The Court Of Appeal Declares That The SGR Project Was Conducted Illegally

The Court Of Appeal Declares That The SGR Project Was Conducted Illegally


Date Posted: 2020-06-19 21:29:45

Summary
In Okiya Omtata and another vs the Attorney-General and others consolidated with the Law Society of Kenya vs the Attorney-General and others, the Court of Appeal found that the procurement of the Standard Gauge Railway (SGR) project was exempt not from the provisions of the Public Procurement and Disposal Act, 2005 (the Act) by reason of Section 6(1) thereof and declared that Kenya Railways Corporation (the 2nd respondent), as the procuring entity, failed to comply with, and violated the provisions of Article 227 (1) of the Constitution and Sections 6 (1) and 29, of the Act.

Background
In a petition presented to the High Court on 5th February 2014, Okiya Omtatah and Wyclife Gisebe Nyakina (the appellants) requested the High Court to intervene and stop the contracting of China Road and Bridge Corporation (the 4th respondent) to implement the Mombasa-Nairobi-Malaba/Kisumu standard gauge railway in flagrant violation of both statute and of the Constitution of Kenya. At the time the petition was presented to the High Court, construction of the railway was yet to commence and the appellants had hoped to stop it dead in its tracks. They applied for interim conservatory orders to suspend the contracts entered into between the 2nd respondent and the 4th respondent for the supply and installation of facilities, locomotive and rolling stock for the railway.

In the High Court, the appellants contended, inter-alia, that there was a conflict of interest in the Government contracting the 4th respondent to implement the project whose feasibility study and design it had intriguingly carried out for free and that in any event the 4th respondent was ineligible for the award of the contract as it had been blacklisted by the World Bank for engaging in corruption in a road project in the Philippines.

The appellants contended in the High Court that the single sourcing of 4th respondent to execute the project contravened Articles 10, 46, 47, 201 and 227 of the Constitution, the Act, the Public Officer Ethics Act and the Ethics and Anti-Corruption Commission Act, and that the contract awarded to 4th respondent was therefore unconstitutional, irregular, illegal, invalid null and void.

The Law Society of Kenya (LSK), on its part, on the 2nd of May, 2014, filed a similar petition in the High Court, in which the 2nd respondent and the Attorney General (the 1st respondent) were named as respondents, seeking declarations that 2nd respondent as a procuring entity is subject to Articles 10, 42, 69, 70 201 and 227 of the Constitution, that the award of the contract to 4th respondent for the supply and installation of facilities and diesel powered engines which are outdated and pollute the environment violates those provisions of the Constitution; and that the purported christening of the contract as a government to government contract is unlawful; and an order of Certiorari to quash the award of the contract. The LSKs petition was consolidated with that of the appellants.

The 2nd respondent filed a cross petition on 7th July 2014 seeking declarations that a constitutional petition cannot be founded on alleged public documents obtained in breach of the Constitution and the Evidence Act, that a constitutional petition cannot be founded on documents whose source or origin has not been disclosed and whose authenticity cannot therefore be vouched for, a declaration that the use and production of the alleged public documents without disclosing their source or authenticity is a breach of the 2nd respondents right to a fair hearing as guaranteed under Article 50 of the Constitution, orders to expunge from the record specific exhibits annexed to the affidavits in support of the petitions, among other prayers. Affidavits in reply to the cross petition as well as supplementary affidavits were filed.

The hearing proceeded thereafter before the High Court on the basis of the consolidated petitions, the affidavits and submissions culminating in the judgment that was delivered on 21st November 2014 dismissing the petitions inter-alia on a finding that the documents that had been tendered by the appellants as evidence in support of the petitions were inadmissible having been obtained illegally and on the ground that section 6 of the Act excluded the provisions of the Act.

Aggrieved by the judgment of the High Court, the LSK filed Civil Appeal No. 10 of 2015 with 5 grounds of appeal while the appellants filed Civil Appeal No. 13 of 2015 with 51 grounds of appeal.

The crux of the appeal was that the learned judge erred in concluding that the procurement of the SGR project did not contravene the Constitution of Kenya, in holding that the Act did not apply to the procurement and in ordering documents tendered in support of the petitions to be expunged from the record. The respondents argued in support of the decision by the High Court and in addition contended that the appeal was now moot as the SGR project was almost complete and as such the courts judgment would just be an academic exercise.

The Court of appeal thus identified three broad issues, i.e. whether the appeal was moot, whether the High Court was correct in expunging certain documents and whether the procurement process was compliant with the Constitution and the Act and whether section 6 of the Act excluded the application of the Act.

