Taxpayers risk 32 billion shillings in Kwale Sugar land row


Taxpayers risk 32 billion shillings in Kwale Sugar land row

A factory manager of Kwale International Sugar Company. Photo File | NMG

Attorney General Kihara Kariuki has asked a court in Mombasa to overturn a preliminary judgment requiring the government to pay Kwale International Sugar Company Ltd (Kiscol) $277.1 million (32 billion shillings) in special damages.

Kiscol, who sued the Cabinet Secretary of the National Treasury and the AG, seeks special damages for breach of legal and contractual obligations regarding his lease of 15,000 acres of land for the cultivation of sugar cane. But the AG failed to respond in time, forcing the court to grant Kiscol its pleas against the government in an interlocutory judgment.

An interlocutory judgment is rendered when a sued party does not file a defense within the time limit and at the request of the plaintiff (party who sued).

In its request for annulment of the judgement, the AG also wishes that its memorandum of appearance and its memorandum of defense be deemed duly filed and therefore correctly served on the file.

Through Deputy Chief Counsel Janet Langat, the AG further argues that they are liable for irreparable harm, loss and damage that could result in economic hardship in the country, as the claim worth billions of shillings of taxpayers’ money.

“The delay in filing the defense was unintentional but is derived from the fact that this is a matter of high public interest with a huge financial claim that requires consultation with various stakeholders who participated to the development of the lease contract which then caused the slight delay”, specifies the AG.

According to the AG, Kiscol did not seek authorization (permission) before issuing a judgment, as required by the rules of civil procedure, therefore, it (the judgment) was not procedural.

The AG says he wrote a letter to CS National Treasury asking for directions regarding Kiscol’s allegations in his case and also prepared a memorandum of appearance which was mistakenly filed in Kwale court instead of Mombasa.

The AG said that after realizing the error, it prepared another appearance brief dated May 31 filed the same day and upon filing it was discovered that Kiscol had requested the interlocutory judgment.

“Amazingly, on the same day, an interlocutory judgment was rendered against the two defendants,” argues the AG in its motion.

The AG further says that if the judgment is not quashed, his request will be rendered ineffective.

In his case, Kiscol says he set up his greenfield sugar factory on the plot of land in Kwale County and holds a sublease dated August 20, 2007 between himself and the government.

He accuses the government of failing to provide him with “full, unimpeded and peaceful possession” of the leased area.

The company says that when it attempted to access the land to implement its project, it found squatters who claimed equitable rights to occupy parts of the leased area.

According to Kiscol, the squatters occupied the leased land of approximately 5,816 acres dispersed in seven areas.

“The plaintiff’s efforts to gain access to portions of the leased land occupied by the squatters were thwarted by a court order,” Kiscol said, adding that he succeeded in having the order overturned on March 13, 2018, before a petition from the squatters was denied in January of this year.

The Sugar Mill argues that it was an express and implied term of the sublease between the plaintiff and the CS National Treasury that he would have full, unimpeded and peaceful possession of the land.

Kiscol says that at the start of the project and when the sublease was granted, it was made known to the government that the virgin land project had been modeled and designed around the availability of land and unhindered access. to these.

It also argues that in violation of the legitimate expectations created by the defendants, it was unable to access the entire leased area and accessed approximately 50% of the leased land.

“The applicant has so far invested $300 million in the project, but the investment cannot yield the expected results because the project is not performing optimally. In fact, the applicant is now forced to embark on a second restructuring exercise with syndicated lenders,” argues Kiscol.

Kiscol says the reason for suboptimal exploitation is inaccessible land which has led to incomplete irrigation and power generation infrastructure, underutilized cane crushing equipment, reduced production, increased operating costs and reduced revenues.

The case will be discussed on September 20.

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Rachel J. Bradford