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4MB Mining Limited v Freight Forwarders (K) Ltd & 3 others (Civil Suit 21 of 2020) [2023] KEHC 17636 (KLR) (12 May 2023) (Ruling)
Neutral citation:
[2023] KEHC 17636 (KLR)
Republic of Kenya
Civil Suit 21 of 2020
DO Chepkwony, J
May 12, 2023
Between
4MB Mining Limited
Plaintiff
and
Freight Forwarders (K) Ltd
1st Defendant
Safmarine Limited
2nd Defendant
Union Logistics Limited
3rd Defendant
Kenya Revenue Authority
4th Defendant
Ruling
1.First, I wish to express my sincere apologies for the delay in the delivery of this ruling which has been caused by factors beyond my control, more specifically the unavoidable exigencies of work.
2.What is pending determination in this matter are two applications and one Notice of Preliminary Objection which form the subject of this ruling.
3.The first application is a Notice of Motion application jointly filed by the 1st and 3rd Defendants dated 26th January, 2021 seeking inter alia, the following orders:-
4.The grounds adduced in support of the application as on its face and in the affidavit of Ketan Moolraj, the Chief Financial Officer of the 1st Defendant are that the subject matter of this suit as confirmed in the plaint is a contract between the Plaintiff and Misnak International (UK) Limited for the carriage and delivery of certain mining equipment meant to be delivered to the Ministry of Mining of South Sudan from Thailand via the Port of Mombasa. That initially upon Misnak International being contracted by the Plaintiff, it contracted Rohling Project Logistics based in Germany for inland haulage once the equipment arrived at the Port of Mombasa. Rohling Project Logistics on the other hand sub-contracted the third Defendant for onward haulage of the equipment from the port of Mombasa to Ministry of Mining of South Sudan. The 3rd Defendant then contracted the 1st Defendant as its agent to handle the customs formalities and clearance of the cargo at the port for transit purpose. Therefore, the 1st and 3rd Defendants have been acting at the behest of Misnak International.
5.It is further averred that on 20th June, 2017, Misnak International informed the 3rd Defendant that a dispute had arisen with the Plaintiff and also the United States Department of Commerce had imposed trade and economic sanctions on South Sudan’s Ministry of Mining for involving in activities which were contrary to National Security and Foreign Policy Interests of the Government of United States.
6.Consequently, Misnak International wrote to the 1st and 3rd Defendants asking them to seek permission from the Kenya Revenue Authority to terminate the transit and re-export the equipment. The same position was confirmed by Rohling Project Logistics in a letter dated 1st July, 2018 and addressed to 1st and 3rd Defendants. Thereafter, Misnak International issued Kenya Revenue Authority with indemnity for any claim that may arise upon re-exportation and accordingly the equipment was re-exported to the Port of Jebel Ali in two batches, that is on 13th August and 22nd August, 2018 respectively.
7.According to the 1st and 3rd Defendants, they were acting as agents of a disclosed principal, and it would be repugnant to law and an abuse of the court process for one to sue an agent of a disclosed principal. The 1st and 3rd Defendants added that they have no interest in the equipment which were re-exported hence no legal action can lie against them. Finally, the 1st and 3rd Defendant argued that the failure to enjoin Misnak International to these proceedings was a grave error constituting to abuse of the court process taking into account that the Plaintiff was aware of the facts surrounding the case having previously enjoined Misnak International in Mombasa HCCC No.30 of 2018 which was unfortunately dismissed for want of jurisdiction.
8.In opposition to the application dated 26th January, 2021, the Plaintiff filed a Replying Affidavit sworn by Yoram Moussaieff, the Plaintiff’s Director on 9th February, 2021. His case is that the application has not met the threshold for dismissal of suit for not disclosing a reasonable cause of action under Order 2 Rule 15 of the Civil Procedure Rules. That, indeed the suit herein is not scandalous, frivolous or vexatious as the Defendants allege and in the deponent’s view, the 1st and 3rd Defendants are merely seeking to avoid the determination of the issues surrounding this case through a full hearing. The Plaintiff’s case in rebuttable of the case made in the application is that whereas it is true that it had contracted Misnak International for transshipment of the equipment from Thailand to Juba in Republic of South Sudan, the said cargo was stolen and re-exported to a different consignee, thus the 1st and 3rdDefendants played role in conversion of the Plaintiff’s cargo.
