https://new.kenyalaw.org/akn/ke/judgment/kehc/2026/11569

 ## REPUBLIC OF KENYA **IN THE HIGH COURT OF KENYA AT NAIROBI CIVIL DIVISION, APPELLATE SIDE** **CIVIL APPEAL NO. HCCSCA/E368 OF 2025** **JAMES KAMIRI WANJIRU APPELLANT** ***VERSUS*** **SAFARICOM PLC LIMITED 1ST RESPONDENT** **M-PESA HOLDING COMPANY LIMITED… 2ND RESPONDENT** *(Being an appeal from the judgment of Hon. V. K. Momanyi, Resident Magistrate/Adjudicator, delivered on 7th November 2025 in Milimani Small Claims Court Case No. SCC COMM E95659 of 2025)* ## JUDGMENT **INTRODUCTION** 1. This appeal arises from the judgment of **the Milimani Small Claims Court in SCCC No. E95659 of 2025**. By a judgment delivered on **7th November 2025**, the learned Adjudicator, Hon. V. K. Momanyi, found for the Respondents, against the Appellant’s claim for the refund of **Kshs. 462,445/-**, general damages, and costs. The trial court found that the Appellant had failed to prove his case on a balance of probabilities, particularly regarding the allegedly fraudulent nature of the M-Pesa transactions in question. 2. Wholly dissatisfied with the trial court's decision, the Appellant, James Kamiri Wanjiru, moved this Court through a Memorandum of Appeal dated 7th November 2025. 3. The Appellant seeks to have the judgment and decree of the lower court set aside in its entirety and replaced with an entry of judgment in his favour as prayed in the Statement of Claim dated 5th June 2025. ## BACKGROUND AND PROCEEDINGS 1. The trial record indicates that the Appellant moved the lower court seeking the recovery of Kshs. 462,445/-. The Appellant’s case was that on 22nd March 2025, he was abducted, drugged, and robbed of his personal effects, including his mobile phone. He contended that while he was unconscious, unknown persons transferred funds from his Stanbic Bank account to his M-Pesa wallet and subsequently withdrew the sum of Kshs. 462,445/- at various M-Pesa agent outlets in Ruai. 2. The Respondents denied liability, maintaining that all disputed transactions were authenticated using the Appellant’s existing credentials, including the correct SIM card and PIN. They further argued that since the COVID-19 pandemic, the requirement for customers to sign manual logbooks at M-Pesa agent outlets which is a central pillar of the Appellant's claim had been discontinued in favour of electronic verification. ## THE APPELLANT’S CASE AND SUBMISSIONS 1. The Appellant filed written submissions dated 22nd April 2025 (as noted in the record) and 7th November 2025. The Appellant primarily submits that the learned Adjudicator erred in law and fact by with his case premised on several grounds, which are reproduced below. : ## Failure to find binding nature of M-PESA Customer Terms & Conditions (Clause 10.1) The learned magistrate/adjudicator erred in law in not finding that all clauses of the M-Pesa Customer Terms and Conditions (June 2022) constituted a binding contract between the Respondents and their customers, including the Appellant. Clause 10.1 thereof required Cash Merchants at M-Pesa Agent Outlets to ensure a customer signed the Log Book to serve as conclusive evidence of the successful completion of the withdrawal transaction. ## Misapplication of Evidentiary Rules on Log Books The learned magistrate/adjudicator erred in law in not applying the Contra Proferentem and Parol Rules of evidence against the Respondents by relying on the testimony of Ms. Victoria Kiprop (RW1) without supporting material that the Respondents had, since the COVID-19 pandemic, discontinued the use of manual log books at Cash Merchant Outlets. This is despite Clause 10.1 being retained in the M- Pesa Customer Terms and Conditions published in June 2022 (well after the pandemic ended and operations returned to normalcy) and remaining applicable to date, a fact the judicial officer failed to take judicial notice. * 1. **Selective Reading of M-PESA Customer Terms & Conditions** The learned magistrate/adjudicator erred in law in the selective reading and application of Clauses 6.1 to 6.4 of the M-Pesa Customer Terms and Conditions (June 2022) while ignoring Clause 10.1, which was the crux of the Appellant's case before her, contrary to the Contra Proferentem and Parol Rules of evidence. ## Misinterpretation of the Burden of Proof The learned magistrate/adjudicator erred in law in not shifting the burden of proof to the Respondents to demonstrate that the impugned transactions were conducted using the Appellant's valid credentials. The Respondents failed to produce evidence that Cash Merchants at the M-Pesa Agent Outlets were interviewed or called as witnesses. Instead, at paragraph 8 of the Judgment, the learned magistrate/adjudicator held that it was upon the Appellant to call the M-Pesa Agent as his witness to prove that the transactions were unauthorized, which is contrary to the rules of evidence on burden of