A bid by a supplier to force Kenya Power to pay Sh284.9 million over a cancelled electricity poles contract has failed after the High Court ruled that the utility lawfully ended the agreement following years of missed delivery deadlines.
The court found that the supplier failed to honour its obligations despite being granted several extensions and could not rely on later communication to revive a contract that had already expired.
In the ruling, the court dismissed the claim by Inter Tropical Timber Trading Ltd and affirmed Kenya Power's decision to terminate the Sh410.6 million contract for the supply of treated electricity poles.
"The email of May 4, 2016 therefore affords the Plaintiff (Inter Tropical Timber Trading Ltd) no legal foundation upon which to anchor its claim," the court said.
The dispute dates back to June 2012 when Kenya Power awarded Inter Tropical a contract to supply 29,500 treated electricity distribution poles worth Sh410.6 million. Under the agreement, the poles were to be delivered to the utility's stores in Ukunda, Malindi and Voi within an 18-month period ending in February 2014.
After Kenya Power brought the contract to an end in January 2017, the company moved to court, saying it had made huge investments to carry out the project. It told the court that it had established wood treatment plants in Mwea and Eldoret, bought transport trucks, sourced timber and hired employees to support the contract.
The company said those investments were financed through bank loans secured using directors' personal guarantees and matrimonial property.
In the case filed in July 2018, Inter Tropical argued that Kenya Power disrupted the contract by changing delivery points, suspending deliveries and delaying the issuance of purchase orders before later declaring the agreement expired. It maintained that those actions caused heavy financial losses after it had already committed substantial resources to the project.
The company asked the court to declare that Kenya Power had unlawfully breached the contract and sought Sh284.9 million in special damages, general damages, interest and legal costs.
It further argued that Kenya Power's conduct created a legitimate expectation that deliveries would continue, making it unfair for the utility to later rely on contractual deadlines to terminate the agreement. During the hearing, the company's director, Geoffrey Nganga Kariuki, produced documents in support of the claim.
Kenya Power denied any wrongdoing, saying the delivery location was changed to Nyeri in July 2013 after consultations with the supplier and with its written approval because the new site was closer to the company's operations.
The utility also told the court that although it granted the supplier several extensions after it failed to meet delivery schedules, the remaining poles were never supplied within the agreed timelines.
The court agreed with Kenya Power, finding that the supplier remained in breach of the contract despite the additional time it had been given. It held that every extension issued by the utility had a clear deadline which Inter Tropical failed to meet.
"I cannot therefore blame the defendant for choosing to terminate the contract due to the plaintiffs inability to perform its obligations under it," said the judge.
The court noted that by the time Kenya Power issued the termination notice in January 2017, the agreement had already expired because the supplier had failed to deliver the remaining 12,865 poles by November 1, 2015.
The judge also ruled that moving deliveries to Nyeri was a valid amendment to the contract since both parties had agreed to the change in writing.
"Having carefully considered the evidence on record, I do find that it was the Plaintiff who was in material breach of the Contract," the court said.
"The termination of the contract was a direct consequence of the Plaintiff's own persistent failure to fulfil its contractual obligations."
The court further rejected the supplier's demand for payment for poles that had not been delivered, noting that payment under the contract was only due after delivery. It also dismissed claims relating to idle machinery, storage costs, depreciation and staff expenses after finding that the company had failed to provide sufficient proof of those losses.