Omar Sheriff t/a Kemco Auto v Freight Forwarders Limited also Trading As Freight Forwarders Limited & Console Base Limited [2019] KEHC 5260 (KLR)

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA

AT MOMBASA

CIVIL SUIT NO. 266 OF 2003

OMAR SHERIFFT/A KEMCO AUTO.............................................PLAINTIFF

VERSUS

1.  FREIGHT FORWARDERS LIMITED

ALSO TRADING AS FREIGHT FORWARDERS LIMITED

2.  CONSOLE BASE LIMITED....................................................DEFENDANTS

J U D G M E N T

Outline of facts and pleadings

1. The plaintiff filed this suit and sought against the two defendantsjointly and severally the recovery of the sum of USD 85,246. 50 said to be the loss suffered by the plaintiff when the goods he had entrusted to the custody of the 1st defendant as a warehouse keeper were allegedly released to a third party or account of what the plaintiff allege to have been negligence.

2.  The brief facts of the dispute are that sometimes during the month of June 2003, the plaintiff contracted the 1st defendant who then took custody of the plaintiffs cargo for purposes of warehousing which goods the first defendant then released to the 2nd defendant for safe custody as a licensed customs warehouse operators but part of the goods were lost or stolen while under such custody thus occasioning loss to the plaintiff.  The plaintiff blames the loss on the negligence on the part of the two defendant particulars of which were set out at paragraph 7 of the plaint as amended on the 16/10/2018.  The description of the lost goods, the value and quantities thereof were equally set out and quantified at the USD 85,246. 50.

3. For the defendants two separate statements of defenses were filed.  The 1st defendant’s statement of defence was dated 1/4/2005 and later amended on the 30/10/2018.  in it the said defendant denies any contract with the plaintiff together with any relationship with the 2nd defendant and denies any privity with both including having taken into its possession and custody any goods as pleaded and at all.  It was added that having not had any contract with the plaintiff, it did not ever have any such goods released to the 2nd defendant and further that it never incurred any duty of care to the plaintiff.  For those reasons the plaintiff suit was described as misconceived, bad in law and incompetent deserving being struck out.  The fact of there having been a previous suit between the parties and the jurisdiction were however admitted.

4. For the 2nd defendant there was a statement of defence filed on the 19/4/2005 which was later amended on the 17/2/2006 purposely to introduce a counter-claim. In that defense and counter-claim the 2nd defendant admitted the description of the parties but denied all other allegations in the plaintiff while adding that:-

i) It operated a container Freight Station open for use by the general public and that any contractual relationship would be spelt out in the bill of lading no. 16MSA -011 between the sloppier (Gulf Import Company) and the carrier (Global Container Lives Ltd).

ii) That the 2nd defendant first come to know about the subject goods on the 16/6/2003 when contracted by African Linen Agencies Ltd, as agents for the carrier to take the shipping documents to enable them take possession of the goods upon discharge from the ship for release into the CFS in terms of the bill of lading but pending customs and other clearance formalities hence the good were never released to the 2nd defendant by the 1st defendant.

5. On the allegations and pleading that the 2nd defendant owed a duty of care to the plaintiff and that part of the goods were lost due to fault of the 2nd defendant, the same was denied and a pleading put forth that, if any duty was owed, it was owed to the shipper but that any goods lost were not lost on account of negligence.  It was then denied that the plaintiff ever suffered any loss as pleaded and at all for which reason it was prayed that the suit be dismissed.

6. In the counter-claim, the entire pleadings at paragraph 1 up to 9 of the defense were reiterated and then it was added that any loss was occasioned by the failure or refusal of the plaintiff to abide by the written request by the customs and excise department that he pays duty and other charges as a consequence where of the plaintiffs goods have remained in its yard and therefore the defendant continue to suffer loss and damage on account of unpaid storage charges at the daily rate of USD 75 per day with effect from 25/6/03 to 31/5/2004 then at USD 100 per day from 01/06/2004 to 04/02/06 amounting to USD 83,000.  For that reason the second defendant prayed that judgment be entered for it against the plaintiff on the counter-claim together with interest for the period and at the rates deemed just by the court as well as costs of the suit and those of the counter-claim.

7. To the defence and counter-claim the plaintiff filed separate Reply to defence and defence to counter-claim the plaintiff denied the allegations at paragraphs 3, 4, 5 , 6, 11, 12 & 13 with an assertion that any loss to the second defendant was authored by itself and that the claim was not due to be met by the plaintiff.

