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ELCDismissedNot stated in the judgment extract· [2024] KEELC 370 (KLR)

Sealink Holdings Limited & another v Chief Registrar of the Judiciary & 2 others (Environment & Land Case 474 of 2016) [2024] KEELC 370 (KLR)

Environment and Land Court of Kenya at Nairobi
25 January 2024
17,639 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
·~71 min to read original · ~4 min brief

The bottom line

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Kenya's Environment and Land Court threw out Sealink Holdings' claims and ordered the company and its contractor to refund public money because their contracts with the Judiciary broke procurement law.

What this practically means

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Executive summary

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This first-instance suit arose from tender No. JUD/12/2012-2013 advertised by the Judiciary for lease of office premises near Milimani Law Courts. The 1st Plaintiff, Sealink Holdings Ltd, claimed to have won the tender through its agent Knight Frank Kenya Ltd, resulting in a 10-year lease over 'Elgon Place' (L.R. No. 209/19114) dated 22nd April 2013. A Head of Terms and subsequent Addendum obligated the Judiciary to pay the 2nd Plaintiff, the building's main contractor, for fit-out and partitioning works. The plaintiffs claimed unpaid fit-out sums (Kshs 89,915,490.08), rent arrears (USD 6,041,505.80), service charge, and restoration costs (Kshs 73,134,439), alleging unlawful termination of the lease by notice of 23rd May 2014. The defendants countered that the tender, Head of Terms and lease were illegal for breaching Article 227 of the Constitution and the PPDA, 2005: the bid quoted in USD contrary to the tender terms, was non-disclosing of the principal, and the Head of Terms and lease materially deviated from the tender document. They counter-claimed for refund of USD 156,849 rent and Kshs 53,820,311.09 advanced to the 2nd Plaintiff, and pleaded frustration due to radiation concerns. The court held that the fit-out arrangement circumvented mandatory procurement law and was illegal; the bid was non-responsive; the lease and Head of Terms were void ab initio; and frustration was not established since the radiation concern was foreseeable and unproven. The plaintiffs' case was dismissed entirely. The counter-claims were allowed: declarations of nullity of the notification of award and the lease, refund of USD 156,849 by the 1st Plaintiff and Kshs 53,820,311.09 by the 2nd Plaintiff, each with interest at court rates. Costs of the suit and counter-claim were awarded to the defendants, borne by the plaintiffs jointly and severally.

Key legal issues

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01

Legality of the fit-out and partitioning arrangement

Holding

The arrangement was illegal and the resulting contract null and void

Reasoning

The tender advertisement and documents were silent on fit-out and partitioning works. The Head of Terms and the Addendum of 14th March 2013, which introduced the 2nd Plaintiff as contractor without competitive procurement, violated Article 227 of the Constitution and the PPDA, 2005. Direct procurement was not shown to have been authorised or documented. Agreements deliberately designed to circumvent procurement law cannot be enforced by a court.

p. 21
02

Refund of advance payments

Holding

The counter-claim for refund of Kshs 53,820,311.09 was allowed

Reasoning

Since the underlying contract was illegal, the court would not lend its aid to the plaintiffs. Amounts paid out of public funds to the 2nd Plaintiff as part payments must be returned to the public coffers, with interest at court rates from the date of filing the counter-claim.

p. 25
03

Responsiveness of the tender

Holding

The bid was non-responsive and the award unlawful

Reasoning

The bid quoted in USD contrary to the requirement for Kenya Shillings, did not disclose it was on behalf of the 1st Plaintiff, and the subsequent Head of Terms and lease materially deviated from the tender document (10-year term instead of 6, added service charge and deposit, larger space). Section 68 of the PPDA, 2005 required the written contract to be based on the tender documents. The deviations rendered the contract illegal, null and void.

p. 29
04

Frustration of the lease

Holding

Frustration was not made out

Reasoning

The alleged radiation concerns were not unforeseeable and should have been investigated before contracting. The plaintiffs' expert evidence established the building was fit for occupation and the defendants led no contradicting evidence. In any event the contracts were already void ab initio, so there was nothing to frustrate or terminate.

