Misort Africa Limited v Principal Secretary, National Treasury and Planning (Commercial Arbitration Cause E049 of 2021) [2022] KEHC 16906 (KLR) (Commercial and Tax) (21 December 2022) (Ruling)

Key Facts

Transaction Type

Issues

• The second issue is whether there was a breach of contract, specifically whether the Respondent's actions amounted to a repudiatory breach.
• The fourth issue is who was to bear the costs of the arbitral proceedings.
• The first issue is whether under the Contract, the Applicant was contracted to construct and deliver a complete and functional Disaster Data Recovery Centre.
• The third issue is whether the parties were entitled to the reliefs sought in the Amended Statement of Claim and the Statement of Defence.

Holdings

• The court dismissed the Respondent's application to set aside the arbitral award, finding no merit in the claim that the award dealt with matters outside the scope of the arbitration or violated Kenyan public policy. The court held that the Arbitrator's findings on the contract and procurement procedures were within his authority and consistent with the law.
• The court allowed the Applicant's application for recognition and enforcement of the arbitral award, confirming the award's finality and binding nature under the Arbitration Act. The award was entered as a judgment of the court, with leave granted to the Respondent to enforce it.
• The Applicant was awarded costs of both applications, assessed at Kshs 200,000.00, following the court's determination that the Respondent's arguments lacked validity.

Remedies

• The Respondent must pay the Applicant Kshs 57,438,038, which covers the legal costs of the arbitration proceedings.
• The awarded sum of Kshs 3,874,450,575.55 attracts simple interest at 12% per annum, starting from the date of the award until it is fully paid.
• The Applicant is required to deliver the electrical installation equipment it holds in storage to the Respondent's project site.
• The legal costs of Kshs 57,438,038 attract simple interest at 12% per annum from the award date until full payment.
• The Applicant has been granted the costs of both the enforcement and opposition applications, totaling Kshs 200,000.00.
• The Respondent is required to refund all fees and expenses related to the arbitration proceedings, as specified in the VAT invoices provided to the parties.
• The Respondent is ordered to pay the Applicant the sum of Kshs 3,874,450,575.55, as determined by the Arbitrator for the awarded relief.

Contract Value

Monetary Damages

Legal Principles

Precedent Name

• Royal Media Services v Independent Electoral & Boundaries Commission & 3 others
• Christ for All Nations v Apollo Insurance Co Ltd
• Synergy Credit Limited v Cape Holdings Limited
• Kenya Tea Development Agency Ltd & 7 others v Savings Tea Brokers Limited
• Mall Developers Limited v Postal Corporation of Kenya

Key Disputed Contract Clauses

• The dispute resolution clause (Clause 37) established the contractual basis for arbitration, specifying that any disputes between the employer/project manager and contractor could be submitted to arbitration within 30 days of notice. The court relied on this clause to affirm the arbitrator's jurisdiction over the parties' claims.
• The recital and contract terms emphasized the Applicant's obligation to construct and deliver a complete and functional Disaster Data Recovery Centre. The court analyzed this clause to determine whether Phase 3 constituted a separate contract requiring competitive procurement or formed part of the original obligation.

Cited Statute

• Constitution of Kenya
• Public Procurement and Disposal Regulations, 2006
• Arbitration Act, 1995
• Public Procurement and Disposal Act, 2005

Judge Name

Passage Text

• The dispute resolution clause as captured under Clause 37 of the Contract provides in part that, 'In case any dispute or difference shall arise between the employer or the project manager on his behalf and the contractor, either during the progress or after the completion or termination of entire works, such dispute shall be notified in writing by either party to the other with a request to submit it to arbitration and to concur in the appointment of an arbitrator within thirty days of notice. The dispute shall be referred to arbitration and final decision of a person to be agreed between the parties.....'
• I fail to see how the Award violates the public policy of Kenya. It is now clear that the Respondent has failed to make a case for setting aside the Award.
• Whereas the Client is desirous that the Contractor executes the Proposed Disaster Data Recovery Centre at Naivasha hereinafter referred to as 'the Services' and client has accepted the tender submitted by the Contractor for the execution and completion of such works and remedying any defects therein for the contract price of Kshs.782, 499,814.30...

Damages / Relief Type

• Payment of Kshs 57,438,038 for legal costs incurred during arbitration.
• Simple interest at 12% per annum on Kshs 57,438,038 from award date until payment.
• Award of Kshs 200,000.00 for costs of both applications.
• Payment of Kshs 3,874,450,575.55 for principal amount (idle resources, loss of profit, and retention sum).
• Simple interest at 12% per annum on Kshs 3,874,450,575.55 from award date until payment.
• Delivery of electrical installation equipment to the project site by the Applicant.
• Refund of arbitration fees and expenses as per VAT invoices.