The owner of the property on which the Dusit D2 hotel sits, the 14 Riverside Drive, is seeking to block the auction of the complex over a Sh8.9 billion debt arising from a botched agreement.
Cape Holdings Limited filed an urgent application in the High Court to block the auction slated for April 11, arguing that the forced sale was illegal.
Synergy Industrial Credit Ltd, through Phillips International Auctioneers, invited bids for the entire complex to recover the Sh8.9 billion debt.
But Cape Holdings, through senior counsel Allen Gichuhi, said the notice of sale was not been issued as required by law.
Mr Gichuhi added that the sale period had been illegally reduced from 59 days to 21 days in contravention of Rule 15 of the Auctioneers’ Rules.
The lawyer said there was no 45-day redemption notice as mandatorily required by the rules upon receipt of the letters of instruction issued by the auctioneer.
“An advertisement can only take place 14 days after issuance of a 45-day redemption notice. Rule 15(e) of the Auctioneers’ Rules has been breached. No consent has been obtained from the judgment debtor to a reduction of the sale period from 59 days to 21 days in accordance with Order 22 Rule 58 of the civil procedure rules,” Mr Gichuhi submitted.
Cape Holdings also argued that there was no current valuation report showing the value of the property or any lots situated on the building.
According to Mr Gichuhi, the only valuation report on record was the instance of the judgment creditor dated November 24, 2020, from Knight Frank, which expired on November 24, 2021.
He further pointed out that the notice of sale did not set out the reserve price of each of the five office blocks and the hotel - Dusit 2.
“The court should not sanitise a miscarriage of justice at the hand of an overzealous judgment creditor who has unlawfully caused the illegal sale of the suit property in contravention of all known legal principles of law pertaining to computation of interest, failure to correctly submit to the court an updated and accurate valuation report and shorting the redemption process allowed by law,” Mr Gichuhi submitted.
The two companies fell out over a deal in which Synergy Industrial Credit was to purchase two blocks, comprising 14 units and parking lots, for Sh710 million, which Cape Holdings failed to transfer.
The matter was referred to an arbitrator, who in 2015 ordered the developer (Cape Holdings) to refund the principal amount and interest, totalling Sh1.66 billion. The amount has since risen to the current Sh8.9 billion.
Cape Holdings further said the Sh8.9 billion claim consists of time-barred interest and amounts to unjust enrichment, hence the need to calculate the correct decretal amount to enable the property to be redeemed.
“It is against public policy to allow unconscionable application of interest rates which would be a contravention of the right to property under Article 40(3) of the Constitution which demands that the State shall not deprive a person of property. By allowing a grossly exaggerated debt to escalate from the principal sum of Sh710,967,694 to rise beyond Sh8.9 billion as of February 2025 is manifestly illegal and unconscionable,” Mr Gichuhi said.
According to Cape Holdings, the actual debt is between Sh1.5 billion and Sh1.8 billion once the correct interest computation is made.
Mr Gichuhi further contests plans by Synergy to auction the entire complex.
He said Synergy’s interest was limited to a part of the property - the ‘A’ and ‘B’ wings on the ground, first, second, third, fourth, fifth, and sixth floors of the building, formerly known as Synergy Square (now Grosvenor).
“The terms of sale are nullity ab initio for ordering the sale of the entire property in lots in the absence of any current valuation report. There is no current market value for each lot comprising the office blocks and hotel,” Mr Gichuhi said.
According to the company, the repeated attempts to auction the property have resulted in several tenants either opting not to renew the leases or effectively discouraging prospective tenants from taking up leased space.
“This has resulted in low uptake of the commercial letting spaces, which in turn has occasioned losses to the applicant,” said Vinaychandra Sanghrajka, a director of Cape Holdings.
