The High Court has ordered Chase Bank to refund one of its borrowers $47,000 (Sh6 million) being excess interest charged on a $2 million loan (Sh258 million) and property valuation charges.
Justice William Musyoka upheld a decision of a magistrate court to order the lender under receivership to return the sum to Nanda Properties Limited, which borrowed the loan 12 years ago and allegedly defaulted leading to a tussle.
The court issued the order even as it held that the bank’s former receiver, Kenya Deposit Insurance Corporation (KDIC), could not be held liable for liabilities of the lender.
The legal dispute started at the magistrate court after the borrower sued claiming erroneous excess interest charges, refund of the monies paid and refund of monies debited as valuation charges. It said that it had borrowed $2 million in May 2012 and was charged excess interest of $40,194 and a further amount of $6,909 was wrongly deducted from its account.
The company also sought delisting of the names of its directors from the Credit Reference Bureau (CRB) where they had been listed as loan defaulters.
After hearing the case, the lower court allowed the claim and awarded the company Sh4.8 million, as per the decree issued by the trial court on July 28, 2023.
Chase Bank and KDIC were dissatisfied with the decision and moved to the High Court seeking to quash the same arguing that the judgment was punitive.
They added that the trial court failed to appreciate the evidence, disregarded their case, and that it relied solely on the calculations by the borrower.
Justice Musyoka, while dismissing the appeal partially, ruled that even if a court cannot rewrite contracts between parties, the excess interest in the instant case was to be charged upon the maximum amount of the loan facility being exceeded, and not the time limit placed by the bank.
“Those were the terms (in the letter of offer) that had been signed to by the parties. Consequently, the increase, in the interest rate, was in breach of the letter of offer, and the trial court was right in its finding,” said Justice Musyoka.
He observed that Chase Bank conceded that the borrowing did not exceed the maximum amount of the facility, $2 million.
With regard to the valuation, the court said though the Land laws allow the valuation fee to be paid by the borrower, there would still be a need to prove that a valuation was done, to justify the making of a deduction.
In this case, the judge said no such proof was provided.
“Being entitled, in law, to charge a valuation fee, is one thing, the valuation being done is another. The appellants were obliged, to provide proof that such a valuation had been undertaken, to justify the deduction. They did not provide proof, and the deduction was unjustified,” said the court.
Justice Musyoka added that according to section 45(b) of the Kenya Deposit Insurance Act, KDIC is shielded from liability and cannot take up the liabilities of the institutions placed under its receivership.
“The liability of the KDIC is limited or restricted to damages suffered by any party. KDIC acts as a receiver, but it cannot be held liable for carrying out that mandate as such,” he ruled.
The judge, however, found that the listing of the company directors at CRB was lawfully done. He said the bank complied with the Credit Reference Bureau Regulations, 2013 including issuance of a notice to the borrower 30 days before the loan becomes non-performing.
He said when default on non-performance happened, the Regulation on sharing of the customer’s information with CRB kicked in, and the information set out in there, including the names of the directors, was shared with the bureau.
