https://new.kenyalaw.org/akn/ke/judgment/kehc/2026/8642

Galana Oil Kenya Ltd v Shamata Enterprises Ltd (Commercial Case E277 of 2020) [2026] KEHC 8642 (KLR) (Commercial and Tax) (19 June 2026) (Judgment) Neutral citation: [2026] KEHC 8642 (KLR) Republic of Kenya In the High Court at Nairobi (Milimani Commercial Courts) Commercial and Tax Commercial Case E277 of 2020 JWW Mong'are, J June 19, 2026 Between Galana Oil Kenya Limited Plaintiff and Shamata Enterprises Limited Defendant Judgment Introduction and Background 1.It is common ground that on 1st May 2017, the parties entered a 10‑year Fuel and Fuel Products Supply Agreement that was to expire on 30th April 2027 (“the Agreement”). The Plaintiff agreed to supply fuel, oils, and lubricants to the Defendant’s petrol station in Ruai, and to invest in branding, mechanical/electrical works, and equipment. The Defendant also agreed to buy exclusively from the Plaintiff. By a plaint dated 19th June 2020, the Plaintiff claims that on 28th June 2019, the Defendant fraudulently and constructively terminated the Agreement by falsely claiming it was vacating its lease and ceasing operations. The Plaintiff relied on this misrepresentation and agreed to terminate but later discovered the representations were untrue because the Defendant did not actually terminate the lease but instead, leased the same premises to Lexo Energy Kenya Limited, a competitor of the Plaintiff. 2.The Plaintiff further claims that the Defendant deliberately misled the Plaintiff to clear the way for the competitor, without giving the Plaintiff an option to buy out the remaining lease stake. The Plaintiff claims loss of business opportunity over the remaining 7 years and 10 months of the Agreement, based on projected margins and Energy and Petroleum Regulatory Authority (EPRA) rates. Specifically, the Plaintiff prays for judgment against the Defendant for:a)Kshs.79,744,446/- for loss of business opportunity;b)Rescission of the contract;c)General damages for termination of the supply contract;d)General damages for fraudulent misrepresentation;e)Costs;f)Interest on (a) and costs at court rates;g)Any other relief the court deems fit. 3.The Defendant responded to the suit through the Statement of Defence dated 26th October 2020. It denies most allegations in the Plaintiff’s plaint except for the existence of the Agreement and the fact that the Plaintiff supplied equipment at its own cost. The Defendant admits terminating the Agreement and vacating its lease, but denies any breach or fraud and claims termination was permitted under Clause 3.1 of the Agreement. It avers that the Plaintiff failed to supply fuel regularly and consistently and that after recouping its investment, the Plaintiff ignored the Defendant’s plea for restructuring. It claims that the Plaintiff offered low discounts, so the Defendant made hardly any profits and that the Plaintiff failed to follow up on agreed resolutions and ignored concerns about outdated technology leading to a bloated workforce. 4.The Defendant claims that the Plaintiff was informed of the Defendant’s intent to vacate the lease as early as November 2018 and that it indeed terminated its lease with the head lessor, AWK, who then leased the property to Lexo Energy Kenya Limited. The Defendant denies entering into any supply contract with Lexo Energy or any other company at the subject premises and that the Plaintiff was given first priority to take over the lease but expressed no interest. The Defendant denies making any false or misleading statements and claims the Plaintiff willingly participated in the termination process without demanding projected earnings or raising fraud claims at the time. The Defendant contends that the claim for Kshs.79,744,446.00/- is unwarranted and it argues that projected earnings cannot arise from a lawfully terminated contract, and the claimed amount is fictitious and non‑existent. 5.The Defendant alleges the Plaintiff has approached the court with unclean hands, concealed material facts, and filed a suit as an afterthought for unjust enrichment and urges the court to dismiss the Plaintiff’s suit with costs. 6.At the hearing, the Plaintiff called its Chief Finance Officer, Raphael Kimani (PW 1) who relied on is witness statement dated 19th June 2020 and produced the List and Bundle of Documents of the same date (PExhibit 1 -4). The Defendant called its director, Wilson Mwangi Kago who adopted his witness statement dated 3rd October 2022 and produced the List and Bundle of Documents of the same date (DExhibit 1-18). After hearing the parties, the court directed them to file written submissions which are on record and since the same are a mirror of the parties’ positions highlighted above, I will not rehash the same but make relevant references in my analysis and determination below. Analysis and Determination 7.As these are civil proceedings, it should not be lost that the court’s determination is on a balance of probabilities and is guided by the principle that he who