https://new.kenyalaw.org/akn/ke/judgment/kehc/2026/10717

David v RFH Health Care (Formerly Sued as Ruai Family Hospital Ltd) (Small Claims Appeal 107 of 2025) [2026] KEHC 10717 (KLR) (16 July 2026) (Judgment) Neutral citation: [2026] KEHC 10717 (KLR) Republic of Kenya In the High Court at Thika Small Claims Appeal 107 of 2025 BW Murunga, J July 16, 2026 Between Dr Charles Matheka David Appellant and RFH Health Care (Formerly Sued as Ruai Family Hospital Limited) Respondent (Being an appeal from the Judgment of Hon. J. K. Tawai, Adjudicator, delivered on 15th April 2025 in the Small Claims Court at Ruiru in SCC COMM NO. E734 OF 2024) Judgment 1.This is an appeal from the judgment of the Small Claims Court at Ruiru (Hon. J. K. Tawai, Adjudicator) delivered on 15th April 2025 in SCC COMM No. E734 of 2024, dismissing in its entirety the Appellant’s claim for Kshs. 584,336.84. 2.By a Service Level Agreement dated 20th October 2023 (“the SLA”), the Appellant, a medical consultant, undertook to provide E.N.T., Head and Neck surgical and consultancy services to patients of the Respondent, a hospital. The SLA was, on its face, a revenue-sharing arrangement and not a fixed-fee contract. The Respondent collected fees from patients and insurers, out of which it was to remit to the Appellant his agreed share. 3.The Appellant’s case was that he performed his obligations under the SLA but was never paid the Kshs. 584,336.84 properly due to him as his share of fees for services rendered. He accordingly sued the Respondent in the Small Claims Court. 4.The Respondent’s defence, in essence, was that under the SLA the Appellant’s share was payable only out of sums actually collected by the Hospital from patients and their insurers, that no such sums had been collected in respect of the disputed claims, and that it had made reasonable efforts, through demand letters to the relevant insurers, to recover them. 5.The learned Adjudicator dismissed the claim. Her reasoning, rested on two limbs: first, that under the SLA the Appellant was entitled to payment only once the Respondent had actually received the corresponding sums from patients or insurers, and that to hold otherwise would amount to rewriting the parties’ bargain; and second, that the Appellant had, in any event, failed to invoke clauses 10.1(b) and 10.2 of the SLA, which required a 90-day notice of termination. 6.Aggrieved, the Appellant filed a Memorandum of Appeal setting out five grounds, which, read together with the written submissions filed on both sides, may conveniently be condensed into three issues for determination:a.whether the learned Adjudicator misdirected herself on the burden and standard of proof and on the proper evaluation of the evidence relating to non-receipt of payment;b.whether the doctrine of privity of contract was applicable to, or was misapplied on, the facts of this case; andc.whether the learned Adjudicator erred in law in determining, and relying upon, the question of the Appellant’s non-invocation of the termination clause, an issue neither party had placed before her. Analysis and Determination 7.Before turning to those issues, it is necessary to recall the limits of this Court’s mandate. Section 38(1) of the Small Claims Court Act provides that “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,” and section 38(2) declares that such an appeal “shall be final.” 8.This Court, sitting on such an appeal, does not retry the merits or reweigh credibility; it intervenes only where it is shown that the trial court considered matters it should not have considered, failed to consider matters it should have considered, misapplied the law, or that the decision, looked at as a whole, is perverse. See the formulation applied in Otieno, Ragot & Company Advocates v National Bank of Kenya Limited [2020] eKLR, itself following Kenya Breweries Limited v Godfrey Odoyo [2010] eKLR and Stanley N. Muriithi & Another v Bernard Munene Ithiga [2016] eKLR. It is with that discipline in mind that I approach the three issues. 9.Section 107 of the Evidence Act provides that “whoever desires any court to give judgment as to any legal right or liability dependent on the existence of facts which he asserts must prove that those facts exist,” and section 108 places that burden on the party “who would fail if no evidence at all were given on either side.” It was for the Appellant, therefore, to establish the SLA, the rendering of the contracted services, and the sum said to be outstanding. 10.On that score there is, in truth, little controversy. It is not disputed that the Appellant rendered the services in question, nor is it seriously disputed that his computation of Kshs. 584,336.84, arrived at by applying the revenue-sharing formula in Schedule 2 of the SLA, was, as a matter of arithmetic, correct. 