How SK Macharia's estate got into receivership

Republic of Kenya

IN THE HIGH COURT, MILIMANI COMMERCIAL COURTS

BANKRUPTCY CASE NO 25 AND 26 OF 2009

BETWEEN

PURITY GATHONI GITHAE — 1ST DEBTOR

SAMUEL KAMAU MACHARIA — 2ND DEBTOR

AND

OCEAN FREIGHT TRANSPORT CO. PETITIONER

BENCH: HON JUSTICE MARTHA KOOME

RULING: 28. 01. 2011

By Wahome Thuku

The news on Friday that media mogul Samuel Kamau (SK) Macharia was in a financial crisis hit the country like thunderbolt. Yet the matter had been slowly and silently simmering in courts for the past two decades.

Mr Macharia and his wife Purity Gathoni are associated with the largest media house in Kenya. But the latest trouble has nothing to do with their media industry.

On September 13, 1982, Mrs Macharia was allocated a plot in Nairobi’s Industrial Area, off Enterprise Road, and issued with an allotment letter. After failing to pay various fees to the Government for the plot, the offer lapsed.

Samuel Kamau (SK) Macharia had his business empire put in receivership after defaulting to refund Sh500,000. [PHOTO: file/Standard]

In October, 1986, however, she struck a deal with an old family friend, Livingstone Ndung’u Waithaka, the owner and managing director of Ocean Freight Transport Company. Waithaka wrote to her confirming he was willing to buy the plot LR No. 209/727 for Sh2 million. He in fact enclosed a Sh250,000 cheque.

Macharia’s lawyer acknowledged the letter and the cheque, and promised to forward a draft sale agreement for the land to Waithaka.

In 1989, Waithaka’s lawyer wrote to the Macharias asking for copies of title documents to process the sale agreement. The Macharias confirmed they had received Sh500,000 and promised to deliver title documents quoting the LR NO 209/727. That promise was never to be.

A different plot

Waithaka’s lawyers conducted a search and established the LR NO 209/727 was a different plot located on Biashara Street at the City Centre. In 1991, after numerous and fruitless letters of correspondence, Waithaka’s company sued the Macharias.

February 21, 1994 another company, Maalaki and Somche Traders, applied for allocation of the Industrial Area plot, which was still open for possession. They paid up the dues and got another allotment letter and transferred the plot to Excello Structures Ltd, who were issued with a title deed.

The Macharias claimed Waithaka offered to purchase the allotment letter and not a registered land. He had been given the letter after paying the Sh500,000 and shown the plot. He was then supposed to go to the Lands office, pay Sh636,970 and process the title deed in his name, then clear the Sh1.5 million with the couple.

That case took more than 10 years in court. On October 23, 2001, Lady Justice Kalpana Rawal gave a summary judgement in favour of the company and ordered the couple to refund the Sh500,000 plus interest at 19 per cent dating back to December 6, 1986. They were also to pay Sh108,000 as costs of the suit.

The Macharias never appealed against that decree and never paid the money.

In 2008, they sued Excello Structures and Ocean Freight Transport Company over the same land.

On July 10, that year, the court issued bankruptcy notices over the 2001 judgement and the notices were served upon the Macharias on August 4, same year.

The couple applied to have the notices set aside. The Milimani High Court dismissed the case on May 27, 2009, and they appealed.

Ocean Freight then filed two bankruptcy petitions against the couple, which were later consolidated.

The company claimed by May 31, 2009, the couple owned them Sh34,854,510. They also asked for interest on the amount at 19 per cent from June 1, 2009.

On November 30, 2009, the Macharias filed notices of objection and denied owning the company that amount. Through Senior Counsel Kamau Kuria, they also claimed they had a cross demand of even a larger amount in their 2008 suit.

Seek inquiry

On April 13, last year, they amended the notices of objection to say they intended to seek inquiry into the 1991 Rawal ruling, claiming it was obtained through fraud.

Waithaka produced all the evidence of the deal, saying the couple had completely refused to pay the debt.

Macharia and his wife testified and said they had sold the allotment letter and not a registered plot. They denied claims that they were selling a non-existing plot. They claimed Waithaka had been keeping the letter of allotment and they had been keeping the Sh500,000.

Mrs Macharia argued that Ocean Freight Transport must have used the letter to process the title in the name of another company, claiming it was Waithaka who originated the plot number. She said there was no sale agreement as Waithaka was required to process the title for himself and that they were surprised when he sued them.

The couple claimed that in February 2002, they sought a clarification of Rawal’s ruling, but nothing had happened to that application.

Last Friday, Lady Justice Martha Koome rejected claims that Waithaka was involved in fraud to obtain a title for Excello Structures Ltd. The Macharias never denied owning the company Sh500,000 and the interest was awarded by a court with discretion to do so.

Avoid paying

"Instead of filing an appeal immediately the judgement was passed, they have used every opportunity to avoid paying by raising complicated legal technicalities, which in my view is like using a sledgehammer to kill an ant," the judge said.

She said the matter only required them to pay the Sh500,000 when it was demanded after failing to proceed with the sale transaction.

Justice Koome also rejected the claim that Mrs Macharia was selling an allotment letter. The couple had never made this point to Waithaka’s company and in all their correspondence they had referred to the plot by the registration number.

"I find that the petitioner has proved that the debt has not been paid, and I issue a receiving order against the 1st and 2nd debtors as prayed," the judge ruled.

With that, Macharia’s business empire was put under official receivership of the State. They were also ordered to pay costs of the petition.

The writer is a court reporter for the Standard Group

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