https://new.kenyalaw.org/akn/ke/judgment/kehc/2026/7197

Muigai t/a Intergra Auctioneering (K) Company v Co-operative Bank of Kenya Limited (Civil Appeal E043 of 2025) [2026] KEHC 7197 (KLR) (Civ) (25 May 2026) (Judgment) Neutral citation: [2026] KEHC 7197 (KLR) Republic of Kenya In the High Court at Nairobi (Milimani Law Courts) Civil Civil Appeal E043 of 2025 AN Ongeri, J May 25, 2026 Between Elizabeth W Muigai t/a Intergra Auctioneering (K) Company Appellant and Co-operative Bank of Kenya Limited Respondent (Being an appeal from the Ruling and orders of Hon. N. Ruguru (CM) in the Chief Magistrate’s Court in CMCC NO.E4194 OF 2023 delivered on 20th December 2024) Judgment 1.The Respondent in this Appeal filed MIlimani Case E4194 of 2023 against the Appellant seeking refund for motor vehicle Registration No. KCG 449Z financed by the Respondent which was stolen from the Appellant’s yard after it was repossessed by the Respondent and deposited there. 2.The Respondent wrote off the loan and compensated the borrower and filed suit seeking Ksh. 3,211,315.84 in respect of compensation paid to the borrower and Ksh. 3,499,988.13 in respect of the outstanding loan which was written off. 3.The Appellant filed a Notice of Preliminary Objection dated 24th October 2023 on the grounds that the Trial Court lacked jurisdiction to hear the suit. 4.The Appellant stated in the preliminary objection that the respondent’s suit against her is entirely based on the cause of action of negligence and is fundamentally time-barred under Section 4(2) of the Limitation of Actions Act (Cap. 22), which strictly provides that an action founded on tort may not be brought after the expiry of three years from the date the cause of action accrued. 5.Further, that the underlying incident occurred on 22nd August 2018, and the Appellant was subsequently notified of the contents of the Rapidtech Insurance Loss Investigators report on 12/7/2019. 6.Consequently, more than three calendar years had lapsed since the cause of action arose, with the statutory limitation period having fully expired on 22nd August 2021 if computed from the date of the incident, or at the very latest on 12/7/2022 if computed from the date the investigation report was received. 7.Under either method of computation, the legal timeframe for filing had passed, and the entire suit is incompetent and must be struck out. 8.The Trial Court dismissed the Notice of Preliminary Objection on the grounds that time started to run when the Respondent replied to the demand letter dated 15/11/2022 which revived the cause of action. 9.The Appellant has appealed against the said Ruling on the following grounds:-a.That the Learned Trial Magistrate erred in law and fact by holding that the suit was not time barred because the suit was premised on both tort and contract despite the suit solely being based on a claim for negligence against the Appellant.b.The learned Trial Magistrate erred in law and fact by holding that the suit was premised on a contract despite there being no privity of contract with the Appellant.c.The learned Trial Magistrate erred in law and fact by finding that she had jurisdiction to hear and determine the suit as filed.d.The learned Trial Magistrate erred in law and fact by relying on a letter dated 11th November 2022 despite the letter being labelled and issued by the Appellant on a without prejudice basis.e.The learned Trial Magistrate erred in law and fact by holding that the suit was not time on the basis of a letter dated 11th November 2022 that was issued by the Appellant on a without prejudice basis.f.The learned Trial Magistrate erred in law and fact by holding Section 23(3) of the Limitation of Actions Act Cap. 22 was applicable despite the suit being solely premised on the tort of negligence and not the recovery of a debt. 10.The parties filed written submissions as follows; The appellant submitted that the trial court wrongfully dismissed the appellant’s preliminary objection which had asserted that the respondent's suit was time-barred. 11.The dispute stems from a plaint filed by the Co-operative Bank of Kenya Limited against Elizabeth W. Muigai, trading as Integra Auctioneering (K) Company, seeking damages for alleged negligence regarding the loss of a motor vehicle from the appellant’s yard on August 22, 2018. 12.The respondent was officially notified of this incident through an insurance investigation report on July 12, 2019. 13.The appellant contends that the trial magistrate erred by ruling that the suit was founded on both tort and contract, and by establishing that the statutory limitation period was reset on November 11, 2022, through an alleged debt acknowledgment under Section 23(3) of the Limitation of Actions Act. 14.To overturn this decision, the appellant raises three central arguments, beginning with the true legal foundation of the underlying suit. 15.The appellant argues that the respondent’s claim is anchored strictly in the tort of negligence rather than contract law, as evidenced by paragraphs in the plaint explicitly blaming the vehicle's loss on the appellant's laxity and willful negligence. 16.Citing judicial precedents like Mutua v CFC Stanbic Bank (K) Ltd, the appellant asserts that parties are bound by their pleadings. 17.The appellant further submitted that because the respondent failed to reference any contractual agreement, plead contractual breaches, or provide related particulars, the appellant claims the trial magistrate overstepped judicial boundaries by injecting a contractual element into a pure tort claim. 18.Building on the position that the suit is strictly a tort claim, the appellant argues that the action is legally time-barred under Section 4(2) of the Limitation of Actions Act, which mandates that tort claims must be brought within three years from the date the cause of action accrues. 