Richfield Engineering Limited v Bamburi Cement Limited [2020] KEHC 761 (KLR)

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA AT NAIROBI

COMMERCIAL & TAX DIVISION

MILIMANI LAW COURTS

HCCC NO. 62 OF 2010

RICHFIELD ENGINEERING LIMITED..............................................................PLAINTIFF

-VERSUS-

BAMBURI CEMENT LIMITED......................................................................DEFENDANT

JUDGMENT

1. A crucial, and expensive, stage in the making of cement is the production of clinker. It is a burning process that requires extreme temperatures (between 1200? – 1500?c) and is mainly carried out in a hanging rotating pipe known as a kiln shell. The kiln at any one time carries as much as 5000 tonnes of material. This puts the kiln under aggressive wear and tear. The dispute between Richfield Engineering Limited (the Plaintiff or Richfield) and Bamburi Cement Limited (the Defendant or Bamburi) revolves around highly specialized engineering works for the replacement of damaged sections of Bamburi’s kiln shells.

2. In a claim set out in the Amended Plaint dated 15th October 2015 and filed on the same day, Richfield, an engineering and construction company, states that it was awarded three contracts in regard to the kiln shells replacement project, details being:-

LPO Number Contract Value Contract Award Date Contract Start Date Contract Completion Date

45000936

(Contract Number 1) Kshs.15,247,422. 80 01. 08. 06 23. 10. 06 15. 11. 06

45001676

(Contract Number 2) Kshs.810,434. 00 24. 08. 06 24. 08. 06 15. 09. 06

45009398

(Contract Number 3) Kshs.5,336,000. 00 01. 02. 07 12. 2.07 08. 03. 07

3. Richfield pleads that the contracts were performance types contracts structured in a way to minimize costs and loss of production time. It was expected that Richfield would work 24 hours in a day, 7 days a week with 12 hour shifts each day. Richfield’s case is that Bamburi provided the design, specifications, programme of works, method of performance, the drawings, materials and supervision. It is stated that the Plaintiff was required to take guidance, instructions and directions from the Defendant’s plant and machinery suppliers and other employees.

4. In regard to the scope of work of each contract, Richfield gives the following details. Contract 1, awarded on 1st August 2006, was to commence on 23rd October 2006 and complete by 15th November 2006. This was to provide specialist engineering, fabrication and construction services for the change of kiln shells. Contract 2 was for the fabrication of items required to perform contract number 1 as per the drawings described in LPO number 45001676. It was awarded on 24th August 2006 and was to commence the same day and complete on 15th September 2006.

5. The third contract, which was awarded on 1st February 2007 was to commence on 12th February 2007 and to complete on 8th March 2007 was the replacement of an extra 2. 6 metres kiln shells and extra ducting for kiln nose ring cooling blowers.

6. Richfield pleads that the works required it to procure specialized welding equipment, tools and tackles, fabricated steel works, consumables and mobilize staff, both local and expatriate. Richfield complains that Bamburi rescheduled the work to a later date and changed the works programme unilaterally, causing it loss as it had already committed itself to start work at the Defendant’s factory on 23rd October 2006. This commitment involved staff and equipment it had hired. That, further, Bamburi made variations to the specified activities and included additional works which were not specified in the original contracts.

7. The claim by Richfield is in two parts. Those relating to un-recovered costs arising from the delays and disruption of works in contract 1 and 2 which is for the sum of Kshs.6,922,214. 94. The second is for delays, disruptions, and additional works carried during the kiln shell change which was not in any of the original 3 contracts principally because the kiln was so seriously deformed that it took longer than expected to replace it. This latter claim is for Kshs.23,628,262. 90.

8. Richfield’s cumulative claim is for Kshs.35,438,554. 30 and interest thereon at 16% per annum compounded on a monthly basis in accordance with the Ministry of Public Works and FIDIC practice contracts from 31st March 2007 until payment in full. As usual, it also seeks costs.

