KENYA – The sibling rivalry at Naivas Supermarkets has taken a new turn after the High Court allowed five children of the retail chain’s founder to auction a store belonging to their eldest brother Newton Nyoro Mukuha over a multi-million-shilling debt.
High Court judge Fred Ochieng gave the green light to the younger siblings — who control Naivas — to recover Sh12.1 million from Mr Nyoro’s Greenmart Supermarket in Nairobi’s Kayole estate. The debt originated from supplies delivered to the store six years ago.
Mr Nyoro’s younger brothers and sisters — Simon Gashwe, David Kimani, Peter Kago, Grace Wamboi and Linet Wairimu — told the court that Naivas had supplied their elder brother with stocks worth Sh46.3 million between 2008 and 2009 but he had refused to settle the debt.
“This court has seen through the deliberate and mischievous actions of Newton Nyoro Mukuha. He incurred debts in the name of the business that he was running,” said the judge.
“I find and hold that if the court stopped the process of execution that would be tantamount to assisting the defendant (Mr Nyoro) run away from his legal obligations. I refuse to do so.”
Justice Ochieng’s judgment effectively means that Bealine Kenya Auctioneers, the bailiffs appointed by Naivas, can now move in and attach Greenmart Supermarket’s assets to recover the debt.
The judgment amounts to a double loss for Mr Nyoro — the eldest son of the late Naivas founder Peter Mukuha Kago — who in October lost his claim to a 20 per cent stake in Naivas and failed to get court orders stopping South Africa’s Massmart from buying out the Kenyan retailer.
Court documents show that the younger Mukuhas helped their brother to set up Greenmart in April 2009, after Mr Nyoro allegedly ran down a Rongai store he inherited from his father.
The younger siblings further accused Mr Nyoro of siphoning Sh230,000 from the Rongai store, leading to his arrest.
The decision to help Mr Nyoro establish a store in Nairobi’s sprawling Eastlands district followed a family truce brokered by their mother. The agreement was that Naivas would supply Greenmart with goods for sale on credit.
“Out of sheer goodwill, after he had run down the business at Rongai, the petitioner (Mr Gashwe) and other family members assisted the objector (Mr Nyoro) to set up a supermarket named Greenmart Supermarket situated in Kayole estate Nairobi,” the younger siblings said in a sworn affidavit.
The High Court in October dismissed Mr Nyoro’s claim to a stake in the retail chain that is now Kenya’s third-largest.
Mr Nyoro had moved to court in 2011 claiming a fifth of the retail chain, a move that effectively blocked Massmart’s plan to buy a stake in Naivas.
Naivas then filed a case seeking to recover Sh12.1 million from Mr Nyoro and his company, Greenmart Stores which trades by the name Greenmart Supermarket.
Mr Nyoro countered the claim, insisting that he owes Naivas only Sh8.1 million, leading to a debt recovery standoff.
The court in October 2013 allowed Naivas to recover Sh8.1 million from Mr Nyoro by way of attaching supplies from his Kayole-based retail store.
But Mr Nyoro went back to court arguing that the debt should be recovered from him in his personal capacity and not from his company as the two were separate legal entities.
“As the limited liability company (Greenmart Store Ltd) was not the judgment debtor, the objector submitted that it was wrong for the court broker to attach the retail chain’s property,” Mr Nyoro argued in court.
Justice Ochieng, however, overruled this line of argument, saying Mr Nyoro and Greenmart Store or its trading name, Greenmart Supermarket, were one and the same thing.
“If there was ever a case in which there was a need to lift the corporate veil, this would be a classic example,” the judge said in his decision.
The ensuing court battle over the ownership of Naivas and the push for debt recovery drove a deeper wedge between Mr Nyoro and his younger siblings, who have now seized the opportunity to take the war to his doorstep.
The siblings’ spat ultimately forced Massmart to opt out of the Naivas deal and set up its own store at the upcoming Garden City Mall on the Thika Superhighway.
High Court judge Anyara Emukule in October ruled that Mr Nyoro has no stake in Naivas, having run down all the stores he inherited from his father.
The ownership of Naivas was given as the late Peter Mukuha Kago (their father) with a 20 per cent stake and four of his children namely Simon Gashwe and David Kimani with 25 per cent each, and their sisters Grace Wamboi and Linet Wairimu with 15 per cent shareholding each.
Naivas has overtaken listed retailer Uchumi to become Kenya’s third-largest supermarket chain by revenue behind Nakumatt and Tuskys, highlighting the growth opportunities in the retail business.
Naivas, which currently has 31 outlets in Kenya, made about Sh16 billion in sales last year compared to Uchumi’ s 14.4 billion.
The history of the retail chain dates back to 1993 when it started off as Rongai Self Service Stores Ltd serving mainly Rongai area. It later opened a branch in Elburgon before spreading its wings to Naivasha town.
It changed names to Naivasha Self Service Stores Ltd before re-branding to the current Naivas in 2007 to take a ‘digital’ look and appeal to young trendy shoppers.
The late Mukuha was the brother of Joram Kamau, the founder of Tuskys, another fast growing retail chain whose ownership is also the subject of a vicious court battle among siblings.