alleges must prove. Denning J., in Miller v Minister Of Pensions [1947]2 All ER 372 discussed the burden of proof and he stated as follows:“That degree is well settled. It must carry a reasonable degree of probability, but not so high as is required in a criminal case. If the evidence is such that the tribunal can say: ‘we think it more probable than not’, the burden is discharged, but, if the probabilities are equal, it is not. Thus, proof on a balance or preponderance of probabilities means a win, however narrow. A draw is not enough. So, in any case in which the tribunal cannot decide one way or the other which evidence to accept, where both parties’ explanations are equally (un) convincing, the party bearing the burden of proof will lose, because the requisite standard will not have been attained.” 8.The aforementioned position has now been espoused by our superior courts and finds statutory comfort in sections 107 and 108 of the Evidence Act(Chapter 80 of the Laws of Kenya) which provide as follows:107.Burden of proof.(1)Whoever desires any court to give judgment as to any legal right or liability dependent on the existence of facts which he asserts must prove that those facts exist.(2)When a person is bound to prove the existence of any fact it is said that the burden of proof lies on that person.108.Incidence of burden.The burden of proof in a suit or proceeding lies on that person who would fail if no evidence at all were given on either side.(Also see Ignatius Makau Mutisya v Reuben Musyoki Muli [2015] KECA 612 (KLR) 9.From the parties’ submissions, I find that the court is being asked to determine the following abridged issues:a.Whether the Agreement was fraudulently terminatedb.Whether the Defendant was in breach of the Agreementc.Whether the Plaintiff is entitled to the reliefs sought in the Plaint Fraudulent termination of the Agreement 10.The Plaintiff contends the Defendant used deceit to end the Agreement which still had 7 years and 10 months remaining. That the Defendant claimed it had vacated its lease at the Ruai service station to justify unilateral termination but that shortly after terminating the contract, the Defendant leased the same property to the Plaintiff's competitor, Lexo Energy Kenya Limited. The Plaintiff submits the Defendant never actually vacated its interest in the lease but made false representations to clear the way for a partnership with Lexo Energy. 11.It is not lost to me that allegations of of fraud and forgery must not only be pleaded but proved and to a standard higher than a balance of probabilities which is the civil standard of proof (see Kiarie & 2 others v Magera [2018] KECA 467 (KLR) and Vijay Morjaria v Nansingh Madhusingh Darbar & another [2000] KECA 223 (KLR). From the evidence, the Defendant gave the Plaintiff first priority to take over the lease/business as early as 13th November 2018 to which the Plaintiff, in an email from Anthony Munyasya, its Chief Executive Officer acknowledged receipt stating “We will review and revert … before end of this month (DExhibit 1). There was no evidence that the Plaintiff responded with an offer and PW 1 also stated in his evidence that it was the Plaintiff who had expressed the intention to terminate the Agreement because the Defendant was not making regular payments for the supplied products. 12.The Plaintiff did not also deny that its CEO and retail manager, participated in meetings in June 2019 and that on 27th June 2019, the Plaintiff wrote to the Defendant stating it had no objection to the Defendant vacating and allowing the landlady to lease to another tenant (DExhibit 7). The Plaintiff did not demand to continue the supply contract or claim fraud at that time. DW 1 in his evidence, also stated that it was the Plaintiff who evinced its intention to terminate the Agreement through its letter of 27th June 2019. The parties also both produced the letter dated 28th June 2019 by the Defendant which PW 1 stated that it confirmed that they had been asked to vacate by the head lessor. PW 1 also stated that the Plaintiff’s own due diligence revealed that the premises lacked good and proper title and it declined to make an offer because of these title defects. 13.From the evidence, it is thus clear to the court that the Defendant genuinely terminated its lease with the head lessor who then independently leased the premises to Lexo Energy. I do not find any evidence of the Defendant “pretending” to vacate as they actually did vacate. The Defendant also stated that after termination, it paid all outstanding fuel debts, that is, Kshs. 1,851,265.89 and electrical installation costs Kshs.1,908,954.00/=, a fact not disputed by the Plaintiff. 