Lenana Peak Limited v County Government of Tana River [2023] KEHC 24890 (KLR)

Lenana Peak Limited v County Government of Tana River (Civil Appeal 03 of 2019) [2023] KEHC 24890 (KLR) (1 November 2023) (Judgment)

Neutral citation: [2023] KEHC 24890 (KLR)

Republic of Kenya

In the High Court at Garsen

Civil Appeal 03 of 2019

SM Githinji, J

November 1, 2023

Between

Lenana Peak Limited

Appellant

and

The County Government of Tana River

Respondent

(An appeal from the Judgment of the Principal Magistrate’s Court at Hola (Hon. A.P.Ndege – PM) dated 14th March, 2019 in Civil Case No.22 of 2016)

Judgment

1. This is an appeal arising out of the judgment of Hon. A.P. Ndege (PM) delivered on 14th March 2019 in Hola Civil Case No. 22 of 2016. In the memorandum of appeal dated 16th April 2019, the Appellant raised six grounds of appeal as follows: -1. That the learned magistrate erred in law and fact in failing to find and hold that the Appellant had made out a proper case against the Respondent.2. That the learned magistrate misdirected himself in failing to find that the Appellant was not properly contracted and thus no basis for payment.3. That the learned magistrate erred in holding that there was no contract between the Appellant and the Respondent.4. That the learned magistrate erred in law and fact by disregarding evidence presented by the Appellant to prove the said contract was in existence.5. The learned magistrate erred in law and fact in failing to appreciate and consider the works were done to the satisfaction of the Respondent.6. That the learned magistrate erred in law and fact by his finding that the case was not proven to the full extent of the law.

2. The Appellant urged the court to allow the appeal and the judgment of the trial court be set aside with costs to the Appellant both in this court and the subordinate court. 3. The Appellant instituted suit against the Respondent before the subordinate court sitting at Hola. In the Plaint dated 3rd October 2016, the Appellant alleged that sometime in the year 2013, the Respondent contracted them to rehabilitate some certain offices (the works) in Hola within Tana River County for the agreed sum of Kshs. 4,393,211/-.

4. The particulars of the said agreement were laid out in various correspondence between the parties and Local Purchase Orders (LPOs). The Appellant averred that upon completion of the works, the Respondent managed to pay the sum of Kshs. 717, 414. 60/- only and refused to complete the balance despite numerous demands by the Appellant. The Appellant therefore sought judgment for the sum of Kshs. 3,616,097. 80/- together with interest and costs of the suit.

5. The Respondent filed a statement of defence dated 8th February 2017. The Respondent vehemently denied the allegations and put the Appellant to strict proof. The Respondent averred that if at all there was a contract between the Appellant and the Respondent’s agent, the same was done in the agent’s own capacity. That the Appellant’s claim never underwent the well-known procurement process.

The Evidence 6. While the Appellant called one witness, the Respondent closed its case without calling any witnesses.

7. Erastus Wahome (PW1) stated that he was the managing director of the Appellant. He adopted his written statement dated 3rd October 2016. He testified that sometime in 2013, the Respondent contracted him to renovate the office of the governor for Kshs. 717,000/- and a further Kshs. 777,414/- and later a CDF building for Kshs. 3,086,615. 76/-. Thereafter, he was to renovate the home of the deputy governor at the cost of Kshs. 529,482/-. The witness produced a copy of an LPO dated 15th March 2013 for Kshs. 777,414. 60/- as PEXH2. He also produced a copy of a letter dated 20th March 2013 (PEXH3) being an approval to rehabilitate the said CDF offices and a bill of quantities (BQ) (PEXH 4) specifying how the works were to be done.

8. For the approval to renovate the deputy governor’s office PW1 annexed a copy of a letter dated 20th May 2013 (PEXH 5) together with a BQ (PEXH 6). The witness also produced a copy of a letter dated 20th December 2013 (PEXH 7) forwarding some payment vouchers produced as PEXH 8 and 9.

9. PW1 added that his demand letter through Mr. Sichangi advocate remained unanswered and upon his investigations, he managed to obtain the minutes of the procurement committee that awarded him the contracts. He produced a copy of the said minutes as PEXH 12.

10. On cross-examination, PW1 told the court that the subsequent two contracts were never advertised or tendered for and that he was awarded the same by virtue of the initial LPO.

11. The trial court observed that the Respondent was an own entity with powers to contract on its own. That there was no proof that the Respondent entered into a contract with the Appellant. Further, the court opined that since the claim was one for special damages, the Appellant failed to substantiate the amounts claimed with certainty. In the end, the trial court dismissed the Appellant’s suit for want of proof.

