https://new.kenyalaw.org/akn/ke/judgment/kehc/2026/10149

National Bank of Kenya Ltd v Flexilease Ltd & another (Commercial Case E167 of 2019) [2026] KEHC 10149 (KLR) (Commercial and Tax) (19 June 2026) (Judgment) Neutral citation: [2026] KEHC 10149 (KLR) Republic of Kenya In the High Court at Nairobi (Milimani Commercial Courts) Commercial and Tax Commercial Case E167 of 2019 MN Mwangi, J June 19, 2026 Between National Bank Of Kenya Limited Plaintiff and Flexilease Limited 1st Defendant Yh Wholesalers Limited 2nd Defendant Judgment 1.In a Plaint dated 29th May 2019, the plaintiff’s claim against the defendants, jointly and severally, is for judgment in the sum of (a) Kshs.19,795,292.99, (b) costs of the suit, (c) interest at Court rates on (a) and (b) from April 2018 until settlement in full; and (d) any other relief this Honourable Court may deem fit to grant. 2.The plaintiff claims that the 1st defendant applied for and was granted a loan facility for the sum of Kshs.54,714,924.00, payable in 36 monthly instalments at an annual interest of 16.5%, for the purpose of purchasing twelve (12) motor vehicles. The plaintiff states that the 1st defendant breached the contract by failing to pay the monthly instalments and in October 2014, the plaintiff repossessed the 1st defendant’s motor vehicles and motorcycles used as security for the facilities. 3.The plaintiff states that it recovered the sum of Kshs.24,220,000/=, leaving a balance of Kshs.19,795,292.99 which continues to accrue interest and penalties, which it now claims. The plaintiff states that 2nd defendant was a Guarantor for the loan facility and it is therefore liable to pay the loan. The plaintiff asserts that it issued Demand Notices to the defendants, who neglected and ignored the same. The plaintiff urges this Court to enter judgment as against the defendants jointly and severally, as prayed in the Plaint. 4.The 1st defendant entered appearance. It also filed a statement of defence and counterclaim dated 5th August 2019. The plaintiff filed a reply to the defence and counterclaim dated 9th September 2019. 5.The matter proceeded to hearing, wherein the plaintiff called Edwin Lubanga, its Manager of Credit and Recoveries, who testified as PW1. He adopted his witness statement dated 6th February 2025 and produced the plaintiff’s bundle of documents dated 29th May 2019, as plaintiff’s exhibits 1-8 and the supplementary bundle of documents dated 25th August 2021, as plaintiff exhibits 9-20. 6.PW1 testified that on 9th April 2014, the Bank (plaintiff) issued a loan to the 1st defendant for the sum of Kshs.54,714,924.00 which was guaranteed by the 2nd defendant. He stated that the purpose of the loan was for the purchase of several assets. The interest rate was 16.5% per annum, and the loan was repayable in 36 months. He further stated that the said loan was secured by several items as indicated in the letter of offer. It was his evidence that the 1st defendant defaulted and the plaintiff issued demand letters, which the defendants did not comply with. He testified that the plaintiff valued the properties and a public auction was thereafter conducted. He stated that the plaintiff recovered some of the money, but a balance of Kshs 19,795,292.00, which continues to accrue interest and penalties, was not realized. 7.In the course of the proceedings, the 1st defendant’s Advocate stopped attending Court sessions, including on the date of the hearing of this case. The 2nd defendant neither entered appearance nor filed a statement of defence. An interlocutory judgment was entered against it on 26th May 2022. 8.This Court considered the fact that the 1st defendant had been served with a Hearing Notice as indicated in the affidavit of service sworn on 18th July 2025, showing that service was effected by way of registered post but it did not attend Court on the date set aside for hearing of this case. The Court also noted that the 1st defendant did not appoint another firm of Advocates after the law firm of Njoroge, Mwaura & Company Advocates ceased from acting for it. This Court proceeded to mark the 1st defendant’s case as closed. 9.The plaintiff filed written submissions through the law firm of Igeria Ngugi & Company Advocates dated 8th April 2016. Ms Ndirangu, learned Counsel for the plaintiff, submitted on two main issues; whether the plaintiff is entitled to the orders sought in the Plaint and whether the 1st defendant’s counterclaim is merited. 10.On the first issue, Ms Ndirangu submitted that in contracts, parties are bound by the terms therein and cited the Court of Appeal case in Civil Appeal 95 of 1999 National Bank of Kenya Ltd vs Pipeplastic Samkolit (K) Ltd & Anor, to buttress her point that the defendants did not plead coercion, fraud or undue influence. She stated that the Musharaka Ending-With-Ownership Financing Agreement, which appears at pages 9-30 of the plaintiff’s bundle of documents in Clause 2.7 gave the terms of the contract, in that the defendant was required to repay the loan, and that Clauses 9.1 and 9.14 gave the terms of default and the consequences thereof. 