[2019] KEHC 8771 (KLR)
The court found that the plaintiffs were compelled to pay VAT on behalf of the defendant due to the defendant's failure to do so, resulting in the plaintiffs being deprived of the use of their money. The contract expressly provided for an interest rate of 10% per annum. The court held that the plaintiffs are...
Source-derived case information.
- Citation
- [2019] KEHC 8771 (KLR)
- Parties
- Plaintiff: Philomena Menezes; Plaintiff: Malcon Menezes; Plaintiff: Mitchell Menezes; Defendant: Jaramogi Oginga Odinga University of Science & Technology
- Court
- High Court
- Court Station
- High Court at Nairobi (Milimani Commercial Courts)
- Jurisdiction
- Kenya
- Case Number
- Civil Case 22 of 2017
- Procedural Posture
- Civil Case / Ruling on Interest After Consent Judgment
- Outcome
- Application for interest allowed.
- Legal Topics
- Contractual Interest, Vat Liability, Consent Judgment, Remedies for Breach
- Source Language
- en
Source-derived case record
Summary, issues, holding and outcome
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Parties
Philomena Menezes
Plaintiff
Malcon Menezes
Plaintiff
Mitchell Menezes
Plaintiff
Jaramogi Oginga Odinga University of Science & Technology
Defendant
Procedural Posture
Civil Case / Ruling on Interest After Consent Judgment
Legal Issues
- 1 Whether the plaintiffs are entitled to interest on the VAT sum paid to KRA on behalf of the defendant.
- 2 What is the applicable rate and period for interest on the decretal sum.
Ratio Decidendi
The court found that the plaintiffs were compelled to pay VAT on behalf of the defendant due to the defendant's failure to do so, resulting in the plaintiffs being deprived of the use of their money. The contract expressly provided for an interest rate of 10% per annum. The court held that the plaintiffs are entitled to interest on the principal decretal sum (the VAT paid) at the contractual rate of 10% per annum from the date of payment to KRA (29th June 2017) until full payment by the defendant. This approach was deemed both appropriate and equitable, as it aligns with the parties' contractual intentions and compensates the plaintiffs for the loss suffered due to the defendant's default.
Court Disposition
Application for interest allowed.
Orders
- Interest on the principal decretal sum of Kshs 27,850,000 awarded at 10% per annum from 29th June 2017 until payment in full.
- Plaintiffs awarded costs of the application.
Full Case Text
Judgment text and source record
44 paragraphs
REPUBLIC OF KENYA
IN THE HIGH COURT OF KENYA AT NAIROBI
CIVIL CASE NO. 22 OF 2017
PHILOMENA MENEZES........................... 1ST PLAINTIFF
MALCON MENEZES..................................2ND PLAINTIFF
MITCHELL MENEZES..............................3RD PLAINTIFF
(As Trustees of Shady Garden Academy)
VERSUS
JARAMOGI OGINGA ODINGA UNIVERSITY
OF SCIENCE & TECHNOLOGY...............DEFENDANT
RULING
The matter before me is about Interest which the Plaintiffs are claiming from the Defendant.
1. It is common ground that the Plaintiffs sold the property L.R. NO. KISUMU/MUNICIPALITY BLOCK 11/10, to the Defendant.
2. The agreed purchase price was stated, by the Plaintiffs, to be
Kshs 174,000,000 PLUS VAT, if VATbecame payable.
3. The Defendant paid to the Plaintiffs the sum of Kshs 174,000,000/= in February 2017.
4. Thereafter, in June 2017 The Kenya Revenue Authority wrote to the Plaintiffs demanding payment of Kshs 27,840,000/= on account of VATpayable on the transaction.
5. The Plaintiffs informed the Defendant about the demand for payment of VAT, because the Plaintiffs held the view that it was a term of the contract between the two parties.
6. Notwithstanding the Plaintiffs’ request, that the Defendant should pay the VATto the Kenya Revenue Authority, the Defendant failed to do so.
7. In those circumstances, the Plaintiffs remitted payment to the Kenya Revenue Authority on 29th June 2017.
8. As the Plaintiffs believed that it was the Defendant that was under the legal duty to pay the VAT, the Plaintiffs later filed this suit, with a view to recovering the money which they had paid to KRA.
9. On 18th April 2018 the parties recorded a consent in the following terms;
“1. ORDER BY CONSENT that Judgment be and ishereby entered for the Plaintiffs against thedefendant in the sum of Kshs 27,850,000/=.
2. The defendant be at liberty to settle the decretalsum by monthly instalment of Kshs 1,000,000/=with effect from the 15th August 2018 andthereafter on the 15th day of each succeeding monthuntil payment in full.
3. The defendant shall bear the costs of the suit to beagreed upon, failing which the same shall be taxed.
4. Mention on 7th May, 2018 to enable the parties agreeon the issue of interest.”
10. When the matter was mentioned on 7th May 2018, the parties informed the court that they were still holding negotiations.
11. After several months the parties informed the court that they had been unable to reach a settlement on the issue of interest. It is at that stage that the parties decided to ask the court to make a determination on the issue.
12. The parties agreed to file written submissions, and a time-table was laid down for that purpose.
13. The Plaintiffs filed their submissions, however the defendant did not file any submissions.
14. The Agreement for Sale which is the subject matter of this Ruling is dated 2nd December 2016.
15. Clause 1. 1 (1) reads as follows;
“Interest Rate” means 10% per annum rate.”
16. In this case the parties have agreed that the VATwhich the Plaintiffs had paid to KRA, ought to be paid by the defendant, back to the Plaintiffs.
17. In effect, that constitutes an acknowledgment by the defendant, that it ought to have paid the VATwhen KRAdemanded payment.
18. As the defendant failed to pay the VAT, the Plaintiffs made the payment, so as to mitigate the losses which could otherwise have befallen them.
19. By paying out money which should have been paid by the defendant, the Plaintiffs were out of pocket, to their detriment.
20. If the Plaintiffs were not compelled to pay the money due on account of VAT, the said money could have been put to some beneficial use by the Plaintiffs.
21. The defendant’s failure to pay the VAThad the effect of depriving the Plaintiffs the use of the money which the Plaintiffs paid out on behalf of the defendant.
22. In the result I hold that the Plaintiffs are entitled to compensation, and that the appropriate and equitable manner of calculating the said compensation is by reference to the terms of the contract. Accordingly, I now award Interest on the principal decretal sum, at 10% per annum, with effect from 29th June 2017 until the defendant pays the decretal sum in full.
23. The Plaintiffs are also awarded the costs of the “application”that has led to this determination on the issue of Interest.
DATED, SIGNED and DELIVERED at KISUMUthis7thday ofMarch2019.
FRED A. OCHIENG
JUDGE