Introduction
1. This is an Appeal from the judgment of the lower court delivered on 13th June 2023, in the Milimani SCCCC No. E2774/2022 by which the court partially allowed the Appellant's claim against the Respondent and awarded a sum of KES 80,571 in special damages.
2. The background of the matter is that by a statement of claim dated 6th May 2022, the Appellant herein (then a Claimant) instituted a claim against the Respondent, seeking special damages in the sum of Ksh. 103, 997; general damages; costs, and interest on the reliefs at court rates.
3. The claim arose from what the Appellant alleged to be a breach of contract by the Respondent due to the Respondent’s failure to supply electrical energy (25 token meters) to the Appellant’s premises in Kasarani, despite the Appellant having paid the Respondent a sum of KES 103.997/= in that regard.
4. Vide its response of 6th June 2022, the Respondent denied the Appellant’s claim and stated that it was the Appellant who frustrated the delivery of the electrical energy to the premises by denying the Respondent’s personnel access to the subject premises.
5. On 13th June 2023, the trial court, after hearing both parties, delivered its judgment and partially allowed the Appellant’s claim, thereby awarding the Appellant a sum of KES. 80, 571/= out of the KES 103,977 claimed in special damages. The rest of the Appellant’s claim was dismissed by the court.
The Appeal
6. Aggrieved by the lower court’s judgment, the Appellant lodged an appeal to this court vide his memorandum of appeal dated 27th June 2023, on the grounds that;
i. The learned trial magistrate erred in law and fact in partially allowing the claimant’s case against the weight of evidence on record.
ii. The learned trial magistrate erred in law and fact in rendering the claimant’s case incompetent when the same was not.
iii. The learned trial magistrate erred in Law and fact in failing to observe that the claimant has for 5 years suffered loss due to the conduct of the respondent
iv. The learned trial magistrate erred in law and fact in allowing the respondent herein to have their way by deducting the amount belonging to the claimant without proof of service rendered
v. The learned trial magistrate erred in law and fact in allowing the respondent not to compensate the claimant for the loss incurred
vi. The learned trial magistrate erred in law and fact not to allow the magistrate who had handled the case to its conclusion to do the judgment.
vii. The learned trial magistrate erred in law and fact by arriving at a biased Ruling.
viii. The learned trial magistrate erred in law and fact in failing to award the claimant costs
7. The Appeal proceeded by way of written submissions. The Appellant’s submissions are dated 1st July 2024, whereas that of the Respondent is dated 22nd September 2024.
Appellant’s submissions
8. The Appellant argued the appeal under three major headings. First, it was the Appellant’s submissions that the trial magistrate erred in partially allowing the Appellant’s claim for special damages. According to the Appellant, it was not in dispute that he had paid to the Respondent a sum of KES 103,997 towards the supply and installation of the token meters.
9. The Appellant maintained that the trial court’s decision to disallow a sum of KES 10,654 (to cater for costs allegedly incurred by the Respondent) and a further KES 12,771/- (on account of being 16% VAT allegedly paid to Kenya Revenue Authority) out of the Kshs. 103,9977 claimed in special damages, was not supported by the Respondent’s pleadings, neither was it proven in evidence at trial by the Respondent.
10. The Appellant therefore asserted that the trial magistrate erred by deducting a total of Kshs. 23,425 from the Appellant’s claim firstly, without a backing of documents in the form of receipts or otherwise in support; and, secondly, that the said averments were introduced in the submissions and did not form part of the pleadings by the Respondent.
11. The second limb of the Appellant’s argument was that the trial court erred in failing to award the Appellant’s claim for general damages. The Appellant submitted that for more than 5 years the houses stayed without electricity connection, the Appellant was unable to secure tenants, a loss which the trial court ought to have placed at the doorstep of the Respondent and accordingly allowed the Appellant’s claim for general damages. The case of Hydro Water Well (K) Limited v Sechere & 2 others (Sued in their representative capacity as the officers of Chae Kenya Society) (2021) eKLR was cited by the Appellant in support of these submissions.
12. The Appellant maintained that the failure to secure tenants for the premises was solely caused by the Respondent’s failure to supply electricity to the premises, despite the Appellant having made the requisite payments.
13. Finally, on the issue of costs, it was the Appellant’s submissions that the trial court erred in failing to award costs to the Appellant despite having been the successful party. Referring to the case of Cecilia Karuru Ngayu V. Barclays Bank of Kenya & Another (2016) eKLR, the Appellant maintained that he was entitled to costs.
