Case ID:50437

CHRISTOPHER NDOLO MUTUKU & another v CFC STANBIC BANK LIMITED [2013] eKLR

Case Metadata

Case Number:

Civil Case 74 of 2011

Parties:

CHRISTOPHER NDOLO MUTUKU & another v CFC STANBIC BANK LIMITED

Date Delivered:

15 Feb 2013

Case Class:

Civil

Court:

High Court at Nairobi (Milimani Commercial Courts Commercial and Tax Division)

Case Action:

Judge(s):

Alfred Mabeya

Citation:

CHRISTOPHER NDOLO MUTUKU & another v CFC STANBIC BANK LIMITED [2013] eKLR

Case Summary:

COURT DETERMINES VALIDITY OF NOTICE OF CHANGE IN INTEREST RATE BY BANK THROUGH THE NEWSPAPER

Reported by Emma Kinya & Victor Andande

Issues

Which document was applicable to the plaintiffs’ loan facility between the General Terms and Conditions of the Application form of the Loan facility (GTC) and the Charge Instrument?

Which document was to be relied on where there was conflict in provisions on the rate of interest?

Whether publication in the newspaper of notice of change of interest rates by the bank amounted to sufficient notice.

Whether the alteration of the interest rates accruing from a bank loan without due notice being served personally to the plaintiff was in breach of the express provisions of the Charge Instrument.

Whether notice of the change of the interest rates was applicable retrospectively in the circumstances.

Contract-terms of a contract – bank contract - notice – notice of change in interest rate – mode of conveying notice of change in interest rate – where Charge document provided for notice to be effected through personal service - validity of notice published in the newspaper.

Contract-terms of a contract – bank contract - due notice – duration of notice – duration of new notice - retrospectively – application of the altered interest rate retrospectively – where Charge Instrument provided for change in interest rate to be effective from the first day of the month next after notification – what amounts to due notice – whether the altered interest rate could have applied retrospectively. Read More...

A dispute arose between the parties arising from a loan facility advanced by the defendants a bank, to the plaintiffs who were customers. It was contended that the plaintiffs fell into arrears which necessitated the defendant to exercise its statutory power of sale to recover the outstanding amount. However, the plaintiff claimed that the bank had habitually altered the rate of interest without duly informing the plaintiff’s in breach of the contract.

Held:

Where the lender opted to use the media as a form of communication, it ought to have expressly stated so in the security instrument. Thus the publication in the newspaper of the change in interest rate was in contravention of the Charge instrument.

The purpose of the notice to a borrower was to put him on notice of the intended increase or decrease in liability. With the usual penal consequence that followed default in making an adequate repayment on the stipulated time, media publication would not have given a borrower adequate, convenient and effective notice to be able to carry out his obligations under the Charge document to adjust the repayment on time.

Since the Bank could render a Statement of Account on monthly basis to all its customers, it would likewise have made commercial sense if the Bank notified its borrowers individually of changes in the interest rates that would increase the borrower’s liability or burden as and when they arose.

Any publication in the newspapers of the change in the rate of interest was not in accordance with the contract between the parties and did not affect the rate of interest on the facility.

Whilst a Letter of offer could have incorporated the General Terms and Conditions (GTC) of a lender, once a subsequent document of contract such as a Charge was executed, it was expected that all terms and conditions contained in the Letter of offer or such GTC were expressly incorporated or they automatically merged with the Charge.

Where a conflict arose between the terms and conditions in the letter of offer and the Charge, the provisions of the Charge were to prevail because the Charge document was the later in time and it was assumed that when the parties executed the same, they were aware of the provisions of the earlier documents.

Whilst the Defendant had the right to vary its rate of interest, notice of such variation should have been given to the Plaintiffs in terms of the Charge Instrument. Thus, since the GTC had not provided for the mode of giving notice, the only way notice of change of interest could have been effected was as provided for in the Charge Instrument.

