Mareco Limited v Future Limited & another [2017] KECA 113 (KLR)
The bottom line
#Kenya's Court of Appeal confirmed that a buyer only owes payment for invoices it formally accepted through its own verification system, and courts cannot decide issues outside the pleadings.
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 by unilaterally formulating issues for determination not raised or agreed by the parties
- 2.Whether the learned Judge departed from, or failed to determine, the issues as framed and agreed by the parties
- 3.Whether the learned Judge misdirected himself on the law, pleadings and evidence on record
- 4.Whether the finding that the 2nd respondent had settled all the invoices was unsupported by evidence
- 5.Whether the appellant was entitled to damages for profit margin and loss of investment opportunity
Key legal issues
#Whether the trial Judge erred in considering the issue of 'duly accepted' invoices and the SCS verification procedure allegedly not raised by the parties
The issue of whether the invoices had been duly accepted arose from the pleadings and evidence; the Judge did not err in considering it or the SCS procedure.
The appellant's cause of action rested on assigned invoices it believed had been accepted, and the 2nd respondent's defence expressly contended it had not duly approved payment of those invoices. The meaning of 'duly accepted' was therefore in issue, and evaluating what 'duly accepted' entailed necessarily involved considering the 2nd respondent's evidence about the SCS approval procedure, which the 1st respondent did not challenge.
Whether the 2nd respondent was liable to pay the appellant on the assigned invoices
The 2nd respondent could only accept and pay invoices verified and entered in its SCS system; it had settled all payments under duly accepted invoices and was under no legal obligation to the appellant.
The 2nd respondent's witness explained in detail its invoice approval procedure, confirming that mere acknowledgment of receipt did not amount to acceptance, and that payment required submission of correct invoices in the SCS system per the payment terms in appendix 2 to the subcontract agreement. This uncontroverted evidence, corroborated by the contractual payment terms, supported the trial court's finding of no liability.
Whether the appellant was entitled to profit margin and loss of investment opportunity damages
There was no evidence warranting the award of those damages.
The appellant argued it had adduced uncontroverted evidence supporting the claims, but the court found nothing on the record justifying the award of profit margins or loss of investment opportunity, and the trial Judge was not faulted for disregarding those heads of claim.
Legal principles established
#- Issues for determination by a court must flow from the pleadings; a court cannot pronounce on issues not raised in the pleadings filed by the parties.
- On a first appeal, the Court of Appeal's role is to re-evaluate, re-assess and re-analyze the evidence and determine whether the trial court's conclusions should stand.
Court orders
#- 1.Appeal dismissed
- 2.Costs of the appeal to the 2nd respondent
The bench
#One judgment of the whole court — no separate or dissenting opinions.
- On appeal from
- High Court of Kenya at Nairobi
- H.C.C.C No. 101 of 2014
- Jurisdiction invoked
- First appeal to the Court of Appeal under the Court of Appeal's appellate jurisdiction (statutory first appeal from the High Court)
Relief refused
#Claim against the 2nd respondent for the purchase price, profit margins and loss of investment opportunity
The invoices were never duly accepted by the 2nd respondent, which settled all payments under the duly accepted invoices; no evidence supported the claims for profit margin and loss of investment
Costs
Appeal dismissed with costs to the 2nd respondent (Huawei Technologies Limited).
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.
It is trite that issues for determination by a court flow from the pleadings. A court cannot make pronouncement on issues not raised in the pleadings filed by parties and to do so would be tantamount to acting outside its mandate.
This being a first appeal, our primary role as a first appellate court is to re-evaluate, re-assess and reanalyze the evidence on record and then determine whether the conclusions reached by the learned trial Judge are to stand or not and give reasons either way.
In the end, we find that the appeal lacks merit and is hereby dismissed with costs to the 2 nd respondent.
Issues in the judgment
#The judgment inconsistently identifies counsel Mr. Oundo as appearing 'for the 2nd appellant' when he appeared for the 2nd respondent.
The judgment states the power of attorney was of even date with the factoring agreement dated 25th March, 2015, but the irrevocable direction to pay is dated 12th April, 2013, a chronological inconsistency on the face of the judgment.
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Mareco Limited v Future Limited & another [2017] KECA 113 (KLR)", Case Analysis (2017). Civil Appeal No. 265 of 2016. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2017/113/eng@2017-12-15
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.