Companies

Judge declines to hear default suit against Cytonn

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Summary

  • Justice Grace Ngenye suspended proceedings of the case following a finding that the agreement signed by the two parties provided that in the event of a dispute, they shall first pursue negotiations.
  • The judge directed that investors Charles Nzioki Kanyaa, Harrison Kaloki Kanyaa, Robert Munyao Kanyaa and the investment firm agree on the number of arbitrators to appoint.

A judge has referred a court dispute pitting three investors against Cytonn Investments to arbitration.

Justice Grace Ngenye suspended proceedings of the case following a finding that the agreement signed by the two parties provided that in the event of a dispute, they shall first pursue negotiations and if no settlement is reached, they shall proceed to arbitration.

"I am of the opinion that parties having voluntarily entered into a contract, they are bound by the same terms of the contract and I am restrained from rewriting the intention of the parties," said Justice Ngenye while allowing an objection Cytonn raised against the case.

The judge directed that investors Charles Nzioki Kanyaa, Harrison Kaloki Kanyaa, Robert Munyao Kanyaa and the investment firm agree on the number of arbitrators to appoint within 45 days.

The trio moved to court in February seeking orders to compel the investment firm to pay them more than Sh46.7 million, which they had invested in the firm plus interests. They sued Cytonn Real Estate Project Notes, Cytonn High Yield Solutions and Cytonn Investments Management PLC, respectively.

HANDSOME RETURNS

They claimed that they invested the money in Cytonn's real estate projects with a promise that they would get handsome monthly returns, but the company has refused to pay them back.

They initially invested Sh30 million with the Cytonn High Yields Solutions under the Investment Agreement dated October 29, 2018, at an agreed interest rate of 18 percent payable monthly for 12 months, the maturity date of the initial investment being November 4, 2019.

Cytonn regularly paid the agreed monthly interest rate until June 2020, when it stopped and varied the contractual investment terms.

When making the investments, they claim that the firm painted a picture of a financially stable company, which they trusted with huge investments.

Last December, the trio sought a refund of the principal amount plus accrued interest as of December 31, 2020, amounting to Sh46, 792,603. Cytonn did not pay, prompting the court case.

Cytonn Investments Management PLC senior legal associate Jennifer Solovea told the court that following the invocation of a force majeure clause of the subscription agreement, the period of investment was extended initially by three months, thereafter 12 months. Therefore, the immediate redemption as the investors sought could not be realised.

Ms Solovea avered that arbitration, as a dispute resolution mechanism, was provided for by parties in terms of Clauses 19 and 15 respectively of the Subscription and Partnership Agreements.

Further, she said the parties had tried negotiations via email correspondences, and the suit is indication negotiations were unsuccessful.

She said the dispute ought to be referred for arbitration as contractually agreed by the parties. She submitted that the court has a duty to encourage Alternative Dispute Resolution under Article 159(2) of the Constitution.

The investors had opposed the reference of the dispute to arbitration, saying the provisions of the Arbitration Act, 1995 relied on by the Cytonn predate the Constitution.

They further opposed the application on the basis that with the existence of the Consumer Protection Act, the agreement between the parties could not override the said legislation.