Court orders Karim Hirji to refund sh10b CHOGM money

Hotel Mogul and City Businessman, Karim Hirji is set to pay over sh10b following a commercial court ruling that he breached contract and took advantage of the governments nobility to defraud the tax payers.

According to the court documents, Hirji has been ordered by Justice Henry Peter Adonyo to pay government USD 1.464m (sh5.12b) as special damages at an interest rate of 12% per annum from the 2009 till payment in full.

The judge also ordered him to pay general damages of sh800m to the government at an interest rate of 23% per annum from date of judgment till full payment.

The case arose from the USD 2.66m (about sh8.8b) that the government advanced to him to prepare hotel space for the Common Wealth Summit activities in 2007, something which he failed to deliver.

The money was a result of an agreement between him and government for the provision of conference and room accommodation facilities to be used for CHOGM.

When he failed to honor his part of the agreement, government dragged him to court in 2009, demanding that he be ordered to refund sh5b paid to him to make available the facilities.

The Attorney General in his suit also wanted court to declare that Hirji breached the contract, and order him to pay for general damages, interests and costs of the suit.

According to court documents, government gazetted several rooms for accommodation by selected paying guests and accepted to pay USD 2.566m inclusive of all taxes and cover for the loss of business the hotel would suffer for the nonuse of the hotel facilities during the CHOGM period.

As per the agreement, Hirji was to receive money from the paying guests at an agreed price and remit it to the government. He was also required to ensure that the facility is ready latest October 26, 2007.

However, through an audit, the government was notified that the hotel would not be ready for the summit and was advised to claim USD1.6m from Hirji.  

Upon demand he paid only USD152, 525 (about sh525m) and retained the remaining balance arguing that the money was used to cater for the loses he incurred when no one checked into the hotel.

In his ruling this morning, Adonyo said that by failing to avail the facility in time, Hirji caused a great inconvenience to the guests and reduced the country's esteem in the eyes of the guests.

"I find the conduct of the defendant not only unpatriotic but shameful for it did substantial damage to the image of this country before the rest of the world, considering the fact that even the president had to personally ensure that he is given funds in advance to enable him complete the hotel in time so that the guests are comfortably accommodated," he said.

Adonyo said that Hirji took advantage of the country's nobility towards him and made the guests to suffer and look for alternative accommodation.

 "It is a sad commentary into how state magnanimity can be abused by good for nothing pretenders. For were the defendant to do what it was required to do or even pay the demanded balance, the tax payers would not have incurred the additional costs to prosecute this case," he said.

He then ordered him to pay the money and also refund all the costs the government incurred in prosecuting the case.