Kenya Women Microfinance Bank Ltd v Benson [2023] KEHC 25583 (KLR)

Kenya Women Microfinance Bank Ltd v Benson (Civil Appeal E078 of 2022) [2023] KEHC 25583 (KLR) (16 November 2023) (Judgment)

Neutral citation: [2023] KEHC 25583 (KLR)

Republic of Kenya

In the High Court at Meru

Civil Appeal E078 of 2022

TW Cherere, J

November 16, 2023

Between

Kenya Women Microfinance Bank Ltd

Appellant

and

Rose Nkirote Benson

Respondent

(An Appeal from the Judgment and Decree in Meru CMCC 199 OF 2019 by Hon. D. Nyambu (CM) on 31st May, 2022)

Judgment

Background 1. On 08th April, 2015, Respondent applied for a loan and Appellant advanced to her a cumulative facility of KES. 8,853,000/- which was secured by chattels mortgage over M/V KCG 122A. It was one of the terms of the agreement that the loan would attract an interest of 11. 38 % on reducing balance.

2. By plaint dated 28th May, 2019, Appellant pleaded that as at 30th January, 2017, the loan arrears stood at KES. 9,458,237/- prompting Appellant to instruct an auctioneer who attached and sold M/V KCG 122A at a public auction conducted on 18th August, 2017 for KES. 5,700,000/-. Appellant pleaded that KES. 100,000/- was applied to offset auctioneer costs and the balance of KES. 5,600,000/- to offset the loan balance and that a sum of KES. 4,798,861. 12 remained outstanding. Appellant therefore prayed for:1. KES. 4,798,861. 12 plus interest at 11. 38% from 15th May, 20182. Costs of the suit and interest3. Any other relief

3. In support of its case, Appellant placed reliance on the loan application form, letter of offer dated 10th August, 2015 with addenda dated 01st October, 2015 and 09th December, 2015, chattels mortgage and logbook for M/V KCG 122A, loan statement of account with an outstanding balance of KES. 4,798,861. 12 as at 15th May, 2018, letter of instructions to Quickline Auctioneers to attach and sell M/V KCG 122A, auction report, demand letter for KES. 4,798,861. 12 dated 07th September, 2018, receipt for legal fees and receipt for postage of the demand letter.

4. In cross-examination, the witness confirmed that Appellant had not given credit for a sum of KES. 2,500,000/- that Respondent had paid.

5. A valuer tendered a valuation report dated 01st August, 2017 which placed the value of M/V KCG 122A at KES. 4,630,000/-.

6. In her defence, Respondent raised three issues. The first was that M/V KCG 122A was unlawfully and without notice to her seized and auctioned and the second issue which was conceded by the Appellant concerned KES. 2,500,000/- paid and not credited to the loan account and the third issue was that M/V KCG 122A was undervalued.

7. In support of her case, Respondent tendered premium debit and credit notes dated 13th March, 2017 and 10th May, 2018 respectively from Orient Insurance which indicated that M/V KCG 122A was insured for KES. 7,700,000/-, Respondent’s letter dated 16th March, 2017requesting for loan reduction instalments and statement of account running from 17th September, 2015 to 15th June, 2017.

8. After the trial, the learned trial magistrate by judgment dated 31st May, 2022 found Appellant’ case not proved and dismissed it with costs to the Respondent on the following grounds. That:1. There was no resolution by Appellant’s Board to file the suit2. Respondent was not served with attachment and the repossession notices of M/V KCG 122A3. M/V KCG 122A was undervalued4. The total loan sum had been paid

9. Appellant was aggrieved and has appealed the judgment and the issues that have arisen for determination are as follows:1. Whether the amendment to the memorandum of appeal was lawful2. Whether the plaint complied with Order 2 rule 10 of the Civil Procedure Rules3. Whether it was pleaded that the suit was filed without a resolution of Appellant’s Board4. Whether there was evidence of service of demand notices and proclamation notice5. Whether Respondent’s premium debit and credit notes can be equated to a valuation report6. Whether the Respondent has paid KES. 10,285,490/-7. Who bears the costs of the appeal

DETERMINATION 10. I have considered the appeal in the light of the trial court record, the submissions and authorities cited by the parties.

11. This being a first appeal, the role of this court is to re-evaluate and subject the evidence to afresh analysis so as to reach an independent conclusion as to whether or not to uphold the decision of the trial court. The court also takes note of the fact that it did not have the benefit of seeing or hearing the witnesses testify and therefore has to make an allowance for the same. (See Selle vs Associated Motor Boat Co. [1986] EA 123, Peters v Sunday Post Ltd [1958] EA 424 and Abok James Odera t/a A.J Odera & Associates v John Patrick Machira t/a Machira & Co. Advocates [2013] e KLR).

