[2017] KEHC 10073 (KLR)

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA AT NAIROBI

MILIMANI LAW COURTS

COMMERCIAL AND TAX DIVISION

CIVIL CASE NO. 19 OF 2012

SQUIRT ENTERPRISES KENYA LIMITED...........PLAINTIFF

VERSUS

DAYSTAR UNIVERSITY....................................DEFENDANT

JUDGMENT

[1]The Plaintiff herein, Squirt Enterprises Kenya Limited, is a limited liability company duly incorporated in Kenya. It carries on business as a water merchant, among others; while the Defendant, Daystar University, is a duly licensed and recognized private institution of higher learning. The Plaintiff filed this suit against the Defendant on the 17 January 2012 in connection with a longstanding contract between them for the supply and delivery of water to the Defendant's campuses at Athi River and Valley Road, Nairobi. The Plaintiff's cause of action was that on diverse dates in the years 2009 and 2011, it supplied several litres of water to the Defendant's campuses at the instance and order of the Defendant through its designated and/or authorized officers; but for which the Defendant had not paid.

[2]The particulars of the unpaid invoices, Numbers 399, 503 and 554 were provided at Paragraph 4 of the Plaint, giving rise to the sum of Kshs. 7,641,250/=, in respect of which this suit was instituted. It was averred in the Plaint that delivery in respect of the outstanding invoices was acknowledged and signed for on behalf of the Defendant by its authorized officers, namely: Grace Ngige, Susan Baroti, Hellen Ogondo and Muthoka. It was therefore the contention of the Plaintiff that the Defendant's failure to pay has been actuated by malice, particulars whereof were supplied at paragraph 7 of the Plaint; and that as a result thereof, the Plaintiff's business had been adversely affected. Accordingly, the Plaintiff instituted this suit praying for Judgment against the Defendant for Special damages of Kshs. 7,641,250/=, General Damages, Costs and Interest; and any other relief that this Court may deem fit to grant.

[3]The Defendant filed an Amended Defence herein on 2 March 2012 by which it partly admitted that it had been supplied with water by the Plaintiff, among other suppliers, on diverse dates in 2009, but denied the Plaintiff's averment that it had not paid for the supplies. In particular, the Defendant conceded that it had received delivery of water on diverse dates between April and November 2009 amounting in aggregate to Kshs. 5,208,750/=, but for which the Plaintiff had not provided sufficient supporting evidence to enable payment; and that it was an express and/or implied term of their contract that the sum due would be payable upon tender to the Defendant of, inter alia, a valid Local Purchase Order, Delivery Notes duly acknowledged and Invoices. It was thus the contention of the Defendant that the Plaintiff failed to comply with the aforesaid fundamental term of the contract, and provided particulars of breach thereof in Paragraph 5B of the Amended Defence.

[4]It was further averred by the Defendant that the figures set out at Paragraph 4 as being the amounts payable under Invoices Numbers 399, 503 and 554 do not correspond with the figures shown in the actual copies of the invoices annexed to the Plaintiff's List and Bundle of Documents, resulting in an unexplained discrepancy of Kshs. 190,000/=. It was further the contention of the Defendant that it had officers who were authorized to place orders for water supply, and that these were: Susan Mbaluto, Fred Ogondo, Grace Ngige and Thomas Muthukya; and therefore averred that it had no knowledge Susan Baroti, Hellen Ogondo or Mr. Muthoka,the persons named in Paragraph 5 of the Plaint.

[5] In Paragraph 8 of the Amended Defence, the Defendant averred that in its own estimation, a maximum sum of Kshs. 5,208,750/=was what may have been due to the suppliers including the Plaintiff, subject to verification; and that that figure was arrived at after a reconciliation of its records. The Defendant accordingly pleaded that it was willing to pay on verification by the Plaintiff but that the Plaintiff had failed refused and/or neglected to provide documentation in proof of the pending invoices. The Defendant, thus, denied the allegations of malice set out in Paragraph 7 of the Plaint and reiterated that its official policy was to issue Local Purchase Orders (LPOs) for specific quantities of water to be supplied over a period of time; and that payment would only be made on the basis of proper documentation. It was therefore the contention of the Defendant that the Plaintiff is not entitled to the reliefs sought herein.

