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Court of AppealPartially AllowedCivil Appeal No. 135 of 2014· [2018] KECA 355 (KLR)

Henry Wafula Khaemba v Nzoia Sugar Company Ltd [2018] KECA 355 (KLR)

Court of Appeal of Kenya
25 May 2017
PKP. Kihara KariukiSKS. Gatembu KairuAMA. K. Murgor
3,438 words in judgment
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The bottom line

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Kenya's Court of Appeal confirmed that a company cannot swap a contract to someone else without consent, but winning that point earned the contractor just Kshs. 5,000 because his bigger loss was never properly proved.

What this practically means

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Executive summary

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This is a second appeal to the Court of Appeal at Eldoret against the judgment of the High Court at Bungoma (F. Gikonyo, J., delivered by A. Mabeya, J.) of 20th March 2014, which had dismissed the appellant's claim for damages for breach of contract. The underlying suit was filed in 2001 before the Magistrates' Court at Bungoma, claiming that Nzoia Sugar Company breached a Cane Transport Contract dated 15th November 1999 by unilaterally substituting the appellant's name as contractor with Nasilai and Sons Contractors. The trial magistrate dismissed the suit, finding key documents were fake. On first appeal, Gikonyo, J. declared the trial judgment a nullity for want of notice of delivery of judgment, set it aside, and dismissed the suit on the merits. The Court of Appeal, in a single judgment of the court delivered by Kihara Kariuki, PCA, identified three issues: validity of the contract, breach, and entitlement to relief. It found, on a review of the evidence, that a valid contract existed - the respondent's internal memo acknowledging the contract displaced its denial in the defence - and that the respondent breached it by unilaterally substituting the contracting party, something it could not lawfully do without the appellant's consent. However, the claim for Kshs. 2,800,000.00 was in substance special damages which must be specifically pleaded and strictly proved; the figure was irreconcilable with the appellant's own evidence and represented gross rather than net loss. The Court awarded nominal damages of Kshs. 5,000.00 with interest from 20th March 2014, allowed the appeal partially, and awarded the appellant two thirds of the costs of the appeal plus costs in both lower courts. The decision binds subordinate courts and High Courts on the rules against unilateral substitution of a contracting party and on the strict pleading and proof of special damages, as well as the availability of nominal damages for established breach without proved loss.

Key legal issues

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01

Existence of a valid Cane Transport Contract between the parties

Holding

The Court found that the parties entered into the contract dated 15th November 1999, the respondent's internal memo acknowledging the contract displacing its denial in the defence.

Reasoning

Reviewing the evidence, the Court noted the respondent's Transport Manager's internal memo of 29th February 2000 stating that the appellant asked that the contract be in his name for ease of payment. That was an unequivocal acknowledgment that the respondent contracted with the appellant, displacing the denial in the defence. The Court also held that the respondent did not plead misrepresentation or lack of capacity, so those defences were not properly before the trial court.

p. 3
02

Breach of the contract by unilateral substitution of the contracting party

Holding

The respondent breached the contract by purporting to substitute the appellant's name with that of Nasilai and Sons Contractors without his consent.

Reasoning

The Court reasoned that if the respondent believed the contract needed changing, it should have sought the appellant's concurrence, or invoked the 30-day termination clause and then contracted with Nasilai. Unilateral substitution was impermissible. The respondent also did not contest that it had made part payment of Kshs. 2,756.95 to the appellant under the contract.

p. 4
03

Entitlement to damages for breach of contract

Holding

The claim for Kshs. 2,800,000.00 was in effect a claim for special damages which must be specifically pleaded and strictly proved; it failed, but nominal damages of Kshs. 5,000.00 were awarded.

Reasoning

The relief pleaded was general damages, but during trial the appellant asserted a specific figure of Kshs. 2,800,000.00, converting the claim into special damages, which must be strictly proved. The figure was irreconcilable with his own evidence of payment frequency and the first payment amount, and it ignored costs of generating the income. General damages for breach of contract were not available since damages for breach are quantifiable and not at large.

p. 4

Legal principles established

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  • A contracting party cannot unilaterally substitute the name of the contracting party with that of another person; any variation or substitution of the contract requires the other party's consent, failing which the proper course is termination under the termination clause.
  • Special damages must be both specifically pleaded and strictly proved.
  • Where a contractual right is infringed but loss is not proved, the injured party is entitled to nominal damages.
  • On a second appeal, this Court is not entitled to interfere with concurrent findings of fact except where those findings are based on no evidence.

Court orders

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  1. 1.Upheld the appellant's complaint that the learned Judge erred in failing to determine that the parties had a valid contract that was breached by the respondent
  2. 2.Awarded the appellant nominal damages of Kshs. 5,000.00 with interest thereon at court rates from 20th March 2014
  3. 3.Awarded the appellant two thirds of the costs of this appeal and the costs of the proceedings in both lower courts based on the award of the Court

Authorities

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Legislation

  • Civil Procedure ActSection 27

Cases cited (8)

  • Habib Zurich Finance (K) Ltd vs. Muthoga and another
    [2002] 1 EA 81
  • Dharamshi vs. Karsan
    [1974] EA 41
  • Provincial Insurance Company East Africa Limited vs. Mordekai Mwanga Nandwa
    Civil Appeal No. 179 of 1995 (C.A) (Kisumu)
  • Bamburi Portland Cement Company Ltd vs. Imranali Chandbhai Abdulhussein
    [1996] eKLR
  • Douglas Odhiambo Apel & another vs. Telkom Kenya Ltd
    C.A 115 of 2006 (2014 eKLR)
  • Ratcliffe Vs. Evans
    [1892] 2 QB 524
  • Kampala City Council Vs. Nakaye
    [1972] E.A 446
  • Hahn Vs. Singh
    [1985] KLR 716
On appeal from
High Court of Kenya at Bungoma
HCC.A. No. 15 of 2012
Jurisdiction invoked
Second appeal to the Court of Appeal under the applicable appellate provisions of the Constitution and the Civil Procedure Act (not expressly cited in the judgment)

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, "Henry Wafula Khaemba v Nzoia Sugar Company Ltd [2018] KECA 355 (KLR)", Case Analysis (2017). Civil Appeal No. 135 of 2014. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2018/355/eng@2018-05-25

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