Sam-Tech Diagnostics Company Limited v County Government of Tharaka Nithi [2022] KEHC 11543 (KLR)

Sam-Tech Diagnostics Company Limited v County Government of Tharaka Nithi (Civil Appeal 20 of 2021) [2022] KEHC 11543 (KLR) (21 July 2022) (Judgment)

Neutral citation: [2022] KEHC 11543 (KLR)

Republic of Kenya

In the High Court at Chuka

Civil Appeal 20 of 2021

LW Gitari, J

July 21, 2022

Between

Sam-Tech Diagnostics Company Limited

Appellant

and

County Government of Tharaka Nithi

Respondent

Judgment

1. This is an appeal against the judgment delivered on September 21, 2021 in Chuka CMCC No. 91 of 2019.

2. The Appellant has based the appeal on following grounds:a.That the Honourable Magistrate erred in law and fact in dismissing the Plaintiff’s/Appellant’s suit against the weight if the evidence adduced.b.That the Honourable Magistrate erred in law and fact in failing to consider the evidence adduced by the plaintiff.c.That the Honourable Magistrate erred in law and fact in failing to consider the pleadings and the plaintiff’s evidence and considered extraneous matters not supported by evidence.d.That the Honourable Magistrate erred in law and fact by holding that the plaintiff/Appellant had failed to prove its case despite finding that the plaintiff had delivered the subject goods to the defendant.e.That the Honourable magistrate erred in law and in fact in holding that lack of a written contract between the parties vitiated their contractual relationship.

3. The Appellant thus prays for orders setting aside the impugned judgment and for judgment to be entered for the appellant against the Respondent as prayed in the plaint. The Appellant also prays for the costs of this appeal.

4. The appeal was canvassed by way of written submissions which I hereunder summarize.

The Appellant’s Submissions 5. The Appellant filed its submissions on 9th December 2021. it was the Appellant’s submission that it duly submitted the Appellant supplied goods pursuant to a request for quotations which had been advertised in the dailies by the Respondent. The Appellant was then issued with the requisite Local Purchase Orders (L.P.Os) and it is on the strength of those L.P.Os that it subsequently delivered the subject goods to the Respondent. The Appellant however contends that it has since never received payment for the supply of the goods. As such, the Appellant urges thus court to allow the appeal by finding that the supply of the goods to the Respondent was in accordance with the law and that the fraud or illegality alleged by the Respondent had not been proved.

The Respondent’s Submission 6. The Respondent filed its written submissions on 14th March 2022. The Respondent maintained that the process in which the Appellant secured the LPOs was fraudulent and contrary to the provisions of the Public Procurement and Asset Disposal Act 2015. The pointed that the Appellant failed to prove how they secured the contracts for the supply of the goods in questions. As such, it was their submission that they could not honour the LPOs as they were procured illegally. The Respondent therefore prays for the dismissal of the appeal.

Issues for determination 7. The issues for determination, which have emerged from the pleadings and written submissions, are:a.Whether the procurement process undertaken by the Appellant was in accordance with the laws; and if so,b.Whether the Appellant is entitled to the reliefs sought;c.Who should bear the costs?

Analysis 8. This is a first appeal. Thus, this court has a duty to subject the whole of the evidence to a fresh and exhaustive scrutiny and make its own conclusions about it, bearing in mind that this court did not have the opportunity of seeing and hearing the witnesses firsthand. This duty was stated in the case ofSelle & another –vs- Associated Motor Boat Co. Ltd. & others (1968) EA 123 in the following terms:“I accept counsel for the respondent’s proposition that this court is not bound necessarily to accept the findings of fact by the court below. An appeal to this court from a trial by the High Court is by way of retrial and the principles upon which this court acts in such an appeal are well settled. Briefly put they are that this court must reconsider the evidence, evaluate it itself and draw its own conclusions though it should always bear in mind that it has neither seen nor heard the witnesses and should make due allowance in this respect. In particular this court is not bound necessarily to follow the trial judge’s findings of fact if it appears either that he has clearly failed on some point to take account of particular circumstances or probabilities materially to estimate the evidence or if the impression based on the demeanour of a witness is inconsistent with the evidence in the case generally (Abdul Hammed Saif –vs- Ali Mohamed Sholan (1955), 22 E.A.C.A. 270).”

