Tanzania firm losses Sh2.4 billion case against KPA over 2007 poll chaos losses

Containers at the Mombasa Port. Port management could not account for 15 of the firm's containers. [File, Standard]

A Tanzanian juice processor has lost a Sh2.4 billion claim against the Kenya Ports Authority for losses it incurred at the Mombasa Port during the 2007/08 post-election violence.

Modern Holdings East Africa Ltd had sued KPA for loss of 15 of its 21 containers that were to be shipped to the United Arab Emirates after the country descended into chaos after the disputed 2007 General Election.

According to the firm, only six containers were traced after the polls chaos, with the juice having expired.

The firm had told a Nairobi court this resulted in the termination of a sales and distribution agreement with Masafi Mineral Water Ltd in the UAE, costing it Sh890 million.

Modern Holdings had accused the Kenya Ports Authority (KPA) of negligence and sought Sh2.4 billion in compensation.

The High Court awarded the firm Sh890 million, but the Court of Appeal yesterday reversed the lower court’s decision, noting that it did not consider conflicting forensic audit reports on how much the firm lost.

Forensic audit

According to Court of Appeal judges Asike Makhandia, William Ouko, and Kathurima M’Inoti, the case ought to have gone to an arbitrator and not a court as they would have harmonised the findings by the audit firms.

“Having so found, there is no need for us to consider the merit of this appeal as the point we have determined is sufficient to dispose of it. It is left for the parties to proceed under section 62 of the Kenya Ports Authority Act,” said the judges. “In the result, we allow the appeal, set aside the impugned judgment and decree of the High Court.”

In the course of the trial, both KPA and Modern Holdings relied on three forensic audit reports prepared by two leading audit firms - PricewaterhouseCoopers and Ernst & Young. Their findings were worlds apart.

While the latter recommended that the loss, if liability was established, would be between $4.6 million (Sh469 million) and Sh8.2 million (Sh836.4 million) respectively, the former proposed losses of between $1.3 million (Sh132.6 million) and $2.046 million (Sh208 million).

A third report made by G Washington & Company gave a review of the financial statements of the respondent.