Shihua Industry Alliance Company Limited v Liu (Also known as Liu Ing-Ming) & 4 others [2023] KEHC 27002 (KLR)

Shihua Industry Alliance Company Limited v Liu (Also known as Liu Ing-Ming) & 4 others (Civil Case E65 of 2022) [2023] KEHC 27002 (KLR) (14 December 2023) (Judgment)

Neutral citation: [2023] KEHC 27002 (KLR)

Republic of Kenya

In the High Court at Mombasa

Civil Case E65 of 2022

DKN Magare, J

December 14, 2023

Between

Shihua Industry Alliance Company Limited

Plaintiff

and

Peter Liu (Also known as Liu Ing-Ming)

1st Defendant

Salma Mbauro

2nd Defendant

Kenya Ports Authority

3rd Defendant

Kenya Revenue Authority

4th Defendant

Maersk Kenya Limited

5th Defendant

Judgment

1. Though this matter has stayed in Court for over one year, it is a fairly straight forward one. It is a case that never should have been had systems been working. The plaintiff is a single member company registered in Hong Kong. It bought timber from the state of Madagascar. The same was in transit. The timber never reached. In a daring heist the 1st defendant believed to a citizen of Taiwan and a person claiming to be a Kenyan Resident Salma Mbauro, derailed a consignment consisting of several pieces of wood. For clarity the same are set out herein below.

No. Container No. Description of Goods

PCIU1238272 (CY/CY)SEAL : S0053893 108 PIECE (S) Pieces of ordinary wood shipper’s load stow count & seal freight collect

PCIU2922839 (CY/CY)SEAL : S0053791 120 PIECE (S) of ordinary wood shipper’s load stow count & seal freight collect

PCIU2805180 (CY/CY)SEAL : S0053800 115 piece (s) of ordinary wood shipper’s load stow count & seal freight collect

PCIU1516917 (CY/CY)SEAL: S0053800 112 piece (s) of ordinary wood shipper’s load stow count & seal freight collect

PCIU2891110 (CY/CY)SEAL : S0053949 127 piece (s) of ordinary wood shipper’s load stow count & seal freight collect

PCIU3992656 (CY/CY)SEAL: S0053948 168 piece (s) Pieces of ordinary wood shipper’s load stow count & seal freight collect

PCIU2023242 (CY/CY)SEAL: S0053930 126 piece (s) of ordinary wood shipper’s load stow count & seal freight collect

PCIU1037581 (CY/CY)SEAL: S0053979 118 piece (s) of ordinary wood shipper’s load stow count & seal freight collect

PCIU1057799 (CY/CY)SEAL: S0053946 110 piece (s) of ordinary wood shipper’s load stow count & seal freight collect

IPXU3598869 (CY/CY)SEAL: S0053943 134 piece (s) of ordinary wood shipper’s load stow count & seal freight collect

PCIU2812873 (CY/CY)SEAL: S0053945 163 piece (s) of ordinary wood shipper’s load stow count & seal freight collect

CAIU3335205 (CY/CY)SEAL: S0053947 148 piece (s) of ordinary wood shipper’s load stow count & seal freight collect

PCIU3931856 (CY/CY)SEAL: S0053798 141 piece (s) of ordinary wood shipper’s load stow count & seal freight collect

PCIU2085901(CY/CY)SEAL: S0053944 130 piece (s) of ordinary wood shipper’s load stow count & seal freight collect

PCIU3883995 (CY/CY)SEAL: S0053950 148 piece (s) of ordinary wood shipper’s load stow count & seal freight collect

TCKU2833666 (CY/CY)SEAL: S0053978 130 piece (s) of ordinary wood shipper’s load stow count & seal freight collect

PCIU1508207 (CY/CY)SEAL: S0053977 122 piece (s) of ordinary wood shipper’s load stow count & seal freight collect

PCIU2113599 (CY/CY)SEAL: S0053941 136 piece (s) of ordinary wood shipper’s load stow count & seal freight collect

PCIU1416271 (CY/CY)SEAL: S0053942 138 piece (s) of ordinary wood shipper’s load stow count & seal freight collect

PCIU3726131(CY/CY)SEAL: S0053598 121 piece (s) of ordinary wood shipper’s load stow count & seal freight collect