12. Parties agreed to canvass the appeal by way of written submission which they did.

13. I have carefully perused the record of appeal, submissions and authorities cited and I note that the issues for determination are; -i.Whether there existed a contract between the parties herein.ii.If so, whether the contract between the parties is enforceable and whether the Plaintiff is entitled to the reliefs sought.iii.Whether the Appeal is merited.

Analysis and Determination 14. This being a court of first appeal it has a duty to re-evaluate the evidence and make its own independent conclusion but bearing in mind that it neither saw nor heard the witnesses testify and make due allowance for that. See Selle v Associated Motor Boat Co. [1968] EA 123 and Kiruga v Kiruga & Another [1988] KLR 348.

15. The general rule in law is that the burden of proof lies on the party who asserts the affirmative of the issue or question in dispute. It is also trite that in civil cases such as the present one, the standard of proof is on a balance of probabilities.

16. In the present case, the Appellant has alleged that the Respondent owed him a liquidated sum of money based on a request that the Respondent made to the Appellant to undertake some renovation works. The burden therefore rests on the Appellant to prove that allegation.

17. As to whether there was a contract between the appellant and the respondent, I will first quote Onguto J (as he then was) in Mamta Peeush Mahajan [Suing on behalf of the estate of the late Peeush Premlal Mahajan] v Yashwant Kumari Mahajan [Sued personally and as Executrix of the estate and beneficiary of the estate of the late Krishan Lal Mahajan] [2017] eKLR; -“I start by quoting the very relevant words of Steyn LJ in G. Percy Trentham Ltd v Archital Luxfer Ltd [1993] 1 Lloyds Rep 25. Lord Steyn said:“…It is important to consider briefly the approach to be adopted to the issue of contract formation ... It seems to me that four matters are of importance. The first is that… law generally adopts an objective theory of contract formation. That means that in practice our law generally ignores the subjective expectations and the unexpressed reservations of the parties. Instead the governing criterion is the reasonable expectations of honest men. … that means that the yardstick is the reasonable expectations of sensible businessmen. Secondly it is true that the coincidence of offer and acceptance will in the vast majority of cases represent the mechanism of contract formation. It is so in the case of a contract alleged to have been made by an exchange of correspondence. But it is not necessarily so in the case of a contract alleged to have come into existence during and as a result of performance. See Brogden –v- Metropolitan Railway [1877] 2 AC 666; New Zealand Shipping Co Ltd v A M Satterthwaite & Co. Ltd. [1974] 1 Lloyd’s Rep. 534 at p.539 col.1 [1975] AC 154 at p. 167 D-E; Gibson v Manchester City Council [1979] 1 WLR 294. The third matter is the impact of the fact that the transaction is executed rather than executory. It is a consideration of the first importance on a number of levels. See British Bank for Foreign Trade Ltd. v Novinex [1949] 1 KB 628 at p. 630. The fact that the transaction was performed on both sides will often make it unrealistic to argue that there was no intention to enter into legal relations. It will often make it difficult to submit that the contract is void for vagueness or uncertainty. Specifically, the fact that the transaction is executed makes it easier to imply a term resolving any uncertainty, or, alternatively, it may make it possible to treat a matter not finalized in negotiations as inessential. In this case fully executed transactions are under consideration. Clearly, similar considerations may sometimes be relevant in partly executed transactions. Fourthly, if a contract only comes into existence during and as a result of performance of the transaction it will frequently be possible to hold that the contract impliedly and retrospectively covers pre-contractual performance. See Trollope & Colls Ltd. v Atomic Power Constructions Ltd. [1963] 1 WLR 333. ”75. The Supreme Court of the United Kingdom later stated as follows in the case of RTS Flexible Systems Ltd v Molkerei Alois Müller GmbH & Co KG (UK Production) [2010] UKSC14, [45]:“The general principles are not in doubt. Whether there is a binding contract between the parties and, if so, upon what terms depends upon what they have agreed. It depends not upon their subjective state of mind, but upon a consideration of what was communicated between them by words or conduct, and whether that leads objectively to a conclusion that they intended to create legal relations and had agreed upon all the terms which they regarded or the law requires as essential for the formation of legally binding relations. Even if certain terms of economic or other significance to the parties have not been finalized, an objective appraisal of their words and conduct may lead to the conclusion that they did not intend agreement of such terms to be a precondition to a concluded and legally binding agreement.”

18. It follows therefore that in law, when we talk of a contract, we mean an agreement enforceable by law. For a contract to be valid and legally enforceable, there must be: capacity to contract; intention to contract; consensus ad idem; valuable consideration; legality of purpose; and sufficient certainty of terms. If in a given transaction any of them is missing, it could as well be something else other than a contract.

