https://new.kenyalaw.org/akn/ke/judgment/kehc/2026/8173

**REPUBLIC OF KENYA** **IN THE HIGH COURT OF KENYA AT NAIROBI** **CIVIL APPELLATE DIVISION** **HCCSCA NO. E095 OF 2026** **SCHOLASTICA ADHIAMBO OPIYO……………….………APPELLANT** **VERSUS** **PINNACLE DEVELOPERS LIMITED……………………..RESPONDENT** ***(Being an appeal from the Ruling of the Small Claims Court at Milimani (Hon. C.W. Ndumia – SRM/Adjudicator) dated 13th January 2023 in SCCCOMM/E5578/2022)*** **JUDGMENT** 1. This appeal arises from a Ruling and Orders issued in Nairobi SCCCOMM/E5578/2022. In the said suit, the appellant who was the claimant sued the respondent who was the respondent for the payment of liquidated damages of Kshs.789,523/=, punitive damages for unfair trade practices, interests at court rate and costs of the suit. This was refund of a deposit paid by the appellant pursuant to a contract for construction of a house in Kitengela. 2. In her statement of claim dated 14th September 2022, the appellant stated that she entered into an agreement with the respondent on 13th November 2018 for the respondent to construct a house in Kitengela and the appellant to pay for the construction. Pursuant to the said agreement, the appellant paid a deposit of Kshs.700,000/= to the respondent but the respondent failed to construct the house as agreed by the parties. 3. The appellant stated further that on 14th March 2020, the parties agreed to rescind the construction contract and that the respondent would refund the Kshs. 700,000/= by 28th August 2020. That the respondent materially breached the refund agreement by issuing a bad cheque that was returned unpaid on 7th December 2020 hence the claim. 4. The respondent filed a response to the statement of claim together with a preliminary objection dated 22nd November 2022 impugning the jurisdiction of the court to hear the matter. In its ruling dated 13th January 2023, the trail court upheld the preliminary objection and struck out the appellant’s claim. 5. The appellant being aggrieved by the said ruling lodged this appeal vide a Memorandum of Appeal dated 8th February 2023 setting out the following grounds: 6. *The learned trial adjudicator erred in law by failing to appreciate that the counterclaim raised by the respondent was a permissive counterclaim governed by Rule 14 of the Small Claims Court Rules 2019.* 7. *The learned trial adjudicator erred in law by allowing a preliminary point on a disputed fact contravening the principle set in* ***Mukisa Biscuit Manufacturers Ltd v West End Distributors Ltd [1969] E. A. 696.*** 8. *The learned trial adjudicator erred in law by finding that it lacks the jurisdiction and control of its procedures with adherence to the principle of natural justice in determination of matters and handle a permissive counterclaim contrary to section 17 of the Small Claims Court Act, 2020.* 9. The appellant urged the court to set aside the ruling delivered on 13th January 2023 together with all consequential orders and that the trial court be directed to hear and determine the claim to conclusion. 10. The appeal was canvassed by way of written submissions. **Appellant’s Submissions** 1. The appellant’s submissions dated 31st December 2023 were filed by the firm of Harry Karanja & Company Advocates. Counsel for the appellant identified one issue for determination thus: whether the trial court erred in law by allowing the preliminary objection. 2. Counsel submitted that the trial court erred in law by allowing a preliminary objection that was based on contested facts contrary to the law. He placed reliance on the case of **Margaret Njeri Gitau v Julius Mburu Gitau & 2 others [2022] eKLR** where the court pronounced itself as to what amounts to a preliminary objection in the following terms: *“It is not in doubt that a preliminary objection raise a pure point of law, which is argued on the assumption that all facts pleaded by the other side are correct. However, it cannot be raised if any facts have to be ascertained from elsewhere or if the court is called upon to to exercise judicial discretion. The court will also take into account that the preliminary objection must steme from the pleadings and raises pure point of law, and should not deal with disputed facts nor should it derive its foundation from factual information. See the case of Oraro vs Mbaja (2005) 1 KLR 141 where it was held that:* *“Anything that purports to be a preliminary objection must not deal with disputed facts and it must not derive its foundation from factual information which stands to be tested by rules of evidence.”* 1. The appellant submitted that her claim was based on an agreement for refund of Kshs.700,000/= which the respondent had agreed to refund after failing to undertake the construction while the respondent’s counterclaim was based on a different cause of action, an alleged breach of construction contract worth Kshs.10,800,000/= by the appellant. 