REPUBLIC OF KENYA
IN THE HIGH COURT OF KENYA AT MALINDI
CIVIL APPEAL NO. E086 OF 2024
(Coram: Andayi W. F., J.)
UTE HERTHA GOODWIN.......................................................................……....APPELLANT
VERSUS
JOSEPHINE WANJIRU..................................................................……………RESPONDENT
(Being an appeal against the judgment and decree of Hon. Grace Mutemi, Adjudicator delivered on 20 th June 2024 in Malindi Small Claims Court Civil Claim No. E026 of 2024)
JUDGMENT
1. This appeal arises from a judgment of the Small Claims Court (SCC) dated 20 th June 2024 in which the court allowed the respondent’s claim for recovery of KShs 460,000/= being a refund by the appellant to respondent as money paid to the appellant by the respondent as deposit for purchase of land identified as Portion No. 8420 Malindi.
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 December 2023 whereby the appellant was to sell to the respondent a land parcel identified as Portion No. 8420 Malindi at a purchase price of KShs 4,600,000/=. There is a letter titled “Letter of Offer for Property described as: Portion 8420 Malindi”, dated 22 nd December 2023 from Noble Realtors to the respondent which states:
“On behalf of our client, Mrs Ute Hertha Goodwin (ID No. 9876462), the Vendor, we confirm that your offer to purchase the above property for KShs 4,600,000/= (Kenya Shillings Four Million Six Hundred Thousand) Has been accepted by the Vendor subject to the following terms and conditions..
By copy of this letter we request the Vendor’s Advocates to proceed.”
3. The letter of offer contains some terms and conditions set out therein. At the end there is an acceptance clause where the purchaser, Josephine Wanjiru duly signed on 30 th December 2023 and the vendor signed on 29 th December 2023.
4. Among the terms and conditions in the letter are:
“The balance of the purchase price being the sum of KShs 4,140,000/= (Kenya Shillings Four Million One Hundred and Forty Thousand Only) to be paid within 90 days, upon completion of due diligence processes.
Further to the acceptance of these Terms of Sale by the signing of this Letter of Offer, The Vendor shall not be bound by the Purchaser until the Purchaser signs the Sale Agreement and payment made as per the Sale Agreement.”
5. According to the respondent in its claim before the SCC dated 9 th April 2024 she signed an agreement as per the letter of offer. She states further that the letter of offer indicated that the balance of the purchase price was to be paid within 90 days. That the respondent declined to sign the agreement that she was not acceptable to the ninety (90) days.
6. This averment does not however fully capture the term of payment of the balance of the purchase price as contained in the letter of offer and captured above. It leaves out the words “upon completion of due diligence processes.”
7. On 1 st February 2024 the advocates for the purchaser Muthike & Makworo Advocates wrote to the vendor’s advocates enclosing three copies of a Sale Agreement dated 23 rd January 2024 together with a copy of the receipt for payment of KShs 460,000/= being 10% deposit of the purchase price. They asked that the vendor signs and forwards the duly signed copy to the purchaser’s advocates for their records. This particular draft Sale Agreement was not made available to the court by either party.
8. On 5 th February 2024, the vendor’s advocates wrote to the purchaser’s advocates acknowledging receipt of their letter. They indicated however that the vendor was not acceptable to have the balance of the purchase price paid in 90 (ninety) days upon completion of the transfer into the name of the purchaser but immediately. They thus requested the purchaser’s advocates to respond so that the vendor could sign the sale agreement and the transfer forms and dispatch the same back for registration.
9. On 14 th February 2024 the advocate for the respondent wrote to the vendor’s advocates informing them that the draft Sale Agreement captured the agreed terms of the engagement between the parties but the vendor had started shifting goal posts and the purchaser was not ready to agree with the new terms introduced by the vendor. That in the circumstances the purchaser was not willing to proceed with the transaction and as such the same was rescinded forthwith. They asked that the vendor arranges to refund the purchaser’s deposit of KShs 460,000/=, survey fees of KShs 25,000/=, advocate’s handling fee KShs 20,000/= making the total KShs 505,000/=.
10. It is apparent that there was a deadlock and therefore no Sale Agreement was signed by the parties. It is also apparent that the vendor failed to refund the money and thus the purchaser filed her claim in the SCC claiming a refund of her deposit plus costs and interest as outlined above.
11. In her statement of defence dated 20 th April 2024 the appellant first raised the issue of the jurisdiction of the SCC to handle the matter, which according to the appellant was a transaction for the sale of land. The preliminary objection was afterwards argued before the SCC which dismissed it, finding that the dispute was not over title and possession of land as the transaction never materialized and so the issue of title and possession of the land could not arise which would have divested the SCC of jurisdiction under sections 12 and 13 of the Small Claims Court Act (Cap. 10A) Laws of Kenya.
12. It was the appellant’s position that the respondent breached the contract by refusing to sign the sale agreement, refusing to deposit the balance of the purchase price in an escrow account and insisting on payment of the balance of the purchase price after completion of the transfer.
