Office Time Limited (burotime) v Keviba Company Limited

4. This sum represented the balance of a refundable rent security deposit after deducting rent for October 2023, following the termination of a lease agreement between the parties. 5. The parties had entered into a lease agreement on 14th November 2019 for a showroom for a term of 5 years and 3 months. 6. The Appellant vacated the premises in November 2023 after issuing a notice of intent to terminate the lease in September 2023. 7. The Respondent filed a response and a counterclaim dated 23rd May 2025, seeking Kshs. 168,887 for alleged unpaid rent, tax liabilities, and restoration costs. 8. Upon evaluating the evidence, the learned Adjudicator decided that the Small Claims Court lacked the requisite jurisdiction. The trial court held that although the claim was framed as a monetary one for "money held and received," it substantially revolved around issues arising from a lease relationship and was therefore inseparable from matters relating to possession and occupation of land. Consequently, the trial court struck out both the claim and counterclaim suo motu. The Appellant’s Case and Submissions 9. The Appellant filed written submissions dated 14th March 2026. 10. The Appellant’s case is premised on the ground that the learned Adjudicator misinterpreted Sections 12(1)(b) and 13(5) of the Small Claims Court Act to wrongly exclude the claim as a land dispute when the lease had already terminated and the premises vacated. 11. In support of its case, the Appellant invites this Court to consider the decision in Muhanda v LP Holdings Ltd (Civil Appeal E256 of 2023) KEHC 393 (KLR), where the High Court held that a claim for a rent deposit falls squarely within the provisions of Section 12(1)(b) of the Act as a contract for money held and received. The Appellant further relies on In the Matter of the Interim Independent Electoral Commission KESC 1 (KLR) to argue that jurisdiction must flow from the Constitution or legislation. 12. The Appellant listed four principal grounds of appeal: i. The learned Adjudicator erred in law and fact by misinterpreting Sections 12(1)(b) and 13(5) of the Act to hold the claim was ancillary to a lease agreement and therefore excluded. ii. The learned Adjudicator erred by failing to consider the merits of the claim, including the undisputed receipt of the Kshs. 1,050,000 deposit. iii. The learned Adjudicator erred by erroneously ousting jurisdiction under the Landlord and Tenant (Shops, Hotels and Catering Establishments) Act. iv. The learned Adjudicator erred by raising and determining jurisdiction suo motu without inviting submissions from the parties, thereby violating principles of natural justice and Article 50 of the Constitution. The Respondent’s Case and Submissions 13. The Respondent filed written submissions dated 10th April 2026. The Respondent contends that the trial court properly held that the claim for a rent security deposit was ancillary to and inseparable from the lease agreement. https://new.kenyalaw.org/akn/ke/judgment/kehc/2026/11570/eng@2026-07-23 2

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14. It is the Respondent's submission that a lease constitutes an interest in land, and therefore the dispute was correctly characterized as one relating to possession and occupation of land upon termination of the lease. The Respondent maintains that the trial court acted properly and judiciously in declining jurisdiction. 15. The Respondent relies on the locus classicus case of Owners of the Motor Vessel “Lilian S” v Caltex Oil Kenya Ltd (Civil Appeal 50 of 1989) [1989] KECA 48 (KLR) (17 November 1989), which establishes that "jurisdiction is everything" and without it, a court must down its tools. 16. The Respondent further cites Equity Bank Limited v Bruce Mutie Mutuku t/a Diani Tour and Travel [2016] eKLR for the proposition that a suit filed without jurisdiction is a nullity and the proper remedy is striking out the suit. Issues for Determination 17. Having considered the record, the grounds of appeal and the submissions filed, this court distils the following issues for determination: i. Whether the Small Claims Court had jurisdiction to hear and determine a claim for the refund of a rent security deposit. ii. Whether the learned Adjudicator erred by determining the issue of jurisdiction suo motu without affording the parties an opportunity to be heard. Determination Jurisdiction over Rent Deposit Refunds 18. The jurisdiction of the Small Claims Court is strictly governed by statute. Section 12(1)(b) of the Small Claims Court Act provides that the Court has jurisdiction to determine any civil claim relating to "a contract relating to money held and received." 19. Conversely, Section 13(5) of the Small Claims Court Act provides that a claim shall not be brought before the Court if it is upon a dispute over a title to or possession of land. 20. The learned Adjudicator erred in law by focusing on the historical origin of the money, the lease, rather than the true nature of the cause of action as presented. The court in Muhanda v LP Holdings Ltd (Civil Appeal E256 of 2023) KEHC 393 (KLR) opines that while a trial court may address itself to rent arrears, a claim for breach of contract relating to a rent deposit falls squarely within the provisions of Section 12(1)(b) of the Act, being a contract for money held and received. 21. In Catholic University of Eastern Africa v Tradebells Services Limited, Civil Appeal 083 of 2024, KEHC 19401 (KLR), the High Court further afirmed that once tenancy has expired, a claim for an outstanding rent deposit and unpaid invoices is no longer a "tenancy dispute" for a specialized tribunal like the Business Premises Rent Tribunal (BPRT). The same position is further elucidated in Bell Estate Agency Limited v Keneth Ochieng T/A Jenks Auctioneers, HCCA/E213/2025, KEHC 7346 (KLR) where the court ruled that the nature of a claim is determined by what the claimant is actually seeking at the time of filing, not the historical origin of the money. 22. The positions expressed in these cases, and consistently upheld in the High Court, contrast with position when rent and rent areas are the primary dispute. For example, the Court in Lisa Kristine Christoffersen v Kavneet Kaur Sehmi T/A The Random Shop, Civil Appeal E036 of 2022, KEHC 14035 (KLR) established the general principle that the Small Claims Court does not have jurisdiction https://new.kenyalaw.org/akn/ke/judgment/kehc/2026/11570/eng@2026-07-23 3

