FARAJA HOTEL LTD v COGEBANQUE PLC ET AL.

# FARAJA HOTEL LTD v COGEBANQUE PLC ET AL.

- Source: Amategeko - Section: Decisions (Judgements) - Date: 2021-03-05 - Case/document no.: RCOMAA 00046/2020/CA - Collection: Court of Appeal

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FARAJA HOTEL LTD v COGEBANQUE PLC ET AL. [Rwanda COURT OF APPEAL – RCOMAA 00046/2020/CA (Ngagi, P.J., Umugwaneza and Kamere, J.) 05 March 2021] Jurisdiction of courts–The jurisdiction of the Court of Appeal – Admissibility of the second appeal–The company reorganisation–In cases where the monetary value of the subject-matter cannot be determined, the second appeal is not admitted. Facts: FARAJA Hotel Ltd states that it lodged an application before the Commercial Court seeking an order for commencing the company reorganisation, and for the appointment of the insolvency administrator. COGEBANQUE Plc, one of FARAJA Hotel’s creditors, voluntarily intervened into the unilateral application, and argued that FARAJA Hotel Ltd has no assurance of its reorganisation; therefore, the Bank requested for the Hotel’s liquidation. The Court heard the case and held that the application for FARAJA Hotel Ltd reorganisation was founded and accordingly, the Court appointed Mubumbyi William Joseph as the Hotel’s provisional administrator. COGEBANQUE Plc was not satisfied with the above judgement and appealed against the ruling before the Commercial High Court. The latter found that the Bank’s appeal was founded and appealed ruling was quashed.

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FARAJA Hotel Ltd was also dissatisfied with the decision of the Commercial High Court and appealed against the ruling to the Court of Appeal. The appellant argued that the Commercial High Court failed to properly consider the elements of evidence it produced and it requested to appoint an administrator. COGEBANQUE PLC raised an objection of lack of jurisdiction of the Court of Appeal, based on the ground that the value of the subject matter in the case does not meet the threshold prescribed by the law for a second appeal to fall within the jurisdiction of this Court, and therefore, the appeal should not be admitted. COGEBANQUE Plc further argued that, even if the debt owed to it amounts to 983,024,542 Frw, but such issue does not constitute the subject-matter of the instant case, but the subject- matter of the case is the insolvency and the company reorganisation, its value is not based on the monetary quantification, rather it is based on unprofitable business of FARAJA Hotel Ltd, it also submits that in the lower courts, the value of the debt was not debated, rather, the debates were based on the measures to be taken for the Company reorganisation in order to settle the issues related to its insolvency. FARAJA Hotel Ltd thereby pleaded by stating that COGEBANQUE’s objection is unfounded; therefore, the instant Court has the jurisdiction for this issue, since the matter at hand concerns the Company’s debt and insolvency and the debt owed to the Bank exceeds the value of 75,000,000 Frw provided under the law. Held: The second appeal is not admitted when the monetary value of the subject-matter cannot be determined.

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The objection of lack of jurisdiction sustained. Statutes and statutory instruments referred to: Law n0 30/2018 of 02/06/2018 determining the jurisdiction of courts, article 52. No cases were referred to. Judgment I. BACKGROUND OF THE CASE

This case started from the Commercial Court, FARAJA Hotel Ltd filed an application seeking the court’s order for commencing the company reorganisation and the appointment of the insolvency administrator. COGEBANQUE Plc, one of the Hotel’s creditors, voluntarily intervened into the unilateral application, and argued that the Hotel has no assurance of its reorganisation and therefore, the Bank requested for the Hotel’s liquidation.

