1. The plaintiff filed a suit in Mombasa HCCC No. 5 of 2017 vide a Plaint dated 23rd January 2017 which was subsequently amended on 25th October 2024, seeking judgment against the defendant for special damages amounting to Kshs. 224,218,481/= as pleaded in paragraph 22(a), special damages of USD 478,417.88, equivalent to Kshs. 48,798,623/= at the then exchange rate, special damages as pleaded in paragraph 22(c), Kshs. 256,567,343/= & (d), costs of the suit and interest on all sums claimed at court rates from the date of filing suit until payment in full.
2. The Plaintiff’s case was that it was duly licensed and gazetted to operate as a Transit Shed/Container Freight Station under Section 12 of the East African Community Customs Management Act, 2004. Its gazettement was effected by the Kenya Revenue Authority through a Gazette Notice dated 5th March 2014, while its operational licence was issued by the Defendant pursuant to Section 12 of the Kenya Ports Authority Act through a Licence Agreement dated 27th August 2014.
3. The Plaintiff averred that the licence was to run for a period of five years and could only be terminated in the manner expressly provided for under the agreement, namely through automatic expiry, mutual consent, specified termination events, or force majeure. It contended that the agreement did not contain any provision allowing either party to suspend the licence or the agreement and that Clause 18 expressly provided that the agreement constituted the entire agreement between the parties.
4. The Plaintiff stated that on 21st January 2016, the Defendant, through its Managing Director, issued a letter suspending the nomination of containers to the Plaintiff’s Container Freight Station with immediate effect, without disclosing the basis, authority, or reasons for the decision. The Plaintiff claimed that this suspension fell outside the scope of the licence agreement and was therefore unlawful. The plaintiff asserted that as a result of the foregoing, it instituted Judicial Review Application No. 7 of 2016 at the High Court in Mombasa seeking orders of prohibition, mandamus, and certiorari.
5. Consequently, the Court granted leave and ordered that the leave operate as a stay of the Defendant’s decision suspending container nominations. It was stated by the Plaintiff that despite the subsisting Court order, the Defendant ignored the same and continued withholding cargo destined for the plaintiff on the basis of “instructions from above.”
6. It was stated by the Plaintiff that correspondence from the Defendant, including a letter dated 4th March 2016 from the Defendant’s Acting Managing Director to the Ministry of Transport and Infrastructure, confirmed that the suspension of cargo nomination arose from a Government directive rather than any contractual or statutory mandate under the licence agreement or the Kenya Ports Authority Act.
7. It maintained that the Defendant’s conduct has been illegal, unlawful, unjust, and in contempt of Court orders, resulting in severe disruption of the Plaintiff’s business operations and causing substantial financial loss and damage which continue to accrue. The Plaintiff particularized its losses as including loss of business profits and operational revenue for the year 2016 amounting to Kshs. 224,218,481/=, loss of business arising from waiver of storage charges and remarshalling fees amounting to USD 478,417.88 and continuing loss of profits for the years 2017 and 2018 amounting to Kshs. 256,567,343.
8. The Plaintiff asserted that the losses continue to accrue so long as the Defendant persists in refusing to nominate containers to its transit shed despite the existing Court orders.
9. In opposition to this suit, the Defendant filed a Statement of Defence dated 30th March 2017. In its defence, the Defendant denied all the averments in the Plaintiff’s Plaint and averred that the Plaintiff’s suit is incompetent, defective, vexatious, and an abuse of the Court process on several grounds. The Defendant stated that Clause 20 of the Licence Agreement dated 21st August 2014 required all disputes arising under the agreement to be referred to arbitration.
10. It then relied on the provisions of Section 62 of the Kenya Ports Authority Act, which provides that claims for compensation arising from the exercise of powers under Section 12 of the Act are to be resolved by agreement or arbitration and that no recovery suit shall lie. The Defendant invoked the provisions of Section 66 of the Kenya Ports Authority Act, which bars actions commenced more than twelve months after the act complained of, asserting that the impugned decision was communicated on 21st January 2016 while this suit was filed outside the statutory limitation period.
11. While the Defendant admitted that the Plaintiff is a licensed Container Freight Station operator, it maintained that such licensing falls exclusively within the jurisdiction of the Kenya Revenue Authority. The Defendant denied licensing the Plaintiff to operate as a CFS and instead stated that the agreement merely authorized the Plaintiff to handle and store full container loads nominated, allocated, and designated to it by the Defendant.
12. It further averred that the licence agreement has never been terminated and that the nomination and allocation of containers under the agreement was entirely discretionary, such that the Plaintiff could not compel the Defendant to allocate any specific volume of containers. The Defendant asserted that it continued to nominate containers to the Plaintiff’s facility in accordance with the agreement.
13. The Defendant contended that the decision communicated to the Plaintiff vide the letter dated 21st January 2016 was validly made within its lawful discretion and was justified on several grounds, including allegations that the Plaintiff persistently misdeclared cargo, engaged in tax and duty evasion, handled illegal cargo, and breached both the law and the licence agreement fraudulently.
14. The Defendant also stated that the Plaintiff was under investigation by various government agencies and that its role in container nomination is essential for national security and maintaining the integrity of the country’s ports of entry. It averred that the issues raised in this suit are substantially similar to those pending before the High Court in Judicial Review Application No. 17 of 2016 and that it has complied with all orders issued in those proceedings.
15. The Defendant maintained that all actions complained of were undertaken lawfully, within its statutory mandate, and pursuant to its contractual rights and obligations under the agreement dated 21st August 2014. It denied allegations relating to the Plaintiff’s alleged losses and damages and asserted that no damages can arise from the lawful exercise of its statutory mandate and discretion.
16. The Plaintiff filed another suit in Mombasa HCCC No. 6 of 2017 vide a Plaint dated 23rd January 2017, seeking judgment against the Defendant for general damages, special damages in the sum of Kshs. 1,130,222,078/= as particularized in paragraph 1, interest thereon and costs of the suit.