Since there was variance in the rate of interest provided for by the letter of offer and the Charge, the Charge document would prevail because it had been signed by both parties whereas the Letter of Offer had been signed by the defendant only. Therefore, the interest rate would have been as per the Charge document until there was service of change of interest rate.

The bank letter that purported to apply the change in the interest rate retrospectively was contrary to the Charge instrument which required that such change would have been effective from the first day of the month next after notification.

Costs of the application to be in the cause.

Swahili Summary:

MAHAKAMA YAAMUA UHALALI WA ARIFA YA MABADILKO KATIKA KIMA CHA RIBA NA BENKI KUPITIA GAZETINI

Imeripotiwa na Emma Kinya & Victor Andande

Masuala

Ni waraka upi ulitumika katika huduma ya mkopo ya mlalamishi kati ya Kanuni na Masharti ya Kawaida ya fomu ya kutuma ombi la Kupata Huduma hiyo ya Mkopo (GTC) na vilevile waraka wa Zana ya Mashtaka?

Ni waraka upi ulifaa kutegemewa pale ambapo kulikuwa na mgogoro katika matoleo ya kima cha riba?

Kujua kama chapisho katika gazeti kuhusu arifa ya kubadilisha kima cha riba na benki lilikuwa arifa tosha.

Kujua kama mabadiliko ya kima cha riba kilichotokana na mkopo wa benki bila ya arifa ya kutosha ya kuwasilishwa kwa mlalamishi binafsi kulisababisha kuvunjika kwa matoleo ya moja kwa moja ya waraka ule wa Zana ya Mashtaka.

Arifa husika ya mabadiliko ya kima cha riba ilitumika kwa kumbukizi katika hali husika.

Mzozo ulitokea kati ya wahusika kutokana na huduma ya mkopo iliyotolewa na benki ya mshtakiwa, hadi kwa walalamishi ambao walikuwa wateja. Ilieleweka kwamba walalamishi walilimbikiza hela ambazo walifaa kulipa na hali hii ikashurutisha mshtakiwa kuweza kuonyesha nguvu zake za kisheria za uuzaji ili kuweza kurudisha kiwango kilichokuwa hakijalipiwa. Hata hivyo, mlalamishi alidai kwamba benki ilikuwa imebadilisha kima cha riba kila wakati bila ya kufahamisha mlalamishi hivyo basi kuvunja mkataba.

Uamuzi:

Pale ambapo mkopeshaji aliamua kutumia vyombo vya habari kama njia ya mawasiliano, basi alifaa kusema hivyo waziwazi kwenye waraka ule wa usalama. Hivyo basi chapisho katika gazeti likionyesha mabadiliko ya kima cha riba lilikuwa katika ukiukajiwa waraka ule wa Zana ya Mashtaka.

Kusudio la arifa ya anayekopa ilikuwa kuweza kumpa arifa ya ongezeko lililonuiwa au punguzo katika kuwajibikia. Huku kukiweko na athari za kawaida za adhabu ambazo hufuata moja kwa moja katika kutoa malipo yanayotosha kwa wakati unaotakikana, chapisho la vyombo vya habari lisingempatia anayekopa arifa ya kutosha, ya kumfaa na bora katika kuweza kutekeleza majukumu yake kama yalivyokuwa kwenye Waraka ule wa Zana ya Mashtaka ili kurekebisha kule kulipia pesa hizo kwa wakati unaofaa.

Kwa sababu Benki ingeweza kutoa kauli ya akaunti kila mwezi kwa wateja wake wote, ingeeleweka kabisa kibiashara kama Benki hiyo ingefahamisha wakopaji wake binafsi kuhusu mabadiliko hayo ya kima cha riba ambayo yangeongeza uwajibikajiwa anayekopa au mzigo pindi tu hali hii ingetekelezwa.

