Mutech Motors & Civil Engineering Contractors Ltd v County Government of Kirinyaga [2023] KEHC 24813 (KLR) | Contractual Liability | Esheria

Mutech Motors & Civil Engineering Contractors Ltd v County Government of Kirinyaga [2023] KEHC 24813 (KLR)

Full Case Text

Mutech Motors & Civil Engineering Contractors Ltd v County Government of Kirinyaga (Civil Appeal 19 of 2018) [2023] KEHC 24813 (KLR) (3 November 2023) (Judgment)

Neutral citation: [2023] KEHC 24813 (KLR)

Republic of Kenya

In the High Court at Kerugoya

Civil Appeal 19 of 2018

LM Njuguna, J

November 3, 2023

Between

Mutech Motors & Civil Engineering Contractors Ltd

Appellant

and

The County Government Of Kirinyaga

Respondent

(Appeal arising from the decision of Hon. Y.M. Barasa RM in Chief Magistrate’s Court at Kerugoya Civil Case No. 59 of 2018 delivered on 02nd February 2018)

Judgment

1. The appeal herein has been filed vide memorandum of appeal dated 22nd February 2018 wherein the appellant being dissatisfied with the above-cited decision of the court, now seeks orders that:a.The appeal be allowed and the lower court’s judgment be reversed;b.Judgment be entered for the appellant in the lower court as per the plaint; andc.Costs of the appeal and the trial court be awarded to the appellant.

2. This appeal is premised on the grounds inter alia that the trial magistrate erred in law and fact:i.In dismissing the suit on a point or points upon which a preliminary objection had been raised, heard and dismissed and no appeal was preferred;ii.In allowing himself to be guided by a provision of law which he had described as a technicality in view of Article 159 of the Constitution;iii.In dismissing the suit despite his finding that there was a contract between the parties and that it was not tainted with fraud;iv.In failing to address himself to the parties’ pleadings to therefore see the respondent’s averment that the work was not carried out to the required standard hence the failure to be paid meaning that work was carried out;v.In allowing a witness who had not recorded a statement to testify hence lowering the procedural and evidential burden in favour of the respondent to the detriment of the appellant in allowing trial by ambush despite the appellant’s objection;vi.In failing to make an adverse finding in respect of the respondent’s failure to call the witnesses who were in the respondent’s office at the time the contracts herein were entered into;vii.While considering the issue of the appellant’s failure to refer the claim to the Transition Authority nevertheless did not consider the respondent’s averment that the claim could only be paid after the Transition Authority granted the authority to pay. The court overlooked the admission that the respondent’s predecessor had compiled its list of debtors and creditors and submitted it to such authority and thus wrongly failed to conclude the failure to produce the list in court was a tacit admission that the appellant’s claim was included therein;viii.Wrongly failed to make an adverse finding against the respondent for failing to avail the records of the committee which were said to be still dealing with the claims at the time of the trial in the lower court.

3. The plaintiff/appellant filed a plaint dated 24th February 2015 seeking payment of Kshs. 3,060,000/= together with interest at 21% from January 2013, being payment for a contract for road construction. The defendant/respondent opposed the claim denying the existence of any contract stating that the plaintiff/appellant ought to have presented its claim (if any) to the transition authority. That the appellant was put into strict proof as to the existence of contract between it and the respondent.

4. At the trial, PW1 who was the manager at the appellant company testified that he was in charge of supervising the road grading work and issuing invoices. That he is the one who drew the invoices totaling the amount claimed. That worksheets were prepared and signed and the appellant claimed according to the rates agreed. He stated that the appellant won a tender from the respondent through LPO following which, the appellant borrowed the money to complete the tender works and so the claim of 21% interest is justified. That the respondent inspected the work once it was completed and did not report on any sub-standard work done.

5. DW1 was the county legal advisor who stated that the claim by the appellant was non-existent as the tender would have been awarded via open tendering but this was not the process that was followed, if any. That even if a tender was awarded, a formal acceptance of award would have been made by the appellant, but this is not the case. That the formal contract would show the terms, conditions and the mode of dispute resolution. That if due process was followed, the appellant would have been issued with LPO and an invoice to be used for payment, following which, the work is inspected and a certificate of completion issued.

6. It was his averment that any dispute between the county council and the county government should have been raised with the transitional authority but the appellant did not raise any issue. On cross-examination, he stated that he did not have any proof that he works with the county government. That he knows that the county government is deemed to have taken over the liabilities of the county council. That the transition authority had a list of liabilities to be settled for the county council and by the time this authority’s mandate lapsed, not all the debts had been settled.

