Njane t/a Argwings Twin Service Station & another v Total Kenya Limited & another (Civil Case 433 of 2010) [2025] KEHC 14898 (KLR) (Commercial and Tax) (24 October 2025) (Judgment)

Key Facts

Transaction Type

Issues

• Whether there existed a valid and enforceable contract between the plaintiffs and 1st defendant
• Whether the 1st defendant is entitled to its counterclaim against the plaintiffs
• Whether the 1st plaintiff is non-suited (lacks standing to sue)
• Whether the plaintiffs are entitled to the reliefs sought, including damages for breaches and business losses
• What orders regarding the costs of the case and counterclaim should be made
• Whether the 1st defendant breached the contract terms, including supply failures, pricing changes, and equipment maintenance issues

Holdings

• The court awarded the plaintiffs Kshs 61,460,012/- for the loss of business value due to the 1st defendant's breach of contract, as the defendant's failures (e.g., supply shortages, equipment neglect) directly caused the business collapse.
• The plaintiffs were awarded Kshs 18,736,211.48 for losses caused by the 1st defendant's failure to supply minimum product quantities, despite the defendant's claims of financial instability and bounced cheques.
• The 1st defendant was held liable for Kshs 4,649,704.97 in losses from a manipulable POS system, as its mandatory use and retained control over the system contributed to theft and data manipulation.
• The claim for Kshs 3,333,592.72 regarding stocks and credit notes was dismissed, as the credited amount to the plaintiff's account (Kshs 2,298,009.61) was confirmed and the remaining balance lacked proof.
• The plaintiffs were awarded Kshs 2,302,573.47 for losses due to faulty calibrated fuel tankers and short landings, with the defendant failing to dispute the evidence of discrepancies in delivered quantities.
• The claim for Kshs 995,249.46 related to unilateral price changes was dismissed, as the defendant's price adjustments were deemed a legitimate response to market forces, and no contractual notice requirement was established.
• The court awarded Kshs 52,149,072/- for losses from equipment downtime, finding the 1st defendant liable for failing to maintain station equipment despite collecting maintenance fees.
• The claim for Kshs 874,727.41 on delayed Bon Voyage Card reimbursements was dismissed due to insufficient evidence of agreed timelines for payment processing.

Remedies

• The court awarded Kshs.61,460,012/- to the plaintiffs for the loss of business value attributed to the defendant's breaches, including failure to supply minimum product quantities and maintain equipment. This valuation was based on expected performance under the agreement and was accepted over the defendant's challenge.
• The court awarded Kshs.18,736,211.48 to the plaintiffs for losses caused by the defendant's failure to supply agreed minimum product quantities. The defendant's contention about bounced cheques was rejected as insufficient to justify supply failures, and plaintiffs demonstrated consistent shortages impacting operations.
• The court awarded Kshs.2,302,575.47 for losses due to the defendant's faulty calibrated fuel tankers and short landings. Plaintiffs demonstrated that delivered quantities were less than billed, with no effective rebuttal from the defendant.
• The court awarded Kshs.4,649,704.97 for losses arising from the defendant's mandated Kenserve POS system, which allowed manipulation by staff. The defendant's argument that the plaintiffs controlled the system was rejected, as the system's vulnerabilities directly contributed to the losses.
• The court dismissed the defendant's counterclaim entirely, finding no evidence to support it. Costs of the suit and counterclaim were awarded to the plaintiffs, with no financial relief granted to the defendant.
• The court awarded Kshs.52,149,072/- for losses due to the defendant's failure to maintain station equipment despite collecting maintenance fees. Evidence showed frequent breakdowns and unaddressed maintenance needs, with the defendant's own technicians recommending repairs that were never implemented.