13. The appellant therefore pleaded that the respondent was not entitled to any refund.
14. In the alternative the appellant averred that she was entitled to set-off the amount paid by the respondent towards expenses incurred following the collapse of the transaction, including effort and outgoings. She thus set up a counterclaim against the respondent based on the above averments and further on grounds that the respondent was in breach of agreed and implied terms being Clauses 5.2.2 and 13.1.6 of the LSK Conditions of Sale which entitle a purchaser to a refund upon rescission where she is not at fault.
15. Further, that under Clause 13.4.1 (a)(i) & (ii) of the LSK Conditions of Sale, the appellant was entitled to a further 10% of the deposit plus damages. Further, she sought compensation under Clause 13.2.1 of the LSK Conditions of Sale.
16. The appellant averred that she incurred expenses through preliminaries such as advocates fees KShs 150,000/=, Realtor fess KShs 400,000/= and payment to agent KShs 40,000/= among others and it would be unjust and unreasonable to be asked to refund the deposit without factoring in these amounts as expended.
17. The appellant therefore prayed in the counterclaim for special damages, an order of specific performance against the respondent or an order of set-off of the costs incurred, damages for breach of contract and loss of business and any other or further relief that the court could grant.
18. There were protestations by learned counsel for the appellant, even applying that the learned Adjudicator recuses herself from the hearing due to what counsel perceived was the high speed at which the matter was being conducted. However, the hearing was had and both parties testified after which the learned Adjudicator delivered her judgment, the subject of this appeal.
19. The respondent testified as CW 1. She adopted her witness statement and also testified and was cross-examined.
20. The appellant also testified as RW 1. She too adopted her recorded witness statement then testified and was cross-examined.
21. Learned counsels for both parties filed submissions on the matter.
22. Upon analyzing the evidence, the submissions and considering the law and authorities cited, the learned Adjudicator concluded that the claim for a refund of KShs 460,000/= by the respondent herein had been proved and she allowed the same with costs to the respondent on the basis that there was no binding agreement between the parties. She at the same time dismissed the counterclaim by the appellant. The learned Adjudicator relied on the case of East African Fine Spinners Limited (in receivership) & 3 others v Bedi Investments Limited [1994] KECA 96 (KLR) which had been cited by the appellant for the position that acceptance of an offer subject to contract does not create a contract.
23. The appellant was dissatisfied with the judgment and in the memorandum of appeal has raised the following grounds:
a) The trial magistrate failed to exercise jurisdiction in weighing evidence adduced by the Respondent Setting off the plaintiffs claim.
b) The trial magistrate failed to properly consider and evaluate the evidence and consequently arrived at an incorrect determination unsupported by the facts, law and the evidence.
c) The trial magistrate made errors apparent on the face of the record, the judgment is riddled with factual and grammatical errors (over 10) including surmising the defense and counterclaim were undated”.
d) The trial magistrate erred in law and in fact in failing to find that the appellant proved Special Damages and Breach of Contract.
e) The trial magistrate erred in fact and in law in failing to recuse herself despite substantiated complaints regarding her impartiality and objectivity: subsequently borne out.
f) The trial magistrate erred in fact and in law in evincing and eagerness to proceed with the matter without ability to read the Respondents pleadings file; but apparently unavailable on record; implying a pre- formed opinion; subsequently borne out.
g) The trial magistrate erred in fact and in law in failing to appreciate the legal concept of implied contract and that it was the claimant who was in breach.
h) The trial magistrate erred in fact and in law in refusing to adhere to trite legal principles in the conduct of the trial which marred with irregularities including breach of ‘ audi alteram partem’ , withholding of ‘written judgement in chambers; away from the court file; thereby vitiated proceedings.
i) That the trial magistrate erred in fact and in law and breached the principles of 'functus officio’ on two occasions; failing to appreciate its meaning at the hearing; and later in irregularly withholding the judgment in chambers.
j) The trial magistrate exercised her discretion wrongly and upon the wrong legal principles in refusing to uphold the preliminary objection regarding want of jurisdiction of the Small Claims Court to handle the matter.
k) The trial magistrate reached a decision which a reasonable tribunal properly evaluating the evidence and pleadings would have reached (sic).
24. The appellant therefore prays that the appeal be allowed and the judgment of the SCC delivered on 20 th June 2024 be set aside and with an order for costs.
25. The appeal was disposed of by way of written submissions filed by learned counsels for the parties. The same are considered in the analysis that follows.
26. I have considered the grounds set out in the Memorandum of Appeal and the submissions by learned counsels for the parties.
27. 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 very distinguished 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. 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. Furthermore, it its approach to determination of the claims before it is a mix of both inquisitorial and adversarial systems of dispute adjudication.
28. Then, 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 Muriungi 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’.”
29. 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. 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.
30. 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 opine that the standard of proof is on a balance of probability as determined by a 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.
31. The appeal by the appellant is summarized in the submissions as argued on grounds that there were fundamental errors of law and procedure committed by the lower court that resulted in a miscarriage of justice. I note that when it came to the submissions, the learned counsel dropped the grounds of appeal alleging errors of fact and focused only on issues of law and that is commendable.
