Raphael Tuju’s legal fight with lender enters new year

It all started in April 2015 when Dari Ltd, a company linked to former Jubilee Party secretary-general Raphael Tuju, sought a loan from a regional bank to acquire and develop a property in Nairobi’s Karen area.

The loan of $9.3 million has since ballooned to more than Sh2.7 billion although the exact amount due is contested by East African Development Bank and Dari Ltd. The money was meant for the purchase of a 20-acre land and the development of housing and hospitality facilities.

The loans according to evidence filed in court, were for the purchase of a 94-year-old bungalow built by a Scottish missionary-Albert Patterson, which currently operates as a high-end restaurant and the construction of Sh100 million two-storey, flat-roofed bungalows sitting on a 20-acre forested land dubbed Entim Sidai.

In the deal, the company was given a 24-month grace period and the repayment fell due in 2017 and since then, Mr Tuju and the regional lender have been embroiled in a court fight over the last four years.

In total, seven cases on the same subject matter have been filed in various courts, starting at the High Court in January 2020 to the Supreme Court, where the matter is pending determination. The case, which was initiated in London in June 2019 has also found its way to the East African Court of Justice as Mr Tuju contested the outcome of the matter.

Read: Raphael Tuju set for auction after losing Sh2bn UK loan suit

Evidence tabled in court showed that Dari Ltd entered into an agreement with EADB on April 10, 2015. The loan was advanced on July 31, 2015. When Dari Ltd failed to service the loan, the bank issued a demand for immediate repayment and soon filed a suit in the United Kingdom against the company and the guarantors—Mr Tuju, his children Mano Tuju, Alma Tuju, Yma Tuju, and S.M. Company Limited.

In a judgment on June 19, 2019, Judge Daniel Toledano of the High Court of Justice Business and Property Courts of England and Wales, entered summary judgment against Dari and guarantors, jointly and severally, for $15,162,320.95 (Sh2.34 billion).

To enforce the decision, the Bank moved to the High Court for recognition of the judgment. The decision was adopted on January 7, 2020, as provided under the Foreign Judgment (Reciprocal Enforcement) Act.

Dari Ltd filed an application before the High Court, for setting aside the UK Judgment but it was rejected and the matter escalated to the Supreme Court.

Mr Tuju claimed bias arguing that Michael Sullivan, who represented the bank, and Justice Toledano, who presided over the matter, shared a chamber. It was rejected. The former Cabinet Secretary unsuccessfully fought the enforcement judgment up to the Court of Appeal, arguing that EADB frustrated efforts to have other lenders, including KCB Group and equity investors, make the property profitable.

While rejecting the argument, the Court of Appeal judges said Mr Tuju and EADB voluntarily chose to subject themselves to the laws of England and the judgment cannot be set aside merely because it was erroneous.

Mr Tuju then moved to the Supreme Court and temporarily suspended the seizure, pending the determination of his application at the apex court.

He argues that EADB only disbursed Sh932.7 million instead of the agreed Sh943.9 million, and reneging on the plan to offer Sh294 million for building luxury homes for sale.

The bank directly paid Sh932.7 million to the owner of the 94-year-old bungalow sitting on 20 acres and demanded that Mr Tuju provide additional security for the construction of the Sh100 million bungalows.

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

Mr Tuju accused the lender of providing funds for the acquisition of the property but the balance, which was allegedly meant for the development of high-end residential units for sale, was never disbursed. He said the sale of the units would have offset the loan. As the matter was pending at the Supreme Court, Mr Tuju headed back to the High Court saying he was ready to pay the debt.

He successfully obtained orders, for maintenance of the status quo- including suspending any insolvency proceedings against him and his children or auctioning the property- pending the determination of the application. The bank on its part, had been allowed by the Supreme Court to take over the management of the property, pending the determination of the petition.

Back at the High Court, Judge Alfred Mabeya said in a ruling that the court is alive to the fact that a lender is not barred from recovering its outlay or realise its security in a case of default.

“However, what happens where the borrower says he is ready to pay but for the actions of the lender?” the judge posed as he ordered the status quo prevailing be maintained as he interrogated Mr Tuju’s claim.

According to Dari Ltd, it has secured alternative funding from other lenders who are willing to pay the loan.

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“That the applicants are able, ready, and have always been willing to settle the debt with interest accrued subject to a reconciliation and negotiation on the amount due to the 1st respondent,” Mr Tuju said.

The lender had opposed the application and in the affidavit, David Odongo, the acting head of the country business, Kenya revealed that the debt stood at $16,550,608 (Sh2.55 billion) as of December 20, 2019.

He said the bank was not interested in mediation as the matter has been in court for the last four years and the Tuju’s have not paid even a cent. The bank revealed that the last payment of $10,000 (Sh1.54 million) was in August 2016.

Parties will now await the hearing of the case at the Supreme Court and the determination of the application before Justice Mabeya.

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