1. The plaintiff filed a suit in HCCOMM No. 433 of 2018 vide a plaint dated 28th September 2018 which was subsequently amended on 14th July 2020 and further amended on 26th March 2021 seeking judgment against the defendant (hereinafter referred to as the defendant) for Kshs.248,558,313.95 with interest thereon at the rate of 10% per annum from 1st August 2017 until payment in full, the sum of Kshs.342,358,725.34 with interest thereon at the rate of 10% per annum from 1st August 2017 until payment in full and costs of the suit.
2. The plaintiff’s claim arises from a series of contractual arrangements relating to the construction of a 400KV transmission line between Loyangalani and Suswa. It claimed that initially, the defendant entered into an EPC Contract with Isolux Ingenieria S.A, on 30th December 2011. That subsequently, on 25th January 2016, the plaintiff entered into a Subcontract Agreement with the contractor to execute part of the works.
3. The plaintiff stated that on 18th January 2017, the contractor and the defendant executed a Direct Payment Agreement to facilitate direct payments by the defendant to it, for mobilizing additional civil works’ teams to accelerate construction. That pursuant to this arrangement, the plaintiff mobilized four additional teams, established site operations, and undertook works including mobilization, plant and equipment deployment, and site overhead services, for which it invoiced a total of Kshs.321,393,927.70.
4. The plaintiff averred that although some payments amounting to Kshs.72,835,613.75 were made, the defendant failed to settle the outstanding certified and invoiced sum of Kshs.248,558,313.95, contrary to the Agreement which required payment within thirty (30) days with interest at 10% per annum. It further averred that it incurred additional losses due to delays, disruptions, and idle time arising from the defendant’s failure to secure wayleaves and manage site conditions, leading to a further claim of Kshs.342,358,725.34. The plaintiff maintained that these delays were not attributable to it, and that it remained entitled to payment under the Direct Payment Agreement. The plaintiff claimed that following the contractor’s insolvency in July 2017, the subsequent termination of the EPC Contract and suspension of the Direct Payment Agreement, the defendant acted in bad faith by refusing to settle outstanding sums and delaying post-termination audits.
5. In opposition to this suit, 1st defendant (hereinafter referred to as the defendant), filed a statement of defence and counterclaim dated 21st January 2019, which were subsequently amended on 21st July 2021. In its defence, the defendant denied all the averments in the plaintiff’s plaint. The defendant acknowledged the existence of the EPC Contract and the Direct Payment Agreement dated 18th January 2017 but denied any involvement in, or liability arising from the Subcontract Agreement between the plaintiff and Isolux Ingenieria S.A. It stated that although it was aware of the Subcontract, it disputed the plaintiff’s assertion that the Direct Payment Agreement was intended to facilitate payments under that Subcontract, maintaining that the Agreement was strictly for direct payment to the plaintiff upon fulfilment of specified conditions, including mobilization and acceleration of works.
6. While admitting the contractual provisions relating to payment rates under Clauses 3.3 and 3.4 of the Agreement, the defendant disputed that the plaintiff satisfied the conditions precedent to trigger such payments. It acknowledged making payments amounting to Kshs.72,835,613.75, for initial mobilization and additional teams, but denied any further indebtedness.
7. The defendant challenged the validity of the plaintiff’s invoices and certification and asserted that any certification required verification and approval in accordance with the Agreement and was conditional upon the plaintiff’s compliance with its obligations. It contended that it fulfilled its obligations regarding wayleaves, save for minimal exceptions, and that the plaintiff failed to notify it of any challenges as required under the Agreement. In the alternative, the defendant asserted that claims for idle time fall outside the scope of the Direct Payment Agreement.
8. In its counterclaim, the defendant averred that it entered into a Direct Payment Agreement dated 18th January 2017 with the plaintiff and the 2nd defendant (hereinafter referred to as Isolux Ingenieria S.A). The defendant explained that the project arose from a 2007 arrangement between the Ministry of Energy and Petroleum and Lake Turkana Wind Power Limited for the development of a 300MW wind power plant in Loiyangalani, necessitating the construction of the Loiyangalani-Suswa 400KV transmission line to evacuate power to the national grid. The defendant stated that under an EPC Contract dated 30th December 2011, Isolux Ingenieria S.A, was to complete the transmission line by June 2017, failure to which the Government of Kenya would incur liability to pay deemed generated energy charges of Kshs.33,000,000/= per day. The defendant asserted that due to financial difficulties faced by Isolux Ingenieria S.A, and resultant delays, it entered into the Direct Payment Agreement with the plaintiff to accelerate construction works between Towers 38 and 147 in South Horr.
9. The defendant contended that under the Agreement, the plaintiff undertook to mobilize four additional civil works’ teams within two (2) weeks and achieve a minimum output of 2.5 Tower foundations per week per team, with the objective of completing the works within the stipulated timeline. It however alleged that the plaintiff breached the Agreement by failing to mobilize the required teams thereby failing to achieve the agreed output despite having received Kshs.74,307,088.00 for mobilization. It was contended that as a result, the project was not completed on time, leading to financial losses to the Government through deemed generated energy payments. The defendant claimed that the plaintiff was unjustly enriched by retaining the mobilization funds without fulfilling its obligations and therefore seeks orders for the plaintiff’s suit be dismissed, for the defendant to be reimbursed the sum of Kshs.74,307,088.00 paid under the Agreement, and for costs of the suit and the counterclaim.
10. Isolux Ingenieria S.A filed two statements of defence to the plaintiff’s suit dated 3rd December 2020 and 31st January 2022. It denied all allegations raised in the plaintiff’s plaint and contended that the plaintiff’s suit is incompetent, defective, and discloses no reasonable cause of action against it, as it has been improperly joined. It averred that disputes arose between it and the defendant, particularly due to the defendant’s failure to provide access to the site, which it characterized as a fundamental breach of contract. It claimed that following termination, a final account assessment established that the defendant owed it a substantial sum exceeding EUR72,000,000.00 for work done, additional costs, performance guarantees, and Subcontractor claims.