32. Learned counsel submits that the learned Adjudicator erred in ignoring a clear question of jurisdiction, breaching the rules of natural justice, failing to uphold judicial integrity, and misapprehending a core contractual principle of implied contract. He buttressed the submissions by reference to the cases of Rai & 3 others v Rai & 4 others [2013] KESC 20 (KLR) , [2007] KEHC 2518 (KLR) , ( Mukisa Biscuit Manufacturing Co. Ltd v West End Distributors Ltd [1969] EA 696 at 700), Ali Abdi Mohamed v Kenya Shell & Company Limited [2017] KECA 590 (KLR) .
33. On her part the respondent submits the issues for determination to be
a) Whether the trial court was biased and impartial in determining the suit.
b) Whether the court erred in failing to uphold the appellant’s preliminary objection in the SCC.
c) Whether there was a contract between the appellant and the respondent.
34. Learned counsel has answered all the questions in the negative.
35. On the issue of breaching the rules of natural justice and failing to uphold judicial integrity, I have considered the submissions by learned counsel and the ruling of the SCC on the issue and I agree with the learned Adjudicator that the alleged apprehension of bias or impartiality had no basis at all. The learned Adjudicator found and I agree with her that the apprehension arose out of learned counsel’s feeling that the proceedings were being rushed. He expressed that complaint to the court and wrote a letter of complaint to the head of station at the Malindi Law Courts. He applied for the recusal of the learned Adjudicator and the court delivered a ruling which was well considered and correct. I am persuaded to follow the decision in the case cited by learned counsel for the respondent of Dobbs v Tridios Bank NV [2005] EWCA 468 , where the court observed that if judges were to recuse themselves whenever a litigant, be it represented or in person criticized them, we would reach a position in which litigants would select by simply criticizing all the judges that they did not want to hear their cases, by producing a situation for a judge to feel obliged to recuse himself, whether the criticism is justified or not. Actual or real likelihood of bias is the test that the applicant must meet. It is not enough to allege a complaint has been lodged with the employer. The applicant has a right to pursue that path to its logical conclusion. As held by the Supreme Court in Jasbir Singh Rai & 3 others Versus Tarlocan Singh Rai & 4 Others (20130 eKLR:
“The perception of fairness of conviction of moral authority to hear the matter was the proper test of whether or not the non-participation of the judicial officer was called for. The objective view in the recusal of a judicial officer was that a. justice as between the parties be uncompromised; b. the due process of law be realized and be seen to have had its role and lastly, c. the profile of the rule of law in the matter in question be seen to have remained uncompromised.
36. The conduct of the learned Adjudicator in the matter was not shown to have been compromised against the appellant in any way. The feeling by learned counsel for the appellant that the proceedings were being rushed arose out of a failure to internalize the difference in proceedings before the SCC and the magistrates’ courts. That is what I have pointed out above that unless parties bear in mind the difference, they will keep thinking that proceedings before the SCC are the same as before the Magistrates Court. That thinking has to be jettisoned from the minds of parties for a proper appreciation of the proceedings before the SCC.
37. On the question of the appellant’s documents being illegible in the Case Tracking System (CTS), learned counsel for the respondent informed the court that she had been provided with legible copies and she had no problem deciphering what was contained therein. On its part the court was able to decipher what had been provided and duly proceeded with the case. The appellant, who had provided the documents copies cannot be heard to complain that she herself could not decipher her own documents and therefore she was not being given an opportunity to present her case or that her rights to a fair trial had been breached. I find no such breach and the learned Adjudicator made a correct determination declining to recuse herself from the proceedings.
38. In any case, learned counsel for the appellant duly took up the case and prosecuted it ably. Nothing stopped him from applying to this court to stop the proceedings, if there was real apprehension of bias on the part of the learned Adjudicator. Indeed, there was no reason to. The trial was conducted properly with both parties presenting their respective cases upon which the court delivered its decision. I therefore find the grounds of bias, impartiality and lack of integrity levelled against the learned Adjudicator to have no merit and these are dismissed.
39. On the issue of jurisdiction, I also find that the learned Adjudicator was correct in her finding that the SCC had jurisdiction in the matter. The jurisdiction of the court is set out under section 12 of the SCCA as follows:
S. 12. Nature of claims and pecuniary jurisdiction
(1) Subject to this Act, the Rules and any other law, the Court has jurisdiction to determine any civil claim relating to—
(a) a contract for sale and supply of goods or services;
(b) a contract relating to money held and received;
(c) liability in tort in respect of loss or damage caused to any property or for the delivery or recovery of movable property;
(d) compensation for personal injuries; and
(e) set-off and counterclaim under any contract.
(2) Without prejudice to the generality of subsection (1), the Court may exercise any other civil jurisdiction as may be conferred under any other written law.
(3) The pecuniary jurisdiction of the Court shall be limited to one million shillings.
(4) Without prejudice to subsection (3), the Chief Justice may determine by notice in the Gazette such other pecuniary jurisdiction of the Court as the Chief Justice thinks fit.
40. Section 13(5) of the SCCA is quite clear on what claims are excluded from the jurisdiction of the SCC. The section provides that:
S. 13(5). A claim shall not be brought before the Court if the cause of action is founded upon defamation, libel, slander, malicious prosecution or is upon a dispute over a title to or possession of land, or employment and labour relations.
