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Court of AppealPartially AllowedCivil Appeal E025 of 2024· [2024] KECA 1907 (KLR)

Kenya Ports Authority v Baharini Oil Supply Services Limited & 2 others

Court of Appeal
11 October 2024
12,985 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
·~52 min to read original · ~4 min brief

The bottom line

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Kenya's Court of Appeal struck out a 2023 port concession lawsuit as too late, confirming that withdrawing a case does not pause the six-year filing deadline.

What this practically means

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Executive summary

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The Court of Appeal at Mombasa (Murgor, Laibuta and Odunga, JJA) allowed an appeal by the Kenya Ports Authority against a ruling of F. Wangari, J. which had declined to strike out the respondents' suit, declined to stay it pending arbitration, admitted contested documents in evidence, and granted a temporary injunction restraining the appellant from processing bids for Mombasa Port Berths 11-14. The suit arose from a 2002 Concession Agreement between the appellant and the 1st respondent for construction of berthing facilities at Mbaraki Wharf, whose performance was frustrated when the Ministry of Transport withdrew approval in January 2007. The 1st respondent's earlier Nairobi suit was withdrawn by consent in 2019 for out-of-court settlement, which produced a technical committee report in January 2023 but no agreement. On privity, the court held that the 2nd respondent, the 1st respondent's majority shareholder and financier, was neither a proper nor necessary party, applying the Salomon principle and the doctrine of privity, and ordered its suit struck out. On limitation, the court held the cause of action accrued in 2007 as a single completed breach, not a continuing wrong; withdrawal of the Nairobi suit did not stop time running; and the failed negotiations and committee report created no fresh contract or cause of action. The Mombasa suit, filed in 2023, was therefore statute-barred under section 4 of the Limitation of Actions Act. The remaining issues on privilege, arbitration and the injunction were left undecided as academic. The High Court ruling was set aside and substituted with orders striking out the 2nd respondent's suit and declaring the suit time-barred, with the 1st and 2nd respondents bearing the costs of the appeal.

Key legal issues

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01

Privity and joinder of the 2nd respondent (shareholder/financier)

Holding

The 2nd respondent was neither a proper nor necessary party; its suit ought to have been struck out for want of privity

Reasoning

Applying the Salomon principle and the privity doctrine, the court held that shareholding or investment in the 1st respondent conferred no contractual rights under the Concession Agreement. No assignment was pleaded, and a valid decree could be passed without the 2nd respondent. The learned Judge erred in treating the 2nd respondent as a proper party merely because of its association with the 1st respondent.

p. 15
02

Limitation of actions and continuing breach

Holding

The suit was time-barred under section 4 of the Limitation of Actions Act; the breach was a single act in 2007, not a continuing wrong

Reasoning

The cause of action accrued when approval was withdrawn and access denied in January 2007. The Nairobi suit filed within time was withdrawn, which did not stop limitation. The subsequent negotiations and technical committee report produced no fresh contract or variation, so no fresh cause of action arose. The Mombasa suit, filed in 2023, was outside the six-year period.

p. 21
03

Whether the technical committee report constituted a settlement

Holding

The report was not a settlement agreement; no offer was made and accepted varying the Concession Agreement

Reasoning

Applying an objective test of agreement, the court found the committee's recommendations were never accepted or implemented. Without a concluded agreement or admission of liability, the negotiations were of no consequence to the cause of action and could not refresh limitation.

Legal principles established

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  • A shareholder or financier of a company is neither a proper nor a necessary party to a suit to enforce the company's contract, absent privity or an assignable interest
  • Withdrawal of a suit does not stop or reset the limitation period; a fresh suit on the same cause of action must be filed within the prescribed limitation period
  • A breach that is a single completed act is not a continuing wrong even though its effects endure; only breach of a continuing obligation refreshes limitation
  • A technical committee's recommendations made in failed negotiations do not constitute a settlement agreement and cannot found a fresh cause of action

Court orders

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  1. 1.The Ruling and Orders of the High Court of Kenya at Mombasa (F. Wangari, J.) dated 19th January 2024 be and is hereby set aside and substituted
  2. 2.An order striking out the 2nd respondent's suit for want of privity
  3. 3.A declaration that Mombasa HCCC No. E026 of 2023 was statute barred under and by virtue of section 4 of the Limitation of Actions Act, Cap. 22
  4. 4.That the 1st and 2nd respondents do bear the costs of the appeal

Authorities

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Legislation

  • Constitution of KenyaArticle 227
  • Arbitration Actsection 7(1); section 6
  • Limitation of Actions Act (Cap. 22)section 4; section 34(1)
  • Kenya Ports Authority Actsection 12(1)
  • Anti-Corruption and Economic Crimes Actsection 35
  • Public Procurement & Assets Disposal Act
  • Public Private Partnerships Act
  • Employment Actsection 90
  • Civil Procedure RulesOrder 1 Rule 1

Cases cited (36)

  • Knott v McDonald's Corp.
    985 F. Supp. 1222

    If an assignment of contract occurs, the assignor loses rights; personal contracts cannot be assigned without consent

  • Nassau Hotel Co. v Barnett Barse Corp.
    162 App. Div 381 (N.Y. App. Div 1914)

    Contracts of a personal nature cannot be assigned without the other party's consent

  • Hannah Maina t/a Taa Flower v Rift Valley Bottlers Limited
    [2016] eKLR

    A related company does not have the right to sue merely because of that relation

  • South Nyanza Sugar Company Limited v Francis Koskei Ntuitai
    [2021] eKLR

    The cause of action in contract accrues when the contract is first breached

  • Rift Valley Railways (Kenya) Ltd v Hawkins Wagunza Musonye & another
    [2016] eKLR

    Time does not stop running merely because parties are engaged in out-of-court negotiations or a parallel remedy