12. The first issue concerns whether the amendment of the memorandum of appeal was lawful. The record reveals that the memorandum of appeal was initially filed on 29th June, 2022 in the names of different Appellants and Respondents. The same was amended on 12th July, 2022 and filed on 15th July, 2022 with the names of both parties herein.

13. The record discloses that except for the names, every other pleading in both memoranda of appeal remain the same.

14. Respondent urged the court to find that the appeal was defective. Appellant did not make any submissions on the issue,

15. No doubt a blunder was made in drawing the initial memorandum of appeal and Appellant realizing its mistake quickly corrected it albeit without leave of court.

16. I have considered whether it would be in the interest of justice to strike out the appeal. It is now a settled principle that striking out a pleading is a draconian act, which may only be resorted to in plain and outright instances. The power of this court to strike out an appeal is discretionary and is exercised based on the peculiar circumstance of each case. (See Tome & another v Attorney General & 2 others (Miscellaneous Civil Application 185 of 2019) [2021] KECA 150 (KLR) (19 November 2021) (Ruling)).

17. Respondent has not demonstrated that she has suffered any prejudice as a result of the blunder committed by the Appellant. I therefore find that it would not be in the interest of justice to strike out the appeal. In arriving at this decision, I find succor from the decision in Philip Chemwolo & Anor. Vs Augustine Kubende (1982 – 88) KAR 103 where Apaloo J. (as he then was) rendered himself thus,“Blunders will continue to be made from time to time and it does not follow that because a mistake has been made that a party should suffer the penalty of not having his case heard on merits”.

18. The second issue for determination is whether the plaint complied with Order 2 rule 10 of the Civil Procedure Rules.

19. The Respondent in its submission before the trial court urged the court to find that the plaint did not comply with Order 2 rule 10 and more particularly that Appellant did not plead particulars of breach and placed reliance on Order 2, rule 10 (Particulars of Pleadings) which provides that;10. (1) Subject to subrule (2), every pleading shall contain the necessary particulars of any claim, defence or other matter pleaded including, without prejudice to the generality of the foregoing —(a)particulars of any misrepresentation, fraud, breach of trust, willful default or undue influence on which the party pleading relies; …..

20. The trial court agreed with the Respondent that Appellant did not specifically plead particulars of breach of contract and ruled that the plaint was defective.

21. Whereas it is true that the plaint does not contain a paragraph titled PARTICULARS OF BREACH or any such particulars, I do not think that it was the intention of the legislature that any pleading without such a paragraph is defective.

22. I have perused the plaint and I notice that paragraph 5 contains particulars of how Respondent applied and was granted a loan by the Appellant and paragraph 6 provides particulars of how the Respondent defaulted thereby breaching the loan agreement.

23. Had the particulars in the plaint not been sufficient to enable Respondent to sufficiently file her statement of response, Respondent had the option to request for particulars vide the provisions of Order 2 Rule 10(2) of the Civil Procedure Rules, 2010 which provides as hereunder;“Particulars of pleading [Order 2, rule 10. ](2)The court may order a party to serve on any other party particulars of any claim, defence or other matter stated in his pleading, or a statement of the nature of the case on which he relies, and the order may be made on such terms as the court thinks just.”

24. In any event, in the new constitutional dispensation, the pendulums have swung and the courts have shifted towards addressing substantive justice and no longer worship at the altar of technicalities (See Richard Nchapi Leiyagu v Independent Electoral & Boundaries Commission & 2 others [2014] eKLR.

25. The third issue is whether it was pleaded that the suit was filed without a resolution Appellant’s Board.

26. In the case of Sonko v County Assembly of Nairobi City & 11 others (Petition 11 (E008) of 2022) [2022] KESC 76 (KLR) (5 December 2022) (Reasons), the Supreme Court of Kenya stated as follows:“[92]…………. In an adversarial system like ours, rules of pleading also serve to ensure that parties define succinctly the issues for determination so as not to take the rest of the parties by surprise. On the other hand, courts adjudicate upon the specific matters in dispute which the parties themselves have raised by their pleadings…..”

27. A perusal of the pleadings by the Respondent reveals that the issue that Appellant’s suit was filed without a resolution of Appellant’s Board was not pleaded.