11.Ms Ndirangu stated that the 1st defendant admitted default in the statement of defence at paragraph 6 and attributed it to financial challenges in paragraph 16 of its counterclaim. She argued that the admission of the 1st defendant in the pleadings satisfies the condition set out in Civil Appeal 8 of 1982 Choitram & another v Nazari, where Madan JA., held that an admission has to be plain and obvious. Counsel stated that the 2nd defendant executed a Corporate Guarantee and Indemnity in favour of the plaintiff, which appears at pages 62-67 of the plaintiff’s bundle of documents, showing that the 2nd defendant is bound to pay the amount owed by the 1st defendant. 12.Counsel submitted that the 1st defendant failed to appear during the hearing of the case, making the plaintiff’s evidence uncontroverted and unchallenged. She cited the case of Shaneebal Limited v County Government of Machakos [2018] eKLR, which was affirmed in Omundi v Josemo Distributors (Civil Appeal E103 of 2022), to support her assertion. She submitted that the plaintiff had discharged its burden of proof on a balance of probabilities, and it is entitled to judgment in the sum of Kshs.19,795,292.99, with interest at Court rates from April 2018 until payment in full, with costs and interest thereof. 13.On the second issue, Counsel submitted that the counterclaim was explained in the witness statement of Ali Khala Mohamed which was never subjected to cross-examination, given the 1st defendant’s absence during the hearing of the case, and the same cannot be relied on. She cited Criminal Appeal 102 of 2017 Oliver Odari vs Republic, where the Court held that challenging the evidence by way of cross-examination is fundamental to the right to a fair trial as enshrined in Article 50(2)(k) of the Constitution. 14.Ms Ndirangu stated that the counterclaim was not supported by any document such as a valuation report, sale agreement, bank statement, accounting record or independent expert opinion, to substantiate the 1st defendant’s claim. She argued that the burden of proof which lay on the 1st defendant, was not discharged in accordance to Sections 107 and 108 of the Evidence Act. 15.She contended that the 1st defendant cannot claim that it was not issued with Notice, given that Clause 11 of the All-Asset Debenture expressly provides that secured “monies hereby secured shall become immediately due and payable without any demand protest or other notice of any kind all of which are expressly waived by the Company...”. She added that the plaintiff did not have a contractual obligation to issue a pre-repossession Notice beyond what the Debenture required. Counsel asserted that the plaintiff issued the defendants with Demand Notices which were ignored. She maintained that the counterclaim is unsupported by evidence, untested by cross-examination and contrary to the express Agreement by the parties herein, and it should be dismissed with costs. Analysis And Determination. 16.I have considered the averments made in the Plaint, the evidence of the plaintiff’s witness, Edwin Lubanga (PW1), and the documentary exhibits produced as plaintiff exhibits 1-20. I have also considered the plaintiff’s Counsel’s submissions. The issues for determination are-i.Whether the plaintiff is entitled to the orders sought in the Plaint; andii.Whether the 1st defendant’s counterclaim is merited. Whether the plaintiff is entitled to the orders sought in the Plaint. 17.This Court heard the evidence of PW1, who produced the plaintiff’s exhibits. Among the said documents, there is a Board Resolution that was made by the 1st defendant on 9th April 2014, to accept the facility in the sum of Kshs.54,714,924.00 that had been negotiated with the plaintiff. There is also a Board Resolution arrived at by the 2nd defendant to offer a Corporate Guarantee for the said sum of Kshs.54,714,924.00. There is a letter of offer dated 9th April 2014, setting out the terms of the facility, the security to be taken, the conditions of approval and covenants, which was executed by the 1st defendant’s Directors. The 2nd defendant’s Directors executed the Corporate Guarantee and Indemnity dated 30th April 2014. There is also a Musharaka Ending-With-Ownership Financing Agreement dated 10th April 2014, showing detailed terms and conditions of the Agreement. I have seen a Debenture dated 14th May 2024 duly executed by the 1st defendant’s Directors. 18.Needless to say, parties to a contract are bound by its terms and Courts cannot rewrite contracts that were voluntarily entered into, unless there is evidence of coercion, fraud or undue influence as was stated in the case of National Bank of Kenya Ltd v Pipe Plastic Samkolit (K) Ltd and another (2001) eKLR, where the Court held as follows-“A Court cannot rewrite a contract between parties. The parties are bound by the terms of their contract unless coercion, fraud and undue influence are pleaded or proved.’’ 19.In this case, the 1st defendant has not proved coercion, fraud or undue influence, so as to invalidate the Agreement in issue. This Court notes that that plaintiff issued a Demand Notice dated 23rd November 2015, for the outstanding debt, which Notice was served through registered post. It is noted that despite the said Notice, the 1st defendant failed to repay the loan. Valuation of the motor vehicles was done, and they were subsequently sold. The plaintiff still demands the balance due and owing after the sale of the said motor vehicles, since the full loan amount was not realized. 