Chinese firm loses bid for Sh73m dues

The High Court has declined a request by a Chinese construction company to force two real estate dealers to pay it a debt of Sh73 million that has remained unsettled for more than five years.

China Wu-Yi Company Limited wanted Suraya Properties and Muga Developers Ltd be forced to release to it titles of 10 houses at Fourways Junction Kiambu to settle the debt.

The property known as Fourways Junction Project comprises housing units and ancillary facilities.

The contractor also wanted the court to issue an injunction order restraining Suraya, Muga Developers Ltd and Equity Bank Ltd #ticker:EQTY from dealing with the houses pending the hearing and determination of the case.

Court papers indicate that the property was developed by Muga Developers using an undisclosed amount of loan obtained from Equity Bank in 2011. Muga also appointed Suraya as its agent to sell the housing units to prospective purchasers.

In March 2009, Muga Developers, through its project manager, advertised a tender for the construction of Phase I of the Fourways Junction Project.

The Chinese contractor won the tender. Upon completion of the project at various stages, the project architect issued certificates in favour of the company amounting to Sh166 million.

The final certificate of Sh116.2 million was issued on April 20, 2015, out of which China Wu-Yi is entitled to Sh73.6 million, and the balance is payable to subcontractors and other suppliers.

Since Suraya was unable to pay the Sh166 million, it was agreed that the amount would be settled in kind by way of sale of 10 houses. The sale agreements were implemented by the sale of those houses to the contractor’s nominee, Lixin Yang.

In due course, the contractor took possession of some of the houses but complained that it did not receive the title documents from Suraya and Muga. It told the court that it is still owed a sum of Sh73,668,495.

The contractor wanted the court to force Muga and Suraya enforce the sale agreement and issue it with the titles. In the alternative, it sought for judgment for Sh73,668,495 with interest and general damages for breach of contract.

But Justice David Majanja declined the request since Muga Developers owes Equity an undisclosed amount of money. It advanced the company the loan nine years ago.

“The bank is owed money by Muga, which continues to accrue interest and will at some point outstrip the value of the security if not paid. In that event, the bank, which has no contractual relationship with the Plaintiff (Chinese Contractor), will not have any recourse against the Plaintiff for that loss,” said the judge.

He added that if the contractor’s claim against the bank succeeds, it can be compensated. The judge said the bank could not be restrained from exercising its statutory rights under the securities based on a claim by a third party, in this case, the Chinese contractor, who has no proprietary interest in the suit property.

The court concurred with the bank that damages are quantifiable and an adequate remedy in light of the remedies sought by the plaintiff.