Housing Finance Company of Kenya v Sharok Kher Mohamed Ali Hirji & another [2019] KECA 166 (KLR)
The bottom line
#Kenya's Court of Appeal upheld a Kshs. 20 million award against Housing Finance for an unlawful property auction, including compound interest at 26% per annum.
What this practically means
#Executive summary
#Questions the Court framed
#The issues the Court set itself to decide, in its own words.
- 1.Whether the appellant credited the 1st respondent's account with the excess sale proceeds of over Kshs. 5 million, and whether the trial judge erred in not accounting for such credit in the damages award
- 2.Whether the High Court became functus officio after the judgment of Khaminwa, J. and could not deal with post-judgment matters
- 3.Whether Gikonyo, J. was right to order that the interest on the decretal sum be calculated on a compound rather than simple basis at 26% per annum from 19th January, 2000
Key legal issues
#Whether the appellant credited the chargor's account with the excess sale proceeds
The trial judge did not err in finding no credit was made; the documentary and oral evidence was confused and contradictory and no credible evidence supported the alleged credit.
The appellant's bank statement showed two credits in December 2000 and January 2001, yet in May 2003 the appellant was still writing that it held excess funds it would forward later. The appellant's own witness did not explain the credit entries, and no cheque or certificate was produced. The court found the documents presented were of no assistance and that no credible evidence showed any credit had been made.
Whether the High Court was functus officio after delivering judgment
The High Court was not functus officio; post-judgment matters such as review, stay of execution, the decree, costs and interpretation of the judgment could procedurally be raised, and it was the appellant itself who moved the court after judgment.
The record showed the appellant applied for stay, for review and for interpretation of the judgment on whether interest was simple or compound. The court held a party cannot move the court after judgment and then attack its jurisdiction, and Gikonyo, J. rightly assumed jurisdiction to deal with the issues raised. Okwengu, JA added that the matter was properly before the judge as an issue concerning the preparation of the decree.
Whether compound interest at 26% per annum could properly be awarded
By majority (Kantai and Okwengu, JJ.A.), Gikonyo, J. properly exercised his discretion in ordering compound interest, given the unlawful sale, the circumstances warranting it, and authority that courts may award compound interest in exercise of equitable jurisdiction; Koome, JA dissented.
The court applied section 26 of the Civil Procedure Act and authority that the rate, date and simple or compound basis of interest are matters of trial court discretion. It noted persuasive foreign authority (Sempra Metals; Bank of America Canada) that compound interest may be awarded on equitable principles, particularly against banks. The 1st respondent had pleaded interest at 26% per annum from the date of sale, and no error of principle in the discretion was demonstrated.
Implied terms and trade usage permitting extra charges on default
Not determined, as counsel abandoned all grounds in Civil Appeal No. 31 of 2016 except ground 2.
The appellant's memorandum contained 14 grounds including the claim that extra charges were implied terms customary in the mortgage industry, but counsel for the appellant expressly urged only ground 2 on the alleged credit and abandoned the rest, so the court made no finding on those grounds.
Legal principles established
#- After judgment, a trial court is not functus officio and may properly be moved on procedural and consequential matters including review, stay of execution, approval of the decree, taxation of costs and interpretation of the judgment on interest.
- Section 26 of the Civil Procedure Act confers discretion on the court to award interest for three stages - before suit, from suit to judgment, and from judgment to payment - and where parties have agreed a rate, the court must enforce the agreed rate unless it is shown to be illegal, unconscionable or fraudulent.
- An appellate court will not interfere with a trial judge's discretion on the date, rate and simple or compound basis of an interest award unless it is shown the discretion was exercised wrongly or on wrong principles.
- The Mbogo v Shah standard governs appellate interference with judicial discretion: interference only where relevant factors were ignored, irrelevant factors considered, or the discretion was demonstrably wrongly exercised.
Court orders
#- 1.Both consolidated appeals dismissed (majority of Kantai and Okwengu, JJ.A.)
