South Nyanza Sugar Co Ltd v Doo [2023] KEHC 23583 (KLR) | Contract Breach | Esheria

South Nyanza Sugar Co Ltd v Doo [2023] KEHC 23583 (KLR)

Full Case Text

South Nyanza Sugar Co Ltd v Doo (Civil Appeal E065 of 2021) [2023] KEHC 23583 (KLR) (12 October 2023) (Judgment)

Neutral citation: [2023] KEHC 23583 (KLR)

Republic of Kenya

In the High Court at Migori

Civil Appeal E065 of 2021

RPV Wendoh, J

October 12, 2023

Between

South Nyanza Sugar Co Ltd

Appellant

and

George Opola Doo

Respondent

(An Appeal from the Judgement and Decree of Hon. R.K. Langat Principal Magistrate (PM) dated and delivered on 29/6/2021 in Rongo PMCC No. 108 of 2018)

Judgment

1. South Nyanza Sugar Co. Ltd (the appellant) commenced this appeal against the judgement and decree of the Hon. R.K. Langat dated and delivered on 29/6/2021. The appellant is represented by the firm of Okong’o Wandago & Co. Advocates while the respondent is represented by the firm of Oduk & Co. Advocates.

2. In the court proceedings of 25/1/2023, before Odera J, Mr. Oduk Counsel for the respondent asked that the orders herein to apply in HCCA Nos. 66, 67 and 74 of 2021.

3. George Opola Doo (the respondent) filed a suit by a plaint dated 10/10/2017. The respondent sued the appellant for damages for breach of contract, costs of the suit, interest from 13/10/2009 until payment in full and any other relief. The respondent pleaded that by an agreement dated 13/10/2009, the appellant contracted him to grow and sell to it sugarcane on his parcel of land measuring 0. 4 hectares being plot number 522 field no. 3 in Kakmasia sub - location; that the respondent duly signed the agreement and was assigned account number 264666 and planted the cane as agreed.

4. It was further pleaded that it was a term of the contract that it would commence on 13/10/2009 and remain in force for a period of 5 years, or until one plant crop and two ratoon crops of the sugarcane are harvested whichever period shall be less; that it was a further express/implied term of the contract that within the 5 years period, the plant and ratoon crops would be harvested at 22 - 24 months and 16 - 18 months respectively. The appellant contended that in breach of the agreement, the respondent failed, refused and/or neglected to harvest the plant and ratoon crops. The appellant particularized the loss of damages at a total of Kshs. 405,000/=.

5. The respondent filed a defence dated 27/3/2018 denying the allegations in the plaint and put the respondent to strict proof. It was averred that the suit was statute barred by virtue of section 4 of the Limitations of Actions Act, cap 22 Laws of Kenya. The respondent further denied the claim of Kshs. 405,000/= as damages for breach of contract and stated that the plant crop would only have yielded 48. 76 tonnes and the ratoon crops Kshs. 12. 19 tons and the price would have been Kshs. 1,730/= per tonne. The respondent asked the trial court to dismiss the suit with costs.

6. The suit proceeded for hearing. The respondent testified in support of his case while Justus Otieno testified on behalf of the appellant. The trial court entered judgement in favour of the respondent.

7. Being dissatisfied with the judgement and decree, the appellant filed a memorandum of appeal dated 28/7/2021 on the following grounds: -i.That the learned trial magistrate erred in law and in fact in failing to hold that the respondent’s suit in the subordinate court was statute barred;ii.That the trial court erred in law and in fact in failing to hold that the respondent did not prove the damages of Kshs. 164,080 which were neither specifically pleaded nor proven;iii.That the trial court erred in law in failing to find that the respondent’s evidence was at variance with his pleadings;iv.That the trial court erred in law and in fact when it failed to make provision for transport, harvesting and other charges when it was duty bound to do so.

8. The appellant prayed: -i.That the judgement and decree dated 29/6/2021 be set aside.ii.The respondent’s suit before the subordinate court be dismissed.iii.Costs of the suit and this appeal be awarded to the appellant.

9. Directions on the appeal were taken that the appeal was canvassed by way of written submissions. Both parties complied. The parties mainly dwelt on the issue of whether the suit was statute barred and they took a diametrical view on the same.