proof. ## Improper Reliance on Unsigned Investigation Report The learned magistrate/adjudicator erred in law in holding that an unsigned and uncorroborated "investigation report" (which did not disclose its author) was unrebutted, and placing full reliance and weight on mere statements therein—such as "...the transactions were concluded using valid credentials and did not involve any system compromise or third-party breach. As such, the liability for the disputed transactions rests with the customer (sic)", without supporting evidence or material to demonstrate the same. ## Contradictory Finding on Authentication vs. Authorization The learned magistrate/adjudicator erred in law in holding that the impugned transactions were completed using the Appellant's authenticated credentials despite finding they were unauthorized from the Appellant's perspective. ## Illogical Requirement for Prior Reporting The learned magistrate/adjudicator erred in law in finding that the Respondents would only be liable had the Appellant reported before the impugned transactions were made. This turns logic on its head, as the Appellant's case was that after promptly applying for his M-Pesa statements and perusing them, he learned of the unauthorized transactions made without compliance with Clause 10.1. ## Erroneous Holding on Log Book Discontinuation The learned magistrate/adjudicator erred in law in holding that the alleged discontinuation of physical log books by the Respondents was neither unlawful nor negligent, when this change was not reflected in the applicable M-Pesa Customer Terms and Conditions published in June 2022 and active at the time of the impugned transactions. ## Failure to Appreciate Evidence and Submissions The learned magistrate/adjudicator deliberately or otherwise ignored and/or failed to appreciate the overwhelming evidence and submissions presented on behalf of the Appellant, thereby arriving at wrong conclusions of fact and law. 1. In support of his case, the Appellant cited the following authorities: 2. ***Uzokwelu v. PDP & Ors LPELR-43737CA*** and ***Omega Bank (Nig) Plc v. O.B.C. Ltd. 8 NWLR*** regarding the interpretation of contracts and the Contra Proferentem Rule. 3. ***Munyoki v Kenya Orient Insurance Company Limited (Civil Appeal E1190 of 2024) KEHC 2671 (KLR)*** concerning the duty of care in specialized service contracts. 4. ***Co-Operative Bank Ltd v Taramusi Francis Ongoki KEHC 1544 (KLR)*** regarding bank liability for unauthorized transactions. ## THE RESPONDENTS' CASE 1. The Respondents’ position, as detailed in their trial submissions dated 3rd November 2025, was that the relationship between the parties is purely contractual, governed by the M-Pesa Terms and Conditions. They relied on: 2. **Clauses 6.1 to 6.4**, which place the absolute responsibility for PIN security on the subscriber. 3. ***Wachira v Safaricom Company Limited* KEHC 16425 (KLR)**, where the court held that a telecommunications provider’s role is primarily to maintain the integrity of subscriber identification and cannot be held liable for third-party criminal acts unless a system failure is proven. 4. **Sections 107 and 109 of the Evidence Act**, asserting that the Appellant bore the burden of proving negligence or system compromise. ## ISSUES FOR DETERMINATION 1. Having considered the record, the grounds of appeal and the submissions filed, this Court distils the following issues for determination: 1. Whether the learned trial magistrate erred in the interpretation of the contractual terms by admitting extrinsic evidence contrary to the parol evidence rule, or alternatively, by failing to construe ambiguous terms against the drafting party under the *contra proferentem* rule. 2. Whether the evidential burden of proof shifted to the party possessing special knowledge of the disputed facts, and if so, whether that burden was legally discharged. 3. Whether the lower court erred in law and fact by admitting and placing reliance upon an unsigned and unauthenticated investigation report to arrive at its final determination. 4. Whether the Appellant has established a legal basis for an award of general damages, and if so, what quantum should be awarded by this court if the appeal is successful. ## DETERMINATION 1. This is a first appeal to this Court, but pursuant to Section 38(1) of the Small Claims Court Act, it is restricted to matters of law, and it is also the final appeal as per Section 38(2) of the Small Claims Courts Act. In accordance with Rule 30 of the Small Claims Court Rules, this appeal is conducted in compliance with Order 42 of the Civil Procedure Rules. 