METAFOAM LTD v EQUITY BANK RWANDA PLC

# METAFOAM LTD v EQUITY BANK RWANDA PLC

- Source: Amategeko - Section: Decisions (Judgements) - Date: 2023-10-12 - Case/document no.: RCOMA 00038/2023/CA - Collection: Court of Appeal

## Text

## Page 1

METAFOAM LTD v EQUITY BANK RWANDA PLC [Rwanda COURT OF APPEAL- RCOMA 00038/2023/CA (Ngagi, P.J.) 19 October 2023] Law determining the jurisdiction of courts – Court of Appeal –Second level of appeal – Value of the subject matte r– Second appeal cannot be admitted when the value of the subject matter is not monetarily quantifiable. Facts: METAFOAM Ltd contracted a bank loan of one billion and four hundred million (1,400,000,000 Frw) from EQUITY BANK RWANDA Plc, including the money meant for redeeming the loan that METAFOAM Ltd had previously obtained from COGEBANQUE and working capital; however, EQUITY BANK RWANDA Plc redeemed only COGEBANQUE’s loan, it did not grant to it the funds for working capital so that it faced the economic problems which impeded its commercial activities and failed to reimburse the loan which was accruing. Such a situation made METAFOAM Ltd to file a claim before the Commercial Court whereby it requested the Court to issue an order for initiating the process of Company’s reorganisation, and appointing the provisional administrator. The Court heard the case and held that the filed claim is unfounded since the Company was found bankrupt. The Court ordered to the chief administrator to proceed with the distribution of METAFOAM’s assets to its creditors. METAFOAM Ltd appealed against the above ruling before the Commercial High Court and argued that once given some more time and with reference to the submitted reorganisation plan, it will be able to repay all the due debts; it also requested to the Court to suspend the hearing of this very case till the verdict on the criminal case RP/ECON 00036/2023/TGI/NGYE in which it sued EQUITY BANK RWANDA Plc for fraud, forgery, money laundering, and tax evasion, with the intervention of various persons. The Commercial High Court heard the case and held that the appeal is ungrounded and held that the judgment rendered by the Commercial Court is sustained, it upheld that the handed ruling should be executed. METAFOAM Ltd appealed against the above ruling before the Court of Appeal. The respondent raised an objection over the Court of Appeal’s lack of jurisdiction on basis of the value of the subject matter, it argued that the litigation matter is about the reorganisation and the reorganisation case, it is examined whether the claimant has capacity to operate for being reorganised; therefore, the capacity should be analysed or determine whether it has capital. It argued that the plaintiff’s appeal is not admissible, more so that the previous court found that the company has no financial means for its business reorganisation. METAFOAM Ltd reacted on the raised objection because the fact that the previous courts held that it has no capacity to reimburse the loan amounting to 4, 028, 168,565 Frw is enough to prove that its appeal falls within the jurisdiction of the Court of Appeal. It states that the litigation issue is the company’s business reorganisation, and that all the disputes revolve around the claimed bank loan and related collaterals.

## Page 2

Held: The second appeal cannot be admitted when the value of the subject matter is not monetarily quantifiable. Objection sustained. Statutes referred to: Law No 30/2018 of 02/06/2018 determining the jurisdiction of courts, article 52. Cases referred to: RCOMAA 00046/2020/CA; FARAJA Hotel Ltd v. COGEBANQUE Plc, rendered by the Court of Appeal on 05/03/2021; RCOMAA 00025/2022/CA; RICHARDSTONE GENERAL TRADING Ltd v COGEBANQUE rendered by the Court of Appeal on 04/11/2022. Judgment I. BACKGROUND OF THE CASE

In 2016, METAFOAM Ltd borrowed EQUITY BANK Plc a loan of one billion and four hundred million (1, 400,000,000 Frw) which includes one billion and eighty million (1,080,000,000 Rwf) for redeeming the loan owed to COGEBANQUE, while the remaining three hundred million (300,000,000 Frw) was meant for working capital, however the Bank only redeemed the loan, and never disbursed funds for the borrower’s working capital, such situation led it to face the economic problems which impeded its commercial activities.

