Court orders throw Sh1bn Multiple Hauliers rescue deal into doubt

The Court of Appeal issued the stay orders on Friday following an application by the NCBA Bank Kenya, which is seeking to recover a Sh7.2 billion debt from the transport company.

Other big creditors include Synergy Credit Ltd, Cooperative Bank, Kenya Commercial Bank, I&M Bank, and Prime Bank, all claiming more than Sh31 billion from the company, which is under administration.

A report of the official receiver dated November 13, 2024, shows that the total debts are in excess of Sh31.4 billion, while the assets of the company are Sh17 billion, meaning the debts exceed its assets by Sh14.4 billion.

In the report, the official receiver gave a caution on the assets because of depreciation, as the figures given were only the book value.

Multiple Hauliers with more than 1,500 employees were placed under administration on June 7, 2021, following a liquidation petition.

The bank challenged the appointment of the official receiver, contending that the High Court’s decision had put its loan at risk.

This is because the appointment of the official receiver was limited to the time sheet of concluding the capital injection by the South African investor named Amava Group Capital (Pty) Ltd.

According to the bank, this effectively left the assets of the company in the hands of its directors, with the imminent risk of diminishing the value of the assets to the detriment of the bank and other creditors.

The bank’s legal team asked the Court of Appeal to grant stay orders pending the hearing and determination of its appeal. The court heard that the official receiver’s appointment was not made with the concurrence of the NCBA, which had earlier appointed joint administrators over the company.

"We agree with the applicant (NCBA) that this limited administration did not preserve the assets and accounts of the respondent to ensure the right of the applicant to recover its loan. In effect, the applicant is likely to suffer irreversibly, if stay is not granted and the intended appeal ultimately succeeds," said Justices Gatembu Kairu, Fred Ochieng, and Aggrey Muchelule.

The Official Receiver, Mark Gakuru, had been appointed by the High Court on September 13, 2024, for the purposes of overseeing the process of completing a $8.5 million (Sh1 billion) deal executed between the company and Amava Group Capital (Pty) Ltd.

He was also to oversee the smooth takeover of the company by the new investor by December 2024, though the administration was extended in February this year.

In the orders issued by Justice Alfred Mabeya, the court had also extended the interim orders in force suspending the administration and liquidation petition to avoid the chaotic dismantling of the company. All actions against the firm were effectively suspended until further orders.

However, the NCBA Bank was aggrieved and moved to the Court of Appeal seeking suspension of execution of the orders pending determination of the appeal.

The bank challenged the High Court decision on the basis that the appointment of the Official Receiver as administrator of the firm was not preceded by an application as required under the Insolvency Act.

The appeal judges heard that the company had not sought the appointment of the Official Receiver as its administrator.

"In our view, whether in the absence of an application, the learned judge had the jurisdiction to appoint the Official Receiver as the administrator of the respondent is an arguable point," observed the judges.

"We allow the notice of motion, and order stay of the orders issued on September 13, 2024, by the learned Judge until the intended appeal is heard and determined".

The said joint administrators later resigned in April 2024, prompting the High Court to appoint the Official Receiver.

"The court disregarded the applicant’s statutory right to appoint the administrator over the respondent," said the bank's lawyers.

It was further contended that, without an application and considering the bank’s right, the High Court judge lacked jurisdiction to appoint the Official Receiver as the administrator of the company.

Another argument was that the appointment of the Official Receiver to be an administrator was to oversee the single transition in relation to the time sheet of the new investor, as opposed to an administrator appointed for the benefit of the company's creditors, the NCBA included.

"The directors will in effect be left to run the respondent (Multiple Hauliers) with the prospect that the applicant’s loan in excess of Sh7 billion will be put to great risk," said the lawyers.

Multiple Hauliers had opposed the application, and their case was that the differences among the creditors had delayed the restructuring process.

It stated that the identification of Amava was going to resuscitate the process, and the implementation of the time sheet was a better deal for the creditors, the NCBA included.

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