The National Social Security Fund (NSSF) has won a long-running legal battle after the Supreme Court on Friday, October 30, set aside a Sh103.4 million award granted to a technology firm over a cancelled security surveillance tender at Social Security House in Nairobi, Kenyans.co.ke reported.

A five-judge bench led by Chief Justice Martha Koome ruled that the company had not produced enough reliable evidence to justify the profits it said it would have earned had the contract gone ahead.

"The material before the Court did not provide a sufficiently reliable factual foundation for the specific award of Kshs.103,447,136," the judges said.

A contract that never started

The dispute involves Micro-City Computers Ltd, which won a tender advertised by NSSF in September 2010 to install CCTV cameras and a restricted access control system at the fund's headquarters, according to earlier reporting by Business Daily. The contract, worth Sh244.8 million, was signed in April 2011 and provided for an annual maintenance fee of Sh15 million once a two-year warranty expired.

Work never began. NSSF did not hand over the site and, in May 2012, told the contractor it could not proceed because of budgetary constraints. The company sued for breach of contract.

How the courts ruled

The case has passed through every level of the court system:

  • High Court: In April 2020, the court awarded the firm about Sh16.06 million but rejected the claim for Sh103.4 million in anticipated profits, finding the projections speculative and poorly supported.
  • Court of Appeal: A majority of the bench later overturned that position and awarded Sh112.5 million in special damages, made up of Sh103.4 million in lost profits and about Sh9 million in tender preparation and consultancy costs. One judge dissented.
  • Supreme Court: NSSF's appeal was certified as raising matters of general public importance, including whether speculative profits can be awarded after a contract is cancelled, and whether special damages can be pleaded after evidence has been given.

In Friday's judgment, the apex court pointed to inconsistencies in the company's evidence. Its managing director had estimated the expected profit at roughly Sh26 million, while an accountant's report put it at Sh103.4 million without adequately explaining the gap.

The judges also found that the accountant's report relied on unverified financial information and projected five years of maintenance income even though the company had no guarantee of work for that long. They noted that the contract allowed NSSF to end it by giving one month's written notice.

The court added that the fund's failure to call its own expert to rebut the figures could not cure the weaknesses in the company's case.

Why the ruling matters

Beyond NSSF, the judgment sets a firm rule for businesses suing over cancelled public and private contracts. The court said a party seeking compensation for anticipated profits after a breach must provide reliable evidence showing that those profits would probably have been earned, not merely projections.

For NSSF, which manages retirement savings for millions of Kenyan workers, the ruling removes a nine-figure liability that would ultimately have been paid from funds held on behalf of members. In earlier filings, the fund argued that the award would amount to unjust enrichment of the contractor.

What happens next

The Supreme Court's decision is final. Kenyans.co.ke did not report whether the bench disturbed the remaining parts of the Court of Appeal award, including the tender preparation costs, or how it allocated legal costs; those details will be clear once the full judgment is published. The company had not publicly commented by Friday evening.

The win comes at a busy time for the fund, which is rolling out higher contribution rates under the NSSF Act, 2013 and facing growing pressure from members to show prudent management of their savings.

Photos: The Judiciary/Kenyans.co.ke (Supreme Court of Kenya); Kenyans.co.ke (NSSF headquarters). Thumbnail design: HAMASTA MEDIA.