A High Court judge has awarded Total Kenya its debt counterclaim and ordered the listed oil marketer to release 4,425 liquefied petroleum gas (LPG) cylinders belonging to smaller rival Hunkar Trading within 30 days, ending a seven-year dispute over unpaid exchange balances.
- •The dispute grew out of Kenya’s LPG cylinder exchange system, created under the Energy (Liquefied Petroleum Gas) Regulations, 2009, which allowed consumers to swap empty cylinders across brands.
- •Oil marketers are required to accept competitors’ cylinders and settle any imbalances through invoicing and interest payments.
- •Total won its KSh 6.73 million counterclaim, with interest, but cannot collect until the cylinders are returned.
Between 2014 and 2016, Hunkar racked up exchange deficits with Total Kenya Limited and failed to clear invoices within the 35-day window set under the industry’s operating procedures, triggering interest of 2% a month on overdue sums.
By early 2016, Total was demanding more than KSh 7.7 million, including nearly KSh 5 million already past due. Hunkar didn’t pay the balance in cash but sent 10 post-dated cheques totaling about KSh 5.9 million, scheduled to mature between April and December 2016. Total Kenya Limited rejected the staggered payments, returned six of the cheques, and insisted on settlement within the 35-day credit period, arguing that stretching payments over eight months amounted to rewriting the deal.
After a July 2016 meeting between the disputing firms that allowed the cylinders to be held, Total retained 4,425 cylinders. Hunkar never paid and sued in March 2017, calling the move illegal and seeking KSh 14.6 million in replacement value for the deteriorated cylinders.
On the other hand, Total argued that Hunkar was a stubborn debtor and owed KSh 6.73 million. It also added that the firm had failed to prove the cylinders were damaged thus justifying the multi-million replacement claim. The court agreed with the oil marketer.
“There is no inspection report from the Kenya Bureau of Standards or a licensed cylinder validator confirming that the cylinders are scrap. Steel cylinders are durable assets; they can often be re-validated, sandblasted, and repainted. To claim 100% replacement cost without technical evidence of total loss is to ask the Court to speculate,” the ruling stated.
A Firm Precedent
At the trial, the court also found that the debt owed to Total was established and that the 2% monthly interest was expressly authorized under the exchange pool’s operating procedures. The judge held that Hunkar’s issuance of post-dated cheques did not satisfy the contractual requirement for payment within 35 days and that Total was entitled to reject them.
The central legal battle turned on whether Total had a right to hold on to a competitor’s cylinders as security for the unpaid balance. Total argued it possessed a ‘common-law right of lien’, allowing a creditor in possession of another’s goods to retain them until a debt is paid.
The court noted that unlike cases where liens are expressly allowed, the LPG exchange rules required cylinders to be returned within seven days and penalized holdings beyond 14 days. The judge ruled that the agreement allowed invoicing and interest but did not let members seize competitors’ cylinders to force payment.
“In the present case, I have scoured the LPG Cylinder Exchange Pool Agreement and the Operations Procedures. There is no express clause granting members a lien over competitors' cylinders for unpaid exchange deficits,” Judge Helene Namisi stated.
The court found that while Hunkar had initially agreed in July 2016 to the temporary holding of its cylinders, that consent did not create an open-ended right. Once Hunkar filed suit in March 2017, any prior arrangement was effectively revoked, and continued detention became unlawful.
The judge also awarded Hunkar KSh 500,000 for wrongful detention of the cylinders.