9. Bamburi defends the claim but admits entering the pleaded contracts. It’s defence is that Richfield represented to it that it would carry out all works as detailed in the invitation documents for a sum of Kshs.12,750,000. 00 plus VAT and withholding tax subject to:-

a) That the Plaintiff would strengthen local manpower personnel with eight (8) numbers of expatriate skilled personnel comprising of coded welders, supervisors and fitters who are experienced in such kiln change works.

b) That the Defendant would provide the Plaintiff with all steel material, fasteners and rawl bolts.

c) That the Defendant would avail its crane to the Plaintiff for handling the existing steel tower, during modifications and fabrications.

d) That the Defendant would avail to the Plaintiff electrical power supply at site for fabrication and medication of steel towers and other steel structures.

10. Regarding expatriate staff, Bamburi alleges that Richfield intended to use or abuse the contract for purposes of carrying on illegal activities of importing or smuggling expatriates into Kenya from India and obtaining works permits for them under the pretense that they were coming into the country to perform specialized skills under the contract.

11. In the statement of defence filed on 14th April 2010, Bamburi contends that Richfield’s claim consists or comprises of further fraudulent claims for service which the Plaintiff knows or ought to know were not rendered or if rendered were exaggerated. Paragraph 12 is a long and detailed catalogue of the claims.

12. The Defendant sets up a counterclaim. First, it asserts that Richfield delayed the completion of the contract by thirteen days and it therefore suffered a loss of Kshs.9,176,550. 00 tonnes of clinker production which worked out to a loss of Kshs.25,474,103. 00.

13. Bamburi also seeks Kshs.11,261,764. 80 being the cost of container storage of containers in its yard for the period September 1998 to 12th January 2007.

14. Richfield resists the claim by Bamburi. Regarding the storage charges, it states that the containers were stored in a designated yard set aside by Bamburi for all its contractors, with full authority and consent of Bamburi and no charges are payable on that account. Further, that the claims of demurrage charges are not only excessive and exaggerated but also time-barred.

15. To be deduced from the rival pleadings is that issues for determination are:-

i. What is the scope of each of the three contracts?

ii. Was contract 3 a variation of contract 1?

iii. If not, was there, nevertheless, a variation of any of the three contracts?

iv. Is the answer to (iii) is in the affirmative, was the variation unilateral or mutual?

v. If the answer to (iv) is that the variation was unilateral, what loss, if any, did the Plaintiff suffer?

vi. Did the Plaintiff carry out extra and un-contracted works requested by the Defendant and if so what is the value?

vii. Has the Plaintiff proved the special damages claimed?

viii. Did the Plaintiff breach the contract or contracts by delaying completion?

ix. If so, what loss did the Defendant suffer?

x. Is the Defendant entitled to claim storage charges from the Plaintiff?

xi. Has the Defendant proved the special damages claimed?

xii. Costs.

16. Jitendra Brahmbhatt (PW1), Fred Waswa (PW2) and Abdul Sangrar (PW3) testified on behalf of the Plaintiff. The Defence called a single witness, Rassam Timimi (DW1).

17. The burning process, which is a crucial stage in the production of clinker requires extreme temperature (between 1200? – 1500?c). The supposed torments that we imagine hell brings! The extreme temperatures liquefies the material and the heating and transport of that material is done in a kiln. The kiln is installed above the ground and rotates when in operation. The kiln is made of special steel of a varying thickness of 25mm to 100mm. A photo (P. Exhibit Page 281) shows three (3) people standing on a kiln shell. That is a graphic demonstration of the size of a kiln shell. It is a huge pipe. The Court was told that it is also a very heavy pipe and must be propped up in its elevated position by heavy equipment.

18. The equipment suffers aggressive wear and tear and by the extreme nature of its operation, it suffers corrosion. There was damage to sections of a kiln shell belonging to Bamburi and this required repairs. The repairs would entail cutting out the corroded sections of the kiln shell and replacing them with new kiln sections imported by Bamburi. This was the service that Bamburi contracted Richfield to provide.

19. As I set down the scope of each contract, it is noted that it is common ground that the contracts were in form of purchase orders.

