INTRODUCTION
1. This appeal arises from the judgment of the Small Claims Court at Thika delivered on 24th June 2024 in SCC Commercial Case No. E1968 of 2023.
2. In the suit before the trial court, Straight Security Services Limited, the respondent herein, sought recovery of Kshs. 627,299 from Chania Gathais Limited, the appellant. The claim comprised Kshs. 354,800 said to be outstanding for security services rendered and Kshs. 272,499 described as contractual liquidated damages or interest.
3. The appellant denied the claim and lodged a counterclaim for Kshs. 773,000. It alleged that, owing to the negligence and lack of professionalism of the respondent and its employees, assorted motor-vehicle parts were stolen from its premises.
4. By consent of the parties, the suit proceeded on the basis of the pleadings, witness statements and documents filed pursuant to section 30 of the Small Claims Court Act. The parties also filed written submissions.
5. Upon considering the material placed before her, the learned Adjudicator entered judgment for the respondent for Kshs. 627,299, dismissed the appellant’s counterclaim and awarded the respondent the costs of both the claim and the counterclaim.
6. Aggrieved by the whole decision, the appellant lodged the present appeal.
THE APPEAL
7. The appellant raised thirteen grounds in its memorandum of appeal. The grounds are repetitive and may conveniently be condensed into the complaints that the learned Adjudicator erred by:
a) Finding that the respondent had proved its claim;
b) Failing to consider the appellant’s pleadings and documentary evidence;
c) Making findings that were unsupported by the evidence;
d) Holding that the appellant had not been candid and truthful;
e) Dismissing the appellant’s counterclaim despite the evidence placed before the court; and
f) Awarding the respondent the entire sum claimed.
8. The appellant consequently asks this Court to allow the appeal, set aside the judgment and substitute it with an order dismissing the respondent’s claim. It also seeks the costs of the appeal.
THE PARTIES’ SUBMISSIONS
9. The appellant submitted that the learned Adjudicator failed to consider its inventory of stolen motor-vehicle parts, the OB report, the letter dated 3rd January 2023 terminating the contract, the receipts for the replacement parts and the witness statement of Inspector Caroline John of DCI Thika West.
10. According to the appellant, Inspector Caroline John’s statement established that a report had been made to Thika Police Station, CCTV footage had been examined and the respondent’s night guard had been identified as a suspect. The appellant argued that the respondent did not controvert that evidence and that the trial court improperly introduced its own conclusions.
11. The appellant relied on John Maina Nyaguthi v Francis Mbugua Njiru [2024] KEHC 4023 (KLR), where the High Court interfered with a Small Claims Court decision because the adjudicator had failed to analyse the evidence and determine a counterclaim. It also relied on Waruingi v Nyambura & another [2025] KEHC 866 (KLR) concerning proof of a material-damage claim.
12. The respondent opposed the appeal. It submitted that the appellant did not dispute that security services had been rendered or that the charges remained unpaid. It relied on the appellant’s emails acknowledging the arrears and requesting additional time within which to pay.
13. The respondent further submitted that clause 10 of the contract entitled it to liquidated damages arising from delayed payment. It relied on Joseph Kangethe Irungu v Peter Ng’ang’a Muchoki [2018] eKLR and Mithika M’Inoti v Eusabia Nkuene Julius [2013] eKLR for the proposition that courts should enforce contractual provisions on agreed damages.
14. Regarding the counterclaim, the respondent submitted that an OB extract merely proved that a report had been made to the police and did not, by itself, establish that the respondent or its employees caused the alleged loss. It maintained that the appellant failed to prove the respondent’s liability for the alleged theft.
DUTY AND JURISDICTION OF THIS COURT
15. This being an appeal from the Small Claims Court, the jurisdiction of this Court is prescribed by section 38 of the Small Claims Court Act, which provides:
“(1) A person aggrieved by the decision or an order of the Court may appeal against that decision or order to the High Court on matters of law.
(2) An appeal from any decision or order referred to in subsection (1) shall be final.”
16. The appeal is therefore confined to matters of law. This Court is not at liberty to undertake an unrestricted reconsideration of the facts and substitute its own conclusions merely because it might have reached a different factual decision.
17. In John Munuve Mati v Returning Officer, Mwingi North Constituency & 2 others [2018] eKLR, the Court of Appeal explained that an appellate court restricted to questions of law will ordinarily not interfere with factual findings unless it is demonstrated that the findings were based on no evidence, resulted from a misapprehension of the evidence or were so perverse that no reasonable tribunal properly directing itself could have reached them.
18. Similarly, in John Maina Nyaguthi v Francis Mbugua Njiru [2024] KEHC 4023 (KLR), the High Court held that failure by an adjudicator to analyse material evidence or give reasons for a decision raises a matter of law capable of appellate intervention.
19. Accordingly, although several grounds in the memorandum are framed as errors of fact, this Court may examine whether the trial court disregarded material evidence, misdirected itself on the burden or standard of proof, misconstrued the contract or reached conclusions unsupported by the evidence. Those are matters of law within section 38(1) of the Act.
ISSUES FOR DETERMINATION
20. Having considered the record, the grounds of appeal and the parties’ submissions, the following issues arise for determination:
a) Whether the respondent proved the principal debt of Kshs. 354,800;
b) Whether clause 10 of the contract supported the award of Kshs. 272,499;
c) Whether the appellant proved its counterclaim for Kshs. 773,000; and
d) What orders should be made regarding costs.