11. The plaintiff then filed a reply to the defendant’s amended defence and a defence to the counterclaim, dated 27th August 2021. In its reply, the plaintiff denied the allegations contained in the defendant’s amended statement of defence and counterclaim and maintained that the defendant was fully aware of the Subcontract Agreement dated 25th January 2016 between the plaintiff and Isolux Ingenieria S.A, noting that the Subcontract was contemplated under the EPC Contract, the defendant was duly notified of the plaintiff’s appointment, and all parties acknowledged its existence under Clause 1.2 of the Direct Payment Agreement.
12. The plaintiff asserted that the purpose of the Direct Payment Agreement was expressly to facilitate direct payments by the defendant to enable the plaintiff to mobilize additional civil works’ teams, as reflected in the Agreement’s preamble, and that the defendant was aware of, and present during the mobilization of resources at the project site. The plaintiff contended that the defendant underpaid it by remitting Kshs.72,835,613.75 instead of the full sum due, and maintained that all invoices were properly certified and approved by Isolux Ingenieria S.A, in accordance with the Agreement. It disputed the necessity of further approval by the defendant and averred that no objections were raised to the invoices despite notification. The plaintiff asserted full compliance with the Agreement.
13. In its defence to the defendant’s counterclaim, the plaintiff denied all the averments contained therein and averred that it is largely a stranger to the background matters relating to the EPC Contract and the arrangements between the defendant and Isolux Ingenieria S.A. The plaintiff emphasized that the purpose of the Direct Payment Agreement was to enable direct payments to facilitate mobilization of additional civil works’ teams. The plaintiff maintained that it duly mobilized the four additional teams within the stipulated time, but the achievement of the targeted output was hindered by delays and disruptions caused by the defendant, particularly its failure to secure wayleaves and manage community interference at the site, circumstances for which it bears no responsibility.
14. The plaintiff averred that as a result of these disruptions, it incurred substantial additional costs for idle time and stoppages amounting to Kshs.342,358,725.34, which it claims is recoverable. It asserted that it nonetheless executed the works within a reasonable time, that such works were duly certified, and that invoices were properly issued and received by the defendant, which even made partial payments, thereby acknowledging performance. The plaintiff denied breaching the Direct Payment Agreement and attributed breach to the defendant for failure to obtain wayleaves, secure the site, and make timely and full payments.
15. It contended that the defendant is estopped from relying on its own default to advance a claim of breach or unjust enrichment. In addition, the plaintiff rejected the allegations of unjust enrichment and maintained that all sums claimed were contractually due, properly certified, and invoiced. The plaintiff reiterated that it performed works valued at Kshs.321,393,927.70, of which only Kshs.72,835,613.75 was paid, leaving an outstanding balance of Kshs.248,558,313.95, exclusive of contractual interest at 10% per annum.
16. The plaintiff also filed another suit, being HCCOMM No. E279 of 2020 through a plaint dated 18th May 2020 seeking judgment against the defendant herein for Kshs.179,193,839.68 plus interest thereon at Court rates until payment in full, and costs of the suit with interest thereon at Court rates.
17. The plaintiff’s case is that the project originated from a 2007 arrangement between the Ministry of Energy and Petroleum and Lake Turkana Wind Power Limited for a 300MW wind power plant, following which the defendant entered into an EPC Contract with Isolux Ingenieria S.A, in 2011. It averred that in 2016, it was Subcontracted by Isolux Ingenieria S.A, to undertake part of the foundation works. The plaintiff further averred that the project experienced delays due to design changes, late provision of specifications, and payment delays, which worsened due to Isolux Ingenieria S.A’s financial difficulties. That consequently, the defendant through its Project Manager and Coordinator, encouraged the plaintiff to accelerate works and undertook to pay it directly, culminating in a Direct Payment Agreement dated 18th January 2017 under which the defendant assumed obligations to finance mobilization and ensure prompt payment to the plaintiff.
18. The plaintiff contended that it duly mobilized resources and commenced accelerated works, which were verified as adequate by the Project Supervisor, but progress was hindered by persistent delays attributable to the defendant, including failure to secure wayleaves, community interference, lack of site access, and non-payment of certified invoices. The plaintiff asserted that despite repeated notices and demands, the defendant failed to settle outstanding sums, leading to severe cash flow constraints and eventual suspension of works in July 2017. The plaintiff maintained that the suspension was justified and attributable to the defendant’s breach of contractual obligations. It claimed that the defendant made representations that it would settle outstanding payments and enter into a direct contract with the plaintiff, thereby inducing the plaintiff to remain on site with its resources, incurring additional costs and losses under the legitimate expectation that payment and project resumption would follow.
19. The plaintiff stated that these representations were false, reckless, and amounted to misrepresentation, as the defendant failed to promptly honour its commitments and delayed entering into a direct contract until several months later. As a result, the plaintiff claimed to have suffered substantial losses due to idle time, prolonged site presence, and additional operational costs equivalent to Kshs.179,193,839.68 and sought recovery of the same, on the basis of breach of contract, negligent or fraudulent misrepresentation, and the principle of restitution, on grounds that it should be restored to the position it would have been in, had the defendant fulfilled its obligations.
20. In opposition to the plaintiff’s suit, the defendant filed a defence and counterclaim dated 22nd October 2020. In its defence, the defendant denied all the averments contained in the plaintiffs’ plaint and averred that it is a State Corporation mandated to manage Kenya’s national transmission grid and was neither privy to the Subcontract between the plaintiff and Isolux Ingenieria S.A, nor to its terms, value, or performance. While acknowledging that delays occurred in the project due to Isolux Ingenieria S.A’s financial difficulties, the defendant denied that such delays were attributable to it and disputed any allegation that it assumed contractual responsibility for the plaintiff’s works. The defendant asserted that the purpose of the Direct Payment Agreement was limited to facilitating payments to enable the plaintiff to mobilize additional civil works’ teams to accelerate construction, and not to create any direct contractual relationship, agency, or obligation between itself and the plaintiff.