20. Contract 1 was under LPO Number 450000936 dated 1st August 2006 (P. Exhibit Page 13). Its value was for Kshs.15,247,422. 80. The commencement date was due for 23rd October 2006 and completion on 15th November 2006. It is Richfield’s case that this contract had two elements. The modification and fabrication of enabling steel works and kiln shells replacement. The latter would have attendant activities. Bamburi was to supply the steel materials required for fabrication.

21. This Court understands the case for Richfield in respect to this contract to be that its second part (that is kiln replacement) was to commence on 24th October 2006 and complete by 15th November 2006 but Bamburi suspended it to some future date. That the communication on extension was made on 26th September 2006. Richfield insists that the suspension was a unilateral decision by Bamburi.

22. The evidence of Jitendra was that, on 28th December 2006, Bamburi informed Richfield that the suspended works was to commence on 12th February 2007 for completion by 8th March 2007.

23. Regarding this suspension Bamburi’s witness, Timimi stated:-

“Works suspended in September 2006. We changed our plan. We informed Richfield of the change of the plan. Because Richfield was not ready, so they agreed to suspend. Richfield was not ready. Richfield was on the ground preparing for kiln replacement. The towers were not ready for implementation of the project. Both parties were not ready.”

24. In support of its proposition that the suspension of the works and subsequent extension was mutual, counsel for Bamburi submits that the variation of contract 1 was made by the agreement of the parties in contract 3. Counsel makes an additional argument that at the time the variation was supposedly made and encapsulated in contract 3, contract 2 for fabrication or preliminary works had been performed and completed and therefore any claims arising from contract 1 and 2 would have been made in contract 3 or captured in contract 3. I shall return to matters relating to contract 2 later but regarding contract 1, how does Richfield react to Bamburi’s proposition?

25. Counsel for Richfield submits that contract 3 was an independent contract and that the contract speaks for itself and does not state that it is an extension of contract 1.

26. The communication of the new date when the 2nd part of contract 1 was to begin was made in a meeting of 28th December 2006 held between Timmy of Bamburi, and Jitendra (PW1) and three others representing Richfield (See minutes of P. Exhibits Pages 48-49). In that meeting, there was also discussion in respect to additional works involving a 2. 65 metres kiln replacement. The need for this additional works had been brought up earlier in a meeting of 18th October 2006 and it would seem that Richfield had been asked to quote for the additional works. In the December meeting, Richfield was reminded that the quote was still awaited. Jitendra, on behalf of Richfield, promised to send it by the end of that week.

27. In his written testimony of 19th September 2012, Jitendra gives his perspective of what was discussed in December meeting. He states:-

“The following were some of the issues discussed;

a) Testing of Three Profile Cutting machines to be carried out by 15/01/07 at BCL.

b) Types of electrodes to be used for shell welding to be counterchecked by KHD.

c) REL Organization Structure and Charts to be made available to BCL by 10. 1.07.

d) Communication Protocol was established – Again Jan 2007.

e) Project Gantt chart presented - Project Completion time of original 24 days, became 25. 5. Days from 12th February 2007 to 8th March 2007. The only change in the scope of works was introduction of New Kiln Shell of 2. 65 Meters Width.

f) REL to submit quote for installation of 2. 65 Meters wide Kiln Shell uphill of Tyre 2. ”

28. It is confirmation, as borne out by the minutes, that the meeting discussed the extension of the 2nd part of the 1st contract and also the addition installation of a 2. 65 meter wide kiln shell. In regard to the controversy whether there was unilateral or mutual extension of that part of the contract, there is this useful insight revealed by the minutes:-

“Time schedule, the Gantt chart was presented the total number of days mechanical works (Richfield) on the critical path is 24 days (from 12th Feb. to 8th March). The issue of penalties and bonus for any extra day/s lost or gained was raised.”

It is evident, and has to be, that Richfield agreed to the extension although it raised the issue of “penalties and bonus.” Was this latter issue followed through?

29. On 6th January 2007 (P. Exhibit Bundles Pages 50 and 51), Richfield follows with a letter that includes a quotation. As to what the quotation covered, the opening words of the letter states:-

“We refer to our offer of 19th July 2006, and subsequent additional KILN SHELL SECTION installation and revised programme starting 12th February 2007, our proposal is as follows:- .....”