14. In the premises, the Appellant therefore urged this Court to find merit in the Appeal and allow the same.
Respondent’s submissions
15. On its part, the Respondent supported the finding of the trial court and submitted that the appeal as presented by the Appellant is bad in law, lacks merit, and therefore ought to be dismissed with costs.
16. On whether the trial court erred in partially allowing the Appellant’s claim for special damages, the Respondent submitted that the finding by the trial court was in law, well founded. The Respondent maintained that they were legally and justifiably entitled to recover from the Respondent, the sum of KES 10,654/- being the expenses incurred by the Respondent in the processing of the Appellant’s Application. It was further the Respondent’s position that from the monies received from the Appellant, a sum of KES 12,771/= related to VAT which had already been remitted to the KRA, and was no longer available to the Respondent, for purposes of being refunded to the Appellant.
17. Regarding the Appellant’s allegation that the trial court erred in failing to award general damages, the Respondent, citing among others, the case of Mbogo & Another v Shah [1968] EA 93, submitted that the award of damages involves the exercise of discretion by the trial court and that an appellate court will not readily interfere with the exercise of that discretion unless it was wrong; was based on no evidence or the court considered irrelevant facts or failed to consider relevant factors which resulted into an injustice.
18. It was further the Respondent’s submissions that in law, general damages are not awardable for breach of contractual obligations. That a contract for the performance of specific duties or obligations, if breached, would lead to compensation for the specific loss suffered as a result of the breach, but not general damages. In support of this argument, the Respondent cited among others, the case of Securicor Courier (K) Ltd v Benson David Onyango & another [2008] eKLR, where the Court of Appeal stated that general damages are not awardable for breach of contract.
19. The Respondent therefore took the position that having claimed special damages, the Appellant was not entitled to general damages for breach of contract. it was further the Respondent’s submissions that in any event, the Appellant did not prove the loss suffered, contrary to the principle espoused in among others, the case of David Bagine v Martin Bundi [1997] eKLR as to the need to prove loss.
20. On the issue of costs, the Respondent submitted that the trial court was right in its decision of not awarding costs to the Appellant despite partially allowing the claim. Citing among others the decision in the case of Republic v. Rosemary Wairimu Munene (Ex parte Applicant) v. Ihururu Dairy Farmers Co-operative Society Ltd Judicial Review Application No. 6 of 2004, the Respondent submitted that under Section 27 (1) of the Civil Procedure Act, the court has the final discretion as to whether costs are payable by one party to another.
21. In the premises, it was therefore the Respondent’s position that the instant appeal lacks merit and therefore ought to be dismissed with costs.
Analysis and determination
22. This is the first and last appeal from the Small Claims Court. Section 38 of the Small Claims Court Act is clear that appeals to this Court are final and on points of law only. The section provides that: -
“38. Appeals
(1) 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.
(2) An appeal from any decision or order referred to in subsection (1) shall be final.
23. It therefore follows that appeals from the Small Claims Court to this court can only be on points of law and this court is enjoined to accept, and not to interfere with the factual findings of the trial court unless it is apparent that, on the evidence, no reasonable tribunal could have reached that conclusion, which would be the same as holding the decision is bad in law. See the decision of this court in the case of Wanjiru v Kiilu (Civil Appeal 90 of 2023) [2024] KEHC 8881 (KLR) (19 July 2024) (Judgment).
24. The first issue in this appeal is the question of whether the trial court erred in partially allowing the Appellant's claim for special damages. It is an established principle of law that whoever lays a claim before the court against another has the burden to prove it. See Sections 107, 108, 109, and 112 of the Evidence Act (Cap. 80) Laws of Kenya.
25. While Section 32 of the Small Claims Court Act excludes the strict rules of evidence in the Small Claims Court, the general principle is that a person who alleges must prove. In Riara Group of Schools Limited v Africa Geothermal International (Kenya) Ltd (Civil Appeal E482 of 2021) [2023] KEHC 26525 (KLR), the Court stated as follows on the import of Section 32 of the Small Claims Court Act; -
“Although under section 32 of the SCCA, the Small Claims Court is not bound wholly by the rules of evidence, the general principle is that the person who alleges must prove………”
26. In the instant case, it is not in dispute that the Appellant paid to the Respondent a sum of KES 103,996.96 for the electricity connection, what is in dispute in this appeal is whether the Respondent had proved to the required standards, that they were entitled to withhold KES 23,425/- which the Respondent alleged to be in respect of expenses incurred by them in processing the Appellant’s Application and the VAT charged on the supply.
27. In his submissions, the Appellant maintained that the trial court erred in allowing the Respondent’s allegations despite the fact that those allegations were not pleaded in defence/response to the Appellant’s Statement of Claim, and only came up in the submissions.