WHETHER THE PRINCIPAL DEBT WAS PROVED
21. The contract between the parties is contained in the General Security Services Agreement executed on 2nd January 2021. Under the agreement, the respondent was to provide one day guard and one night guard at the appellant’s premises in Thika at a monthly charge of Kshs. 32,000, exclusive of VAT.
22. Clause 4 required the appellant to pay the monthly invoice by the fifth day of the succeeding month after receipt of the invoice.
23. Although the appellant’s defence contained a general denial of the agreement and the outstanding balance, the correspondence exchanged between the parties tells a different story.
24. In its email of 1st June 2023, the appellant requested an additional 30 days to pay the arrears. It explained that payments it had expected had not materialised and stated that it was committed to settling the debt.
25. In a subsequent email dated 6th July 2023, the appellant proposed to reduce the number of guards, pay Kshs. 100,000 by the end of that month and thereafter pay monthly instalments of Kshs. 64,000 towards both the existing arrears and the current charges.
26. These communications constituted clear acknowledgments that the respondent had rendered security services and that charges remained unpaid.
27. In Choitram v Nazari [1984] KLR 327 , the Court of Appeal observed that an admission must be plain, obvious and unambiguous. The appellant’s emails met that threshold. They were inconsistent with its general denial of the contract and the outstanding charges.
28. The appellant also signed the security-services handing-over note dated 8th February 2023. That document referred to the withdrawal of services for non-payment and recorded that everything at the premises was in order at the time of handover. The record further shows that the services subsequently continued before the final handover on 1st July 2023.
29. The respondent produced a statement of account setting out the invoices issued, the payments received and the outstanding balance of Kshs. 354,800. The appellant did not present an alternative reconciliation of the account or identify any particular invoice that had been settled but omitted from the statement.
30. Under sections 107 and 108 of the Evidence Act, the burden rested upon the respondent to establish its claim on a balance of probabilities. Once the respondent produced the contract, statement of account, notices and the appellant’s acknowledgments, the evidential burden shifted to the appellant to demonstrate payment or some other discharge of the debt.
31. In Karugi & another v Kabiya & 3 others [1987] KLR 347 , the Court of Appeal affirmed that the burden of proof rests on the party who substantially asserts the affirmative of an issue. The respondent discharged that burden regarding the principal debt.
32. I consequently find no error of law in the trial court’s conclusion that the appellant owed the respondent Kshs. 354,800 for services rendered.
WHETHER CLAUSE 10 SUPPORTED THE AWARD OF KSHS. 272,499
33. The respondent claimed Kshs. 272,499 as liquidated damages or contractual interest. The trial court awarded the amount on the basis that clause 10 of the agreement authorised a penalty for delayed payment.
34. Clause 10 provided, in the material part :“The Company shall have the right to increase by 5% the amount of the charge invoiced as specified in clause 3 above, if it is not paid within thirty days from the date of receipt of invoice.”
35. The respondent interpreted that clause as permitting interest at 5% per month for the entire duration each invoice remained unpaid. Its statement of account calculated interest according to the number of delayed days and applied a recurring monthly rate of 5%. That calculation generated Kshs. 272,499 on the outstanding principal of Kshs. 354,800.
36. The starting point is that courts must enforce lawful contracts made by parties and should not rewrite their bargains. In National Bank of Kenya Ltd v Pipeplastic Samkolit (K) Ltd & another [2001] eKLR , the Court of Appeal held that a court cannot rewrite a contract between parties, who are bound by its terms unless coercion, fraud or undue influence is pleaded and proved.
37. The same principle was restated in Pius Kimaiyo Langat v Co-operative Bank of Kenya Ltd [2017] eKLR, where the Court of Appeal held that it is not the role of a court to rewrite a contract or relieve a party from a bad bargain freely entered into.
38. That principle operates both ways. A court may neither subtract from nor add to the parties’ agreement. Before enforcing a contractual charge, the court must ascertain whether the charge claimed is authorised by the words the parties used.
39. The objective of contractual interpretation is to ascertain the parties’ intention from the language of the agreement, read as a whole and in its relevant context. In Fidelity Commercial Bank Ltd v Kenya Grange Vehicle Industries Ltd [2017] eKLR, the Court of Appeal emphasised that contractual terms are to be construed objectively and in accordance with the language chosen by the parties.
40. Clause 10 permitted the respondent to “increase by 5% the amount of the charge invoiced” where payment was delayed beyond 30 days. It did not expressly provide for:
a) Interest at 5% per month;
b) A fresh 5% increase for every subsequent month of default;
c) Daily apportionment of monthly interest; or
d) Compounding of the charge until payment.
41. The clause contemplated an increase of 5% upon an invoice remaining unpaid for 30 days. Had the parties intended a recurring monthly rate of 5%, they could readily have said so.
42. The cases relied upon by the respondent concerning liquidated damages do not answer the central question. An agreed liquidated sum may be enforceable, but the sum must first be shown to have been agreed upon or calculated in the manner authorised by the contract.
43. In Mithika M’Inoti v Eusabia Nkuene Julius [2013] eKLR , the court was dealing with damages expressly agreed upon by the parties. In the present case, Kshs. 272,499 was not stated in the agreement and was not generated by a recurring formula expressly provided by clause 10.