9.The Plaintiff avers that the 1st Defendant being a licensed custom clearing agent was named in the Bills of Lading as a notified party to receive the cargo on behalf of Plaintiff and under the East Africa Community Customs Management Act 2002, the 1st Defendant as well as the 3rd Defendant had a duty to ensure that the consignment reaches the consignee (the Plaintiff herein). The 1st and 2nd Defendants however breached that duty by diverting the consignment allegedly on instruction of Misnak International which had neither the authority to do so nor ownership of the cargo.
10.According to the Plaintiff, the equipment had already been delivered to the 1st and 3rd Defendants and transported to a custom bonded warehouse owned by the 1st Defendant before being re-exported. Thus, for genuine re-exportation, under the East African Customs Management Act 2004, the 1st and 3rd Defendants had to obtain among other documents, a commercial invoice, Certificate of origin and proof of ownership. None of those documents were obtained from the Plaintiff and since the Plaintiff was unaware of the re-exportation, the documents presented for that purpose were forgeries meant to deprive the Plaintiff of its goods. It is on basis of those forged documents that the Plaintiff obtained fresh bills of lading to re-export the equipment to the cargo to a different consignee and differently notified parties against the will of the Plaintiff, the legitimate owner of the goods.
11.Thus, the foregoing raises questions as to whether in so acting, the 1st and 3rd Defendants were acting as agents of Misnak International as alleged or independent contractors acting as agents of the consignee, the Plaintiff herein. In any event, the 1st and 3rd Defendants did not present evidence of existence of a Principal-Agent relationship. Therefore, the same is a question to be determined upon presentation of evidence by both parties.
12.Finally, the Plaintiff averred that the disposition that the equipment were re-exported owing to economic sanctions imposed by the U.S Government is a misplaced argument because the equipment belong to the Plaintiff and not the Ministry of Mining of South Sudan. Thus, the sanctions could not be imposed on a Company incorporated in the U.S. In any event, the 1st and 3rd Defendants did not seek the Plaintiff’s consent while undertaking the re-exportation.
13.In response to the averments made in the Replying Affidavit, the 1st and 3rd Defendants filed a Supplementary Affidavit sworn by Ketan Moolraj on 20th April, 2021. He averred that the alleged fraudulent diversion and conversion of equipment against the Plaintiff’s will is merely a scandalous attack on the 1st and 3rd Defendants’ character intended to drag them through a frivolous and vexatious suit. In the same regard, a complaint was made to Port Police Station by the Plaintiff but so far, no action has been taken against the 1st and 3rd Defendants. Further, in response to the allegation that the sanctions imposed by the U.S Government had no bearing to Plaintiff’s equipment, the deponent averred the relevant Bill of Lading named the Ministry of Mining of South Sudan as the ultimate consignee and not the Plaintiff herein. Thus, the sanctions were applicable in facts surrounding the present case but not directed to individual companies like the Plaintiff herein.
14.In much as it can be said, the deponent maintained that whereas the 1st and 3rd Defendants were acting on instructions of Misnak International Ltd, they were not privy to the contract between the Plaintiff and Misnak hence they are not liable to the Plaintiff herein at all. It is on that basis that the deponent reiterates that the suit herein discloses no reasonable cause of action against the 1st and 3rd Defendants. Further, the deponent asked the court to expunge the email correspondences annexed by the Plaintiff wherein Misnak personnel had allegedly failed to approve the re-exportation. According to the deponent, the emails are incomplete and were also obtained illegally.
15.Both parties filed written submissions in support of their respective views on the application. The 1st and 3rd Defendants filed two sets of submissions, one dated 20th April, 2021 and the other is dated 26th May, 2021 whilst the Plaintiff’s submissions are dated 12th May, 2021. I have read through the said submissions for consideration in the determination of the application herein.
