Companies

Prime Bank quest for security in contract row declined

Prime-Bank

Prime Bank head office in Nairobi. FILE PHOTO | NMG

The High Court has dismissed an application by Prime Bank seeking to compel a Nigerian construction firm to provide security before proceeding with a case in which the lender has been sued over the failure to allegedly honour some obligations.

The Israeli firm, Reynolds Construction (NIG) Ltd has sued Prime Bank accusing the lender of alleged failure to honour guarantees it signed on behalf of D.M. Enterprises Ltd, which had been subcontracted to supply some materials for the construction of several link roads and footpaths in Nairobi.

But before the case was heard, the lender said the firm is incorporated in Nigeria and its list of assets in Kenya is not known.

Prime Bank further says the case by the Nigerian construction firm has no chances of succeeding, and recovering costs incurred in defending the suit might be difficult.

Justice David Majanja dismissed the application saying the fact that the company was Israeli was not sufficient to ask for security for costs.

The judge added that Reynolds Construction had demonstrated that it had dealings worth billions with the government and its agencies.

“I hold that the bank must go further than make a mere allegation that a company is incorporated abroad, it must establish that the company may not be in a position to settle its costs should the suit be unsuccessful,” the judge said.

The Nigerian firm was contracted by the government to construct missing link roads and non-motorised transport (NMT) facilities in Nairobi County at a cost of Sh4.5 billion. It was also contracted to make footpaths in the city.

The firm later engaged D.M. Enterprises to supply aggregate and precast concrete. The contractor advanced 30 percent of the sub-contract amount for mobilisation and the money was to be recovered from works completed.

As a condition for advance payment, the sub-contractor was required to obtain payment guarantees from the lender.

The Israeli firm says it advanced Sh167.4 million to the sub-contractor and the money was recovered but left a balance of Sh43 million.

Reynolds thereafter blamed the lender in the court documents stating that Prime Bank failed to honour the guarantees.

The Nigerian firm revealed in the court papers that it has won several contracts from the government.

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