THE REPUBLIC OF KENYA
IN THE HIGH COURT OF KENYA AT NAIROBI
COMMERCIAL AND TAX DIVISION
HCCOMMA NO. E145 OF 2022
DOMINO (INTL) HOTEL MANAGEMENT
COOPERATION LIMITED…………...………………………….APPELLANT
-VERSUS-
SONGHONG FREIGHT SERVICES LIMITED….……………RESPONDENT
(Being an Appeal from the judgment of Hon. V.M. Mochache, Resident Magistrate & Adjudicator of the Small Claims Court in SCCCOMM E3623 of 2022 delivered on 3rd September, 2022).
JUDGMENT
1. The plaintiff (respondent) filed a suit against the defendant (appellant) in the lower Court vide a statement of claim dated 14th June, 2022 seeking judgment against the appellant in the sum of Kshs.926,058.00, interest thereon from 26th August, 2019 at a commercial rate of 14% per annum until payment in full, and costs of the claim. The respondent’s case was that sometime in July 2019, the appellant retained its services to import and clear goods from China, and that it undertook the said services on behalf of the appellant as a consignee, and thereafter raised an invoice for the sum of Kshs.2,477,658.56 on 26th August, 2019. The respondent claimed that upon delivery of the imported goods, the appellant failed, refused and/or neglected to pay the balance of the agreed fees of Kshs. 926,058.00.
2. In opposition to the respondent’s claim, the appellant filed a response to statement of claim and counter-claim dated 1st July, 2022, where it denied owing the respondent any money and averred that it retained services of the respondent to clear goods from China, which goods had already been paid for in China. The appellant stated that upon clearing the goods, the respondent was paid a total of USD 62,957.00 which was equivalent to Kshs.6,522,552.40 after conversion into Kenya Shillings at the then rate of Kshs.103.6 to the dollar, which sum was in excess of the amount agreed on by the parties herein.
3. The appellant averred that it was agreed between it and the respondent that the sum for clearance of one container was Kshs.2,700,000/=, and since the appellant only imported two containers, the respondent was entitled to Kshs.5,400,000.00 from the appellant leaving an overcharge of Kshs.1,122,552.40 which it was claiming. In the end, the appellant sought for the Trial Court to dismiss the respondent’s claim with costs to the appellant, and enter judgment for the appellant against the respondent in the sum of Kshs.1,122,552.40 as prayed in the counter-claim.
4. The respondent filed a reply to the response, and a response to counter-claim dated 18th July, 2022 where it denied the averments contained in the appellant’s response to the statement of claim and counter-claim and averred that while the initially agreed clearing fees per container was Kshs.2,700,000/=, the weather conditions at Maasai Mara National Reserve where the consignment was to be delivered made it impossible for the respondent to get truck drivers willing to deliver the goods at the initially agreed price. That the respondent consulted with the appellant’s instructing Director who approved an increment in the clearing fees to Kshs.2,850,000/=.
5. The respondent further averred that in addition to the clearing charges, it incurred other charges on account of the appellant such as the ocean freight charges, SGR to ICD logistics charge, warehouse charges, DHL charges, purchasing containers for the respondent, overdue warehousing charges, offloading charge, transport charges, and inspection charges.
The respondent contended that the total sums owed to it by the appellant were captured in the debit notes dated 2nd September, 2019 and 29th May, 2019, which the appellant was expected to settle in full. The appellant stated that the exchange rate at the time of the transaction was Kshs.107/= against the dollar and Kshs.18/= against the RMB.
6. Judgment was delivered by the Trial Magistrate on 23rd September, 2022, where she found that the respondent’s claim was successful and entered judgement for the respondent against the appellant in the sum of Kshs.806,205.20, together with costs and interest at Court rates from the date of filing the claim until payment in full. The Trial Magistrate then dismissed the appellant’s counter-claim with no order as to costs.
7. The appellant being dissatisfied with the said judgment filed a Memorandum of Appeal dated 11th October, 2022 raising the following grounds of appeal -
i) The Court erred in law in hearing and determining a dispute in which the counter-claim was in excess of its jurisdiction whereupon it unlawfully compelled the appellant to abandon any amount in excess of its jurisdiction;
ii) The Court erred in law in ignoring the facts admitted in the respondent’s pleadings and placed a legal burden on the appellant to prove the said admitted facts to the appellant (sic);
iii) The Court erred in law in basing its decision on invoices that were addressed to entities other than the appellant which entities had no connection with the appellant in any way despite the Court finding that indeed the invoices where sent to entities other than the appellant;
iv) The Court erred in law in failing to appreciate that upon admission by the respondent’s witness that the respondent had been paid Kshs.6,522,522.40, the respondent was overpaid in any event whether the clearing cost per container was Kshs.2,700,000/= or Kshs.2,850,000/= per container as pleaded in the respondent’s pleading; and
v) The Court erred in law in failing to analyze the evidence presented by the claimant despite making a finding that “the sums due kept on metamorphosing as the transaction progressed” but instead proceeded to blame the appellant for not objecting to the metamorphosis.
8. The appellant’s prayer is for the appeal herein to be allowed with costs, for the judgment of the Small Claims Court delivered on 23rd September, 2022 to be set aside and for the claim against the appellant to be dismissed. The appellant also prays for judgment to be entered against the respondent as prayed in the counter-claim, and for the appellant to be awarded costs for the claim in the Small Claims Court.
9. The appeal herein was canvassed by way of written submissions. The appellant’s submissions were filed by the law firm of Muriungi & Company Advocates on 29th June, 2023, whereas the respondent’s submissions were filed on 26th July, 2023 by the law firm of Wambugu & Muriuki Advocates.
