A former landlord to the troubled Nakumatt Supermarkets has challenged orders directing it to deposit Sh20 million as security in a case where it has been sued by the retailer.
South Coast Holdings Ltd, which housed the firm's Diani branch, wants the orders by Environment and Land Court Judge Anne Omollo suspended pending hearing, filing and determination of an appeal against the directive.
Through lawyer Kinyua Kamundi, South Coast Holdings Ltd argues that security in applications of injunctions is provided by the applicant and not the respondent.
“There was no application for security of any amount before the judge, the judge favoured the respondent (Nakumatt) by granting drastic orders that it had not sought,” argues Mr Kamundi in the papers filed at the Court of Appeal.
He further argues that Nakumatt is insolvent and has liabilities in excess of Sh35 billion against assets of less than Sh6 billion, hence South Coast Holdings will have no chance of recovering the money.
Nakumatt had sued its former landlord seeking to have it restrained from utilising and dealing with its equipment at the Diani premises it used to operate from.
Justice Omollo had directed South Coast Holdings Ltd to deposit the money to be held in an escrow account to be opened in the joint names of the advocates on record for the parties.
The money, the court had said, will be treated as security in the event the application by Nakumatt succeeds.
South Coast Holdings Ltd says that the judge ought not to have ordered Sh20 million to secure assets valued at less than Sh5 million and that no prejudice will be suffered by Nakumatt is the application for suspending of the order.
In his supporting affidavit, Mr Sultan Khimji, one of the Directors at South Coast Holdings Ltd, argues that a former tenant whose lease was lawfully terminated cannot file any claim for mesne profits.
“The respondent (Nakumatt) was a tenant, it did not own the building and it is absurd for any court to entertain an application based on a suit for mesne profits by a former tenant,” says Mr Khimji.
Mr Khimji also says that the order for security failed to take into account the terms and conditions of the lease that the tenant cannot merely remove fixtures, fittings, furniture and equipment without reinstating the building to its original status.
“The judge did not consider that ripping off fixtures embedded onto the building will require it to be repaired and due to insolvency status, the respondent (Nakumatt) will not be able to meet the expense,” said Mr Khimji.
In its application against South Coast Holdings Ltd, Nakumatt claims it took possession of the premises in 2009 for use as a supermarket with quiet and peaceful possession until last year when it ran into cash flow problems due to turbulent economic times in the country.
Through lawyer Mutiso Ngonze, Nakumatt argues that as a result of the economic turbulence, two companies filed insolvency petitions seeking to liquidate it.
It further says that suppliers also started withholding supplies to the supermarket resulting in low stock on the shelves.
According to the retailer, in November last year, South Coast Holdings blocked entry into and out of the supermarket thereby barring it and its customers from accessing the premises on account of unspecified rental arrears.
The retailer argues that in January this year, the landlord unlawfully gained access to the premises through breaking and commenced trading, utilising fixtures, fittings, furniture and equipment property of the supermarket.
Nakumatt says all outstanding arrears prior to an ‘Administration Order’ given by the High Court in Nairobi remain subject of the administration and are only payable upon approval of the administrator’s schedules of payment by the creditors.
“The defendant has continued with the lock out on the suit property as well as use of the equipment to the plaintiff exclusion,” the application states in part.
South Coast Holdings Ltd also wants proceedings at the ELC court suspended pending hearing and determination of the appeal against the order to deposit Sh20 million security.