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Court of AppealPartially AllowedCivil Appeal No. 138 of 2009· [2013] KECA 505 (KLR)

Thika Coffee Mills v Mikiki Farmers Co-Op Society & another [2013] KECA 505 (KLR)

Court of Appeal of Kenya
26 June 2013
7,772 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
·~31 min to read original · ~4 min brief

The bottom line

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Kenya's Court of Appeal cut a coffee farmer society's award from Kshs 84.6M to Kshs 36.9M, confirming the miller was liable but slashing the damages.

What this practically means

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Executive summary

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This first appeal arose from a dispute between Thika Coffee Mills (a miller) and Mikiki Farmers Co-op Society, representing 4,000 small-scale coffee farmers in Embu. The Society delivered 4,242 bags of coffee to the miller under a 1997 agreement, of which only 218 bags reached the Coffee Board of Kenya for marketing. The High Court (Khaminwa, J.) found a principal-agent relationship, held the miller liable for detaining the coffee for four years, and awarded the Society Kshs. 84,588,005.30, comprising Kshs. 77,588,005.30 for loss of value and Kshs. 7,000,000 exemplary damages, with interest. The Court of Appeal (Visram, Koome & Otieno-Odek, JJ.A.) revisited the case afresh. It upheld the finding of an agency relationship founded on the 1st agreement, and held that under privity of contract and estoppel the miller, not the Coffee Board, bore responsibility for transporting and delivering the milled coffee notwithstanding the Board's statutory obligation. The Court found the Society had mitigated its loss through correspondence while the miller delayed four years. It upheld the reliance on the 2nd valuation report but held the trial judge erred in treating unchallenged accounts as admitted and in finding the sale proceeds to be Kshs. 1,342,229.20 rather than the evidenced Kshs. 1,281,354.95. The exemplary damages award was set aside as based on extraneous matters and contrary to the restitutive purpose of contract damages. The Court also found interest had been charged twice, since the valuation report already embedded interest of Kshs. 53,926,925.31. The High Court judgment was set aside and substituted with judgment for Kshs. 36,910,694.49 with interest at court rates from 10th June 1999; the appeal against the Coffee Board was dismissed with costs of the appeal to the respondents.

Key legal issues

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01

Nature of the relationship between the parties

Holding

The relationship was one of principal and agent arising from the 1st agreement; the appellant was estopped from denying its duty to transport and deliver the milled coffee to the Coffee Board.

Reasoning

The court construed the 1st agreement objectively, noting its transport services, Commission Agency and Management Agency provisions, including the duty to keep records of all coffee delivered. Performance of the contract by the appellant in transporting and delivering 218 bags evidenced acceptance of the agency role, giving rise to estoppel.

p. 6
02

Responsibility for transporting the milled coffee

Holding

Liability for delay in delivery rests with the appellant, not the Coffee Board, on account of privity of contract and estoppel, notwithstanding the Board's statutory obligation under the repealed Coffee Act.

Reasoning

The 2nd respondent was not party to the 1st agreement. Despite the Rule 21(1) of the Coffee (Mills, Milling and Management) Rules 1994 placing a transport obligation on the Board, privity of contract meant the Board owed no contractual duty to collect the 1st respondent's coffee. The 2nd agreement of 4th August 1998 was not retroactive and did not amend the 1st agreement.

p. 7
03

Mitigation of loss

Holding

Both parties were under a duty to mitigate; the 1st respondent did what it could through correspondence, while the appellant, in possession of the coffee, delayed mitigation for four years and is liable for the deterioration.

Reasoning

The 1st respondent repeatedly instructed the appellant to mill and deliver the coffee and had no physical possession, so its mitigation options were limited. The appellant, being in possession, ought to have delivered the coffee or returned it; instead it moved for conservatory orders only in 2002.

p. 8
04

Whether special damages had to be pleaded where accounts were taken

Holding

A claim for accounts and loss was pleaded; the amount found due on taking account need not be separately pleaded as special damages, and the court would not allow a wrong without a remedy.

Reasoning

The plaint pleaded an order for accounts and loss from breach. The trial judge distinguished the special-damages authorities (tort-based or otherwise inapplicable). The Court held equity would not allow a wrong without remedy and the appellant ought to have foreseen the deterioration of the coffee from withholding it for four years.

p. 10
05

Duty of the court where accounts are unchallenged

Holding

It is a misdirection to deem unchallenged accounts admitted; the court must itself verify the accounts and certify the amount due.

Reasoning

Relying on Order 20(4) of the Civil Procedure Act, the court held that the trial judge erred in treating the unchallenged 2nd valuation report as automatically admitted; the court must ascertain the correct accounts between the parties.

p. 11
06

Exemplary damages for breach of contract

Holding

The award of Kshs. 7,000,000 exemplary damages was set aside; the trial judge relied on an extraneous matter not canvassed by the parties and the figure was unexplained.

Reasoning

Remedies for breach of contract restitute rather than enrich. The trial judge's finding that the appellant detained the coffee to gain marketing advantage was based on evidence not canvassed before it, and no basis for the quantum was stated.

p. 12
07

Double charging of interest

Holding

The judgment sum included interest of Kshs. 53,926,925.31 embedded in the 2nd valuation report; awarding interest from date of filing suit amounted to charging interest twice, so the embedded interest had to be deducted.

Reasoning

Following Salim & Another v Kikava, the court held interest is discretionary and must be exercised judicially. Since the valuation report already included interest for 1st July 1998 to 28th February 2005, further interest from filing suit duplicated it. However, interest from filing suit was still justified on the principal since the coffee had been delivered and demand for account made in 1998.

p. 12

Legal principles established

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  • A court is not bound to accept unchallenged accounts or valuation figures; it remains the duty of the court to verify and determine the accuracy and probative value of accounts tendered to it.
  • Interest should only be awarded from the date of filing suit where the amount claimed had actually been expended or incurred at the date of filing suit.
  • Punitive or exemplary damages should be awarded sparingly and judiciously, and remedies for breach of contract are geared to recompense and not to enrich.
  • It is dangerous for a court to canvass its own matters and rely on evidence not canvassed by the parties.
  • A court of law cannot re-write a contract between the parties; parties are bound by the terms of their contract unless coercion, fraud or undue influence are pleaded and proved.

Court orders

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  1. 1.The judgment of the High Court delivered on 30th April, 2008 awarding the 1st respondent Kshs. 84,588,005.30 is set aside
  2. 2.Judgment is substituted for the 1st respondent against the appellant in the sum of Kshs. 36,910,694.49 with interest at court rates from the date of filing the suit (10th June 1999)
  3. 3.The award of Kshs. 7,000,000 exemplary damages is set aside
  4. 4.The appeal against the 2nd respondent is dismissed
  5. 5.The appellant shall pay the costs of the appeal to the respondents
On appeal from
High Court of Kenya at Embu
H.C.C.C No. 28 of 2006
Jurisdiction invoked
First appeal to the Court of Appeal under the Appellate jurisdiction statute (judgment does not cite the specific provision)

Key timeline

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Practical implications

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Frequently asked questions

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Cite this brief

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Cite this brief

Caselaw, "Thika Coffee Mills v Mikiki Farmers Co-Op Society & another [2013] KECA 505 (KLR)", Case Analysis (2013). Civil Appeal No. 138 of 2009. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2013/505/eng@2013-06-26

Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.