2. Counsel further submitted that even though the respondent had counterclaimed for Kshs.10,100,000/= being what it alleged to be the remaining balance of the contract price, the appellant had by her response to counterclaim dated 21st November 2022 denied having agreed to pay a deposit of Kshs.1,080,000/= for the construction works to begin and further denied that the contract agreement value was Kshs.10,800,000/=. He therefore submitted that the preliminary objection was raised based on disputed facts contrary to the law. That the so called preliminary objection required further probing of evidence to ascertain the claims by the parties. 3. Counsel for the appellant further submitted that the trial court ought to have flagged the respondent’s counterclaim for what it was; a ploy to delay if not defeat justice. He argued that filing a counterclaim which is beyong the pecuniary jurisdiction and subsequently filing a preliminary objection based on it cannot be anything else but a mischievous plot to defeat the course of justice. He urged that it is the counterclaim that ought to have been struck out as it was filed in a court without the requisite pecuniary jurisdiction. Counsel placed reliance on Rule 14 of the Small Claims Court Rules 2019 which gives a party having a counterclaim exceeding the small claims’ court’s jurisdiction three options: the first is to abandon the counterclaim, the second to abandon the excess sum (the amount over and above Kshs. 1,000,000/=) and lastly, to file a separate suit in a magistrate’s court. counsel concluded by submitting that had the trial court correctly applied Rule 14(1) of the Small Claims Court Rules, 2019, it would not have arrived at the decision that it did. 4. She therefore urged the court to overturn the trial court’s determination and direct that the suit be heard and determined on its merit. **Respondent’s Submissions** 1. The respondent filed its submissions through the law firm of Okoth Okwemba S. M. & Associates Advocates. The same are dated 12th March 2024. They also identified one issue for determination being; whether the Small Claims Court was right in dismissing the appellant’s claim for want of pecuniary jurisdiction. 2. Counsel submitted that Order 3 Rule 4 of the Civil Procedure Rules provides in part that: “Every suit shall include the whole of the claim which the plaintiff is entitled to make in respect of the cause of action; but a plaintiff may relinquish any portion of his claim.” Counsel further argued that the appellant made a claim for refund of a payment she made on a construction contract valued at Kshs. 10,800,000/= and that she maneuvered her claim in a manner that carved out a portion of the contract that it would fit within the pecuniary jurisdiction of the Small Claims Court. That the respondent on the other hand had a claim against the appellant on the same contract and as such was entitled by the aforesaid legal provision to bring it before the court for determination. He submitted that in order for the issues to be determined, it followed that the same be filed before a court of competent jurisdiction which would be the Chief Magistrate’s Court as the Small Claims Court lacked jurisdiction to determine both claims. 3. Counsel further placed reliance on Order 3 Rule 5(2) of the Civil Procedure Rules which provides that: “Where the causes of action are united, the jurisdiction of the court as regards the suit shall depend on the amount or value of the aggregate of the subject matters at the date of instituting the suit.” The court was urged to find that the value of the subject matter herein exceeded the pecuniary limit of the jurisdiction of the Small Claims Court since the contract was for the sum of Kshs. 10,800,000/=. 4. Counsel further cited section 14 of the Small Claims Court Act which provides that a claimant cannot defeat the limit on jurisdiction by isolating small aspects of the subject matter/contract in order to bring her claim within the jurisdiction of the Small Claims Court. Counsel placed reliance on the Court of Appeal decision in case of **Phoenix of E. A. Assurance Company Limited v M. Thiga t/a Newspaper Service [2019] eKLR** where it stated as follows: *“We are not persuaded that that proposition by the respondent is correct in law. Jurisdiction is primordial in every suit. It has to be there when the suit is filed in the first place. If a suit is filed without jurisdiction, the only remedy is to withdraw it and file a compliant one in the court seized of jurisdiction. A suit filed devoid of jurisdiction is dead on arrival and cannot be remedied. Without jurisdiction, the court cannot confer jurisdiction to itself. The subordinate court could not therefore entertain the suit and allow only that part of the claim that was within its pecuniary jurisdiction.”* 1. The respondent urged this court to reject the appeal and dismiss it with costs. **Analysis and Determination** 1. I have carefully considered the grounds of appeal, evidence on record, cited authorities and the law. I have identified the sole issue for determination which is whether there was any merit in the notice of preliminary objection dated 22nd November 2022. 