LUBOMBO PROPERTY ORDERED TO PAY ESWATINIBANK E53M

MBABANE – Lubombo Property Group Limited has been ordered to pay Eswatini Development Bank over E53 million.

The order by the court comes after the bank instituted legal proceedings against the company where it was demanding a total of E53 212 734, which the latter reportedly borrowed at different instances during the construction of the Siteki Mall. 

Other respondents in the matter were Norman Sigwane, Timothy McSeveny, Nicholas Charles McSeveny, Mcebo Mbhuti Dlamini and Collin George Ries.

During the argument of the matter, the court was informed that as security for the due performance of their (respondents) obligations in terms of the loans agreements, the defendants offered first mortgage over Portion 149 and 140 of Flame Free Park, Siteki and assured that upon completion of the mall, the property would have a market value of E86 794 000.

Claim

In its first claim, the bank submitted  that on May 9, 2018, it lent the company a sum of E2 million and the facility was for the purpose of bridging finance for the payment of value added tax (VAT) while developing a commercial property in Siteki town. In breach of their obligations in terms of the loan payment agreement, Lubombo property group  failed to maintain regular and punctual payments resulting in the account being constantly in arrears. 

Agreement

The bank averred that the arrears were brought to the attention of the company by a letter dated January 23, 2020 and at that stage the arrears were E1 684 298. In the second claim, the bank stated that on May 9, 2018, the parties entered into a written loan agreement in that the bank lend and advanced E25 million to the company and the facility was for the purpose of commercial housing loan for the development of a mall in Siteki town. “Repayments were at the rate of E380 200 payable on or before the 30th day of each month. The client may within the repayment period redraw the facility for purposes of purchasing other assets.

Opposing

Meanwhile, the opposing respondents relied on the provisions of the Consumer Credit Act of 2016. They contended that the manner in which the bank granted them the credit was in contravention of Section 25(1) and (2)(a) of the Consumer Credit Act, in that the first and fifth respondents were not involved in the application  for such a credit.

It was further their argument that the plaintiff ( bank) was guilty of reckless lending in Section 25( 5) of the Consumer Credit Act. It was further argued on behalf of some of the respondents that the loan was not properly applied for by all the company’s directors, but the second and fifth respondents were not personally engaged in respect of the loan and the consequences of the loan.

In her judgement, Judge Mumcy Dlamini stated that the mere fact that the borrower was a legal persona did not exclude the parties entering into a credit agreement from liability under the Act.   

Turnover

She said what excluded a credit transaction was where a consumer was a company or body corporate from the provision of the Act, was the threshold of its turnover profits or assets as fixed by the Minister of Finance.

“Now the first question is, what is the minster’s determined threshold? I have not been referred to any gazette by the Minister of Finance in terms of Section 11.  The fact of the matter is, there is no gazette where the minister sets the threshold,” said the judge.

Judge Dlamini further highlighted that it would be grossly injustice to find that the bank was subjected to the provision of the Act in the absence of the opposing respondents demonstrating that the provisions of the Act were applicable at the time the three loan agreements were concluded.

“The cardinal rule, he who alleges must prove, is wanting in the case at hand especially in light of Section 3 of the Act,” reads part of the judgement.

The court found that from the averments by the fifth respondent (Mcebo Mbhuti Dlamini), three directors signed the resolution to borrow a sum of E2 million

Judge Dlamini further noted that the opposing respondents did not challenge the loan agreement of March 6, 2018 which led to the loan agreement of E25 million.  

Loan

She said of significant from the none contestation of this loan agreement was that: It was taken in the same meeting of March 6, 2016 or  on the same day as the  E2 million resolution, the same signatories that reflected in  the  resolution pertaining to the E2 million advance were reflected also in the resolution for the loan of E25 million from the same bank.

The bank was represented by Kenneth Motsa of Robinson Bertram while appearing for the third, fourth and sixth respondents was Sibusiso B Shongwe of Sibusiso B Shongwe and Associates. 

The first, second, third and fifth respondent were represented by B Magagula of Magagula Attorneys.

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