16.The second application is a Notice of Motion dated 10th June, 2020 filed by the 2nd Defendant seeking the following orders: -
17.The grounds adduced in support of the application and in the affidavit of Alice Kisima, are that the Plaintiff has sued the 2nd Defendant for an approximate sum of Kshs.4,346,860,400/= together with interests at commercial rates which is pegged as a claim for an alleged loss and damage of consignment that the 2nd Defendant was contracted by a third party to a ship. According to the defendant, its liability is limited to the loss which may occur to the goods while in its custody but not any other liability. That in addition, the 2nd Defendant having been contracted by different parties other than the Plaintiff, the Plaintiff lacks the locus standi to sue the 2nd Defendant on the basis of such an arrangement. In the same vein the court lacks jurisdiction to determine a suit filed by a party without locus standi and it is more likely than not that the 2nd Defendant will succeed in its line of defence.
18.The 2nd Defendant avers that the Plaintiff is a foreign Company with no known assets within the Republic of Kenya hence the need for them to deposit security for costs as demanded.
19.In opposition to the 2nd Defendant’s application, the Plaintiff filed grounds of opposition dated 7th July, 2020 and a Replying Affidavit sworn by Yoram Moussaieff on 15th July, 2020. In summary, the Plaintiff’s case is that in as much as the 2nd Defendant avers that it was acting on instructions of Misnak International in re-exporting the consignment to the Port of Jebel Ali, the directions were issued without authority since Misnak International had no title to the goods, and it is the Plaintiff who has a bonafide claim. In any event, should the 2nd Defendant be awarded costs upon the determination of the suit, the same may be executed against the Plaintiff’s assets in South Sudan through the mutual legal assistance recognized within the East African States. The Plaintiff is of the view that the application is meant to stifle its genuine claim and craves for its dismissal.
20.The application was canvassed by way of written submissions and as the recordreflects, the 2nd Defendant filed a set of submissions dated 7th July, 2020 whilst those of the Plaintiff are dated 28th August, 2020. I have read through the said submissions which are a reiteration of the above summary, and will be considered in the determination herein.
21.Lastly, as earlier mentioned, there is a pending a Notice of Preliminary Objection dated 10th June, 2020 filed by the 4th Defendant, Kenya Revenue Authority in which the following Grounds of Objection have been raised:-
22.The 4th Defendant filed submissions dated 16th July, 2020 in support of the Notice of Preliminary Objection wherein it argues that the previous suit filed by the Plaintiff vide Mombasa HCCC No.30 of 2018 having been found to be incompetent and struck out by the Court of Appeal on 25th July, 2019, the present suit offends the doctrine of res-judicata. According to the 4th Defendant, the issues in the two suits were directly and substantially the same and so are the parties, thus the Plaintiff is precluded under Sections 6 and 7 of the Civil Procedure from raising such similar issues in the present case.
23.On the other hand, in response of the Preliminary Objection, the Plaintiff filed an affidavit sworn by its advocate Grace A. Okumu on 21 July, 2020. The learned counsel deponed that the former suit, Mombasa HCCC No.30 of 2018 was struck out by court at preliminarily stage on basis of improper service hence the substantive issues therein were never tried on merit. Similarly, she depones that the 4th Defendant was not a party in the former suit so as to say that the matters are between similar parties. These arguments were explicated in the submissions dated 14th September, 2020 filed on behalf of the Plaintiff.
Analysis and Determination
24.Having considered the applications at hand by reading through and analysing the affidavits sworn in support and in rebuttal of the same and submissions tendered by parties, this Court is of the humble opinion that the following issues do crystalize for determination:-
a)Whether the Notice of Preliminary Objection dated 10th June, 2020 is merited.
25.Parties herein have rightfully appreciated that a preliminary objection should always be raised on a point of law, and add that it ought to be apparent on the face of the pleadings. It is argued on the understanding that the facts as pleaded are correct save for the legal barrier to the sustenance of the suit which does not require extensive analysis of facts and circumstances because if argued at a preliminary stage, the same may dispose of the suit. In the case of Oraro v Mbaja [2005] 1KLR 141, the court held that:-
26.It is on basis of the above cited case that a consideration of whether the Preliminary Objection raised herein satisfies the ingredients of a Preliminary Objection, can be made. In its Preliminary Objection, the 4th Defendant averred that the suit herein offends the doctrine of sub-judice but in its submissions the 4th Defendant faults the suit for being res-judicata, a consequence of which the court lacks jurisdiction. As has been accepted by courts within our jurisdiction and others beyond our jurisdiction, a court of law can only exercise that jurisdiction that has been donated to it by either the Constitution or legislation or both and cannot arrogate to itself jurisdiction exceeding that which is conferred upon it by law. Jurisdiction is in the end everything as it goes to the very heart of a dispute, without which the court cannot entertain any proceedings and must down its tools. In that respect, the issue as to whether this court has jurisdiction to hear the Plaintiff’s suit is a pure question of law and this Court is satisfied that the Preliminary Objection dated 10th June, 2020 meets the threshold.
