Kenya Revenue Authority v Doshi Iron Mongers Ltd & another (Civil Appeal E015 of 2021) [2024] KECA 176 (KLR)
The bottom line
#Kenya's Court of Appeal confirmed KRA unlawfully seized a trader's goods using the wrong customs form, though it reduced the damages awarded.
What this practically means
#Executive summary
#Questions the Court framed
#The issues the Court set itself to decide, in its own words.
- 1.What was the basis for the seizure and detention of the 1st respondent's goods by the appellant and the 2nd respondent, and whether there was justification for such action
- 2.Whether the claims by the 1st respondent for special damages were sufficiently proved
- 3.Whether the learned Judge applied the judgement in Nairobi High Court Miscellaneous Civil Application No. 206 of 2004 to the case and, if so, whether it was proper to do so
- 4.Whether the 1st respondent was entitled to an award of general damages in the sum of Kshs 300,000.00 each from the appellant and the 2nd respondent
- 5.Whether the 1st respondent's claim was res judicata
- 6.Whether the 2nd respondent was denied the opportunity to call its witness
- 7.Whether the award of interest was proper
- 8.Whether the order as to costs was properly made
Key legal issues
#Legality of the seizure and detention of the goods using Form F89
The seizure and detention by the appellant and the 2nd respondent using Form F89 was unlawful; Form C53 under rule 267 was the proper instrument, and detention exceeded the 21 days allowed under sections 34 and 39 of the Act.
The court, following its own decision in Kenya Revenue Authority v Doshi Iron Mongers [2016] eKLR, held that Form F89 is not listed in the First Schedule to the Customs and Excise Act and only underpins deposit of goods in a customs warehouse pending proof of compliance or payment of taxes. It cannot be used to effect a seizure on suspicion of an offence. Having used the wrong form and detained the goods beyond 21 days, the appellant's action was unlawful and the subsequent forfeiture tortious.
Proof of special damages against the appellant
Only Kshs 6,682,467.00 was proved against the appellant (invoice of Kshs 6,239,250.00 stamped 'paid' plus receipts totalling Kshs 443,217.00), not the claimed Kshs 7,126,010.00.
The invoice stamped 'paid' was produced without objection and could not later be impugned. Following Great Lakes Transport and Hatangimbabazi, an invoice endorsed 'paid' becomes a receipt. However, items claimed beyond those in the invoice were unsupported, and the three receipts totalled Kshs 443,217.00. The court therefore substituted Kshs 6,682,467.00 for the Kshs 7,126,010.00 awarded by the trial court.
Proof of special damages against the 2nd respondent
The claim of Kshs 6,296,140.00 against the 2nd respondent was not strictly proved and that award was set aside.
No invoice or document supported the value of the goods released by the 2nd respondent, and PW1 conceded on re-examination that he had no document proving the value of the expired goods. The trial judgment gave no reason for the award. Strict proof of special damages was lacking, so the cross-appeal succeeded on this head.
Whether the trial Judge applied the judgment in Nairobi High Court Misc. Application No. 206 of 2004
The learned Judge did not transpose the two cases; he only applied the ratio in the earlier decision that use of F89 rather than C53 was fatal.
The court examined the only passage in the trial judgment referencing the earlier decision and found the judge merely adopted its ratio on the use of Form F89. The goods in the two cases being different did not render the adoption improper, as the legal principle on the forms was what was applied.
Res judicata
The defence of res judicata failed: it was not expressly pleaded, and the cause of action (expiry of the goods after release) arose after the earlier determination.
Relying on Order 2 rule 4(1) of the Civil Procedure Rules and the pleading principles in IEBC v Mutinda Mule, the court held that a party intending to rely on res judicata must plead it, else the opponent is taken by surprise. Further, applying Siri Ram Kaura v M J E Morgan, the fact of the goods' expiry was a fresh circumstance that could not have been known when the earlier suit was filed.
Denial of the 2nd respondent's opportunity to call its witness
The 2nd respondent was not denied a fair hearing; it failed to utilise the opportunity given and filed no appeal against the ruling declining its request.
The 2nd respondent obtained 30 days' leave to file witness statements but did not comply; its request to have an unfiled witness testify as an expert was declined, it sought stay and certified proceedings for an intended appeal but never filed one. Applying Union Insurance v Ramzan Abdul Dhanji, a party given and not utilising a reasonable opportunity of being heard cannot later complain.
Award of general damages and interest
Both the award of Kshs 300,000.00 general damages each and the interest orders were unobjectionable and were left undisturbed.
The trial judge justified the general damages on the high-handed, oppressive and arbitrary conduct of the defendants, and no basis was laid to disturb it. On interest, applying Dipak Emporium, interest on special (liquidated) damages runs from the date of suit while general damages attract interest from judgment; the trial court had done exactly that, and delay in the proceedings is not a reason to deny a successful party interest.
