COTECNA INSPECTION S.A v HEMS GROUP TRADING COMPANY LIMITED [2007] KECA 354 (KLR)

The court re-evaluated the evidence as a first appellate court. The appellant's shifting positions - first claiming receipt of the IDF on 24 October 1994, then 21 October 1994, with no conclusive evidence of either - undermined its assertion that preshipment inspection was impossible. A Clean Report of Findings was necessary for the bank to pay under the letter of credit; issuing a false CRF without inspection recklessly enabled payment for substandard goods before the respondent could know their condition. Under the preshipment inspection contract the appellant owed duties of due diligence to third parties, and it could have stopped the transaction by issuing a non-negotiable Clean Report of Findings.

Causation evidence must show, on a balance of probabilities, that the defendant's breach, and not solely the act of another, caused the damage. The respondent, as importer in Kenya, could not know how payment was made in the USA; the appellant was best placed to explain. Its failure to adduce such evidence, coupled with its admission of a false CRF, satisfied the causation requirement.

Whether steps taken in mitigation are reasonable is a question of fact, with the burden on the defendant. The offer required acceptance of a 'final settlement' of all claims for a sum less than the loss already incurred and tied to uncertain proceeds from the exporter's claims against its own supplier. Rejecting it was reasonable. The cleaning of the beans, though costly, was a commendable attempt to salvage the consignment.

Special damages must be pleaded and strictly proved. The Odd Jobs principle allowing courts to decide unpleaded issues applies only to issues canvassed at trial, not to claims for special damages where the law is strict. Since the plaint was never amended to raise the amounts, the excess over the pleaded sums was disallowed.

Only loss flowing from the breach is recoverable. Railway transport was arranged before shipment and was a component of the costing that produced the allowed profit, so allowing it again would double-count. The extra purchase of soya beans in December 1994 predated both the CRF and the beans' arrival, so the appellant's acts could not have caused it. The shortfall figure conflated shortlanding with post-cleaning deficiency already accounted for in the profit computation.

The respondent took the overdraft to finance the transaction in the expectation that the deal's profit would clear it; the appellant's breach defeated that expectation, causing interest to accumulate. The court saw no fault in the superior court's allowance of this head.