REPUBLIC OF KENYA
IN THE HIGH COURT OF KENYA AT NAIROBI
MILIMANI CIVIL APPELLATE DIVISION
CIVIL APPEAL NO. E763 OF 2022
(Coram: Andayi W. F., J.)
EMBU GATURI HOUSING COOPERATIVE SOCIETY LIMITED……....APPELLANT
VERSUS
JINSING ENTERPRISES LIMITED.............................................……………RESPONDENT
(Being an appeal against the judgment and decree of Hon. B. J. Ofisi., Adjudicator delivered on 31 st August 2022 in Milimani Small Claims Court SCCCOMM. CLAIM NO. E1987 of 2022)
JUDGMENT
1. This appeal arises from a judgment of the Small Claims Court (SCC) dated 31 st August 2022 in which the court allowed the respondent’s claim for recovery of KShs 996,481/= for services rendered to the appellant by the respondent.
2. According to the pleadings, the evidence and the submissions filed by the parties before the Small Claims Court (SCC), the appellant and the respondent entered into negotiations some time in the year 2016 whereby the respondent was to undertake for the appellant, construction of a nine storey office block on the appellant’s piece of land parcel LR No. 209/744 situate along Biashara street within the Nairobi Central District.
3. According to the respondent in its claim before the SCC dated 29 th March 2022, upon discussions with the appellant they both agreed to invest and construct the project and the terms thereof were reduced into an Equity Finance Agreement that was produced before the SCC as evidence. The agreement was however never signed.
4. Bills of Quantities (BQs) for the project were prepared by Costek Alma, the QS and were submitted to the respondent. The respondent considered the BQs alongside the architectural drawings from the project architects Lexicon + ion. The respondent averred that the it submitted the architectural designs together with the structural drawings and plans to Nairobi City County and requested for a construction permit. Further that on 19 th and 20 th January 2017, the respondent paid a total of KShs 996,481/= for the approval, being KShs 896,481 to the Nairobi City County and KShs 100,000/= to Lexicon + ion on the understanding that the money would be refunded to it by the appellant with interest at the rate of 14% p.a.
5. The project did not receive the expected funding from financiers and some tenants of the premises that were to be demolished before construction could take off declined to vacate, leading to court cases that ended up in their favour thereby making the site unavailable for the contemplated project. So the project never took off.
6. The respondent demanded for a refund of the KShs 996,481/= expended by it towards obtaining the construction permit for the project. The appellant failed to refund the money, thereby leading to the respondent to file the claim before the SCC.
7. The appellant filed a response to the claim and denied the claim. It averred that the project was frustrated by an unforeseen event being refusal by some tenants to vacate the premises leading to a court case which ended in the tenants’ favour. Further that the appellant and the respondent were to execute a contract only if the proposed project was ready to start but no such contract was executed. The appellant denied that it ever authorized the respondent to procure any approval on its behalf.
8. The appellant averred further that the respondent frustrated the opportunity to engage in the proposed project by declining to issue a letter of representation regarding financing of the proposed project when the same was requested by the appellant for purposes of the case that was before the Business Premises Rent Tribunal.
9. CW 1, Caroline Mutua, the respondent’s project manager testified and gave evidence on behalf of the respondent. She adopted the respondent’s pleadings as her evidence in chief and relied on the filed documents as exhibits. She was cross-examined on her evidence.
10. DW 1, Jacob Nyaga Gachau a manager of the appellant presented the appellant’s case. He adopted his witness statement dated 13 th April 2022 as his evidence in chief. He produced the documents filed alongside the response as exhibits. He maintained that the appellant did not sign any agreement with the respondent and did not hold any meetings.
11. DW 1 said that the money used to request for the approval was willingly done by the respondent. He said further that if the construction was concluded and the appellant received the rental income the said amount would be reimbursed but the project did not take off. He said that the respondent frustrated the project.
12. In cross-examination, DW 1 said that the appellant had never had any discussions with Lexicon + ion. Further that the respondent was bound to issue the appellant with a letter of representation
13. Upon analyzing the evidence and considering the law and authorities, the learned Adjudicator concluded that the claim had been proved and she allowed the same with costs to the respondent.
14. The appellant was dissatisfied with the judgment and in the memorandum of appeal dated 28 th September 2022 it raised the following grounds:
a) The Learned magistrate erred in law by implying the existence of a contractual relationship between the Claimant and the Respondent, despite there being substantial evidence indicating that there was no such relation as the parties intended their relationship to be governed by a written agreement, executed by both the Claimant and the Respondent.
b) The learned Magistrate erred in law in failing to appreciate the legal position that agreements that are still under negotiations do not amount to contracts. In this case, the learned Magistrate failed to appreciate that the Draft Investment term sheet expressly indicated that the same was for the sole purpose of facilitating discussion between the Claimant and the Financier and thus subject to an eventual and formal loan agreement.
c) The learned Magistrate erred in law when she entered Judgement in favour of the Claimant against the Respondent in spite of the Claimant’s failure to establish its case on a balance of probability, especially on the issue of whether the Respondent authorized the Claimant to procure the building approval from the County Government.
d) The learned Magistrate erred in law in holding that the Claimant had proved that it was entitled to payment of Kshs, 996,481.00/= when there was clear and overriding evidence to the contrary.
e) The learned Magistrate erred in law by failing to appreciate the legal position that there could be no order of restitution without proof of unjust enrichment.
f) The learned Magistrate misdirected herself on several matters of law and consequently arrived at a decision that was unjust and unfair in the circumstances of the case.
g) The Learned Magistrate’s decision is against the weight of the evidence tendered, and made findings unsupported by evidence offending the rules of fairness and justice.
