How old law exposed Tuju to auction over Sh2.2bn debt
Mr Raphael Tuju's Dari Restaurant grounds. Mr Tuju lost control of his company, Dari Limited, over a Sh2.22 billion owed to the East African Development Bank (EADB).
What you need to know:
- The receivership came days after the Court of Appeal dismissed Mr Tuju’s bid to block the bank from enforcing a judgment issued by a UK court in 2019 in favour of the bank.
Mr Tuju had borrowed $9.3 million from EADB to upgrade Dari Restaurant and establish a real estate project at the Tree Lane property.
The loan, which was advanced to him on July 31, 2015, has since snowballed to over $16.5 million (Sh2.22 billion) due to interest and currency shifts.
Former Cabinet Secretary Raphael Tuju has lost control of his company, Dari Limited, over a Sh2.22 billion owed to the East African Development Bank (EADB) under an old law that favours asset auction over a rescue plan.
The operations of Dari Limited —with assets and businesses such as Dari Restaurant in Karen Nairobi — are now under the control of joint receivers Muniu Thoithi and George Weru from consultancy firm PriceWaterhouseCoopers Limited, setting the stage for recovery of the bank’s loan.
Under the Insolvency Act that came into force in January 2016, a creditor is expected to rescue an indebted company ahead of auctioning its assets, offering a lifeline to the debtors. But the loan deal inked in the UK between Dari Ltd and EADB was entered on April 10, 2015, before the enactment of the Insolvency Act, removing the shield that would have helped Mr Tuju to avoid auction.
Dari Restaurant is a high-end eatery located on Ngong Road near Karen Forest. The receivership came days after the Court of Appeal dismissed Mr Tuju’s bid to block the bank from enforcing a judgment issued by a UK court in 2019 in favour of the bank.
“The powers of the receivers extend to all assets and undertakings of the company including, but not limited to, its property on Tree Lane (Karen),” the notice says. The Tree Lane property sits on 20 acres and comprises boutique business and accommodation units.
Mr Tuju had borrowed $9.3 million from EADB to upgrade Dari Restaurant and establish a real estate project at the Tree Lane property.
The loan, which was advanced to him on July 31, 2015, has since snowballed to over $16.5 million (Sh2.22 billion) due to interest and currency shifts.
Dari was to be transformed to look like the Victorian-themed Windsor, the golf resort owned by the family of former Cabinet minister John Michuki, or Hemingways – the five-star luxury boutique hotel on Mbagathi Ridge, Nairobi, owned by Mr Richard Evans and overlooking Ngong Hills.
Gated community project
At the Tree Lane property, Mr Tuju intended to set up a gated community project described as “Karen Retirement Home” comprising 30 three-bedroom retirement homes and a spa.
It was thought that the sale of these houses and the income from the accommodation, spa, and restaurant would be enough to repay the loan. To get the loan, Mr Tuju offered Dari’s seven acres and his residential home on Mwitu Road, also in Karen, as securities. EADB also held as collateral the project’s 20 acres title.
According to court papers, the parties entered into a written facility agreement dated April 4, 2015, between the bank and Dari Ltd, Mr Tuju, Mano Tuju, Alma Tuju, Yma Tuju, and S.A.M Company Ltd.
Former Cabinet Secretary Raphael Tuju. Mr Tuju had borrowed $9.3 million from EADB to upgrade Dari Restaurant and establish a real estate project at the Tree Lane property.
The loan was also to fund the acquisition and development of commercial units for sale in Nairobi. Mano, Alma, Yma, and S.A.M Company were the loan guarantors and co-directors of Dari.
In the commercial dispute in court, Mr Tuju said the bank disbursed $9,197,084 and not the entire facility of $9,300,000, a sum that was paid directly to the seller of the property.
He said the bank later declined to finance the construction of residential units because they needed additional security. The bank wanted another property in Upper Hill that had already been charged to the Bank of Africa, he said.
After failing to disburse the entire amount, Dari experienced financial difficulties and was unable to service the loan as agreed. Mr Tuju said the bank also failed to disburse another Sh294 million that was to, in part, fund the renovation of hospitality facilities on the property.
Bank claim
They fell out and the bank filed a claim on November 5, 2018, in the High Court of Justice Business and Property Courts of England and Wales, Queens Bench Division Commercial Court Royal Courts of Justice.
Judge Daniel Toledano ruled that the bank was under no obligation to lend the Sh294 million. The dispute was subjected to the English court as per the facility agreement.
“No facility agreement was concluded and no other contractual obligation to lend this amount was agreed according to the material before the court. It is true that a further facility was proposed and discussed, but it never reached the stage of being agreed upon and implemented,” says the ruling delivered on June 19, 2019.
Mr Tujus and Dari Ltd were ordered to pay the bank $15,162,320 under the facility agreement dated April 10, 2015, and the guarantee and indemnity of the same date.
In addition, they were to jointly and severally pay the bank interest from June 20, 2019. They were to also pay the bank’s costs of the proceedings and make an interim payment of GBP 100,000 on account of the bank’s costs within 28 days.
On July 10, 2019, Dari and Mr Tuju unsuccessfully applied in the English Court of Appeal, Civil Division, for leave to appeal and stay of execution.
The theatre then shifted to Nairobi, when the bank on January 3, 2020, filed an application at the High Court for recognition, registration, and enforcement in Kenya of the judgment of the English court.
By a ruling dated January 7, 2020, High Court judge Winfrida Okwany allowed the application, thus paving the way for the execution of the judgment of the English court in Kenya.
Last week, the Court of Appeal dismissed Mr Tuju’s appeal, paving the way for the enforcement of the English court’s judgment.
