Robric Limited & another v Kobil Petroleum Limited & another [2018] KECA 425 (KLR)

IN IN THE COURT OF APPEAL

AT NAIROBI

[CORAM: NAMBUYE, MAKHANDIA & ODEK, JJ.A]

CIVIL APPEAL NO. 109 OF 2015

ROBRIC LIMITED .............................................................1^ST APPELLANT

PETER B. RACHAU ...........................................................2^ND APPELLANT

=VERSUS=

KOBIL PETROLEUM LIMITED....................................1^ST RESPONDENT

SHREEJI TRANSPORTERS (1990) LIMITED.............2^ND RESPONDENT

 (Being an appeal from the Judgment and Decree of the High Court of Kenya at Nairobi (Justice E.K.O. Ogola) given on 15^th October, 2012 in HCCC No. 448 OF 1999)

BETWEEN

KOBIL PETROLEUM LIMITED...................................................PLAINTIFF

AND

SHREEJI TRANSPORTERS (1990) LIMITED...................1^ST DEFENDANT

ROBRIC LIMITED.................................................................2^ND DEFENDANT

PETER B. GACHAU..............................................................3^RD DEFENDANT

JUDGMENT OF THE COURT

This is an appeal from the Judgment of the High Court, E.K.O. Ogola, J, dated the 15^th day of October, 2012, denying the appellants costs upon dismissal of the 1^st respondent’s claim against them, and also for dismissing the appellant’s counter claim against the 1^st respondent.

The background to the appeal is that the first respondent sued the second respondent and the appellants on the 23^rd April, 1999, at the High Court Nairobi, vide a plaint dated the 3^rd day of March 1999, seeking from the 2^nd respondent and the appellants jointly and severally a sum of Kshs 1,918,398.70, for goods supplied and not paid for, together with interest at the rate of 18% p.a., costs, and any other relief the honourable Court could deem fit and just to grant. It is not disputed that the amount claimed was the value for fuel products supplied to the 2^nd respondent by the 1^st respondent through the appellants and not paid for. At the conclusion of the trial, the learned Judge absolved the appellants from any responsibility to meet that claim to the 1^st respondent. Instead, the Judge found a sum of one million eight hundred forty two thousand, six hundred thirty two and forty four cents (Kshs 1,842,632.44) due and payable to the 1^st respondent by the 2^nd respondent. The Judge however denied the appellants costs on that claim. Since this appeal does not turn on that finding, we find it prudent not to give reasons as to why the Judge absolved the appellants from the responsibility to meet that claim.

Turning to the appellant’s case in the High Court, it is not disputed that they filed a defence dated the 23^rd day of April, 1999, and subsequently amended it on the 15th day of February, 2007, to incorporate a counter claim in defence of the 1^st respondent’s claim against them; that since the trial Judge absolved them of any responsibility to meet the claim to the first respondent, they were a successful party at the High Court in so far as the 1^st respondent’s claim against them was concerned but were denied costs; that the appellants counterclaimed from the 1^st respondent, general damages for breach of contract, specific damages amounting to Kshs 644,700.10, as at 30^th day of September, 2000, interest on the counter claim amount at commercial rates together with an attendant order for costs.

The 1^st respondent filed a reply to defence and defence to the counterclaim dated the 21^st day of February, 2007, denying the contents of the counter claim in toto and specifically that it offset the amount of Kshs 644,700.10 or any amount whatsoever from the account held by the appellants and put them to strict proof. The 1^st respondent also denied that the appellants were entitled to any damages for alleged breach of contract and that the counterclaim disclosed no cause of action against it either for damages for breach of contract or for the amount specifically counterclaimed.

The suit was canvased by way of oral testimony through witnesses tendered by the 1^st respondent and the appellants and written submissions. At the close of the trial, the Judge assessed and analyzed the record, dismissed the counterclaim with no order as to costs, triggering this appeal in which the appellants contend that the learned Judge erred both in law and facts by:

(1) totally failing to award costs against the successful appellant, who has painstakingly defended the suit from its onset and who in the end were successful against the 1^st respondent’s claim,

(2) totally failing to consider any of the evidence adduced by the appellants in support of their counterclaim against the 1^st respondent, and proceeding to dismiss the same,

(3) finding the appellants’ case unmeritorious,

(4) That in all the circumstances of the case, and in as far as the appellants are concerned, the learned Judge failed to do complete justice before him.

Directions on appeal were given on the 27^th day of November, 2017, for the parties to file written submissions within the timelines given. Neither party complied with those directions. The appeal was therefore canvased by way of oral submissions.

