Public officers incurring debts must pay, court rules

Public officers who subject the government to unwarranted losses should personally pay the amount lost, the High Court has ruled.

The ruling follows a case where a Sh45 million legal fees debt owed to a law firm by Insurance Regulatory Authority (IRA) has almost doubled in interest.

Justice Alfred Mabeya in his ruling stated that government officials enter into agreements on behalf of taxpayers, then negligently refuse or decline to honor the terms of the agreement.

The result, he said, is to have taxpayers shoulder the burden of footing bills that would have been paid without incurring interest.

The case was filed by senior lawyer Waweru Gatonye's law firm, seeking to attach IRA's accounts in the National Bank of Kenya, Kenya Commercial Bank, Co-operative Bank, and NCBA Bank after it failed to foot legal fees for three years now.

Justice Mabeya stated that the insurance regulator's accounting officer knew that it had a debt from 2021 but he failed to offset the same.

He added that it was more puzzling that IRA alleged the money owed was never factored in its estimated 2023 budget.

The judge said the claim cannot hold the court from issuing the orders.

"I agree with senior counsel on that. That it may well be that time has come whereby public officers who negligently subject public bodies to unwarranted losses should personally be held liable for such losses. Failure to plan is planning to fail.

A simple answer to that is that, it is high time public bodies realized that they cannot incur obligations and fail to honor them. The accounting officers have a duty to factor in their work plans and budgets, settlement of Court decrees as are other liabilities," said justice Mabeya.

At the heart of the case was a judgment issued in favour of Gatonye's law firm by Justice David Majanja. The judge ordered IRA to pay Sh 262 million for legal services offered in a case filed by Lakestar Insurance Company.

Lakestar's director John Kilel had in 2013 sued the authority, seeking Sh12 billion compensation. He claimed that the insurance firm was illegally wound up in 2002.

In the case before Justice Mabeya, Gatonye told the court IRA had paid his law firm Sh283 million but had a balance of Sh45 million.

The court heard the amount was paid again through an application to attach IRA accounts.

Gatonye told the court that since 2021, the debt owed has accrued interest of more than Sh80 million.

KCB told the court that IRA had Sh5.5 million while NBK stated the insurance regulator had Sh1.4 million.

IRA on the other hand urged the court not to force the banks to release the amount. It claimed the funds had not been included in this year's financial projections. At the same time, it claimed it has to get approvals from the board of directors and the national Treasury.

IRA said Treasury was silent and the amount owed would cripple its operations.

The judge allowed the lawyer to take the money identified by KCB and NBK.