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Court of AppealPartially Allowed

Centurion Engineers & Builders Limited v Kenya Bureau of Standards (Civil Appeal E398 of 2021) [2023] KECA 1289 (KLR)

Court of Appeal
27 October 2023
HOH. A. OmondiKLDr. K. I. LaibutaGMG. W. Ngenye - Macharia
3,070 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
·~12 min to read original · ~4 min brief

The bottom line

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Kenya's Court of Appeal allowed Centurion Engineers to enforce an arbitral award against KEBS, holding a public body cannot dodge payment by raising procurement law objections too late.

What this practically means

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Executive summary

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KEBS invited bids for refurbishment of its biochemical laboratories and Centurion Engineers emerged as main contractor under a contract dated April 27, 2008. Variations became necessary and a supplementary contract dated December 17, 2009 was signed for extra works. A dispute over the effect of the supplementary agreement went to arbitration; after the High Court set aside the first award and remitted the matter, arbitrator Onesmus Mwangi Gichuri issued a second award dated May 5, 2015. Tuiyott, J. set aside that award in a ruling dated December 9, 2016 on the ground that upholding variations exceeding 15% of the original contract sum would breach section 47 of the Public Procurement and Disposal Act and regulation 31(c), and would therefore be contrary to public policy under section 35(2)(b)(ii) of the Arbitration Act. Centurion appealed on the single ground of public policy. The Court of Appeal, exercising its first-appeal mandate, found that the variation was a mutual agreement evidenced by instructions and the supplementary contract; that the respondent never raised the PPDA during performance and was estopped from doing so too late; and that, unlike cases where liability was unproven, the works were completed and there was evidence of liability, only a refusal to pay. The public-policy objection was an afterthought. The Court reversed the High Court ruling, recognized and adopted the arbitral award as judgment of the court, and allowed the appeal with costs to the appellant.

Questions the Court framed

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The issues the Court set itself to decide, in its own words.

  1. 1.Whether the arbitral award was contrary to the public policy of Kenya within the meaning of section 35(2)(b)(ii) of the Arbitration Act
  2. 2.Whether the variation of the original contract by way of the supplementary agreement breached section 47 of the Public Procurement and Disposal Act as read with regulation 31(c)
  3. 3.Whether the respondent, having instructed the extra works and never raised the PPDA earlier, was estopped from raising the procurement-law objection on appeal

Key legal issues

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01

Whether the arbitral award upholding variations exceeding 15% of the contract sum was contrary to public policy under section 35(2)(b)(ii) of the Arbitration Act

Holding

The award was not contrary to public policy; the PPDA objection was an afterthought by a respondent that used a private document and never referred to the PPDA, and there was evidence of liability to pay.

Reasoning

The Court found the variation was a mutual agreement evidenced by instructions and a supplementary contract. The respondent never raised the PPDA during the works, the tender and contract documents did not reference it, and the arbitrator found no evidence of breach of section 47. Unlike cases where liability was unproven, here the works were completed and the premises occupied, so enforcement was not injurious to the public good.

p. 6
02

Whether the respondent was estopped from raising the PPDA breach for the first time on appeal

Holding

The respondent was estopped from raising the statutory objection too late in the day.

Reasoning

The Court found as a fact that at no point did the respondent raise the provisions of the PPDA, nor did it inform the appellant that it would not pay beyond 15% of the original contract. Having instructed the extra works, signed the supplementary agreement and taken possession of the completed premises, the respondent could not turn around at the last minute to disown its contractual obligations.

p. 5
03

Whether the appellant was entitled to payment for the additional works on a quantum meruit basis

Holding

The appellant was entitled to the value of the work done under the contract as mutually agreed; the arbitral award recognizing that entitlement stands.

Reasoning

It was not disputed that the appellant carried out and completed the additional works as instructed and handed over the project, which the respondent has used in its day-to-day business without paying. The supplementary agreement listed the exact amounts of each additional work, evidencing a meeting of minds, and the respondent's refusal to pay was a 'won't pay' rider rather than a want of liability.

p. 6

Legal principles established

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  • A court will not set aside an arbitral award as contrary to public policy where the procuring entity itself never invoked the procurement statute and there is proof of liability for the work done; a party cannot hide behind statutory violation it participated in.
  • Parties are bound by the terms of their contract and courts will not rewrite contracts for them.

Court orders

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  1. 1.The ruling of the High Court dated December 9, 2016 is set aside
  2. 2.The arbitral award of Mr Onesmus Mwangi Gichuri dated May 5, 2015 is recognized as binding and adopted as judgment of the court
  3. 3.The appeal is allowed with costs to the appellant

The bench

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One judgment of the whole court — no separate or dissenting opinions.

HO
majority
KL
majority
GM
majority
On appeal from
High Court
Jurisdiction invoked
First appeal to the Court of Appeal from the High Court in a matter arising from the setting aside of an arbitral award under section 35 of the Arbitration Act

Relief refused

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Respondent's invocation of public policy to defeat the award on procurement-law grounds

The respondent never raised the PPDA in the contract or earlier proceedings and the works were done and liability evidenced; the objection was an afterthought

p. 5

Costs

The appeal was allowed with costs to the appellant.

Quotable passages

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Verbatim from the judgment, each located to the page it appears on in the official PDF — so these can be cited and checked directly.

The upshot of this is that the ruling of the High Court dated December 9, 2016 be and is hereby set aside. The arbitral award of Mr Onesmus Mwangi Gichuri dated May 5, 2015 be and is hereby recognized as binding and shall be adopted as judgment of the court.
p. 6Final orders - reversal of High Court ruling and adoption of arbitral award
The appeal is accordingly allowed with costs to the appellant.
p. 6Disposition and costs
The respondent cannot be seen to hide under the provisions of the PPDA, yet it was never referred to in the contract between the parties. The respondent being a public body ought to have governed itself as such and not at the last-minute try and turn tables.
p. 6Public bodies cannot invoke procurement law as a shield against obligations they contracted
In this instance, there is evidence of liability to pay, but with a rider of ‘won’t pay’.
p. 5Distinguishing enforcement against public policy from a mere refusal to pay
A court of law cannot rewrite a contract between parties. The parties are bound by the terms of their contract, unless coercion, fraud or undue influence are pleaded or proved.
p. 4Sanctity of contract

Issues in the judgment

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minor

The judgment refers to the arbitrator's award as dated November 28, 2013 in the narrative, but the operative order adopts an award of the same arbitrator dated May 5, 2015; the November date appears to refer to the first (set aside) award while the May 5, 2015 award is the one under challenge, but the sequence is not expressly clarified.

Key timeline

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Practical implications

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Frequently asked questions

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Later judgments citing this (7)

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Judgments in the corpus that rely on this one. Where the Court said how it treated the authority, that is shown.

Cite this brief

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Cite this brief

Caselaw, "Centurion Engineers & Builders Limited v Kenya Bureau of Standards (Civil Appeal E398 of 2021) [2023] KECA 1289 (KLR)", Case Analysis (2023). . Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2023/1289/eng@2023-10-27

Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.