Raphael Tuju set for auction after losing Sh2bn UK loan suit

Former Jubilee Party Secretary General Rafael Togo is facing auction over a botched loan deal with a regional bank after his bid to block the enforcement of a British court ruling in 2019 was rejected by an appeals court.

The Court of Appeal cleared the way for the East African Development Bank (EADB) to recover the $9.3 million loaned to Mr Tojo on July 31, 2015, which has since swelled to more than $16.5 million (Sh2.22 billion).

At risk is a 20-acre prime property in Karen worth more than Sh1.3 billion and an upscale hotel, Dari Restaurant, linked to the Tujus.

EADB, which is partly owned by the Kenyan government, has been embroiled in a four-year legal battle with a former cabinet minister over the enforcement of a British ruling to seize Mr Tuju’s property under Dari Limited for sale.

Mr Tuju unsuccessfully fought enforcement of the British ruling up to the Court of Appeal, arguing that the EDB was thwarting efforts to get other lenders, including KCB Group and equity investors, to make the property profitable.

In the end, we are convinced that this appeal has no merit. Accordingly, this appeal has been dismissed under this Agreement with Costs Affected by the Respondent (EADB),” Judges Kathurima Menotti, Emana Laibuta and Mwaniki Gachuka ruled on Thursday.

“The (Tujus) appellants are prohibited by section 10(2)(h) from claiming that the judgment was obtained by fraud, having failed to bring it up in the proceedings before the English courts.”

is reading: Tojo avoids the auction in a row of loans worth Sh1.8 billion

The judges said Mr Tuju and EADB had voluntarily chosen to submit themselves to the laws of England and the judgment could not be overturned simply because it was wrong as it would constitute a persuasive appeal.

“It is therefore expected that before they make a decision as to where their disputes will be resolved, they fully appreciate and understand the applicable law,” the judges said.

According to the judges, complaining that the laws are unfair after the verdict is passed is an “unlawful attempt to renegotiate” the applicable law after the fact.

“All this leads us to the conclusion that the purpose of Sections 10(2) and (3) of the Act is not to provide a back door through which an unsuccessful litigant in the foreign reciprocal State can re-raise his case in Kenya,” the court said.

Tojo, who served as a minister in the previous administrations of Mwai Kibaki and Uhuru Kenyatta, was a senior member of opposition leader Raila Odinga’s presidential campaign in a race won by President William Ruto last year. Mr Odinga opposed Dr Ruto’s victory, but it was upheld by the country’s Supreme Court.

Mr. Togo had obtained temporary orders in 2020 preventing EADB from auctioning off his property and proceeding with a bankruptcy case against him.

He also filed another pending case before the East African Court of Justice based in Arusha.

EADB says the debt, which it presented on July 31, 2015, at $9.19m (then Sh932.7m), has been in default since 2017 when it came due.

The loans were for the construction of a Sh100 million two-storey, bungalow, thatched roof on 20 acres of woodland dubbed Entim Sidai and the purchase of a 94-year-old bungalow built by the Scottish missionary, Dr. Albert Patterson, which currently operates as an upscale restaurant.

Dare’s opposition to the bank’s claim was rejected by the London court, clearing the way for the lender to seek enforcement and auction.

London court documents showed that the restaurant entered into an agreement with the bank on April 10, 2015, according to which it agreed to give Dare a loan of $ 9.3 million (then 943.9 million shillings).

The deal gave the restaurant a 24-month grace period, which is due in 2017.

But two years later, Dare failed to pay the $1.8m (243m shillings) in interest owed, according to the bank, adding that Mr Tojo had ignored a notice to settle the debt.

Among the charges faced by the defendants – who included the sons of former Cabinet Secretary Manu Togo, Alma Togo and Lema Togo – were breach of agreement and default on the loan.

The Dari Economic Development Bank, where Togo and his sons are directors, was accused of breaching the debt agreement and defaulting on the loan.

Dare’s counterclaim was also rejected by the London court, which stated that the interest rate charged by the bank was an unenforceable penalty.

The judge disagreed, ruling that it was a standard clause in loan agreements of the type provided to the hotel.

Mr. Tojo chose to fight his battles in Kenyan court and accused the African Development Bank of breaching the terms of the loan deal, making it difficult to complete the high-end real estate project.

First, it accused the EDB of spending Sh932.7 million instead of the agreed Sh943.9 million, adding that the bank reneged on a plan to offer Sh294 million to build luxury homes for sale.

The bank directly paid MYS 932.7 million to the 94-year-old owner of the bungalow that sits on 20 acres and demanded Mr. Tuju provide additional security to build the bungalows, which cost 100 million shillings.

“Having failed to cash the balance of $102, 916 (then Sh10.4 million) and Sh294 million, the first defendant inevitably faced cash flow challenges,” said Mr. Togo.

“The European Economic Development Bank is fully aware that in the absence of development of residential units for sale as envisaged in the project proposal, Dari will not be able to service the loan facility.”

is reading: Togo is facing a lawsuit in a debt row of Sh1.6 billion

The Entim Sidai luxury home project features five-bedroom homes worth Sh100m each. They have two jacuzzis in two master bedrooms with a translucent ceiling that lets in natural light as families live next to the century old trees and historic bungalow.

The Victorian bungalow currently operates as a spa and restaurant with rooms to allow. There is one room for honeymooners for Sh43,000 per night.

The property has preserved Dr. Patterson’s furniture, wall clock, rulers, wall clock, and 60-year-old refrigerator among other things.

Togo, who made his fortune in the media business, has invested heavily in real estate.

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