With the aid of decided cases

With the aid of decided cases, discuss the importance of the understanding of the constitution and principle of contract and tort laws to business in East Africa.

Introduction
Definitions
Constitution: A set of fundamental principles or established precedents according to which a state or other organization is governed. It is a principal source of law and it is the supreme law of the land. All laws in Kenya must conform to the constitution in order to be applied. Constitution can either be written law or unwritten law.
Written laws – Laws that has been put down in writing in a systematic and coherent document. (most laws in Kenya are written, e.g. civil law, procedural laws).
Unwritten law – Laws that have not been put down in writing in a systematic and coherent document. e.g. African customary law.

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Importance of constitution
It empowers the state, establishes the values and ideals of a nation
It gives rights and therefore responsibilities to citizens, lends legitimacy to the state/government.

Ensures accountability, transparency, responsiveness and ensures wealth distribution for common services that promotes individual well being.

It provides for independence of judiciary and rule of law.
Principle of contract: An agreement between two or more parties to perform or to refrain from an act now or in the future. A legally enforceable agreement.
Tort laws: Civil wrong for which remedy is a common law action for unliquidated damages which is not a exclusively a breach of contract or a breach of trust or other merely equitable obligations, Salmond et al.

Decided cases
In a case at the republic of Kenya, in the high court of Kenya at Nyeri civil case no. 11 of 2016 root capital incorporated…plaintiff/applicant versus Tekangu farmers co-operative society ltd…..defendant/respondent co-operative bank of kenya limited….interested party
RULING
“On the 11th July, 2016 the applicant filed in this Court a suit against the respondent seeking for the following prayers:-
a) A Declaration that the plaintiff is entitled to a cash cover for a minimum sum of US$292,190.96;
b) A freezing order binding the funds held by Co-operative Bank of Kenya Limited, Karatina Branch in Account Nos. 01120059745100 and 01120059745101 and/or any other or further funds held in any other bank accounts held by the defendant as may be directed by the honourable court pending assessment of the sums payable under prayers c),d)and e);
c) Special damages in the sum of US$ 292,190.96;
d) Interests thereon at the rate of 16.5% per annum from 05/07/2016 until payment in full;
e) Cost of the suit together with interests at court rates from the date of judgment until payment in full.

Alongside the suit, the plaintiff also moved this Court by way of a motion dated 21st July, 2016 seeking several interim orders initially pending the hearing and determination of the motion itself and subsequently pending the hearing and determination of the suit in which the motion has been filed. On 22nd July, 2016 I issued an ex parte interim order pending the hearing of the motion inter partes and therefore when the motion came up for hearing inter partes on 27th July, 2016 all that the court was concerned with was primarily the prayer for an interim order pending the hearing and determination of the substantive suit. This prayer is couched in the following terms:-
” That pending the hearing and determination of this suit, the honourable court be pleased to issue a   freezing order binding the funds held by the Co- operative Bank of Kenya Limited, Karatina Branch  in account Nos. 1120059745100 and 1120059745101 both in the name of the defendant to a sum equivalent to US$ 292, 190.96 or the total of such lesser sums as may be available in the said   accounts;”
… That said and, subject to the concerns I have raised on the applicant’s capacity to sue and proof of its claim, there is a glimmer of hope for the applicant’s suit if only it can be put in its proper perspective; I am not satisfied, however, there is any possibility that it can succeed in its present state and for this reason I hold that the applicant’s motion dated 21st July, 2016 is misconceived and without basis. It is hereby dismissed with costs to the respondent”. (Kenyalaw.org)
Dated, signed and delivered in open court this 19th August, 2016
Ngaah JairusJUDGE
In a case at the republic of Kenya in the high court of Kenya at Mombasa commercial civil case 40 of 2009, Nalinkumar M.shah….plaintiff versus Mumias sugar company ltd……………defendant
JUDGMENT
“By a plaint dated 17th August 1995, and amended on 7th October 1998, Nalinkumar Meghji Shah (hereinafter “the plaintiff”), instituted this suit against Mumias Sugar Company Limited (hereinafter “the defendant”) seeking special damages in the sum of Kshs. 49,460,576.46, general damages for breach of contract, interest at 32% p.a. or at commercial rates or such other rate as the court may apply on the total award of damages from the date of filing this suit until payment in full and costs.  In the amended plaint, the plaintiff pleaded as follows:  He carries on the business of sugar distribution in Kenya.  By an agreement made between him and the defendant, he agreed to purchase from the defendant and the defendant agreed to sell to him 10,000,000 kilogrammes of sugar packed in 100 and 50 kilogram bags at the price of Kshs. 319,882,000/=.  ….by reason whereof the plaintiff has lost the benefit of the agreement and lost the business and profit he would otherwise have made under it and has thereby suffered loss and damage.