[6]The Plaintiff joined issues with the Defendant in its Reply to the Amended Defence dated 2 April 2012 and filed herein on 3 April 2012. It reiterated its contention that it supplied water to the Defendant on diverse dates between 2009and 2011; and that payment had not been fully made for which it seeks Judgment in the sum of Kshs. 7,641,250/=.In response to Paragraph 5A of the Amended Defence, the Plaintiff denied that there was any express or implied term that payment would only be made on the presentation of LPOs. To the contrary, it was the Plaintiff's contention that it was a custom and/or trade usage that it would supply water upon orders being placed by the Defendant's officers who would then sign and keep the original delivery notes at the gate. Thereafter the Plaintiff would issue invoices upon which LPOs would be raised. Thus, the Plaintiff averred in its Reply to the Amended Defence, that it was never issued with any LPO in respect of Invoices Numbers 399, 503 and 554 which form the subject of this suit.

[7]In response to Paragraph 5B of the Amended Defence, the Plaintiff averred that it had never failed to comply with any express term of the contract and had not breached any fundamental term thereof as alleged. It asserted that the sums set out in the subject invoices correspond well with the documents filed in support of its case, explaining that the Defendant had paid the sum of Kshs. 77,500/= that appears to be the difference in the sums set out in the documentation filed. Thus, the Plaintiff's pitch was for the Court to find that there is no valid defence to its claim and to allow its claim as prayed in the Plaint.

[8]Granted the admission by the Defendant in paragraph 8 of the Amended Defence, the parties recorded a consent herein on 9 June 2014 compromising the suit partially in the following terms:

"BY CONSENT:

(1) Judgment be and is hereby [entered] against the Defendant in favour of the Plaintiff for a sum of Kshs. 5,208,750/= which sum should be paid within the next fourteen (14) days from today i.e by 23 June 2014, failure to which execution to issue forthwith.

(2) The matter to proceed for the remaining sum of Kshs. 2,404,000/= on a date to be agreed by the parties in court, which date has been agreed as 6 October 2014. "

[9]Upon the endorsement of the Consent Order aforesaid, the Plaintiff was directed to file a Supplementary Statement and Bundle of Documents to specifically attach the Delivery Notes pertinent to the unpaid invoices to support the remainder of the Plaintiff's claim. Accordingly the Plaintiff filed a Supplementary Witness Statement and Bundle of Documents. The hearing did not take off on 6 October 2014 as anticipated, but did proceed on 17 May 2016. On behalf of the Plaintiff, Michael Mwangi Ndungu (PW1), a director of the Plaintiff adopted his initial Witness Statement dated 16 January 2012 as well as the Supplementary Witness Statement that he made dated 21 October 2014. He averred that, after the filing of this suit, the Defendant deposited the sum of Kshs. 81,500/= which formed part of the sum claimed herein to his account by way of a cheque. Thereafter, after the Consent Order aforementioned, the Defendant paid a further sum of Kshs. 5,208,750/= through his Advocates on 18 June 2014, thereby leaving an outstanding balance of Kshs. 2,351,000/=.

[10] PW1 further explained that due to the fact that some considerable time had passed from the date of the filing of the suit, and the fact that he had misplaced some of the delivery notes, he was able to avail documentation to support the sum of Kshs. 2,235,000/= only. He produced as exhibits the Supplementary List and Bundle of Documents filed herein on 19 August 2013 in support of the Plaintiff's case. PW1 was categorical that the water he supplied the Defendant with was duly acknowledged and signed for by the Defendant's authorized personnel, who retained the original copies of the Delivery Notes, as set out in the Summary Statements marked "A" to "E" of the Plaintiff's Bundle of Documents, and as supported by all the documents exhibited herein by the Plaintiff. PW1 thus, urged the Court to enter Judgment in the Plaintiff's favour for the sum of Kshs. 2,235,000/= together with General Damages, interest at court rates based on the original claim as pleaded in the Plaint and costs.

