[2022] KEHC 1205 (KLR)

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA

AT NAIROBI

COMMERCIAL AND ADMIRALTY DIVISION

HCCC 342 OF 2014

SKAIR ASSOCIATES ARCHITECTS..............................................................................................PLAINTIFF

VERSUS

THE EVANGELICAL LUTHERAN CHURCH.....................................................................1ST DEFENDANT

THE ARCHBISHOP OF THE EVANGELICAL LUTHERAN CHURCH OF KENYA...2ND DEFENDANT

EVANGELICAL LUTHERAN CHURCH OF KENYA.......................................................3RD DEFENDANT

LUTHERAN CHURCH OF KENYA.....................................................................................4TH DEFENDANT

TRUSTEES OF THE EVANGELICAL LUTHERAN CHURCH OF KENYA................5TH DEFENDANT

JUDGMENT

1. By way of Plaint filed on 30th June 2014, amended on 15th July 2014 and further Amended on 3rd November 2014, SKAIR ASSOCIATES, the Plaintiff herein sought judgment against the Defendant as follows:-

“(i). Kshs 53,198,263. 00

(ii). Costs of the suit

(iii). Damages for breach of Contract

(iv). Interest for (i), (ii) and (iii) at commercial rates from thedate of judgment to payment in full.

(v) Any other relief that this Honourable Court may deem fit to grant thereon.”

2. The Defendants THE REGISTERED TRUSTEES OF EVANGELICAL LUTHERAN CHURCH IN KENYA filed an Amended statement of defence dated 29th October 2018 in which they denied the Plaintiffs claim and sought for the dismissal of the suit against them with costs. The hearing of the suit which proceeded by way of vive voce evidence commenced before this court on 18th June 2019.

3. The Plaintiff called one (1) witness in support of their case whilst the Defendant also called one (1) witness

4. At the outset I wish to apologize for the delay in rendering this judgment. Following my transfer from the Commercial and Tax Division of the High Court, the file was only brought to my attention in October 2021. Due to pressure of work and other exigencies of duty, I was unable to prepare the judgment earlier. Any inconvenience to the parties is sincerely regretted.

THE EVIDENCE

5. PW1 JUDAH KAIRIMA MAGAMBO was the Managing Partner of Skair Associates Architects. PW1 relied entirely upon his written statement dated 30th June 2014 as his evidence in chief.

6. PW1 stated that on 22nd February 2010, the Defendant appointed the Plaintiff as Project Managers/Project Architects for the construction of twenty four (24) Residential Apartments to be constructed upon the parcel of land known as LR No. 1870/VI/89 in the Westlands area of Nairobi County (herein after referred to as ‘the Project”). The total contract sum was Kshs 234,093. 293,00.

7. According to PW1 the duty of the Plaintiff was to design and approve the entire project, to appoint and supervise the works of the Quality Surveyor, Civil/Structural Engineer as well as the Electrical/Mechanical Engineer. PW1 states that on 25th February 2010, the Plaintiff as per the terms of their appointment proceeded to appoint the Quality Surveyor, Civil/Structural Engineer as well as the Electrical/Mechanical Engineerfor the project.

8. That on or about 2nd August 2010,following a tender evaluation exercise TEAM CONSTRUCTION LTD were awarded the Tender for the proposed construction of the 24 Apartments. Thereafter on 3rd August 2010the Defendants and Plaintiffs signed an Agreement and Conditions of contract for building workers (hereinafter referred to an “the Agreement”)

9. PW1 went on to state that on 9th March 2011 the Plaintiff in accordance with instructions from the Defendant forwarded all relevant documentation to Co-operative Bank of Kenya who was the proposed financier for the Project.

10. Thereafter on 6th June 2011 and on 9th June 2011 the Plaintiff forwarded to the Defendant two interim fee notes for Kshs15,328,000/- and Kshs 15,471,000. 00 which two fee notes were never paid.

