This morning, a copy of an advert in one of the newspapers, made and is making several rounds on various social media channels, especially WhatsApp.
The advert, by Quickway Auctioneers & Court Bailiffs titled: Sale by Public Auction/Private Treaty reads: “Duly instructed by M/S Kirunda & Wasige Advocates, on behalf of their client, the registered mortgagee, we shall proceed to sell by public auction/private treaty, the undermentioned property, under the Mortgage Act, 2009, unless the debtor, mortgagor pays the entire outstanding loan balance and all costs attendant to our clients, within 30 days from the date of this advert, our clients shall sale or take possession of the property, described her to recover all the monies owed.”
The properties in question are Simba Properties Investment Co. Ltd (Elizabeth Royal Apartments); Protea Hotel- Naguru (Skyz Hotel) and Moyo Close Apartments in leafy upscale Kololo. The properties are part of the Simba Group empire, owned by billionaire businessman, Patrick Bitature.
This latest move, which is now being contested by the Simba Group as an unlawful, attempt by Mezzanine to blackmail and arm-twist the businessman, is one in many moves staged by the lender, in a bitterly contested commercial dispute that dates from 2019.
What we know about the case
The brief facts of the case are that Simba Properties Investment Co. Limited obtained a term facility of USD10 million from and entered into a Mezzanine Term Facility Agreement (MTFA) with Vantage Mezzanine Fund II Partnership on 11th December 2014 signed between the Applicant and the 1st Respondent.
Mezzanine financing is a hybrid of debt and equity financing that gives the lender the right to convert the debt to an equity interest in the company in case of default. It is a relatively new form of financing in developing markets for projects usually with low appetite from banks. Vantage Mezzanine Fund II is run by South Africa’s Vantage Capital Fund Managers (Pty) Ltd.
Thereafter, a commercial dispute ensued, over the contractual terms of the agreement prompting Simba Properties Investment Co. Limited to go to Court, under Civil Suit No. 988 of 2019.
Before the main case could proceed, Vantage Mezzanine Fund II Partnership in Miscellaneous Application No. 201 of 2020 asked the court to dismiss it, arguing that the case should have gone for arbitration as provided for in the original agreement and asked the court to refer all related matters for arbitration.
Hon. Mr. Justice Boniface Wamala of the Commercial Court, indeed agreed with Vantage Mezzanine Fund II Partnership that all matters related to the case should be referred for arbitration.
“An impugned arbitration agreement exists, is valid, operative and capable of being performed, and that there is an arbitrable dispute between the parties herein, it is ordered that this matter be and is accordingly referred to arbitration in accordance with section 5 of the Arbitration and Conciliation Act,” Justice Wamala ruled on 16th June 2021.
In a twist of events, Vantage Mezzanine Fund II Partnership which argued so fervently in favour of arbitration, instead of referring the matter to arbitration, proceeded to the Registrar of Companies, seeking to transfer into its ownership, shares in the respective suit companies.
On June 16th, 2021, only two days after the court ruling, Vantage Mezzanine Fund II Partnership filed board resolutions and share transfer documents with URSB, seeking to transfer Simba Properties Investment Co. Limited, Simba Telecom Limited, Linda Properties Limited and Elgon Terrace Hotel Limited into its names.
Upon perusal and further scrutiny, and upon objections by Muwema & Co Advocates, on behalf of the respective Simba companies, via a 22nd June 2021 letter, declined the transfers. Muwema & Co Advocates letter notified URSB of the existence of an order of the High Court of Uganda vide Miscellaneous Application 201 of 2020 that referred the commercial dispute in question for arbitration.
Within its powers, URSB convened a virtual hearing between Vantage Mezzanine Fund II Partnership’s and Simba Properties’ lawyers via zoom on 28th June 2021. After convincing itself that the documents submitted to it are part of the dispute referred to arbitration by the Commercial Court, URSB, in a 1st July 2021, the letter advised both parties to instead expedite the resolution of the dispute through arbitration as ordered by the court.
Dissatisfied, Vantage Mezzanine Fund II Partnership again went to Court, via Miscellaneous Cause No. 205 of 2021 seeking a judicial review of URSB’s refusal to register the said shares. It sued URSB, together with Simba Properties Investment Co. Limited; Simba Telecom Limited, Linda Properties Limited and Elgon Terrace Hotel Limited accusing especially URSB of acting illegally in refusing to transfer and register the said shares and properties.
Bob Okodi, Amref Health Africa Uganda CFO, On Purpose-Driven Finance and Measuring Impact in Lives, Not MarginsAmongst other orders, Vantage Mezzanine Fund II Partnership sought court orders to set aside the decision by URSB to transfer and register the said board resolutions and share transfers into its names as well as an order to compel URSB and all its concerned officers to immediately complete the process of registering the documents lodged by Vantage Mezzanine Fund II Partnership on 18th June 2021 and do so without delay.
