KPA on the spot over Sh715m pay to tycoon for its own land

The Kenya Ports Authority (KPA) has once again found itself under the spotlight over its alleged intention to pay Sh715 million for a disputed land lease.

The payment stems from a dispute regarding a lease agreement between the State-owned firm and a private company, Memphis Limited, which is associated with a prominent businessman.

Memphis has obtained an arbitration award of Sh715 million against the KPA over the lease of the seven-acre piece of land that was to run for 33 years from 2009.

The KPA took over the land in 2017 to construct a public road from Mombasa port to Kipevu, claiming Memphis had breached terms of lease agreements that demanded the development of the property within two years from 2009.

Memphis sued, forcing the dispute to be referred for arbitration under lawyer Ambrose Rachier.

"The claimant is awarded the total sum of Sh715 million as compensation for loss of its leasehold," ruled Mr Rachier.

"Interest of the above will be at court’s rates from the day of judgment and payment in full."

Now, two Mombasa residents have moved to court seeking to stop payment of the award, accusing the KPA of failing to follow due diligence to protect taxpayers from losing millions of shillings.

The activists, Caleb Ngwena and Millicent Adhiambo, have sued the State agency and Memphis and want the decision of the arbitrator awarding the firm the millions quashed.

They have also accused KPA of failing to appeal against the arbitrator’s decision.

"Pending hearing and determination of this application interparties, conservatory orders be issued restraining KPA, its agents, employees or any other person acting on its instructions, from authorising, approving, allowing and/or permitting it to pay Memphis Ltd money awarded by the arbitrator on June 15, 2020," say the petitioners

The petitioners have expressed fear that Memphis will at any moment demand settlement of the award, which payment if made, shall further overburden the taxpayers.

They also argue that when a State agency requires to acquire land for its use, the entire process of acquisition is to be done by the National Land Commission, which has the sole responsibility to value the property and advise accordingly.

Skewed arbitration

The activists say the entire transaction from the lease, the acquisition, the arbitration are marred with irregularities.

"The respondents from the foregoing have been working in cahoots to defraud the public, thus KPA inertia to appeal against the unfounded award of the skewed arbitration," say the petitioners.

The company leased the land for the development of a container freight station (CFS) for loading and clearing cargo from ships docking at the Mombasa port.

The firm took possession of the plot in 2009 and was required to fund the cost of constructing street lighting, sliding roads, drain waters and sewers and to maintain the same.

"Develop the land within two years of the lease failure to which the land shall revert to the lessor without any compensation whatsoever to the lessee including forfeiture of the stand premium to the lessor," says the lease agreement seen by the Business Daily.

The terms of the lease also required the firm to pay periodic premiums to the KPA.

Documents indicate that the firm had also intended to set up a liquefied petroleum gas project.

However, the documents suggest that by 2017 the land had no development and that Mephis did not seek an extension of the lease to make the improvements, prompting the KPA takeover.

The petitioners say Mephis should obtain approval to establish the LPG project.

"Memphis Ltd does not have any tangible assets or financial capacity having failed to develop the leases property and as a matter of concern, the rates for the property were settled by a third party -- Portside Ltd -- and it is instructive to note that the development plans are planned by Hass Petroleum Ltd," say the petitioners.

The hearing of the case is scheduled for May 6.