(An appeal from the judgment and decree of the Chief Magistrate’s Court at Nairobi (S.N. Muchungi, PM) delivered on 6th October 2023 in MCCC No. 8459 of 2021)
1. This is an appeal from the decision in Chief Magistrate’s Court in MCCC No. 8459 of 2021. The facts leading to this appeal are contained in a plaint dated 10th May 2021, where the respondent sued the appellant for breach of contract. The facts giving rise to the dispute are that the respondent is a manufacturer of assorted steel products. On 10th April 2019, vide purchase order number No. 5945 dated 3rd April 2019, and an invoice/delivery note No. 245975, the respondent supplied assorted steel products worth Kshs. 1,709,797.00 to the appellant. As per the term of the contract of supply, payment would be effected within 30 days from the date of delivery and any late payment attracted interest at the rate of 3% per month.
2. The respondent contends that the appellant failed to honor its obligations. In the circumstances, the respondent sought Kshs. 1,709,797.00 being the costs of the goods and Kshs.431,552.00 being interest accrued as at 30th September 2020. The respondent further sought costs of the suit.
3. The appellant filed its statement of defence dated 23rd August 2021. It denied the averments in the plaint and stated that it had no contractual relationship with the respondents; it obtained the goods pursuant to a principal agency relationship between itself and the contractor Cospin S.R.L. That the contract dated 20th May 2019, for the supply of goods, was between the respondent and Cospin S.R.L; that the invoice cannot introduce new terms or vary a subsisting agreement. It prayed that the suit be dismissed with costs.
4. In its judgment dated 6th October 2023, the trial court found that the respondent proved its case to the required standard and proceeded to award judgment in favor of the respondent as against the appellant for a sum of Kshs. 2,205,638.00 accounting for Kshs. 1,709,797.00 and Kshs. 495,841.00 in interest. The respondent was further granted costs of the suit plus interest at court rates on the amount from the time of filing till payment in full.
5. The appellant, aggrieved with those findings, filed its memorandum of appeal dated 24th October 2023 raising seven grounds summarized as follows: the learned magistrate erred in its analysis and findings as to find that the respondent had proved its case on a balance of probabilities and entitled to a sum of Kshs. 2,414,338.00; the trial court erroneously failed to consider the principal agency relationship between the appellant and the contractor Cospin S.R.L. out of which, in the respondent’s knowledge, the appellant was an agent; and that in the circumstances, the appellant was not liable for the actions of the contractor as the principal as no contract existed between it and the respondent. In view of the premised circumstances, the appellant urged this court to allow the appeal, set aside the judgment of the trial court dated 6th October 2023 and award it costs of the appeal and of the trial.
6. The appeal was heard by way of written submissions. The appellant relied on its written submissions and list and bundle of authorities both dated 23rd May 2024. It argued that from an analysis of the evidence adduced, the contract dated 22nd February 2019 and executed on 10th May 2019 and 19th May 2019 was valid having spelled out the relationship between the respondent and the third party contractor Cospin S.R.L. In the circumstances, it was the contractor, and not the appellant, that was liable for breach.
7. It was its submission that in finding that the contract was only effective in May 2019, the learned magistrate erroneously redrafted the contract. It urged this court to find that the said contract started running on 22nd February 2019, contrary to the trial court’s findings. Thus, it urged the court to find that it is only the contractor who could legitimately bear the burden of the breach of contract and not the agent (the appellant herein). It urged that, the respondent was not entitled to the reliefs sought and prayed that the appeal be allowed with costs.
8. The respondent filed its written submissions and list and bundle of authorities both dated 10th June 2023. The respondent summarized the facts and set out the issue for determination as whether the learned magistrate erred in both law and fact in awarding it a sum of Kshs.2,414,338/- being the principal sum together with interest and costs from the date of filing the suit. It was his submission that the trial court properly evaluated the evidence and rightfully held that he was entitled to the sum of Kshs.2,414,338.00 together with interest from the date of filing suit. This was premised on the fact that the goods were delivered; the contract was executed on 29th May 2019; the goods were ordered prior to the signing of the contract; and the local purchase order between the parties created a legally binding contract between the parties. Furthermore, it submitted that if indeed the appellant shouldered Cospin S.R.L with liability, then it ought to have enjoined the party through third party proceedings. It urged this court to find that the appeal lacks merit and the same ought to be dismissed with costs.