On 01/03/2019, the Commercial Court heard the case RCOM 02171/2018/TC and held that FARAJA Hotel’s application has justification and ordered for the Hotel’s reorganisation starting from 01/03/2019 up to 31/07/2019, and the Court appointed Mubumbyi William Joseph as insolvency administrator for the Hotel’s reorganisation and gave him the following assignments:

preparing FARAJA Hotel’s reorganisation plan to be considered and approved by the Hotel’s creditors, and that must be done within 45 days starting from the ruling pronouncement date and a related report must

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thereby be submitted to the Court; monitoring the Hotel’s business and taking the necessary measures in the interest of FARAJA Hotel’s creditors and shareholders; safeguarding the assets and supervising the Hotel’s business and keeping the Hotel’s finances; drafting and submitting the reports on the consideration and implementation of FARAJA Hotel’s reorganisation, the reports must be presented to the Court, the shareholders and creditors for every two months starting from the court’s ruling pronouncement; and performing any other tasks as the Court might assign to him.

The Commercial Court has well held that FARAJA Hotel Ltd would pay to Mubumbyi William Joseph 500,000 Frw per month, in addition to the support for his travels for performing his tasks, provide to him all necessary information, and hand over to him all the business related books of accounts and help him to achieve his duties. The Court has also held that FARAJA Hotel’s debts, including the debts with mortgage and seizure rights, should be suspended for a period of five (5) months starting from the ruling pronouncement date; the Court requested all FARAJA Hotel’s creditors to have all their owed debts registered with the Hotel’s insolvency administrator for approval by the creditors’ general assembly. The Court has as well moved that all any other Hotel’s existing creditors must be notified of the very ruling through a public notice within the most read local newspaper.

COGEBANQUE Plc was not satisfied with the ruling of the judgment RCOM 02171/2018/TC, and appealed against it before the Commercial High Court and, in the judgment RCOMA 00295/2019/HCC rendered on 20/12/2019, the Commercial High Court held that COGEBANQUE’s appeal is

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founded, and the Court reversed the appealed ruling and ordered to FARAJA Hotel Ltd to refund to GOGEBANQUE Plc 40,000 Frw deposited as court fee for claim filing.

FARAJA Hotel Ltd dissatisfied with the above judgement, appealed against the ruling before the Court of Appeal and argued that the Commercial High Court never bothered considering the elements of evidence it produced, arguing that the Court has simply based its ruling on a certain report made by Mubumbyi William Joseph, yet the latter has never visited the Hotel, and even his report has never been shared to FARAJA Hotel Ltd for information. FARAJA Hotel Ltd further stated that the Hotel’s business was unprofitable, COGEBANQUE granted the loan in instalments, but it sought for other partners and it is ready to revamp the Hotel’s business, and it requests to the Court to appoint the insolvency administrator.

The case was heard on 08/02/2021, FARAJA Hotel Ltd was represented by Counsel Zitoni Pierre Claver while COGEBANQUE Plc was represented by Counsel Sangano Yves; Mubumbyi William Joseph did not appear before the Court, and he did not even bother to inform the Court of the reasons for his absence and the Court moved to hear the case in his absence.

During the hearing, Counsel Sangano Yves, representing COGEBANQUE Plc, raised an objection over the Court of Appeal’ s lack of jurisdiction on ground that the monetary value of the subject-matter is less than the legally appealable amount of 75,000,000 Frw for the second appeal admissibility into the Court of Appeal; he requested to the Court not to admit FARAJA Hotel’ appeal. Counsel Zitoni

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Pierre Claver, representing FARAJA Hotel Ltd, argued that COGEBANQUE’s objection is baseless. The Court closed the hearing on the raised objection, and the pronouncement was scheduled on 05/03/2021, on which the judgment was pronounced. II. ANALYSIS OF LEGAL ISSUES a. Determine whether the second appeal of FARAJA HOTEL Ltd does not fall within the jurisdiction of the instant Court

Counsel Sangano Yvès, representing COGEBANQUE Plc, submits that the Court of Appeal lacks the jurisdiction to hear the second level of appeal filed by FARAJA Hotel Ltd, basing his argument on Article 52, paragraph 2, subparagraph 8 of Law no 30/2018 of 02/06/2018 determining the jurisdiction of courts1. He states that, although the debt owed by FARAJA Hotel Ltd to COGEBANQUE Plc amounts to 983,024,542 Rwandan Francs, this debt is not the subject matter of the present case. Instead, the case concerns the insolvency and the request for the company reorganisation, as submitted by FARAJA Hotel Ltd. He further argues that, in both the first and second instance proceedings, there was no debate regarding the value of the debt, but rather, the debate focused on whether FARAJA Hotel Ltd had reorganisation plan in place that would enable it to address its insolvency. He also maintains that the