10. Ms. Okun, learned Counsel for the appellant relied on the case of the Owners of the Motor Vehicle “Lillian S” v Caltex Oil (Kenya) Ltd [1989] eKLR, 1 and Section 12(3) of the Small Claims Court Act and submitted that the appellant’s counter-claim exceeded the pecuniary jurisdiction of the Small Claims Court, which issue was brought to the Court’s attention but the appellant was compelled to proceed with the suit as the Court was unwilling to down its tools. Counsel referred to the provisions of Section 107(1) of the Evidence Act and the Court of Appeal decisions in of Choitram v Nazari [1984] KLR 327 and Charterhouse Bank Ltd v Frank N. Kamau [2016] eKLR, which cited the decision in Karugi & another v Kabiya & 3 others [1987] KLR 347, and submitted that the respondent’s witness admitted receipt of all the payments as pleaded in paragraph 3(c) of the appellant’s response to the statement of claim and in the counter-claim, thus it was not disputed that the agreed amount was fully paid and there was an over payment.
11. It was stated by Counsel that paragraph 4 of the respondent’s statement of claim states that the respondent raised an invoice of Kshs.2,477,658.56 which upon payment a balance of Kshs.926,058.00 remained unpaid, and that was the same amount indicated in the demand letter dated 25th May, 2022 and the invoice alleged to have been sent to the appellant. Counsel stated that in the respondent’s reply to the response and defence to the counter-claim, the said amount was revised to Kshs.2,850,000.00 without any supporting documents, despite the respondent admitting that the agreed clearing fees was Kshs.2,700,000.00 per container. In addition, Counsel stated that the respondent’s witness admitted that there was no written agreement to vary the original agreement. Ms. Okun cited the case of Housing Finance Co. of Kenya Limited v Gilbert Kibe Njuguna Nairobi HCCC No. 1601 of 1999 and contended that the remedies granted by the Court ought to give effect to what was voluntarily agreed upon and undertaken by the parties.
12. Counsel argued that the Trial Magistrate at paragraph 10 of her judgment erred by making an assumption as to the nature of the terms of engagement between the parties herein, and by arriving at a conclusion which had not been mutually agreed on by both parties. Counsel contended that by doing so, the said Magistrate took into account considerations which she should not have taken account of, and failed to take account of considerations which she should have taken into account.
It was submitted by Ms. Okun that the invoices found at pages 18, 57, 58, 89 & 90 of the Record of Appeal clearly show that they were addressed to Zhongtian and not to the appellant. She relied on the case of Kenya Akiba Micro Financing Limited v Ezekiel Chebii & 14 others [2012] eKLR and submitted that the respondent did not demonstrate why it did not invoice the appellant, but at paragraph 18 of the judgment, the Trial Magistrate shifted the said burden of proof to the appellant to prove that the said invoices were not meant for it.
13. Mr. Eredi, learned Counsel for the respondent referred to Rules 13 & 14 of the Small Claims Courts Rules, 2019 which provide that in cases where a respondent files a counter-claim that exceeds the pecuniary jurisdiction of the Small Claims Court, the respondent can choose to abandon the part of the counter-claim exceeding Kshs. One million, or file a separate claim in the Magistrates’ Courts to recover the whole of the amount counter-claimed. He submitted that on 1st August, 2022 during the hearing before the Trial Magistrate, the appellant chose to waive its claim over and above Kshs. One Million, thus the matter proceeded for hearing. He further stated that RW1, who testified on behalf of the appellant confirmed that the appellant was no longer interested in claiming the amounts above Kshs. One million, and for that reason, the appellant was estopped from seeking to challenge the jurisdiction of the Small Claims Court on that issue.
14. Counsel relied on the case of Christopher Kyalo Musau v Yangguang Property Design & Manufacturing [2020] eKLR and the provisions of Section 107 of the Evidence Act in submitting that the appellant failed to prove the counter-claim to the required standard, thus the Trial Court carefully considered all the evidence presented to it by both parties before making an informed decision on the case. He held the position that the respondent sufficiently proved its case by presenting cogent evidence that it would receive instructions to import various goods for the appellant via WhatsApp messages, it would then issue a cost breakdown, including the balance before the new instructions, the amount last paid amount and the total outstanding balance. He asserted that the respondent would always update the said breakdown on WhatsApp messages every time it would receive payment from the appellant, and contended that the appellant never contested any transactions presented.
15. Mr. Eredi cited the provisions of Section 78A of the Evidence Act and stated that it permits a Court to refer to electronic messages as evidence of an agreement for rendering services. Further, that the fact that the appellant would at various times send such instructions to the respondent means that the appellant is estopped from claiming overpayment when he is fully aware that there was a wider scope of instructions to the respondent. Counsel referred to the provisions of Section 83J of the Kenya Information and Communication Act which provides that save for statutory exempt contracts, a contract shall be valid and enforceable even when the contract is formed electronically. Counsel also relied on Section 83K which enjoins the Court to give effect to electronic messages where they demonstrate parties’ intentions to be bound and asserted that the WhatsApp correspondences tendered by the respondent formed written contracts.
16. It was submitted by Counsel that the Court erred in basing its decision on invoices that were addressed to entities other than the appellant and such an issue cannot be addressed at this stage since it is an evidentiary issue that requires the Court to interrogate the evidence, whereas appeals from the Small Claims Court are purely on points of law. He stated that the respondent’s witness indicated that the invoice dated 26th August, 2019 was meant for internal arrangements since it was for goods the appellant had asked it to pay for in China, and have the costs reimbursed, hence it was addressed to its local subsidiary. That with respect to the debit note dated 29th April, 2019 the respondent’s witness stated that it was drawn to Zhongtian on the instructions of the appellant and the said witness guided the Court to the relevant correspondence with the said instructions.
17. Mr. Eredi argued that even though the said debit note was wrongly addressed, it was still delivered to the appellant’s Director who then partially paid for the services, and that the respondent satisfactorily discharged its burden of proof. Counsel relied on the decisions in Twehangane Alfred v Uganda (Criminal Appeal No. 139 of 2001) [2003] UGCA 6 (17th February, 2003) as cited in MTG v Republic (Criminal Appeal E067 of 2021) [2022] KEHC 189 (KLR). He also relied on the provisions of Section 38 of the Small Claims Court Act which provides that appeals against the decisions of the Small Claims Court to the High Court should be confined to matters of law only, and submitted that the appeal herein should be dismissed since it is based on factual matters which require the Court to interrogate facts.