7. The appeal was disposed of by way of written submissions. Both parties filed their submissions.

8. The appellant abandoned grounds 3 and 4 of the appeal and proceeded to submit that the trial court based its decision on an issue that had already been raised and determined in the preliminary objection. That the trial court referred to Sections 7 and 8 of the Transition Authority Act and termed the objection as a technicality that can be overlooked in light of Article 159 of the Constitution and used the judgment to cure its faults during the ruling of the preliminary objection. It was their submission that the defendant failed to file witness statements and the court still allowed the witness to testify even though the appellant raised an objection to this. That furthermore, the evidence of DW1 is to be disregarded as he has no expertise in procurement, construction or finance. For this argument, reliance was placed on the case of Raila Odinga & 5 Others Vs. IEBC & 3 Others (2013) eKLR and Netah Njoki Kamau & Another Vs. Eliud Mburu Mwaniki (2021) eKLR.

9. It was their case that the respondent stated that there is no proof that the appellant did not file their claim with the Transition Authority, but no proof was tendered in that regard. That the respondent did not prove that it did not have staff that were conversant with the alleged contract but the court proceeded to find that the appellant should pay costs for failing to file the claim before the relevant court. Further, that the respondent conceded that a list of the county council’s creditors had been filed with the transition authority.

10. The respondent submitted that the case was filed after the enactment of the Transition Authority Act and was therefore wrongly before the court according to schedule 6 of the Constitution. That the appellant had failed to prove that their claim was listed before the transition authority and therefore, the court was not bound by its ruling on the preliminary objection. It was their submission that failure to file defense witness statements was not detrimental to the suit in any way and that the court even stated that it was not mandatory and that the defense was not limited to base its evidence on the list of documents. That the appellant did not appeal against the ruling on the preliminary objection and the same issues cannot be decried in this appeal. Reliance was placed on the case of Methuselar Keyah Lubembe Vs. Albina Kipkemboi (Mombasa HCCA No. 18 of 2017).

11. It was the respondent’s case that DW1 was well competent to testify given that he was the legal advisor of the county and an advocate of the High Court of Kenya. That the appellant did not call for any records or witnesses from the respondent’s office and was denied the same. That the liabilities could not be verified without going through the transition authority and to say otherwise, the appellant would be misleading the court. That the onus was on the appellant to prove that the liabilities claimed were or were not paid and such burden should not shift to the respondent at any point.

12. That it was the responsibility of the appellants to make their claim known to the transition authority but they failed to do so. They submitted that the LPOs produced by the appellant do not supersede a contract and that the tendering process was very clear as stated by DW1. They argued that the amount claimed was unascertained as the same was not presented to the transition authority. That the respondent did not issue a certificate of completion of works and even the LPOs produced in court were not signed by the defunct county council. They urged the court not to allow the appeal and interests claimed as it is not clear whether the work was done at all.

13. The trial court found that from evidence, indeed, there existed a contractual relationship between the parties notwithstanding that there was no contract to that effect. The learned magistrate found that the appellant herein has done itself an injustice by failing to submit its claim to the transition authority even though they had an opportunity to do so. It was on this basis that the suit failed.

14. From the foregoing, in my view, the main issue for determination is whether the appellant should succeed in his claim as pleaded in the plaint.

15. The trial court considered the evidence placed before it and found that there existed a contractual relationship between the parties. I have looked at the evidence afresh and specifically exhibits nos. 1, 5, 10 and 16 as well as the original copies filed at trial. They are LPO 1302-0015 dated 11th February 2013, LPO 1302-0017 dated 13th February 2013, LPO 1302-0014 dated 11th February 2013 and LPO 1302-0016 dated 13th February 2013 respectively and I note that they were system-generated by the respondent’s predecessor and fully signed and dated by the relevant officials.

16. According to DW1, LPOs are issued before payments are disbursed. DW1 further stated that within the tendering process for the county government, the LPOs are usually produced by the respondent and issued to a contractor. The process may be different between the now defunct county council and the current county government, however, as rightly stated by DW1, the former was succeeded by the latter. In fact, among several other demands for the payment, the appellant wrote a demand letter dated 17th December 2014 to the respondent through the law firm of J.N. Mbuthia & Co. Advocates. The said letter was stamped as received on 23rd December 2014.

17. The invoices produced by the appellant are unsigned and not acknowledged. The appellant’s invoices numbers 6272, 6260,6259 and 6258 for Kshs. 559,000/=, Kshs. 782,600/=, Kshs. 860,000/= and Kshs. 860,000/= respectively, are not stamped as received by the respondent. Further, the amounts claimed relate to hours of work spent by the appellant’s workers, and yet the work tickets are not properly signed by the supervisors and it is not easy to tell who the supervisors were. However, the LPOs were issued and the same seem authentic and must have been processed in furtherance of transactions between the appellant and the respondent. In its response, the respondent denied knowledge of any contract with the appellant and that whatever existing claim should have been raised with the transition authority. I take it that there was an understanding between the County Council of Kirinyaga, now the respondent (in the absence of the transition authority) that the appellant would grade the roads which are within the jurisdiction of the respondent, in exchange for money to be paid at a later date. Otherwise, it is absurd to think that the appellant would have decided to work on the roads free of charge.

18. The appellant produced copies of payment certificates numbers 8762, 8764 and 8765, being for the amounts of Kshs. 867,568, Kshs. 700,728/= and Kshs. 834,200/=, all having been paid to the appellant through cheques on 26th February 2013 by the respondent’s predecessor. This is evidence that the appellant was paid some money for the same project and what he is now claiming is the balance of what is owing to it.