1 The Court of Appeal has also jurisdiction to try at the second level of appeal cases tried by the High Court, the Commercial High Court and Military High Court if such cases have ordered the award of damages of at least seventy-five million Rwandan francs (FRW 75,000,000) or in case of disagreement between the parties, the same amount is ordered by the judge

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value of the subject matter in dispute (insolvency) is not based on a monetary value, rather on the poor performance of FARAJA Hotel Ltd’s business activities, adding that when a company is in financial distress, it is evident that its balance sheet is negative.

Counsel Zitoni Pierre Claver, representing FARAJA Hotel Ltd, states that COGEBANQUE’s raised objection is unfounded on ground that the claim admissibility is under the discretion of the court’s chief registrar, and in case of any discord in relation to claim admissibility, the dissatisfied party presents his/her grievances to the President of the Court within a period of five (5) days. He therefore argues that COGEBANQUE’s objection cannot be brought before the bench, since such a claim is an exclusive responsibility of the chief registrar and the president of the court. He submits that the Court of Appeal has the jurisdiction to hear this case since the root cause of the issue is a certain debt that FARAJA Hotel Ltd owes to GOGEBANQUE Plc and the concerned debt is even above 75,000,000 Frw. DETERMINATION OF THE COURT

With regard to the jurisdiction of the Court of Appeal for the second appeal, the article 52, paragraph 2, subparagraph 8 of the above mentioned Law n0 30/2018 of 02/06/2018 provides the following: “The Court of Appeal has also jurisdiction to try at the second level of appeal cases tried by the High Court, the Commercial High Court and Military High Court if such cases have ordered the award of damages of at least seventy-five million Rwandan francs (FRW 75,000,000)

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or in case of disagreement between the parties, the same amount is ordered by the judge”.

With regard to the claim admissibility by court registry, the article 22 of the Law n0 22/2018 of 29/04/2018 relating to the civil, commercial, labor and administrative procedure provides the following: “A party that is dissatisfied with the decision of a court registrar appeals in writing to the president of the court, indicating the reasons for his/her dissatisfaction, within five (5) days of his/her being notified of the decision”.

The case file contains the decision n0 146/2020/COM/GCA issued by the Court of Appeal’s Chief Registrar on 21/09/2020 on the admissibility of the appeal filed by FARAJA Hotel Ltd. In that decision, FARAJA Hotel Ltd argues that the Court of Appeal has jurisdiction to hear its appeal since the appealed ruling of the judgment RCOMA 00295/2019/HCC is about the request for initiating the reorganisation of FARAJA Hotel Ltd since the Hotel owes to COGEBANQUE a debt of more than 900,000,000 Frw, which means that the highlighted Hotel’s insolvency together with the GOGEBANQUE’s debt amount to more than the legally appealable sum of 75,000,000 Frw. FARAJA Hotel Ltd relies on the article 52, paragraph2, subparagraph 8 of the Law n0 30/2018 of 02/06/2018 determining the jurisdiction of courts. As conclusion, the Chief Registrar held that, though the subject-matter does not indicate the monetary value amounting to 75,000,000 Frw, nor the case has ordered damages amounting to 75,000,000 Frw, nor there is no report drafted by a valuer, he found that the litigation monetary value can be reflected in the debts and insolvency that FARAJA Hotel Ltd to request for reorganisation of its business, and such claim

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value is more than the 75,000,000 Frw; therefore, the second appeal filed by FARAJA Hotel Ltd falls within the jurisdiction of the Court of Appeal.

The case file indicates that it is FARAJA Hotel Ltd which initiated the proceedings before the Commercial Court through a unilateral application, without naming any respondent or requesting that any party should be ordered to perform an obligation. It further indicates that COGEBANQUE Plc intervened in the case not for the purpose of seeking a court order requiring FARAJA Hotel Ltd to pay any specific debt, but rather to oppose the reorganization sought by FARAJA Hotel Ltd, specifically the request to initiate reorganization proceedings and the appointment of an insolvency administrator.

