Arrow Hi-Fi (E.A) Limited v City Nominees Limited [2015] eKLR

Key Facts

Transaction Type

Issues

• What were the terms of the contract between the Plaintiff and the Defendant
• What relief is available for the innocent party
• What order as to costs of both the suit and counter-claim
• Whether the Defendant has a lien over the 3rd Motor Vehicle retained by it
• Who between the parties breached the contract
• Whether as pleaded, the Plaintiff's case is sustainable

Holdings

• The court dismissed the Plaintiff's suit, ruling that as an agent of a disclosed principal (Premium Automotive Group), the Plaintiff lacked locus standi to sue on the contract. The court found the Plaintiff's case unsustainable because the contract was between the Defendant and the disclosed principal, not the Plaintiff directly.
• The Defendant's counterclaim partially succeeded. The court determined the Defendant holds a lien over the third motor vehicle (Chassis No. WP1ZZZ9PZ6LA07873) until the Plaintiff pays Kshs. 4,362,589/90 and US$12,732 in proven expenses. These expenses include demurrage, storage, and VAT claims, though other asserted costs were not substantiated.

Remedies

• The Defendant is entitled to hold the third motor vehicle (Chassis No. WP1ZZZ9PZ6LA07873) as a lien for the unpaid expenses of Kshs. 4,362,589/90 and US$12,732. The vehicle must be released upon full payment. The court also ruled that the Defendant's counterclaim costs were awarded to it.
• The Plaintiff's suit was dismissed with costs awarded to the Defendant. Additionally, the Defendant's counterclaim was partially successful, entitling it to retain the third motor vehicle (Chassis No. WP1ZZZ9PZ6LA07873) until the Plaintiff pays Kshs. 4,362,589/90 and US$12,732 in expenses. No interest was awarded on the unpaid sum, and the Defendant was granted costs of the counterclaim.

Monetary Damages

Legal Principles

• The court applied the principle of Pacta Sunt Servanda to determine the enforceability of the contract between the parties. It found the Plaintiff breached the contract by failing to deliver vehicles as agreed, emphasizing that contractual obligations must be fulfilled.
• The court determined the Plaintiff failed to meet the burden of proof for its claims, including locus standi and the validity of its counterclaim. The Defendant's counterclaim succeeded as it proved incurred expenses for vehicle clearance.

Precedent Name

• Fairlie vs Fenton and Another
• Mwai vs KTDC
• Galaxy Paints Company Ltd vs Falcon Guards Ltd
• Galaxy Rails Company Ltd vs Falcon Guards Ltd

Key Disputed Contract Clauses

• The Defendant asserted a lien over the third vehicle for expenses incurred in clearing it (storage, demurrage, and VAT). The court partially accepted this, awarding a lien for proven costs of Kshs. 4,362,589/90 and US$12,732.
• The court considered the Plaintiff's compliance with Section 12 of the Sale of Goods Act, which requires delivery within a reasonable time after payment. The Plaintiff's delayed delivery (over 8 months) was deemed a breach.
• The court analyzed whether the Plaintiff, as an agent of a disclosed principal (Premium Automotive Group), had the right to sue under the Sale of Goods Act, Cap 31 Laws of Kenya, Section 39(2). The ruling concluded the Plaintiff lacked standing as the contract was between the Defendant and the disclosed principal.
• The Plaintiff claimed the Defendant was obligated to pay US$5,500 for an alternative vehicle per Section 28 of the Sale of Goods Act. The court found insufficient evidence to validate this claim.

Cited Statute

• Sale of Goods Act, Cap 31 Laws of Kenya
• Civil Procedure Rules

Judge Name

Passage Text

• In view of the foregoing, it is the judgment of this court that the Plaintiff did not deliver or perform its part of the contract as agreed. Delivering documentation in December, 2007 or January, 2008 was in my view not within a reasonable time. Apart from the letter by the seller... there was no evidence to show that MV Chassis number WP12229PZ8LA00379 was an alternative to the one contracted by the Defendant.
• The amount of lien in respect of which the motor vehicle Chassis No. ending with 07873 is held is Kshs. 4,362,589/90 and US$ 12,732. On payment of the said sum, the Defendant is to release the said motor vehicle to the owner of the vehicle or whoever shall have been appointed by the seller for that purpose.
• Accordingly, I am satisfied that according to the pleadings and the evidence tendered, the Plaintiff was an agent of Premium Automotive Group who was a disclosed principal. The issue whether the Plaintiff had locus standi to sue in the circumstances was a natural consequence though it was not raised in the issues submitted by the parties. My finding is that, as an agent of disclosed principal, the Plaintiff could not sue on the contract which DW 1 admittedly stated to have been between the Defendant and the said disclosed principal. To that extent the Plaintiff's suit as pleaded fails and is for dismissal.

Damages / Relief Type