United Bank of Zambia has been sued in the Lusaka High Court for breach of contract after it allegedly failed to settle over US$ 8 million dollars owed to Petrofin Africa, a local company that provided debt recovery services to the Bank.
According to court documents filed by its lawyers K.B.F and Partners, in early-mid 2020, Petrofin Africa had entered into an agreement with UBA under which it would provide debt recovery services including negotiations, meetings, compromises, and general consultation work, for the recovery of a debt of over US$ 34 million which UBA was owed by the Zambian Government.
The undertakings were confirmed in writing on 11th of June 2020 by the then UBA Managing Director and Chief Executive Officer Mr. E. Dimanochie.
The works done by Petrofin Africa comprised of developing an acceptable debt repayment structure that was acceptable to all the parties involved-and holding meetings and discussions with the Government personnel who acknowledged the work done by the firm and even wrote to UBA about the works done by Petrofin Africa.
The court documents state that Petrofin Africa shall show that in or around 2016, UBA had helped finance the purchase of fertiliser for the Ministry of Agriculture by providing Letters of Credit to Rockfield Trading situated in the United Arab Emirates amounting to a total of sum of approximately USD 25 million or so.
It states that the total amount payable to Rockliffe Trading under this agreement was USD 34,025,647-50.
“In 2020, after over four years of having unsuccessfully tried to recover the principle amount USD 25.7 million plus interest, the Defendant engaged the Plaintiff in order to successfully recover its debt from the government. The Plaintiff shall aver that in or around 2020, after entering into its agreement with the Defendant, the Plaintiff aided in developing an acceptable debt repayment structure that would use Government Securities, i.e. Government bonds or Treasury Bills to settle the outstanding debt,” it adds.
“Upon presentation of this proposal to the Government of Zambia, the Government, through the Ministry of Finance, approved and agreed to settle the outstanding debt due to the Defendant using Government Bonds with varying maturity dates with a minimum tenor of 3 years.”
“Due to the progress made in the negotiation process with the Government, the Plaintiff and the Defendant, through its new Managing Director and Chief Executive Officer at the time, Mr. Chinedu Obera, made a subsequent verbal agreement whereby the previous sum offered to the Plaintiff was increased to a sum equivalent to the value of any funds that would be paid by the Government in addition to the Defendant’s original debt and interest. Based on this understanding, the Plaintiff continued to work for the Defendant, believing that its commission had been increased to the additional amount that it would secure for the Defendant.”
This was further confirmed in writing as evidenced in an email that is in our possession and dated 14th of October 2020 from the UBA Head of Corporate Banking, Fatima Elmi to PetroFin Africa, UBA clearly proposed a payment for fees of 25% of the value of the issued Government Bonds.
In one of the court records, it said that after many months of work, the Plaintiff ultimately managed to secure a 25% buffer from the Government in addition to the Defendant’s original debt and that the 25% buffer was provided by the government to settle any additional costs related to the transaction which included the Plaintiff’s commission costs.
“Consequently on 30th April 2021, the Government of Zambia, through the Ministry of Finance issued five Government Bonds amounting to ZMW 899,879,935.00 (or USD 40,663,350.00) in favour of the Defendant in full and final settlement of the State’s liability to the Defendant.”
Documents obtained from the Bank of Zambia website detailing the unique identifier number of each Government Bond shows that the 3- year Government Bonds were and are still earning 1% per month.
“From the 30th of April 2021 to the 30th of September 2022 the ZMW 899,879,935-00 in Government Bonds have earned ZMW8,998,799-35 in interest or coupons every month for 17 months. A simple calculation shows the coupon or interest alone earned by UBA Zambia up to the 30Sept2022 is ZMW 152,979,588-00.”
“If we add on the amount in Government Bonds issued to UBA Zambia on the 30th of April 2021, these bonds being worth ZMW 899,879,935-00 and then add the interest or coupons earned so far of ZMW 152,979,588-00. This will bring the total payout to UBA Zambia to date to ZMW1,052,859,523-95”
“Using the closing rates of the 30th of September 2022 for USD/ZMW obtained from the Bank of Zambia Website, whose exchange rate of USD1 translating to ZMW15.7448. The amount obtained by UBA Zambia of ZMW1,052,859,523-95 translates to USD66,870,301-56 On a principle debt of USD25.7M.”
Through their lawyer, KBF and Partners, Petrofin Africa claims that is entitled to 25% of the ZMW 899,879,935-00 (or USD 40,663,350-00) which represents the principal sum owed approximately USD 25.7 million, interest of approximately USD 7 million and 25% translating to USD8,132,670-00 which was agreed between the parties during the course of the negotiations.
Petrofin Africa says it shall show that it’s input, intellectual property and expertise was a major reason for UBA’s recovery of the subject debt from the Government at the time of settlement.
“However and despite the Plaintiffs role in securing the Defendant’s payment from the State, the Defendant has to date failed, refused and/or neglected to pay the Plaintiff its due consideration (i.e., commission) for the work done in complete disregard of the parties’ mutual undertakings during the subsistence of their agreements.”
Petrofin Africa contends that it has suffered grave loss, damages, and inconvenience due to UBA’s non-remission of its commission under the parties’ agreements.
“The Plaintiff has been deprived and denied the opportunity to employ and benefit from the sums due to it in its business’s operations. The Plaintiffs have had to make numerous formal and informal follow ups with the Defendant to receive the funds due but to no avail. The Plaintiff has had to incur legal fees and costs by retaining Counsel to represent its interests due to the Defendant’s persistent and protracted failure, refusal and neglect to pay the Plaintiff its dues under their agreement.”
“The Defendant has illegitimately employed the sums due to the Plaintiff in order to receive interest payments from the Government Bonds, knowing full well that some of those interest payments should be paid to the Plaintiff. Due to the Defendant’s refusal to settle its fees the Plaintiff wrote the Government who, while noting that other parties (such as the Plaintiff) were involved in finalising the transaction with the Defendant, refused to get involved in the matter as the State was not privy to the transaction,” the court papers said.
The matter is before Judge Bonaventure Mbewe in the Commercial Division.