PCIU2734657SEAL: S0053891 146 piece (s) of ordinary wood shipper’s load stow count & seal freight collect

PCIU1637837SEAL: S0053892 120 piece (s) of ordinary wood shipper’s load stow count & seal freight collect

PCIU2541391(CY/CY)SEAL: S0053895 130 piece (s) of ordinary wood shipper’s load stow count & seal freight collect

PCIU1475422(CY/CY)SEAL: S0053896 130 piece (s) of ordinary wood shipper’s load stow count & seal freight collect

PCIU2633610 (CY/CY)SEAL: S0053899 128 piece (s) of ordinary wood shipper’s load stow count & seal freight collect

PCIU3174747(CY/CY)SEAL: S0053899 125 piece (s) of ordinary wood shipper’s load stow count & seal freight collect

PCIU1163975 (CY/CY)SEAL: S0053900 127 piece (s) of ordinary wood shipper’s load stow count & seal freight collect

PCIU1124053 (CY/CY)SEAL: S0053792 126 piece (s) of ordinary wood shipper’s load stow count & seal freight collect

PCIU2942840(CY/CY)SEAL: S0053894 130 piece (s) of ordinary wood shipper’s load stow count & seal freight collect

PCIU1532184 (CY/CY)SEAL: S0053794 130 piece (s) of ordinary wood shipper’s load stow count & seal freight collect

PCIU1265642 (CY/CY)SEAL: S0053795 120 piece (s) of ordinary wood shipper’s load stow count & seal freight collect

PCIU2849126 (CY/CY)SEAL: S0053796 130 piece (s) of ordinary wood shipper’s load stow count & seal freight collect

PCIU1356608 (CY/CY)SEAL: S0053797 123 piece (s) of ordinary wood shipper’s load stow count & seal freight collect

PCIU1541078(CY/CY)SEAL: S0053799 126 piece (s) of ordinary wood shipper’s load stow count & seal freight collect

2. These pieces of wood were to be transferred from Madagascar to Zanzibar, the spice Island then transship to Hong Kong. The 1st defendant signed a resolution to himself and purported to act for the plaintiff. The 2 fraudsters caused the Chief Magistrate to release the consignment of timber to themselves on 29/11/2018 in a Misc. Application. They got themselves involved in an appeal by a government agency.

3. The Court found that the timber belonged to the plaintiff herein. Unknown to the court and all involved the proceedings were meant to circumvent the importation process.

4. The Ruling subsequently obtained does not bind the plaint here in terms of Sections 46 and 47 of the Evidence Act.“46. Inadmissible judgments.Judgments, orders or decrees other than those mentioned in sections 43, 44 and 45 of this Act are inadmissible except where the existence of such judgment, order or decree is a fact in issue or is relevant under some other provision of this Act.47. Proof that judgment was incompetent or obtained by fraud or collusion.Any party to a suit or other proceeding may show that any judgment, order or decree which is admissible under the provisions of this Act and which has been proved by the adverse party, was delivered by a court not competent to deliver it, or was obtained by fraud or collusion.”

