[2022] KEHC 16502 (KLR)

Timary Africa Limited v Mwangi (Civil Appeal E051 of 2018) [2022] KEHC 16502 (KLR) (Commercial and Tax) (9 December 2022) (Judgment)

Neutral citation: [2022] KEHC 16502 (KLR)

Republic of Kenya

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

Commercial and Tax

Civil Appeal E051 of 2018

DAS Majanja, J

December 9, 2022

Between

Timary Africa Limited

Appellant

and

Simon Peter Mwangi

Respondent

(Being an appeal from the Judgment and Decree of Hon. M. W. Murage, SRM dated 22nd March 2022 at the Nairobi Magistrates Court, Milimani in CMCC No. E3549 of 2020)

Judgment

Introduction and Background 1. The Appellant’s appeal is grounded on its Memorandum of Appeal dated 26th April 2022 where it seeks to set aside the judgment and decree dated 22nd March 2022 issued by the Subordinate Court in favour of the Respondent ordering the Appellant to pay him Kshs. 4,000,000. 00 and dismissing the Appellant’s claim for Kshs. 1,615,000. 00.

2. The facts that gave rise to the suit in the Subordinate Court and this appeal are fairly straightforward and can be gleaned from the record. The parties entered into an agreement dated 29th November 2018 (“the Agreement”) where the Appellant agreed to sell and the Respondent agreed to buy a HQJ-D-1100 micro computer controlled high precision machine with longitudinal slitting and a BTCP-297A-A4 Copy paper ream packaging machine (“the machine”) for Kshs. 4,650,000. 00. It was agreed, inter alia, that the Respondent was to take possession of the machines upon payment of the full purchase price. On various dates between 18th November 2018 and 25th April 2019, the Respondent made payments totaling Kshs. 4,000,000. 00 leaving a balance of Kshs. 650,000. 00. Upon payment of the initial deposit, the Respondent arranged for the inspection of the machine and sent his personnel to this effect.

3. By a Plaint dated 21st July 2020, the Appellant filed suit claiming that the Respondent had failed to pay the balance of the purchase price and take possession of the machine and as a result, he incurred storage charges of Kshs. 1,615,000. 00 over a period of 17 months. The Appellant further averred that it was an implied term in the Agreement that the whole transaction had to be completed within a reasonable time and to this end, the Appellant had orally extended a 60 days’ period within which the Respondent was to clear the balance of the purchase price and collect the machine. The Appellant thus sought judgment against the Respondent for the storage fees amounting to Kshs. 1,615,000. 00, interest and costs of the suit.

4. The Respondent filed a Defence and Counterclaim denying that there was an implied term as alleged by the Appellant or that there was an oral extension of 60 days for payment of the balance of the purchase price. He stated that he was willing and ready to complete the balance of the purchase price of Kshs. 650,000. 00 but then the Appellant frustrated the Agreement by introducing new terms of storage costs and as such he was not able to settle the amount demanded. The Respondent stated that at the time of purchasing the machine, there was no mention of any storage costs to be incurred and the same could not be introduced when it had paid over 95% of the purchase price. The Respondent therefore claimed a refund of the Kshs. 4,000,000. 00 already paid for the machine or in the alternative, that he takes possession of machine upon payment of the balance of the purchase price, interest and costs of the suit.

5. The matter was set down for hearing where the Appellant called one witness and the Respondent testified on his own behalf. After considering the evidence adduced against the pleadings filed, the court delivered judgment on 22nd March 2022 holding that under the Agreement, the Appellant was to keep the machine and only release it upon completion of the purchase price. That since the Agreement did not provide for storage charges, the Appellant could not introduce such terms outside the Agreement. The court further noted that the Addendum to the Agreement did not indicate when the Respondent was to complete payment. For these reasons, the trial court dismissed the Appellant’s case and allowed the Respondent’s counterclaim thus precipitating this appeal

6. This appeal was canvassed by way of written submissions where the parties adopted the positions taken before the trial court and which I have summarized above.

