William Muchiri Kabagi v Farhan Motors Limited

retain both the vehicle and the funds paid as the agreement did not provide for forfeiture of the funds, and as the same would amount to unjust enrichment. 5. The Claimant prayed for judgment in the sum of Kshs. 698,500 from the Respondent being a refund of the amount paid to the Respondent as deposit and instalments. 6. The Respondent filed a Statement of Defence and Counterclaim dated 23rd September 2024 whereby they prayed that judgment be entered against the Claimant for Kshs. 515,000 being the outstanding suit motor vehicle purchase price, Kshs. 165,000 being penalties from 23rd September 2023 to 23rd July 2024, Kshs. 1,130,000 being the total outstanding balance of the suit motor vehicle, Kshs. 450,000 for legal fees incurred whilst securing the release of the suit motor vehicle, interest on the purchase price of the motor vehicle and legal fees from date of filing suit until payment in full, costs of the suit with interest thereon, and any other remedy that the court deemed fit to award. 7. This suit proceeded on the basis of documents and judgment delivered on 30th October 2024. Judgment was entered in favour of the Claimant against the Respondent for Kshs. 350,000/= being the estimated value of the vehicle as at the time of repossession. The Respondent’s Counter-claim was dismissed. Each party was o bear its own costs. 8. Being dissatisfied with the Judgment, the Appellant filed this appeal through the Memorandum of Appeal dated 29th November 2024 on grounds that; a. The learned trial magistrate proceeded on the wrong principles of law by declining to award costs to the Appellant who was the successful party in the suit. b. That the learned trial magistrate misdirected himself on provisions of Section 33 and 33 (3) (a) of the Small Claims Court Act in failing to award costs of the suit to the Appellant who was the successful party. c. That the learned trial magistrate in deciding that each party shall bear its own costs erred in law by failing to follow the well established principle that costs follow the event. 9. The Appellant prayed for orders that the appeal be allowed and that costs of the appeal be borne by the Respondent. 10. The Respondent then filed a Notice of Cross Appeal dated 14th April 2025 that; a. The learned magistrate erred in fact and law in re-writing the agreement between the parties in clear contravention of well established principles prohibiting courts from doing so. b. In finding that the contract between the parties was unconscionable for the reason that the Respondent was not given an opportunity for redemption. c. In finding that the Respondent’s consumer protection rights were denied by the Appellant upon the sale of the suit motor vehicle KDH 262S. d. The court erred in finding that the Appellant’s counterclaim was unenforceable for the reason that the counterclaim was based on unconscionable contract. e. In considering extraneous factors that were neither pleaded or evidence adduced to that effect in coming up with his decision. f. In forcing the parties to proceed under Section 30 of the Small Claims Court Act despite the fact that the Respondent was ready to proceed viva voce and lead evidence in support of its case. https://new.kenyalaw.org/akn/ke/judgment/kehc/2025/19554/eng@2025-11-27 2

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g. In totally misdirecting himself in the evaluation of the evidence produced before him and arrived at a wrong decision thereby occasioning a miscarriage of justice, and that the decision was against the weight of the evidence tendered. 11. The Respondent prayed for orders that the cross appeal be allowed, that judgment of the Small Claims Court delivered on 30th October 2024 and subsequent decree be set aside, that the counterclaim by the Respondent in the Small Claims Court succeeds and allowed as prayed, and that costs of the appeal, the cross appeal and those of the counterclaim be provided for. 12. In opposition to the Notice of Cross Appeal, the Appellant filed a Notice of Preliminary Objection dated 16th April 2025 that the Notice of Cross Appeal is time barred by dint of the court order issued on 16th December 2024 in HCCA No. 410 of 2024. 13. The appeal, cross appeal and preliminary objection were canvassed by way of written submissions. The Appellant in their submissions argued that under Section 38 of the Small Claims Court Act, appeals from the Small Claims Court are limited to matters of law only. That costs under the Act are governed by Section 33 of the Act which states that the court may award costs to the successful party in any proceedings and that in any other case parties shall bear their respective costs of the proceedings. 14. That the Appellant was the successful party and therefore entitled to costs, and that the Respondent’s counterclaim having been dismissed, the Appellant was equally entitled to costs for dismissal of the counterclaim. The Appellant submitted that from the wording of Section 33 (1) and (2), the award of costs was not discretionary as guided by the holding in Chadwick Okumu v Capital Markets Authority (2018) eKLR and Omoke v Tamarind Management Ltd (Civil Appeal 180 of 2022) [2023] KEHC 17525 (KLR) (27 April 2023) (Judgment). 15. The Appellant submitted on the preliminary objection that the Respondent filed the cross appeal pursuant to a court order in HCCA No. E410 of 2025, Farhan Motors Limited v William Muchiri Kabagi and that the court in allowing the application for stay of execution pending appeal filed by the Respondent gave directions. That the Respondent partially complied with the orders by depositing Kshs. 350,000 in court by close of business 17th December 2024 but filed the cross appeal 120 days later instead of within 60 days. 16. That the cross appellant did not seek leave of the court either to file the cross appeal out of time or to extend the time for filing the cross appeal, and that the cross appeal was filed after the Appellant had already filed the Record of Appeal and served the cross appellant. It is on this basis that the Appellant urged the court to dismiss the cross appeal. 17. The Appellant further submitted on the cross appeal and without prejudice to their position on the preliminary objection that, appeals from the Small Claims Court to the High Court are restricted to matters of law by Section 38 of the Small Claims Court Act. That all the grounds in the cross appeal save for grounds 6 and 8 raise issues of fact which cannot be canvassed before this court and ought to be dismissed from the onset. 18. That on ground 6, the Respondent was ready to proceed viva voce when the court directed parties to proceed by way of documents only. That the court records for 15th October 2024 show that the parties did not raise an objection to the court’s directions and that both parties proceeded to file their submissions in compliance with the directions. That the said directions affected both parties equally and that the appeal on that ground is an afterthought aimed at denying the Appellant fruits of the judgment. https://new.kenyalaw.org/akn/ke/judgment/kehc/2025/19554/eng@2025-11-27 3

