St Lavina Medical & Laboratory Services Ltd v National Hospital Insurance Fund Board of Management (Civil Appeal 80 of 2019) [2025] KECA 1527 (KLR)
The bottom line
#Kenya's Court of Appeal refused to pay a medical provider Kshs. 9.4 million because its contract with NHIF was void from the start due to missing licences and conflicts of interest.
What this practically means
#Executive summary
#Key legal issues
#Validity of the contract given lack of KMPDB licensing at the time of contracting
The contract was void ab initio because the Facility was not licensed at the time of contracting; later compliance could not cure the illegality
The record confirmed the Facility was unlicensed by KMPDB when the January 2012 contract was executed, with licensing secured only months later. Relying on Macfoy v UAC and Patel v Singh, the court held that subsequent compliance cannot cure an illegality and that contracts founded on illegality are void ab initio.
Conflict of interest in the accreditation and contracting process
The conflict of interest, whereby a respondent employee held an interest in the appellant during accreditation, rendered the contract unenforceable
Evidence established that a respondent employee held an interest in the appellant during accreditation, breaching statutory and ethical standards. Invoking Holman v Johnson and the maxim that no court will lend its aid to a cause founded on an illegal act, the court held such a conflict compromises transparency and renders the contract unenforceable, and the trial court did not err in declining enforcement.
Privity of contract and standing to enforce
The appellant, incorporated after execution with no assignment or novation, lacked standing to enforce the agreement
The record showed the appellant company was incorporated after execution of the contract, and no evidence of assignment or novation was adduced. Applying Agricultural Finance Corporation v Lengetia Limited, the court held that under the doctrine of privity the appellant lacked standing to enforce the agreement, so the High Court did not err on this point.
Whether quantum meruit could defeat the doctrine of illegality
Quantum meruit cannot override illegality; courts cannot aid enforcement of illegal transactions
The appellant sought payment for services rendered on a quantum meruit basis even if illegality were found. Citing Scott v Brown Doering McNab & Co., the court held the principle cannot override the doctrine of illegality because courts cannot aid enforcement of illegal transactions, and therefore declined to grant restitutionary relief.
Legal principles established
#- Compliance with a licensing requirement after execution of a contract cannot cure an illegality existing at the time of contracting; contracts founded on illegality are void ab initio.
- A conflict of interest in the contracting/accreditation process, breaching statutory and ethical standards, compromises transparency and renders the contract unenforceable.
- The doctrine of privity bars a party incorporated after execution of a contract, with no assignment or novation, from enforcing it.
- Quantum meruit cannot be invoked to override the doctrine of illegality; courts cannot aid enforcement of illegal transactions.
- The primary role of a first appellate court is to re-evaluate, re-assess and re-analyse the evidence and determine whether the trial judge's conclusions were correct.
Court orders
#- 1.The appeal is dismissed for lack of merit
- 2.The appellant shall bear the costs of this appeal and of the High Court
- On appeal from
- High Court of Kenya at Meru
- Not stated in the judgment
- Jurisdiction invoked
- First appeal to the Court of Appeal under the Court of Appeal's appellate jurisdiction (statutory first appeal from the High Court)
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "St Lavina Medical & Laboratory Services Ltd v National Hospital Insurance Fund Board of Management (Civil Appeal 80 of 2019) [2025] KECA 1527 (KLR)", Case Analysis (2025). Not stated in the judgment. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2025/1527/eng@2025-10-03
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.