Chapisho lolote katika magazeti kuhusu mabadiliko ya kima cha riba halikuwa kulingana na kandarasi kati ya wahusika na halikuathiri kima cha riba katika huduma hiyo ya mkopo.

Huku Barua ya Tolea Husika ikiwa ilielezea Kanuni na Masharti ya Kawaida (GTC) ya mkopeshaji, pindi tu waraka mwingine wa kandarasi kama vile Mashtaka ulitiliwa maanani, ilitarajiwa kwamba kanuni na masharti yote yaliyokuwemo katika Barua ya Tolea Husika au GTC basi moja kwa moja yalikuwa yameingizwa au yameunganishwa otomatiki katika ule waraka wa Zana ya Mashtaka.

Pale ambapo mzozo ulitokea kati ya kanuni na masharti katika barua ya tolea la ada na Ada, basi matoleo yale ya Adayangetumiwa kwa sababu ule waraka wa Mashtaka hayo ndio uliokuja baadaye na wakati ulipokubaliwa kutumika wahusika wote walikuwa na habari nao, walikuwa wakijua pia matoleo yaliyokuwemo katika waraka ule wa mwanzo.

Huku Mshtakiwa akiwa na haki ya kubadilisha kima chake cha riba, arifa kuhusu mabadiliko kama hayo yalifaa kupewa mlalamishi kupitia katika waraka ule wa Zana ya Mashtaka, hivyo basi, kwa sababu GTC haikuwa imeonyesha ule mfumo wa kutoa arifa, njia ya pekee ambayo arifa ya mabadiliko ya riba yangetekelezwa ni kama ilivyoelezewa katika ule waraka wa Zana ya Mashtaka.

Kwa sababu kulikuwa na tofauti katika kima cha riba kilichotolewa kwenye barua ya toleo husika na vilevile Ada, ule waraka wa Zana ya Mashtaka ungetumika kwa sababu ulikuwa umepigwa saini na wahusika wote wawili huku ile Barua ya Toleo ilikuwa imepigwa saini na mshatakiwa pekee. Kwa hivyo, kima cha riba kingekuwa kulingana na ule waraka wa Zana ya Mashtaka mpaka pale ambapo kulikuwa na wasilisho rasmi la kubadilisha kima cha riba.

Barua ya kutoka kwenye benki iliyodai kutekeleza mabadiliko katika kima cha riba kwa kumbukizi ilikuwa kinyume cha ule waraka wa Zana ya Mashtaka ambayo ilihitaji kwamba mabadiliko kama hayo yangetekelezwa kwanzia siku ya kwanza ya mwezi baada ya fahamisho.

Gharama za ombi kuwekwa katika kesi.

Disclaimer:

The information contained in the above segment is not part of the judicial opinion delivered by the Court. The metadata has been prepared by Kenya Law as a guide in understanding the subject of the judicial opinion. Kenya Law makes no warranties as to the comprehensiveness or accuracy of the information

REPUBLIC OF KENYA

High Court at Nairobi (Milimani Commercial Courts)

Civil Case 74 of 2011

CHRISTOPHER NDOLO MUTUKU.......................................................1

ST

PLAINTIFF

CAROLINE NJOKI MUTUKU................................................................2

ND

PLAINTIFF

VERSUS

CFC STANBIC BANK LIMITED.................................................................DEFENDANT

RULING

1.

By way of a Chamber Summons dated 19

th

February, 2012, the Plaintiffs applied to this Court under Sections 1A, 1B, 3, 3A and 63(e) of the Civil Procedure Act and Order 8 Rules 1, 3 and 4 of the Civil Procedure Rules for Orders that a proper account with all necessary enquiries, specifically the legally applicable interest rate respecting the Plaintiffs’ mortgage account with the Defendant, be taken. Further, they sought orders that any monies found to be due and owing to the Plaintiffs from the Defendant be repaid forthwith and in any event, within seven (7) days of the taking of the account. They also sought for the costs of the Application.

