[2025] KEHC 4584 (KLR)

Kihoi v Faulu Microfinance Bank Limited (Civil Appeal 9 of 2024) [2025] KEHC 4584 (KLR) (3 April 2025) (Judgment)

Neutral citation: [2025] KEHC 4584 (KLR)

Republic of Kenya

In the High Court at Thika

Civil Appeal 9 of 2024

FN Muchemi, J

April 3, 2025

Between

Mary Muthoni Kihoi

Appellant

and

Faulu Microfinance Bank Limited

Respondent

(Being an Appeal from the Judgment and Decree of Hon. C. A. Otieno Omondi (SPM) delivered on 17th May 2023 in Ruiru SPMCC No. E238 of 2021)

Judgment

Brief facts 1. This appeal arises from the judgment of Ruiru Senior Principal Magistrate in SPMCC No. E238 of 2021 whereby the trial court dismissed the appellant’s suit for lack of merit. The appellant was found to have defaulted in repayment of the loan to the respondent contrary to her claim of having fully paid.

2. Dissatisfied with the court’s decision, the appellant lodged this appeal citing 11 grounds of appeal summarized as follows:-a.The learned trial magistrate erred in law and in fact in finding that the appellant had not proved her case.b.The learned trial magistrate erred in law and in fact by failing to find that the respondent ought to render the full statements of accounts in respect of the appellant’s loan account from the date the loan was deposited to date.c.The learned trial magistrate erred in law and in fact by failing to find that the appellant’s land parcel should be discharged as the loan charged for was paid for in full.d.The learned trial magistrate erred in law and in fact by finding that the appellant was issue with other loans when no evidence was tendered in court to prove that the said loans were deposited in her account.e.The learned trial magistrate erred in law and in fact by failing to consider that the interest rates imposed by the respondent were higher than the primary loan.

3. Parties disposed of the appeal by way of written submissions.

The Appellant’s Submissions 4. The appellant submits that she received a loan facility of Kshs. 3,500,000/- from the respondent and diligently repaid the same. Pursuant to the loan agreement, she charged her property land parcel LR. No. Ruiru/ruiru East/block 2/6603 as security for the said loan. In the year 2020, the appellant submits that she had financial constraints and could not repay her monthly instalments. She wrote a letter to the respondent requesting for a 90 days moratorium on both principal and interest to which the respondent agreed that she makes partial payments to repay the same. The respondent sent her an offer letter dated 14th October 2016 for loan rescheduling the loan repayments. The appellant says she executed the agreement believing that it was indeed a restructure not knowing that the respondent was acting in bad faith by considering the same as a refinancing. The appellant submits that the respondent alleged that it issued to the appellant a loan facility of Kshs. 3,088,353/- which the lender later alleged that the respondent had applied for a further loan which was given to her. The appellant further argues was incorrect and misleading. Further the appellant argues that the respondent could not prove that she applied for any further loan and the document issued and signed was for loan rescheduling.

5. The appellant further produced in evidence an offer letter dated 8th December 2020 which read restructure and the same was sent to her after she had requested the respondent for a 3 month’s moratorium on the loan. The appellant further produced statements from her account number 100xxxxxx showing payment of the loan instalments to the loan accounts which kept on being varied by the respondent. The appellant argues that the account showed clearly all the deductions to her loan account which repayments were not contested by the respondent. The appellant further argues that the respondent acted in bad faith as she had requested for statements of her account from the respondent, showing her payments towards servicing her loan, but the respondent failed to provide the sttements.

6. The appellant submits that the respondent subjected the loan facility to illegal penalties, unreasonable interest rates on the outstanding balances and other strange debits unknown to her by claiming that two or more loan facilities had been granted which was not true. The appellant therefore states that the trial court failed to consider the letters she wrote to the respondent seeking to restructure her loan and not request for a further loan. The appellant refers to Section 107 of the Evidence Act and submits that she tendered sufficient evidence to prove her case on a balance of probability.

7. The appellant submits that she repaid the full loan amount and made a lump sum payment of Kshs. 500,000/- on 28th May 2019 to account number 100xxxxxx, which reflects cumulatively being recovered from her account on the same date. The statement rendered by the respondent also confirmed the recovery of the same loan amount being paid to her account. In the statement produced by the respondent, it showed clearly that as at December 2020, she had paid a total of Kshs. 5,515,829. 02/-, which confirmed that she had cleared her loan arrears for the loan she had applied for and was advanced to her.