10. I have considered the appeal, the submissions by the parties and the trial court’s record and the following are the issues for determination: -i.Whether the suit filed in the lower court was statute barred.ii.Whether the respondent was entitled to damages awarded.

11. This being the first appellate court, the court has a duty to re-evaluate and analyse all the evidence tendered in the lower court and arrive at its own conclusions but bearing in mind that it neither saw nor heard the witnesses testify. It has to establish whether the decision of the lower court was well founded. The court is guided by the decision in Selle & another v Associated Motor Boat Co. Ltd (1968) EA 123.

12. A similar holding was held in the Court of Appeal for East Africa which took the same position in Peters v Sunday Post Limited [1958] EA 424 where Sir Kenneth O’Connor stated as follows: -“It is a strong thing for an appellate court to differ from the finding, on a question of fact, of the judge who tried the case, and who has had the advantage of seeing and hearing the witnesses. An appellate court has, indeed, jurisdiction to review the evidence in order to determine whether the conclusion originally reached upon that evidence should stand. But this is a jurisdiction which should be exercised with caution; it is not enough that the appellate court might itself have come to a different conclusion…”

13. On the first issue for determination, it is not in dispute that parties entered into a contract which commenced on 13/10/2009. It was a term of the contract that it would continue for a period of 5 years or until one plant crop or two ratoon of the sugar cane were harvested whichever came first. Clause 1 (f) of the contract provided that the maturity date of the plant crop was not later than 24 months and of each of the two ratoon crops not later than 22 months.

14. It was a further term of the contract under paragraph 3. 1 that within three months of signing the agreement, the grower would clear the plot and grant the miller access to the plot. None of the parties led evidence before the trial court on the exact date when the crop was planted and/or developed. However, Julius Otieno the appellant’s Senior Field Supervisor testified that the respondent was assisted to develop the cane. The assumption therefore is that the cane was developed as from the time of signing the contract.

15. The maturity date of the plant crop is not less than 24 months. The contract was signed on 13/10/2009. The expected maturity date of the plant crop was to be harvested was on or before 13/10/2011.

16. The main issue in contention is when does the breach of contract occur. The appellant took the position that the breach occurred on 13/10/2011 when it failed to harvest the plant crop. On the other hand, the respondent’s position is that since the contract ran for a period of 5 years, the breach only occurs at the end of the contract period and time starts running then.

17. Section 4 (1) of the Limitation of Actions Act provides as follows in relation to actions on contracts, tort and certain other actions: -“The following actions may not be brought after the end of six years from the date on which the cause of action accrued -a.actions founded on contract…”

18. As provided by Statute, actions relating to contracts can only be brought to court before the lapse of six years from the time when the cause of action accrued. According to Black’s Law Dictionary (10th Edition) the word “accrue” means “to come into existence as an enforceable claim or right.” Therefore, in interpreting the word accrued as per the Statute, the cause of action on breach of contract can only be brought at the time the actual breach occurred. This is when it can be said that time started running.

19. The Court of Appeal in Maersk Kenya Limited v Murabu Chaka Tsuma (2017) eKLR had an occasion to discuss when a cause of action accrues as follows:-“In determining whether the claim filed by the respondent was time barred, it is not in dispute that the cause of action arose on 20th November 2006 when the respondent was dismissed from employment. It is also not in dispute that the cause of action arose prior to the enactment of the Employment Act, 2007, so that in computing whether the suit was time barred, the applicable law was section 4 (1) (a) of the Limitation of Actions Act which provides that actions founded on contract may not be brought after the end of six years from the date on which the cause of action accrued.When six years is computed from when the cause of action arose on November 20, 2006, there is no question that the suit ought to have been filed latest before November 19, 2012. Instead it was filed four months later on March 21, 2013. ” (emphasis mine)

20. This court, constituted differently, has dealt with this issue. Mrima J in the case of South Nyanza Sugar Company Limited v Diskson Aoro Owuor (2017) eKLR held: -“There is no doubt in this matter that the parties entered into a contract and which contract was allegedly breached. What is for determination is when exactly the cause of action accrued since from that time the limitation period of 6 years starts running. I do not find that issue difficult to decide on. I say so because when a party enters into a contract for a specific period of time, it does so in the understanding and belief that each of the parties to the contract will observe its part thereof until full execution of the contract. It is only when one of the parties happens to be in breach of the contract that a possible cause of action arises as at that date of the alleged breach and not at the end of the contract period.”

