Air Afrik Aviation Limited, registered in Nairobi and South Sudan, is suing Stanbic Bank Kenya Limited and the Bank of South Sudan in the Kenya High Court in Nairobi for effectively having scuppered a lucrative aircraft leasing deal with the South Sudanese government in 2014.
In a defence hearing before High Court judge Sifuna Nixon on October 8, Air Afrika Aviation managing director Erica Lugalia testified that the banks' actions had led to the termination of the lease agreement. He said Air Afrik Aviation spent "substantial time and resources and also incurred substantial losses and damages in pursuit of the illegal freezing of its account" but claimed Stanbic Bank "adamantly refused to unfreeze or allow the plaintiff to access the said credit balance". He claimed the bank had admitted to an error and punished the staff involved.
According to court documents, Air Afrik Aviation entered a leasing agreement with the South Sudan government on September 4, 2014, to provide several aircraft for one year, renewable for up to five years, commencing October 1, 2014, until August 30, 2015, at an agreed cost of USD20.64 million. The government was to pay a 35% deposit of USD7.22 million upfront.
On February 8, 2016, Stanbic Bank (the first defendant) credited Air Afrik Aviation's account with the deposit based on a payment order from South Sudan's Ministry of Finance and Economic Planning with the Bank of South Sudan. However, on May 27 of that year, Stanbic reversed the transaction as the Bank of South Sudan had not yet credited its offshore account with the required sum, resulting in insufficient funds in its offshore account. Stanbic Bank reversed the USD7.22 million deposit and on May 30 also debited Air Afrik Aviation's account by an additional USD1.1 million, claiming this amount was mistakenly withdrawn by the airline.
In 2018, Air Afrik Aviation sued Stanbic Bank (civil case 413 of 2018), accusing it of fraudulent practices, misrepresenting facts regarding unauthorised credits and debits, reckless and negligent accounting, and acting in bad faith. Bank of South Sudan was later added to the case.
Air Afrik Aviation claims it suffered more than USD80 million losses/damages as it could not fulfil its obligations under the leasing agreement with the South Sudanese government, which was ultimately terminated. The company asserts that these actions caused it to lose business opportunities, including potential contract extensions and new agreements. The company is seeking declaratory, punitive, special, and exemplary damages.
Testimonies from a financial expert and the former governor of the Bank of South Sudan indicated that the reversal was due to insufficient funds in Stanbic's offshore account, which they argued was the bank's responsibility to manage properly.
The case continues, with further hearings scheduled.
Meanwhile, Kenya's The Standard newspaper reports that Stanbic Bank and its CEO Joshua Oigara are contesting a summons before High Court judge Chacha Mwita filed by the country's Directorate of Criminal Investigations (DCI) related to the dispute with Air Afrik Aviation. The DCI reportedly is investigating alleged fraudulent accounting, but Stanbic claims the issue has already been cleared and that the investigation is interfering with the ongoing case.