- 2.Costs of both appeals and of the suit at the High Court awarded to the 1st respondent (majority)
- 3.Dissenting order of Koome, JA: Civil Appeal No. 31 of 2016 dismissed; Civil Appeal No. 32 of 2016 partially allowed and the orders of Gikonyo, J. of 3rd June, 2015 relating to compound interest set aside
The bench
#Judges wrote separately. A dissent does not bind; a concurrence may narrow the ratio.
Wrote the judgment
Principal judgment. Found no credible evidence of any credit to the chargor's account; held the High Court was not functus officio after judgment since post-judgment matters such as review, stay, decree and interest issues could properly be raised; and held Gikonyo, J. properly exercised discretion in awarding compound interest. Dismissed both appeals with costs.
The consolidated appeals have no merit and are accordingly dismissed with costs to the 1st respondent who will also have costs of the suit at the High Court.p. 8
Wrote the judgment
Concurred entirely with Kantai, JA, adding that the compound-interest question was properly before Gikonyo, J. as an issue concerning the preparation of the decree under Order 21 Rule 8(3) of the Civil Procedure Rules.
In my view the matter was properly before Gikonyo, J. as an issue concerning the preparation of a decree.p. 9
Wrote the judgment
Agreed that Appeal No. 31 should be dismissed, including on the credit and damages findings, but dissented on the compound interest order, holding the trial judge had already awarded interest and there was no error apparent on the record to justify altering the decree; partially allowed Appeal No. 32 and set aside the compound interest orders.
On my part, I dismiss C.A. No. 31 of 2016 and partially allow C.A. No. 32 of 2016 and set aside the orders of Gikonyo, J. of 3rd June, 2015 relating to compound interest.p. 10
- On appeal from
- High Court of Kenya at Nairobi
- HCCC No. 223 of 2006
- Jurisdiction invoked
- First appeal to the Court of Appeal against the judgment and decree of the High Court (no specific constitutional provision invoked in the judgment)
- Consolidated with
- Civil Appeal No. 32 of 2016
Relief refused
#Setting aside of the damages award of Kshs. 20,000,000 for the unlawful sale
Counsel for the appellant abandoned all grounds in Civil Appeal No. 31 of 2016 except ground 2 on the alleged credit, and did not contest the damages award
Substitution of the compound interest order with simple interest or interest from the date of filing suit
The question of the date, rate and simple or compound basis of interest is a matter for the trial court's discretion and no error of principle was demonstrated
Costs
The consolidated appeals were dismissed with costs to the 1st respondent, who will also have costs of the suit at the High Court (majority order); Koome, JA's dissenting order set aside the compound interest orders but made no separate costs order.
Quotable passages
#Verbatim from the judgment, each located to the page it appears on in the official PDF — so these can be cited and checked directly.
The consolidated appeals have no merit and are accordingly dismissed with costs to the 1st respondent who will also have costs of the suit at the High Court.
After judgment had been delivered the court could properly be asked for review, stay of execution, approval of decree arising from judgment, the issue of costs if taxed and thereafter a disagreement arising thereof; amongst other issues that could procedurally be raised after judgment.
The question of interest as regards the date from which it should be paid, the rates thereof as well as whether the same should be on compound or simple basis, is essentially a matter for the discretion of the court and unless the discretion is exercised wrongly an appellate court would not interfere with the (decision of the trial court).
there is no credible evidence on record to show that any credit was made. The Judge did not err in finding that no credit had been made by the appellant to the chargor
On my part, I dismiss C.A. No. 31 of 2016 and partially allow C.A. No. 32 of 2016 and set aside the orders of Gikonyo, J. of 3rd June, 2015 relating to compound interest.
Issues in the judgment
#The judgment states Khaminwa, J's judgment was delivered on 29th November, 2010 in one passage and on 29th November, 2000 in another.
The value of the suit property is given as Kshs. 20,000,000 in the main judgment but as Kshs. 25,000,000 in Koome, JA's judgment.
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Housing Finance Company of Kenya v Sharok Kher Mohamed Ali Hirji & another [2019] KECA 166 (KLR)", Case Analysis (2019). Civil Appeal No. 31 of 2016 (consolidated with Civil Appeal No. 32 of 2016). Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2019/166/eng@2019-11-22
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.