Taxpayers pay hefty price for government's refusal to obey court orders

Former KDF officer Isaiah Ochanda could get upto Sh36 million due to interest on a court order that awarded him Sh19 million for injury while he was serving. [Elvis Ogina, Standard]

Details have emerged on how Kenyan taxpayers are carrying the heavy burden of government’s failure to honor court orders, resulting in substantial interest payments.

Sometime in 2012, the Ministry of Health contracted Rockey Africa Ltd to supply Renal dialyses consumables.

The deal was that the firm would be paid Sh316 million within 60 days after fulfillment of its end of bargain. 

According to court records, one before Justice Wilfrida Okwany and another before Justice Jairus Ngaah, the company supplied dialysis items to Nakuru, Mombasa and Kisumu.

Despite fulfilling its part of the contract, the Ministry of Health failed to pay.

After four years of musical chairs with the ministry, Rockey moved to court demanding its money.

The company called Robert Wachira as its witness. He told the court that none of the goods that the company delivered were defective or did not meet standards.

Wachira narrated that he had to take a bank loan to facilitate the purchase and delivery of the items.

The court heard that the ministry had claimed there were ‘excess’ items which it never returned.

On the other hand, health ministry urged the court to dismiss the case. It also denied that it had committed to pay within 60 days of delivery.

In addition, the ministry claimed that Rockey breached the terms of contract by supplying defective goods.

It also claimed that there was no proof of delivery.

The ministry called its supply chains assistant manager John Kamau. However, Kamau threw his employer under the bus by admitting that Rockey had a valid contract.

Kamau also admitted that the agreement was that a breach would lead to 20 percent interest penalty per quarter.

The witness further told the court that although the inspection committee had indicated that the company had supplied excess items, they were never returned.

In a contradiction of the ministry’s position, Kamau also confirmed that the verification committee found that the goods ordered were in good condition and were used upon delivery.

The case took three years to settle.

Justice Okwany found on October 31, 2019 that the ministry owed the Rockey Sh326 million.

She directed that the amount would attract 20 percent per quarter from July 1, 2012 until payment in full.

The judge also ordered the ministry to foot costs of the case with 12 percent interest per annum.

Even with the Judge ordering that they should pay, the ministry went quiet.  Again in 2021, the same company filed yet another case before Justice Ngaah.

The shocker to the taxpayer is that the defiance will now cost Kenyans 10 times the amount ministry officials failed to pay. The entire cost is now Sh3 billion.

In court, the Attorney General argued that the government wanted to pay the money. However, its problem was that the interest was too high.

The court heard that the AG had written to Treasury on June 26, 2023 asking for the money but the same was not paid.

Justice Ngaah observed that the government admitted owing the firm and did not give an explanation why it had not honoured its bargain.

It is not the first time the government’s defiance is causing pain to Kenyans for failure to pay litigants, suppliers and contractors.

The case is not an isolated one, nor is it the first time that the government or its agencies are being put on the spot over failure to pay court awards.

As of last year December, the total outstanding pending bills for both National and County Government were at Sh794 billion.

The amount had increased by close to Sh600 billion.

The largest bulk was State Corporations which had Sh509.37 billion (64.1 per cent) followed by Ministries, Departments, and Agencies at Sh121.19 billion (15.3 per cent) and counties at Sh163.62 billion (20.6 per cent) 

In a separate case, Insurance Regulatory Authority was forced to pay Sh80 million to a law firm after failure to pay Sh45 million.

Justice Afred Mabeya ruled that in order to avert the menace of public officers subjecting the government to unwarranted losses, they should be ordered to personally pay for the amount.

From the second case, taxpayers coughed twice the amount an official ought to have paid.

The case was filed by senior lawyer Waweru Gatonye’s law firm, seeking to attach IRA’s accounts in National Bank of Kenya, Kenya Commercial Bank, Co-operative Bank and NCBA Bank.

This was 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 that the money owed was never factored in its estimates for 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 Sh262 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 that IRA had paid his lawfirm Sh283 million but had a balance of Sh45 million.

The court heard that the amount was paid again through 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 that 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 that the funds had not been included in this year’s financial projections.

At the same time, it claimed that it has to get approvals from the board of directors and the national treasury before settling the debt.

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

An Executive brief presented to President William Ruto during a Cabinet retreat in Naivasha in February this year indicated that there are a staggering 40,333 unresolved court cases against the government.

The risk cost of the cases indicated that taxpayers are exposed to Sh1.763 trillion, with an average case age of 5.83 years.

In 2020, multiparty democracy champion Kenneth Matiba was awarded Sh978 million as remedy for torture.

However, by the time he was being paid, Kenyans gave him an extra 600 million in interest.

Again, the court apportioned blame to government officials who were holding back the amount.

Matiba died without tasting a coin for the pain caused him.

In the meantime, the case of former soldier Isaiah Ochanda moved the country.  He was wheeled to Parliament building to seek help as the award he had won against the Ministry of Defence had never been paid.

He was awarded Sh19 million in 2011.

By the time he was going to Parliament, he was owed Sh36 million. If he will be paid, Kenyans will have paid almost double the amount.

The former Kenya Air Force officer sustained a spinal injury and a fracture around the waist in 1987 that left him bedridden.

He narrated to the William Cheptumo-led committee his 35 years of pain, suffering and pursuit of justice.

Hardly audible, Ochanda strained to narrate his story to the committee that listened keenly.

The Ministry of Defence PS was ordered by the court to pay Sh200,000 fine for failing to pay Ochanda.

Initially, the High Court had ordered that he should pay Sh5 million but Court of Appeal Judges Hannah Okwengu, Hellen Omondi and John Mativo lowered the amount of fine.

In the meantime, Anne Wanjira and Miriam Wairimu won their case against the government in 2007. They were awarded Sh24 million.

By the time Justice Pauline Nyamweya was ordering the AG to release their money in 2021, the interest had risen to Sh41 million. Their cost of the case was capped at Sh 957,720.

In the meantime, the AG says that his office had saved the country at least Sh 809 billion between May 2018 to June 2020.