5. The fraudsters filed an application in the Appeal file for them to be allowed to export timber. The plaintiff sought to be joined in the proceedings but were not allowed. They set out particulars of fraud. They sought the following prayers:-a.A declaration that the Plaintiff’s authorized officer is Mr. Yao Bao.b.A declaration that the legal title in the Woods subsists and/or rests with the Plaintiff.c.A declaration that the Plaintiff, as the legitimate owner of the Woods is entitled to claim and take possession of the Woods, whether by itself or its directors, officers, employees, servants, agents, successors and/or assigns.d.A declaration that the Plaintiff is entitled to exercise its right of lien, right of retention and/or right of stoppage in relation to the Woods.e.A permanent injunction restraining the 1st and 2nd Defendants whether by themselves, their personal representatives, successors and/or assigns from alienating, dealing with, retaining, holding or remaining with or causing the transshipment or delivery of the consignment comprising of twenty-two (22) containers whose numbers are: TCKU 6736469; HAS]U 4696146; TLLU 5122029; MIEU 3018814; TILU 7662480; MRKU 3221591; MRKU 6499781; TRHU 6183103; MRKU 6091228; BEAU 6346327; SUDU 8957641; TCNU 2884586; MRKU 2131066; MRKU 6017940; MRKU 2594100; MRSU 4248100; MRKU 4190160; MSKU 9842480; MRSU 4328231; TCKU 6720591; MRKU 5607578; and Maersk container number 4853538, containing the Woods from the Port of Mombasa and/or any other point of collection.f.A permanent injunction restraining the 3rd and 4th Defendants whether by themselves, their directors, officers, employees, servants, agents, successors and/or assigns from releasing the Woods or in any manner facilitating the release of the Woods to the 1st and 2nd Defendants and/or their representatives, successors and/or assigns for purposes of Transshipment.g.A permanent injunction restraining the Defendants whether by themselves, officers, employees, servants, agents, successors, personal representatives and/or assigns from proceeding with any transactions, arrangements, agreements and/or deals, howsoever arising and which are aimed at or have the result of, whether directly or indirectly, alienating, distributing, dissipating, excluding and transferring or otherwise disposing of the Woods or the legal title thereof.h.A mandatory injunction directed at the Defendants requiring the release of the Woods to the Plaintiff and/or its nominated agents, and/or representatives.i.A permanent injunction restraining the 3rd and 4th Defendants from enforcing any accrued levies, duties, taxes and/or charges against the Plaintiff in respect of the Woods, in view of the fraud by the 1st and 2nd Defendants.j.In the alternative to prayer (h) above, a declaration that the 3rd and 4th Defendants waive any accrued levies, duties, taxes and/or charges against the Plaintiff in respect of the Woods, in view of the fraud by the 1st and 2nd Defendants.k.Special damages of USD 12. 8 Million, payable by the 1st and/or 2nd Defendants or their personal representatives, successors and/or assigns if the Woods are released to the 1st and/or 2nd Defendants by the 3rd, 4th and/or 5th Defendants whether by their officers, employees, servants and/or agents.l.General damages as against the 1st and 2nd Defendants for fraud, fraudulent misrepresentation, inducement, and conspiracy to defraud the Plaintiff.m.Interest.n.Costs.

6. There is no defence filed to the claim. There was a preliminary objection filed but it was unmeritorious and I dismissed the same on 5/8/2023. There was also an application filed on 24/11/2023 which I dismissed in limine yesterday. I declined to grant stay and ordered the judgment to be read today. Understood that the same was a gimmick to delay in order to steal the matches on the plaintiff. The plaintiff filed a witness statement through Yau Bao of Nos. 5 Xiapue, Xiali village, Yuxi Town Fuqing City, Fujian China. He reiterated the contents of the plaint. He traced the origin and the process of the proceeding he served as fraudulent. He produced documents which are in pages 1 – 252. I have perused the same. He was testifying in Mandarin. Translation was done by Fung Wei Peng Fei translating. All parties were served with the summons to enter appearance. The 3rd and 4th Respondent took a neutral stance. The 5th Defendant was removed from the proceedings. The 1st and 2nd defendants opted to engage in shenanigans to obfuscate issues and involve the Court in a wild goose chase.

Issues For Determinationa.Whether there are previous proceedings and whether they bind the plaintiff.b.The ownership of cargo.c.Reliefs.

Previous Proceedings 7. Section 6 and 7 defines previous proceedings. The Application filed was a Misc Application seeking release of cargo to the 1st and 2nd defendant. It was not against the 1st and 2nd defendant. The evidence on record is succinct that the proceedings herein instituted by the 1st and 2nd defendant. There is no power of attorney capable of taking away the powers of directors. The previous matters were a nullity in this respect: -a.Under order 3 Rule 1, a suit must be filed by plaint or other prescribed means. It provides as doth: -“commencement of suit and case track allocation [Order 3, rule 1. ]1. Every suit shall be instituted by presenting a plaint to the Court, or in such other manner as may be prescribed.”

8. There was no plaint filed. The same was not against the same parties. Consequently, there are no previous proceedings. Secondly they were filed in the name of the plaintiff without a director’s resolution.

