Court hits the taxpayer with Sh11 billion fine

The state of Kenya’s public finances has changed for the worse after the High Court awarded a private company Sh11.4 billion against the government.

Orbit Chemical Industries, a manufacturer and distributor of cleaning chemicals and hygiene solutions, won the massive award in a protracted legal tussle over the registration of a caveat on a piece of land that it bought in Nairobi.

Lady Justice Roselyne Nambuye ordered the Attorney General to pay Orbit Sh6 billion plus Sh5 billion in interest accrued from March 4, 2008, when the parties to the suit agreed on the deal.

The award is one of the largest in Kenya’s history and comes just a month after the government’s finances suffered a major hit from a wave of workers’ strikes that added nearly Sh40 billion to the public wage bill. 

The landmark ruling that judge David Majanja delivered on behalf of Mrs Nambuye said Orbit Chemicals was entitled to the relief sought “because the settlement reached was agreed by the parties.”

Orbit Chemicals had lodged an Sh18 billion claim arising from the profits it allegedly lost for failure to utilise the 92.2 acres of land in Embakasi, near the Jomo Kenyatta International Airport (JKIA).

Lady Justice Nambuye said that Orbit had conceded to a downsizing of its Sh18 billion claim to Sh6 billion leaving the AG with the obligation of settling the debt.

Orbit had sued the Ministry of Lands for unlawful registration of a caveat against the property it had bought from the National Bank of Kenya (NBK).
The firm moved to court in 2004, seven years after the ministry placed a caveat on the property claiming that it belonged to the government.

The caveat also blocked the company from interfering or dealing in the land.

Court documents show that the land was later sub-divided and sold to unsuspecting buyers before it was invaded by squatters who have since assumed proprietary rights over it. The squatters have recently moved to court to contest the government’s attempt to evict them.

Orbit Chemicals had sought general damages against the government and the removal of the squatters from the land. The chemical company had argued that the registrar of titles had no powers to register a caveat against legally acquired private land.

Orbit’s lawyer, Mathew Oseko, told the court that registration of the caveat against his client’s property was unlawful.

Mr Oseko argued that there was no fraud or improper dealing on the land LR 12425 and insisted that the Sh6 billion claim had not been denied by the government.

He further told Mrs Nambuye that the company’s attempts to remove the caveat had been unsuccessful.

Mr Oseko claimed that the Ministry of Lands had been driven by ulterior motives to maintain the offending caveat. 

Justice Nambuye ruled that Orbit Chemicals had demonstrated that the government had agreed to pay the Sh6 billion as the quantity of damages computed by the Chief Economist in the Finance Ministry, JPG Tuamwari.

Parties to the dispute had authorised the economist to prepare a compromise report for tabling in court as part of the settlement deal.
The Treasury, however, refused to settle the amount alleging that the economist, lacked authority to compute the figures.

Treasury permanent secretary Joseph Kinyua opposed the claim saying the Government Contracts Act did not authorise Mr Tuamwari to negotiate or determine the amount.

His Lands counterpart, Dorothy Angote, also opposed the claim on grounds that the chief economist did not consult the ministry for authorisation.
She said it was only the PS who is legally authorised to commit the government on issues affecting the ministry.

Lady Justice Nambuye dismissed the AG’s arguments saying Orbit Chemicals had demonstrated a well-founded and sufficient cause for seeking the court’s intervention to compel the government not to abandon the compromise.

“The plaintiff’s complaints raised against the defendants which compelled them to move to court, have been found to be competent, sound and well founded,” she said.

Lady Justice Nambuye recently survived an earlier ruling by the Judges and Magistrates Vetting Board that she was unfit to continue serving as a judge.
She is waiting to appear before the board for a second time after she successfully appealed the decision.

On September 22, 2006, High Court judge Jackton Ojwang struck out the AG’s defence in the land case, stating that he had failed to disclose reasonable grounds of opposition and termed it an abuse of court process.

“The defendant has no credible pleading on how and on what account, the registrar’s Caveat was lodged and kept in place for more than a dozen years – yet that is the core of the plaintiff’s gravamen,” said Prof Ojwang, who is now a Supreme Court judge.

Mr Justice Ojwang noted that rather than the AG engaging Orbit Chemical squarely on its claim, “its statement of defence alleged that it was the squatters on land who were to blame and not the registrar of titles.”

“A pleading of this kind is a red herring which I would typify, with respect, as scandalous, frivolous and vexatious.”

Orbit Chemical Industries inked a deal in 2007 to start manufacturing such products as Jik, Harpic and Dettol for Reckitt Benckiser East Africa—which bowed out of the Kenyan market due high operating costs.