Two units of investment firm Cytonn, have asked the Court of Appeal to block the sale of a 40-acre Ruiru land, even as Official Receiver Mark Gakuru argues that the fresh application is an attempt to scuttle refunds of over 3,000 Cytonn High Yields Solutions (CHYS) investors.
Cytonn Investment Partners Five LLP and Cytonn Investment Partners Twelve LLP claim that they are the registered owners of the Ruiru land, hence it should not be liquidated to refund investors that lost more than Sh9.4 billion in the collapsed CHYS.
Mr Gakuru in an October meeting with CHYS investors, said he is in the process of acquiring provisional title deeds for several properties, because Cytonn Group officials led by co-founder Edwin Dande have refused to release ownership documents for the lands.
On its website, Cytonn Investments stated in 2021 that the land is valued at approximately Sh845 million. The Court of Appeal will hold a hearing of the application today (Friday), and then give directions.
The two Cytonn subsidiaries argue in the Court of Appeal application that they are solvent firms, with ongoing projects on the Ruiru property, dubbed Riverrun, with buyers.
But Mr Gakuru says in a replying affidavit that the two companies suing are special purpose vehicles, which were incorporated for projects intended to benefit investors of CHYS and Cytonn Project Notes (CPN), both of which the High Court last year declared insolvent.
The Official Receiver adds that the application by the two Cytonn subsidiaries, is similar to another ongoing case before the Court of Appeal, hence is aimed at stalling liquidation of properties to ease the pain of CHYS and CPN victims.
Cytonn Investment Partners Five LLP and Cytonn Investment Partners Twelve LLP, claim that if stop orders are not issued, Mr Gakuru may acquire new title deeds and sell the property at the expense of investors and people who have paid deposits for homes.
“If the current application is not treated with utmost urgency, the respondent (Official Receiver) will not only demand compliance with the ruling and subsequent orders, but will also take possession of the subject property for sale as stated in the creditors meeting on October 24.
"This would effectively dismantle the applicants' business plan and irreparably harm the livelihoods of many individuals,” Solomon Kimani, a project manager with the Cytonn Group says in court papers.
But Mr Gakuru argues that Mr Kimani and the Cytonn subsidiaries have not disclosed the full story of the Ruiru property to the Court of Appeal.
The Official Receiver says that the two subsidiaries were formed as part of a joint venture with the original land owner, Muiruri Laban Limited.
He adds that the joint venture collapsed and Muiruri Laban Limited in 2022, successfully sought dissolution of the partnership.
The Official Receiver adds that the Court of Appeal in January, held that there is a close link between the Cytonn companies and their subsidiaries, to delink assets targeted for sale in the liquidation of CHYS and CPN.
Cytonn Investment Partners Five and Cytonn Investment Partners Twelve, admitted to owing CHYS Sh634.6 million in 2022, and Mr Gakuru says that if the two subsidiaries are indeed solvent, then they should offset the debt.
“The claim of urgency is a misrepresentation of facts, as the status of the property has not changed since the court delivered its ruling over 10 months ago on January 17, 2024.,” Mr Gakuru says in court papers.
The Official Receiver has received claims totaling Sh9.4 billion. Of that amount, Sh1.176 billion are claims by KCB and SBM Bank, which are secured creditors meaning they will get first priority in payment after liquidation of assets.
CHYS and CPN investors have made claims totaling Sh8.236 billion.
