National Bank of Kenya Ltd v Nandi (Civil Appeal E015 of 2022) [2023] KEHC 22749 (KLR) (28 September 2023) (Judgment)

Key Facts

Transaction Type

Issues

• The primary legal issue was whether the respondent successfully proved that the appellant (bank) deducted Kshs. 79,536.00 in excess of the agreed loan repayment terms after the respondent had fully repaid the loan. The trial court found the primary claim unproven but awarded special damages for expenses incurred in pursuing the claim, which the appellate court deemed inconsistent.
• The secondary issue concerned the validity of awarding the respondent Kshs. 387,000.00 in special damages (transport, accommodation, and consultancy fees) for pursuing the claim. The appellate court held that the secondary claim depended on the primary claim's success, and since the primary claim was unproven, the special damages had no basis.
• The trial court's reliance on IRAC reports and the absence of a bank statement to prove the excess deductions were challenged. The appellate court ruled that the IRAC reports were not formally introduced as evidence and the bank statement was never produced, leaving no proof of the alleged excess recovery.

Holdings

• The court upheld the dismissal of the primary claim for Kshs. 79,536.00 in excess deductions, finding the respondent failed to provide evidence proving the appellant recovered more than entitled. The judgment was self-contradictory in allowing the secondary claim for expenses (Kshs. 387,000.00) without valid proof of the primary claim.
• The appeal was allowed, substituting the trial court's judgment to dismiss the respondent's claims entirely. The appellant was awarded costs in both the appeal and trial court.
• The secondary claim for transport, accommodation, and consultancy fees (Kshs. 387,000.00) was overturned as it relied on the unproven primary claim. The expenses were deemed unjustified in the absence of proven fault by the appellant.

Remedies

• The court ordered the appellant to be awarded costs both in the appeal and at the trial court.
• The appellate court dismissed the respondent's claim for Kshs. 387,000.00 in expenses as the primary claim was not proven.

Contract Value

Legal Principles

• The appeal court found the trial court erred by awarding secondary damages (transport, accommodation, consultancy fees) under the balance of probability standard, as these claims depended on the unproven primary claim. Expenses incurred in pursuit of a non-established claim were deemed unjustified.
• The IRAC reports, which the respondent relied on to substantiate excess deductions, were not formally admitted into evidence. The court emphasized that mere filing of documents without proper introduction during testimony and cross-examination rendered them inadmissible for factual proof.
• The court held that the respondent did not discharge the burden of proof for his primary claim of Kshs. 79,536.00 in excess deductions by the bank. The trial court's reliance on the IRAC reports as evidence was invalid since they were not formally introduced as exhibits and cross-examined.

Precedent Name

Key Disputed Contract Clauses

• The bank claimed it notified the respondent of interest rate changes via media and gazette, but the respondent argued he was not informed. The court ruled that the respondent's assertion of lack of notification was not substantiated, as no formal evidence of this communication was presented.
• The contractual clause governing the checkoff system for loan repayments was pivotal. The respondent claimed the bank continued unauthorized deductions post-repayment, while the bank asserted the system was halted upon full repayment. The court found no evidence to confirm either party's adherence or breach of this clause.
• The court examined the contractual terms regarding interest rates, including their initial 18% rate, subsequent increase to 23% in 2011, and parliamentary capping at 16% in 2016. The dispute centered on whether the bank followed these terms and notified the respondent of changes, as alleged wrongful deductions were tied to interest rate calculations.

Judge Name

Passage Text

• The trial court's findings on the primary claim were inconsistent... having found that the respondent had not proved the excess recovery, the trial court had no basis to find and hold that there had been recovery of some money in excess.
• The respondent did not place any computations before the court to demonstrate that what was recovered was in excess of what should have been recovered, and that the excess amounted to Kshs. 79,536.00.
• The secondary claim rested or hinged on the primary claim... once that primary claim was dismissed, the secondary claim was left without a base or foundation.

Damages / Relief Type

• Compensatory Damages for Kshs. 387,000.00 (transport, accommodation, and consultancy fees)
• Compensatory Damages for Kshs. 79,536.00 (excess loan deductions)