9. The documents filed in those matter are fraudulent. The defendant chose not to answer the said question under order 2 Rules 4 those are matters that must be specifically denied. The Rule provides as doth:-“Matters which must be specifically pleadedA party shall in any pleading subsequent to a plaint plead specifically any matter, for example performance, release, payment, fraud, inevitable accident, act of God, any relevant Statute of limitation or any fact showing illegality—(a)which he alleges makes any claim or defence of the opposite party not maintainable;(b)which, if not specifically pleaded, might take the opposite party by surprise; or(c)which raises issues of fact not arising out of the preceding pleading.

10. This was also dealt with in the case of Raghbir Singh Chatte v National Bank of Kenya Limited [1996] eKLR, where the court of Appeal stated as doth: -“The main object of this rule and r.14 is to bring the parties by their pleadings to an issue, and indeed to narrow them down to definite issues, and so diminish expense and delay, especially as regards the amount of testimony required on either side at the hearing (per Jessel M. R. in Thorp v Holdworth (1876) 3 Ch. D. 637). This object is secured by requiring that each party in turn should fully admit or clearly deny every material allegation made against him. Thus, in an action for a debt or liquidated demand in money, a mere denial of the debt is wholly inadmissible”,I will also add that the crucial deficiency of a general denial which I have already described, also applies to the evasive, inconsistent and contradictory alternative general traverse in the appellant’s defence. This was that if the respondent had extended any overdraft facilities without stating the amount involved, to the appellant which, was moreover, denied, then the same and here again, without stating how and when, had been paid. Such a spurious pleading in the alternative cannot give any merit to the defence and so also makes it one which discloses no reasonable defence for all purposes including that of 0 6 r 13(1)(a).”

11. In any case, the purported resolution are within the special knowledge of the 1st and 2nd defendants. They chose not to attend court or even file defence over the same. Even when there is for formal proof the plaintiff has a duty to prove their case. The duty to proof even in formal proof was stated by justice J. B. HAVELOCK in the case of Rosaline Mary Kahumbu v National Bank of Kenya Ltd [2014] eKLR:“In light of the absence of a Defence on the file, it follows logically, that the matter would proceed to formal proof. What therefore is hearing by formal proof? In the case of Samson S. Maitai & Another v African Safari Club Ltd & Another [2010] eKLR, Emukule, J observed thus;“……. I have not seen judicial definition of the phrase "Formal Proof". "Formal" in its ordinary Dictionary meanings - refers to being "methodical" according to rules (of evidence). On the other hand according to Halsbury's Laws of England, Vol. 15, para, 260, "proof" is that which leads to a conviction as to the truth or falsity of alleged facts which are the subject of inquiry. Proof refers to evidence which satisfies the court as to the truth or falsity of a fact. Generally, as we well know, the burden of proof lies on the party who asserts the truth of the issue in dispute. If that party adduces sufficient evidence to raise a presumption that what is claimed is true, the burden passes to the other party who will fail unless sufficient evidence is adduced to rebut the presumption.”Can hearing, therefore, by formal proof, be similar to a full hearing? According to the observations of Emukule, J, in a formal hearing, all rules of evidence and procedure are observed and the party to a suit has to adduce evidence sufficient to sustain the suit. In adducing this evidence, the party has to raise a presumption that whatever is claimed is true and this therefore goes to the merits of the case. The Court considering a full hearing, to determine the matter based on the evidence that is presented before it by the parties. In contrast, at a formal proof hearing, if the party with the onus of adducing evidence fails to satisfy the truth threshold, the matter would stand to be dismissed on the basis that it was unmeritorious and did not raise sufficient proof of any issues of fact or law. It would be heard and determined on its merits.”

12. Further, under Section 112 of the Evidence Act, the party with special knowledge is bound to testify on the same. The conveys is that failure to testify will lead to an adverse interference, which I hereby make.

