Introduction
1. This is an appeal from the ruling of lower delivered on 3rd November 2023 in the Milimani Small Claim Court Comm Suit No. E4577/2023 in which the trial court found that it did not have pecuniary jurisdiction over the Appellant’s claim.
2. The background of the matter is that by a statement of claim dated 30th May 2023, the Appellant herein, instituted a claim against the Respondent, seeking special damages in the sum of Ksh. 735, 500/- on account of goods supplied by the Appellant to the Respondent but allegedly not paid for.
3. In response to the Appellant’s Statement of Claim, the Respondent filed a response and a counterclaim in which the Respondent claimed from the Appellant a sum of Kshs. 2,482,100/- arising from the same contract. Consequently, the Respondent filed a Notice of Preliminary Objection dated 10th August 2023, seeking to have the suit stayed and transferred to the Magistrate Court, on the basis that the Small Claims Court lacked pecuniary jurisdiction over the matter.
4. On 3rd November 2023, the trial court delivered its ruling, allowing the application, and directed the parties to apply to transfer the matter to the magistrate court.
The Appeal
1. Aggrieved by the trial court’s ruling, the Appellant lodged an appeal to this court, vide its memorandum of appeal dated 10th November 2023, on the grounds that;
a. That the Honourable Magistrate erred in law and in fact, by allowing the Claimant’s Preliminary Objection, that the court lacks pecuniary jurisdiction
b. That the Honourable Magistrate erred in law and in fact, when it held that the Respondent’s counterclaim of Ksh. 2, 000, 000 could not be heard in the Small Claims Court contrary to Rule 14 of the Small Claims Rules
c. That the Honoured Magistrate erred in law and fact, when it failed to appreciate that, the Claimant’s case was for Ksh. 735, 500, which amount was well within the jurisdiction of the Small Claims Court
d. That the Honourable Magistrate erred in law and in fact, when it failed to appreciate that, the Respondent’s counterclaim did not arise from the transaction as the Claimant’s claim
e. That the Honourable Magistrate erred in law and in fact when it failed to appreciate that the Respondent admitted owing the Claimant Ksh. 735, 500
f. That the Honourable Magistrate erred in law and in fact, when it failed to appreciate the Respondent’s claim of Ksh. 2, 482, 100 arose sometime in 2021 which claim was never prosecuted by the Respondent
g. That the Honourable Magistrate erred in law and in fact, when it failed to appreciate that the Claimant’s claim arose in November 2022, where the Claimant paid Ksh. 500, 000, leaving a balance of Ksh. 735, 500
Submissions
2. Both parties filed their respective written submissions. The Appellant’s submissions are dated 24th October 2024, whereas the Respondent’s submissions are dated 14th October 2024.
3. The Appellant in its submissions took the position that the trial court erred in upholding the Respondent's Preliminary Objection. According to the Appellant, jurisdiction is primordial and has to exist in the first place, where a suit is filed. That since the Respondent’s Counterclaim was beyond the Kshs. 1 million, the same was beyond the pecuniary jurisdiction of the trial court. It was also the Appellant’s position that the Respondent’s counterclaim could only be dealt with within the confines of Rule 14 of the Small Claims Court Rules.
4. Conversely, the Respondent on its part supported the trial court’s Ruling and submitted that the trial court was right in its finding that the Respondent’s counterclaim was intimately connected to the Claimant’s Claim and therefore the Claim needed to be withdrawn from the trial court (Small Claims Court) and parties to apply to have both the Claim and Counterclaim transferred to the Magistrate’s Court for hearing and disposal.
Analysis and determination
5. The jurisdiction of the Small Claims Court is set out in the Small Claims Court Act. According to the Act, there is only one chance of Appeal from the decisions of that court, and such appeals can only be on points of law pursuant to the provisions of section 38 of the Small Claims Court Act, which provides that: -
“38. Appeals
(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.
6. In the case of Otieno, Ragot & Company Advocates v National Bank of Kenya Limited [2020] eKLR, the Court of Appeal addressed the duty of an appellate court when considering an appeal on points of law as follows: -
“This is a second appeal. I am alive to my duty as a second appellate court to determine matters of law only unless it is shown that the courts below considered matters they should not have considered or failed to consider matters they should have considered or looking at the entire decision, it is perverse. (See: Stanley N. Muriithi & Another versus Bernard Munene Ithiga (2016) eKLR).
