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Court of AppealDismissedCivil Appeal No. 226 of 2005· [2017] KECA 402 (KLR)

Satwant Singh Dhanjal & 2 others t/a Paramount Hauliers v Kenya Revenue Authority [2017] KECA 402 (KLR)

Court of Appeal of Kenya
21 July 2017
EGE. M. GithinjiHOHannah OkwenguSKS. ole Kantai
6,683 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
·~27 min to read original · ~4 min brief

The bottom line

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Kenya's Court of Appeal ruled that buying at a KRA statutory auction gives you mainly a refund—not damages—if a court order later cancels the sale.

What this practically means

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Executive summary

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The appellants, trading as Paramount Hauliers, successfully bid at a public auction conducted by the Kenya Revenue Authority for two containers of Ro-Ro cane-harvesting machines and paid the full bid price of Kshs.7,120,000/=. Before delivery, the High Court in Kisumu, in judicial review proceedings brought by Caneland Limited, ordered release of the containers to the consignee, and the sale aborted. The appellants sued for special damages, general damages for breach of contract, and punitive and exemplary damages. The High Court (Anyara Emukule, J) dismissed the damages claims and awarded only a refund of the bid price with interest and costs. The appellants appealed on seventeen grounds, principally contesting the findings on warranty of authority to sell, the interpretation of sections 206(3) and 212(3) of the Customs and Excise Act, the applicability of the Sale of Goods Act, and the proof of special damages for loss of bargain and profits. The Court of Appeal, in a single judgment of the court, affirmed the decision below. It held that a statutory auction advertisement represents that the right to sell has crystallised; that sections 212(3) and 206(3) are not contradictory, the former restricting remedies in suits against officers personally where reasonable grounds are found, the latter permitting damages in representative-capacity suits; that the sale under a statutory power was exempt from the Sale of Goods Act; and that special damages for loss of profits were neither pleaded nor strictly proved, a one-off sale by Caneland being insufficient evidence of a ready market. The appeal was dismissed with costs to the respondent.

Key legal issues

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01

Whether the respondent gave a warranty or representation as to its authority to sell

Holding

No actionable warranty arose; the respondent was exercising a statutory power of sale under section 34 of the C&E Act, the power to sell was presumed to have arisen, and the purchaser's remedy for irregular exercise lay in damages, not avoidance of the sale.

Reasoning

The court agreed with the trial judge, drawing on the Transfer of Property Act analogy, that a purchaser at a statutory auction need not inquire whether the power to sell has arisen. The advertisement itself represented that the right to sell had crystallised. Since no plea was made that the power to sell had not arisen, no issue of warranty or representation in contract arose, and any irregularity gave a remedy in damages.

p. 6
02

Interpretation and application of sections 206(3) and 212(3) of the C&E Act

Holding

The two provisions are not contradictory: section 212(3) restricts remedies in actions against an officer personally where reasonable grounds are found, while section 206 applies to actions against the Commissioner in a representative capacity where damages may be awarded. The suit against the KRA fell under section 206 (via section 22(3) of the KRA Act), so damages were available in principle.

Reasoning

The court analysed the threshold conditions in section 212(3): suit against an officer personally, prior proceedings in favour of the owner, and a finding of reasonable grounds. The restriction applies only where reasonable grounds are found. Because the suit was brought against the Authority as a statutory corporation, section 206(3)(b) applied and damages could have been awarded; the claim failed instead on the facts.

p. 9
03

Whether the Sale of Goods Act governed the transaction

Holding

The Sale of Goods Act did not apply; a sale under a statutory power of sale is exempt under section 23(2)(b), and the consequences of default are governed by the C&E Act.

Reasoning

The auction was conducted pursuant to section 34 of the C&E Act, a statutory power of sale. Section 23(2)(b) of the Sale of Goods Act preserves the validity of sales under special statutory powers of sale and excludes their application. The trial judge was therefore right that the substantive law applicable was the C&E Act, not the Sale of Goods Act.

p. 9
04

Whether special damages for loss of bargain and profits were proved

Holding

No. Special damages must be specifically pleaded and strictly proved; evidence of a single sale by Caneland Ltd could not establish a ready market or market price for the appellants, and the claim was in any event moot as no breach was established.

