The government has been ordered to pay Orbit Chemical Industries Sh11.4 billion, dealing an already burdened Treasury a heavy financial blow.
The High Court in Nairobi awarded the company Sh6 billion plus a compounded interest, which shot the amount to Sh11,434,809,912.
The award is the largest that a court has issued against the government, according to city lawyer Mathew Oseko, whose firm represented the company.
The Treasury is already grappling with how to raise money to pay the recently increased teachers’ salaries and is facing a Sh2.1 billion severance demand from MPs.
In addition, it must now raise the Sh11.4 billion, or appeal against the decision.
The property in question is a prime plot measuring 92.2 acres in Nairobi’s Embakasi area, near the Jomo Kenyatta International Airport (JKIA).
Orbit Chemicals Industries owned it, but the Ministry of Lands placed a caveat on it in 1987, stopping any development or dealings with it.
The land was later irregularly sub-divided and sold to unsuspecting buyers, while squatters also moved into it, the company claimed.
The company sued the Attorney General in 1987 seeking general damages against the government and removal of the squatters.
The Registrar of Lands did not have powers or reason to place the caveat, it argued.
In a ruling written by Justice Roselyne Nambuye, the court ruled that the chemical company was entitled to the amount.
The judge ruled that the company had demonstrated that the Treasury had agreed to pay Sh6 billion, which had been arrived at by a government economist.
The parties had tried to settle the dispute out of court, but failed. During the negotiations, the company had demanded Sh18 billion for loss of investment.
It went down to Sh8 billion after the government stood its ground. The government sought a 25 per cent reduction, and they compromised on Sh6 billion.
However, the Treasury refused to pay the amount, alleging that a Mr J.P.G. Tuamwari, a chief government economist who had computed the figures and negotiated the amount, lacked authority to do so.
The company returned to court seeking the Sh6 billion, with interest. Treasury PS Joseph Kinyua opposed the application.
Mr Kinyua argued that the Government Contracts Act did not authorise Mr Tuamwari to negotiate the amount.
Lands PS Dorothy Angote also opposed it, arguing that the chief economist did not consult her ministry. Only the Treasury PS was authorised to bind the government, she added.
Justice Nambuye rejected these arguments. The ruling was delivered on her behalf on Friday by Justice David Majanja. The lady Justice was declared unfit to serve in the Judiciary but the decision was reversed on appeal.
“The delay in the drafting and delivery of this ruling, which is highly regretted, was occasioned by systemic work constraints,” she wrote.