NAIROBI, Kenya, Oct 5 – The Government has been ordered to pay Equip Agencies Limited Sh1.15 billion for unpaid contracts to supply anti-malarial insecticides and chemicals to the Ministry of Health more than 30 years ago.
A three-judge bench of the Court of Appeal (CoA) upheld the company’s claim, finding that Equip Agencies supplied, delivered and invoiced the Government for goods that were subsequently accepted and distributed for use by the Ministry of Health.
The court ordered the Government to pay Sh1.15 billion, being the principal amount for the invoiced goods, together with interest at the court rate from June 26, 1995 until payment in full.
The dispute arose from two contracts signed between the Government and Equip Agencies in 1993 and 1995 for the supply of insecticides, agricultural chemicals, anti-mosquito chemicals and related equipment to government institutions.
The supplies were made on an “as and when required” basis, with the Ministry of Health issuing Local Purchase Orders (LPOs) for the goods it required. Equip Agencies supplied anti-malarial equipment and drugs to various Ministry facilities and subsequently raised invoices for the goods.
In 1996, however, the Ministry cancelled three LPOs despite the goods having already been supplied, received and distributed for use.
This prompted Equip Agencies to sue the Government for Sh1.15 billion, together with interest and costs.
The Government challenged the claim, arguing that the LPOs were invalid because they lacked confirmation that funds were available and had not been properly authorised.
CoA rejected the argument, holding that government institutions cannot rely on internal procedural failures to escape contractual obligations after receiving and using the goods.
The Attorney General also argued that the company’s claim had been filed outside the three-year limitation period applicable to contractual claims against the Government.
The appellate court disagreed, finding that the cause of action arose on August 23, 1996, when the Ministry cancelled the three LPOs after the goods had already been supplied.
Since Equip Agencies filed the suit in 1999, the court found that the claim was lodged within the required three-year limitation period.
The High Court had previously ordered the Government to pay Sh1.86 billion together with compound interest of 18 percent per year until full settlement.
However, CoA set aside the compound interest and instead ordered payment of the Sh1.157 billion principal amount with interest at the applicable court rate from June 26, 1995 until payment in full.