27.As for whether the said Preliminary Objection is merited, it is the 4th Defendant’s case that the Preliminary Objection offends the provisions of Sections 6 and 7 of the Civil Procedure Rules. For consideration on priority basis is the objection raised that the suit herein is sub-judice Mombasa HCCC No.30 of 2018, 4MB Mining Limited C/o Ministry of Mining Juba Republic of South Sudan v Misnak International (UK) Limited & 3 Others hence the instant suit is vexatious and an abuse of the court process.
28.Section 6 of the Civil Procedure Act Cap 21, provides for the doctrine of sub judice as follows:-
29.It serves repetition to reiterate the principle encapsulated under Section 6 above that no court ought to proceed with the trial of any suit or proceedings in which the matter in issue is also directly and substantially in issue in a previous instituted suit or proceeding; and or the previously instituted suit or proceedings is between the same parties; and or the suit or proceeding is pending in the same or any other court having jurisdiction to grant the reliefs claimed. A party that seeks to invoke the doctrine of res sub-judice must therefore establish that; there is more than one suit over the same subject matter; that one suit was instituted before the other; that both suits are pending before courts of competent jurisdiction and lastly; that the suits are between the same parties or their representatives.
30.In the above context, it is a common ground between the parties that although Mombasa HCCC No.30 of 2018 4MB Mining Limited C/o Ministry of Mining Juba Republic of South Sudan v Misnak International (UK) Limited & 3 Others was previously instituted by the Plaintiff against the same was brought to a closure upon being struck out by the Appellate Court. The basic purpose and the underlying object of sub judice is to prevent the courts of concurrent jurisdiction from simultaneously entertaining and adjudicating upon two parallel litigations in respect of same cause of action, same subject matter and the same relief. In this Court’s respectful view, the doctrine of res sub judice is not applicable to the facts of this suit given that there are no two pending parallel litigations in respect of same cause of action.
31.The second objection is hinged on the present suit being contrary to the doctrine of res judicata in that the issues raised herein by the Plaintiff were canvassed by the Plaintiff in Mombasa HCCC No.30 of 2018 4MB Mining Limited C/o Ministry of Mining Juba, Republic of South Sudan -vs- Misnak International (UK) Limited & 3 Others but was found to be incompetent by the Court of Appeal and struck out. The Plaintiff on the other hand argues that the previous suit was struck out preliminarily merely on the ground of improper service hence the controversial issues were never determined on merit.
32.The law pertaining to the doctrine of res judicata is captured under the provision of Section 7 of the Civil Procedure Act as follows:-
33.For res judicata to arise as stated in the said Section, the requirements are that: -
34.Section 7 has a further explanation on the application of these requirements, and the main objective of the doctrine of res judicata as can be seen from this explanation is to have issues in a suit litigated with finality. In that regard, the 4th Defendant argued that the issues raised by the Plaintiff in this case were considered by the Court of Appeal which found it incompetent in the case of Mombasa HCCC No.30 of 2018 and it would be an abuse of the court process to re-litigate over the same issues herein.
35.In this Court’s view, the elements of res judicata are to be proven conjunctively rather than disjunctively in that for a successful plea of res-judicata, the Applicant ought to establish all elements enlisted under Section 7 above. More specifically, the Applicant ought to establish that the instant suit or issues were directly and substantially in issue in the former suit, that the former suit was between the same parties or parties under whom they or any of them claim, that those parties were litigating under the same title, that the issues were heard and finally determined in the former suit, and lastly that the court which formerly heard and determined the issue was competent to try the subsequent suit or the suit in which the issue is raised.