30. The letter of offer of 19th July 2006 (P. Exhibit 10 and 11) is undoubtedly in respect to contract 1 and so this letter was not just about the additional kiln shell replacement but also the revised timelines of part 2 of contract 1. If there was doubt, then it is dispelled by the following in Richfield’s letter of 6th January 2007:-

“Our revised proposal for the additional work and revised programme is for additional Kshs.5,250,000. 00 + VAT + W.TAX.”

I take it, and hold, that this quotation included the penalties and bonus that had been alluded to in the meeting of 28th December 2006.

31. It turns out that Bamburi negotiated the offer downwards to Kshs.4,600,000. 00 + VAT + W.TAX (See the witness statement of Jitendra of 19th December 2012). However, I do not accept part of that statement when he attempts to restrict the quotation of Richfield to only the additional 2. 65 Meters wide kiln installation. The evidence discussed early overawes this attempt.

32. It is, nevertheless, true that the local purchase order (P. Exhibit Pages 92 to 102) that followed the agreement on the price of Kshs.4,600,000. 00 makes reference only to the additional kiln installation. Yet, as I have held, the quotation of Kshs.5,250,000. 00 was also for the extension of part 2 of contract 1. By agreeing to a negotiated price of Kshs.4,600,000. 00, Richfield either accepted the discounted figure as fees for both works or abandoned its request for additional payment for the extension of part 2 of contract 1.

33. This leads me to the conclusion that the extension for the part 2 of contract No. 1 was agreed by the parties at no extra consideration or if there was extra consideration then it was subsumed in the price of Kshs.4,600,000. 00 under contract 3. Further, and it being that the Plaintiff’s entire claim on unlawful extension of the contracts was pegged on the alleged unlawful extension of part 2 of contract 1, this limb of the Plaintiff’s claim must fail and by extension the gamut of claim comprised in paragraph 10 of Amended Plaint.

34. The Court was told that a chart called a Gantt chart is singularly useful in guiding the implementation of a project of complex works like those under the contracts. It sets out the action plan and activities to be undertaken. Richfield complains that the Gantt chart provided to it by Bamburi did not accurately depict the scope of works to be undertaken under the contracts. Indeed, Timimi on behalf of Bamburi conceded as much in his testimony. His evidence was that upon Richfield pointing out gaps in the original chart, a more detailed one was issued (P. Exhibit Pages 110 to 117). The more detailed chart had 92 tasks unlike the previous one with 45 (P. Exhibit 9).

35. The evidence of Jitendra (PW1) and Waswa (PW2) was that the scope of works eventually carried out exceeded that envisaged in the contracts and that there were a total of 20 additional and unplanned works. These works are set out in schedule sent by Bamburi to Richfield through a letter of 28th March 2007 (P. Exhibit Pages 125 and 126). The additional works are:-

1. Cutting the 4. 8m outlet section to reduce the length. Champhering the ends for wielding, installation of scaffolding twice.

2. Removal of spider and reinstallation spider stiffener inside the 4. 8m shell.

3. Cutting the 8. 2m section number 2 to reduce the length, champhering the end for welding, scaffolding twice for above.

4. Removal of spider and reinstallation spider stiffener inside the 8. 2m shell.

5. Modification of tower structure 4, to accommodate the change in foundation level.

6. Repair of tyre cracks.

7. Cutting 80mm shell at tyre number 2. Champhering of the 80mm shell for weld preparation. Installation of dummy shell for the external & internal champhering of the 80mm shell. This shell was cut near the weld joint; instead it was cut very near the tyre stoppers.

8. Removal and reinstallation of saddle, thrice, to cater for the saddle shortage.

9. Fitting of joint number 3 three times, due to difference in diameters, and deformation of tyre shell.

10. Fitting of joint number 4 twice times, due to difference in diameter.

11. Cutting of all joints using our orbital machine. The orbital machines provided by bel did not work.

12. Reforming of 80mm shell at tyre number 2 using 100 – ton jacks and 200 – ton jacks to remove out of circularity devotion.