The particulars of loss and damage were expressed as follows:-
(i)                Kshs. 3,381,182.50 being part of the purchase price paid to the defendant by the plaintiff and not refunded plus a sum of Kshs. 212,899.03 by way of damages for loss of use of the said sum of Kshs. 3,381,182.50 calculated by way of interest during the period 2nd May 1995 to the date of filing this suit.

(ii)             Kshs. 41,559,750/= being the profit the plaintiff would have made on the sugar that the defendant failed and/or refused to supply.

(iii)           Kshs. 4,306,744.95 being the interest paid to the bank by the plaintiff as interest on the sum of Kshs. 251,914,250.00.

…..the defendant filed its defence on 13th October 1995.  He admitted that the plaintiff entered in an agreement with it for the sale of sugar but denied that the nature or effect of the said agreement was as set out in the plaint.  The defendant pleaded that the said sale was subject to certain implied conditions.  The defendant admitted receiving the plaintiff’s orders by fax, and bankers’ drafts in payment for the said sugar but denied that the particulars given in the plaint were of the nature and effect stated in the plaint. The defendant pleaded that on or before 13th April 1995, the plaintiff took delivery of 2270 bags of 50 kgs each at the total price of Kshs. 26,464,483/=.

The defendant pleaded that on or about 13th April 1995, the Minister of Agriculture varied the price at which sugar could be sold by the defendant and the defendant could no longer sell sugar at a discounted price to anyone including the plaintiff.  It is pleaded that if there was a concluded agreement for the sale of sugar, then the same was frustrated by virtue of an act of Government.  It is pleaded that subsequent to 13th April 1995, the plaintiff took further delivery of 6330 bags of 50 kgs each and 10,027 bags of 100 kgs each at the total price of Kshs. 44,854,450/= which was the price at which the defendant could sell the sugar to the plaintiff pursuant to the order of the Minister aforesaid.  The defendant pleaded that the suit was an abuse of the process of the court in view of the Minister’s said order.

On 12th March 1997, the parties framed the following issues:-
Whether by an agreement made between the plaintiff and the defendant prior to 13th April 1995, the latter agreed to sell to the plaintiff 10,000,000 kgs of sugar packed in 100 kg and 50 kg bags at the price of Kshs. 319,882,000/=.

Whether the particulars of the agreement mentioned in 1 above were of the nature and effect mentioned by the plaint.

Whether, in any event, the said agreement was subject to the implied conditions set out in the defence and was of the nature and effect set out in the defence.

Whether on or before 13th April 1995, the plaintiff took delivery of 2270 bags of 50 kgs each and 7055 bags of 100 kgs each at the total price of Kshs. 24,464,483/= and subsequent to 13th April 1995 took further delivery of 6330 bags of 50 kgs each and 10027 bags of 100 kgs each at the total price of Kshs. 44,884,450/=.

If the answer to complaints hereof is in the negative whether the plaintiff took delivery of a total of 210300 kgs of sugar at the cost of Kshs. 67,967,750/=.

Whether by virtue of the order of the Minister for Agriculture made on or about 13th April 1995, the contract mentioned in 1 above was frustrated and the defendant thereby discharged from further performance thereof.

If the answer to issues raised above is in the affirmative, whether the defendant could thereafter sell sugar at a price no less than that prescribed by the Minister in the said order.

Whether the plaintiff is entitled to damages as particularized in the plaint.

On 5th November 1998, the parties recorded a consent judgment on liability and after numerous adjournments for various reasons the suit proceeded before me for assessment of damages on 11th May 2005, 12th May 2005, 26th October 2005, 27th October 2005, 14th February 2006, 17th October 2006, 22nd May 2007, 31st July 2007, 15th October 2008, 14th May 2009 and 22nd February 2010.
The plaintiff’s evidence was given through Meghji Shah Paresh (PW 1), the plaintiff’s General Manager and Sanjeet Shah (PW 2), who worked for various banks between 1990 and 2005.  PW 1 testified as follows:  He became the General Manager of the plaintiff’s business in 1987.  The business dealt in all kinds of merchandise including Colgate Palmolive products, sugar, rice, fertilizer, salt and other fast moving consumer goods.  In 1995, he was still such General Manager and at the time of his testimony he was working in America.  The plaintiff started purchasing sugar in the later part of 1994 from the defendant until the latter blacklisted the plaintiff when this suit was instituted.  Previously sugar could only be purchased through Kenya National Trading Corporation (K.N.T.C.) and not directly from millers.  In 1994/1995, however, that changed and millers, including the defendant, could sell sugar directly to the market.  The price per metric ton of sugar in the first three quarters of 1994 was 34,000/=.  That price was higher than the price of Kshs. 28,000/= per metric ton which was the price at which imported sugar was being sold.  The effect was that there was preference for imported sugar and local sugar millers, including the defendant, piled up stocks.  To clear those stocks, the defendant offered its sugar to traders at a discount of 5% on the purchase of 5000 metric tons for which the plaintiff paid a total of Kshs. 161,642,500/= on 30th March 1995.  On 4th April 1995, PW 1 again negotiated a discount of 6% on another purchase of 5000 metric tons of sugar for which the plaintiff paid Kshs. 158,239,500/= on 6th April 1995.