Analysis and Determination 7. Since this is the first appeal, this court is enjoined by the provisions of section 78 of the Civil Procedure Act (Chapter 21 of the Laws of Kenya) to evaluate and examine the Subordinate Court record and the evidence presented before it in order to arrive at its own conclusion. This principle of law was well settled in the case of Selle v Associated Motor Boat Co. Ltd (1968) EA 123 where the Court of Appeal outlined the duties of a first appellate court as follows:[An appellate court] is not bound necessarily to accept the findings of fact by the court below. An appeal to this court ... is by way of retrial and the principles upon which this court acts in such an appeal are well settled. Briefly put they are that this court must reconsider the evidence, evaluate it itself and draw its own conclusions though it should always bear in mind that it has neither seen nor heard the witnesses and should make due allowance in this respect...

8. The Appellant has grounded its appeal upon 6 grounds which have been condensed to three issues in its submissions as follows:i.Whether the Learned Magistrate failed to consider the Appellant's right of resale of the machine.ii.Whether the Learned Magistrate failed to sufficiently interpret the terms of the contract for the sale of the machine.iii.Whether the Learned Magistrate failed to establish that the counterclaim was unmerited and an afterthought on the part of the Respondent.

Right of resale 9. It is common ground that the Appellant has since sold the machine to a third party after the Respondent failed to pay the sums demanded by the Appellant. The Appellant argues that it was entitled to resale the machine as provided for under section 39(1)(a) of the Sale of Goods Act (Chapter 31 of the Laws of Kenya) which provides that the seller of goods is deemed to be an unpaid seller within the meaning of the Act ‘when the whole of the price has not been paid or tendered’. That since the property in the goods had passed, the remedy for the Appellant was an action for the price of the goods under section 49 (1) of the Sale of Goods Act which provides that:Where, under a contract of sale, the property in the goods has passed to the buyer, and the buyer wrongfully neglects or refuses to pay for the goods according to the terms of the contract, the seller may maintain an action against him for the price of the goods.

10. The Appellant therefore submits that it was entitled to exercise its right as the unpaid seller since the Respondent had not paid the full purchase price. It contends that it should not be punished for exercising its statutory right. The Respondent supports the decision of the trial court. It submits that right of sale had not accrued to the Appellant since the Appellant was not an unpaid seller under section 39(1)(a) of the Sale of Goods Act.

11. It is not in dispute that the Respondent did not pay the balance of Kshs. 650,000. 00 for the machine. Under section 39(1)(a) of the Sale of Goods Act, a seller is considered unpaid, ‘when the whole of the price has not been paid’. The fact that the Respondent has paid a substantial part of the purchase price did not mean that the Appellant was not within the definition of an ‘unpaid seller’. As long as the entire purchase price had not been paid or tendered, then one is considered an ‘unpaid seller’.

12. The rights of an unpaid seller such as the appellant are provided for under section 40 of the Sale of Goods Act as follows:40. Rights of unpaid seller(1)Subject to the provisions of this Act, and of any Act in that behalf, notwithstanding that the property in the goods may have passed to the buyer, the unpaid seller of goods, as such, has by implication of law—a.a lien on the goods or right to retain them for the price while he is in possession of them;b.in case of the insolvency of the buyer, a right of stopping the goods in transitu after he has parted with the possession of them;c.a right of resale as limited by this Act.(2)Where the property in goods has not passed to the buyer, the unpaid seller has, in addition to his other remedies, a right of withholding delivery similar to and coextensive with his rights of lien and stoppage in transitu where the property has passed to the buyer.

13. Since the Respondent had not paid the balance of the purchase price of Kshs. 650,000. 00, I find that the Appellant was entitled to exercise any of its rights as an unpaid seller including its right of resale over the machine. I hold that the trial magistrate erred in finding that this right had not accrued when, in fact, the balance of the purchase price remained unpaid.

Interpretation of the Agreement 14. The Appellant faults the trial magistrate for failing to hold that under the Agreement, the Respondent was to take possession of the machine once he had paid the full purchase price. That since the full purchase price was not tendered, it could not be disputed that the Respondent was in breach. The Appellant contends that the parties were bound by the terms of the Agreement which was clear that the transaction would be completed within a reasonable time and not a period stretching to almost 2 years, a period that the trial magistrate failed to take into consideration.

