Imagine your business wins a major three-year corporate contract, only for the client to abruptly cut you off six weeks in. Obviously, you sue for the profits you would have made over those three years. You present a stunningly formatted accountant’s report projecting those lost earnings based on your internal numbers. At trial, the client doesn’t even bring an expert to challenge your report. Are you automatically entitled to a massive payout? How can a business recover anticipated profits in Kenya when a commercial contract is terminated prematurely?
On 30th October 2026, the Supreme Court of Kenya delivered a resounding reality check in National Social Security Fund Board of Trustees v Micro-City Computers Limited (Petition No. E037 of 2025). The Apex Court completely wiped out a massive award of KSh 103,447,136 for “loss of anticipated profits.” Instead of reducing the payout, the Court refused to give the supplier a single shilling of that profit claim, reshaping commercial litigation and contract strategy in Kenya forever.
The Story Behind the Dispute
In 2011, Micro-City Computers Limited signed a KSh 244.8 million contract with the National Social Security Fund (NSSF) to install a CCTV and access control system, plus a KSh 15 million annual maintenance deal. However, the NSSF never handed over the site, citing “budgetary constraints” a year later.
Notably, Clause 6.2 of the contract allowed the NSSF to terminate the agreement “at any time and for any reason” on one month’s notice, excluding claims for lost profits. The NSSF, however, simply walked away without giving formal notice.
Micro-City sued. The High Court found NSSF in breach but rejected the profit claim as speculative. The Court of Appeal flipped the ruling, awarding Micro-City the full KSh 103 million. The NSSF appealed to the Supreme Court, forcing a definitive ruling on how anticipated profits must be proven.
The Four-Part Framework Established by the Supreme Court
Part 1: The “Expectation Interest” Cap
The Court clarified that contract damages protect your “expectation interest”, putting you where you would have been if the contract was performed properly. Significantly, anticipated profits mean net profit, not gross revenue, and are strictly bounded by the contract’s terms.
The Court noted: “The claimant is entitled to the value of lawful performance, not to the value of the most advantageous imaginable course of performance.” Since the NSSF had the contractual right to walk away on a 30-day notice, Micro-City’s legal loss was strictly capped at that 30-day notice period. You cannot claim three years of guaranteed profits from a contract that lets a client fire you in 30 days.
Part 2: The Real Meaning of “Strict Proof”
“Strict proof” does not raise the civil standard of proof beyond the balance of probabilities. Instead, it demands high-quality, particular, and cogent evidence to back up a specific monetary claim. The Court introduced a rigid two-stage inquiry:
- The Fact of the Loss: The business must first prove a factual foundation, readiness to perform, past trading history, and historical profitability.
- The Quantification: Only if Stage 1 is established can the court estimate the exact number. A court can never use estimation to cure a complete failure to prove that a loss actually occurred.
Part 3: The Myth of the Unstoppable Expert Report
Under Section 48 of the Evidence Act, expert opinions are purely advisory. If an accountant’s report is built entirely on unverified assumptions and figures blindly supplied by the client, it is legally unreliable. Furthermore, the defense’s silence or failure to call a counter-expert does not rescue a hollow claim; the burden of proof always stays with the claimant.
Part 4: Fatal Evidentiary Flaws
The Supreme Court threw out Micro-City’s claim after finding six fatal gaps:
- Internal Contradiction: Micro-City’s Managing Director estimated losses at KSh 26 million, while their expert report claimed KSh 103 million.
- No Verification: The report openly confessed the authors could not verify the client’s data.
- Lazy Allocation: Operating expenses covered the macro business, not this specific contract.
- Missing History: No historical trading or tax records from 2011 were produced.
- Fabricated Terms: The maintenance claim assumed an uncontracted five-year term.
- No Guarantees: Clause 6.2 left long-term performance completely unguaranteed.
The Court held that judges cannot pull numbers out of thin air just because “some loss must have occurred.” It left Micro-City with only KSh 9 million for verified out-of-pocket tender preparation costs.
PRACTICAL IMPLICATIONS
- Build the factual foundation before the expert report. Accounts, costs, margins and tax records go beside the projection.
- Instruct experts to test, not merely compute: allocate contract-specific costs, reconcile with witnesses, flag assumptions.
- Align witness and expert evidence before filing: the KSh 26 million to KSh 103 million gap was fatal.
- Termination-for-convenience clauses cap the expectation. Damages follow the lawful exit route; observe notice strictly.
- Draft duration and pricing with damages in mind: fix maintenance terms; exclusion clauses should cover lawful and unlawful termination.
- The defence’s silence is no shield: cross-examination and documentary gaps suffice; an unchallenged report is not conclusive.
- Plead and preserve special damages with particularity. Keep contemporaneous records from the dispute’s outset.
- Public bodies should note the wider signal: public funds are shielded from inflated awards, yet budgetary constraints excuse no defective termination.
- Re-evaluate pending claims and settlements: thin records may need supplementing or reframing as reliance loss.
The decision will be remembered for the KSh 103 million it took away. Its value is the discipline it imposes: profits never earned remain recoverable, but only on proved facts.
This article is provided free of charge for information purposes only; it does not constitute legal advice and should not be relied on as such. No responsibility for the accuracy and/or correctness of the information and commentary as set out in the article should be held without seeking specific legal advice on the subject matter. If you have any query regarding the same, please do not hesitate to contact the Litigation Department at Wamae & Allen LLP: Litigation@wamaeallen.com.
About the author
Caxstone specializes in civil, employment and labour disputes, constitutional law, family law and succession, and environment and land matters. He has amassed a wealth of knowledge and experience in litigation which is evident in the successes obtained for clients. He is an active member of the Employment and Labour Relations Court Bar-Bench committee.
Denis Mutugi specializes in Commercial Litigation and Alternative Dispute Resolution.
Denis graduated with a Bachelor of Laws, LLB (Hons) from The University of Nairobi in 2021 and was admitted to the Roll of Advocates of the High Court of Kenya in the year 2023.
Denis has amassed a considerable wealth of experience in conducting legal research on various complex legal matters touching on Commercial, Insurance, Employment and Insolvency law and bankruptcy.
Frankline M. Otieno is a dispute resolution associate, recommended professional and committed to offering sustainable client-centred solutions to legal issues.Frankline is astute in commercial litigation, securities law, banking law, intellectual property litigation, public procurement, land law litigation, Judicial Review and Administrative law litigation, sports law, tax litigation, administrative law, consumer protection law, competition law and constitutional litigation.
