VINTAGES WINES & LIQUARS LTD v KARASIRA

# VINTAGES WINES & LIQUARS LTD v KARASIRA

- Source: Amategeko - Section: Decisions (Judgements) - Date: 2024-07-07 - Case/document no.: RCOMAA 00044/2023/CA - Collection: Court of Appeal

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VINTAGES WINES & LIQUARS LTD v KARASIRA [Rwanda COURT OF APPEAL – RCOMAA 00044/2023/CA (Rutazana, P.J) 05 July 2024] Laws relating to commercial cases – Mortgage – The rights of a mortgage lender – Lending a loan collateral does not mean that the lender has surrendered his/ her ownership rights Laws relating to commercial cases – Insolvency – Application for initiating insolvency proceedings – Application for initiating insolvency proceedings is not a ground for suspending the rights of secured creditors neither can it stay property retention rights; unless the application is thereby accompanied by the applicant’s proper plan for business recovery. Laws relating to commercial cases – Insolvency – Insolvency law – The rights on a secured debt remains suspended for a period of six months due to the debtor’s application for insolvency proceedings and the court’s approval of the applicant’s business reorganisation plan. Commercial procedure – intervening into a court case – the mortgage lender has a personal and direct interest to intervene into a court case. Facts: Vintage Wines & Liquors Company Ltd contracted a loan of 180,000,000 Rwf from Equity Bank Rwanda Plc, for which one Nzamukosha Sylvie lent them a house to serve as the loan security. The collateral was recorded in the books of RDB Registrar General, and it was meant to serve for the loan reimbursement, should Vintage Wines & Liquors Ltd fail to repay the loan. The Company eventually failed to repay the loan, and Equity Bank Rwanda Plc petitioned RDB Registrar General and requested for a certificate to auction the mortgaged collateral and the certificate was issued. Meanwhile, Vintage Wines & Liquors Ltd filed a claim before the Commercial Court and prayed the Court to initiate the Company’s insolvency proceedings, authorise its business restructuring plans, and appoint the Company’s provisional administrator. And in addition, the Company petitioned RDB Registrar General, and requested him to suspend the mortgage auction, But the above court dismissed the application. Vintage Wines& Liquors Ltd appealed the above ruling before the Commercial High Court, but meanwhile, Equity Bank Rwanda Plc. re-wrote to RDB Registrar General and again sought a certificate to auction the mortgaged house; and the collateral was then auctioned at 320,000,000 Rwf and it was acquired by Club House La Palisse Ltd. Vintage Wines & Liquors Ltd lodged a claim with the Commercial Court and sued all the auctioneer, Counsel Karasira Colette Ratifa, Equity Bank Rwanda Plc, Club House La Palisse Ltd and RDB Registrar General, the plaintiff sought the invalidation of the auction, lamenting that the auction was illegally conducted. And the court annulled it. The respondents appealed the above ruling before the Commercial High Court, and they argued that the auction was not supposed to be revoked since it had been legally conducted. Club House La Palisse Ltd argued that the Commercial Court misinterpreted the legal provisions, while Equity Bank Rwanda Plc argued that they had all the inalienable rights on the mortgaged collateral and they had a right to have it auctioned. The Commercial High Court held that the appellants’ claim has justification and the auction was stayed.

