Court orders Fidelity Insurance to pay firm Sh68mn over fire incident

Fidelity Shield Insurance has been ordered to pay a Coast-based company Sh68 million over a fire incident that occurred six years ago.

Mombasa High Court on Thursday ordered the underwriter to pay Dhanjal Investments Ltd T/A Travellers Mwaluganje the money after a five-year court battle.

Justice Dorah Chepkwony issued the orders after finding that the contract between the two companies provided for such reliefs in case of an accident of a similar nature.

Justice Chepkwony ruled that the evidence tabled before the court proved that the fire had razed down the firm’s camp which lead to loss of property and that cause of the fire was malicious damage.

“I, therefore, find and hold that the plaintiff has proved that it is entitled to be compensated by the defendant,” she said.

The judge further noted that evidence tabled revealed that the buildings were reduced to rubble. The insurance’s loss adjuster put the salvage value at Sh200,000, which she said meant that it was a total loss.

“In the final analysis, I find and hold that the defendant is liable to pay to plaintiff a sum of Sh68 million, costs of the suit and interest on the sum awarded from the date of filing this suit together with costs from the date of this judgment at the rate prayed for,” said the judge.

Dhanjal Investments Ltd sued the insurance company five years ago after an unidentified arsonists set its camp and property ablaze.

The company’s director Nirmal Singh testified that the fire broke out and damaged its property, which it holds the insurance firm liable under a policy of insurance executed between them on July 1, 2012, and renewable annually.

When the fire broke out, the certificate of renewal for July 1, 2014 to the same month the following year was in force.

And when the incident happened, he said the policy cover for the property worth Sh80 million was still in force.

However, he said that the policy document was not given to him until after the fire accident and that an inquiry had exonerated him for being the arsonist.

The incident happened on May 3, 2015, at the firm’s camp in Kinango, Kwale County.

• The High Court has dismissed a suit filed by minority owner of Bluebird Aviation who accused his partners of siphoning more than $1 billion (Sh108 billion) from the airline through tax evasion, fraud and money laundering.
• Justice Alfred Mabeya brought to an end the five-year court battle pitting Adan Abdi Yussuf against three other owners of the 29-year-old airline.
• The judgment came after the Director of Criminal Investigations (DCI) cleared three shareholders and executives of Bluebird — Hussein Farah, Unshur Mohamed and Mohamed Abdikadir — from financial malpractices after a nine-month investigation.

The High Court has dismissed a suit filed by minority owner of Bluebird Aviation who accused his partners of siphoning more than $1 billion (Sh108 billion) from the airline through tax evasion, fraud and money laundering.

Justice Alfred Mabeya brought to an end the five-year court battle pitting Adan Abdi Yussuf against three other owners of the 29-year-old airline.

The judgment came after the Director of Criminal Investigations (DCI) cleared three shareholders and executives of Bluebird — Hussein Farah, Unshur Mohamed and Mohamed Abdikadir — from financial malpractices after a nine-month investigation.

The investigation followed a criminal complaint from Mr Yussuf against his fellow shareholders, accusing them of fraudulently channelling massive funds out of the company as part of a money laundering scheme.

Justice Mabeya dismissed Mr Yusuf’s allegations, saying he failed to prove claims of fraudulent accounting, tax evasion, fraud and money laundering.

“In the present case, all that the plaintiff did was to make sweeping allegations without any backing by way of evidence. He only stated that he had carried out investigations and made discovery of the allegations he made,” said the judge.

“The documents that were produced were not authenticated to prove any of the allegations made against the defendants.”

Mr Yussuf, who claims to own 25 percent of the charter airline, argued that more $1 billion (about Sh108 billion) has been stolen and put in offshore accounts and investments in Western capitals after being transported physically out of the country without declaration. He said the three directors were using the airport passes granted for restricted areas in airports to move the billions.

The DCI dismissed the secret movement of cash at the airports, arguing its investigation and probe by Kenya Airports Authority (KAA) found no evidence of money laundering.

The Financial Reporting Centre through the DCI said it failed to detect breaches while tracking the flow of cash in and outside Blue Bird Aviation.

Mr Yussuf claimed that his partners were stashing proceeds from the airline in international banks under Amazon International FZE. But Justice Mabeya said his partners had sufficiently showed that their relationship with Amazon was purely commercial.

“That the plaintiff had failed to demonstrate the directorship or shareholding of the defendants at Amazon or that they had stolen money from the Company and deposited the same at Amazon’s accounts,” he said.

“No faithful director exercising independent judgment would take any of the said measures, none of which are beneficial to the Company. In fact, all the steps taken by the plaintiff were contrary to the success of the Company. They were meant to sound a death knell on the company,” he added.