28. I have reviewed the Respondent’s response to the Statement of Claim dated 6th June 2022 and note that there is nowhere in the response where it was pleaded by the Respondent that any part of the monies received from the Appellant had either been expended towards processing the Appellant’s order. Further, there was no evidence adduced by the Respondent in that regard at trial. The Respondent merely stated in its submissions, without providing any proof, that a sum of KES 10,654/- was expended by them towards processing the Appellant’s order.
29. In the circumstances, it is, therefore, the finding of this court that the conclusion by the trial court, allowing the Respondent to retain the sum of KES 10,654/- was not supported by evidence, neither was it pleaded in the defence, and was therefore erroneous.
30. Regarding the amount of KES 12,771/- which the Respondent alleged was paid to the Kenya Revenue Authority (KRA), this court takes judicial notice that pursuant to Section 5 of the VAT Act, 2013 the supply of electricity is by law vatable and that VAT thereon is due to the Commissioner (KRA) even before the services are actually offered. In fact, Section 12 of the VAT Act which deals with the time of supply provides as follows; -
“12. Time of supply of goods and services
(1) Subject to subsection (3), the time of supply, including a supply of imported services, shall be the earlier of—
(a) the date on which the goods are delivered or services performed;
(b) the date a certificate is issued by an architect, surveyor or any other person acting as a consultant in a supervisory capacity;
(c) the date on which the invoice for the supply is issued; or
(d) the date on which payment for the supply is received, in whole or in part.
(Emphasis added]
31. From the above, it therefore follows that in this case, VAT was due to KRA on the date when the subject invoice was issued (being the earlier date). Consequently, the argument by the Appellant that the Respondent did not adduce any evidence that the said amount was remitted to KRA, is not merited.
32. However, taking into account that in this case no services were offered by the Respondent to the Appellant, it would be extremely prejudicial and unfair, if not illegal, to subject the Appellant to bear the burden of tax. VAT is a tax on consumption and as long as there was no consumption, then there cannot be VAT. In the circumstances, it is the position of this court that the amount of KES 12,771/- is equally refundable to the Appellant.
33. It is for the Respondent to take up the matter with the KRA for the purposes of having the VAT charged on this transaction reversed. The Court notes that it is the Respondent who filed the VAT return and remitted the money to KRA, not the Appellant herein. It is therefore the Respondent who can initiate the refund process and have the monies (VAT) refunded to them by the Kenya Revenue Authority.
34. Consequently, I find that this is a proper case where this court is entitled to interfere with the finding of the trial court regarding the award of special damages. The Respondent having admitted to receiving the sum of KES 103,996.96 from the Appellant, the amount must be refunded now that no services were offered by the Respondent to the Appellant. Any costs or losses incurred in the process of making the refund (if any), are to be borne by the Respondent.
35. On whether the trial court erred in failing to award to the Appellant general damages as prayed, this court is alive to the fact that the award of damages involves the exercise of discretion by the trial court and that an appellate court will not readily interfere with exercise of that discretion unless it was wrongly exercised; was based on no evidence or the court considered irrelevant facts or failed to consider relevant factors which resulted into an injustice. This is the principle in the case of Kemfro Africa Ltd t/a “Meru Express Services (1976)” & Another v Lubia and Another (No.2) [1985] eKLR.
36. The Court of Appeal in the case of Johnson Evan Gicheru v Andrew Morton & Another [2005] eKLR stated as follows regarding the issue;-
“It is trite 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 small as to make it, in the judgment of this Court, an entirely erroneous estimate of the damage to which the plaintiff is entitled.”
37. From the record, I note that the Appellant, in his Statement of Claim, claimed general damages on account of the more than five years that his premises remained unoccupied and without tenants due to what he alleged to be the failure of the Respondent to supply electricity to his premises. The claim in my view, though couched as a general damage claim, is more of a special damage claim. In any event, as rightly submitted by the Respondent, general damages are not typically awardable in cases of breach of contract. In Maranya v South Nyanza Sugar Co. Ltd (2017)eKLR, the court stated as follows on the issue; -
“…It is well settled in law that general damages cannot be awarded on a claim anchored on a breach of contract. In affirming that position, the Court of Appeal in the case of Joseph Urigadi Kedeva vs. Ebby Kangishal Kavai Kisumu Civil Appeal No. 239 of 1997 (UR) emphatically expressed itself thus:
“.....As to the award of Kshs. 250,000/= as general damages, Mr. Adere submitted that there can be no award of general damages for breach of contract......We respectfully agree. There can be no general damages for breach of contract......"