19. Based on this understanding, it is my view that there was a promise made by the County Council of Kirinyaga, now the respondent, to the appellant. In the absence of a written contract of any sort as stated by both parties, I take it that this was a promise upon which the parties herein transacted. In other words, this is merely a transaction and not necessarily a contract and should not be treated as a contract. Therefore, none of the parties should fall back to the strict provisions of the law at this point because none of the parties began the transaction by a legally acceptable contract process. If justice is to be served herein, it will be through application of the equitable remedy of estoppel by convention.

20. According to Chitty on Contracts Vol. 1 General Principles, Twenty-Eighth Edition, 1999 at pages 222-224 the learned author stated as follows regarding estoppel by convention;“3-100: estoppel by convention may arise where both parties to a transaction ‘act on assumed state of facts or law, the assumption being either shared by both or acquiesced in by the other’. The parties are then precluded from denying the truth of that assumption, if it would be unjust or unconscionable to allow them (or one of them) to go back on it.3-103: the effect of this form of estoppel is to preclude a party from denying the agreed or common assumption. One such assumption may be that a particular promise has been made”

21. In the English case of Tinkler Vs. Commissioners for Her Majesty’s Revenue and Customs (2021) UKSC 39 the court stated thus with reference to the doctrine of estoppel by convention:“It is also true that many statements of the doctrine refer to there being a transaction between the parties……...It is also correct that many of the statements of the doctrine by commentators, such as Chitty on Contracts, 33rd ed (2018), para 4-108 and Snell’s Equity, 34th ed (2020), at 12-012, refer to there being a transaction between the parties.”

22. In the local case of Carol Construction Engineers Limited & another Vs National Bank of Kenya (2020) eKLR the court held that:“….the doctrine of equitable estoppel prevents a party from acting inconsistently with a promise the party has made if that promise or representation had the effect of inducing another party to reasonably rely on it to that other party’s detriment. From a scan of our decisional law, one must show the following five elements in order to establish estoppel by representation or promissory estoppel:a.Representation: There must be a representation by the representor in words or by acts or conduct;b.Reasonableness: The person relying must satisfy the Court that it was reasonable for them to rely on the representation;c.Reliance: the victim must demonstrate that he was induced by the representation and in such reliance acted on it;d.Detriment: the victim must show that in acting in reliance of the representation he suffered some detriment or changed his position; ande.Unconscionability: the victim must demonstrate that it would be unconscionable to permit the representor to resile from the representation.Where each of these elements is demonstrated, a party will be permitted to raise an estoppel to prevent the opposite side from going back on their word and establishing by evidence any averment which is substantially at variance with his former representation.”

23. The circumstances of this case, when tested against the above-mentioned elements, pass the test. The respondent (as successor of the County Council of Kirinyaga) conducted itself in such a way as to make the appellant believe that it (the respondent) would pay the sum captured in the LPOs. The LPOs did not appear from thin air as the same must have been made and were intended to be paid to the appellant following a transactional agreement between the parties. In fact, some payments in relation to the same works were made to the appellant and at this point, it is absurd that the respondent would feign knowledge of a transactional relationship with the appellant.

24. The appellant proceeded with the road-grading works relying on the promise that they would be paid an amount of money that was agreed and which amount the appellant claims. It is the appellant’s case that if the respondent, or its predecessor does not acknowledge the understanding they had, it (the appellant) will suffer detriment. It would be unjust and unconscionable to allow the respondent to go back on its promise to the appellant in this transaction.

25. At no point has the respondent denied that the roads were indeed graded. The standard of work should not be a question at this point because it ought to have been raised before the trial court. Having found that this was merely a transaction, in my view, the appellant did its part of the transaction and ought to be paid its dues. Therefore, the respondent is estopped from denying that it owes the appellant the sum pleaded.

26. It is already established that the transition authority is no longer an option for the appellant to pursue its claim and the said authority no longer has its mandate as stipulated in the Transition Authority Act. The matter is now before the court and I must say that it is not in the character of the courts to deprive parties of justiciable recourse. In addition, the trial magistrate indeed erred in basing its judgment on an issue that the same court had already determined in the preliminary objection which was raised before the hearing.

27. In the end, I do find that the appeal succeeds and is hereby allowed with orders as follows:i.The trial court’s judgment is hereby set aside;ii.The respondent to pay the appellant the sum of Ksh. 3,060,000/= plus interest at court rates starting February 2013 until payment in full; andiii.Costs of the trial and this appeal be to the appellant with interest at court’s rates.

28. It is so ordered.

DELIVERED, DATED AND SIGNED AT KERUGOYA THIS 3RD DAY OF NOVEMBER, 2023. L. NJUGUNA................................JUDGEI certify that this is a true copy of the originalSignedDEPUTY REGISTRAR……………………………………………………for the Appellant……………………………………………………for the Respondent