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19. The Respondent in their submissions dated 23rd June 2025 on whether the Notice of Preliminary Objection is merited relied on the locus classicus case of Mukisa Biscuit Manufacturing Co. Ltd v West End Distributors Ltd (1969) EA 696 and argued that the Appellant talks of an order dated 16th December 2024 in HCCA E410 of 2024 but the same is neither attached nor brought to the attention of this court. That it is on this basis alone that the preliminary objection fails. 20. That additionally, there was no penal notice given if the Respondent failed to file the cross appeal within the given timeline of 60 days and that it therefore cannot be said that the cross appeal was time barred. That filing of the cross appeal was pursuant to discretion of the court and that such matters of discretion are not subjected to preliminary objection. 21. The Respondent argued that Article 159 of the Constitution behooves this court to administer justice without undue regard to procedural technicalities. That filing a cross appeal out of time before final determination of the matter and before final directions on disposal of the appeal is a matter of technical nature but does not go to the substance of the matter. 22. That the Respondent should therefore be allowed to ventilate the cross appeal to its logical conclusion. That moreover, the Appellant has not made any prayer in the preliminary objection and that the court cannot grant that which has not been asked for. That the preliminary objection should therefore be dismissed with costs. 23. On whether the Small Claims Court correctly analyzed evidence in relation to the relevant laws for a just decision, the Respondent submitted that it is evident from the proceedings that the court forced parties to proceed with the suit vide written submissions despite the Respondent being ready to proceed viva voce. That this was procedural on the part of the court because Section 30 of the Small Claims Act provides that a matter can only proceed on the basis of documents only if the same is agreeable by the parties. 24. The Respondent further submitted that the court correctly found that there was a written agreement between the parties dated 23rd June 2022. That a look at the evidence presented, the Appellant was not under undue pressure at any point to accept terms in the agreement and he did not at any point allege that the agreement was entered into through fraud or that the said contract was unconscionable. 25. That it was the Appellant who walked into the Respondent’s show room and sought to engage the Respondent in purchase of the subject motor vehicle. The Respondent stated that the court properly found that the right procedure was followed for repossession of the suit motor vehicle and that Clause 12.1 of the sale agreement provided for the procedure for repossession. 26. The Respondent relied on the holding in the case of Pius Kimaiyo Langat v Co-operative Bank of Kenya Limited (2017) eKLR and submitted that the lower court in finding that the Appellant was not given an option on redemption, it was rewriting the agreement of the parties. 27. That the lower court in finding that the Appellant’s consumer protection rights were breached, it did not bother to elaborate which rights were violated. That the right of redemption is only offered and/ or provided for under the Movable Property Security Rights Act and that the right only accrues upon execution of the security agreement. The Respondent stated that the agreement between the Appellant and the Respondent was a sale agreement of the suit motor vehicle and not a security agreement. 28. The Respondent submitted that the lower court made a finding that the motor vehicle depreciated in value thus awarded the Respondent Kshs. 350,000 to cater for the depreciated value. That this issue was never pleaded and that a court can only award what has been pleaded. According to the Respondent, https://new.kenyalaw.org/akn/ke/judgment/kehc/2025/19554/eng@2025-11-27 4

