[2022] KEHC 1681 (KLR)

REPUBLIC OF KENYA

HIGH COURT OF KENYA AT KERICHO

CIVIL APPEAL NO.21 OF 2019

KIPKEBE LIMITED..................................................................................APPELLANT

V E R S U S

KERICHO WHOLESALERS LIMITED.............................................RESPONDENT

(Being a appeal from the Judgment, decree of Hon. B. R. KIPYEGON (SRM) in CMCC No.348 of 2014 delivered on 17/6/2019)

JUDGMENT

1. On or about 1st October, 2008, the Appellant (KIPKEBE LIMITED) and the Respondent (KERICHO WHOLESALERS LIMITED) (hereafter referred to as the Appellant and the Respondent respectively) entered into a contract for transportation of Tea from the Appellant’s Factory at Sotik to the Appellant’s ware houses in Mombasa for an agreed compensation.

2. On 8/10/2008, the Defendant was instructed to transport a consignment of tea in the Respondent’s Truck Reg. No.KAU 200A/ZC 2366 when the entire consignment was stolen. The consignment was worth Kshs.4,309,159. 80.

3. The Appellant was paid Kshs.3,603,144/= by M/S First Assurance co.Ltd and also a further Kshs.202,814/= being adjuster’s fee for the consignment and M/s First Assurance co. Ltd filed the primary suit under subrogation against the Respondent claiming Kshs.3,603,144. 60 plus Kshs.202,814. 00 being adjuster’s fee and interest at bank rate and costs of the suit.

4. The Trial Court awarded Kshs.30,000/= only as general damages. The appellant has now appealed to this Court against the Judgment and decree of the Court on the following grounds;

(i) THAT the Trial Court misapprehended the applicability of the doctrine of subrogation in Insurance Contracts hence arriving at a wrong conclusion

(ii) THAT the Trial Court ignored/disregarded binding decisions of the Superior Courts on the proper application of the doctrine of subrogation and failed to consider authorities submitted.

(iii) THAT the Trial Court treated the submissions of the Applicant lightly and disregarded the Appellant’s evidence on record and also disregarded the evidence of the appellant’s witnesses.

(iv) THAT the Judgment of the Trial Court was against the law and the evidence on record.

5. The parties filed written submissions in this appeal which I have duly considered.

6. The Appellant submitted that the trial court misunderstood and misapplied the doctrine of subrogation and as a result, arrived at an erroneous award of damages of Kshs. 30,000, yet the subrogated rights entitled the First Assurance to payment of Kshs. 3, 603, 144. 60 and an adjuster’s fee of Kshs. 202, 814.

7. The Appellant further submitted that the act by the insurer of compensating the Appellant for the loss was merely a fulfilment of its contractual obligation to the Appellant under the goods-in-transit policy and not an admission of liability, thus the trial court erred in finding that the insurer admitted liability.

8. The Appellant also submitted that the trial court interpreted clause 1(X) (b) of the contract of transportation in a manner that shielded the Respondent from liability, when it was responsible for the loss of tea, to the disadvantage of the insurer.

9. The Appellant relied on the following cases:

(a) MERCANTILE LIFE & GENERAL ASSURANCE COMPANY LIMITED & ANOTHER VERSUS DILIP M SHAH & 3 OTHERS (2015) eKLR;

(b) JOSEPH OBIERO VERSUS STEPHEN KOSGEI KWANBAI & 4OTHERS (2019) eKLR;

(c) POISES VERSUS LION OF KENYA INSURANCE COMPANY CIVIL APPEAL NO. 185;

(d) SUN SAND DUNES LTD VERSUS RAIYA CONSTRUCTION LTD (2018) eKLR; and

(e) FIDELITY COMMERCIAL BANK LIMITED VERSUS KENYA GRANGE VEHICLE INDUSTRIES LIMITED (2017) eKLR.

10. The Respondent submitted that the trial court took into consideration all the evidence that was presented before it while awarding damages and that the transporter was only to be held liable for the entire loss if the company’s insurer declined liability on account that the transporter was negligent.