21. The defendant emphasized that Isolux Ingenieria S.A, remained responsible for the execution and management of the works, including payment for all Subcontracted works, while its (defendant’s) obligation was confined to financing mobilization and maintenance of additional teams. The defendant denied that it undertook to pay the plaintiff’s outstanding invoices or guaranteed such payments and stated that any correspondence or meetings did not create legal obligations or legitimate expectation. It further denied the plaintiff’s assertions regarding suspension of works and maintained that any such suspension related to the Subcontract with Isolux Ingenieria S.A, and was not governed by the Direct Payment Agreement.
22. The defendant contended that any losses suffered by the plaintiff are attributable to Isolux Ingenieria S.A. While admitting that it later entered into direct contracts with the plaintiff in September 2017 and February 2018 for completion of certain works under which the plaintiff was paid substantial sums, the defendant maintained that these were separate arrangements and do not validate the plaintiff’s claims. The defendant asserted that the plaintiff failed to mitigate its losses and that any alleged damages are unproven and not recoverable from it.
23. In the counterclaim, the defendant stated that it entered into an EPC Contract with Isolux Ingenieria S.A, on 30th December 2011 for construction of the transmission line, which was to be completed by June 2017, failure to which the Government would incur daily payments for deemed generated energy. It stated that due to financial difficulties faced by Isolux Ingenieria S.A’s parent company, the project experienced delays, prompting it (defendant) to enter into a Direct Payment Agreement dated 18th January 2017 with the plaintiff and Isolux Ingenieria S.A, to accelerate works between Towers 38 and 147 by funding the mobilization of four additional civil works’ teams. The defendant asserted that under the Agreement, the plaintiff undertook to mobilize the four additional teams within two weeks and achieve a minimum output of 2.5 Tower foundations per week per team, with the overall objective of completing ten foundations per week in consideration of payments covering mobilization, equipment, personnel, and related costs.
24. The defendant claimed that despite receiving Kshs.74,307,088.00 for this purpose, the plaintiff failed to mobilize the required teams and did not achieve the agreed output, thereby breaching the said Agreement. It contended that this failure contributed to delays in completing the transmission line, which in turn exposed the Government to substantial financial liability through deemed generated energy payments. The defendant maintained that the plaintiff’s retention of the mobilization funds without fulfilling its obligations amounts to unjust enrichment, as the payments were made in reliance on the plaintiff’s representations regarding performance capacity. The defendant states that it seeks reimbursement of the sum of Kshs.74,307,088.00, with costs and interest, and prays for dismissal of the plaintiff’s suit with costs.
25. The plaintiff then filed a reply to defence and a defence to the defendant’s counterclaim dated 16th November 2020. In its reply, the plaintiff maintained that the defendant was fully aware of the Subcontract Agreement between it (plaintiff) and Isolux Ingenieria S.A. It averred that the Subcontract was contemplated under the EPC Contract, acknowledged in the Direct Payment Agreement, and that the defendant was notified of both the plaintiff’s appointment and Isolux Ingenieria S.A’s financial difficulties, which hindered performance. The plaintiff contended that the Direct Payment Agreement was specifically intended to secure and facilitate payments to the plaintiff due to persistent delays that were affecting project progress and the plaintiff’s financial stability. The plaintiff asserted that performance under the Direct Payment Agreement was dependent on all parties fulfilling their respective obligations, including the defendant’s duty to ensure availability of wayleaves, timely payments, and coordination of project requirements.
26. The plaintiff attributed delays and failure to achieve agreed output rates to the defendant’s and Isolux Ingenieria S.A’s shortcomings, including failure to secure wayleaves, community disruptions, delayed approvals, lack of materials, and adverse site conditions such as difficult terrain. It however contended that despite these challenges, it mobilized the required teams and resources, which were verified through site reports, correspondence, and approved invoices. The plaintiff emphasized that Isolux Ingenieria S.A, certified its works and invoices, and that the defendant made partial payments, thereby affirming the existence and purpose of the Direct Payment Agreement. It averred that delays in payment and non-payment of certified invoices severely hampered operations which led to withdrawal of equipment due to unpaid dues, and that the defendant is estopped from denying its payment obligations.
27. The plaintiff maintained that it was directly engaged under the Direct Payment Agreement to provide manpower and machinery and that it fulfilled its obligations to the extent possible under the prevailing constraints. It asserted that any failure to meet performance targets was due to delays and disruptions beyond its control, particularly the defendant’s failure to secure wayleaves and ensure smooth project execution. The plaintiff justified its suspension of works as lawful and necessary due to substantial unpaid invoices and financial strain. It further claimed that it continued to incur costs while relying on the defendant’s representations and assurances that payments would be made and that a direct contract would follow, thereby creating a legitimate expectation. The plaintiff rejected allegations of unjust enrichment and reiterated that it carried out substantial works which were duly certified but remain unpaid.
28. In the defence to the defendant’s counterclaim, the plaintiff denied all the averments contained therein and maintained that it duly mobilized the required teams within the stipulated timeframe but emphasized that achievement of the agreed output rates was contingent upon the absence of delays, availability of resources, and fulfillment of obligations by the defendant. The plaintiff attributed its inability to meet the prescribed output targets to numerous delays and disruptions caused by the defendant, including failure to secure wayleaves, persistent community interference, and lack of site access. It insisted that these challenges were beyond its control and fundamentally hindered performance. The plaintiff denied any breach of the Direct Payment Agreement and instead accused the defendant of breaching its obligations by failing to facilitate smooth project execution, provide security, implement recommendations from Project Coordinators, and make timely payments for certified works.
29. The plaintiff contended that it performed and completed works within a reasonable time under the circumstances, which works were duly certified by Isolux Ingenieria S.A, and invoiced to the defendant, which acknowledged the same through partial payments. The plaintiff also accused the defendant of making false or misleading representations that induced it to remain on site and it continued incurring costs under the expectation of payment and eventual direct contracting, thereby causing financial prejudice.
30. On 2nd March 2021, an order was made by the Court to consolidate HCCOMM No. 433 of 2018 with HCCOMM No. E279 of 2020 and directed that HCCOMM No. 433 of 2018 would be the lead file. Further, in a Ruling delivered on 14th June 2022, the Court in HCCOMM No. 433 of 2018 disallowed an application by the plaintiff which sought to proceed with the suit against the 2nd defendant as a nominal defendant.