ANALYSIS AND DETERMINATION.
18. I have considered the Memorandum of Appeal, the Record of Appeal and the written submissions filed by Counsel for the parties. The issues that arise for determination are –
i) Whether the Trial Court erred in determining a dispute where the counter-claim exceeded the Small Claims Court pecuniary jurisdiction; and
ii) Whether the appeal herein is merited.
19. Section 38 of the Small Claims Act provides that –
“A person aggrieved by the decision or an order of the Court may appeal against that decision or order to the High Court on matters of law.”
20. The Court of Appeal in the case of John Munuve Mati v Returning Officer Mwingi North Constituency & 2 others [2018] eKLR summarized what amounts to “matters of law” as hereunder -
“The interpretation or construction of the Constitution, statute or regulations made thereunder or their application to the sets of facts established by the trial Court. As far as facts are concerned, our engagement with them is limited to background and context and to satisfy ourselves, when the issue is raised, whether the conclusions of the trial judge are based on the evidence on record or whether they are so perverse that no reasonable tribunal would have arrived at them. We cannot be drawn into considerations of the credibility of witnesses or which witnesses are more believable than others; by law that is the province of the trial court.”
21. This being an appeal, I am not permitted to substitute the Trial Court’s finding of facts with my own conclusions based on my own analysis and appreciation of the facts, unless the Trial Court’s decision cannot be supported by any evidence, or if the Trial Court misdirected itself.
Whether the Trial Court erred in determining a dispute where the counter-claim exceeded the Small Claims Court’s pecuniary jurisdiction.
22. The appellant in response to the respondent’s claim filed a response to the claim and a counter-claim, where it claimed from the respondent Kshs.1,122,552.40 for an alleged overpayment. The pecuniary jurisdiction of the Small Claims Court is provided for under Section 12(3) of the Small Claims Court Act which states as follows -
“The pecuniary jurisdiction of the Court shall be limited to one million shillings.”
23. This Court notes that in as much as the respondent’s claim was within the pecuniary jurisdiction of the Small Claims Court, the appellant’s counter-claim was not. As was correctly submitted by Counsel for the respondent, Rule 14 of the Small Claims Court Rules gives a respondent who wishes to file a counter-claim whose value exceeds the pecuniary jurisdiction of the Court various options. It states that -
“(1) A respondent who has a counterclaim exceeding two hundred thousand shillings may –
a) abandon that part of the counterclaim exceeding two hundred thousand shillings;
b) pursue his or her counterclaim in the proceedings and recover an amount not exceeding two hundred thousand shillings; or
c) file a separate claim in the Magistrates' Court to recover the whole of the amount counterclaimed.
(2) A respondent who abandons that part of the counterclaim exceeding two hundred thousand shilling shall state in his or her response that the amount in question is abandoned.
(3) A respondent who abandons any part of a counterclaim or setoff in accordance with this rule shall not be entitled to file a subsequent claim in any court to recover the amount stated as abandoned.”
24. The issue of the value of the counter-claim being above the Small Claims Court pecuniary jurisdiction was raised before the Small Claims Court on 1st August, 2022 when Counsel for the appellant indicated that if the Court was to direct that they proceed with the suit as it was, they would be forced to waive the amount over and above Kshs.1,000,000/=. Thereafter, the Court stated that they could proceed with the counter-claim if the appellant was willing to waive the amount over and above Kshs.1,000,000/=. There is however no record and/or evidence of whether the appellant or its Counsel on record indicated that they were willing or not, to waive the amount over and above Kshs.1,000,000/=. All that the record shows is that the claimant’s witness proceeded with his testimony.
25. It is however worthy of note that when the matter came up for hearing of the appellant’s case before the Trial Court on 23rd August, 2022, the appellant’s witness testified that they had not prayed for anything above Kshs. One Million. In the premise, I hold that the appellant categorically waived its claim over and above Kshs.1,000,000/=, and as such, the Trial Magistrate was clothed with the requisite jurisdiction to hear and determine the respondent’s claim and the appellant’s counter-claim.
Whether the appeal herein is merited.
26. As stated earlier in this ruling, appeals to the High Court from the Small Claims Court are on matters of law only. In Peter Gichuki King'ara v IEBC & 2 Others, Nyeri Civil Appeal No. 31 Of 2013 (Court of Appeal) (Visram, Koome & Odek, JJA) Of 13.02.2014, the Court of Appeal stated thus -
“it was held that it is trite law that the exercise of judicial discretion is a point of law and that the trial court in denying a prayer of scrutiny is exercising judicial discretion. The Court concluded that it would not be feasible for the Court of Appeal to order for a recount and scrutiny as this would involve matters of fact that were within the jurisdiction of the trial court. The court further held that the question of whether the trial judge properly considered and evaluated the evidence and arrived at a correct determination that is supported by law and evidence – with the caveat that the appeal court did not see the witness demeanor – is an issue of law.”
27. The Trial Magistrate in her judgment identified only one issue for determination being, whether the appellant owed the respondent an outstanding amount of Kshs.926,058.00 for services rendered, or whether the respondent owed the appellant Kshs.1,122,552.40 as an overpayment.
28. It is not in dispute that the appellant contracted the respondent to import and clear goods for it from China, and the respondent fulfilled its part by duly importing, clearing and delivering the appellant’s goods to the appellant. The respondent in its statement of claim averred that upon importing and clearing goods from China on behalf of the appellant, it raised an invoice for the sum of Kshs.2,477,658.56 on 26th August, 2019, but the appellant declined to pay it Kshs.926,058.00 upon delivery of the said goods. The appellant in its response to the statement of claim and counter-claim stated that in as much as the respondent imported and cleared goods for it from China, it (appellant) paid its suppliers directly.