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there was no valuation report produced as evidence and that any award by court has to be based on reasonable evidence. 29. The Respondent contended that the Appellant’s appeal was purely on costs and that costs awarded are discretional. That the lower court was alive to Section 33 of the Small Claims Court Act in its decision of each party to bear their own costs. That the Appellant did not fully succeed in its claim against the Respondent and the lower court was therefore well within its right in its directions on costs Analysis 30. The role of the first appellate court to reexamine and to reevaluate evidence to come up with its own findings was set out in Selle v Associated Motor Boat Co. (1968) E.A 123 as follows: “ … Briefly put they are that this court must reconsider the evidence, evaluate it itself and draw its own conclusions though it should always bear in mind that it has neither seen nor heard the witnesses and should make due allowance in this respect …” 31. 32. I have considered the Record of Appeal dated 13th February 2025, the notice of cross appeal dated 14th April 2025, the Notice of Preliminary Objection dated 16th April 2025 and submissions by the parties. The issues for determination are: a. Whether the Notice of Preliminary Objection is merited b. Whether the Appellant was entitled to costs c. Whether the cross appeal is merited d. What orders on costs should issue On the first issue, the parameters for consideration of a Preliminary Objection are now well settled. A Preliminary Objection must only raise issues of law. In the case of Mukisa Biscuit Manufacturing Co. Ltd vs. West End Distributors Ltd [1969] EA 696. At page 700, Law, JA stated: “ A Preliminary Objection consists of a point of law which has been pleaded, or which arises by clear implication out of pleadings and which if argued as a preliminary point may dispose of the suit. Examples are an objection to the Jurisdiction of the Court or a plea of limitation, or a submission that the parties are bound by the contract giving rise to the suit to refer the dispute to arbitration.” At page 701, Sir Charles Newbold, P added: “ A Preliminary Objection is in the nature of what used to be a demurrer. It raises a pure point of law which is usually on the assumption that all the facts pleaded by the other side are correct. It cannot be raised if any fact has to be ascertained or if what is sought is the exercise of judicial discretion…” 33. This point was underscored by J.B. Ojwang, J (as he then was) in the case of Oraro v Mbaja [2005] eKLR where the court held as follows: “ …I think the principle is abundantly clear. A “preliminary objection”, correctly understood, is now well identified as, and declared to be a point of law which must not be blurred with factual details liable to be contested and in any event, to be proved through the processes of evidence. Any assertion which claims to be a preliminary objection, and yet it bears factual https://new.kenyalaw.org/akn/ke/judgment/kehc/2025/19554/eng@2025-11-27 5

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aspects calling for proof, or seeks to adduce evidence for its authentication, is not, as a matter of legal principle, a true preliminary objection which the Court should allow to proceed…” 34. The Appellant in the Preliminary Objection submits that the cross-appeal was filed out of time and without leave of court hence it ought to be dismissed. The orders on filing of the cross appeal were issued in Mombasa HCCA No. 410 of 2024. It is stated that I the said matter, the Respondent had filed an appeal against the Appellant in respect to the judgment of the court subject to this appeal. It is important to note that the appeal in HCCA No. 140 of 2024 was filed before the Appellant filed appeal. 35. For purposes of order and to avoid issuing of conflicting judgments, the Respondent herein who was the Appellant in the matter was directed to file a cross-appeal in this matter. Though the proceedings and the court order were not filed, it is discerned from the pleadings in this appeal that the cross appeal was to be filed within 60 days which order was not complied with. 36. I do concur with the Respondent that this does not amount to a point of law as it was a matter of discretion by the court on the time frame when the cross appeal ought to have been filed. Noncompliance with the court’s directions is a matter of fact not of law. On this ground, the Preliminary Objection fails. 37. On the appeal by the Appellant, it is argued that the court erred in law in failing to award costs to the Appellant in the lower court despite judgment being entered in his favour. Section 27 of the Civil Procedure Act o costs provides as follows; “ (1) 38. 39. Subject to such conditions and limitations as may be prescribed, and to the provisions of any law for the time being in force, the costs of and incidental to all suits shall be in the discretion of the court or judge, and the court or judge shall have full power to determine by whom and out of what property and to what extent such costs are to be paid, and to give all necessary directions for the purposes aforesaid; and the fact that the court or judge has no jurisdiction to try the suit shall be no bar to the exercise of those powers: Provided that the costs of any action, cause or other matter or issue shall follow the event unless the court or judge shall for good reason otherwise order.” Further, section 33 (1) and (3) of the Small Claims Act provides as follows; 1. The Court may award costs to the successful party in any proceedings. 2. ……………………………………………………………………… 3. Without prejudice to subsections (1) and (2), the Court may award to a successful party disbursements incurred on account of the proceedings. From the above sections of the law, the award of costs by the court is discretionary. In Farah Awad Gullet v CMC Motors Group Ltd [2017] eKLR the Court of Appeal held as follows; “ …it is our finding that the position in law is that costs are at the discretion of the Court seized of the matter with the usual caveat being that such discretion should be exercised judiciously, meaning, without caprice or whim and on sound reasoning.” https://new.kenyalaw.org/akn/ke/judgment/kehc/2025/19554/eng@2025-11-27 6