8.  Parties did file witness statements and separate document but later on agreed on a common bundle of documents which was filed in a bundle dated 3/8/2017 containing some 41 documents. That bundle even though not signed by all advocates like the one dated 27/2/2017 and filed on 29. 3.2017, did replace that bundle with the consent of all the parties because the advocates addressed the court on it on 4. 8.2017 and confirmed it so.  Even issues were mutually agreed and filed on the 17/10/2016 isolating only 3 issues for determination by the court.

Evidence tendered

9. As directed at the case conference parties adopted their witness statements as evidence in chief, produced  relied on the bundle of documents agreed between the parties and were then cross- examined.

10. For the plaintiff the witness statement 12/11/2015 was relied upon.  In it the plaintiff averred that in the year 2003 he went to Dubai and arranged shipment of spare parts worth USD 85,000.  The goods were bought from Gulf Import Company and were shipped through African Line Shipping Agency.

11. In the month of June 2003 the 1st defendant was contracted as a licensed custom warehouse to clear the goods and keep same in its custody.

12. Thereafter the witness said that he received a call from the 2nd defendant that the container had been broken into and part of the cargo stolen while in its custody.  He went to the 2nd defendant’s yard and confirmed that indeed the container had been broken into and part of the goods stolen. Since no report had been lodged by the 2nd defendant with the police, the plaintiff himself made a report to Port Police and a joint inventory of the lost goods was taken with a promise that the 2nd defendant would pay the compensation of the lost goods only to decline payment upon the calculation and documents being availed.

13. On cross examination by Mrs. Amarshi the witness referred to the bill of lading which nominated the 1st defendants container freight station as the port of landing but confirmed that he did not have any written instructions to the shipping line.

14. On his assertion that the two defendants operated as one entity he referred court to page 26 – 29 of the bundle in which all payment to the port were made by both.  Other documents were also pointed out to show that both worked in concert.  On how the goods came to be with the 2nd defendant the witness said the release order named both defendants.  He then referred to paragraph 4 of the 2nd defendant’s witness statement which to him confirmed the 2nd defendant was part of Freight Forwarders Kenya Ltd and that the manifest showed the goods were released to the 1st defendant.

15. On cross-examination by the said defendant, the witness related the loss to have occurred in June 2003.  When referred to page 74 of the agreed bundle of document witness said the documents were destined for the 1st defendants premises and that he had nominated goods for the 1st defendant and that it was the 2nd defendant who called to disclose the fact of loss and that a joint inspection was conducted with the defendants, police, KRA, the clearing agent, the security firm and the insurance surveyor.  That joint inspection revealed a loss of 20714 pieces of the cargo as only 2,624 were remaining.  He then confirmed receipt of letter from KRA demanding payment of duty for the entire consignment which he declined to pay as the goods had been lost in the custody of the defendants.  He was then shown the letter from the supplier showing the values/price of the goods supplied.

16. The witness then admitted having dealt with the defendants before but for goods less than USD 5,000/=.  The witness further admitted that the invoice did not have a signature nor rubber stamp and that he had not paid the defendants handling charges because the defendant had not given an invoice.  On seeking his compensation from the insurer, the witness said he had not insured the consignment after landing in Kenya.

17. When referred to page 37 of the common bundle, the witness denied knowledge of any recoveries made by the police and that there was a letter at page 72 of the bundle stating that verification at 100% could not be done because 75% of the good were stolen.  He however reconfirmed having not paid the storage charges to the 2nd defendant.

18. On re-examination, the witness said there was a contract with the defendant in the bill of lading him having nominated the CFS.  On value of the goods the witness repeated that the same was verified by the 1st defendants advocate from the supplier.  He said that he had been unable to collect the remainder of the goods due to inability to pay the duty for the entire consignment as demanded by the KRA.  He said that had the shed owner answered to his duty under Section 22 of the East African Community Customs Management Act by paying duty he would have collected the relaying goods.

19. On the standard trading conditions by the defendant the witness said he saw the same for the first time in court and that the same had not been brought to his attention prior.  On payment of storage charges he contended that it was not his obligation having not been the cause for delay.  With that evidence the plaintiff’s case was closed.