Pursuant to the said agreement, the defendant issued sugar release orders and the plaintiff took certain deliveries of sugar at the price of Kshs. 67,967,750/= when the defendant stated that it would not continue to supply sugar at any discounted price at all because the Minister for Agriculture had directed accordingly.  The defendant further informed PW 1 that deliveries would be restricted to 500 tons per week at the full price. 
The defendant gave the plaintiff two options:
To return the deposit made for the sugar or
The sum be retained by the defendant for sugar to be delivered at the full price. 
The plaintiff declined to take any of the said options and insisted that the defendant meets its obligation under the contract.  PW 1 further testified that the plaintiff declined both alternatives because they were unreasonable; the terms were different, deliveries were staggered and the defendant required the plaintiff to waive his right to make any other claims.
The defendant then refunded by way of cheque a sum of Kshs. 248,533,067.50 which cheque was cleared on 2nd May 1995 and was less by a sum of Kshs. 3,381,182.50.  That sum had not been refunded to date.  That sum, according to PW 1, could have earned compound interest of Kshs. 212,899.03 if it had been placed on a Fixed Deposit account between 2nd May 1995 and 17th August 1995.  Arising from the defendant’s breach of contract, according to PW 1, the plaintiff suffered loss of profits amounting to Kshs. 41,559,750/= which is the difference between the contract price and the price at which the plaintiff would have sold the undelivered sugar.

The plaintiff applied for costs for two counsels.  I note however, that although counsel submitted extensively on the issues of compound interest and mitigation of damages, the issue before the court was a simple one of assessment of damages for breach of contract, the defendant having conceded liability for the breach.  I am, in the circumstances, not persuaded that a certificate for two counsels should issue.

 
SUMMARY
1)             Judgment is hereby entered for the plaintiff against the defendant as prayed in paragraph 8 (i) of the amended plaint in the sum of:
(a)  Kshs. 3,381,182.50
      (b)  Kshs. 212,899.03
2)              Judgment is also entered for the plaintiff against the defendant as prayed in paragraph 8 (ii) of the amended plaint in the sum of Kshs. 41,559,750.00.

3)              The plaintiff will have the costs of this suit.

4)              Interest is awarded on (i) and (ii) above at court rates from the date of filing suit until payment in full and on 3 above at the same rate from the date of taxation until payment in full.

 
Those then are the orders of the court. (Kenyalaw.org)
 
Dated and delivered at Mombasa this 26th day of april 2010.

F. AzangalalaJudge
In a case at the republic of Kenya in the Industrial court of Kenya at Nairobi case 40 1539 of 2012,Teachers Service Commission (TSC) versus Kenya National Union of Teachers(KNUT)
 B. Ongaya J.

August 31, 2012
 
“The application was brought by a Notice of Motion made under Article 53(1) (b), 53 (2) and 162 of the Constitution, Section 77 of the Labour Relations Act, Section 12 Industrial Court Act, 2011 and Rule 16 of the Industrial Court (Procedure) Rules, 2010. Counsel for the applicant, The Teachers Service Commission submitted that a restraining exparte order should be issued to restrain the respondents, The Kenya National Union of Teachers (KNUT) from taking part in the strike which was scheduled to begin upon opening of the primary, secondary and post-secondary learning institutions on September 3, 2012. The matters in dispute which concerned teachers’ pay was said to have commenced in 1997.

The court noted that the Teachers Service Commission Act, 2012 had not been published which was an Act of Parliament for implementation of the Constitution of Kenya, 2010. The coming into effect and operation of the Act would provide the Respondents’ an institutional framework for efficiently and effectively negotiating the matters leading to the filing of the case. In particular the Act sought to establish in Section 13(5) a Consultative Committee to review the Teachers Remuneration and Salaries. The Act also provided for the appointment of the Chairperson and other members of the Applicant as established in Article 237 of the Constitution and governed in accordance with Chapter 15 of the Constitution.

On the issue of the parties’ rights under the Constitution, the court observed that there was the need to protect the rights of the children to free and compulsory education as provided for in Article 53 (1) (b) and Article 53(2) of the Constitution, that a child’s best interests are paramount importance in every matter concerning the child. The children’s right to education enjoys Constitutional protection just as the Respondents’ Constitutional rights in Article 41 on labour relations.

