Introduction
1. This is an Appeal from the judgment from the magistrate’s court delivered on 29th September 2023, in the Milimani CMCC No. 1849 of 2019 in which the lower court allowed the Appellant’s claim against the Respondent, save for the prayer for surcharge.
2. The background of the matter is that by a plaint dated 6th March 2019, the Appellant, instituted a suit against the Respondent for the recovery of monies owed to it by the Respondent. In the plaint, the Appellant (then a plaintiff) sought the following orders; -
a) The defendant do pay to the plaintiff a sum of Kshs 560,848/= being the sum owed as per the statement of account for unpaid invoices.
b) The defendant also pays Kshs 10,999,993.25/= being the surcharge for the period of 1/08/2014 to 1/08/2018
c) Interest accruing on the amounts at court rate.
d) Cost of suit.
3. On 29th September 2023, the lower Court delivered its Judgement in the dispute and found that the Appellant had proved its claim against the Respondent. The court consequently awarded the Appellant an amount of Kshs. 560, 848/- as against the Respondent. Costs and interests were also awarded to the Appellant. However, no award was made by the court in respect of prayer (b) of the plaint which related to the prayer for a surcharge, neither did the magistrate provide any reasons in the judgment for failing to award the same.
The Appeal
4. Aggrieved by the lower court’s judgment, the Appellant appealed to this court vide her memorandum of appeal dated 11th March 2024 raising two (2) grounds of appeal that; -
i. The learned magistrate erred in law and fact by denying the Plaintiff’s prayer (b) for surcharge despite the fact that, she agrees in her judgment that the Defendant breached their contract and that the Plaintiff is entitled to the remedies sought.
ii. The learned trial magistrate erred in law by failing to address herself as to the merits of prayer (b) despite the same having been fully substantiated and her concurrence that the parties are bound by their contracts.
5. The appeal was canvassed by way of written submissions. Both parties filed their respective written submissions. The Appellant’s submissions are dated 9th September 2024 whilst that of the Respondent is dated 23rd September 2024.
Appellant’s submissions
6. In its submissions, the Appellant argued that the learned Magistrate erred in law and fact by denying the Plaintiff’s prayer for a surcharge (prayer (b) in the plaint) notwithstanding the finding by the magistrate that the defendant had in fact breached the contract and that the plaintiff was entitled to the remedies sought.
7. Citing the Court of Appeal decision in the case of Pius Kimaiyo Langat v Co-operative Bank of Kenya [2017] eKLR, the Appellant maintained that the parties herein are bound by the agreement they both signed. That Clause (f) of the contract provided for a surcharge at the rate of 5 percent per month for the failure to pay for the services rendered. According to the Appellant, it provided in the lower court, sufficient proof and tabulation of the outstanding surcharge fees from the period of 1st August 2013 to 1st August 2018, being the sum of Ksh. 10, 999, 993.25.
8. The Appellant further submitted that the Respondents did not deny the legality of the surcharge and neither did they dispute the tabulations of the figures in their submissions before the trial magistrate. The Appellant maintained that the failure by the trial court to award the surcharge was therefore erroneous since the same was specifically pleaded and proved to the requisite standard.
9. Finally, the Appellant submitted that the trial court erred in failing to address its mind to the prayer for surcharge and provide any reasons as to whether or not the same had been proved by the Appellant.
10. The Appellant therefore urged this court to relook into the evidence on record and award the sum of Ksh. 10,999,993.25 on account of the surcharge as pleaded in the plaint.
Respondent’s submissions
11. On its part, the Respondent supported the trial court’s findings. The Respondent maintained that the learned Magistrate’s decision of failing to award the prayer for surcharge was based on proper legal and factual considerations.
12. While admitting that Clause (f) of the subject agreement provided for a surcharge at the rate of 5 percent for each month the Respondent was in arrears, the Respondent argued that the enforceability of such must be evaluated in the context of its application and the conduct of the parties. According to the Respondent, penalty clauses including surcharge provisions, must be applied in a manner consistent with the terms of the contract and the principles of fairness. The Respondent cited the Court of Appeal decision in the case of Kenya Power & Lighting Co. Ltd v. M. H. Lokichar [2014] eKLR in this regard.
13. According to the Respondent, to award a penalty surcharge of Kshs. 10,999,993.25/= in respect of a principal debt of Kshs. 560,848/= would in the circumstances be excessive, disproportionate, and contrary to principles of fair and reasonable compensation. Relying on the decision in Re Mombasa Maize Millers Ltd [2017] eKLR, the Respondent submitted that penalties that exceed the actual loss suffered are unjust and contrary to the principles of fairness.
14. It was further the Respondent’s submissions that in any event, the Appellant’s claim for surcharge was based on an unsubstantiated tabulation. Citing the case of Kisumu Cotton Mills Ltd v. Ali & Sons Ltd [2012] eKLR, the Respondent submitted the Appellant failed to prove to the required standards, how the quantum in relation to the claim for surcharge was arrived at.