2.

When the Application came up for hearing before this Court on 20

th

July, 2012, the parties recorded a consent order in the following terms:-

a)

that the question of the rate of interest applicable to the Loan facility in issue be determined as a preliminary issue in respect of the application dated 12

th

February, 2012

b)

that the Defendant files and serves its Replying Affidavit within 14 days of 20

th

July, 2012 and the Plaintiffs be at liberty to file a Further Affidavit within 7 days after service of the Replying Affidavit

c)

that the parties file and exchange their written submissions in respect of the issue of the rate of interest within 14 days of the Service of the Replying Affidavit by the Defendant.

d)

that the matter be mentioned in Court on 27

th

September, 2012 for purposes of taking a ruling date.

3.

The matter subsequently came up for the hi-lighting of the written submissions by both parties. It is in respect of that preliminary issue of the applicable rate of interest to be levied upon the Loan facility that this Ruling is about.

4.

A brief background to the matter will reveal that this is a dispute between the Plaintiffs and the Defendant arising from a Loan facility of Kshs. 10,530,000/- advanced to the Plaintiffs by the Defendant in or about July, 2007. It is contended that the Plaintiffs fell into arrears necessitating the Defendant to exercise its statutory power of sale to recover the amount outstanding. Interim orders were however granted restraining the Defendant, its servants or agents from advertising, selling, disposing of, alienating or in any manner dealing with the Plaintiff’s property known as L.R. No. 209/9680/4 until such a time the Court would deem appropriate. There is no dispute that the Plaintiff did pledge L.R. No. 209/9680/4 as security for the said facility. It is also not in dispute that the Defendant has expressed its intention to realise the security to recover the amounts it alleges is still outstanding.

5.

Mr. Mutuku, learned Counsel for the Plaintiff submitted that the Defendant habitually altered the rate of interest without duly informing the Plaintiffs which was in breach of express provisions in the Charge document dated 28

th

September, 2007, that the charge document had stipulated that any variation of interest was to be effected with due notice to the Plaintiffs and would become payable on the first day of the month next after notification of the amount thereof to the Plaintiffs. It is argued for the Plaintiffs that the rates of interest variously levied by the Defendant were too exorbitant and served to essentially clog the equity of redemption. It was further contended that the letters produced by the Defendant to support its averment that it had served notices to the Plaintiffs on the change of rates of interest have no merit. The Plaintiff’s counsel argued that the Letters were not delivered to the Plaintiff in accordance to the provisions of Clause 11 of the Charge which provided for a series of delivery modes that appear not to have been invoked. Counsel specifically pointed out that two letters, namely the ones dated 15

th

December 2011 and 1

st

August 2011 do not show the Plaintiffs address and only read “TO BE ADVISED KENYA”. It is the Plaintiffs’ contention that with these anomalies, it was impossible for the Plaintiffs to have received this communication despite the Defendant having been seized with the Plaintiff’s proper address evidenced in the Defendant’s letters dated 11

th

July 2007 and 22

nd

December 2008 produced as

“HS1”,

respectively. The Plaintiffs further contend that the notice of change of interest rates by way of publication through daily newspapers was not an agreed method of communication and the Defendant could not therefore rely on that alleged mode of communication.

6.

On his part, learned Counsel for the Defendant was of the view that the Plaintiffs arguments on the application of the interest rates has no basis. In the Affidavit of Hamilton Suba sworn on 4

th

October 2012, the Defendant maintained that the facility had incorporated the Defendant’s standard terms and conditions, which provided for the variation of the rate of interest pegged on the Defendant’s base rate. That the Plaintiffs had not demonstrated that the Defendant had departed from the standard terms and conditions. The Defendant’s also contended that the Charge dated 28

th

September 2007 was pursuant to and followed the General Terms and Conditions of the Application form of the Loan facility (GTC). It was further contended that the Defendant’s base rate is a publicly quoted rate that is subject to change from time to time at the Defendant’s discretion. That further, all customers of the Defendant are always notified of the changes of the base interest rate through various publications in the daily newspapers and in this regard, such changes to the rate of interest are duly advertised and become public knowledge. The Defendant therefore urged the court to find that the GTC are applicable in determining the interest rate applied to the loan facility and that the Defendant’s variation of the rate of interest was legal and permissible under its agreement with the Plaintiffs.

