REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA AT NAIROBI

CIVIL SUIT  NO. 284  OF 2008

KABUITO CONTRACTORS LIMITED.................................PLAINTIFF

-V E R S U S –

THE HON. ATTORNEY GENERAL................................... DEFENDANT

JUDGEMENT

1. Kabuito  Contractors Ltd, the plaintiff herein, filed an action against the Hon. Attorney General, the defendant herein vide the plaint dated 30.6.2008 and amended on 23.3.2018 in which it sought for  judgement in the following terms:

a. The sum of ksh.1,122,668,596/71

b. Interest at commercial rates from the date of filing suit.

c. Costs of the suit

d. Interest on (a) and (c ) above.

2. The defendant filed a defence to deny the plaintiff’s claim.  When the suit came up for hearing, the plaintiff summoned three witnesses to testify in support of its case while the defendant summoned the evidence of a single witness to buttress his defence.

3. The brief background of this dispute  is that by a contract dated 14^th March  1997 the Government of the Republic of Kenya acting through the Ministry of Local Government, the plaintiff was allegedly contracted to carry out emergency repairs along certain roads within the city of Nairobi.  This was following the devastating destruction of the infrastructure  caused by the El Nino rains that pounded the city making roads impassable.  The plaintiff claimed that the contract PKG/5B  which it had executed with the defendant recognized that there was an offer and acceptance of that offer so that the Government was the employer while the plaintiff was the contractor and that the employer agreed  to pay the contractor.  It is the plaintiff’s submission that the contract was extended on three occasion where the plaintiff was to carry out repair works on Kenyatta Avenue and various roads within the Nairobi Central Business District.

4. The following issues were identified for the determination of this court:

a) Whether there was a valid contract for the work in question?

b) Whether the plaintiff is entitled to the reliefs sought?

5. On the first issue as to whether or not there was a valid contract for the works done by the plaintiff, the plaintiff is emphatic that there was a valid contract.  It is the  evidence of the plaintiff that on 14^th March 1997, the plaintiff executed contract no. PKG/5B with the Ministry of Local Government.  According to the plaintiff the initial contract PKG/5B  was paid for and that there were three extensions that followed covering several streets within the Central Business District of Nairobi  measuring about 4.4 kms that were never paid for.  The defendant submits that indeed in January 1997, the Central Tendering Board of the Ministry deliberated and approved an award for contract no. PKG/5B, recarpeting of Nairobi, Kamukunji roads to the tune of ksh.64,282,199/75.  Engineer Nguso Murila (DW1), testified on behalf of the defendant.  DW1 told this court that he was the superintendent engineer with the Ministry of Local Government, Urban Development Department during the material period of the subject works in dispute.  He stated that the scope of the works within the aforesaid contract comprised of recarpeting Biashara Street, City Hall Way, Harambee Avenue, Kaunda Street, Kimathi Street, Koinange Street, Mama Ngina Street, Muindi Mbingu Street, Murang’a road, Parliament road, Ring road, Taifa Road and University way which road works were estimated to be 9.5 kms long.  DW1 also stated that the first contract was completed and the plaintiff paid for the work done.  He however, stated that upon completion of the works under the contract, the roads were destroyed by the El Nino rains and the resultant repairs required, necessitating the need to engage a contractor urgently as the roads became impassable.   DW1 further stated that the Central Tender Board approved the extension of contract PKG/5B on 15.5.1997 to cover more roads in the Central Business District at a tender sum of ksh.45,056,874/10.  He identified the roads under the extension to include: Monrovia, Moktar Dadar, Utalii, Maketer Streets, Kigali road, Tubman road, Banda Street, Posta road, General Kago Street and Harry Thuku road.  DW1 also stated that on 12.2.1998, the Central Tender Board further approved another extension of contract no. PKG/5B to cover emergency repairs to Kenyatta Avenue and other Central Business District roads namely: Short street, Bank street and Central Street at the tender sum of ksh.16,637,500/=.

6. It is the evidence of DW1 that the Central Tender Board in its meeting of 16^th April 1998 rejected any further request for a third extension of contract no. PKG/5B and instead recommended for new tenders to be processed in accordance with existing regulations.  DW1 pointed out in his testimony that in the year 2000, the Ministry appointed a committee to evaluate contracts which were awarded during that period of El Nino weather when most road works were carried out on an emergency basis with the aim of regularizing eh contracts in line with the Government Procurement Regulations contained in legal notice no. 51.  It is DW1’s evidence that the evaluation committee that the value of the works carried out by the plaintiff could not be assessed as the instructions given to them were purely verbal therefore extension III of the contract no. PKG/5B was never formalized since there was no sufficient documentation to regularize the same and therefore the contract was not payable.  It is therefore, the defendant’s submission that there was no valid contract between the parties and that the plaintiff failed to discharge the burden of proof.