9. The Appellant instituted this matter in the lower court vide a Plaint filed on May 15, 2019. He sought for:a.A sum of Kshs. 2,500,800/=;b.Interests;c.Costs;d.Any other reliefs that the court may grant.

10. In brief, it was the Appellant’s case that it is an importer and supplier of laboratory agents in county hospital. The Appellant claimed that on or about 30th September 2015, the Respondent made an order for the supply of laboratory reagents and consumable which the Appellant delivered and the Respondent duly received. Despite the deliveries, the Appellant claimed that the Respondent failed to honour payments amounting to Kshs. 2,500,800/= vide the following Local Purchase Orders L.P.O Numbers:a.L.P.O. No. 2507261 (Invoice 7735) for Kshs. 723,000/=;b.L.P.O. No. 2507262 (Invoice 7736) for Kshs. 688,800/=;c.L.P.O. No. 250763 (Invoice 7737) for Kshs. 1,089,000/=.

11. According to the Appellant the said amount remains unpaid to date.

12. PW1 was Samson Maina, a director in the Appellant company. HE adopted his statement as part of his defence. He testified that the Respondent was their client who they supplied with medical laboratory agents. He stated that the goods in the 3 L.P.O.s named above were supplied to Chuka General Hospital on September 28, 2015 and duly received. On cross examination, he stated that the procurement department of Chuka District Hospital issued the LPOs. It was a quotation but no tender was advertised. He stated that this was not the first time to supply goods to the county government in that manner.

13. DW1 was Leitan Kiruja, the principal Legal Officer of Tharaka Nithi County. She also adopted her statement as part of her defence. She testified that sometime in 2017-2018, the Tharaka Nithi County Government issued a notice to its suppliers to produce all pending bills for verification and payment. The Appellant did not produce the documents requested hence his claim could neither be verified nor paid. On cross examination, confirmed that tendering was not the only method of procurement. Quotation was also legal but had to be done within the confines of the procurement rules. First, the supplier must be on the panel then a contract and award is given. The learned trial magistrate held that the appellant did not prove his case to the required standards and dismissed it with costs.

14. I shall now proceed to analyse this appeal under the following heads.`

Whether the procurement process undertaken was legal 15. The respondent is a county government. It is established under Article 176 of the Constitution and the County Governments Act, 2012. The Respondent exercises the sovereign power of the people at the county level and is therefore bound by the Constitution and all the laws of the land.

16. Article 227(1) of the Constitution states that: -“When a State organ or any other public entity contracts for goods or services, it shall do so in accordance with a system that is fair, equitable, transparent, competitive and cost-effective.”

17. In order to comply with the above constitutional requirement, the Public Procurement and Disposal Act, 2015 (hereinafter referred to as ‘the 2015 Act’). was enacted pursuant to Article 227(2) of the Constitution. The 2015 Act repealed the Public Procurement and Disposal Act, 2005 (hereinafter referred to as ‘the repealed 2005 Act).

18. From the record, the dealings between the parties herein were in September 2015. By then he repealed 2005 Act was operational, but subject to Part 2 of the Sixth Schedule of the Constitution. The 2015 Act was assented to on 18/12/2015 and commenced on 17/01/2016. Section 183 of the 2015 Act provided for the application of the transitional provisions under the Third Schedule. Clauses 1(1) and (2) of the Third Schedule provides as follows: -(1)Procurement proceedings commenced before the commencement date of this Act shall be continued in accordance with the law applicable before the commencement date of this Act.(2)For purposes of sub paragraph (1), procurement proceeding commences when the first advertisement relating to the procurement proceeding is published or, if there is no advertisement, when the first documents are given to persons who wish to participate in the procurement proceeding.”

19. The repealed 2005 Act provided for very extensive procedures in any form of procurement. Part IV thereof provided for the general rules for procurement whereas Part V thereof provided for how Open Tendering was to be undertaken and the limited instances where the alternatives to open tendering being Direct procurement, Request for Proposals and Request for Quotations modes of procurement could be sparingly used in procurement processes. Regardless of the mode of procurement used save in direct procurement any successful party was to be provided with a notification letter by the procuring entity which sought for acceptance. Once the procuring entity obtained the acceptance then a contract for the specific procurement was to be executed and performed thereby leading towards the completion of the procurement process.

