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How local investors, Saudi prince made peace in Galana Kulalu deal

NATIONAL
By Amos Kareithi | May 30th 2021
A pump attendant in one of the pilot project farms which is being piloted by Green Arava from Israel in a ten-thousand-hectare model Farm of Galana Kulalu Food Security Project [Gideon Maundu, Standard]

When Saudi businessman Hassan Babakar Osman learnt that the company he had started in Nairobi on behalf of a royal prince had slipped through his fingers, he was devastated. 

The royal prince, Sultan Bin Nasser Bin Abdul Aziz Al Saud, had not only lost Arafco Agriculture Integration Company Limited but also the crown jewel of his investment in Kenya, 100,000 acres at the Galana Kulalu ranch in Kilifi.

The Agricultural Development Corporation had leased this land to Arafco for 16 years with effect from September 2010.

A dispute arose, leading to the change of shareholding. Osman complained that the changes had been done behind his back but this was disproved when the matter went to court.

Robinson Kigen, who was representing Arafco’s managing director, shed some light on the dispute, explaining that the transfer of shares had been done with Osman’s full knowledge.

According to Kigen, who was involved in drafting articles of association, there was an agreement to protect the interests of the local investors, undated instruments of transfer be prepared.

“My clients were supposed to be refunded the money which they had spent in securing the lease of Galana Kulalu. I did the agreement and there is a clause that if the prince defaulted, the local investors would get all the shares.”

Kigen further explained that he advised the prince’s representative to bring the undated instruments of transfer to protect the interests of the local investors to enable them recover the money they had spent in securing the lease and paying the rent.

This money, Kigen said, amounted to $216 million (Sh23 billion in current exchange rates) and the understanding was that the local investors would take possession of the 100,000 acres.

Share transfer

The Agricultural Development Corporation leased out 100,000 acres at Galana Kulalu [File, Standard]

“Osman himself delivered the signed but undated forms for share transfer on the afternoon of September 23, 2010. Five years after the sultan failed to honour his part of the deal, I was instructed to file a suit to evict him,” Kigen added.

According to the lawyer, “this is the genesis of the case filed at Malindi environment and lands court. This case has not been concluded although some applications emanating from it have been ruled.” 

When the case came up for hearing, the court was told that at the time Arafco company was being incorporated, the sultan was to inject $216 million for sugar project.

During the hearing of the case, one of Arafco’s shareholders, Mohamedulmin Mohamed, testified that they instructed their lawyer to prepare a post-dated letter of resignation, affidavits and transfer documents which were signed by Osman so that in the event the Sultan defaulted, the instruments would be lodged at the company’s registry.

Osman, however, told the court that he prepared the Memorandum and Articles of Association and Abdulwahab was not a majority shareholder, insisting that the CR12 form produced in court bearing the list of shareholders was the subject of police investigations.

He also told the court that he had personally leased the 100,000 acres from ADC, and that he had been paying rent to the corporation regularly.

Justice Oscar Angote heard that there had been a gentleman’s agreement where the Sultan was to give Abdulwahab 60 shares on condition that he pays $300,000 (Sh32 million) within 90 days, but he never fulfilled this condition.

To disprove this Abdulwahab produced evidence to show that he paid Sh2 million from his personal account as the initial deposit for the first year rent to ADC. He also tabled evidence that he paid Sh430,800 from his company, Milestone Developers Limited, to ADC’s lawyers on October 18, 2010, to cater for the costs of drawing the lease.

The court also heard that Abduwahab sub-leased his offices located at Town House, 7th Floor, Kaunda Street in Nairobi to Aramco and was to get rent and service charge of Sh250,000 per month from the Sultan.

In his ruling, Justice Angote said, “The evidence before me shows that the defendant first signed the lease dated September 28, 2010, on behalf of the Sultan. The evidence also shows that it is Abdulwahab who paid the initial rent of Sh2 million to ADC and the fees for preparing the lease.”

Although Osman denied signing the agreement and the MoU of August, 3, 2010, in which Abdulwahab was admitted as a director, he could not explain on which basis the former also signed the lease with ADC on September 28, 2010, as Arafco’s managing director.

The court also observed that Osman failed to adduce evidence to prove that he paid the rent for the initial lease, either from his personal account or from Arafco’s account.

“Having gone through the defendant’s affidavits, there is no evidence that the defendant, or indeed the Sultan, injected in the plaintiff’s company the stated amount of $260,000,000 or at all,” Angote said The court also took note that according to a letter dated July 16, 2014, by ADC, Arafco rent arrears had accumulated to Sh14 million

When delivering his verdict on May 13, 2016, Angote said: “In the absence of evidence to show that the defendant (Osman) did not sign the agreement and the Memorandum of Understanding of August 3, 2010, and the undated transfer of share documents resigning from the plaintiff’s company, I find and hold that the plaintiff has established a prima facie case with chances of success.”

Justice Angote allowed the application and dismissed Osman’s three applications dated January 21, 2016 and March 21, 2016, with costs.

Dissatisfied, Osman went to the Court of Appeal to have Angote’s decision overturned, arguing that the he was the legitimate majority shareholder of Arafco. His appeal was thrown out on May 10, 2017. The parties have now made peace, according to a consent order reached on April 6, 2021, before Deputy Registrar, Ivy Wasike.

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