14.DW 1 further testified that the Plaintiff continued supplying fuel to Lexo Energy at the same station under the new lease and therefore, the Plaintiff suffered no loss from losing the Defendant as a dealer as it merely replaced one dealer with another. I thus come to the conclusion that the Defendant did not knowingly make a false representation as the Plaintiff was fully aware of the situation, conducted its own title search, declined to make an offer, and agreed to the termination and no fraudulent intent is proved. Breach of the Agreement 15.The Plaintiff stated that the Defendant was the party in breach of the Agreement as it breached Clause 2.26 by failing to maintain a registered lease for the property, that under Clause 9.2, the Defendant was required to pay for fuel products upfront and the Plaintiff claims the Defendant failed to do this on many occasions and failed to maintain the required 5-to-10-day stock levels mandated by Clause 7. That because the Defendant committed these material breaches, the Plaintiff, as the innocent party, was the only one legally entitled to terminate under Clause 14.2 of the Agreement. 16.On its part, the Defendant averred that the Plaintiff was the party in fundamental breach of the Agreement as its primary obligation was to supply fuel regularly and consistently but the Defendant alleges the Plaintiff persistently failed to do so, frustrating business operations and making the contract commercially unworkable. That this irregular supply is a fundamental breach that defeated the commercial purpose of the Agreement and that on 1st March 2019, the Plaintiff allegedly invaded and evicted the Defendant’s petrol station without notice, installed its own systems illegally, and issued new contracts to staff while the Defendant was still in occupation. The Defendant maintains that upon termination, all outstanding debts were settled amicably. 17.As submitted by the Defendant, “Breach of Contract” based on the definition from Black’s Law Dictionary means “A violation of a contractual obligation failing to perform one’s own promise, by repudiating it or interfering with another’s performance. A breach may be one by non performance or by reputation or by both. Every breach gives rise for a claim of damages and may give rise to other remedies….” The court (Naikuni J.,) in Okoba v Ajwang [2023] KEELC 20806 (KLR) cited Lord Diplock at pg. 848 in Photo Production v Securicor Limited (1980) AC 827 where he remarked that “…characteristically, commercial contracts are a source of primary legal obligations upon each party to it to procure That whatever has been promised will be done...Every failure to perform a basic term of contract, is a breach of contract. The secondary obligation on the part of the contract on the part of the contract breaker to which it gives rise by….common law is to pay monetary compensation to the other party for the loss sustained by him in consequence of breach” 18.In his testimony, DW 1 was adamant that the Plaintiff failed to supply fuel regularly and constantly, causing loss of customer confidence, that it ignored the Defendant’s pleas for restructuring and that the Plaintiff offered low discounts, making the Defendant’s business unprofitable. Further, that the Plaintiff failed to invest in technology, leading to a bloated workforce. Indeed, the Defendant was entitled to terminate the lease and the Agreement because the Plaintiff’s failures frustrated the commercial purpose of the agreement. Moreover, under Clause 3.1, the Agreement could be terminated by mutual agreement which is what happened in this case. The Plaintiff agreed in writing on 27th June 2019 and the Defendant responded on 28th June 2019. I also agree with the Defendant that it did not breach Clause 2.2.6 because the title defects were not within the Defendant’s control and they were disclosed to the Plaintiff, who then declined to proceed. It is therefore my finding that the Defendant lawfully terminated the Agreement with the Plaintiff’s consent, after the Plaintiff had already breached its supply obligations. Reliefs sought by the Plaintiff 19.Going by my findings above, it is obvious that the Plaintiff is not entitled to the reliefs it seeks. The workings of Kshs.79,744,446.00/= for loss of business opportunity is in the form of special damages that must be strictly proved but the Plaintiff did not prove that it would have earned that amount and I find its projection quite speculative. The Plaintiff did not also prove that it suffered any loss, because it immediately secured a supply contract with Lexo Energy at the same station. Further, as the Agreement is already terminated by mutual consent, the prayer for rescission is moot and since no fraud or wrongful termination was proved, general damages cannot issue in the circumstances. Since the Plaintiff has lost its case, I find that it will only be appropriate that the Defendant is awarded costs. Conclusion and Disposition 20.The Plaintiff’s suit is now dismissed with costs being awarded to the Defendant DATED SIGNED AND DELIVERED VIRTUALLY AT NAIROBI THIS 19TH DAY OF JUNE 2026............................................................................J.W.W. MONGAREJUDGEIn The Presence OfMr. Simiyu holding brief for Mr. Kipkorir for the Plaintiff.Mr. Kinyua Muriithi for the Defendant.Amos- Court Assistant