38. The rationale as to why general damages cannot be awarded in cases of breach of a contract was explained in the case of Consolata Anyango Ouma vs. South Nyanza Sugar Co. Ltd (2015) eKLR as follows:
“The next question is whether the appellant was entitled to damages as a result of the breach. As a general principle, the purpose of damages for breach of contract is, subject to mitigation of loss, the claimant is to be put as far as possible in the same position he would have been if the breach complained of had not occurred. This principle is encapsulated in the Latin phrase restitution in integrum (see Kenya Industrial Estates Ltd v Lee Enterprises Ltd NRB CA Civil Appeal No. 54 of 2004 [2009]eKLR, Kenya Breweries Ltd v Natex Distributors Ltd Milimani HCCC No. 704 of 2000 [2004]eKLR). The measure of damages is in accordance with the rule established in the case of Hadley v Baxendale (1854) 9. Exch. 341 that the measure of damages is such as may be fairly and reasonably be considered arising naturally from the breach itself or such as may be reasonably contemplated by the parties at the time the contract was made and a probable result of such breach (see Standard Chartered Bank Limited v Intercom Services Ltd & Others NRB CA Civil Appeal No. 37 of 2003 [2004]eKLR). Such damages are not damages at large or general damages but are in the nature of special damages and they must be pleaded and proved (see Coast Bus Service Ltd v Sisco Murunga Ndanyi & 2 others, NRB CA Civil Appeal No. 192 of 92 (UR) and Charles C. Sande v Kenya Co-operative Creameries Ltd, NRB CA Civil Appeal No. 154 of 1992 (UR)).” [emphasis added]
39. From the foregoing, it is clear that general damages are not recoverable for breach of contract since such damages are in the nature of special damages, which must be pleaded, quantified, and proved.
40. In the circumstances, I find and hold that the Appellant’s prayer for general damages is not merited.
41. Finally, as to whether the trial court erred in failing to award costs to the Appellant, it is critical to note that the issue of costs in the Small Claims Court is provided for under Section 33 of the Small Claims Court Act and the Act is clear that it is within the discretion of the court. However, just like under Section 27 of the Civil Procedure Act, the basic rule on attribution of costs is that costs follow the event. (see Cecilia Karuru Ngayu V. Barclays Bank of Kenya & Another (2016) eKLR).
42. The Appellant at paragraph 25 of his submission submitted that the trial court ought to have taken into consideration “the hustle that the Appellant has been put through thus far in rightfully seeking the goods and services paid more than 5 years ago.” Regrettably, this is not one of the issues for consideration in awarding costs to a party to a proceeding in court.
43. It is a well settled principle that costs follow the event and is not to be used to penalize the losing party but rather to compensate the successful party for the trouble taken in prosecuting or defending the case. In the case of Haraf Traders Limited v Narok County Government [2022] eKLR, the court stated as follows; -
“[27] From the jurisprudence in this area of law, the exercise of discretion on costs depends on the facts of each case and is guided by the principle that costs should follow the event unless the court orders otherwise. Such circumstances as are relevant include (i) the conduct of the parties, (ii) the subject of litigation, (iii) the circumstances which led to the institution of the proceedings, (iv) the events which eventually led to their termination,(v) the stage at which the proceedings were terminated, (vi) the manner in which they were terminated, (vii) the relationship between the parties and (viii) the need to promote reconciliation amongst the disputing parties pursuant to Article 159 (2) (c) of the Constitution; (ix) public interest.
44. In the instant case, the Claim having only partially succeeded, I find that the trial court correctly exercised its discretion in directing that each party bears their own costs thereat.
45. Lastly, as for the grounds in the memorandum of appeal left unprosecuted, by the Appellant, such as grounds (ii), (vi), and (vii), the same stand dismissed as there were no submissions made by the Appellant demonstrating their merits.
46. For the reasons set out above, the appeal herein partially succeeds. I therefore order and direct as follows; -
a) The trial court’s judgment of 13th June 2023 is hereby set aside and substituted with the judgment and order of this court granting the prayer for special damages in the sum of Kshs. 103,997/-.
b) The prayer for general damages is declined.
c) Interest is hereby awarded at court rates from the date of filing the suit in the lower court.
d) Each party is to bear their own costs, both in the lower court and for this appeal.
47. It is so ordered.
SIGNED DATED and DELIVERED IN VIRTUAL COURT
THIS 23RD DAY OF JANUARY 2025
ADO MOSES
JUDGE
In the presence of:
Moses – Court Assistant
N/A..………. for the Appellant
Ms. Owano………...for the Respondent