11. On or about 8th November 2011 the Plaintiff forwarded to the Defendant another fee note being invoice No. SK-1002/01 for Kshs 31,068,510. 65 for consultancy services done on their behalf since inception of the project. On 20th November 2012 a second invoice No. SK-1002/02 for Kshs.37,199,805. 00 was also raised for money payable to Team Construction.

12. PW1 stated that none of the above invoices were paid and thus on 25th June 2011 the Quantity Surveyor issued the Plaintiff with a Notice of Intention to suspend works for non-payment.

13. The Plaintiff admits having received from the Defendant SWIFT/RTGS payment the sum of Kshs 5,500,000. That despite demand and Notice of Intention to sue, the Defendant has failed/refused to make good payment on the invoices raised. Accordingly, the Plaintiff now demands from the Defendant payment of Kshs 53,198,263. 00 made up of Kshs 50,641,672. 35 for services rendered plus Kshs 2,556,591. 35 for supervision works and disbursements as well as accrued interest at 14% per annum.

14. The Defendants called one (1) witness BISHOP WILLIAM LOPETA who told the court that he was a member since 2003 and the Chairman since 2018 of a body known as the “Registered Trustees Evangelical Lutheran Church in Kenya”. DW1 stated that the Defendant is a body Corporate, which had powers to transact only in its corporate name and in a collective manner. DW1 cited Article XVIII Paragraph (1)of theConstitution of the Evangelical Lutheran Church in Kenya which provided thus:-

“No transaction or dealing whatsoever involving the property of the church is valid unless it is authorized by at least half of the Trustees.”

15. DW1 categorically denied the existence of any contract between the Plaintiff and the Defendants in respect of the construction of the 24 Apartments in Westlands. He stated that he had not come across any contractual document bearing the common seal of the Defendant and endorsed and witnessed in line with the requirements of the Constitution of the Defendant. DW1 insisted that the church as a body corporate could only transact through its Trustees and not through the Archbishop of the church.

16. DW1 went on to concede that he was aware that sometime in 2010 the Evangelical Lutheran Church in Kenya had plans to undertake the construction of Apartments upon a parcel of land located in Westlands area of Nairobi County. However before the church was able to secure requisite finances for the project Teams Construction Ltd moved onto the site and commenced construction works in anticipation of the church securing funds.

17. Unfortunately, the Defendant failed to secure the required funds, thus construction had to cease. DW1 blames the contractor for moving too fast and acting prematurely before requisite funds to support the project had been sourced and obtained. He insists that the Trustees never deliberated on the planned project and never entered into any contract with any party regarding the said proposed project.

18. DW1 later learnt that a suit had been filed by the contractor seeking payment for work done. That the contractor held negotiations with the Evangelical Lutheran Church in Kenya as the result of which the contractor was paid the sum of Kshs75,000. 00 in full and final settlement of his claim. DW1 denies that the Defendant owes the sum of Kshs 37,199,805. 00 to Teams Construction Ltd as alleged by the Plaintiff. He points out that Teams Construction Ltd have not made any claim against the Defendant, are not parties to this suit and states that the Plaintiff is not their spokesman to claim on their behalf.

19. DW1 further claims that even before the present suit was filed officials of the church with whom the Plaintiff had dealt caused the church to make a payment of Kshs 7,580,000. 00 to the Plaintiff as follows: -

(a) Kshs 2,080. 000 paid on or about 3rd February 2013.

(b) Kshs 5,500,000 paid on or about 19th April 2013.

20. DW1 insists that the above gratuitous payments were made to the Plaintiff without the authority of the Defendant, which is a body corporate.

21. DW1 denies that the Defendant as a body corporate ever appointed the Plaintiff as the Project Manager/Project Architect as alleged in the Amended Plaint. He asserts that the Defendant is not a party to the Agreement with the Plaintiff and points out that the Archbishop of the church had no authority to sign the Agreement on behalf of the Defendant. As such the contract relied upon by the Plaintiff could not and did not bind the Defendant as a body corporate.

