Kenya: Doctor's Sh1.3 Billion City Office Block Purchase Runs Into Trouble

On June 19, 2017, Dr Samuel Thenya Maina, a founder of The Nairobi Women's Hospital, sealed a Sh1.3 billion deal to buy a property in Nairobi's Kilimani.

With the paperwork for the transaction apparently in order and the financing arranged, it was only a short while before the medic took possession of Adlife building, a seven-storey office block.

The deal involved six property owners selling their entire issued share capital in Adlife Plaza Limited (APL) and Adlife Management Company Limited (AMCL) to the doctor.

APL is the registered proprietor of the property known as LR No. 111366 and Adlife building.

By way of the Share Purchase Agreement (SPA), the six agreed to sell their shares in APL, initially for Sh1,077,000,000, but the figure was raised to Sh1,382,000,000 by a Deed of Amendment dated May 7, 2018.

Court papers indicate Dr Maina purchased 77 per cent of Adlife Plaza Ltd in June 2017 from Mr Brian Martin Francis, estate of Hiram Ngaruiya, Isaac Njoroge Gitoho, James Njuguna Gitoho, Krisco Holdings Limited and Muiboro Enterprises Ltd.

It was agreed the money would be paid in two lump sums of Sh442 million, payable before the execution of the agreement, and Sh940 million, which Kenya Commercial Bank undertook to pay on the completion date.

The first instalment of Sh442 million was paid. In order to facilitate the release of the title documents and transfer forms, lawyers from Igeria & Ngugi Advocates, acting for KCB, issued a professional undertaking to pay the outstanding balance on the completion date.

Dispute arose

Kemboy Law Advocates LLP for the sellers forwarded all the transfer documents to Igeria Advocates and later the purchaser took full control of Adlife Plaza Ltd and Adlife Management Company Limited, management and accounts and also took possession of all the companies' assets.

The shares were duly transferred to the purchasers and the property was charged to KCB for Sh940 million. The sale was then completed and transfers effected.

But a dispute arose. The genesis of the dispute was failure by Igeria & Ngugi Advocates, who acted on behalf of the property purchaser (Dr Maina) and financier (KCB bank), to pay the balance of the sale that started in 2017.

Kemboy claimed out of the agreed consideration of Sh1.382 billion, only Sh1,279,621,977 has been paid, leaving a balance of Sh102,378,022.

Kemboy Law Advocates were aggrieved that Igeria & Ngugi Advocates declined to pay the outstanding balance despite constant reminders to do so and they continued to withhold the money upon instructions of the property purchaser without justifiable cause.

Igeria & Ngugi Advocates, however, argued fulfilment of their undertaking was conditional. The clause provided that the undertaking would be honoured subject to "the sellers' warrantees being true and accurate at completion and sellers not otherwise being in breach of their obligation under the Share Purchase Agreement".

However, it would later turn out that the six sellers were in breach of some of their warranties under the SPA.

In terms of the contract between the parties, Dr Maina commenced arbitral proceedings before Arbitrator Martin Munyua, claiming Sh259.5 million.

Six initial owners

It was agreed by the parties that the balance of the purchase price be paid and the sum of Sh102 million be ring-fenced pending reconciliation of some amounts allegedly misappropriated by the initial owners of the building from Adlife Plaza Ltd (APL).

Dr Maina contended that if payment of the said amount was made, it would occasion him irrevocable harm as well as the substantive claim pending before the arbitrator.

He said the substratum of the dispute between him and the six is inextricably linked to the settling of final account, which is the subject of the arbitral proceedings.

And now the six initial owners of Adlife Plaza have lost a bid to strike out a court case that seeks to delay completion of the sale.

Together with the law firm Kemboy Law Advocates LLP, the six had wanted the court to dismiss the application by Dr Maina seeking to stop KCB bank from releasing the Sh102 million.

In a preliminary objection, the six and Kemboy Advocates told Justice Alfred Mabeya that another judge had allowed the release of the money, hence the dispute could not be re-adjudicated in the same court.

They argued that the application by Dr Maina to stop the payment amounted to an appeal or a review of orders issued on February 5, 2021 by Justice Maureen Odero.

Conclusion of arbitration

The orders had paved the way for completion of the sale of the seven-storey commercial building.

But Justice Mabeya dismissed the objection, saying it was without merit because the application by Dr Maina is to protect an arbitration process that is ongoing before Mr Martin Munyua.

The judge explained that Dr Maina's application is for an interim measure of protection and he is asking court to assist the arbitration so that the same is not rendered nugatory as at the time it is determined.

"The issue in the suit before court is whether there should be some interim measure of protection to safeguard the sum of Sh102,3778,022 pending the conclusion of arbitration," said Justice Mabeya.

He added that the court has authority to entertain Dr Maina's application and by doing so the court would not be reviewing or re-looking at the judgment of justice Odero.

In her judgment, Justice Odero had ordered Benson Ngugi, Igeria Arthur Konye and Njoroge David Ngumbu trading as Igeria & Ngugi Advocates to fulfil their professional undertaking in the transaction and pay the sum of Sh102 million to Kemboy Law Advocates LLP (for the sellers).

After that judgment Kemboy started to execute it, a move that forced Dr Maina to rush to court seeking orders to restrain Igeria & Ngugi Advocates and KCB from releasing the money pending determination of his application.

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