Mugoya Woes: Mugoya, NSSF Sh7b case referred to arbitrator (July 2005)

Published on July 30, 2005, Standard

By Joseph Murimi

The Sh7 billion suit lodged against the National Social Security Fund by Mugoya Construction Company has been referred to an arbitrator.

Justice Leonard Njagi of the Milimani Commercial Courts made the order following an application by NSSF, which argued that the High Court lacked the powers to compel it to have Mugoya Construction and Engineering Ltd as one of its contractors.

NSSF argues that parastatals were at liberty to terminate contracts whose performance was unsatisfactory.

The court was told that the performance of Mugoya in the Sh13 billion housing contract awarded in 1995, was not satisfactory.

Out of the 4,000 housing units of the Nyayo Embakasi Estate, Mugoya had completed just 1,156 and was three years behind schedule, the court heard.

According to the contract, phase one of the project with a total of 1,156 units ought to have been completed and handed over by the end of January 1998 while phases two and three, with 3,618 units were to be completed and handed over by the end of April 1999.

The last unit in phase one, the court heard, was delivered in 2001. Mugoya is claiming Sh7 billion from NSSF for the construction of the houses.

It wanted the High Court to issue an injunction stopping NSSF from inviting another contractor to complete the remaining phases of the estate.

NSSF had insisted that an arbitrator appointed by the two parties would determine the matter.

Justice Njagi said his hands were tied because of the Arbitration Act that makes it mandatory for him to refer the matter to arbitration.

The judge observed that the contract signed between the parties provided that any dispute that may arise be referred to an arbitrator.

He said even the plaintiff was initially for the arbitration "but somewhere along the way changed its mind".

Mugoya accuses NSSF of failing to remit the money for the project in good time thus disrupting its programme and causing undue delay.

NSSF on the other hand, accuses Mugoya of breaching the contract by not working within set deadlines even after money was paid.

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