15. The appellant therefore prays that the appeal be allowed and the judgment of the trial court delivered on 2 nd May 2024 be set aside and with an order for costs and that this court may make such further or consequential orders as it deems just.
16. The appeal was disposed of by way of written submissions filed by learned counsels for the parties. Learned counsels highlighted the submissions on 25 th February 2026. The submissions are considered in the analysis that follows.
17. The appellant condensed the grounds of appeal into four issues for determination as follows:
a) Whether the learned magistrate erred in law in finding that a contractual relationship existed between the appellant and the respondent.
b) Whether the learned magistrate erred in law in finding that the respondent had established on a balance of probability that the appellant had authorized it to procure the building approval from the Nairobi City County.
c) Whether the learned magistrate erred in law by failing to appreciate the settled legal principle that there could be no order of restitution without proof of unjust enrichment.
d) Whether the learned magistrate erred in law in finding that the respondent has established its case on a balance of probability.
18. The respondent on its part submitted that there was only one issue for this court’s determination, that is, whether the appeal is on points of law as required under section 38 of the SCCA. Learned counsel for the respondent answered that question by stating that all the seven grounds of appeal raised by the respondent are issues of fact rather than law. He has set out each of them pointing out how it is an issue of fact rather than law. He buttressed his submission with various case law, among the that of Stephen M’Iriungu and Another vs. Republic (1982-88) 1 KAR 360 (supra) and others such as the Philippines Supreme case of Republic v. Malabanan, G.R. No. 169067, October 632 SCRA 338, 345 citing with approval the case of Leoncio v. De Vera, G.R. No. 176842, 546 SCRA 180, 184 where it was held that:
“A question of law arises when there is doubt as to what the law is on a certain state of facts, while there is a question of fact when the doubt arises as to the truth or falsity of the alleged facts. For a question to be one of law, the same must not involve an examination of the probative value of the evidence presented by the litigants or any of them. The resolution of the issue must rest solely on what the law provides on the given set of circumstances. Once it is clear that the issue invites a review of the evidence presented, the question posed is one of fact. Thus, the test of whether a question is one of law or of fact is not the appellation given to such question by the party raising the same; rather, it is whether the appellate court can determine the issue raised without reviewing or evaluating the evidence, in which case, it is a question of law; otherwise it is a question of fact.”
19. Learned counsel for the respondent submits that the appellant is asking this court to retry the case on factual findings conclusively determined by the SCC and so the same should be dismissed.
20. Learned counsel submits that whether or not a contract exists between parties is a matter of fact and the learned Adjudicator properly evaluated the evidence and arrived at the conclusion that there was an implied contract established between the parties. He relied on the case of Caleb Onyango Adongo v Bernard Ouma Ogur [2020] eKLR which cited with approval the case of Rose and Fran Co. vs. J R Crompton & Bros Ltd (1932) 2 B held that: -
“To create a contract there must be a common intention of the parties to enter into legal obligations, mutually communicated expressly or impliedly.”
21. Learned counsel also relied on the case of Stancom Sacco Society Limited v Alliance One Tobacco Limited [2018] eKLR where the Court proceeded as follows on the issue of implied contract:
“As to implied contracts, Lord Clarke in the case of RTS Flexible Systems Ltd vs. Molkerei Alois Muller GmbH (2010) UKSC 14 stated that: -
“…The general principles are not in doubt. Whether there was a binding contract between the parties and of so, upon what terms depends upon what they have agreed. It depends not upon their subjective state of mind, but upon a consideration of what was communicated between them by words or conduct, and whether that leads objectively to a conclusion that they intended to create legal relations and had agreed upon all the terms which they regarded or the law requires as essential for the formation of legally binding relations. Even if certain terms of economic or other significance have not been finalized, an objective appraisal of their words and conduct may lead to the conclusion that they did not intend agreement of such terms to be a precondition to a concluded and legally binding agreement.”
22. Learned counsel submits further that whether the Draft Investment Term Sheet was merely a document facilitating negotiations or part of a binding agreement is a question of fact just as the issue of whether or not the appellant had authorized the respondent to proceed with the approvals as the appellant was at all times aware and did not object to the necessity of the building approvals, the application for the same and the subsequent payment made in its stead.
23. Learned counsel submits that the respondent has not pointed out any instances in which the learned Adjudicator misdirected herself on point of law and that the submission that the decision was against the weight of the evidence is not a point of law.
24. Learned counsel submits that the respondent was entitled to a refund of the KShs 996,481/= because the SCC correctly found that the respondent made payments for the appellant’s benefit and that the appellant received those benefits without compensating the respondent. That the learned Adjudicator, therefore, correctly applied the legal doctrine of restitution to the facts of the case.
25. Learned counsel for the appellant filed supplementary submissions to rebut those made by the respondent that the grounds of appeal were on issues of fact rather than law. Learned counsel submitted that the grounds raise points of law, citing the case of Patrick Omondi Opiyo t/a Dallas Pub v Shaban Keah & another [2018] KECA 545 (KLR) where the Court of Appeal held that it is important to revisit, albeit briefly the facts before the trial court in order to determine whether the learned Judge arrived at the wrong conclusions of facts because questions involving the evaluation of the conclusions of a trial court on the basis of the evidence on record become points of law.
26. Learned counsel for the appellant submitted further that issues of law are as enunciated by the Supreme Court in the case of Pater Munya v. Kithinji & two others (Petition 2B of 2014) [2014] KESC 38 (KLR) where the findings of the Supreme Court of India in Meenakshi Mills, Madurai v. The Commissioner of Income Tax, Madras (1957) AIR, 49 (1956) SCR 691 were adopted that a matter of law would arise in the following circumstances:
a) The construction of a statute or document of title.
b) The legal effect of the facts found where the point for determination is a mixed question of law and fact.
c) A finding of fact unsupported by evidence, or that is unreasonable or perverse in nature.