7.

I have considered the rival submissions of counsel and also the materials placed before me. At the commencement of the hearing of the applications, the parties agreed that the court should first determine the rate of interest as a preliminary issue. It is the contention of the Plaintiffs that the interest rates were varied by the Defendant without notification to the Plaintiffs on countless times in contravention of what is mandated by clause 2 (b) and (c) of the Charge document dated 28

th

September, 2007. Clause 2 of the Charge provides as follows:-

“2.

COVENANT TO PAY INTEREST.

The Chargor hereby agrees with the Chargee that the rate of interest payable on all moneys hereby secured shall be determined as follows:-

a)

Until service of such a notice as is hereinafter referred to

( or as otherwise provided under Sub-Clause 2(e) below)

interest shall be at the rate of Thirteen per centum (13%) per annum

;

b)

The Chargee

reserves the right to vary the rate of interest and may from time to time serve on the Chargor notice forthwith

requiring payment of interest at such increased or reduced rate as shall in the decision of the Chargee fairly represent the rate of interest commonly chargeable in Kenya having regard to such circumstances as the Chargee considers to be relevant and the decision of the Chargee in this behalf shall not be questioned on any account whatsoever;

c)

In any event of the Chargee requiring a variation in the rate of interest under the provisions of sub-clause 2(b) above

the Chargee will notify the Chargor of the amount of the resulting increased or decreased monthly instalments payable under the provisions of sub-clause 1(b) above and the first of such increased or decreased monthly instalments shall become due and payable on the first day of the month next after notification

of the amount thereof to the Chargor;…………” (Emphasis supplied)

8.

From the foregoing, it is clear that the rate of interest payable on the facility was agreed at 13% per annum. The Defendant had the exclusive and unlimited right to vary the said rate of interest and notify the Plaintiffs of such variation. The clause further required that once there had been such variation of the rate of interest, the Defendant would communicate and or notify the Plaintiff the resulting increased monthly instalments. The said increased monthly payments were payable on the first day of the month next after notification. The Plaintiffs contend that the Defendant wrongfully and arbitrarily varied the rate of interest on various dates to 13.75%, 15.75%, 20%, 18.5%, 25.5% and 23.5%, contrary to what had been agreed in the charge document.

9.

The Defendants response to this was that GTC applied and that the Plaintiff had been duly notified both through advertisements in the daily newspapers and by letters dated 22/09/2008, 01/08/2011 and 15/12/2011, respectively. The Defendant also produced a schedule detailing the application of the various interest rates.

10.

There is no dispute that there was change of the rate of interest. The issue is whether such change was lawful and in accordance with the terms of the contract between the parties. In order to discern whether the changes were in terms of the contract, is imperative to revert to the said contract for its terms and conditions. The contract between the parties is contained in two documents, the GTC dated 4

th

July, 2007 and the Charge dated 28

th

September, 2007, respectively.

11.

I have examined the said documents and it is clear that the GTC did not fix the rate of interest payable on the facility. Such rate was disclosed in two documents the Letter of Offer dated 11

th

July, 2007 and the charge dated 28

th

September, 2007. The Letter of Offer disclosed that the Bank’s base rate was 13/75% and with a margin of -0.75%. On the other hand, the Charge provided at Clause 2(a) that until service of notice of change of rate of interest, the interest payable was 13% per annum. The charge was executed by both parties whilst the Letter of Offer was signed by the Defendant only. Accordingly, my view is and I so hold that as at the commencement of the facility on 28

th

September, 2007, the rate of interest agreed upon by the parties was 13% p.a. I reject the assertion by Hamilton Suba in paragraph 7 of his Affidavit that the interest rate under the facility was teh bak’s base rate plus a margin of 0.75%. the G.T.C does not disclose that fact. The letter of offer indicated the bank’s base rate to be 13.75% with a margin of negative (-ve) 0.75%. thus the rate of 13% p.a. appearing On the Charge document

12.

