Maravi

Mujuda dismisses DBZ suit as a legal joke, nonsense

Mujuda dismisses DBZ suit as a legal joke, nonsense
Written by George Chellah
Saturday, May 09, 2009 4:08:33 PM

POST legal counsel Sam Mujuda yesterday dismissed the Development Bank of Zambia (DBZ) legal suit as a legal joke, a nonsense.

Reacting to a legal suit filed by DBZ in the High Court against JCN Holdings Limited, Post Newspapers and Mutembo Nchito as first, second and third defendants respectively, Mujuda, who is also the deputy editor-in-chief and deputy managing director dismissed the legal suit describing it as a desperate suit, by desperate people.

"Today, DBZ is suing us demanding that we buy back shares that they acquired in Zambian Airways. What shares? Let them show the nation the shares they acquired in Zambian Airways. This is what happens when people mix politics with commercial transactions. DBZ have got their legal matrix wrong," Mujuda said.

"The general framework of their statement of claim shows that this was a commercial transaction. Those who may want to understand the Zambian Airways transaction can read the DBZ statement of claim. To start with this is a desperate suit by desperate people. They have failed to come up with any evidence of criminal wrongdoing on our part."

He said the falsity of their claim that The Post had stolen US$ 30 million from state institutions seemed to be haunting them.

"Now they are resorting to civil claims that have no basis at all, at law and even in common sense or logic. Today, they can claim that they are shareholders of Zambian Airways when all along they were accusing us of trying to get DBZ on board as shareholders and they told Parliament that they had refused to do that," Mujuda said.

He said the case against The Post was very simple.

"Anyway, that is how liars behave, they easily forget what they did or said yesterday. Today, they are suing us to buy back shares, which they told Parliament that they never acquired. It's a very simple case for us, we are very happy that they have taken us to court where we will teach them a lesson that it does not pay to lie, to be dishonest or deceitful," Mujuda said.

"This writ does not disclose the cause of action. They wrote to us through their lawyers, demanding that we buy back shares and we replied to them. It seems this writ has not addressed any of the things that we raised in our letter to them."

According to a letter dated March 23, 2009, which was written to DBZ's lawyers by MNB legal practitioners, who are acting for JCN holdings and Post Newspapers in the matter, its client's position in the matter was that any and all documents signed by them and delivered to DBZ were so signed, as evidenced in writing, subject to negotiations between the two sides.

"These negotiations have never been concluded and that is where the matter ended. We note that contrary to the position now being taken by your client, your client's shareholder (s) and/or their agents or representatives have made unequivocal pronouncements in Parliament that they had rejected the offer to convert the debt facility into equity/shares," read the letter in part.

"Our instructions are therefore, as follows; the issue of conversion from debt to shares never proceeded beyond the negotiations that had commenced between your clients and ours. The parties were never ad idem thereon, as the contemporaneous correspondences passing between them, which you no doubt have in your possession, will show. The document you assert constitutes an enforceable share buy-back undertaking was executed subject to negotiations, which negotiations as noted above, have never concluded.

"In any event, even assuming the document you refer to was binding, and our client's position is that it is not, the undertaking referred to at paragraph two of your letter was contingent upon the consideration of conversion of the debt facility to Zambian Airways Limited into shares. Since this has not occurred, that undertaking is wholly unenforceable for lack of consideration."

They further stated that since no conversion of debt into shares took place, there are no shares to buy back.

"Our clients are still open to an amicable resolution of this matter. Should yours decide to institute suit, as they are well entitled to do, you may assume that we are instructed to receive process," stated the letter.

And according to the statement of claim filed in the High Court, the DBZ is claiming a sum of K14 billion.

The plaintiff is also claiming interest at the contractual rate.

"In the alternative, for an order that Mr Mutembo Nchito executes a guarantee or be deemed to have executed the guarantee under clause 8.6 of the Syndication Loan Agreement," stated DBZ's claim in part.

The DBZ is further demanding that Nchito pay the sum of US$ 3.0 million under the Personal Guarantee.

"Such order as the court may deem just and equitable," stated the claim.

They are also claiming costs of the action.

And the background of the case filed in the High Court states that, desirous of expanding its operations, by inter alia, the acquisition of new equipment, Zambian Airways in or about 2007 approached Investrust to syndicate a loan facility in favour of the company aforesaid in the sum of US$ 5.5 million, [the loan] to be secured against certain assets of the company.

"Investrust then as the lead bank put together a consortium of banks comprising itself, Intermarket and the plaintiff who together as joint lenders ("the lenders") agreed to provide banking facilities up to the said sum to be secured by; a fixed debenture of two Boeing aircraft registration No. 9CJ JCN and 9CJ JOY, subordination of shareholders loans to the lenders, assignment of receivables duly executed, personal guarantee of Mr Mutembo Nchito for the full value of US$ 5,5 million and Key Man Insurance of the key promoter Mr Mutembo Nchito for the period provided for in the various offer letters from the banks party to the transaction," they stated.

