[2022] KEHC 16424 (KLR)

Omr Medikal Turkish Limited v Asterix (K) Limited (Commercial Civil Suit 104 of 2019) [2022] KEHC 16424 (KLR) (Commercial and Tax) (16 December 2022) (Judgment)

Neutral citation: [2022] KEHC 16424 (KLR)

Republic of Kenya

In the High Court at Nairobi (Milimani Commercial Courts Commercial and Tax Division)

Commercial and Tax

Commercial Civil Suit 104 of 2019

A Mabeya, J

December 16, 2022

Between

Omr Medikal Turkish Limited

Plaintiff

and

Asterix (K) Limited

Defendant

(Formerly Milimani CMCC No.117 of 2017)

Judgment

1. The plaintiff is a limited liability company registered in Turkey and the defendant is a limited liability company duly incorporated under the provisions of the Companies Act, cap 486, laws of Kenya.

2. In the amended plaint dated November 15, 2018, the plaintiff pleaded that it got into a contractual relationship with the defendant in the form of a proforma invoice on July 18, 2016. The contract stipulated that the defendant would supply the plaintiff Richard Wolf branded medical equipment.

3. That the terms of the contract included that the time of delivery of the products would be 45 days after the payment of the deposit as required. That the payment schedule would be in two instalments, the first was a payment of 40% as advance payment and then payment of the remaining 60% before delivery of the products to the plaintiff.

4. The invoice was drawn by the defendant and sent to the plaintiff for acceptance. As a sign of acceptance of the terms thereof, the plaintiff made a 40% deposit on August 3, 2016 in the sum of Euros 133,088. 59. The defendant was to deliver the products to the plaintiff not later than September 18, 2016. At the point of making the deposit, the defendant informed the plaintiff that since the products were being obtained from a factory in Germany, the same would be shipped directly to Turkey without passing through Kenya.

5. Later, the defendant informed the plaintiff that the German factory declined direct shipment to Turkey and insisted that the same be through Kenya first. However, the products failed to arrive in Kenya making it difficult for the plaintiff to make deliveries to its customers in China. It was opted that the defendant delivers whatever products in its custody which were valued at only Euros 8,065.

6. The plaintiff contended that the defendant alleged that a new law had been enacted that barred freshly imported goods from being shipped out. The plaintiff claimed that as a result of the defendant’s conduct it had lost its Chinese business. It demanded a refund of deposit paid less Euros 8,065 but the defendant failed to pay claiming that it had already ordered for the products.

7. In the premises, the plaintiff claimed a breach of contract and prayed for judgment for a total sum of Euros 463,088. 59 being the deposit paid, travel expenses and damages for loss of business. The plaintiff further claimed damages for loss of reputation and the costs of the suit.

8. The defendant defended the claim vide a defence and counterclaim dated June 18, 2019. Its case was that; it was a term of the agreement that the contract would be performed ex-works and not FOB which meant that, the plaintiff was responsible for availing the goods for collection in Germany. That it was the duty of the plaintiff to confirm collection of the goods failing of which, it entitled the defendant to deem it a breach of the agreement.

9. The defendant specifically denied that it undertook to deliver the goods to Kenya at the payment of the deposit. That the travels by the plaintiff’s representatives was never at the defendant’s behest and that it had performed its obligations.

10. In its counterclaim, the defendant contended that the plaintiff failed to collect the goods from Germany occasioning the non-performance of the contract. That it made a partial delivery even when the plaintiff had failed to perform its obligations under the contract. That the plaintiff was aware that the defendant had an irrevocable letter of credit to R Wolf which meant that it was exposed to the entire cost of the consignment.

11. In the premises, the defendant counterclaimed against the plaintiff for: -a)A finding that the plaintiff was in breach of the agreement dated July 18, 2016b)Specific performance of the agreement dated July 18, 2016. c)In the alternative and without prejudice to b) above, damages in the sum of Kshs 7,750,000/- with interest and costs of the suit.

12. In its reply to defence and defence to counter-claim dated June 27, 2019, the plaintiff contended that the defendant never informed it that the products were ready and had to be received in Germany. That the defendant had tried to vary the terms of the contract by attempting to force the plaintiff to pay non-contractual costs including taxes and other incidentals.

