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Grand Regency Twist: Court Rules CBK Rightfully Kept KSh185.5 Million After 28-Year Legal War
For almost three decades, a single banker’s cheque worth KSh185.5 million refused to disappear from Kenya’s court system.
It outlived judges, survived dismissals, climbed to the Supreme Court and returned to the Court of Appeal before finally reaching its legal destination.
At the centre was a simple but fiercely contested question: was the money a refundable deposit for the failed purchase of Nairobi’s Grand Regency Hotel, or was it part of Kamlesh Pattni’s debt repayment to the Central Bank of Kenya?
On Friday, the Court of Appeal settled that question once and for all, ruling that the money was never a hotel deposit and ordering an end to one of Kenya’s longest-running commercial disputes.
Long Journey
The Court of Appeal has dismissed Malaysian company Westmont Holdings SDN. BHD.’s attempt to recover KSh185.5 million from the Central Bank of Kenya (CBK), ending litigation that began in 1998.
In a judgement delivered by Justices Joel Ngugi, Katwa Kigen and Nderi Nduma, the court upheld an earlier High Court decision that Westmont lacked legal capacity to pursue the claim after the company was dissolved in 2002.
The judges also found that the disputed money was never held by CBK as a refundable deposit pending the purchase of the Grand Regency Hotel.
Instead, they concluded that it formed part of an existing debt settlement involving Kamlesh Pattni and Uhuru Highway Development Limited.
“The High Court was therefore correct in holding that the suit was incompetent for want of proper parties,” the judges ruled, adding that this finding alone was sufficient to dispose of the appeal.
Goldenberg Link
The dispute traces its roots to the aftermath of the Goldenberg scandal.
CBK had advertised the Grand Regency Hotel for sale after taking control of the property as security for debts owed by Uhuru Highway Development Limited.
Westmont claimed it acted as agent for Malaysian investor Lynwood Development Ltd, which intended to buy the hotel.
According to the company, it paid KSh185.5 million as a 10 per cent deposit before the transaction collapsed because CBK allegedly refused to facilitate due diligence.
The company argued that once the sale failed, the money should have been refunded.
CBK told a very different story.
It maintained that the money was delivered by Pattni under an existing agreement to redeem the property from the bank’s charge and reduce liabilities linked to Exchange Bank.
The Central Bank insisted it never entered into a sale agreement with either Westmont or Lynwood and therefore had no obligation to refund the money.
Fatal Defect
The Court found that Westmont’s case collapsed long before judges examined whether the money was refundable.
Evidence showed the company had been wound up on May 21, 2002, effectively ending its legal existence.
Despite that, litigation continued for years.
The judges held that a dissolved company cannot sue or continue court proceedings.
They further found that Westmont’s dissolution had not been disclosed during earlier proceedings when the case was reinstated, describing the omission as material non-disclosure.
The Court also rejected attempts to substitute Lynwood as the plaintiff.
It explained that permission to amend pleadings does not automatically allow parties to replace one litigant with another.
“Substitution required a separate, specific application and leave of the Court,” the judges said.
“The purported substitution was therefore irregular.”
Debt, Not Deposit
Even after finding the proceedings legally defective, the court examined the substance of the dispute.
Westmont insisted the KSh185.5 million was paid solely as a hotel purchase deposit that CBK agreed to hold until the transaction was completed.
The judges found no evidence supporting that claim.
There was no sale agreement between CBK and either Westmont or Lynwood.
Neither was there any evidence showing CBK agreed to act as a neutral stakeholder holding the money in trust.
Instead, the Court found documentary evidence linking the payment to Pattni’s existing debt redemption arrangements with the Central Bank.
“It is our view that the said KSh185,500,000 was to be treated in no other manner than as part settlement of amounts due to the chargee, CBK,” the judges held.
The Court equally rejected Westmont’s argument that CBK had been unjustly enriched.
It held that unjust enrichment only applies where someone retains another person’s benefit without legal justification.
Here, the judges found CBK had a clear contractual basis for retaining the money because it had been paid under debt settlement agreements rather than a hotel purchase contract.
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