7. Further, in the case of Mwita v Woodventure (K) Limited & another (Civil Appeal 58 of 2017) [2022] KECA 628 (KLR) (8 July 2022) (Judgment), the Court of Appeal while referring to a second Appeal, which is essentially on points of law and thus similar to the duty of the court under section 38 of the Small Claims Court, stated that: -
“This is a second appeal. Accordingly, the jurisdiction of this Court is limited to consideration of matters of law. As was held in the case of Stanley N. Muriithi & Another v Bernard Munene Ithiga [2016] eKLR, on a second appeal, the Court confines itself to matters of law only, unless it is shown that the court below considered matters it should not have considered, or failed to consider matters it should have considered, or looking at the entire decision, it is perverse. See also Kenya Breweries Limited v Godfrey Odoyo [2010] eKLR in which it was held that: “In a second appeal however, such as this one before us, we have to resist the temptation of delving into matters of facts. This Court, on second appeal, confines itself to matters of law unless it is shown that the two courts below considered matters they should not have considered or failed to consider matters they should have considered or looking at the entire decision, it is perverse.”
8. In this matter, it is apparent from the memorandum of appeal and the parties’ respective submissions that the only issue for determination is whether the trial court erred in upholding the Respondent’s Preliminary Objection dated 10th August 2023 by which the Respondent argued that the trial court lacked jurisdiction in view of the fact that both the Claimant’s Claim (Kshs. 735,500), together with the Respondent’s Counterclaim thereon (Kshs. 2,482,100) exceeded the pecuniary jurisdiction of the trial court.
9. From the memorandum of appeal and the submissions by the parties, it is apparent that the appeal involves the issue of jurisdiction is obviously a question of law, and is therefore properly before this court in its appellate capacity. In JN & 5 others v Board of Management of St. G School Nairobi and another [2017] eKLR the court stated as follows on the issue: -
“A point of law is a question that must be answered by applying relevant legal principles to interpretation of the law and such a question is distinct from a question of fact which must be answered by reference to facts and evidence as well as inferences from those facts. To answer to a question of fact usually depends on particular circumstances or factual situations.”
10. The pecuniary jurisdiction of the Small Claims Court is clearly and unequivocally capped at Kshs. 1,000,000 by Section 12 (3) of the Small Claims Court Act. The statutory form for lodging a claim before the Court binds a claimant to waive and forfeit the recovery of all sums above 1 million. In the case of West Kenya Sugar Company Limited v Okendo (Civil Appeal E056 of 2023) [2024] KEHC 2844 (KLR) (8 March 2024) (Judgment)
“The language of the statute on the extent of the court’s jurisdiction leaves no room for debate as it is beyond equivocation. In fact, the statutory form for lodging a claim binds the claimant to waive and forfeit the recovery of all sums in excess of Kshs 1,000,000…...”
11. Further, Rule 14 of the Small Claims Court Rules gives a Respondent who wishes to file a counterclaim exceeding Kshs. 1 million three options. First, such a Respondent may abandon that part of the counterclaim exceeding one million shillings; second, to pursue the counterclaim in the proceedings and recover the amount not exceeding one million shillings; or third, to file a separate claim in the Magistrate’s Court to recover the whole of the amount counterclaimed.
12. For clarity, Rule 14 of the Small Claims Court Rules provides as follows: -
14. Respondent may abandon part of counterclaim
(1) A respondent who has a counterclaim exceeding one million shillings may —
(a) abandon that part of the counterclaim exceeding one million shillings;
(b) pursue his or her counterclaim in the proceedings and recover an amount not exceeding one million shillings; or
(c) file a separate claim in the Magistrates' Court to recover the whole of the amount counterclaimed.
(2) A respondent who abandons that part of the counterclaim exceeding one million shillings shall state in his or her response that the amount in question is abandoned.
(3) A respondent who abandons any part of a counterclaim or set off in accordance with this rule shall not be entitled to file a subsequent claim in any court to recover the amount stated as abandoned.
13. The above provision of the law was dealt with by the court in the case of Alcott Wiz Trading Co., Ltd & 2 others v Jotun (K) Limited [2023] KEHC 2742 (KLR) where the court stated as follows; -
“In this case, the Applicants invite the court to transfer the suit before the Small Claims Court to the Magistrates Court on account of a counterclaim filed in a court without jurisdiction. It is now a settled principle that the court will not transfer a suit filed in court without jurisdiction to another court of competent jurisdiction. In Equity Bank Limited v Bruce Mutie Mutuku t/a Diani Tour and Travel MSA CA Civil Appeal No. 13 of 2016 [2016] eKLR, the Court of Appeal observed that:
"In numerous decided cases, courts, including this Court have held that it would be illegal for the High Court in exercise of its powers under Section 18 of the Civil Procedure Act to transfer a suit filed in a court lacking jurisdiction to a court with jurisdiction and therefore sanctify an incompetent suit. This is because no competent suit exists that is capable of being transferred. Jurisdiction is a weighty fundamental matter and to allow court to transfer an incompetent suit for want of jurisdiction to a competent court would be to muddle up the waters and allow confusion to reign. It is settled that parties cannot, even by their consent confer jurisdiction on a court where no such jurisdiction exists. It is so fundamental that where it lacks, parties cannot even seek refuge under the “O2” principle or the overriding objective under the Civil Procedure Act, the Appellate Jurisdiction Act or even Article 159 of the Constitution to remedy the situation. In the same way, a court of law should not through what can be termed as judicial craftsmanship sanctify an otherwise incompetent suit through a transfer.”