13. Additional welding consumables and manpower to cater of change in weld edge geometry at shell ends, at joint 3.

14. Additional welding consumables and manpower to cater of change in weld edge geometry at shell ends, at joint 4.

15. Installation of tyre no. 1 stoppers, twice, as instructed by MR. N. Marcus OF KHD.

16. Installation air blasters, associated pipe work etc, instructed BT T. Rassam.

17. Modification of dust collection chutes, below kiln seals.drg.gz-413-50-456ba.

18. Removal and refixing of kiln manhole.

36. Another additional work was said to be the modification of a telescope seal flange to match the cooler hood inlet flanges. These 19 (perhaps not 20) items form the basis of Richfield’s claim on additional works. As I understand it, the claim is twofold; for the expenses incurred in carrying out those works and for the extended stay of staff and equipment on site.

37. The dispute is however narrowed because in response to that letter, Bamburi on 18th April 2007 (P. Exhibit Page 127) admits 9 of the additional works. The admitted works are those in 11(a), 11(b), 11(c), 11(d), 11(e), 11(f), 11(p), 11(q) and 11(r) of the amended plaint. In the statement of defence, Bamburi attempts to resile from this position as regards items 11(a), 11(b), 11(p), 11(q), 11(r). But that may be too late because of its clear admission prior to the filing of the suit.

38. In attempting to drill down on disputed items, this Court has read the position taken by Richfield in justifying its claim (See the claims explanation from P. Exhibit Pages 186 to 214) against the response of Bamburi (D. Exhibit Pages 153 to 158). These positions are deeply technical and unravelling them would have been a tortuous and perhaps intimidating task for this Court which has no specialized schooling on the issues. Indeed, faced with the possibility of walking a labyrinth, I invited parties to submit this part of the dispute to arbitration by an expert but my invitation was declined. Thankfully, I need not resolve the rival positions because even if I found that the 10 disputed works were additional works still this Court would not have awarded the Plaintiff any of the claims on the expenses allegedly incurred as they were not specifically proved as required by law. What Richfield did was simply to provide its workings on the expenses without any material or documents to support it.

39. But that would not be the end of the matter because it is agreed that there was a delay in completion of the project by some 13 days. Richfield attributes these to the extra works but Bamburi blames it on Richfield. What has emerged however is that some extra works had to be undertaken and Bamburi accedes to 9 items. This required deployment of extra hours of work. If there is need for confirmation of this then it is found in the statement of defence, when Bamburi allocates extra hours where it admits to additional works. Noteworthy as well is that Bamburi complained of delay in implementation of the contract only after Richfield raised its claim for additional works. Taking these to account I favour the explanation of Richfield that the delay in completion was caused by uncontracted works.

40. It has to be remembered, and it is agreed by both sides, that the contracts performance was structured to minimize on costs and loss of time for cement production. Indeed, Richfield was expected to work 24 hours a day, 7 days a week! If Richfield put in more time because of additional works then it deserves to be compensated. Richfield proposes to work out the compensation pro rata the contract value. That seems to me to be fair and just. So the damages for the additional works is 10,007,040 as worked out by Richfield in paragraph 11(t) of its Amended Plaint.

The Counterclaim

41. This is on two accounts. It is Bamburi’s case that Richfield delayed completion of the contract for 13 days and was therefore in breach of contract for which it suffered Kshs.25,474,103. 00 in loss of production of clinker. The second is for the sum of Kshs.11,261,176. 80 being container storage charges.

42. There is no serious contention there was a delay in the completion of the project. A certificate of completion was then issued on 28th March 2007 (P. Exhibit Page 122). From the evidence it is clear that Richfield had to undertake additional works which were not contracted. It has not been demonstrated by Bamburi that the lateness in completion of the works can be placed at the feet of Richfield. Liability is not proved. And neither was quantum. There was no effort at all by the Defendant to prove the special damages claimed.