22. DW1 further states that there is no evidence that the Plaintiff ever performed any of the tasks claimed in the Plaint. That certain items in the fee notes have been charged multiple times. That the said fee notes were never forwarded to the Defendant and that the Plaintiff has not furnished any evidence to support allegations that they effected appointments as claimed in the Plaint.

23. DW1 states that since the church was unable to secure requisite finances for the project the Defendant was justified to rely on the defence of “Force Majeure” to shield itself from any blame for the failed project. Finally, DW1 urged the court to dismiss the Plaintiffs claim against the Defendant with costs.

24. Upon conclusion of the hearing parties were invited to file their written submission. The Plaintiff filed its written submissions on 11th March 2020 whilst the Defendant filed written submissions dated 8th June 2020.

ANALYSIS AND DETERMINATION

25. I have carefully considered the material placed before the court, the evidence adduced before me as well as the written submissions filed by the all parties. The Evidence Act, places the burden of proof of any fact on the person who wishes to rely on the same Section 107 of the Evidence Act Cap 80, Law of Kenya provides as follows: -

“Burden of Proof

(1) Whoever desires any court to give judgment as to any legal or liability dependent on the existence of facts which he asserts must prove that those facts exist.

(2) When a person is bound to prove the existence of any fact it is said that the burden of proof lies on that person”

26. The issue which arise for determination on this case are as follows:-

(1) Whether there existed a valid and enforceable contract between the Plaintiff and the Defendants.

(2) If yes, whether the Plaintiff performed its obligations under said contract.

(3) Whether there was any breach by the Defendant of the contract.

(4) Whether the Plaintiff is entitled to the remedies sought in the Plaint.

(1) Existence of a contract

27. The Plaintiffs evidence is that they entered into a contract with the Defendant for the construction of 24 Apartments in Westlands. The contract relied upon by the Plaintiff is the Agreement and conditions of contract for Building works dated 3rd August 2010. The said Agreement is annexed at Pages 38-41 to the Plaintiffs Bundle of documents filed on 6th March 2019.

28. The Agreement is indicated (at Page 4) to have been made between the Evangelical Lutheran Church (referred to as ‘the Employer’) on the one hand and “Team Construction Limited” (referred as ‘the Contractor’) on the other hand. At Page 43 of the Plaintiffs Bundle of Documents are the signatures of the parties to the contract. There is a signature by a representative of the Defendant and one by a representative of Teams Construction Ltd.

29. It is clear from the Agreement that the Plaintiff Skair Associates Architects were not parties to this Agreement at all. PW1 merely appended his name to the Agreement as a ‘witness’ to the Agreement between the contracting parties. (See Page 42 of Plaintiffs Bundle).

30. Though it is manifest that the Plaintiffs were not parties to the main Agreement and cannot sustain any claim thereunder, the question which arises is whether there was any other Agreement between the Plaintiff and the Defendant, under which the Plaintiff could sustain a claim.

31. PW1 told the court that through a letter of Appointment dated 22nd February 2010 (Annexed at Page 18-19 of the Plaintiffs Bundle), the Defendant appointed Skair Associates Architects as the Project Manager/Architects for the Project. This letter which was referenced as follows: RE: PROPOSED DEVEOPLOMENT ON L.R. NO. 1870/VI/89, LANTANA ROAD WESTLANDS FOR EVANGELICAL LUTHERAN CHURCH IN KENYAand was written on the letter head of the Defendant read in part as follows:-

“We are pleased to inform you that you have been appointed the project Architect in the above project. You will lead the other members of the project team namely the Quantity Surveyor, the Civil Structural Engineer and the Electrical Mechanical Engineer who you are requested to appoint and submit the undersigned as soon as possible…….

Please indicate your acceptance of this appointment to the undersigned confirming that you are in a position to proceed with this project immediately and to completion”.

