[2020] KEHC 7243 (KLR)

REPUBLIC OF KENYA

IN THE HIGH COURT

AT MOMBASA

COMMERCIAL DIVISION

CIVIL SUIT NO. 252 OF 2010

MULTISERVE OASIS COMPANY LIMITED................PLAINTIFF

VERSUS

THE KENYA PORTS AUTHORITY......................1ST DEFENDANT

COMPACT FREIGHT SYSTEM LIMITED........2ND DEFENDANT

JUDGMENT

1. On 26. 7.2010, by a plaint dated 23. 7 2010, the Plaintiff, sued the defendant and sought judgment against the defendants of the specific sums making an aggregate of US $352,890.

2. The prayers were crafted and made out as follows:-

a. A sum of US$ 352,890. 98, or its equivalent at the date of full payment.

b. costs of the suit

c. Interest on (a) and (b) at courts rate.

d. Such further or other relief as this Court may deem fit to grant.

3. The facts giving rise to the suit were pleaded to have been that the plaintiff did import 1X4 FT container PCIU No. 8230479, containing 212 bales of ready-made garments from the Republic of China, under Bill of Lading No.9324227. The vessel carrying the cargo docked at the port of Mombasa on 26. 7 2009 and the cargo was accordingly discharged into the custody of the 1st defendant. The 1st defendant upon taking possession of the cargo nominated same for storage at the 2nd defendant’s premises pursuant to an agreement between the two defendants called a license agreement. However, when the plaintiff sought the release of the cargo it was discovered that the container had been broken into and substantial part of the goods stolen.

4. The claim was opposed by the 1st Defendant by its Defence dated 16. 9.2010, and filed on 20. 9.2010, in which it was conceded that the consignment was indeed discharged at the port of Mombasa and thereafter, left the 1st Defendant’s premises intact headed to the 2nd Defendant’s custody and control and that the 1st defendant was not liable to the plaintiff for the loss. It was also stated that the Plaintiff failed to issue the 1st Defendant with a Notice of intention to sue thereby contravening the provisions of the Kenya Ports authority Act and thus the suit was incompetent.

5. The 2nd Defendant on its part resisted the claim through its Defence dated on the 8. 9.2010 and filed on the same day. In it, the said 2nd Defendant pleads that the Plaintiff has no locus standito sue in this suit as it is not the owner or the importer of the container PCIU Number 8230479. It was further pleaded that the Plaintiff failed to produce to the defendants documentary evidence to prove ownership, purchase abroad, and importation of the consignment in order to help in the processing of the claim. An additional pleading was made that the subject container had ladies’ shoes and not assorted readymade garments as alleged and that the alleged loss of the consignment was a scheme by the Plaintiff to avoid processing the consignment through the normal process.

6. In support of its case, the Plaintiff called a total of three witnesses. MR. Ahmed Maalim Osman (the plaintiffs clearing agent), Mr. Bashir Mohamed Nur (Managing Director of The Plaintiff) and Mr. Dahir Farah Mohammed (supplies manager to the Plaintiff. The 1st Defendant, on its part, relied on the evidence of its three witnesses Mrs. Mary Mutisya (senior operations officer), Mr. Simeon Kipsang Chebotibin (a tally clerk) and Stanslaus Angira, while the 2nd Defendant relied on the evidence of its sole witness Mr. George Mwangi (an operations manager). All the witness relied on, adopted their respective witness statements as evidence in chief, and then produced the Bundles of Documents filed as exhibits.

Evidence by the Plaintiff

7. To prove the Plaintiff’s case MR. Ahmed Maalim Osman testified as PW1. He introduced his case and went ahead to adopt his witness statement filed in court on the 4. 6.2012. He testified that the goods aboard MV Kota Nanhai were paid for via “Hawala System of Money Transfer” in two installments. The 1st installment being the sum of USD 100,000/= paid on the 21. 5.2009, while the second installment was for USD 197,800 paid on the 29. 5.2009 and a receipt was issued by the shipper. Unfortunately, on the bill of lading sent to PW1, the goods had been misdescribed as 212 bales of ladies’ shoes instead of 212 bales of assorted ready-made garments. That misdescription necessitated that the manifest be and was so corrected via Form C11, which accurately described the goods on board as being 212 bales of assorted readymade garments and an amended bill of lading issued.