Learned Counsel Miss Wanjiku Muriu, appeared for the appellants, while learned Counsel Saadia K. Effendy appeared for the 1^st respondent. There was no appearance for the 2^nd respondent whose attendance and participation in this appeal was dispensed with pursuant to orders made by the Court on the 14^th day of December, 2016, following the concurrent assurance to the Court by the remaining participating learned Counsel that the real contest in this appeal was between the appellants and the 1^st respondent.

In support of the appeal, Miss Wanjiku Muriu faulted the trial Judge for his failure to award costs to the appellants who had succeeded in their defence of the 1^st respondent’s claim against them. It was Counsel’s submission that the learned Judge when exercising his discretion to withhold costs from the appellants failed to appreciate that it is the 1^st respondent who sued the appellants in 1999; that the litigation dragged on for a long time and was concluded only in the year 2012; that the 1^st respondent only succeeded against the 2^nd respondent and failed to prove its case against the appellants; that the appellants led evidence in defence of the 1^st respondent’s claim against them which the Judge evaluated and arrived at the conclusion that the appellants were not liable to make good the 1^st respondent’s claim. In counsel’s view, in the light of the above submissions, it was a misdirection on the part of the Judge when he improperly exercised his discretion to withhold costs from the appellants for the sole reason that the appellants too were involved in a blame game. Counsel therefore urged us to find that costs usually follow the event unless declined for good cause, which in counsel’s view, was not the case herein, as the reasons the Judge gave for withholding costs from the appellants made no logical sense.

As for ground 2, 3 & 4, which were argued as one, Counsel urged that the appellants had adduced sufficient evidence through documentary exhibits which were discounted by the Court on account of alleged late service of those documents. It was Counsel’s view that since the discounted documents were on the record, the Judge should have evaluated them and taken them into consideration when assessing evidence for and against the counter claim; that had the Judge taken into consideration those documents, there was no way he could have discounted the appellant’s counter-claim.

To buttress her submissions, Counsel cited Nicholas Kiptoo Arap Korir Salat versus Independent Electoral and Boundaries Commission & 6 others [2013] eKLR without specifying the particular principle of law therein she intended us to rely on in support the appeal.

Opposing the appeal on ground 1, Saadia K. Effendy, submitted that section 27 of the Civil Procedure Act donates discretion to the Court either to grant or withhold costs; that the Judge properly exercised his discretion under the said section as he gave reasons for withholding costs from the appellants, and which discretion should not be interfered with.

Turning to grounds 2, 3 & 4, Counsel submitted that the Judge was entitled to disallow the appellant’s counter claim as the same had not been proved to the required threshold as the same was based on documents that were discounted by the trial Judge through a ruling, which the appellants never appealed against. It was therefore wrong in the circumstances for counsel for the appellant to fault the judge for not taking into consideration the discounted documents as had the Judge done so, then that action on the part of the Judge would have amounted to introducing evidence through the backdoor.

To buttress the above submissions, Counsel cited Bhagwaqnji Raja versus Swaran Singh S/O Hari Singh [1962] – E.A 288, for the principle that “An appellate Court will not interfere with the Court’s exercise of discretion unless it is satisfied that the lower Court acted on the wrong principle”.  Kiska Ltd versus De Angelis [1969] E.A. 6 at 8, also for the principle that “where a trial Court has exercised its discretion on costs, an appellate Court should not interfere unless the discretion has been exercised unjudicially or on wrong principle”.

Counsel also relied on the text of Kuloba: Hints on Civil procedure page 94 sec. 151 – on the Court’s discretion as to costs generally, where it is stated as follows:

 “ ….Since costs are a matter in the discretion of the Court, an appellate Court will not interfere unless it is satisfied that the lower Court acted on a wrong principle”

 “…If there is some ground for departing from the general principle that the losing party pay the costs, the adequacy of that ground is a matter purely for the trial Judge. Though the discretion as to costs is a wide one, yet the discretion must nevertheless be exercised judicially”.

Also relied on is section 155- regarding circumstances in which a successful defendant will be deprived of his costs:

 “ …. It appears to be clear that a successful Defendant, who after all is brought into Court against his will, can only be deprived of his costs when it is shown that his conduct either prior to or during the course of the suit, has led to litigation which, but for his own conduct might have been averted. There must be evidence of such conduct on the part of the Defendant”

Counsel further relied on Halsbury’s Laws  of  England,  Fourth  Edition  for  the exposition of the same principle.

In reply to the first respondent’s submissions, Miss Wanjiku urged us to find that on the basis of what had been presented to court, the Judge exercised his discretion injudiciously and the same should therefore be interfered with.

