On October 14, 2015, the Kenyatta International Convention Centre (KICC) and Greenstar Systems Limited signed an agreement for the refurbishment and customization of six floors of the KICC Tower Block Offices in readiness for the World Trade Organization Conference that was scheduled to be held in Nairobi, Kenya later that year.
The deal was supposed to have cost the facility Ksh76,320,500.
The work was completed by December 12, 2015 and the management of the facility took over. By this time, only Ksh10 million had been paid to the contractor, which raised a conflict between the two.
By September 1, the amount had escalated to Ksh84 million.
As the agreement between them contained an arbitration clause providing for resolution of disputes arising out of or in connection with the agreement or its interpretation, the respondent invoked the clause and submitted the matter to a single arbitrator, Mr Geoffrey Imende, who heard both parties and issued his award on March 17, 2017.
The arbitrator found that KICC had contravened the provisions of the Public Procurement and Disposal Act, 2005 which rendered the tender illegal.
Nevertheless, in line with several authorities on the doctrines of ‘unjust enrichment and restitution’, the arbitrator proceeded to issue a Ksh57 million award in favour of KICC.
“KICC shall pay to the Claimant the sum of Ksh47,419,029.86, such payment to be made within 21 days of the date on which this award is taken up by either party,” said Mr Imende.
KICC’s counterclaim for refund of Ksh10 million paid for the works was also rejected, meaning that it would part with Ksh57 million in total.
KICC had 90 days to challenge the decision of the arbitrator in the High Court, but did not. Instead, it filed a motion before the High Court seeking to set aside the award on June 23, 2017. In turn, the contractor filed an application of its own on July 14, 2017 seeking enforcement of the Arbitral Award as a Decree of the Court.
Upon hearing both applications, High Court judge Olga Sewe held that the application was filed out of time and there was no provision for extension of time in Arbitration matters.
“Thus, although Counsel for the Respondent suggested that the Court ought to have been moved for extension of time, there is no such jurisdiction, granted that the Arbitration Act does not seem to envisage such a situation,” ruled Justice Sewe.
“Thus, the date of delivery and receipt of the Award in this instance was the 17 March 2017. In the premises, I would agree with Mr Mbobu that the First Application herein is incompetent, for having been filed outside the 90 day period provided for in Section 35 (3) of the Arbitration Act. Accordingly there is good cause for holding that the First Application is incompetent and therefore ought to be struck out.”
On September 10, 2018, KICC proceeded to the Court of Appeal to challenge the decision by the arbitrator and the High Court.
A three-bench jury, Philip Waki, Mohammed Warsame and Philip Murgor, heard the case and made their verdict on February 22, 2019.
In their verdict, the Court of Appeal agreed with the High Court, and dismissed KICC’s appeal, with costs.
“Even if we were to consider whether there was a point of law of general importance as required under section 39 (3) (b) (supra), we are not persuaded that the mere fact that the applicant was paying a huge amount of money would avail it. If the contract between the parties had prevailed as the basis of the claim, the applicant may well have paid even more money,” ruled the judges.
“The ogre put forth by the applicant is that the contract was declared illegal, but the creator of that ogre was the applicant itself! The finding was made by the arbitrator, and is not challenged, that it was the applicant, not the respondent, who did not fully comply with the law on procurement. But the applicant was happy to set up its own malfeasance as a defence to the respondent’s claim and a basis for its counterclaim.”
In their view, the judges found that the arbitrator sought all the best avenues to put the case to rest.
“In our view, the arbitrator was entitled to make the decision he did. However, this aspect of the application is not the ratio decidendi. In the result, the application fails, and we order that it be and is hereby dismissed with costs,” concluded the judges.
KICC will now have to pay Greenstar Systems Ltd an addition of Ksh47 million.