https://new.kenyalaw.org/akn/ke/judgment/kehc/2026/7346

Bell Estate Agency Ltd v Ochieng t/a Jenks Auctioneers (Civil Appeal E213 of 2025) [2026] KEHC 7346 (KLR) (Civ) (28 May 2026) (Judgment) Neutral citation: [2026] KEHC 7346 (KLR) Republic of Kenya In the High Court at Nairobi (Milimani Law Courts) Civil Civil Appeal E213 of 2025 BW Murunga, J May 28, 2026 Between Bell Estate Agency Limited Appellant and Keneth Ochieng t/a Jenks Auctioneers Respondent (Being an appeal from the Ruling of Hon. Wamae Muindi, Milimani Small Claims Court, delivered on 27th January 2025 in SCCCOMM/E20522/2024) Judgment 1.The matter coming up for determination is an appeal from the decision delivered on 27th January 2025, following the striking out of the Appellant’s claim by the Small Claims Court on the grounds of lack of jurisdiction. The claim before the Small Claims Court was filed on 7th November 2024, seeking the recovery of a sum of Kenya Shillings Two Hundred and Seventy Five Thousand (Kshs. 275,000), ostensibly on breach of contract and fiduciary duty. 2.The Appellant, engaged in the business of property management, had amongst its clientele and property, the rental premises at Sifa Towers. It appears that circa 2021, a company known as Golden Cara Investment Limited, rented some of the property at the said Sifa Towers and thereafter fell into default to the sum of Kenya Shillings Eighteen Million Seven Hundred and Twenty Thousand (Kshs. 18,720,000). 3.The Respondent was then instructed by the Appellant, through the Appellant’s Counsel, to levy distress for rent against the defaulting tenant. The auction conducted by the Respondent on or about 24th November 2021 realized a sum of Kenya Shillings Four Hundred and Seventy Six Thousand, Five Hundred (Kshs. 476,500). 4.From the Appellant’s narrative in the pleadings, the Respondent indicated that it would retain Kenya Shillings Two Hundred and One Thousand, Five Hundred (Kshs. 201,500) as auctioneer’s fees and pay the balance sum of Kenya Shillings Two Hundred and Seventy Five Thousand (Kshs. 275,000) to the Appellant. 5.It is this claim that the learned Adjudicator categorised as a dispute relating to rent and thus not within the jurisdiction of the Small Claims Court. Unfortunately, the lower court record has not been availed to this Court, but there is a screenshot from the Court’s electronic Tracking System that shows the outcome with the notation: “Struck out.” 6.One of the grounds of appeal is that the Adjudicator handed down this outcome suo motu, and that the parties were not afforded any opportunity to make representations on the issue of jurisdiction before the Court. When the parties appeared before Lady Justice Okwany on 24th February 2026, Counsel for the Respondent indicated that he did not wish to participate in the appeal but was only opposed to the granting of costs to the Appellant, on the basis that the Respondent had not participated in the matter that led to the appeal. 7.The Appellant duly filed their written submissions, but the Respondent demurred as aforesaid. Appellant’s Submissions 8.The Appellant has framed four issues for determination in this appeal, to wit:i.Whether the Small Claims Court had jurisdiction to hear the Appellant’s claim;ii.Whether the learned Adjudicator erred by determining jurisdiction without hearing parties and without a reasoned ruling;iii.Whether the Appellant’s constitutional rights under Articles 47 and 50 were violated; andiv.Who should bear the costs of the Appeal. 9.On the question of jurisdiction, the Appellant submits that the learned Adjudicator fundamentally erred in categorising the claim as a rent dispute. The jurisdictional framework for the Small Claims Court is to be found in Section 12 of the Small Claims Court Act, 2016, which provides:“ 12.Subject to this Act, the Rules and any other law, the Court has jurisdiction to determine any civil claim relating to—a contract for sale and supply of goods or services; a contract relating to money held and received;liability in tort in respect of loss or damage caused to any property or for the delivery or recovery of movable property;compensation for personal injuries; andset-off and counterclaim under any contract.” 10.The Appellant submits that, whilst the original mandate given to the Respondent was rooted in a landlord-tenant rent dispute, the nature of the claim as filed had fundamentally shifted by the time proceedings were instituted before the Small Claims Court. 11.Once the Respondent conducted the auction on 24th November 2021 and collected the auction proceeds, the tenancy dispute between the Appellant and Golden Cara Investment Limited was concluded. What remained was an entirely distinct contractual and commercial matter: the obligation of the Respondent, as agent, to account for and remit the proceeds held on behalf of the Appellant as his principal. The claim was therefore no longer a rent dispute; it had transformed into a claim for the recovery of a debt, money held and received by the Respondent in his capacity as auctioneer and agent, which he refused to remit despite repeated demands. 