[11]The Defendant called two witnesses herein, namely John Ndiki Wainaina (DW1), the Defendant's Internal Auditor, and the Finance Manager, Phyllis Mutua (DW2). The testimony of DW1 was that he was instructed by the Defendant's Management to conduct an audit, following the Plaintiff's claim that it was owed a sum of Kshs. 5,208,750/= for water supplied to the Defendant. He stated that it was a financial policy of the Defendant that, for any payment for supplies made to be effected, it was a mandatory requirement that a Local Purchase Order be produced together with its corresponding delivery notes and invoices. He added that upon carrying out his audit exercise, he was able to verify delivery for Kshs. 5,208,750/=, on the basis of which the Plaintiff was paid that amount. It was further the evidence of DW1 that the Defendant was under no obligation to pay the Plaintiff the balance of Kshs. 2,351,000/= as it was not supported by the requisite LPO or delivery notes.

[12] DW2 reiterated the evidence of DW1 and explained that for every procurement at the University, there had to be an LPO, which would be generated and issued to the respective supplier before delivery could be made. That the supplier would then raise appropriate invoices, supported by the LPO and delivery notes on the basis of which payment vouchers would be prepared for payment. It was further the evidence of DW2 the payments vouchers would have to be approved by her office or the office of the Vice Chancellor, depending on the amount involved, before any payment could be made.

[13]It was further the evidence of DW2that they had a cordial relationship with the Plaintiff as their water supplier from 2006 to 2011, when a dispute arose between the parties over some deliveries that were unsupported by LPOs and delivery notes; and that after the matter was brought to the attention of the Defendant's Management, an audit was commissioned to verify the claim, as negotiations were going on to find an amicable solution to the dispute, as the Plaintiff was one of their long-term suppliers. DW2 further testified that, on the basis of the audit report, which was done under the charge of DW1, the Defendant sanctioned the payment of and did pay the Plaintiff Kshs. 5,208,750/=.She thus concluded her evidence by affirming that there being no documentation to support the Plaintiff's claim to the remaining sum of Kshs. 2,351,000/=, the Plaintiff's suit in that regard should be dismissed with costs.

[14]Pursuant to the directions given by the Court on 15 March 2017, the parties filed and exchanged written submissions herein dated 17 May 2017 and 5 June 2017, respectively. According to Counsel for the Plaintiff, Mr. Matwere, the Plaintiff had demonstrated, by way of evidence that there was a contractual relationship between it and the Defendant for the supply of water; and that the relationship went on well for a considerable period of time until the years 2009 and 2011 when payment would not be made promptly, or not made at all, for water supplied and delivered. Counsel stressed the aspect that, often times, urgent orders would be placed by the Defendant before the processing and issuance of LPOs; which would end up delaying payments; and urged that Court to find that this is what precipitated the dispute before the Court. It was, thus, the submission of Mr. Matwere that the documents exhibited by the Plaintiff do prove to the requisite standard that the Defendant is still indebted to it in the sum of Kshs. 2,236,000/= and urged the Court to enter Judgment in the Plaintiff's favour in the said sum of Kshs. 2,236,000/= together with General Damages, for which he proposed a sum of Kshs. 500,000/= together with interest on the entire claim of Kshs. 7,641,250/= from the date of filing the suit to 19 August 2014 when part payment was made; and thereafter on the balance till payment in full.

[15]Counsel for the Defendant, Ms. Olando, on her part, submitted that it was crucial for the Plaintiff to demonstrate that the subject supplies were indeed made. She urged the Court to take note of the elaborate process that the Defendant had in place, and which had to be followed for each and every procurement undertaken by it. She submitted that both DW1 and DW2 in their evidence, set out the requisite process that included the issuance of an LPO as the most critical component, and the document upon which the delivery notes and invoices would be premised; and it was the LPO that would provide for the quantity of water to be supplied and the amount payable. Counsel urged the Court to note the admission by PW1 that, in respect of the outstanding invoices, no LPO was issued by the Defendant.