Held
On the issue of mootness of the appeal, the court found that while the reliefs in the nature of orders of injunctions to restrain the implementation of the impugned contract or to quash the award of the contract were no longer within reach, the issues relating to the constitutionality of the procurement, the interpretation and applicability of Section 6 of the Act and the question whether annexures to the petitions were properly expunged, remain for consideration before the Court.

With regard to the expunged documents, the Court found that the sources of those documents were not disclosed in the affidavits and neither were such of those documents that consisted of public documents, certified. The Court found that it was upon the filing of the cross petition seeking orders for those documents to be expunged that the appellants disclosed that the documents were supplied by conscientious citizens and whistleblowers. The Court, in agreement with the High Court, was of the view that it would be detrimental to the administration of justice and against the principle underlying article 50(4) of the Constitution to in effect countenance illicit actions by admission of irregularly obtained documents. However well intentioned conscientious citizens or whistleblowers might be in checking public officers, there can be no justification, as pointed out by the Supreme Court of the Republic of Kenya, for not following proper procedures in the procurement of evidence.

As to whether the process was compliant with article 227 and the Act, the that on 12th August 2009, the Ministry of Transport of the Government of Kenya (MoT) entered into a Memorandum of Understanding and Cooperation (MoU) with the 4th respondent on the basis of which the 4th respondent was to undertake, at its cost, a study on the feasibility of a railway system between Mombasa and Malaba; to consider the technical details of the project; the financing required and the manner in which the project would be implemented. With regard to financing, the MoU further stipulated that, after signing of the commercial contract of the project, the 4th respondent shall try its best to look for the sources for the funding of the project.

On 11th July 2012 and 4th October 2012, contracts were signed, with approval by MoT and the 1st respondents office, between the 2nd respondent and the 4th respondent for the civil works and for facilities, locomotive and rolling stock respectively, which provided, inter-alia, that, the commercial contracts are part of the process towards the negotiations for funding for the project from the Peoples Republic of China and will become effective only after executing the financial agreement, that the Government of Kenya has entered into a financing agreement with the Exim Bank of China (the Bank) (within a Government to Government framework directed by the Cabinet) for a concessional and a commercial loan to support the project and that [the 4th respondent] is to be engaged as the Engineering Procurement and Construction Contractor in line with Section 6 subsection (1) of the Public Procurement and Disposal Act 2005, this being an instance of a negotiated grants and loan.

Thus, as far as the Court was concerned, it was clear from the MoU therefore that from conception of the project, it was understood by both the MoT and the 4th respondent that should the feasibility study be approved and decision taken to go ahead with the implementation of the project, it would be on the basis that the 4th respondent would be contracted to execute or implement it. As such the Court of Appeal found that the procurement of the 4th respondent was therefore a foregone conclusion from the outset. The question of the procurement procedure being dictated by a subsequent financing arrangement did not arise. Based on the foregoing, the Court of Appeal found that it was not accurate, as was claimed by the 2nd respondent, that the engagement of the 4th respondent as the contractor was as a result of dictation by the financing agreement since it had already been understood, even before the financing agreement was entered into, that the 4th respondent would be engaged. In finding that section 6 did not, in this instance, oust the provisions of the Act and as such the 2nd respondent was obliged to follow the Act, the Court of Appeal poignantly held as follows:

We do not think that in enacting Section 6 of the Act, it was intended that the identification of a supplier of goods and services (in effect the procurement) would precede the loan agreement which would oust the procurement procedures under the Act.

Our comment
The finding by the Court of Appeal on the issue of mootness and the expunging of documents are correct. The decision on the constitutionality of the procurement process is of interest since a huge number of contracts involving the 2nd respondent have an element of what has been described as a Government to Government contract under section 6 of the Act. Consistent with the fact that in 2005, when section 6 (1) of the Act, was enacted, international treaties were not part of Kenyan law, the said provision provided as follows:

Where any provision of this Act conflicts with any obligations of the Republic of Kenya arising from a treaty or other agreement to which Kenya is a party, this Act shall prevail except in instances of negotiated grants or loans.

As such, the provisions of the Act had to be strictly adhered to even in the face of a conflicting international treaty, except, of course, in the instance of a negotiated grant or loan. As such to the extent that the MoU between MoT and the MoU did not touch on any grants or loans it could not have been the basis for excluding the Act. The only document that could exclude the Act was the financing agreement between the Kenya Government and the Bank, which agreement was signed after the MoU that had already committed the 2nd respondent to engaging the 4th respondent. In this regard the MoU was inconsistent with the Act and since it did not deal with grants or loans, the procurement process arising therefrom was not excluded from the application of the Act. As such, the procurement process was unconstitutional and illegal. This decision is likely to be appealed because the repercussions may be very far-reaching.

The decision is available on http://www.okadvocates.com/blog/wp-content/uploads/2020/06/Okiya-Omtata-and-another-vs-Attorney-General-and-others.pdf

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