29. Further, that the appellant imported and cleared two containers at an agreed fee of Kshs.2,700,000.00 per container, making the total Kshs.5,400,000.00. The appellant averred that having paid the respondent Kshs.6,522,552.40, it overpaid it by Kshs.1,122,552.40. In response thereto, the respondent filed a reply to the response and defence to the counter-claim where it confirmed that the initial agreed fees for clearing charges was Kshs.2,700,000.00 per container but after consultation with the appellant’s instructing Director, he approved an increment in the clearing charges to Kshs.2,850,000.00. The respondent stated that there were other charges over and above the clearing charges which it lawfully incurred on behalf of the appellant, which the latter was required to pay.
30. The Trial Magistrate at paragraph 9 of her judgment held that the appellant had the duty of proving that the agreed contract sum was Kshs.2,700,000.00 since it wishes the Court to believe so. It is trite that in a civil suit, the burden of proof lies with the plaintiff and in this case, the respondent, to prove its case on a balance of probabilities. Sections 107, 108 & 109 of the Evidence Act provides that the burden of proof lies with the party who wishes the Court to believe that a particular fact is true.
31. In view of the fact that the contract price in the invoice referred to by the respondent in its statement of claim is different from the contract price stated in the reply to the response and the defence to the counter-claim, and bearing in mind that both parties agree that the clearing fees were Kshs.2,700,000.00 at some point, this Court finds that the respondent had the burden of proving that the clearing fees were reviewed from Kshs.2,700,000.00 to Kshs. 2,850,000.00. In the premise, I find that the Trial Magistrate erred in finding that the appellant bore the burden of proving that the contract sum was Kshs.2,700,00.00.
32. In support of its claim, the respondent relied on WhatsApp communication between the respondent’s witness and a Director of the appellant. From the said correspondence, it is evident that the parties herein have been in business since sometime in 2019. As correctly observed by the Trial Magistrate, the said correspondence contains a summary of all payments made to the respondent by the appellant. In addition, it is evident that the respondent would regularly send to the appellant’s Director a statement showing how much was owed to it, how much had been paid by the appellant, and the balance due to the respondent. At no point did the appellant’s Directors raise any queries with the statement of its account with the respondent. To the contrary, it kept making promises to pay the balance of USD 7,782.00 until sometime in January 2020 when the appellant raised queries with the invoices issued. The respondent responded by stating that operation fee and transport costs were not reflected in the invoice since if they had been included, the appellant would have been required to pay 16% VAT.
33. The appellant challenged the respondent’s claim on the grounds that the invoices relied on were addressed to entities other than the appellant, who had no relation with the appellant. The respondent in response thereto contended that the invoices addressed to Zhongtian were done on the appellant’s instructions. This was corroborated by WhatsApp correspondence of 5th February, 2020 which I note the appellant did not object to and/or challenge. In any event, from the pleadings and evidence presented before the Trial Magistrate, the appellant did not dispute receipt of the said invoices. The appellant did not establish that when it received the said invoices, it informed the respondent that it was issued with wrong invoices and/or that the invoices were not addressed to it.
34. I note that the appellant received the invoices and held on to them, and it is only now when it is challenging their validity on the grounds that it is not the addressee on the face of the invoices. This Court notes that even if I were to find that the invoices tendered by the respondent were invalid for being addressed to an entity that is different from the appellant, there is still WhatsApp correspondence showing that there was a balance of USD 7,782.00 that was still due and owing from the appellant to the respondent. The appellant contended that it has since fully paid the respondent its dues since the respondent’s witness admitted to having received Kshs.6,522,552.40 from the appellant, which is in excess of what was due to the respondent. It has however not been shown how it ended up overpaying the respondent if at all material times it was aware that the clearing fees for the two containers imported and cleared by the respondent on its behalf was Kshs.2,700,000.00 making a total of Kshs.5,400,000.00.
35. I have perused the evidence of the appellant’s witness before the Trial Magistrate and I note that she confirmed that the appellant received the container referred to at page 4 of the translated documents, but the invoice was to Zhongtian. She also confirmed that from the WhatsApp correspondence, the appellant’s Director did not dispute the amounts owed to the respondent. The appellant’s witness testified that the appellant instructed the respondent to transfer the container to Masai Mara, but she did not know the cost. In my considered view, that confirms that the clearing charges agreed upon were exclusive of other charges such as transport thus giving credence to the respondent’s contention that in addition to the clearing charges, it incurred other charges on account of the appellant, such as ocean freight charges, SGR to ICD logistics charge, warehouse charges, DHL charges, purchasing containers for the respondent, overdue warehousing charges, offloading charge, transport charges, and inspection charges
36. In light of the foregoing, this Court finds that in the absence of a written contract/agreement between the parties herein governing the terms of their engagement and the sums due, the Trial Court properly relied on the contents of WhatsApp correspondence which were not denied and/or disputed by the appellant, in determining how much was due and to whom, as a result of the services rendered to the appellant by the respondent. I am guided by the provisions of Sections 83J and 83K of the Kenya Information and Communication Act which states that –
“83J. Formation and validity of contracts
1) In the context of contract formation, unless otherwise agreed by the parties, an offer and acceptance of an offer may be expressed by means of electronic messages thus where an electronic message is used in the formation of a contract, the contract shall not be denied validity or enforceability solely on the ground that an electronic message was used for the purpose.
2) Nothing in this section shall apply to any law that expressly provides a different method for the formation of a valid contract.
83K. Recognition of parties of electronic messages as between the
originator and the addressee of an electronic message, a declaration of intent or other statement shall not be denied legal effect, validity or enforceability solely on the ground that it is in the form of an electronic message”.
37. In the premise, it is my finding that the Trial Magistrate did not err by holding that the appellant still owed the respondent USD 7,782.00.
38. The upshot is that the instant appeal is not merited. It is hereby dismissed with costs to the respondent.
It is so ordered.
DELIVERED, DATED and SIGNED at NAIROBI on this 7th day of June, 2024. Judgment delivered through Microsoft Teams online plat form
NJOKI MWANGI
JUDGE
In the presence of:
Ms Okun for the appellant
Mr. Eredi for the respondent
Ms.B.Wokabi Court Assistant.