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40. The trial court on costs stated as follows; “ The spirit of the Small Claims Court Act been to facilitate access to justice and not create hardships upon parties, the Court is guided by Sections 3(3)(a) and 33 of the Act to decree that each party bears their own costs.” 41. In exercise of the courts discretion by not awarding costs to the Appellant, the trial court gave good reasons as herein above. Further, the fact that the claim was not entirely successful, I find no fault on the part of the trial court in directing that each party to bear its own costs. The Appellant’s appeal fails. 42. On whether the cross appeal has merits, it is a fact that there was a sale of motor vehicle agreement between the parties. The Appellant who was the purchaser on hire purchase basis faced challenges in payment of the instalments. Further, the vehicle was detained by the police over a criminal issue. Thereafter, the vehicle was repossessed by the Respondent and sold. The court did not fault the repossession process as it was a court process. 43. The Respondent challenged the award of Kshs. 350,000 to the Appellant, being the estimated value of the vehicle as at the time of repossession. Further, the Respondent faulted the finding of the court that the agreement was unconscionable and the court proceeded to rewrite the agreement. The trial court on the matter held as follows; “ 10. Looking at the evidence placed on record, there is no doubt that there was the agreement between the parties. This is so especially when the same was claimed by the Respondent and conceded to by the Respondent. In Margaret Njeri Muiruri v Bank of Baroda (Kenya) Limited (2014) eKLR it was stated that: “It is not for the Court to rewrite a contract for the parties. As this Court held in National Bank of Kenya Ltd vs Pipeplastic Sankolit (K) Ltd. Civil Appeal No. 95 of 1999 “a Court of law cannot rewrite a contract with regard to interest as the parties are bound by the terms of their contract.” Nevertheless, courts have never been shy to interfere with or refuse to enforce contracts which are unconscionable, unfair or oppressive due to the/a procedural abuse during formation of the meaningful choice for the other party. An unconscionable contract is one that is extremely unfair. Substantive unconscionability is that which results from actual contract terms that are unduly harsh, commercially unreasonable, and grossly unfair given the existing circumstances of the case.” 44. I have perused through the documentary evidence on record. The Appellant had paid a total of Kshs.698,000/= before the vehicle was repossessed. The Appellant claimed the refund from the Respondent. On the other hand, the Respondent claimed Kshs. 515,000/= being the outstanding purchase price, Kshs. 165,000/= being penalties, Kshs. 1,130,000/= being losses incurred and Kshs. 450,000/= being legal fees. 45. In the case of Red Gems Investment Group Limited v Irene Chepkoech Chumo [2019] eKLR, the court stated as follows; “ The general principle is that parties are bound by their agreement and the court will not intervene unless, coercion, fraud, undue influence or other facts that may vitiate such an agreement are pleaded and proved. I therefore agree with the respondent that in a proper case the court may vitiate a contract where the terms are unfair or unduly harsh. This point was emphasized by the Court of Appeal in Margaret Margaret Njeri Muiruri v Bank of Baroda https://new.kenyalaw.org/akn/ke/judgment/kehc/2025/19554/eng@2025-11-27 7

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(Kenya) Limited NRB CA Civil Appeal No. 282 of 2004 [2014] eKLR where it observed that: 36. Nevertheless, courts have never been shy to interfere with or refuse to enforce contracts which are unconscionable, unfair or oppressive due to procedural abuse during formation of the contract, or due to contract terms that are unreasonably favourable to one party and would preclude meaningful choice for the other party. An unconscionable contract is one that is extremely unfair. Substantive unconscionability is that which results from actual contract terms that are unduly harsh, commercially unreasonable, and grossly unfair given the existing circumstances of the case (See Black’s Law Dictionary, 9th Edition, Gardner, Ed.). 46. I do agree with the trial court that the vehicle having been repossessed, asking for the balance, penalties, losses incurred and legal fees would amount to harsh terms of the contract. By this alone, the cross appeal fails. 47. The Preliminary Objection, appeal and cross appeal having found to have no merits, each party is to bear its own costs. Determination 48. The upshot of the foregoing is that the court renders itself as hereunder; i. The appeal, cross appeal and the Preliminary Objection dated 16/04/2025 lacks merits and are hereby dismissed. ii. Each party to bear its own costs. It is so ordered. DELIVERED, DATED AND SIGNED AT MOMBASA ON THIS 27TH DAY OF NOVEMBER, 2025. ………………. HON. F. WANGARI JUDGE In the presence of: N/A by the Applicants Mr. Salim Advocate for the Respondent Ms. Salwa, Court Assistant https://new.kenyalaw.org/akn/ke/judgment/kehc/2025/19554/eng@2025-11-27 8

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