28. By discrediting the Appellant’s claim on the basis of a matter that was not pleaded, I find that the learned trial magistrate entered into the arena of the dispute and made up a case for the Respondent thereby defying the fundamental principle that ours is an adversarial system where courts decide only those matters that have been properly pleaded and laid out in evidence.

29. The fourth issue concerns whether there was evidence that notification of attachment and sale was served on the Respondent.

30. On the basis of Respondent’s evidence that she did not receive the notification of sale and attachment, the trial magistrate concluded that the Appellant may have made an error while filing some of the forms and ruled that the notification was not served and the attachment was unlawful.

31. I have perused the loan application form, letter of offer dated 10th August, 2015 with addenda dated 01st October, 2015 and 09th December, 2015 all signed by the Respondent and the address provided thereto is 1284-60200 MERU whereas the address on the chattels mortgage is 1287-60200.

32. With respect, I agree with the Appellant that it cannot be that the address 1284-60200 MERU is acceptable when receiving the loan and unacceptable when notification of attachment and sale and demand notice are sent to the same address. Having duly signed the forms with the address 1284-60200 MERU, Respondent was estopped from denying that that was her address. In arriving at this decision, I am content to cite in Nest Manor Residence & Suites Ltd & another v African Banking Corporation Ltd & another [2021] eKLR where the court held as follows at paragraph 106;“It follows therefore that since the respondents have shown evidence that they effected proper service upon the applicants, the burden now shifted to the applicants to show that they did not receive the said notices. It is clear vide the letters of offer and the charge instruments that the 1st respondent’s obligation was to send any notices to the postal address given by the applicants in the said letters of offer and charge instruments and in the manner provided therein. The applicants cannot now turn and claim that the postal address used by the respondents is incorrect for the 1st applicant.”

33. Consequently, the finding by the trial magistrate that the notices and demand letters were not duly served and that the attachment and sale of Respondent’s motor vehicle was unlawful was without merit.

34. The fifth issue is whether Respondent’s premium debit note and credit note can be equated to a valuation report.

35. The debit note tendered by the Respondent as DEXH. 1 is a written record showing that Respondent owed KES. 440,875/- on account of insurance premiums for M/V KCG 122A & ZF 3392 and the credit note tendered as DEXH. 2 is an acknowledgement by the insurer of the sum of KES. 123,711/- owed to Respondent on account of cancelled insurance cover for M/V KCG 122A & ZF 3392.

36. Other than the debit and credit notes that show that M/V KCG 122A & ZF 3392 was insured for KES. 7,700,000/-, Respondent did not tender any valuation report that the vehicle was indeed valued at KES. 7,700,000/-. With respect, I find that there was no basis to reject the valuation report dated 01st August, 2017 presented by the Appellant which placed the value of M/V KCG 122A at KES. 4,630,000/-.

37. As a result, the finding by the trial magistrate that the debit and credit notes presented by the Respondent demonstrated that the subject motor vehicle was valued at KES. 7,700,000/- and was thus undervalued by the Appellant was in my considered view against the weight of the evidence.

38. The sixth issue is whether the Respondent has paid KES. 10,285,490/-. In arriving at this figure, the trial court ruled that the subject motor vehicle ought to have been sold at KES. 7,700,000/- and after adding that sum to KES. 2,585,470/- paid by Respondent came to the conclusion that Respondent had fully paid the debt.

39. The loan statement of account as at 15th May, 2018 had an outstanding balance of KES. 4,798,861. 12. Out of the said sum, Appellant’s witness conceded credit for a sum of KES. 2,500,000/- that Respondent had paid had not been factored which would have reduced the outstanding sum to KES. 2,298,861. 12. The finding by the trial court that the loan was fully settled was therefore not well founded.

40. The seventh issue relates to costs and it is trite that costs follow the event and a successful litigant ought to be fairly reimbursed for the costs that have been incurred.

41. From the foregoing, the appeal is allowed in its entirety and it is hereby ordered:1. The judgment dated 31st May, 2022 is set aside and substituted with an order for judgment in favour of the Appellant against the Respondent for KES. 2,298,861. 12 plus interest at 11. 38% from 15th May, 20182. Costs of the suit3. Costs of this appeal

DATED AT MERU THIS 16TH DAY OF NOVEMBER 2023. WAMAE. T. W. CHEREREJUDGEAppearancesCourt Assistant - Morris KinotiFor Appellant - Mr. Kimaita for Wambugu & Muriuki AdvocatesFor Respondent - Mr. Mutuma for Mutuma & Koskei Advocates