Reprieve for a businesslady after court orders a Mortgage lender Housing Finance to compensate her Sh 52.7 million for selling her house after levying irregular charges and penalties on a loan she took 22 years ago.

This was after the Supreme Court rejected an appeal by Housing Finance saying there was nothing on the interpretation of the constitution about the case.

“Upon our perusal of the record, it is not evident that the matter took a constitutional trajectory to warrant our jurisdiction,” ruled the bench comprising of Chief Justice David Maraga, DCJ Philomena Mwilu and Mohamed Ibrahim, Smokin Wanjala and Njoki Ndung’u.

The judges said the central issues for determination were repayment of debt by Scholastica Nyaguthii, validity of a statutory notice before the sale of her house, valuation of the property, collusion and conspiracy between the parties and whether the house was sold by private auction or private treaty.

“At no point did any of the courts below us delve into matters of interpretation or application of the Constitution,” they said.

Housing finance finance had moved to the superior court after the Court of Appeal and High court had ruled in favour of the woman and faulted the bank for failing to keep proper records of her loan account but determined the amount through guess work.

Court records showed that by the time the house in Muthithi Gardens in Kiambu was sold in 2011, the bank had recovered a whooping Sh18 million, from the original amount of Sh3 million borrowed by the woman.

“The appellant (Housing finance F) was not entitled to do that. Once the loan became non-performing, if indeed, it did, the appellant should have followed and complied with the provisions of the Banking Act,” Said Court of Appeal Justices Asike Makhandia, Patrick Kiage and Sankale ole Kantai ruled.

Nyaguthii borrowed a loan of Sh3 million from the bank in 1998 and charged her two properties. She repaid part of the amount and being unable to meet her obligations, she requested the bank to sell one of the properties. The house was sold for Sh3.5 million and taken as part of the repayment.

But the bank persisted and sold the second house for Sh16 million. She moved to court arguing that the property was undervalued because it was valued at Sh32 million.

The woman said she lost her job through retrenchment in 2000 and she had difficulty servicing the loan.

Nyaguthii through her lawyer Titus Koceyo accused the bank of imposing high interest rates on the loan making it difficult for her to repay the amount.

She said she moved to the USA, and while away, her family was harassed by officers of the bank who placed notices on the property advertising it for sale, yet she maintained that she had overpaid the loan.

Koceyo told the court that by 2010 she had paid Sh8.4 million, but the mortgage lender was still demanding an additional Sh7.3 million. She held that HF, at the time of filing her suit, had placed the total amount to be repaid at Sh18 million.

High Court judge Eric Ogola ruled that the bank levied irregular charges on the loan and that it was only legally allowed to demand a maximum of Sh6 million going by the in duplum rule. According to the rule, arrears interest ceases to accrue once the sum of the unpaid (accrued) interest equals the amount of capital outstanding at the time.

The rule provides that banks can only recover a maximum of double the principal amount loaned to customers.

The judge ordered Housing finance to refund Nyaguthii the Sh16 million it sold her land for with 26 per cent interest.

“It is clear that HFCK had treated her as a cash cow, which it milked to the extent of even denying the calf milk.” said Justice Ogola

He added that, “It can never be justified in any society that one borrows Sh3m and pays Sh18 million.”