Legal principles established
#- Customs Form F89 (Notice of Goods Deposited in Customs Warehouse) is not a lawful instrument for seizing goods suspected of an offence; the proper form for a seizure is Form C53 under rule 267 of the Customs and Excise Regulations, and detention under sections 34 and 39 of the Customs and Excise Act cannot exceed 21 days.
- A party cannot raise an unpleaded ground (here, non-payment of tax) at the appellate stage; pleadings define and delimit the matters in controversy.
- An invoice endorsed 'paid' and produced without objection may constitute proof of payment for purposes of special damages; a party may not impugn the authenticity of a document it did not object to at trial.
- Special damages must be specifically pleaded and strictly proved, the degree of particularity depending on the circumstances and nature of the acts.
- A first appellate court reconsiders and evaluates the evidence and draws its own conclusions, departing from the trial court's factual findings only where they are not evidence-based, proceeded on wrong principles, or the discretion was exercised injudiciously.
Court orders
#- 1.Partly allow the appellant's appeal by setting aside the award against it of Kshs 7,126,010.00 and substitute therefor an award of Kshs 6,682,467.00
- 2.Partly allow the 2nd respondent's Notice of Cross Appeal and set aside the award against it of Kshs 6,296,140.00
- 3.Affirm the other awards in the impugned judgment, including general damages of Kshs 300,000.00 each and interest as ordered by the trial court
- 4.Make no order as to the costs in the appeal
The bench
#One judgment of the whole court — no separate or dissenting opinions.
- On appeal from
- High Court of Kenya
- HCCC arising from plaint dated 16th May 2006 (amended 13th May 2022)
- Jurisdiction invoked
- First appellate jurisdiction under the Court of Appeal Act, statutory right of appeal against the High Court judgment
Relief refused
#1st respondent's claim for Kshs 6,296,140.00 against the 2nd respondent
Not strictly proved - no document produced showing the value of the goods released by the 2nd respondent
2nd respondent's res judicata defence
Not expressly pleaded and the claim arose from fresh circumstances (expiry of goods) discovered after the earlier decision
2nd respondent's complaint of denial of opportunity to call its witness
The 2nd respondent did not utilise the opportunity given to it and filed no appeal against the ruling declining its application
Appellant's challenge to the interest award
The trial judge's discretion on interest was properly exercised
Costs
No order as to the costs in the appeal, since both the appellant and the 2nd respondent were only partly successful; costs of the suit before the High Court remained as awarded to the 1st respondent as successful party.
Quotable passages
#Verbatim from the judgment, each located to the page it appears on in the official PDF — so these can be cited and checked directly.
This Court has had occasion to deal with form F89, the same form that was used by the appellant and the 2nd respondent herein in Kenya Revenue Authority v Doshi Iron Mongers & another [2016] eKLR
From the foregoing analysis, it is clear that the learned Judge cannot be faulted for finding that the use of the F89 form was ultra vires. The same was not anchored on Cap 472, it was used for the wrong purposes, and further, it was signed by persons who had no authority to sign customs documents.
special damages must not only be claimed specifically but must also be proved strictly, with a caveat that the degree of certainty and particularity of proof required depends on the circumstances and the nature of the act themselves.
Having considered the appeal and the cross-appeal before us, we hereby partly allow the appellant’s appeal by setting aside the award against it of Kshs 7,126,010.00. We hereby substitute therefor an award of Kshs 6,682,467.00.
Likewise, we hereby partly allow the 2nd respondent’s Notice of Cross Appeal and set aside the award against it of Kshs 6,296,140.00. Save for the foregoing, we see no reason to interfere with the other awards in the impugned judgment.
In view of the fact that both the appellant and the 2nd respondent are only partly successful in the proceedings before this Court, we make no order as to the costs in the appeal.
Issues in the judgment
#Internal inconsistency in the dates of the amended plaint: first stated as dated 16th May, 2006 amended 13th May, 2002 (an amendment predating the plaint), and later as amended 13th April 2022 in the memorandum of appeal
The captioned value of goods seized by the appellant is inconsistently stated as Kshs. 7,126,010.00 in the plaint but Kshs 7,126,000.00 in PW1's evidence
The seizure is variously attributed to Forms F89 No. 064997, 064998 and 084742 (evidence of PW1) but to Forms (F89) No. 106510 and 106511 by the court at paragraph 39
The invoice from Simran Ltd is stated as Kshs. 6,239,250.00 for the goods against the appellant, while the cross-referenced claim against the 2nd respondent is stated in places as Kshs 6,296,140.00 in an invoice dated 2nd August 2001 from Simran Ltd, creating ambiguity as to which invoice supports which claim
Paragraph 19 states general damages of Kshs. 300,000/= were awarded 'each against the appellant and the 1st respondent', apparently an error for the 2nd respondent
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Kenya Revenue Authority v Doshi Iron Mongers Ltd & another (Civil Appeal E015 of 2021) [2024] KECA 176 (KLR)", Case Analysis (2024). Court of Appeal Civil Appeal arising from Nairobi HCCC suit; memorandum of appeal dated 13th April 2022. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2024/176/eng@2024-02-23
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.