Data Hub

Memorable court appeals that cut short the joy of hefty cash awards

court

An empty courtroom. FILE PHOTO | NMG

BDgeneric_logo

Summary

  • Pain of plaintiffs who see initial amounts cut drastically when losing parties mount successful cases for review.

When a party goes to court seeking compensation, they must picture several outcomes of the case.

Either it is dismissed with costs or the matter is ruled in his or her favour or at times, the court directs the party to arrive at an amicable solution.

There will be rejoicing when the court directs huge compensation or hefty award to the winning party. But there are several instances where courts have dampened the joy of the winning party and drastically reduced the award or rejected the amount in toto.

The Business Daily looked at several cases where the amounts were reduced drastically after the losing party mounted a successful appeal.

Last December, the Supreme Court referred back a long-running dispute between a distributor and Airtel Networks to the Court of Appeal, as the parties’ battle over a Sh500 million dispute.

The dispute revolves around a Sh541 million arbitration award between the telco and its former distributor Nyutu Agrovet Ltd. Documents filed in court showed that Airtel and Nyutu entered into an agreement in 2007 where Nyutu was to distribute telephone handsets.

An agent of Nyutu, Mr George Chunga, is said to have placed orders for products totalling Sh11 million but upon delivery, Airtel realised the orders were made fraudulently. The distributor failed to pay the said amount.

The disputants later agreed and appointed Senior Counsel Fred Ojiambo to arbitrate the dispute in 2009. And after hearing the case, Mr Ojiambo awarded Nyutu Sh541,005,922.

Airtel later filed an appeal before the High Court and successfully convinced Justice Kanyi Kimondo that the arbitrator dealt with matters that were outside the distributorship agreement.

Aggrieved by the decision to quash the award, Nyutu filed an appeal and a Bench of five judges of the Court of Appeal ruled that the decision of the High Court was final.

The Judges unanimously ruled that the decision by the High Court made under Section 35 of the Act was final and no appeal can be made. They struck out the appeal and awarded the telco costs of the case.

The distributor then moved to the Supreme Court and four judges of the apex court ruled that the only instance that an appeal may move to the Court of Appeal is where the High Court, in setting aside an arbitral award, stepped outside the grounds set out in Section 35 of the Arbitration Act.

During the second appeal, Chattered Institute of Arbitrators- Kenya branch joined the fray and argued through Kamau Karori that in the recent past, arbitral awards are increasingly being set aside on grounds that they do not conform to the Constitution.

The advocate said if Section 35 is interpreted in a manner that bars appeals, then the High Court would be the first and only forum where constitutional arguments are made and such a proposition would not be in the interests of protecting the sanctity and finality of arbitral awards.

Mr Karori thus proposed that there should be a balance between finality of arbitral awards and minimal court intervention.

“In concluding on this issue, we agree with the interested party (the institute) to the extent that the only instance that an appeal may lie from the High Court to the Court of Appeal on a determination made under Section 35 is where the High Court, in setting aside an arbitral award, has stepped outside the grounds set out in the said section and thereby made a decision so grave, so manifestly wrong and which has completely closed the door of justice to either of the parties,” Justices Mohamed Ibrahim, Smokin Wanjala, Njoki Ndung’u and Isaac Lenaola said.

Chief Justice David Maraga wrote a dissenting opinion, saying he would have dismissed the case because of the principle of finality.

The distributor will be hoping that the half-a billion shilling award will be restored while the telco prays that the Appellate Court will uphold the decision of Justice Kimondo.

A few years ago, former deputy director of intelligence Stephen Mwangi Muriithi managed to prove allegations against retired President Daniel Moi.

His hard-fought case suffered a blow when Mr Moi, who died on February 4,2020 appealed and convinced the Appellate Court that he was not responsible for the claims made by the former spy.

Mr Muriithi sued Mr Moi seeking close to Sh2 billion for unlawful detention, which occasioned huge him financial loss.

He convinced Justice Jeanne Gacheche in 2011 that his detention without trial was not for the purposes of preserving public security, but for Mr Moi to secure commercial advantage and to interfere with his liberties and rights.

The retired President appealed and in 2014 the Court of Appeal saved him from paying the former intelligence chief over Sh1.9 billion. The appellate court set aside the decision, saying Mr Moi was not personally responsible for Mr Muriithi’s detention, which was an action of the State.

