Nakumatt Note Holders Struck with a Sh508 Million Insurance Loss

More than thirty creditors who possessed commercial papers from the now-dissolved Nakumatt Holdings, a sizable retailer, have suffered a setback after a tribunal denied their request to receive more than Sh508 million from an insurance.

A commercial paper is a type of short-term, unsecured debt instrument that can be used to meet a variety of short-term financial obligations.

The investors demanded compensation from Mayfair Insurance Company Ltd. when Nakumatt failed and lost their millions.

However, a tribunal presided over by senior attorney Njoroge Regeru, retired judge Aaron Ringera, and John Ohaga determined that since there was no proof that the premium had been paid, the investors and the underwriter had no legal policy.

“The upshot of the totality of the foregoing analysis is that the Claimants (note holders) did not provide credible prima facie evidence of payment of the premium to shift the evidential burden of proof to the Respondent,” the tribunal ruled.

In May 2017, the note holders allegedly purchased an insurance policy on behalf of a number of investors in conjunction with advancements made by Nakumatt Holdings Limited.

The investors asserted that the underwriter promised payment to the noteholders of up to 80% of the invested amount in the event of Nakumatt’s failure through attorney Elijah Mwangi.

According to the attorney, the underwriter failed to pay the noteholders as required by the insurance after Nakumatt was placed under administration. They demanded payment of Sh508.9 million with interest.

James Dry of Dry Associates, Peter Obondo Kahi, and Bimal Shah, the MD of Broadway Bakery, are a few of the investors that gave testimony before the tribunal.

The insurance company was informed of Nakumatt’s failure to make payments on the commercial paper notes that had matured between July and November 2017, the tribunal heard.

They alleged that the insurance company attempted to shift responsibility while neglecting to promptly honor their claim. The trade insurance policy, which the panel heard, amounted to an indemnity policy and a guarantee, under which they are entitled to the full sum of damages plus interest as of February 2018.

Through attorney James Singh, the insurer denied issuing a comprehensive insurance policy and argued that, if one had, it had been issued to the Note Trustee rather than the claimants in their individual capacity.

Mr. Singh said that the company had not received any legal claims or valid notices of default and that the insurer was not required to honor any claims that did not adhere to the terms of the policy. He said that the investors were always aware of Nakumatt’s inability to pay its debts.

The tribunal decided that the first premium and commitment fee were necessary for the policy to go into effect.