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Supreme Court of Kenya.


Synergy Credit Wins multibillion property dispute against Cape Holdings

NAIROBI, Kenya Nov 23 – A private developer has been ordered to pay a city businessman over Sh4.8 billion in compensation in a disputed prime property on 14 Riverside Drive in Nairobi.

The order involving a decade-old transaction was issued by the Court of Appeal, in which Cape Holdings is now required to pay Synergy Industrial Credit Limited Sh1.66 billion as directed by an arbitrator in 2015.

In the orders, the private developer was also ordered to pay all interest that had accumulated as well as the suit costs from the time the matter was determined at a compounded interest rate of 18 percent monthly.

The orders were issued by judges Kathurima M’Inoti, Fatima Sichale and Jamila Mohammed who faulted High Court Judge Charles Kariuki for quashing an initial award.

The judges observed that the judge had failed to restrict himself to the question as contained in the arbitration agreement when he went ahead to determine the amounts by the arbitrator.

They ruled: “This was tantamount to undertaking a merit review of the arbitral award, based on consideration of provisions of the written agreements far removed from the arbitral agreement itself, so as to reach a different finding from the arbitral tribunal, which we think the learned judge was not entitled to do.”

Synergy Industrial Credit is owned by Vipul Shah, a Nairobi-based businessman while Cape Holdings is owned by the Sanghrajka family–owners of Tile & Carpet and Dusit D2 hotel.

According to court documents, and evidence that was adduced in the case, Synergy had purchased two blocks with 14 units, in which it paid Sh750 million.

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The buyer accused Cape Holdings of declining to hand over or transfer the property, leading to an arbitration – James Ochieng Oduol who ordered the developer to refund the principal amount and interest totaling Sh1.66 billion.

This aggrieved Cape Holdings which filed a case at the High Court, in which a judge quashed the award terming erroneous.

Cape Holdings later agreed to sell the units referred in court as Synergy Square at Sh700 million. The parking silo was sold at Sh3.2 million. Synergy had already paid Sh577 by mutual agreement, the appellate judges were told.

Synergy subsequently sought to be paid Sh1.47 billion including a refund of advance payments, loss of interest, opportunity cost and loss of exchange fluctuation, for monies paid in dollars as well as loss of goodwill while accusing the developer of breaching the contract.

That is when Oduol ordered the developer to pay back Sh1.66 billion.

Aggrieved, Cape Holdings filed an appeal. Justice Kariuki said all the issues determined by the arbitrator went beyond the scope of the case.

Synergy eventually filed an appeal at the Court of Appeal where the case was dismissed, when the judges ruled that the matter ought to have ended at the High Court.

Supreme Court

Synergy was not to rest at that, it moved to the highest court in the land, filing an appeal at the Supreme Court in search of justice.

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Here, the judges ruled that not all arbitration disputes end at the High Court, effectively faulting the Appellate judges’ ruling and referred the matter back to the appeals court.

Lawyer Ahmednassir Abdullahi for Synergy submitted that the High Court had determined the application on a different consideration and beyond the scope.

On its part, Cape Holdings argued that the tribunal arbitrator was outside the scope of its mandate by determining the dispute outside the written agreements.

“The learned judge was not justified in setting aside the arbitral award on the grounds that the arbitral tribunal had dealt with a dispute that was not contemplated by the parties, or one beyond the reference to arbitration, or had decided matters beyond the scope of the reference,” Court of Appeal ruled.

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