Evidence by the 1st defendant

20. One JEFFERY PEREIRA, a director of the 1st defendant, gave evidence said the company deals in clearing and forwarding as well as logistics and denied any connection with the 2nd defendant.  He denied operating a customs warehouse and that there was never any contract between them and the plaintiff neither had the 1st defendant received any goods from the plaintiff so as to release same to the 2nd defendant.

21. On cross examination by the 2nd defendants advocate, the witness denied having any offices at Mikindani nor Dubai and further that they do not issue bills of lading.

22. On cross examination by the plaintiff the witness admitted that the two defendants have common directors but denied directing any cargo meant for Freight Forwarders Kenya to the second defendant.  He denied any dealings with the consignment but revealed that it had let the yard known as FFK to the 2nd defendant and that the 2nd defendant uses the initials FFK as the CFS name and that the plaintiff had nominated FFK/consolidate as the destination of the cargo.  However when shown the Mombasa Port Release Order the witness confirmed that the goods were released to consolbase ltd for FFK Ltd, C.F.S.  He also admitted that they issued cargo manifest at page 6 with FFK Ltd stamp as an anomaly and that by that act the public would take the two companies to do business together. He further confirmed that there is a document at page 17 which suggest that the 2nd defendant is the Managers of the 1st defendant.  There was also at page 21 where there is a release order by the 2nd defendant on behalf or for the 1st defendant.

23. The witness also acknowledge that the letter at page 30 of the bundle, written by KRA, was addressed to directors FFK CFS/consolbase and that KRA is the person who licenses CFSs.  On re-examination the witness said that the 1st defendant does not hold a license to operate a CFS but that the documents at pages 15, 16, 21 and 74 all refer to the 1st defendant and that the CFS is known as FFK CFS.

24. When asked questions by the court the witness reiterated the fact that the two companies have common directors and that at page 17 of the bundle of document there is direct reference to the 1st defendant.  He however admitted there being a service level agreement between KRA and 2nd defendant as well as a lease agreement between the two defendants which was not exhibited.  Up to that level the 1st defendant case was equally closed.

Evidence by the 2nd defendant

25. Mr. Fernando M. Olivera, DW 2, gave evidence on behalf of the 2nd defendant by adopting his written witness statement dated 26/4/2016 as evidence in chief and confirmed being the director of the 2nd defendant since incorporation.  He said the company engages in the business of freight forwarding as far as he was aware and that the 2nd defendant is not related to the 1st defendant save for the share shareholding.  On the use of the word Freight Forwarders Transit shed, the witness told court that the first defendant used to operate a transit which the 2nd defendant took over.  He then clarified the difference between a freight station and a transit shed to be the fact that a freight station is a bonded warehouse where non-duty paid goods are kept while a Transit shed only houses goods on transit only.  He then explained the uses of both defendants’ names in the entry documents to have been necessitated by the fact that both were necessary to log unto the Simba System of KRA. He reiterated that while the second defendant is licensed to operate a CFS, the 1st is not and therefore the 1st defendant had no connection with the goods at all.  He also denied that the first defendant did clear the cargo from the port.  He then admitted the fact that part of the cargo got lost while in the second defendants custody but took the view that the documents produced to show the value had exaggerated prices which informed the 2nd defendant’s failure to pay compensation to the plaintiff as demanded and sued for.  He then asked that judgment be entered for the 2nd defendant as sought in the counterclaim.

26. When cross examined by the advocate for the 1st defendant, the witness said that the two defendants were two different entities and further that the good were never released to or handled by the 1st defendant at any time.

27. When cross examined by the plaintiff’s advocate, the witness admitted that the 2nd defendant did receive the goods as custodians; that the goods got lost in their custody and that the only reason the 2nd defendant did not compensate the plaintiff for the loss was the dispute on the value of the loss which the 2nd defendant considered exaggerated and inflated.  When referred to pages 50, 51, 52 and 59 of the bundle of exhibits the witness admitted that when their lawyer sought to verify the prices of the goods from the supplier, the supplier gave same prices like those demanded by the plaintiff.  On the allegation that a substantial portion of the lost goods was recovered in Nairobi, the witness denied having any evidence to that effect.

28. On how the goods came to the 2nd defendant’s possession, the witness said they were nominated by the shipping line but there was never a release order to the 2nd defendant but rather to the FFK Ltd.  When shown page 17 of the bundle of exhibits, the witness confirmed that the 1st defendant issued an import manifest which names the 2nd defendant as its manager and that the document at page 6, on the letterheads of the 1st defendant, also bear the 2nd defendants stamp.  There was also endorsement on the manifest at page 15 that the cargo be loaded into containers for de-stuffing at the first defendants premises.

