https://new.kenyalaw.org/akn/ke/judgment/scc/2026/180

**REPUBLIC OF KENYA** **IN THE SMALL CLAIMS COURT AT MILIMANI** **CIVIL CASE NO. E5841 OF 2025** **VERODAH FREIGHTERS AND LOGISTICS COMPANY LIMITED……………CLAIMANT** **VERSUS** **SHIVEN DEVELOPMENT LIMITED…………………………………………RESPONDENT** **AND** **FRECLADIC LOGISTICS LIMITED…………………………………..……….THIRD PARTY** **JUDGMENT** **Introduction** 1. The Claimant instituted this suit vide a Claim dated 15th September 2025 seeking the following reliefs: a) Judgment in the sum of Kshs. 990,640/=, b) Compensation to be determined by the Court c) Costs of the claim. 2. The Respondent filed a response dated 25th September 2025, opposing the claim. The Respondent filed a Third-Party notice dated 25th February 2025. 3. The Third- Party filed a response dated 30th March 2026, opposing the claim. 4. The matter was set down for hearing on 6th May 2026. **Claimant’s Case** 1. The Claimant avers that on diverse dates during the period February 2022 to October 2022, at the request of the Respondent, he processed custom clearance on behalf of the latter in respect of importation of various consignments in Namanga, Oloitoktok and Isebania customs border posts. He further avers that he processed 122 import declaration entries at the customs border posts. In line with the prevailing guidelines issued by the Kenya International Freight and Warehousing Association on minimum pricing for customs clearance services, he was required to charge and be paid by the Respondent Kshs. 7,000/= for each entry, hence he was entitled to remuneration in the sum of Kshs. 854,000/= exclusive of VAT. 2. In breach of contractual and/or legal obligations, the Respondent did not pay the Claimant for the customs clearance services provided. 3. The Claimant contends that the Respondent owes him Kshs. 990, 640/= inclusive of VAT. **Respondent’s Case** 1. The Respondent contends that he entered into an agreement with Frecladic Logistics Limited owned by Mr Fredrick Otieno Odongo, who is the Third- Party herein, for the importation of various consignments through the Namanga Oloitoktok and Isebania customs border posts between the period February 2022 to October 2022. The respondent further contends that he paid in full all invoices issued by the Third- Party. 2. The Respondent also avers that the letter dated 9th April 2024, confirms that he paid all invoices due for the clearance of the subject consignments. 3. The Respondent further avers that the guidelines issued by the Kenya International Freight Warehouse Association on minimum payment pricing came into force on 1st December 2023. The consignments in question were imported during the period February 2022 to October 2022 and therefore cannot apply retrospectively. 4. The Respondent therefore prays that the claim be dismissed with costs. **Third- Party’s Case** 1. The Third party contends that he was authorized by the Claimant to use its customs agent's license to lodge customs entries at a cost of Kshs. 500 per entry. 2. He avers that he entered into a verbal agreement with the Claimant for the importation of various consignments through the Namanga, Oliotoktok and Isebania customs border between February 2022 to October 2022. 3. He further avers that he charged the Respondent Kshs. 1,800= per entry and that the respondent paid in full all the invoices he issued to him. He further avers that he was not an employee of the Claimant. 4. The Third- party prays that the claim be dismissed with costs. **Issues for Determination** 1. The following are the issues for determination: 2. Whether there was a contract between the Claimant and the Respondent; 3. Whether there was a contract between the Respondent and the third party; 4. What was the nature of the relationship between the Claimant and the Third party? 5. Whether an employee is an agent of the employer 6. Whether there was a breach of contract by the Respondent 7. Whether there was a breach of contract by the third party 8. Whether the Claimant is entitled to the reliefs sought. **Analysis and Determination** 1. **Whether there was a contract between the Claimant and the Respondent** 2. I have considered the evidence on record and the respective well-written submissions filed by the parties. 3. It is trite law that he who alleges must prove. The burden rested upon the Claimant to demonstrate on a balance of probabilities that a contractual relationship existed between himself and the Respondent. The Claimant averred that the Respondent breached the terms of their contract. However, the Claimant did not adduce any evidence to prove that there was indeed a contract between him and the Respondent. The Respondent denied ever having any dealings with the Claimant and stated that all instructions, invoices, and payments were channelled through the Third Party. The third party corroborated this position, confirming that the Claimant and the Respondent never interacted. 4. It is the Court’s finding that there was no contract between the Claimant and the Respondent. 5. **Whether there was a contract between the Respondent and the third party;** 6. The Respondent testified that he had entered into a verbal agreement with the Third Party for the clearance of various consignments through the Namanga, Oliotoktok and Isebania Customs border between February 2022 to October 2022. 7. The Third Party’s testimony is that he indeed entered into a verbal agreement for the clearance of the Respondent’s consignments during the material period. 