Sh1b property dispute between developer, insurer drags in DCI

A firm behind one of Kenya’s largest real estate projects is embroiled in a court battle with an insurer and the government over a Sh1.2 billion apartments deal.

Garden City Ltd has sued Directline Assurance Ltd (DACL), Directline Investments Ltd and Kenya Revenue Authority (KRA) before the Lands court, alleging that DACL failed to pay more than Sh50 million in stamp duty as had been agreed between them in the sale of apartments to the insurer in Ruaraka, Nairobi County.

At the same time, it has filed a separate case to block investigations by the Directorate of Criminal Investigations (DCI) claiming that detectives have illegally come after it and probed its lawyer’s accounts over the deal with Directline.

The firm claims DCI is silent on who the complainant is.

In the Land case, Garden City wants the court to force Directline to pay stamp duty for the apartments the insurer bought in 2017.

The firm constructed a residential development known as Garden City Village comprising 215 residential units, 76 apartments in Phase 1 (Park View), 83 apartments in Phase 2B (Garden Court) and 56 villas in Phase 2A.

It claims that sometime in January 2015, then DACL Managing Director John Macharia contacted it seeking to purchase apartments at Garden City Village.

Court papers say Garden City and DACL struck a deal that the insurer would buy 44 apartments at a cost of Sh1.2 billion. The insurer paid the first installment of Sh200 million on August 3, 2017, and the balance of Sh914 million at the end of the same month.

However, differences arose over DACL’s failure to pay the stamp duty. The developer’s lawyers have been holding onto the apartment leases until the insurer clears the tax.

“Whereas the first defendant (DACL) paid the lease premium for the sale of properties in full, the first defendant did not pay the stamp duty on the sale properties, which stamp duty was estimated at Sh50 million,” Garden City says.

“Despite repeated requests, to date, the first defendant has failed to pay the stamp duty to facilitate the registration of the leases at the lands registry.”

Garden City now argues that Directline has failed to honour its end of the bargain. It wants the court to find that its lawyers, Anjarwalla & Khanna LLP (A&K), are legally holding the leases of the 44 apartments in Phase 2B.

The firm also wants the court to find that Directline ought to pay stamp duty as assessed by KRA. Meanwhile, the developer also filed a separate case against DCI, Attorney General Kihara Kariuki and the Director of Public Prosecutions Noordin Haji.

In the case, Garden City claims that DCI has unleashed its officers on the firm and its lawyers without explaining what they were probing. Accoding to the firm, it suspects the probe surrounds the deal between it and Directline. “At all material times, the petitioners and A&K have extensively cooperated with the first respondent’s team by recording statements and supplying the first respondent (DCI) with information and various documents, notwithstanding that the first respondent has declined to share details of the complaint or the true nature of the investigation,” the developer says.

It says DCI obtained search warrants against the law firm and accessed its client account maintained at I&M Bank. “The first respondent breached A&K’s constitutional right to privacy and the privacy of A&K’s clients,” court papers filed before the Constitutional Court read.

The suit claims DCI is interested in four years’ transactions in A&K’s client account.

Garden City asserts that it does not know who the complainant is.

It claims its lawyers have been harassed, noting that they do not know whether they are being treated as suspects or witnesses.

The developer claims DCI officers are being used to achieve an ulterior motive.

“Police officers are tasked with the detection and prevention of crime; not to aide parties to gain commercial advantage in civil disputes using coercive State power of investigation and threatened arrest, detention, and institution of fictitious criminal charges,” argues Garden City.

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