2. While the principles in ***Selle & another vs Associated Motor Boats Co. Ltd* [1968] E.A. 123** mandate that a first appeals court re-evaluate the trial record, this Court is mindful of the principle in Section 38(2) of the Small Claims Courts Act (*Supra*) that this appeal shall only be on points of law. In this instance, I find that the learned Adjudicator committed several reversible errors of law. **The Interpretation of Contractual Terms, the Parol Evidence and the *Contra Proferentem* Rules** 1. The Appellant’s claim was primarily founded on a breach of **Clause 10.1 of the M-Pesa Customer Terms and Conditions (June 2022)**. This clause explicitly mandates that for any withdrawal at a Cash Merchant Outlet, the customer needs to sign. Clause 10.1 is reproduced below: ## “10. Withdrawal (Redemption) of E-Money * 1. Cash Merchant Outlets: Upon passing the vetting requirements conducted by an Cash Merchant, you may withdraw your E-Money at participating Cash Merchant Outlets by accessing your Account and following the prompts on your phone’s M-PESA menu; *however, any withdrawal Transaction must be initiated and completed within a Cash Merchant’s premises* ***and you must ensure you sign the Log Book which will serve as conclusive evidence of the successful completion of the withdrawal Transaction*”** (*Empasis this Court’s*). 1. The trial court, however, allowed the Respondents' witness, Victoria Kiprop (RW1), to orally testify that this requirement was discontinued during the COVID-19 pandemic. Allowing oral evidence contrary to written terms of a contract is violative of the parol evidence rule where it is established that a contract term has been reduced to writing. As noted in ***I & M Bank Limited v Buzeki Enterprises Limited* [2026] KEHC 1443 (KLR),** where terms to a contact are reduced to a written agreement, then prior or contemporaneous oral terms shall not contradict said written terms. 1. Flowing from the paragraph above, the Court finds that the learned Adjudicator erred in law by failing to apply **Section 97(1) of the Evidence Act**, which stipulates: # "When the terms of a contract... have been reduced to the form of a document... no evidence shall be given in proof of the terms of the contract... except the document itself." 1. However, the rule expressed in 97(1) has exceptions. Section 97(2) provides two concessions to the rule in Section 97(1): 1. Probated Wills: Wills that have already been admitted to probate in Kenya do not require further proof. 2. Public Officers: When the law requires a public officer to be appointed in writing, proving that a specific individual has actively functioned in that role satisfies the requirement without needing to produce the physical appointment letter. 2. Needless to say, the circumstances in the case do not involve any of these two exceptions provided in law. Thus, oral evidence should not have been used to vary the legal obligations and terms one agreed to in writing and presented by the Respondents in Clause 10.1 of the M-PESA Customer Terms & Conditions. 3. In this case, with Clause 10.1 of the M-PESA Customer Terms & Conditions extant, the Court should not have taken into account any oral evidence that contradicted the clearly stipulated terms. 4. To reiterate, given that the M-PESA Customer Terms & Conditions contained a clause that governed withdrawal of the funds by Customers, and the necessity of signature in the manual log for withdrawal, the Respondents were legally bound by these terms under the contra proferentem rule, which dictates that any ambiguity in a contract must be interpreted against the party that drafted it in this case, the Respondents. To allow oral testimony to override these written terms constitutes a clear error of law. 5. The present case is differentiated from ***Wachira v Safaricom Company Limited* [2024] KEHC 16425 (KLR).** In *Wachira*, the court defined the telecommunications provider’s role as primarily providing the "communication infrastructure and maintaining the integrity of subscriber identification." The court held that Safaricom cannot be liable for third-party criminal acts if the core system functioned as intended. 6. In contrast to ***Wachira***, where communication infrastructure and its functioning is the question, this case is centred on a specific breach of **Clause** **10.1 of M-Pesa Terms and Conditions**. While ***Wachira*** deals with general system security, Wanjiru addresses a procedural failure by Safaricom’s agents to obtain a manual signature in a logbook, which the said Clause in M-PESA Customer Terms & Conditions itself defines as the "conclusive evidence" of a successful withdrawal. 1. Consequently, the present case concerns the contra proferentem rule. As applied in Kenyan jurisprudence, this rule mandates that ambiguous contractual terms must be interpreted against the party that drafted them. Therefore, because the Respondents drafted the M-PESA Customer Terms & Conditions, which the Appellant had to accept to use M-PESA services, any ambiguity in the agreement must be strictly construed against the Respondents. 