Court orders KAA to pay contractor Sh433m in demolitions job lawsuit

The High Court has directed the Kenya Airports Authority (KAA) to pay part of the Sh812 million to a contractor hired a decade ago to demolish buildings at the Jomo Kenyatta International Airport (JKIA).

Justice Alfred Mabeya ordered KAA to pay Machiri Ltd Sh300 million and another $1,022,022 (Sh133.2 million) held in two bank accounts.
The court directed the contractor to pursue the balance through other means.

Justice Mabeya made the decision in a ruling where KAA opposed the case, arguing that the contractor can only demand the money under the Government Proceedings Act, which requires litigants to notify the Attorney General before filing suits against the government or its agencies.

The judge said there was nothing to show that KAA exercises any sovereign power by whatever means to qualify as a government. He added that State corporations are not automatically subject to the Government Proceedings Act.

“Secondly, it is not shown and there is nothing on record that it (KAA) is a department of the government of Kenya,” the judge said, adding that KAA is a body corporate with perpetual succession with the capacity to sue and be sued in its name.

The contractor and KAA entered into a contract for the demolition of airport halls, baggage areas, and multi-storey office blocks at the JKIA in June 2014. The contract was for Sh388.2 million.

Machiri Ltd completed the work and left the site on July 15, 2016, after issuing a certificate of completion.

A dispute ensued when KAA failed to make the necessary payments.

The matter was referred to arbitration, and the parties settled for Mr Nyagah Boore Kithinji to arbitrate the case. The arbitrator published his award on April 6, 2023, by directing KAA to pay the amount plus interest.

The contract submitted that the contract provided for interest on late payments, and the tribunal calculated the delayed payments as per the documents before him.

But KAA faulted the tribunal for holding that the project contract was governed only by the FIDIC conditions of contract for Design- Building and Turnkey First Edition 1995.

KAA contended that the award was manifestly excessive and punitive contrary to the law, the principles of public finance and public policy.

It was further submitted that the arbitrator erred in computing interest monthly rather than in accordance with the prevailing mean commercial lending rates as determined by the Central Bank of Kenya.

In its decision, the arbitrator awarded compound interest at 3 percent above the discount rate of the CBK.

The matter was, however, dismissed by Justice Mabeya in January.

The contractor went back to court stating that the amount now stood at Sh812 million and KAA had refused to pay.

The firm sought to attach KAA’s bank accounts at Citibank.