Bawazir Glassworks Limited & another v Asea Brown Boweri Limited [2015] KECA 659 (KLR)
The bottom line
#Kenya's Court of Appeal confirmed that businesses must pay agreed interest rates and that buying a company means inheriting its debts.
What this practically means
#Executive summary
#Key legal issues
#Existence and enforceability of an agreed interest rate of 3% per month
The rate was agreed in the proforma invoice and endorsed by the 1st appellant; it is enforceable despite some invoices being ambiguous
The court found ample evidence that the initially agreed rate was 3% per month: the proforma invoice so stipulated and the 1st appellant confirmed the order by fax on 5th June 1999. Any ambiguity in later invoices is imputable to the appellants, who never enquired whether the rate was monthly or annual and never objected to the demand letters. The appeal on grounds 1, 4 and 5 was dismissed.
Whether the 3% per month rate was unconscionable or a penalty / liquidated damages
36% per annum is not unconscionable where agreed; the rate is not liquidated damages but contractual interest
Relying on Shah v Guilders International Bank Ltd, the court applied the rule that an agreed rate must be enforced unless illegal, unconscionable or fraudulent. The appellants had not paid even the principal years after supply, and promptly paying would have avoided the interest issue entirely. Liquidated damages were distinguished as sums designated at contract formation for a specific breach, which the interest clause was not.
Liability of the 2nd appellant for the 1st appellant's debt
The 2nd appellant is liable under its undertaking of 23rd June 2000 and under section 3(1) of the Transfer of Business Act as transferee of the business
The court rejected the plea of mistake, holding that a party making a firm written commitment is deemed to have exercised due diligence. Independently, the Transfer of Business Act renders a transferee liable for the transferor's business liabilities unless due notice under the Act has been given and become complete, which was not done. Joint and several liability against both appellants was therefore proper.
Quantum of indebtedness (ground 2)
The sum of US$95,796.41 was properly due: principal sums of US$57,500 and US$13,524 plus interest as pleaded
The breakdown was pleaded at paragraph 7 of the plaint and the principal sums were undisputed. The installation work was done by Burhani Engineers on behalf of the respondent under a contract directly between the 1st appellant and the respondent, so the installation fee and interest at 3% per month were properly payable given the appellants' delay in settling the installation charges.
Legal principles established
#- Where parties have fixed an interest rate by agreement, the court must enforce it unless it is illegal, unconscionable or fraudulent
- Under section 3(1) of the Transfer of Business Act, a transferee of a business is liable for liabilities incurred in the business by the transferor absent statutory notice
- Interest at 3% per month (36% per annum) on overdue commercial debts is not unconscionable
Court orders
#- 1.The appeal is dismissed in its entirety
- 2.Judgment of the High Court against the appellants jointly and severally affirmed (US$57,500 plus interest at 3% per month from 29.8.1999 and US$13,524 plus interest at 3% per month from 19.4.2000, until payment in full)
- 3.The appellants shall bear the costs of the appeal as well as the costs in the High Court
- On appeal from
- High Court of Kenya at Nairobi
- HCCC No. 1619 of 2000
- Jurisdiction invoked
- First appeal to the Court of Appeal under the applicable appellate provisions of the Constitution and the Civil Procedure Act (not expressly stated in the judgment)
Key timeline
#Practical implications
#Frequently asked questions
#Later judgments citing this (3)
#Judgments in the corpus that rely on this one. Where the Court said how it treated the authority, that is shown.
- Sanghani t/a KB Sanghani & Sons v Talewa Road Contractors Limited & another (Environment & Land Case 221 of 2016) [2024] KEELC 981 (KLR)[2024] KEELC 981 (KLR)27 Feb 2024applied
- General Printers Limited v Savichem Africa Limited[2022] KECA 580 (KLR)28 Apr 2022followed
- Savichem Africa Limited v General Printers Limited[2019] KEHC 7662 (KLR)8 May 2019applied
Cite this brief
#Cite this brief
Caselaw, "Bawazir Glassworks Limited & another v Asea Brown Boweri Limited [2015] KECA 659 (KLR)", Case Analysis (2015). Civil Appeal No. 96 of 2007. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2015/659/eng@2015-06-12
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.