14. A review of the Ruling by the trial court clearly reveals that the court, in arriving at its decision, did not take into account the import of Rule 14 of the Small Claims Court Rules, which was material and critical in the determination of the question of jurisdiction. In the case of Mbogo & Another v Shah (1969) EA 93, it was held, inter alia, that: -
“An appellate court will interfere if the exercise of the discretion is clearly wrong because the judge has misdirected himself or acted on matters which he should not have acted upon or failed to take into consideration matters which it should be taken into consideration and in doing so arrived at a wrong conclusion. It is trite law that an appellate court should not interfere with the exercise of the discretion of a judge unless satisfied that the judge in exercising his discretion has misdirected himself and has been clearly wrong in the exercise of the discretion and that as a result there has been injustice.”
15. Additionally, the Supreme Court of Kenya in the case of Apungu Arthur Kibira v Independent Electoral and Commission Boundaries & 3 Others [2019] eKLR considered the above issue and stated as follows: -
“We reiterate that in an appeal from a decision based on an exercise of discretionary power, an Appellant has to show that the decision was based on a whim, was prejudicial or was capricious. This was as determined in the New Zealand Supreme Court case of Kacem v Bashir (2010)NZSC 112; (2011)2 NLRI (Kacem) where it was held para 32]:“In this context a general appeal is to be distinguished from an appeal against the decision made in exercise of discretion. In that kind of case, the criteria for a successful appeal are stricter: (i) error of law or principle; (2) taking account of irrelevant considerations; (3) failing to take account of a relevant consideration; or (4) the decision is plainly wrong.”
16. In this case, having found that the trial court failed to examine the import of Rule 14 of the Small Claims Court Act in determining the question of jurisdiction, I find that this is a proper case for this court, exercising its appellate jurisdiction to interfere with the finding of the trial court.
17. I agree with the submissions by the Appellant that jurisdiction is primordial and must first exist before a suit is filed. Where a suit is filed in a court without jurisdiction, then the same is dead on arrival and cannot therefore be dealt with by the court. In this case, the Respondent’s counterclaim was beyond the pecuniary jurisdiction and could not therefore be dealt with. The trial court therefore erred in allowing the Respondent’s Preliminary Objection.
18. In Phoenix of EA Assurance Company Limited v SM Thiga t/a Newspaper Service NRB Civil Appeal No. 244 of 2010 [2019] eKLR the Court of Appeal reiterated that: -
“Jurisdiction is primordial in every suit. It has to be there when the suit is filed in the first place. If the suit is filed without jurisdiction, the only remedy is to withdraw it and file a complaint one in the court seized of jurisdiction. A suit filed devoid of jurisdiction is dead on arrival and cannot be remedied. without jurisdiction, the Court cannot confer jurisdiction upon itself ...
19. In this appeal, it is not in dispute that, the Respondent’s counterclaim was beyond the jurisdiction of the lower court. In light of this, the only option open to the Respondent, if it intends to pursue the counterclaim, is to comply with the provisions of Rule 14 of the Small Claims Court Rules. This however does not in any way affect the validity of the Appellant’s claim which is well within the pecuniary jurisdiction of the trial court.
20. Consequently, this court finds that the trial court erred to the extent that it based its decision on the Respondent’s counterclaim, which, for all intents and purposes, is a separate suit.
21. As for costs, Section 27 of the Civil Procedure Act stipulates costs follow events, and the Appellant herein having been successful in the prosecution of the appeal is hereby awarded the costs of the appeal.
Disposition
22. For the reasons set out above, the appeal herein succeeds as follows;
a. The ruling and orders of the trial court delivered on 3rd November 2023, in Milimani SCCCOMM No. E4577 of 2023 upholding the Respondent’s Preliminary Objection dated 10th August 2023 is hereby set aside in its entirety.
b. The Appellant’s suit being the Milimani SCCCOMM No. E4577 OF 2023 Tononoka Rolling Mills Ltd v Full Back Media Ltd is hereby reinstated for hearing and final disposal at the trial court.
c. The Respondent is at liberty to pursue its Counterclaim, but only to the extent that is permitted under Rule 14 of the Small Claims Court Rules.
d. The Respondent shall bear the costs of this appeal
23. It is so ordered.
SIGNED DATED and DELIVERED IN VIRTUAL COURT
THIS 27TH DAY OF FEBRUARY 2025
ADO MOSES
JUDGE
In the presence of:
Moses – Court Assistant
..………. for the Appellant
………...for the Respondent