27. That upon extensive anaylsis the Supreme Court held that matters of law are as follows:
a) The technical element: Involving the interpretation of a constitutional or statutory interpretation.
b) The practical element: Involving the application of the constitution and the law to a set of facts or evidence on record.
c) The Evidentiary element: Involving the evaluation of the conclusions of a trial court on the basis of the evidence on record.
28. Learned counsel submits that an appellate court is not bound to accept the findings of fact of a trial court where it is evident and apparent that on evidence no reasonable court could have reached the same as the trial court in which case the finding would be perverse.
29. I have considered the grounds set out in the memorandum of appeal, the record of appeal and the submissions by learned counsels for the parties. Guided by the decisions cited above, the issue for determination by this court becomes whether the learned Adjudicator considered the evidence as presented by the parties, evaluated the same and and made correct conclusions or not.
30. The case that was before the SCC is as set out in briefly the initial paragraphs of this judgment.
31. As a preliminary issue for guidance to learned counsel for the appellant that the SCC is presided over by an Adjudicator and not a magistrate. It is important to bear in mind the vital provisions of the SCCA in order to appreciate and always have at the back of the mind the spirit behind the creation of this revolutionary court because, otherwise it gets meshed up with the operations of the magistrate’s court and there it loses meaning as a different court from the magistrate’s court. In the Kenyan context, an Adjudicator is indeed a magistrate, with full legal training and an admitted advocate of the High Court of Kenya. However, while presiding over the SCC she removes the robes of a magistrate and wears the ordinary garment of an Adjudicator who in the spirit of the SCCA should come down to the level of a reasonably informed person to determine the issues raised in the claims filed before the court. The reasons are that the SCC is designed to be simple that is, without the strictures of formal procedure and strict evidentiary rules, fast and accessible.
32. First, an appeal to this court from the SCC is on points of law only as provided for under section 38 of the SCC Act . On the issue of how an appellate court should deal with an appeal based on points of law only, the Court of Appeal in numerous decisions has reiterated consistently the decision in Stephen M’Iriungu and Another vs. Republic (1982-88) 1 KAR 360 , where Chesoni Acting JA (as he then was) said at page 366:
‘We would agree with the view expressed in the English case of Martin vs Glywed Distributors Ltd (t/a MBS Fastenings) 1983 ICR 511 that where a right of appeal is confined to questions of law only, an appellate court has loyalty to accept the findings of fact of the lower court(s) and resist the temptation to treat findings of fact as holdings of law or mixed findings of fact and law, and, it should not interfere with the decisions of the trial or first appellate court unless it is apparent that, on the evidence, no reasonable tribunal could have reached that conclusion, which would be the same as holding the decision is bad in law’.”
33. Another important feature to bear in mind while considering the appeal is that the SCC Act exempts the court’s proceedings from the rigid application of the standards of evidence applicable in other court proceedings and permits the court to include as evidence any material that it deems credible or trustworthy (emphasis by underlining supplied). It follows from this provision that it is largely upon the Adjudicator to determine the material to rely upon.
34. Section 32 of the Act provides that the strict evidentiary rules applicable in other courts are not wholly applied in the Small Claims Court. It further, provides that the Court may admit as evidence any oral or written testimony, record, or other material even though the same is not admissible as evidence in any other Court under the law of evidence (emphasis by underlining supplied). This means the Adjudicator has the discretion to admit any evidence which may be helpful in establishing whether or not the claim is proved. This provision further limits the province of the appellate court to issues of law only as the appellate court would have no means to overturn the findings of fact by the trial court and substitute them with its own findings.
35. When considering authorities, including decided cases and even text books on admissibility and reliability of evidence, an Adjudicator will be required always to bear in mind the provisions of the SCCA which excludes the strict application of the rules of evidence as conventionally known, which the authority may not be in line with, such as the present case.
36. I believe in taking into account the material presented in the court for its reliance, the learned Adjudicator was well aware of the provisions of the SCCA that it permits the court to include as evidence any material that it deems credible or trustworthy and further that the court may admit as evidence any oral or written testimony, record, or other material even though the same is not admissible as evidence in any other Court under the law of evidence.
37. Given the provisions of the SCC Act excluding to a large extent the strict provisions of the law of evidence and the technicalities of procedure under the CPR, I would find that the standard of reasonableness would be that of reasonably informed person. My thinking therefore is that the responsibility of this court when considering an appeal from the SCC is to consider the legality and reasonableness of the decision of the learned Adjudicator. If this court is satisfied that the law was properly considered and applied and a reasonable evaluation of the facts had, then it will not interfere with the findings and determination of the trial court. The converse would also be true. That where the law was not properly considered and/or applied or where the decision does not seem reasonable on the standards of a reasonably informed person from the facts before the court, then this court will interfere.
38. The learned Adjudicator found on the evidence tendered by the parties that the appellant was aware that the respondent had on its behalf sought approval for the architectural designs and building plans for the project from the County Government of Nairobi. For that reason, the learned Adjudicator found that the respondent was entitled to a refund of the money expended on seeking the approvals.
39. The issue therefore is, was the material before the SCC when considered objectively by a reasonably informed person capable of leading to that conclusion?
40. According to the appellant however, there was no contract, the basis upon which the respondent would have proceeded to seek for the approvals from the County government. According to the appellant, the lack of this contract was caused by two factors both which frustrated the formation of the contract. First, the refusal by some of the tenants to vacate the premises, leading to protracted court cases that ended up in favour of the tenants meaning that they could not vacate the premises for the appellant to hand vacant possession to the respondent to commence the construction works. The appellant goes ahead to allege that this state of affairs was brought about by the respondent who declined to issue a letter of representation regarding financing of the project so that there was no evidence from the appellant before the Business Premises Rent Tribunal that heard the case to satisfy it that the appellant was genuine in its eviction of the tenants for purposes of undertaking the new construction.
