In the area of defamation, media houses have been on the receiving end of heavy damages, raising concern about defamation suits being used to silence the media.
The bigger danger is that such legal precedents shape and perhaps change the law in fundamental ways if not reviewed.
How do courts assess and award monetary damages, compensation, and fines in personal and commercial litigation?
In the US and Europe, law firms and the courts recruit the services of a forensic economist. Forensic economics is a field where the application of economics intersects with legal matters — basically quantification of harm from behavior that has become a subject of litigation.
That is not the case for Kenya. So how do courts and even lawyers quantify compensation in monetary terms?
This question is important because as dispensers of justice the courts cannot afford to render verdicts based on guesswork. This is a matter of growing concern.
In the area of defamation, media houses have been on the receiving end of heavy damages, raising concern about defamation suits being used to silence the media. For example, in 2016, the High Court awarded a judge Sh20 million in damages for defamation against NMG.
Now, NMG had requested the court to settle the case at Sh2.8 million, but the court settled on Sh20 million even though the judge had asked for Sh32 million. So, is there a standard and verifiable yardstick that the court used to arrive at the decision where it found Sh.32 million was excessive and Sh.2.8 million minimal?
The case of Synergy Industrial Credit Limited against Cape Holdings also raises similar concern of how courts calculate damages.
In 2010, Synergy approached Cape Holdings, at that time developing 14 Riverside complex, to purchase one block. Formal sale agreements were signed and an amount of Sh570 million paid as deposit.
A few months later, Synergy withdrew from the agreement accusing Cape Holdings of repudiatory breach of contract.
Cape Holdings said Synergy wasn’t entitled to the full deposit and it also requested customised changes to the building and therefore incurred additional cost escalating.
The matter ended in arbitration in 2012, and the crux of the matter comes in here. The arbitrator awarded Synergy a sum of Sh1.67 billion, with Sh750 million as interest, Sh.148 million as income opportunity loss and Sh50 million in foreign exchange loss.
The arbitrator calculated a compounding interest at the rate of 18 percent. This led to interest being more than the principal amount. The arbitrator appeared to have ignored the “In Duplum rule”, which states that interest cannot accumulate more than the loan once the accrued interest equals the amount of loan.
The second issue is that the arbitrator calculated both interest and income opportunity loss. So why is interest being charged if income opportunity loss also applies? Grant of interest is what is mostly used in terms of contractual breach to get the income opportunity loss.
Notably, the arbitrator also awarded foreign exchange loss when the transaction was done in Kenya shillings.
But that is not the end of it, the matter went to the High Court and the Court Appeal, which both set aside the arbitration ruling. Synergy went to the Supreme Court and the matter was referred back to the Court of Appeal, which reinstated the arbitration ruling.
The court applied the compound interest at the rate of 18 percent again from January 2015 to February 2021, using the Sh1.67 billion awarded by the arbitration as principal amount and awarded the interest alone to Sh.3.35 billion.
From Sh570 million to Sh5 billion within 10 years, does the court believe it delivered justice here? What the court did here was to simply take away the property (now placed on auction) without due process.
The bigger danger is that such legal precedents shape and perhaps change the law in fundamental ways if not reviewed.
In 2001, Nicholas Biwott was awarded a hefty sum of Sh67.5 million in a defamation suit and this case has set precedence till today in awarding hefty defamation fines to public figures.