METAFOAM Ltd explains that EQUITY BANK RWANDA Plc later secured for it a foreign loan of two million seven hundred and fifty thousand US dollars (2,750,000 USD) from TLG and another foreign loan of three million and two hundred and thirty five thousand US dollars (3, 235,000 USD) from LAMAR, but still it never grant to it the agreed working capital so that it failed to reimburse the loan that accrued the company’s debt until it reached at three billion nine hundred forty-five million four hundred twenty-eight thousand and two hundred twenty-nine ( 3, 945, 428, 229 Frw). It is such a situation that made METAFOAM Ltd to lodge a claim with the Commercial Court whereby it requested to the Court to order for METAFOAM reorganization and the appointment of a provisional administrator.

On 28/04/2022, METAFOAM Ltd submitted its business reorganization plan, it stated that once the Court approves the plan and grants to it a period of 6 months, appoints a provisional administrator, the Company would reorganize its business and repay the loan owed to the Bank.

EQUITY BANK RWANDA Plc voluntarily intervened in the case for safeguarding its interests related to the loan owed to it by METAFOAM which should indicate its capacity to repay. It submits that for METAFOAM Ltd to be granted with the requested moratorium time for its business reorganization, it must provide assurance and produce tangible evidence of its capacity to reimburse the loan.

## Page 3

On 23/12/2022, the Commercial Court held that the request of METAFOAM Ltd for initiating the process for its reorganization and appointing the Company’s provisional administrator is unfounded since METAFOAM Ltd has already gone bankrupt and it has no basic capital that would serve for its business reorganization; and it has no funds for paying the insolvency proceeding, including the provisional administrator’s remuneration. The Court ordered to the chief administrator to proceed with the distribution of the Company’s assets to its creditors. The Court held that the counterclaim filed by EQUITY BANK RWANDA Plc for counsel fee of two million (2,000,000 Frw) and procedural fee of one million (1,000,000 Frw) is groundless.

METAFOAM Ltd appealed against the above ruling before the Commercial High Court, and prayed to the Court to honor their request for initiating the process for the company’s business reorganization scheme, arguing that once METAFOAM Ltd is granted some moratorium time period, and with reference to the company’s submitted business reorganization plan, there is hope for regaining the company’s solvency. METAFOAM Ltd also requested to the Court to temporarily suspend the current case till the verdict of the criminal case RP/ECON 00036/2023/TGI/NYGE for which EQUITY BANK RWANDA Plc has been indicted for the offences of fraud, forgery, money laundering, and tax evasion. METAFOAM Ltd has also requested to the Court to order for forced intervention of HAKIZIMANA Jean Bosco, BAHATI Vanessa together with HABATU MINING CAMPANY Ltd that provided the guarantee for its benefits since it might have effects on them while they have not been parties to the case.

EQUITY BANK RWANDA Plc argues that METAFOAM’s appeal is unfounded, stating that the Commercial Court examined the submitted evidence and found that the Company has gone bankrupt and METAFOAM Ltd has so far not been able to rebut such a stance. EQUITY BANK RWANDA Plc concluded the submission by requesting to the Court to rectify some errors featuring in the copy of the appealed judgement, and it also prayed the Court to examine whether the Commercial Court should not repay to it the damages for the incurred expenses.

In the judgment RCOMA 00768/2022/HCC rendered by the Commercial High Court on 22/06/2023, the Court held that the appeal filed by METAFOAM Ltd is unfounded, the judgment RCOM 00817/2022/TC is sustained, and in the appealed judgment, the judgment number RCOM 1385/2020/TC is rectified and became RCOM 00817/2022/TC. It ordered that the ruling of the judgment RCOM 00817/2022/TC should be executed, as METAFOAM has no basic capital for reorganization of its business, it has no funds for insolvency proceeding including the provisional administrator’s remuneration, that METAFOAM is bankrupt, it ordered to the chief administrator to proceed with the distribution of the Company’s assets to its creditors. The Court ordered to METAFOAM Ltd to pay to EQUITY BANK RWANDA Plc one million and two hundred thousand (1, 200,000 Frw) for both counsel fee and procedural fee, and the Court ordered that the forty thousand Rwandan francs (40,000 Frw) deposited by METAFOAM Ltd for the appeal filing should be borne to the Public Treasury.

