OFFICIAL RECEIVER & INTERIM LIQUIDATORS CONTINENTAL CREDIT FINANCE LIMITED vs DETO INVESTMENT COMPANY LIMITED [1999] KECA 171 (KLR)
The bottom line
#Kenya's Court of Appeal cut a lender's damages bill to the interest its own delay caused, confirming lenders must promptly enforce repayment undertakings.
What this practically means
#Executive summary
#Questions the Court framed
#The issues the Court set itself to decide, in its own words.
- 1.Whether the learned Judge erred in entering judgment against the appellant (defendant below) on the respondent's claim for breach of contract
- 2.What was the correct quantum of general damages for breach of contract arising from the failure to demand repayment from KNA and the auction sale of the maisonettes
- 3.Whether the learned Judge erred in law in dismissing the appellant's counterclaim for the unpaid loan and interest
- 4.Whether the respondent's cross-appeal should succeed
Key legal issues
#Liability of the appellant for breach of contract in failing to demand repayment from KNA
The learned Judge did not err in entering judgment against the appellant; the appellant's failure to demand repayment from KNA when it should have done so in November 1983, and its combination of the two loans, supported the finding of breach.
The respondent completed the maisonettes and by letter of 4th November 1983 requested the appellant to demand payment from KNA, which the appellant agreed to do but only did in 1989. The mortgage of 13th September 1983 did not cover the first loan of Kshs.1,275,000/= or interest thereon. KNA's unconditional undertaking was unaffected by the respondent's failure to fulfil pre-disbursement conditions, so the appellant's delay caused the accumulation of interest for which it was liable.
Quantum of general damages for breach of contract
General damages should be limited to the accumulated interest on the first loan not recoverable under the mortgage, assessed at Kshs.3,993,975/60 as at 15th June 1989 plus Kshs.1,000,000/= to the date of the April 1993 auction, totalling Kshs.4,993,975/60 with interest at court rates from 2nd April 1993.
The auction sale was found not to have been fraudulent, so the special damages formula in the Further Amended Plaint (difference between market value and auction price) could not be transposed onto general damages. The proper measure was the interest that accumulated because the appellant failed to timeously demand repayment from KNA, with an additional sum to account for the period up to the auction.
The appellant's counterclaim for the unpaid loan and interest
The appellant failed to establish its counterclaim and the appeal on that ground was dismissed.
On the court's analysis of the facts and law, the appellant could not sustain its claim for the balance of the unpaid loan and interest amounting to Kshs.10,600,000/=, given its own breach in failing to demand repayment from KNA and its treatment of the accounts.
Fraud as pleaded by the respondent
Fraud was not established at trial and that aspect of the plaint was dismissed; the appeal court proceeded on the basis of breach of contract only.
The learned Judge found fraud had not at all been established and dismissed that limb, so no special or general damages for fraud were awarded. The court noted the distinction between fraud-based special damages and general damages for breach when assessing quantum.
Legal principles established
#- Where a lender fails to demand repayment from a guarantor/insurer in accordance with its undertaking and instead combines loans and charges interest on the accumulated sum, the borrower's recoverable general damages are limited to the amount not recoverable under the mortgage, namely the accumulated interest on the loan that should have been repaid by the insurer.
- General damages for breach of contract are not necessarily the same amount as special damages that would have been awarded had fraud been established, and must be assessed on the court's own view of the loss suffered.
Court orders
#- 1.Judgment against the appellant upheld, but general damages reduced and substituted at Kshs.4,993,975/60 with interest thereon at court rates from 2nd April, 1993
- 2.The appellant's appeal on the dismissal of its counterclaim dismissed
- 3.The respondent's cross-appeal dismissed
- 4.Each party to bear its own costs
The bench
#One judgment of the whole court — no separate or dissenting opinions.
- On appeal from
- High Court of Kenya at Machakos
- H.C.C.C. No. 100 of 1994
- Jurisdiction invoked
- First appeal to the Court of Appeal under the Kenyan appellate framework (specific provision not stated in the judgment)
Relief refused
#Appellant's appeal against dismissal of its counterclaim for Kshs.10,600,000/=
The appellant did not establish its counterclaim on the facts and law
Respondent's cross-appeal
The court's assessment of the law and facts did not support it
Costs
Each party shall bear its own costs
Quotable passages
#Verbatim from the judgment, each located to the page it appears on in the official PDF — so these can be cited and checked directly.
We do not think that the learned Judge erred in entering judgment against the appellant except that the damages awarded should have been Kshs.4,993,975/60 with interest thereon at court rates from 2nd April, 1993, and it is so ordered.
the amount of general damages should be based on the amount that was not recoverable under the mortgage namely, all the interest that had accumulated on the loan of Kshs.1,275,000/=
we conclude that the appellant did not establish its counterclaim and the appellant's appeal on the ground that the learned Judge erred in law in dismissing the appellant's counterclaim, is dismissed and it is so ordered.
Having regard to the particular circumstances of this appeal and the cross appeal, each party shall bear its own costs.
Issues in the judgment
#The judgment is dated and delivered on 22nd October 1999 but the header/coram context and the appeal number reference 1998; no internal contradiction in substance, noted only for completeness of the record.
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "OFFICIAL RECEIVER & INTERIM LIQUIDATORS CONTINENTAL CREDIT FINANCE LIMITED vs DETO INVESTMENT COMPANY LIMITED [1999] KECA 171 (KLR)", Case Analysis (1999). Civil Appeal No. 126 of 1998. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/1999/171/eng@1999-10-22
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.