Reasoning

The court applied Banque Indosuez v DJ Lowe & Co Ltd on the strict pleading and proof of special damages. The appellants were not in the business of selling cane-harvesting machines and a one-off invoice from Caneland could not show they would have sold at that price. Loss of bargain damages were also unavailable because the sale was nullified by court order, not by breach of either party.

p. 10
05

First appellate court's mandate

Holding

On a first appeal the Court of Appeal reconsiders and re-evaluates the evidence and draws its own conclusions, while making allowance for not having seen or heard the witnesses.

Reasoning

The court restated the established principles from Kenya Ports Authority v Kuston (Kenya) Ltd and Selle v Associated Motor Boat Co Ltd, including the limited scope for interfering with a trial judge's exercise of discretion. It applied those principles to evaluate whether the trial judge erred in law on the statutory scheme and the damages findings.

p. 5

Legal principles established

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  • A publication of an advertisement of an intended statutory auction sale is a representation that the right to sell has crystallised; if the exercise of the statutory power is proved irregular, the purchaser's recourse lies in damages, but the power to sell is presumed to have arisen and the purchaser need not inquire into it.
  • Section 212(3) of the Customs and Excise Act restricts remedies only where proceedings are brought against an officer in his personal capacity and the court finds reasonable grounds for the officer's act; where there is no finding of reasonable grounds, or where the suit is brought against the Commissioner/Authority in a representative capacity under section 206, damages may be awarded.
  • A sale conducted under a statutory power of sale is exempt from the Sale of Goods Act by virtue of section 23(2)(b); the consequences of default are governed by the statute under which the sale was conducted.
  • Special damages must be specifically pleaded and strictly proved; figures cannot be plucked from the air and a one-off comparable sale does not prove a ready market or loss of profits.

Court orders

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  1. 1.Appeal dismissed
  2. 2.Appellants to pay the respondent's costs of the appeal

Authorities

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Legislation

  • Customs and Excise Act (Cap 472)Section 34
  • Customs and Excise Act (Cap 472)Section 206(3)
  • Customs and Excise Act (Cap 472)Section 212(3)
  • Customs and Excise Act (Cap 472)Section 27
  • Kenya Revenue Authority Act (Cap 469 / No. 2 of 1995)Sections 3, 22(3), 23
  • Sale of Goods ActSection 23
  • Transfer of Property Act 1882 (India)Section 69B
  • Civil Procedure RulesOrder 21

Cases cited (15)

  • Ratcliffe vs Evans
    (1892) 2 QB 524
  • Siree vs Lake Turkana El Molo Lodges Limited
    (2002) 2 EA 521
  • Radacanachi vs Milburn
    (1886) 18 QBD 67
  • Hadley vs Baxendale
    (1854) 9 Exch. 341
  • Hahn vs. Singh
    Civil Appeal No. 42 of 1983 [1985] KLR
  • Kenya Ports Authority versus Kuston (Kenya) Limited
    (2009) 2 EA 212
  • Selle v Associated Motor Boat Company Ltd
    [1968] EA 123
  • Pil Kenya Ltd vs. Oppong
    [2009] KLR 442
  • Banque Indosuez vs DJ Lowe and Company Ltd
    [2006] 2 KLR 208
  • Ratcliffee v. Evans
    (1892) 2 QB 524, 532, 533
  • Storms Bruks Aktic Bolag v. John & Peter Hutchinson
    [1905] AC 515, 525, 526
  • Kampala City Council v. Nakaye
    [1972] EA 446, 447
  • Ouma v. Nairobi City Council
    [1976] KLR 294, 304
  • Sande Charles C. v. Kenya Co-operative Creameries Ltd
    Civil Appeal No. 125 of 1996 (unreported)
  • Southern Shield Holdings Limited v Estate Building Society
    [2013] eKLR
On appeal from
High Court of Kenya at Nairobi
H.C.C.C. No. 1610 of 2001
Jurisdiction invoked
First appeal to the Court of Appeal under the Court of Appeal's appellate jurisdiction (Constitution/ Appellate Jurisdiction Act not expressly cited in the judgment excerpt); appeal against the judgment and decree of the High Court

Key timeline

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Practical implications

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Frequently asked questions

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Later judgments citing this (11)

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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, "Satwant Singh Dhanjal & 2 others t/a Paramount Hauliers v Kenya Revenue Authority [2017] KECA 402 (KLR)", Case Analysis (2017). Civil Appeal No. 226 of 2005. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2017/402/eng@2017-07-21

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