Pattni firm suffers setback over Laico Regency deal

A company associated with Goldenberg architect Kamlesh Pattni has lost a bid for 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 three judges dismissed the application by Westmont Holdings, seeking to be allowed to move to the Supreme Court, saying it is not substantial to warrant the attention of the apex court.

Westmont was seeking to overturn the demand to deposits Sh20 million before its multi-billion shilling claims against the CBK can proceed.

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 plus interest.

“There is no issue raised for determination which would have any bearing on the public interest and likewise we see no issue raised that would call for attention or determination by the Supreme Court,” the Judges ruled in relation to the deposit suit.

Following the ruling on the deposit, the firm, which had also sought to substitute Westmont with Lynwood Development Ltd, argued that the condition was punitive yet it had been defrauded of substantial amount of money.

The company wanted the Supreme Court to determine whether imposing a stringent condition is a hindrance to the right to justice.

Westmont said the issue is a matter of public interest because costs should not be an impediment to access to justice.

And after moving to the Court of Appeal, the CBK argued that Westmont had wound up and the firm should be compelled to provide security before pursuing the case.

The CBK had asked for Sh87 million but the appeals court directed the firm to deposit Sh20 million.

The CBK has vigorously challenged Lynwood’s claim, arguing that 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.

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.

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.

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 later a road accident that made its representative to be hospitalised in Malaysia.

The CBK had urged the appeals court to dismiss the case, arguing Mr Pattni had paid in the money to reduce his liability as per the agreement he signed with the government in May 1997.

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.

The businessman urged the court to uphold the High Court decision that dismissed the application.

Court records, however, show that he was one of the petitioners when the case was initially filed in 1998.

Grand Regency Hotel, which Mr Pattni surrendered to the Mwai Kibaki administration, was sold to the Libyans in 2008, a deal which evoked public outrage and ended in the appointment of a commission of inquiry, which concluded that the CBK did not realise the best value for the hotel.

The Justice Majid Cockar commission of inquiry into the sale of the hotel at the centre of the multi-billion-shilling Goldenberg scandal concluded that the CBK could have realised better value for the sale based on prices that were quoted in an earlier auction advertised in 1994.

The Cockar report says one bidder, identified as Hames Watts, was willing to pay $60 million (about Sh4.5 billion at current rates) for the hotel.

The hotel has 230 suites and rooms, conference and banqueting facilities, lounges and recreational facilities as well as shopping arcades.