A sugar company owned by tycoon Jaswant Rai has been spared the trouble of having to pay Sh1.3 billion in damages to a rival after a successful appeal.
A bench of three judges of the Court of Appeal overturned the costs slapped on Rai-owned West Kenya Sugar Company and the regulator, the Agriculture and Food Authority (AFA), for opposing the licensing and operation of Butali Sugar Mills 18 years ago.
Justices Francis Tuiyott, Aggrey Muchelule and George Odunga found that the only damages Butali Sugar proved was a Sh18,267,438 claim for preliminary expenses.
“In the result, we would set aside the learned Judge’s assessment of damages. We substitute the award with Sh18,267,438/70,” said the judges. West Kenya had blocked the operations of Butali Sugar for being within a 24-kilometre radius of its Sh4 billion plant.
It cited a rule that barred millers from being within a radius of 40 kilometres to curb a fight for the raw material, sugar cane.
Butali Sugarr claimed that it incurred losses for delaying the establishment of a sugar factory in Malava, Kakamega County.
High Court judge Alfred Mabeya had condemned Mr Rai and AFA to compensating Butali Sugar Sh590 million, with 12 percent interest from 2007, ballooning to Sh1.864 billion.
Mr Rai’s company was to pay 70 percent of the damages or Sh1.3 billion. AFA was to pay the remaining 30 percent or Sh559 million.
The three judges reckoned that they were unable to find any basis for apportioning liability at 70 percent and 30 percent.
“It would seem that the apportionment was ‘plucked from the air’. Accordingly, we find that the appellant (West Kenya) and the 1st respondent (AFA) ought to be jointly and severally liable,” added the court.
Mr Rai has suffered a series of losses in the past three years, including a 20-year lease of Mumias Sugar Company to rival miller Sarrai of Uganda. In August 2023, Mr Rai was allegedly abducted by people believed to be police officers and was released about 24 hours later.
The police later denied that they were holding him but the tycoon soon withdrew cases he had filed challenging the lease of Mumias Sugar.
West Kenya had emerged as the highest bidder for the lease of the troubled miller but its bid was rejected over claims that his firms would have the monopoly of sugar in the country.
The billionaire owns Naitiri, Olepito, Sukari and West Kenya, the maker of Kabras Sugar, with the family controlling over half of the sweeteners sales in Kenya.
In the long-running court fight with Butali Sugar, the High Court ruled that the miller had proved that it had lost Sh590 million after it was delayed in establishing the factory.
Butali Sugar had claimed a loss of profits of Sh135.9 million, an escalation in costs Sh171.5 million, an increase in construction costs at Sh39.7 million, preliminary expenses of Sh48 million, additional interest of Sh15.2 million, loss of profits due to an increase in the sale value of sugar at Sh145.3 million and interest accrued due to additional borrowing of Sh34.7 million.
The case was filed in 2006 and a court order suspended the establishment of the factory within 25 Km radius.
A compromise recorded in court stated that West Kenya would compensate Butali Sugar the resultant relocation costs subject to independent professional valuation of the land and civil and building works constructed so far at the current Butali factory site.
West Kenya also agreed to withdraw all related court cases and agreed to an out-of-court settlement.
The three judges noted that the order of stay was issued on July 27, 2005, and was lifted on July 27, 2006.
The judges observed that the loss claimed by Butali Sugar was linked to its inability to start operations during the 13 months.
“To be entitled to the claim, it was incumbent upon the 2nd respondent (Butali Sugar) to place satisfactory material before the trial court showing that that had it not been for the stay, the 2nd respondent was certain that the preparations necessary for its operation would have been completed within the stipulated 18 months for it to start operations,” said the three judges.
The court said the company ought to have shown that without the stay order, its operations would have started by the 18th month.
“In light of these uncertainties, the question remains whether the inability by the 2nd respondent to commence the milling in June 2006 can be solely traced to the stay,” added the court.
The judges further said the losses claimed by Butali Sugar were not actual losses and their quantification was hypothetical and speculative.
They added that a party urging the court to award damages must prove the losses incurred.
“Where the losses arise in an industrial enterprise, comparisons from similar enterprises within the same environment may be useful in determining whether the claims are real or speculative but such comparisons are not necessarily binding since there are imponderables in such enterprises that may not lead to uniformity in profit making,” the appellate court said.