Court finds Mezzanine to be an illegal entity, dismisses its case
In its defence, over and above citing the existence of a court order referring the matter to arbitration, URSB also argued that the papers for the transfer of shares and the board resolutions that authorized the same were filed by people that were not recognized as Directors and Secretary on form 20 as persons with legal mandate of the respective companies. URSB therefore, as the custodian of the register, refused to allow them to alter the register without the concurrence of the directors and shareholders of those companies. According to URSB, the said papers tendered by Vantage Mezzanine Fund II Partnership, had gross illegalities, namely the failure to pay registration charges at the time they were signed in 2014, which is contrary to Section 105 of the Companies Act, 2012.
According to URSB, the pre-signed resolutions and transfer forms signed 8 years before, were against the Ugandan public policy.
On their part, the Simba companies told the court that the resolutions in possession of Vantage Mezzanine Fund II Partnership, were “undated and the transfer of shares were blank.” They contended that the application to transfer the shares by the applicant was fraudulent, misleading and erroneous since it was not authorized by the respondents’ valid board resolutions.
It was then decided by the court that the following four issues would go to trial:
- Whether Vantage Mezzanine Fund II Partnership has locus (legal basis) to bring the judicial review proceedings before the court?
- Whether Vantage Mezzanine Fund II Partnership sets out the proper case for judicial review?
- Whether the Application raises any grounds for judicial review?
- Whether the Vantage Mezzanine Fund II Partnership is entitled to the relief sought?
On whether Vantage Mezzanine Fund II Partnership has the legal basis to sue, the court ruled that the Ugandan law under The Partnership Act makes it a mandatory requirement for certain partnerships to register and the failure to register had serious consequences on the legal existence of the partnership entity.
“This Court rejects the submission of counsel for the applicant (Vantage Mezzanine Fund II Partnership), that foreign partnerships are free to operate in Uganda outside the regulatory registration requirements contained in the Partnerships Act, 2010 and the Business Names Registration Act (Cap 109). Order 30 of the Civil Procedure Rules provides for suing and being sued once the partnership has satisfied the mandatory requirements of the law. Therefore, the international partnerships or foreign partnerships just like the Ugandan partnership cannot be recognized once they are not registered since their identities are unknown and it may open the door wide for fraud in their transactions and dealings,” Justice Musa Ssekaana ruled on May 9th, 2022.
“The locus standi or standing to sue (capacity) in a partnership name should be by mandatory registration under the Partnership Act and Business Names Registration Act which sets out the regulatory framework for partnerships in Uganda. For the reasons hereinabove stated, the applicant has no legal presence and locus (capacity) to commence this application. The application is dismissed,” the judge further ordered.
Court also went on to rule that URSB, was right to entertain the complaint by the Simba Companies and accord them a hearing along with Vantage Mezzanine Fund II Partnership.
“The 1st respondent (URSB) was justified and right to hear the affected parties and cannot be faulted for this exercise of power to hear the parties. There is a presumption that procedural fairness is required whenever the exercise of power adversely affects an individual’s rights protected by the constitution. Whenever a public function is being performed like that of the Registrar of Companies, there is an inference, in absence of an express requirement to the contrary, that the function is required to be performed fairly,” the judge further ordered.
Based on the above, Court then refused to issue the order of certiorari quashing URSB’s decision not to consider Vantage Mezzanine Fund II Partnership’s documents for registration. It also declined to issue an order of mandamus compelling URSB to register the impugned resolutions and share transfer documents in Mezzanine’s possession.
Each party was ordered to bear its costs.
In light of the above two rulings and the absence of a binding arbitral award in favour of either party, it appears, that Vantage Mezzanine Fund II Partnership’s latest move to publicly advertise the sale and or takeover of the properties in question is likely to fail, especially when subjected to court interpretation. Vantage Mezzanine Fund II Partnership and its lawyers have an uphill task to first convince the court that the agreement they are seeking to enforce is enforceable in the first place, after which, if they are successful, they are likely to be referred back to into arbitration before they can make a move on the Simba Group properties. Until then, the adverts by auctioneers, purporting to sell and or takeover the said suit properties could be a ploy to sway the court of public opinion and or possibly humiliate the businessman into submission.
In a brief comment to CEO East Africa Magazine, by a Simba Group official off the record, the Group insists that the public advert purporting to put up its properties for sale and or takeover is in bad taste and an attempt to blackmail and publicly arm-twist them in the court of public opinion, on a matter that is before courts of justice for competent interpretation and orders.