9. This being a first appeal I am guided by the Court of Appeal in the case of Selle vs. Associated Motor Boat Co. [1968] EA 123 as follows:
“The appellate court is not bound necessarily to accept the findings of fact by the court below. An appeal to the Court of Appeal from a trial by the High Court is by way of a retrial and the principles upon which the Court of Appeal acts are that the 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. In particular, the court is not bound necessarily to follow the trial Judge’s findings of fact if it appears either that he has clearly failed on some point to take account of particular circumstances or probabilities materially to estimate the evidence or if the impression based on the demeanour of a witness is inconsistent with the evidence in the case generally.”
10. I have considered the memorandum of appeal, examined the record of appeal and the parties’ rival submissions and analyzed the law. From the record the facts of the case are that the respondent called Prasad Karey PW1, the head of sales and marketing officer as it sole witness. His evidence was that the respondent is in the business of construction steel, black pipes, galvanized pipes and sockets, as well as square and rectangular hollow sections.
11. On 10th April 2019, vide purchase order number No. 5945 dated 3rd April 2019, the respondent supplied assorted steel products worth Kshs. 1,709,797.00 vide an invoice/delivery note number 245975 to the appellant. Those goods were duly acknowledged as received by the appellant’s representative. The goods were intended for use in the appellant’s Kirandich Water Project based in Baringo County.
12. PW1’s evidence was that it was a term of the contract that payment of the said goods would be effected within 30 days from the date of delivery. Furthermore, any late payment attracted interest at the rate of 3% per month. That the appellant failed to honor its obligations. He further stated that he knew of Cospin S.R.L. through the appellant as its project managers and contractor. However, the respondent did not supply any goods to it. He also was not aware that Cospin S.R.L. entered into a contract with the appellant.
13. To support the claim, PW1 produced the following in evidence to establish previous relationship it had with the appellant and to also prove the subsistence of the current agreement:
PExh1. – Invoice number 245975 dated 10th April 2019;
PExh.2 – Invoice number 259961 dated 27th March 2020;
PExh3. – Invoice number 26932 dated 11th June 2020;
PExh4. – Invoice number 264498 dated 5th August 2020;
PExh5. – Invoice number 266872 dated 3rd October 2020;
PExh6. – Invoice number 266906 dated 5th October 2020;
PExh7. – Local Purchase Order number 5945 dated 3rd April 2019;
PExh8. – Customer statement issued to the defendant for October 2020;
PExh9. – Emails between the parties’ agents;
PExh1o. – Letter of demand dated 20th November 2020;
14. It was PW1’s further evidence that the appellant’s agents promised to pay but have never honored that obligation. He added that the invoices were evidence of purchase orders. He observed that a contract signed by the respondent on 13th May 2019 was entered into between the respondent and the Cospin S.R.L That the respondent signed the same under the pretext that it would be paid upon execution. He was then advised to amend the invoices to read the names of the contractor as a further condition for payment.
15. The appellant’s CEO Coralie Piron testified as DW1. He stated that no contractual relationship existed between the appellant and the respondent. That by contract executed on 20th May 2019 [DExh1.], the respondent was engaged by Cospin S.R.L. to supply assorted steel products for the rehabilitation and design of the water and sewage systems of Kirandichi Basin located in Kabarnet. That Cospin S.R.L reserved the services of the appellant as its agent to oversee the performance of the contract by the respondent a fact well within its knowledge. That at all times the appellant was the contractor agent and/or intermediary and not party to the contract for supply of the assorted steel products. An agency contract, dated 22nd February 2019 and executed on 12th February 2019 was adduced in evidence and marked DExh2.
16. That regardless, the respondent proceeded to invoice the appellant and demand for payment. It was his testimony that as per clause 16 of the contract, (DExh1) the contractor was liable to pay respondent and not the agent, the appellant. By email exchange, the appellant urged the respondent to correct the invoices and reflect the correct name of the debtor. She however confirmed that two other purchase orders number 5945 and 5946 both dated 3rd April 2019 were issued to the appellant who made the requisite payment.
17. DW1 asserted that a local purchase order is not a contract. In addition, she advised that no money was paid because the amendments to the invoices were not done. Though she was emphatic that Cospin S.R.L. was responsible to pay, notably, the appellant did not seek to join them as third parties to the proceedings.
18. The undisputed facts of the claim are that on 10th April 2019 vide local purchase order number 5945 dated 3rd April 2019 the respondent supplied assorted steel products worth Kshs. 1,709,797.00 to the appellant. The goods were delivered to the appellant against an invoice/delivery note number 245975. The goods were duly acknowledged as received by the appellant. The goods were for use in the construction of the Kirandich Water Project based in Baringo County. It is also not in dispute that the respondent has not been paid for the delivery of the goods.
