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Court of AppealPartially AllowedCivil Appeal No. 50 of 2015· [2016] KECA 550 (KLR)

National Social Security Fund Board of Trustees v Sifa International Limited [2016] KECA 550 (KLR)

Court of Appeal of Kenya
27 May 2016
ASAsike-MakhandiaWilliam OukoW. OukoKMK. M'Inoti
6,489 words in judgment
View original judgmentRead on Kenya Law Watch case
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The bottom line

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Kenya's Court of Appeal struck down Kshs.16.5 million in damages because the tenant couldn't prove its losses with documents, showing Kenyan courts demand strict proof of special damages.

What this practically means

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Executive summary

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This is the judgment of the Court of Appeal at Mombasa (Makhandia, Ouko and M'Inoti, JJ.A.) in a first appeal against the decision of Mukunya, J. of the Environment and Land Court arising from a landlord and tenant dispute over six parcels of land in Mombasa leased to Sifa International Limited, which converted dilapidated structures into a hotel and tourist resort. The trial court had ordered the respondent to pay Kshs.16,508,200/- as rent for the lease period, and the appellant to pay the respondent Kshs.16 million as the cost of structures demolished by the appellant and Kshs.500,000/- for loss of business. The appellant's nine grounds challenged the special damages awards, the rent computation ignoring the 15% escalation clause, and the treatment of the demolished structures as legal. The respondent cross-appealed on breach of the lease, denial of the first option to purchase, and rent liability. The Court of Appeal held that special damages must be both pleaded and strictly proved, with no middle ground, and found that the trial court's reliance on estimates, judicial notice and concessions had no legal basis; both awards were set aside. On rent, the court held that although unpleaded by counter-claim, the issue became alive at trial, but the Deputy Registrar was directed to compute rent with due regard to the escalation clause. The cross-appeal failed: mere advertisement did not breach the first option clause where no sale materialised, and refusal to renew was moot as the respondent remained in possession. Each party was ordered to bear its own costs in both courts.

Key legal issues

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01

Whether the award of Kshs.16,000,000/- as special damages for demolished structures was proper

Holding

The award was improper as the special damages were not strictly proved; the trial court relied on estimates and concessions without documentation

Reasoning

The Court of Appeal, as a first appeal court, re-evaluated the evidence and found that the quantity surveyor's testimony was based on estimates from sketches, with no receipts or supporting documents, and the director disclaimed knowledge of the claim. The trial court itself had found the claim unproved yet awarded a reduced figure based on 'concessions'. Special damages being non-discretionary, they must be strictly proved, and the award had no legal basis.

p. 7
02

Whether the Kshs.500,000/- award for loss of business could stand

Holding

The award could not stand; a court may not award special damages on the basis of judicial notice

Reasoning

The trial Judge expressly found the claim of Kshs.67,275,339/- unproved but awarded Kshs.500,000/- by taking judicial notice that 'some loss' must have occurred. The court held that Sections 59 and 60 of the Evidence Act do not permit judicial notice of a claimant's loss of profits, and uncontroverted evidence showed the respondent declared no income and remitted no tax during the relevant period. The award therefore failed in toto.

p. 8
03

Whether unpaid rent was an issue before the trial court despite no counter-claim

Holding

Although not pleaded by way of counter-claim, the issue of rent became alive during trial and the court was bound to determine it; however the Judge erred in not factoring in the escalation clause

Reasoning

Relying on Vyas Industries v Diocese of Meru and Odd Jobs v Mubia, the court held that a court may base its decision on an unpleaded issue if it was left to the court during trial and the parties participated in it. The parties raised rent in the amended list of issues and through evidence. The proper course was only to order payment or transfer of rent, and computation with due regard to the 15% escalation clause, not to fix a lump sum ignoring the lease.

p. 8
04

Whether the appellant breached the lease by advertising the premises for sale without first granting the first option to purchase

Holding

No breach was established; mere advertisement did not deny the option where no sale materialised without the option being accorded

Reasoning

The first option clause was silent as to when the option was to be given. The Judge was entitled to view the right to sell as importing a right to advertise, subject to giving the respondent the first option. Since no sale to a third party occurred without first according the option, or at all, breach was not made out. Had the appellant sold to a third party without according the option, there would have been breach.

p. 9
05

Whether refusal to renew the lease constituted breach of the lease

Holding

The issue was moot as the respondent remained in possession for a second term and acknowledged rent was payable per the lease

Reasoning

Although the appellant refused renewal by its letter of 4th February 2009, the respondent continued in occupation for a second term and did not refute that rent for the second term was calculable per the lease. Refusal to renew could only have become an issue had the appellant taken steps to evict the respondent.

p. 9

Legal principles established

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  • Special damages must be both pleaded with particularity and strictly proved; there is no middle ground, and a court may not award them on judicial notice or estimates

Court orders

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  1. 1.The award of Kshs.16,000,000/= as special damages for the demolished structures is set aside
  2. 2.The award of Kshs.500,000/= as loss of business is set aside
  3. 3.Any rent owing or due to the appellant should be computed by the Deputy Registrar, giving due regard to the escalation clauses in the lease, and then paid or transferred to the appellant
  4. 4.The cross-appeal is dismissed in its entirety
  5. 5.Each party bears its own costs both in the Court of Appeal and the High Court

Authorities

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Legislation

  • Landlord and Tenant (Shops, Hotels & Catering Establishments) Actgeneral provisions on protected tenancy
  • Evidence ActSection 59
  • Evidence ActSection 60
  • Physical Planning Actcited by appellant regarding illegality of structures
  • Local Government (Adoptive By-Laws) Building By-Laws Orders of 1968cited by appellant regarding illegality of structures

Cases cited (8)

  • Securicor Courier (K.) v Benson David Onyango & Another
    [2008] eKLR
  • Standard Chartered Bank Kenya Ltd v Intercom Services Ltd & 4 Others
    [2004] eKLR
  • Ole Nganai v Arap Bor
    [1982] eKLR
  • Kenya Ports Authority v. Kuston (Kenya) Ltd
    [2009] 2 EA 212
  • William Kiplangat Maritim & Another v Benson Omwenga
    Civil Appeal No. 180 of 1993 (Nairobi)
  • Coast Bus Service Ltd v Murunga Danyi & 2 Others
    Civil Appeal No. 192 of 1992 (UR)
  • Vyas Industries v Diocese of Meru
    (1982) KLR 114
  • Odd Jobs v Mubia
    (1970) EALR 476
On appeal from
Environment and Land Court of Kenya at Mombasa
E.L.C. C. Suit No. 263 of 2006
Jurisdiction invoked
First appeal to the Court of Appeal under the Court of Appeal's appellate jurisdiction

Key timeline

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Practical implications

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Frequently asked questions

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Later judgments citing this (25)

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Judgments in the corpus that rely on this one. Where the Court said how it treated the authority, that is shown.

Cite this brief

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Cite this brief

Caselaw, "National Social Security Fund Board of Trustees v Sifa International Limited [2016] KECA 550 (KLR)", Case Analysis (2016). Civil Appeal No. 50 of 2015. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2016/550/eng@2016-05-27

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