Sylvek Ltd v Transist Logistics Ltd & another (Civil Appeal E039 of 2025) [2026] KEHC 8615 (KLR) (19 June 2026) (Judgment)

Sylvek Ltd v Transist Logistics Ltd & another (Civil Appeal E039 of 2025) [2026] KEHC 8615 (KLR) (19 June 2026) (Judgment) Neutral citation: [2026] KEHC 8615 (KLR) Republic of Kenya In the High Court at Mombasa Civil Appeal E039 of 2025 NM Orina, J June 19, 2026 Between Sylvek Limited Appellant and Transist Logistics Limited 1st Respondent Ntawali Aime Alexandre 2nd Respondent (Being an Appeal from the Judgment and Decree of Hon. Gatambia Ndung’u (RM/Adjudicator) in Mombasa Small Claims Commercial Case No. E1214 of 2024 delivered on 30 January 2025) Judgment Background 1.The claim before the trial court originated from a transportation agreement between the 1st Respondent and the Appellant to transport the 2nd Respondent’s cargo from Mombasa to Kigali. It was the Respondents’ claim before the trial court that despite being paid the sum of USD. 2,039.00 to the Appellant, the Appellant detained the cargo for 2 months alleging that the 1st Respondent owned money for other containers belonging to another client. The 1st Respondent contended that it was forced to procure services of another transporter and that the Respondents bore the cost of the storage and demurrage amounting to Kshs. 172,000.00. The Appellant averred in response to the claim that the 1st Respondent had failed to fulfil its obligations of paying charges due to the relevant authorities leading to accrual of demurrage and storage charges amounting top USD. 4,650.00. The Appellant sought award of these sums in the counterclaim. 2.The trial court found in favour of the Respondents awarding them the sum of USD. 2,039.00 and Kshs. 172,000.00. the Appellant’s counterclaim was dismissed. The Appeal 3.Aggrieved by that determination, the Appellant filed a memorandum of appeal listing 8 grounds seeking to set aside the trial court judgement as follows:a.That the trial adjudicator erred in fact and in law in failing to look at the terms of the agreement between the Appellant and the 1st Respondent wholly;b.That the trial adjudicator erred in fact and in law in faulting the Appellant in favour of the 2nd Respondent, when there were no contractual or any obligations between them;c.That the trial adjudicator erred in fact and in law in finding the Appellant in breach of apparent contract with the 2nd Respondent, when there was no contract between them;d.That the trial adjudicator erred in fact and in law in failing to keenly look at and consider the documentary evidence and statements filed and/or presented by the Appellant;e.That the trial adjudicator erred in fact and in law in failing to recognise that only the 1st Respondent was in agreement with the Appellant;f.That the trial adjudicator erred in fact and in law by failing to properly adjudicate the matter placed before him, thereby rendering a wrong decision;g.That the trial adjudicator erred in fact and in law in allowing the claim against the Appellant and dismissing the counterclaim. Appellant’s Submissions 4.The Appellant identifies two issues for resolution through its written submissions dated 17 April 2026 as follows:a.Whether the Honourable Adjudicator erred in law in finding the Appellant liable to the 2nd Respondent in the absence of any contractual relationship between them;b.Whether the Honourable Adjudicator erred in law in dismissing the Appellant’s counterclaim contrary to the documentary evidence on record. 5.In respect of issue one, the Appellant submits that the agreement between the Appellant and the 1st Respondent is exclusive between the two parties and that the 2nd Respondent is not a party. The Appellant faults the trial court’s invocation of the collateral contract exception to the doctrine of privity of contract in respect of this contract and argues that the facts did not satisfy the conditions required for it to take effect. It is the Appellant’s case that the collateral contract exception requires existence of a separate and distinct collateral contract between one of the contracting parties and the third party relating to the same subject matter. The Appellant argues that a collateral arrangement must be independently established and cannot be inferred merely from the fact that a third party was the intended beneficiary of the main contract. 6.Even though the Appellant admits that it was aware that the 2nd Respondent was a beneficiary of the cargo, it avers that such awareness does not translate into contractual liability. The Appellant argues that the trial court seems to have conflated contractual and tortuous liability despite the two being distinct and the 2nd Respondent not having pursued any claim under tort against the Appellant. 7.The Appellant places reliance on the Court of Appeal decision in National Bank of Kenya Ltd v. Pipeplastic Samkolit (K) Ltd & Another [2001] eKLR which emphasized that a court of law cannot rewrite a contract between parties, and that parties are bound by the terms of the contract they have made. 8.The Appellant, therefore, asserts that the proper recourse that should have been pursued by the 2nd Respondent was against the 1st Respondent with whom there was a contract for transportation of cargo. 