[16]Counsel reiterated the evidence of both DW1 and DW2 that, although there were instances where urgent orders for water supply would be placed by the Defendant, these were the exception rather than the norm; and that even then, the belated LPOs would be generated and issued shortly after the deliveries were done. She further submitted that since there was a limit in terms of the quantity of water which would be supplied in such instances, there was no way this situation would occur repetitively and result in an accumulated bill of Kshs. 2,351,000/=. Ms. Olando further submitted that the only documents produced by the Plaintiff, in an attempt to prove that the supplies were made, were delivery notes raised by the Plaintiff; which delivery notes were filed herein after the Consent Order of 9 June 2014. She urged the Court to believe the evidence of DW1 and DW2 that they had never come across the delivery notes in question before the hearing and to find that their authenticity was questionable.

[17]Citing Section 107(1) of the Evidence Act, Chapter 80 of the Laws of Kenya, the Defence Counsel urged the Court to find that the Plaintiff had failed to prove, on a balance of probabilities that it made the deliveries in question, noting that some of the names listed in the Summary of Deliveries are not names of employees of the Defendant. With regard to the three invoices, Numbers 399, 503 and 554, Counsel submitted that they are clearly at variance with the particulars supplied in the Plaint in terms of the amounts involved as well as the number of trips made. She, accordingly, urged the Court to dismiss the contention by the Plaintiff that the settlement by consent supports their claim and in this regard she relied on the case of Mumias Sugar Co. Ltd & Another vs. Beatrice Akinyi Omondi [2016] eKLR to support her argument that out of court negotiations have no bearing on the merits or otherwise of the Plaintiff's claim to the additional sum ofKshs. 2,236,000/=. On account of all the foregoing, Ms. Olando prayed for the dismissal of the Plaintiff's claim with costs to the Defendant.

[18]The Plaintiff had initially filed a List of Agreed Issues for determination by the Court dated 5 February 2013. The Issues that had been flagged up for the Court's consideration are:

[a]Whether the Plaintiff and the Defendant had a business and/or contractual relationship prior to the filing of the instant suit;

[b]Whether the Plaintiff delivered and/or supplied the Defendant with water pursuant to orders placed by the Defendant's employees, servants and/or agents;

[c]Whether the Defendant fully paid the Plaintiff for all the litres of water supplied on diverse dates between the years 2009 and 2011;

[d]Whether therefore the Defendant is indebted to the Plaintiff to the tune of Kshs. 7,641,250/=;

[e] Whether the Defendant has been malicious by refusing to pay the Plaintiff for the litres of water supplied;

[f]Whether the Plaintiff's business has therefore been affected by the Defendant's refusal to pay for the litres of water so supplied;

[g]Whether the Plaintiff and the Defendant had a trade usage and/or custom on how they conducted their said business and/or contractual relationship aforesaid;

[h]Whether the Defendant is liable to pay the Plaintiff the amounts claimed in its Plaint;

[i]Whether the Defendant is liable to meet the cost of this suit.

[19]However, it is now apparent that that List of Issues has since been overtaken by events, granted the Consent Order of 9 June 2014 by which the Plaintiff's claim was partially and largely compromised. Accordingly, the only issue remaining for the Court's determination is whether the Plaintiff has proved that the Defendant still owes it the sum of Kshs. 2,235,000/= as claimed; and whether it is entitled to General Damages; and if so, in what quantum.

[20]The particulars of the Plaintiff's claim as originally conceived, were set out in Paragraph 4 of the Plaint. The three outstanding invoices were set out as Invoice Number 399 for Kshs. 2,010,000/=, Invoice No. 503 for Kshs.77,500/= and Invoice No. 554 for Kshs. 5,553,750/=, making a total of Kshs. 7,641,250/=. Following the Consent Order aforesaid, the Plaintiff was directed to file a Supplementary Bundle focusing on the remainder of its claim. The Supplementary Bundle of Documents, filed 19 August 2013, comprises of delivery notes whose summary is set out at the pages marked "A" to "E" of the Bundle. The summary shows that the Plaintiff supplied a total of 2,980,000 litres of water using Motor Vehicle Registration Numbers KAB 929R, KAB 884Z, KAB 322Dand KXU 859 amounting to Kshs. 2,235,000/=.

