Cement firm’s bid to pull out of 337-acre deal flops

By WAHOME THUKU

Machakos, Kenya: Superior Homes (Kenya) is a company owned by foreign investors that is engaged in construction and sale of houses in various parts of Kenya. One of their prime projects is the upmarket Greenpark Estate, located on Mombasa Road at Athi River, Machakos County.

The estate was constructed on land purchased from a State corporation, East Africa Portland Cement Company (EAPCC).

On September 1, 2005, EAPCC gave Superior Homes (Kenya) another option to purchase 337 acres of land for construction of housing estate. The land was to be hived off from their 1,329 acres of land Ref No. 8784/4. The option was to last for 12 months.

Superior Homes (Kenya) took up the offer and wrote to the EAPCC. The cement firm acknowledged the letter but advised that the transaction could only start after an earlier sale deal had been completed. The two parties reached an agreement for the sale of land at Sh292,000 an acre.

However, according to Superior Homes (Kenya), EAPCC declined to carry on with the transaction. They failed to prepare a sale agreement or to deal with the purchaser in any other way.  Superior Homes Managing director Ian Hazlitt Henderson said EAPC managing director intimated to him that they intended to sell the land to other parties.

On August 29, 2011, Superior Homes sued EAPCC at the High Court in Nairobi claiming the cement firm had blatantly disregarded the agreement.

Through their lawyer Philip Nyachoti, Superior Homes sought a permanent injunction restraining EAPCC from interfering in any way with the land number 8784/4. They also sought an order to have the cement firm forced to transfer the 337 acres to them, in accordance with the September 2005 agreement.

On August 30, 2011, the High Court issued an injunction restraining EAPCC from interfering in any way with the land pending the hearing and determination of the case. However EAPCC continued with the excavation of raw material on the land for production of cement, even after being served with the order.

Deposit

On  November 28, 2011, Superior Homes filed an application, this time seeking to have the then EAPC managing director Kephar Tande committed to jail for disobeying the court order.

Faced with the contempt proceedings, EAPC decided to enter into a deal with the Superior Homes (Kenya). On November 30, 2012 the parties signed a consent to the effect that EAPC would transfer the 337 acres of land to Superior Homes, that the purchase price for the entire land would be Sh750 million, that Superior Homes would pay Sh100 million as deposit within seven days. The money was to be held by EAPCC lawyers Letangule Advocates until the completion of payments.

They also agreed that the completion documents would be released to the developer after handing an acceptable bank guarantee to EAPCC  or any other agreed security for the balance of Sh650 million.

The company was to pay the Sh650 million within seven days after the transfer of the land.

The completion period was set as 145 days from date of the decree or seven days after the transfer.

If Superior Homes (Kenya) did not  complete the deal, it would get back its Sh100 million deposit within seven days of demand and without interest

The High Court issued a decree in accordance with the consent on December 17, 2012.

The company paid the Sh100 million deposit and also secured a guarantee from a local bank confirming the financing of the Sh650 million. However the transaction did not proceed and the time to complete it lapsed.

On July 30, 2013 Superior Homes filed an application to have the terms of the decree varied and/or reviewed so that the completion of the transaction could be extended by another 365 days to enable the two parties to fully comply.

Superior Homes (Kenya) told the court that despite writing to EAPCC asking for completion documents and even providing the bank guarantee, the cement firm had refused to perform its obligation under the decree and completely refused to release the completion documents to them plaintiff as agreed.

EAPCC had instead written to them on June 12, 2013 purporting to discharge themselves from the terms of the decree. They accused the company of breach of the terms of decree on the ground that they had not procured a bank guarantee as required.

EAPCC Managing Director, Mr Tande, said they had instructed their lawyers to cancel the transaction and discharge itself from the deal following the failure by the plaintiff to comply with the terms of the consent decree. The cancellation was proper and legal in the circumstances. He said Superior Homes (Kenya) had not challenged the propriety and legality of the cancellation, and hence there was nothing more between the two parties based on the contract.

Superior Homes (Kenya) explained that after carrying out a search on the land, they had established that it had  been listed in the Ndung’u Land Commission Report as one of the parcels whose titles should be revoked.

The firm sought clarification from the EAPCC and also questioned whether the process of acquisition of the property by the Government initiated in 1988 had been completed.

The company had then sought an indemnity from the EAPCC against all loss, claims and liability likely to arise at any time upon the conclusion of the transaction. In addition, they also sought to know the progress made in obtaining the completion documents for the transaction.

They then requested for a release of the completion documents to enable them complete the purchase and to use the property to get the Sh650 million but the same was not released to them. They argued that they were not to blame for the lapse of the completion period.

After hearing the arguments, presiding judge Pauline Nyamweya ruled that the purported attempt by EAPCC to discharge itself from the consent had no legal effect and that the said consent order and decree were consequently still subsisting and in force.

New information

“The plaintiff has brought evidence to show that upon discovery of the fact of the possible revocation of title to the suit property, it engaged the defendant to see how the consent order could still be implemented in light of the new information. The evidence in this regard were the letters by the plaintiff’s advocate raising this issue dated 4th April 2013 and the response by the defendant’s advocate dated 8th May 2013 in which he states that he had raised the Plaintiff’s concerns with his client, and in which he requested for the bank guarantee.

“The possibility of revocation of a title of the suit property is in my view a material fact that ought to have been disclosed by the defendant, and it is apparent that the plaintiff’s consent was given in ignorance of this fact. In addition the defendant does not dispute that the title to the suit property was at risk of revocation, and it is my finding that these are sufficient grounds to vary the term of the consent order as to time for completion” the judge summed up the case.

With that the judge ordered that the terms of the decree be extended by 120 days. This means that EAPCC will have that period to transfer the land to the developer.