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Court of AppealPartially AllowedCivil Appeal No. 108 of 2016· [2017] KECA 293 (KLR)

Kenya Ports Authority v Modern Holdings [E.A] Limited [2017] KECA 293 (KLR)

Court of Appeal of Kenya
29 September 2017
AMAsike MakhandiaWilliam OukoW. OukoKMK. M'inoti
6,229 words in judgment
View original judgmentRead on Kenya Law Watch case
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The bottom line

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Claims against Kenya Ports Authority must first go through negotiation or arbitration under section 62 before any court case — skip that step and you risk losing everything.

What this practically means

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Executive summary

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Modern Holdings (E.A) Limited, a Tanzanian importer, brought 21 containers of Masafi products through the port of Mombasa at the height of the 2007/2008 post-election violence. The cargo could not be cleared in time and 15 containers could not be traced after transfer to Makupa Transit Shade Limited, a third party engaged by Kenya Ports Authority. The High Court (Otieno, J.) found the Authority liable and awarded US$ 9,187,090 with interest and costs. The Authority appealed on 28 grounds, argued as five, principally that section 62 of the Kenya Ports Authority Act deprived the High Court of jurisdiction and that the award of damages, particularly loss of profits based on the E&Y audit report, was unsound. The Court of Appeal held that section 62 does not oust the jurisdiction of the courts but merely limits and postpones it: parties must first seek agreement on compensation, failing which the Chief Justice appoints a single arbitrator, with court adjudication as the final stage. The court rejected post-2010 decisions holding section 62 unconstitutional and affirmed that the Constitution did not change the application of section 62. It also held the trial Judge erred in preferring the E&Y report without cogent reasons or oral evidence from the experts. On that basis the court allowed the appeal and set aside the High Court judgment and decree, directing the parties to proceed under section 62, without considering the merits. The judgment contains an internally contradictory costs order.

Key legal issues

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01

Whether section 62 of the Kenya Ports Authority Act ousts the High Court's jurisdiction over claims against the Authority

Holding

It does not oust jurisdiction but merely limits and postpones it; the prescribed statutory route of agreement or a single arbitrator appointed by the Chief Justice must first be pursued, with court adjudication as the final stage

Reasoning

The court reasoned that Article 1 vests judicial authority in courts established under the Constitution, and Article 159(2)(b) promotes alternative dispute resolution including arbitration. Section 62 provides a simpler, faster and cost-effective avenue: parties first negotiate compensation, failing which the Chief Justice appoints a single arbitrator, whose award is subject to the High Court's supervisory jurisdiction or appeal. Post-2010 decisions holding section 62 otiose were rejected; earlier authorities remain good law.

p. 8
02

Whether the trial Judge properly resolved the conflicting forensic audit reports

Holding

He did not; he chose the easier way out by merely preferring the E&Y report as 'more convincing' without cogent reasons, without oral evidence from the experts, and without considering the second PWC report

Reasoning

The trial Judge relied on the fact that E&Y had discounted and pointed out errors in the PWC report, which the appellant explained is a standard approach in forensic audit reports. In technical expert evidence of this nature, the makers should have explained their conclusions by oral evidence. The Judge also failed to consider the second PWC report. The court held this dispute ought to have been resolved by an arbitrator under section 62.

p. 10

Legal principles established

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  • Section 62 of the Kenya Ports Authority Act does not oust the jurisdiction of the courts but limits and postpones it in the first instance; disputes arising from damage in the exercise of the Authority's powers must first go through agreement or arbitration before the court
  • The promulgation of the Constitution of 2010 did not change the law on the application of section 62 of the Kenya Ports Authority Act
  • Where a Constitution or statute prescribes a procedure for redress of a grievance, that procedure must be strictly followed
  • Jurisdiction can be raised at any stage of the proceedings, including for the first time on appeal
  • Where a court prefers one expert's evidence over another's, it must give cogent reasons for the preference

Court orders

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  1. 1.Appeal allowed
  2. 2.Impugned judgment and decree of the High Court set aside
  3. 3.Parties to proceed under section 62 of the Kenya Ports Authority Act

Authorities

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Legislation

  • Constitution of Kenya, 2010Article 1
  • Constitution of Kenya, 2010Article 159(2)(b)
  • Constitution of Kenya, 2010Article 165(3)
  • Constitution of Kenya, 2010Article 165(3)(e) and (6)
  • Constitution of Kenya, 2010Article 40(b)
  • Constitution of Kenya, 2010Section 7 of the Sixth Schedule
  • Kenya Ports Authority ActSection 62
  • Kenya Ports Authority ActSections 12, 14, 15 and 16
  • Kenya Ports Authority ActSections 65 and 66
  • Kenya Ports Authority ActSection 22
  • Kenya Ports Authority ActSection 23
  • Evidence ActSection 48
  • Court of Appeal Rules, 2010Rule 86
  • Civil Procedure RulesOrder 53

Cases cited (16)

  • William Koross V. Hezekiah Kiptoo Kimue & 4 others
    Civil Appeal No. 223 of 2013
  • Floriculture International Limited V Central Bank of Kenya Limited & 3 Others
    Civil Appeal No. 121 of 1995
  • Samuel Kamau Macharia & Another V Kenya Commercial Bank Limited & 2 Others
    S.C Application No. 2 of 2011
  • Kenya Ports Authority V Kunston (Kenya) Limited
    (2009)2 EA 212; Civil Appeal No. 315 of 2005
  • Kenya Ports Authority V African Online Transport Company Limited
    Civil Appeal No. 149 of 2012
  • The Owners of the Motor Vessel Lilian 'S' v. Caltex Kenya Limited
    (1989) KLR 1
  • Adero & Another V Ulinzi Sacco Society Limited
    [2002] 1 KLR 577
  • All Progressive Grand Alliance (APGA) v. Senator Christiana N.D. Anyanwu & 2 others
    LER [2014] SC. 20/2013
  • Multi-serve Oasis Company Limited V Kenya Ports Authority
    Civil Suit No. 252 of 2010
  • Threeways Shipping Services (K) Limited V Kenya Ports Authority & Another
    Commercial Civil Suit No. 28 of 2010
  • Narok County Council v. Trans Mara County Council and Another
    Civil Appeal No. 25 of 2000
  • Safmarine Container N.V of Antwerp V Kenya Ports Authority
    HCCC No. 263 of 2010
  • Secretary, County Public Service Board & another v Hulbhai Gedi Abdille
    Civil Appeal No. 202 of 2015
  • Speaker of the National Assembly v James Njenga Karume
    Civil Application No Nai 92 of 1992 (Nai 40/92 Ur)
  • Ndolo V. Ndolo
    [2008] 1 KLR (G&F) 742
  • Davei vs Edinburh Magistrates
    [1933] SC 34
On appeal from
High Court of Kenya at Mombasa
HCCC No. 19 of 2009
Jurisdiction invoked
First appeal under the Court of Appeal Rules, 2010; dispute governed by section 62 of the Kenya Ports Authority Act

Key timeline

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Practical implications

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Frequently asked questions

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Later judgments citing this (5)

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Judgments in the corpus that rely on this one. Where the Court said how it treated the authority, that is shown.

Cite this brief

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Cite this brief

Caselaw, "Kenya Ports Authority v Modern Holdings [E.A] Limited [2017] KECA 293 (KLR)", Case Analysis (2017). Civil Appeal No. 108 of 2016. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2017/293/eng@2017-09-29

Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.