29. The witness then confirmed that a bill of lading is both contract and document of title and that in this case it provided that the goods be delivered at the 2nd defendants CFS and a release order was made in favour of the 1st defendant a fact confirmed by the document at page 17 showing to have come from both the defendants.

30. On the contentious issue of CCRF the witness referred to page 72 of the bundle of exhibits in which KRA said the same could not be prepared because the goods could not be verified. On the storage charges claimed in the counterclaim the witness said the same were brought to the attention of the plaintiff by a letter written after the good had been lost.

31. On re-examination the witness said that the second defendant’s objection to the claim was due to the perceived inflated values.  He also conceded that KRA documents referred to the 2nd defendant as FFK CFS/Consolbase and that the customs assigned reference No. is FFK /CFS/157/17.

32. When asked questions by the court the witness said that during transition they dealt and traded as FFK CFS/Consolbase and even today KRA know them as FFKCFS with that evidence the production of evidence was closed and parties were given directions to file submissions.  The plaintiffs submissions were filed on 13/3/2018 those by the 1st defendant were filed on 27/4/2018 while those by the 2nd defendant were filed on 19/6/2018.

33. I have had the benefit of reading the submissions by the three parties which seem not to agree even on the uncontested facts and I will take same into account in making my determination based on the three issues agreed upon by the parties. The issues were framed as follows:-

i. Does the Plaintiff have a valid cause of action against the First Defendant and/or the Second Defendant and, if so, did the Frist Defendant and/or the Second Defendant owe the Plaintiff a duty of care in respect of the loss as pleaded in the Amended Plaint?

ii. If the answers to(1) above are in the affirmative, is the said pleaded loss claimable from either the First Defendant and/or the Second Defendant and, if so, what is the proven value of that loss and how (if at all) should it be apportioned?

iii. Does the Second Defendant have a valid Counterclaim against the Plaintiff in respect of its claim for storage and other charges as pleaded in the Second Defendant’s Re-Amended Defence and Counterclaim and, if so, what is the proven value of those charges?

34. The stating point is whether there existed a contract between the plaintiff and the defendants or either of them to establish a cause of action based on a breach of duty.  To determine that position one needs to review the entire evidence in the documents produced as well as the oral testimonies given, culminating in the agreed position that the 2nd defendant indeed received the goods into its custody and part of the goods got lost while in such custody.

35. In law a fact not disputed or just admitted is not due for determination by the court[1].  Here the 2nd defendants witness said at least twice that the 2nd defendant indeed received the goods into its custody and that while they so held the goods a portion got lost.  It cannot therefore be denied that or deniable that the goods indeed got lost while under the custody of the 2nd defendant.

36.  That being admitted, to this court, it does not matter that there may be no written contract spelling out the parties’ obligation.  It then follows that the plaintiff’s assertion that the goods were handed over to the 2nd defendant for safe custody is admitted and when the same got lost or stolen the duty to keep them safe was breached and the evidence of breach has not be rebutted.

37. That position is straight forward and does not demand any citation of a legal principle or authority to back.  It suffices to say, however, that when one leaves his goods for safe custody with another, a contract of bailment is entered into and the strict liability of a bailee arises where the goods are lost or destroyed[2].

38. In   Equator Distributors v Joel Muriu & 3 others [2018] eKLRthe court of appeal held:-

“The relationship between the appellant and 3rd respondent became one of bailor and bailee and the bailee owes a duty of care to the bailor. It is not sufficient for the 3rd respondent to state it was a gratuitous agent. The 3rd respondent was a bailee of the motor vehicle registration no. KAL 970 G with clear instructions to deliver the vehicle at the appellant’s premises in Voi. The basic rule is that the bailee is expected to return to its owner the bailed goods when the bailee’s time for possession of them is over, and he is presumed liable if the goods are not returned. We note that the bailee is not an insurer of the goods’ safety; liability depends on the circumstances. The 3rd respondent and its employee driver, the 2nd respondent, owed the appellant a duty of ordinary care to safely deliver the vehicle at Voi”.

