One of Kenya’s best journalists, a seasoned politician and a shrewd businessman is how many would describe the current Jubilee Party secretary general Raphael Tuju.
He lost his Rarieda parliamentary seat in 2007, and focused into business before resurfacing in 2013 with a new party, when he unsuccessfully ran for the Presidency. In 2017 he was appointed Jubilee Party’s secretary general, and a Cabinet Secretary without portfolio for the Jubilee government.
Unknown to many, behind the scenes, Tuju was working to expand his business empire, specifically his Dari Restaurant in Karen to have a five-star facility.
Tuju wanted to buy a 20-acre property in Karen owned by Mr Peter Paterson, a son of a former settler to expand his business empire. The project (Tree Lane property) required close to Ksh1 billion, which Tuju could not provide.
The property had been valued at Ksh1.3 billion by Knight Frank, but the owner was asking for Ksh930 million.
Tuju was looking for a financier, when the East African Development Bank (EADB) approached him with a ‘good’ offer. Unknown to Tuju, the offer would be the beginning of his troubles since EADB enjoys absolute immunity from judicial proceedings in relation to disputes arising from the exercise of its lending power.
EADB enjoys immunity from every form of legal process as per Article 44 (1) of the Charter of the East African Development Bank annexed to the Treaty for East African Co-operation of 1967 and as amended on July 23, 1980 and set out in the Schedule to the East African Development Bank Act, Cap 493.
The Bank agreed to give Tuju a loan of Ksh1.224 billion, Ksh 930 million for purchase of the property and Ksh294 million for renovation and construction of the property.
Excited about the offer, Tuju offered Dari’s seven acres (valued at Ksh540 million) and his residential home on Mwitu Road as collateral.
In 2015, the bank, in a suspicious move, put up another condition requiring Dari to put up Ksh100 million down payment for the purchase of the property. This was not part of the original agreement.
In the initial agreement, EADB was to pay the National Environment Management Authority (Nema) fees, architectural drawings and other incidentals, while the company (Dari) was to meet the legal fees.
In a new twist, EADB paid Ksh910 million on July 29, 2015, withholding Ksh20 million, marking the beginning of a bitter fallout that would see Tuju face auction.
The Bank also refused to release Ksh294 million that was meant to be used in the construction of new villas and renovation. The proceeds from the sale of the villas would be used in the repayment of the loan. However, without the Ksh294, construction of new villas and renovation, meaning that the acquired property was a dead capital.
Instead, the Bank was now asking for more collateral, eyeing Tuju’s rental property in Upper Hill, which had 26 units sitting on 1.6 acres, worth Ksh780 million as per 2015 valuation.
However, the Upper Hill property was charged with Bank of Africa, hence could not be used as collateral. Instead, Bank of Africa agreed to finance the Tree Lane Property, but EADB rejected the offer.
Also, the owner of the Tree Lane property had registered it as agricultural land and it was taking time to get the approval of the land board for a change of use.
EADB was now demanding repayment of the loan in full plus interest, putting Tuju in a fix. By the second quarter of 2016, the bank declared the loan a default, and began the process of recovering it. This meant an auction of Tuju’s properties that were used as collateral.
Nation reports that EADB and Dari Ltd had opened an escrow account in which any money from the sale of the villas would be deposited. The Ksh294 million was to be deposited here and whoever purchased a unit would pay into this account.
Clients who had declared interest in the villas had deposited Ksh21 million into the account, which Dari was arm-twisted into remitting to EADB.
Tuju was then introduced to a British loan restructuring firm, Maxwell Stamp, which got Tuju a Ksh500 million deal from the Kenya Commercial Bank (KCB) under a pari-passu deal. EADB rejected the deal and filed a case in a UK court demanding Ksh1.5 billion immediately on November 27, 2017.
EADB wanted a summary judgment, which meant that the court would give a nod to auction of Tuju’s property.
In 2017, Dari had also got a Ksh1 billion deal from a United Arab Emirates private investor. EADB was instead demanding Ksh1.2 billion instead.
To raise the Ksh1.2 billion, the investor required a board meeting, hence he opted to pull out after EADB rejected the offer.
Nation adds that after six months of negotiations, a new agreement was drafted in which the bank was to receive Ksh1 billion and the balance of Ksh200 million would be guaranteed by another bank. EADB, however, refused to sign the agreement drafted by its lawyer and continued with its claim.
In court, Tuju could not use the Bank’s failure to release the Ksh294 million as defence, since the bank in its conditions stated that “any claim against the bank shall not provide a defence or a justification for non-payment of any amount due”.
The presiding Judge, Daniel Tolidano, ruled against Tuju, arguing that “since the defendants do not appear to be in a position to return the monies borrowed to the claimant and for other reasons too, restitution in integrum (to the original position) would be impossible.”
Back home, Tuju has filed a petition in the High Court seeking to save his properties, arguing that the Judge in UK was biased.
“The judge, barrister and the daughter of the chief officer lived in the same chamber and one would have expected justice to be entered in favour of Tuju,” read the suit in part.
The Court of Appeal has granted a stay on the London ruling.
On the other hand, the bank has appointed receiver managers for Dari and also served insolvency notices against Mr Tuju and his children.
The big question is whether EADB duped Tuju in order to take up his property and misused its immunity to prosecution or it was just a default like any other.
According to Tuju’s lawyers, if the properties are sold, Tuju will get more money than the bank.