[21]The Defendant countered the Plaintiff's evidence by presenting the Reconciled Schedule of the Delivery Notes in their possession, together with the Plaintiff's Summary for the period January 2008 to December 2010, LPOs for the year 2009 as well as Payment Vouchers for the paid transactions. The Defendant's Bundle of Documents was filed on 30 May 2013, and they support the sum of Kshs. 5,208,750/= for a total of 6,945,000/= litres of water that was verified and confirmed to have been delivered; which sum the Defendant has since paid.

[22]As was rightly pointed out by Counsel for the Defendant, the burden of proof was on the Plaintiff to prove its case on a balance of probabilities. The Plaintiff adduced credible evidence to demonstrate that he was one of the Defendant's water suppliers after having participated in a tender for that purpose; and that, having been thus prequalified, he would, from time to time, be issued with LPOs whenever the need for procurement of water arose. The documents at pages 5 and 6 of the Plaintiff's initial Bundle of Documents attest to this fact. PW1 further stated, which evidence was conceded to by the Defendant, that there were instances when he would be called on short notice, to supply water without an LPO. In such instances, he would make the delivery as placed by the Defendant's authorized officers and submit his delivery note and invoice for payment. It would thus be for the Defendant to prepare the necessary LPO to support the procurement. Both DW1 and DW2 admitted as much; and it was on that basis that an audit was carried out and deliveries verified on the basis of which the Consent Order of 9 June 2014was hinged.

[23]The Plaintiff further exhibited a bundle of delivery notes to show that the Defendant still owes it a further Kshs. 2,236,000/=in unsettled invoices for deliveries made. It produced a bundle of invoices in the Supplementary Bundle of Documents to prove its case; and although it was the contention of the Defendant that those documents are fictitious and were contrived after the fact to simply to back the claim, no concrete evidence was availed in that regard. Here are the reasons why the contention by the Defendant is, to my mind, unbelievable:

[a]First and foremost, it was a key plank of the Defendant's case that it had a structured way of engaging with its suppliers, which was documented in the form of a Manual; and that no procurement could be made without an LPO, no such Manual was exhibited before the Court. Moreover, both DW1 and DW2 conceded that there were instances when orders would be placed verbally depending on the urgency of the situation. Indeed, it was on this basis that they carried out a verify with their gate records and ascertained the admitted portion of the Plaintiff's claim.

[b]The Plaintiff exhibited correspondence it had with the Defendant to show that quite a number of deliveries of water had been made without LPO. The letters are included in the Plaintiff's initial Bundle of Documents at pages 15(b), 17(a), and 17(b). The Defendant did not respond to these assertions, and in particular did not demonstrate to the Court whether it responded to the letters or not.

[c]The Report of the audit exercise that DW1 undertook, which would otherwise be considered vital to the Defence case, was never produced by DW1 to demonstrate the basis upon which the Defendant agreed to pay Kshs. 5,208,750/= without an LPO; and why the outstanding deliveries ought not to be paid. No plausible explanation was provided as to why the said report was not produced herein by DW1.

[d]The Plaintiff all along maintained that it received verbal instructions to deliver water as he did, and provided the names of the concerned officers of the Defendant to be Susan Baroti, Hellen Ogondo and Mr. Muthoka. DW1 is on record as having stated that, whereas she did not know Susan Baroti or Mr. Muthoka, she knew Susan Mbaluto, Fred Ogondo, Grace Ngige and Thomas Muthukya as employees of the Defendant; and that Hellen Ogondo and Grace Ngige were working in the Administration Department and would receive deliveries and sign for them on behalf of the Defendant. No explanation was forthcoming from the Defendant why these officers were never called as witnesses to refute the alleged deliveries, if the contention of the Defendant were true.

