Case Digest

Case Digest: Civil Cause No. 125 of 2015 reveals the inhumane nature of the Njenga Karume Estate Trustees (Part 1)

Trustee chairman of the late Njenga Karume Estate George Ngugi (left) spokesman Stephen Karau (centre) and Geoffrey Njenga, a mediator during a past media briefing at Jacaranda Hotel Nairobi.

The ongoing court case pits Njenga Karume’s children: Albert Karume, Samuel Karume and Lucy Karume against the Trustees of the Njenga Karume Trust (George Ngugi Waireri, Henry Waireri Karume, Kung’u Gatabaki and Margaret Nduta Kamithi). 

Also, enjoined in this case as interested parties are Grace Njoki Njenga Karue, Jane Mukuhi Matu, Teresia Njeri Karume and Dr. Fransisca Wanjiku Kahiu. Grace is the late Njenga’s wife whereas Jane, Teresia and Dr. Fransisca are the late Njenga’s daughters.

This controversial case revealed the intricacies of the broken relations between the Njenga Karume Trust beneficiaries and its trustees. The plaintiffs feel that the trustees are driven by self serving interests hence have a reason to majorly act against the trust instrument.

In the case, Samuel Karume- Director of Cianda Estate Limited- confirmed that before the demise of his father a law firm (Iseme, Kamau and Maema Advocates) had received instructions on behalf of the Cianda Estate to convey a property (Land Reference 3644) to the trustees of Kenyatta University Staff Retirement Benefit Scheme. The total sum that the property was sold amounted to approximately Ksh. 1.126 billion. 

This transaction was completed when the late Njenga Karume was still alive (but ailing). Its proceeds were meant to pay off and settle debts due to other companies wherein the late Njenga Karume had interest or wherein he was the majority shareholder. Yet a dilemma pondering among the beneficiaries is albeit a large amount of money was left by the trust founder; some of his properties (such as Jacaranda Hotel in Westlands) still have a charge attached to them. Recently, Jacaranda Hotel was almost auctioned for failing to pay off a Ksh. 257.6 million loan due by Guaranty Trust Bank.

Moreover, the plaintiffs -suing on behalf of other beneficiaries, contend that the beneficiaries have never been informed on whether the existing debts had been settled as the trustees -against the beneficiaries interests- are adamant to be accountable in the dealings of the late Njenga Karume estate or other business empires despite numerous requests of the same.

In a witness testimony, Albert Karume, the first plaintiff, stated that he was aware of a sum of Ksh. 280 million or thereabouts that had been left intact by the founder of the Trust as at the time of his demise. The money had been left in an account at the Co-operative Bank of Kenya. The money was meant for purposes of settling any other debts that could have arose as well as furthering the development of two properties (the Indian Ocean Beach Resort at Ukunda, South Coast and the Pizza Gardens located in Westlands, Nairobi). 

Nevertheless, the beneficiaries are still in the dark on how money on this account was expended by the trustees, Moreover the trustees have taken over all Bank Accounts that belonged to the late Njenga Karume. With regards to the aforementioned account, bank statements obtained by the plaintiffs evince that on diverse dates between May 15, 2013 to September 12, 2013 one L. Gachugia  received payments that total to approximately Ksh. 1,575,473 whereas between October 4, 2013 and October 1, 2013 Sichangi Partners Advocates and IKM received Ksh 3.2m and KSh 2.8million respectively.

In a different bank account that the late Njenga Karume owned (belonging to Lynton farm) at the same Co-opertive Bank, obtained bank statements indicate that in June 2013, L. Gachugia further received payments that total  to Ksh. 453,096 whereas L.Njeri received payments totaling Ksh 750,000. 

Also in a different account owned by Jacaranda Hotel at Co-operative Bank, Bank Statements reveal that L.Gachugia is said to also have receive payments totaling to Ksh 1,526,044. Other accounts that have lost money according to Albert Karume witness testimony include the Kacharaba limited account at Co-operative Bank that had been withdrawn close to Ksh. 43.5 million with Richard Muhoro Wanjohi receiving payments close to 32.5 million on various dates between February 19, 2013 and August 16, 2013.

