Attorney General v Equip Agencies Limited
The bottom line
#Kenya's Court of Appeal upheld a Kshs 1.15 billion payment owed to a supplier by government but struck out the massive compound interest award.
What this practically means
#Executive summary
#Questions the Court framed
#The issues the Court set itself to decide, in its own words.
- 1.Whether the contractual claims before the superior court were time barred by dint of Section 3(2) of the Public Authorities Limitation Act
- 2.Whether the trial court was justified in awarding the respondent compounded interest at the rate of 18% per annum from 1st March, 1999 until payment in full
Key legal issues
#Limitation under section 3(2) of the Public Authorities Limitation Act
The cause of action accrued on 23rd August 1996 when the LPOs were cancelled, so the suit filed on 22nd July 1999 was within the three-year period
The court held that 'as and when required' supply contracts comprise a series of individual obligations within a framework agreement, so limitation runs from breach of each individual supply. The breach occurred when the Ministry cancelled the LPOs after the goods had been supplied, accepted and distributed. The trial court's finding on accrual was affirmed, and the government could not rely on unsigned LPOs or lack of budgetary allocation to invalidate the contracts.
Validity of LPOs not signed by AIE holders and without budgetary allocation
The LPOs and contracts were valid despite internal procedural irregularities
Relying on the Turquand rule and ostensible authority, the court held that outsiders dealing with a government body in good faith may assume internal approvals were completed. Section 34 of the Companies Act gives the Turquand rule statutory backing. A government institution cannot rely solely on its internal process failures to deny an otherwise binding contract.
Award of compound interest at 18% per annum
The award of compound interest was set aside; compound interest must be specifically pleaded and proved as special damages
The contract contained no express interest provision, so interest was not a contractual right. The court laid down a four-part test: proof of causation and actual loss, foreseeability, specific pleading as special damages with details of compounding intervals and rates, and commercially reasonable borrowing. The respondent pleaded only simple interest, and its expert evidence of bank facilities did not prove causation or loss within the appellant's contemplation.
Legal principles established
#- A cause of action on an 'as and when required' supply contract accrues on breach of individual supplies, not continuously; cancellation of LPOs after supplies were made and accepted marks the accrual date
- A government entity cannot rely on its own internal procedural failures to escape a contract entered with a private party; the Turquand rule and ostensible authority bind it
- Compound interest is not automatic; it must be specifically pleaded and proved as special damage with proof of causation, foreseeability and commercially reasonable borrowing
Court orders
#- 1.The appellant shall pay the respondent special damages in the sum of Kshs. 1,157,846,150/= being the principal sum for the invoiced goods
- 2.Interest thereon at court's rate from 26th June, 1995 until payment in full
- 3.Each party shall bear its costs
The bench
#One judgment of the whole court — no separate or dissenting opinions.
Wrote the judgment
Wrote the judgment
Wrote the judgment
- On appeal from
- High Court of Kenya at Nairobi
- HCCC No. 159 of 2006
- Jurisdiction invoked
- Appellate jurisdiction of the Court of Appeal over the High Court judgment (first appeal on facts and law)
Relief refused
#Compound interest at 18% per annum from 1st March, 1999 until payment in full
Compound interest was never specifically pleaded or proved; no causation between breach and borrowing was established
Costs
Since the appeal is partly successful, each party shall bear its costs
Quotable passages
#Verbatim from the judgment, each located to the page it appears on in the official PDF — so these can be cited and checked directly.
Thus, as long as the supply is made within the terms of the framework agreement, cause of action accrues from the time there is breach of individual supplies.
The government cannot escape its obligation simply because its own officials failed to follow internal protocols, bureaucratic steps or administrative circulars.
For compound interest, the party must specifically plead it and prove their claim for compound interest. It is not an automatic right.
Since the appeal is partly successful, each party shall bear its costs.
The appellant shall pay the respondent special damages in the sum of Kshs. 1,157,846,150/= which is the principal sum for the invoiced goods
Issues in the judgment
#Inconsistent pleaded totals for the interest component
Consent letter dispensing with hearing dated 2026 though submissions were filed in 2022
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Attorney General v Equip Agencies Limited", Case Analysis (2026). Civil Appeal No. E053 of 2022. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2026/1762/eng@2026-09-25
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.