11.The entire contest turns on a single mechanism: Schedule 2 of the SLA provides that the Doctor’s share “shall be made on gross revenue for the specified service received by the Hospital,” that “what is payable is what has been received by the hospital, whether in cash or insurance,” and, at page 8, that “services offered but not paid for are not payable.” 12.I find no difficulty in accepting, as a matter of contractual construction, that this is a lawful term which the Adjudicator was right to give effect to. Parties are entitled to allocate between themselves the risk that a paying third party may default, and it is not the office of a court to relieve a party of a bargain merely because it later proves onerous. 13.As the Court of Appeal held in National Bank of Kenya Ltd v Pipeplastic Samkolit (K) Ltd & another [2001] KECA 362 (KLR),“a court of law cannot re-write a contract between the parties. The parties are bound by the terms of their contract, unless coercion, fraud or undue influence are pleaded and proved.” 14.No coercion, fraud or undue influence is pleaded here. Had the Respondent genuinely not received payment corresponding to the Appellant’s patients, that would, on the plain words of Schedule 2, be a complete answer to the claim. 15.The real dispute, then, is not what the SLA means, but whether the fact said to withhold the Appellant’s entitlement, namely, non-receipt by the Hospital, was established, and upon whom the burden of establishing it lay. 16.Section 112 of the Evidence Act provides that “in civil proceedings, when any fact is especially within the knowledge of any party to those proceedings, the burden of proving or disproving that fact is upon him.” 17.That provision is decisive here. It was the Respondent’s own witness who testified that the Hospital “bore the sole responsibility of following up on payments from insurers,” and that “all reconciliations between the hospital and the insurers were conducted entirely to the exclusion of the Appellant.” 18.On the Respondent’s own evidence, whether and to what extent it had collected sums referable to the Appellant’s patients was a fact within its own exclusive knowledge and custody, and not one the Appellant had any means of independently verifying. 19.Once the Appellant had shown that services were rendered and had quantified his claim under the agreed formula, the burden of showing non-receipt shifted to the party uniquely placed to prove it. 20.This accords with the principle restated by the Supreme Court in Raila Amolo Odinga & Another v Independent Electoral and Boundaries Commission & 2 Others [2017] eKLR, that although the legal burden remains constant,“the evidential burden keeps shifting” and its position “at any time is determined by answering the question as to who would lose if no further evidence were introduced.” 21.What, then, did the Respondent place before the trial court to discharge that shifted burden? On the record, it relied on demand letters written to several insurance companies. A demand letter, without more, proves only that payment was requested; it does not, by itself, prove that payment was never received. 22.Critically, each of the demand letters referred to invoices said to have been attached to them, documents that would have shown precisely what was billed, to which insurer, and the status of each claim. 23.The Appellant, recognising their importance, served a Notice to Produce those invoices, in accordance with section 69 of the Evidence Act. The Respondent neither produced them nor offered any explanation for the omission, notwithstanding its own case that they were within its exclusive custody. 24.Section 68(1)(a)(iii) of the Evidence Act contemplates exactly this situation: where a document is shown to be in the custody of a party who, after due notice, “refuses or fails to produce it,” the party tendering the notice may resort to secondary evidence of its contents. 25.More fundamentally, that refusal or failure has long been recognised as inviting an inference adverse to the party withholding the document. An application of the wider “presumption of likely facts” preserved in section 119 of the Evidence Act, which entitles a court to presume the existence of a fact it considers likely, “regard being had to the common course of natural events, human conduct and public and private business.” The Court of Appeal applied kindred reasoning very recently in General & another v Hussein & 3 others [2025] KECA 1022 (KLR), adopting the observation in Munster Estates (Pty) Ltd v Killarney Hills (Pty) Ltd [1979] (1) SA 621 (A) that whether an adverse inference ought to be drawn from a party’s failure to produce available evidence capable of elucidating the facts. It was stated that:“where a party fails to call as his witness as one who is available and able to elucidate the facts, whether the inferences that the party failed to call such a witness because he feared that such evidence would expose facts unfavourable to him should be drawn would depend on the facts peculiar to the case where the question arises.” 