From the evidence on record, the Defendant seems to have applied the rate of interest of 13.75% from the commencement of the facility. There is no evidence to show that the Plaintiffs were notified of the charge from 13% to 13.75% in terms of the contract between the parties. Accordingly, the charge of 13.75% for the period 2007 and September, 2007 was irregular and without any basis, I will shortly revert to the other rates of interest charged.

13.

The Defendant contended that it has always notified its customers of the changes in its base rate through publications in the daily newspapers and that all changes to the rate of interest have been advertised. Firstly, the Defendant did not produce any evidence of any such publication or advertisement of the changes complained of by the Plaintiffs. It is a requirement of the law that he who alleges must prove. The Defendant has not proved the allegation of publication. Secondly, even if there was such publication, which is not the case, that is not one of the modes agreed upon by the parties. Clause 11 of the Charge document provided that notices to the Plaintiffs would be by either personal service or leaving the same at the last known place of residence or business in Kenya of the Plaintiffs or by registered post to the last known address of the Plaintiffs. I have looked at the GTC, the same does not provide the mode of giving notice and for that reason, I hold that the only way notice of change of interest could be effected upon the Plaintiffs is as provided for in Clause 11 of the Charge.

14.

It may be argued that publication of change of rate of interest in the daily newspapers is an effective convenient and cheaper way of communicating the change of the rate of interest to the borrowers. Lenders may argue that it is cumbersome to write to each of their

individual customers to advise on the change of interest rates. To my mind, that cannot be acceptable for reasons that, the lenders do enter into individual contracts with each of their customers therefore having individual obligations

inter se

. Further, it is not every day that every borrower flips through the daily newspapers to see if his lender has effected changes of the rate of interest applicable to his borrowing. In any event, if a lender wishes to use the media as a form of communication, be it electronic or print as one of the mode of notification, it should expressly state so in the security instrument. My thinking is informed by the fact that, the purpose of the notice to a borrower is to put him on notice of the intended increased/decreased liability. With the usual penal consequence ( by way of penalty interest, default charges and other charges) that follow default in making an adequate repayment on the stipulated time, media publication does not give a borrower adequate, convenient and effective notice to be able to carry out his obligations under the Charge document to adjust the repayment on time. In any event, if a Bank can render a Statement of Account on monthly basis to all its customers, it will likewise make commercial sense if the Bank should notify its borrowers individually of changes in the interest rates that increase the borrower’s liability/burden as and when they arise. Accordingly, I hold that, any publication in the newspapers of the change in the rate of interest, which I have found there was none, was not in accordance with the contract between the Plaintiffs and the Defendant and did not affect the rate of interest on the facility.

15.

The other issue that arise is, which as between the GTC and the Charge would apply to the Plaintiffs facility. I raise this issue because whilst the Defendant contend that the GTC allowed it to change its publicly quoted base rate from time to time, the Plaintiffs insist that the Charge document required that the Plaintiffs be notified of such change. My view is that, whilst a Letter of Offer may incorporate the General Terms and Conditions of a lender, once a subsequent document of contract such as a Charge is executed, it is expected that all terms and conditions contained in the Letter of Offer or such GTC are expressly incorporated or they automatically merge with the Charge. Threfore when there arises a conflict between the terms and conditions in the G.T.C/Letter of Offer and the Charge, the provisions of the latter prevails. This is so because the Charge document is the later in time and it is assumed that when the parties execute the same, they are aware of the provisions of the earlier documents. I am not alone in his. In the case of John

Muriithi Gacugo Ng’ang’a –vs- HFCJ & Anor NRB HCCC No.15 of 2005 UR

– Hon. Kimondo J delivered himself thus:-

“The letters of offer executed by the parties are relevant in forming the foundation of the contract and the intentions of the parties. Of course, as between them and the charge instruments, the charge is superior and if there is any conflict, then the terms of the charge would supercede any other agreement between the parties.”