Under paragraph 26 of the appealed judgment RCOMA 00295/2019/HCC, the Commercial High Court examined whether a certain set of agreements that FARAJA Hotel Ltd concluded with its clients and its partners are convincing enough to ensure the Hotel’s reorganization as per the terms of the article 80, paragraph 2 of the Law n0 22/2018 of 29/04/2018 on insolvency and bankruptcy. The Court has in no way considered the debt FARAJA Hotel Ltd owes to COGEBANQUE Plc as the subject matter in this case. While examining application of FARAJA Hotel Ltd for its reorganization, the Commercial High Court has confronted the Hotel’s request to the provisions of article 80 of the above mentioned Law n0 23/2018, and found that FARAJA Hotel Ltd has no firm measures for its reorganization for paying all its creditors (and COGEBANQUE Plc included).

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Regarding the assertion by Counsel Zitoni Pierre Claver that the admissibility of a claim falls within the responsibilities of the Court Chief Registrar, and that any party dissatisfied with the decision made may appeal to the President of the Court within five (5) days, therefore arguing that such matters should not be submitted to the hearing bench as they fall under the exclusivity of the Chief Registrar and the President of the Court, this Court finds that this statement is unfounded, as provided under Article 22 of the abovementioned Law no 22/2018 of 29/04/2018, the decision taken by the Court Chief Registrar regarding the admissibility of a claim may only be appealed to the President of Court in cases where the Registrar rejects the claim, and only by the party that submitted the claim. It is thus clear that since COGEBANQUE Plc was not the appellant, it was entitled to submit its concern to the hearing bench in the form of a preliminary objection to the admissibility of the claim. Furthermore, the hearing bench examines such objections like any other preliminary issues related to the case before it.

With regard to the objection of COGEBANQUE about the court’s lack of jurisdiction in relation to the value of subject-matter, while FARAJA Hotel Ltd states that it filed the second appeal on basis of the fact that the value of the subject- matter is more than 75,000,000 Frw, the Court finds that the subject-matter as it has been filed by FARAJA Hotel Ltd from the Commercial Court, had no monetary value and it cannot be monetarily quantifiable, as it cannot be confused with the debt of more than 900,000,000 Frw that FARAJA Hotel Ltd owes to COGEBANQUE Ltd, since COGEBANQUE Ltd did not intervene into this case with a purpose of forcing repayment of the above debt, such debt was not subject of debate between

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parties before the lower courts and no lower court rendered a judgment about such debt. Therefore, this Court finds that the COGEBANQUE’s objection related to the lack of jurisdiction in consideration of the subject-matter value is founded, the second appeal lodged by FARAJA Hotel Ltd should not be admitted and the Court cannot examine any other issue among the issues of this case, except only the issue related to the refund of the expenses of proceedings. b. With regard to the procedural and counsel fees claimed in this case

FARAJA Hotel Ltd requested that COGEBANQUE Plc refunds 700,000 Frw for the procedural fee and 1,000,000 Frw for counsel fee as well as the deposited court fee.

COGEBANQUE Plc, in its defense, argues that FARAJA Hotel Ltd filed its claim as a unilateral application solely for its own benefit, it did not sue because it was deprived of its right by COGEBANQUE Plc, since COGEBANQUE Plc is not the sole creditor in a way that would justify being ordered to pay counsels’ fee simply for having requested to intervene into the case. The Bank bases its position on Article 80 of Law no 23/2018 of 29/04/2018 relating to insolvency and bankruptcy, which provides that “Any person who is likely to be affected by the application for reorganization, must be notified of such application”. Its counsel avers that it is actually FARAJA Hotel Ltd that must give to COGEBANQUE Plc 1,000,000 Frw for the counsel fee and 500,000 Frw for the procedural fee as it was necessary for it to appear before the Courts for providing explanations about the insolvency of FARAJA Hotel Ltd.