44. The learned Adjudicator stated that it was the duty of the court to enforce the contract rather than rewrite it. That statement of principle was correct, but its application was erroneous. By enforcing recurring monthly interest which the agreement did not expressly provide, the trial court effectively enlarged clause 10.
45. The interpretation of a written contract is a matter of law. This Court is therefore entitled under section 38(1) of the Small Claims Court Act to intervene.
46. I find that the respondent did not establish a contractual basis for the recurring monthly calculation of Kshs. 272,499. That part of the award cannot stand.
47. The respondent nevertheless pleaded interest as an alternative remedy. Having established that the appellant withheld payment for services duly rendered, the respondent is entitled to reasonable interest on the proved principal debt.
48. In Highway Furniture Mart Ltd v Permanent Secretary, Office of the President & another [2006] eKLR, the Court of Appeal explained that the justification for awarding interest is to compensate a claimant for being deprived of the use of money lawfully due.
49. In the circumstances, interest at court rates on Kshs. 354,800 from the date of filing the claim until payment in full is fair and reasonable.
WHETHER THE COUNTERCLAIM WAS PROVED
50. The appellant counterclaimed for Kshs. 773,000, being the alleged value of assorted motor-vehicle parts stolen from its premises. The particulars included engines, gearboxes, batteries, suspension components, catalytic converters, radios and other vehicle parts.
51. The appellant pleaded that the loss resulted from the respondent’s negligence and lack of professionalism. Its particulars of negligence included failure to prevent the theft, stealing the parts, colluding with other persons and failing to raise an alarm or notify the police.
52. The learned Adjudicator questioned the identity of the person who had reported the matter, the nature of the report, the investigations undertaken and whether any employee of the respondent had been implicated.
53. In this respect, the trial court did not adequately engage with the witness statement of Inspector Caroline John of DCI Thika West. Her statement explained that Joseph Muthaiga Kariuki, associated with the appellant, had made a report at Thika Police Station. She further stated that CCTV footage was reviewed and that a person said to be the respondent’s night guard was identified as a suspect. According to her, an attempt to arrest the suspect was unsuccessful because he escaped and subsequently disappeared.
54. The assertion that the identity of the complainant and the investigative action taken were entirely unexplained was therefore not borne out by the full record.
55. A judicial decision must engage with material evidence and give intelligible reasons for accepting or rejecting it. In Judicial Service Commission v Ndururi [2021] KECA 365 (KLR), the Court of Appeal affirmed the obligation of courts to give reasons for their decisions.
56. The present case is, however, distinguishable from John Maina Nyaguthi v Francis Mbugua Njiru (supra). In Nyaguthi, the adjudicator failed altogether to analyse the witnesses’ evidence and did not determine the counterclaim. In this case, the learned Adjudicator identified the counterclaim as a distinct issue, considered it and gave reasons for dismissing it. The inadequacy in the treatment of one witness’s statement does not necessarily mean that the counterclaim was proved.
57. A counterclaim constitutes an independent suit. The burden therefore rested upon the appellant, as counterclaimant, to prove every essential element of the claim on a balance of probabilities.
58. The fact that evidence is uncontroverted does not relieve the party bearing the burden of proving its case. In Charterhouse Bank Ltd (under statutory management) v Frank N. Kamau [2016] eKLR , the Court of Appeal reiterated that failure by the opposing party to call evidence does not automatically result in proof of the claimant’s case. The court must still determine whether the evidence tendered discharges the legal burden.
59. The appellant was required to prove that the listed goods existed and were at its premises, that they were stolen during the subsistence of the respondent’s contractual responsibility, that the theft resulted from an actionable breach or negligence attributable to the respondent, and that the loss amounted to Kshs. 773,000.
60. Inspector Caroline John’s statement provided evidence of a report, an investigation and suspicion directed at a person said to have been the respondent’s guard. It did not, without the CCTV footage, a concluded investigation or other corroborating evidence, establish that all the items particularised in the counterclaim were stolen by that person.
61. An OB extract is principally evidence that a report was made. It is not, standing alone, conclusive proof that the reported offence occurred in the manner alleged or that a particular person or employer is civilly liable for the resulting loss.
62. The receipts produced by the appellant may show the purchase or value of certain motor-vehicle parts. They do not, without further evidence, establish that every part listed in the counterclaim was present at the premises immediately before the alleged theft or that the respondent’s breach caused its disappearance.
63. The counterclaim was for a specific sum of Kshs. 773,000 and was therefore in the nature of special damages. The law is settled that special damages must be specifically pleaded and strictly proved.
64. In Hahn v Singh [1985] KLR 716 , the Court of Appeal held that special damages must not only be specifically claimed but must also be strictly proved. The degree of proof required depends upon the nature and circumstances of the claim.
65. Similarly, in Capital Fish Kenya Limited v Kenya Power & Lighting Company Limited [2016] eKLR, the Court of Appeal held that it is not enough merely to list figures or produce documents without demonstrating how the claimed loss arose and connecting it to the wrong attributed to the defendant.
66. The appellant relied on Waruingi v Nyambura & another [2025] KEHC 866 (KLR), where an assessor’s report was accepted as proof of the reasonable cost of repairing an accident-damaged vehicle. That decision is distinguishable. The issue here is not merely the value of identified damaged items. The appellant had first to prove the occurrence and extent of the alleged theft and connect the entire claimed loss to the respondent’s breach.