26.The focus is on “would depend on the facts peculiar to the case where the question arises.” 27.Measured against demand letters unaccompanied by the invoices they refer to, and unsupported by any statement of account, insurer remittance advice, or hospital revenue record demonstrating that the Appellant’s specific claims went unpaid, I am not persuaded that the Respondent discharged the burden the law placed on it. Civil liability is determined on a balance of probabilities, whether it is, in the classic formulation, “more probable than not” as per Miller v Minister of Pensions [1947] 2 All ER 372. 28.By treating the bare demand letters as sufficient proof of non-receipt, without addressing her mind to the significance of the Respondent’s unexplained failure to honour the Notice to Produce, the learned Adjudicator misdirected herself, not on the meaning of the contract, which she construed correctly, but on what the law required to prove that its condition had gone unfulfilled. 29.That is a misdirection on a matter of law properly reviewable under section 38(1) of the Act. This ground of appeal succeeds. 30.The Appellant’s second complaint invokes the doctrine of privity of contract, relying on Savings & Loan (K) Limited v Kanyenje Karangaita Gakombe & another [2015] KECA 784 (KLR) and Aineah Likuyani Njirah v Agha Khan Health Services, Civil Application No. 194 of 2009. The Respondent, in answer, points to the repeated references to insurers and “various insurance partners” scattered through clauses 3.1.3, 3.1.14, 4.3 and Schedules 1 and 2 of the SLA. 31.The doctrine, in its classical formulation, holds that “a contract cannot confer rights or impose obligations on any person other than the parties to the contract” and “cannot be enforced either by or against a third party” Savings & Loan (K) Limited v Kanyenje Karangaita Gakombe & another (supra), applying Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co Ltd [1915] AC 847. Its office is a narrow one: to protect a stranger to a bargain from being burdened by, or permitted to enforce, obligations he never assumed. 32.The difficulty with the Appellant’s reliance on the doctrine is that he is not, and has never been, a stranger to the SLA. He is very much a party to it, and it is the terms of that very agreement, Schedule 2 and page 8, in particular, and not of any separate arrangement between the Respondent and its insurers, that make his entitlement contingent on the Hospital’s actual receipt of payment. 33.The Adjudicator did not purport to bind the Appellant to any term of the Hospital’s contracts with its insurers, to subject him to obligations owed by the Hospital to a third party, or to permit a stranger to enforce or resist the SLA. She simply gave effect to a payment mechanism the Appellant himself agreed to. That the mechanism happens to use the conduct of a third party as the measure of the Appellant’s own entitlement does not offend the doctrine, any more than it would were the Appellant a sales agent paid on sums his principal actually recovers from a purchaser, or a debt-collector paid on sums actually recovered from a debtor. 34.In each such case the third party’s conduct is merely the yardstick of the parties’ own bargain; the third party is neither bound by, nor entitled to enforce, anything. 35.What the Appellant in truth complains of is not that a stranger’s contract has been imposed on him, but that he has, on his account, been left to shoulder a collection risk he could neither manage nor verify. That is a real grievance, but it belongs to the evidential inquiry already undertaken above, not to the doctrine of privity, which is simply not engaged on these facts. This ground of appeal must fail. 36.The final complaint is that the learned Adjudicator went beyond the pleadings by determining that the Appellant had failed to invoke the 90-day termination notice under clauses 10.1(b) and 10.2 of the SLA, and relied on that finding, at least in part, to dismiss the claim. 37.It is well settled that a court is confined to the issues placed before it by the parties’ pleadings, and has no jurisdiction, absent consent, to found its decision on a matter neither side has raised or canvassed. In Chalicha FCS Ltd v Odhiambo & 9 Others [1987] KLR 182, the Court of Appeal held that“cases must be decided on the issues on the record”and that a court“has no power to make an order, unless by consent, which is outside the pleadings.” 38.The Supreme Court, in Raila Amolo Odinga & Another v Independent Electoral and Boundaries Commission & 2 Others [2017] eKLR, went further still, holding it“neither desirable nor permissible for a court to frame an issue not arising on the pleadings.” 