19. The contentious issue which calls for determination is whether the appellant is liable to pay the sum of Kshs. 1,709,797.00 for the delivered goods. The respondent position is that the appellant ordered for the goods, which they supplied and payment was to be effected within 30 days and late payment would attract an interest at the rate of 3% per month. That despite numerous demands, the appellant failed to settle the invoices. On the other hand, the appellant’s position is that it had no contractual relationship with the respondent. That it was an agent of Cospin S.R.L who were the contractors in the project and responsible for settlement of the invoice. That the appellant was an intermediary, appointed to oversee the performance of the contract as a domestic agent. Further, that the procurement of the materials was done on the contractor’s behalf but the payment ought to have been made directly by the contractor. They urged that the appellant being an agent of the contractor cannot be held liable for its principal’s obligation. To buttress the argument that those payments ought to have been made by the principal, the appellant relied on the the agreement executed between Cospin S.R.L. and the respondent executed on 13th May 2019 and 20th May 2019 respectively (DExh1).
20. Notably, at paragraph 3 of its statement of defence, , the appellant averred that it had no contractual relationship with the respondent; the contract of supply of the assorted goods was between the respondent herein and the appellant’s sister company known as Cospin S.R.L; and that it was engaged by Cospin S.R.L as its agent to oversee the works being undertaken. Outrightly, the appellant blames a third party Cospin S.R.L who was not a party to this suit for being liable for the claim by failing to pay for the goods supplied. Thus, did the trial court err in not finding , third party Cospin S.R. L liable for the claim?
21. Order 1 Rule 15 of the Civil Procedure Rules provides as follows;“
“ i. Where a defendant claims as against any other person not already a Party to the suit (hereinafter called the third Party)
a) that he is entitled to contribution or indemnity; or
b) that he is entitled to any relief or remedy relating to or connected with the original subject-matter of the suit and substantially the same as some relief or remedy claimed by the plaintiff; or
c) that any question or issue relating to or connected with the said subject-matter is substantially the same question or issue arising between the plaintiff and the defendant and should properly be determined not only as between the plaintiff and the defendant but as between the plaintiff and defendant and the third Party or between any or either of them, he shall apply to the Court within fourteen days after the close of pleadings for leave of the Court to issue a notice (hereinafter called a third-Party notice) to that effect, and such leave shall be applied for by summons in chambers ex parte supported by affidavit.”
22. In the High Court case of; Kenya Commercial Bank vs Suntra Investment Bank l ltd [2015] eKLR, stated that;
“In law, a third party is enjoined in a suit at the instance of the Defendant and through the set procedure under Order 1 rule 15 – 22 of the Civil Procedure Rules. And, liability between the Defendant and the third party is determined between the Defendant and the third party, but of course, after the court is satisfied that there is a proper question to be tried as to liability of the third party and the Defendant, and has given directions under Order 1 rule 22 of the Civil Procedure Rules.”
23. Guided by the above authority, this court finds that the appellant had a duty to take out the third-party proceedings against Cospin S.R.L. It also had the onus to establish and prove its case as against the third-party in order for the court to determine liability between it and the third party for the payment of the respondent’s claim. It was not enough for the respondent to blame a party not part of the proceedings and fail to take out the third-party proceedings.
24. From the proceedings, this court notes that the LPOs which triggered the delivery of the goods subject of this claim were issued by the appellant on the 3rd April 2019 in its name. Thereafter, the goods were delivered against an invoice/delivery note number 245975. Notably, this was before the agreements relied upon by the appellant came into force.
25. The time envisaged in the contracts corroborating the appellant’s evidence only started running in the month of May 2019 when the contract was executed and not earlier. In fact, the contract did not exist at the time the respondent delivered the goods to the appellant. The goods were delivered and received in April 2019 with no objections or reservations. Any interpretation other than that would be unconscionable and only intended to shield a party from honoring its obligations.
26. This court notes that the trial court in addressing itself to the contract noted that those contracts were entered ex post facto after the goods had been delivered to the appellant. I do agree with this finding of the trial magistrate.
27. Furthermore, if indeed the appellant was adamant that the contractor was liable to pay, nothing stopped the appellant from instituting third party proceedings and seek indemnification or compensation accordingly. I therefore find that as per the invoices raised and the delivery note, goods were delivered to the appellant and it is incumbent upon it to meet its financial obligations.
28. The upshot of my above analysis is that the trial court properly analyzed the evidence and accurately arrived at a just conclusion. Indeed, the respondent proved its case on a balance of probabilities. I see no reason to depart from those findings. Consequently, I find that the appeal herein lacks merit and proceed to dismiss it with costs to the respondent.
It is so ordered.
Delivered, Dated and Signed this 24th day of January 2025