Vimal, Nyagah and Mwagiru must pay Tatu City owners Sh1.7 billion - courts.
Mauritius Supreme Court Chief Justice KP Matadeen on 5 March, 2018 ordered Manhattan Coffee International Holdings to pay $17 million to SCF Holdings II following a binding London arbitration award.
Manhattan is jointly owned by Redline (the Shah family) and BlackKnight (belonging to Nyagah and Mwagiru). It was their vehicle to participate in the Tatu City project
SCF Holdings is the Cypriot company behind Rendeavour, the majority shareholder in the Tatu City project, which is controlled by Jennings and his international partners.
The ruling of the London Court of International Arbitration was issued on 15 February, 2018 by Stephen Nesbitt QC.
The arbitrator concluded that he was 'satisfied that Manhattan is in breach of the Deposit Advance Agreement, and is liable to repay to SCF the sum of USD 10,536,653'.
In addition the arbitrator awarded SCF interest of $3,811,051 and costs of GBP 1,838,048, making a total amount of $16,920,971.
The arbitration hinged on whether Renaissance, which later became Rendeavour, believed that Shah, Mwagiru and Nyagah had paid $20 million (Sh2 billion) to the sellers of the Tatu City land, or whether Renaissance believed that this was a convenient fiction to reward the Kenyan shareholders for setting up the deal.
In the end the arbitrator decided that the documentary evidence showed that Renaissance believed there was an actual deposit of $20 million and that the three Kenyans were therefore guilty of 'fraudulent misrepresentation'.
The London court ruling effectively confirms that Jennings, the founder and CEO of Rendeavour, the largest shareholder in Tatu City, and his international partners paid for all the land on which Tatu City is located (and other coffee farms around it) in 2008.
According to the LCIA ruling, Shah, Nyagah and Mwagiru were unable to demonstrate that they paid any money to either Rendeavour or to Socfinaf, the previous owner of over 10,000 acres of Kiambu land acquired by Rendeavour.
SCF and Rendeavour successfully argued that they had advanced US$10,536,653 ( Sh1.075 billion) to Manhattan Coffee to pay for their share of the Tatu City land from the Belgian coffee company Kofinaf.
The London arbitrator did not accept the first claim by Manhattan that they had deposited $20 million with the sellers of Kofinaf.
Dipak Shah, a director of Manhattan and Bidco, initially told the arbitration court that Manhattan principals had deposited $20 million with the sellers of Kofinaf in 2007.
However in November 2016 Dipak Shah changed his position to say 'that Renaissance acknowledged a discount, not a cash payment by BlackLine shareholders'. The arbitrator said it was 'not plausible' that the $20 million was an agreed discount.
Nyagah had also confirmed in September 2016 that $20 million was on deposit with the Socfinaf shareholders. The $20 million deposit had allegedly been paid by BlackKnight, the company of Nyagah and Mwagiru.
However during the course of the arbitration, Manhattan changed its position to state that the $20 million was a discount on the purchase of Kofinaf shares rather than a cash deposit. Mwagiru and Nyagah declined to appear before the tribunal saying that the transaction was "confidential".
It also emerged that SCF had agreed to pay BlackKnight ( Nyagah and Mwagiru) $10 million as an 'incentive fee' for allowing them to participate in the deal to purchase what became the Tatu City land. However Vimal told the tribunal that he was not aware of this side deal.
Vimal Shah admitted to the arbitrator that the arrangement with the sellers of the Tatu City land 'may not have been above board'.
'He (Vimal) also confirmed that he did not believe, and never had believed, that the deposit had been paid, but was aware that Renaissance understood that it had ( although, to be fair, his evidence varied somewhat on the issue). In light of that confirmation, it is unclear why he would have allowed representations as to the existence of the deposit to remain in documents which he had reviewed and approved', the arbitrator stated in clause 267.
The arbitrator concluded that there had been 'fraudulent misrepresentation' by the Manhattan shareholders.
SCF argued that they only advanced Manhattan $10,936,653 because they believed that the shareholders had already deposited $20 million with the sellers of the Tatu City land.
'There was fairly consistent evidence that Renaissance expected both sides to make a financial contribution pro rata to the shareholding they would receive in the joint venture,' said the arbitrator.
The arbitrator accepted that Manhattan's claim that it had deposited $20 million with the sellers had induced Renaissance to enter into the deal.
Manhattan denied that SCF had suffered any loss because whatever happened with the deposit, it had made substantial profits by buying into Tatu City and Kofinaf through subsequently acquiring shares in the companies Cedar IV and CedarSoc. And Manhattan also argued that Renaissance would not have had access to the same deal if it had not paid the advance of $10.9 million.
However the arbitrator decided that 'it was always envisaged that the Kenyan partners would contribute financially in proportion to their shareholding' and 'once the deposit entered the frame it was treated as representing the vast majority of the Kenyan partners' financial contribution'.
The arbitrator concluded that SCF had suffered a loss of $10,536,653 by entering into the Deposit Advance Agreement with Manhattan.
Manhattan got its shares in the Cedar IV land company as a result of this advance funded by SCF.