High Court order KURA to withhold Sh173million pending payment to Chinese firm in Sh2billion Ngong Road tender

The High Court has ordered the Director General of Kenya Urban Roads Authority (KURA) Engineer Silas Kinoti to withhold Sh173.8million pending payment to a Chinese firm meant for the construction of the Sh2billion 9.8 Kilometers Municipal Road along Ngong Road, Nairobi

Justice Alfred Mabeya of Commercial Division has ruled that it would be proper to preserve the said monies pending the outcome of an arbitration between the Chinese firm China Qingjian International Group and Enzyne Creations Limited which it had subcontracted.

A dispute has since arisen between China Qingjian International Group, the main contractor and Enzyne Creations Limited, the subcontracted firm.

In 2017, KURA signed the deal, worth about $20 million SH2billion) with the China Qingjian International Group for the dualling of a stretch of the road from Dagoretti Corner to Karen Shopping Center.

Qingjian is one of the Chinese contractors controlling over 50 percent of KURA projects worth over Sh25.5 billion that were undertaken in 2021.

At the time, KURA said the project is fully funded by the government through the Development Vote and was expected to be complete within 24 months.

The dualling project will cover three sections: Dagoretti Corner-Karen Roundabout (6.2km), Karen Road (1.9km) and a small section of Langata Road from Karen shopping center (1.7km).

Qingjian had sub-contracted Enzyne Creations Limited for provision of various services and construction materials with regard to the construction of 9.8 Kilometers Municipal road along Ngong Road within Karen Area.

The dispute arose between the parties after the Chinese road construction and engineering firm failed to pay the local firm Sh173, 801,105.69. The tender had been awarded by KURA.

According to suit papers filed by Enzyne Creations in court, the matter was referred to arbitration to determine the dispute but the Chinese firm was not cooperating with the process of arbitration.

The Kenyan firm moved to court to preserve any arbitral award that may be awarded in the dispute between itself and the Chinese firm.

It argued that China Qingjian Internal Group was a Chinese company and it did not know any of its assets, the location or its directors and any contracts they are involved in at the moment.

“Unless the amount sought in the arbitration is preserved Enzyne Creations would suffer a total loss of the award and the arbitration shall have been in vain,” argued the local firm in court documents.

The Chinese firm however opposed the suit claiming that a director of its firm colluded with the local staff including the directors of the Enzyne Creations to embezzle funds from the firm.

“The mismanagement of the respondent (China Qingjian Internal Group) between 2020 -2021 had led to major losses including the dualling of 9.8 Kilometers Municipal Road along Ngong Road tender,” argued the Chinese firm.

It argued that the delayed payment by KURA had made it difficult for it to settle its suppliers and subcontractors, who currently have judgments against the firm.

KURA also opposed the suit claiming that the local’s firm application sought to attach, in disguise of a preservation order, an amount that is unverified, uncertified, and unascertained

Justice Mabeya however noted that, it is undisputed that the dispute arising between the parties would be determined through arbitration and that although the Chinese firm is registered locally, it is Chinese owned and has no known assets within the jurisdiction.

“It is not clear for how long it intends to be in operation in Kenya. On the other hand, KURA has not denied the contract. It has also not denied that it holds or may in future hold monies on behalf of the Chinese firm arising out of the contract. All that it stated was that it had not certified such a sum to the firm,” noted the Judge.

Justice Mabeya noted that if the arbitral proceedings proceed and conclude in favour of the Local firm and by that time the Chinese firm has folded business in Kenya, the said proceedings would have been in futility.

“On the other hand, if the monies continue to be held by KURA and not paid over, that money would still be available to any of the successful parties in the arbitration…Neither of the parties would suffer prejudice as it would be if all the monies were to be released to the Chinese Firm and it lost the arbitration,” ruled the Judge.

This project came in as part of the construction and infrastructure upgrades meant to elevate Nairobi city’s status and its environs and achieve the Vision 2030 objective of transforming the country to a middle-income economy.
China Qinjian International Group, established in 2008, has been involved in multi-billion construction works in Philippines, Botswana and Singapore.
The Sh2billion Ngong Road project was their first entry in construction in Kenya.