7. The plaintiff through the evidence of Amip RAjendra Patel (PW1) stated that it was orally instructed by the then Permanent Secretary, Ministry of Local Government to proceed and carry out further works on the road repairs which it did under the supervision of the Ministry’s Engineers and works.  The defendant urged this court to find that the oral instructions given to the plaintiff were contrary to the International Federation of Consulting Engineers conditions which required such form of instructions to be in writing.

8. I have carefully considered the competing evidence and the submissions over the question as to whether or not there was a valid contract.  It is clear to this court that the parties do not dispute the fact that there were extensions made on contract  no. PKG/5B.  The defendant admits that there were two valid extensions but DW1 disputes the third extension.  A careful consideration of the evidence of DW1, will reveal that the defendant does not seriously dispute the plaintiff’s assertion that there was a third extension of contract no. PKG/5B.  The defendant’s main contention is that the extension was verbal.  It is not disputed that pursuant to the verbal instructions by the Permanent Secretary, Ministry of Local Government, the plaintiff proceeded to carry out the works which the defendant was unable to assess because of lack of documentation since it was not in writing.

9. The defendant expressly stated that the work under extension three was unpaid for because the same was neither approved nor formalized by the Central Tender Board nor by the Ministerial Tender Committee.  It is the evidence of Amip Rajendra Patel (PW1) and Timothy Onyango (PW2) that it was normal in the circumstances for the permanent secretary to give instructions since he was very powerful and could at any point override written instructions when the work is of urgent nature like in this case.  A careful consideration of the evidence of DW1 will show that he was given oral instructions for extension three by the Permanent Secretary.  DW1 expressly stated that the engineer who allegedly supervised the contract had no written authority to do so as there was no contract executed in respect thereof. 

10. There is no dispute that the El Nino weather phenomena brought destruction of the road infrastructure of high magnitude.  Decisions had to be made urgently to restore the destroyed infrastructure without undergoing the laborious tendering processes.

11. DW1 stated in his evidence that the roads in Central Business District were in a deplorable condition because of El Nino rains and the Ministry ws in an emergency situation to rectify.  The defendant was actively involved in the road construction works by sending engineers to give necessary instructions to the plaintiff and to supervise the works done, approving of the quality and quantity of the material used and ultimately receiving payment certificates raised.  It is clear in my mind that the defendant was well aware of the ongoing works and approved the same.  PW1 and PW2 adduced evidence and tendered a bundle of documents to show that the work was done and DW1 confirmed.  The plaintiff’s evidence therefore remains uncontroverted.

12. In the circumstances of this case the defendant is not permitted  in law and in equity to turn around and plead invalidity of the claim and make a contrary pleading to the effect that none of the actions created a legal or contractual obligation under the said contract.  Section 120 of the Evidence Act expressly states:

“where one has, by his declaration, act or omission, intentionally caused or permitted another person to believe a thing to be true and to act upon such belief, neither he nor his representative shall be allowed in any suit or proceedings between himself and such person or his representative, to deny the truth from that thing.”

13. With respect, I agree with the pontiff’s submission that the defendant acted in bad faith when it failed to settle the claim on the basis that the contract was not in writing nor subjected to a competitive procurement process.  It is also apparent that the contract was executed in 1997/1998, therefore the Public Procurement Act, 2005 was not in force and could not be applied retrospectively.

14. I am convinced that the original contract was contract no. PKG/5B and the rest were purely extensions and the same rates in the original contract therefore applied.  I have already stated that extension 3 was made as a matter o f urgency due to the destruction caused by El Nino phenomena and the defendant having contracted the plaintiff to carry out the emergency works, there was therefore no breach of Public Procurement Laws.  In the unique circumstances of this case Section 3(1) of the law of contract does not bar the plaintiff from enforcing an oral agreement against the defendant.  The works done by the plaintiff were supervised by the defendant’s engineers and works officers.

15. It is apparent from the evidence presented by both sides that the plaintiff did not solicit for the extensions of contract no. PKG/5B but the defendant was the one who contracted it to provide for additional services for urgent works since there was no time to invite new bids.  It is not in dispute that the plaintiff received the instructions and accepted to perform the extended contract in  good faith believing that the defendant was committed to pay.  I am convinced that the defendant should not be allowed to deny liability by applying the doctrine of Estoppel.  In Combe =vs= Combe (1951) 2KB 215, Denning L. J. Expounded the doctrine of estoppels in part as follows:

“The principle as I understand it, is that, where a party has, by his words or conduct, made to the other a promise or assurance which was intended to affect the legal relations between them and to be acted accordingly, then, once the other party has taken him at his word and acted on it, the one who gave the promise or assurance cannot afterwards be allowed to revert to the previous legal relations as if no such promise or assurance had been made by him but he must accept that legal relations subject to the qualifications which he himself has introduced, even if it is not supported in a point of law by any consideration, but only by his word.”