In spite of all the enormous wealth left by the Trust’s founder, the three plaintiffs pose that mismanagement and greed are the reason as to why Njenga Karume Estate Trustees have borrowed substantially from financial institutions. According to the plaintiffs, in breach of good corporate governance, the defendants have borrowed more than Ksh 200 from the Co-operative Bank of Kenya and a further Ksh 200 million from GT Bank limited without consulting them or other beneficiaries. The plaintiffs said that the borrowing was inconsiderate of the business interests, the entities and the properties that were used as securities for the loans.

According to the plaintiffs, In 2012, the children of the deceased were called to the offices of IKM. Both the trustees and executors of the will were present. The will was then executed and it set out terms such as the Njenga Karume Trust was only executable on condition that all its beneficiaries were to receive a monthly allowance of Ksh 200,00 effective from June 2012. Whereas most of the late Njenga Karume children signed the document out of desperation and frustration, the third plaintiff, Lucy Karume, did not sign it and consequently she has never received any allowance.

From the court documents, it is said that trustees also circulated a circular on June 17, 2012. The circular informed the beneficiaries that they would be paying themselves monthly remuneration. As for example a trustee, Kung’u Gatabaki, was to receive Ksh. 300,000 from Jacaranda Holdings limited, Ksh 75,000 from Cianda Holdings Limited and a further Ksh 75,000 from Karume Holdings Limited. This totals to almost Ksh 450,000. Using this rate multiplied by the number of trustees then approximately Ksh 2 million per month goes to payment of Trustees salary whereas some of the beneficiaries such as the Late Michelle Wariara are denied of money to cater for their healthcare.

The plaintiffs further contended that they were well aware the trustees had opened separate bank accounts without disclosing it to the beneficiaries. Case in point was the Njenga Karume Trust Bank account held with Co-operative Bank. Concerning this account, court documents revealed that Margret Kamithi, Kungu Gatabaki and George Ngugi Waireri had benefited from funds in the secret account. Bank statements reveal that between April 25, 2013 and November 14, 2014 Margaret Nduta Kamithi withdrew Ksh 600,000, Ngugi Waireri Ksh 4.1m and Kungu Gatabaki Ksh 300,000. The account is in breach of the founder’s intention.

The downside of the aforementioned activities is that they have brought a downfall on the estate of the late Njenga Karume. As for example, court documents reveal that Jacaranda Holdings made losses in 2014. This losses are attributed to decisions made by the board and the trustees. This decision inter alia include increasing board members to 25 or thereabouts whereas the original board constituted of less than 10 members. The defendants also moved offices to Muthithi house wherein the hotel pays a monthly rent of Ksh 450,000/= (To note is that Muthithi house is part of the estate left by the late Njenga Karume). The plaintiffs argue that no justifiable or valid reason for incurring the said expense was in existence consequently a substantial loss was incurred.

The plaintiffs argue that the defendants have also failed to put proper structures to oversee projects for the trust and the hotel leading to constant conflicts. In Jacaranda Hotel, Mr. Paterson was appointed as the Group Finance Manager whereas Mr. Charles Kimani ( who has reportedly bought two high end Motor Vehicles -Tuareg and a Mitsubishi and stocked a boutique with clothes worth Ksh. 5m) was the finance manager during the same period. The defendants are said to also have destroyed the Pizza Garden which had been giving good income without a good justification and in a clear way closing all avenues of income to the businesses left by the founder.

Although Jacaranda Hotels reportedly train highly professional people before employing them. The plaintiffs state that its management and operational setbacks as well as erroneous business decisions have been caused by lack of experience in management and running of such institutions as for example one Mr. Kihwe is paid Ksh 1.2 monthly on top of his allowance that include his children fee’s that total to Ksh 2 million per term. 