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Counsel Zitoni Pierre Claver, representing FARAJA Hotel Ltd, pleads by stating that in case the Court finds that COGEBANQUE Plc deserves such fees, they should be determined in its own discretion.

Counsel Kamali Didier who participated in the pre-trial conference of 04/11/2020 representing Mubumbyi William Joseph, requested that his client should be given by FARAJA Hotel Ltd 2,000,000 Frw for the procedural and counsel fees while Counsel Cyubahiro David representing FARAJA Hotel Ltd argues that its request is baseless due to lack of supporting evidence. DETERMINATION OF THE COURT

Article 111 of the Law n0 22/2018 of 29/04/2018 relating to the civil, commercial, labor and administrative procedure provides that “the claim for representation fees is an incidental claim to the principal claim aiming to repay expenses incurred during judicial proceedings. The claim for legal costs is adjudicated at the same time with the principal claim. It can also be admitted and adjudicated even if the principal claim has not been admitted”.

The case file indicates that FARAJA Hotel Ltd filed a claim on its own motion without suing a party, it claimed for commencing the business reorganization and appointment of the insolvency administrator and COGEBANQUE Plc intervened into the proceedings from the first instance in the Commercial Court with purpose of preventing any prejudice that would be caused by the decision to be taken.

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The case file also indicates that Mubumbyi Joseph William has never in any way been a party to this case from its first instance in the Commercial Court, he only appeared for the very first time when the Court appointed him as the insolvency administrator of FARAJA Hotel Ltd. The case file also indicates that when the ruling got appealed before the Commercial High Court, Mubumbyi Joseph William featured into the case through IECMS, and he appeared neither as an appellant nor a defendant, he was simply referred to as “a third party”. It is therefore clear, that he never handed any case- related submission to the court, neither did he personally appear before the court for a trial and he never had any representative. However, the judgement copy features him as a defendant though in the court’s ruling, he neither won nor lost for anything in this case. The case file contains any document that explains how Mubumbyi Joseph William joined this case at the Commercial High Court level, since there is no document that indicates that he was forced to intervene or voluntarily intervened in the case. This confusion around his status still complicates the matter even before the Court of Appeal, since the IECMS still features him as wronged by COGEBANQUE at the appeal instance, then he uploaded his submissions and filed a cross-appeal by which he requested for refund over the procedural and counsel fees, yet he never appeared before the Court to provide the needed clarifications.

The case file also indicates that in the appealed judgement as rendered by the Commercial High Court, no single party has ever been awarded the fee covering the expenses of proceedings at that instance.

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This Court finds therefore that since it is FARAJA Hotel Ltd that unilaterally initiated the case on its own motion, and for its own interests, and without any opponent party, FARAJA Hotel Ltd should bear the loss from its initiative, and its request for the procedural and counsel fees has no justification.

With regard to the request of COGEBANQUE Plc, this Court finds that, in case that FARAJA Hotel Ltd had not filed this second appeal which was not admitted as above explained, COGEBANQUE Plc would not have hired a lawyer for representation in the court, and it would not have incurred expenses for case follow-up; therefore, it deserves the claimed procedural and counsel fees and they must be paid by FARAJA Hotel Ltd which caused the incurred loss; but, as it has requested for an excessive amount, the Court of Appeal has discretionally awarded to it 500,000 Frw for counsel fee, and 200,000 Frw for procedural fee.

With regard to the request of Counsel Kamali Didier for the procedural and counsel fees over representing Mubumbyi Joseph William, the Court holds that his request is not granted since nothing clarifies how his client became a party to this case, more so that during the case hearing, he never appeared before the court, neither was he represented to clarify about his requests. III. DECISION OF THE COURT

Holds that the objection raised by COGEBANQUE Plc over the court’s lack of jurisdiction has merit;

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Holds that the second appeal lodged by FARAJA Hotel Ltd is not admitted due to the Court of Appeal’s lack of jurisdiction;

Orders to FARAJA Hotel Ltd to pay to COGEBANQUE Plc 700,000 Frw for the procedural and counsel fees at this instance;

Rules that the deposited court fees cover the expenses of proceedings.