17. The Plaintiff’s case was that it was duly licensed and gazetted to operate as a Transit Shed, also known as a Container Freight Station (CFS), pursuant to the provisions of Section 12 of the East African Community Customs Management Act, 2004 and Section 12 of the Kenya Ports Authority Act through a Licence Agreement dated 16th April 2009. It averred that under the said agreement, the licence was to remain in force for five years and would terminate automatically upon expiry of the five-year term or by mutual consent.
18. The Plaintiff further averred that pursuant to Clause 18 of the agreement, the agreement constituted the entire agreement between the parties. It was stated by the plaintiff that on 21st January 2016, vide a letter signed by the then Managing Director, Mr. Gichiri Ndua, the Defendant communicated a decision suspending nomination of containers to the Plaintiff’s Container Freight Station with immediate effect, without disclosing who made the decision, the reasons for it, or when it had been reached.
19. The Plaintiff contended that aggrieved by the said decision, it instituted Judicial Review proceedings and obtained leave on 25th January 2016, with the Court directing that the leave operate as a stay of execution and enforcement of the Defendant’s decision suspending container nominations pending hearing and determination of the proceedings.
20. The Plaintiff asserted that the subsequent Court orders and related documents were personally served upon the Defendant’s legal department, the then Managing Director, and later the Acting Managing Director, Ms. Catherine Mturi, together with the Head of Litigation and Disputes. But despite service and knowledge of the Court orders, the Defendant failed and refused to comply with the same by continuing to interfere with and suspend nomination of containers to the Plaintiff’s premises.
21. The Plaintiff claimed that trucks destined for its CFS were locked at the KPA gates, payments relating to nominated containers were rejected, containers destined for the Plaintiff were not processed and that its sheds within the port precincts remained closed. It contended that these acts were undertaken in blatant disregard of the Court orders and through both acts of omission and commission.
22. Consequently, its business operations were effectively paralyzed, resulting in severe losses and jeopardizing the livelihoods of hundreds of employees. The Plaintiff asserted that this prompted it to institute contempt proceedings against the Defendant’s Managing Director and Head of Litigation and Disputes for disobeying the Court orders issued on 25th January 2016, the application was heard, determined and the Defendant’s Managing Directors were found to be in contempt of Court.
23. The Plaintiff stated that in a letter dated 4th March 2016, the Defendant’s Acting Managing Director to the Ministry of Transport and Infrastructure, acknowledged that KPA had been served with Court orders directing suspension of the impugned decision but KPA had subsequently been unable to nominate cargo. It averred that the said correspondence demonstrated that the Defendant’s actions were based on a prevailing Government directive barring nomination of cargo to the Plaintiff rather than on the licence agreement or the defendant’s statutory mandate under the Kenya Ports Authority Act.
24. It maintained that the Defendant’s conduct in suspending nomination of containers was illegal, unlawful, unjust, and in continuing contempt of Court orders. The Plaintiff further averred that the aforesaid suspension severely damaged its operations and business as a Transit Shed operator and caused substantial financial losses.
25. The Plaintiff claimed to have suffered losses in the sum of Kshs. 18,725,262/= for loss of business profits during the closure period between 28th January and 2nd March 2016, Kshs. 8,212,143/= as interest on business losses up to September 2016, Kshs. 240,873,554/= for loss of business profits between March and September 2016, Kshs. 387,124,012/= for loss of business opportunities over five years, and Kshs. 480,787,107/= for loss of business profits between October 2016 and January 2018, bringing the total claim to Kshs. 1,130,222,078.
26. In opposition to the Plaintiff’s suit, the Defendant filed a Statement of Defence dated 4th April 2017. In its defence, the Defendant denied all the averments contained in the Plaintiffs’ Plaint and contended that this Court lacks jurisdiction to hear and determine this suit. It relied on Section 62 of the Kenya Ports Authority Act, which provides that claims for compensation arising from the exercise of powers under Section 12 of the Act are to be resolved through agreement or arbitration and that no recovery suit shall lie.
27. It also invoked the provisions of Section 66 of the Act, which bars institution of legal proceedings after the lapse of twelve months from the act, neglect, or default complained of. The Defendant claimed that the impugned decision was communicated through the letter dated 21st January 2016, thus this suit was filed outside the statutory limitation period.
28. The Defendant admitted that the Kenya Revenue Authority appoints transit sheds pursuant to the provisions of Section 12(1) of the East African Community Customs Management Act and acknowledged that the Plaintiff held itself out as possessing such authority. However, it maintained that although the Kenya Revenue Authority may gazette and license transit sheds, it cannot compel or require cargo to be deposited at any particular transit shed, as the nomination and consignment of cargo falls exclusively within the Defendant’s discretion and statutory mandate.
29. The Defendant further averred that under Section 12 of the Kenya Ports Authority Act, it is empowered to perform functions including warehousing, storage, handling, and consignment of cargo, and under Section 12(2) (n) (ii), it may enter into agreements with third parties for provision of such services.
30. It therefore stated that the agreement entered into with the Plaintiff merely authorized it to handle and store full container loads nominated, allocated, and designated to it by the Defendant and did not amount to licensing the Plaintiff as a transit shed operator, which remains the preserve of the Kenya Revenue Authority. The Defendant also stated that the licence agreement dated 16th April 2009 has since lapsed and was never renewed.
31. Consequently, the Defendant asserted that without a valid agreement authorizing the handling and storage of full container loads, there could be no obligation to nominate cargo to the Plaintiff. It further maintained that nomination and allocation of containers is entirely discretionary and that the Plaintiff cannot compel the Defendant to designate any specific volume of containers to its facility. The defendant admitted that its Managing Director communicated the decision to suspend nomination of containers to the Plaintiff through the letter dated 21st January 2016 but asserted that the decision was lawfully made within its contractual and statutory discretion.
32. It was stated by the Defendant that port operations involve multiple government agencies working collaboratively to ensure safety and efficiency within the port environment. It further averred that the suspension of nominations was justified on security and regulatory grounds. The Defendant claimed that the Plaintiff persistently misdeclared cargo, including declaring sugar and methanol as hardware, thereby defrauding the Kenya Revenue Authority, the Government, and the public.