The court considered that Article 19 of the Constitution offered a clear guidance on balancing the two competing rights. The Respondents were substantially demanding payment of money which could be done at a future date. Postponing the rights of the children to education for which both the Claimants and Respondents protect was not a decision that could be remedied in future. It would be an irreparable injury to the children.

In conclusion, the court opined that on a balance of the right of children to education and the right of the Respondents to go on strike, the right to education outweighs the monetary demands the Respondents were making. The court also took into account the need for both the Respondent and the Claimant to harmoniously work towards the realization of the relevant Constitutional and Statutory provisions.” (Kenyalaw.org)
Respondents restrained from taking part in or calling an unprotected strike pending the hearing and determination of the Application.

Court declares section 45(3) of the Employment Act unconstitutional
“Section 45(3) of the Employment Act 2007 is inconsistent with the Constitution of Kenya particularly Articles 28, 41 (1), 47, 48 and 50(1) to the extent the said section deny rights and freedoms enshrined in the said Articles of the Constitution”
Samuel G. Momanyi versus the Hon. Attoney General and another
Petition No 341 of 2011
High Court, Constitutional and Human Rights Division
Lenaola J.

May 18, 2012.
 
“Section 45(3) of the Employment Act 2007 has been declared inconsistent with the Constitution of Kenya 2010 particularly Articles 28, 41 (1), 47, 48 and 50(1). The court found the said section purported to deny rights and freedoms enshrined in the said Articles of the Constitution. Samuel Momanyi was employed by the SDV Transami Kenya Ltd as a Project Manager until his services were terminated without being heard and without any lawful reasons being given for that action. He filed a claim before the Industrial Court which claim was struck off under Section 45(3) of the employment Act 2007 as he had only worked for 11 months and 27 days with Transami.

He therefore appealed to the High Court and prayed for a declaration that his right to fair labour practices under Article 41(1) of the Constitution had been violated by his employer because he was not accorded a fair opportunity to be heard on the allegations resulting in the termination of his employment and that section 45(3) of the Employment Act was inconsistent with the provisions of the Constitution of Kenya particularly Articles 28, 41 (1), 47, 48 and 50 (1). He therefore asked that an order be issued declaring section 45(3) of the Employment Act invalid by reason of its violation of the rights and fundamental freedoms and the said ruling be reviewed and set aside.

Samuel had also argued that section 45(3) was in conflict with Articles 48 and 50 (1) of the Constitution which guaranteed the rights to access justice and the right to a fair hearing. It was his argument that it was discriminatory of certain kinds of employees and that only those who had served for over 13 months could have claimed for unfair termination of their services.

The court observed that the Employment Act was enacted in 2007 before the enactment of the 2010 Constitution of Kenya and therefore there was need to align the provisions of all statutes enacted prior to it with the said Constitution. The Judge held that in lieu of Articles 27 and 48 of the Constitution which guaranteed equality and freedom from discrimination and the right to access to justice, there was obvious discrimination and the Samuel had been denied equal protection and equal benefit of the law. The court noted that no explanation had been given by either Transami or the Attorney General as to why a person who had worked for 13 months was the only one who could have claimed that his employment had been unfairly terminated and that one who had worked for a lesser period could not have had the benefit of that claim.

In considering what circumstances a court could have declared a law to have been unconstitutional, Judge Lenaola held that section 45(3) was unreasonable and had the opposite of what the object of the Employment Act was intended to be. Judge Lenaola thus observed that the law was oppressive and the Industrial Court’s hands were tied and therefore upheld the Constitution and declared section 45(3) invalid to the extent of its consistency.” (Kenyalaw.org)
Arresting a judgment- debtor without sufficient notice unconstitutional
“…Order 22 rule 7 is a cause for concern as it empowers the court to issue a warrant of arrest upon an oral application by the judgment creditor when passing the decree if the judgment debtor is within the court precincts. This provision in my view, does not entitle the judgment debtor to sufficient notice nor opportunity to pay the debt even where he has the means to do so. The rule as worded is an unnecessary infringement on the rights of the judgment-debtor. This renders this particular rule unconstitutional…”
Beatrice Wanjiku and another versus Attorney general and 3 others (2012 eKLR).
Petition No. 190 of 2011
High Court, at Nairobi
D S Majanja J
 
July 23, 2012.

“A section of the law that allows the arrest of a judgment debtor without giving them sufficient notice or opportunity to repay the debt due is unconstitutional. This was held in a petition in which the petitioners, judgment debtors, were challenging, among other things, the fact that the law allows their arrest and committal to civil jail within the court precincts upon a decree being issued by the court. Part of the sections of the law that the petitioners were challenging were Order 22 rule 7 (1) of the Civil Procedure Act (Cap.21) which states as follows…” 7. (1) Where a decree is for the payment of money the court may on the oral application of the decree-holder at the time of the passing of the decree, order immediate execution thereof by the arrest of the judgment-debtor, prior to the preparation of a warrant, if he is within the precincts of the court.