IN THE HIGH COURT OF KENYA AT NAIROBI
COMMERCIAL AND TAX DIVISION
HCCOMMA NO. E145 OF 2022
DOMINO (INTL) HOTEL MANAGEMENT
COOPERATION LIMITED…………...………………………….APPELLANT
-VERSUS-
SONGHONG FREIGHT SERVICES LIMITED….……………RESPONDENT
(Being an Appeal from the judgment of Hon. V.M. Mochache, Resident Magistrate & Adjudicator of the Small Claims Court in SCCCOMM E3623 of 2022 delivered on 3rd September, 2022).
JUDGMENT
1. The plaintiff (respondent) filed a suit against the defendant (appellant) in the lower Court vide a statement of claim dated 14th June, 2022 seeking judgment against the appellant in the sum of Kshs.926,058.00, interest thereon from 26th August, 2019 at a commercial rate of 14% per annum until payment in full, and costs of the claim. The respondent’s case was that sometime in July 2019, the appellant retained its services to import and clear goods from China, and that it undertook the said services on behalf of the appellant as a consignee, and thereafter raised an invoice for the sum of Kshs.2,477,658.56 on 26th August, 2019. The respondent claimed that upon delivery of the imported goods, the appellant failed, refused and/or neglected to pay the balance of the agreed fees of Kshs. 926,058.00.
2. In opposition to the respondent’s claim, the appellant filed a response to statement of claim and counter-claim dated 1st July, 2022, where it denied owing the respondent any money and averred that it retained services of the respondent to clear goods from China, which goods had already been paid for in China. The appellant stated that upon clearing the goods, the respondent was paid a total of USD 62,957.00 which was equivalent to Kshs.6,522,552.40 after conversion into Kenya Shillings at the then rate of Kshs.103.6 to the dollar, which sum was in excess of the amount agreed on by the parties herein.
3. The appellant averred that it was agreed between it and the respondent that the sum for clearance of one container was Kshs.2,700,000/=, and since the appellant only imported two containers, the respondent was entitled to Kshs.5,400,000.00 from the appellant leaving an overcharge of Kshs.1,122,552.40 which it was claiming. In the end, the appellant sought for the Trial Court to dismiss the respondent’s claim with costs to the appellant, and enter judgment for the appellant against the respondent in the sum of Kshs.1,122,552.40 as prayed in the counter-claim.
4. The respondent filed a reply to the response, and a response to counter-claim dated 18th July, 2022 where it denied the averments contained in the appellant’s response to the statement of claim and counter-claim and averred that while the initially agreed clearing fees per container was Kshs.2,700,000/=, the weather conditions at Maasai Mara National Reserve where the consignment was to be delivered made it impossible for the respondent to get truck drivers willing to deliver the goods at the initially agreed price. That the respondent consulted with the appellant’s instructing Director who approved an increment in the clearing fees to Kshs.2,850,000/=.
5. The respondent further averred that in addition to the clearing charges, it incurred other charges on account of the appellant such as the ocean freight charges, SGR to ICD logistics charge, warehouse charges, DHL charges, purchasing containers for the respondent, overdue warehousing charges, offloading charge, transport charges, and inspection charges.
The respondent contended that the total sums owed to it by the appellant were captured in the debit notes dated 2nd September, 2019 and 29th May, 2019, which the appellant was expected to settle in full. The appellant stated that the exchange rate at the time of the transaction was Kshs.107/= against the dollar and Kshs.18/= against the RMB.
6. Judgment was delivered by the Trial Magistrate on 23rd September, 2022, where she found that the respondent’s claim was successful and entered judgement for the respondent against the appellant in the sum of Kshs.806,205.20, together with costs and interest at Court rates from the date of filing the claim until payment in full. The Trial Magistrate then dismissed the appellant’s counter-claim with no order as to costs.
7. The appellant being dissatisfied with the said judgment filed a Memorandum of Appeal dated 11th October, 2022 raising the following grounds of appeal -
i) The Court erred in law in hearing and determining a dispute in which the counter-claim was in excess of its jurisdiction whereupon it unlawfully compelled the appellant to abandon any amount in excess of its jurisdiction;
ii) The Court erred in law in ignoring the facts admitted in the respondent’s pleadings and placed a legal burden on the appellant to prove the said admitted facts to the appellant (sic);
iii) The Court erred in law in basing its decision on invoices that were addressed to entities other than the appellant which entities had no connection with the appellant in any way despite the Court finding that indeed the invoices where sent to entities other than the appellant;
iv) The Court erred in law in failing to appreciate that upon admission by the respondent’s witness that the respondent had been paid Kshs.6,522,522.40, the respondent was overpaid in any event whether the clearing cost per container was Kshs.2,700,000/= or Kshs.2,850,000/= per container as pleaded in the respondent’s pleading; and
v) The Court erred in law in failing to analyze the evidence presented by the claimant despite making a finding that “the sums due kept on metamorphosing as the transaction progressed” but instead proceeded to blame the appellant for not objecting to the metamorphosis.
8. The appellant’s prayer is for the appeal herein to be allowed with costs, for the judgment of the Small Claims Court delivered on 23rd September, 2022 to be set aside and for the claim against the appellant to be dismissed. The appellant also prays for judgment to be entered against the respondent as prayed in the counter-claim, and for the appellant to be awarded costs for the claim in the Small Claims Court.
9. The appeal herein was canvassed by way of written submissions. The appellant’s submissions were filed by the law firm of Muriungi & Company Advocates on 29th June, 2023, whereas the respondent’s submissions were filed on 26th July, 2023 by the law firm of Wambugu & Muriuki Advocates.