2. The appellant argued that any inquiry as to whether the amount involved was Kshs. 700,000/= or Kshs. 10,800,000/= was a question of fact that could not be determined through a preliminary objection. The appellant further submitted that the trial court erred by failing to find that her claim emanated from a contract for the refund of the sum of Kshs. 700,000/= as opposed to the respondent’s assertion that the claim was founded on the rescinded contract for construction of a house for the sum of Kshs. 10,800,000/=. 3. The respondent on its part argued that the appellant’s claim as well as the respondent’s counterclaim were both founded on the construction contract whose value was Kshs. 10,800,000/= hence the Small Claims Court had no jurisdiction. 4. The learned trial magistrate in her ruling observed that the amount claimed in the counterclaim exceeded the pecuniary jurisdiction of the Small Claims Court and therefore upheld the preliminary objection thereby striking out the suit. 5. From the evidence on record, it is not in dispute that the appellant and the respondent entered into an agreement for the construction of a house in Kitengela at a cost of Kshs. 10,800,000/=. It is also not in dispute that the appellant paid the respondent a sum of Kshs. 700,000/= by way of deposit. No other payment was made to the respondent. The respondent never undertook the construction of the house. The appellant in her statement of claim averred that the respondent had subsequently agreed to refund the said sum of Kshs. 700,000/= and even issued a cheque which was dishonoured by the bank upon presentation. The appellant’s claim was therefore for the said amount which according to her, the respondent had agreed to refund. 6. The respondent raised a counterclaim based on the first agreement, the construction agreement. The counterclaim is based on a totally different cause of action and seeks an interpretation of the construction agreement. This is quite different from what the claimant had pleaded in her statement of claim. 7. In determining this issue, the court is well guided by Rue 14(1) of the Small Claims Court Rules 2019 which provides as follows: *“14(1) A respondent who has a counterclaim exceeding one million shillings may: -* *a) Abandon that part of the counterclaim exceeding one million shillings,* *b) Pursue his or her counterclaim in the proceedings and recover the amount not exceeding one million shillings; or* *c) File a separate claim in the Magistrates’ Court to recover the whole of the amount counterclaim.* ***(2) A respondent who abandons that part of the counterclaim exceeding one million shillings shall state in his or her response that the amount in question is abandoned.*** *(Emphasis supplied).* 1. I have carefully examined the Statement of Claim dated 14th September 2022 which clearly shows that the appellant was claiming the sum of Kshs. 789,523/= being refund of the deposit plus interest which she averred that the respondent had agreed to pay. She was not seeking an interpretation of the earlier agreement for construction as she even pleaded that the same had been rescinded by the parties. She further pleaded that the respondent had already issued a cheque for the said amount but it was dishonoured by the bank. The respondent raised totally different issues in its counterclaim and is therefore caught by Rule 14(1) of the Small Claims Rules, 2019. 2. In my view, the respondent’s counterclaim is the one that was filed in a court that did not have jurisdiction. The respondent ought to have complied with Rule 14(1) of the Small Claims Court Rules by either abandoning that part of the its claim that exceeded Kshs. 1,000,000/=; or pursuing its counterclaim in the proceedings and recover the amount not exceeding one million shillings; or filing a separate claim in the Magistrates’ Court to recover the whole of the amount counterclaim.” 3. Instead of following the law as set out above, the respondent decided to file a notice of preliminary objection, which the trial court wrongfully upheld and stuck out the appellant’s suit. 4. Flowing from the foregoing, I find that the trial magistrate erred in law by upholding the respondent’s notice of preliminary objection. The same ought to have been rejected and dismissed. 5. Consequently, I do hereby allow the appeal and make the following orders: 6. ***The ruling of the learned trial magistrate/adjudicator is hereby set aside in its entirety and substituted with an order dismissing the respondent’s notice of preliminary objection dated 22nd November 2022 with costs.*** 7. ***The matter is hereby remitted back to the Small Claims Court for hearing and determination on merit. For the avoidance of doubt, the respondent’s counterclaim shall be dealt with in accordance with Rule 14(1) of the Small Claims Rules 2019.*** 8. ***The appellant shall have the costs of the appeal.*** ***Dated, signed, delivered virtually via Microsoft teams and uploaded to the Case Tracking System this 11th day of June 2026.*** **DAVID MBURU** **JUDGE** **11/06/2026**