41. Clearly, from the above provisions and on the pleadings presented to the court by the parties, the claim did not fall in any of those excluded matters. Specifically, it was not over a title or possession of land. It was a contract for purchase of land. It had not reached the point of one party claiming title or possession of the land. It was simply over a contract gone bad. I am persuaded to agree with the decision in the case of Muhanda v LP Holdings Ltd [2025] KEHC 393 (KLR) where the High Court in considering the issue of jurisdiction of the SCC where the appellant’s claim was for breach of contract, relating to the rent deposit paid by the appellant to the respondent found that the SCC had jurisdiction over the matter as the appellant’s claim fell squarely within the provisions of section 12(1)(b) of the Act, being a contract for money held and received.
42. Finally, learned counsel submits that the learned Adjudicator failed to appreciate the legal principle of implied contract. I have considered the transaction leading to the respondent’s claim and I find that there was no implied terms of a contract here because the circumstances are clear contract was never concluded in the first place. There was nothing to be implied therefore. The parties expressed themselves through the letter of offer which was signed by both of them that there was going to be the Sale Agreement by which terms they would be bound. The letter of offer was not the contract for the sale of the land. It was only part of the negotiations to enter into the contract. It thus provided in several clauses that the parties would be bound by the terms in the Sale Agreement. For instance, it provided expressly that “... the Vendor shall not be bound by the Purchaser until the Purchaser signs the Sale Agreement and payment made as per the Sale Agreement.”
43. The Court of Appeal extensively considered the position in law when negotiations between parties are subject to contract in the case of East African Fine Spinners Limited (in receivership) & 3 others v Bedi Investments Limited [1994] KECA 96 (KLR) and stated as follows:
‘The sale was by its express terms subject to contract and until that contract had been executed there was no contract between the parties which could be enforced by an order for specific performance or mandatory injunction. In the course of his judgment in the case of Keppel v Wheeler & Another [1927] 1 KB 577, Bankes LJ said at page 584: “I pause here to state plainly what is now well established, that where a person accepts an offer subject to contract, it means that the matter remains in negotiation until a formal contract is settled and the formal contracts are exchanged.”
44. Learned counsel for the appellant relies on the case of Ali Abdi Mohamed v Kenya Shell & Company Limited [2017] KECA 590 (KLR) to urge this court to find that the learned Adjudicator failed to appreciate the principle of implied contract. First, in that case there existed a contract between the parties, unlike in the present case. Secondly, learned counsel seems to have only picked the section of that decision that appeared favourable to the appellant’s case but left out the portion that explained how the principle of implied contract operates which if he had considered he would have noticed that it was in favour of the respondent. In that case, it was stated thus with regard to implied terms in a contract:
“ The respondent disputes there being any implied term in the agreement for notice to terminate. Halsbury's Laws of England 4 th Edition (Reissue), at paragraph 778 provides as follows:
"In addition to the terms which the parties have expressly adopted, there may be other terms imported into the contract, these latter being generally known as 'implied' terms, ... As a general rule, the Courts will enforce not only the terms expressly agreed between the parties, but also those which are to be logically implied from those express terms including from any recitals... The question of whether a term is to be logically implied from the express terms of the agreement is a matter of construing the intention of the parties".
Atkin LJ in the case of Rose and Frank Co v J R Crompton & Bros Ltd , ([1923] 2 KB at 293, stated:
"To create a contract there must be a common intention of the parties to enter into legal obligations, mutually communicated expressly or impliedly".
Lord Neuberger in the case of Marks and Spencer plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd [2016] UKSC 72, stated:
“In most, possibly all, disputes about whether a term should be implied into a contract, it is only after the process of construing the express words is complete that the issue of an implied term falls to be considered. Until one has decided what the parties have expressly agreed, it is difficult to see how one can set about deciding whether a term should be implied and if so what term”.
In Lamb v Evans [1893] 1 Ch 218, Bowen LJ stated:
“The common law, it is true, treats the matter from the point of view of an implied contract, and assumes that there is a promise to do that which is part of the bargain, or which can be fairly implied as part of the good faith which is necessary to make the bargain effectual. What is an implied contract or an implied promise in law? It is that promise which the law implies and authorises us to infer in order to give the transaction that effect which the parties must have intended it to have, and without which it would be futile”.
Bingham LJ in The Aramis [1989] 1 Lloyd's Rep 213 made some general observations about the circumstances in which a contract might be implied. At p.224 col. 1, he said:
"As the question whether or not any such contract is to be implied is one of fact, its answer must depend upon the circumstances of each particular case – and the different sets of facts which arise for consideration in these cases are legion. However, I also agree that no such contract should be implied on the facts of any given case unless it is necessary to do so; necessary that is to say, in order to give business reality to a transaction and to create enforceable obligations between parties who are dealing with one another in circumstances in which one would expect that business reality and those enforceable obligations to exist".
Further:
"I do not think it is enough for the party seeking the implication of a contract to obtain “It might” as the answer to these questions for it would, in my view, be contrary to principle to countenance the implication of a contract from conduct if the conduct relied on is no more than consistent with an intention to contract than with an intention not to contract. It must surely be necessary to identify conduct referable to the contract contended for or at the very least, conduct inconsistent with there being no contract made between the parties to the effect contended for. Put another way, I think it must be fatal to the implication of a c
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IN THE HIGH COURT OF KENYA AT MALINDI
CIVIL APPEAL NO. E086 OF 2024
(Coram: Andayi W. F., J.)
