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JudgmentKUKU GOLD TRADERS LIMITED VS DIAMOND SHIPPING COMPANY LIMITED AND KENYA REVENUE AUTHORITY12 min read

KUKU GOLD TRADERS LIMITED VS DIAMOND SHIPPING COMPANY LIMITED AND KENYA REVENUE AUTHORITY

High Court at Mombasa High Court · · Florence Wangari

1. The Plaintiff/ Applicant filed the Notice of Motion dated 2nd July 2026 pursuant to Sections 1A, 1B, 3, 3A of the Civil Procedure Act and Order 40 and Order 50 Rule 1 of the Civil Procedure Rules, and all other enabling provisions of the law.
2. Prayers 1 and 2 of the application has been spent. The Applicant further seeks for orders that pending the hearing and determination of the suit, the 1st Defendant/ Respondent be compelled to issue the Applicant/ its agents or assigns with a release order to facilitate the clearing and releasing the consignment of the 3 Bills of Lading comprising of 20containers each, totaling to 60 containers of Manan Pakistan Long Grain White Rice, upon issuing security and or signing indemnity to the 2nd Respondent for the perishable Agricultural Commodities that were imported under the Bills of Lading numbers CIMKHIMBA261078, CIMKHIMBA261070 and CIMKHIMBA261065. The respective container numbers are listed under each Bill of Lading as stated in the application.
3. The Applicant also prayed to have the hearing expedited for purposes of preserving the 3 consignments of 20 containers each containing the above mentioned rice. The Applicant also prayed for costs of the application.
4. The application is supported by the affidavit sworn by Mahmood Mughal, the Director of the Plaintiff Company. It was deponed that the Applicant was awarded a tender by the Agricultural Food Authority to import food stuff which included rice, where a waiver on import duty was granted. The waiver was to last from 9th January 2026 to 31st May 2026.
5. With respect to the waiver, the Applicant imported 60 containers of Manan Pakistan Long Grain White Rice, (herein after referred to as “the rice”) from Karachi, Pakistan under the 3 Bills of Landing as stated herein above. Due to the various suits against the Agricultural Food Authority, there was delay in the arrival of the consignment as they had been detained in the deep seas, and the consignment arrived at the Port of Mombasa on 19th June 2026.
6. The Applicant paid all the statutory dues to the 2nd Respondent, while the 2nd Respondent waived customs warehouse rent amounting to Kshs. 694,980.00, after the Applicant made an application for waiver as the duty free period had already lapsed. The Applicant paid to the 1st Respondent Kshs. 2,000,000.00 being the shipping charges.
7. The 1st Respondent thereafter refused to clear the consignment belonging to the Applicant on the basis that here was unpaid debt, claiming a further USD 200,000. The 1st Respondent is holding the containers as ransom for payment of alleged debt which is denied by the Applicant. The Applicant reached out to the 1st Respondent for a solution but the 1st Respondent refused to any proposal with a view of auctioning the goods at a throw away price.
8. The Applicant depones that the continuous detention of the consignments by the 1st Respondent, exposes the Applicant to unforeseen charges which includes the demurrage charges assed at USD 200 per day as the waiver period has already lapsed. Further, the consignment contains perishable goods and considering the climate of Mombasa Port, risks of mishandling at the port exposing the rice to external hazardous factors, which will render the rice unfit for human consumption.
9. With the duty fees and shipping fees already paid, and the container charges which are accruing on daily basis, the expenses are likely to exceed the value of the consignment unless the court intervenes. The 1st Respondent is said to have entered into contractual obligations with the local traders to supply the imported rice. The matter was reported to the police, and they advised that the matter be pursued through civil proceedings.
10. The Applicant is willing to deposit a Bank Guarantee as security. It is prayed that the application be allowed with costs to the Applicant.
11. The application was opposed by the 1st Respondent. The 1st Respondent filed Grounds of Opposition and the Replying Affidavit both dated 14th July 2026. The Affidavit was sworn by Eddah Mng’angu, the Team Leader, Line forwarding of the 1st Respondent. It was deponed that the 1st Respondent was not the carrier in respect to the consignment. The 1st Respondent was acting solely as the duly appointed local shipping agent of EMKAY Shipping Line/ CIM Shipping as disclosed in the above mentioned Bills of Lading. There was no contractual relationship between the Applicant and the 1st Respondent.
12. The jurisdiction of this court was disputed as the Bills of Lading provided that any disputes arising relating to the same should be referred for arbitration or litigation in Dubai, United Arab Emirates, in accordance with the English Law.
13. It was further deponed that the Applicant became the holder of the relevant Bills of Lading following the endorsement in its favour by the Original Consignee. The consignment arrived in the Port of Mombasa on 11th April 2026 and not 19th June 2026 as alleged by the Applicant. The Applicant made no efforts to have the consignment cleared within the contractual free period, thereby occasioning the detention and demurrage charges in accordance with the contractual terms.
14. It was deponed that the detention charges as at 14th July 2026 was USD 237,600 and the amount continues t accrue on a daily basis until the containers are duly released and the outstanding contractual charges are fully settled. The Applicant is said to have requested for a 100% waiver from the 1st Respondent, and a 15% waiver was granted. The Applicant failed to settle the amount. Instead, the Applicant wrote to the 1st respondent stating that the 15% waiver was not agreeable and it requested for reconsideration of 100% waiver, and in the alternative, the outstanding amount be paid in instalments of 6 months.
15. It is deponed that the request for the waiver and payment in instalments is an unequivocal acknowledgment that the detention and demurrage charges had accrued and remained outstanding. The 1st Respondent further deponed that it was acting in good faith and in accordance with its mandate as the local agent of the carrier. It was also denied that the Applicant settled the outstanding bills with the 1st Respondent. It was prayed that the application be dismissed with costs.
16. The Applicant filed a Further Affidavit dated 20th July 2026 in response to the 1st Applicant’s Grounds of Opposition and Replying Affidavit. It was deponed that the Applicant not being the appointing party, may not be privy to the terms of the agreement with its appointee. On the issue of jurisdiction, the Applicant states that the same has been overtaken by events. It relied on the case of Blooming Bliss Kenya Limited v Ocean Freight (E.A) Limited and Mediterranean Shipping Co (SA) where the Kenyan Courts have assumed jurisdiction on contractual disputes to be performed in Kenya notwithstanding a clause conferring jurisdiction to a foreign court.
17. It was further stated that the demands by the 1st Respondent were unreasonable despite it being paid Kshs. 2,000,000.00 as per the law hence nothing is owed to the 1st Respondent by the Applicant. The Applicant denies owing the 1st Respondent the amount demanded.
18. The court directed that the application be canvassed by way of written submissions. Both Parties complied by filing their respective submissions in support of their rival positions which I have considered.
Analysis
19. Having considered the Notice of Motion application, Supporting and Further Affidavits, Grounds of Opposition the Replying Affidavit and the rival submissions by the parties, the issues for determination are;
(a) Whether this court has jurisdiction over the matter
(b) What interim orders should issue
(c) Who should bear costs

