Court orders Kura to hold Sh175m in road contractors row

The Kenya Urban Roads Authority has suffered a blow after the High Court blocked the release of Sh174 million to a Chinese contractor tasked with the dualling of the 9.8-kilometre Ngong Road in Nairobi.

Photo credit: File | Nation Media Group

The Kenya Urban Roads Authority has suffered a blow after the High Court blocked the release of Sh174 million to a Chinese contractor tasked with the dualling of the 9.8-kilometre Ngong Road in Nairobi.

High Court judge Alfred Mabeya directed the KURA director-general to withhold the funds until the dispute between China Qingjian International Group and a subcontractor, Enzyne Creations Limited, is resolved by an arbitrator.

Enzyne was subcontracted by the Chinese firm to provide various services and construction materials and moved to court after the contractor failed to settle a debt of Sh173,801,105.

Under the agreement, the parties’ dispute was referred to arbitration by the chairman of the Chartered Institute of Arbitrators.

The sub-contractor urged the court to order the roads agency to hold the money until the dispute was determined.

Enzyne complained that the Chinese firm was not cooperating with the arbitration proceedings.

China Qingjian opposed the suit, claiming that one of its directors had colluded with the local staff as well as directors of Enzyne to embezzle funds from the construction company.

Through a sworn affidavit, Qu Gaolei of China Qingjian said in a period of one year, more than Sh197 million was fraudulently paid out to Enzyne in unclear circumstances.

“Enzyne did not carry out any work but was involved in an elaborate plot to swindle and defraud the Chinese contractor. Monies owed to them, if any, had been settled,” said Gaolei.

But Enzyne argued that the contractor was a foreign company without any known assets, the location of its directors and other contracts they are undertaking at the moment. It claimed the firm was a flight risk.

“Unless the amount sought is preserved, Enzyne will suffer a loss of the award and the arbitration will be in futility,” the subcontractor said.

Established firm

Opposing Enzyne's application, China Qingjian stated that it was registered in Kenya in 2015 and had established a reputation as a top-tier road construction and engineering firm.

The contractor affirmed that it was a multinational company with assets in Kenya and business all over Africa and was not about to leave the country.

China Qingjian said the mismanagement of the company between 2020-2021 had led to major losses including the dualling of 9.8 km Ngong Road.

The firm argued that delayed payment by KURA had made it difficult to pay its suppliers and sub-contractors.

“Some have secured judgments against us while others have already executed various judgments and thus putting the company assets at risk,” said the firm.

In its defence, KURA said Enzyne had sought to attach, under the guise of a preservatory order, an unverified, uncertified and unascertained amount.

The roads authority told the court that any preservertory order sought should be on the arbitration because it was not a party to the contract between China Qingjian and Enzyne.

Justice Mabeya ruled that Enzyne merited interim measure of preservation and consequently directed KURA to withhold Sh174 million.

The judge observed that if the arbitration concluded in favour of Enzyne and by that time the Chinese firm had closed business in Kenya, the proceedings would have been futile.

On the other hand, the judge found, if the monies continued to be held by KURA, it would be available to any successful parties in the arbitration.

Ultimately, the judge ruled that the dispute between the parties would be determined through arbitration.