33. It further claimed that the Plaintiff was involved in tax and duty evasion, handling of illegal cargo, and willful and fraudulent breaches of the law. It averred that the Plaintiff was under investigation by various government agencies and reiterated that the Plaintiff had no guaranteed entitlement to any particular volume of containers. The Defendant emphasized that its role in nominating containers is essential for national security and safeguarding the integrity of Kenya’s ports of entry.
34. The Defendant claimed that it fully complied with all orders issued in the Judicial Review proceedings and maintained that all actions it took were lawful exercises of its mandate and discretion. The Defendant denied all particulars of loss and damage pleaded by the Plaintiff and maintained that no damages can arise from the lawful exercise of statutory authority and discretion, particularly after the lapse of the licence agreement.
35. The two suits were consolidated for purposes of hearing and final determination. The matter proceeded to hearing where both Plaintiffs relied on the same witnesses. The Plaintiffs called two witnesses to ventilate their case and the Defendant also called two witnesses in support of its case.
Plaintiffs’ Case.
36. Mr. Salim Sadhru, the Plaintiffs’ Director and Operations Manager testified as PW1. He adopted his Witness Statements dated 28th February 2024 as his evidence in chief, and produced the documents in paragraph 24 of his witness statement as Plaintiff exhibits Nos. 1(a) to (e). PW1 also produced the documents filed in HCCC No. 5 of 2017 as Plaintiff exhibit No. 2, documents attached to the Plaint and list of documents dated 23rd January 2017 as Plaintiff exhibits Nos. 2(a) & 2(b) respectively, and those attached to the statement dated 25th January 2016 in HCCC No. 6 of 2017 as plaintiff exhibit No. 3.
37. PW1 testified that the Defendant’s letter dated 21st January 2016 suspended all forms of container nominations to the Plaintiffs’ CFSs, including KPA nominations, shipping line nominations, and nominations arising from agreements with industries. He referred to a Bill of Lading dated 11th May 2016 containing the notation “hold as per instructions from above,” which, according to him, demonstrated that even nominated cargo destined for the plaintiffs was blocked. He further confirmed that the licence agreement relating to Autoports had expired in April 2014 and was never renewed.
38. PW1 referred to Judicial Review Applications Nos. 6 and 7 of 2016 and testified that in the ruling delivered on 31st January 2018, the High Court found that the Defendant’s suspension decision was unfair, oppressive, and in violation of the Plaintiffs’ rights to fair hearing and fair administrative action. The Court consequently quashed the suspension decision, prohibited further unlawful suspensions, granted mandamus compelling the Defendant to discharge its public duties lawfully and fairly, and awarded costs to the Plaintiffs. He further testified that the Court of Appeal, in its judgment delivered on 28th July 2023, upheld those findings and dismissed the Defendant’s appeal. According to PW1, those decisions conclusively resolved the issue of the legality of the suspension in favour of the Plaintiffs.
39. PW1 further testified that despite obtaining stay orders on 25th January 2016 suspending the implementation of the Defendant’s letter, the Defendant continued refusing to nominate containers to the Plaintiffs and instead acted pursuant to government directives issued on 4th March 2016. He stated that the continued non-compliance with Court orders formed the basis of contempt proceedings, culminating in a ruling delivered on 23rd March 2016 in which the Defendant’s Acting Managing Director was found to be in contempt of Court. PW1 therefore maintained that the only remaining issue for determination was the extent of compensation payable for the losses occasioned by the unlawful suspension and continued disobedience of Court orders.
40. PW1 testified that the Plaintiffs made substantial investments in reliance on the Licence Agreement dated 21st August 2014, including procurement of equipment, operational infrastructure, insurance cover, and bonds amounting to Kshs. 800 million, all without financial assistance from the defendant. He stated that the agreement was intended to subsist for five years and could only be terminated by mutual consent. According to him, the agreement contemplated compensation for business disruption, and since the suspension arose from “orders from above” rather than any contractual provision, the arbitration and limitation clauses could not apply to shield the defendant from liability.
41. In conclusion, PW1 asserted that the Defendant’s unlawful suspension of nominations caused severe disruption to the Plaintiffs’ transit shed operations, resulting in loss of business, waived storage and marshalling fees, and diminished profits. He maintained that the Defendant was fully aware that interruption of the Plaintiffs’ operations would inevitably occasion financial losses and was therefore liable to compensate the Plaintiffs for all losses and damages pleaded in the suits.
42. Upon cross-examination by Mr. Munyao learned Counsel for the Defendant, PW1 testified that the Plaintiffs’ claim arose from the licence agreements entered into with the Defendant after gazettement by KRA as Container Freight Station (CFS) operators. He stated that the Plaintiffs’ businesses under Autoport and Portside involved logistics services such as container handling, project cargo, bulk cargo, shipping line nominations, and agent nominations, all of which generated revenue, although the agreements did not guarantee any fixed number of nominations.
43. PW1 testified that following the suspension of nominations in January 2016, the plaintiffs were effectively shut out of operations. He stated that access to the port system was blocked, their PIN numbers were disabled, their accounts with the defendant were closed, and containers destined for their facilities were turned away. He further stated that enforcement officers, including GSU personnel, restricted access to their premises while multiple government agencies, among them KRA and KEBS, descended on the facilities and halted operations without issuing formal suspension notices.
44. PW1 confirmed that although the Portside licence agreement had expired in 2014, the Defendant continued allocating nominations until the suspension letter dated 21st January 2016. He stated that the Plaintiffs thereafter instituted Judicial Review Applications Nos. 6 and 7 of 2016 to challenge the legality of the suspension, though no compensation was sought in those proceedings. According to him, the present suits seek damages for loss of business and profits arising from the closure and do not amount to double compensation since the Judicial Review proceedings sought different reliefs.
45. PW1 further testified that the suspension paralysed the Plaintiffs’ entire operations and caused customers to migrate elsewhere, thereby affecting the Plaintiffs’ business beyond the immediate closure period. He explained that the Plaintiffs’ claims for losses in 2016, 2017, and 2018 were based on the continuing commercial effects of the suspension and the gradual process of rebuilding customer confidence and business volumes.