The petitioners argued that Kenya had ratified the United Nations International Covenant on Civil and Political Rights whose Article 11 disallowed civil jail for matters whose cause of action arose from contractual obligations; that Article 2(5) and 2(6) of Kenya’s Constitution incorporates into Kenyan Law the above mentioned convention and thus civil jail for debtors would be unlawful; and that imprisonment of a debtor violates their rights as captured in the bill of rights including the right to liberty and movement.

The issues for determination centered around two aspects, that is, whether there was a breach of the petitioners’ rights under Article 11 of the United Nations International Covenant on Civil and Political Rights and whether enforcement of civil jail against the petitioners was a breach of their fundamental rights and freedoms as are protected under the Bill of Rights.

On the first question, the court held that the fact that Article 11 of the Convention states that, “No one shall be imprisoned merely on the ground of inability to fulfil a contractual obligation…” meant that one could not be imprisoned for the sole reason of inability to fulfil a contractual obligation but where additional reasons other than inability to pay existed, then one would be imprisoned. The court went ahead to state that the said Article 11 recognizes that in fact there may be instances where imprisonment for inability to fulfil a contractual obligation may be permitted hence there is no inconsistency between Article 11 of the Convention and the general tenor of the committal regime under Civil Procedure Act and the Rules. It concluded that the provisions of Article 11 of the Convention are at best an interpretative aid.

On the second question as to whether the Civil Procedure Act was unconstitutional, the court analyzed section 38 of the Civil Procedure Act and Order 22 of the Rules and stated the they demonstrate the following:
The process of arrest and detention is not arbitrary. The debtor is given an opportunity to show a judicial officer makes cause before an order.

The Judgment-Creditor can only be committed to civil jail once it is demonstrated that he or she has refused or neglected to pay, is about to abscond or is intent on obstructing or delaying execution of the decree.

The burden of proof rests on the judgment-creditor to show prove the elements that are necessary for the arrest and committal of the judgment-debtor.

That arrest and committal is the last resort after other modes of execution have failed.

There is a right of appeal against the decision of ordering arrest and committal.

However, the court took issue with Order 22 section 7 of the Civil Procedure Act, which it stated, empowers the court to issue a warrant of arrest upon an oral application by the judgment creditor when passing the decree if the judgment debtor is within the court precincts. This provision, the court concluded, does not entitle the judgment debtor to sufficient notice nor opportunity to pay the debt even where he has the means to do so. It is thus an unnecessary infringement on the rights of the judgment-debtor hence unconstitutional, null and void.” (Kenyalaw.org)
Failure to extend a disabled person’s retirement age from 55 years to 60 years Unconstitutional
“Discrimination is subtle but can manifest itself in many forms and the State is obligated to eradicate it by inter-alia procedural fairness imposed upon it.”
Fredrick Gitau Kimani and another versus Attorney Ggeneral ; 2 others (2012) eKLRHigh Court at Nairobi (Constitutional ; Human Rights Division)
I. Lenaola J,
August 2, 2012
“The court has held that it is a violation of a disabled person’s right to be retired before the age of 60 years, due to the disability, contrary to section 15(6) of the Persons with Disabilities Act. The said Act enhances the retirement age of persons with disabilities from 55 years of age to 60 years of age. The brief facts of the case were as follows:
The petitioner, Fredrick Gitau Kimani was until his retirement in March 2004, a public officer, in the police force, having been employed as such in January 1974. He was however relieved of his duties on medical grounds, having had one of his limbs amputated due to ill health. This amputation resulted into his being certified as a disabled person by the National Council for Persons with Disabilities.

The petitioner’s retirement was initiated by the 3rd respondent who expressed to him (the petitioner) the fact that he had to retire upon attaining the mandatory age of 55. This was despite the fact that the said respondent had been requested by the petitioner for extension of his retirement age as is provided for in the Persons with Disabilities Act.

As a result, the petitioner moved the court contending that the act of retiring him at the age of 55 years as opposed to 60 years amounted to discrimination on his part on grounds of health, status, age as well as disability which was a direct violation of Article 27(4) of the Constitution as read with Section 15(6) of the Persons with Disabilities Act.

He thus sought; a declaration that his right not to be discriminated against under Article 27(4)(5)(6) and (7) of the Constitution and Article 7 of the Universal Declaration of Human Rights had been violated, a declaration that failure by the 2nd and 3rd respondents in extending his retirement age from 55 years to 60 years in total disregard to the provisions of Section 15(6) of the Persons With Disability Act amounted to a violation of his right not to be discriminated against on grounds of health, age and disability; a declaration that failure by the 2nd and 3rd respondents in recognizing him as a disabled person pursuant to Section 15(6) of the Persons With Disabilities Act, Chapter 14 Laws of Kenya, is discrimination against him, hence a violation of his right as a fore-mentioned; a declaration that as a result of the breaches afore-mentioned, he had been unfairly treated and subjected to serious economic hardship thus deprived of his right to livelihood and lastly, a declaration that he is entitled to payment of Kshs.358,540/- tabulated at Kshs.15,448.00/- per month being the amount in arrears he would have otherwise earned had his rights not been violated for five (5) years until the retirement age of sixty (60).