39. Now having found that there was a bailment and that while the same existed the goods were lost, where should that loss lie?  The answer to this question is equally straight forward because as an operation of Container Freight Station, it is a matter this court takes judicial notice , that the defendant is entitled to charge storage just as it has demonstrated that right by the counterclaim in this matter.  If it operates a business of safe custody and benefit by charging for such services, it surely must shoulder a burden by way of duty to the cargo owners.

40. More importantly the 2nd defendants witness said more than once in his evidence that the only reason the compensation was made was the view taken that the sum demanded was inflated and exaggerated.  That evidence to this court was asserting that it admitted its liability to pay provided the just and due sum was ascertained.

41. The plaintiff did provide the invoices from the supplier of the goods with itemized prices.  When the 1st defendant did not believe the figures given, it did make inquiries from the same supplier and the prices given were the same as those demanded by the plaintiff.  The documents at page 11-14 show the description of the items and their prices.  The entire consignment had a value of USD82,246. 50 but not the entire consignment was lost.

42. The joint inspection by parties in the presence of the KRA, police and the security firm guarding the 2nd defendant premises on the date of loss agreed that 75% of the consignment was lost.  There was however exhibited to court a Loss Adjustment and Investigation Report by SPICA MARINE INSPECTORS LTD and dated 23/10/2003 which confirm that a cargo verification exercise conducted on 22/10/2003 identified the lost items and their values and a returned a loss of USD 80,881. 20.  That to this court is the proved loss, it being admitted that only a portion of the consignment was lost.  That is therefore the sum for which I enter judgment for the plaintiff against the 2nd defendant.  On it I award costs and interest at court rates of 14% from the 1/11/2003, being the reasonable date the defendant ought to have made good the loss after the joint verification exercise.

43. There was also claim for general damages for breach of contract of bailment.  This claim to this court is not capable of being awarded for two reasons; the first is that there was no evidence on the resultant or consequential loss and the second reason is that the law is that ordinarily there cannot be awarded general damages for breach of contract unless it be proved that the defendant was guilty of outrageous, oppressive, insolent or vindictive conduct[3].

44. The last issue for determination is whether the 2nd defendant entitled to the sum claimed in the counter-claim.  That counter-claim is made in the sum of USD 83,000 as at 04/2/2006 and continuing and calculated at pleaded daily rates.

45. My view is that whether or not this sum is awardable will depend on who is to blame for the stalemate leading to the continued stay of the container in the defendants’ yard.  I have found that had the 2nd defendant made good the loss by November 2003 this suit may not have been necessary.  On that point alone I do hold that it would be unjust to allow the 2nd defendant to reap the benefit occasioned by his wrong act against the plaintiff.  The defendant had a legal duty to mitigate own losses including releasing the reminder of the cargo even upon terms.  Having not done so I do find that to allow the counter-claim would be to sanitize unjust enrichment and I do disallow the counterclaim and order the same dismissed with costs.

46. Having come to the foregoing conclusion, there is the matter of the remainder of the goods which neither party addressed to court upon.  Having held that the defendant is not entitled to storage charges up to the date of this judgment that, however, does not say how the good are to be dealt with.  In order that no further dispute is not entertained, I direct that there being no claim on the goods other than the dismissed storage charges, let the goods be released and collected by the plaintiff forthwith and within 7 days from today and on default by the plaintiff do so collect, let the second defendant be at liberty to dispose the same as the law my permit.

47. Lastly is the status of the 1st defendant.  While it is proved without rebuttal that it was not licensed to operate a CFS, it is also in evidence that there were documents which were issued as if the two defendants were one and the same entity.  In fact there is document signed by the 1st defendant as manager of the 2nd defendant.  Moreover in the advocates own submission it is stated unequivocally that the yard operated by the 2nd defendant is notoriously reputed and known as FFK-CFS/Consolbase. That is an operation style that is bound to confuse or mislead and the plaintiff should not be penalized for having been so confused or misled.

48. For that reason while I do not enter any judgment for the plaintiff against the 1st defendant, I order that the suit against the 2nd defendant is dismissed but with no orders as to costs.

Dated and delivered at Mombasa this 20th day of May 2019.

P.J.O. OTIENO

JUDGE

[1] Section 61 of the Evidence Act

[2] Toyota East Africa Ltd V Express Kenya Limited [2009] Eklr

[3] Capital Fish Kenya Limited v The Kenya Power & Lighting Company Limited [2016] eKLR