46. On further cross-examination by Mr. Mutua, learned Counsel for the Defendant, PW1 acknowledged that the licence agreements contained a five-year term and an arbitration clause under Clause 20. He conceded that the agreement did not guarantee specific volumes of container allocations and that the Defendant-related business constituted approximately 10% of the Plaintiffs’ total revenue, with the remaining revenue generated from other clients.
47. However, he maintained that the suspension affected all aspects of the Plaintiffs’ operations, including third-party nominations, thereby justifying the claims for compensation. He further clarified that the proceedings involving KRA had been stayed and that the Plaintiffs were not seeking to recover the same losses twice.
48. In re-examination, PW1 reiterated that despite the expiry of Portside’s formal licence agreement in 2014, the business relationship with the Defendant continued through ongoing nominations. He explained that the Plaintiffs’ operations depended not only on KPA nominations but also on client and shipping line nominations, which constituted a larger share of their business. According to him, the suspension letter dated 21st January 2016 effectively disrupted all nomination streams and consequently crippled the plaintiffs’ entire container handling operations.
49. Mr. John Makori, the Plaintiffs Certified Public Accountant testified as PW2. He stated that he had been engaged by the Plaintiffs to prepare Forensic Accounting Reports for both Autoport Freight Terminals Limited and Portside Freight Terminal Limited, producing 22 volumes for Autoport and 10 volumes for Portside. He confirmed that he received instructions on 16th April 2025, as reflected in Volume 1 page 12 of the Autoport report and Volume 1 page 11 of the Portside report. As part of his methodology, he interviewed key management staff from both companies and reviewed operational and financial records relevant to the assignment.
50. PW2 testified that the assignment was guided by three key objectives: first, to assess the companies’ historical performance using 2014 and 2015 as baseline years; second, to analyse actual performance following the suspension between 2016 and 2018; and third, to project the performance the companies would likely have achieved had the suspension not occurred. He stated that the analysis relied on a before-and-after methodology, comparing projected revenue against actual revenue and deducting direct and administrative costs to determine the net losses attributable to the suspension.
51. With regard to Autoport Freight Terminals Limited, PW2 testified that the company’s historical revenues were Kshs 357,302,982/= in 2014 and Kshs 1,084,387,113/= in 2015, demonstrating significant growth prior to the suspension. He stated that actual revenues thereafter declined sharply to Kshs 350,763,339/= in 2016 before partially recovering to Kshs 557,842,674/= in 2017 and Kshs 1,094,918,176/= in 2018. Against a projected revenue of Kshs 976,682,376/= for 2016, he computed net losses of Kshs 251,254,550/= in 2016, Kshs 251,648,546/= in 2017, and Kshs 10,698,183/= in 2018, giving a total net loss of Kshs 513,601,279/= for the period under review. He then produced the Autoport report as the plaintiffs’ exhibit No. 4.
52. Regarding Portside Freight Terminal Limited, PW2 testified that the company recorded revenues of Kshs 876,593,214/= in 2014 and Kshs 847,340,384/= in 2015. Following the suspension, actual revenues declined to Kshs 477,263,366/= in 2016, Kshs 552,845,229/= in 2017, and Kshs 846,802,813/= in 2018. He computed net losses at Kshs 542,747,617/= in 2016, Kshs 540,688,429/= in 2017, and Kshs 420,908,578/= in 2018, resulting in aggregate losses of Kshs 1,504,344,624/= for the period 2016 to 2018. He produced the Portside report as plaintiffs’ exhibit No. 5.
53. Upon cross-examination by Mr. Munyao, learned Counsel for the defendant, PW2 clarified that although he received instructions on 16th April 2025, he was unaware whether the Plaint or Amended Plaint had already been filed and had not reviewed them. He denied working backwards from predetermined figures or relying on any earlier report prepared by another expert. He maintained that while the client defined the scope and period of the assignment, the methodology and execution remained matters of his independent professional judgment.
54. He further testified that he verified the information supplied to him before applying his methodology. PW2 confirmed that prior to the suspension the plaintiffs were actively receiving containers, and that the suspension resulted in closure of the CFS operations for a period, during which some clients terminated their contracts with the plaintiffs.
55. On container volumes for Portside, PW2 testified that the company handled 17,010 containers in 2014, 15,400 in 2015, 10,255 in 2016, 8,992 in 2017, and 8,906 in 2018. He acknowledged that the decline in volumes was not attributable solely to the suspension and conceded that other market factors also contributed. He explained that 2015 was adopted as the baseline year because it was the closest complete year preceding the suspension and that all data used in the analysis had been verified.
56. He further testified that the plaintiffs expected increased container volumes following expansion of the defendant’s port facilities and growth in overall port traffic during 2014 and 2015. However, he noted that Portside’s volumes declined during that period partly because Autoport, which had been established in 2014, attracted some nominations away from Portside.
57. On exchange rates, PW2 testified that he applied an average exchange rate across the review period because the use of daily rates was impracticable. He confirmed that the management accounts used in the analysis were obtained directly from management and acknowledged that such accounts, being unaudited, could still contain errors unlike finalized audited accounts. He clarified that the Plaintiffs’ claims related to net losses rather than gross turnover and explained that turnover figures alone could not determine profitability or loss.
58. PW2 further testified that while some tariffs were set by the Defendant, Container Freight Stations were free to determine their own charges depending on the services offered, including container handling services. He stated that the Plaintiffs’ administration costs reflected actual overhead expenses incurred in the course of business operations. He also referred to portions of the report containing competitor analysis used in assessing the Plaintiffs’ market position.
59. During cross-examination by Mr. Mutua, learned Counsel for the Defendant, PW2 stated that although the Plaintiffs experienced reduced container volumes in 2014 and 2015, the companies did not record losses during those years. He further testified that approximately 90% of the Plaintiffs’ revenue came from client nominations rather than direct defendant nominations.
60. In re-examination, PW2 referred to the container volume analysis contained in the Autoport and Portside reports. He testified that Autoport handled 19,934 containers in 2015, which reduced to 11,293 in 2016, 6,899 in 2017, and 5,730 in 2018. He stated that the figures reflected a cumulative reduction of more than 14,000 containers over the three-year period following the suspension. PW2 explained that the decline occurred progressively rather than abruptly, which, in his view, was consistent with evidence that customers gradually moved away from the Plaintiffs’ facilities and returned only slowly after operations resumed.