p. 30
05

Rent between termination notice and vacation

Holding

Not payable

Reasoning

Apart from the illegality of the contract, the plaintiffs' own witness admitted that the 1st Plaintiff, through Knight Frank, prevented the Judiciary from vacating the premises by warning it not to remove properties. The plaintiffs could not claim rent for a period during which they themselves blocked the defendant's exit.

p. 30

Legal principles established

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  • A public entity's procurement of goods and services must comply with Article 227 of the Constitution and the applicable procurement statute; contracts procured in breach are illegal and unenforceable
  • Courts will not lend their aid to enforce illegal contracts even where the illegality is raised belatedly or by the procuring entity itself
  • Contractors and suppliers bear an equal duty to ensure compliance with procurement law and cannot rely on ignorance of the procuring entity's internal non-compliance
  • A bid that materially deviates from the mandatory requirements of the tender document is non-responsive and any award based on it is contrary to the procurement law
  • A contract void ab initio is a nullity and needs no court order to set it aside

Court orders

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  1. 1.Declaration that the notification of award issued to Knight and Frank Ltd on 26th September 2012 in respect of tender No. JUD/12/2012-2013 was illegal/null and void
  2. 2.Declaration that the lease dated 22nd April 2013 registered on 17th September 2013 over L.R. No. 209/19114 Nairobi is illegal and null and void
  3. 3.Judgment for the 1st and 2nd Defendants against the 1st Plaintiff for USD 156,849 with interest at court rates from the date of filing the counter-claim until payment in full
  4. 4.Judgment for the 1st and 2nd Defendants against the 2nd Plaintiff for Kshs 53,820,311.09 with interest at court rates from the date of filing the counter-claim until payment in full
  5. 5.Costs of the suit and counter-claim awarded to the 1st and 2nd Defendants, borne by the plaintiffs jointly and severally

Authorities

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Legislation

  • Constitution of Kenya, 2010Article 227(1) and 227(2); Article 3; Article 10; Article 159(2)(a)-(e); Article 161(2)(c)
  • Public Procurement and Disposal Act, 2005 (repealed)Sections 2, 3, 4(3)(a), 27, 29(3), 36(1), 38, 40, 51, 52, 60, 64, 66(2), 68, 68(3), 93(1)
  • Public Procurement and Disposal Regulations, 2006General
  • Judicature ActSection 3

Cases cited (9)

  • Adrec Ltd vs Nation Media Group Ltd
    (2017) eKLR
  • Royal Media Services -vs- Independent Electoral and Boundaries Commission and 3 others
    [2019] eKLR
  • Kenya Pipeline Company Ltd –versus Glencore Energy (UK) Ltd
    [2015] eKLR
  • Noa Investment Limited -vs- County Government of Nyamira
    (2021) eKLR
  • Kenya Airways Ltd vs Satwant Singh Flora
    (2013) eKLR
  • Macfoy -vs- United Africa Co. Ltd
    [1961] 3 ALL E.R 1169
  • Holman v Johnson
    (1775-1803) ALLER 98
  • Standard Chartered Bank v Inter Coms Services Ltd & 4 Others
  • Centurion Engineers & Builders Ltd vs. Kenya Bureau of Standards
    [2016] eKLR
Jurisdiction invoked
Original civil jurisdiction of the High Court/ELC over contract and lease disputes; procurement framework under Article 227 of the Constitution and the Public Procurement and Disposal Act, 2005

Key timeline

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Practical implications

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Frequently asked questions

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Cite this brief

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Cite this brief

Caselaw, "Sealink Holdings Limited & another v Chief Registrar of the Judiciary & 2 others (Environment & Land Case 474 of 2016) [2024] KEELC 370 (KLR)", Case Analysis (2024). Not stated in the judgment extract. Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2024/370/eng@2024-01-25

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