The East African Development Bank reneged on its deal to loan out Sh294 million to a company belonging to former CS Raphael Tuju.

Thus, the bank breached a contract signed between the two, a Nairobi court has heard.

Justice Alfred Mabeya of the commercial division of the High Court in Milimani also heard that the breach caused Tuju and his company Dari Limited to be unable to service the part of the loan that was previously advanced to it.

This emerged during the hearing of the Sh2.2 billion loan dispute between the lender and the former minister.

Tuju is the director and chairman of Dari Limited, the company that was to get the loan from the bank. 

The bank's country manager, David Odongo, recanted his earlier evidence by disowning his previous affidavit.

In his testimony, Odongo said the EADB failed to honour a Sh294 million loan deal with Tuju.

Odongo said he was involved in the negotiations for the loan and that Tuju and his company were to be given the funds for a two-phased project in Karen, Nairobi.

In the agreement, Tuju was to get $9.1 million for the first phase of the project, which involved the acquisition of the 20 acres parcel of land in Karen.

The balance of Sh294 million was to be disbursed for the second phase, involving the construction of high-end residential villas for sale.

According to Odongo, failure to disburse this amount meant the bank sabotaged the project.

The project was to develop a five-star hospitality establishment consisting of high-end villas for sale together with ancillary amenities, services and accommodation as well as rehabilitation of historical structures on the property.

"...it was understood that the construction of the villas and the hospitality establishment was in essence the project," Odongo said in affidavits filed in court.  

Tuju was also to build a Sh100 million two-storey, flat-roofed bungalow and purchase a 94-year-old bungalow built by a Scottish missionary with the loan for the second phase.

The bungalow currently operates as a high-end restaurant in Karen.

"The facility (loan) would be repaid primarily from the proceeds of the sale of the villas. " 

Tuju and the bank are locked in a protracted dispute over the repayment of the initial loan that was advanced to his company.

The bank has instituted several cases - including a suit to have Tuju and his children who are co-directors of the company - declared bankrupt.

EADB is also seeking to take over rent proceeds from the property in a bid to recover the loan, a move Tuju termed "misconceived" and "not aligned with our constitutional policy".

Odongo's testimony confirms statements made by Tuju that the bank breached the contract by not fully advancing the loan, thus puncturing the repayment plan.

Asked why he had sworn two conflicting affidavits, Odongo told Justice Mabeya that the earlier document was sworn under instructions from the bank.

"The usual procedure would be that I receive a call from the bank's security manager or legal officer giving me strict instructions to immediately proceed to the offices of one or the other of Kaplan & Stratton or Mohammed and Muigai Advocates to sign documents on behalf of EADB which I duly complied with," he said.

The affidavits were prepared by their team of advocates and were only given to him for signing, without reading and understanding the contents.

"I trusted the guidance and opinion of the bank's counsel to assure me I was signing in good faith," he said.

Odongo's testimony followed an application by Tuju through lawyer Paul Nyamodi that the witness appear in court and be questioned on allegations made in his affidavit.

The matter returns to court on September 18, when Mabeya is expected to give a ruling.

Tuju has engaged a multi-pronged strategy to have a judgement issued against him by a UK court quashed.

He argued that the UK judge who issued the judgement against him is also a senior partner in a law firm acting for the bank.