32. This letter was signed by the Most Reverend Dr. Walter Onwansa, Archbishop ELCK. It was copied to Rev John Halakhe, General SecretaryandMr John Michoro - Treasurer of the Church.

33. In response to this letter the Plaintiff wrote the letter of Acceptance dated 25th February 2010 (Page 20-21 of the Bundle). It is trite law that a contract exists and becomes legally enforceable where there is an offer by one party which offer is accepted by the other party for valid consideration. It would appear from the above correspondences that the Defendants through the Archbishop made an ‘offer’ to appoint the Plaintiff as the lead consultant for the Project. The Plaintiff in turn “accepted” that offer by the letter of Acceptance dated 26th February 2010.

34. The consideration for the contract is set out in paragraph (d) of the letter of offer, which reads as follows:-

“(d) FEES

You are advised that the fees for normal service for all the terms under your consortium shall be 13. 5% of the Total Construction costand shall be deemed to be exclusive of additional serves VAT and disbursements…..” (Own emphasis)

35. In denying the existence of any contract between the Plaintiff and the Defendant DW1 asserted that the church as a body corporate could only transact in its corporate name, in a collective manner, and not through individual office holders. He cited and relied on Article XVIII Paragraph (1) (f)of theConstitution of the Defendant which provided that-

“No transaction or dealing whatsoever involving the property of the church is valid unless it is authorized by at least half of the Trustees”.

36. DW1 in his evidence stated that although the Head officials of the church gave the Plaintiff the contract as lead consultant for the Project, they had no authority to do so. He insisted that it was only the church Trustees who had authority to enter into contracts on behalf of the church and only by way of resolutions, which were to be recorded as minutes. DW1 maintained that at no time did the Trustees ever meet and resolve to appoint the Plaintiff as lead consultant for the Project and that no resolution to this effect was ever reached and no such minutes existed.

37. The Defendant therefore insisted that the Archbishop had no capacity or authority to enter into contract on behalf of the church and that the purported contract between the Plaintiff and the Archbishop did not bind the church at all.

38. It is evident that the Plaintiff dealt with the Church through its officials. The Plaintiff would not have been expected to be aware of the intricacies of the inner dealings of the Church or the provisions of the Church Constitution. The Defendant has not denied the authenticity of the letter of Appointment written to the Plaintiff nor have they denied that the author was in fact at the material time an Archbishop of the Defendant Church. The Archbishop was an official of the church and he engaged the Plaintiff in his capacity as a Church Official. Therefore, I find that the letter of Appointment to the Plaintiff dated 22nd February 2010 binds the Defendant

39. Moreover, it has been conceded by DW1 that the Defendant made a payment of Kshs 7,580,000 to the Plaintiff. It is trite law that a contract entered into without requisite authority may subsequently be ratified by a body corporate. The act of the Defendant in paying out this sum of Kshs 7,580. 000 to the Plaintiff in respect of the contract between the two parties amounts to an act of ratification of said contract by the Defendant.

(2) Whether the Plaintiff performed its obligations under the contract.

40. In the letter of Appointment dated 22nd February 2010 the Plaintiff was appointed as the Project Manager and the Project Architect. The Plaintiff was tasked to design and approve the entire Project as well as appointing, instructing and supervising the works of the Quantity Surveyor, the Civil/Structural Engineer as well as the Electrical/Mechanical Engineer. The Defendant claims that the Plaintiff did not performed its obligations under the contract but the Plaintiff insists that it carried out its mandate to the best of its ability.

41. In the letter of Acceptance dated 25th February 2010 the Plaintiff gave proposed names for Quantity Surveyors, Civil Structural Engineers, Electrical Engineers and Mechanical Engineers.

42. There is evidence that a tendering process was carried out and that the eventual contract was awarded to Team Construction Ltd. At Page 25 of the Plaintiffs Bundle is the Approval for construction of the Apartments obtained from the City Council of Nairobiwhich approval is dated 17th March 2010.

