would make no commercial sense to sign up to a Chattels Mortgage when a person was not a party or even a guarantor. The Court is persuaded that the 1st Respondent did not sign this Chattels Mortgage for the 2nd loan. The facts point to having signed for the 1st loan which was fully paid for. It may be that the 2nd Respondent took advantage of the delay in registration, to attempt to, and did use it for the 2nd loan application. She did not involve the 1st Respondent as they were estranged. Whether the 1st Respondent was entitled to a mandatory injunction. 27.The Court having reached the conclusion that the 1st Respondent did not pledge his good, the Bank was not entitled to seize them. 28.In absence of a duly signed loan guarantee and with a cloud over the Chattels Mortgage, the 1st Respondent had established a prima facie case. It matters not that the Bank can be able to repay the loss. The Bank could only proceed to seize and sell the goods if they had been correctly and legally pledged. As to the balance of convenience, it lay in protecting the Plaintiff’s goods from unlawful seizure.Once more the Court does not fault the Trial Court’s summation of facts, its analysis and conclusion reached. 29.The Trial Court also correctly applied the decision of Maher Unissa Karim v Edward Oluoch Odumbe [2015] KEHC 4029 (KLR). A Court should not grant a mandatory injunction as a final order if it is in doubt. As this Court is similarly not in doubt, the decision was well taken. Whether the Bank proved its Counterclaim to entitle it to recover the loan arrears from Josphat Mwangi Kang'ethe. 30.. The Appellant wants this Court to award it Kshs. 216,082.53 against he 1st Respondent. Since this Court has established that he never signed the guarantee or the Chattels Mortgage for the second loan, the claim collapses automatically. 31.In law, there is a sacred principle called privity of contract. A contract cannot impose obligations on a person who is not a party to it. You cannot force a person to pay a debt they never consented to secure. The Bank can pursue the actual borrower, Virginia Kanugu Baranya, but it cannot touch the 1st Respondent’s goods in his shop. The loan was secured by personal guarantees of persons who are known or named. They can be pursued to the extent that the law requires and allows as per the contracts signed. The Learned Trial Magistrate was perfectly right to dismiss the Counterclaim. Whether delivering a judgement on a date other than that scheduled affected the outcome thereof. 32.This Court notes that the Judgement was to be delivered on 01/11/2023. However, it was delivered four months later on 12/02/2024. There appears to have been no notice to the parties. 33.This would severely compromise the litigation timelines. A party is entitled to have adequate notice of the date of delivery of a judgement or ruling. This is because certain events arise after delivery of a decision. A case in point is the appellate process. An appeal has to be filed within a limited timeline. Failure to notify parties may compromise this period leading to claims of unfairness, prejudice and injustice. It may also affect the process of execution. 34.The law requires that parties be notified of the date of delivery of decisions. 35.The Court has taken note of the proceedings herein and noted that the Appellate process was not compromised.This Court differently constituted did grant a stay of execution pending Appeal. The Appellant has not established any injustice, prejudice or unfairness that would lead to invalidation of the decision. 36.Having said so, this Court notes that Ngoso General Contractors Ltd v Jacob Gichunge [2005] KECA 299 (KLR) is good law on this issue. 37.The Court has reached a determination that the Appeal is not merited for the reasons stated, based on this Court’s independent review of the evidence. 38.As to costs, the same ordinarily follow the event and lie at this Court’s discretion. This Court notes the Appeal was not opposed.The fair order is that there shall be no orders as to costs. Determination 39.The Appellant’s Appeal is HEREBY dismissed for lack of merits. 40.There shall be no orders as to costs. 41.It is so ordered. DATED, SIGNED AND DELIVERED AT MALINDI THIS 2ND DAY OF JULY, 2026NJOROGE BENJAMIN K.JUDGEIn the presence of:Miss Orago holding brief for Mr. Odhiambo for the Appellant.N/A for the 1st Respondents.N/A for the 2nd Respondent.Mr. John Paul - Court Assistant.