41. Learned counsel for the appellant has extensively submitted on the fact that the parties were merely engaged in negotiations, that the negotiations never resulted in any formal contract being signed by the parties and that all that the respondent produced in court were Draft Equity Investment Agreement and Draft Investment Term Sheet that were neither executed, attested nor dated and therefore the same could not be held to constitute a contract between them. The following cases were cited to support counsel’s submission that the negotiations between the parties were subject to contract and in the absence of a formally executed contract what went on between the parties was not enforceable. Fidelity Commercial Bank Ltd v Kenya Grange Vehicle Industries Ltd [2017] KECA 800 (KLR) , Capacity Building & Research Company Limited v Permanent Secretary, Minister or Labour & another [2020] KEHC 4346 (KLR) and East African Fine Spinners Limited (in receivership) & 3 others v Bedi Investments Limited [1994] KECA 96 (KLR) .
42. I agree with that submission that before a magistrate’s court, such documents could not be held to constitute a binding contract between the parties. However, here the court before which the case was filed and both parties submitted to its jurisdiction is allowed to take into account such material as would enable it to arrive and a reasonable conclusion that the parties were engaged in a relationship from which the respondent could reasonably proceed to seek approval for the building plans for the appellant’s project. The appellant was insisting that seeking of approval for the architectural designs and building plans for the project was supposed to be part of the formal contract for the construction project. From the correspondence between the parties, it is apparent that although a formal contract had not been finalized processed had been set in motion from which one could deduce the existence of a contract. There were Bills of Quantities, architectural designs and building plans prepared and submitted to the respondent for its consideration. All these were for the benefit of the appellant. The respondent acted on these documents in seeking the requisite approvals from the Nairobi City County. So the existence of a contract could be properly deduced from the conduct of the parties. It is not disputed that it was the obligation of the respondent to seek such approvals seeing the level of engagement that the parties were involved in.
43. Further, the process of seeking approval did not take an instance. The respondent had to obtain architectural designs together with the structural drawings and plans from the other parties engaged by the appellant on the project to Nairobi City County and request for approval and a construction permit. It is inconceivable in the eyes of a reasonably informed person that the respondent could have obtained these documents without the knowledge, acquiescence and even consent of the appellant who raised no objection to the same.
44. Beside the Equity Investment Agreement and Draft Investment Term Sheet which the appellant relies upon to assert that no formal contract was signed between the parties, there is a considerable amount of correspondence between the two parties over the project and all these together with the other documents were available for the learned Adjudicator’s consideration in arriving at her decision. For instance, the letter dated 19 th January 2017 forwarding the banker’s cheque for the sum of KShs 896,481/= for the NCC approvals and the cheque for KShs 100,000/= to Lexicon + ion to facilitate the process was copied to the appellant’s advocates, Muma & Kanjama Advocates. That is an indication that the appellants were aware of the ongoing process of seeking the approvals. There is no indication that they stopped the respondent from proceeding with the process on account of there being no contract concluded between the parties. The correspondences show that the appellant was to a large extent acting through its agent in its dealings with the respondent. It could not be heard to say that it did not authorize the respondent to seek the approvals.
45. Therefore, I find that the protestation by the appellant that no formal contract had been concluded and signed by the parties is no valid defence to the claim by the respondent in the eyes of the SCC.
46. The appeal by the appellant is argued on grounds that first, there was no formal contract entered into between the appellant and the respondent but that in fact, the parties were only engaged in negotiations that would culminate in a formal agreement and that the learned Adjudicator failed to appreciate the law relating to implied contracts when she found that there was an implied contract between the parties.
47. The reasonably informed person understands the simple language clear and direct that the appellant engaged the respondent with a view to the respondent financing the construction of a nine storey building on the respondent’s property known as land parcel L.R. No. 209/744 along Biashara street in the CBD, Nairobi. The issue of how the finances were to be sourced and the involvement of the respondent in the same are not the reasonably informed person’s concern. The reasonably informed person understands that the respondent expended KShs 996,481/= for the processing of the building plan approvals. The person on the streets also understands that it was in order and normal industry practice in the construction industry for the contractor to obtain such approvals for the client. In this case the parties had formatively agreed that the respondent as the financier would do so.
48. On the ground of restitution, learned counsel for the appellant submits at great length that there could be no order of restitution without proof of unjust enrichment. I note that the claim by the respondent was not an explicit plea for restitution in integram nor did the learned Adjudicator make any finding in that regard. All the same it is apparent that it was a claim based on total failure of consideration. In that case I do not think it matters whether the appellant ultimately received the expected commercial benefit. I think the question was simply whether the respondent had made a payment for the benefit of the appellant and whether the expected consideration was forthcoming from the appellant. It is apparent that none was forthcoming.
49. On account of the foregoing analysis, this court finds that it has no reason to interfere with the conclusion of the learned Adjudicator. I have no reason to find that the SCC did not consider matters it should not have considered or failed to consider matters it should have considered (see the case of Kenya Breweries Ltd v Odoyo [2010] KECA 498 (KLR) .
50. The reasonably informed person understands that the parties were engaged in a contractual relationship, the project did not materialize and in that case, the respondent herein was entitled to a refund of its money, the KShs 996,481/= of which it was not even asking for interest thereon accrued before institution of the suit. The money was paid for the benefit of the appellant and whether or not the benefit indeed accrued is not the issue. In fact the circumstances leading to the benefit not accruing were solely attributable to the appellant who had failed to have the tenants vacate the premises to enable the project to take off.