39.The rationale is straightforward: each party must know the case it has to meet - Galaxy Paints Co. Ltd v Falcon Guards Ltd [2000] 2 EA 385. 40.A narrow exception exists. Where an unpleaded issue is nonetheless crucial to the controversy and both parties have plainly addressed it in evidence or submissions, leaving it to the court, the court may pronounce upon it. This residual rule is traceable to Odd Jobs v Mubia [1970] EA 476, as explained in Ann Wairimu Wanjohi v James Wambiru Mukabi [2021] eKLR. The burden of bringing the case within that exception lay with the Respondent, as the party in whose favour the finding was made. 41.It has not discharged that burden. On its own submissions before this Court, the Respondent’s pleaded defence “was straightforward: that payment to the Appellant was contingent upon receipt of funds from patients or insurers” nothing is said there of termination. Its attempt to locate a plea on termination in “Clause 10 of the Agreement, at page 79 of the Record of Appeal” is, on a fair reading of its own submissions, made only in response to the Appellant’s prayer for costs, a matter distinct from a substantive defence to liability on the principal claim. 42.Nothing placed before me shows that the question of termination, or the Appellant’s compliance with the 90-day notice clause, was ever pleaded by either side as a ground for resisting the claim, or that it was so fully canvassed in evidence that the parties could be taken to have submitted it to the Adjudicator for decision. 43.It follows that, in resting part of her judgment on the Appellant’s failure to invoke a clause that neither party had put in issue, the learned Adjudicator considered a matter she was not entitled to consider and denied the parties a fair opportunity to address her on it. That, too, is an error of law. This ground succeeds. Disposition 44.Drawing the threads together: the Adjudicator’s construction of the SLA, that the Appellant’s entitlement was conditional on the Respondent’s actual receipt of payment from patients and insurers was correct, and the ground of appeal founded on privity of contract must fail. 45.However, two independent errors of law taint the ultimate decision: first, the acceptance of unsubstantiated demand letters as sufficient proof of non-receipt, without regard to the adverse inference properly available from the Respondent’s unexplained failure to honour a Notice to Produce the underlying invoices; and second, the reliance, in part, on an unpleaded and uncanvassed issue of termination. 46.Either error, standing alone, would suffice to vitiate the judgment; together, they leave no sound basis on the record for the finding that the Respondent had not received, or was not liable for, the sums claimed. 47.The question that remains is what should follow. I decline to remit the matter for retrial. The Respondent was formally called upon, by a Notice to Produce, to place its own billing, insurer-remittance and reconciliation records before the trial court, and it chose not to. Proceedings before the Small Claims Court are designed for speed and finality, a design reflected in section 38(2) of the Act, which makes an appeal of this kind final. 48.To remit the matter now would hand the Respondent a second opportunity to make good a case it declined to prove when it had every occasion to do so, at the expense of a claimant whose underlying entitlement, on quantum, has never seriously been in dispute. Finality on the record as it stands better serves the interests of justice. 49.In the result, I find that the Respondent failed to discharge the evidential burden that lay upon it to prove non-receipt of the sums claimed, and that the alternative basis for dismissal cannot stand, having been decided outside the pleadings. The Appellant’s claim, established as to both liability and quantum, must succeed. Orders 50.For the foregoing reasons, I make the following orders:a.The appeal is allowed.b.The judgment of the Small Claims Court at Ruiru delivered on 15th April 2025 in SCC COMM No. E734 of 2024 is set aside in its entirety.c.Judgment is entered for the Appellant against the Respondent in the sum of Kshs. 584,336.84.d.The said sum shall attract interest at court rates from the date of filing of the claim before the Small Claims Court until payment in full.e.The Respondent shall bear the Appellant’s costs of this appeal and of the proceedings before the Small Claims Court. 51.It is so ordered. DATED, SIGNED AND DELIVERED AT NAIROBI THIS 16th DAY OF JULY 2026.……………………………………………………BENARD WAFULA MURUNGAJUDGEDelivered on a virtual platform in the presence of:Ms Kimani h/b for Ndichu for Appellants instructed by Kimani Musyimi & Ndichu LLPAmbala h/b for Odindo for Respondents instructed by Odindo & Co.Kevin Babu - Court Assistant