19.Counting from either the date of the vehicle's actual loss in August 2018 or the disclosure of the investigation report in July 2019, the three-year statutory window lapsed in August 2021 or July 2022, respectively. 20.Since the respondent did not file the suit until September 2023, the claim is stale. 21.The appellant emphasizes that statutory limitation is a foundational matter of jurisdiction, meaning that once a suit is time-barred, a court loses the legal authority to entertain it and must immediately cease proceedings. 22.Finally, the appellant refutes the trial magistrate's conclusion that the limitation period was extended by a fresh accrual of the right of action under Section 23(3) of the Limitation of Actions Act. 23.The appellant demonstrates that statutory extensions triggered by a debtor's acknowledgment apply exclusively to liquidated pecuniary claims, which require a specific sum due under a contract that is already fixed or easily calculated through simple arithmetic. 24.Conversely, the respondent's claim involves unliquidated damages that require extensive judicial investigation and proof beyond mere calculation. 25.Furthermore, the appellant emphasizes that the document relied upon by the trial court as an acknowledgment of liability was a "without prejudice" letter dated November 11, 2022. Invoking Section 23(1) of the Evidence Act and relevant case law, the appellant notes that dispute-related communications made on a without-prejudice basis are inadmissible as evidence of liability. 26.Consequently, the appellant requests that the High Court set aside the Chief Magistrate's ruling and strike out the respondent's suit entirely for want of jurisdiction. 27.The Respondent, Co-operative Bank of Kenya Limited, submitted the that Court should dismiss the appeal filed by the Appellant, and uphold the ruling delivered on December 20, 2024. 28.The dispute originated when the bank repossessed a motor vehicle from a defaulting customer, David Goligol Ntete, and moved it to the Appellant’s yard for safe custody. 29.When the bank later sought to retrieve the vehicle after the customer regularized his loan, it discovered that the vehicle had been stolen from the yard. 30.As a result, the bank was compelled to pay the customer Kshs. 6,711,303.97 for the loss and subsequently filed a suit in the lower court on September 19, 2023, seeking to recover this amount, along with general damages, costs, and interest. 31.The Appellant filed a Preliminary Objection claiming the suit was time-barred, which the trial court dismissed, prompting this current appeal. 32.The core issues for determination are whether the bank's suit is founded on contract or tort, and whether it is legally time-barred under the Limitation of Actions Act. 33.The Appellant argues that the suit is solely based on the tort of negligence and is therefore time-barred under the statutory three-year limit. 34.Conversely, the Respondent maintains that the claim is soundly grounded in both contract and tort. 35.The bank asserts that a storage services contract existed between the parties regarding the repossessed vehicle, meaning the cause of action falls within the six-year statutory limitation period for contracts. 36.Given that the bank learned of the vehicle's loss on July 12, 2019, and filed the suit in September 2023, the action was initiated well before the contract limitation period expires in July 2025. 37.Relying on established jurisprudence, the bank contends that where a claim is pleaded in both tort and contract, a plaintiff is entitled to rely on whichever limitation period is more favorable. 38.Alternatively, the Respondent argues that even if viewed strictly as a tort claim, the action is still within time because the Appellant legally revived the limitation period. 39.In a letter dated November 11, 2022, the Appellant admitted that the vehicle was stolen and noted that a claim had been lodged with its insurer, Phoenix of E. Assurance Co. Ltd. 40.Under Section 23(3) of the Limitation of Actions Act, an acknowledgment of liability causes the right of action to accrue afresh from the date of that acknowledgment. 41.Therefore, the three-year clock for tort began running on November 11, 2022, making the September 2023 filing timely, as it occurred less than a year after the admission. 42.While the Appellant contends that its correspondence was marked "without prejudice" and should be inadmissible, the Respondent argues that exceptions apply, pointing out that an implied agreement arose when the Appellant undertook to pursue insurance compensation for the bank's loss. 43.Citing Court of Appeal precedent, the bank asserts that "without prejudice" communications are admissible when they result in a binding or relied-upon understanding, making it unconscionable for the Appellant to deny the statement now. 44.The Respondent concludes that the trial court possesses full jurisdiction because the statutory timelines for both causes of action were respected, and asks the Court to dismiss the appeal with costs so the lower court can determine the suit on its merits. 45.The issues for determination in this appeal are as follows;i.Whether the Respondent’s suit is founded strictly on the tort of negligence or concurrently on contract,ii.Whether the applicable statutory limitation period is three years for tort or six years for contract, andiii.Whether the letter dated 11th November 2022 marked "without prejudice" constitutes a valid acknowledgment capable of reviving a stale tortious cause of action. 46.On the first issue, a careful perusal of the underlying dispute reveals that the relationship between the parties arose when the Respondent, a financial institution, repossessed a motor vehicle and deposited it at the Appellant’s yard for safe custody pending the regularization of a loan facility. 