8. The appellant submits that she had made efforts to obtain her full account statement from the respondent who refused to do so with malicious intent to frustrate her and conceal the same. The appellant further argues that she disputed applying and receiving the alleged further loans when the bank claimed that she still had arrears and requested the respondent to avail her account statements to show the amount of money she had paid but the respondent rejected the request. Instead the respondent went ahead and appointed M/s Watt Auctioneers to sell her property through public auction on 24th March 2022.

9. The appellant submits that she testified that she only applied for a reschedule of her initial loan and not a refinancing of a further loan. The appellant submits that the respondent in their testimony alleged that she was issued with a further loan of Kshs.3,088,353/-However the document that she executed read that it was a loan rescheduling. There was no proof that she applied for a further loan or had agreed with the respondent to advance to her a further loan. The appellant submits that she tendered evidence that she had instructed the respondent to restructure her loan so that she would pay lesser instalments due to financial difficulties. The respondent failed to adduce any evidence of the facilities being deposited into her account and instead tricked her to sign a reschedule document.

10. The appellant relied on the offer letter executed on 8th December 2020 which was issued after her request for a moratorium of 3 months in respect of the loan. The respondent claimed that the offer was made following her letter dated 2/10/2020 which she denied writing.

11. The appellant submits that she adduced evidence that she fully repaid her loan. According to her, the respondent did not establish that they deposited the said monies to her account out of any agreement between the parties. Further, the respondent did not produce any application by the appellant for a further loan. The respondent acted in bad faith by making claims of other penalties, interests and other unknown loan arrears in an effort to justify putting up her land parcel for sale. The appellant argues that once the loan was fully paid, the respondent ought to have discharged the land parcel but this did not happen because it was malicious intention of putting up the land for auction.

12. The appellant further submits that she testified that the land parcel was matrimonial property which would have prejudiced her family as they lived within the land parcel.

13. The appellant submits that she took out a loan facility of Kshs. 3,500,000/- which she was to repay as a total of Kshs. 5,418,679. 99/- together with interest. The appellant argues that the terms of the alleged loan were unfair, unjust and exaggerated as the purported second loan was calculated with an interest of 23% p.a payable in 84 months meaning that she would end up paying a total of Kshs. 6,238,428/- which was twice the amount of loan issued to her. The appellant further argues that the rates were unfair and fraudulent and a breach of the respondent’s duty to her.

The Respondent’s Submissions. 14. The respondent relies on Section 107(1) of the Evidence Act and the case of Manchester Outfitters Limited vs Tailors and textiles Workers Union [2024] KECA 304 (KLR) and submits that the appellant failed to prove that she fully repaid the loan including interest. The respondent argues that the appellant produced account statements purporting they were her loan accounts. The statements showed that her loan account was AAxxxxxx and the accounts the appellant produced were her personal accounts. The respondent argues that the said statements of her personal account were irrelevant and could not be used in support of her case. Regarding the lumpsum payment of Kshs. 500,000/- made on 27th May 2018, the respondent submits that the same was acknowledged but was insufficient to clear the outstanding loan balance.

15. The respondent submits that the appellant obtained a further loan of Kshs. 3,088,353/= as evidenced in the letter of offer dated 14th October 2016. The loan was repayable in monthly instalments of Kshs. 74,267/- with interest set at 23% reducing balance per annum. It was to be secured by an existing legal charge over land title deed number Ruiru/ruiru East Block 2/6603. The offer letter clearly indicates that the purpose of the facility was loan rescheduling. Under the terms of the further loan, it was agreed that the outstanding loan borrowed in August 2014 would be cleared from the disbursement of the loan. The respondent argues that although the appellant claims that the further loan was issued to her without her consent, she duly signed each page of the letter of offer dated 14th October 2016 thus acknowledging the facility. The appellant did not challenge the authenticity of the offer letter and neither did she tender any evidence to show that the same was not signed by her or was forged.

16. The respondent submits that the appellant approached them through her letter dated 2nd October 2020 to request for a loan restructure. By letter of offer dated 8th December 2020, the respondent offered her the same at an amount of Kshs. 2,650,000/- payable in monthly instalments of Kshs. 55,746/- and to be secured by the existing legal charge over her parcel of land. The said offer letter was duly signed by the appellant and she did not challenge its authenticity.

17. The respondent relies on the cases of Assets Recovery Agency vs Boru & 3 Others [2023] KECA 1570 (KLR) and Vijay Morjaria vs Nansingh Madhusingh Darbar & Another [2000] eKLR and submits that the appellant did not allege any form of fraud on its part in her pleadings and she did not plead and prove the same.