19. In the present case, there was no agreement availed to the court and therefore the terms of the transaction can only be deduced from the LPO and the series of documents availed by the Appellant. I say so because the Black’s Law Dictionary defines a Local Purchase Order (LPO) as:“A document that has been generated by the buyer in order to purchase products or property. This document allows a transaction to occur and when accepted by the seller becomes a legal binding contract of sale.”

20. Similarly, in Bristol Cardiff and Swansea Aerated Bread Co. Ltd v Maggs(11890) 44 Ch. Div 616 the court expressed that it is necessary to look into the whole of the correspondences between the parties to see if they have come to a binding agreement.

21. Having looked at the LPO dated 15th March 2013 it is evident that there existed a binding agreement between the parties herein. The Respondent did admit as much in their submissions. Particularly, counsel submitted that it was not in dispute that the Appellant was in a contract with the Respondent for the renovation of offices to the tune of Kshs777,414. 60/-. The Respondent’s main contention was with the extension of works. To the Respondent, there was no proof that the other works or contracts were procedurally tendered for and that the officer who awarded the other contracts to the Appellant did so in his own capacity.

22. There is no doubt that the Respondent in this case is a public entity. It follows therefore that the law applicable to this case is firstly, Article 227(1) of the Constitution of Kenya which obligates state organs and public entities to procure goods and services in accordance with a system that is fair, equitable, transparent, competitive and cost effective; and secondly the Public Procurement and Assets Disposal Act of 2005 which provided the framework within which policies relating to procurement were to be implemented at the time material to this case. Notably, that Act has since been replaced by the Public Procurement and Assets Disposal Act of 2015 but for the purposes of this case regard shall be as to the Act of 2005 as that was the law in force at the time.

23. As already established, the LPO issued to the Appellant was restricted to rehabilitation works at the governor’s office. This meant that the LPO was exhausted once those works were complete and any other works done by the Appellant thereafter amounted to direct procurement.

24. Direct procurement was and is still permitted under the Public Procurement and Assets Disposal Act provided it meets the parameters set out in Section 29 thereon. Section 29 of the Act of 2005 required that all procurement be done by way of open tendering. However, it allowed procurement entities to use alternative procurement such as restricted tendering or direct procurement on certain conditions highlighted below. That section read; -“The result of dilatory conduct on the part of the procuring entity.” “29. (1) For each procurement, the procuring entity shall use open tendering under Part V or an alternative procurement procedure under Part VI.(2)A procuring entity may use an alternative procurement procedure only if that procedure is allowed under Part VI.(3)A procuring entity may use restricted tendering or direct procurement as an alternative procurement procedure only if, before using that procedure, the procuring entity —(a)obtains the written approval of its tender committee; and(b)records in writing the reasons for using the alternative procurement procedure.(4)A procuring entity shall use such standard tender documents as may be prescribed.Further Section 74(3) read; -(3)A procuring entity may use direct procurement if the following are satisfied —(a)there is an urgent need for the goods, works or services being procured; (b) because of the urgency the other available methods of procurement are impractical; and(c)the circumstances that gave rise to the urgency were not foreseeable.”

25. I have perused the exhibited copy of minutes held by the Tana River District Tender Committee on 4th April 2012 where the committee approved the additional works to be done by the contractor on ground, the Appellant herein, for urgency reasons (See minute 3/5/2012-2013). The committee mandated the County Works Officer to effect the extension, which he did as can be seen in the correspondence annexed. In the circumstances, I am satisfied that the provisions of the Act highlighted above were met. I therefore find no basis in the Respondent’s argument.

26. The outcome is that there existed an enforceable contract between the parties.

27. The Appellant adduced copies of BQs issued for the works at the CDF offices and the deputy governor’s home quantified at Kshs. 3,086,615. 76/= and Kshs. 529,482/= respectively amounting to Kshs. 3,616,097. 76/=. Copies of payment vouchers confirm that the works were properly executed. What was remaining was for the Respondent to make payment. In the foregoing I find merit in the appeal. The judgment of the lower court is therefor set aside and judgment is hereby entered in favor of the Appellant for the sum of 3,616,097. 76/= together with interest and costs of the suit and the appeal.

JUDGMENT READ, SIGNED AND DELIVERED VIRTUALLY AT MALINDI THIS 1stDAY OF NOVEMBER, 2023. S.M. GITHINJIJUDGEIn the Presence of; -1. Mr Oronga for the Respondent2. Ms Kimani for the Appellant