31. This matter proceeded for hearing, wherein the plaintiff called one witness in support of its case and the defendant called one witness to ventilate its case.
PLAINTIFF’S CASE.
32. Mr. Jonathan Van Eetvelde, the Business Controller and Chief Executive Officer of the plaintiff company testified as PW1. He adopted his witness statements dated 2nd December 2020, 18th May 2020 & 10th December 2020 as his evidence in chief, and produced the documents in the plaintiff’s Trial Bundle of Pleadings and Documents Volume 1 dated 19th December 2020, as plaintiff’s exhibits No. 1 to 14, and those in Volume 2 as plaintiff’s exhibits No. 15 to 23. The documents in the plaintiff’s supplementary bundle of documents was produced as the plaintiff’s exhibits No. 24 to 44. PW1 testified that the plaintiff was engaged in January 2016 as a Subcontractor by Isolux Ingenieria S.A, to undertake foundation works for the Loiyangalani - Suswa transmission line project under an EPC contract with the defendant. He further testified that 295 Tower foundations were to be excavated at the rate of 6 Towers per week, apart from the first two weeks.
33. PW1 contended that although not privy to the EPC Contract, the plaintiff’s role was known to, and acknowledged by the defendant. PW1 stated that the plaintiff mobilized resources and commenced works but encountered significant disruptions, including delayed designs and materials, unresolved wayleave issues, community hostility, difficult terrain, and persistent non-payment of certified invoices by the contractor as communicated in the email dated 15th June 2017 at page 49 of the plaintiff’s supplementary bundle of documents and the DNV GL Field Visit Report dated 7th February 2017. He testified that these challenges disrupted the work sequence, increased costs, and caused delays. He stated that due to worsening payment issues, a Direct Payment Agreement was executed in January 2017 between the plaintiff, the contractor (Isolux Ingenieria S.A), and the defendant, which is found at page 48 of Volume 1 of the plaintiff’s trial bundle, and that the defendant undertook to pay the plaintiff directly for accelerated works.
34. PW1 asserted that the plaintiff complied by mobilizing four additional teams at Kshs.23,554,449.00 per team, making a total of Kshs.94,217,796.00, and executing the works, but payments were delayed and only partially made, leaving substantial outstanding sums for certified works and additional costs arising from idle time and disruptions. PW1 referred to page 245 of volume 1 of the plaintiff’s trial bundle, which is a letter by Isolux Ingenieria S.A, showing that the plaintiff’s invoices were approved by the Project Manager. He contended that the consequences of not being paid on time is that the plaintiff had to fund the project as it was not funded. He explained that the work was interrupted, which in turn interrupted the deliverables, leading to the machinery and workforce not working, making the plaintiff to encounter idle time, essentially between the time the plaintiff suspended the contract and the time when the defendant took over the site.
35. He asserted that the defendant was fully aware of the ongoing challenges, regarding wayleave acquisition and community interference, yet failed to remedy them, thereby breaching its contractual obligations and frustrating performance. It was his evidence that as a result of non-payment, the plaintiff issued notices and eventually suspended works in July 2017, attributing the suspension to the defendant’s breach and Isolux Ingenieria S.A’s financial collapse. He contended that the contract between the defendant and Isolux Ingenieria S.A, was terminated on 14th August 2017, but the defendant induced the plaintiff to remain on site through representations that outstanding payments would be settled and that a direct contract would be executed, which representations were not promptly honoured. He testified that this led to prolonged idleness of resources, additional operational costs, and financial losses. PW1 maintained that the defendant’s conduct amounted to breach of contract and negligent or fraudulent misrepresentation, causing it to incur substantial losses, including idle time and prolongation costs.
36. PWI testified that despite the eventual execution of direct contracts in late 2017 and early 2018 for completion of remaining works, prior outstanding payments and losses were never settled. He asserted the plaintiff’s entitlement to Kshs.248,558,313.95 for certified works and Kshs.342,358,725.34 (or alternatively quantified sums) for idle time and associated costs, with interest.
37. PW1 denied the contents of the defendant’s counterclaim, stating that it did not breach any contractual obligations and that the delays and losses were solely attributable to the defendant’s failures, including non-payment and failure to ensure a conducive work environment. He asserted that the sum claimed by the defendant was the one paid to the plaintiff for mobilizing the 4 additional teams for purposes of accelerating the work, which sums were approved by all the parties involved.
38. During cross-examination, PW1 confirmed that he was not physically present on site during the execution of the Subcontract or the Direct Payment Agreement, as he attended the office in Kenya only occasionally. He referred to page 16 of volume 1 of the plaintiff’s trial bundle, confirming that the plaintiff was engaged under a Subcontract with Isolux Ingenieria S.A, which acted as the contractor, and that the plaintiff’s participation in the project arose solely from that Agreement.
39. PW1 explained that while the execution of works remained governed by the Subcontract, the Direct Payment Agreement with the defendant created a separate arrangement, whereby the defendant became the direct beneficiary of the works, responsible for payment of mobilization and additional teams, while coordination and field supervision remained the responsibility of Isolux Ingenieria S.A.
40. PW1 emphasized that communication regarding work progress and invoices was conducted through DNV, the employer’s (defendant’s) representative, and that the Direct Payment Agreement did not derogate from the plaintiff’s rights under the Subcontract. To this end, he referred to paragraphs 50-53 & 228-230 of volume 1 of the plaintiff’s trial bundle. PW1 further stated that claims for idle resources were not expressly provided for under either the Subcontract or the Direct Payment Agreement, and only arose after the plaintiff suspended works on 13th July 2017 following the insolvency of Isolux Ingenieria S.A, on 12th July 2017. He asserted that the main contract between the said company and the defendant was terminated on 14th August 2017, leaving no subsisting contract at that time, although the plaintiff remained on site.