8. It is my finding that it is not in dispute that the Respondent and the Third Party entered into a verbal agreement. 9. **What was the nature of the relationship between the Claimant and the Third party?** 10. It was the Claimant’s testimony that there existed an employment relationship between himself and the Third Party. In support of this position, the Claimant produced a bundle of documents dated 20th April 2026. Item No. 1 therein is a letter dated 13th February 2021 revising the terms and conditions of employment of the Third-Party. Additionally, he produced an extract of his password allocation details on the Integrated Customs Management System, which indicates the name of the Third- Party, username ID, his email address, status is locked and the effective date as 29/07/22 and expiry date as 31/12/2026. The Claimant also produced an extract of the Claimant’s Kenya Revenue Authority itax portal confirming PAYE returns in respect of the Third- Party. Further, he produced an Mpesa statement reflecting various payments to the Third- Party. 11. It was the Third party’s testimony that he was not an employee of the Claimant. He stated that he entered into a verbal agreement with the Claimant for the importation of various consignments through the Namanga, Oliotoktok and Isebania Customs border between February 2022 to October 2022. The third party did not adduce contrary evidence to disapprove the evidence of the Claimant. 12. It is my considered view that the letter of employment and PAYE remittances support the existence of an employer-employee relationship between the Claimant and the Third Party. 13. **Whether an employee is an agent of the employer** 14. An employee is not automatically an agent of the employer in all matters, but when an employee acts within the scope of their employment and with express, implied, or apparent authority, they act as the employer's agent and their acts bind the employer. 15. In the present case, the Third party expressly admitted that he used the Claimant’s license to lodge the 122 entries at the aforementioned border posts. He conceded that he did so because he had no license of his own at the time. 16. The Claimant produced an extract from the Integrated Customs Management System showing the Third Party’s username, email, effective date of 29/07/22 and expiry date of 31/12/26. This confirms that the Claimant granted the third-party access to operate using his customs credentials. Granting such operational authority, in my view, constitutes a defining act of conferring authority on an agent. 17. The Court is guided by the decision in **Thika Coffee Mills v Mikiki Farmers Co-op Society (2013) eKLR,** where the Court of Appeal affirmed the trial court's finding that the relationship between Thika Coffee Mills and Mikiki Farmers Co-op Society was one of principal and agent, deriving this conclusion from the terms of the written agreement between the parties. The Court held: ***"We find that the ordinary reading of the 1st agreement and the various headings point to an agency relationship between the appellant and the 1st respondent. The appellant was mandated to be the agent of the 1st respondent for purposes of transportation and delivery of milled coffee to the 2nd respondent. In consideration, the appellant became a commission agent and was given a lien over all payments due from the 2nd respondent.”*** 1. A reading of the employment letter envinces that the Third Party was placed in charge of the Namanga border station, required to report to the Claimant’s Director and made responsible for the Claimant’s customs clearance operations. Further, he was authorised to use the Claimant’s licence and granted access to operate under the Claimant’s credentials in the course of those operations. These factors establish the existence of an agency relationship. 2. I find that the Third Party, in the course of executing his duties, acted as an agent of the Claimant. 3. **Whether there was a breach of the contract by the Respondent** 4. Breach of contract requires proof of i) existence of a contract between the parties; and ii) Failure to perform a term of a contract by either party. 5. Having found that there was no contract between the Claimant and the Respondent, the question of breach of contract does not arise. 6. **Whether there was breach of contract by the Third party** 7. It is settled that the Third Party was an employee and, in the peculiar circumstances of this case, acted as an agent of the claimant. The Third Party conceded that he was paid in full by the Respondent. 8. An agent is under a strict duty to account to the principal for all the money received in the course of discharging his duty. By collecting payments from the respondent and retaining them without accounting to the claimant, the Third Party breached his fiduciary duty to account. 9. In **International Air Transport Association & another v Hubaal Travel Agency Limited & 2 others [2024] KEHC 13075 (KLR),** the court found that where an agent was appointed to sell airline tickets, the agent was supposed to account for monies received and would be responsible for remittance of amounts payable to the principal. Where the agent failed to account for monies held and failed to furnish an account of payments, the court held that there was a cause of action for breach of the agreement. 