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to entertain matters involving rent and rent arrears, as these remain commercial disputes for the High Court or specialized tribunals. 23. In reviewing the facts that were before the Small Claims Court, it is apparent that the primary issue is the question of security deposits, as opposed to rent and rent arrears. As noted, in in Bell Estate Agency Limited v Keneth Ochieng T/A Jenks Auctioneers, HCCA/E213/2025, KEHC 7346 (KLR) (Supra), a cause of action is defined by the ultimate redress the litigant demands upon filing, irrespective of the financial origin of the disagreement. In Bell Estate although the money originated from a distress for rent, once the auctioneer collected the proceeds, the matter transformed from a rent dispute into a commercial debt recovery claim arising from a contract of agency. 24. In the present case, the dispute originated as a dispute between a former tenant and the tenant’s former landlord. The operative word here is the adjective “former” which is indicative that as at the filing, the two did not have a tenant- landlord relationship. As noted elsewhere in this judgement, once the tenancy ends, as it did in this case, the matter transforms into one of funds held and received. In the present case, the end of the tenancy before the filing of the matter made it a recoverable debt under ordinary contract law, placing it within the jurisdiction of the Small Claims Court under Section 12(1) (a) and (e) of the Act 25. To reiterate, the lease had already been terminated and the premises vacated. The matter had shifted from being a tenancy dispute to a simple commercial claim for debt recovery. The Appellant was not seeking possession of land, reinstatement of a lease, or the interpretation of lease terms, but the return of its own funds held by the Respondent. 26. Therefore, the Small Claims Court was fully clothed with jurisdiction to entertain the claim. On Judicial Discretion and Natural Justice 27. While the Small Claims Court manages its own flexible procedures per Section 17 of the Small Claims Court Act, it must do so within the bounds of fairness and natural justice. Rule 31 of the Small Claims Court Rules provides that the Court shall exercise its discretion while following the principles of natural justice. 28. The record confirms that the learned Adjudicator raised and disposed of the jurisdictional issue suo motu, without inviting the parties to make representations. The court in Prime Salt Works Ltd v Kenya Industrial Plastics Ltd [2001] 2 EA 528 stated that implicit in the concept of fair adjudication is the principle that no man shall be condemned unheard. This principle extends even to the dismissal of suits. 29. Furthermore, Article 50(1) of the Constitution of Kenya provides that every person has the right to have any dispute that can be resolved by the application of law decided in a fair and public hearing. The court in Evans Odhiambo Kidero & 4 Others v Ferdinand Ndungu Waititu & 4 Others [2014] eKLR explained that fair hearing incorporates the rule of audi alteram partem, hear the other side. 30. However, it is even more striking that in this case, the issue is not merely hearing the other side, but hearing both sides. The court refused to hear either and both of sides at the trial stage. By stroke of a pen, the Adjudicator denied both sides their right to be heard and to have their dispute resolved in open court. 31. By summarily striking out the suit without affording the parties a chance to ventilate the issue of jurisdiction, the trial court exercised its discretion capriciously and unreasonably, violating the Appellant’s constitutional rights. https://new.kenyalaw.org/akn/ke/judgment/kehc/2026/11570/eng@2026-07-23 4

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Conclusion and Orders 32. This court finds that this appeal is meritorious. The trial court’s decision to strike out the claim for want of jurisdiction was an error of law, and the procedure adopted was a violation of the rules of natural justice and the right to a fair hearing. 33. Consequently, this Court makes the following final orders: i. The Appeal is hereby allowed. ii. The Judgment and Decree issued by the learned Adjudicator Hon. T.K. Nambisia on 18th September 2025 in Nairobi SCCC No. E81627 of 2025 is hereby set aside in its entirety. iii. Nairobi SCCC No. E81627 of 2025 is hereby reinstated to its original position for hearing and determination on its merits before a different Adjudicator. iv. The costs shall lie in the cause. DATED, SIGNED AND DELIVERED AT NAIROBI ON THIS 23RD DAY OF JULY 2026. E.K OGOLA JUDGE In the presence of: M/s Ndunga holding brief Keser for the Appellant. M/s Gishenge the Respondent. Gisielle Muthoni - Court Assistant. https://new.kenyalaw.org/akn/ke/judgment/kehc/2026/11570/eng@2026-07-23 5

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