18. The respondent relies on the case of M. A. Consulting Group Ltd vs Kibiru [2024] KECA 667 (KLR) and submits that the appellant wanted her property to be discharged alleging that she had repaid the loan amount in full yet she failed to produce bank statements or mpesa statements to prove the alleged payments. The respondent argues that the judgment of the trial court dismissed the appellant’s entire case before the prayer for the statement of accounts was granted. The respondent thus argues that it was not obligated by law to render full statements of accounts as the appellant failed to discharge the burden of proof.

19. The respondent submits that it did render the appellant a loan statement on her third request, a fact admitted by the appellant in her own testimony.

20. The respondent submits that the appellant in her submissions purported to challenge the authenticity of the subsequent offer letters alleging that they were obtained under special advantage and undue influence. The respondent refers to the case of Daniel Toroitich arap Moi vs Mwangi Stephen Muriithi & Raymark Limited [2014] KECA 642 (KLR) and submits that submissions cannot take the place of evidence.

21. The respondent relies on Section 102(1) of the Land Act and submits that a charge can only be released when the borrower has fulfilled all the obligations secured by the charge. Having failed to prove to the required standard, full repayment of the outstanding loan balance, the appellant lacked any legal basis to claim discharge of the security.

22. The respondent further submits that the appellant was not entitled to the equitable relief of an injunction as she did not repay fully her loan amount and furthermore the statements she produced in court were of her personal account and not the loan account, thus irrelevant.

23. The respondent refers to the case of Godfrey Ngumo Nyaga vs Housing Finance Company of Kenya Limited Civil Appeal No. 134 of 1987 (unreported) and submits that all the required notices under Section 90 and 96 of the Land Act were sent to the appellant and therefore it had a right to exercise its statutory power of sale.

24. The respondent further relies on the case of Jopa Villas LLC vs Overseas Private Investment & 2 Others (2009) eKLR and submits that the appellant has failed to demonstrate any errors in the trial magistrate’s judgment.

Issue for determination. 25. The main issue for determination is whether the appellant proved her case to the required standard.

The Law 26. Being a first Appeal, the court relies on a number of principles as set out in Selle and Another vs Associated Motor Boat Company Ltd & Others [1968] 1EA 123:“…..this court must reconsider the evidence, evaluate it itself and draw its own conclusions though it should always bear in mind that it has neither seen nor heard the witnesses and should make due allowance in this respect. In particular,, this court is not bound necessarily to follow the trial judge’s findings of fact if it appears either that he has clearly failed on some point to take into account of particular circumstances or probabilities materially to estimate the evidence.”

27. In Gitobu Imanyara & 2 Others vs Attorney General [2016] eKLR the Court of Appeal stated that:-An appeal to this court from a trial by the High Court is by way of retrial and the principles upon which this Court acts in such an appeal are well settled. Briefly put, they are that this court must reconsider the evidence, evaluate it itself and draw its own conclusions though it should always bear in mind that it has neither seen nor heard the witnesses and should make due allowance in this respect.

28. From the above cases, the appropriate standard of review to be established can be stated in three complementary principles:-a.That on first appeal, the Court is under a duty to reconsider and re-evaluate the evidence on record and draw its own conclusions;b.That in reconsidering and re-evaluating the evidence, the first appellate court must bear in mind and give due allowance to the fact that the trial court had the advantage of seeing and hearing the witnesses testify before it; andc.That it is not open to the first appellate court to review the findings of a trial court simply because it would have reached different results if it were hearing the matter for the first time.

Whether the appellant proved her case to the required standard. 29. It is trite law that he who alleges must prove. Section 107 (1) of the Evidence Act, Cap 80 Laws of Kenya, provides that:-Whoever desires any court to give judgment as to any legal right or liability dependent on the existence of facts which he asserts must prove that those facts exist.

30. This degree of proof is well enunciated in the case of Miller vs Minister of pensions [1947] cited with approval in D.T. Dobie Company (K) Limited vs Wanyonyi Wafula Chabukati [2014] eKLR where the court stated:-That degree is well settled. It must carry a reasonable degree of probability, but not so high as is required in a criminal case. If the evidence is such that the tribunal can say ‘we think it more probable than not’, thus proof on a balance or prepodence of probabilities means a win however narrow. A draw is not enough. So, in any case in which the tribunal cannot decide one way or the other which evidence to accept, where both parties’ explanations are equally unconvincing the party bearing the burden of proof will lose, because the requisite standard will not have been attained.