15. The Respondent further argued that the learned magistrate’s failure to award the claim for surcharge was in the exercise of the court’s judicial discretion which should not be readily interfered with by this court. The Respondent cited the case of Hercules Ltd v. Njaramba [2008] eKLR in support of this argument.
16. On the allegation by the Appellant that the trial court erred by failing to pronounce itself on the prayer for surcharge, the Respondent cited the case of Njuguna v Njuguna [2005] 2 KLR 579 and submitted that a judgment need not detail every issue if the core issues are addressed comprehensively.
Analysis and determination
17. This being a first appeal, it is the duty of this court to reevaluate and reassess the evidence tendered at trial with a view of reaching its own conclusion, keeping in mind that, unlike the trial court, it did not have the advantage of observing the demeanor of the witness and hearing their evidence first hand. See the Court of Appeal decision in Peters vs Sunday Post Limited [1958] EA where the court stated that; -
“It is a strong thing for an appellate court to differ from the findings on a question of fact, of the judge who had the advantage of seeing and hearing the witnesses……the jurisdiction to review the evidence should be exercised with caution: it is not enough that the appellate court might have come to a different conclusion…”
18. The court is equally aware that an appeal to this court is by way of retrial and this court is not bound by the findings of the trial court merely because it did not have the advantage of hearing the witnesses testify and seeing their demeanor as was held in the case of Selle & Another vs. Associated Motor Boat Co. Ltd & Others [1968] EA where the court stated that: -
“...I accept counsel for the respondent’s proposition that this court is not bound necessarily to accept the findings of fact by the court below. An appeal to this court from a trial court .....is by way of retrial and the principles upon which this court acts in such an appeal are well settled. Briefly put they are that this court must reconsider the evidence, evaluate it itself and draw its own conclusions though it should always bear in mind that it has neither seen nor heard the witnesses and should make due allowance in this respect..."
19. In Gitobu Imanyara & 2 Others vs Attorney General [2016] eKLR the Court of Appeal stated that: -
“An appeal to this court from a trial by the High Court is by way of retrial and the principles upon which this Court acts in such an appeal are well settled. Briefly put, they are that this court must reconsider the evidence, evaluate it itself and draw its own conclusions though it should always bear in mind that it has neither seen nor heard the witnesses and should make due allowance in this respect.”
20. I have carefully considered the Appellant’s memorandum of appeal dated 11th March 2024, the record of appeal, and the submissions filed by the parties herein in support of their respective positions and note that the main issue for determination in the instant appeal is whether the trial court erred in failing to award the prayer for surcharge as alleged by the Appellant.
21. From the record, it is not in dispute that the parties were in a contractual agreement for the provision of security services. It is also clear from the record that the award of Ksh. 560, 848 by the trial court in favour of the Appellant is not disputed by any of the parties to this appeal. What is in dispute, in this appeal, is the failure by the trial court to award the Appellant prayer (b) of the Plaint, which was for a sum of Kshs 10,999,993.25/= being the surcharge for the period of 1/08/2014 to 1/08/2018.
22. I have reviewed the record of appeal and note that in his Plaint dated 6th March 2019, the Plaintiff claimed among others, that “[T]he defendant also pays Kshs. 10,999,993.5 being the surcharge amounts for the period 1/08/2014-1/08/2018.” I also note that the claim for surcharge was based on clause (f) of the ‘guard service contract’ dated 18th July 2012 between the parties, which provided for a surcharge fee of 5 percent per month for every month the Respondent was in default.
23. It is also apparent from the record that on 29th September 2023, the trial court delivered its judgment on the dispute and awarded to the Appellant, the claim for Kshs. 560,848/= being the sums owed for service charge. However, no award was made by the court in relation to the Appellant’s claim for surcharge, and neither did the learned magistrate make any pronouncement of the same.
24. It is a settled principle of law that a judgment must reflect a considered decision on the main issues. Order 21 Rule 4 of the Civil Procedure Rules, 2010 is clear in its terms that judgment in defended suits must contain a concise statement of the case, the points for determination, the decision thereon, and the reason for such decision. Order 21 Rule 5 on the other hand provides that a court shall state its decision on each issue. In Bwire v Wayo & Sailoki (Civil Appeal 032 of 2021) [2022] KEHC 7 (KLR) (24 January 2022) (Judgment), Mativo J (as he then was) had the following to say on the issue; -
“The form and contents of a judgment is provided for under Order 21 Rule 4 of the Civil Procedure Rules, 2010 which provides in clear terms that "Judgment in defended suits shall contain a concise statement of the case, the points for determination, the decision thereon, and the reason for such decision." Order 21 Rule 5 provides that a court shall state its decision on each issue. In fact, failure to determine all the issues raised in the pleadings is so serious that in Chandaria v Nyeri the court observed that failure to deal with many of the issues makes the judgment unsatisfactory and amounts to a mistrial.
The giving of reasons is a normal incident of the judicial process. The obligation to explain how, and why, a particular decision has been reached stems from the common law. This duty has a constitutional dimension as well. This is consistent with the dictates of the Constitution.”