12.The Appellant contends that this claim falls squarely within Section 12(1)(b) of the Act as a contract relating to money held and received, and that the learned Adjudicator erred by looking at the historical genesis of the instruction rather than the true nature of the cause of action as presented. 13.Further, the Appellant submits that it is borne out of the record and concession that the learned Adjudicator raised the issue of jurisdiction suo moto and proceeded to determine it without hearing the parties and without issuing a reasoned ruling explaining the legal basis for declining jurisdiction. The Appellant avers that it was thereby deprived of the right to be heard on a determinative issue, which rendered the entire process procedurally unfair. It is submitted that had the presiding judicial officer granted the parties an opportunity to argue the matter, whether orally or by way of submissions on the issue of jurisdiction, she would have been properly guided and would not have fallen into the error of misconstruing the true nature of the claim. 14.On the constitutional dimension, the Appellant submits that the failure to render a reasoned ruling amounted to a violation of its rights under Articles 47 and 50 of the Constitution of Kenya, 2010. Article 47 guarantees the right to fair administrative action that is expeditious, efficient, lawful, reasonable and procedurally fair, while Article 50 guarantees the right to a fair hearing. The Appellant urges that these constitutional imperatives were entirely disregarded, and that the appeal was therefore fully warranted. 15.On costs, the Appellant prays that costs follow the event in its favour, given that the appeal was necessitated solely by the learned Adjudicator’s errors in law and procedure. Issues For Determination 16.Noting the grounds of appeal, this Court adopts those four issues as the gravamen of the appeal. Analysis And Determination 17.Based on the foregoing, this Court is called upon to determine, first and foremost, the proper characterisation of the claim and whether the Small Claims Court was clothed with jurisdiction to entertain it. It is well-settled that jurisdiction is everything. A court that lacks jurisdiction must, as a matter of law, down its tools. Several courts have, in applying this principle, held that the jurisdictional net of the Small Claims Court does not extend to disputes relating to the collection of rent. 18.In Lisa Kristine Christoffersen v Kavneet Kaur Sehmi T/A The Random Shop (Civil Appeal No. E036 of 2022), the High Court of Kenya held that the Small Claims Court does not have jurisdiction to entertain matters involving rent and rent arrears, even if the compensation sought by a litigant fell within the Kenya Shillings One Million (Kshs. 1,000,000) pecuniary limit. The Court upheld that disputes involving rent and rent arrears remained commercial disputes within the preserve of the Adjudicator’s Court and the High Court. That position, on its face, would appear to support the decision of the learned Adjudicator below. 19.However, there is no doubt that the sums originally being pursued related to rent arrears, and that ordinarily this would connote a dispute between a landlord and a tenant, who are the primary actors in rent disputes. The critical question, however, is whether that remained the character of the claim by the time it was placed before the Small Claims Court. 20.In this instance, the Respondent is not the defaulting tenant. The Respondent is the auctioneer who had already collected the proceeds of the distress for rent sale, having levied distress and conducted the auction. The tenancy dispute between the Appellant as landlord and Golden Cara Investment Limited as tenant was resolved through those proceedings. 21.Once the auction was completed and the proceeds received by the Respondent, the matter shifted from being a rent dispute to being a claim for debt recovery arising from a contract of agency: the Respondent, having received money on behalf of the Appellant as his principal, was obligated to remit it. His failure to do so gave rise to a fresh and independent cause of action in contract, not in landlord-tenant law. 22.This Court agrees with the Appellant that the provision of Section 12(1)(b) is clear and unambiguous. The Small Claims Court has jurisdiction over cases relating to claims of “a contract relating to money held and received.”The Appellant’s claim for Kshs. 275,000 plainly falls within this monetary threshold and does not fall within any of the exclusions set out in Section 12 of the Act. The learned Adjudicator therefore misdirected herself by focusing on the origin of the instruction, the rent arrears, rather than on the nature of the legal relationship and cause of action as framed in the claim before her. 23.Lady Justice Namisi in Muhanda v LP Holdings Ltd (Civil Appeal E256 of 2023) [2025] KEHC 393 (KLR) equally upheld this view and held that:“In coming to its determination on the Preliminary Objection, the trial court addressed itself to rent and rent arrears, which was the claim by the Respondent in its Counterclaim. However, the Appellant’s claim was for breach of contract, relating to the rent deposit paid by the Appellant to the Respondent. In my view, the Appellant’s claim falls squarely within the provisions of Section 12(1)(b) of the Act, being a contract for money held and received. It is, therefore, the finding of this Court that the trial court has the requisite jurisdiction. I am guided by the decision in the case of Greenlife Crop Protection Africa Limited v Trovic Ventures Limited & 2 others (Civil Appeal E148 of 2023) [2023] KEHC 27359 (KLR).” 