13. In the case of Nesco Services Limited v CM Construction [EA] Limited [2021] eKLR, justice G V Odunga as then he was stated as doth:“In my view, the fact that the document in question was authored by the Appellant’s agent and was produced by consent of the parties themselves entitled the learned trial magistrate to rely on it. The Court of Appeal in Ephantus Mwangi and Another vs. Duncan Mwangi Civil Appeal No. 77 of 1982 [1982-1988] 1KAR 278 had this to say on the issue:“Where documents are put in by consent, as for example an agreed bundle of correspondence, the usual agreement is that they are admitted to be what they purport to be (so as to save the necessity for formal proof of each document).”41. Since the said author was for reasons unknown to the Court not called to testify and dispute its authenticity, adverse inference could be made thereon. In Kenya Akiba Micro Financing Limited vs. Ezekiel Chebii & 14 others [2012] eKLR the court stated as follows:“Section 112 of the Evidence Act Chapter 80 of the laws of Kenya provides:‘In civil proceedings, when any fact is especially within the knowledge of any party to those proceedings, the burden of proofing of disproving that fact is upon him.’Where a party has custody or is in control of evidence which that party fails or refuses to tender or produce, the court is entitled to make adverse inference that if such evidence was produced, it would be adverse to such a party. In the case of Kimotho –vs- KCB (2003) 1 EA 108 the court held that adverse inference should be drawn upon a party who fails to call evidence in his possession.”

14. Thirdly, there was no power of attorney produced. In any case a power of attorney does not supersede the donor or the principle. It is clear that the Magistrate Court had no jurisdiction to deal with the multi Million 34 containers of woods. It was before a court without competent jurisdiction. The suit was also against other parties. The suit was fraudulently filed. It was meant to steal not only a match but also timber. The same is not binding on the plaintiff. Subsequent appeal to the higher courts did not change the fact that the dispute was release not ownership. I am not surprised that the fraudsters sued Kenya Wildlife Service regarding matters of timber. I find and hold that by dint of Section 47 A of the Evidence Act the judgment of the Magistrate Court in Misc 328 of 2017 and 329 of 2017 was procured by fraud and is not binding. The Court also had no jurisdiction to handle the matter.

15. On the second issue, the question is ownership of the timber. There is no disputation that the plaint is the owner of the timber in the 38 containers. There is also no claim had by the 1st and 2nd defendant. They are not just busy bodies but Fraudsters. I so hold that the timber contained a containers imported underthrew container numbers indicated in paragraph 8 belongs to Shihua Industry Alliance Co. Ltd.

16. I have seen the bill of lading and noted that the consignee and the notify party are the same, the plaintiff herein. There is no place for the 1st and 2nd defendant. I am satisfied that the purported power of attorney is factious. It is not worthy the paper it is typed in.

17. From page 3 it is clear that Yao Bao made the order in Madagascar. The 1st and 2nd defendants were no involved the certificate is importation show that Yao Bao, the sole director. Even the certificate origin of Origine shows Yao Bao as the person contracting.

18. I am satisfied that the plaintiff’s director Yao Bao is the only one to deal with the timber.

19. The plaintiff have caused timber to be lying from 2017 to date. The loss is immense. I therefore direct that the 1st and 2nd defendant shall pay damages for fraud. They are wrong doers but have kept the plaintiff stuck in a state of suspected amination. The state is not a proper one. I therefore award a sum of USD 3,000,000 against the 1st and 2nd defendant for damages suffered as a result of the fraud that has kept 37 containers or over 7This is in addition to allowing the plaint as prayed.

20. The 1st and 2nd defendant to bear a cost of USD 115,000/= to the plaintiff. The defendants to release the cargo to the plaintiff. Any previous order issued in particulars on CMCC Misc. 329 of 238 of 2017 is hereby overridden has been null and void. No state agency is under obligation to release the timber to any party other that the plaintiff under the hand of Yao Bao, the sole director of the plaintiff. By dint of this judgment any fraudulent documents showing that the plaintiff has appointed the 1st and 2nd defendant to act as its attorney is null and void.

21. In Mc Foy =vs= United Africa Co. Ltd. (1961) 3 ALL ER 1169, where Lord Denning MR stated as follows: -“If an act is void, it is in law a nullity. It is not only bad but incurably bad. there is no need for an order of the court to set it aside. It is automatically null and void without more ado, though it is sometimes convenient to have the court declare it to be so and every proceeding which is founded on it is also bad and incurably bad. You cannot put something on nothing and expect it to stay there. It will collapse.”