25. In view of the above and after a careful review of the judgment and the proceedings in this case, I find that the trial court did not make any pronouncement of the Appellant’s prayer for the surcharge as contained in prayer (b) of the Plaint. I further find and hold that the failure by the learned trial court to apply its mind and make a determination on the Appellant’s claim and prayer for surcharge amounted to an error in law.
26. Having found that the trial court failed to pronounce itself on the Appellant’s prayer for surcharge and that that failure on the part of the court amounted to an error of law, the next issue for this court’s determination is whether the claim for surcharge as framed and argued by the Appellant in the lower court was in law justified and whether the same was sufficiently proven at trial.
27. It is trite law that the award of damages is a judicial discretion and that an appellate court can only interfere with in very limited circumstances. In the case of Gitobu Imanyara & 2 Others vs. Attorney General [2016] eKLR, the Court of Appeal held that: -
“…it is firmly established that this Court will be disinclined to disturb the finding of a trial Judge as to the amount of damages merely because they think that if they had tried the case in the first instance they would have given a larger sum. In order to justify reversing the trial Judge on the question of the amount of damages it will generally be necessary that this Court should be convinced either that the Judge acted upon some wrong principle of law, or that the amount awarded was so extremely high or so very low as to make it, in the judgment of this Court, an entirely erroneous estimate of the damage to which the plaintiff is entitled. This is the principle enunciated in Rook v Rairrie [1941] 1 All ER 297. It was echoed with approval by this Court in Butt v. Khan [1981] KLR 349 when it held as per Law, J.A that: ‘An appellate court will not disturb an award of damages unless it is so inordinately high or low as to represent an entirely erroneous estimate. It must be shown that the Judge proceeded on wrong principles, or that he misapprehended the evidence in some material respect, and so arrived at a figure which was either inordinately high or low.”
28. In the instant case, the Appellant maintained that the surcharge should be awarded based on Clause (f) of the contract. While I agree with the Appellant that Clause (f) of the contract was explicit that a surcharge of 5 percent for each month the Respondent was in arrears was payable under the contract, I find it against the principle of fairness to award penalties in the sum of Kshs, 10,999,993.25 as claimed by the Appellant, particularly taking into account that the principal debt between the Appellant and the Respondent arising from the contract is a sum of Kshs. 560,848/- only.
29. I am persuaded by the Respondent’s submissions that awarding penalties in the sum of Kshs, 10,999,993.25/= where the principal debt is a sum of Kshs. 560,848/- only would, in the circumstances of this case, be excessive, disproportionate, and contrary to principles of fair and reasonable compensation. This is the principle that underlies the in-duplum rule, which is applicable in Kenya, not only as a statutory interdict under Section 44A of the Banking Act, Cap. 488 (Laws of Kenya), but also as a common law principle.
30. The Court of Appeal in Kenya Hotels Ltd vs Oriental Commercial Bank Ltd [2019] eKLR as follows in relation to the in duplum rule; -
“In duplum" is a Latin phrase derived from the word “in duplo” which loosely translates to “in double”. Simply stated, the rule is to the effect that interest ceases to accumulate upon any amount of loan owing once the accrued interest equals the amount of loan advanced. Since the introduction of this principle on 1st May, 2007 it has been applied by the courts with reasonable degree of consistency. See Lee G. Muthoga V. Habib Zurich Finance (K) Limited & another [2016] eKLR, Mwambeja Ranching Company Limited & another V. Kenya National Capital Corporation [2019] eKLR, along a host of many others where it has been invoked…”
31. In the case of Mugure & 2 others v Higher Education Loans Board (Petition E002 of 2021) [2022] KEHC 11951 (KLR) (Civ) (19 August 2022) (Judgment), the in duplum rule was extended and applied by the Court in situations and circumstances outside the Banking Act. The Court (Mabeya J) stated that; -
“36. Through the aforesaid legislation, the state sought to ensure fairness and justice in matters borrowing even where the lender has a higher bargaining power. There is nothing to bar the extension of such relief and accommodation to the specific borrowers under the HELB Act. [emphasis added]
32. In the circumstances, I therefore allow the appeal and set aside the trial court’s judgment of 29th September 2023 and substitute the same with a judgment and order of this court in the following terms; -
a. The Respondent do pay to the Appellant the sum of Kshs. 560,848/- being the sum owed for the services rendered.
b. The claim for the surcharge for the period of 1/08/2014 to 1/08/2018 is hereby allowed, but only up to a maximum of Kshs. 560,848/-, being equivalent to 100 percent of the principal debt due.
c. Interest on (a) and (b) above at court rate from the date of delivery of the lower court judgment [29.09.2023] until payment in full.
d. The Costs of this appeal as well as that in the lower court is hereby awarded to the Appellant.
33. It is so ordered.
SIGNED DATED and DELIVERED IN VIRTUAL COURT
THIS 19TH DAY OF DECEMBER 2024
ADO MOSES
JUDGE
In the presence of:-
Moses – Court Assistant
Kabaila h/b for Mutiso………………...For the Applicant
Wangila….………………...For the Respondent