Held:
The Petitioner’s right not to be discriminated against under Article 27(4) (5)(6) and (7) of the Constitution and Article 7 of the Universal Declaration of Human Rights had been violated. There was no procedural fairness when his request for extension of his retirement age was not responded to and least of all, acknowledged.

The failure by the 2nd and 3rd respondents to recognize the petitioner as a disabled person and to extend the petitioner’s retirement age from 55 years to 60 years in total disregard of section 15(6) of the Persons With Disabilities Act amounted to a violation of his right not to be discriminated against on grounds of health, age and disability.

Even though general damages are the preserve of the Court as they are discretionary, specific claims must be specifically pleaded and proved even in matters of a constitutional nature. A person cannot be paid for services that he has not rendered. There was no evidence that the petitioner was earning the amount of money that he had claimed.

The remedy for breach of one’s constitutional rights is clearly set out in Article 23(e) of the Constitution and whether pleaded or not, the fact of breach of a fundamental right will in appropriate cases attract the remedy and it is a remedy at the discretion of the Court.” (Kenyalaw.org)
Petitioner awarded Kshs. 500,000 being general damages at large as compensation by the 2nd and 3rd respondents.

In a case at the republic of Kenya In the high court of Kenya at Kisii civil suit no.24 of 2013 ICEA Lion general insurance co. ltd……plaintiff versus the board of governors Rioma mixed secondary school………..defendant and nicholas munge tai ; 22 other…………interested parties
Judgment
On 8th October 2015 the Plaintiff herein, ICEA Lion General Insurance Co. Limited, filed this case seeking the following reliefs:-
A declaration that the Plaintiff is not liable and/or duty bound under the policy and/or bound by contract to compensate and/or settle any claims arising from the aforementioned accident in respect of the Defendant’s motor vehicle registration KBT 580N Isuzu bus.

A declaration that the provisions of Section 10(4) of the Insurance motor vehicle third party risk) Act Cap.405 Laws of Kenya absolve the plaintiff from any liability in respect of and in relation to the aforesaid accident.

Costs of the suit.

Any other relief this Honourable Court may deem fit and just to grant.

The cause of action is captured by the said Plaint wherein the plaintiff states that the defendant was at all material times to this suit the registered owner of a motor vehicle registration number KBT 580N, Isuzu Bus (hereinafter also known as the suit motor vehicle) which was at all material times insured by the Plaintiff under a comprehensive commercial motor vehicle insurance policy.

On 10th July 2013 an accident occurred at Nyambunde area along Itumbe-Igare Road involving the suit motor vehicle, which accident resulted into deaths and injuries of the passengers therein and that upon receipt of the accident report the plaintiff dispatched investigators to the scene of the said accident to establish the circumstances leading to the accident.  The accident in question received a lot of publicity and was widely covered in both the print and electronic media.

That the report that was filed by the investigators indicated that the defendant’s said motor vehicle was overloaded at the time of the accident having carried excess passengers contrary to the contract of insurance and traffic laws.

Particulars of breach of contract on the part of the defendant’s agent or servant were particularized as follows:
Allowing motor vehicle registration number KBT 580N Isuzu bus to be overloaded.

Overloading and/or carrying excess passengers on board motor vehicle registration number KBT 580N Isuzu bus.

Failing to observe the weight capacity limit set.

Failing to adhere to the Road Traffic Rules and regulations and safety precautions.

Exposing and/or causing the accident to occur.

Permitting and/or carrying uninsured passengers.

Driving at an excessive speed having overloaded the vehicle.

Failing to disclose the circumstances leading to the accident at the time of the report contrary to the Traffic Act.

That as a result of the aforementioned breach on the part of the defendant the plaintiff is now expected to settle numerous claims as the insurer of the suit motor vehicle and is therefore likely to suffer financial loss resulting from such settlements.

The plaintiff thus contends that in line with the terms of their contract of insurance it is not LIABLEto settle any claims that may arise from the said accident which it alleges was caused by the defendant’s breach of the terms of their contract.  The plaintiff case is that as a result of the said breach, the defendant is wholly to blame for the accident and should therefore be held solely responsible to settle them.