51. The complexities of the project failing to take off because tenants had failed to v
[...truncated]
IN THE HIGH COURT OF KENYA AT NAIROBI
MILIMANI CIVIL APPELLATE DIVISION
CIVIL APPEAL NO. E763 OF 2022
(Coram: Andayi W. F., J.)
EMBU GATURI HOUSING COOPERATIVE SOCIETY LIMITED……....APPELLANT
VERSUS
JINSING ENTERPRISES LIMITED.............................................……………RESPONDENT
(Being an appeal against the judgment and decree of Hon. B. J. Ofisi., Adjudicator delivered on 31 st August 2022 in Milimani Small Claims Court SCCCOMM. CLAIM NO. E1987 of 2022)
JUDGMENT
1. This appeal arises from a judgment of the Small Claims Court (SCC) dated 31 st August 2022 in which the court allowed the respondent’s claim for recovery of KShs 996,481/= for services rendered to the appellant by the respondent.
2. According to the pleadings, the evidence and the submissions filed by the parties before the Small Claims Court (SCC), the appellant and the respondent entered into negotiations some time in the year 2016 whereby the respondent was to undertake for the appellant, construction of a nine storey office block on the appellant’s piece of land parcel LR No. 209/744 situate along Biashara street within the Nairobi Central District.
3. According to the respondent in its claim before the SCC dated 29 th March 2022, upon discussions with the appellant they both agreed to invest and construct the project and the terms thereof were reduced into an Equity Finance Agreement that was produced before the SCC as evidence. The agreement was however never signed.
4. Bills of Quantities (BQs) for the project were prepared by Costek Alma, the QS and were submitted to the respondent. The respondent considered the BQs alongside the architectural drawings from the project architects Lexicon + ion. The respondent averred that the it submitted the architectural designs together with the structural drawings and plans to Nairobi City County and requested for a construction permit. Further that on 19 th and 20 th January 2017, the respondent paid a total of KShs 996,481/= for the approval, being KShs 896,481 to the Nairobi City County and KShs 100,000/= to Lexicon + ion on the understanding that the money would be refunded to it by the appellant with interest at the rate of 14% p.a.
5. The project did not receive the expected funding from financiers and some tenants of the premises that were to be demolished before construction could take off declined to vacate, leading to court cases that ended up in their favour thereby making the site unavailable for the contemplated project. So the project never took off.
6. The respondent demanded for a refund of the KShs 996,481/= expended by it towards obtaining the construction permit for the project. The appellant failed to refund the money, thereby leading to the respondent to file the claim before the SCC.
7. The appellant filed a response to the claim and denied the claim. It averred that the project was frustrated by an unforeseen event being refusal by some tenants to vacate the premises leading to a court case which ended in the tenants’ favour. Further that the appellant and the respondent were to execute a contract only if the proposed project was ready to start but no such contract was executed. The appellant denied that it ever authorized the respondent to procure any approval on its behalf.
8. The appellant averred further that the respondent frustrated the opportunity to engage in the proposed project by declining to issue a letter of representation regarding financing of the proposed project when the same was requested by the appellant for purposes of the case that was before the Business Premises Rent Tribunal.
9. CW 1, Caroline Mutua, the respondent’s project manager testified and gave evidence on behalf of the respondent. She adopted the respondent’s pleadings as her evidence in chief and relied on the filed documents as exhibits. She was cross-examined on her evidence.
10. DW 1, Jacob Nyaga Gachau a manager of the appellant presented the appellant’s case. He adopted his witness statement dated 13 th April 2022 as his evidence in chief. He produced the documents filed alongside the response as exhibits. He maintained that the appellant did not sign any agreement with the respondent and did not hold any meetings.
11. DW 1 said that the money used to request for the approval was willingly done by the respondent. He said further that if the construction was concluded and the appellant received the rental income the said amount would be reimbursed but the project did not take off. He said that the respondent frustrated the project.
12. In cross-examination, DW 1 said that the appellant had never had any discussions with Lexicon + ion. Further that the respondent was bound to issue the appellant with a letter of representation
13. Upon analyzing the evidence and considering the law and authorities, the learned Adjudicator concluded that the claim had been proved and she allowed the same with costs to the respondent.
14. The appellant was dissatisfied with the judgment and in the memorandum of appeal dated 28 th September 2022 it raised the following grounds:
a) The Learned magistrate erred in law by implying the existence of a contractual relationship between the Claimant and the Respondent, despite there being substantial evidence indicating that there was no such relation as the parties intended their relationship to be governed by a written agreement, executed by both the Claimant and the Respondent.
b) The learned Magistrate erred in law in failing to appreciate the legal position that agreements that are still under negotiations do not amount to contracts. In this case, the learned Magistrate failed to appreciate that the Draft Investment term sheet expressly indicated that the same was for the sole purpose of facilitating discussion between the Claimant and the Financier and thus subject to an eventual and formal loan agreement.
c) The learned Magistrate erred in law when she entered Judgement in favour of the Claimant against the Respondent in spite of the Claimant’s failure to establish its case on a balance of probability, especially on the issue of whether the Respondent authorized the Claimant to procure the building approval from the County Government.
d) The learned Magistrate erred in law in holding that the Claimant had proved that it was entitled to payment of Kshs, 996,481.00/= when there was clear and overriding evidence to the contrary.
e) The learned Magistrate erred in law by failing to appreciate the legal position that there could be no order of restitution without proof of unjust enrichment.
f) The learned Magistrate misdirected herself on several matters of law and consequently arrived at a decision that was unjust and unfair in the circumstances of the case.
g) The Learned Magistrate’s decision is against the weight of the evidence tendered, and made findings unsupported by evidence offending the rules of fairness and justice.
15. The appellant therefore prays that the appeal be allowed and the judgment of the trial court delivered on 2 nd May 2024 be set aside and with an order for costs and that this court may make such further or consequential orders as it deems just.