20. On the issue of jurisdiction, in the case of Owners of Motor Vessel “Lillian S” v Caltex Oil Kenya Ltd [1989] KLR 1, it was stated as follows;
“Jurisdiction is everything. Without it, a court has no power to make one step. Where a court has no jurisdiction, there would be no basis for a continuation of proceedings pending other evidence, and a court of law downs its tools in respect of the matter before it, the moment it holds the opinion that it is without jurisdiction.”
21. The issue of jurisdiction is fundamental and the same ought to be determined before this court proceeds further in the matter. The 1st Respondent stated that the jurisdiction over this matter was through arbitration proceedings and in Dubai, UAE. Stating the case of United India Insurance Co. Ltd v East African Underwriters (Kenya) Ltd [1985] KLR , which was relied on by the Applicant, the 1st Respondent stated that the discretion by the Kenyan Courts to assume jurisdiction notwithstanding a foreign jurisdiction clause applied where the parties have freely chosen to have the forum of dispute resolution or where strong reasons are demonstrated, and the Applicant has failed in that aspect.
22. Both parties relied on the case of United India Insurance Co. Ltd (supra) . It is common ground that Kenyan Courts have assumed jurisdiction over matters where contracting parties have conferred exclusive jurisdiction to a foreign court. Though there is no evidence that the parties had freely chosen to confer jurisdiction to the Kenyan court, I find that the Applicant has demonstrated strong reasons to have this court assume jurisdiction.
23. The final destination of the goods is the Kenyan market and both contracting parties are Kenyan and under the circumstances, the foreign court cannot deal with the issues being raised which includes but not limited to goods at risk of perishing while still at the port or as soon as it lands in the Kenyan consumer market, hence risking the health of Kenyan in general.
24. As it was held in the case of Blooming Bliss Kenya Limited v Ocean Freight (E.A) Limited & ano [2023] eKLR , Justice Kizito Magare held that seeking to have the suit instituted in London as per the contract, where the parties are Kenyan and the goods in issue were being supplied from Kenya, this would keep away the parties from access to justice, and that forum is otiose and does not bind the conscience of the court. He found that the Kenyan Court had jurisdiction both ratione personae and ratione materiae. This court therefore has jurisdiction to deal with the matter.
25. On whether the court should issue the order as prayed, his court in its mandate to issue interim orders is required to preserve the subject matter of the suit while protecting the interest of both parties. Order 40 Rule 1 of the Civil Procedure Rules provides for temporary injunctions as follows: -
Where in any suit it is proved by affidavit or otherwise: -
(a) that any property in dispute in a suit is in danger of being wasted, damaged, or alienated by any party to the suit, or wrongfully sold in execution of a decree; or
(b) that the defendant threatens or intends to remove or dispose of his property in circumstances affording reasonable probability that the plaintiff will or may be obstructed or delayed in the execution of any decree that may be passed against the defendant in the suit,
the court may by order grant a temporary injunction to restrain such act, or make such other order for the purpose of staying and preventing the wasting, damaging, alienation, sale, removal, or disposition of the property as the court thinks fit until the disposal of the suit or until further orders.
26. The principles that govern grant of orders of injunction were articulated in the celebrated case of Giella v Cassman Brown (1973) EA 358 that: -
“First, an applicant must show a prima facie with a probability of success. Secondly, an interlocutory injunction will not normally be granted unless the applicant might otherwise suffer irreparable injury, which would not adequately be compensated by an award of damages. Thirdly, if the court is in doubt, it will decide an application on the balance of convenience.”
27. On whether the Applicant has established a prima facie case, the Court of Appeal in Mrao Ltd v First American Bank of Kenya Ltd & 2 others (2003) eKLR defined prima facie case as follows: -
