One of Tanzania’s largest consumer goods dealers, Modern Holdings East Africa (Masafi), has won a $9.2 million compensation for a consignment it lost during the 2007-2008 post-election violence in a landmark case that could open a floodgate of similar suits against the Kenyan government.
The High Court in Mombasa ordered the Kenya Ports Authority (KPA) to pay Masafi the amount after it was found to have mishandled 21 containers of fruit juice and mineral water that consequently denied the importer any profits that was to accrue from sale of the products.
The suit is one of the first successful claims from the political turmoil that paralysed business in Kenya and the larger East Africa region for nearly two months, and could open the door for other firms to lodge claims for lost business opportunities during the December 2007-February 2008 chaos.
The political turmoil brought businesses to a halt, culminating to huge losses that only ended with the signing of a power sharing deal between former president Mwai Kibaki and ex-prime minister Raila Odinga. Sixteen firms from Uganda and Rwanda have separately sued the Kenyan government, seeking Ksh4.7 billion ($46.4 million) for goods and property destroyed during the turmoil.
The petitioners claim that the government, through the police, failed to accord their trucks adequate security -- leading to loss of their property.
They have also faulted the government for opening the highway for use in clash-prone areas. Their trucks were attacked and destroyed along the Nakuru-Eldoret-Malaba and Nakuru-Busia highways.
Intraspeed Logistics, Kampala City Traders Association, KATRACO Uganda and Mugenga Holdings were the owners of the 22 heavy duty trucks destroyed in the chaos. They have been joined by Dooba Enterprises, Willex Uganda, SEBCO Uganda, KPI Limited, Bunyonyi Safaris, Seven Hills Impex, Uganda Agricultural Tools, Board City, Bidco Uganda and businessmen Suleiman Bateganya, David Musana and Arthur Turyahikayo.
The KPA moved Masafi’s consignment to the privately-owned Makupa Transit Shade following a pile-up of containers at its premises during the post-election melee.
Masafi insists that KPA did not notify it of the move, and did not ensure that the consignment was safely stored. Masafi says it was forced to pay unreasonable storage charges amounting to over $1 million at Makupa and that it was unable to trace 15 of its containers, a development that saw it lose out on profits from the sale of its fruit juice and mineral water.
Masafi insists that the juice inevitably expired as it was trying to sort out the confusion and sued the KPA for compensation.
Modern Holdings sells Masafi fruit juice, mineral water and tissues across Africa.
Justice Patrick Otieno has ordered that the KPA pays Masafi $8,296,536 for lost profits, $819,544 for lost consignment and $71,000 for clearance and transport charges.
“I find that the KPA failed in its duty of care and find it liable for loss of Modern Holdings’ 15 containers. The inference I have drawn is that those goods were badly kept to make it difficult for location, identification and verification by Modern Holdings.”
KPA was also found negligent for not informing Masafi that its consignment had been moved, and for not ensuring safe storage of the containers.
“I equally find that the failure by the KPA to serve upon Modern Holdings a notice of removal of cargo to Makupa was a glaring failure on its statutory duty under both Kenyan and East African Community statutes,” the judge ruled.
The KPA had in its defence denied that the political turmoil affected clearance of Masafi’s consignment and its consequent transportation to Tanzania.
The state corporation also held that it was not bound by law to waive all requisite taxes incurred by importers during the post-election violence period as had been ordered by the Ministry of Industry, Trade and Co-operatives.
Masafi told the court that Makupa granted it a 90 per cent waiver on storage charges on condition that the containers would be collected in three days, but it was unable to identify its cargo because there were no proper records indicating where the containers had been stored.
One of the clearing agents Masafi hired said during the hearing that after the containers landed at the Mombasa port in January, he was unable to lodge necessary documents to obtain the consignment because of the political turmoil.
The agent said he was only able to lodge the documents in late February.
“Modern Holdings could not identify, verify and remove all the containers except six out of the 21. This was despite the fact that the plaintiff had availed nine lorries for the goods destined for Tanzania and six lorries for the goods destined for Kenya. At the lapse of the three days, they were denied the right to take out the containers as time granted had lapsed,” the Tanzanian company said.
Masafi held that Tanzanian laws only allow goods with a 75 per cent shelf life remaining to be imported making it impossible for the good to enter Tanzania shortly thereafter.
KPA held that Masafi did not bring to its attention the perishability of the goods being imported hence it cannot be said to have neglected the urgency of clearing Masafi’s products.
Masafi had initially sought compensation of $33.5 million for losses and refunds of costs incurred while trying to recover its cargo.
KPA holds that Masafi was misguided in seeking waivers from a privately owned storage facility, and that the Tanzanian firm should have sued Makupa for any losses it suffered from the containers debacle.
Masafi in 2008 sued the KPA at the East African Court of Justice which refused to hear the suit, arguing that only the Kenyan courts could determine the commercial dispute.
This story was first published by the Business Daily.