KPC sparks row with Sh3bn payment to contractor despite High Court injunction

Two senior lawyers opened an epic legal battle in court after a state corporation ignored an existing court order and paid a foreign contractor more than Sh3 billion.

The Kenya Pipeline Company (KPC) paid the amount to Zhakem International Construction Limited for a 2015 contract to replace the old oil pipeline that transports oil between the port city of Mombasa and Nairobi.

KPC had been barred from making the payment after Zhakem, a Lebanese company, disagreed with its local partner Oilfields Engineering and Suppliers Limited, over the performance of the contract and took the matter to court.

The High Court, sitting in Nairobi, heard the suit and at the request of the parties allowed it to go for arbitration before Kyallo Mbobu, a Nairobi-based advocate, who upon hearing the matter, issued an award in favour of Oilfields.   

Oilfields subsequently moved to court to register the award even as Zakhem filed a fresh suit contesting the award. Oilfields responded to Zakhem’s suit by filing a Mareva injunction suit against KPC – a prayer that the court granted through orders issued on 31^st August 2023.

A Mareva injunction is a freezing order designed to mitigate the risk of an unsatisfied judgment. The injunction is directed to parties who may endeavour to place their assets beyond the reach of a prospective judgment creditor -- in this case KPC.

But KPC acting on instruction from PS Treasury Dr Chris Kiptoo vide a letter dated July 17, 2024, paid the colossal amount to Zhakem through its lawyer Ahmednasir Abdulahi sparking a new wave of legal suits. 

Oilfieds responded to KPC’s action in a strongly worded letter to Dr Kiptoo questioning his decision to authorise the release of the money despite the existing court order. The payment was made on 19^th July 2024.

“Our attention has been drawn to a letter dated 17^th July 2024 from yourself advising KPC to release USD31,308,249.80 (about Sh4.57 billion) to Zakhem International Constructions Limited on account of an erroneous interpretation of the 21^st June 2024 ruling of Justice Alfred Mabeya,” Oilfields said adding that KPC had deliberately failed to inform the PS of the existence of the Mareva injunctive Orders issued on 31^st august 2023 and upheld by the Court of Appeal.

It was during Tuesday’s hearing of the matter before Justice Patrick Otieno that a heated erupted between two senior counsels Ahmednasir Abdullahi for Zakhem and Prof. Tom Ojienda representing Oilfields. Prof Ojienda had teamed up with Dr Duncan Okubasu and Bernard Odero for Oilfields

Dr Okubasu had claimed that Zhakem and KPC went before High Court Judge Alfred Mabeya and filed a consent to settle the payment in order to beat the court’s orders freezing the amount.

“They are doing this because they want to go about your pending rulings, they want to countermand them. They are looking for an easy way out and that is why they recorded consent before Justice Mabeya even though he told them this does not affect other obligations. They have been actively involved in getting the subject matter that has been reserved out of this court,” Dr Okubasu charged, asking the court to end the misconduct.

“This conduct must be brought to an abrupt end,” he submitted before Ahmednasir stepped in with an objection arguing that Oilfields was not a party to the consent.

It was at this point that the two senior lawyers engaged in a heated exchange, prompting the judge to intervene. “Kindly, you are seniors. You should be letting others know what it is to be a senior. I think you are now quarreling before me. I expect submissions and I understand that when one submits the other should be quiet,” Justice Otieno said.

Mr Abdullahi had earlier notified the judge of his intention to make an application asking him (Justice Otieno) to withdraw from the case. Prof Ojienda claimed that Zakhem’s application to have Justice Otieno withdraw from hearing the case was meant to buy time for the money to be moved.

Prof Ojienda further argued that the application to freeze the money was meant to ‘drain the swamp' of litigation that parties intended to undertake in the matter. “No one is dying. Why is the transfer being done today?” He paused.

In his reply, Mr Abdullahi claimed that his client was not happy that the judge had issued fresh orders despite an application for him to withdraw from the case. He argued that his client Zhakeem had made only two applications for judges to withdraw from the case. The first one for Justice Freda Mugambi and Justice Otieno.

“In this country, this is becoming one of the common applications that take judicial time. Litigants my lord sometimes rightly so, or on mere suspicion have lost confidence in our courts,” he said adding that the reason his client wanted the judge out was because there were pending rulings before him that he had not delivered yet he continued to admit new suits on the same matter.  “You have done the unusual thing in the judicial practice of hearing other matters, including this recusal and many applications by Oilfield when you have pending rulings… You have a personal interest in this matter,” he claimed.

In response, the judge said that the file would vindicate him as he had indicated that he would hear all three applications that Ahmednasir was arguing about, and determine them together on the same day.

“I think it is also fair to us who cannot respond and take a look at the file and see what was done. I am not stopping you but it is important to submit along the lines of what happened when you were absent,” said Justice Otieno.

Mr Abdullahi told the court that the other reason his client wanted the Judge to withdraw from the case was that there was a ‘clandestine hearing’ on July 10, 2024, where his client was not represented. According to the lawyer, his client believed that there was a scheme by judges, lawyers and other parties to share his money.

Oilfields urged the court to dismiss the claims saying Zhakem had not tabled evidence to support the claims.