They further stated that the plaintiff's portion of the loan was US$ 3.0 million then equivalent to K14 billion, which sum was duly drawn and utilised by the company.

"The full terms and conditions are contained in the syndication loan agreement signed by the company and the lenders, including the plaintiff on the 3rd November 2007. The lenders agreed to share pari passu the securities referred to in paragraph 10 hereof and/or as in the security sharing agreement executed by the lenders and the company. By mid 2008, it was clear that in spite of the injection of US$ 5.5 million into the company, the said company was facing serious liquidity problems and was in arrears in the repayment of both interest and principal on the sum advanced to it by the plaintiff," read the statement in part. "By clause 8.6 of the syndication loan agreement executed by the plaintiff on the 3rd November, 2007, Mr Mutembo Nchito was to give a personal guarantee for the repayment of the loan facility for the full value of US$ 5,5000,000-00. Mr Mutembo Nchito executed the said syndication loan agreement on behalf of the company but he did not and until now has not executed the personal guarantee envisaged under the agreement aforesaid. By reason of Mr Mutembo Nchito's failure to execute the guarantee as hereinbefore pleaded, the plaintiff suffered a dimunition in the security offered by the company for the due repayment of the loan, and the plaintiff is entitled to call upon Mr Mutembo Nchito to execute the guarantee as agreed by the parties."

They also stated that at the request of the company and in light of the company's failure to meet its debt obligations and to avert its liquidation, the plaintiff agreed to participate in the restructuring of the capital of the company, in consideration of the defendants executing an equity buy-back guarantee in favour of the plaintiff.

"The restructuring referred to in the above paragraph was necessary and a condition precedent to the company accessing further loans from Finance Bank to fund working capital for the company. The capital restructuring agreed to included: that the plaintiff converts its portion of the loan to the company into common stock equity in the said company, that the said common stock equity was in the sum of K14 billion redeemable at the plaintiff's discretion in with interest calculated at the current 182 Government of the Republic of Zambia treasury bill rate (at the material time at 16 per cent per annum) plus eight per cent margin or a floor rate of 20 per cent per annum, whichever is higher," they stated. "That the first and second defendants would jointly and/or severally guarantee the repayment to the plaintiff of the sums referred to in paragraph 19.2 in any of the circumstances referred to in the offer letter dated 6th October 2008, that the plaintiff would in consideration of Finance Bank lending the company the sum of US$ 3.0 million relinquish its interest in securities referred to in paragraph 10 hereof in favour of Finance Bank. The plaintiff did relinquish their interest in the securities and Finance Bank did avail the company banking facilities in the sum of US$ 3.0 million, which the company drew and utilised.

"In consideration of and as a condition precedent to the plaintiff converting its loan to the company into common stock equity as aforesaid, and the plaintiff relinquishing its interests in the securities in favour of Finance Bank to enable the said Finance Bank lend US$ 3 million to the company, the first and second defendants executed an irrevocable undertaking to buy back the common stock equity referred to in paragraph 19 hereof."

They stated that: "The equity buy-back guarantee executed or signed severally by the first and second defendants and dated 13th October 2008 provided that the defendants jointly and severally; in consideration of the plaintiff's "Conversion of a debt facility, amounting to K14 billion plus interest calculated at the 182 GRZ treasury bill rate plus eight per cent margin or a floor rate of 20 per cent annum, whichever is higher. Hereby irrevocably undertake to buy back the said equity from the bank as may be determined in accordance with the terms of the shareholders agreement. In the event that the shareholders agreement is not executed the buy back will be determined by the bank. Further undertake to hold this undertaking valid and legally binding on ourselves until the execution of the irrevocable joint and several share buy-back guarantee by all the shareholders of the Zambian Airways. Also undertake to buy-back the equity from the bank on demand upon presentation of reasonable notice from the bank to do so."

They also stated that on or about January 10th 2009, the company and Zambian Airways Limited informed the lenders that their board had resolved to suspend the operations of the company.

"By a letter dated 13th January 2009 the plaintiff, considering the suspension of operations an event of default, made a demand for payment by the defendants in terms of the agreement evidenced by the defendants' letter of the 13th October 2008, referred to in paragraph 18 hereon. The first and second defendants have failed to make payment of the sum demanded or any sum at all," they stated.

"The plaintiff is entitled to and claims payment of the sum of K14 billion plus interest calculated at the 182 GRZ treasury bill rate currently at 16 per cent per annum plus eight per cent margin or a floor rate of 20 per cent per annum whichever is higher from the date of the disbursement of the loan and under the terms of the guarantee."

Labels: DBZ, SAM MUJUDA, THE POST, ZAMBIAN AIRWAYS

posted by MrK @ 3:10 PM