Justices John Mwera, Daniel Musinga and William Ouko also said Mr Muriithi had failed to prove the losses he claimed to have suffered when in detention. “Claims by Mr Muriithi that they jointly had three companies with Mr Moi to ascertain percentage of shares was not proved. His claims that Mr Moi sold off and transferred some of the properties were also not proved,” ruled the judges. Mr Muriithi filed a second appeal and the matter is pending before the Supreme Court.

Former finance director of Kenya Airways Alex Mbugua had been awarded about Sh144 million by the Employment and Labour Relations Court in 2017 for wrongful dismissal.

But by a stroke of fate, the Court of Appeal, in a judgment delivered on June 7 last year, slashed the mouth-watering award to about Sh30 million.

Although the Judges said Mr Mbugua was by any account a guru in matters of finance, as he was head-hunted, poached even, from his high-flying and lucrative position as Chief Financial Officer – Africa, at Anglo Gold Ashanti in South Africa by Kenya Airways, part of the award granted to him by the court was not justified.

He was appointed on June 25, 2008, which detailed his terms of engagement and stated his gross salary as Sh1.8 million per month, which was a pay cut from what he was earning down South.

About two decades ago, the late politician and businessman Njenga Karume was at a loss when the appellate court nullified an award of Sh214 million granted to him by the High Court.

Mr Karume through his company, Kiambu General Transport Agency Ltd, took Kenya Breweries to court for alleged breach of agreement after it terminated its distribution of alcoholic beverages within Kiambu District.

Persuaded that Kenya Breweries had unlawfully terminated Mr Karume’s contract for no good reason, then High Court judge Joyce Aluoch (now a judge at the International Criminal Court (ICC)) awarded him Sh214 million in general and special damages.

“Hon Njenga Karume struck me as a fairly simple person and very trusting in his dealing with KBL,” observed Justice Aluoch. But appellate judge Akilano Akiwumi while dismissing the award, argued that the extent of Karume’s business empire was inconsistent with the finding of Justice Aluoch.

Justices Akiwumi and Evans Gicheru gave a concurring judgement setting aside the award while Justice A.A Lakha delivered a dissenting opinion, awarding Mr Karume Sh70 million in general and special damages.

The two judges exonerated KBL from blame and instead faulted the High Court for not interrogating the correspondence between Mr Karume and Kenya Breweries’ top managers prior to termination of his distribution agreement

Mr Karume. who was then accompanied by his personal cardiologist during the judgement, was said to have walked to the Court of Appeal with a decree of Sh200 million and left the judge’s chambers penniless.

On July 28, 218, a decade-long battle between the Kenya Pipeline Company (KPC) and London-based Glencore Energy over a compensation of Sh4 billion came to an abrupt end after the Supreme Court declined to hear the case.

The High Court found KPC at fault and ordered the State Corporation to pay Glencore Energy Sh4 billion.

But KPC appealed and three appellate judges reversed the decision holding that there was an elaborate scheme hatched and executed by Glencore, using Triton Oil Company as a front, which allowed the company to enter and trade in the Kenyan oil market without a licence, a move in itself, a “flagrant illegality”.

“That illegality defeats all its claims against the appellant and the learnt High Court judge should have so found.

“In failing to do so despite pleadings and strident pleas by the appellant, he fell into error and must be reversed,” Justices Patrick Kiage, Gatembu Kairu and Kathurima M’Inoti ruled.

The firm then sought to move to the Supreme Court but the application was rejected by the Court of Appeal. Not satisfied, it moved to the Supreme Court directly, seeking to be heard but its case was summarily dismissed.

The judges led by Chief Justice David Maraga said the Constitution cannot protect rights supposedly acquired through the violation of law.

On May 27, 2016, the Court of Appeal saved the taxpayer the burden of paying a private firm Sh712 million for alleged breach of contract relating to the supply of pharmaceutical equipment to the Health ministry.

Appellate judges Alnashir Visram, GBM Kariuki and Jamila Mohammed reversed a decision by Justice Joseph Mutava directing the government to pay Dol International Ltd the lump sum as damages for the cancellation of the contract.

Dol International was awarded a tender in 2006 to supply the government with X-ray machines, X-ray film envelopes and sutures at a cost of Sh123 million, Sh17 million and Sh40 million respectively.

However, the government cancelled the contract and refused to pay for the equipment already supplied over alleged fraud and corruption. This forced the company to move to court in 2009.

In February, 2013,Justice Mutava awarded Dol International Sh712 million as damages for huge losses incurred by the company. He also ruled that there was no evidence to show the tender was secured through fraudulent means.