Two firms ordered to open joint account in Sh460m land battle

Company that sold the 2,000-acre land to deposit Sh46 million. [Courtesy]

The High Court has ordered two feuding companies to establish a joint Sh46 million account pending the determination of a Sh460 million land case.

The Environment and Land Court sitting in Mombasa also ruled that no transaction shall be made on the 2,000-acre land in Taita Taveta.

Image Font Ltd is also restrained from demanding a refund of Sh69 million it paid to Izera Entreprises Ltd as a deposit before the purchase contract collapsed.

According to Justice Lucas Naikuni, Izera, which has sued Image Font for alleged breach of contract and a threat to recovering its deposit, will deposit Sh46 million into the account to be operated by advocates for both firms.

“The plaintiff is ordered to deposit Sh46 million in an interest-earning escrow account to be held by both M/S Gikandi Ngibuini Advocate and Njuguna Kiai & Kahari Advocates at a bank of reputable first-tier status according to the provisions of the Banking Act and Banking Regulations of the Laws of Kenya,” said the judge.

The dispute began when the companies signed a land sale agreement on February 11, this year.

Image Font paid a deposit of Sh69 million, or 15 per cent of the purchase price, which is above the statutory 10 per cent.

In the agreement, which had a clause for arbitration in case of a dispute, the transfer and balance were to be concluded in 120 days.

What followed after this is not clear because the parties have given conflicting explanations.

Izera submits that after the execution of the agreement, Image Font developed the land, including sinking two boreholes, a makeshift road and a fence, and dumped some materials there.  But the respondent refuted the claim, stating that it could not have occupied the property because Izera was living on it.

The two sides also differ on the legality and integrity of the sale agreement.

In a letter dated June 2, Font Images raises questions regarding the legality of the agreement and the whole transaction, including alleging that the applicant concealed material facts on the property.

The company claims to have discovered there were pending lawsuits on the property, and Izera’s lease expired in 2017 and was not renewed.

But Izera denies, claiming the only legal suit against the property ended in 2010 when a court ruled in its favour.

The respondent also contends the applicant did not obtain consent from the Land Control Board before commencing the sale transaction, and hence the entire contract is null and void.

According to Izera, the buyers changed their mind, including questioning the validity of the title deed, and refused to budge even when the queries were addressed, demanding a refund of the money paid instead.

Image Font also filed a counterclaim demanding a refund of the deposit. It also argued that the purported sale agreement violated the law and is therefore not binding.