16.

In view of the foregoing, my view is that whilst the Defendant had the right to vary its rate of interest, notice of such variation should have been given to the Plaintiffs in terms of Clause 2 (a) (b) and (c) of the Charge.

17.

Being of the aforesaid conclusion, I consider it necessary at this point to examine whether change of rate of interest variously effected by the Defendant was in accordance with the Charge documents. From the record, the following are the various changes in the rates of interest charged by the Defendant and the notifications thereof:-

a)

13.75% p.a. – 2007 to 31/08/2008.

As I have already held above, this change had no basis as the Charge expressly indicated the interest as 13%.

b)

15.25% from 1

st

September, 2008 to June, 2010. The change of the rate of interest to 15.75% was communicated to the Plaintiffs by a letter dated 4

th

September, 2008. I note that the letter exhibited as “CNM2” was properly addressed to the Plaintiffs to their known address. However, the letter purported to apply the rate retrospectively to 1

st

September, 2008. This was contrary to Clause 2(a) and (c) of the Charge which requires that such change shall be effective from the first day of the month next after notification. Accordingly, I hold that the rate of interest was properly varied from 13% p.a. then prevailing to 15.25% from 1

st

October, 2008 to end of June, 2010.

c)

14.25% - from July, 2010 to July, 2011 – there was no evidence of service of any notice. Accordingly, the change did not become effective in terms of Clause 2(a) of the Charge.

d)

15.25% - From 1

st

August, 2011 to September, 2011. The letter of notification is dated 1

st

August, 2011. It has no address. There is no evidence to show that it was personally served upon the Plaintiffs. I therefore hold that the changes were never effective.

e)

16.25% - From 1

st

October, 2011 to November, 2011. There was no evidence of any notification. The same therefore did not become effective.

f)

24% - From 1

st

January, 2012. Notification for this change is contained in a letter dated 15

th

December, 2011. However, the letter does not contain the Plaintiffs’ address. There is no evidence to show that the same was delivered to the Plaintiffs and if so how the notice thereof was effected. The Plaintiffs have denied ever receiving the same. Evidence of service of the same in terms of Clause 11 lacking, I am inclined to hold that the same never become effective.

18.

I have endevoured to analyse the documents placed before me to be able to decipher how the parties intended to deal with each other. They indicated in the Charge document that the facility attracted interest and they agreed on the rate of interest. The parties also agreed that the Defendant could change that rate of interest at its discretion from time to time but also indicated how such change would be effected. Clauses 2 and 11 of the charge must be given effect. I cannot re-write the agreement or the contract between the parties. I have to give effect to its letter and spirit even if it causes hardship to either of them. The parties executed the same willingly and they are therefore bound by it. This is what the Court of Appeal seems to have said in the case of

Shah –vs- Guilders International Bank Ltd (2003) KLR 8

19.

Accordingly, I make a determination of the rate of interest applicable to the facility as follows:-

a)

From the date of drawdown to 30

th

September, 2008 – 13% per annum.

b)

From 1

st

October, 2008 to date – 15.25% per annum.

Having determined the preliminary issue of the rate(s) of interest applicable, the parties are at liberty now to prosecute the rest of the motion if they deem necessary. The costs of the application shall be in the cause.

It is so ordered.

DATED and DELIVERED at Nairobi this

15

th

day of

February

, 2013.

A. MABEYA

JUDGE