24.The reasoning in Muhanda is directly on point. Just as a claim relating to a rent deposit held by a landlord was found to be a contract for money held and received, so too is a claim against an auctioneer who received auction proceeds on behalf of his principal and declined to remit them. The character of the claim is determined by what the claimant is actually seeking, the recovery of money received and retained by the defendant, and not by the commercial context in which that money originally changed hands. This Court is therefore satisfied that the learned Adjudicator erred in law by striking out the claim for want of jurisdiction. 25.Even if this Court were to take a different view on the jurisdictional question, which it does not, the procedure adopted by the learned Adjudicator was fundamentally flawed. The issue of jurisdiction was raised and disposed of suo motu, without the parties being invited to make any submissions. This is an issue of natural justice. The Court of Appeal has rendered a definitive decision on what transpires when a judicial officer acts suo motu and makes orders that adversely impact a case. In Prime Salt Works Ltd v Kenya Industrial Plastics Ltd [2001] 2 EA 528, the learned Judges (Omolo, Lakha and Keiwua, JJ.A) stated:“Implicit in the concept of fair adjudication lie two cardinal principles, namely that no man shall be a judge in his own cause and that no man shall be condemned unheard. These two principles, the rules of natural justice, must be observed by the Courts save where their application is excluded expressly or by necessary implication. In the instant case it has not been suggested that the rule has been excluded.” 26.Parties must be given an opportunity to convince the presiding judicial officer of their position on a matter in contention, especially one such as jurisdiction that can collapse the entire case. This did not happen in the present matter. Even if there were other reasons that could have been furnished for the striking out of the suit, the opportunity to ventilate the matter before the Court was simply not availed. 27.The Appellant was denied the chance to demonstrate, as this Court has now found, that the claim had shifted from the realm of rent disputes into that of contractual debt recovery, a distinction that is both legally significant and factually apparent from the pleadings. 28.The failure by the learned Adjudicator to render a reasoned determination further amounts to a violation of the Appellant’s constitutional right to fair administrative action under Article 47 of the Constitution of Kenya, 2010, and the right to a fair hearing under Article 50. 29.Article 47(2) requires that where a person’s rights are adversely affected by an administrative action, written reasons must be furnished. Article 50(1) guarantees every person the right to have any dispute that can be resolved by the application of law decided in a fair and public hearing before a court or, if appropriate, another independent and impartial tribunal or body. Judicial decisions, particularly those that dispose of proceedings or determine substantive rights, must be accompanied by reasons. 30.Reasons are the link between the decision and the law; they demonstrate that the decision-maker applied their mind to the issues and enable the parties, as well as an appellate court, to understand the basis upon which the decision was made. The bare notation “Struck out” on the Court’s electronic tracking system is manifestly insufficient to meet this constitutional standard. 31.On the question of costs, this Court notes that while the Appellant has succeeded in this appeal, the Respondent elected not to participate in the proceedings. Counsel for the Respondent, on the single occasion he appeared before this Court, indicated opposition only to the award of costs. In those circumstances, and in the interest of facilitating a prompt and fair determination of the substantive claim on the merits, this Court is of the view that each party shall bear their own costs of the appeal. This is due to the fact that the resopondent was an ionnocent party who did not move the Court to make the determination that it did. The Respondent should not be condemned to pay costs for actions that are not of their own making. They were probably only too glad to have seen the court move as it did without any prompting and did not come to this Court to try and justify the impugned outcome. Orders 32.Consequently, the Court allows the Appeal, sets aside the impugned ruling in its entirety, and reinstates the Appellant’s claim for hearing and determination on merit before a different Adjudicator other than Hon. Wamae Muindi. 33.Each party shall bear their own costs. DATED AND DELIVERED AT NAIROBI THIS 28TH DAY OF MAY 2026. BENARD WAFULA MURUNGAJUDGEDelivered on virtual platform in the presence of Ms Kamau h/b for Wachira for the Appellant N/A for the RespondentAbdirazak Abdi - Court Assistant