13. At the trial, the plaintiff called Mustafa Kemal Akin (Pw1) as the only witness. He adopted his witness statement dated January 21, 2020 which reiterated the contents of the amended plaint. He stated that due to the defendant’s failure to deliver the goods, the plaintiff lost a good client from China who used to order goods from the plaintiff worth Euros 500,000 and the plaintiff’s reputation was damaged.

14. In cross examination, he admitted that the contract between the parties was ex-works which meant that the buyer was to pay for transportation and insurance from the supplier’s warehouse.

15. On re-examination, he stated that the plaintiff made a separate extra order which was distinct from the main transaction.

16. The defendant also called only 1 witness, Dipen Rajani (Dw1). He testified that the terms of the proforma invoice that the prices were ex works meant that, goods were to be available at the factory, in this case, Richard Wolf in Germany and the buyer was to collect the goods from the factory.

17. That the decision to carry out the contract ex-works was because the defendant has an agency agreement which binds it to sell only in East Africa. In this regard, if it was to ship the goods elsewhere it would be contravening the agency agreement. That the plaintiff failed to collect the goods from the manufacturer in Germany.

18. On cross examination, DW1 admitted that there was no notification to the plaintiff that the goods were ready for delivery. That the plaintiff paid the 40% deposit but the delivery was not made within 45 days or at all to Kenya. He admitted that the the defendant had breached the terms of delivery.

19. He maintained that, although the contract was for delivery ex works, its supplier refused to work with the plaintiff’s forwarders known as Shanker. That this became a problem and the defendant informed the plaintiff that in the alternative, it could bring the goods to Nairobi. That the plaintiff refused to pay the extra cost of delivery to Nairobi and to collect the goods in Nairobi. In the premises, the goods were returned to the manufacturer.

20. On re-examination, DW1 emphasised that the defendant did not breach the terms of the contract and the plaintiff was unable to collect the goods.

21. Having considered the pleadings and the parties’ submissions, the issues for determination are; who was in breach of the contract? what are the consequences of such a breach? Who is to bear the costs of the suit?

22. A proforma Invoice No RWG.AL.AG.2016. 001 was produced at pages 1-4 of the defendant’s list of documents. The same was signed on June 18, 2016 by both parties. It served as the primary contract document that governed the commercial transaction between the parties.

23. The invoice was prepared by the defendant and sent to the plaintiff. It listed the specific items ordered by the plaintiff from the defendant and the total cost thereof.

24. The terms set out therein were, inter-alia, that; the process would be Ex-Works in Euros, the manufacturer would be Richard Wolf GmbH & Co.KG from Germany (hereinafter ‘the manufacturer’), the delivery would be 45 days from receipt of the order confirmation and payment would be 40% upon order and 60% before delivery.

25. The order confirmation was issued by Richard Wolf to the defendant on 9/8/2016 whereby the payment of Euros 133,088. 59 was made by the plaintiff to the defendant on August 1, 2016.

26. The plaintiff submitted that the defendant breached the terms of the contract between them as it never effected delivery at all nor notified the plaintiff of readiness of the shipment for collection. That the defendant unilaterally changed the place of delivery from Germany to Nairobi contrary to the terms of the contract.

27. On the other hand, the defendant contended that the contract having been ex works, it was the duty of the plaintiff to confirm that they would collect the goods. That in failing to collect the goods from Germany, the plaintiff occasioned non-performance of the contract and thereby breached the same.

28. The Court’s view is that; the contract between the parties was for the supply of the specific goods at an agreed price. The same been ex-works, the plaintiff was to collect the goods from the manufacturer in Germany. The term ‘Ex Works’ is an international trade term that describes a transaction in which a seller makes avails a product at a designated location and the buyer thereof bears the transport costs.

29. In the present case, all the defendant was to do was to avail or make the goods available in Germany and the plaintiff was to ensure collection therefrom.

30. The evidence on record shows that, on August 10, 2016, one Mr Okan Atlay, a representative of the plaintiff, emailed Ms Gladys Mutheu of the defendant and proposed that it would be better not to continue with the ex-works and that the goods be sent to Kenya. He further proposed that the plaintiff do pay for the transportation expenses to Kenya while the defendant pays the expenses of shipment from Kenya. The plaintiff agreed to this arrangement and offered a proposal on splitting the costs of transportation for the new arrangement.

