The majestic 14 Riverside Drive complex is the subject of an ownership tussle that has been playing out in court since 2011. At the centre of the legal battle is a disputed property deal between Cape Holdings and Synergy Industrial Credit Limited signed the same year.
Cape Holdings began constructing the mixed development in 2009, made up of five office blocks – a five-star hotel, a parking silo, a food court inclusive a cafeteria that stretches into a garden, and high-security protocols and backup generators. About two years later, the developer signed a deal in which Synergy Industrial Credit Limited was to take up two blocks within the complex in return for Ksh703 million; Ksh577 million up front, with the balance due upon completion.
However, later the same year, Synergy Industrial Credit Limited wrote to Cape Holdings seeking to terminate the agreement, demanding a refund.
This saw the matter go into arbitration in May 2012. During the arbitration process, a supposed settlement offer by Cape Holdings to pay Synergy Industrial Credit Limited Ksh750 million, was declined. The arbitrator eventually determined that Cape Holdings had breached contractual terms by failing to transfer the agreed upon property to Synergy Industrial Credit Limited.
Cape Holdings was ordered to refund the principal amount and interest amounting to about KSh1.7 billion, including advance payments, loss of interest costs, opportunity cost and loss of exchange fluctuation for foreign exchange, and goodwill. This was to be done within 30 days, failure to which it would attract interest at the annual rate of 18 percent.
Cape Holdings sought to overturn the decision at the High Court. Among other issues, the developer queried application of the 18% compound interest rate; and how the arbitration award could attract multiple remedies. Cape Holdings argued that it was not averse to honouring payments, but it was concerned with the formula being used. Cape Holdings’ argument was that the Court would give due consideration to Sections 4(4) & (5) of the Limitation of Actions Act, with further guidance, by way of the in-duplum rule, provided that the period of 6 and 2 years respectively, was not exceeded.
Justice C. Kariuki, having found, in March 2016, that the arbitrator had exceeded his mandate by failing to decide the matter based on written agreements between the parties, set aside the entire arbitration award.
Synergy Industrial Credit Limited proceeded to lodge an appeal but the matter was struck out based on the then subsisting legal position that Section 35 of the Arbitration Act did not permit an appeal on a High Court decision, affirming, varying, or setting aside an award.
Synergy Industrial Credit Limited, undeterred, filed an appeal at the Supreme Court, as the High Court had not directed whether fresh arbitration proceedings could commence. The Supreme Court referred the matter back to the Cóurt of Appéal in 2019 to “assume jurisdiction and undertake intervention under Section 35 of the Arbitration Act to remedy any injustice to any party.”
The Cóurt of Appéal began hearing the matter in 2020 but the bench had to be reconstituted after recusal by the Appellate Court President on grounds that he knew the arbitrator.
> Woodley Park Project Offers Residential Homes at Sh13 Million
In November 2020, the Cóurt of Appéal set aside the High Court’s ruling. A further application at the Cóurt of Appéal by Cape Holdings for leave to proceed to the Supreme Court was declined. Cape Holdings tried again to seek legal reprieve by way of a direct application to the Supreme Court praying for leave and stay on the basis that the initial Supreme Court’s directions were not adhered to. This was also dismissed in October 2021. By then, the award had risen to Ksh4.4. billion.
Cape Holdings was back to the Cóurt of Appéal in March 2022 with the prayer that the Court would recall, review and/ or set aside its decision. Cape Holdings specifically wanted the Court to set aside the Ksh1,088,918,183 arbitral award of January, 2015 being the total sum awarded beyond the disputes contemplated in its agreements with Synergy and separated from the award, leaving the sum of Ksh577,200,000.
Cape Holdings also asked the Court to set aside the commercial rate of interest at 18% per annum and replace this with interest at Court rates of 12% per annum, on the sum of Ksh577,200,000. In addition, Cape Holdings asked that interest computation be limited to six years. This would be in accordance with Section 4 (4) of the Limitation of Actions Act.
The ruling on this matter was delivered more than a year later, in December 2023, disallowing Cape Holdings’ appeal. What Cape Holdings was seeking to do was to challenge the awards made by the Courts, specifically how an arbitration of Ksh577,200,000 could lead to an award of about KSh1.7 billion.
Cape Holdings returned to the Cóurt of Appéal to file for leave to appeal to the Supreme Court on a matter of general public importance, with the Chartered Institute of Arbitrators joining the case as amicus curae. The matter was dismissed by the Cóurt of Appéal. The award in question now stands at Ksh5.4 billion, which Cape Holdings maintains is punitive and against public policy.
I&M Bank Concerns
At the same time, the I&M Bank has sought to block the sale of the complex by Synergy Industrial Credit Limited arguing that the property was charged to the lender over a loan of Ksh2.8 billion as debenture. The bank, in essence was alarmed at how an active debenture could be disregarded by the court in such a sensitive property matter.
The property’s administrators have also echoed the lender, disputing the court’s ruling on the property where a debenture is involved, as the rest of the complex that is not in contention was wholly financed by bank loans. The property’s administrators returned to court and obtained an order blocking Synergy from interfering with the management of the complex, stating that Synergy had threatened to sell the entire property, yet the administrator has interests in several blocks.
The Court has since given initial direction, instructing that the matter comes up for hearing on October 2, 2024.
> Mwenda Thuranira: From Dishwasher to Real Estate Billionaire