15. It is not in dispute that neither the Agreement nor its Addendum provided for a time frame for payment of the balance of the purchase price. The only condition imposed by the parties’ agreement was that the Appellant would continue to be in possession of the machine until the full purchase price is paid. Section 20(a) of the Sale of Goods Act provides that:where there is an unconditional contract for the sale of specific goods, in a deliverable state, the property in the goods passes to the buyer when the contract is made, and it is immaterial whether the time of payment or the time of delivery or both be postponed.

16. I agree with the Appellant that the property in the machine passed to the Respondent when the Agreement was executed. However, I disagree that the Addendum to the Agreement provided for an extension of 60 days to make the payment of the full purchase price and that the Respondent was to incur storage charges in case of delay. Under the Agreement and Addendum, the consequence of any delay or failure to pay the balance of the purchase price was the Appellant retaining possession of the machine until such payment is made or ultimately exercising its right of resale as the Appellant did. I cannot therefore fault the trial magistrate for determining that there was no 60-day extension for payment or any provision for the application of storage charges.

The Respondent’s counterclaim 17. The Appellant submits the order for it to refund the Respondent Kshs. 4,000,000. 00 was against the terms of the Agreement and Clause 3 of the Addendum which authorized the Respondent to utilize the Kshs. 4,000,000. 00. On the hand, the Respondent submits that the utilization of 75% of the purchase price was allowed on the ground that the Respondent would complete the payment of purchase price as agreed and take possession of the machine and that the Respondent expressed intention of finalizing the purchase price and taking possession of the machine through a letter dated 13th July 2020.

18. Since the parties do not contest that the Addendum allowed the Appellant utilization of the Kshs. 4,000,000. 00 and since the Respondent did not make payment of the balance of the purchase price so as it can take possession of the machine, then it was not judicious for the Subordinate court to order the Appellant to refund the said Kshs. 4,000,000. 00. This could only have been done had the Respondent paid the full purchase price and the Appellant had refused to cede possession to the Respondent.

Conclusion and Disposition 19. For the reasons I have set out above, I hold that neither of the parties’ claims ought to have succeeded before the subordinate court. The Appellant could not succeed in its claim for the storage charges as the claim was unfounded as it was outside the parties’ agreement. Even if the claim was founded, on appreciation of the evidence I find that the claim was not proved to the required standard. The Appellant only produced invoices which are not proof of payment. This position was articulated by the Court of Appeal in Great Lakes Transport Co. (U) Ltd v Kenya Revenue Authority [2009] eKLR and Total (Kenya) Ltd formerly Caltex Oil (Kenya) Limited v Janevams Limited [2015] eKLR where it was held that a Proforma Invoice is a commitment to purchase goods at a specified price and not a receipt and as such cannot attest to the existence of acquisition of goods or services.

20. Likewise, the Respondent was not entitled to a refund of the Kshs. 4,000,000. 00 as the Appellant was not in breach of the Agreement and the Respondent had not paid the full purchase price. Since the Appellant had exercised the right of resale as an unpaid seller to recoup its losses, the Agreement was deemed to have been rescinded and the thus no benefit could accrue to the Respondent’s favour. Even if I accept that the Appellant did not have a right of resale, it was entitled to mitigate its losses once the Respondent breached the contract by failing to pay the full contract price by disposing of the machine (see African Highland Produce Limited v Kisorio [1999] LLR 1461 (CAK)).

21. In conclusion, the Appellant’s appeal succeeds to the extent that I hold that the Appellant was entitled to exercise its right of resale. On the other hand, the Respondent’s counterclaim lacks merit and the decision of the trial court ordering the Appellant to refund the Kshs. 4,000,000. 00 was erroneous.

22. I allow the Appeal with the result that both the Appellant’s Claim for storage fees and the Respondent’s Counterclaim for refund are dismissed. In view of the ultimate result, the parties shall bear their own costs in this court and in the Subordinate Court.

DATED AND DELIVERED AT NAIROBI THIS 9TH DAY OF DECEMBER 2022. D. S. MAJANJAJUDGECourt Assistant: Mr M. Onyango.Mr Asitiba instructed by Edward C. Asitiba and Associates Advocates for the Appellant.Mr Mburu instructed by Ashitiva Advocates LLP for the Respondent.