41. PW1 referred to invoices, letters, and supporting documentation demonstrating certified payments, mobilization and demobilization costs, and reminders for payment. He noted that while some records for accelerated teams were incomplete, unit rates and invoices were submitted to substantiate the claims, as evidenced by the letters and emails at pages 27, 37, 50, 128-131, 162-164, 231, 285, 446, 552 of volume 1, and page 405 of volume 2 of the plaintiff’s trial bundles. He asserted that the said communication with the defendant and Isolux Ingenieria S.A, concerned payment, guarante
[...truncated]
2. The plaintiff’s claim arises from a series of contractual arrangements relating to the construction of a 400KV transmission line between Loyangalani and Suswa. It claimed that initially, the defendant entered into an EPC Contract with Isolux Ingenieria S.A, on 30th December 2011. That subsequently, on 25th January 2016, the plaintiff entered into a Subcontract Agreement with the contractor to execute part of the works.
3. The plaintiff stated that on 18th January 2017, the contractor and the defendant executed a Direct Payment Agreement to facilitate direct payments by the defendant to it, for mobilizing additional civil works’ teams to accelerate construction. That pursuant to this arrangement, the plaintiff mobilized four additional teams, established site operations, and undertook works including mobilization, plant and equipment deployment, and site overhead services, for which it invoiced a total of Kshs.321,393,927.70.
4. The plaintiff averred that although some payments amounting to Kshs.72,835,613.75 were made, the defendant failed to settle the outstanding certified and invoiced sum of Kshs.248,558,313.95, contrary to the Agreement which required payment within thirty (30) days with interest at 10% per annum. It further averred that it incurred additional losses due to delays, disruptions, and idle time arising from the defendant’s failure to secure wayleaves and manage site conditions, leading to a further claim of Kshs.342,358,725.34. The plaintiff maintained that these delays were not attributable to it, and that it remained entitled to payment under the Direct Payment Agreement. The plaintiff claimed that following the contractor’s insolvency in July 2017, the subsequent termination of the EPC Contract and suspension of the Direct Payment Agreement, the defendant acted in bad faith by refusing to settle outstanding sums and delaying post-termination audits.
5. In opposition to this suit, 1st defendant (hereinafter referred to as the defendant), filed a statement of defence and counterclaim dated 21st January 2019, which were subsequently amended on 21st July 2021. In its defence, the defendant denied all the averments in the plaintiff’s plaint. The defendant acknowledged the existence of the EPC Contract and the Direct Payment Agreement dated 18th January 2017 but denied any involvement in, or liability arising from the Subcontract Agreement between the plaintiff and Isolux Ingenieria S.A. It stated that although it was aware of the Subcontract, it disputed the plaintiff’s assertion that the Direct Payment Agreement was intended to facilitate payments under that Subcontract, maintaining that the Agreement was strictly for direct payment to the plaintiff upon fulfilment of specified conditions, including mobilization and acceleration of works.
6. While admitting the contractual provisions relating to payment rates under Clauses 3.3 and 3.4 of the Agreement, the defendant disputed that the plaintiff satisfied the conditions precedent to trigger such payments. It acknowledged making payments amounting to Kshs.72,835,613.75, for initial mobilization and additional teams, but denied any further indebtedness.
7. The defendant challenged the validity of the plaintiff’s invoices and certification and asserted that any certification required verification and approval in accordance with the Agreement and was conditional upon the plaintiff’s compliance with its obligations. It contended that it fulfilled its obligations regarding wayleaves, save for minimal exceptions, and that the plaintiff failed to notify it of any challenges as required under the Agreement. In the alternative, the defendant asserted that claims for idle time fall outside the scope of the Direct Payment Agreement.
8. In its counterclaim, the defendant averred that it entered into a Direct Payment Agreement dated 18th January 2017 with the plaintiff and the 2nd defendant (hereinafter referred to as Isolux Ingenieria S.A). The defendant explained that the project arose from a 2007 arrangement between the Ministry of Energy and Petroleum and Lake Turkana Wind Power Limited for the development of a 300MW wind power plant in Loiyangalani, necessitating the construction of the Loiyangalani-Suswa 400KV transmission line to evacuate power to the national grid. The defendant stated that under an EPC Contract dated 30th December 2011, Isolux Ingenieria S.A, was to complete the transmission line by June 2017, failure to which the Government of Kenya would incur liability to pay deemed generated energy charges of Kshs.33,000,000/= per day. The defendant asserted that due to financial difficulties faced by Isolux Ingenieria S.A, and resultant delays, it entered into the Direct Payment Agreement with the plaintiff to accelerate construction works between Towers 38 and 147 in South Horr.
9. The defendant contended that under the Agreement, the plaintiff undertook to mobilize four additional civil works’ teams within two (2) weeks and achieve a minimum output of 2.5 Tower foundations per week per team, with the objective of completing the works within the stipulated timeline. It however alleged that the plaintiff breached the Agreement by failing to mobilize the required teams thereby failing to achieve the agreed output despite having received Kshs.74,307,088.00 for mobilization. It was contended that as a result, the project was not completed on time, leading to financial losses to the Government through deemed generated energy payments. The defendant claimed that the plaintiff was unjustly enriched by retaining the mobilization funds without fulfilling its obligations and therefore seeks orders for the plaintiff’s suit be dismissed, for the defendant to be reimbursed the sum of Kshs.74,307,088.00 paid under the Agreement, and for costs of the suit and the counterclaim.
10. Isolux Ingenieria S.A filed two statements of defence to the plaintiff’s suit dated 3rd December 2020 and 31st January 2022. It denied all allegations raised in the plaintiff’s plaint and contended that the plaintiff’s suit is incompetent, defective, and discloses no reasonable cause of action against it, as it has been improperly joined. It averred that disputes arose between it and the defendant, particularly due to the defendant’s failure to provide access to the site, which it characterized as a fundamental breach of contract. It claimed that following termination, a final account assessment established that the defendant owed it a substantial sum exceeding EUR72,000,000.00 for work done, additional costs, performance guarantees, and Subcontractor claims.
11. The plaintiff then filed a reply to the defendant’s amended defence and a defence to the counterclaim, dated 27th August 2021. In its reply, the plaintiff denied the allegations contained in the defendant’s amended statement of defence and counterclaim and maintained that the defendant was fully aware of the Subcontract Agreement dated 25th January 2016 between the plaintiff and Isolux Ingenieria S.A, noting that the Subcontract was contemplated under the EPC Contract, the defendant was duly notified of the plaintiff’s appointment, and all parties acknowledged its existence under Clause 1.2 of the Direct Payment Agreement.
