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Reprieve for Nairobi Hospital as court lifts ban on capital expenditure
The main entrance at The Nairobi Hospital.
The High Court has lifted orders blocking the management of Nairobi Hospital from embarking on capital expenditure and replacing old equipment at the facility.
In a reprieve for the hospital, which has been rocked by leadership wrangles in the recent past, Justice Peter Mulwa said the orders sought by Dr Samuel Mithamo Muchiri were similar and interlinked with two other case pending before him.
“Taking into account the import and tenor of the provisions of Section 6 of the Civil Procedure Act, and the fact that this court is the one ceased of HCCOMM E544 of 2024, I hereby proceed to decree that the instant matter be mentioned alongside HCCOMM E544 of 2024 for possible consolidation and expedited hearing and determination,” said the judge.
He directed that the case be mentioned on April 28, with a view to consolidate the matters.
“The orders granted in the interim, are hereby discharged,” Justice Mulwa said.
The ruling comes a few days after a multi-agency team led by the Directorate of Criminal Investigations (DCI), the Assets Recovery Agency (ARA) and the Kenya Revenue Authority (KRA) stormed the facility and carted away documents.
The team said it was probing claims of abuse of office, conspiracy to commit crimes and money laundering.
Board of management chairman Dr Barcley Onyambu welcomed the probe and promised to comply with the directives of the officers, saying it was in the best interest of Nairobi Hospital.
The management had opposed the orders issued on February 11, arguing that the hospital needed to replace old and outdated medical equipment, which manufacturers have since stopped offering support and servicing them.
The hospital cited its Linear Accelerator, which is used for treatment of cancer patients and which was acquired in 2012 and is no longer supported by the vendor as it has reached its mechanical ‘End-of-Life’.
The country’s premier hospital further defended a Sh4.2 billion loan, arguing that the facility needed new medical equipment including MRI and CT scan machines, which had already been procured through tenders.
The court heard that blocking the management from using the intended loan to pay for the machines would expose the hospital to legal liability running to hundreds of millions. It doubted whether Dr Muchiri would compensate the hospital if the case is dismissed.
Further, the court heard that there was ongoing construction of a labour ward, a cardiac centre and the conversion of second floor into a doctors’ room.
The hospital said stopping the works might attract legal action against the hospital because the tender had timelines and with new equipment, there would be a guaranteed return on investment given that the hospital would generate revenue from their usage and, most importantly, offer its patients safety and quality healthcare.
Dr Muchiri had obtained orders blocking the procurement of the machines and other capital intensive expenditure as well as resolutions passed during the December 4, 2024 annual general meeting (AGM).
Through lawyer Nelson Havi, he maintained that the AGM was held in gross contravention of provisions of the Companies Act and Articles of Association of the Company, thereby rendering invalid the resolutions made during the meeting.
Mr Havi said the new membership was admitted without corresponding payment per applicant before the AGM.
He further claimed that 333 persons were admitted to membership without a proper board of directors and without vetting and consideration of suitability.
The former Law Society of Kenya (LSK) president added that the members were not allowed to inspect the register of members and to make copies and that the alteration in the register was not lodged at the Registrar of Companies.
Mr Havi claimed that the board of management had driven the company to losses amounting to Sh1.155 billion, with a debt to suppliers of nearly Sh3 billion.
He said that with the knowledge of the loss-making position and the debt, the management allegedly intended to borrow the Sh4.2 billion using the hospital’s assets as collateral.
“Clearly, there is no necessity to imperil the assets and existence of the Company by exposing it to a loan of Sh4.2 billion, when the suicidal borrowing can be avoided,” Mr Havi said.
He said a company cannot borrow to pay debt and that long-term financial investments and assets should be used to meet the long-term goals, objectives, and strategic plans of the hospital.
In the ruling, the judge said most of the issues raised by Dr Muchiri had also been raised in two other matters before him, and there was a risk of rendering conflicting decisions if the matters proceeded separately.
“It will be untidy for the court to consider the outcome of the AGM both in this suit and the earlier suit as there is a great risk of coordinate courts granting conflicting orders,” said the judge, noting that the Sh4.2 billion had also been raised in the other matter yet to be concluded.