10. Ms. Okun, learned Counsel for the appellant relied on the case of the Owners of the Motor Vehicle “Lillian S” v Caltex Oil (Kenya) Ltd [1989] eKLR, 1 and Section 12(3) of the Small Claims Court Act and submitted that the appellant’s counter-claim exceeded the pecuniary jurisdiction of the Small Claims Court, which issue was brought to the Court’s attention but the appellant was compelled to proceed with the suit as the Court was unwilling to down its tools. Counsel referred to the provisions of Section 107(1) of the Evidence Act and the Court of Appeal decisions in of Choitram v Nazari [1984] KLR 327 and Charterhouse Bank Ltd v Frank N. Kamau [2016] eKLR, which cited the decision in Karugi & another v Kabiya & 3 others [1987] KLR 347, and submitted that the respondent’s witness admitted receipt of all the payments as pleaded in paragraph 3(c) of the appellant’s response to the statement of claim and in the counter-claim, thus it was not disputed that the agreed amount was fully paid and there was an over payment.
11. It was stated by Counsel that paragraph 4 of the respondent’s statement of claim states that the respondent raised an invoice of Kshs.2,477,658.56 which upon payment a balance of Kshs.926,058.00 remained unpaid, and that was the same amount indicated in the demand letter dated 25th May, 2022 and the invoice alleged to have been sent to the appellant. Counsel stated that in the respondent’s reply to the response and defence to the counter-claim, the said amount was revised to Kshs.2,850,000.00 without any supporting documents, despite the respondent admitting that the agreed clearing fees was Kshs.2,700,000.00 per container. In addition, Counsel stated that the respondent’s witness admitted that there was no written agreement to vary the original agreement. Ms. Okun cited the case of Housing Finance Co. of Kenya Limited v Gilbert Kibe Njuguna Nairobi HCCC No. 1601 of 1999 and contended that the remedies granted by the Court ought to give effect to what was voluntarily agreed upon and undertaken by the parties.
12. Counsel argued that the Trial Magistrate at paragraph 10 of her judgment erred by making an assumption as to the nature of the terms of engagement between the parties herein, and by arriving at a conclusion which had not been mutually agreed on by both parties. Counsel contended that by doing so, the said Magistrate took into account considerations which she should not have taken account of, and failed to take account of considerations which she should have taken into account.
It was submitted by Ms. Okun that the invoices found at pages 18, 57, 58, 89 & 90 of the Record of Appeal clearly show that they were addressed to Zhongtian and not to the appellant. She relied on the case of Kenya Akiba Micro Financing Limited v Ezekiel Chebii & 14 others [2012] eKLR and submitted that the respondent did not demonstrate why it did not invoice the appellant, but at paragraph 18 of the judgment, the Trial Magistrate shifted the said burden of proof to the appellant to prove that the said invoices were not meant for it.
13. Mr. Eredi, learned Counsel for the respondent referred to Rules 13 & 14 of the Small Claims Courts Rules, 2019 which provide that in cases where a respondent files a counter-claim that exceeds the pecuniary jurisdiction of the Small Claims Court, the respondent can choose to abandon the part of the counter-claim exceeding Kshs. One million, or file a separate claim in the Magistrates’ Courts to recover the whole of the amount counter-claimed. He submitted that on 1st August, 2022 during the hearing before the Trial Magistrate, the appellant chose to waive its claim over and above Kshs. One Million, thus the matter proceeded for hearing. He further stated that RW1, who testified on behalf of the appellant confirmed that the appellant was no longer interested in claiming the amounts above Kshs. One million, and for that reason, the appellant was estopped from seeking to challenge the jurisdiction of the Small Claims Court on that issue.
14. Counsel relied on the case of Christopher Kyalo Musau v Yangguang Property Design & Manufacturing [2020] eKLR and the provisions of Section 107 of the Evidence Act in submitting that the appellant failed to prove the counter-claim to the required standard, thus the Trial Court carefully considered all the evidence presented to it by both parties before making an informed decision on the case. He held the position that the respondent sufficiently proved its case by presenting cogent evidence that it would receive instructions to import various goods for the appellant via WhatsApp messages, it would then issue a cost breakdown, including the balance before the new instructions, the amount last paid amount and the total outstanding balance. He asserted that the respondent would always update the said breakdown on WhatsApp messages every time it would receive payment from the appellant, and contended that the appellant never contested any transactions presented.
15. Mr. Eredi cited the provisions of Section 78A of the Evidence Act and stated that it permits a Court to refer to electronic messages as evidence of an agreement for rendering services. Further, that the fact that the appellant would at various times send such instructions to the respondent means that the appellant is estopped from claiming overpayment when he is fully aware that there was a wider scope of instructions to the respondent. Counsel referred to the provisions of Section 83J of the Kenya Information and Communication Act which provides that save for statutory exempt contracts, a contract shall be valid and enforceable even when the contract is formed electronically. Counsel also relied on Section 83K which enjoins the Court to give effect to electronic messages where they demonstrate parties’ intentions to be bound and asserted that the WhatsApp correspondences tendered by the respondent formed written contracts.
16. It was submitted by Counsel that the Court erred in basing its decision on invoices that were addressed to entities other than the appellant and such an issue cannot be addressed at this stage since it is an evidentiary issue that requires the Court to interrogate the evidence, whereas appeals from the Small Claims Court are purely on points of law. He stated that the respondent’s witness indicated that the invoice dated 26th August, 2019 was meant for internal arrangements since it was for goods the appellant had asked it to pay for in China, and have the costs reimbursed, hence it was addressed to its local subsidiary. That with respect to the debit note dated 29th April, 2019 the respondent’s witness stated that it was drawn to Zhongtian on the instructions of the appellant and the said witness guided the Court to the relevant correspondence with the said instructions.
17. Mr. Eredi argued that even though the said debit note was wrongly addressed, it was still delivered to the appellant’s Director who then partially paid for the services, and that the respondent satisfactorily discharged its burden of proof. Counsel relied on the decisions in Twehangane Alfred v Uganda (Criminal Appeal No. 139 of 2001) [2003] UGCA 6 (17th February, 2003) as cited in MTG v Republic (Criminal Appeal E067 of 2021) [2022] KEHC 189 (KLR). He also relied on the provisions of Section 38 of the Small Claims Court Act which provides that appeals against the decisions of the Small Claims Court to the High Court should be confined to matters of law only, and submitted that the appeal herein should be dismissed since it is based on factual matters which require the Court to interrogate facts.