UTE HERTHA GOODWIN.......................................................................……....APPELLANT
VERSUS
JOSEPHINE WANJIRU..................................................................……………RESPONDENT
(Being an appeal against the judgment and decree of Hon. Grace Mutemi, Adjudicator delivered on 20 th June 2024 in Malindi Small Claims Court Civil Claim No. E026 of 2024)
JUDGMENT
1. This appeal arises from a judgment of the Small Claims Court (SCC) dated 20 th June 2024 in which the court allowed the respondent’s claim for recovery of KShs 460,000/= being a refund by the appellant to respondent as money paid to the appellant by the respondent as deposit for purchase of land identified as Portion No. 8420 Malindi.
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 December 2023 whereby the appellant was to sell to the respondent a land parcel identified as Portion No. 8420 Malindi at a purchase price of KShs 4,600,000/=. There is a letter titled “Letter of Offer for Property described as: Portion 8420 Malindi”, dated 22 nd December 2023 from Noble Realtors to the respondent which states:
“On behalf of our client, Mrs Ute Hertha Goodwin (ID No. 9876462), the Vendor, we confirm that your offer to purchase the above property for KShs 4,600,000/= (Kenya Shillings Four Million Six Hundred Thousand) Has been accepted by the Vendor subject to the following terms and conditions..
By copy of this letter we request the Vendor’s Advocates to proceed.”
3. The letter of offer contains some terms and conditions set out therein. At the end there is an acceptance clause where the purchaser, Josephine Wanjiru duly signed on 30 th December 2023 and the vendor signed on 29 th December 2023.
4. Among the terms and conditions in the letter are:
“The balance of the purchase price being the sum of KShs 4,140,000/= (Kenya Shillings Four Million One Hundred and Forty Thousand Only) to be paid within 90 days, upon completion of due diligence processes.
Further to the acceptance of these Terms of Sale by the signing of this Letter of Offer, The Vendor shall not be bound by the Purchaser until the Purchaser signs the Sale Agreement and payment made as per the Sale Agreement.”
5. According to the respondent in its claim before the SCC dated 9 th April 2024 she signed an agreement as per the letter of offer. She states further that the letter of offer indicated that the balance of the purchase price was to be paid within 90 days. That the respondent declined to sign the agreement that she was not acceptable to the ninety (90) days.
6. This averment does not however fully capture the term of payment of the balance of the purchase price as contained in the letter of offer and captured above. It leaves out the words “upon completion of due diligence processes.”
7. On 1 st February 2024 the advocates for the purchaser Muthike & Makworo Advocates wrote to the vendor’s advocates enclosing three copies of a Sale Agreement dated 23 rd January 2024 together with a copy of the receipt for payment of KShs 460,000/= being 10% deposit of the purchase price. They asked that the vendor signs and forwards the duly signed copy to the purchaser’s advocates for their records. This particular draft Sale Agreement was not made available to the court by either party.
8. On 5 th February 2024, the vendor’s advocates wrote to the purchaser’s advocates acknowledging receipt of their letter. They indicated however that the vendor was not acceptable to have the balance of the purchase price paid in 90 (ninety) days upon completion of the transfer into the name of the purchaser but immediately. They thus requested the purchaser’s advocates to respond so that the vendor could sign the sale agreement and the transfer forms and dispatch the same back for registration.
9. On 14 th February 2024 the advocate for the respondent wrote to the vendor’s advocates informing them that the draft Sale Agreement captured the agreed terms of the engagement between the parties but the vendor had started shifting goal posts and the purchaser was not ready to agree with the new terms introduced by the vendor. That in the circumstances the purchaser was not willing to proceed with the transaction and as such the same was rescinded forthwith. They asked that the vendor arranges to refund the purchaser’s deposit of KShs 460,000/=, survey fees of KShs 25,000/=, advocate’s handling fee KShs 20,000/= making the total KShs 505,000/=.
10. It is apparent that there was a deadlock and therefore no Sale Agreement was signed by the parties. It is also apparent that the vendor failed to refund the money and thus the purchaser filed her claim in the SCC claiming a refund of her deposit plus costs and interest as outlined above.
11. In her statement of defence dated 20 th April 2024 the appellant first raised the issue of the jurisdiction of the SCC to handle the matter, which according to the appellant was a transaction for the sale of land. The preliminary objection was afterwards argued before the SCC which dismissed it, finding that the dispute was not over title and possession of land as the transaction never materialized and so the issue of title and possession of the land could not arise which would have divested the SCC of jurisdiction under sections 12 and 13 of the Small Claims Court Act (Cap. 10A) Laws of Kenya.
12. It was the appellant’s position that the respondent breached the contract by refusing to sign the sale agreement, refusing to deposit the balance of the purchase price in an escrow account and insisting on payment of the balance of the purchase price after completion of the transfer.