9.In respect of the second issue, the Appellant submits that the trial court erred by making a finding that was directly contradicted by documentary evidence and by treating cognisable legal claims as irrelevant without any proper legal basis for doing so. The Appellant avers that it placed before the trial court documentary evidence including email and WhatsApp communications, a statement of arrears and a detention invoice as evidence in support of the counterclaim. 10.The Appellant further argues that the trial court erred in law in finding the issues raised in the counterclaim as not being relevant to the matter. The Appellant asserts that the counterclaim was rooted in the same transaction that was the subject of the main claim which is the clearing and forwarding agreement dated 8 April 2024 and the events arising from it. The Appellant avers that accrued demurrage and storage charges were a direct consequence of the 1st Respondent’s failure to meet its obligations under the agreement. The Appellant places reliance on Pius Kimaiyo Langat v. Co-operative Bank of Kenya Limited [2017] eKLR. 11.Consequently, the Appellant prays that the trial court’s judgment be set aside and judgment be entered in its favour for the sum of USD. 4,650.00 plus costs. The Respondents’ Case 12.The Respondents identify three issues for determination being: whether the trial court erred in law in finding the Appellant liable; whether the Appellant proved its counterclaim; and, costs. 13.The Respondents contend that the issue of existence of a contract between the Appellant and the 1st Respondent was not in contention at the trial court but the existence of a contract with the 2nd Respondent is what was in issue. In their submissions, the Respondents argue that the trial court was correct in holding that the contract between the Appellant and the 1st Respondent qualified for an exception to the doctrine of privity of contract. 14.The Respondents further argue that the Appellant was aware from the onset of the existence of the third party. Consequently, the Respondents aver, any actions taken by the Appellant while handling the containers was in full knowledge that they owed a duty towards a third party. 15.On whether the Appellant proved its counterclaim, the Respondents submit that the entirety of the counterclaim was pegged on transactions between other third parties and the 1st Respondent. The Respondents argue that the Appellant failed to produce evidence to show any liability or transactions involving the Appellant and the Respondents in concert. It is the Respondents’ case that the counterclaim could not hold as the transactions were different from what was before court and the potential parties were equally different. 16.The Respondents, therefore, pray for dismissal of the appeal with costs. Analysis and Determination 17.There are three issues that arise in this matter being whether the appeal complies with Section 38(1) of the Small Claims Court; whether the trial court erred in finding the Appellant liable and, whether the trial court erred in dismissing the counterclaim. 18.Section 38(1) of the Small Claims Court Act provides as follows:38.Appeals(1)A person aggrieved by the decision or an order of the Court may appeal against that decision or order to the High Court on matters of law.(2)An appeal from any decision or order referred to in subsection (1) shall be final. 19.It is incumbent upon the court to satisfy itself that the appeal before it complies with the above section to mean that it is on matters of law. On what constitutes a matter of law, it is settled that an appeal (on matters of law) would only concern itself with the correct application of the law and conclusions drawn from findings of fact rather than the findings of fact themselves. Chesoni AJA observed as follows in M’riungu and Others -vs- R [1982-88] 1 KAR 360 inthis regard:… We would agree with the views expressed in the English case of Martin v Glyneed Distributors Ltd (t/a MBS Fastenings) [1983] 1 CR 511 that where a right of appeal is confined to questions of law only, an appellate court has loyalty to accept the findings of fact of the lower court(s) and resist the temptation to treat findings of fact as holdings of law or mixed findings of fact and law, and, it should not interfere with the decision of the trial of first appellate court unless it is apparent that; on the evidence, no reasonable tribunal could have reached that conclusion, which would be the same as holding the decision is bad law. 20.Therefore, even if the appellate court which is confined to only matter of law doesn’t concern itself with the factual findings of the trial court, it must satisfy itself that the conclusions drawn from those findings are correct. 21.In the present case, the Appellant has contested the legal characterisation of the relationship between the Appellant and the 2nd Respondent. Specifically, the Appellant contests the trial court’s determination that there was privity of contract between the Appellant and the 2nd Respondent. Equally, the Appellant avers that the trial court disregarded its evidence in support of the counterclaim. I am satisfied that these are matters of law that are properly before this court. 