Works & another v Wananchi Group (Kenya) Limited [2022] KEHC 12924 (KLR)

Works & another v Wananchi Group (Kenya) Limited (Civil Appeal E09 of 2021) [2022] KEHC 12924 (KLR) (Commercial and Tax) (14 September 2022) (Judgment)

Neutral citation: [2022] KEHC 12924 (KLR)

Republic of Kenya

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

Commercial and Tax

Civil Appeal E09 of 2021

DAS Majanja, J

September 14, 2022

Between

Gady Motors Works

1st Appellant

Indomitable Auctioneers

2nd Appellant

and

Wananchi Group (Kenya) Limited

Respondent

Judgment

1. The appellants have filed an appeal with the court challenging the decision of the subordinate court dated June 30, 2020 where the respondent was awarded KES 300,000. 00 as general damages plus costs and interest.

2. The facts giving rise to this appeal are common ground and can be gleaned from the record. The 1st appellant is a garage and conducts routine maintenance of the respondent’s motor vehicles. At the material time, the respondent delivered motor vehicles registration numbers KBY 7xxL, KBW 2xxT, KAR 9xxY, KBK 3xxE and KCH 7xxW (“the motor vehicles”) to it for repair. Upon completion of the repairs, the 1st appellant demanded payment of KES 1,637,087. 97 by an invoice dated July 27, 2017. When the respondent did not honour the invoice, the 1st appellant detained the motor vehicles and instructed the 2nd appellant to recover the said amount by way of auction. The 1st appellant then issued the respondent with a revised invoice inclusive of storage charges of KES 207,900. 00 making a total of KES 1,844,989. 97.

3. The respondent disputed the demand whereupon the parties commenced negotiations to resolve the dispute. As a result, the parties agreed that the amount due to the 1st appellant was KES 1,336,166. 00. On August 25, 2017, the respondent remitted KES 996,625. 85 to the 1st appellant. However, the 1st appellant continued to hold and exercise lien over the motor vehicles claiming that the respondent had not paid the sum of KES 1,336,166. 00 agreed upon.

4. The respondent filed suit by way of the plaint dated September 4, 2017 claiming that the 1st appellant’s demand of KES 1,844,989. 97 was excessive, exaggerated and unfair and the demand and proclamation by the 2nd appellant was unlawful. Following the agreement on the gross amount due of KES 1,336,166. 00, the Respondent complained that the 1st appellant had failed to not only release the motor vehicles but also failed to account for the tax it demanded from the 1st appellant, failed to produce proof of remittance of tax and issued unverifiable ETR receipts yet opposing the withholding of tax by the Respondent, as legally required.

5. The respondent further accused the 1st appellant of fraud and prayed for a mandatory injunction directing the appellants to return the motor vehicles, a permanent injunction restraining the appellants from interfering with the respondent’s ownership and possession of the motor vehicles, general damages, costs of the suit and interest.

6. The appellants responded to the suit through an amended statement of defence and counterclaim dated September 7, 2018 denying the respondent’s averments and insisting that the sum of KES 848,364. 12 remained unpaid. It insisted that it had a right of lien over the motor vehicles to secure payment of the outstanding sum.

7. The matter was set down for hearing with each party calling witnesses in support of their respective positions. After considering the oral and documentary evidence as well as the parties’ submissions, the court rendered the judgment that is subject of this appeal. In the judgment, the court framed two main issues for determination; whether the respondent’s claim was merited and whether the appellants’ counterclaim was merited. The court held that at the time of the judgment, it could not grant the injunction as the motor vehicles had been released. It found that the respondent’s evidence that the 1st appellant unlawfully levied VAT charges was not rebutted at all and that there was evidence that the 2nd appellant’s employees served the proclamation notice without his instructions and knowledge. The court held that the appellants also admitted that the minutes of the meeting by the parties held at the 1st appellant’s offices on August 23, 2017 were genuine and that the parties held several reconciliation meetings.

8. The trial court concluded that the respondent had proved its case on the balance of probabilities and had fulfilled its obligation, paid the outstanding balance and that there was no basis for withholding the motor vehicles after payment was made hence the proclamation was also unlawful. The court relied on the decision in Wanjohi v Resma Commercial AgenciesLtd& another NKR HCCA No 91 of 2002 eKLR and awarded the respondent general damages of KES 300,000. 00 as compensation for the wrongful detention of the respondent’s motor vehicles.

9. The court further found that the appellants’ claim for a further KES 848,364. 12 was not justified and the claim for auctioneers and storage charges was also not proved. The court dismissed the appellants’ counterclaim.

10. This appeal was canvassed by written submissions which were highlighted orally by the counsel. It is important to recall that this is a first appeal hence this court has a duty to examine matters of both law and facts and subject the whole of the evidence to a fresh and exhaustive scrutiny, drawing an independent conclusion from that analysis and bearing in mind that the court did not have an opportunity to hear the witnesses first hand (see Ajay Shah v Deposit Protection Fund Board as Liquidator of Trust Bank Limited (In Liquidation) NRB CA Civil Appeal No 158 of 2013 [2016] eKLR, Selle v Associated Motor BoatCo Ltd [1968] EA 123).

