In a significant legal development, Britam General Insurance Company has been directed by the Court of Appeal to pay Sh83.6 million as a condition for suspending the execution of a previous order. This order had mandated Britam to pay a total of Sh167.26 million in a dispute involving a performance bond with Rokoh (K) Construction Limited. The case centers around the Enaki Residential Apartments project located on Redhill Road, Nairobi, owned by Rosslyn Suites Limited.
The Background of the Dispute
In 2019, Rokoh (K) Construction Limited secured a performance bond from Britam. The bond, worth Sh167,266,450, was for the Enaki Residential Apartments project. Performance bonds serve as a guarantee that contractors will meet their obligations.
Problems arose when Rosslyn Suites Limited demanded the bond amount. Rokoh failed to meet the demand, leading to the termination of their contract. The dispute escalated to the courts. In October 2024, Justice Nixon Sifuna ruled in favor of Rosslyn Suites. The High Court ordered Britam to pay the full bond amount, plus interest.
Britam’s Appeal to the Court of Appeal
Britam challenged the High Court’s decision. The insurer argued that it was not a direct party to the construction contract. According to Britam, this limited its ability to challenge the contract’s termination.
Lynette Monzi, Britam’s Legal Manager, emphasized their concerns. She argued that Rosslyn Suites might not refund the bond amount if Britam won the appeal. On the other hand, Rosslyn Suites countered these claims. They cited their significant asset base, including ongoing projects worth over Sh7 billion.
The Court of Appeal reviewed submissions from both parties. Judges Daniel Musinga, Mumbi Ngugi, and George Odunga found merit in Britam’s appeal. They stayed the execution of the High Court order but with conditions. Britam must pay Sh83,633,225, half of the disputed amount, within 45 days. Failure to do so will allow Rosslyn Suites to enforce the full Sh167 million judgment.
Impact on Construction and Insurance Industries
This case highlights important issues for insurers and contractors. Performance bonds are critical in construction. They protect project owners and ensure contractors meet their commitments. However, disputes like this show the need for clear contract terms.
For insurance firms, the ruling serves as a wake-up call. They must understand the projects they underwrite. Additionally, they should prepare for legal challenges arising from disputes between contractors and project owners.
Previous Legal Challenges for Britam
This is not Britam’s first major legal battle. In 2014, Britam was involved in a high-profile dispute with Acorn Group, a property development firm. The disagreement stemmed from Britam’s failed attempt to acquire a majority stake in Acorn. The case included allegations of fund mismanagement and lengthy court proceedings. The matter was resolved out of court in 2015. Acorn agreed to pay Sh5 billion to Britam, and Britam relinquished its minority stake in the firm.
Lessons from the Case
The Britam-Rosslyn Suites case shows the importance of legal clarity. It emphasizes how performance bonds can create challenges when disputes arise. Contractors, insurers, and property developers must establish clear agreements to avoid similar conflicts.
Additionally, this case stresses the importance of financial due diligence. Insurers should assess their liability risks thoroughly. For contractors, it is crucial to honor agreements to maintain credibility in the industry.
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This ongoing legal dispute highlights key lessons for Kenya’s construction and insurance sectors. The Court of Appeal’s ruling ensures a fair balance between the parties while the appeal continues. As the case unfolds, it will shape future relationships between insurers, contractors, and property developers.