Defendant’s Pleadings
In the defendant’s written statement of defence and counterclaim filed on 28th November 2013 the defendant denies all the allegations contained therein and particularly denies being in breach of the insurance contract it had with the plaintiff over the suit motor vehicle.  The defendant further contends that the number of persons aboard the suit motor vehicle at the time of the accident could not be authenticated, verified, or correctly tested unless and until the affected individuals filed claims in court so as to accord the defendant an opportunity to test the veracity, propriety capacity and authenticity of the claimants. The defendant’s case is that adhered to and diligently observed all the terms and conditions of the contract.

In the counterclaim the defendant states as follows:
That the defendant insured the suit motor vehicle for the period 16th January 2013 to 15thJanuary 2014 after paying the agreed premiums.

That the defendant’s suit motor vehicle was involved in a road accident on 10th July 2013 and as a result some passengers therein sustained bodily injuries while others died.  The defendant avers that the passengers aboard the suit motor vehicle were within the limit set or envisaged in the proposal form.

That after filling the proposal form and paying premium, the defendant’s motor vehicle was placed on comprehensive insurance cover and hence the plaintiff committed itself to be responsible for all liabilities to the third parties in the event of death or bodily injury.

That in breach of the germane contract the plaintiff has unilaterally, arbitrarily and without any legal justification elected or decided to opt out of the contract by failing, refusing and/or neglecting to abide and/or perform its part of the bargain as spelt out in the germane insurance contract that commenced 16th January, 2013.

The defendant’s claim against the plaintiff is for an order of the court compelling the plaintiff to abide with and/or unconditionally comply with the contract of insurance in respect to the suit motor vehicle for the period between 16th January 2013 up to 15thJanuary 2014.

The defendant maintains that the third party aspect of the said insurance cover was compulsory and that it would be against public policy for the plaintiff to avoid its obligations and/or seek to disengage from the pertinent insurance contract.

The defendant therefore prayed for the following orders:
That the plaintiff’s suit be dismissed in with costs.

That judgment be entered in for the defendant as prayed for in the counter claim through an order  directing the plaintiff to perform all its contractual obligations to the defendant institution and/or genuine third party claimants as per the insurance policy number 980-A1-118482-13 issued in favour of the defendant on the 16th January 2013.

A declaration that public policy enjoins the plaintiff to uphold the contract in terms of the compulsory third party insurance dimensions of the contract dated 16th January 2013.

Costs of the defence and counterclaim be awarded to the defendant.

An analysis of the evidence adduced by the plaintiff’s witnesses, on a balance of probabilities, shows that the number of passengers on the suit vehicle exceeded the 51 passenger limit set by the conditions of the insurance policy. It is my humble view that even though the plaintiff did not prove the exact number of students and teachers aboard the suit motor vehicle at the time of the accident, the plaintiff nevertheless  proved, on a balance of probabilities, that the said number exceeded the 51 passengers which was the capacity of the suit motor vehicle. I say so because once the plaintiff adduced the evidence suggesting that the bus had carried more passengers than the 51 agreed upon, the burden of proof shifted to the defence to call evidence so as to prove that the contrary was the  position, and that indeed the insured motor vehicle did not exceed its passenger limit.

After weighing the above evidence, and considering that this is a civil suit in which strict proof of facts is not mandatory, I find that, on a balance of probability, the suit motor vehicle had carried more than 51 passengers at the time of the accident.

Having made a finding that all the passengers on the suit motor vehicle were third parties within the meaning of the The Act, and having found that on a balance of probabilities the passengers in the said vehicle exceeded the 51 passenger limit agreed upon in the insurance policy,  I will now shift my focus to the the most critical part of this judgment, which is, whether or not the plaintiff can avoid liability by virtue of the fact that the defendant was in breach of an express condition of their contract in respect to the suit motor vehicle’s passenger limit.

 Clause 2 of the general exceptions contained in the motor vehicle policy document signed between the plaintiff and defendant reads:
“we will not be liable in respect of any accident, injury, loss, damages on liability if the motor vehicle is carrying more than its authorized capacity.”
In a case at the republic of Kenya in the high court of Kenya at Nairobi commercial and admiralty division civil case no. 79 of Hassan Zubeidi …………plaintiff versus Patrick mwangangi kibaiya  .……….…1st defendant eite paka services limited …….2nd defendant
Ruling
Temporary injunction
The Motion before me is dated 4th March, 2014 and is seeking a temporary injunction. It is premised on Sections 1A, 1B and 3A of the Civil Procedure Act, Order 40 Rules 1 and Order 50 of the Civil procedure Rules. It is supported by two affidavits sworn by Mr. Hassan Zubeidi. The Respondent opposed the application and filed a replying affidavit.

This application is hotly contested and that is visible in the kind of submissions and the tempo with which those submissions have been presented before Court. I will, for what they are worth, reproduce those submissions in extenso here below.