20. In this case, the Respondent has been very categorical in denying that any procurement process for the alleged supply of the goods in issue was undertaken and that if it was undertaken it was in contravention of the law and without the approval of the Respondent. According to the Respondent, no tender was advertised, there was no competitive bidding, and no contracts were executed between the parties. As such, the Respondent maintained that the Appellant should not benefit from an illegal process. Having taken this position, the onus was thus on the Appellant to substantiate how it dealt with the Respondent.

21. Section 27 of the repealed 2005 Act provided as follows: -(1)A public entity shall ensure that this Act, the regulations and any directions of the Authority are complied with respect to each of its procurements.(2)The accounting officer of a public entity shall be primarily responsible for ensuring that the public entity fulfils its obligations under subsection (1)(3)Each employee of a public entity and each member of a board or committee of the public entity shall ensure, within the areas of responsibility of the employee or member, that this Act, the regulations and any directions of the Authority are complied with.(4)Contractors, suppliers and consultants shall comply with all the provisions of this Act and the regulations.(5)The accounting officer may use the procurement until and tender committee of another procuring entity which shall carry out the procurement in accordance with this Act and the regulations.(6)The Authority shall have power to transfer the procuring responsibility of a procuring entity to another procuring entity or procuring agent in the event of delay or in such other instances as may be prescribed.”[Emphasis added]

22. As per Section 27(4) of the repealed 2005 Act, the Appellant was under a strict duty to comply with all the provisions of the law and the regulations made thereunder. In this case, the Appellant contends that it participated in a request for quotations which had been advertised. The Appellant further contends that upon submitting its quotation, it was pre-qualified by Chuka District Hospital. The pre-qualification letter was however not produced in evidence. There was no contract executed between the parties.

23. Section 45 of the repealed 2005 Act provided that all procurements records should be kept by the procuring entity for at least six years after entering into a contract or if no contract was entered into, after the procurement proceedings were terminated. The Appellant, as the procuring entity in this case, did not however endeavour to either produce such records or compel the Respondent to produce them, if at all available. The Appellant heavily relied on the L.P.Os 2507263, 2507262, and 2507261; the delivery notes no. 11906, 11904, 11903 and 11865; as well as the invoices no. 7737, 7736 and 7735 which it produced in evidence. There was also no evidence that the goods were inspected and confirmed to meet the required specifications. This was the duty of the Inspection and Acceptance Committee of the Respondent. From these facts, it is clear that the procurement laws were not adhered to by the plaintiff. The appellant was under a duty to comply with the provisions of the Public Procurement Act and the Regulations thereunder. As such, the trial court was correct to find and hold that the procurement processes subject of this suit were not undertaken in accordance with the laws.

Whether the Appellant is entitled to the reliefs sought 24. The Appellant’s failure to adhere to the procurement laws means that it willingly engaged in illegal contracts. The law is very clear that such contracts are unenforceable. [See: Mapis Investment (K) Limited vs. Kenya Railways Corporation(2006) eKLR, Heptulla vs. Noormohammed (1984) KLR, Kenya Airways Limited vs. Satwant Singh Flora (2013) eKLR, Patel vs. Singh (1987) eKLR].

25. In Heptulla vs. Noormohammed (supra) the Court of Appeal held that:“…No court ought to enforce an illegal contract where the illegality is brought to its notice and if the person invoking the aid of the court is himself implicated in the illegality...”

26. Based on the above authorities, it follows that the trial court’s decision to find that it could not enforce a contract that did not adhere to the law, in this case, the Public Procurement Law, was properly founded. As such, the Appellant was not entitled to the reliefs sought.

Conclusion 27. The upshot of the foregoing, is that the contracts alleged by the appellant are unenforceable. The appeal lacks merits. I dismiss it with costs.

DATED, SIGNED AND DELIVERED AT CHUKA THIS 21ST DAY OF JULY 2022. L.W. GITARIJUDGE