11. The respondent also submitted that the insurance company has already settled the loss and that the loss was not attributed to the negligence of the respondent.

12. The respondent further submitted that the appellant has not indicated that the trial court proceeded on wrong principles or that it misapprehended the evidence which led it to arrive at a wrong conclusion, and that there are no reasonable grounds for the superior court to interfere with the award of the trial court.

13. The Respondent relied on the following cases:

(a) NATIONAL BANK OF KENYA LTD VERSUS PIPEPLASTIC SAMKOLIT (K) LIMITED & ANOTHER (2001) eKLR;

(b) AMAZON ENERGY LIMITED VERSUS RAMADHAN KALUME KALAMA (2019) eKLR;and

(c) GEORGE GIKUBU MBUTHIA VERSUS KENYA POWER AND LIGHTING COMPANY LTD

14. The issues for determination in this appeal are as follows: -

(i) Whether the doctrine of subrogation is applicable in this case.

(ii) Whether the Respondent is liable to pay the Appellant the amount sought in the Plaint.

(iii) Who pays the costs of this Appeal.

15. I find that the primary suit was filed under the doctrine of subrogation where an Insurance Company steps into the shoe of the Insured to seek compensation after compensating the Insured.

16. The Black’s Law Dictionary, 11th Edition at page 1726, defines the word subrogation as;

“the substitution of one party for another, whose debt the party pays, entitling the paying party to rights, remedies or securities that would otherwise belong to the debtor.”

17. It also defines the doctrine of subrogation as follows;

“the principle under which an insurer that has paid a loss under an insurance policy is entitled to all the rights and remedies belonging to the insured against a third party with respect to any loss covered by the policy.”

18. In Kenya Power & Lighting Company Limited v Julius Wambale & another [2019] eKLR, the high court stated as follows;

“The parameters within which the principle of subrogation applies are now well settled. The doctrine applies where there is a contract of insurance and following crystallization of the risk insured, the insurer had compensated its insured for financial loss occasioned thereby usually by a third party. Under this doctrine, the insurer is in law entitled to step into the shoes of the insured and enjoy all the rights, privileges and remedies accruing to the insured including the right to seek indemnity from a third party.”

19. I find that the said doctrine is not based on the terms of contract between the Insured and the 3rd party.

20. I find that The doctrine of subrogation applies in the present case since there was a contract of insurance and following crystallization of the risk insured, the insurer had compensated its insured for financial loss occasioned by the loss.

21. Under this doctrine, the insurer M/s First Assurance co. Ltd is in law entitled to step into the shoes of the insured and enjoy all the rights, privileges and remedies accruing to the insured including the right to seek indemnity from a third party and to sue in the name of the insured.

22. I accordingly find that the doctrine of subrogation is applicable in this case. The same is not based on the contract between the Insured and the 3rd party.

23. I therefore find that the Trial Court misapprehended the applicability of the doctrine of subrogation in Insurance Contracts hence arriving at a wrong conclusion.

24. On the issue as to whether the Respondent is bound to pay Kshs.4,309,159/= which is the actual value of the lost tea, I find that under the doctrine of subrogation, the Respondent is to indemnify no more that the amount paid by the Insurer.

25. I accordingly find that the Respondent is bound to pay the Insurer Kshs.3,603,144. 60 plus the loss adjuster fee paid of Kshs.202,314/= making it a total of Kshs.3,805,958/=.

26. The appeal is allowed and the award of the Trial court is set aside and Judgment be and is hereby entered in favour of the Appellant against the Respondent in the sum of Ksh.3,805,958/= together with interest at court rates from the date of judgment in the Trial court until payment in full.

27. On the issue of costs of the appeal, I find that the Trial Court already awarded costs of the suit to the Appellant.

28. The appeal is accordingly allowed with costs.

DELIVERED, DATED AND SIGNED AT KERICHO THIS 4TH DAY OF MARCH, 2022.

A. N. ONGERI

JUDGE