KRK Impex PVT Limited v Safmarine Kenya Limited & another [2022] KEHC 12176 (KLR)

KRK Impex PVT Limited v Safmarine Kenya Limited & another (Civil Case 693 of 2008) [2022] KEHC 12176 (KLR) (Commercial and Tax) (3 June 2022) (Ruling)

Neutral citation: [2022] KEHC 12176 (KLR)

Republic of Kenya

In the High Court at Nairobi (Milimani Commercial Courts Commercial and Tax Division)

Commercial and Tax

Civil Case 693 of 2008

A Mshila, J

June 3, 2022

Between

KRK Impex PVT Limited

Applicant

and

Safmarine Kenya Limited

1st Defendant

Accord Metals (Kenya) Limited

2nd Defendant

Ruling

1. The Notice of Motion dated July 7, 2020 was brought under Section 3A,26(1) (2) and 34(1) of the Civil Procedure Act, Order 40 Rule 1(a), Order 22 Rule 7(2) (e) (f) and (g) of the Civil Procedure Rules. The Application was supported by the sworn Affidavit of Natasha Gichuki and the Applicant sought the following orders;a.The Court to grant temporary injunction in the first instance, and a permanent injunction following inter partes hearing restraining the Plaintiff, his agents, servants, employees and/or assignees and M/S Jumbo Airlink Auctioneers attaching, collecting or otherwise interfering with the Applicant’s goods in execution of the decree and warrants herein dated July 2, 2020 pending the hearing and determination of this Application;b.There be a stay of execution of the decree dated July 2, 2020 and warrants of attachment issued to M/S Jumbo Airlink Auctioneers dated July 2, 2020 and served on July 6, 2020 respectively pending the hearing and determination of this Application;c.The warrants of attachment issued to M/S Jumbo Airlink Auctioneers be recalled, set aside and quashed.

Applicant’s Case 2. It was the Applicant’s submissions that in the Court’s Ruling of January 22, 2020 the court observed that a concise appeal had been preferred to the Court of Appeal on the very narrow points that the applicable interest could not and cannot be left to a party, Central Bank of Kenya, to provide the applicable interest rate as this would be contrary to express provisions of statute. Further that by not taking evidence by way of formal proof of an alleged interest rate which is not a court rate of interest as provided by clear provisions of statute would violate clear provisions of statute.

3. It was the Applicant’s position that the only issue is what interest ought to have been paid on the principal sum from the filing of suit to the time the principal sum was paid in December, 2015.

Respondent’s Case 4. The Respondent submitted on the issue of commercial rate of interest and stated that to establish this rate as the appropriate prevailing commercial rate, the Plaintiff relies on interest rate set by the Central Bank of Kenya (CBR) in its various reports and the Banking Act, The Central Bank lending rate prevailing as at March 12, 2010 was 6. 75%.

5. Further, the average interest rate spread in Kenya and as reported by the Central Bank of Kenya in its report The Impact of Interest Rate Capping on the Kenyan Economy (2018) (page 50,53) stood at 9. 7% in 2009 and 10. 8% in 2011. The Plaintiff/decree- holder elected the one prevailing in 2009 which is 9. 7% and which when added to the CBR rate of 6. 75% sums it up to 16. 45%.

6. The Respondent relied on the case of Office Technologies Limited v Independent Electoral and Boundaries Commission [2014) eKLR where the court expounded and addressed itself on the phrase 'prevailing commercial rate' as follows; -“A commercial rate of interest is any rate that the bank and the borrower may agree upon; it does not have to be higher than the court rates. This rate, however, is determinable from the practice of banking. It can also be determined from the contracts of the parties...ln my view, and subject to any agreement by contracting parties; any rate of interest above the court rates is a commercial rate”.

7. In addition, the above position is further expounded inChitty on Contracts, 28th ed. 1999, Vol I, at paragraph 146 which contains the following:“In business contexts, the rate of interest should reflect the current commercial rate. The approach of the Commercial Court is to award interest at a rate which broadly represents the rate at which the successful party would have had to borrow the amount recovered over the period in question”.

Issues for Determination 8. The Court has considered the Application and rival submissions. The issue for determination is;a.What interest rate should be allowed at a commercial rate?

Analysis 9. Judgment on this suit was issued by Lady Justice Khaminwa on March 12, 2010 and entered in terms of the Amended Plaint. The Plaintiff in the Amended Plaint had prayed for interest on USD 100, 000 at commercial rates prevailing from time to time.

10. In the Court’s Ruling dated January 22, 2020, the Court found that the Plaintiff in its Amended Plaint had prayed for interest at commercial rates and thus directed that the same to be calculated based on "the prevailing commercial rates obtained from the Central Bank of Kenya as at the date of Judgment".

11. On July 22, 2021 the parties herein informed the Court that the Application dated July 2, 2020 was largely compromised except on the issue of interest and submissions were made on the issue of interest. It is not disputed that the interest applicable was at the commercial rate as at the date of judgment;

12. One description of a commercial rate of interest has been held to be ‘any interest rate that is above the court rate’; another description is that in a business context it can be determined from the practice of banking and this description is found in Chitty on Contracts (supra) which reads as follows;“In business contexts, the rate of interest should reflect the current commercial rate. The approach of the Commercial Court is to award interest at a rate which broadly represents the rate at which the successful party would have had to borrow the amount recovered over the period in question”.

13. In the circumstances of this case this court finds a blend of the two descriptions would be the best approach in determining the commercial interest rate herein. The letter dated March 11, 2021 is from a competent authority, namely The Central Bank of Kenya and this court made reference to it when making a determination as to what constituted the prevailing interest at the time when judgment was rendered. The letter was availed to the Court through the Deputy Registrar and it sets out in detail the prevailing interest rates.

14. Upon perusal of the letter The Central Bank commercial interest rates as at March 12, 2010 were as set out hereunder;Tenor Type of Customer Weighted Average

Corporate Business Personal

Weighted Average 13. 57 15. 29 16. 04 14. 96

Overdraft/loan 13. 55 15. 47 14. 16 14. 06

1-5 years 13. 40 15. 31 17. 87 15. 56

Over 5 Years 13. 75 15. 08 16. 10 15. 24

15. Firstly, from the tabulated figures it is this courts considered view that the weighted average interest rate for a business loan for a period over five (5) years that is 15. 08% is found to be the most appropriate. This period of over five (5) years is derived from the date of judgment to the date of repayment of the principal sum. Secondly, this weighted average rate of interest of (15. 08%) is a figure that falls within the first description hereinbefore mentioned of a commercial rate being a rate that is over and above the court rates.

16. This court reiterates that it is satisfied that a blend of the two descriptions would be the best approach in determining the commercial interest rate applicable.

Findings and Determination 17. In the light of the forgoing reasons this court makes the following finding and determination;i.This court finds the applicable commercial interest rate to be 15. 08%;ii.The Deputy Registrar is directed to proceed and tabulate the interest accrued on the principal sum at this rate from the date of judgment to the date of repayment;iii.Each party shall bear its own costs.

DATED, SIGNED AND DELIVERED ELECTRONICALLY AT NAIROBI THIS 3RD DAY OF JUNE, 2022. HON. A. MSHILAJUDGEIn the presence of;Mr. Masika for the plaintiff/RespondentMr. Omondi holding brief for Dr. Kiplagat for the DefendantLucy-------------------------Court Assistant