36.Where a suit is struck out on the ground of being incompetent, it cannot be said that the suit is res-judicata as the court would not have expressed itself on the merits of the issues raised in the previous suit which now the Plaintiff has revived in the present suit. In the circumstances, this Court does not agree with the 4th Defendant that the instant suit is res-judicata.
b)Whether the Plaintiff’s claim against the 1st and 3rd Defendant should be struck out for failing to disclose reasonable cause of action
SUBDIVISION c) - Whether an order for deposit of security should be made as against the
37.The 1st and 3rd Defendants challenged this court’s jurisdiction to hear and determine the Plaintiff’s claim against them since under the common law, there exist no reasonable cause of action against agents of a disclosed principal. They allege that in this case, the cause of action revolves around a contract dated 22nd May, 2017 between the Plaintiff and Misnak International (UK) Limited for the carriage of mining equipment from Thailand to the Ministry of Mining of South Sudan. That the Plaintiff has acknowledged in its Plaint that the 1st and 3rd Defendants were sub-contracted by Misnak International and all along acted under the instructions of Misnak.
38.It is thus, the 1st and 3rd Defendants contention that they were not privy to the agreement between the Plaintiff and Misnak and cannot be sued under the agreement wherein the principal is disclosed. As such, it is the 1st and 3rd Defendants’ view that the Plaintiff’s claim is vexatious, scandalous and the allegations of fraud and attempted conversion are mere attempts to engage the Defendants in a frivolous claim.
39.On the other hand, the Plaintiff began by faulting the 1st and 3rd Defendants’ application for having been filed prior to filing of a defence since the challenge on jurisdiction has to first be pleaded. Be that as it may, the Plaintiff is of the view that in deciding whether a pleading discloses a reasonable cause of action, one has to look at the Plaint without going beyond to its merits. And that in the Plaint, the Plaintiff accuses the 1st and 3rd Defendants for actively participating in the re-shipment of its equipment to a different consignee notwithstanding they were aware that the Plaintiff had the legal title of the consignment. Thus, the illegal and fraudulent acts of re-exporting the equipment qualifies this suit to the exception on the common law principle against suing an agent of disclosed principal.
40.In the Court’s view, the Plaintiff accuses the 1st and 3rd Defendants for wrongfully re-exporting the consignment without consent of the Plaintiff who had the legal title of the consignment. It is averred that although the 1st and 3rd Defendants have all along maintained that they were acting on instructions of Misnak International (UK) Limited, the common law principle that an agent of a disclosed principal cannot be sued is not absolute. It follows that someone acting on behalf of a principal, whether disclosed or not, may incur either personal liability in tort or impose vicarious or attributed liability upon his/her principal. Where such agent commits a wrongful act in the course of his engagement, the agent may be personally liable to any third party who suffers loss or damage thereby, notwithstanding that the act was expressly authorized or ratified by the principal, unless it was deprived of its wrongful character.
41.That having been said, the wrongful accusations made by the Plaintiff against the 1st and 3rd Defendants cannot be wished away merely because the 1st and the 3rd Defendants were acting on instructions of a disclosed Principal. It is immaterial that the 1st and 3rd Defendants wrongfully re-exported the consignment as the Plaintiff alleges, innocently.
42.Having made a conclusion that the 1st and 3rd Defendants may be personally liable for tortious acts committed in the course of their engagement, and the Plaintiff having so far impleaded the Defendants for such tortious acts, this Court is of the humble opinion that the liability of the 1st and 3rd Defendants on the purported unlawful re-exportation of the Plaintiff’s consignment may only be determined upon evidence being led by both sides. It is at such time that the court shall determine whether the 1st and 3rd Defendants were obligated under the East Africa Community Customs Management Act, 2002 to exercise duty of care towards the Plaintiff as alleged.
43.Consequently, this Court declines the invite to strike out the claim against the 1st and 3rd Defendant as sought since the same can only be resorted to in the clearest of cases but not where the case made has to be supported by further facts or evidence. Therefore, this Court does not find merit in the application dated 26th January, 2021 and proceeds to dismiss the same but with no orders as to costs.
Plaintiff
44.In the application dated 10th June, 2020, the 2nd Defendant argued that the Plaintiff is a foreign entity with no known assets in Kenya hence the need for it to furnish security for costs which the 2nd Defendant may incur. In that regard the 2nd Defendant suggested security of costs in the sum of Kshs.105,408,922.15 being the anticipated legal costs for defending the suit which in the 2nd Defendant’s view, its defence is likely to succeed. The Plaintiff on the other hand submitted that if costs are awarded upon conclusion of the case, then the defendants can execute by attachment of its assets in the Republic of South Sudan through laid down mutual legal assistance. Otherwise, the Plaintiff expresses the view that the application for deposit of cost is made to stifle its access to justice.