11. I have considered the parties’ submissions in light of the evidence on record. It is common ground that at a meeting held by the parties on August 23, 2017, it was agreed that the respondent would pay KES 1,336,166. 00 by the same date. The agreement stated as follows:"The parties present have agreed to pay KES 1,336,166,00 by August 23, 2017 and Gady to raise the invoice of towing and KBX 845B total KES 48,250. 00 to be paid by Wananchi Group in the next payment (sic) in September 15, 2017. After this 1st payment Wananchi Group are free to collect their vehicle immediately (as from 23rd August)."

12. Following the agreement, it is also common ground that the respondent paid KES 996,625. 85 stating that the balance amounted to double VAT charged across all invoices. In its evidence, the respondent stated that it requested the 1st appellant for VAT certificates and credit notes for the overcharge which were not provided. The respondent’s advocates, in a letter dated August 28, 2017 raised the issue of, tabulated and justified the double VAT charged which resulted in the respondent paying KES 996,625. 85. The 1st appellant denied this claim.

13. The issue for resolution before the court as concerns the respondent’s claim was whether the appellants wrongfully detained the motor vehicles. A mechanic has a right to exercise a lien for unpaid services. In the agreement evidenced by the minutes of the August 23, 2017 meeting, the respondent expressly recognized the 1st appellant’s lien. It is this basis that the 1st appellant agreed to release the motor vehicles on payment of the agreed amount. The agreement, arrived at after reconciliation of accounts, was very clear that motor vehicles would be released upon payment of KES 1,336, 166. 00. The respondent did not pay the amount agreed upon but raised other issues concerning taxes which I find and hold was an attempt to vary the agreement.

14. The trial magistrate failed to consider that the parties had entered into the agreement and instead proceeded to find that the 1st Appellant dealt with VAT claims by the respondent casually. As long as the agreement remained in place, I do not think the respondent or the court could ignore it. After all, the general principle is that parties are bound by their agreement and as was stated by the Court of Appeal in National Bank of Kenya Ltd v Pipeplastic Samkolit (K) Ltd & another NBI CA Civil Appeal No 35 of 1999 [2001] eKLR,“A court of law cannot re-write a contract between the parties. The parties are bound by the terms of their contract, unless coercion, fraud or undue influence are pleaded and proved. There was not the remotest suggestion of coercion, fraud or undue influence in regard to the terms of the charge.”The issues raised by the respondent are separate claims which ought to have formed the basis of its own claim or pleaded as a set off against the counterclaim. I therefore find and hold that under the agreement, as long as the respondent had not paid KES 1,336,166. 00 as agreed, the 1st appellant was entitled to hold the motor vehicles.

15. Since the respondent failed to pay the full amount agreed upon under the agreement, the appellant retained the right of lien and could not be liable for damages from wrongful detention of the motor vehicles as long as the respondent had not paid the balance. The right to exercise a lien does not confer on the holder the right to sell the goods. It was therefore irregular for the 1st appellant to instruct the 2nd appellant to proclaim the motor vehicles. In any case, the 2nd appellant admitted before the Auctioneers Licensing Board that the proclamation notice was issued by its employees without instructions.

16. Ultimately and on an independent analysis of the evidence, I find and hold that the respondent did not comply with the clear and unequivocal agreement to pay the 1st appellant KES 1,336,166. 00 in order to secure release of the motor vehicles. The respondent could only raise the issue of taxes as a separate claim or claim a set off against the amount claimed by the 1st appellant as the balance due under the agreement.

17. Turning to the counterclaim, the 1st appellant’s case is that following the agreement and part payment, there was a balance of KES 339,540. 15 remaining in addition to the sum of KES 848,364. 12 which was outstanding on account of repair works and maintenance. I have considered the entirety of the evidence and I hold that the reconciliation of accounts by the parties resulted in the agreement which settled the amount due. Since the respondent paid part of the said sum, the 1st appellant is only entitled to the balance of KES 339,540. 15. The claims for auctioneers’ and storage charges likewise cannot stand for the same reason and because they are in the nature of special damages they ought to have been pleaded.

18. For the reasons stated above, I find that the trial magistrate erred by failing to give effect to the agreement between the parties where they agreed on payment of a specific amount as a condition for release of the motor vehicles. The trial magistrate also failed consider the fact that there was an outstanding balance under the agreement due to the 1st appellant which was not subject to any set off or cross-claim by the respondent.

19. Consequently, and for the reasons I have set out above, I allow the appellants’ appeal and set aside the judgment of the subordinate court dated June 30, 2020 and substitute it with a judgment on the following terms:(a)The respondent’s claim before the subordinate court be and is hereby dismissed with costs to the 1st appellant.(b)The 1st appellant’s counterclaim is allowed on terms that judgment be and is hereby entered for the 1st appellant against the respondent for the sum of KES 339,540. 15 with interest thereon from the date of filing suit until payment in full with costs to be paid by the respondent.(c)The respondent shall pay the appellants’ costs of this appeal assessed at KES 40,000. 00 only.

DATED AND DELIVERED AT NAIROBI THIS 14TH DAY OF SEPTEMBER 2022. DS MAJANJAJUDGECourt Assistant: Mr M Onyango.Ms Nyambane instructed by Moraa Nyambane and Company Advocates for the appellants.Mr Gakunga instructed by Kimani and Michuki Advocates for the respondent.