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Court of AppealPartially AllowedCivil Appeal No. 120 of 2017· [2018] KECA 312 (KLR)

Kenya Tourist Development Corporation v Sundowner Lodge Limited [2018] KECA 312 (KLR)

Court of Appeal
28 September 2018
3,507 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
·~14 min to read original · ~4 min brief

The bottom line

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Kenya's Court of Appeal threw out a Kshs. 30 million award, confirming that breach of contract damages must be pleaded and proved, not guessed.

What this practically means

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Executive summary

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This appeal and cross-appeal concerned the withdrawal on 18th January 1999 by the Kenya Tourist Development Corporation of a 1996 letter of offer of a Kshs. 15 million loan to Sundowner Lodge Limited for construction of a Two-Star Hotel in Nakuru. The High Court (E.K. Ogola, J.) found the withdrawal to be a malicious breach of contract but dismissed the pleaded special damages claim of some Kshs. 421,760,000 for want of strict proof, awarding only Kshs. 153,000 in proved appraisal fees and, curiously, a further Kshs. 30 million in general damages. The KTDC appealed against that award; the respondent cross-appealed for enhancement, including punitive damages. The Court of Appeal, in a unanimous judgment, allowed the appeal and set aside the Kshs. 30 million award. It reaffirmed the settled rule that general damages are not recoverable for breach of contract, holding that where a plaintiff quantifies and particularises its loss as special damages, the court cannot substitute an unrelated, unclaimed and unquantified figure. Drawing on Chitty on Contracts and McGregor on Damages, it held that breach of an executory contract to lend money attracts only nominal damages or proved special damages such as the cost of a substitute loan or foreseeable loss of profit, the burden of proof resting on the plaintiff. It further held that a large damages claim cannot rest on guesswork or conflicting reports, and that a judicial assessment of damages cannot be an oracular pronouncement plucked from the air. The cross-appeal was dismissed and each party ordered to bear its own costs of the appeal.

Key legal issues

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01

Whether general damages may be awarded for breach of contract

Holding

No. General damages are not recoverable in breach of contract cases; the trial judge erred in exercising a supposed discretion to award Kshs. 30 million as general damages.

Reasoning

The court reaffirmed the settled position, citing Dharamshi v Karsan, that general damages are not allowable in addition to quantified damages because such an award would amount to duplication. The respondent had pleaded and particularised its loss as special damages but failed to prove it; awarding an unrelated, unquantified sum would be sympathetic sentimentalism rather than proof-based judicial determination.

p. 3
02

Whether the trial court could award an unquantified Kshs. 30 million without any foundation

Holding

Even if general damages had been recoverable, the award of Kshs. 30 million was wholly erroneous, having no pleading, authority, discussion, justification or comparable basis.

Reasoning

The judge gave no explanation for the figure, which the appellate court found was whimsically and capriciously imposed, 'literally plucking it out of the air.' Damages assessment is a judicial exercise, not an oracular pronouncement, and an award without a demonstrable foundation cannot be comprehended or defended on appeal.

p. 4
03

Whether the measure of damages for a lender's breach of a contract to lend money permits substantial unproved awards

Holding

The remedies for breach of an executory contract to lend are nominal damages or special damages such as the cost of a substitute loan or proved consequential loss, all of which must be pleaded and proved.

Reasoning

Drawing on Chitty on Contracts and McGregor on Damages, the court held that damages for failure to advance a loan are usually nominal unless the borrower proves the expense of procuring a substitute loan or foreseeable loss of profit. The burden of proving the amount of loss rests on the plaintiff, and the respondent here proved nothing beyond Kshs. 153,000 in appraisal fees.

p. 4
04

Whether the dismissal of the Kshs. 421,760,000 special damages claim was correct

Holding

Yes. The sums claimed as opportunity cost and loss of business profits were properly treated as special damages requiring strict proof, which was lacking because the evidence was contradictory, speculative or absent.

Reasoning

The feasibility study projections were based on a four-star rather than a two-star hotel, the figures were not traceable to the reports, and no witness explained how the figures were derived. The trial judge was entitled to dismiss the huge claim and grant only the receipted Kshs. 153,000 paid as appraisal and application fees.

p. 3
05

The duty of a first appellate court on re-evaluation of evidence and deference to discretionary decisions

Holding

A first appellate court must re-evaluate and reassess the entire evidence and reach its own conclusions, though it pays deference to findings of fact and discretionary decisions unless these are based on no evidence, misapprehension, wrong principles or are perverse.

Reasoning

Relying on Abok James Odera and Mwana Sokoni, the court stated it lacked the advantage of observing witnesses and would be slow to disturb findings, but would interfere where findings rest on no evidence, a misapprehension of the evidence, irrelevant considerations, wrong principles, or are generally perverse and unsupportable.

p. 2

Legal principles established

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  • As a general rule, general damages are not recoverable in cases of alleged breach of contract; only special damages specifically pleaded and strictly proved, or nominal damages, may be awarded.
  • Where a plaintiff quantifies and particularises its loss as special damages, the court cannot award a different, unclaimed and unquantified sum in general damages.
  • In a contract to lend money, the borrower's remedies are nominal damages or proved special damages such as expense incurred in procuring a substitute loan; the borrower cannot sue for the loan as a debt.
  • Large special damages claims cannot be founded on guesswork or inconclusive or conflicting reports; the makers of feasibility or valuation reports must be called to justify the claim.

Court orders

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  1. 1.The appeal succeeds and the award of Kshs. 30 million in general damages is set aside
  2. 2.The cross-appeal for enhancement is dismissed
  3. 3.Each party shall bear its own costs of the appeal

Authorities

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Cases cited (9)

  • MBOGO vs. SHAH
    [1968] EA 93
  • JOHN WAMBUGU NJOROGE vs. KENYA COMMERCIAL BANK LTD
    Kisumu Civil Appeal No. 179 of 1972
  • ABOK JAMES ODERA T/A A.J ODERA & ASSOCIATES vs. JOHN PATRICK MACHIRA T/A MACHIRA & CO. ADVOCATES
    [2013] eKLR
  • MWANA SOKONI vs. KENYA BUS SERVICES LTD
    [1985] 931
  • VICTORIA LAUNDRY (WINDSOR) LTD vs. NEMAN INDUSTRIES LTD; COULSON & CO. LTD (THIRD PARTIES)
    [1949] 2KB 528
  • BANQUE INDOSUEZ vs. DJ LOWE & CO. LTD
    [2006] 2KLR 208
  • HAHN vs. SINGH
    [1985] KLR 716
  • DHARAMSHI vs. KARSAN
    [1974] EA 41
  • SECURICOR (K) vs. BENSON DAVID ONYANGO & ANOR
    [2008] eKLR
On appeal from
High Court at Nairobi
H.C.C.C. No. 481 of 2003
Jurisdiction invoked
First appellate jurisdiction under the Court of Appeal Act (appeal as of right 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 (5)

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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, "Kenya Tourist Development Corporation v Sundowner Lodge Limited [2018] KECA 312 (KLR)", Case Analysis (2018). Civil Appeal No. 120 of 2017. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2018/312/eng@2018-09-28

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