67. The contractual provisions also required attention. Clauses 13 and 14 limited the circumstances in which the respondent would be liable for criminal acts or losses caused by theft. Clause 14 contemplated liability where the loss was caused by the sole negligence of the respondent’s employees, while the subsequent clauses imposed monetary limitations upon recoverable loss.
68. Exclusion and limitation clauses must be construed strictly and in the context of the contract as a whole. Nevertheless, parties to a commercial contract are ordinarily bound by clearly expressed limitations of liability unless they are shown to be unlawful or otherwise unenforceable.
69. The appellant did not demonstrate how its claim for the full sum of Kshs. 773,000 fell within the liability assumed by the respondent under the agreement or why the express limitations did not apply.
70. The chronology of events also casts doubt upon the appellant’s account. Its letter dated 3rd January 2023 alleged poor services and losses exceeding Kshs. 700,000 and purported to terminate the contract with effect from 31st January 2023. The alleged theft forming the subject of OB No. 40/15/03/2023 was, however, reported more than two months later, on 15th March 2023. The January letter could not, without further explanation, have related to the specific theft subsequently reported in March.
71. The respondent had issued a notice of withdrawal for non-payment on 1st February 2023, followed by a handing-over note dated 8th February 2023. That note, signed on behalf of both parties, recorded that everything at the premises was in order at the time of handover. The evidence nevertheless shows that the parties subsequently resumed or continued their contractual dealings, culminating in a further handing-over note dated 1st July 2023. The record does not clearly explain when and on what terms the guards were redeployed before the alleged theft reported on 15th March 2023.
72. More significantly, the alleged theft and the respondent’s purported responsibility were not raised in the appellant’s subsequent emails seeking indulgence. In June and July 2023, the appellant acknowledged the arrears, explained its financial difficulties and proposed arrangements for payment. It did not assert that the respondent’s guard had stolen parts worth Kshs. 773,000, demand compensation or claim a set-off against the outstanding charges.
73. That omission is material. A party who believed that its security provider was responsible for a substantial loss would reasonably be expected to raise the matter in contemporaneous communications concerning payment and continuation of the same security services. Although the omission is not conclusive by itself, it substantially weakens the later counterclaim and reinforces the conclusion that the appellant failed to establish the pleaded loss and the respondent’s contractual liability on a balance of probabilities.
74. Taken cumulatively, the evidence raised suspicion that a theft may have occurred and that a person associated with the respondent became a suspect. Suspicion and an incomplete investigation did not, however, prove all the elements of the pleaded counterclaim for Kshs. 773,000 on a balance of probabilities.
75. In Wareham t/a A.F. Wareham & 2 others v Kenya Post Office Savings Bank [2004] 2 KLR 91; [2004] KECA 166 (KLR), the Court of Appeal stated that a court’s decision must be founded upon the case pleaded and the evidence adduced in proof of it. The evidential gaps in the present counterclaim could not be filled by submissions or inference alone.
76. I therefore find that, notwithstanding the trial court’s inadequate treatment of Inspector Caroline John’s statement, its ultimate conclusion that the counterclaim had not been proved was correct. The error did not occasion a miscarriage of justice warranting reversal of that part of the judgment.
COSTS
77. Costs are discretionary, although they ordinarily follow the event.
78. Section 27(1) of the Small Claims Court Act provides that the Small Claims Court may award costs to the successful party. In the present case, the respondent succeeded on the principal claim and successfully resisted the appellant’s counterclaim. I find no sufficient basis for interfering with the trial court’s award of costs.
79. Regarding this appeal, the appellant has succeeded in setting aside the substantial award of Kshs. 272,499 but has failed in its challenge to the principal debt and the dismissal of its counterclaim.
80. In Jasbir Singh Rai & 3 others v Tarlochan Singh Rai Estate & 4 others [2013] eKLR, the Supreme Court stated that although costs generally follow the event, the court retains discretion to make an order that meets the justice of the particular case.
81. Given the parties’ divided success, the just order is that each party shall bear its own costs of the appeal.
DISPOSITION
82. In the result, the appeal succeeds only to the extent of the award of Kshs. 272,499. Consequently, I make the following orders:
a) The appeal is partially allowed.
b) The finding that the appellant owes the respondent the principal sum of Kshs. 354,800 is upheld.
c) The award of Kshs. 272,499 as contractual liquidated damages or interest is hereby set aside.
d) The judgment of the Small Claims Court for Kshs. 627,299 is set aside and substituted with judgment for the respondent against the appellant for Kshs. 354,800.
e) The sum of Kshs. 354,800 shall attract interest at court rates from the date of filing the claim in the Small Claims Court until payment in full.
f) The dismissal of the appellant’s counterclaim for Kshs. 773,000 is upheld.
g) The trial court’s order on costs is upheld.
h) Each party shall bear its own costs of this appeal.
i) 30 days stay granted.
83. Orders accordingly.
DELIVERED, DATED, AND SIGNED ON THIS 17 TH DAY OF SEPTEMBER, 2026.
JUDGMENT DELIVERED THROUGH MICROSOFT TEAMS ONLINE PLATFORM.
MARTHA MUTUKU-JUDGE.
In the presence of: -
Mr. Seda for the Appellant.
No appearance for Respondent.