16. The appeal was disposed of by way of written submissions filed by learned counsels for the parties. Learned counsels highlighted the submissions on 25 th February 2026. The submissions are considered in the analysis that follows.
17. The appellant condensed the grounds of appeal into four issues for determination as follows:
a) Whether the learned magistrate erred in law in finding that a contractual relationship existed between the appellant and the respondent.
b) Whether the learned magistrate erred in law in finding that the respondent had established on a balance of probability that the appellant had authorized it to procure the building approval from the Nairobi City County.
c) Whether the learned magistrate erred in law by failing to appreciate the settled legal principle that there could be no order of restitution without proof of unjust enrichment.
d) Whether the learned magistrate erred in law in finding that the respondent has established its case on a balance of probability.
18. The respondent on its part submitted that there was only one issue for this court’s determination, that is, whether the appeal is on points of law as required under section 38 of the SCCA. Learned counsel for the respondent answered that question by stating that all the seven grounds of appeal raised by the respondent are issues of fact rather than law. He has set out each of them pointing out how it is an issue of fact rather than law. He buttressed his submission with various case law, among the that of Stephen M’Iriungu and Another vs. Republic (1982-88) 1 KAR 360 (supra) and others such as the Philippines Supreme case of Republic v. Malabanan, G.R. No. 169067, October 632 SCRA 338, 345 citing with approval the case of Leoncio v. De Vera, G.R. No. 176842, 546 SCRA 180, 184 where it was held that:
“A question of law arises when there is doubt as to what the law is on a certain state of facts, while there is a question of fact when the doubt arises as to the truth or falsity of the alleged facts. For a question to be one of law, the same must not involve an examination of the probative value of the evidence presented by the litigants or any of them. The resolution of the issue must rest solely on what the law provides on the given set of circumstances. Once it is clear that the issue invites a review of the evidence presented, the question posed is one of fact. Thus, the test of whether a question is one of law or of fact is not the appellation given to such question by the party raising the same; rather, it is whether the appellate court can determine the issue raised without reviewing or evaluating the evidence, in which case, it is a question of law; otherwise it is a question of fact.”
19. Learned counsel for the respondent submits that the appellant is asking this court to retry the case on factual findings conclusively determined by the SCC and so the same should be dismissed.
20. Learned counsel submits that whether or not a contract exists between parties is a matter of fact and the learned Adjudicator properly evaluated the evidence and arrived at the conclusion that there was an implied contract established between the parties. He relied on the case of Caleb Onyango Adongo v Bernard Ouma Ogur [2020] eKLR which cited with approval the case of Rose and Fran Co. vs. J R Crompton & Bros Ltd (1932) 2 B held that: -
“To create a contract there must be a common intention of the parties to enter into legal obligations, mutually communicated expressly or impliedly.”
21. Learned counsel also relied on the case of Stancom Sacco Society Limited v Alliance One Tobacco Limited [2018] eKLR where the Court proceeded as follows on the issue of implied contract:
“As to implied contracts, Lord Clarke in the case of RTS Flexible Systems Ltd vs. Molkerei Alois Muller GmbH (2010) UKSC 14 stated that: -
“…The general principles are not in doubt. Whether there was a binding contract between the parties and of so, upon what terms depends upon what they have agreed. It depends not upon their subjective state of mind, but upon a consideration of what was communicated between them by words or conduct, and whether that leads objectively to a conclusion that they intended to create legal relations and had agreed upon all the terms which they regarded or the law requires as essential for the formation of legally binding relations. Even if certain terms of economic or other significance have not been finalized, an objective appraisal of their words and conduct may lead to the conclusion that they did not intend agreement of such terms to be a precondition to a concluded and legally binding agreement.”
22. Learned counsel submits further that whether the Draft Investment Term Sheet was merely a document facilitating negotiations or part of a binding agreement is a question of fact just as the issue of whether or not the appellant had authorized the respondent to proceed with the approvals as the appellant was at all times aware and did not object to the necessity of the building approvals, the application for the same and the subsequent payment made in its stead.
23. Learned counsel submits that the respondent has not pointed out any instances in which the learned Adjudicator misdirected herself on point of law and that the submission that the decision was against the weight of the evidence is not a point of law.
24. Learned counsel submits that the respondent was entitled to a refund of the KShs 996,481/= because the SCC correctly found that the respondent made payments for the appellant’s benefit and that the appellant received those benefits without compensating the respondent. That the learned Adjudicator, therefore, correctly applied the legal doctrine of restitution to the facts of the case.
25. Learned counsel for the appellant filed supplementary submissions to rebut those made by the respondent that the grounds of appeal were on issues of fact rather than law. Learned counsel submitted that the grounds raise points of law, citing the case of Patrick Omondi Opiyo t/a Dallas Pub v Shaban Keah & another [2018] KECA 545 (KLR) where the Court of Appeal held that it is important to revisit, albeit briefly the facts before the trial court in order to determine whether the learned Judge arrived at the wrong conclusions of facts because questions involving the evaluation of the conclusions of a trial court on the basis of the evidence on record become points of law.
26. Learned counsel for the appellant submitted further that issues of law are as enunciated by the Supreme Court in the case of Pater Munya v. Kithinji & two others (Petition 2B of 2014) [2014] KESC 38 (KLR) where the findings of the Supreme Court of India in Meenakshi Mills, Madurai v. The Commissioner of Income Tax, Madras (1957) AIR, 49 (1956) SCR 691 were adopted that a matter of law would arise in the following circumstances:
a) The construction of a statute or document of title.
b) The legal effect of the facts found where the point for determination is a mixed question of law and fact.
c) A finding of fact unsupported by evidence, or that is unreasonable or perverse in nature.
