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Tuesday, 16 June 2020

KQ told to hand back equipment over Sh102m debt

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National carrier Kenya Airways has been ordered to surrender a batch of ICT equipment it leased from a firm co-owned by South African President Cyril Ramaphosa over a Sh102 million debt, a move that could hamper the airline’s plans to resume local operations this month.
High Court Judge Wilfrida Okwany allowed Rentworks East Africa Limited to enforce an arbitration decision, which ordered Kenya Airways to surrender the equipment and settle the $966,821 (Sh102 million) debt.
The national carrier argued that arbiter Kariuki Muigai had rewritten the contract in ordering it to pay Sh102 million with 10 per cent interest from the date of filing the claim until full payment.
DISPUTE
But Justice Okwany held that the arbitration agreement between Kenya Airways and Rentworks covered any dispute that might arise between them, so Dr Muigai did not go beyond his authority in determining the dispute.
The national carrier is aggrieved that Dr Muigai’s ruling partly drew from sale and cession agreements between KQ and Rentworks.
“I have perused the final award and the documents filed by the parties before the arbitrator. I note that the sale and cession agreement forms part of the bundle of documents that Rentworks East Africa presented before the arbitrator.”
“I also note that Kenya Airways did not object to the said documents and that they, therefore, formed part of the evidence that the arbitrator needed to consider in determining the dispute between the parties,” Justice Okwany said.
Kenya Airways has since 2007 entered into 18 separate lease contracts for ICT equipment with Rentworks East Africa but defaulted on payments along the way, forcing Rentworks to call off the deal worth millions of shillings.
The leasing firm is a joint venture between Australia’s Rentworks Group and South Africa’s Shanduka Group. The two businesses partnered in 2003 to form Rentworks East Africa, and bagged their first contract with KQ four years later.
PEACE TALKS
President Ramaphosa is Shanduka’s founder.
Rentworks’ dealings with KQ was one of the  reasons the Party of National Unity (PNU) cited in their successful protest against  the inclusion of President Ramaphosa in  the peace talks with the Orange Democratic Movement (ODM) following the 2007/2008 post-election violence.
President Ramaphosa was already arrived in Kenya when PNU protested his involvement. The mediators, led by former United Nations Secretary-General Kofi Annan and then Tanzania President Jakaya Kikwete acceded to PNU’s protests.
Rentworks initially sued Kenya Airways in 2018, but they reached an out-of-court deal to have the dispute resolved through arbitration.
Then, in May, last year, arbiter Dr Muigai ruled in favour of Rentworks, and ordered KQ to settle the Sh102 million debt and return the equipment to Rentworks East Africa.
ADOPTION OF RULING
On August 29, 2019, Rentworks moved to court seeking to have Dr Muigai’s ruling adopted by the court, which would give the leasing firm authority to enforce the award.
KQ applied to stop the enforcement a week later. 
KQ insists that the issue between it and Rentworks involves the amount owed, hence the dispute is an accounting one and not a legal one.
Kenya Airways also faulted Dr Muigai for failing to consider its request for recomputation of the award.
The national carrier was also aggrieved that Dr Muigai awarded Rentworks 10 per cent interest from the date the dispute was filed.
But Rentworks insisted that arbitration agreements in the lease agreements with KQ allowed for the inclusion of interest in an award. Justice Okwany agreed, adding that arbitration laws in Kenya provide for the inclusion of interest.
“Having regard to the above-cited provisions of Section 32C of the (Arbitration) Act, I do not find that there was anything untoward in the arbitrator’s award on interest that would necessitate the setting aside of the final award,” Justice Okwany ruled.

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