Billionaire businessman Peter Munga in 2016 pocketed Sh135.7 million worth of dividends from Britam shares he did not own, an inquiry report shows.

The tycoon inked a secret deal with top officials of Mauritius government giving up the rights to earn dividends on the shares before Mr Munga acquired the stock.

The insurance firm declared a dividend of Sh0.3 per share for the year ended December 2015.

The book closure date — the day when the company’s share registrar determined who would be eligible for the dividends — was June 9, 2016.

Mr Munga through his investment vehicle Plum LLP signed an agreement to buy 452.5 million Britam shares from the government of Mauritius a day later on June 10, 2016.

This meant that the island nation qualified for the dividend, which was paid soon after the Nairobi Securities Exchange-listed firm held its annual general meeting on June 24, 2016.

But Mauritius officials agreed to certain clauses in the agreement with Mr Munga that saw the island nation surrender its right to the dividend, marking one of the lopsided arrangements that triggered an investigation in Port Louis.

Mauritius was to receive the dividend through the National Property Fund Limited (NPFL), which was created to manage the Britam shares that were part of assets seized from its citizen Dawood Rawat, whose Sh71 billion ponzi scheme exploded in 2015.

The loss of the accrued dividend is among the major issues that were investigated by the commission of inquiry besides the sale of the Britam shares to Mr Munga for Sh7.1 billion in disregard of higher offers of Sh11 billion each from South Africa’s MMI Holdings and Barclays Bank (now Absa Group).

This left the government of Mauritius with a Sh3.9 billion loss, prompting an inquiry that Kenyan officials were reportedly reluctant to support.

“As per these clauses, the NPFL would never be entitled to the 2015 dividend. This is not usual or good practice,” the inquiry report says.

“The commissioner therefore considers that NPFL had been unfairly deprived of an amount of approximately R43 million [Sh135.7 million] representing dividend calculated on the basis of Sh0.30 yield per share for the year ending 2015 in view of the fact that the completion date referred to at clause 6.2 of the special purchase agreement is well after the June 10, 2015.”

Britam’s 2016 accounts confirm that the dividend of Sh0.3 per share declared for the year ended December 2015 was paid in full amounting to an aggregate of Sh581.5 million.

The dividend Mr Munga earned on his new shares raised his total dividend income from Britam that year to Sh234.5 million.

His other direct and indirect stakes in the insurer – including his interest in investment vehicles Equity Holdings Limited and Filimbi Limited — raked in Sh98.7 million.

The commission of inquiry says it was shocked that NPFL conservators and Mauritian officials did not push back against the overly generous terms Mr Munga was demanding, including the dividend forfeiture.

“This is not usual or good practice. The commission notes with utmost concern that such clauses do not seem to have been questioned by the NPFL or even the special administrator,” the report says.

“It is also not clear whether this special purchase agreement (SPA) had been duly vetted by the legal advisers of the NPFL.”

The Munga deal ran against the standard practice in sale of major stakes in companies. Sellers typically retain the right to receive the dividends declared close to the transaction date.

Alternatively, the dividend declared or anticipated is incorporated into the purchase price.

This means that the buyers pay an additional amount equivalent to the dividend to the sellers and will recoup the same later through actual dividend distribution on their newly acquired shares.

This, for instance, is what happened when Equity Group acquired a controlling 66.53 percent in DRC’s Banque Commerciale Du Congo last year.

The bank paid a total of $105 million (Sh11.4 billion), equivalent to $167.9 (Sh18,242) per share.

This included an amount of $2.6 million (Sh289 million) or $4.2 (Sh462) per share that the sellers were anticipating in the form of dividend.

“The agreement specifies that Equity will pay a cash consideration … for the 625,354 ordinary shares of BCDC to be purchased inclusive of dividends declared after 1st January 2020 in respect of the financial year ended 31st December 2019,” Equity said in a circular ahead of the conclusion of the deal.

Mr Munga’s large purchase discount and dividend takeover are some of the most generous terms a Kenyan acquirer has ever extracted in international transactions that have been made public.

The commission of inquiry, however, made scathing remarks on Mauritian officials’ apparent conflict of interest, sloppiness and unethical practices.

“The Mauritian side got it wrong altogether. Mr Peter Munga was a business tycoon and all the Mauritian professionals involved put together were no match for him singly alone,” the commission said.

“He was able to dictate both time and terms, price and party. That the Mauritians enjoyed the trip Mr Peter Munga gave them is evident from the public statements made on it in Mauritius and in Kenya.”

The former Minister of Financial Services, Good Governance and Institutional Reforms Roshi Bhadain was criticised heavily for helping the Kenyan businessman close the lopsided deal in secret.