13. The appellant therefore pleaded that the respondent was not entitled to any refund.
14. In the alternative the appellant averred that she was entitled to set-off the amount paid by the respondent towards expenses incurred following the collapse of the transaction, including effort and outgoings. She thus set up a counterclaim against the respondent based on the above averments and further on grounds that the respondent was in breach of agreed and implied terms being Clauses 5.2.2 and 13.1.6 of the LSK Conditions of Sale which entitle a purchaser to a refund upon rescission where she is not at fault.
15. Further, that under Clause 13.4.1 (a)(i) & (ii) of the LSK Conditions of Sale, the appellant was entitled to a further 10% of the deposit plus damages. Further, she sought compensation under Clause 13.2.1 of the LSK Conditions of Sale.
16. The appellant averred that she incurred expenses through preliminaries such as advocates fees KShs 150,000/=, Realtor fess KShs 400,000/= and payment to agent KShs 40,000/= among others and it would be unjust and unreasonable to be asked to refund the deposit without factoring in these amounts as expended.
17. The appellant therefore prayed in the counterclaim for special damages, an order of specific performance against the respondent or an order of set-off of the costs incurred, damages for breach of contract and loss of business and any other or further relief that the court could grant.
18. There were protestations by learned counsel for the appellant, even applying that the learned Adjudicator recuses herself from the hearing due to what counsel perceived was the high speed at which the matter was being conducted. However, the hearing was had and both parties testified after which the learned Adjudicator delivered her judgment, the subject of this appeal.
19. The respondent testified as CW 1. She adopted her witness statement and also testified and was cross-examined.
20. The appellant also testified as RW 1. She too adopted her recorded witness statement then testified and was cross-examined.
21. Learned counsels for both parties filed submissions on the matter.
22. Upon analyzing the evidence, the submissions and considering the law and authorities cited, the learned Adjudicator concluded that the claim for a refund of KShs 460,000/= by the respondent herein had been proved and she allowed the same with costs to the respondent on the basis that there was no binding agreement between the parties. She at the same time dismissed the counterclaim by the appellant. The learned Adjudicator relied on the case of East African Fine Spinners Limited (in receivership) & 3 others v Bedi Investments Limited [1994] KECA 96 (KLR) which had been cited by the appellant for the position that acceptance of an offer subject to contract does not create a contract.
23. The appellant was dissatisfied with the judgment and in the memorandum of appeal has raised the following grounds:
a) The trial magistrate failed to exercise jurisdiction in weighing evidence adduced by the Respondent Setting off the plaintiffs claim.
b) The trial magistrate failed to properly consider and evaluate the evidence and consequently arrived at an incorrect determination unsupported by the facts, law and the evidence.
c) The trial magistrate made errors apparent on the face of the record, the judgment is riddled with factual and grammatical errors (over 10) including surmising the defense and counterclaim were undated”.
d) The trial magistrate erred in law and in fact in failing to find that the appellant proved Special Damages and Breach of Contract.
e) The trial magistrate erred in fact and in law in failing to recuse herself despite substantiated complaints regarding her impartiality and objectivity: subsequently borne out.
f) The trial magistrate erred in fact and in law in evincing and eagerness to proceed with the matter without ability to read the Respondents pleadings file; but apparently unavailable on record; implying a pre- formed opinion; subsequently borne out.
g) The trial magistrate erred in fact and in law in failing to appreciate the legal concept of implied contract and that it was the claimant who was in breach.
h) The trial magistrate erred in fact and in law in refusing to adhere to trite legal principles in the conduct of the trial which marred with irregularities including breach of ‘ audi alteram partem’ , withholding of ‘written judgement in chambers; away from the court file; thereby vitiated proceedings.
i) That the trial magistrate erred in fact and in law and breached the principles of 'functus officio’ on two occasions; failing to appreciate its meaning at the hearing; and later in irregularly withholding the judgment in chambers.
j) The trial magistrate exercised her discretion wrongly and upon the wrong legal principles in refusing to uphold the preliminary objection regarding want of jurisdiction of the Small Claims Court to handle the matter.
k) The trial magistrate reached a decision which a reasonable tribunal properly evaluating the evidence and pleadings would have reached (sic).
24. The appellant therefore prays that the appeal be allowed and the judgment of the SCC delivered on 20 th June 2024 be set aside and with an order for costs.
25. The appeal was disposed of by way of written submissions filed by learned counsels for the parties. The same are considered in the analysis that follows.
26. I have considered the grounds set out in the Memorandum of Appeal and the submissions by learned counsels for the parties.
27. 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 very distinguished 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. 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. Furthermore, it its approach to determination of the claims before it is a mix of both inquisitorial and adversarial systems of dispute adjudication.
28. Then, 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 Muriungi 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’.”
29. 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. 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.
30. 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 opine that the standard of proof is on a balance of probability as determined by a 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.
31. The appeal by the appellant is summarized in the submissions as argued on grounds that there were fundamental errors of law and procedure committed by the lower court that resulted in a miscarriage of justice. I note that when it came to the submissions, the learned counsel dropped the grounds of appeal alleging errors of fact and focused only on issues of law and that is commendable.