31. The appellant argued the trial court erred by finding that she did not discharge the burden of proof yet she fully repaid her loan to the respondent and therefore her land parcel LR. No. Ruiru/ruiru East Block 2/6603 ought to be discharged. The respondent argues that the appellant took another loan in addition to the loan facility obtained in August 2014 for a sum of Kshs. 3,088,353/- in October 2016 and the loan was restricted as indicated in the letter of offer dated 8th December 2020 which showed that the loan balance as Kshs. 2,650,000/.

32. From the record, the appellant obtained a loan from the respondent for a sum of Kshs. 3,500,000/- on 21st August 2014. The loan was to be repaid in monthly installments of Kshs. 76,320/- and loan was secured by a charge over the appellant’s property LR. No. Ruiru/ruiru East Block 2/6603.

33. On further perusal, there is a letter of offer dated 14th October 2016 whose purpose has been indicated as loan rescheduling and offers an amount of Kshs. 3,088,353/- payable in 84 months at an interest rate of 23% reducing balance per annum. The said letter of offer indicated in Clause 1. 1.3 that the loan was to be repaid in monthly installments of Kshs. 74,267/- in 84 months, a fact admitted by the appellant in her testimony. The security was listed as an existing first legal charge over L.R. No. Ruriu/ruiru East Block 2/6603 to cover the initial amount of Kshs. 3,500,000/- and a deed of assignment of rent over the same suit property. Furthermore, one of the conditions in the said letter of offer provides that the outstanding Faulu loan account number 210xxxxxx was to be cleared from the disbursement of the loan in the said letter of offer. The said letter of offer has been executed by the appellant on every page and witnessed by an advocate on 24/10/2016. In her evidence, the appellant did not dispute that she signed the said letter of offer or challenged its authenticity.

34. On further perusal of the record, there is a handwritten letter by the appellant dated 2/10/2020 titled “Restructure of Loan” whereby the respondent requested the appellant to clear her loan arrears in the process of restructure. In response, the respondent wrote to the appellant vide its letter of offer dated 8th December 2020 where the respondent offered a restructure loan of Kshs. 2,650,000/- payable within 55 months at monthly installments of Kshs. 55,746/-. The rate of interest was set at 1. 67% per month reducing balance over the life of the loan. One of the conditions of the loan restructure was the outstanding Faulu Loan Account Number AA1xxxxxx to be cleared upon the loan drawdown and evidence to be provided. The said letter of offer has been executed on every page by the appellant and witnessed by her advocates. Similarly, the appellant in her evidence at the trial court did not challenge its authenticity nor did she dispute that her signature was a forgery. In fact, it is only at the appellate stage that the appellant argues that the letters of offer dated 14th October 2016 and 8th December 2020 were given to her by the respondent with malicious intent to ensure that it was impossible for her to redeem her land which the respondent would dispose of. The appellant has further argued that she did not receive any of the loan amount and the respondent did not produce any document to show that it disbursed the loan to her. The allegations made by the appellant amount to fraud on the part of the respondent.

35. It is noted that the plaint dated 30th May 2021 and amended on 28th June 2022 that the appellant did not plead or list the particulars of fraud on part of the respondent. The standard of proof in alleging fraud was discussed in the case of Vijay Morjaria vs Nansingh Madhusingh Darbar & Another [2000] eKLR where the court held:-It is well established that fraud must be specifically pleaded and that particulars of fraud alleged must be stated on the face of the pleading. The acts alleged to be fraudulent must be of course set out, and then it should be stated that these acts were done fraudulently. It is also settled that fraudulent conduct must be distinctly alleged and as distinctly proved, and it is not allowable to leave fraud to be inferred from the facts.

36. The Court of Appeal in the case of Jephther O. Opande vs Mary Atemo Gathiriga [2019] eKLR stated that the standard or burden of proof where fraud is alleged in civil matters has been held in decided cases to be higher than the ordinary standard of balance of probabilities. Additionally the same court in Vivo Energy Kenya limited vs Maloba Petrol Station & 3 Others [2015] eKLR it was held that where fraud is alleged, it must be specifically pleaded and particulars thereof given. The bare allegations out forward by a party won’t suffice.

37. From the foregoing, the appellant did not specifically plead fraud nor did she list the particulars of fraud on the part of the respondent. Furthermore, by virtue of the fact that she executed all the three letters of offer and had them witnessed by an advocate shows that she was offered three loan facilities by the respondent. The appellant did not dispute her signature or challenge the authenticity of the three letters of offer but seek to challenge them on appeal, which is an afterthought. The appellant further challenged the hand written letter dated 2/10/2020 produced in evidence but she did not dispute the letter through evidence. In any event, the letters of offer dated 21st August 2014, 14th October 2016 and 8th December 2020 show that the respondent offered her three facilities to the appellant.

