What started as a plan to acquire a block of apartments at Nairobi’s prestigious Riverside Drive is now threatening to swallow the entire complex that houses a hotel, offices and other properties estimated to be worth billions of shillings.
In 2010, a company known as Synergy Industrial Capital paid Sh750 million to acquire two blocks out of 14 from Cape Holdings, the developer of the property where DusitD2 Hotel stands. The deal fell through and the matter was referred to arbitration.
A decade later, Synergy Industrial is claiming more than Sh5.5 billion from Cape Holdings and had last November successfully obtained orders from the High Court allowing it to auction the complex to recover its funds.
In April though, the Court of Appeal halted the sale plan after I&M Bank moved to court and said the property is charged to the lender over a loan of Sh2.82 billion.
But as the court considers who between the bank and Cape Holdings should be given priority over the property, the amount sought by the company remains one of the biggest court awards resulting from a botched deal.
Cape Holdings Ltd had been embroiled in a dispute since 2010 with the company accused the developer of failing to honour its part of the bargain by failing to hand over the blocks as agreed.
The matter was referred to arbitration and in 2015 the arbitrator — Ochieng Oduol — ordered the developer to refund the principal amount and interest totalling Sh1.66 billion.
The debt has since ballooned to more than Sh5 billion, and last December, High Court judge Alfred Mabeya allowed Synergy to sell the property to recover the money. The dispute has been in court corridors over the years but attempts by Cape Holdings to escalate it to the Supreme Court were rejected.
The property known as 14 Riverside Drive near the University of Nairobi’s Chiromo Campus sits on a 5.2-acre parcel of land and comprising of five office blocks, a five-star hotel — Dusit D2 — with a swimming pool, a parking silo, food court and cafeteria.
Last year, former KPMG chief executive officer Richard Boro Ndung’u was awarded Sh379.03 million after he was illegally sacked by the audit firm and removed as a partner.
Mr Ndung’u has since gone back to court seeking a higher payment accusing the Dutch-based parent audit firm of racial discrimination in the wake of his sacking in 2017.
The former equity partner in KPMG (K) and a member of KPMG (EA) fell out with KPMG in 2016.
Mr Ndung’u joined the firm in 1999 and served for 18 years rising to become the first Kenyan senior partner and chief executive and later head of tax.
Documents filed in court showed that he was informed that he was involved in an inappropriate relationship with his personal assistant. He was then asked to surrender his phone and laptop to facilitate investigations as they would be subjected to forensic imaging.
As the internal investigation proceeded the company allegedly changed tune and accused him of a more serious offence of sexual harassment, dropping the earlier one of improper conduct.
Mr Ndungu contends that although he knew it was unlawful for the CEO to confiscate his phone and laptop, he nonetheless gave them out without a fight.
In October 2016, Mr Ndung’u wrote to Trevor Hoole, chief executive of KPMG-Southern Africa, raising his concerns about the treatment from the local CEO after the investigations took longer than expected.
The CEO and two other partners met him at a club, where they informed him of the decision by KPMG (K) to ask for his resignation in exchange for a financial settlement. He rejected the proposal.
In a subsequent meeting in January 2017, KPMG (EA) voted to remove Mr Ndung’u as a partner, triggering the court case. He sued and last June, Justice Francis Tuiyott awarded him for the illegal sack.
Mr Ndung’u has since gone back to court seeking an undisclosed amount from the parent company for damages after the sack. He said the global firm encouraged the local partners to take action against him for raising the complaint, contrary to KPMG’s code of conduct.
“My treatment at KPMG’s hands was therefore discriminatory and racially motivated, given the disdain they have for the citizens and the laws of Kenya in particular, and Africa in general,” Mr Ndungu says in the documents filed at the High Court.
The audit firm has also filed a cross-petition as it seeks to reverse the award.
In another case, the High Court in 2017 awarded multi-party hero Kenneth Matiba Sh978 million for special and general damages for the suffering he went through at the hands of State officials in the 1990s.
The amount included Sh15 million for damages and violations suffered and another Sh18.1 million for medical expenses. The amount later rose to more than Sh1.5 billion because of interest, as the government delayed releasing the payout.
Mr Matiba, a former Kiharu MP, died in 2018 aged 85 after battling an illness.
He suffered a stroke while in detention on May 26, 1991, but State officials did not get him medical attention and he remained in that condition for a week.
His lawyer John Mburu argued that Mr Matiba lost investments worth Sh5 billion following his detention.
The lawyer called Lawrence Riungu, a financial and investment analyst who testified that Mr Matiba’s businesses started collapsing soon after his detention. He said the former minister had an illustrious career in politics and a flourishing business empire.