22.The doctrine of privity of contracts is one of the most fundamental doctrines in contract law. Contract terms can only bind the parties to a contract. It is only the parties to a contract who can enforce the terms of the contract or be bound by those terms. Simply put, a contract does not bind a third party who is not a party to the contract. This doctrine developed from English common law and has been endorsed in our jurisprudence. The Court of Appeal in Agricultural Finance Corporation V Lengetia, 1982-88 I KAR 772 expressed itself as follows:As a general rule, a contract affects only the parties to it, and cannot be enforced by or against a person who is not a party, even if the contract is made for his benefit and purports to give him the right to sue or to make him liable upon it. The fact that a person who is a stranger to the consideration of a contract stands in such near relationship to the party from whom the consideration proceeds that he maybe considered a party to the consideration does not entitle him to sue upon the contract. 23.The development of this concept over time has, however, also acknowledged the unfair outcomes of its rigid application. For that reason, courts have accepted that there could be exceptions to the strict rule on privity of contracts particularly to protect parties who, even though not directly bound by the terms of the contract as parties, are beneficiaries of the contract. In certain cases, parties to a contract may expressly recognise that the contract benefits a third party even though the third party is not privy to the contract. Lord Steyn in Darlington Bourough Council v Witshire Northern Ltd [1995] 1 WLR 68 recognised this exception as follows:The case for recognizing a contract for the benefit of a third party is simple and straightforward. The autonomy of the will of the parties should be respected. The law of contract should give effect to the reasonable expectations of contracting parties. Principle certainly requires that a burden should not be imposed on a third party without his consent. But there is no doctrinal, logical or policy reason why the law should deny effectiveness to a contract for the benefit of a third party where that is the expressed intention of the parties. Moreover, often the parties, and particularly third parties, organize their affairs on the faith of the contract. They rely on the contract. It is therefore unjust to deny effectiveness to such a contract. [Emphasis added] 24.It follows then that under contract law there are relationships that may necessitate recognition of rights or obligations of third parties who are not privy to certain contracts. These relationships are, for instance, insurer-insured; trustee-beneficiary; principal-agent; assignor-assignee relationships, etc. In these relationships, the contract between the parties either explicitly or implicitly recognises rights of third parties that can be enforced by the third parties or that can be asserted against such third parties. It is against this backdrop that the relationship between the Appellant and the 1st Respondent, on the one hand, and the 2nd Respondent, on the other hand, must be evaluated. 25.The sticking point in the Appellant’s case is whether or not there was privity of contract between the Appellant and the 2nd Respondent. The evidence presented before the trial court that is relevant in this regard was an agreement dated 8 April 2024. This agreement is between the Appellant and the 1st Respondent and it provides a general agreement for provision of clearance and transportation services by Appellant for the 1st Respondent. The agreement also provides a schedule for prices for different container sizes. It is a term of the said contract that the Appellant would provide an invoice for services offered to the 1st Respondent which shall then be paid by the 1st Respondent upon arrival of the vessel. Payment was based on the agreed rate per container. 26.It is clear from the contract between the Appellant and the 1st Respondent that the Appellant was offering general clearance and transportation services to the 1st Respondent as and when contracted to do so. The terms of the contract envisaged generation of an invoice whenever the 1st Respondent required the services of the Appellant. On the other hand, evidence suggests that the 2nd Respondent entered into a separate contract for the clearance and shipping of goods to Kigali with the 1st Respondent. The 1st Respondent, therefore, sub-contracted the Appellant to undertake the clearance and shipping of the 2nd Respondent’s goods to Kigali. The question before the trial court was whether this relationship created privity of contract between the 2nd Respondent and the Appellant to which the court answered in the affirmative. 