Chinese Firm Ordered To Pay Local Firm Sh683M For Breach Of Contract

A Chinese firm has been ordered to pay a local company Sh683 million for breach of contract over the construction of Sh82 billion Thwake Dam in the lower eastern.

Justice Alfred Mabeya directed China Gezhouba Group to pay JTG Enterprises Limited the amount plus interest after finding that the Chinese firm did not pay the actual excavated works as was on the site

The local firm was contracted to do excavation and support for the main spillway project, for the dam in Makueni and Kitui counties in Lower Eastern.

“In this regard, the defendant having failed to make payments for the works as were on site and as agreed in the sub-contract supplementary agreements, the defendant had breached the contract itself and the plaintiff,” the judge said.

The court found JTG Enterprises limited proved its case against China Gezhouba Group on balance of probability and the company had breached the contract between itself and JTG Enterprise ltd.

“Consequently, judgment is hereby entered for the plaintiff against the defendant as follows, special damages for IPC No. 26 for Sh. 10,623,086.15, Sh. 73,431,524/53 retention money and Sh 477,473,634/24 for unpaid excavation works, Sh. 89,844,519/19 VAT 16% and liquidated damages of Sh. 31,390,300.80 all totaling Sh. 682,763,067. Interest on Sh.682,763,067/- at court rate from the date of filing suit until payment in full,” ruled the judge in his decision.

The judge said no party can be allowed to take advantage and benefit from its own wrong, after dismissing a counterclaim filed by the Chinese company.

JTG Enterprise ltd was contracted by the Chinese firm to excavate, protection and support of the main spillway at Thwake Multipurpose Dam.

The parties formalized the contract by filing a subcontract agreement and the terms of the subcontract were that the agreement was a fixed unit price where payments were dependent on the nature of the excavated materials.

JTG’s position was that upon commencement of the works, it noted that quantities of topographic soil layers as provided by the Chinese company did not correspond with the actual and practical conditions on the ground.

That according to the Chinese firm, there were three layers of soil, thus the soft soil materials, then the common materials and finally the concrete structures of rocks. However, that immediately after the soft soil, JTG Enterprise ltd encountered concrete structures of rock.

The discovery led to the signing of a new supplementary subcontract agreement in July 2019 which modified the earlier subcontract and it reflected the actual position on the ground.

The supplementary subcontract agreement provided that the payment rates in the Bill of quantities of the original contract wouldbe applicable and the quantities excavated would be determined based on the practical conditions at the site.

The Chinese firm payed the JTG Enterprise ltd based on the rates for common excavation rather than making payments using the provided rates for rock excavation.

The works were completed and the defendant approved payment of Sh. 1,042,618,307.51 which was based on the quantities of topographic soil layers agreed upon at the start of excavation leaving a balance of Sh. 477,473,634.24.

JTG Enterprise ltd faulted the Chinese firm for failing to settle the interim payment certificate (IPC 26) for Sh. 10,623,086.15, refusing to refund retention of money of Sh. 73,431,524.53 and 16% VAT on outstanding contractual amounts.

JTG’s position was that the Chinese firm was in breach of the subcontract agreement as well as various supplementary subcontract agreements.

The Chinese firm opposed the suit but admitted the sub-contracts but denied that the price was a fixed unit price dependent on the complexity and dexterity of the work to be done.

Chinese firm position was that JTG Enterprise ltd was bound by the terms of the subcontract and was going to execute the works based on the drawings and bill of quantities contained in the contract unless the variation was given by the Ministry of Water and Irrigation.

It admitted signing the supplementary subcontract but contended that the same was not the basis of the plaintiff’s claim. It further denied that there were any changes in the rock level that would necessitate a change in the payment price.