METAFOAM Ltd appealed against the above ruling before the Court of Appeal. Its appeal was docketed as RCOMAA 00038/2022/CA. The hearing was held on 04/10/2023, METAFOAM Ltd was represented by Counsel RUGWIZANGOGA Marcellin, EQUITY BANK RWANDA PLc was represented by Counsel KAREMERA Frank while HABATU MINING COMPANY was not represented since Counsel MUTWARE NGARUYINKA Innocent, had informed the Court of his sickness; and the hearing was then adjourned to 11/10/2023. On that date, the hearing was

## Page 4

conducted in public with all the involved parties represented by the lawyers as above mentioned. The Court first heard the issue related to the objection raised by EQUITY BANK RWANDA Plc on this Court’s lack of jurisdiction due to the value of the subject-matter, and to the fact that METAFOAM Ltd had lost the case in the lower courts for the same reasons. II. ANALYSIS OF THELEGAL ISSUES 1. Whether the Court of Appeal has jurisdiction to hear this appeal on basis of the value of the subject-matter

The Counsel of EQUITY BANK RWANDA made a reference to sub-paragraph 8 of paragraph 2 of article 52 of the Law n0 30/2018 of 02/06/2018 determining the jurisdiction of courts, and raised an objection over the Court of Appeal’s lack of jurisdiction for the matter; and he states that the appeal of METAFOAM Ltd should not be admitted as the subject-matter is the reorganization, yet for reorganization, there must be an examination of the capacity of METAFOAM Ltd to operate and be reorganized , there must be an examination of financial means and its working capital; due to the fact that the lower courts found it does not have means for reorganization, its appeal should not be admitted since it does not fall within this Court’s jurisdiction.

METAFOAM’s counsel pleads about the raised objection, and argues that the objection is unfounded and with reference to sub-paragraph 8 of paragraph 2 and even paragraph 4 of article 52 of the above mentioned Law, he notes that the fact that the lower courts found that METAFOAM Ltd is insolvent for a debt of 4,028,168,565 Frw is enough to prove that the company’s appeal is under the jurisdiction of the Court of Appeal. He adds that the subject-matter of this case the reorganization, and the debate revolves around the outstanding debt and related collaterals.

The counsel for HABATU MINING COMPANY submits that HABATU MINING COMPANY commits to give to METAFOAM Ltd a sum of two hundred million (200,000,000 Frw) for supporting METAFOAM Ltd in the payment of a debt owed to EQUITY BANK RWANDA Plc, but he does not equate the above sum with the value of the subject-matter. DETERMINATION OF THE COURT

The debate for the raised objection revolves around whether the appeal of METAFOAM Ltd should not be admitted due to the fact that the appeal is a request for the reorganization of the business of METAFOAM Ltd and such is the reason for which its appeal does not fall within the jurisdiction of the Court of Appeal.

Sub-paragraph 8 of paragraph 2 of article 52 of the Law n0 30/2018 of 02/06/2018 determining the jurisdiction of courts 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: 8° 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”.

## Page 5

The case file indicates that METAFOAM Ltd lodged a claim before the Commercial Court, and prayed the Court to issue an order for initiating the process for the company’s business reorganization, and it also requested to the Court to appoint the company’s provisional administrator.

For the issue concerning the fact that the party who filed a claim by requesting for the reorganization of its business and whose due debt is above 75,000,000 Frw, is a ground for the Court of Appeal to have the jurisdiction of hearing the case, the Court finds that such issue has been examined in the case RCOMAA 00046/2020/CA rendered by this very Court on 05/03/2021 with FARAJA Hotel v. COGEBANQUE Plc whereby the Court held that the request for ordering the process for the company’s business reorganization made by FARAJA Hotel Ltd right away from the Commercial Court had no monetary value, explaining that the request could not be confused with a sum of 900,000,000 Frw owed by FARAJA Hotel Ltd to COGEBANQUE Plc; because COGEBANQUE Plc voluntarily intervened into the case without claiming for the debt repayment, such debt did not cause an disputes between parties before the lower courts, and no lower court has ever heard a case over the above debt; and the court therefore held that COGEBANQUE’s objection on the court’s lack of jurisdiction was founded. The same position was set by this Court in the case RCOMAA 00025/2022/CA rendered on 04/11/2022 in which the parties were RICHARDSTONE GENERAL TRADING v. COGEBANQUE Plc.