32. Learned counsel submits that the learned Adjudicator erred in ignoring a clear question of jurisdiction, breaching the rules of natural justice, failing to uphold judicial integrity, and misapprehending a core contractual principle of implied contract. He buttressed the submissions by reference to the cases of Rai & 3 others v Rai & 4 others [2013] KESC 20 (KLR) , [2007] KEHC 2518 (KLR) , ( Mukisa Biscuit Manufacturing Co. Ltd v West End Distributors Ltd [1969] EA 696 at 700), Ali Abdi Mohamed v Kenya Shell & Company Limited [2017] KECA 590 (KLR) .
33. On her part the respondent submits the issues for determination to be
a) Whether the trial court was biased and impartial in determining the suit.
b) Whether the court erred in failing to uphold the appellant’s preliminary objection in the SCC.
c) Whether there was a contract between the appellant and the respondent.
34. Learned counsel has answered all the questions in the negative.
35. On the issue of breaching the rules of natural justice and failing to uphold judicial integrity, I have considered the submissions by learned counsel and the ruling of the SCC on the issue and I agree with the learned Adjudicator that the alleged apprehension of bias or impartiality had no basis at all. The learned Adjudicator found and I agree with her that the apprehension arose out of learned counsel’s feeling that the proceedings were being rushed. He expressed that complaint to the court and wrote a letter of complaint to the head of station at the Malindi Law Courts. He applied for the recusal of the learned Adjudicator and the court delivered a ruling which was well considered and correct. I am persuaded to follow the decision in the case cited by learned counsel for the respondent of Dobbs v Tridios Bank NV [2005] EWCA 468 , where the court observed that if judges were to recuse themselves whenever a litigant, be it represented or in person criticized them, we would reach a position in which litigants would select by simply criticizing all the judges that they did not want to hear their cases, by producing a situation for a judge to feel obliged to recuse himself, whether the criticism is justified or not. Actual or real likelihood of bias is the test that the applicant must meet. It is not enough to allege a complaint has been lodged with the employer. The applicant has a right to pursue that path to its logical conclusion. As held by the Supreme Court in Jasbir Singh Rai & 3 others Versus Tarlocan Singh Rai & 4 Others (20130 eKLR:
“The perception of fairness of conviction of moral authority to hear the matter was the proper test of whether or not the non-participation of the judicial officer was called for. The objective view in the recusal of a judicial officer was that a. justice as between the parties be uncompromised; b. the due process of law be realized and be seen to have had its role and lastly, c. the profile of the rule of law in the matter in question be seen to have remained uncompromised.
36. The conduct of the learned Adjudicator in the matter was not shown to have been compromised against the appellant in any way. The feeling by learned counsel for the appellant that the proceedings were being rushed arose out of a failure to internalize the difference in proceedings before the SCC and the magistrates’ courts. That is what I have pointed out above that unless parties bear in mind the difference, they will keep thinking that proceedings before the SCC are the same as before the Magistrates Court. That thinking has to be jettisoned from the minds of parties for a proper appreciation of the proceedings before the SCC.
37. On the question of the appellant’s documents being illegible in the Case Tracking System (CTS), learned counsel for the respondent informed the court that she had been provided with legible copies and she had no problem deciphering what was contained therein. On its part the court was able to decipher what had been provided and duly proceeded with the case. The appellant, who had provided the documents copies cannot be heard to complain that she herself could not decipher her own documents and therefore she was not being given an opportunity to present her case or that her rights to a fair trial had been breached. I find no such breach and the learned Adjudicator made a correct determination declining to recuse herself from the proceedings.
38. In any case, learned counsel for the appellant duly took up the case and prosecuted it ably. Nothing stopped him from applying to this court to stop the proceedings, if there was real apprehension of bias on the part of the learned Adjudicator. Indeed, there was no reason to. The trial was conducted properly with both parties presenting their respective cases upon which the court delivered its decision. I therefore find the grounds of bias, impartiality and lack of integrity levelled against the learned Adjudicator to have no merit and these are dismissed.
39. On the issue of jurisdiction, I also find that the learned Adjudicator was correct in her finding that the SCC had jurisdiction in the matter. The jurisdiction of the court is set out under section 12 of the SCCA as follows:
S. 12. Nature of claims and pecuniary jurisdiction
(1) Subject to this Act, the Rules and any other law, the Court has jurisdiction to determine any civil claim relating to—
(a) a contract for sale and supply of goods or services;
(b) a contract relating to money held and received;
(c) liability in tort in respect of loss or damage caused to any property or for the delivery or recovery of movable property;
(d) compensation for personal injuries; and
(e) set-off and counterclaim under any contract.
(2) Without prejudice to the generality of subsection (1), the Court may exercise any other civil jurisdiction as may be conferred under any other written law.
(3) The pecuniary jurisdiction of the Court shall be limited to one million shillings.
(4) Without prejudice to subsection (3), the Chief Justice may determine by notice in the Gazette such other pecuniary jurisdiction of the Court as the Chief Justice thinks fit.
40. Section 13(5) of the SCCA is quite clear on what claims are excluded from the jurisdiction of the SCC. The section provides that:
S. 13(5). A claim shall not be brought before the Court if the cause of action is founded upon defamation, libel, slander, malicious prosecution or is upon a dispute over a title to or possession of land, or employment and labour relations.