2. Quoting the preamble to the M-PESA Terms and Conditions, the Court notes that they state *verbatim* that: # *“*This Agreement contains the complete terms and conditions that apply to your participation in Safaricom's M-PESA Mobile Money Transfer Service and supersedes all other agreements entered into between you and Safaricom PLC of P.O. Box 66827 Westlands, Nairobi – 00800 (“Safaricom) with respect to the M- ***PESA mobile money transfer Services****”* The agreement further stipulates that # *“*By participating in or continuing to use the M-PESA Service you shall be deemed to be making an affirmative statement of your acceptance of these terms and conditions*.”* 1. This Court observes that an ambiguity arose when the Respondents sought to bypass their own written agreement in favor of an uncommunicated oral provision. This oral term, if it can even be called so, was never brought to the attention of the Appellant or any other M-PESA customers. To resolve this ambiguity, the Court relies on established precedent. As stated in ***Bhogatia v Madison Group* [2024] KEELRC 1587 (KLR),** “Under the *contra proferentem* rule, an ambiguity in a contract is to be construed unfavourably to the drafter.” Consequently, because the Respondents drafted the M-PESA Terms and Conditions, they cannot rely on hidden oral terms to contradict their own written contract. **Burden of Proof and Special Knowledge** 1. Under **Section 107(1) of the Evidence Act**, the initial burden of proof lies with the party asserting facts. This is not in dispute. The Appellant discharged this initial burden by providing the testimony of **Sgt. Frederick Chetalam (CW2)**, who confirmed finding the Appellant in a "semi-conscious" and "stupefied" state in Ruai at the very time the transactions occurred. 2. Once the appellant demonstrated that he was incapacitated, the evidential burden shifted to the respondents under Section 112 of the Evidence Act, which provides that where a fact lies “especially within the knowledge of any party, the burden of proving or disproving that fact is upon him.” The reasoning aligns with ***Evans Nyakwana v Cleophas Ongaro* (2015) eKLR,** where the court held that when one party is the custodian of institutional or transactional records, the evidential burden moves to them once the claimant establishes a baseline transaction. In the same way, having shown that he was incapacitated, the appellant triggered the operation of Section 112, requiring the respondents, who were better placed to explain the circumstances regarding the signatures, or lack thereof to discharge the burden. 3. To reiterate, the Respondents alone possessed the logs and merchant statements to prove that the withdrawals were conducted in strict compliance with **Clause 10.1**. By holding that it was the Appellant's duty to call the M-Pesa agents as witnesses, the trial court misapplied the law on the shifting burden of proof. **Reliance on the Unsigned Investigation Report** 1. The trial court placed heavy reliance on the Respondents’ “internal investigation report” to conclude that correct credentials were used. However, the record shows this report was **unsigned** and its author not initially disclosed in the document. 2. In line with the Court’s holding in ***Ramogi & 3 others v Attorney General &*** ***4 others; Muslims for Human Rights & 2 others (Interested Parties)* [2020] KEHC 10266 (KLR),** where the Court stated that an unsigned agreement “cannot be said to be a valid contract capable of enforcement.” Thus, such a document which is unsigned but produced in Court has no legal force and cannot be relied upon to establish any factual or legal conclusion. The Adjudicator’s reliance on this legally ineffective document therefore amounted to an error of law. The High Court reached a similar conclusion in ***Mugo Mungai & 4 Others v Official Receiver* [2025] KEHC 16109 (KLR)** where it was held that a document that is unsigned and whose maker is unknown is inadmissible, has no probative value, and amounts to hearsay. The Court stated that “the makers of the document are unknown and… they did not sign it” , and concluded that “an unsigned document has no probative value as the contents genuineness cannot be proved.” 1. Applying the principles in the paragraph above, the Adjudicator’s reliance on an unsigned, unauthenticated “internal investigation report” was a clear error of law, as such a document is legally incapable of establishing any factual or evidentiary conclusion. **Damages** 1. Having found that the Respondents breached Clause 10.1 of the M-Pesa Customer Terms and Conditions and failed to discharge the evidential burden under Section 112 of the Evidence Act, the Court must now determine the quantum of damages recoverable by the Appellant. ## Special Damages (Refund of Kshs. 462,445/-) 1. The law governing special damages in Kenya is well settled: special damages must be specifically pleaded and strictly as held in ***Mburu & another v Mwangi* [2026] KEHC 5016 (KLR).