This is a first appeal, our mandate is to analyze and re-assess the evidence on record and arrive at our own conclusions on the matter. See Selle versus Associated Motor Boat Co. (1968] E.A. 123. In Jabane versus Olenja [1986] KLR 661, this Court stated inter alia that it will not lightly differ from the findings of fact of a trial Judge and will only interfere with them if they are based on no evidence. (See also Ephasntus Mwangi versus Duncan Mwangi Wambugu [1982-88] 1KLR 278 and Mwana sokoni versus Kenya Bus Services [1982-88] 1KAR 870.

Having carefully considered the evidence on record and the rival submissions by the parties, we are satisfied that, the issues that fall for our consideration are the same as those raised in the grounds of appeal.

With regard to the complaint on the denial of costs, section 27 of the civil procedure Act provides guidance on the exercise of the Court’s discretion. It provides inter alia:-

Sec.27(1)“Subject to such conditions and limitations as may be prescribed , and to the provisions of any law for the time being in force, the costs of and incidental to all suits shall be in the discretion of the court or judge, and the court or judge shall have full power to determine by who and out of what property and to what extent such costs are to be paid, and to give all necessary directions for the purposes aforesaid; and the fact that the court or judge has no jurisdiction to try the suit shall be no bar to the exercise of those powers:

Provided that the costs of any action, cause or other matter or issue shall follow the event unless the court or judge shall for good reason otherwise order.

(2) The court or judge may give interest on costs at any rate not exceeding fourteen per cent per annum, and such interest shall be added to the costs and shall be recoverable as such”

In Edward Sargent –versus- Chhotabhai Jhaverbhat Patel [1949] 16 EACA 63, it was held that an appeal does lie to an appellate Court against an order made in the exercise of judicial discretion, but the appeal Court will interfere only if it be shown that the discretion has not been exercised judicially. The circumstances under which an appellate Court can interfere with discretionary orders are well settled. See the case of Mbogo & Another versus Shah [1968] E.A. 93, where it was held at page 96 that:-

 “An appellate Court will interfere if the exercise of the discretion is clearly wrong because the Judge has misdirected himself or acted on matters which he should not have acted upon or failed to take into consideration and in doing so arrived at a wrong conclusion. It is trite law that an appellate Court should not interfere with the exercise of the discretion of a Judge unless it is satisfied that the Judge in exercising his discretion has misdirected himself and has been clearly wrong in the exercise of the discretion and that as a result, there has been injustice”

In the High Court case of the Party of Independent Candidates of Kenya versus

Mutula Kilonzo & 2 others, HC EP No. 6 of 2013, the High Court had this to say on the

issue of costs:-

 “It is clear from the authorities that the fundamental principle underlying the award of costs is two-fold. In the first place, the award of costs is a matter in which the trial judge is given discretion …. But this is a judicial discretion and must be exercised upon grounds on which a reasonable man could come to the conclusion arrived at. In the second place the general rule that costs should be awarded to the successful party, is a rule which should not be departed from without the demonstration of good grounds for doing so.”

In Richard Kuloba, Judicial Hints on Civil Procedure, 2^nd Edition, page at page 101, the author authoritatively states as follows:-

“The law of costs as it is understood by Courts in Kenya, is this, that where a plaintiff comes to enforce a legal right and there has been no misconduct on his part-no omission or neglect, and no vexatious or oppressive conduct is attributed to him, which would induce the Court to deprive him of his costs- the Court has no discretion and cannot take away the plaintiff’s right of costs. If the defendant, however innocently, has infringed a legal right of the plaintiff, the plaintiff is entitled to enforce his legal right and in the absence of any reason such as misconduct, is entitled to the costs of the suit as a matter of course”.

Bearing the above principles in mind, the core issue for our determination is whether the appellants were entitled to costs for defending the 1^st respondent’s claim against them before the High Court. Put differently, did the trial Court exercise its discretion judiciously when it declined to award costs to the appellants who successfully defended the 1^st respondent’s claim against them?

This is what the trial Court gave as a reason for failing to award costs to the appellants:-

 “While I disallow the claim against them, I use my discretion to deny them the costs due to their documented participation in the claim”.

The above comments arose from the impression formed by the Judge of the entire record with regard to the conduct of the parties towards each other both prior and during the litigation resulting in this appeal as borne out by a summary of the evidence adduced before the trial Judge as hereunder.

P.W.1, Mary Wambui Mwangi testified that the orders to the appellants for the supply of fuel to the 2^nd respondent were all required to be authorized by the 2^nd respondent without whose authority the appellants could not supply the fuel. The appellants were expected to confirm that the said order bore the authorized signatures, before releasing the fuel products to the 2^nd respondent’s agents who would sign for the delivery of the fuel products. The 2^nd respondent would then compile all the order forms and signed invoices for transmission to the 1st respondent, to raise a debit note on the basis of which the 2^nd respondent would release payments to the 1^st respondent. It was P.W.1’s testimony that they sued the appellants because they were the suppliers of the fuel products to the 2nd respondent, on behalf of the 1^st respondent and that the dispute arose because of the appellants’ failure to perform their part of the contract in accordance with the terms of the agreement between the respondent.