With regard to this case, the Court finds that, the fact that METAFOAM Ltd seized the court requesting for an order to initiate the process of the company’s business reorganization, and for the appointment of the Company’s provisional administrator; EQUITY BANK RWANDA Plc intervened in the case by submitting that for the approval of reorganization, anyone requesting for the reorganization must inspire assurance for the company’s prospective solvency; the fact that the debt owed by METAFOAM to EQUITY BANK RWANDA Plc is not the subject-matter in this case, rather the subject-matter is the reorganization the appeal of METAFOAM should not be admitted because it does not fall within the jurisdiction of the Court of Appeal since the company’s business reorganization has no monetary value, and it cannot be confused with the debt owed by METAFOAM Ltd to EQUITY BANK RWANDA Plc, or the value of the collaterals mortgaged as METAFOAM Ltd puts it forth.

The Court finds that it is no longer necessary to examine the objection related to the fact that METAFOAM Ltd lost the case in the lower courts for the same reasons since the Court has already found that it has no jurisdiction to hear the case due to the value of the subject-matter.  2. Whether the procedural fee and the counsel fee claimed in this case can be granted.

Basing on the article 111 of the Law n0 22/2018 of 29/04/2018 relating to the civil, commercial, labour and administrative procedure, the counsel of EQUITY BANK RWANDA Plc requests to the Court of Appeal to order to METAFOAM Ltd to pay to EQUITY BANK RWANDA Plc a sum of one million and five hundred thousand (1,500,000 Frw|) that include five hundred thousand (500,000 Frw) for the procedural fee, and one million (1,000,000 Frw) for the counsel fee. He also argues that the damages claimed by HABATU MINING COMPANY has no justification.

The counsel of METAFOAM Ltd pleads about the damages claimed by EQUITY BANK RWANDA Plc and submits that they have no justification.

## Page 6

The counsel of HABATU MINING COMPANY Ltd prayed the Court to order to EQUITY BANK RWANDA Plc to pay to HABATU MINING COMPANY three million (3,000,000 Frw) that include moral damages, the procedural fee and the counsel fee, because it is the root cause of the case by committing offences related to METAFOAM’s loan so that the courts were seized and HABATU MINING COMPANY intervened in the case. DETERMINATION OF THE COURT

Article 111 of the Law n0 22/2018 of 28/04/2018 relating to the civil, commercial, labor and administrative procedure provides the following: “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 Court finds that, due to the fact METAFOAM appealed for the second time before this Court led EQUITY BANK RWANDA Plc to hire the lawyer for representing it in the case, and it incurred some expenses for the follow-up of the case; therefore, the procedural fee and the counsel fee claimed to be paid to it by METAFOAM Ltd are founded, but the claimed fees are excessive as the case is limited on the objection; in its discretion, it grants to it 500,000 Frw for counsel fee, and 200,000 Frw for procedural fee.

The Court finds that the moral damages claimed by HABATU MINING COMPANY cannot be examined in this case is limited on the objection related to the lack of jurisdiction, while the procedural and counsel fees claimed by METAFOAM Ltd and HABATU MINING COMPANY Ltd are unfounded, as the objection raised by EQUITY BANK RWANDA Plc is grounded. III. DECISION OF THE COURT

Holds the objection raised by EQUITY BANK RWANDA Plc for this court’s lack of jurisdiction is founded.

Holds that the appeal filed by METAFOAM Ltd is not admitted since it does not fall within the jurisdiction of the Court of Appeal.

Orders to METAFOAM Ltd to pay to EQUITY BANK RWANDA Plc five hundred thousand (500,000 Frw) for counsel fee, and two hundred thousand (200,000 Frw) for procedural fee at this instance.

Rules that the deposited court fee covers the expenses of proceedings.