Cianda Holdings makes its money through selling green tea leaves. It has about 1000 acres of land. It reportedly makes a turnover between Ksh 30m – 45m per year. The company also generate revenue of similar amounts through sell of coffee. However, the same amount is not reflected as the defendants are accused of cooking account books.

The beneficiaries want to replace the trustees as they believe they have the necessary experience, care and goodwill to replace the current trustees of the Njenga Karume Trust.

Albert Karume fronted that he is fit to be a trustee as he has previously been operating a business known as Sola Gardens. He stated that he had been a board member of several companies such as the Karume Investment Limited for several years. Thus he claims to be fit as he has experience in managing the businesses having assisted the trust founder in his lifetime. Furthermore, he was involved in the initial operation of some of his late fathers business and feels that as a child of the deceased he has the best interests of the businesses at heart.

The second plaintiff, Samuel Karume, claims that he is well fit to serve the job on the basis that he is a farmer and sits in the Board of Cianda Estates Limited. He stated on record that he assisted his late father in managing the operations of the farms for a long duration. He resides within one of the farms. He fronted his experience and goodwill to grow the businesses as the chief reason as to why he should be a trustee.

The third plaintiff, Lucy Karume, is a hotelier by training. She was trained tourism in Houston, Texas and has a masters in Business Administration. She has a rich experience in the hospitality industry having served as a director of the Indian Ocean Beach Resort for about 9 years during which it was at is peak. She currently doubles up as chairman of the Kenya Tourism Federation as well as the chairperson of the tourism recovery task force. It is with view of such background that she fronted having the required experience in growing the hospitality industry business under the trust.

The 2nd Interested party, Jane Mukuhi, stated that she is a hotelier by training. She was trained at Richmond College in London and then worked at Ritz Hotel in London before returning to work in Kenya at the Block Hotels in Kenya. She claims that she could use this experience and training to grow the business under trust.

The plaintiffs also claimed that the reliefs sought are necessary to avoid collapse of the business empire left by the founder. The plaintiffs opine that the defendants have clearly demonstrated that they lack the necessary experience to manage the assets under the Trust. 

“They are proving to have an agenda to bring down the businesses and more so it is clear that they have failed to fulfill the objectives of the trust”

The plaintiffs believe that the trustees have only been interested in construction projects involving procurement for substantial sums and the inference thereto is clear hence their failure to undertake the objectives under the trust documents. Further, the trustees have been involved in the sale of assets without disclosing to the beneficiaries all such transactions or giving an account of the proceeds.

Albert Karume claims that on the February 26, 2015 the Board of Directors of Karume Holding Limited held a board meeting wherein the plaintiffs were not involved in any way and the issue of sale of some assets.

In a ruling made by the court on November 17, 2016 the affected parties were informed to file their respective affidavits in reply to enable the court to give directions on November 18, 2016. The court also ordered that the proceeds from the sale of Kacharoba Farm to be put on hold until all parties agreed their distribution.

The judgment of this case was set to be delivered by Hon Lady Justice Roselyn Aburili on July 31, 2019. However, it was rescheduled to October 25, 2019.

It was later further postponed to December 3, 2019. However due to the demise of Jane Mukuhi Matu the case was further rescheduled to a later date.

On November 25, 2019 in a different case, the trustees also suffered a huge blow after Judge John Onyiego ruled that three administrators were to be selected, two among the beneficiaries and one among the trustees. These administrators were also to be strictly the late Njenga Karume’s offspring.

In this case, involving estate of the late Njenga’s wife, the judge directed that “Mr Karume’s children should try and agree among themselves on who will be the administrator of Ms Wariara Njenga Karume’s estate, which was previously managed by their late father.” The children had filed an application at the High Court challenging the letters of administration which their late father had obtained after Wariara’s demise in 2008. They had cited non involvement in the consent as a ground for nullification.

The late Njenga had initially appointed AG Paul Kihara as the chairman of the trust. However, he resigned shortly after the demise of the former minister. The beneficiaries are crying to the President of Kenya, Hon Uhuru Kenyatta to intervene and help them sort the mess as the two families (Kenyatta and Karume family) have been long term friends.

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