The government has been ordered to pay Sh3.1 billion to a contractor who repaired 26 major roads in Nairobi's CBD following the 1997El Niño floods.
High Court judge Joseph Sergon has awarded Kabuito Construction the amount as compensation, following a 20-year battle between the firm and government over works done on 13 roads in Nairobi during former President Daniel Moi's regime.
Kabuito sued the government in 2008 after the the Ministry of Local Government refused to pay it for the works.
The ministry insisted that verbal instructions given to Kabuito by its permanent secretary could not stand as a valid contract.
Kabuito, owned by tycoon Amip Rajendra Patel, insisted that the ministry owed it Sh115 million, but the amount ballooned to Sh1.12 billion when it sued owing to interest.
The amount stood at Sh3.17 billion when Justice Sergon delivered his judgment.
The judge's landmark decision has reaffirmed that verbal agreements can stand as valid contracts recognised by law.
He also ruled that the government cannot refuse to settle a contract sum on grounds that procurement procedures were not followed, after benefiting from fruits of the same arrangement.
The judge said the repair works done can be construed to be extensions of the original contract which was for the repair of the 9.5 kilometres covering 13 roads.
“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. In the end I am satisfied that there was a valid contract for works between the plaintiff and the defendant,” Justice Sergon held.
Patel's firm was initially contracted to recarpet a total of 9.5 kilometre cutting across 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.
But following floods after the 1997 El Nino rains, the roads were destroyed and Kabuito was hired to do repairs.
The repair works were then extended to include Monrovia, Moktar Dadar, Utalii, General Kago, Short, Bank, Central, Maketer streets, Kigali road, Tubman road, Banda Street, Posta road and Harry Thuku road.
When Kabuito sought payment, the Local Government ministry said it was unable to assess the works done on the strength of verbal instructions issued by the PS.
Patel in his court filings said that it was then normal for a PS to issue verbal instructions even in public procurement, because the government bureaucrats at the time were very powerful.
Justice Sergon said evidence before him showed that Kabuito did not solicit for the extensions, and was contracted under urgency as there was insufficient time to invite new bids for the repairs.
“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,” the judge added.