16. In my humble view, the defendant is estopped from denying to settle the plaintiff’s claim for non-compliance of public procurement processes after benefitting from the services rendered by the plaintiff upon its inducement.  There is no evidence tendered by the defendant to sow that the plaintiff was an accomplice to any breach of the internal Government Regulatory Procedures that might have taken place, therefore the defendant is barred from relying on such shortcomings.  The defendant was enjoined as the procuring  entity to ensure that the procurement regulations then in force were complied with.  In the end I am satisfied that there was a valid contract for works between the plaintiff and the defendant.

17. The second issue to determine is whether or not the plaintiff is entitled to the reliefs sought.  On this issue, the plaintiff has averred that it completed the works under the contract no. PKG/5B extension III and the defendant failed to pay for the works.  The plaintiff stated that under the extended contract the plaintiff would submit to the project manager monthly statements of the estimated value of work done less the cumulated amount certified previously. 

18. The plaintiff further pointed out that it was a term of the original contract that the defendant’s employer would pay the plaintiff the amount certified by the project manager within 28 days from the date of each certificate failing which the plaintiff would be paid interest on the late payment at the prevailing rate of interest for commercial borrowing. 

19. The defendant continued to be adamant, that extension II of contract no. PKG.5B was not approved by the Central Tender Board but the plaintiff still went ahead to carry out the works.  The defendant further averred that it is on the basis of the above reason that the plaintiff’s employer refused to pay for the works. 

20. It is admitted by the defendant that the plaintiff submitted an application for payment of three (3) certificates amounting to ksh.103,698,585/50 but the same was rejected because there was no authority for the third extension for the works and that the alleged extension II of contract PKG/5B was never formalized and therefore could not have been processed for payment. 

21. It is the submission of the plaintiff that all the works for the original contract and also the three extensions were never formalized but were done to the satisfaction of the defendant’s engineers. 

22. It is clear from the terms Clause 42 of the contract that the plaintiff would submit to the project manager monthly statements of the estimated value of work less the cumulative amount previously certified.  In their testimonies PW1, PW2, Florence Atieno Awino (PW3) and (DW1) agree that certificates were issued as required in the agreement but some were paid.  Once certificates are raised, the project manager would check the contractor’s monthly statement and certify the amount to be paid according to Clause 43 of the agreement.

23. With respect, I agree with the plaintiff’s averment that the defendant cannot rely on its own failure to sign the certificates to deny the plaintiff its claim on the principal amount and interest.  The evidence presented by the plaintiff shows that the initial cost was ksh.115,000,000/= according to the certificates that had been raised. 

24. At the lapse of 28 days if payment had not been made, the same would attract interest at a commercial rate.  It is clear that at the time of the plaintiff’s testimony on 18.6.2017 the amount due stood at ksh.3,170,908,263/=.  PW2 and PW3 confirmed in their testimonies too that the retention amount retained by the employer and payable at the end of the contract was to the tune of ksh.11,522,065/= was never paid.  DW1 also admitted that the retention money was not paid.  The plaintiff also produced a huge bundle of documents and correspondences in court which showed that at the end of the Ministerial Board meeting no. MLQ/12/200-2001, there was an acknowledgement that the plaintiff was owed.  It is also clear in clause 43 of Contract no. PKG/5B  that the plaintiff was entitled to charge interest for late payment.  The interest is 1+ average commercial interest multiplied by the delayed number of days.

25. The plaintiff summoned one Florence Atieno Awino (PW3), an accountant who has worked for the plaintiff for 25 years.  PW3 confirmed that the initial amount pleaded in the amended plaint was ksh.1,122,668,596/71.  It is now nearly 10 years since the suit was filed.  PW3 took this court through a summary of the account in connection with all the works carried out and presented.  In the document PW3 presented, listed therein are the principal amount for each of the projects, the certificates raised, interest upto date and the total amount claimed.  PW3 also attached the schedule of all the payments that had been settled and confirmed that the outstanding amount as at the date of the schedule to be ksh.3,170,908,263/24.

26. In the end, I find that the plaintiff has proved its claim against the defendant on a balance of probabilities. Consequently judgment is given in favour of the plaintiff and against the defendant as follows:

i. Ksh.3,170,908,263/25 as at 30^th June 2017.

ii. The aforesaid amount to attract interest at court rates from the date of judgment until full payment.

iii. Costs of the suit.

Dated, Signed and Delivered in open court this 25^th day of May, 2018.

J. K. SERGON               

JUDGE

In the presence of:

....................................................  for the Plaintiff

..................................................... for the Defendant