22. I therefore allow the case as prayed with costs of USD 3,000,000/= and cost of 122,000 USD. 30 days stay.

Determinationa.A declaration that the Plaintiff’s authorized officer is Mr. Yao Bao.b.A declaration that the legal title in the Woods subsists and/or rests with the Plaintiff.c.A declaration that the Plaintiff, as the legitimate owner of the Woods is entitled to claim and take possession of the Woods, whether by itself or its directors, officers, employees, servants, agents, successors and/or assigns.d.A declaration that the Plaintiff is entitled to exercise its right of lien, right of retention and/or right of stoppage in relation to the Woods.e.A permanent injunction restraining the 1st and 2nd Defendants whether by themselves, their personal representatives, successors and/or assigns from alienating, dealing with, retaining, holding or remaining with or causing the transshipment or delivery of the consignment comprising of twenty-two (22) containers whose numbers are: TCKU 6736469; HASU 4696146; TLLU 5122029; MIEU 3018814; TILU 7662480; MRKU 3221591; MRKU 6499781; TRHU 6183103; MRKU 6091228; BEAU 6346327; SUDU 8957641; TCNU 2884586; MRKU 2131066; MRKU 6017940; MRKU 2594100; MRSU 4248100; MRKU 4190160; MSKU 9842480; MRSU 4328231; TCKU 6720591; MRKU 5607578; and Maersk container number 4853538, containing the Woods from the Port of Mombasa and/or any other point of collection.f.A permanent injunction restraining the 3rd and 4th Defendants whether by themselves, their directors, officers, employees, servants, agents, successors and/or assigns from releasing the Woods or in any manner facilitating the release of the Woods to the 1st and 2nd Defendants and/or their representatives, successors and/or assigns for purposes of Transshipment.g.A permanent injunction restraining the Defendants whether by themselves, officers, employees, servants, agents, successors, personal representatives and/or assigns from proceeding with any transactions, arrangements, agreements and/or deals, howsoever arising and which are aimed at or have the result of, whether directly or indirectly, alienating, distributing, dissipating, excluding and transferring or otherwise disposing of the Woods or the legal title thereof.h.A mandatory injunction directed at the Defendants requiring the release of the Woods to the Plaintiff and/or its nominated agents, and/or representatives.i.A permanent injunction restraining the 3rd and 4th Defendants from enforcing any accrued levies, duties, taxes and/or charges against the Plaintiff in respect of the Woods, in view of the fraud by the 1st and 2nd Defendants.j.In the alternative to prayer (h) above, a declaration that the 3rd and 4th Defendants waive any accrued levies, duties, taxes and/or charges against the Plaintiff in respect of the Woods, in view of the fraud by the 1st and 2nd Defendants.k.Special damages of USD 12. 8 Million, payable by the 1st and/or 2nd Defendants or their personal representatives, successors and/or assigns if the Woods are released to the 1st and/or 2nd Defendants by the 3rd, 4th and/or 5th Defendants whether by their officers, employees, servants and/or agents.l.General damages as against the 1st and 2nd Defendants for fraud, fraudulent misrepresentation, inducement, and conspiracy to defraud the Plaintiff.m.Interest.n.Costs.o.General damages: USD 3,000,000p.Costs USD 122,000q.The 1st and 2nd defendant to pay cost of USD 12,000 to the 3rd Defendant and USD 24,000 to the 4th Defendant.r.There is a perpetual injunction issued against the 1st and 2nd defendants from in any way purporting to act as or on behalf of the plaintiff.s.Given that the proceedings in CMCC 329 / 328 of 2017 were a nullity they stand struck out with costs to the respondents herein to be paid by the 2nd defendants herein.t.This file is closed.

DELIVERED, DATED AND SIGNED AT MOMBASA ON THIS 14TH DAY OF DECEMBER, 2023. JUDGMENT DELIVERED THROUGH MICROSOFT TEAMS ONLINE PLATFORM.KIZITO MAGAREJUDGEIn the presence of:Mr. Cheruiyot for Khyndh for 3rd DefendantEgunza for the 1st and 2nd DefendantMr. Gitonga for the PlaintiffMr. Ochieng for Kenya Revenue AuthorityCOURT ASSISTANT - BRIAN