CBK loses to Pattni firm in Laico Regency row

A company associated with Goldenberg architect Kamlesh Pattni has convinced the Supreme Court to determine its dispute with the Central Bank of Kenya (CBK) over a multi-million shilling claim linked to sale of Laico Regency Hotel.

A bench of five judges led by Deputy Chief Justice Philomena Mwilu agreed with Westmont Holdings that its suit is of public importance given the firm was asked to deposit Sh20 million before pursuing the claim against the CBK.

Malaysia-based Lynwood Development Limited used its local agent, Westmont Holdings, to pay Sh185.5 million to the CBK in April 1997, being a 10 percent deposit for the purchase of Grand Regency Hotel and interest accrued.

The hotel was ultimately sold to Libya Arab Investment Company (Laico) and renamed Laico Regency, prompting Westmont to sue seeking refund of the Sh185.5 million plus interest.

The firm is accusing the CBK of defrauding it of Sh185 million over the botched sale of Grand Regency hotel, now Laico Regency.

The CBK has vigorously challenged Lynwood’s claim, arguing that Westmont’s Mr Pattni paid the money to offset a loan he owed the regulator, setting the stage for a legal battle that may once again leave taxpayers with a heavy bill to settle.

With the annual court interest set at 12 percent, the CBK could be forced to pay Sh2.8 billion should the top court rule in favour of the Pattni firm. "After looking at all the submissions, we hereby determine and certify the following issue as one of general public importance and which we shall consider in the intended appeal," the judges of the Supreme Court said.

The firm lost a similar bid in July when judges of the Court of Appeal rejected the application to challenge the requirement to deposit the amount within 45 days before the apex court.

But the five judges of the Supreme Court agreed to hear the case stating the court needs to determine whether an order for security for costs is unreasonable as it impedes a litigant’s access to justice, by imposing a condition before being heard, against the Constitution.

The CBK’s main argument was that Westmont was wound up in May 2002 and that Westmont lacked capacity to start or conduct an appeal, either directly, through an attorney or firm of advocates.

The banks regulator said through senior counsel Philp Murgor that that being the case, there was no possibility of his client ever recovering costs awarded in the High Court and at the Court of Appeal if Westmont lost the appeal.

The CBK also said Jasmine See, who has filed an affidavit in support of Westmont, is a foreigner who holds multiple passports including US and Malaysia and does not reside in Kenya

But Westmont argued that the condition to deposit the amount is prohibitive to access to justice and is in contravention of Article 48 of the Constitution that provides that access to justice should be reasonable.

Westmont further argued that the issue of access to justice concerns foreign and domestic investors across the country and there is a need to protect their investment and have any dispute heard without barriers such as costs.

Lynwood had told the court that it heard of the CBK’s intention to sell the hotel from Mr Pattni and paid the 10 percent of the hotel’s purchase price. Mr Pattni, a major shareholder of export firm Goldenberg International, was at the centre of a scam that involved re-exporting gold and diamonds

It is thought to have cost Kenya as much as $600m (Sh66.4 billion) between 1990 and 1993, and former President Daniel arap Moi and his allies were reported to have received a cut of the cash

Lynwood had in October 1998 filed a suit demanding a refund of the money but did not pursue the matter, leading to its dismissal by Justice Luka Kimaru in 2008 for lack of prosecution.

The firm maintained that Westmont was its agent and stated that it remitted US $ 3, 700,000.00 to the CBK for the sale of the Grand Regency Hotel. Four years later, the company moved back to the High Court seeking reinstatement of the case

The Malaysian firm argued that the delay was caused by the prolonged investigations into the Goldenberg scandal and a road accident that caused its representative to be hospitalised in Malaysia.

The banking regulator had told the court that the government did not enter into any sale agreement with the Malaysian company and money received was not kept in any suspense account as is always the case and, therefore, no liability was due.

The CBK, therefore, asked Lynwood to pursue its claim against Mr Pattni, if it wishes, since the agreement it entered with the businessman did not involve the CBK.

Mr Pattni has distanced himself from the case, arguing that the suit is between the CBK and the Malaysian firm.