The High Court dismissed a petition by the owners of Nairobi’s 14 Riverside complex, which houses the DusitD2 hotel, challenging part of the Banking Act that excludes judgment debtors from protection against runaway interest.
Cape Holdings and its directors challenged Section 44A(4) of the Banking Act, which excludes judgment debts and court decrees from the in duplum rule. The in duplum rule is a legal protection that caps the total recoverable interest, fees, and charges on a non-performing loan at an amount equal to the outstanding principal. This means that once the unpaid interest equals the principal debt, it stops accumulating for recovery purposes, preventing borrowers from being trapped in endless debt cycles.
The court, however, upheld Synergy Industrial Credit Limited’s objection, ruling that Cape Holdings attempted to reopen a dispute that had been determined through a constitutional petition.
‘It is evident that the Petition is yet another attempt to avoid complying with and settling the arbitral award, now crystallised as a decree of the Court. This Court cannot consider the Petition in isolation from the extensive litigation history that frames it,’ the court said.
The dismissal leaves Cape Holdings facing the prospect of having its 14 Riverside Drive development auctioned to recover the Sh10.6 billion debt, which has grown from an original Sh570 million.
‘The court has previously pronounced itself on the applicability of articles 10(2b), 25, 40, and 50 to the decree. The claim that this is a constitutional challenge to section 44 of the Banking Act cannot, therefore, salvage this petition,’ the court said.
The judge held that the prayers sought by Cape Holdings showed that the company attempted to relitigate issues that had already been determined conclusively.
‘In conclusion, the preliminary objection is upheld on the ground that the matter is res judicata and accordingly the petition is dismissed. Costs are awarded to the first respondent (Synergy),’ the court said.
Cape Holdings has signalled its intention to appeal against the ruling.
The company had asked the court to determine whether enforcing the debt, now calculated at more than Sh10.6 billion, against the entire 14 Riverside Drive development would disproportionately limit its right to property under Article 40 of the Constitution, in a manner that cannot be justified under Article 24.
Cape Holdings argued that the debt exceeds the development’s estimated value of Sh7.3 billion as of October 2025, despite the original transaction involving only one block within the complex.
The petition arose from a long-running commercial dispute between Cape Holdings and Synergy over an aborted transaction involving a block in the 14 Riverside Drive development in Nairobi.
Cape Holdings told the court that about Sh9.013 billion of the amount claimed comprises compound interest, accounting for approximately 84 per cent of the total debt.
The company argued that the interest had grown far beyond the original award and that the debt now exceeds the property’s open-market value, raising questions about the proportionality of the proposed enforcement.
Synergy opposed the petition and asked the court to strike it out.
Earlier this month, the court ruled that the procedures followed by Synergy and Moran Auctioneers in a proposed public auction scheduled for May 26, 2026, were defective and invalid.
However, the judge said Synergy could issue fresh notices and execution documents, provided they complied with the law.
‘I have carefully considered the material record. I find that contrary to Synergy’s submission, the execution instruments relied upon were defective,’ the judge said.
The court declared invalid the notification of sale, warrants of sale, auctioneer’s notice and advertisement.