ANALYSIS AND DETERMINATION.
18. I have considered the Memorandum of Appeal, the Record of Appeal and the written submissions filed by Counsel for the parties. The issues that arise for determination are –
i) Whether the Trial Court erred in determining a dispute where the counter-claim exceeded the Small Claims Court pecuniary jurisdiction; and
ii) Whether the appeal herein is merited.
19. Section 38 of the Small Claims Act provides that –
“A person aggrieved by the decision or an order of the Court may appeal against that decision or order to the High Court on matters of law.”
20. The Court of Appeal in the case of John Munuve Mati v Returning Officer Mwingi North Constituency & 2 others [2018] eKLR summarized what amounts to “matters of law” as hereunder -
“The interpretation or construction of the Constitution, statute or regulations made thereunder or their application to the sets of facts established by the trial Court. As far as facts are concerned, our engagement with them is limited to background and context and to satisfy ourselves, when the issue is raised, whether the conclusions of the trial judge are based on the evidence on record or whether they are so perverse that no reasonable tribunal would have arrived at them. We cannot be drawn into considerations of the credibility of witnesses or which witnesses are more believable than others; by law that is the province of the trial court.”
21. This being an appeal, I am not permitted to substitute the Trial Court’s finding of facts with my own conclusions based on my own analysis and appreciation of the facts, unless the Trial Court’s decision cannot be supported by any evidence, or if the Trial Court misdirected itself.
Whether the Trial Court erred in determining a dispute where the counter-claim exceeded the Small Claims Court’s pecuniary jurisdiction.
22. The appellant in response to the respondent’s claim filed a response to the claim and a counter-claim, where it claimed from the respondent Kshs.1,122,552.40 for an alleged overpayment. The pecuniary jurisdiction of the Small Claims Court is provided for under Section 12(3) of the Small Claims Court Act which states as follows -
“The pecuniary jurisdiction of the Court shall be limited to one million shillings.”
23. This Court notes that in as much as the respondent’s claim was within the pecuniary jurisdiction of the Small Claims Court, the appellant’s counter-claim was not. As was correctly submitted by Counsel for the respondent, Rule 14 of the Small Claims Court Rules gives a respondent who wishes to file a counter-claim whose value exceeds the pecuniary jurisdiction of the Court various options. It states that -
“(1) A respondent who has a counterclaim exceeding two hundred thousand shillings may –
a) abandon that part of the counterclaim exceeding two hundred thousand shillings;
b) pursue his or her counterclaim in the proceedings and recover an amount not exceeding two hundred thousand shillings; or
c) file a separate claim in the Magistrates' Court to recover the whole of the amount counterclaimed.
(2) A respondent who abandons that part of the counterclaim exceeding two hundred thousand shilling shall state in his or her response that the amount in question is abandoned.
(3) A respondent who abandons any part of a counterclaim or setoff in accordance with this rule shall not be entitled to file a subsequent claim in any court to recover the amount stated as abandoned.”
24. The issue of the value of the counter-claim being above the Small Claims Court pecuniary jurisdiction was raised before the Small Claims Court on 1st August, 2022 when Counsel for the appellant indicated that if the Court was to direct that they proceed with the suit as it was, they would be forced to waive the amount over and above Kshs.1,000,000/=. Thereafter, the Court stated that they could proceed with the counter-claim if the appellant was willing to waive the amount over and above Kshs.1,000,000/=. There is however no record and/or evidence of whether the appellant or its Counsel on record indicated that they were willing or not, to waive the amount over and above Kshs.1,000,000/=. All that the record shows is that the claimant’s witness proceeded with his testimony.
25. It is however worthy of note that when the matter came up for hearing of the appellant’s case before the Trial Court on 23rd August, 2022, the appellant’s witness testified that they had not prayed for anything above Kshs. One Million. In the premise, I hold that the appellant categorically waived its claim over and above Kshs.1,000,000/=, and as such, the Trial Magistrate was clothed with the requisite jurisdiction to hear and determine the respondent’s claim and the appellant’s counter-claim.
Whether the appeal herein is merited.
26. As stated earlier in this ruling, appeals to the High Court from the Small Claims Court are on matters of law only. In Peter Gichuki King'ara v IEBC & 2 Others, Nyeri Civil Appeal No. 31 Of 2013 (Court of Appeal) (Visram, Koome & Odek, JJA) Of 13.02.2014, the Court of Appeal stated thus -
“it was held that it is trite law that the exercise of judicial discretion is a point of law and that the trial court in denying a prayer of scrutiny is exercising judicial discretion. The Court concluded that it would not be feasible for the Court of Appeal to order for a recount and scrutiny as this would involve matters of fact that were within the jurisdiction of the trial court. The court further held that the question of whether the trial judge properly considered and evaluated the evidence and arrived at a correct determination that is supported by law and evidence – with the caveat that the appeal court did not see the witness demeanor – is an issue of law.”
27. The Trial Magistrate in her judgment identified only one issue for determination being, whether the appellant owed the respondent an outstanding amount of Kshs.926,058.00 for services rendered, or whether the respondent owed the appellant Kshs.1,122,552.40 as an overpayment.
28. It is not in dispute that the appellant contracted the respondent to import and clear goods for it from China, and the respondent fulfilled its part by duly importing, clearing and delivering the appellant’s goods to the appellant. The respondent in its statement of claim averred that upon importing and clearing goods from China on behalf of the appellant, it raised an invoice for the sum of Kshs.2,477,658.56 on 26th August, 2019, but the appellant declined to pay it Kshs.926,058.00 upon delivery of the said goods. The appellant in its response to the statement of claim and counter-claim stated that in as much as the respondent imported and cleared goods for it from China, it (appellant) paid its suppliers directly.