Defendant’s case.
61. Mr. Peter Masinde, the Defendant's Manager of Co
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2. The Plaintiff’s case was that it was duly licensed and gazetted to operate as a Transit Shed/Container Freight Station under Section 12 of the East African Community Customs Management Act, 2004. Its gazettement was effected by the Kenya Revenue Authority through a Gazette Notice dated 5th March 2014, while its operational licence was issued by the Defendant pursuant to Section 12 of the Kenya Ports Authority Act through a Licence Agreement dated 27th August 2014.
3. The Plaintiff averred that the licence was to run for a period of five years and could only be terminated in the manner expressly provided for under the agreement, namely through automatic expiry, mutual consent, specified termination events, or force majeure. It contended that the agreement did not contain any provision allowing either party to suspend the licence or the agreement and that Clause 18 expressly provided that the agreement constituted the entire agreement between the parties.
4. The Plaintiff stated that on 21st January 2016, the Defendant, through its Managing Director, issued a letter suspending the nomination of containers to the Plaintiff’s Container Freight Station with immediate effect, without disclosing the basis, authority, or reasons for the decision. The Plaintiff claimed that this suspension fell outside the scope of the licence agreement and was therefore unlawful. The plaintiff asserted that as a result of the foregoing, it instituted Judicial Review Application No. 7 of 2016 at the High Court in Mombasa seeking orders of prohibition, mandamus, and certiorari.
5. Consequently, the Court granted leave and ordered that the leave operate as a stay of the Defendant’s decision suspending container nominations. It was stated by the Plaintiff that despite the subsisting Court order, the Defendant ignored the same and continued withholding cargo destined for the plaintiff on the basis of “instructions from above.”
6. It was stated by the Plaintiff that correspondence from the Defendant, including a letter dated 4th March 2016 from the Defendant’s Acting Managing Director to the Ministry of Transport and Infrastructure, confirmed that the suspension of cargo nomination arose from a Government directive rather than any contractual or statutory mandate under the licence agreement or the Kenya Ports Authority Act.
7. It maintained that the Defendant’s conduct has been illegal, unlawful, unjust, and in contempt of Court orders, resulting in severe disruption of the Plaintiff’s business operations and causing substantial financial loss and damage which continue to accrue. The Plaintiff particularized its losses as including loss of business profits and operational revenue for the year 2016 amounting to Kshs. 224,218,481/=, loss of business arising from waiver of storage charges and remarshalling fees amounting to USD 478,417.88 and continuing loss of profits for the years 2017 and 2018 amounting to Kshs. 256,567,343.
8. The Plaintiff asserted that the losses continue to accrue so long as the Defendant persists in refusing to nominate containers to its transit shed despite the existing Court orders.
9. In opposition to this suit, the Defendant filed a Statement of Defence dated 30th March 2017. In its defence, the Defendant denied all the averments in the Plaintiff’s Plaint and averred that the Plaintiff’s suit is incompetent, defective, vexatious, and an abuse of the Court process on several grounds. The Defendant stated that Clause 20 of the Licence Agreement dated 21st August 2014 required all disputes arising under the agreement to be referred to arbitration.
10. It then relied on the provisions of Section 62 of the Kenya Ports Authority Act, which provides that claims for compensation arising from the exercise of powers under Section 12 of the Act are to be resolved by agreement or arbitration and that no recovery suit shall lie. The Defendant invoked the provisions of Section 66 of the Kenya Ports Authority Act, which bars actions commenced more than twelve months after the act complained of, asserting that the impugned decision was communicated on 21st January 2016 while this suit was filed outside the statutory limitation period.
11. While the Defendant admitted that the Plaintiff is a licensed Container Freight Station operator, it maintained that such licensing falls exclusively within the jurisdiction of the Kenya Revenue Authority. The Defendant denied licensing the Plaintiff to operate as a CFS and instead stated that the agreement merely authorized the Plaintiff to handle and store full container loads nominated, allocated, and designated to it by the Defendant.
12. It further averred that the licence agreement has never been terminated and that the nomination and allocation of containers under the agreement was entirely discretionary, such that the Plaintiff could not compel the Defendant to allocate any specific volume of containers. The Defendant asserted that it continued to nominate containers to the Plaintiff’s facility in accordance with the agreement.
13. The Defendant contended that the decision communicated to the Plaintiff vide the letter dated 21st January 2016 was validly made within its lawful discretion and was justified on several grounds, including allegations that the Plaintiff persistently misdeclared cargo, engaged in tax and duty evasion, handled illegal cargo, and breached both the law and the licence agreement fraudulently.
14. The Defendant also stated that the Plaintiff was under investigation by various government agencies and that its role in container nomination is essential for national security and maintaining the integrity of the country’s ports of entry. It averred that the issues raised in this suit are substantially similar to those pending before the High Court in Judicial Review Application No. 17 of 2016 and that it has complied with all orders issued in those proceedings.
15. The Defendant maintained that all actions complained of were undertaken lawfully, within its statutory mandate, and pursuant to its contractual rights and obligations under the agreement dated 21st August 2014. It denied allegations relating to the Plaintiff’s alleged losses and damages and asserted that no damages can arise from the lawful exercise of its statutory mandate and discretion.
16. The Plaintiff filed another suit in Mombasa HCCC No. 6 of 2017 vide a Plaint dated 23rd January 2017, seeking judgment against the Defendant for general damages, special damages in the sum of Kshs. 1,130,222,078/= as particularized in paragraph 1, interest thereon and costs of the suit.
17. The Plaintiff’s case was that it was duly licensed and gazetted to operate as a Transit Shed, also known as a Container Freight Station (CFS), pursuant to the provisions of Section 12 of the East African Community Customs Management Act, 2004 and Section 12 of the Kenya Ports Authority Act through a Licence Agreement dated 16th April 2009. It averred that under the said agreement, the licence was to remain in force for five years and would terminate automatically upon expiry of the five-year term or by mutual consent.