27.In the relevant part of the trial court judgement, the court stated:As cornerstone term of the agreement between the 1st Claimant and the Respondent, there was an express term that the cargo would be delivered to Kigali to the 2nd Claimant. 28.The contract between the Appellant and the 1st Respondent did not specify that the cargo would be delivered to the 2nd Respondent. This was, however, specified in the delivery order which was merely a document authorising delivery of goods rather than forming part of the contract. To the extent that the trial court concluded that the contract between the Appellant and the 1st Respondent provided for a term requiring delivery of goods to the 2nd Respondent, the court erred in law in reaching a wrong conclusion upon evaluation of the facts. 29.The general nature of the contract between the Appellant and the 1st Respondent did not confer upon third parties rights under the contract that were not specifically mentioned. Further, the 2nd Respondent did not adduce evidence of any communication directly with the Appellant to infer that there was a direct representation by the Appellant to the 2nd Respondent. There was also no evidence of any direct payments that were made by the 2nd Respondent to the Appellant as evidence of formalisation of a relationship. It is, therefore, this court’s finding that there was no privity of contract between the Appellant and the 2nd Respondent. The 2nd Respondent did not have a direct claim against the Appellant and could only claim against the 1st Respondent with whom they had a contractual relationship. On the other hand, it is only the 1st Respondent who could sustain a claim against the Appellant. The trial court’s findings on liability of the Appellant as against the 2nd Respondent were erroneous and are, accordingly, reversed. 30.The second issue relates to the Appellant’s counterclaim and whether the same was merited. A defendant to a suit may bring a counterclaim against the claimant as long as the same can be tried within the claim. The defendant to a suit, therefore, has some broad leeway in terms of a counterclaim as long as the same does not relate to a totally different transaction. Halsbury’s Laws of England, 4th edition, vol 42 explains a counter-claim by giving a case scenario as follows: -When A has a claim of any kind against B and brings an action to enforce that claim, and B has a cross-claim of any kind against A which by law he is entitled to raise and have disposed of in the action brought by A, then B is said to have a right of counterclaim. 31.Further that:…any claim in respect of which the defendant could bring an independent action against the plaintiff may be enforced by a counter-claim subject only to the limitation that it must be such as can conveniently be tried with the plaintiff’s claim. Thus not only claims for money but also other claims such as a claim for injunction or for specific performance or for declaration may be the subject of a counter-claim. 32.The essence of a counterclaim within a suit is to avoid multiplicity of suits between the parties. As underscored by the Court of Appeal in County Government of Kilifi –vs- Mombasa Cement Limited [2017] eKLR:…a defendant is permitted to raise a counterclaim against a plaintiff on any right and claim he may have against the plaintiff even where the subject matter or cause of action maybe different from the original suit. The rationale is to avoid multiplicity of proceedings and claims based on same or different cause of action between parties to the suit to enable a court to pronounce a final judgment in the suit both on the original claim and on the counter claim. 33.The Appellant’s counterclaim was in respect of money allegedly owed by the 1st Respondent pursuant to the contract dated 8 April 2024. The Appellant contended, before the trial court, that the 1st Respondent owed it money which was acknowledged for services rendered and the same had not been paid. In support thereof, the Appellant relied on various communications between the parties on email and WhatsApp. The 1st Respondent on its part averred that the claim in the counterclaim related to separate events and, in any case, the same had not been proved. 34.From the outset, a counterclaim for money owed as against a claimant who is seeking a remedy for alleged breach of contract was within the Appellant’s rights. It is noted in this respect that the trial court considered the claim on its merits and dismissed it. On the merits of the counterclaim, the evidence presented by the Appellant did not discharge the burden under Section 107 of the Evidence Act. Despite presenting email conversations between the parties, the Appellant did not discharge the burden of proving the amounts owed. The finding by the trial court in this regard was not in error. 35.The upshot of the above analysis is that the appeal has partly succeeded with the consequence that the trial court’s finding of liability as against the Appellant is hereby reversed. Consequently, each party shall bear its own costs. DELIVERED, DATED AND SIGNED AT NAIROBI THIS 19TH DAY OF JUNE, 2026.NABIL M. ORINAJUDGEJudgment virtually delivered virtually in the presence of:Ms. Mukoya for the AppellantLisa – Court Assistant