An audit of the estate revealed that the politician lost more than Sh2 billion in commercial real estate and a further Sh2 billion in privately held shares.
Justice Isaac Lenaola, now a Supreme Court Judge, agreed that the collapse of Matiba’s empire started after his detention.
The judge noted that the former minister was the driving force in his businesses, which lacked his leadership during his detention and failing health attributed to the detention.
“The business needed his attention focus, energy, guidance and leadership, which he was giving his companies before. Without him, at the helm, the businesses deteriorated and some of them collapsed,” Justice Lenaola noted.
In July 2018, the Supreme Court brought to an end a decade-long battle between the Kenya Pipeline Company (KPC) and London-based Glencore Energy over compensation of Sh4 billion after refusing to hear the case.
The dispute stemmed from Triton Petroleum Company (KPC) — belonging to runaway businessman Yagnesh Devani — allegedly withdrawing oil worth more than Sh7 billion from KPC storage facilities and selling it to marketers.
The court heard that Glencore, one of the financiers of Triton, said the State agency was at fault for not informing financiers that it had released the oil for sale.
In a letter dated January 5, 2009, addressed to Glencore, KPC recalled and rescinded its confirmation as to the stock of gas oil it held, stating that an earlier confirmation, on December 2008, was erroneous.
Glencore said in the Transportation and Storage Agreement dated December 8, 2001, between the company and Triton, KPC would receive, and store petroleum products imported into Kenya and deliver them to Triton.
The deal was contained in a Collateral Financing Agreement, which also said that the KPC would not release oil products in its custody without the express instructions of the financiers.
The High Court later found KPC at fault and ordered the State corporation to pay Glencore Energy Sh4 billion.
The parastatal appealed and three appellate judges reversed the decision holding that there was an elaborate scheme hatched and executed by Glencore, using Triton Oil Company as a front, which allowed the company to enter and trade in the Kenyan oil market without a licence, a move in itself, a “flagrant illegality”.
“That illegality defeats all its claims against the appellant and the learnt High Court judge should have so found. In failing to do so despite pleadings and strident pleas by the appellant, he fell into error and must be reversed,” Justices Patrick Kiage, Gatembu Kairu and Kathurima M’Inoti ruled.
The firm then sought to move to the Supreme Court but the application was rejected by the Court of Appeal. Not satisfied, it moved to the Supreme Court directly, seeking to be heard but its case was summarily dismissed.
The judges led by then Chief Justice David Maraga said the Constitution cannot protect rights supposedly acquired through the violation of the law.
In another yet-to-be-decided court case, the family of a former deputy director of Intelligence Stephen Mwangi Muriithi, who died last year, has moved to the Supreme Court as they pursue compensation of Sh2 billion from the estate of former President Daniel arap Moi.
The former spy chief had accused Moi of forcibly seizing his property. Mr Muriithi had sued the late retired president for unlawful detention without trial and depriving him of his properties including land, buildings and shares in three companies, where they were allegedly business partners.
Mr Muriithi had sued Mr Moi and Raymark Ltd, seeking close to Sh2 billion for unlawful detention and occasioning his financial loss.
The High Court in 2011 awarded him Sh1.9 billion for loss suffered in the sale of his properties and damages for illegal detention, but the Court of Appeal overturned the judgment in 2014, triggering the second appeal to the Supreme Court.
In 2011, High Court Judge Jeanne Gacheche had ruled in his favour, saying Mr Muriithi’s detention without trial was not to preserve public security but for Moi to secure commercial advantage and interfere with his liberties and rights.
The retired President appealed, and in 2014 and the Court of Appeal saved him from paying the former intelligence chief more than Sh1.9 billion.
The appellate court set aside the decision, saying Moi was not personally responsible for Muriithi’s detention, as it was an action of the state.
Muriithi was Moi’s business partner but claims that the former President used a clause in the former Constitution to detain and deprive him of his properties.
Among the companies they allegedly co-owned are Fourways Investments Limited, where Mr Muriithi held 40 percent shareholding, former spy chief James Kanyotu held a similar percentage, while Sadru Alibhai (one percent) and Moi held 19 percent.
Also in contention is Sheraton Holdings Limited, where he allegedly held 40 percent, Mr Kanyotu 40 percent and Moi 19 percent and Mokamu Limited — where all the three held 33 percent shareholding each.
He said he had a majority stake in the three companies and the said companies owned Kenwood House on Kimathi Street, Atlas Building on Moi Avenue and Ruprani House but they were sold off while he was in detention.
He also claimed that Mokamu ltd owned a 1,020-acre parcel of land in Solai, Nakuru County.
The second appeal is set for hearing on July 22.