8. The witness went on to state that the subject container was delivered to the 2nd Defendant, a gate pass was issued by the 1st Defendant showing the transfer of the subject container to the 2nd Defendant, the loss of the container was reported to the police and after the complaint was made, a company called Toplis & Harding International Ltd contacted the plaintiffs to confirm that they had made a demand of the lost consignment.

9. On cross-examination by Mr Noorani, Learned Counsel for the 1st Defendant, PW1 stated that he was not a clearing agent but the plaintiff’s agent in Mombasa and that he appointed a clearing agent on the instruction of the Plaintiff. He further confirmed that he was aware that the 1st Defendant authorizes cargo to be stored at CFS’s which are usually outside the port and are privately owned and that the plaintiff was to collect its container from the 2nd Defendant, only to learnt that the subject container had been pilfered on its way to the 2nd defendant’s premises.

10. PW1 also confirmed that the payments made by the Plaintiff were made on the 21. 5.2009 and 29. 5.2009, the invoice is dated 1. 7.2009, the receipt in dated 27. 6.2009 and the bill of lading was issued on the 5,7. 2009.

11. On cross-examination by Mr. Sitonik, Learned Counsel for the 2nd Defendant stated that their agent (Musdafa Ahmed) based in china, sourced for the goods, ensured they were packed and shipped. They also received a bill of lading and invoice from him. He added that a delivery order is not required for clearance and that an import declaration can be generated before or after importation and that one only needs a pro forma invoice. He also stated that an invoice is issued after payment of the full purchase price of the consignment.

12. PW1 also confirmed that the remaining 59 bales were retained as exhibits and that the honesty of the importer was questioned by the 1st Defendant’s report on the basis that there was an attempt to conceal the accurate description of the goods.

13. In re-examination, PW1 stated that the packaging list did not indicate any shoes and that there is evidence of payment of USD 297,800 and a delivery order was issued by the shipping line and the correction of the description was approved.

14. When asked by the Court about the formula applied in calculation of the loss of profit, PW1 answered that there was no formula he used to arrive at such profits.

15. PW2 adopted his statement filed in Court 4. 6.2012 to the effect that they are demanding the sum of USD 352,890. 98 from the defendant, which comprises of the value of the consignment, agent expenses and projected profits which is about 15% of the costs of the goods and per bale the Plaintiff has projected USD 216. 51 profit.

16. PW2 further testified that he was informed by their clearing agent that the suit container was aboard truck number KBE 742G/ZC9357, which had been broken into and 153 bales of assorted garments stolen leaving behind only 59 bales of assorted garments.

17. On cross-examination by Mr. Noorani, PW2 stated that he sells goods to ready customers but he did not have a list of his customers in Court and that the Plaintiff incurred expenses for its agent Mr. Dhahir Farah Mohamed.

18. On cross-examination by Mr. Sitonik, PW2 confirmed that he was the one who discovered the discrepancy between the bill of lading and the packaging list. He further stated that the price per bale depended on the contents in the bale.

19. PW3 adopted his statement filed in Court on the 9. 7.2012. He testified that he went to china, purchase goods, met with the Plaintiff’s authorized agentMr. Musdafa Ali Ahmed, they proceeded to the manufacture of the goods that were made on the 27. 6 2009 and later paid for and shipped to Kenya.

20. On cross-examination by Mr. Noorani, PW3 stated that after the goods were shipped he remained in China waiting for the Plaintiff’s instructions and when shown airplane ticket by Counsel, he stated that he transited to china on the 1. 4.2009 and returned in Kenya in December 2009. He further confirmed that “DFM” were his initial but the initials on the invoice were not his.

21. The Court also put questions to the PW3 during which he stated that he parked and dispatched only one container to Kenya between April and December and he did not remember whether he stopped in Dubai for a week.

Evidence by the 1st Defendants

22. The statement of DW1 Mr. Stanlaus Angira dated 23. 7.2012 and filed on the 3. 9.2012 was, by consent of the parties, admitted as evidence in chief and without need for cross-examination. DW1 testimony was that the subject container was discharged at the port of Mombasa with its seals intact and the same is confirmed by the discharge Tally Sheet No. B0026422. The container was nominated to the 2nd Defendant but the same was diverted from the normal route to the 2nd Defendant’s premises and abandoned at Makande. It was further established that LULU Ltd who had been contracted by the 2nd Defendant owned the truck transporting the container. The witness confirmed discharged and taking of possession by the 1st defendant as well as the fact that the same container was released to the 2nd defendant.