18. The Plaintiff further averred that pursuant to Clause 18 of the agreement, the agreement constituted the entire agreement between the parties. It was stated by the plaintiff that on 21st January 2016, vide a letter signed by the then Managing Director, Mr. Gichiri Ndua, the Defendant communicated a decision suspending nomination of containers to the Plaintiff’s Container Freight Station with immediate effect, without disclosing who made the decision, the reasons for it, or when it had been reached.
19. The Plaintiff contended that aggrieved by the said decision, it instituted Judicial Review proceedings and obtained leave on 25th January 2016, with the Court directing that the leave operate as a stay of execution and enforcement of the Defendant’s decision suspending container nominations pending hearing and determination of the proceedings.
20. The Plaintiff asserted that the subsequent Court orders and related documents were personally served upon the Defendant’s legal department, the then Managing Director, and later the Acting Managing Director, Ms. Catherine Mturi, together with the Head of Litigation and Disputes. But despite service and knowledge of the Court orders, the Defendant failed and refused to comply with the same by continuing to interfere with and suspend nomination of containers to the Plaintiff’s premises.
21. The Plaintiff claimed that trucks destined for its CFS were locked at the KPA gates, payments relating to nominated containers were rejected, containers destined for the Plaintiff were not processed and that its sheds within the port precincts remained closed. It contended that these acts were undertaken in blatant disregard of the Court orders and through both acts of omission and commission.
22. Consequently, its business operations were effectively paralyzed, resulting in severe losses and jeopardizing the livelihoods of hundreds of employees. The Plaintiff asserted that this prompted it to institute contempt proceedings against the Defendant’s Managing Director and Head of Litigation and Disputes for disobeying the Court orders issued on 25th January 2016, the application was heard, determined and the Defendant’s Managing Directors were found to be in contempt of Court.
23. The Plaintiff stated that in a letter dated 4th March 2016, the Defendant’s Acting Managing Director to the Ministry of Transport and Infrastructure, acknowledged that KPA had been served with Court orders directing suspension of the impugned decision but KPA had subsequently been unable to nominate cargo. It averred that the said correspondence demonstrated that the Defendant’s actions were based on a prevailing Government directive barring nomination of cargo to the Plaintiff rather than on the licence agreement or the defendant’s statutory mandate under the Kenya Ports Authority Act.
24. It maintained that the Defendant’s conduct in suspending nomination of containers was illegal, unlawful, unjust, and in continuing contempt of Court orders. The Plaintiff further averred that the aforesaid suspension severely damaged its operations and business as a Transit Shed operator and caused substantial financial losses.
25. The Plaintiff claimed to have suffered losses in the sum of Kshs. 18,725,262/= for loss of business profits during the closure period between 28th January and 2nd March 2016, Kshs. 8,212,143/= as interest on business losses up to September 2016, Kshs. 240,873,554/= for loss of business profits between March and September 2016, Kshs. 387,124,012/= for loss of business opportunities over five years, and Kshs. 480,787,107/= for loss of business profits between October 2016 and January 2018, bringing the total claim to Kshs. 1,130,222,078.
26. In opposition to the Plaintiff’s suit, the Defendant filed a Statement of Defence dated 4th April 2017. In its defence, the Defendant denied all the averments contained in the Plaintiffs’ Plaint and contended that this Court lacks jurisdiction to hear and determine this suit. It relied on Section 62 of the Kenya Ports Authority Act, which provides that claims for compensation arising from the exercise of powers under Section 12 of the Act are to be resolved through agreement or arbitration and that no recovery suit shall lie.
27. It also invoked the provisions of Section 66 of the Act, which bars institution of legal proceedings after the lapse of twelve months from the act, neglect, or default complained of. The Defendant claimed that the impugned decision was communicated through the letter dated 21st January 2016, thus this suit was filed outside the statutory limitation period.
28. The Defendant admitted that the Kenya Revenue Authority appoints transit sheds pursuant to the provisions of Section 12(1) of the East African Community Customs Management Act and acknowledged that the Plaintiff held itself out as possessing such authority. However, it maintained that although the Kenya Revenue Authority may gazette and license transit sheds, it cannot compel or require cargo to be deposited at any particular transit shed, as the nomination and consignment of cargo falls exclusively within the Defendant’s discretion and statutory mandate.
29. The Defendant further averred that under Section 12 of the Kenya Ports Authority Act, it is empowered to perform functions including warehousing, storage, handling, and consignment of cargo, and under Section 12(2) (n) (ii), it may enter into agreements with third parties for provision of such services.
30. It therefore stated that the agreement entered into with the Plaintiff merely authorized it to handle and store full container loads nominated, allocated, and designated to it by the Defendant and did not amount to licensing the Plaintiff as a transit shed operator, which remains the preserve of the Kenya Revenue Authority. The Defendant also stated that the licence agreement dated 16th April 2009 has since lapsed and was never renewed.
31. Consequently, the Defendant asserted that without a valid agreement authorizing the handling and storage of full container loads, there could be no obligation to nominate cargo to the Plaintiff. It further maintained that nomination and allocation of containers is entirely discretionary and that the Plaintiff cannot compel the Defendant to designate any specific volume of containers to its facility. The defendant admitted that its Managing Director communicated the decision to suspend nomination of containers to the Plaintiff through the letter dated 21st January 2016 but asserted that the decision was lawfully made within its contractual and statutory discretion.
32. It was stated by the Defendant that port operations involve multiple government agencies working collaboratively to ensure safety and efficiency within the port environment. It further averred that the suspension of nominations was justified on security and regulatory grounds. The Defendant claimed that the Plaintiff persistently misdeclared cargo, including declaring sugar and methanol as hardware, thereby defrauding the Kenya Revenue Authority, the Government, and the public.
33. It further claimed that the Plaintiff was involved in tax and duty evasion, handling of illegal cargo, and willful and fraudulent breaches of the law. It averred that the Plaintiff was under investigation by various government agencies and reiterated that the Plaintiff had no guaranteed entitlement to any particular volume of containers. The Defendant emphasized that its role in nominating containers is essential for national security and safeguarding the integrity of Kenya’s ports of entry.