21. Later on, the learned Judge departed from his holding in South Nyanza Sugar Company Limited v Diskson Aoro Owuor (supra) and held in several other decisions that the breach occurs after the end of the contractual period that is, 5 years but not when one of the three crops is to be harvested. Refer to the decisions in Sipora Achieng Ayege v South Nyanza Sugar Co. Ltd HCCA No. 105 of 2010, Zadock Danda v South Nyanza Sugar Co. Ltd (2018) eKLR and South Nyanza Sugar Co. Ltd v Ezekiel Oduk (2019) eKLR. The same position was taken by Sitati J in South Nyanza Sugar Co. Ltd v Paul N. Lila (2014) eKLR.

22. In B. Mathayo Obonyo v South Nyanza Sugar Co. Ltd (2019) eKLR Majanja J agreed with the approach taken in the case of South Nyanza Sugar Company Limited v Diskson Aoro Owuor (supra) but differed with position taken by Sitati J in South Nyanza Sugar Co. Ltd v Paul N. Lila (supra) and held as follows: -“In my view, the question under section 4(1) of the LAA is when does the cause of action accrue? I adopt the position taken in South Nyanza Sugar Company Limited v Diskson Aoro Owuor (supra) in determining when the cause of action accrue. According to Black’s Law Dictionary (10th Edition) the word “accrue” means “to come into existence as an enforceable claim or right.” Thus under the outgrowers cane agreement, such as the one subject to the suit, the right to sue for breach of contract arose when one of the parties failed to meet its obligations under the contract. In the case at hand this could only arise when the respondent failed to harvest the plant crop. This is when the cause of action accrued and when, in terms of section 4(1)(a) of the LAA, the time begins to run.”

23. This court has always taken the position that the action accrues and/or a breach occurs when the miller fails to harvest any of the three crop cycles. The difficulty with taking the position that an action accrues at the end of the 5 years contract period, is that the performance of sugar contracts is dependent on the maturity and harvest of any of the crop cycles; which maturity has a specified period of time. The contract cannot be termed to have been fully performed without the harvest of either of the three cycles.

24. Thus, in taking the present instance where the contract was entered in 13/10/2009 and the maturity period of the plant crop is not earlier than 24 months and each of the ratoon crops is not earlier than 22 months, the harvest computation will be as follows: -a.Plant Crop on or before 13/10/2011. b.1st ratoon on or before 13/7/2013. c.2nd ratoon on or before 13/4/2015.

25. From the foregone, the end of the contract period can only be after 13/4/2015 but not earlier. If the argument is that time starts running at the end of the 5 years contract period, that is, on 13/10/2014, the maturity period of the plant crops and the ratoons would fall outside but not within the ambit of the 5 years period. It would still therefore mean that a breach will have occurred as the 2nd ratoon will not have been harvested by the end of the 5 years period. Another problem would arise as to when time would start running and the question would be, is it before or after the harvest of the 2nd ratoon. The drafters of the standard contracts in the appellant’s company should relook into the clause which stipulates the period in which the contract should be running.

26. Taking into account the definition of the word “accrue” and the provisions under Section 4 (1) of the Limitation of Actions Act and the interpretation thereof of when a breach occurs by the Court of Appeal in Maersk Kenya Limited (supra), this court’s view and it hereby reiterates its position is that a breach occurs when a miller fails to harvest any of the crop cycles.

27. In this instance, the breach occurred on 13/10/2011 when the appellant failed to harvest the plant crop. Time started running therefrom and the suit ought to have been filed before the lapse of 6 years that is, on or before 13/10/2017. The suit was filed in the lower court on 7/2/2018. The suit was therefore filed outside the limitation period by about 3 months. There is no evidence that the respondent sought leave of the court to institute the proceedings out of time.

28. The foregone discussions brings this court to the conclusion that the appeal is meritorious and is allowed.

29. The trial Magistrate’s judgement and decree dated and delivered on 29/6/2021 is hereby set aside. Having found so, the second issue for determination falls by the way. This judgement shall also apply to Migori HCCA Nos. 66, 67 and 74 of 2021.

30. Costs of the appeal and lower court to the appellant.

DATED, DELIVERED AND SIGNED AT MIGORI THIS 12TH DAY OF OCTOBER 2023. R. WENDOHJUDGE