27. That upon extensive anaylsis the Supreme Court held that matters of law are as follows:
a) The technical element: Involving the interpretation of a constitutional or statutory interpretation.
b) The practical element: Involving the application of the constitution and the law to a set of facts or evidence on record.
c) The Evidentiary element: Involving the evaluation of the conclusions of a trial court on the basis of the evidence on record.
28. Learned counsel submits that an appellate court is not bound to accept the findings of fact of a trial court where it is evident and apparent that on evidence no reasonable court could have reached the same as the trial court in which case the finding would be perverse.
29. I have considered the grounds set out in the memorandum of appeal, the record of appeal and the submissions by learned counsels for the parties. Guided by the decisions cited above, the issue for determination by this court becomes whether the learned Adjudicator considered the evidence as presented by the parties, evaluated the same and and made correct conclusions or not.
30. The case that was before the SCC is as set out in briefly the initial paragraphs of this judgment.
31. As a preliminary issue for guidance to learned counsel for the appellant that the SCC is presided over by an Adjudicator and not a magistrate. It is important to bear in mind the vital provisions of the SCCA in order to appreciate and always have at the back of the mind the spirit behind the creation of this revolutionary court because, otherwise it gets meshed up with the operations of the magistrate’s court and there it loses meaning as a different court from the magistrate’s court. In the Kenyan context, an Adjudicator is indeed a magistrate, with full legal training and an admitted advocate of the High Court of Kenya. However, while presiding over the SCC she removes the robes of a magistrate and wears the ordinary garment of an Adjudicator who in the spirit of the SCCA should come down to the level of a reasonably informed person to determine the issues raised in the claims filed before the court. The reasons are that the SCC is designed to be simple that is, without the strictures of formal procedure and strict evidentiary rules, fast and accessible.
32. First, an appeal to this court from the SCC is on points of law only as provided for under section 38 of the SCC Act . On the issue of how an appellate court should deal with an appeal based on points of law only, the Court of Appeal in numerous decisions has reiterated consistently the decision in Stephen M’Iriungu and Another vs. Republic (1982-88) 1 KAR 360 , where Chesoni Acting JA (as he then was) said at page 366:
‘We would agree with the view expressed in the English case of Martin vs Glywed Distributors Ltd (t/a MBS Fastenings) 1983 ICR 511 that where a right of appeal is confined to questions of law only, an appellate court has loyalty to accept the findings of fact of the lower court(s) and resist the temptation to treat findings of fact as holdings of law or mixed findings of fact and law, and, it should not interfere with the decisions of the trial or first appellate court unless it is apparent that, on the evidence, no reasonable tribunal could have reached that conclusion, which would be the same as holding the decision is bad in law’.”
33. Another important feature to bear in mind while considering the appeal is that the SCC Act exempts the court’s proceedings from the rigid application of the standards of evidence applicable in other court proceedings and permits the court to include as evidence any material that it deems credible or trustworthy (emphasis by underlining supplied). It follows from this provision that it is largely upon the Adjudicator to determine the material to rely upon.
34. Section 32 of the Act provides that the strict evidentiary rules applicable in other courts are not wholly applied in the Small Claims Court. It further, provides that the Court may admit as evidence any oral or written testimony, record, or other material even though the same is not admissible as evidence in any other Court under the law of evidence (emphasis by underlining supplied). This means the Adjudicator has the discretion to admit any evidence which may be helpful in establishing whether or not the claim is proved. This provision further limits the province of the appellate court to issues of law only as the appellate court would have no means to overturn the findings of fact by the trial court and substitute them with its own findings.
35. When considering authorities, including decided cases and even text books on admissibility and reliability of evidence, an Adjudicator will be required always to bear in mind the provisions of the SCCA which excludes the strict application of the rules of evidence as conventionally known, which the authority may not be in line with, such as the present case.
36. I believe in taking into account the material presented in the court for its reliance, the learned Adjudicator was well aware of the provisions of the SCCA that it permits the court to include as evidence any material that it deems credible or trustworthy and further that the court may admit as evidence any oral or written testimony, record, or other material even though the same is not admissible as evidence in any other Court under the law of evidence.
37. Given the provisions of the SCC Act excluding to a large extent the strict provisions of the law of evidence and the technicalities of procedure under the CPR, I would find that the standard of reasonableness would be that of reasonably informed person. My thinking therefore is that the responsibility of this court when considering an appeal from the SCC is to consider the legality and reasonableness of the decision of the learned Adjudicator. If this court is satisfied that the law was properly considered and applied and a reasonable evaluation of the facts had, then it will not interfere with the findings and determination of the trial court. The converse would also be true. That where the law was not properly considered and/or applied or where the decision does not seem reasonable on the standards of a reasonably informed person from the facts before the court, then this court will interfere.
38. The learned Adjudicator found on the evidence tendered by the parties that the appellant was aware that the respondent had on its behalf sought approval for the architectural designs and building plans for the project from the County Government of Nairobi. For that reason, the learned Adjudicator found that the respondent was entitled to a refund of the money expended on seeking the approvals.
39. The issue therefore is, was the material before the SCC when considered objectively by a reasonably informed person capable of leading to that conclusion?
40. According to the appellant however, there was no contract, the basis upon which the respondent would have proceeded to seek for the approvals from the County government. According to the appellant, the lack of this contract was caused by two factors both which frustrated the formation of the contract. First, the refusal by some of the tenants to vacate the premises, leading to protracted court cases that ended up in favour of the tenants meaning that they could not vacate the premises for the appellant to hand vacant possession to the respondent to commence the construction works. The appellant goes ahead to allege that this state of affairs was brought about by the respondent who declined to issue a letter of representation regarding financing of the project so that there was no evidence from the appellant before the Business Premises Rent Tribunal that heard the case to satisfy it that the appellant was genuine in its eviction of the tenants for purposes of undertaking the new construction.