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Vintage Wines & Liquors Ltd. appealed the above ruling before the Court of Appeal, they contended that the Commercial High Court disregarded the provisions of the insolvency law, and they prayed the Court of Appeal to assess whether the ruling on the appeal was or was not fair. Before the Court of Appeal, all respondents asserted that Nzamukosha Slyvie has no interest to defend in this case, and besides, all her complaints into this case are new claims and therefore they cannot be admitted for their very first time before the Court of Appeal, and they prayed the Court not to admit her claim. Nzamukosha argued that she has a legitimate, direct and personal interest to intervene into this case. She argued that this case originates from a claim made by Vintage Wines & Liquors Ltd by which the latter sought the annulment of a public auction effected on a property she lent them and which they mortgaged with Equity Bank Rwanda Plc, she therefore prayed the court to admit her claim. All respondents argued that Nzamukosha’s complaints for the auction annulment should not be considered since they came up as new claims and they cannot, at their very first time, be admitted before the Court of Appeal. Club House La Palisse who bought the disputed property, argued that Nzamukosha Sylivie’s complaints for annulment of the auction have not been presented before RDB’ Registrar General for a decision, yet it is a prior requirement before their submission to the court. Nzamukosha Sylvie argued that the respondents defence is still void since the law allows her to intervene into the case at any stage of the proceedings. She also added that her claim aligns well with the claim made by Vintage Wines & Liquors Ltd since they both seek the annulment of a public auction, arguing that her concerns should not be termed as new claims. Vintage Wines & Liquors Ltd argued that the Insolvency Law provides that when the Court happens to decide on the debtor’s request for initiating insolvency proceeding within a period of six months, the creditor immediately loses the right to make an application for auctioning the loan collateral. But for the case at hand, the Commercial High Court disregarded the applicable law and stayed the conducted auction, they therefore prayed the Court of Appeal to invalidate a decision that stayed the auction. All respondents prayed this court to stay the appealed ruling. Club House La Palisse that acquired the auctioned property argued that should the Court find it otherwise, Equity Bank Rwanda Plc should refund them for the auction price, plus all related interests that are computed at a rate of 18% Held: 1. Lending a mortgage does not mean that the lender has surrendered his/ her property ownership rights. 2. The mortgage lender has a personal and direct interest to intervene into a court case. 3. Application for initiating insolvency proceedings is not a reason for suspending the rights of secured creditors neither can it stay property retention rights; unless the application is thereby accompanied by the applicant’s proper plan for business recovery 4. The rights on a secured debt remains suspended for a period of six months due to the debtor’s application for insolvency proceedings and the court’s approval of the applicant’s business reorganisation plan.

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The appeal lacks merit.

Statutes referred to: Law N0 22/2018 of 29/04/2018 relating to civil, commercial, labor and administrative procedure, articles 114 and 154. Law N0 075/2021 of 06/12/2021 relating to insolvency, article 12. No cases referred to. Judgment I. BACKGROUND OF THE CASE

On 15 May 2019, Vintage Wines & Liquors Ltd contracted for a loan of 180,000,000 Rwf from Equity Bank Rwanda Plc. For Vintage Wines & Liquors Ltd to receive the above loan facility, Nzamukosha Sylvie had to lend them her house registered under UPI 1/02/13/02/635 located in Kigabiro II Village, Nyarutarama Cell, in Remera Sector of Gasabo District in the City of Kigali. Her house was given for a loan collateral and it was recorded in the books of RDB Registrar General and was meant to serve for loan security, ready for sale and repay the loan just in case Vintage Wines & Liquors Ltd fails to reimburse.

Vintage Wines & Liquors Ltd eventually failed to repay the loan, and Equity Bank Rwanda Plc petitioned RDB Registrar General and sought a certificate for auctioning the above mentioned collateral. The certificate was issued and one Kayumba Godfrey was appointed as the property auctioneer, and the latter started the auction process from the 20/03/2022. Vintage Wines & Liquors Ltd seized the Commercial Court and prayed the court to initiate the Company’s insolvency proceedings, insolvency related disputes settlements, and the appointment of the company’s provisional administrator. Besides, they also referred to their filed claim, and wrote to RDB Registrar General and prayed him to abort the auction processes. And on the 31 March 2022, RDB Registrar-General wrote a letter to the appointed auctioneer, and requested him to suspend the auction process.

