Kenya Railways Corporation has suffered a blow in a rent dispute with a container and tableware manufacture after a court in Mombasa ordered it to refund the firm millions of shillings it has been collecting illegally as rent.
Court records show that the corporation has been demanding Sh10.2 million annually as rent from Milly Glass Works Ltd since 2012 as opposed to Sh146,000 that it was supposed to collect from the firm over the same period.
This means that if the firm complied and made the payment of Sh10.2 million annually, then Kenya Railways has so far received more than Sh90 million instead of Sh1.4 million.
Environment and Land Court Judge Sila Munyao has termed this as an unjust enrichment that the court cannot close its eyes to.
“I will use my wide discretion to order KR to refund to the firm all sums paid which exceed the annual amount of Sh146,000 per year. That sum must be refunded forthwith and each installment paid will attract interest from the time that it was paid at court rates until settlement in full,” said the judge
It also emerged during the proceedings of this case that the corporation ignored an order issued on March 14, 2013, prohibiting it from demanding Sh10.2million annually from the firm.
The court record indicates that the government agency demanded this money from the firm under coercion despite an order requiring the company to continue paying an annual rent of Sh146,000 pending the hearing and determination of this case.
“Now, I wonder why, despite the clear terms of the said orders, KR continued to demand Sh10.2 million. This demand is to me illegal. There is clearly an unjust enrichment which I am unable to close my eyes to,” said the judge
The dispute between the firm and the state agency began in 2012 when KR increased annual rent for a property that it had leased to the company from Sh146, 000 to Sh10.2 million.
Court documents show that KR leased to the firm a plot through a lease dated 1980 for a term of 81 years, with effect from January 1, 1977, at an annual rent of Sh22,000.
The firm argued that the terms of the lease expressly stated that the KR could have a right, at the expiry of each period of 30 years, to raise the annual rent to an amount equivalent to 1/20th part of the unimproved value of the land as at the date of such revision.
But in breach of these terms of the lease, the firm stated that KR in 1994, increased the annual rent from Sh22,000 to Sh146,000, before the expiry of the 30 years, which is the rent it continued paying until December 2011.
The firm argued that this increase is contrary to the terms of the lease and asked the court to issue orders prohibiting the government agency from charging or demanding any annual rent higher than Sh146, 000 until January 1, 2037.
But KR defended its action arguing that it was justified to increase the rent as it did. It denied that its right to increase rent was waived or is extinguished.
The government agency also pleaded that it could revise rent at any time after the expiry of 30 years.