Court Assistant- Mr. Kibet
1 | Page KIAMBU CIVIL APPEAL NO.E0114 OF 2024
1. This appeal arises from the judgment of the Small Claims Court at Thika delivered on 24th June 2024 in SCC Commercial Case No. E1968 of 2023.
2. In the suit before the trial court, Straight Security Services Limited, the respondent herein, sought recovery of Kshs. 627,299 from Chania Gathais Limited, the appellant. The claim comprised Kshs. 354,800 said to be outstanding for security services rendered and Kshs. 272,499 described as contractual liquidated damages or interest.
3. The appellant denied the claim and lodged a counterclaim for Kshs. 773,000. It alleged that, owing to the negligence and lack of professionalism of the respondent and its employees, assorted motor-vehicle parts were stolen from its premises.
4. By consent of the parties, the suit proceeded on the basis of the pleadings, witness statements and documents filed pursuant to section 30 of the Small Claims Court Act. The parties also filed written submissions.
5. Upon considering the material placed before her, the learned Adjudicator entered judgment for the respondent for Kshs. 627,299, dismissed the appellant’s counterclaim and awarded the respondent the costs of both the claim and the counterclaim.
6. Aggrieved by the whole decision, the appellant lodged the present appeal.
THE APPEAL
7. The appellant raised thirteen grounds in its memorandum of appeal. The grounds are repetitive and may conveniently be condensed into the complaints that the learned Adjudicator erred by:
a) Finding that the respondent had proved its claim;
b) Failing to consider the appellant’s pleadings and documentary evidence;
c) Making findings that were unsupported by the evidence;
d) Holding that the appellant had not been candid and truthful;
e) Dismissing the appellant’s counterclaim despite the evidence placed before the court; and
f) Awarding the respondent the entire sum claimed.
8. The appellant consequently asks this Court to allow the appeal, set aside the judgment and substitute it with an order dismissing the respondent’s claim. It also seeks the costs of the appeal.
THE PARTIES’ SUBMISSIONS
9. The appellant submitted that the learned Adjudicator failed to consider its inventory of stolen motor-vehicle parts, the OB report, the letter dated 3rd January 2023 terminating the contract, the receipts for the replacement parts and the witness statement of Inspector Caroline John of DCI Thika West.
10. According to the appellant, Inspector Caroline John’s statement established that a report had been made to Thika Police Station, CCTV footage had been examined and the respondent’s night guard had been identified as a suspect. The appellant argued that the respondent did not controvert that evidence and that the trial court improperly introduced its own conclusions.
11. The appellant relied on John Maina Nyaguthi v Francis Mbugua Njiru [2024] KEHC 4023 (KLR), where the High Court interfered with a Small Claims Court decision because the adjudicator had failed to analyse the evidence and determine a counterclaim. It also relied on Waruingi v Nyambura & another [2025] KEHC 866 (KLR) concerning proof of a material-damage claim.
12. The respondent opposed the appeal. It submitted that the appellant did not dispute that security services had been rendered or that the charges remained unpaid. It relied on the appellant’s emails acknowledging the arrears and requesting additional time within which to pay.
13. The respondent further submitted that clause 10 of the contract entitled it to liquidated damages arising from delayed payment. It relied on Joseph Kangethe Irungu v Peter Ng’ang’a Muchoki [2018] eKLR and Mithika M’Inoti v Eusabia Nkuene Julius [2013] eKLR for the proposition that courts should enforce contractual provisions on agreed damages.
14. Regarding the counterclaim, the respondent submitted that an OB extract merely proved that a report had been made to the police and did not, by itself, establish that the respondent or its employees caused the alleged loss. It maintained that the appellant failed to prove the respondent’s liability for the alleged theft.
DUTY AND JURISDICTION OF THIS COURT
15. This being an appeal from the Small Claims Court, the jurisdiction of this Court is prescribed by section 38 of the Small Claims Court Act, which provides:
“(1) A person aggrieved by the decision or an order of the Court may appeal against that decision or order to the High Court on matters of law.
(2) An appeal from any decision or order referred to in subsection (1) shall be final.”
16. The appeal is therefore confined to matters of law. This Court is not at liberty to undertake an unrestricted reconsideration of the facts and substitute its own conclusions merely because it might have reached a different factual decision.
17. In John Munuve Mati v Returning Officer, Mwingi North Constituency & 2 others [2018] eKLR, the Court of Appeal explained that an appellate court restricted to questions of law will ordinarily not interfere with factual findings unless it is demonstrated that the findings were based on no evidence, resulted from a misapprehension of the evidence or were so perverse that no reasonable tribunal properly directing itself could have reached them.
18. Similarly, in John Maina Nyaguthi v Francis Mbugua Njiru [2024] KEHC 4023 (KLR), the High Court held that failure by an adjudicator to analyse material evidence or give reasons for a decision raises a matter of law capable of appellate intervention.
19. Accordingly, although several grounds in the memorandum are framed as errors of fact, this Court may examine whether the trial court disregarded material evidence, misdirected itself on the burden or standard of proof, misconstrued the contract or reached conclusions unsupported by the evidence. Those are matters of law within section 38(1) of the Act.
ISSUES FOR DETERMINATION
20. Having considered the record, the grounds of appeal and the parties’ submissions, the following issues arise for determination:
a) Whether the respondent proved the principal debt of Kshs. 354,800;
b) Whether clause 10 of the contract supported the award of Kshs. 272,499;
c) Whether the appellant proved its counterclaim for Kshs. 773,000; and
d) What orders should be made regarding costs.