34. The Defendant claimed that it fully complied with all orders issued in the Judicial Review proceedings and maintained that all actions it took were lawful exercises of its mandate and discretion. The Defendant denied all particulars of loss and damage pleaded by the Plaintiff and maintained that no damages can arise from the lawful exercise of statutory authority and discretion, particularly after the lapse of the licence agreement.
35. The two suits were consolidated for purposes of hearing and final determination. The matter proceeded to hearing where both Plaintiffs relied on the same witnesses. The Plaintiffs called two witnesses to ventilate their case and the Defendant also called two witnesses in support of its case.
Plaintiffs’ Case.
36. Mr. Salim Sadhru, the Plaintiffs’ Director and Operations Manager testified as PW1. He adopted his Witness Statements dated 28th February 2024 as his evidence in chief, and produced the documents in paragraph 24 of his witness statement as Plaintiff exhibits Nos. 1(a) to (e). PW1 also produced the documents filed in HCCC No. 5 of 2017 as Plaintiff exhibit No. 2, documents attached to the Plaint and list of documents dated 23rd January 2017 as Plaintiff exhibits Nos. 2(a) & 2(b) respectively, and those attached to the statement dated 25th January 2016 in HCCC No. 6 of 2017 as plaintiff exhibit No. 3.
37. PW1 testified that the Defendant’s letter dated 21st January 2016 suspended all forms of container nominations to the Plaintiffs’ CFSs, including KPA nominations, shipping line nominations, and nominations arising from agreements with industries. He referred to a Bill of Lading dated 11th May 2016 containing the notation “hold as per instructions from above,” which, according to him, demonstrated that even nominated cargo destined for the plaintiffs was blocked. He further confirmed that the licence agreement relating to Autoports had expired in April 2014 and was never renewed.
38. PW1 referred to Judicial Review Applications Nos. 6 and 7 of 2016 and testified that in the ruling delivered on 31st January 2018, the High Court found that the Defendant’s suspension decision was unfair, oppressive, and in violation of the Plaintiffs’ rights to fair hearing and fair administrative action. The Court consequently quashed the suspension decision, prohibited further unlawful suspensions, granted mandamus compelling the Defendant to discharge its public duties lawfully and fairly, and awarded costs to the Plaintiffs. He further testified that the Court of Appeal, in its judgment delivered on 28th July 2023, upheld those findings and dismissed the Defendant’s appeal. According to PW1, those decisions conclusively resolved the issue of the legality of the suspension in favour of the Plaintiffs.
39. PW1 further testified that despite obtaining stay orders on 25th January 2016 suspending the implementation of the Defendant’s letter, the Defendant continued refusing to nominate containers to the Plaintiffs and instead acted pursuant to government directives issued on 4th March 2016. He stated that the continued non-compliance with Court orders formed the basis of contempt proceedings, culminating in a ruling delivered on 23rd March 2016 in which the Defendant’s Acting Managing Director was found to be in contempt of Court. PW1 therefore maintained that the only remaining issue for determination was the extent of compensation payable for the losses occasioned by the unlawful suspension and continued disobedience of Court orders.
40. PW1 testified that the Plaintiffs made substantial investments in reliance on the Licence Agreement dated 21st August 2014, including procurement of equipment, operational infrastructure, insurance cover, and bonds amounting to Kshs. 800 million, all without financial assistance from the defendant. He stated that the agreement was intended to subsist for five years and could only be terminated by mutual consent. According to him, the agreement contemplated compensation for business disruption, and since the suspension arose from “orders from above” rather than any contractual provision, the arbitration and limitation clauses could not apply to shield the defendant from liability.
41. In conclusion, PW1 asserted that the Defendant’s unlawful suspension of nominations caused severe disruption to the Plaintiffs’ transit shed operations, resulting in loss of business, waived storage and marshalling fees, and diminished profits. He maintained that the Defendant was fully aware that interruption of the Plaintiffs’ operations would inevitably occasion financial losses and was therefore liable to compensate the Plaintiffs for all losses and damages pleaded in the suits.
42. Upon cross-examination by Mr. Munyao learned Counsel for the Defendant, PW1 testified that the Plaintiffs’ claim arose from the licence agreements entered into with the Defendant after gazettement by KRA as Container Freight Station (CFS) operators. He stated that the Plaintiffs’ businesses under Autoport and Portside involved logistics services such as container handling, project cargo, bulk cargo, shipping line nominations, and agent nominations, all of which generated revenue, although the agreements did not guarantee any fixed number of nominations.
43. PW1 testified that following the suspension of nominations in January 2016, the plaintiffs were effectively shut out of operations. He stated that access to the port system was blocked, their PIN numbers were disabled, their accounts with the defendant were closed, and containers destined for their facilities were turned away. He further stated that enforcement officers, including GSU personnel, restricted access to their premises while multiple government agencies, among them KRA and KEBS, descended on the facilities and halted operations without issuing formal suspension notices.
44. PW1 confirmed that although the Portside licence agreement had expired in 2014, the Defendant continued allocating nominations until the suspension letter dated 21st January 2016. He stated that the Plaintiffs thereafter instituted Judicial Review Applications Nos. 6 and 7 of 2016 to challenge the legality of the suspension, though no compensation was sought in those proceedings. According to him, the present suits seek damages for loss of business and profits arising from the closure and do not amount to double compensation since the Judicial Review proceedings sought different reliefs.
45. PW1 further testified that the suspension paralysed the Plaintiffs’ entire operations and caused customers to migrate elsewhere, thereby affecting the Plaintiffs’ business beyond the immediate closure period. He explained that the Plaintiffs’ claims for losses in 2016, 2017, and 2018 were based on the continuing commercial effects of the suspension and the gradual process of rebuilding customer confidence and business volumes.
46. On further cross-examination by Mr. Mutua, learned Counsel for the Defendant, PW1 acknowledged that the licence agreements contained a five-year term and an arbitration clause under Clause 20. He conceded that the agreement did not guarantee specific volumes of container allocations and that the Defendant-related business constituted approximately 10% of the Plaintiffs’ total revenue, with the remaining revenue generated from other clients.
