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Former Cabinet Secretary Raphael Tuju is seeking the intervention of a United Kingdom court to reverse its earlier decision that allowed the East African Development Bank (EADB) to seize two of the politician’s prime properties to recover a $35,051,622 (Sh4.5 billion) loan.
The former minister believes the decision by a senior EADB official to recant part of his earlier statements made in the UK court has handed him a fighting chance in his nine-year legal tussle with the Kampala-based lender.
Mr Tuju’s two properties, Entim Sidai alongside Tamarind Karen and Dari Business Park, were charged as security for the loan.
A buyer whose identity has yet to be made public is said to have snapped up the Dari Restaurant in Karen, Nairobi following an auction of the property on October 1 for Sh450 million.
The auction followed a protracted legal battle instigated by Mr Tuju in 2021, which went in EADB’s favour after the High Court allowed the lender to recover the defaulted debt.
“I am back to the UK with the new facts,” said Mr Tuju, adding that he has since applied for a review of a 2015 decision by a London court that prompted his two businesses being put under receivership and until recently, one of them being auctioned.
During his cross-examination before High Court judge Alfred Mabeya in July, EADB’s country manager David Odongo said some claims in an affidavit he filed in the London court opposing Mr Tuju’s case were not entirely true.
In his affidavit, Mr Odongo had told the court that EADB was not required to disburse an additional Sh294 million loan to Mr Tuju to build and develop villas for sale, with the proceeds of the high-end homes being used to pay off the loan.
The former minister had argued that the reason he defaulted on EADB’s loan is because the regional lender reneged on an agreement to remit the additional funds, triggering a financial crisis at his Dari Restaurant, the principal debtor.
In its submissions in court, EADB added that it had not committed itself to disburse the extra money.
Mr Odongo also confirmed before Justice Mabeya that he did not appear before a Commissioner for Oaths while presenting the statement in the UK.
Mr Tuju’s firms Dari Limited and SAM Company Limited entered into a facility agreement with EADB for a loan of $9.3 million in 2015 to expand his business. The loan was secured by several forms of collateral, including an indemnity and guarantee agreements on April 10, 2015.
He insists that, not only did the bank fail to disburse the full amount thereby precipitating a financial crisis at Dari, the principal debtor, but that EADB frustrated his efforts to find investors that would refinance the loan. This allegedly hindered Dari’s ability to fulfil its obligations under the agreement.
During negotiations for the facility, EADB and Mr Tuju agreed that should there be a dispute on the loan, the matter would be arbitrated in any of the foreign countries that can make a legal decision that would be binding in Kenya.
In December 2018, the lender called this clause into effect and went to a London court to have Dari Ltd and the loan guarantors – Mr Tuju, his three children and their S.A.M Company – compelled to repay the money borrowed. In London, a ruling was issued against Mr Tuju by Daniel Toldano, a senior lawyer and judge of the High Court of Justice, on July 18, 2019.
Mr Tuju’s appeal of this decision at Her Majesty’s Court of Appeal was dismissed two months later by Lord Justice Leggatt.
Consequently, Lord Justice Legatt and Kenyan High Court judge Justice WA Okwany ruled against Mr Tuju.
They found that EADB had a right to file its case in the UK, and that the decision could be enforced in Kenya.
Lord Justice Legatt blamed Mr Tuju for putting up “a skeleton argument”.
Mr Tuju planned to use the money to build a 30-room home that he would then sell to retirees.
The former journalist identified a 94-year-old Victorian bungalow in Karen for this project, dubbed the Karen Retirement Home, and paid Sh100 million for the upmarket property.
In his appeal, he accused EADB of engaging in predatory lending – a shylock-like behaviour where a lender deceitfully entices, induces and assists a borrower to take a loan that carries high fees. The motive for such behaviour is normally to elbow out the borrower from his or her business.
At the heart of Mr Tuju’s argument was the decision by EADB to fail to disburse the entire Sh933 million (it sent Sh20 million less), and the lender’s failure to approve the Sh294 million in additional funds.
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