43. There is also evidence that site meetings were conducted – at Page 29 of the Plaintiffs Bundle is the schedule of site meetings and inspections. Indeed PW1 in his evidence stated that they held seven site meetings in Westlands at which meetings a representative from the church was always in attendance. It is clear from the foregoing that the Plaintiff did perform its obligations as lead consultant under the contract.

44. PW1 told the court that at no time did the Defendant ever complain about their work. He is aggrieved that all the other consultants were paid and that only the Plaintiff was not paid its dues.

(3) Breach of Contract

45. The next question to be answered is whether the Defendant breached any of the terms of its contract with the Plaintiff. It is common ground that the project was not completed due to lack of funds. DW1 told the court that the church then sold off the uncompleted projects to a third party and the contractor (Teams Construction Ltd) was paid an amount of Kshs 75 million in full and final payment for work they had done.

46. Paragraph (d) of the letter of Appointment dated 22nd February 2010 provided as follows:-

“upon commencement the construction works made and time of payment shall be as specified in CAP 525 as follows:-

(a) 75% of the total to be paid on submission of the tender report and analysis.

(b) 25% to be paid in instalments based on construction progress” (own emphasis)

47. There is evidence of a letter of Demand dated 25th June 2011 from Team Construction to the Defendant (see Page 32 of the Plaintiffs Bundle) which letter read in part as follows:-

“We would like to bring to your attention that you are in default of sub clause 34. 5 of the conditions of contract by failing to honour certificates No. 1 and 2. Certificate No. 1 amounting to Kshs 15,471,000. 000 was presented to you on 9th March 2011 and payment were due not later than 23rd March 2011, and No 2 amounting to Kshs 15,328,000. 00 presented to you on 6th June 2011 and due not later than 20th June 2011.

We are therefore, as provided by sub clause 29. 2 give (sic) our seven (7) days notice that we were (sic) are going to suspend the work on 27th May 2011 due to reasons of nonpayment for Certificate No. 1 as provided by Clause 29. 1.”

48. By this letter the contractor was giving notice of intention to suspend works for non-payment. It is clear that the Defendant breached the contract by failing to make payments “based on construction progress” upon presentation of certificates/invoices. Secondly, the Defendant breached the contract by failing to honour the invoices raised by the Plaintiff for work done on the project.

49. DW1 told the court that the project was frustrated because the church was not able to secure funding to complete it. He contends that this failure to secure funding was a factor beyond the control of the Defendants and contends that this amounted to ‘Force Majeure’ as it was a circumstance beyond the control of the Defendants. According to DW1 the church was therefore shielded from any liability arising from the stalled project.

50. The Project Agreement did have a clause covering ‘Force Majeure’ Clause 1. 11provided as follows:-

“Force Majeure – means an event, occurrence of circumstance which:

1. 11. 1 is beyond a party’s control.

1. 11. 2 such party could not reasonably have foreseen before entering into contract.

1. 11. 3 having arisen, such party could not reasonably have avoided or overcome

1. 11. 4 and is not substantially attributable to either party”.

51. “Blacks Law Dictionary defines ‘force majeure’ as “an event or effect that can be neither anticipated nor controlled. It is a contractual provision allocating the risk of loss if performance becomes impossible or impracticable, especially as a result of an event that the parties would not have anticipated or controlled”. (Own emphasis)

52. In the case of KENYA UNION OF COMMERCIAL, FOOD & ALLIED WORKERS – VS – TUSKER MATTRESSES LIMITED [2020] eKLR it was held that:-

“Force Majeure’ refers to unforeseeable events that prevent a party from fulfilling a contract.”

53. Therefore the concepts of frustration applies when the performance of a contract is rendered impossible to due to an unforeseen supervening event which is not the fault of either party. Could it be said to have been unforeseen that without funding the project would stall?

