Sh1.5bn debt ruling sets the stage for CS Tuju assets seizure

A Nairobi High Court judge on Thursday set the stage for the East African Development Bank (EADB) to auction property in Karen, Nairobi, belonging to Jubilee Secretary-General Raphael Tuju over a Sh1.53 billion ($15.6 million) loan deal that has returned to haunt the Cabinet Secretary.

Justice Wilfrida Okwany dismissed an application by Mr Tuju and Dari Limited to set aside a judgement obtained by EADB before a United Kingdom court, and a decision that was approved by the High Court in January.

Judge Okwany said that the judgement cannot be dropped by the Kenyan High Court. She said she was satisfied by the UK judges’ decision.

Thursday’s ruling is likely to embolden EADB’s quest to seize Mr Tuju’s property under Dari Limited for sale, a double blow to the Cabinet Secretary who is currently in hospital after he was involved in a road accident on Wednesday while on his way to Kabarak in Nakuru County to attend the burial of former president Daniel arap Moi.

Mr Tuju, a CS without portfolio in the Jubilee government, had borrowed the money from EADB for the construction of Sh100 million two-storey luxury bungalows sitting on a 20-acre forested property known as Entim Sidai and the purchase of a 94-year-old bungalow built by a Scottish missionary, Albert Patterson, which currently operates as a high-end restaurant. However, the development of the 12 homes worth Sh1.2 billion fell behind schedule, setting the stage for the default and, consequently, the potential asset seizure.

Now, EADB is seeking to take over the 20-acre prime land, whose value is above Sh1.2 billion, as well as the high-end hotel operated by the Tuju family.

The bank says that the initial $9.19 million (Sh932.7 million) loan, which it advanced on July 31, 2015, has remained in default since 2017 when it fell due.

UK JUDGEMENT

However, through his lawyer, Mr Tuju had blamed the bank for the delayed construction of the homes, saying the lender declined to provide additional money to fund the building of the luxury homes.

According to him, this was in breach of the loan agreement. He also accused EADB of disbursing Sh932.7 million instead of the agreed Sh943.9 million, adding that the bank had reneged on a plan to offer another Sh294 million for building the luxury homes for sale.

“EADB is fully aware that in the absence of the development of the housing units for sale as envisaged in the project proposal, Dari would not be able to service the loan facility,” said Mr Tuju, who was not in government when the borrowed the money.

Mr Tuju suffered the first blow when, Judge Danie Toledano in his judgement delivered in the UK, said the bank was under no obligation to lend the additional Sh294 million. And on Thursday, the CS suffered yet another major blow when Justice Okwany agreed with the UK judge, arguing that Mr Tuju had been given an opportunity to defend himself.

”It was not disputed that the applicant was given an opportunity to respond to the case and the appeal by him was dismissed,” she said. “Any further challenge to the finding of the UK judgement can only be determined in the English court.”

In his application, Mr Tuju had alleged that the bank’s aim was to take over his properties in Karen.

“This court should not allow itself to be used as a conduit to perpetrate the grabbing of a property through unsavoury, unconstitutional means,” he had told the court.

Through Senior Counsel Paul Muite and Mr Nyamodi, Mr Tuju told the court that the UK judge did not accord him a fair hearing, hence his ruling should be set aside on the grounds that it was biased.

He told the court that Dari Ltd had raised the issue of bias before the UK court, claiming that Mr Michael Sullivan, who represented the bank, and Justice Toledano, who presided over the matter, shared a chamber or an office.

In his reply, however, Mr Sullivan QC, told the court that there was nothing wrong with sharing chambers because each is independent of each other. He cited a number of decisions made by courts in UK, supporting the argument that all members of chambers are independent of each other, whether part or full-time judges.

According to the UK lawyer, there was no imputation of apparent bias where a judge appears in a case where counsel shares chambers with counsel appearing for one of the parties. He said it was upon Dari Ltd to show the court why the judge should have recused himself from the case.

Justice Okwany also heard that Dari Ltd had submitted itself to the jurisdiction of the court and its complaint was dismissed for lack of merit.

The London court dismissed Dari Limited’s opposition to the bank’s claim, setting the stage for the lender to seek enforcement and auction. Court documents showed that the restaurant had entered into an agreement with EADB on April 10, 2015, under which the lender agreed to give Dari Limited a $9.3 million (Sh943.9million) loan. The deal gave the restaurant a 24-month grace period, which fell due in 2017.

However, two years later, Dari Ltd had failed to pay the $1.8 million (Sh186 million) in interest owed, according to the bank, which also told the court that Mr Tuju had ignored a notice to service the debt.

Among the accusations that the defendants -- who also include Mr Tuju’s children Mano, Alma and Yma -- faced were breach of agreement and defaulting on the loan repayment terms.

EADB accused Dari Ltd, where Mr Tuju and his children are directors, of breaching the debt agreement and defaulting on the loan.

Mr Tuju, who made his wealth from the media business, has invested heavily in real estate.