[2023] KEHC 23515 (KLR)

Ngotho Architects v Permanent Secretary, Ministry of Education, Science & Technology & another (Commercial Case 238 of 2012) [2023] KEHC 23515 (KLR) (Commercial and Tax) (13 October 2023) (Ruling)

Neutral citation: [2023] KEHC 23515 (KLR)

Republic of Kenya

In the High Court at Nairobi (Milimani Commercial Courts Commercial and Tax Division)

Commercial and Tax

Commercial Case 238 of 2012

DAS Majanja, J

October 13, 2023

Between

Ngotho Architects

Plaintiff

and

Permanent Secretary, Ministry of Education, Science & Technology

1st Defendant

Attorney General

2nd Defendant

Ruling

1. The Plaintiff filed this suit against the Defendants (formerly Nairobi High Court Case No 540 of 2006) seeking Kshs 149,207,052. 07. By an order dated May 2, 2013, the court directed that the matter be referred to arbitration for determination. The Arbitral Tribunal published an award on April 10, 2014 where it ordered the 1st Defendant to pay the Plaintiff Kshs 17,444,982. 12 plus simple interest thereon at the rate of 12% pa from May 23, 2006 until payment in full together with costs of the arbitration together with interest thereon at the rate of 15% pa from the date of collection of the arbitral award until payment in full. The Award was recognized by the Court on November 3, 2014 and a Decree was issued on January 28, 2015 together with a Certificate of Taxation dated 04. 12. 02105 for the sum of Kshs 1,279,862. 00 with interest on this amount at 15% pa from May 2, 2014.

2. After negotiations to settle the outstanding decretal amount and interest, the parties recorded a consent order dated July 14, 2016 which provided as follows:1. That the Defendants do liquidate part of the Decretal sum as follows:(a)Payment of a 1st installment of Kshs 5 million in November, 2015 (Receipt whereof is duly acknowledged);(b)Payment of a 2nd installment of Kshs 7 million by the end of 2015/2016 financial year; and(c)Payment of a 3rd installment of Kshs 5,444,982. 12 on or before the end of January, 2017. 2.That the matter be mentioned on a date to be agreed by the parties to update the court on agreement or otherwise on (1) payment of the balance of the Decretal sum and (2) interest.3. That the Attorney General’s Department/Office shall pay to the Plaintiff's Advocates on record (Messrs Muthaura Mugambi Ayugi & Njonjo Advocates) the sum of Kshs 7 million (Received from the Defendants on account of the 2nd installment referred to in clause 1 above) with reference to HCC No 238 of 2012 on or before September 30, 2016. 4.That mention on October 6, 2016.

3. When the matter was mentioned on October 6, 2016, the parties entered into another consent which was adopted as an order of the court on the same date as follows:"…………….It is hereby ordered by consent:2. That the Defendants do further liquidate the Decretal sum as follows:(a)Payment of a 4th instalment of Kshs. 8 million within the 2016/2017 financial year;(b)Payment of a 5th instalment in the sum of Kshs. 12 million within the 2017/2018 financial year."

4. The court went on to issue further orders:3. That all payments due to the Plaintiff and henceforth to be paid into court on the due day.4. That the order of 12th August, 2016 is amended by Consent to order that the instalment due on September 30, 2016 shall be paid within 14 days. Payment will be made into court and upon deposit the sums paid to be released forthwith to Plaintiff's Advocates5. That costs in the cause.6. That list for mention to ensure compliance on October 26, 2016.

5. Between June 7, 2016 and February 7, 2022, the Defendants made staggered installment payments to the Plaintiff totaling Kshs 37,202,057. 02. On June 20, 2022, the Plaintiff wrote to the Defendants informing them that based on its own computations and taking into account the payments already made, there is an outstanding amount of Kshs 20,576,594. 70 as at June 15, 2022. In their letter of June 22, 2022, the Defendants responded that their negotiations were pegged on the understanding that interest was capped and the resultant consent served to waive accrued interest from 25. 05. 2015 until payment in full. That in any event, the consent did not include a default clause so as to entitle the Plaintiff to a claim of interest after the payment of the agreed amount in full. According to the Defendants the amounts claimed comprised accrued interest that stood waived by consent of both parties.

6. The Plaintiff, in its response dated June 23, 2022, stated the Defendants were making installment payments based on a Decree and the resulting Certificate of Order Against the Government which expressly provide for interest being payable to the Plaintiff. That neither the Decree nor the Certificate of Order Against the Government have ever been amended, altered, varied or reviewed whether by consent of parties or otherwise to exclude interest.

7. The Plaintiff thus stated that it was erroneous to state that the amounts paid by the Defendants were paid “pursuant to a consent recorded between the parties in court in 2016 following negotiations between parties”. That the payments were made in partial satisfaction of the Decree and Certificate of Order against the Government and not otherwise. The Plaintiff further stated that the consent referred to, which the Plaintiff presumed to be the consent dated the October 6, 2016, only provided for liquidation of the Decretal Sum by the Defendants by way of instalments, at the request and application of the Defendants and in no way froze, suspended, capped or waived interest due under the Decree.

8. The Plaintiffs asserted that there was no understanding, written or otherwise, that interest was to be capped or waived or frozen and that indeed, this was made clear in previous proceedings before the court that interest was neither capped nor waived by the Plaintiff. The Plaintiff also urged the Defendants to refer to the proceedings before Tuiyott J., (as he was then) between the March 3, 2020 and May 12, 2020. Thus, the Plaintiff maintained that interest was therefore due and payable and that since the Defendants had not disputed the Plaintiff’s computations on interest as communicated to them earlier, the Plaintiff looked forward to receiving the Defendants’ proposal on how this amount was to be settled.

9. The court directed the parties to file affidavits in respect of this claim by the Plaintiff, which depositions have been filed together with written submissions and which I have considered in my determination below.

Analysis and Determination 10. The court is being called to determine whether the Plaintiff is entitled to the claim of Kshs 20,576,594. 70 as the outstanding decretal amount as of June 15, 2022. The Defendants’ opposition to this amount is borne out of their claim that the Consent of the parties adopted as an order of the court on October 6, 2016 compromised the decree and that interest was capped and the resultant consent served to waive accrued interest amounts from May 25, 2015 until payment in full.

11. I am unable to agree with the Defendants as the two Consents, whose contents I reproduced in the introductory part above, do no show that the parties agreed to waive or freeze the application of interest due under the decree. I agree with the Plaintiff that what the parties consented to was the liquidation of the decretal sum by installments and not waiver of interest. Even without an agreement by the parties to waive interest, the court lacks discretion to waive interest lawfully accrued and decreed by a court. The statute, that is the Civil Procedure Act (Chapter 21 of the Laws of Kenya), does not provide for it.

12. Since the Defendants do not deny the Plaintiff’s computations therein, I find and hold that that Defendants are truly indebted to the Plaintiff and that the Kshs 20,576,594. 70 remains due and payable to the Plaintiff on account of interest.

DATED AND DELIVERED AT NAIROBI THIS 13TH DAY OF OCTOBER 2023. D. S. MAJANJAJUDGECourt Assistant: Mr Michael Onyango