23. DW2, M/s. Mary Mutisya adopted her statement filed in court on 6. 7.2017. She testified that her duties entailed nominating vessels to CFS’s based on arrangement between the 1st Defendant and the CFS. In this case, 2nd Defendant undertook to transfer the subject container and that the responsibility of the container rested on the CFS once the container left the 1st Defendant premises as provided under clause 3 of the Licence Agreement.

24. She further stated that under clause 10 of the licence agreement, it was provided that, the CFS would operate as an independent contractor and that under clause 7 of the licence agreement, the 2nd Defendant agreed to indemnify the 1st Defendant against all proceedings costs, claims, damages, expenses and liabilities incurred as a result of loss of container/cargo handed over to it for transfer and storage in their facility.

25. On cross-examination by Mr. Lakicha Learned Counsel for the Plaintiff, DW2 stated that the Licence Agreement between the 1st and 2nd Defendant was valid for five years effective from 1. 12. 2008. DW2 confirmed that she was on leave from 25th - 30th July 2009 and that she was not aware whether the 1st Defendant nominated the Plaintiff’s cargo to the 2nd Defendant and that she did not know whose duty it was to offload the container. She further stated that she was not aware that an investigating report by Major (rtd) Mohamed D. Morowa unbold and that the said report held the 1st Defendant liable for the loss of the consignment.

26. On cross-examination by Mr. Sitonik, DW2 stated that her work was to nominate vessels to CFS’s and that a CFS agent must produce a pick up order and an invoice both issued by the 1st Defendant. However, she was not aware of any document issued to show release of a container. DW2 also confirmed that clause 20 of the Licence agreement makes it mandatory that disputes be referred to arbitration.

27. On re-examination by Mr. Noorani, DW2 confirmed that all containers arriving at the port usually contain a seal from the port of origin and that those containers that are usually stacked, have to be moved daily for the purposes of accessing a needed container and the movements are recorded.

28. DW3, Mr. Simeon Kipsang Chebotibin,a tallying clerk, adopted his statement filed in Court on the 3. 9.2012. He testified that he was on duty on the 29. 7.2009 and he was the one who authorized the loading of the subject container with its seals intact to truck registration Number KBE 742G/ZC9357 which was dully authorized to collect the container on behalf of the 2nd Defendant and its driver drove towards the port gate.

29. On cross-examination by Mr. Sitonik, DW3 confirmed that for a person to collect a container they have to submit a pick up order together with an invoice and before release of the container, it has to be ascertained that the container is intact. He also confirmed that the 2nd Defendant had requested for a permanent pass for its employees, its Application had been approved and the driver who ferried the subject container had a permanent pass issued to him on behalf of the 2nd Defendant.

Evidence by the 2nd Defendants

30. DW4, George Mwangi the 2nd Defendant’s Operations manager adopted his statement filed in Court on the 6. 9.2018. He testified that the 2nd Defendant was an agent of the 1st Defendant as per letter dated 20. 4.2010 and their interaction is governed by the Standard Operation Procedures in the Licence Agreement dated 1. 12. 2008.

31. He further stated that for them to collect the container they had to obtain a manifest from Kenya Revenue Authority and the 1st Defendant, and then send a list of trucks to collect the cargo. DW4 further stated that internally they have a tracking system and they did not expect the subject container in their yard as they came to learn of the container after somebody made enquiries and that the 1st Defendant is still liable as there was no pick up order or invoice by it.

32. On cross-examination by Mr. Lakicha, DW4 confirmed that he was appointed an operation manager in 2010 but he had been the 2nd Defendant’s supervisor prior to the appointment and therefore he would have known if a container was nominated to the 2nd Defendant, since the 1st Defendant would provide them with a list of the said containers.

33. He further confirmed that the subject container was indeed nominated to 2nd defendant because the vessel KOTA NANHAI which delivered the container was wholly nominated to them. He confirmed that the subject container was indeed discharged, the 2nd Defendant had applied for permanent passes for its three drivers and more specifically Mr. Isaack Kweyu who was one of its driver who was issued with a pass and he allegedly pilfered the container. DW4 also confirmed that they contract other transporters to help them in transporting containers.