54. The Defendant had been negotiating for funding with the Co-operative Bank of Kenya. These negotiations did not bear fruit. When no funds were forthcoming from Co-operative Bank the project folded and the Defendant sold off the partial project together with the improvements done by the Plaintiff to a third party. Kenya is replete with multiple banks and financial institutions, which have the capacity to fund a project of this nature. It is not only Co-operative Bank who could finance the Project. The Defendant did not bother to approach any other financial institution for funding. Given that the Defendant had already entered into binding contracts for construction of the Apartments, they ought to have made greater efforts to secure the requisite funding.

55. Force Majeure does not in my view apply in these circumstances. It was foreseeable that without funding the project would stall. The Defendant in my view had the option of approaching other financial institutions for funding but opted not to do so. This omission led to their breaching the contract for which the Defendant is liable.

(4) Whether the Plaintiff is entitled to the remedies sought in the Plaint.

56. Vide Prayer (1) of the Amended Plaint dated 3rd November 2017the Plaintiff sought judgment for Kshs 53,198,263. 00 being the amount claimed as unpaid by the Plaintiff. According to Clause (d) of the letter of Appointment the fees payable to all the firms in the Plaintiffs consortium is 13. 5%of the total construction cost exclusive of VAT and disbursements.The total construction cost wasKshs 236,093,293. Therefore13. 5%of this figure comes toKshs 31,602,594. 55which represents the amount the Plaintiff would have been paid if the project had been completed. As it was, the project only lasted for twenty six (26) weeks out of the envisaged sixty-six (66) weeks. PW1 told the court that the Project was terminated upon 30% of the work having been done.

57. According to PW1 the payment demand based on the invoices submitted to the Defendant came to Kshs 53,198,263. 70 (see Page 25 of Defendants Bundle filed on 17th June 2019). However, PW1 did in his evidence admit that certain errors were made in calculating the period for which interest was to accrue for the various claims. PW1 stated that he would leave it to the court to determine the interest payable on the amount owed to him.

58. Upon re-calculation the Plaintiff rightful claim as against the Defendant would be as follows:-

(i) 1ST Invoice No SK 1002/01 For Kshs 31,068,510. 65.

The Plaintiff applied interest at 14% per annum for three (3) years. The correct amount due on this invoice as interest is Kshs 13,048,774. 50 making a total of Kshs 44,117,285. 10.

(ii) 2nd Invoice No. SK 1002/02 for Kshs 2,542,720. 00.

The Plaintiff applied interest at 14% per annum for 1-5 years. The correct amount due on this invoice as interest is Kshs 533,971. 20 making a total of Kshs 3,076,691. 20 less payment received on 3rd February of Kshs 2,080. 000. Balance = Kshs 996,691. 20. Interest @14% p.a for one year for the period 2013 = Kshs 139,536. 75. Total balance due on Invoice SK 1002/02 = Kshs 1,136,227. 95.

59. Therefore the Plaintiffs claim against the Defendant would be the outstanding balance on invoice No. SK 1002/01, which is Kshs 44,117,285. 10plus the outstanding balance on Invoice SK-1002/02, which is Kshs 1,136,227. 95. Totaling = Kshs 45,253,513. 05.

60. Accordingly I find that the Plaintiff has proved his claim in the amount of Kshs 45,253,513. 05 only.

61 It is trite that damages are not awardable for breach of contract, therefore the Plaintiffs claim for damages for breach for contract cannot succeed.

62. Finally, I do enter judgment in favour of the Plaintiff against the Defendant as follows:-

(i) Kshs 45,253,513. 05.

(ii) Interest on the above at commercial rates from the date of filing of the suit until payment in full.

(iii) Costs of the suit are awarded to the Plaintiff.

DATED IN NAIROBI THIS 11TH DAY OF MARCH 2022.

........................................

MAUREEN A. ODERO

JUDGE