Patmose Technical Services (K) Limited v Rural Electrification Authority [2014] eKLR

Key Facts

Transaction Type

Issues

• The court needed to establish the exact percentage of customs duty the Plaintiff paid, which was higher than initially tendered.
• The court needed to determine what constitutes a contract in a tender, specifically whether the tender and award notification formed a contract or if the signed agreement was the contract.
• The court was tasked with determining the customs duty rate that applied at the time the contract was issued, which was central to the liability determination.
• The court had to assess whether the Defendant is legally liable to reimburse the Plaintiff for the overpaid customs duty.
• The court had to identify the specific contract entered into by the parties, particularly the obligations regarding customs duty.

Holdings

• The court ordered the Defendant to pay the costs of the suit, including court interest on the costs from the date the suit was filed (24th August 2012) until full payment.
• The court determined that the Defendant is liable to reimburse the Plaintiff Kshs.30,477,023 for extra customs duty paid on ACSR conductors. The judgment was based on Section 120 of the Customs and Excise Act, which allows sellers to add duty differences to the agreed price when duty rates increase post-contract. The court found the Plaintiff factored in the 10% duty rate at the time of tendering (07.12.2010), as the 25% rate was only gazetted on 22.03.2011.
• The court ruled in favor of the Plaintiff's claim for interest at 18% per annum on the reimbursed customs duty, citing the Plaintiff's entitlement to commercial interest rates for the use of funds. The interest was to accrue from 23rd October 2011 until full payment.

Remedies

• Reimbursement of Kshs.30,477,023 being the extra customs duty paid by the Plaintiff on behalf of the Defendant
• Costs of the suit with interest thereon at court rates from the date of filing (24th August 2012) until full payment
• Interest at a commercial rate of 18% per annum on the Kshs.30,477,023 reimbursement from 23rd October 2011 until full payment

Monetary Damages

Legal Principles

Precedent Name

• National Bank of Kenya Ltd. vs. Pipeplastic Samkolit (K) Ltd
• Vijay Morjaria v Nansingh Madhusingh Darbar & another

Key Disputed Contract Clauses

• Clause 2.10.2 mandated that tender prices for ACSR conductors be quoted as 'Delivered Duty Paid (DDP)', meaning the 10% customs duty rate in December 2010 was factored into pricing. The court held this clause obligated the Defendant to reimburse the Plaintiff for the 15% duty increase after the 2011 gazette notice.
• Clause 2.15.1 determined the tender's validity until March 2011, but the court found this clause irrelevant to the dispute as the contract execution date was the central issue, not tender expiration.
• Clauses 2.29.1-2.29.3 established requirements for contract formation, including mandatory execution within 30 days (not earlier than 14 days) of the award notification. The court analyzed whether the May 2011 contract date violated these timelines, finding the Defendant's execution date invalid.

Cited Statute

• Public Procurement and Disposal Act
• Customs and Excise Act, Chapter 472 of the Laws of Kenya
• East African Community Customs Management Act, 2004

Judge Name

Passage Text

• The court's final judgment: 'I am satisfied that the Plaintiff has proved its case on a balance of probability, and that the Defendant is liable to pay the Plaintiff the extra 15% customs duty the Plaintiff paid on behalf of the Defendant.'
• Section 120 of the Customs and Excise Act (Chapter 472) states: 'If after a contract has been entered into for the sale or delivery of goods at a price which includes duty chargeable under Section 117, an alteration takes place in the rate or amount of the duty before the goods are entered for home use or before export duty or excise duty becomes due, then in the absence of express written provision in the contract to the contrary, the contract shall have effect as follows: In the event of an alteration being the increase of an existing duty, or the imposition of a new duty, the seller, after payment of all the duty payable may add the difference caused by the alteration to the agreed price.'

Damages / Relief Type

• Interest at 18% per annum on the reimbursement amount from 23rd October 2011 until full payment
• Costs of the suit plus interest at court rate from filing date until full payment
• Reimbursement of Kshs.30,477,023 for extra customs duty paid