The owner of the building where DusitD2 hotel stands wants the court to review an award of Sh5.4 billion being sought by a businessman who failed to get a block in the complex.
The deal to purchase part of the building started in 2011 when Synergy sought two blocks in the complex, once it was complete.
The initial plan was to construct a residential building but this changed and the proprietor decided to go for office suites, targeting the growing list of clients aiming for offices in high-end areas.
The owner of the building where DusitD2 hotel stands wants the court to review an award of Sh5.4 billion being sought by a businessman who failed to get a block in the complex after a botched deal a decade ago.
Cape Holdings, which owns 14 Riverside Drive, says in an application before the Court of Appeal that the amount being claimed by Synergy Industrial Credit is punitive and against public policy.
Synergy had advertised the complex for sale in January to recover the amount, but I&M Bank blocked the sale through a court order arguing that the building is charged to the lender over a loan of Sh2.82 billion.
“It is unconscionable and unlawful for the award to stand as it means that from a partial payment of the purchase price, Synergy now claims in excess of Sh5.4 billion, which in essence means it claims the entire development if the properties were auctioned,” lawyer Allen Waiyaki said in the application.
The deal to purchase part of the building started in 2011 when Synergy sought two blocks in the complex, once it was complete.
The initial plan was to construct a residential building but this changed and the proprietor decided to go for office suites, targeting the growing list of clients aiming for offices in high-end areas.
The parties negotiated a total of 14 agreements and in the end agreed that Synergy could have an office block known as Grosvenor plus 104 parking bays at a price of Sh703 million.
The deal fell through, sparking a court fight that lasted 10 years.
The matter was first referred to arbitration and in 2015, arbitrator Ochieng Oduol directed Cape Holdings to pay Synergy a total of Sh1.66 billion, including lost income opportunities amounting to Sh147 million, refund of loan borrowed to purchase the building of Sh715 million and exchange fluctuations of Sh50 million.
The amount was to be paid within 30 days failing which it would attract interest of 18 percent per annum.
Mr Gichuhi says in the application that the court should set aside Sh1.08 billion because it was not pleaded by the parties and that the arbitrator went beyond what was contemplated in the agreements. This should leave the amount owed at Sh577 million.
The lawyer further says the interest of commercial rate of 18 percent per annum should be removed and replaced at 12 percent per annum from January 30, 2015.
Cape Holdings is currently under administration. The administrator says interest computation should be limited to six years in accordance to section 4(4) of the Limitation of Actions Act.
“Since there is no recourse once the case was rejected by the Supreme Court, the Court of Appeal has the powers to review its judgment because the failure will result in miscarriage of justice,” Vruti Shantilal Shah, the administrator says.
The administrator says had Synergy completed the 14 agreements, it would own part of the building, which is currently valued at Sh1.2 billion.
“Charging interest otherwise known in the commercial world as compound interest is punitive and not compensatory. As already held, interest is meant to compensate a party for having been kept out of its funds or property for some time and not either to enrich such a party or punish the opposing party,” Mr Shah says.
He argues that the moment the interest is levied on any accumulated interest and not principal sum, such interest stops being simple and becomes compounded and therefore punitive.
If allowed, the company would pay about Sh992 million.
