Longhorn Publishers, majority owned by Dr Chris Kirubi, was ordered to pay shillings 35 million to two authors for books the government bought in bulk from the company, which then refused to pay royalties to two authors.
The authors, Dr Stephen Mburu and Dr Geoffrey Chemwa, had sued Longhorn, in which Dr Kirubi was a shareholder.
And the arbitrators, Mr. Kyalo Mbobu and Dr. Muthomi Thiankolu, found that Centum had unfairly excluded royalties totaling 35 million shillings from the educational guides written by the two authors.
Centum Investments became the first company to take a controlling stake in another company listed on the Nairobi Stock Exchange, when it took a 60% stake in Longhorn Publishers in 2016.
Dr Kirubi, who died last month, was the majority shareholder of Centum, making him the biggest financial beneficiary of Longhorn’s success.
The disputed royalties came from copies of the guides worth 350 million shillings that Longhorn sold to the government, through the Ministry of Education, in 2018 and 2019.
The ministry first ordered copies of books worth 195.2 million shillings on September 12, 2018 before placing another order worth 185.4 million shillings on April 30, 2019.
Dr Mburu and Dr Chemwa wrote four books in accordance with the contracts they had with Longhorn.
Under the contracts, the two authors were each to receive five percent of the price of the books. If Longhorn sold the books at a discount of 40% or more, the authors would each receive 5% of the sales made instead.
Lawyer John Njomo, representing the two authors, argued that the government bought the books at a 27 percent discount, which meant that its clients were entitled to 10 percent of the publication price, not the money received by Longhorn for copies sold.
Mr Njomo added that his clients were entitled to 35 million shillings in royalties on books sold to the government in 2018 and 2019.
Royalties were due no later than May 15 of each year. And for 16 years, Longhorn submitted a statement of account to both authors without fail and honored all royalty payments on time.
Longhorn sent authors an account statement on February 4, 2020 detailing the book sales made between January 1, 2019 and December 31, 2019.
The paper ruled out sales made to the government between 2018 and 2019, and the authors confronted Longhorn about the differences.
Longhorn had also completely ruled out the sale of one of the books written by the duo.
The publishing house also deducted 2.8 million shillings from Dr Mburu’s dues and 4.6 million shillings from Dr Chemwa’s without giving any explanation.
Dr Chemwa said Longhorn was only entitled to deduct 1.5 million shillings which he had received from the publisher as a deposit.
But when the two authors received an account statement detailing the copies of their books sold in 2019, money from government purchases the previous year had been excluded.
The document also did not disclose the number of copies of the books written by the two writers that had been sold.
Dr Mburu and Dr Chemwa investigated government sales and found out through third parties that the government had received a 27 percent discount.
This meant that they should have been paid 10 percent of the publishing price of books sold by Longhorn in accordance with their contracts.
Dr Mburu claimed Sh 18.2 million, while Dr Chemwa wanted Sh 16.7 million.
Longhorn CEO Maxwell Ndung’u Wahome argued that the Education Department had yet to pay for the books he ordered in 2018 and 2019, so there was no legal claim from Dr Mburu and Dr Chemwa.
Mr. Wahome added that Longhorn deducted distribution costs from authors’ contributions.
On June 5, Longhorn offered to pay Dr Mburu 14.3 million shillings, while Dr Chemwa was offered 12.5 million shillings following a new appraisal by the publisher.
Both authors rejected Longhorn’s offer. Dr Mburu insisted that he owed her 18.2 million shillings.
Dr Chemwa claimed he owed her 16.7 million shillings.
While Longhorn said he had not been paid in full by the government, the company did not provide any documents to the arbitrators as to how much the Department of Education had paid so far.
Longhorn attorney Daniel Kabata insisted the books were Longhorn’s brainchild and the company should be declared the copyright owner.
But arbitrators ruled that all of the evidence presented in court and testimony from Longhorn’s CEO indicated that both authors owned the copyrights.
“Longhorn Publishers’ witness, Ndung’u Maxwell Wahome, was evasive about the actual amount Longhorn Publishers received from the government and the unpaid amount, if any … In conclusion, the court unanimously concludes and judges that the plaintiffs have proved their against the respondent â, ruled the arbitrators.
“Longhorn Publishers will pay Dr Mburu 18,299,166 as cumulative royalties for the years 2018 and 2019. Longhorn Publishers will pay Dr. Chemwa 16,799,166 as cumulative royalties for the years 2018 and 2019,” ordered Mr. Mbobu and Dr Thiankolu.
Mr Mbobu and Dr Thiankolu also felt that Longhorn was not entitled to deduct distribution costs because the contract signed with the author allowed the company to publish the books “at its own risk and expense.”
The arbitrators considered that the distribution costs are part of the risks and expenses mentioned in the contracts.
Both authors have now filed a motion to have the arbitral award adopted as an order of the tribunal.
The adoption as a court order would open the door for Dr Mburu and Dr Chemwa to auction Longhorn’s assets in the event of non-payment.