The Supreme Court has overturned the Ksh103.4 million anticipated-profit award against NSSF.
Judges reject a contractor’s anticipated-profit claim, finding that its financial evidence could not support the Ksh103.4 million award.
The Supreme Court has overturned a Ksh103.4 million NSSF compensation award over a cancelled security surveillance contract. The judges found that the contractor had not adequately supported its claim for anticipated profits.
Chief Justice Martha Koome led the five-judge bench, which delivered its judgment on October 30. The dispute concerned a Ksh244.8 million tender for CCTV cameras and access control systems at Social Security House in Nairobi.
Why the court rejected the NSSF compensation award
The Supreme Court identified significant differences in the company’s estimates of its expected earnings. Its managing director put anticipated profits at about Ksh26 million, while an accountant’s report gave Ksh103.4 million.
However, the accountant did not adequately explain the gap between those figures. The judges also found that the report depended on financial information that had not undergone verification.
In addition, the calculations included five years of maintenance income without evidence guaranteeing work for that period. The agreement also allowed NSSF to end the contract with one month’s written notice.
The bench concluded that the evidence lacked a reliable factual basis for the Ksh103.4 million award. Although NSSF had not submitted a competing expert report, the judges said that could not cure weaknesses in the contractor’s evidence.
The court therefore set aside the anticipated-profit award. It also stressed that businesses claiming lost profits must present reliable evidence showing they would probably have earned them.
Cancelled tender prompted years of litigation
NSSF awarded the tender in March 2011, and the parties signed an agreement the following month. The contract included Ksh15 million in annual maintenance fees after a two-year warranty expired.
However, work never started because NSSF did not hand over the site. In May 2012, the Fund cited budget constraints and told the company it could not proceed, prompting a breach-of-contract lawsuit.
The High Court awarded the contractor Ksh16.06 million in April 2020 but rejected its anticipated-profit claim. It found the financial projections speculative and lacking sufficient supporting evidence.
The company then appealed, securing Ksh112.5 million in special damages at the Court of Appeal in April 2024. That amount included Ksh103.4 million in anticipated profits and Ksh9.06 million in other costs.
NSSF subsequently challenged the award at the Supreme Court, which rejected the evidence supporting the anticipated profits.