47.This arrangement is the classic definition of a contract of bailment for reward, where the Appellant acted as a bailee and assumed a legal duty to take reasonable care of the property entrusted to it. 48.A bailment for reward contract is a contract where the owner of goods(bailor) or their assignee transfers the possession of the goods to another party (the bailee) for a specific purpose in exchange for payment with the understanding that the goods will be returned or dealt with in accordance with the directions of the owner thereof. 49.Again apart from that, it is a well-settled principle that a single transaction can concurrently give rise to distinct obligations in both contract and tort. 50.The Appellant’s contention that the suit is strictly anchored in the tort of negligence because the plaint uses terms like "laxity" and "wilful negligence" misconstrues the nature of pleadings in bailment claims. 51.In a contract of bailment, the breach of the contractual duty to safely keep the goods is almost invariably proved by demonstrating the bailee’s negligence or failure to exercise reasonable care. 52.Where a plaintiff has concurrent causes of action in both contract and tort, they are legally entitled to rely on whichever cause of action is more advantageous to them, including the more favorable limitation period. 53.Consequently, even if the plaint heavily emphasizes negligent conduct, the underlying substratum of the claim remains rooted in a storage services agreement, which is a contractual relationship. 54.Turning to the statutory timelines, Section 4(1)(a) of the Limitation of Actions Act mandates that actions founded on contract must be brought within six years from the date the cause of action accrued, whereas Section 4(2) restricts actions founded on tort to a three-year window. 55.The facts demonstrate that the Respondent became aware of the vehicle’s theft upon receiving the loss investigator’s report on 12th July 2019. 56.Since the Respondent is fully entitled to formulate its claim around the six-year statutory window provided for contractual breaches, the limitation period for filing a suit based on the contract of bailment was set to expire on 12th July 2025. 57.By instituting the lower court suit on 19th September 2023, the Respondent acted well within the six-year statutory timeline. 58.The trial court therefore correctly assumed jurisdiction, as the suit was not time-barred under the contractual framework. 59.Even if the claim were to be assessed exclusively through the lens of the tort of negligence, the Appellant's argument on the absolute expiration of time fails on the account of statutory extension. 60.The Appellant asserts that the trial court erred by using its letter of 11th November 2022 to reset the limitation clock under Section 23(3) of the Limitation of Actions Act, arguing that the letter was written on a "without prejudice" basis and that acknowledgments only apply to liquidated debts. 61.While it is true under Section 23(1) of the Evidence Act (Cap 80) that admissions made during settlement negotiations are generally protected from disclosure, this privilege is not an absolute shield for bad faith. 62.The courts have consistently carved out exceptions to protect the integrity of justice. 63.It is trite law that a "without prejudice" correspondence becomes admissible if it contains an unequivocal admission of independent facts or when it results in a binding agreement or promise that the opposite party relies upon to their detriment. 64.In this instance, the Appellant explicitly admitted that the vehicle was stolen from its custody and asserted that it had lodged a compensation claim with its insurer, Phoenix of East Africa Assurance Company Limited. 65.By communicating that it was actively pursuing insurance compensation for the bank's loss, the Appellant created a reasonable expectation that the matter would be resolved out of court, effectively lulling the Respondent into a false sense of security and delaying litigation. 66.To allow the Appellant to hide behind the "without prejudice" banner after using it to induce delay would be to convert a rule designed to encourage honest settlement into an instrument of fraud. 67.Furthermore, the argument that Section 23(3) applies strictly to liquidated debts ignores the progressive judicial interpretation of acknowledgment of liability. 68.When a bailee acknowledges the physical loss of a bailed item and points to an active insurance process to cover that specific loss, they acknowledge the very breach that forms the basis of the right of action, thereby resetting the statutory clock. 69.Ultimately, limitation periods are intended to shield defendants from stale claims where evidence may have been lost over time, not to help parties escape clear liabilities they have actively acknowledged. 70.The trial court's dismissal of the Preliminary Objection was legally sound and factually justified because the suit was filed within the permissible six-year window for contractual actions, and the alternative tort claim was kept alive by the Appellant's own written acknowledgments. 71.Consequently, this Court finds no merit in the grounds of appeal raised by the Appellant. 72.The Appeal is hereby dismissed with costs to the Respondent, and the order of the Chief Magistrate’s Court dismissing the Preliminary Objection is upheld, allowing the suit at the lower court to proceed to full hearing on its merits. 73.Orders to issue accordingly. DATED, SIGNED AND DELIVERED ONLINE VIA MICROSOFT TEAMS AT NAIROBI THIS 25TH DAY OF MAY, 2026.………….…………….A. N. ONGERIJUDGEIn the presence of:Miss Bundi for the AppellantMiss Mululu for the RespondentUbah – Court Assistant