34. In re-examination, by Mr. Sitonik, DW4 stated that on the position slip it was not indicated the details of who picked the container. Therefore, there was no evidence that they took possession of the subject container.

Issues, Analysis and Determination

35. Having perused the evidence above in line with the pleadings filed, read the submissions offered by both parties and the law cited by the parties, I have isolated the following issues as falling for determination by the Court.

36. Before I identify the isolated issues for determination, it is noteworthy, that on the 26. 6.2018, the parties herein by consent adopted the witness statement by DW1 Mr. Stanslaus Angira filed in Court on the 3. 9.2012 and the same was admitted in evidence without need for cross-examination. Therefore, it is common ground that container no. PCIU 8230479 was discharged at the port of Mombasa, the ship carrying the said container was nominated to the 2nd Defendant, on the 29. 7.2009 the container was loaded aboard truck registration no. KBE 742G/ZC9357, thereafter, a pick-up order was confirmed as per information obtained from the Tally Sheet No. B0138171.

37. It is also admitted that the aforementioned truck was diverted from the normal route while headed to the 2nd Defendant CFS, pilfered then abandoned at a location called Makande. It is after investigations that it was ascertained that the 2nd Defendant had contracted Lulu limited to transport various containers to its CFS premises and the truck KBE 742G/ZC9357 that ferried the subject container was owned by Lulu Limited but contracted by the 2nd Defendant. Also, it was discovered that the driver of the said truck was one Mr. Isaack Kweyu Makokha who had a port movement Pass G005088 issued to him in January 2009 at the request of the 2nd Defendant.

38. Further, it is admitted that a joint survey involving the agents of the Plaintiff, 1st and 2nd Defendant was carried out on 21. 1.2010 at Port Police station, where it was ascertained that only 59 bales of fabric were intact while the other 153 went missing.

39. From the foregoing, I am of the view that the Plaintiff has on a balance of probabilities proved that the container was lost while in the custody of the 2nd Defendant and that the evidence given by the 1st and 2nd defendant was not adequate to displace that inference. Consequently, I find that the only issues remaining for determination are.

1. Who is liable for the loss of container PCIU 8230479;

2. Whether the plaintiff is entitled to be compensated by the If the defendant is liable for the loss of the containers

1. Who is liable for the loss of container PCIU 8230479?

40. It was the Plaintiff’s submission that the 1st Defendant nominated the vessel carrying container to the 2nd Defendant, the container was then delivered to the defendant and it failed to safely secure it leading to it being pilfered. Consequently,the 1st Defendant could not escape liability since its report stated that the it could not escape the mistakes made by its agent who in this instance was the 2nd Defendant. Therefore, both the defendants should be held jointly and severally liable.

41. The 1st Defendant on its part submitted that the 2nd Defendant was not its employee but an independent contractor. However, since it has not been rebutted that the 2nd Defendant received the subject container, the 2nd Defendant should indemnify the 1st Defendant for the loss of cargo handed over to it as per clause 7. 1(b) of the licence Agreement dated 1st December 2008 which agreement has not been denied.

42. On the part of the 2nd Defendant, it was submitted that the commodities alleged to be lost are not what was contained in the bill of lading produced in Court by the Plaintiff. Therefore, there cannot be liability without fault.

43. I have carefully considered the submission of the parties on the issue of liability, I find that indeed the 1st defendant nominate the vessel carrying the subject container to the 2nd Defendant, the said container was loaded onto a truck belonging to Lulu limited which was contracted by the 2nd defendant to help it because of its heavy workload, the said truck was driven by one Mr. Isaack Kweyu whom the 2nd Defendant had applied for him to be issued with a permanent pass to enable him access the port.