The appellants’ witness D.W.3 (Peter B. Gachau), who was the 3^rd respondent at the trial admitted in evidence that there were instances when they would supply fuel products with Local Purchase Orders (LPOs); that sometimes, directors of the 2^nd respondent could call and give names of persons to collect the fuel products and the appellants would supply fuel products against those telephone calls. When shown the disputed invoices in Court, D.W.3 conceded that of the contested thirty seven invoices, only two were backed up by LPOs; that some invoices were given without LPOs and that it was not proper to issue invoices without LPOs.

The guiding principle on the discretion to grant or withhold costs as distilled above is that the Court may not only consider the conduct of the parties in the actual litigation, but also matters which led to the litigation, and the contribution to the causation of the matters triggering the litigation by the parties in whose favour the order of costs was declined.

We have considered the principles highlighted above in the light of the above summary of the evidence of the parties. It is our finding that the uncontested evidence tendered through P.W.1 was that the 2^nd respondent had supplied the appellants with four (4) signatures of authorized signatories against which the appellants could supply the fuel products to its drivers.

P.W.1 was also categorical that all orders were to be authorized by the 2^nd respondent; that the appellants could not supply fuel in the absence of such authorization ; that the appellants were expected to confirm the authenticity of the authorizations before releasing the fuel products which were to be signed for by the 2^nd respondent’s drivers. It was also P.W.1’s evidence that out of the invoices that formed the core of the dispute before Court; only two appeared to bear the authentic authorization signatures as authorized by the 2^nd respondent.

Faced with the above admission on the part of the appellants’ witness that there was departure from the terms of the agreement in their (the appellants) performance of their part of the contract, between the respondents, there was no way the Judge could have totally absolved the appellants from contribution towards the matters that triggered the litigation resulting in this appeal. It is evident from the record that the 2^nd respondent withheld payment from the 1^st respondent on allegation of suspected fraud arising from alleged release of fuel products by the appellants against telephone calls and chits as opposed to authenticated LPOs under the signatures of the 2^nd respondent’s authorized signatories. It is therefore our finding that had the appellants performed their part of the contract as was expected of them and in accordance with the terms of the contract between the respondents, the litigation resulting in this appeal may have been unnecessary. We therefore find nothing to suggest that the Judge exercised his discretion injudiciously to withhold costs from the appellant. There is therefore no reason to interfere with the exercise of that discretion.

Turning to grounds 2, 3, and 4 which are interrelated, it is undisputed that the appellant’s claim was a civil claim which fell into the category of special claim. The principles that guide

the Court in the determination of such a claim have now been crystalized by case law. See Hahn versus Singh [1985] KLR 716, for the principle that special damages must not only be specifically claimed but also specifically proved; that the degree of certainty and the particulars of proof required to establish a special claim depends on the circumstances and the nature of the acts themselves.

The summary of the evidence by the appellants’ witnesses in support of their counter-claim was as follows:-

 “The plaintiff has paid me Shs 618,000.00 but I have no documents to prove the same. It was part of this counter-claim. The claim arose in the year 1995. I brought with (sic) vide amended defence in 2007. The plaintiff has not refused to pay me but told me to wait until the issue is resolved …..”

The Judge considered the above evidence and then concluded as follows:-

 “28.The 2^nd and 3^rd defendants filed a counter-claim for Kshs 644,000/- on account of money allegedly withheld by the plaintiff. However, no evidence was led to establish or prove the counter-claim apart from the third defendant merely stating that the plaintiff owed him the said amount. In the end, this Court can only dismiss the claim”

Applying the principle in Hahn versus Singh (supra) to the rival arguments on this issue, it is our finding that the appellants complied with the first limb of the principle by specifically pleading the special claim. As for the second limb, once the documents on the basis of which the counterclaim was anchored were discounted, the counter claim had no legs on which to stand. Further, it is also our finding that the appellants did not file a reply to the 1^st respondent’s defence to the counterclaim in which they were challenged on their claim for damages for breach of contract which was a component of the counterclaim. They did not also provide particulars of breach of contract attributed to the 1^st respondent. Neither did they give any evidence in support of the alleged breach of contract. Lastly, once the appellants’ witness admitted in evidence that they had substantially been paid in relation to their counterclaim, there was no way the Judge could have overlooked that fact.