Kenya ordered to pay Sh1.157bn for supplies delivered three decades ago

Chemicals and equipment supplied to Kenya’s Ministry of Health more than 30 years ago have left the Government facing a Sh1.157 billion principal bill, plus interest running from June 26, 1995. The goods had already been received and distributed when the ministry cancelled the purchase orders at the centre of the dispute, according to Capital FM Kenya Business (direct).

A three-judge Court of Appeal bench upheld Equip Agencies Limited’s claim for payment. It found that the company had delivered and invoiced the goods, which the Government accepted and put into use. The ruling preserves the supplier’s right to recover the unpaid amount while changing the interest terms imposed by the High Court. The principal—the amount owed before interest—is Sh1.157 billion under the appellate order.

Delivered, used, then disputed

The case grew out of two government contracts signed in 1993 and 1995. They covered insecticides, agricultural chemicals, anti-mosquito chemicals and related equipment for government institutions. Rather than requiring all the goods at once, the arrangements allowed supplies as needed. The Ministry of Health issued Local Purchase Orders, or LPOs, specifying what it required, and Equip Agencies supplied ministry facilities before submitting invoices.

In 1996, the ministry cancelled three of those orders, although the goods had already been supplied, received and distributed for use. Equip Agencies then sued for Sh1.15 billion, interest and costs. The Government contested the claim on the grounds that the orders were invalid: they lacked confirmation that money was available and had not received proper authorisation.

The appeal judges rejected that defence. Their finding put the Government’s receipt and use of the goods ahead of its objections about how the orders had been processed internally. As Capital FM Kenya Business reported, the court’s position was that procedural shortcomings within government institutions did not remove the obligation to pay for goods already accepted and used.

The Court of Appeal held that internal procedural failures do not allow government institutions to avoid contractual obligations after receiving and using the goods.

Interest terms rewritten

The Attorney General also challenged when the lawsuit had been filed. Contract claims against the Government were subject to a three-year filing deadline, and the Government argued that Equip Agencies had missed it. The appeal court instead identified August 23, 1996—the date the ministry cancelled the three orders—as the point when the right to sue arose. It found that the company’s 1999 lawsuit fell within the required period.

The High Court had previously ordered payment of Sh1.86 billion, together with annual compound interest of 18%. Compound interest adds interest to the balance on which further interest is calculated. The Court of Appeal set that award aside in favour of the Sh1.157 billion principal, with interest at the applicable court rate from June 26, 1995, until full payment.

The next point to watch is settlement of that revised obligation. The report gives neither the applicable court interest rate nor a payment date, so it does not establish the final bill. Under the appellate order, interest continues to run until the Government pays in full.