44. I note that on the 15. 12. 2010, the 1st defendant filed a Notice to Co-Defendant, claiming an indemnity from the 2nd Defendant in respect of any losses, damages, costs and interest awarded to the Plaintiff against the 1st Defendant. The basis of the claim for a claim of indemnity was the licence agreement dated 1. 12. 2008 which provided for the rules of engagement between the 1st and 2nd Defendant. Clause 7. 1(b) of the licence agreement dated 1. 12. 2008 provides as follows;

Without prejudice to any other provision of this agreement, the licensee undertakes to indemnify and keep indemnified the authority and its employees, agents, directors and officers on demand for and against all proceedings, costs, claims, damages, expenses and liabilities of whatsoever nature howsoever suffered or incurred by any of them arising out of or by reason of:

a. …

b. Any damage and/or loss of container /cargo handed over to the licensee by the Authority for transfer and storage in their facility

45. Further, clause 10 of the licence Agreement is on the Independent Contractor and it provides as follows:

“Nothing in this agreement shall constitute or be deemed to constitute the licensee the agent or partner of the authority for any purpose whatsoever. The licensee is not granted any right or authority to assume or create any obligation or responsibility, express or implied, on behalf of, or in the name of the Authority in any manner, or with respect to anything whatsoever”

46. From the foregoing and from the admitted evidence of DW1, I find and hold that on a balance of probabilities, the Plaintiff has proved that the 2nd Defendant is liable for the loss of container no. PCIU 8230479, which was delivered to its custody and control by the 1st Defendant on the 29. 7,2009. However, I find that the Plaintiff has failed to prove that the 2nd Defendant was an agent of the 1st Defendant since under Clause 10 of the Licence Agreement it has been expressly stated that the 2nd Defendant is an independent contractor. Clause 7 of the said licence it is stated that the 2nd Defendant shall indemnify the 1st Defendant against any loss of cargo delivered to it.

2. Whether the plaintiff is entitled to be compensated by the If the defendant is liable for the loss of the containers.

47. The Plaintiff submitted that it ordered a consignment of 212 bales of assorted garment via invoice no. 5874 from Zhejiang Changhan Import & Export Trading co. LTD, the consignment was paid for, a receipt issued in the name of the Plaintiff on the 27. 6.2009 and a bill of adding was issued. It was later on discovered that there was a discrepancy on the bill of lading as the description of the goods and the same was amended via FORM C11 that captured the correct description of 212 bales of readymade garments.

48. The 1st Defendant on its part submitted that it was confirmed in the joint survey that out of the 212 bales, only 59 were recovered and they were available for the Plaintiff to pick from the police station, but they did not pick them as they were retained at the police station. He further submitted that the Plaintiff has failed to give any evidence of efforts it made to recover the remaining 59 bale in order to mitigate its loss. For authority, reliance was placed in the case of Safe Rentals Limited v Leisure Lodge Limited t/a Leisure Lodge Hotel Club Casino [2012] eKLR where the Court of Appeal held that by leaving the safes at the respondent’s premises, the Appellant failed to mitigate its loss.

49. The 2nd Defendant on its part submitted that the Plaintiff declared that its consignment comprised of ladies shoes, the bill of lading confirmed the same, the delivery order dated 31. 7.2009 and the declaration form dated 28. 7.2009 all confirmed that the container carried ladies shoes. Therefore, legal estoppel forbids the Plaintiff from alleging otherwise. Counsel further submitted that it has not been alleged that the commodities (the ladies shoes) contained in the bill of lading have been stolen. Consequently, there cannot be liability without fault.

50. It is this Court’s finding that the Plaintiff through its commercial invoice no. no. 5874 proved that it had sourced for assorted garments from China by sending its supplies manager Mr. Dahir Farah Mohamedto China, Payment was made in two instalments, a receipt issued by the manufacturer for a sum of USD 297. 790. 98 and a bill of lading was issued in the name of the Plaintiff. Unfortunately, there was a discrepancy on the description of the goods on the bill of lading prompting the Plaintiff to apply for an amendment of the description of the goods via Form C11. The amendment of the description of the goods was accepted and the said form was even endorsed by Kenya Revenue Authority. Furthermore, the 2nd Defendant did not furnish this Court with any evidence to challenge the authenticity of the Form C11.

51. The Plaintiff also produced a copy of an invoice no. PILLK0092828 dated 27. 7.2009 from its shipper (PIL Kenya) and a copy of a delivery order to demonstrate that it had cleared all its liabilities before being issued with the said delivery order by its shipper. Unfortunately, refund of the shipping fees was not pleaded and as a result, the same is not awardable.

52. This Court also finds that the plaintiff pleaded and proved that its supply manager travelled specifically to china in order to prepare the consignment for shipping and in the process incurred a hotel bill of USD $4300 for the period between 4. 4.2009 to 2. 7.2009 together with air ticket charge.