Monetary Damages

Legal Principles

• The court emphasized the expectation of good faith in commercial relationships, requiring the defendant to provide reasonable notice for price revisions and to ensure the plaintiff could operate effectively under the agreed terms.
• The court reiterated that the burden of proof lies with the plaintiff to establish claims with verifiable evidence. Expert testimony was evaluated alongside factual evidence, with the plaintiff successfully proving most claims through documented interactions and financial records.
• The court applied this principle to enforce the contractual obligations under the offer letter, despite the absence of a signed Marketing Licence Agreement. The parties' actions over two years demonstrated their intent to be bound by the agreement.
• The court found a binding contract existed between the parties based on their conduct and actions, even though the offer letter was labeled 'subject to contract.' The parties operated under the terms of the offer letter for over two years, demonstrating mutual acceptance through performance.
• The defendant was held liable for ensuring the security and functionality of the mandated POS system. The court applied the principle from Donoghue v Stevenson, holding that assuming control over a system imposed a duty to ensure its integrity.

Precedent Name

• Donoghue v Stevenson & Hedley Byrne & Co Ltd v Heller & Partners Ltd
• RTS Flexible Systems Ltd v Molkerei Alois Müller GmbH & Co KG (UK Production)
• Keppel v Wheeler
• G. Percy Trentham Ltd v Archital Luxfer Ltd
• Stephen Kinini Wang'ondu vs The Ark Limited
• East African Fine Spinners Ltd v Bedi Investments
• Githaiga vs Mwangi
• Transnational Computer Technology (Kenya) Ltd v Principal Secretary, the National Treasury & Planning & 2 others
• Ann Wambui Ndiritu vs Joseph Kiprono Ropkoi
• Han vs Singh

Key Disputed Contract Clauses

• The plaintiffs paid maintenance fees (0.23% per litre) for equipment upkeep, but the defendant failed to fulfill its implied obligation to maintain the station's infrastructure, leading to operational losses.
• A key dispute centered on the defendant's obligation to supply minimum monthly fuel quantities (250,000 litres super petrol, 90,000 litres diesel, etc.). The court found the defendant breached this contractual duty.
• The defendant required the plaintiff to use its Kenserve POS system, which proved vulnerable to internal fraud. The court held the defendant liable for not ensuring the system's security despite retaining administrative control.
• The plaintiffs claimed the defendant delayed reimbursing Bon Voyage card transactions (up to 14 days), disrupting cash flow. The court dismissed this claim due to lack of evidence showing agreed timelines in the contract.
• The plaintiffs alleged under-delivery of fuel (short landings) and faulty calibration, resulting in discrepancies between billed and actual delivered quantities. The defendant failed to rebut this evidence.
• The court analyzed whether the 'subject to contract' clause in the offer letter (dated 31/7/2007) negated its enforceability. Despite the clause, the parties' two-year operational conduct under the letter's terms established a binding agreement.

Cited Statute

Judge Name

Passage Text

• 76. The Supreme Court of the United Kingdom later stated as follows in the case of RTS Flexible Systems Ltd v Molkerei Alois Müller GmbH & Co KG (UK Production) [2010] UKSC14,[45]: - "The general principles are not in doubt. Whether there is a binding contract between the parties and, if so, upon what terms depends upon what they have agreed. It depends not upon their subjective state of mind, but upon a consideration of what was communicated between them by words or conduct, and whether that leads objectively to a conclusion that they intended to create legal relations and had agreed upon all the terms which they regarded or the law requires as essential for the formation of legally binding relations..." (Emphasis provided).
• 138. In this regard, the Court finds that the plaintiffs were able to prove this claim of the value of the business that collapsed as a result of the breaches to Kshs.61,460,012/- and awards the same.
• 82. Accordingly, the Court finds that the failure to sign the Marketing Licence Agreement did not negate the enforceability of the terms of the earlier offer letter dated 31/7/2007, under which the 1st plaintiff commenced and sustained operations for over two years. While that letter may have been labeled "subject to contract" and was time bound, the parties' conduct demonstrates that they treated it as binding and continued to act on it.

Damages / Relief Type

• Awarded Kshs.4,649,704.97 for POS system manipulation losses
• Awarded Kshs.52,149,072/- for equipment maintenance failures
• Awarded Kshs.61,460,012/- for business valuation loss due to breach of contract
• Awarded Kshs.18,736,211.48 for losses from product shortages
• Awarded Kshs.2,302,575.47 for fuel calibration discrepancies