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Court of AppealPartially AllowedNot stated in the judgment text

Kipchumba v BOG Tambach Teachers Training College (Civil Appeal 100 of 2019) [2023] KECA 802 (KLR)

Court of Appeal of Kenya
30 June 2023
FSF. SichaleFOF. OchiengLAL. Achode
3,650 words in judgment
View original judgmentRead on Kenya Law Watch case
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·~15 min to read original · ~4 min brief

The bottom line

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Kenya's Court of Appeal ruled that when a court decree doesn't specify an interest rate, the standard 12% per year applies, increasing what judgment debtors owe.

What this practically means

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Executive summary

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This is a second appeal before the Court of Appeal at Nakuru (Sichale, Ochieng and Achode, JJA, delivering a single judgment of the court) against a High Court judgment of 23rd October 2018 which allowed the respondent's appeal and held that the applicable interest rate on the principal sum was 6% per annum under Section 26(2) of the Civil Procedure Act, that being the statutorily deemed rate where a decree is silent, while interest on costs under Section 27(2) stood at 14%. The dispute arose from a 2008 road traffic accident compensation suit where the decree awarded 'costs and interest' without specifying a rate, and the trial court had fixed 14% on the party-and-party bill of costs. The appellant contended for 14% or alternatively 12% per the Chief Justice's Practice Note No. 1 of 1982 and later practice directions and case law; the respondent supported the 6% finding. The Court framed a single issue: whether the applicable rate was 6%, 12% or 14%. Distilling three principles from Section 26 (judicious trial-court discretion over rates; discretion covering filing-to-judgment and judgment-to-payment periods; inapplicability to the pre-filing period), the Court found the original decree silent on the rate and held that the rate used by the courts absent special or exceptional circumstances is 12% per annum from the date of filing suit until payment in full. The appeal was accordingly allowed with costs, reversing the High Court's 6% finding. The judgment binds lower courts on the applicable rate where a decree is silent.

Questions the Court framed

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The issues the Court set itself to decide, in its own words.

  1. 1.Whether the applicable interest rate on the principal sum in this case was 6%, 12% or 14%

Key legal issues

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01

The applicable interest rate on the principal sum where the original decree was silent on the rate

Holding

The applicable rate is 12% per annum, being the rate used by the courts absent special or exceptional circumstances, rather than the 6% under Section 26(2) found by the High Court or the 14% contended for by the appellant.

Reasoning

The Court extracted three principles from Section 26 of the Civil Procedure Act: the trial court's judicious discretion over rates; the discretion covering the period from filing to judgment and from judgment to payment; and the inapplicability of Section 26 to the pre-filing period. Finding the original decree did not specify a rate, and that no higher or lower rate had been ordered, the Court relied on its jurisprudence (Orix Oil, Autolog Kenya, Permuga Auto Spares) to fix 12% per annum from filing until payment in full.

p. 6
02

The scope of a second appellate court's mandate

Holding

A second appeal is confined to matters of law, unless the courts below considered matters they should not have, failed to consider matters they should have, or the decision is perverse.

Reasoning

The Court stated its duty as a second appellate court by reference to Stanley N. Muriithi & another v Bernard Munene Ithiga, adopting the standard formulation that only questions of law fall for determination at second appeal, with the stated exceptions. This framed the entire appeal as a question of the correct legal rate of interest.

p. 4
03

Whether Practice Note No. 1 of 1982 displaced the statutory rate

Holding

Had the court specified an interest rate in the decree, the practice direction setting 12% in the absence of valid reason for a higher or lower rate would have guided the Court; here no rate was ordered, so the Court determined the appropriate rate from its own jurisprudence.

Reasoning

The judgment reproduces Practice Direction No. 1 of 1982 issued by Simpson AG CJ, which provides that in the absence of valid reason for a higher or lower rate the rate should be 12%. The Court noted the original decree indicated no rate, so there was no 'higher or lower rate' question; the appellant's suggestion of 14% or 12% under the practice directions did not displace the Court's reliance on its rich jurisprudence fixing 12%.

p. 6

Legal principles established

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  • On a second appeal, the Court of Appeal confines itself to matters of law only, unless it is shown that the courts below considered matters they should not have considered, failed to consider matters they should have considered, or the decision is perverse.
  • The trial court has wide discretion to award and fix the rate of interest, to be exercised judiciously; an appellate court should not interfere unless the trial court proceeded on an erroneous principle or was plainly and obviously wrong.
  • Section 26 of the Civil Procedure Act does not apply to the period before a suit is filed; interest prior to filing is a matter of substantive law, claimable only by contract, mercantile usage pleaded and proved, statutory right, or implied agreement from course of dealing.
  • Where a decree is silent on further interest, the established rate used by the courts absent special or exceptional circumstances is 12% per annum from the date of filing suit until payment in full.

Court orders

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  1. 1.The appeal is merited and allowed with costs
  2. 2.Orders accordingly, dated and delivered at Nakuru on 30th June 2023

The bench

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One judgment of the whole court — no separate or dissenting opinions.

FS
majority
FO
majority
LA
majority
On appeal from
High Court of Kenya at Eldoret (Kabarnet HCCA No. 2 of 2018)
Kabarnet HCCA No. 2 of 2018
Jurisdiction invoked
Second appeal to the Court of Appeal under the Civil Procedure Act, limited to matters of law

Relief refused

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Upholding the High Court's finding that the applicable rate on the principal sum was 6% under Section 26(2) of the Civil Procedure Act

The Court instead found, relying on its own jurisprudence, that absent special or exceptional circumstances the rate is 12% per annum from the date of filing suit until payment in full

p. 6

Costs

The appeal was allowed with costs.

Quotable passages

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Verbatim from the judgment, each located to the page it appears on in the official PDF — so these can be cited and checked directly.

From the foregoing, we find that the applicable interest rate in this case is 12% per annum.
p. 6Determination of the applicable interest rate
The rate used by the courts, absent special or exceptional circumstances is 12% per annum from the date of filing suit until payment in full.
p. 6General rule on interest rate on liquidated damages
Section 26 of the Act is not applicable to the period before a suit is filed.
p. 5Inapplicability of Section 26 to pre-filing interest
Consequently, the appeal is merited and allowed with costs. Orders accordingly.
p. 6Final orders / disposition
…on a second appeal, the Court confines itself to matters of law only, unless it is shown that the courts below considered matters they should not have considered or failed to consider matters they should have considered or looking at the entire decision, it is perverse.
p. 4Second appellate court's mandate

Issues in the judgment

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minor

The judgment appears internally inconsistent on whether the 12% rate applies from the date of filing suit or from the date of the decree, and does not state the remand/computation orders the narrative elsewhere describes; the operative conclusion fixes 12% 'from the date of filing suit until payment in full' while the High Court judgment under appeal had distinguished Section 26(2) (deemed 6%) from Section 26(1) discretion, and the Court simultaneously quotes the practice direction that absent a valid reason for a higher or lower rate the rate 'should now be 12%'.

minor

Orix Oil (Kenya) Limited is relied on as '(supra)' but the case is not earlier named in the judgment text with full citation.

Key timeline

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Practical implications

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Frequently asked questions

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Later judgments citing this (4)

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Judgments in the corpus that rely on this one. Where the Court said how it treated the authority, that is shown.

Cite this brief

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Cite this brief

Caselaw, "Kipchumba v BOG Tambach Teachers Training College (Civil Appeal 100 of 2019) [2023] KECA 802 (KLR)", Case Analysis (2023). Not stated in the judgment text. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2023/802/eng@2023-06-30

Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.