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Court of AppealPartially AllowedCivil Appeal (from High Court Civil Case No. 1180 of 2001)· [2023] KECA 91 (KLR)

Nairobi City County v Maksam Pioneer Services Limited & another (Civil Appeal 327 of 2017) [2023] KECA 91 (KLR)

Court of Appeal
3 February 2023
5,433 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
·~22 min to read original · ~4 min brief

The bottom line

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Kenya's Court of Appeal ruled a party cannot claim interest unless the contract provides for it or a court decree awards it.

What this practically means

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Executive summary

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This first appeal arose from a High Court judgment in which the trial court (E.K.O. Ogola, J.) found that the balance of the purchase price of four Hanomag wheel loaders, Kshs. 35,000,000/=, had been paid before the suit was filed, dismissed the plaintiff's (1st respondent's) claim for the principal sum, yet awarded it interest at 28% per annum on that sum from 2nd March 1998 to 4th April 2000, with interest thereafter at court rates, and capped the 1st respondent's costs at 30%. The appellant, the county entity that had purchased the loaders, challenged the interest award as made per incuriam and without contractual or statutory basis, the costs capping, and the dismissal of its counterclaim seeking a refund of Kshs. 60,000,000/=. The Court of Appeal, in a unanimous single judgment, applied Selle v Associated Motor Boat Co. as a retrial court and held that the contract contained no interest clause, that the 1st respondent's unilateral notice of interest did not vary the contract, and that section 26(1) of the Civil Procedure Act confers discretion to award interest only where a decree is made for payment of money - which was not the case here. None of the recognised bases for pre-suit interest (mercantile usage, statutory right, or implied agreement) was pleaded or proved. The Court further noted the 1st respondent's non-disclosure that the loaders were subject to receivership, which caused the payment delay. The appeal was allowed with costs: the interest and 30% costs orders were vacated and the 1st respondent's claim dismissed in its entirety, while the dismissal of the appellant's counterclaim (unproved at trial) was upheld.

Key legal issues

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01

Award of interest on a dismissed money claim

Holding

The trial court erred in awarding interest at 28% p.a. where the principal sum had been paid before suit, the claim was dismissed, no decree was made, and there was no contractual, statutory, mercantile-usage, or implied basis for interest.

Reasoning

The contract contained no interest clause, so consensus ad idem excluded interest. The 1st respondent's unilateral notice of interest did not amount to a contract. Section 26(1) of the Civil Procedure Act confers discretion only where a decree is made for payment of money; since the money claim was dismissed, there was no decree and the discretion was unavailable. None of the recognised bases - mercantile usage (not pleaded or proved), statutory right, or implied agreement - applied, so the award had no basis in law.

p. 7
02

Costs capped at 30% of recoverable costs

Holding

Since the 1st respondent was held not entitled to interest, the 30% costs award predicated on partial success on interest fell away.

Reasoning

The learned Judge had capped the 1st respondent's recoverable costs at 30% on the basis that it had partially succeeded on the claim for interest. That premise having been found erroneous, the costs order lacked legal basis. Section 27 of the Civil Procedure Act vests the costs discretion in the court, and costs follow the event, but here the foundation for any costs award in favour of the 1st respondent collapsed with the interest award.

p. 10
03

Conduct of the 1st respondent as disentitling factor

Holding

The 1st respondent's non-disclosure that the wheel loaders were subject to receivership caused the delay in payment and it could not benefit from the resulting confusion.

Reasoning

The trial record showed that the 1st respondent did not disclose that the motor vehicles were subject to receivership commenced by the 2nd respondent, which contributed to the delay in paying the balance of the purchase price. The 1st respondent was also inconsistent in its pleadings about the instruction to pay Oraro and Rachier Advocates. Being the author of its own misfortune, it could not be allowed to benefit in terms of interest from confusion it caused.

p. 9

Legal principles established

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  • Interest antecedent to the filing of suit is claimable only where there is an agreement or statutory right, mercantile usage pleaded and proved, or an implied agreement from the course of dealing; absent these and absent a decree for payment of money, no interest may be awarded.
  • Section 26 of the Civil Procedure Act applies only where and in so far as a decree is for payment of money; where the money claim is dismissed because the sum was paid before suit, there is no decree and the section is inapplicable.
  • A party cannot charge interest where it is not provided for in the contract unless the right to interest was agreed when the contract was made.

Court orders

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  1. 1.The appellant's appeal be and is hereby allowed with costs to the appellant
  2. 2.The orders allowing the 1st respondent's claim for interest and 30% of the costs made on 17th February 2017 in High Court Civil Case No. 1180 of 2001 be vacated and set aside, and the same be substituted for an order dismissing the 1st respondent's claim in its entirety
  3. 3.The order dismissing the appellant's counterclaim is hereby upheld

Authorities

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Legislation

  • Civil Procedure Actsection 26(1)
  • Civil Procedure Actsection 27
  • Local Government Act (repealed)

Cases cited (8)

  • Selle v Associated Motor Boat Co.
    [1968] EA 123
  • Abdul Hameed Saif v Ali Mohamed Sholan
    (1955) 22 E.A.C.A 270
  • Bakshish Singh & Brothers v Panafric Hotels Limited
    [1986] KLR
  • Ajay Indravadan Shah v Guilders International Bank Ltd
    [2003] eKLR
  • Barclays Bank (K) Limited v William Mwangi Nguruki
    [2014] eKLR
  • Highway Furniture Mart Limited v The Permanent Secretary & Another
    EALR (2006) 2 EA 94
  • Bengal Nagpur Railway Co v Rattaji Ramji
    6 S I A 66 (1938) 2 Cal 73
  • London, Chatham and Dover Railway Company v South Eastern Railway Co
    [1893] AC 429
On appeal from
High Court
Civil Case No. 1180 of 2001
Jurisdiction invoked
First appeal to the Court of Appeal under the Civil Procedure Act/Court of Appeal jurisdiction (appeal as of right from the High Court; not stated by reference to a specific article)

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, "Nairobi City County v Maksam Pioneer Services Limited & another (Civil Appeal 327 of 2017) [2023] KECA 91 (KLR)", Case Analysis (2023). Civil Appeal (from High Court Civil Case No. 1180 of 2001). Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2023/91/eng@2023-02-03

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