Why Nakumatt and NSSF are in battle over Hazina Trading Centre

Former giant retailer Nakumatt is embroiled in a Sh3.5 billion court battle with the National Social Security Fund (NSSF) over a lease of the Hazina Trading Centre, Nairobi.

On one hand, Nakumatt Holdings Ltd accuses NSSF of breach of the agreement, claiming that it had delayed in surrendering the leased space for the defunct supermarket chain to run its Nakumatt Ukay outlet.

In its case, the collapsed retailer’s administrator, Peter Kahi, sued the NSSF and construction firm, China Jiang Xi International Kenya Ltd, claiming that the redevelopment of the property along Moktar Daddah Street led to the expiry of the deal without the space being utilised as rented.

Kahi said that Nakumatt had leased the property for a period of 20 years, starting from January 1, 2004. He further stated that the deal was set to expire on December 31, 2023.

The administrator said that in January 2004, NSSF indicated that it would be bringing in heavy machinery for the construction of the then-intended 36-floor building.

He claimed that at the time the retailer was leaving, alongside other tenants, there was 10 years which had not expired.

Kahi also accused the Chinese firm of disregarding its right to trade in the building. He said that Nakumatt allegedly lost its shoppers as the machineries and the activities were an inconvenience.

“Upon commencement of the construction activities by the defendants, the plaintiff’s customers traffic immediately dropped by 37 per cent and continued to drop thereby caused the plaintiff huge loss of business,” claimed Kahi.

 He added that the contractor allegedly dumped building materials and waste at the premises’ access points, blocking the users and shoppers access to the premises.

“The second defendant is the contractor who came on the site, and commenced construction work without due regard to the plaintiff’s business and its shoppers, and moved in materials, objects and machinery which process  irritated customers and tenants, making it clear that the defendants were set out on a mission to illegally and irregularly, frustrate the brisk business of the plaintiff and its agents and shoppers without accounting for the consequent losses,” he said.

Nakumatt initially filed its case before the environment and lands courts. However, NSSF filed an application, seeking to have the case transferred to the commercial court.

NSSF argued that Nakumatt’s claim for Sh 2.2 billion compensation for alleged loss was purely a commercial dispute. It argued that the Lands Court had no powers to entertain such a dispute.

“This honourable court lacks jurisdiction to entertain and determine commercial disputes of this nature, which properly fall within the jurisdiction of the High Court pursuant to Article 165(3)(a) of the Constitution and the Civil Procedure Act,” argued NSSF.

In the meantime, NSSF argued that Nakumatt had defaulted on rent and always paid in arrears.

According to the fund, the entire building had been leased to Ukay Estates Ltd. Nevertheless, it argued that Ukay was all aware that the building was incomplete.

The court heard that the Lease was later varied through an agreement dated January 30, 2008, limited only to changing the name of the Lessee from Ukay to its successor, Nakumatt Holdings Ltd.

“It is for this reason that both parties agreed to the inclusion of the following clause where NSSF reserved for itself and Ukay Estates Ltd agreed to accept the business risks associated with such future development of the premises,” it replied. 

The court heard that the Lease was later varied through an agreement dated January 30, 2008, limited only to changing the name of the Lessee from Ukay to its successor, Nakumatt Holdings Limited.

It stated that Nakumatt was aware about the construction and it inly sought for rent reduction by 50 percent, which was declined.

The plaintiff was fully briefed on the expansion program, and also given adequate notice to decide whether to terminate its lease or continue with it at the premises, and again, voluntarily assumed the business risk of disruption to its commercial activities in consideration of the rental rebates granted to it by NSSF,” the fund told the court.

It also denied that Nakumatt incurred losses out of the construction.