WHETHER THE PRINCIPAL DEBT WAS PROVED
21. The contract between the parties is contained in the General Security Services Agreement executed on 2nd January 2021. Under the agreement, the respondent was to provide one day guard and one night guard at the appellant’s premises in Thika at a monthly charge of Kshs. 32,000, exclusive of VAT.
22. Clause 4 required the appellant to pay the monthly invoice by the fifth day of the succeeding month after receipt of the invoice.
23. Although the appellant’s defence contained a general denial of the agreement and the outstanding balance, the correspondence exchanged between the parties tells a different story.
24. In its email of 1st June 2023, the appellant requested an additional 30 days to pay the arrears. It explained that payments it had expected had not materialised and stated that it was committed to settling the debt.
25. In a subsequent email dated 6th July 2023, the appellant proposed to reduce the number of guards, pay Kshs. 100,000 by the end of that month and thereafter pay monthly instalments of Kshs. 64,000 towards both the existing arrears and the current charges.
26. These communications constituted clear acknowledgments that the respondent had rendered security services and that charges remained unpaid.
27. In Choitram v Nazari [1984] KLR 327 , the Court of Appeal observed that an admission must be plain, obvious and unambiguous. The appellant’s emails met that threshold. They were inconsistent with its general denial of the contract and the outstanding charges.
28. The appellant also signed the security-services handing-over note dated 8th February 2023. That document referred to the withdrawal of services for non-payment and recorded that everything at the premises was in order at the time of handover. The record further shows that the services subsequently continued before the final handover on 1st July 2023.
29. The respondent produced a statement of account setting out the invoices issued, the payments received and the outstanding balance of Kshs. 354,800. The appellant did not present an alternative reconciliation of the account or identify any particular invoice that had been settled but omitted from the statement.
30. Under sections 107 and 108 of the Evidence Act, the burden rested upon the respondent to establish its claim on a balance of probabilities. Once the respondent produced the contract, statement of account, notices and the appellant’s acknowledgments, the evidential burden shifted to the appellant to demonstrate payment or some other discharge of the debt.
31. In Karugi & another v Kabiya & 3 others [1987] KLR 347 , the Court of Appeal affirmed that the burden of proof rests on the party who substantially asserts the affirmative of an issue. The respondent discharged that burden regarding the principal debt.
32. I consequently find no error of law in the trial court’s conclusion that the appellant owed the respondent Kshs. 354,800 for services rendered.
WHETHER CLAUSE 10 SUPPORTED THE AWARD OF KSHS. 272,499
33. The respondent claimed Kshs. 272,499 as liquidated damages or contractual interest. The trial court awarded the amount on the basis that clause 10 of the agreement authorised a penalty for delayed payment.
34. Clause 10 provided, in the material part :“The Company shall have the right to increase by 5% the amount of the charge invoiced as specified in clause 3 above, if it is not paid within thirty days from the date of receipt of invoice.”
35. The respondent interpreted that clause as permitting interest at 5% per month for the entire duration each invoice remained unpaid. Its statement of account calculated interest according to the number of delayed days and applied a recurring monthly rate of 5%. That calculation generated Kshs. 272,499 on the outstanding principal of Kshs. 354,800.
36. The starting point is that courts must enforce lawful contracts made by parties and should not rewrite their bargains. In National Bank of Kenya Ltd v Pipeplastic Samkolit (K) Ltd & another [2001] eKLR , the Court of Appeal held that a court cannot rewrite a contract between parties, who are bound by its terms unless coercion, fraud or undue influence is pleaded and proved.
37. The same principle was restated in Pius Kimaiyo Langat v Co-operative Bank of Kenya Ltd [2017] eKLR, where the Court of Appeal held that it is not the role of a court to rewrite a contract or relieve a party from a bad bargain freely entered into.
38. That principle operates both ways. A court may neither subtract from nor add to the parties’ agreement. Before enforcing a contractual charge, the court must ascertain whether the charge claimed is authorised by the words the parties used.
39. The objective of contractual interpretation is to ascertain the parties’ intention from the language of the agreement, read as a whole and in its relevant context. In Fidelity Commercial Bank Ltd v Kenya Grange Vehicle Industries Ltd [2017] eKLR, the Court of Appeal emphasised that contractual terms are to be construed objectively and in accordance with the language chosen by the parties.
40. Clause 10 permitted the respondent to “increase by 5% the amount of the charge invoiced” where payment was delayed beyond 30 days. It did not expressly provide for:
a) Interest at 5% per month;
b) A fresh 5% increase for every subsequent month of default;
c) Daily apportionment of monthly interest; or
d) Compounding of the charge until payment.
41. The clause contemplated an increase of 5% upon an invoice remaining unpaid for 30 days. Had the parties intended a recurring monthly rate of 5%, they could readily have said so.
42. The cases relied upon by the respondent concerning liquidated damages do not answer the central question. An agreed liquidated sum may be enforceable, but the sum must first be shown to have been agreed upon or calculated in the manner authorised by the contract.
43. In Mithika M’Inoti v Eusabia Nkuene Julius [2013] eKLR , the court was dealing with damages expressly agreed upon by the parties. In the present case, Kshs. 272,499 was not stated in the agreement and was not generated by a recurring formula expressly provided by clause 10.