12. The plaintiff asserted that the purpose of the Direct Payment Agreement was expressly to facilitate direct payments by the defendant to enable the plaintiff to mobilize additional civil works’ teams, as reflected in the Agreement’s preamble, and that the defendant was aware of, and present during the mobilization of resources at the project site. The plaintiff contended that the defendant underpaid it by remitting Kshs.72,835,613.75 instead of the full sum due, and maintained that all invoices were properly certified and approved by Isolux Ingenieria S.A, in accordance with the Agreement. It disputed the necessity of further approval by the defendant and averred that no objections were raised to the invoices despite notification. The plaintiff asserted full compliance with the Agreement.
13. In its defence to the defendant’s counterclaim, the plaintiff denied all the averments contained therein and averred that it is largely a stranger to the background matters relating to the EPC Contract and the arrangements between the defendant and Isolux Ingenieria S.A. The plaintiff emphasized that the purpose of the Direct Payment Agreement was to enable direct payments to facilitate mobilization of additional civil works’ teams. The plaintiff maintained that it duly mobilized the four additional teams within the stipulated time, but the achievement of the targeted output was hindered by delays and disruptions caused by the defendant, particularly its failure to secure wayleaves and manage community interference at the site, circumstances for which it bears no responsibility.
14. The plaintiff averred that as a result of these disruptions, it incurred substantial additional costs for idle time and stoppages amounting to Kshs.342,358,725.34, which it claims is recoverable. It asserted that it nonetheless executed the works within a reasonable time, that such works were duly certified, and that invoices were properly issued and received by the defendant, which even made partial payments, thereby acknowledging performance. The plaintiff denied breaching the Direct Payment Agreement and attributed breach to the defendant for failure to obtain wayleaves, secure the site, and make timely and full payments.
15. It contended that the defendant is estopped from relying on its own default to advance a claim of breach or unjust enrichment. In addition, the plaintiff rejected the allegations of unjust enrichment and maintained that all sums claimed were contractually due, properly certified, and invoiced. The plaintiff reiterated that it performed works valued at Kshs.321,393,927.70, of which only Kshs.72,835,613.75 was paid, leaving an outstanding balance of Kshs.248,558,313.95, exclusive of contractual interest at 10% per annum.
16. The plaintiff also filed another suit, being HCCOMM No. E279 of 2020 through a plaint dated 18th May 2020 seeking judgment against the defendant herein for Kshs.179,193,839.68 plus interest thereon at Court rates until payment in full, and costs of the suit with interest thereon at Court rates.
17. The plaintiff’s case is that the project originated from a 2007 arrangement between the Ministry of Energy and Petroleum and Lake Turkana Wind Power Limited for a 300MW wind power plant, following which the defendant entered into an EPC Contract with Isolux Ingenieria S.A, in 2011. It averred that in 2016, it was Subcontracted by Isolux Ingenieria S.A, to undertake part of the foundation works. The plaintiff further averred that the project experienced delays due to design changes, late provision of specifications, and payment delays, which worsened due to Isolux Ingenieria S.A’s financial difficulties. That consequently, the defendant through its Project Manager and Coordinator, encouraged the plaintiff to accelerate works and undertook to pay it directly, culminating in a Direct Payment Agreement dated 18th January 2017 under which the defendant assumed obligations to finance mobilization and ensure prompt payment to the plaintiff.
18. The plaintiff contended that it duly mobilized resources and commenced accelerated works, which were verified as adequate by the Project Supervisor, but progress was hindered by persistent delays attributable to the defendant, including failure to secure wayleaves, community interference, lack of site access, and non-payment of certified invoices. The plaintiff asserted that despite repeated notices and demands, the defendant failed to settle outstanding sums, leading to severe cash flow constraints and eventual suspension of works in July 2017. The plaintiff maintained that the suspension was justified and attributable to the defendant’s breach of contractual obligations. It claimed that the defendant made representations that it would settle outstanding payments and enter into a direct contract with the plaintiff, thereby inducing the plaintiff to remain on site with its resources, incurring additional costs and losses under the legitimate expectation that payment and project resumption would follow.
19. The plaintiff stated that these representations were false, reckless, and amounted to misrepresentation, as the defendant failed to promptly honour its commitments and delayed entering into a direct contract until several months later. As a result, the plaintiff claimed to have suffered substantial losses due to idle time, prolonged site presence, and additional operational costs equivalent to Kshs.179,193,839.68 and sought recovery of the same, on the basis of breach of contract, negligent or fraudulent misrepresentation, and the principle of restitution, on grounds that it should be restored to the position it would have been in, had the defendant fulfilled its obligations.
20. In opposition to the plaintiff’s suit, the defendant filed a defence and counterclaim dated 22nd October 2020. In its defence, the defendant denied all the averments contained in the plaintiffs’ plaint and averred that it is a State Corporation mandated to manage Kenya’s national transmission grid and was neither privy to the Subcontract between the plaintiff and Isolux Ingenieria S.A, nor to its terms, value, or performance. While acknowledging that delays occurred in the project due to Isolux Ingenieria S.A’s financial difficulties, the defendant denied that such delays were attributable to it and disputed any allegation that it assumed contractual responsibility for the plaintiff’s works. The defendant asserted that the purpose of the Direct Payment Agreement was limited to facilitating payments to enable the plaintiff to mobilize additional civil works’ teams to accelerate construction, and not to create any direct contractual relationship, agency, or obligation between itself and the plaintiff.
21. The defendant emphasized that Isolux Ingenieria S.A, remained responsible for the execution and management of the works, including payment for all Subcontracted works, while its (defendant’s) obligation was confined to financing mobilization and maintenance of additional teams. The defendant denied that it undertook to pay the plaintiff’s outstanding invoices or guaranteed such payments and stated that any correspondence or meetings did not create legal obligations or legitimate expectation. It further denied the plaintiff’s assertions regarding suspension of works and maintained that any such suspension related to the Subcontract with Isolux Ingenieria S.A, and was not governed by the Direct Payment Agreement.