The Applicant’s submissions
The Applicant submitted that granting a temporary injunction is a matter of judicial discretion, which must be exercised in accordance with the defined legal principle in the case of Giella Vs Cassman Brown (supra). He made the following submissions to demonstrate that he has established a prima facie case with a probability of success. The Respondent submitted that what constitutes prima facie case was discussed in the case of MRAO LIMITED v FIRST AMERICAN BANK OF KENYA LTD; CIVIL APPEAL 39 OF 2002 which was cited with approval in the case of BULK MEDICALS LTD v PARAMOUNT UNIVERSAL BANK LTD ; 2 OTHERS (2006) eKLR. It consists in a demonstration of infringement of a right and the probability of success of the Applicant’s case at trial. And, they relied on the definition on the word “probability” in The Concise Oxford Dictionary of Current English, 8th Ed. As follows:
“….The likelihood of something happening…the extent to which an event is likely to occur measured by the ratio of favourable cases to the whole number of cases possible….”
….applying the test in this case, the Applicant is convinced he has established as prima facie case with a probability of success and should be granted the injunction sought. He gave his reasons for that belief which draw from the circumstances of the case as follows. The understanding between the Applicant and the 1st Respondent was that they would in collaboration establish a Joint Venture for the design and development of apartments, a gym, a swimming pool and other conveniences on a portion of Land Known as LR No.209/1052/1, LR NO.134939 (hereinafter “the property”. The property was registered in the name of the 2nd Defendant and was charged to the Kenya Commercial Bank Limited (hereinafter “The Bank’
The Respondents argued that the 1st Respondent’s contribution of Kshs.53 million was acknowledged as paid under the JVA. That is not true and as Clause 2.3.1.2 of the JVA is ambiguous in light of the discernible spirit of the JVA and it was a rider sneaked by the 1stRespondent in collusion with its advocates on record who drew up the JVA with a clear intention of defeating the rights of the Applicant. They gave the following reasons in support of that submission:
a) As confirmed by the 2nd Respondent’s letter of 4th July, 2012 at page 34 of the application,  which was written a few months to the JVA, the amount owed to KCB by the 2nd Respondent was estimated at Kshs.155million
b) The intention of the JVA was to enable the 2nd Respondent raise funds in order to clear its liability with the Bank;
c) At the point at which the JVA was executed, no party had made any contribution; in fact in the Applicant’s letter of 30th September, 2013, the Applicant was concerned that his initial contribution of Kshs. 33.4 million would be lost if there was no clear intimation from the Respondent on how they intended to clear the deficit even after full payment of the Applicant’s contribution; this was necessary since as at September, 2013 the loan account was in arrears in excess of Kshs. 100 million, which fact has not been refuted by the Respondent
d) In the letter dated 30th September, 2013, the Applicant requested the Respondents to avail bank statements of the 2nd Respondent if indeed it was their position that they had paid a sum of 53 million. The Respondents declined to avail the statements.

…..the legal position is that a party should never be allowed to take advantage of his wrongs/omissions at the expense of the other party.  The 1st respondent is seeking to walk away from the JVA with the sole intention of defeating the Applicant’s interest notwithstanding the fact that the Applicant’s money has been used to significantly reduce the 2nd Respondent’s indebtedness to the bank.

“On my part let me restate that damages is not automatic remedy when deciding whether to grant an injunction or not.  Damages is not and cannot be substitute for the loss which is occasioned by a clear breach of the law, in any case, the financial strength of a party is not always a factor to refuse an injunction.  More so a party cannot be condemned to take damages in lieu of his crystalized right which can be protected by an order of injunction.”
This case is not one of a kind with clear infringement of contractual rights as to warrant an injunction despite the fact that an award of damages would be adequate remedy. Each party has claimed the other is the one in breach of the agreement herein and each has presented powerful arguments in support of their respective stand-points. As such, on the balance of convenience in light of the findings foregoing, preponderant weight tilts in favour of refusal of injunction. The suit property is owned by the 2nd Respondent and consists in several units owned and occupied by different persons. And it will be unfair to stop transactions which involve third parties who are not parties in the suit. The upshot is that the application dated 4thMarch. 2014 is dismissed. Costs shall abide the cause. The case should, however, be set down for hearing with expedition.

Dated, signed and delivered in court at Nairobi this 8th October, 2014
F. GikonyoJudge
References
Www. Kenyalaw.org
Wade & Forsyth, Administrative Law, 10th Ed, 2009, p3
(1803) 1 Cranch 137 at 177; 5 US 87 at 111
CCK v Royal Media Services 2014eKLR at 359
 Meriam Webster Dictionary Online last accessed from http://www.merriam-webster.com/dictionary/quasi-judicial
ESLJ (2008) at 4
Ibid at 357-358
at 206
 Vol. 80:1 Tulane Law Review 2006 at pp 72
 at para. 26
2010) 26 SAJHR at 405
Ibid at 411
 Ibid at 412