41. Clearly, from the above provisions and on the pleadings presented to the court by the parties, the claim did not fall in any of those excluded matters. Specifically, it was not over a title or possession of land. It was a contract for purchase of land. It had not reached the point of one party claiming title or possession of the land. It was simply over a contract gone bad. I am persuaded to agree with the decision in the case of Muhanda v LP Holdings Ltd [2025] KEHC 393 (KLR) where the High Court in considering the issue of jurisdiction of the SCC where the appellant’s claim was for breach of contract, relating to the rent deposit paid by the appellant to the respondent found that the SCC had jurisdiction over the matter as the appellant’s claim fell squarely within the provisions of section 12(1)(b) of the Act, being a contract for money held and received.
42. Finally, learned counsel submits that the learned Adjudicator failed to appreciate the legal principle of implied contract. I have considered the transaction leading to the respondent’s claim and I find that there was no implied terms of a contract here because the circumstances are clear contract was never concluded in the first place. There was nothing to be implied therefore. The parties expressed themselves through the letter of offer which was signed by both of them that there was going to be the Sale Agreement by which terms they would be bound. The letter of offer was not the contract for the sale of the land. It was only part of the negotiations to enter into the contract. It thus provided in several clauses that the parties would be bound by the terms in the Sale Agreement. For instance, it provided expressly that “... the Vendor shall not be bound by the Purchaser until the Purchaser signs the Sale Agreement and payment made as per the Sale Agreement.”
43. The Court of Appeal extensively considered the position in law when negotiations between parties are subject to contract in the case of East African Fine Spinners Limited (in receivership) & 3 others v Bedi Investments Limited [1994] KECA 96 (KLR) and stated as follows:
‘The sale was by its express terms subject to contract and until that contract had been executed there was no contract between the parties which could be enforced by an order for specific performance or mandatory injunction. In the course of his judgment in the case of Keppel v Wheeler & Another [1927] 1 KB 577, Bankes LJ said at page 584: “I pause here to state plainly what is now well established, that where a person accepts an offer subject to contract, it means that the matter remains in negotiation until a formal contract is settled and the formal contracts are exchanged.”
44. Learned counsel for the appellant relies on the case of Ali Abdi Mohamed v Kenya Shell & Company Limited [2017] KECA 590 (KLR) to urge this court to find that the learned Adjudicator failed to appreciate the principle of implied contract. First, in that case there existed a contract between the parties, unlike in the present case. Secondly, learned counsel seems to have only picked the section of that decision that appeared favourable to the appellant’s case but left out the portion that explained how the principle of implied contract operates which if he had considered he would have noticed that it was in favour of the respondent. In that case, it was stated thus with regard to implied terms in a contract:
“ The respondent disputes there being any implied term in the agreement for notice to terminate. Halsbury's Laws of England 4 th Edition (Reissue), at paragraph 778 provides as follows:
"In addition to the terms which the parties have expressly adopted, there may be other terms imported into the contract, these latter being generally known as 'implied' terms, ... As a general rule, the Courts will enforce not only the terms expressly agreed between the parties, but also those which are to be logically implied from those express terms including from any recitals... The question of whether a term is to be logically implied from the express terms of the agreement is a matter of construing the intention of the parties".
Atkin LJ in the case of Rose and Frank Co v J R Crompton & Bros Ltd , ([1923] 2 KB at 293, stated:
"To create a contract there must be a common intention of the parties to enter into legal obligations, mutually communicated expressly or impliedly".
Lord Neuberger in the case of Marks and Spencer plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd [2016] UKSC 72, stated:
“In most, possibly all, disputes about whether a term should be implied into a contract, it is only after the process of construing the express words is complete that the issue of an implied term falls to be considered. Until one has decided what the parties have expressly agreed, it is difficult to see how one can set about deciding whether a term should be implied and if so what term”.
In Lamb v Evans [1893] 1 Ch 218, Bowen LJ stated:
“The common law, it is true, treats the matter from the point of view of an implied contract, and assumes that there is a promise to do that which is part of the bargain, or which can be fairly implied as part of the good faith which is necessary to make the bargain effectual. What is an implied contract or an implied promise in law? It is that promise which the law implies and authorises us to infer in order to give the transaction that effect which the parties must have intended it to have, and without which it would be futile”.
Bingham LJ in The Aramis [1989] 1 Lloyd's Rep 213 made some general observations about the circumstances in which a contract might be implied. At p.224 col. 1, he said:
"As the question whether or not any such contract is to be implied is one of fact, its answer must depend upon the circumstances of each particular case – and the different sets of facts which arise for consideration in these cases are legion. However, I also agree that no such contract should be implied on the facts of any given case unless it is necessary to do so; necessary that is to say, in order to give business reality to a transaction and to create enforceable obligations between parties who are dealing with one another in circumstances in which one would expect that business reality and those enforceable obligations to exist".
Further:
"I do not think it is enough for the party seeking the implication of a contract to obtain “It might” as the answer to these questions for it would, in my view, be contrary to principle to countenance the implication of a contract from conduct if the conduct relied on is no more than consistent with an intention to contract than with an intention not to contract. It must surely be necessary to identify conduct referable to the contract contended for or at the very least, conduct inconsistent with there being no contract made between the parties to the effect contended for. Put another way, I think it must be fatal to the implication of a c
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