22. The defendant contended that any losses suffered by the plaintiff are attributable to Isolux Ingenieria S.A. While admitting that it later entered into direct contracts with the plaintiff in September 2017 and February 2018 for completion of certain works under which the plaintiff was paid substantial sums, the defendant maintained that these were separate arrangements and do not validate the plaintiff’s claims. The defendant asserted that the plaintiff failed to mitigate its losses and that any alleged damages are unproven and not recoverable from it.
23. In the counterclaim, the defendant stated that it entered into an EPC Contract with Isolux Ingenieria S.A, on 30th December 2011 for construction of the transmission line, which was to be completed by June 2017, failure to which the Government would incur daily payments for deemed generated energy. It stated that due to financial difficulties faced by Isolux Ingenieria S.A’s parent company, the project experienced delays, prompting it (defendant) to enter into a Direct Payment Agreement dated 18th January 2017 with the plaintiff and Isolux Ingenieria S.A, to accelerate works between Towers 38 and 147 by funding the mobilization of four additional civil works’ teams. The defendant asserted that under the Agreement, the plaintiff undertook to mobilize the four additional teams within two weeks and achieve a minimum output of 2.5 Tower foundations per week per team, with the overall objective of completing ten foundations per week in consideration of payments covering mobilization, equipment, personnel, and related costs.
24. The defendant claimed that despite receiving Kshs.74,307,088.00 for this purpose, the plaintiff failed to mobilize the required teams and did not achieve the agreed output, thereby breaching the said Agreement. It contended that this failure contributed to delays in completing the transmission line, which in turn exposed the Government to substantial financial liability through deemed generated energy payments. The defendant maintained that the plaintiff’s retention of the mobilization funds without fulfilling its obligations amounts to unjust enrichment, as the payments were made in reliance on the plaintiff’s representations regarding performance capacity. The defendant states that it seeks reimbursement of the sum of Kshs.74,307,088.00, with costs and interest, and prays for dismissal of the plaintiff’s suit with costs.
25. The plaintiff then filed a reply to defence and a defence to the defendant’s counterclaim dated 16th November 2020. In its reply, the plaintiff maintained that the defendant was fully aware of the Subcontract Agreement between it (plaintiff) and Isolux Ingenieria S.A. It averred that the Subcontract was contemplated under the EPC Contract, acknowledged in the Direct Payment Agreement, and that the defendant was notified of both the plaintiff’s appointment and Isolux Ingenieria S.A’s financial difficulties, which hindered performance. The plaintiff contended that the Direct Payment Agreement was specifically intended to secure and facilitate payments to the plaintiff due to persistent delays that were affecting project progress and the plaintiff’s financial stability. The plaintiff asserted that performance under the Direct Payment Agreement was dependent on all parties fulfilling their respective obligations, including the defendant’s duty to ensure availability of wayleaves, timely payments, and coordination of project requirements.
26. The plaintiff attributed delays and failure to achieve agreed output rates to the defendant’s and Isolux Ingenieria S.A’s shortcomings, including failure to secure wayleaves, community disruptions, delayed approvals, lack of materials, and adverse site conditions such as difficult terrain. It however contended that despite these challenges, it mobilized the required teams and resources, which were verified through site reports, correspondence, and approved invoices. The plaintiff emphasized that Isolux Ingenieria S.A, certified its works and invoices, and that the defendant made partial payments, thereby affirming the existence and purpose of the Direct Payment Agreement. It averred that delays in payment and non-payment of certified invoices severely hampered operations which led to withdrawal of equipment due to unpaid dues, and that the defendant is estopped from denying its payment obligations.
27. The plaintiff maintained that it was directly engaged under the Direct Payment Agreement to provide manpower and machinery and that it fulfilled its obligations to the extent possible under the prevailing constraints. It asserted that any failure to meet performance targets was due to delays and disruptions beyond its control, particularly the defendant’s failure to secure wayleaves and ensure smooth project execution. The plaintiff justified its suspension of works as lawful and necessary due to substantial unpaid invoices and financial strain. It further claimed that it continued to incur costs while relying on the defendant’s representations and assurances that payments would be made and that a direct contract would follow, thereby creating a legitimate expectation. The plaintiff rejected allegations of unjust enrichment and reiterated that it carried out substantial works which were duly certified but remain unpaid.
28. In the defence to the defendant’s counterclaim, the plaintiff denied all the averments contained therein and maintained that it duly mobilized the required teams within the stipulated timeframe but emphasized that achievement of the agreed output rates was contingent upon the absence of delays, availability of resources, and fulfillment of obligations by the defendant. The plaintiff attributed its inability to meet the prescribed output targets to numerous delays and disruptions caused by the defendant, including failure to secure wayleaves, persistent community interference, and lack of site access. It insisted that these challenges were beyond its control and fundamentally hindered performance. The plaintiff denied any breach of the Direct Payment Agreement and instead accused the defendant of breaching its obligations by failing to facilitate smooth project execution, provide security, implement recommendations from Project Coordinators, and make timely payments for certified works.
29. The plaintiff contended that it performed and completed works within a reasonable time under the circumstances, which works were duly certified by Isolux Ingenieria S.A, and invoiced to the defendant, which acknowledged the same through partial payments. The plaintiff also accused the defendant of making false or misleading representations that induced it to remain on site and it continued incurring costs under the expectation of payment and eventual direct contracting, thereby causing financial prejudice.
30. On 2nd March 2021, an order was made by the Court to consolidate HCCOMM No. 433 of 2018 with HCCOMM No. E279 of 2020 and directed that HCCOMM No. 433 of 2018 would be the lead file. Further, in a Ruling delivered on 14th June 2022, the Court in HCCOMM No. 433 of 2018 disallowed an application by the plaintiff which sought to proceed with the suit against the 2nd defendant as a nominal defendant.
31. This matter proceeded for hearing, wherein the plaintiff called one witness in support of its case and the defendant called one witness to ventilate its case.
PLAINTIFF’S CASE.