43. Two 20 feet containers had been kept in the Bamburi’s yard from 1998 to 12th January 2007 this is a long period of time. Again four other containers were kept there after 13th April 2008. They were kept on the express permission of Bamburi. There is no evidence that a charge on storage was agreed or even contemplated by the parties. And although Timimi’s testimony was that the security department of Bamburi communicated to Richfield concerning removal of the containers, no such communication was proved. In addition the basis for the storage charges of Ksh.11,261,764. 80 was not demonstrated.

The outcome

44. Ultimately, I find that the Plaintiff has proved its claim of Ksh. 10,007,480. 00. On this amount the Plaintiff seeks interest at 16% p.a compounded on a monthly basis. As a basis for this enhanced interest the Plaintiff invokes Ministry of Public Works and FIDIC practice contracts. But this Court has a difficulty in granting the interest sought for two reasons. First, if the claim is premised on trade usage and custom, then it is not available because that trade and custom was neither pleaded nor proved (seeC. A. Harilal & Co. V Standard Bank Ltd[1967]512 and Samuel Ndiba Kihara V Housing Finance Company of Kenya Limited[2018]eKLR). Second, if the intention of the parties was that delay in payment would attract such interest, then it has not been explained why that intention was not incorporated in the contracts.

45. I turn to the request by Counsel for the Plaintiff that I allow for costs of two advocates. This would be a request under the provisions of paragraph 59 of the Advocates (Remuneration)Order which reads;

“59. Costs of more than one advocate may be certified by the judge

(1) The costs of more than one advocate may be allowed on the basis hereinafter provided in causes or matters in which the judge at the trial or on delivery of judgment shall have certified under his hand that more than one advocate was reasonable and proper having regard, in the case of a plaintiff, to the amount recovered or paid in settlement or the relief awarded or the nature, importance or difficulty of the case and, in the case of a defendant, having regard to the amount sued for or the relief claimed or the nature, importance or difficulty of the case.

(2) A certificate may be granted under this rule in respect of two members or employees of the same firm.”

46. Counsel for the Plaintiff submits that the case was complex and involved compilation and analysis of many documents, research, preparation of documentary evidence, preparation of witness statements, marshalling of witnesses and representation in Court to support its case which, inter alia, comprised a bundle with 430 pages. It is also argued that as evidence of the complexity and involving nature of the matter, another Counsel was hired to lead the Plaintiff’s Counsel.

47. The law is explicit as to when costs of more than one advocate is deserved. It is in the exceptional instances set out in paragraph 59, to wit; where the nature, importance and difficulty in a case call for such costs and in the case of the Plaintiff, having regard to the amount recovered or paid or relief awarded and for the Defendant, having regard to the amount sued for and or relief claimed. As the true objective of costs is not to punish the losing party but to enable the winning party recoup costs and expenses fairly and properly incurred in pursuing or defending a claim, costs of more than one advocate will only be awarded when it is apparently deserved and those will be on rare occasions. Although this matter was about contracts that involved complex engineering works, the Court did not perceive the dispute itself to be raising novel or complex legal issues. Again, while certain aspects of the case may have been more readily understood by a mind with expertise in the engineering field, interpreting the contracts was not more than a run of the mill for Counsel and the Court. Lastly, the number or length of documents produced is not, on its own, evidence that a dispute is complex. In the end, the Court is reluctant to allow costs of more than one Counsel and declines the request.

48. The upshot is that the Counterclaim is dismissed with Costs to the Plaintiff and Judgment is entered for the Plaintiff against the Defendant for Kshs. 10,007,480. 00 with interest thereon at court rates with effect from the date of filing suit until full payment. The Plaintiff shall also have costs on the main claim.

Dated, Signed and Delivered in Court at Nairobi this 14th Day of December 2020

F. TUIYOTT

JUDGE

ORDER

In view of the declaration of measures restricting Court operations due to the COVID-19 pandemic and in light of the directions issued by his Lordship, the Chief Justice on 17th April 2020, this Judgment has been delivered to the parties through virtual platform.

F. TUIYOTT

JUDGE

PRESENT:

Mbobu and Mwangi for the Plaintiff.

No appearance for the Defendant.