38. The appellant argues that she paid back the loan and even made a lumpsum amount of Kshs. 500,000/- on 28th May 2019 which cleared the loan. I have perused the bank account statements of account number 10xxxxxx produced by the appellant and noted that the account, number shows that the funds were deposited in the appellant’s personal account and not in the loan account. The statement indicates the appellant made a payment of Kshs. 500,000/- to her loan on 28th May 2019 in regard to her personal account.

39. On further perusal of the record, the respondent provided the appellant’s loan account statement which is loan account number AA2xxxxxx and the payments are made from her personal account number 10xxxxxxx. The statement produced by the respondent begins from 11th December 2020 showing a loan disbursement of Kshs. 2,444,625/- which proves that the appellant received the loan amount pursuant to the letter of offer dated 8th December 2020. The statement further shows the amounts disbursed to repay the loan whereby the appellant has not been repaying the loan from 9th March 2021. Thus, even if the amount of Kshs. 500,000/- was captured as repayment of the loan, the amount was made in the year 2019 at 11th August 2022. The outstanding loan at that time was Kshs. 4,110,834. 36/- and the amount deposited was not sufficient to offset the outstanding loan. In my view, the appellant fell short of proof that she repaid the loan fully.

40. The appellant has further argued that the interest charged on the purported second loan was unfair, unjust and exaggerated as the same was set at 23% per annum payable in 84 months meaning she would end up paying a total of Kshs. 6,238,428 which is twice the amount of the loan issued to her. It is trite law that a court cannot rewrite a contract between parties. In National Bank of Kenya Ltd vs Pipeplastic Samkolit (K) Ltd [2002] 2 EA 503 the court stated:-A court of law cannot rewrite a contract between parties. The parties are bound by the terms of their contract, unless coercion, fraud or undue influence are pleaded and proved. There was not the remotest suggestion of coercion, fraud or undue influence in regards to the terms of the charge. As was stated by Shah JA in the case of Fina Bank Ltd vs Spares and Industries Ltd [2000] 1 EA 52: “It’s clear beyond peradventure that save those special cases where equity might be prepared to relieve a party from a bad bargain, it is ordinarily no part of equity’s function to allow a party to escape from a bad bargain.

41. The letter of offer dated 14th October 2016 stipulated that interest shall be calculated at the rate of 23% reducing balance per annum. Furthermore, the clause provided further that the respondent reserves the right to amend interest charges after one month notice to the borrower. The letter of offer was duly executed by the appellant and witnessed by an advocate. The letter of offer forms the basis of contract between the appellant and the respondent and this court cannot rewrite the terms of the contract.

42. The appellant has argued that the suit property is matrimonial property and she lives there with her family thus she risks losing her home. Notably, from the evidence of the court below the appellant did not raise that issue in her pleadings or her oral evidence in court but in her submissions. It is trite law that submissions are not evidence. In Daniel Torotich arap Moi vs Mwangi Stephen Muriithi & Another [2014] eKLR the court held:-Submissions cannot take the place of evidence. The 1st respondent had failed to prove his claim by evidence. What appeared in submissions could not come to his aid. Such a course only militates against the law and we are unable to countenance it. Submissions are generally parties’ “marketing language” each side endeavoring to convince the court that its case is the better one. Submissions, we reiterate, do not constitute evidence at all. Indeed there are many cases decided without hearing submissions but based only on evidence presented.

43. The appellant has further argued that the respondent declined to issue her with the loan statement for her account. On perusal of the trial record, the appellant admitted on cross examination that she requested for a loan statement from the respondent and she was given the same upon her third request. Based on the fact that the appellant contradicted herself, the court below declined to grant orders directing that the respondent render full statement of accounts in respect of her account number 10xxxxxx from the date of the loan to date. It is my considered view that the appellant was furnished with a copy of her loan statement and was aware of her outstanding amount.

Conclusion 44. In view of the foregoing, I find that the appellant failed to satisfy the court below on the balance of probabilities that she deserved the orders sought.

45. It is my finding that the trial magistrate did not err in the dismissal of the case.

46. I find no merit in this appeal and it is dismissed with costs.

47. It is hereby so ordered.

JUDGMENT DELIVERED VIRTUALLY, DATED AND SIGNED AT THIKA THIS 3RD DAY OF APRIL 2025. F. MUCHEMIJUDGE