** As the Court of Appeal held in ***David Bagine v Martin Bundi* [1997] KECA 54 (KLR):** *" These (special*) *damages as pointed out earlier by us must be strictly proved."* 1. In the present case: 2. The Appellant explicitly pleaded the sum of **Kshs. 462,445/-** in his Statement of Claim. 3. He produced official M-Pesa transaction statements demonstrating that this precise amount was siphoned from his wallet across Ruai agent outlets while he was incapacitated. 4. The Respondents failed to produce the mandatory signed physical logbooks mandated by Clause 10.1 to prove authorized withdrawal. 5. Because this financial loss directly flows from the Respondents' procedural breach and failure to enforce contractual safeguards, the claim for special damages in the sum of **Kshs. 462,445/-** is fully proved and allowed. ## General Damages 1. Under traditional contract principles , the general rule is that damages for breach of contract are restricted to *restitutio in integrum*, placing the aggrieved party in the position they would have occupied had the breach not occurred (***Nyamweya v Asakania* [2025] KEHC 1702 (KLR)**. Courts generally refrain from awarding general damages for ordinary breach of contract unless exceptional circumstances exist. This restrictive approach heavily influenced early banking jurisprudence, such as ***Patel v. National & Grindlays Bank* Ltd [1970] EA 121**, where the court ruled that a bank’s wrongful dishonour of a cheque generally merits only nominal damages. 2. Under this traditional framework, substantial general damages for injury to reputation or credit were strictly limited to established commercial traders, leaving ordinary consumers without a remedy for the emotional or social fallout of a financial breach. 3. However, 2010 presented a paradigm shift as a result of Article 46(1) of the Constitution and the Consumer Protection Act. Where a financial institution breaches contractual duties contained in its Terms and Conditions, failing to ensure its agents ensure manual signatures for money withdrawal from M-pesa outlets, and thus subjecting the consumer to distress and mental anguish. It is fair and just, per the Constitution of Kenya 2010, to ensure their compensation. ## Quantum Assessment 1. The assessment of general damages is an exercise of judicial discretion guided by principles of reasonableness, moderation, and comparability**.** 2. The Appellant was subjected to a traumatic ordeal, being abducted and drugged, only to suffer the added distress of having his savings drained due to the Respondents' failure to enforce their own written agent verification rules. The Respondents' subsequent denial of liability, reliance on an unsigned internal report, and insistence on uncommunicated oral terms forced the Appellant through multi-tiered litigation to vindicate his basic consumer rights. 3. Taking into account the specific issues in this case, and prevailing economic conditions, an award of Kshs. 150,000/- in damages for breach of contract, inconvenience, and distress is fair, reasonable, and proportionate. 4. Interest on (1) and (2) at court rates from the date of filing the suit until payment in full. ## CONCLUSION AND FINAL ORDERS 1. Upon a comprehensive review of the legal issues raised, this Court finds that the trial court erred in law by misconstruing Sections 97, 107 and 112 of the Evidence Act and relying on an unsigned document to dismiss the Appellant's claim. Furthermore, the failure to enforce contractual terms and safeguard the Appellant’s economic rights under Article 46(1) of the Constitution resulted in a miscarriage of justice. The Appellant successfully proved his claim for special damages to the required standard and demonstrated entitlement to general damages. 2. Consequently, this Court makes the following final orders: 1. The Appeal is hereby allowed. 2. The Judgment and Decree issued by Hon. V. K. Momanyi, Resident Magistrate/Adjudicator, delivered on 7th November 2025 in Milimani Small Claims Court Case No. SCC COMM E95659 of 2025 is hereby set aside in its entirety. 3. Judgment is hereby entered in favour of the Appellant (James Kamiri Wanjiru) against the 1st and 2nd Respondents (Safaricom PLC Limited and M-Pesa Holding Company Limited) jointly and severally for: 1. Special Damages: Kshs. 462,445 2. General Damages: Kshs. 150,000 3. Interest: Interest on (a) and (b) above at court rates from the date of filing the suit in the lower court until payment in full. 3. The Appellant is awarded the costs of this appeal and the costs of the proceedings in the lower court. ## DATED, SIGNED AND DELIVERED AT NAIROBI on this 23RD DAY of JULY 2026. ………………………………… ## E.K. OGOLA JUDGE In the presence of: Mr. Mbithi……. for the Appellant. Mr. Ongwei……… for the Respondent. Gisielle Muthoni, Court Assistant.