KENYA:Government could pay Sh35b in drugs dispute

July 2017 Dailynation;The Health ministry’s move to withhold a Sh1.8 billion payment from a supplier who shipped in anti-malarial drugs and equipment between 1993 and 1995 has exposed taxpayers to the risk of paying at least Sh35 billion after interest accumulated over two decades.

Equip Agencies, a local supplies firm, was contracted by the Health ministry in 1993 to supply anti-malarial drugs and equipment as the government moved to fight the then emerging deadly disease.

But things went sour after the government called off the deal in 1995 before settling the amount Equip Agencies said was due.


What followed was a 12-year battle in the courts, where the ministry, in its defence, admitted to having business dealings with the firm but denied owing it money.

In 2011, then High Court judge Muga Apondi ruled in favour of Equip Agencies after the firm submitted documents indicating that it had supplied anti-malarial drugs and equipment to the Ministry of Health without receiving any payments.

Justice Apondi ordered that the government pays Equip Agencies the due Sh1.8 billion with interest from March 1999 when the dispute first went to court.

Attorney-General Githu Muigai then notified the judge of his intention to challenge the decision, but is yet to file the suit at the Court of Appeal.


Equip Agencies has now filed a fresh suit at the High Court, seeking to compel the government to settle the bill as it argues that Prof Muigai’s notice of appeal has now expired with no action being taken to challenge Justice Apondi’s judgment.

Under the law, a party in any given case is required to file a notice of appeal within 14 days of judgment, after which they have 60 days to lodge the appeal before a higher court.

Permission can, however, be sought to extend the period beyond 60 days.

Prof Muigai has opposed the fresh suit by Equip Agencies, arguing it was filed prematurely, and has asked Justice George Odunga to throw it out and order the supplies firm to pay the legal bills his office has incurred in seeking the dismissal.


The Attorney-General said he intends to challenge Justice Apondi’s decision at the Court of Appeal and should be allowed to follow through before any orders are issued in favour of Equip Agencies.

He adds that the dispute involves a huge amount of public funds and he should, therefore, be allowed to challenge the 2011 award at the appellate court.

“The AG filed a notice of appeal on December 14, 2011, intending to appeal against the whole judgment but has never taken any steps to file the appeal, and the notice of appeal is deemed withdrawn pursuant to rule 83 of the Court of Appeal rules of 2010. Equip Agencies has been struggling to pay the financiers of the supplies using its own resources, incurring further debts in the process,” Equip Agencies said.


Former Health Permanent Secretary Julius Meme said in court papers before Justice Apondi that the local purchase orders Equip Agencies had furnished seeking payment were not signed by the authorised officer hence it had no obligation to settle the disputed bill.

But Justice Apondi after examining arguments from both parties ruled there was a legal contract between Equip Agencies and the government, and that the firm’s demand for payment was warranted as it had supplied anti-malarial drugs which were received and put into use.

Equip Agencies has faulted Prof Muigai for failing to provide an explanation as to why the Sh35 billion has never been paid despite being furnished with the orders against the government.


The firm claims that the ministry is hiding behind provisions of the Government Proceedings Act, which prohibits creditors from attaching State property to recover debts, and wants the High Court to intervene.

“Further the Ministry of Health has failed to pay the amount for the last five years, an inordinately long period, knowing very well that the amount due was in respect of goods received and utilised by the ministry.


This continued failure is meant to unjustly enrich the ministry and is unfair treatment to Equip Agencies as it faces imminent winding up if the amount is not paid,” the firm adds.

The case, should it proceed to the appellate court, could offer a deeper interpretation of contract law as the fulcrum of the AG’s case is that there was no binding agreement with Equip Agencies as the LPOs presented by the firm were not signed by the Health ministry’s authorised official.


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