20.This Court however notes that the Demand Notice dated 23rd November 2015, was issued prior to the sale of the motor vehicles and there is no evidence that a subsequent one was issued demanding for the balance that was outstanding. The plaintiff relied on Clause 11 of the Asset Debenture, which expressly states that “monies hereby secured shall become immediately due and payable without any demand protest or other notice of any kind all of which are expressly waived by the Company...”. It is the Court’s considered view that by dint of the said Clause, failure to issue a fresh Demand Notice was not fatal to the plaintiff’s case. 21.This Court finds that the plaintiff has proved its case against the 1st defendant for breach of contract on a balance of probabilities, as the 1st defendant admitted having failed to pay the monthly instalments due to financial challenges. The defendants by executing the letter of offer, the Musharaka Ending-With-Ownership Financing Agreement, the Asset Debenture and the Corporate Guarantee, are bound by the terms therein and being in default is evidence of non-compliance. 22.I note that the 2nd defendant as the Guarantor of the 1st defendant was served with a Notice dated 15th February 2016 notifying it of the 1st defendant’s default in servicing the loan facility. In its letter to the plaintiff dated 26th February 2016, the 2nd defendant however denied having ever executed a guarantee for the plaintiff. The 2nd defendant never entered appearance and it did not file any statement of defence in Court to deny liability, leading to interlocutory judgment being entered against it. Since the defendants failed to adduce evidence to controvert the plaintiff’s evidence, this Court finds that the plaintiff is justified to claim the balance of the loan amount jointly and severally from the defendants. Whether the 1st defendant’s counterclaim is merited. 23.The 1st defendant filed a defence and counterclaim dated 5th August 2019 wherein it admitted having taken a loan facility of Kshs.54,714,924.00, and that it serviced the loan until October 2018, when it experienced financial challenges which it communicated to the plaintiff, but the same was ignored. It stated that since the plaintiff recovered Kshs.24,220,000/= against the sum of Kshs.19,795,292.99, it shows that the plaintiff owes it Kshs.4,424,708.00 being the amount surpassed. The 1st defendant contended that the plaintiff failed to issue a Notice, and that it failed to furnish pertinent information such as the execution process, certificates of sale, valuation reports, written notice on default and contemplated action. It urged this Court to dismiss the plaintiff’s suit, order the excess amount of Kshs.4,424,708.00 to be paid to it. It also prays for interest on prayer (b), until settlement in full. 24.The 1st defendant failed to appear in Court for the hearing of this case, thereby failing to call any witness to produce any documents in support of its case. As such, the counterclaim remains a mere pleading which cannot be considered as evidence. This Court relies on the case of Gateway Insurance Co. Ltd v Jamila Suleiman & Aisha Mwaro Okumu (Civil Appeal 227 of 2017) [2018] KEHC 1855 (KLR), where it was held as follows-“What are the consequences of a party failing to adduce evidence? In the case of Motex Knitwear Limited vs. Gopitex Knitwear Mills Limited, Nairobi (Milimani) HCCC No. 834 of 2002, Lesiit, J, citing the case of Autar Singh Bahra and Another vs. Raju Govindji, HCCC No. 548 of 1998, appreciated that: “Although the Defendant has denied liability in an amended Defence and counterclaim, no witness was called to give evidence on his behalf. That means that not only does the defence rendered by the 1st plaintiff’s case stand unchallenged, but also that the claims made by the Defendant in his Defence and Counter-claim are unsubstantiated. In the circumstances, the Counter-claim must fail”. “Again, in the case of Trust Bank Limited vs. Paramount Universal Bank Limited & 2 Others Nairobi (Milimani) HCCS No. 1243 of 2001 the learned judge citing the same decision stated that it is trite that where a party fails to call evidence in support of its case, that party’s pleadings remain mere statements of fact since in so doing the party fails to substantiate its pleadings. In the same vein, the failure to adduce any evidence means that the evidence adduced by the plaintiff against them is uncontroverted and therefore unchallenged.” 25.The 1st defendant’s counterclaim, being a mere statement of facts remains unsubstantiated. It is hereby dismissed with costs. 26.In the result, this Court makes the following final orders-i.Judgment is hereby entered in favour of the plaintiff as against the defendants jointly and severally for the sum of Kshs.19,795,292.99, with interest at Court rates which shall accrue from 11th June 2019 when this suit was filed in Court.;ii.The plaintiff is awarded costs of the suit;iii.The 1st defendant’s counterclaim is hereby dismissed with costs to the plaintiff; andiv.The plaintiff is awarded interest on costs from the date of this Judgment until payment in full. It is so ordered. DATED, SIGNED AND DELIVERED AT KIAMBU ON THIS 19TH DAY OF JUNE 2026. JUDGMENT DELIVERED THROUGH MICROSOFT TEAMS ONLINE PLATFORM.NJOKI MWANGIJUDGEIn the presence of:-Mr. Mumu for the plaintiffNo appearance for the defendantsMs Julia – Court Assistant.