47. However, he maintained that the suspension affected all aspects of the Plaintiffs’ operations, including third-party nominations, thereby justifying the claims for compensation. He further clarified that the proceedings involving KRA had been stayed and that the Plaintiffs were not seeking to recover the same losses twice.
48. In re-examination, PW1 reiterated that despite the expiry of Portside’s formal licence agreement in 2014, the business relationship with the Defendant continued through ongoing nominations. He explained that the Plaintiffs’ operations depended not only on KPA nominations but also on client and shipping line nominations, which constituted a larger share of their business. According to him, the suspension letter dated 21st January 2016 effectively disrupted all nomination streams and consequently crippled the plaintiffs’ entire container handling operations.
49. Mr. John Makori, the Plaintiffs Certified Public Accountant testified as PW2. He stated that he had been engaged by the Plaintiffs to prepare Forensic Accounting Reports for both Autoport Freight Terminals Limited and Portside Freight Terminal Limited, producing 22 volumes for Autoport and 10 volumes for Portside. He confirmed that he received instructions on 16th April 2025, as reflected in Volume 1 page 12 of the Autoport report and Volume 1 page 11 of the Portside report. As part of his methodology, he interviewed key management staff from both companies and reviewed operational and financial records relevant to the assignment.
50. PW2 testified that the assignment was guided by three key objectives: first, to assess the companies’ historical performance using 2014 and 2015 as baseline years; second, to analyse actual performance following the suspension between 2016 and 2018; and third, to project the performance the companies would likely have achieved had the suspension not occurred. He stated that the analysis relied on a before-and-after methodology, comparing projected revenue against actual revenue and deducting direct and administrative costs to determine the net losses attributable to the suspension.
51. With regard to Autoport Freight Terminals Limited, PW2 testified that the company’s historical revenues were Kshs 357,302,982/= in 2014 and Kshs 1,084,387,113/= in 2015, demonstrating significant growth prior to the suspension. He stated that actual revenues thereafter declined sharply to Kshs 350,763,339/= in 2016 before partially recovering to Kshs 557,842,674/= in 2017 and Kshs 1,094,918,176/= in 2018. Against a projected revenue of Kshs 976,682,376/= for 2016, he computed net losses of Kshs 251,254,550/= in 2016, Kshs 251,648,546/= in 2017, and Kshs 10,698,183/= in 2018, giving a total net loss of Kshs 513,601,279/= for the period under review. He then produced the Autoport report as the plaintiffs’ exhibit No. 4.
52. Regarding Portside Freight Terminal Limited, PW2 testified that the company recorded revenues of Kshs 876,593,214/= in 2014 and Kshs 847,340,384/= in 2015. Following the suspension, actual revenues declined to Kshs 477,263,366/= in 2016, Kshs 552,845,229/= in 2017, and Kshs 846,802,813/= in 2018. He computed net losses at Kshs 542,747,617/= in 2016, Kshs 540,688,429/= in 2017, and Kshs 420,908,578/= in 2018, resulting in aggregate losses of Kshs 1,504,344,624/= for the period 2016 to 2018. He produced the Portside report as plaintiffs’ exhibit No. 5.
53. Upon cross-examination by Mr. Munyao, learned Counsel for the defendant, PW2 clarified that although he received instructions on 16th April 2025, he was unaware whether the Plaint or Amended Plaint had already been filed and had not reviewed them. He denied working backwards from predetermined figures or relying on any earlier report prepared by another expert. He maintained that while the client defined the scope and period of the assignment, the methodology and execution remained matters of his independent professional judgment.
54. He further testified that he verified the information supplied to him before applying his methodology. PW2 confirmed that prior to the suspension the plaintiffs were actively receiving containers, and that the suspension resulted in closure of the CFS operations for a period, during which some clients terminated their contracts with the plaintiffs.
55. On container volumes for Portside, PW2 testified that the company handled 17,010 containers in 2014, 15,400 in 2015, 10,255 in 2016, 8,992 in 2017, and 8,906 in 2018. He acknowledged that the decline in volumes was not attributable solely to the suspension and conceded that other market factors also contributed. He explained that 2015 was adopted as the baseline year because it was the closest complete year preceding the suspension and that all data used in the analysis had been verified.
56. He further testified that the plaintiffs expected increased container volumes following expansion of the defendant’s port facilities and growth in overall port traffic during 2014 and 2015. However, he noted that Portside’s volumes declined during that period partly because Autoport, which had been established in 2014, attracted some nominations away from Portside.
57. On exchange rates, PW2 testified that he applied an average exchange rate across the review period because the use of daily rates was impracticable. He confirmed that the management accounts used in the analysis were obtained directly from management and acknowledged that such accounts, being unaudited, could still contain errors unlike finalized audited accounts. He clarified that the Plaintiffs’ claims related to net losses rather than gross turnover and explained that turnover figures alone could not determine profitability or loss.
58. PW2 further testified that while some tariffs were set by the Defendant, Container Freight Stations were free to determine their own charges depending on the services offered, including container handling services. He stated that the Plaintiffs’ administration costs reflected actual overhead expenses incurred in the course of business operations. He also referred to portions of the report containing competitor analysis used in assessing the Plaintiffs’ market position.
59. During cross-examination by Mr. Mutua, learned Counsel for the Defendant, PW2 stated that although the Plaintiffs experienced reduced container volumes in 2014 and 2015, the companies did not record losses during those years. He further testified that approximately 90% of the Plaintiffs’ revenue came from client nominations rather than direct defendant nominations.
60. In re-examination, PW2 referred to the container volume analysis contained in the Autoport and Portside reports. He testified that Autoport handled 19,934 containers in 2015, which reduced to 11,293 in 2016, 6,899 in 2017, and 5,730 in 2018. He stated that the figures reflected a cumulative reduction of more than 14,000 containers over the three-year period following the suspension. PW2 explained that the decline occurred progressively rather than abruptly, which, in his view, was consistent with evidence that customers gradually moved away from the Plaintiffs’ facilities and returned only slowly after operations resumed.
Defendant’s case.
61. Mr. Peter Masinde, the Defendant's Manager of Co
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