31. This was a variation from the initial contract. The goods were then to be shipped to Kenya first before being transhipped to Turkey.

32. However, the goods from the manufacturer were never made available for collection. There was no evidence to show that the there was any notice to the plaintiff advising on the availability of the goods for collection from the manufacturer. Further, there was no proof that the goods were ever sent to Kenya.

33. The record shows that the manufacturer declined to avail the goods for collection in Germany by the plaintiff and insisted that it would only to send the same to Nairobi.

34. The plaintiff paid the 40% deposit but did not receive the goods set out in the proforma invoice. The defendant failed to provide the Lot and/or shipment numbers to confirm that the goods ordered would be delivered.

35. In this regard, it is clear that the defendant having failed to, first notify the availability of the goods for collection (the manufacturer refused to release the goods to the plaintiff in Germany and insisted that it will deliver the same to Kenya), secondly, the defendant having refused to share on the extra costs for shipment to Kenya, it made it impossible for the contract to be performed.

36. In view of the foregoing, I find and hold that the defendant was in breach of the contract.

37. The second issue was the consequences of the breach of the contract. The plaintiff had already paid to the defendant the deposit of Euros 133,088. 59. It is trite that where there is breach of contract, the remedy is damages. The actual and foreseeable loss suffered is the damages that are recoverable by an innocent party.

38. The defendant contended that it had issued the manufacturer with a standing irrevocable Letter of Credit (LC) in favour of the manufacturer. That it could not therefore refund the deposit. This cannot stand as there was no evidence of such LC and even if there was, it was on the defendant to prevail upon the manufacturer to avail the goods to the plaintiff in Germany and not to insist that the same was only deliverable to Kenya.

39. In this regard, the plaintiff is entitled to recover the deposit less Euros 8,065 that constitutes the value of the goods that were ultimately delivered by the defendant. The sum recoverable is therefore Euros 125,023. 59.

40. The plaintiff further prayed for special damages for the expenses incurred in travelling to and from the country while following up on the transaction.

41. In Hahn v Singh [1985] KLR 716, the Court of Appeal stated:-“… special damages which must not only be claimed specifically but proved strictly for they are not the direct natural or probable consequences of the act complained of and may not be inferred from the act. The degree of certainty and particularity of proof required depends on the circumstances and the nature of the act themselves.”

42. The plaintiff proved that its representatives travelled to Kenya on various occasions in an attempt to have the transaction completed. This was shown through the copies of single entry visas for the plaintiff’s employees, hotel invoices and flight receipts. These were produced in the plaintiff’s bundle of documents. I find that the claim for Euros 30,000 was proved.

43. The plaintiff further prayed for special damages arising from the loss of business due to the non-delivery of the contract items amounting to Euros 300,000 and damages arising from loss of reputation.

44. PW1 testified that due to the breach of contract by the defendant, the plaintiff lost business from its client in China who was awaiting the good. That the loss amounted to Euros 300,000. He told the court that the losses arose from the cancellation of the order by their client in China, the demand for refund of the deposit by the client and the loss of the reputation of the plaintiff’s company in the eyes of the client and China at large.

45. However, the plaintiff failed to specifically prove the damages claimed and only staked a claim for Euros 300,000. The particulars of the alleged refund was not produced. Further, there was no evidence of any negative concern by the particular client or other clients in China. In this regard, this head was not proved.

46. As regards the defendant’s counterclaim, the same cannot succeed. This is because the court has already found the defendant to have been the cause of the breach of the agreement between the parties.

47. Accordingly, the plaintiff has been able to prove its case on a balance of probability. Judgment is therefore entered for the plaintiff against the defendant for a total sum of Euros 155,023. 59 together with interest thereon at court rate from the date of this judgment until payment in full. The other claims are denied.

48. The plaintiff will also have the costs of the suit.

49It is so decreed.

DATED AND DELIVERED AT NAIROBI THIS 16TH DAY OF DECEMBER, 2022. A MABEYA, FCIArbJUDGE