32. Mr. Jonathan Van Eetvelde, the Business Controller and Chief Executive Officer of the plaintiff company testified as PW1. He adopted his witness statements dated 2nd December 2020, 18th May 2020 & 10th December 2020 as his evidence in chief, and produced the documents in the plaintiff’s Trial Bundle of Pleadings and Documents Volume 1 dated 19th December 2020, as plaintiff’s exhibits No. 1 to 14, and those in Volume 2 as plaintiff’s exhibits No. 15 to 23. The documents in the plaintiff’s supplementary bundle of documents was produced as the plaintiff’s exhibits No. 24 to 44. PW1 testified that the plaintiff was engaged in January 2016 as a Subcontractor by Isolux Ingenieria S.A, to undertake foundation works for the Loiyangalani - Suswa transmission line project under an EPC contract with the defendant. He further testified that 295 Tower foundations were to be excavated at the rate of 6 Towers per week, apart from the first two weeks.
33. PW1 contended that although not privy to the EPC Contract, the plaintiff’s role was known to, and acknowledged by the defendant. PW1 stated that the plaintiff mobilized resources and commenced works but encountered significant disruptions, including delayed designs and materials, unresolved wayleave issues, community hostility, difficult terrain, and persistent non-payment of certified invoices by the contractor as communicated in the email dated 15th June 2017 at page 49 of the plaintiff’s supplementary bundle of documents and the DNV GL Field Visit Report dated 7th February 2017. He testified that these challenges disrupted the work sequence, increased costs, and caused delays. He stated that due to worsening payment issues, a Direct Payment Agreement was executed in January 2017 between the plaintiff, the contractor (Isolux Ingenieria S.A), and the defendant, which is found at page 48 of Volume 1 of the plaintiff’s trial bundle, and that the defendant undertook to pay the plaintiff directly for accelerated works.
34. PW1 asserted that the plaintiff complied by mobilizing four additional teams at Kshs.23,554,449.00 per team, making a total of Kshs.94,217,796.00, and executing the works, but payments were delayed and only partially made, leaving substantial outstanding sums for certified works and additional costs arising from idle time and disruptions. PW1 referred to page 245 of volume 1 of the plaintiff’s trial bundle, which is a letter by Isolux Ingenieria S.A, showing that the plaintiff’s invoices were approved by the Project Manager. He contended that the consequences of not being paid on time is that the plaintiff had to fund the project as it was not funded. He explained that the work was interrupted, which in turn interrupted the deliverables, leading to the machinery and workforce not working, making the plaintiff to encounter idle time, essentially between the time the plaintiff suspended the contract and the time when the defendant took over the site.
35. He asserted that the defendant was fully aware of the ongoing challenges, regarding wayleave acquisition and community interference, yet failed to remedy them, thereby breaching its contractual obligations and frustrating performance. It was his evidence that as a result of non-payment, the plaintiff issued notices and eventually suspended works in July 2017, attributing the suspension to the defendant’s breach and Isolux Ingenieria S.A’s financial collapse. He contended that the contract between the defendant and Isolux Ingenieria S.A, was terminated on 14th August 2017, but the defendant induced the plaintiff to remain on site through representations that outstanding payments would be settled and that a direct contract would be executed, which representations were not promptly honoured. He testified that this led to prolonged idleness of resources, additional operational costs, and financial losses. PW1 maintained that the defendant’s conduct amounted to breach of contract and negligent or fraudulent misrepresentation, causing it to incur substantial losses, including idle time and prolongation costs.
36. PWI testified that despite the eventual execution of direct contracts in late 2017 and early 2018 for completion of remaining works, prior outstanding payments and losses were never settled. He asserted the plaintiff’s entitlement to Kshs.248,558,313.95 for certified works and Kshs.342,358,725.34 (or alternatively quantified sums) for idle time and associated costs, with interest.
37. PW1 denied the contents of the defendant’s counterclaim, stating that it did not breach any contractual obligations and that the delays and losses were solely attributable to the defendant’s failures, including non-payment and failure to ensure a conducive work environment. He asserted that the sum claimed by the defendant was the one paid to the plaintiff for mobilizing the 4 additional teams for purposes of accelerating the work, which sums were approved by all the parties involved.
38. During cross-examination, PW1 confirmed that he was not physically present on site during the execution of the Subcontract or the Direct Payment Agreement, as he attended the office in Kenya only occasionally. He referred to page 16 of volume 1 of the plaintiff’s trial bundle, confirming that the plaintiff was engaged under a Subcontract with Isolux Ingenieria S.A, which acted as the contractor, and that the plaintiff’s participation in the project arose solely from that Agreement.
39. PW1 explained that while the execution of works remained governed by the Subcontract, the Direct Payment Agreement with the defendant created a separate arrangement, whereby the defendant became the direct beneficiary of the works, responsible for payment of mobilization and additional teams, while coordination and field supervision remained the responsibility of Isolux Ingenieria S.A.
40. PW1 emphasized that communication regarding work progress and invoices was conducted through DNV, the employer’s (defendant’s) representative, and that the Direct Payment Agreement did not derogate from the plaintiff’s rights under the Subcontract. To this end, he referred to paragraphs 50-53 & 228-230 of volume 1 of the plaintiff’s trial bundle. PW1 further stated that claims for idle resources were not expressly provided for under either the Subcontract or the Direct Payment Agreement, and only arose after the plaintiff suspended works on 13th July 2017 following the insolvency of Isolux Ingenieria S.A, on 12th July 2017. He asserted that the main contract between the said company and the defendant was terminated on 14th August 2017, leaving no subsisting contract at that time, although the plaintiff remained on site.
41. PW1 referred to invoices, letters, and supporting documentation demonstrating certified payments, mobilization and demobilization costs, and reminders for payment. He noted that while some records for accelerated teams were incomplete, unit rates and invoices were submitted to substantiate the claims, as evidenced by the letters and emails at pages 27, 37, 50, 128-131, 162-164, 231, 285, 446, 552 of volume 1, and page 405 of volume 2 of the plaintiff’s trial bundles. He asserted that the said communication with the defendant and Isolux Ingenieria S.A, concerned payment, guarante
[...truncated]