41. Learned counsel for the appellant has extensively submitted on the fact that the parties were merely engaged in negotiations, that the negotiations never resulted in any formal contract being signed by the parties and that all that the respondent produced in court were Draft Equity Investment Agreement and Draft Investment Term Sheet that were neither executed, attested nor dated and therefore the same could not be held to constitute a contract between them. The following cases were cited to support counsel’s submission that the negotiations between the parties were subject to contract and in the absence of a formally executed contract what went on between the parties was not enforceable. Fidelity Commercial Bank Ltd v Kenya Grange Vehicle Industries Ltd [2017] KECA 800 (KLR) , Capacity Building & Research Company Limited v Permanent Secretary, Minister or Labour & another [2020] KEHC 4346 (KLR) and East African Fine Spinners Limited (in receivership) & 3 others v Bedi Investments Limited [1994] KECA 96 (KLR) .
42. I agree with that submission that before a magistrate’s court, such documents could not be held to constitute a binding contract between the parties. However, here the court before which the case was filed and both parties submitted to its jurisdiction is allowed to take into account such material as would enable it to arrive and a reasonable conclusion that the parties were engaged in a relationship from which the respondent could reasonably proceed to seek approval for the building plans for the appellant’s project. The appellant was insisting that seeking of approval for the architectural designs and building plans for the project was supposed to be part of the formal contract for the construction project. From the correspondence between the parties, it is apparent that although a formal contract had not been finalized processed had been set in motion from which one could deduce the existence of a contract. There were Bills of Quantities, architectural designs and building plans prepared and submitted to the respondent for its consideration. All these were for the benefit of the appellant. The respondent acted on these documents in seeking the requisite approvals from the Nairobi City County. So the existence of a contract could be properly deduced from the conduct of the parties. It is not disputed that it was the obligation of the respondent to seek such approvals seeing the level of engagement that the parties were involved in.
43. Further, the process of seeking approval did not take an instance. The respondent had to obtain architectural designs together with the structural drawings and plans from the other parties engaged by the appellant on the project to Nairobi City County and request for approval and a construction permit. It is inconceivable in the eyes of a reasonably informed person that the respondent could have obtained these documents without the knowledge, acquiescence and even consent of the appellant who raised no objection to the same.
44. Beside the Equity Investment Agreement and Draft Investment Term Sheet which the appellant relies upon to assert that no formal contract was signed between the parties, there is a considerable amount of correspondence between the two parties over the project and all these together with the other documents were available for the learned Adjudicator’s consideration in arriving at her decision. For instance, the letter dated 19 th January 2017 forwarding the banker’s cheque for the sum of KShs 896,481/= for the NCC approvals and the cheque for KShs 100,000/= to Lexicon + ion to facilitate the process was copied to the appellant’s advocates, Muma & Kanjama Advocates. That is an indication that the appellants were aware of the ongoing process of seeking the approvals. There is no indication that they stopped the respondent from proceeding with the process on account of there being no contract concluded between the parties. The correspondences show that the appellant was to a large extent acting through its agent in its dealings with the respondent. It could not be heard to say that it did not authorize the respondent to seek the approvals.
45. Therefore, I find that the protestation by the appellant that no formal contract had been concluded and signed by the parties is no valid defence to the claim by the respondent in the eyes of the SCC.
46. The appeal by the appellant is argued on grounds that first, there was no formal contract entered into between the appellant and the respondent but that in fact, the parties were only engaged in negotiations that would culminate in a formal agreement and that the learned Adjudicator failed to appreciate the law relating to implied contracts when she found that there was an implied contract between the parties.
47. The reasonably informed person understands the simple language clear and direct that the appellant engaged the respondent with a view to the respondent financing the construction of a nine storey building on the respondent’s property known as land parcel L.R. No. 209/744 along Biashara street in the CBD, Nairobi. The issue of how the finances were to be sourced and the involvement of the respondent in the same are not the reasonably informed person’s concern. The reasonably informed person understands that the respondent expended KShs 996,481/= for the processing of the building plan approvals. The person on the streets also understands that it was in order and normal industry practice in the construction industry for the contractor to obtain such approvals for the client. In this case the parties had formatively agreed that the respondent as the financier would do so.
48. On the ground of restitution, learned counsel for the appellant submits at great length that there could be no order of restitution without proof of unjust enrichment. I note that the claim by the respondent was not an explicit plea for restitution in integram nor did the learned Adjudicator make any finding in that regard. All the same it is apparent that it was a claim based on total failure of consideration. In that case I do not think it matters whether the appellant ultimately received the expected commercial benefit. I think the question was simply whether the respondent had made a payment for the benefit of the appellant and whether the expected consideration was forthcoming from the appellant. It is apparent that none was forthcoming.
49. On account of the foregoing analysis, this court finds that it has no reason to interfere with the conclusion of the learned Adjudicator. I have no reason to find that the SCC did not consider matters it should not have considered or failed to consider matters it should have considered (see the case of Kenya Breweries Ltd v Odoyo [2010] KECA 498 (KLR) .
50. The reasonably informed person understands that the parties were engaged in a contractual relationship, the project did not materialize and in that case, the respondent herein was entitled to a refund of its money, the KShs 996,481/= of which it was not even asking for interest thereon accrued before institution of the suit. The money was paid for the benefit of the appellant and whether or not the benefit indeed accrued is not the issue. In fact the circumstances leading to the benefit not accruing were solely attributable to the appellant who had failed to have the tenants vacate the premises to enable the project to take off.
51. The complexities of the project failing to take off because tenants had failed to v
[...truncated]