44. The learned Adjudicator stated that it was the duty of the court to enforce the contract rather than rewrite it. That statement of principle was correct, but its application was erroneous. By enforcing recurring monthly interest which the agreement did not expressly provide, the trial court effectively enlarged clause 10.
45. The interpretation of a written contract is a matter of law. This Court is therefore entitled under section 38(1) of the Small Claims Court Act to intervene.
46. I find that the respondent did not establish a contractual basis for the recurring monthly calculation of Kshs. 272,499. That part of the award cannot stand.
47. The respondent nevertheless pleaded interest as an alternative remedy. Having established that the appellant withheld payment for services duly rendered, the respondent is entitled to reasonable interest on the proved principal debt.
48. In Highway Furniture Mart Ltd v Permanent Secretary, Office of the President & another [2006] eKLR, the Court of Appeal explained that the justification for awarding interest is to compensate a claimant for being deprived of the use of money lawfully due.
49. In the circumstances, interest at court rates on Kshs. 354,800 from the date of filing the claim until payment in full is fair and reasonable.
WHETHER THE COUNTERCLAIM WAS PROVED
50. The appellant counterclaimed for Kshs. 773,000, being the alleged value of assorted motor-vehicle parts stolen from its premises. The particulars included engines, gearboxes, batteries, suspension components, catalytic converters, radios and other vehicle parts.
51. The appellant pleaded that the loss resulted from the respondent’s negligence and lack of professionalism. Its particulars of negligence included failure to prevent the theft, stealing the parts, colluding with other persons and failing to raise an alarm or notify the police.
52. The learned Adjudicator questioned the identity of the person who had reported the matter, the nature of the report, the investigations undertaken and whether any employee of the respondent had been implicated.
53. In this respect, the trial court did not adequately engage with the witness statement of Inspector Caroline John of DCI Thika West. Her statement explained that Joseph Muthaiga Kariuki, associated with the appellant, had made a report at Thika Police Station. She further stated that CCTV footage was reviewed and that a person said to be the respondent’s night guard was identified as a suspect. According to her, an attempt to arrest the suspect was unsuccessful because he escaped and subsequently disappeared.
54. The assertion that the identity of the complainant and the investigative action taken were entirely unexplained was therefore not borne out by the full record.
55. A judicial decision must engage with material evidence and give intelligible reasons for accepting or rejecting it. In Judicial Service Commission v Ndururi [2021] KECA 365 (KLR), the Court of Appeal affirmed the obligation of courts to give reasons for their decisions.
56. The present case is, however, distinguishable from John Maina Nyaguthi v Francis Mbugua Njiru (supra). In Nyaguthi, the adjudicator failed altogether to analyse the witnesses’ evidence and did not determine the counterclaim. In this case, the learned Adjudicator identified the counterclaim as a distinct issue, considered it and gave reasons for dismissing it. The inadequacy in the treatment of one witness’s statement does not necessarily mean that the counterclaim was proved.
57. A counterclaim constitutes an independent suit. The burden therefore rested upon the appellant, as counterclaimant, to prove every essential element of the claim on a balance of probabilities.
58. The fact that evidence is uncontroverted does not relieve the party bearing the burden of proving its case. In Charterhouse Bank Ltd (under statutory management) v Frank N. Kamau [2016] eKLR , the Court of Appeal reiterated that failure by the opposing party to call evidence does not automatically result in proof of the claimant’s case. The court must still determine whether the evidence tendered discharges the legal burden.
59. The appellant was required to prove that the listed goods existed and were at its premises, that they were stolen during the subsistence of the respondent’s contractual responsibility, that the theft resulted from an actionable breach or negligence attributable to the respondent, and that the loss amounted to Kshs. 773,000.
60. Inspector Caroline John’s statement provided evidence of a report, an investigation and suspicion directed at a person said to have been the respondent’s guard. It did not, without the CCTV footage, a concluded investigation or other corroborating evidence, establish that all the items particularised in the counterclaim were stolen by that person.
61. An OB extract is principally evidence that a report was made. It is not, standing alone, conclusive proof that the reported offence occurred in the manner alleged or that a particular person or employer is civilly liable for the resulting loss.
62. The receipts produced by the appellant may show the purchase or value of certain motor-vehicle parts. They do not, without further evidence, establish that every part listed in the counterclaim was present at the premises immediately before the alleged theft or that the respondent’s breach caused its disappearance.
63. The counterclaim was for a specific sum of Kshs. 773,000 and was therefore in the nature of special damages. The law is settled that special damages must be specifically pleaded and strictly proved.
64. In Hahn v Singh [1985] KLR 716 , the Court of Appeal held that special damages must not only be specifically claimed but must also be strictly proved. The degree of proof required depends upon the nature and circumstances of the claim.
65. Similarly, in Capital Fish Kenya Limited v Kenya Power & Lighting Company Limited [2016] eKLR, the Court of Appeal held that it is not enough merely to list figures or produce documents without demonstrating how the claimed loss arose and connecting it to the wrong attributed to the defendant.
66. The appellant relied on Waruingi v Nyambura & another [2025] KEHC 866 (KLR), where an assessor’s report was accepted as proof of the reasonable cost of repairing an accident-damaged vehicle. That decision is distinguishable. The issue here is not merely the value of identified damaged items. The appellant had first to prove the occurrence and extent of the alleged theft and connect the entire claimed loss to the respondent’s breach.
