Politics and policy
Kenya's NSSF risks losing Sh1.5bn in dispute with Jirongo firm
Posted Tuesday, April 17 2012 at 20:19
The National Social Security Fund (NSSF) could lose another Sh1.5 billion in a fresh suit where Sololo Outlets is seeking to compel it to honour a pledge purportedly made by a former managing trustee.
The firm, owned by Lugari MP Cyrus Jirongo, claims that Alex Kazongo promised to pay the amount as part of the deal to review its claim from Sh1.39 billion to Sh490 million in a recent arbitration.
NSSF has settled the Sh490 million awarded to Sololo, indicating that the total payout could top Sh2.9 billion should the court grant the company’s plea, leaving the State pension manager exposed.
“Sololo Outlets has returned to court under a certificate of urgency to claim a further payment of Sh1.52 billion allegedly based on a promise by the former managing trustee to review the claim of Sh490 million,” the NSSF acting managing trustee Tom Odongo told Parliament’s Public Investments Committee.
He, however, said there was no written agreement between Mr Kazongo –sacked in February – and Sololo Outlets.
The committee was informed that the board of trustees was not aware of the new contract, but NSSF may now have to bear full liability.
Legal experts point out that Sololo does not need to have a written contract to present a strong case in court, citing that implied agreements can be valid and enforceable.
“A contract can be implied depending on the circumstantial relationship between the parties,” said Ashford Mugwuku, a Nairobi-based commercial lawyer, alluding to the fact that Sololo Outlets could have a case.
Earlier, the fund had paid Sh342 million toUganda’s Mugoya Construction Company for breaching a contract entered between the two parties for the development of an up-market housing estate in Karen, which did not take off.
The claim by Sololo Outlets relates to a contract entered in 1992 where NSSF purchased an incomplete housing project in Nairobi’s South B estate consisting 420 homes, a school and a shopping centre from the developer for Sh1.2 billion- where the selling price included the cost of completing the works.
The seller raised the price to Sh2.65 billion in May 1993 citing a jump in material costs, prompting NSSF to terminate the contract after Sh900 million had been paid, bringing the total payout to Sh1.39 billion.
NSSF hired a different contractor to finish the works and the homes have since been sold out to individuals under a tenant purchase scheme.
Last week, Mr Jirongo wrote to NSSF seeking to repossess Hazina Estate in exchange for the Sh1.39 billion paid to his company to date—a position Adan Mohammed, the chairman of the board of trustees, says is not enforceable.