Companies
CBK loses first round to Pattni firm in Sh8.84bn Laico row
Monday February 20 2023
Businessman Kamlesh Pattni. FILE PHOTO | EVANS HABIL | NMG
A company associated with Goldenberg architect Kamlesh Pattni has been allowed to pursue its claim of a refund of Sh8.84 billion paid to the Central Bank of Kenya (CBK) as a deposit for the botched purchase of Laico Regency Hotel in 1997.
The Supreme Court allowed Westmont Holdings – the local agent of Malaysia-based Lynwood Development Limited — to pursue the claim at the Court of Appeal after the firm was stopped in 2017 from doing so on the failure to deposit Sh20 million in court before proceeding with the suit.
Lynwood Development says the claim is for the $3.7 million (Sh464.7 million) it paid the CBK in April 1997, being a 10 percent deposit for the purchase of Grand Regency Hotel and interest accrued.
Read: CBK loses to Pattni firm in Laico Regency row
With the annual court interest set at 12 percent, the CBK could be forced to pay $70.4 million (Sh8.84 billion) based on compounded interest and exchange rate losses should the top court rule in favour of the Pattni firm.
The hotel was ultimately sold to Libya Arab Investment Company (Laico) and renamed Laico Regency– one of the late Muammar Gaddafi’s signature business projects in Africa, prompting Westmont to sue seeking a refund of the deposit plus interest.
The CBK pushed for the Sh20 million to act as security for costs in case the firm’s appeal is not successful.
The Supreme Court bench comprising Deputy Chief Justice Philomena Mwilu, Mohammed Ibrahim, Smokin Wanjala, Njoki Ndung’u and Isaac Lenaola said fees should be imposed in a manner that is reasonable and not meant to punish or subdue a genuine claim.
“The Court of Appeal’s order put an end to the appellant’s litigation journey before being heard on merit thereby denying them the opportunity to secure their legal rights,” the judges said.
The judges ruled that the imposition of the fees affected the company’s appeal negatively and sought to punish it, given it was allegedly wound up.
The CBK has vigorously challenged the refund claim, arguing that Westmont under Mr Pattni paid the money to offset a loan he owed the regulator, setting the stage for a legal battle that may once again leave taxpayers with a heavy bill to settle.
The CBK argues that Mr Pattni had paid in the money to reduce his liability following an agreement he signed with the government in May 1997.
The banking regulator had told the court that the government did not enter into any sale agreement with the Malaysian company and money received was not kept in any suspense account and therefore no liability was due.
The CBK, therefore, asked Lynwood to pursue its claim against Mr Pattni, if it wishes, since the agreement it entered with the businessman did not involve the CBK.
Lynwood Development used its local agent, Westmont Holdings, to pay the deposit.
The Malaysia-based firm had told the court that it heard of the CBK’s intention to sell the hotel from Mr Pattni and paid 10 percent of the hotel’s purchase price.
Mr Pattni, a major shareholder of export firm Goldenberg International, was at the centre of a scam that involved re-exporting gold and diamonds
It is thought to have cost Kenya as much as $600m (Sh75.3 billion) between 1990 and 1993. Former President Daniel arap Moi and his allies were reported to have received a cut of the cash.
Lynwood Development had in October 1998 filed a suit demanding a refund of the money but did not pursue the matter, leading to its dismissal by Justice Luka Kimaru in 2008 for lack of prosecution.
Read: Pattni firm suffers setback over Laico Regency deal
The firm went back to court seeking to reinstate the case arguing that the delay was caused by the prolonged investigations into the Goldenberg scandal.
It further said its representative was involved in a road accident and hospitalised in Malaysia.
Mr Pattni had dropped from the case but is named as a respondent in the matter.
Grand Regency Hotel, which Mr Pattni surrendered to the Mwai Kibaki administration, was sold to the Libyans in 2008, a deal which evoked public outrage and ended in the appointment of a commission of inquiry.
The Majid Cockar commission of inquiry into the sale of the hotel at the centre of the multi-billion shilling Goldenberg scandal concluded that the CBK could have realised better value for the sale based on prices that were quoted in an earlier auction advertised in 1994.
The Cockar report says one bidder, identified as Hames Watts, was willing to pay $60 million (about Sh4.5 billion at current rates) for the hotel.
The hotel has 230 suites and rooms, conference and banqueting facilities, lounges and recreational facilities as well as shopping arcades.