67. The contractual provisions also required attention. Clauses 13 and 14 limited the circumstances in which the respondent would be liable for criminal acts or losses caused by theft. Clause 14 contemplated liability where the loss was caused by the sole negligence of the respondent’s employees, while the subsequent clauses imposed monetary limitations upon recoverable loss.
68. Exclusion and limitation clauses must be construed strictly and in the context of the contract as a whole. Nevertheless, parties to a commercial contract are ordinarily bound by clearly expressed limitations of liability unless they are shown to be unlawful or otherwise unenforceable.
69. The appellant did not demonstrate how its claim for the full sum of Kshs. 773,000 fell within the liability assumed by the respondent under the agreement or why the express limitations did not apply.
70. The chronology of events also casts doubt upon the appellant’s account. Its letter dated 3rd January 2023 alleged poor services and losses exceeding Kshs. 700,000 and purported to terminate the contract with effect from 31st January 2023. The alleged theft forming the subject of OB No. 40/15/03/2023 was, however, reported more than two months later, on 15th March 2023. The January letter could not, without further explanation, have related to the specific theft subsequently reported in March.
71. The respondent had issued a notice of withdrawal for non-payment on 1st February 2023, followed by a handing-over note dated 8th February 2023. That note, signed on behalf of both parties, recorded that everything at the premises was in order at the time of handover. The evidence nevertheless shows that the parties subsequently resumed or continued their contractual dealings, culminating in a further handing-over note dated 1st July 2023. The record does not clearly explain when and on what terms the guards were redeployed before the alleged theft reported on 15th March 2023.
72. More significantly, the alleged theft and the respondent’s purported responsibility were not raised in the appellant’s subsequent emails seeking indulgence. In June and July 2023, the appellant acknowledged the arrears, explained its financial difficulties and proposed arrangements for payment. It did not assert that the respondent’s guard had stolen parts worth Kshs. 773,000, demand compensation or claim a set-off against the outstanding charges.
73. That omission is material. A party who believed that its security provider was responsible for a substantial loss would reasonably be expected to raise the matter in contemporaneous communications concerning payment and continuation of the same security services. Although the omission is not conclusive by itself, it substantially weakens the later counterclaim and reinforces the conclusion that the appellant failed to establish the pleaded loss and the respondent’s contractual liability on a balance of probabilities.
74. Taken cumulatively, the evidence raised suspicion that a theft may have occurred and that a person associated with the respondent became a suspect. Suspicion and an incomplete investigation did not, however, prove all the elements of the pleaded counterclaim for Kshs. 773,000 on a balance of probabilities.
75. In Wareham t/a A.F. Wareham & 2 others v Kenya Post Office Savings Bank [2004] 2 KLR 91; [2004] KECA 166 (KLR), the Court of Appeal stated that a court’s decision must be founded upon the case pleaded and the evidence adduced in proof of it. The evidential gaps in the present counterclaim could not be filled by submissions or inference alone.
76. I therefore find that, notwithstanding the trial court’s inadequate treatment of Inspector Caroline John’s statement, its ultimate conclusion that the counterclaim had not been proved was correct. The error did not occasion a miscarriage of justice warranting reversal of that part of the judgment.
COSTS
77. Costs are discretionary, although they ordinarily follow the event.
78. Section 27(1) of the Small Claims Court Act provides that the Small Claims Court may award costs to the successful party. In the present case, the respondent succeeded on the principal claim and successfully resisted the appellant’s counterclaim. I find no sufficient basis for interfering with the trial court’s award of costs.
79. Regarding this appeal, the appellant has succeeded in setting aside the substantial award of Kshs. 272,499 but has failed in its challenge to the principal debt and the dismissal of its counterclaim.
80. In Jasbir Singh Rai & 3 others v Tarlochan Singh Rai Estate & 4 others [2013] eKLR, the Supreme Court stated that although costs generally follow the event, the court retains discretion to make an order that meets the justice of the particular case.
81. Given the parties’ divided success, the just order is that each party shall bear its own costs of the appeal.
DISPOSITION
82. In the result, the appeal succeeds only to the extent of the award of Kshs. 272,499. Consequently, I make the following orders:
a) The appeal is partially allowed.
b) The finding that the appellant owes the respondent the principal sum of Kshs. 354,800 is upheld.
c) The award of Kshs. 272,499 as contractual liquidated damages or interest is hereby set aside.
d) The judgment of the Small Claims Court for Kshs. 627,299 is set aside and substituted with judgment for the respondent against the appellant for Kshs. 354,800.
e) The sum of Kshs. 354,800 shall attract interest at court rates from the date of filing the claim in the Small Claims Court until payment in full.
f) The dismissal of the appellant’s counterclaim for Kshs. 773,000 is upheld.
g) The trial court’s order on costs is upheld.
h) Each party shall bear its own costs of this appeal.
i) 30 days stay granted.
83. Orders accordingly.
DELIVERED, DATED, AND SIGNED ON THIS 17 TH DAY OF SEPTEMBER, 2026.
JUDGMENT DELIVERED THROUGH MICROSOFT TEAMS ONLINE PLATFORM.
MARTHA MUTUKU-JUDGE.
In the presence of: -
Mr. Seda for the Appellant.
No appearance for Respondent.
Court Assistant- Mr. Kibet
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