  • David Ngugi Waweru v Attorney General & another
    [2017] eKLR

    Time does not stop running because of out-of-court negotiations or a parallel remedy

  • Manani Lilan & Mwetich Co. Advocates v Veronica Sum
    [2022] eKLR

    Importance of legal advice privilege; communication must be secret unless with consent

  • Guardian Bank Limited v Jambo Biscuits Kenya Limited
    [2014] eKLR

    Privileged documents need not be marked 'confidential' or 'without prejudice' for privilege to apply

  • UAP Provincial Insurance Company Ltd v Michael John Beckett
    [2013] eKLR

    If there is no dispute to refer to arbitration, summary judgment follows; stay of proceedings under arbitration agreements

  • Lucy Wangui Gachara v Minudi Okemba Lore
    [2015] eKLR

    An appellate court will not interfere with the exercise of the trial court's discretion absent clear abuse

  • Safi Terrazo & General Contractors Limited v Teresia Njeri T/A Gata General Agencies
    [2008] eKLR

    An injunction cannot issue if it is not sought as a final remedy in a suit alleging breach of contract

  • East African Cables limited v Public Procurement Complaints, Review and Appeals Board & Another
    [2007] eKLR

    The court should consider public interest vis-à-vis private interests in an application for injunction

  • Mombasa Bricks & Tiles Ltd & 5 others v Arvind Shah & 7 others
    [2019] eKLR

    A party is properly joined if its presence is necessary for determination of the real issues in controversy

  • The German School Society & another v Ohany & another
    [2023] KECA 894 (KLR)

    A continuing wrong creates a continuing source of injury rendering the doer liable for its continuance

  • Al-Sabah v East African Fitness Limited
    [2021] KECA 269 (KLR)

    A lawyer is excused for failing to mark a communication without prejudice only if it was a true omission

  • Credit Reference Bureau Africa Limited t/a Transunion v True African (Kenya) Limited
    [2022] KEHC 11083 (KLR)

    The court may enter summary judgment where there are no triable issues

  • People's Union for Democratic Rights & Others v Union of India & others
    [1982] 3 SCC 235

    Matters affecting the public at large may be redressed by public interest litigation

  • Waithaka v Industrial and Commercial Development Corporation
    [2011] eKLR

    Money is not everything; one should not violate another's rights only at the pain of damages

  • Departed Asians Property Custodian Board v Jaffer Brothers Ltd
    [1999] 1 EA 55

    A party may be joined where its presence is necessary for effectual and complete adjudication of all questions

  • Civicon Limited v Kivuwatt Limited & 2 others
    [2015] eKLR

    Any party reasonably affected by pending litigation is a necessary and proper party and should be enjoined

  • Meme vs Republic
    [2004] KLR 637

    Conditions under which joinder is permissible

  • Kingori v Chege & 3 Others
    [2002] 2 KLR 243

    Distinction between necessary and proper parties; a person with only commercial interest is not entitled to be added

  • Salomon v A Salomon & Co Ltd
    [1896] UKHL 1; [1897] AC 22

    A registered company is a separate legal entity from its shareholders with distinct rights and liabilities

  • Kenya National Capital Corporation Ltd v Albert Mario Cordeiro & another
    [2014] eKLR

    The doctrine of privity of contract: only parties to a contract have enforceable rights and obligations under it

  • Savings & Loan (K) Limited v Kanyenje Karangaita Gakombe & another
    [2015] eKLR

    In its classical rendering, privity postulates a contract cannot confer rights or impose obligations on non-parties

  • Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co Ltd
    [1915] AC 847

    Only a person who is a party to a contract can sue on it

  • Agricultural Finance Corporation v Lengetia Ltd

    A contract affects only the parties to it and cannot be enforced by or against a stranger, even if made for his benefit

  • William Muthee Muthami v Bank of Baroda

    Affirmation of the privity doctrine in this jurisdiction

  • Amin Akberali Manji & 2 others v Altaf Abdulrasul Dadani & another
    [2015] eKLR

    Legal personality of companies and the rule in Foss v Harbottle

  • Foss v Harbottle
    [1843] 67 ER 189

    The proper plaintiff in respect of a wrong done to a company is the company itself

  • Edwards v Halliwell
    [1950] All ER 1064

    Restatement of the rule in Foss v Harbottle: proper plaintiff and majority principles

  • Arthi Highway Developers Ltd v Westend Butchery Ltd & 6 Others
    Civil appeal No. 246 of 2013

    A company is a legal person separate from its directors or shareholders; the company alone sues for damage done to it

  • Moir v Wallerstainer
    [1975] 1 All ER 849

    Fundamental principle that a company has its own corporate identity separate from shareholders

  • Balakrishna S.P. Waghmare v Shree Dhyaneshwar Maharaj Sansthan
    AIR 1959 SC 798

    Definition of continuing wrong: an act creating a continuing source of injury

  • M. Siddiq v Suresh Das
    (2020) 1 SCC 1

    A continuing wrong requires breach of a continuing duty; continued effects of a completed wrong are insufficient

  • Giella v Cassman Brown and Co Ltd
    [1973] EA 358

    Cited in the grounds of appeal regarding the second limb of the injunction test

On appeal from
High Court of Kenya at Mombasa
HCCC No. E026 of 2023
Jurisdiction invoked
First appellate jurisdiction over the High Court (Article 164 of the Constitution); appeal against ruling in HCCC No. E026 of 2023

Key timeline

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Practical implications

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Frequently asked questions

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Cite this brief

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Cite this brief

Caselaw, "Kenya Ports Authority v Baharini Oil Supply Services Limited & 2 others", Case Analysis (2024). Civil Appeal E025 of 2024. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2024/1907/eng@2024-10-11

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