45.This Court’s has anxiously considered the submissions by both parties while balancing the overarching objectives in the administration of Justice as enunciated under Article 50 and 159 of the Constitution that courts should aim to dispense substantive Justice by allowing parties to ventilate their cases while aiming to address the core issues in dispute as opposed to the peripheral issue of giving security for the cost of defending a suit. Nonetheless, Order 26 Rule 1 of the Civil Procedure Rules, 2010 deals with security for costs and provides as follows:-Security for costs [Order 26, rule 1.]
46.The above Section confers discretion on the court to consider a call for security of costs in view of the grounds tendered by a Defendant. However, that discretion is to be exercised reasonably and judiciously upon consideration of each case on its own basis. In the case of Raw Bank PLC v Yusuf Shaa Mohamed Omar & Another [2020]eKLR, the Court listed some of the factors to be considered in an application for costs as follows:-a)“absence of known assets within the jurisdiction of court; absence of an office within the jurisdiction of court; insolvency or inability to pay costs.b)the general financial standing or wellness of the Plaintiff.c)the bona fides of the Plaintiff’s claim; ord)any other relevant circumstance or conduct of the Plaintiff or the Defendant the list is not even exhaustive.
47.Similarly, in the persuasive case of Guff Engineering (East Africa) Ltd v Amrik Singh Kalgi, the Court cited with approval the English case of Lindsay Parkinson & Co. Ltd [1973] 2WLR 632, where it was held thus:-
48.In the case of Patrick Ngetakimanzi v Marcus Mutuamuluvi & 2 Others, High Court Election Petition No.8 of 2013, it was held that: -
49.Lastly, the in the case of Shah –vs- Shah [1982] KLR 95, it was held that: -
50.Taking cue from the above decisions, whether or not to condemn a party to deposit Security of Costs is to be considered on the basis of each case while equally considering the court’s mandate to act justly in every situation, the need to have regard to the principle of proportionality and the need to create a level playing ground for all the parties coming before the courts by ensuring that the principle of equality of arms is maintained, and that as far as it is practicable to place the parties on equal footing.
51.It is however not in dispute that the Plaintiff is a foreign Company with no known assets or a registered Company in Kenya. As indicated in the above decisions which this Court entirely agrees with, a court is required to consider the place of incorporation of the Plaintiff Company, its place of business and its ability to pay costs in the event the proceedings are unsuccessful. The Plaintiff has not presented any such evidence, financial records or other means to allay the 2nd Defendant’s fear on its ability to pay costs. Thus, it is this Court’s finding that the 2nd Defendant has presented reasonable grounds to justify the calling of Security for Costs from the Plaintiff. But the amount in such costs is within the court’s discretion to determine whilst balancing the rights of both parties in regard to access to justice on the one hand and the costs to be paid to the Applicant on the other hand, in the event that the suit or appeal does not succeed.
52.In so doing, this Court finds that it will be just to order that the Plaintiff deposits security of costs as prayed by the 2nd Defendant but in the sum of Kshs.500,000/=.
53.In the upshot, and for purposes of clarity, this court makes the following orders:-
a)The Notice of Preliminary Objection dated 10th June, 2022 and filed by the 4th Defendant is hereby dismissed for want of merit.b)The 1st and 3rd Defendants’ application dated 26th January, 2021 is hereby declined in its entirety. However, the 1st and 3rd Defendants are granted leave to file their statements of defence.c)The 2nd Defendant’s application dated 10th June, 2020 is allowed with orders that the Plaintiff shall deposit in court security of costs in the sum of Kshs.500,000/= within sixty (60) days from the date this ruling is made available to parties at the court registry.d)Each party shall bear its own costs for the applications.It is so ordered.
RULING DELIVERED VIRTUALLY, DATED AND SIGNED AT KIAMBU THIS 12TH DAY OF MAY , 2023.D. O. CHEPKWONYJUDGEIn the presence of:Mr. Akwalla counsel for 1st and 3rd DefendantsMr. Mogambi counsel for the 2nd DefendantCourt Assistant - Mwenda