10. Guided by the above authority, I find that the Third Party owed the Claimant a fiduciary duty to account for all sums collected using the Claimant’s licence. The Third Party’s failure to account for and/or remit the monies received from the Respondent constitutes a clear breach of contract. 11. **Whether the Claimant is entitled to the reliefs sought** 12. The Claimant pleaded for judgment in the sum of Kshs. 990,640 inclusive of VAT. In respect of the 122 entries, the Claimant claims a sum of Kshs. 854,000/=. This amount was computed based on the Kenya International Freight and Warehousing Association (KIFWA) minimum pricing guidelines of Kshs. 7,000/= per customs declaration entry. 13. The Respondent opposed the applicability of these guidelines. The Respondent's position was that the KIFWA guidelines on minimum pricing came into force on 1st December 2023, whereas the customs clearance services in question were rendered between February 2022 and October 2022. He argues that the same is not applicable retrospectively. 14. This court has independently confirmed from publicly available sources that the KIFWA minimum pricing guidelines were indeed announced and deemed to be effective from 1st December 2023. To hold otherwise, would amount to imposing new obligations on parties in respect of transactions already concluded under a different legal and commercial framework. Accordingly, the rate of Kshs. 7,000/= per entry cannot form the basis for the computation of the award in this matter. 15. Further, this Court has already found, and it bears emphasis, that no contractual relationship existed between the Claimant and the Respondent. The claim for Kshs. 990,640/= was framed as a debt allegedly owed by the Respondent to the Claimant for services rendered. In the absence of a contractual nexus between the two parties, there is no legal basis upon which the Respondent can be held liable to pay any sum to the Claimant. 16. Having carefully reviewed the Respondent's List of Documents, I note the following: - * The invoices are all issued by Third Party billing the Respondent at a uniform rate of Kshs. 1.800/= per entry; * The NCBA Bank statements confirm the payments made to the Third party in the sum of Kshs. 600,400/=. * The QuickBooks Register Report (page 54) provides a comprehensive summary, indicating a total of Kshs. 1,053,000/= both credited and debited with a closing balance of zero, confirming the Respondent paid the third party in full. 1. The Third Party testified that he was authorized to use the Claimant’s licence and to charge Kshs. 500/= per entry. However, no evidence was adduced in support of this assertion. 2. The Court is therefore required to determine the applicable rate. It is noteworthy that the number of entries in dispute, being 122, is not contested. 3. It is evident from the Respondent’s List of Documents that the invoices issued by the Third Party cover a larger number of entries than the 122 entries that form the subject matter of this dispute. In addition, the NCBA Bank statements and the QuickBooks Register Report confirm total payments of Kshs. 1,053,000/= to Third Party, representing a wider pool of transactions beyond the disputed entries. 4. This Court finds that the payments evidenced in the Respondent’s documents reflect full settlement of all entries processed by the Third Party. The 122 entries in issue represent only a subset of those transactions in respect of which the Third Party failed to account to and remit payment to the Claimant. The Court therefore proceeds on the basis that all other entries were duly accounted for by the Third Party at the rate of Kshs. 1,800/= per entry, leaving only the 122 entries as unpaid. 5. Based on the foregoing, the Court finds that the rate for computation is Kshs. 1,800/= per entry for the following reasons: * This is the rate that was actually charged by the Third Party for customs clearance services during the material period of February 2022 to October 2022; * The KIFWA minimum pricing guidelines of Kshs. 7,000/= per entry only came into effect on 1st December 2023, more than a year after the transactions in question. The guidelines cannot apply retrospectively; and * The Third Party’s assertion that the agreed rate between himself and the Claimant was Kshs. 500/= per entry is unsupported by any evidence. No agreement, receipts, or other corroborative material were produced. This bare assertion is further undermined by his own conduct of charging Kshs. 1,800/= per entry to the Respondent. 1. Below is the computation: - Number of unpaid entries - 122 entries Rate per entry - Kshs. 1,800/= Subtotal - Kshs. 219,600/= VAT @ 16% - Kshs. 35,136.00 **Total - Kshs. 254,736.00** **Disposition** 1. The upshot of the foregoing, I make the following orders: - 2. Judgment be and is hereby entered in favour of the Claimant against the Third Party in the sum of Kshs. 254,736/=; 3. The Third party shall pay costs of Kshs 25,000/= to the Claimant and Kshs. 30,000/= to the Respondent; 4. Interest on the decretal sum from the date of filing until payment in full; 5. Stay of execution for 30 days; 6. Right of appeal be exercised within 30 days; and 7. Let the file be closed forthwith. 8. Orders accordingly. **DATED, SIGNED AND DELIVERED VIRTUALLY AT MILIMANI SMALL CLAIMS COURT THIS 25th DAY OF MAY 2026.** **CHEROTICH MARYLEEN** **ADJUDICATOR/ RESIDENT MAGISTRATE** Judgment delivered in the presence of: Ms. Kyalo h/b Mr. Mutua for the Claimant. Mr. Kabugu for the Respondent. Ms. Okeyo for the Third party.