53. From the foregoing, I find that the Plaintiff’s claim is a special damage claim. Therefore, for the Plaintiff to claim special damages, it must demonstrate that they actually made the payments or suffered the specific injury before compensation will be permitted. It is trite law that special damages must be pleaded and proved. See Mohammed Ali & another v Sagoo Radiators Limited [2013] eKLR (Civil Appeal No. 231 of 2005)wherein the Court adopted the holding of the Court in Hahn vs Singh [1985] KLR 716 that:

“… special damages which must not only be claimed specifically but proved strictly for they are not the direct natural or probable consequences of the act complained of and may not be inferred from the act. The degree of certainty and particularity of proof required depends on the circumstances and the nature of the act themselves.”

54. On the Plaintiff claim for loss of profit for the bales stolen,it is my view that such a claim was a special damage that needed to be specifically proved.In Kimani vs. Attorney General Civil Appeal No. 6 of 1969 [1969] EA 502:the Court held as follows:-

“A claim for loss of profits is clearly “special damages” though in certain circumstances it could be included within a claim for general damages. This claim, however, relates to a special loss of profits consequent on the loss of use of the article for a specific period prior to the date of the plaint which is clearly special damages which must be pleaded and proved. The reason for this rule is that a defendant must be given an opportunity of knowing precisely what specific claims are made and thus be in a position to call evidence to show that the claim in respect of the details is not correct.”

55. Similarly, in Bank of Baroda (Kenya) Limited vs. Timwood Products Ltd Civil Appeal No. 132 of 2001 (CAK) [2008] KLR 236it was held as follows:

“As to loss of profits, apart from the fact that no particular paragraph of the plaint specifically dealt with the circumstances surrounding such loss, there was no evidence of what contracts, if any, were lost…It was, for example, not proved that prior to the [incident]…Timwood had been making such and such profits but that subsequent[ly]…the profits decreased or were wiped out altogether. No specific contract was identified as having been lost as a result of the [incident]…No trading accounts were produced. It may be that Kenya’s economy is topsy-turvy and it may be that management accounts kept by companies such as Timwood may not be very useful, but if such accounts are kept and one is claiming damages for loss of profits, such accounts ought to be produced to assist the court in coming to a conclusion on the issue of whether there has in fact been a loss, and if so, the magnitude of the loss.”

56. The Plaintiff in response to this courts question on how it arrived at the pleaded lost profit stated that there was no formula he used to arrive at the profit. The Plaintiff failed to give any contract it had signed with its customer in preparation for the assorted readymade garment and the Plaintiff also failed to attach its previous trade record in order to give a projection of the profit it would have made based on the profit it has been before. Consequently, it is the finding of this Court that the Plaintiff failed to proof loss of profit and as a result, the same is not awardable.

57. I did not award the cost of the 59 bales since am persuaded by the 1st defendant’s argument that the Plaintiff failed to remedy its loss by collecting the 59 bales that were left at the port police station. I am persuaded with the finding in the case of African Highland Produce Ltd v John Kisorio Civil Appeal No. 264 of 1999,where the Court of Appeal stated as follows:-

“The guiding principle of law in mitigation of losses is as follows. It is the duty of the plaintiff to take all reasonable steps to mitigate the loss he has sustained consequent upon the wrongful act in respect of which he sues, and he cannot claim as damages any sum, which is due to his own neglect. The duty arises immediately a plaintiff realizes that an interest of his has been injured by a breach of contract or a tort and he is then bound to act, as best he may not only in his own interest but also in those of the defendant.”

58. Accordingly, I find and hold that the 2nd Defendant is liable for the loss of container no. PCIU 8230479. Consequently, keeping in line with Clause 7. 1(b) of the Licence Agreement dated 1. 12. 2008 Judgment is hereby entered for the plaintiff against the 2nd defendant as follows-

(i) US$ 214,803. Being the value of 153 bales imported assorted garments that went missing.

(ii) US$ 4300 being the cost of accommodation

(iii) Kshs. 92,560/= as air ticket to china

(iv) Interest at Court rates from the date of filing this suit until payment in full; and

(v) Costs of the suit.

It is so ordered.

Dated, signed and delivered at Mombasathis 28th day of February 2020.

P.J.O. OTIENO

JUDGE