29. Further, that the appellant imported and cleared two containers at an agreed fee of Kshs.2,700,000.00 per container, making the total Kshs.5,400,000.00. The appellant averred that having paid the respondent Kshs.6,522,552.40, it overpaid it by Kshs.1,122,552.40. In response thereto, the respondent filed a reply to the response and defence to the counter-claim where it confirmed that the initial agreed fees for clearing charges was Kshs.2,700,000.00 per container but after consultation with the appellant’s instructing Director, he approved an increment in the clearing charges to Kshs.2,850,000.00. The respondent stated that there were other charges over and above the clearing charges which it lawfully incurred on behalf of the appellant, which the latter was required to pay.
30. The Trial Magistrate at paragraph 9 of her judgment held that the appellant had the duty of proving that the agreed contract sum was Kshs.2,700,000.00 since it wishes the Court to believe so. It is trite that in a civil suit, the burden of proof lies with the plaintiff and in this case, the respondent, to prove its case on a balance of probabilities. Sections 107, 108 & 109 of the Evidence Act provides that the burden of proof lies with the party who wishes the Court to believe that a particular fact is true.
31. In view of the fact that the contract price in the invoice referred to by the respondent in its statement of claim is different from the contract price stated in the reply to the response and the defence to the counter-claim, and bearing in mind that both parties agree that the clearing fees were Kshs.2,700,000.00 at some point, this Court finds that the respondent had the burden of proving that the clearing fees were reviewed from Kshs.2,700,000.00 to Kshs. 2,850,000.00. In the premise, I find that the Trial Magistrate erred in finding that the appellant bore the burden of proving that the contract sum was Kshs.2,700,00.00.
32. In support of its claim, the respondent relied on WhatsApp communication between the respondent’s witness and a Director of the appellant. From the said correspondence, it is evident that the parties herein have been in business since sometime in 2019. As correctly observed by the Trial Magistrate, the said correspondence contains a summary of all payments made to the respondent by the appellant. In addition, it is evident that the respondent would regularly send to the appellant’s Director a statement showing how much was owed to it, how much had been paid by the appellant, and the balance due to the respondent. At no point did the appellant’s Directors raise any queries with the statement of its account with the respondent. To the contrary, it kept making promises to pay the balance of USD 7,782.00 until sometime in January 2020 when the appellant raised queries with the invoices issued. The respondent responded by stating that operation fee and transport costs were not reflected in the invoice since if they had been included, the appellant would have been required to pay 16% VAT.
33. The appellant challenged the respondent’s claim on the grounds that the invoices relied on were addressed to entities other than the appellant, who had no relation with the appellant. The respondent in response thereto contended that the invoices addressed to Zhongtian were done on the appellant’s instructions. This was corroborated by WhatsApp correspondence of 5th February, 2020 which I note the appellant did not object to and/or challenge. In any event, from the pleadings and evidence presented before the Trial Magistrate, the appellant did not dispute receipt of the said invoices. The appellant did not establish that when it received the said invoices, it informed the respondent that it was issued with wrong invoices and/or that the invoices were not addressed to it.
34. I note that the appellant received the invoices and held on to them, and it is only now when it is challenging their validity on the grounds that it is not the addressee on the face of the invoices. This Court notes that even if I were to find that the invoices tendered by the respondent were invalid for being addressed to an entity that is different from the appellant, there is still WhatsApp correspondence showing that there was a balance of USD 7,782.00 that was still due and owing from the appellant to the respondent. The appellant contended that it has since fully paid the respondent its dues since the respondent’s witness admitted to having received Kshs.6,522,552.40 from the appellant, which is in excess of what was due to the respondent. It has however not been shown how it ended up overpaying the respondent if at all material times it was aware that the clearing fees for the two containers imported and cleared by the respondent on its behalf was Kshs.2,700,000.00 making a total of Kshs.5,400,000.00.
35. I have perused the evidence of the appellant’s witness before the Trial Magistrate and I note that she confirmed that the appellant received the container referred to at page 4 of the translated documents, but the invoice was to Zhongtian. She also confirmed that from the WhatsApp correspondence, the appellant’s Director did not dispute the amounts owed to the respondent. The appellant’s witness testified that the appellant instructed the respondent to transfer the container to Masai Mara, but she did not know the cost. In my considered view, that confirms that the clearing charges agreed upon were exclusive of other charges such as transport thus giving credence to the respondent’s contention that in addition to the clearing charges, it incurred other charges on account of the appellant, such as ocean freight charges, SGR to ICD logistics charge, warehouse charges, DHL charges, purchasing containers for the respondent, overdue warehousing charges, offloading charge, transport charges, and inspection charges
36. In light of the foregoing, this Court finds that in the absence of a written contract/agreement between the parties herein governing the terms of their engagement and the sums due, the Trial Court properly relied on the contents of WhatsApp correspondence which were not denied and/or disputed by the appellant, in determining how much was due and to whom, as a result of the services rendered to the appellant by the respondent. I am guided by the provisions of Sections 83J and 83K of the Kenya Information and Communication Act which states that –
“83J. Formation and validity of contracts
1) In the context of contract formation, unless otherwise agreed by the parties, an offer and acceptance of an offer may be expressed by means of electronic messages thus where an electronic message is used in the formation of a contract, the contract shall not be denied validity or enforceability solely on the ground that an electronic message was used for the purpose.
2) Nothing in this section shall apply to any law that expressly provides a different method for the formation of a valid contract.
83K. Recognition of parties of electronic messages as between the
originator and the addressee of an electronic message, a declaration of intent or other statement shall not be denied legal effect, validity or enforceability solely on the ground that it is in the form of an electronic message”.
37. In the premise, it is my finding that the Trial Magistrate did not err by holding that the appellant still owed the respondent USD 7,782.00.
38. The upshot is that the instant appeal is not merited. It is hereby dismissed with costs to the respondent.
It is so ordered.
DELIVERED, DATED and SIGNED at NAIROBI on this 7th day of June, 2024. Judgment delivered through Microsoft Teams online plat form
NJOKI MWANGI
JUDGE
In the presence of:
Ms Okun for the appellant
Mr. Eredi for the respondent
Ms.B.Wokabi Court Assistant.