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Court of AppealPartially AllowedCivil Appeal No. 5 of 2014· [2017] KECA 268 (KLR)

Caltex Oil (kenya) Limited (Currently trading as Total Kenya Limited) v Evanson Njiiri Wanjihia

Court of Appeal of Kenya
29 September 2017
5,317 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
·~21 min to read original · ~4 min brief

The bottom line

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Kenya's Court of Appeal cut a petrol dealer's award from Ksh 15 million to Ksh 1.4 million, ruling that terminating an expired contract without notice required only fifteen months' compensation.

What this practically means

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Executive summary

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The respondent obtained a Caltex petrol station dealership on Waiyaki Way, Nairobi in 1991, initially on six months' probation, with terms spelt out in a letter dated 16th December 1992. In August 1993 the appellant asked him to hand over the station temporarily for reconstruction, promising reinstatement after about four months. Instead, the appellant withdrew the dealership licence with immediate effect and later issued a letter purporting to give one month's notice, stating the licence had expired in July 1993. The High Court (Osiemo, J.) found breach of contract and awarded the respondent Kshs. 15,055,423, being average monthly profits of Kshs. 93,512 assessed over 161 months, with costs and interest. On appeal, the Court held that the offer letter and the December 1992 letter constituted a valid contract with a six-month lifespan which expired by effluxion of time on 23rd July 1993, leaving only a nebulous working relationship with no termination clause. There was no proof of breach by the respondent, and the immediate termination was in utmost bad faith, amounting to trickery to remove him without notice. Because no contract capable of being breached existed at termination, the damages were at large, or general damages, which need not be specifically pleaded; the trial Judge could not be faulted for using the unchallenged audit figures. However, the 161-month assessment was grossly inflated. Applying the principle of reasonable notice where no termination clause exists, and considering the respondent's loan, bank guarantee and need to secure alternative income, the Court fixed a reasonable notice period of fifteen months. The appeal partially succeeded: the High Court judgment was set aside and substituted with an award of Ksh 1,402,680 (Kshs 93,512 x 15), attracting interest at court rates from the date of the High Court judgment until payment in full. The appellant received half costs of the appeal and before the High Court.

Key legal issues

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01

Existence and terms of the dealership contract

Holding

The letter of offer dated 29th October 1991 coupled with the letter of 16th December 1992 constituted a valid and binding dealership agreement with a six-month probationary lifespan and no termination clause

Reasoning

The Court found the letter of offer signed by the respondent, together with the December 1992 letter appointing him dealer and setting targets and conditions, together amounted to the dealership contract binding both parties. The agreement stipulated a six-month lifespan, admitted by the appellant in its termination letter, meaning the contract expired by effluxion of time on 23rd July 1993, leaving only a nebulous working relationship.

p. 6
02

Fairness of termination and adequacy of notice

Holding

The immediate termination of the dealership was unfair; the request to wind up temporarily was in utmost bad faith and an act of trickery, and the one-month notice was superfluous because the licence had already been terminated with immediate effect

Reasoning

The respondent handed over the station temporarily on the understanding he would be reinstated after reconstruction, retained staff, serviced a loan and bank guarantee, and expected to resume business. Instead the licence was withdrawn with immediate effect. The subsequent one-month notice letter was superfluous as the licence had already been terminated. The Court held the termination was without notice and unfair in the circumstances.

p. 8
03

Nature of the damages awarded - special or general

Holding

Since no contract capable of being breach existed at termination, the claim could not be based on breach of contract; the damages were at large, or general damages, which did not require specific pleading

Reasoning

As the contract had expired by effluxion of time before the licence was terminated, there was no contract capable of being breached, so the learned Judge erred in assessing damages as if for breach of contract. The Court characterized the award as general damages at large, adopting the principle in Adais v Gramophone Co. Ltd, and held such damages need not be particularly pleaded or proved. The audit report figures were unchallenged and properly used as a conventional yardstick.

p. 8
04

Quantum of damages - the reasonable notice period

Holding

The 161-month assessment was grossly inflated; the reasonable notice period was 15 months, yielding Ksh 1,402,680/= (Kshs 93,512 x 15)

Reasoning

The Court held that where there is no termination clause the court must determine reasonable notice based on the peculiar circumstances of each case, considering mitigation and guarding against unjust enrichment. Considering the respondent's loan facility, bank guarantee, loss of income and need to find alternative business, the minimum time he needed to get back on his feet was fifteen months, making the trial Judge's 161-month assessment wrong in principle and grossly inflated.

p. 9

Legal principles established

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  • Where a contract has expired by effluxion of time and contains no termination clause, the party wishing to end the resulting relationship must give reasonable notice, determined by the circumstances of each case
  • Damages at large or general damages do not need to be particularized or specifically pleaded
  • In calculating damages where there is no termination clause, the court must take a reasonable approach, guard against unjust enrichment, and expect the aggrieved party to mitigate its loss
  • On a first appeal the Court of Appeal is enjoined to appraise and re-analyse the evidence in its entirety and reach its own independent conclusion, while allowing for the fact that it neither heard nor saw the witnesses

Court orders

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  1. 1.The impugned judgment delivered on 31st May, 2007 and all consequential orders arising therefrom is set aside
  2. 2.The sum of Ksh 15,055,423 is set aside and substituted with an amount of Ksh 1,402,680/= being the monthly income of Ksh 93,512 for a period of 15 months
  3. 3.The substituted amount will attract interest at court rates from the date of the judgment of the High Court until payment in full
  4. 4.The appellant is awarded half costs of this appeal, and before the High Court
On appeal from
High Court of Kenya at Nairobi
H.C.C.C. No. 5366 of 1993
Jurisdiction invoked
First appeal to the Court of Appeal under the Court of Appeal Rules, Rule 29(1)(a)

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, "Caltex Oil (kenya) Limited (Currently trading as Total Kenya Limited) v Evanson Njiiri Wanjihia", Case Analysis (2017). Civil Appeal No. 5 of 2014. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2017/268/eng@2017-09-29

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