[24]The Plaintiff having exhibited delivery notes to prove its case, the burden of proof shifted to the Defendant, who posited that the Delivery Notes exhibited herein by the Plaintiff to support the balance of its claim are a fabrication, to prove such fabrication. Indeed, Section107(1) of the Evidence Act provides that:

"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."

[25]There being no proof, on a balance of probabilities that the delivery notes are fabricated, I would find and hold that the Plaintiff has demonstrated that the Defendant is still indebted to it to the tune of Kshs. 2,236,000/=.Thus, I would endorse the viewpoint taken byMabeya, J.in Safarilink Aviation Limited vs. Trident Aviation Kenya Limited & Another [2015] eKLR, Mabeya, J. that:

"...failure to rebut evidence tendered by one party leaves the court with no option but to draw an inference that the facts as presented are true..."

[26]The Plaintiff also prayed for General Damages, contending that, as a result of the delayed payment by the Defendant, its business was adversely affected; and that it was unable to meet the expectations of its clients given the fact that it had been forced to reduce the number of water bowsers in its business. And in its written submissions, the Plaintiff contended that, for a period of 7 years, it lost a lot of business as it could not meet the demand of its customers due to financial constraints. It was further submitted that the Plaintiff suffered mental anguish as a result of this suit which cost it considerably in terms of time and expense. Its Counsel thus proposed an award of Kshs. 500,000/= as General Damages for the unjustified holding of sums due to it.

[27] Whereas the Defence Counsel did not respond specifically to the foregoing submissions on damages, it is trite that a claim for damages be justified. In the case of Banque Indo Suez V DJLowe and Company Limited [2006] eKLR,the Court of Appeal held thus in a matter where the High Court had awarded General and Special Damages in the absence of proof:

“…It is simply not enough for the respondent to pluck figures from the air and throw then in the face of the court and expect them to be awarded. It is trite that special damages must not only be claimed specially but proved strictly for they are not the direct natural or probable consequences of the act complained and may not be inferred from the act. The degree and certainty and particularity of proof required depend on the circumstances and nature of the acts themselves …”

[28]There was no attempt by the Plaintiff to justify the claim, by showing for instance that it lost business or was otherwise struggling as a direct result of the non-payment; or to provide some foundation upon which an award could be fashioned. There was no rationalization as to why Kshs. 500,000/= was proposed by the Plaintiff. Moreover, it was not demonstrated how the Plaintiff, as a juristic person, suffered mental anguish for which damages would be recoverable in law. It is therefore my finding that this component of the claim has not been proved and is accordingly dismissed.

[29] The Plaintiff also claimed for interest on the full amount claimed herein from the date of filing suit up to 19 August 2014, when part payment was made, and on the balance from 19 August 2014 till full payment. Needless to say that the rationale for an award of interest on the principal sum is to compensate a plaintiff for the deprivation of any money that is rightfully due to it through the wrong act of a defendant. Thus, in Lata vs. Mbiyu[1965] EA 392 it was held that:

“The award of interest on a decree for payment of money for a period from the date of the suit to the date of the decree is a matter entirely within the court’s discretion, by section 26 of the Civil Procedure Act but such discretion must, of course, be judicially exercised…It is clearly right that in cases where the successful party was deprived of the use of goods or money by reason of a wrongful act on the part of the defendant, the party who has been deprived of the use of goods or money to which he is entitled should be compensated for such deprivation by the award of interest.”

[30]The Plaintiff having failed to show how its business was adversely affected, I am unable to find sufficient cause for awarding interest from the date of filing of the suit. In any event, this was not prayed for in the Plaint. Accordingly, interest herein is payable from the date hereof till payment in full, only on the balance of Kshs. 2,236,000/=.

[31]In the result, Judgment is hereby entered for the Plaintiff in the sum of Kshs. 2,236,000/=,being the balance of sums due for water delivered to the Defendant in the period 2009-2011, together with interest and costs.

It is so ordered.

DATED, SIGNED AND DELIVERED AT NAIROBI THIS 3RD DAY OF NOVEMBER, 2017

OLGA SEWE

JUDGE