“A prima facie case in a civil application includes but is not confined to a genuine and arguable case. It is a case which, on the material presented to the court, a tribunal properly directing itself will conclude that there exists a right which has apparently been infringed by the opposite party as to call for an explanation or rebuttal from the latter.”
28. This court is required to assess whether the dispute between the parties is genuine and worth of protection pending hearing of the suit. The Applicant alleges that the delay in clearing the goods during the duty free window period was affected by the many suits filed against the Agriculture and Food Authority leading to the detention of the vessel in the deep sea. Further, the consignment being rice is at imminent risk of being destroyed being perishable goods, ready for the Kenyan market. It is on those reasons that this court is of the view that the Applicant has established a prima facie case with probability of success.
29. On the second issue of whether the Applicant will suffer irreparable injury, the Court of Appeal in Nguruman v Jan Bonde Nielsen & 2 others (2014) eKLR held;
“… if the applicant establishes a prima facie case that alone is not sufficient basis to grant an interlocutory injunction, the court must further be satisfied that the injury the respondent will suffer, in the event the injunction is not granted will be irreparable. In other words, if damages recoverable in law are an adequate remedy and the respondent is capable of paying, no interlocutory order of injunction should normally be granted, however strong the applicant’s claim may appear at that stage.”
30. This court is satisfied that the Applicant stands to suffer irreparable harm if the 60 containers of rice continue to be detained by the 1st Respondent. Notwithstanding the interests and the rights of the contracting parties, the court considers the fact that this is rice meant to be consumed by the Kenyan market, hence a public interest issue. The court has a duty to protect the consumers of the rice from getting into contact with toxic food. The harm that is likely to be suffered by the public cannot be compensated by an award of damages. Further, the demurrage charges continue to accrue on daily basis, which puts the Applicant at a risk of not recovering its costs in the event the matter is determined in its favour. I find that such harm cannot be adequately compensated by an award of damages.
31. Having found that the Applicant has established a prima facie case and that it is likely to suffer irreparable harm if the rice continues to be detained, this court finds that the balance of convenience tilts in favour of the Applicant. The Respondent will suffer no prejudice if ordered to release the containers of rice, whereas the Applicant stands to suffer substantial and potentially irreversible prejudice if the rice continues to be detained. Accordingly, the balance of convenience favours the grant of an interim injunction.
32. Further, in the spirit of balancing the interest of parties, considering that the 1st Respondent claims that the Applicant owes demurrage charges, there is need for security in the event the matter shall be determined in favour of the Respondent. The 1st Respondent is hereby orders to release 50 containers of the rice forthwith and continue detaining 10 containers as security.
Determination
33. Accordingly, this court makes the following orders: -
(a) The Notice of Motion dated 2nd July, 2020 is allowed on the following terms;
i. That pending the hearing and determination of the suit, prayer no. 3 of the application is hereby allowed subject to the 1st Respondent retaining 10 containers of the Manan Pakistan Long Grain White Rice as security.
ii. Putting into consideration of the interests of the parties herein, the hearing if the suit shall be fast tracked and to be heard on priority basis.
(b) Each party to bear their costs of this application.
(c) Parties to comply with Order 11 before the next mention for Case Management Conference.

Dated and delivered virtually at Mombasa this 7th day of August, 2026.

HON. F. WANGARI
JUDGE OF THE HIGH COURT

In the presence of: -
Mr. Odhiambo Advocate for the Applicant
Mr. Timmamy Advocate for the 1st Respondent
Ms. Nzia Advocate for the 2nd Respondent
Ms. Salwa, Court Assistant

Details

Delivered
Court rank
High Court

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