Surgipharm Limited v Express Kenya Limited & another [2015] eKLR

Key Facts

Transaction Type

Issues

• The court needed to decide which party (Plaintiff, Defendant, or Third Party) should bear the costs of the legal proceedings.
• The court needed to determine if a contract of bailment existed between the Plaintiff and Defendant for transporting 78 and 128 cartons of medical supplies to Khartoum, Sudan, and what the terms (implied or express) of that contract were.
• The court had to assess whether the Defendant breached the contract of bailment by failing to deliver the medical supplies as agreed.
• The court had to assess whether the third party (Kenya Airways) should be classified as a bailee or a carrier under the provisions of the Carriage by Air Act.
• The court needed to determine if the third party's carriage of the medical supplies was governed by the conditions outlined in the airway bill, particularly those related to liability and compensation.
• The court needed to determine if the Defendant's obligations under the bailment contract ended upon handing over the goods to Kenya Airways, and whether the loss of the medical supplies was attributable to the Defendant.
• The court had to decide whether the Plaintiff clearly and specifically pleaded the special damages in their plaint, particularly the value of the lost medical supplies.
• The court considered whether the Defendant could claim indemnity from the third party (Kenya Airways) for the losses incurred due to the missing medical supplies.

Holdings

• The court held that there was a contract of bailment between the Plaintiff and Defendant for the transportation of medical supplies to Sudan. The Defendant was found to be a bailee under this contract, as defined by Chitty on Contracts and Coggs v Bernard, and thus strictly liable for the safe delivery of the goods.
• The Plaintiff successfully pleaded special damages by providing detailed debit notes and witness statements outlining the value of lost cartons (Kshs. 3,238,104 total). The court found the Defendant's argument about missing airway bill declarations to be invalid.
• The Plaintiff is awarded costs of the suit against the Defendant. The third party is ordered to bear costs related to the indemnity claim granted by the court.
• The Defendant breached the contract by failing to deliver all cartons of medical supplies. The court determined the Defendant remained liable even after handing goods to Kenya Airways, as their obligation extended to ensuring delivery to the Plaintiff's customer in Sudan.
• The third party is a carrier under the Carriage by Air Act and the amended Warsaw Convention. Their liability is limited to $20/kg (US$1,103.40 total), and they must indemnify the Defendant for this amount at the current exchange rate.
• The loss of goods was attributed to the Defendant, not the third party. The court rejected the third party's limitation defense, finding the Defendant's claim against them was timely and the third party negligent in losing the cargo.
• The Defendant is entitled to indemnity from the third party for the limited compensation amount (US$1,103.40). The third party's liability is governed by the Conditions of Carriage and the Convention's weight-based calculation rules.

Remedies

• The defendant is ordered to bear the costs of the suit against the plaintiff, while the third party is ordered to bear the costs of the indemnity claim granted in this decision.
• The third party is ordered to indemnify the defendant in the sum of US$ 1,103.40 (or its equivalent in Kenya Shillings at the current official exchange rate) for the loss of 55.17 kg of cargo (3 cartons in July 2008 and 6 cartons in November 2008) calculated at US$ 20.00 per kg under the amended Warsaw Convention.

Monetary Damages

Legal Principles

• The court addressed the Plaintiff's obligation to plead special damages, referencing Civil Procedure Rules and the admissibility of debit notes as evidence of loss. While not directly listed in the enum, this falls under procedural requirements for damage claims.
• The burden of proof shifted to the Defendant to demonstrate they excluded liability through agreement. The court found no evidence of such an agreement, upholding the Plaintiff's claim. This aligns with the legal requirement that a bailee must prove exclusion of liability to avoid responsibility.
• The court applied the principle of strict liability in bailment contracts, holding that a bailee (carrier) is liable for loss or damage to goods unless they prove the loss occurred despite all due care. This was reinforced by references to Coggs v Bernard and Halsbury's Laws, emphasizing that a bailee's liability extends until actual delivery of goods to the agreed destination.

Precedent Name

• Emirates Airlines
• Alitalia Airlines Vs. Skylink Air Services Limited
• Coggs v Bernard
• Farida Abdullahi Ibrahim & 2 Others Vs. Gulf Air Limited

Key Disputed Contract Clauses

• The court analyzed whether the Defendant's contractual obligation under the bailment extended to ensuring the goods were delivered to the final destination in Sudan, rather than merely handing them over to the third party (Kenya Airways). The Plaintiff argued delivery was required to the consignee, while the Defendant claimed their duty ended at transfer.
• The court examined implied terms of the bailment contract, including the Defendant's duty to take all reasonable steps to safeguard the goods. The Defendant argued these terms were modified by their contract with the third party, but the court rejected this, emphasizing the Plaintiff's exclusive reliance on the Defendant for delivery.
• The dispute centered on whether the Defendant (bailee) was strictly liable for the lost goods despite handing them to the third party. The Plaintiff asserted ongoing liability, while the Defendant argued the third party's conditions of carriage (under the Warsaw Convention) limited their responsibility to $20/kg.

Cited Statute

• Warsaw Convention as Amended by The Hague Protocol of 1955
• Constitution of Kenya (incorporation of Warsaw Convention)
• Civil Procedure Rules (pleading requirements)
• Carriage by Air Act (definition of carrier, applicability of conditions, liability calculations)

Judge Name

Passage Text

• [40] The Third Party did not make a special declaration of value for carriage as for liability to be pegged on the declared value for carriage stated on the face of the air waybill or included in the shipment record. I held that the Defendant as the bailee knew or ought to have known the conditions applicable to his contract and ought to have taken all steps to ensure that these conditions do not derogate from or diminish the property of the bailor.
• [35] The Defendant undertook to have the goods belonging to the Plaintiff delivered to Sudan. It engaged the services of the third party as such bailee. Therefore, the Defendant entered into a contract with the third party for the actual carriage which is a matter between them to the exclusion of the Plaintiff. And whether the Plaintiff had knowledge or confirmed that the Defendant did not have a plane of its own will not absolve them from liability to the Plaintiff. The third party proceedings were based on legal reality so that the defendant is not left without a remedy. The bailee was under an obligation to take all reasonable steps to ensure the bailor does not suffer loss of his goods.
• [43] Accordingly, I order indemnity by the third party to the Defendant shall be in the sum of US$ 1,103.40, or its equivalent in Kenya Shillings at the current official exchange rate.

Damages / Relief Type

• Costs awarded to plaintiff against defendant; third party bears indemnity claim costs
• Indemnity awarded to defendant from third party: US$ 1,103.40 for lost cargo under Warsaw Convention limits