For case RCOM 00438/2022/TC/ rendered by the Commercial Court on the 02 September 2022, the court held that the claim made by Vintage Wines & Liquors Ltd for initiating the Company’s insolvency proceedings, insolvency related disputes settlements and the appointment of a provisional administrator was not admitted due to the claimant’s failure of complying with the provisions of Law n0 075/2021 of 06 December 2021 relating to insolvency. Vintage Wines & Liquors Ltd appealed the above decision before the Commercial High Court, whereas Equity Bank Rwanda Plc rewrote to RDB Registrar General praying for a certificate to auction the above mentioned loan collateral. And, on the 26 April 2023, RDB Registrar General issued the auction certificate, and appointed Counsel Karasira Colette Ratifa as the auctioneer. The collateral was auctioned on the 15 June 2023 and it was bought by Club House La Palisse at a price of 320, 000,000 Rwf.

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Meanwhile, the appeal case RCOMA 00617/2022/HC made by Vintage Wines & Liquors Ltd requesting initiation of insolvency proceedings was heard by the Commercial High Court on the 19 January 2024, and the Court held that their appeal has no justification.

On the 16 June 2023, Vintage Wines & Liquors Ltd petitioned RDB Registrar General and prayed him to invalidate the auction of 15 June 2023 that was conducted on a certain loan collateral they gave Equity Bank Rwanda Plc; lamenting that Counsel Karasira Colette Ratifa, the auctioneer, initiated the auction process yet Vintage Wines & Liquors Ltd had a pending court claim for initiating the Company’s insolvency proceedings, insolvency-related disputes settlement and the appointment of the Company’s provisional administrator, a claim that was not yet decided. But on the 06 July 2023, the Registrar General replied, and notified the claimant that they presented no evidence that can make him annul the auction.

On the 22 June 2023, Vintage Wines & Liquors Ltd. filed a claim before the Commercial Court and collectively sued Counsel Karasira Colette Ratifa, the auctioneer, and Equity Bank Rwanda Plc, Club House la Palisse Ltd and RDB Registrar-General, and the plaintiff sought the annulment of the above mentioned auction for the following reasons: - A fact that the auction was conducted regardless the existence of a case RCOMA 00617/2022/HCC relating to the plaintiff’s request for initiating the Company’s insolvency proceedings which was still pending, as it was scheduled to be heard on the 19 October 2023; - A fact that the auction was illegally conducted since it violated procedures of seizure, surety and the publication of the auction. - A fact that the collateral was auctioned at a derisory price.

Counsel Karasira Colette Ratifa, the auctioneer, argued that the auction was legally conducted since it was electronically published on Judgements Execution platform, and it was equally published under IGIHE Newspaper and Isango Star Radio. The Counsel has also added that all auction related notices were posted at the Office of Nyarutarama Cell, the exact location of the concerned property.

Equity Bank Rwanda Plc have equally argued that the auction was legally conducted; adding that all procedures relating to seizure and publication have been legally observed. They also added that Vintage Wines & Liquors Ltd have deliberately declined their right to insolvency proceedings time extension which is normally allocated to proceedings whose final decisions needed more than six months. They therefore argued that the mere existence of an insolvency related pending claim was not material enough to prevent Equity Bank Rwanda Plc from auctioning the collateral.

Club House la Palisse has also seconded that the auction has been legally conducted. They also added that the acquired property is already registered under their name, and they prayed the court to stay the auction. They however cautioned that should the court find it otherwise, Equity Bank Rwanda Plc must then be ordered to refund Club House la Palisse for the auction price, plus all related interests.

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RDB Registrar General made no submissions since he did not appear despite a fact that he was legally summoned and aware of the hearing date.

For case RCOM 01117/2023/TC rendered on the 18 July 2023, the Commercial Court held that the public auction of 15 June 2023, conducted on a property registered under UPI 1/02/13/02/635 is invalidated since it was conducted in disregard of the existence of related pending claim made by Vintage Wines & Liquors Ltd who requested the court to initiate insolvency proceedings, and the appointment of the company’s provisional administrator. The Court ordered Equity Bank Rwanda Plc to refund Club House la Palisse for 320,000,000 Rwf of the auction price, and ordered them to liaise with Counsel Karasira Colette Ratifa and jointly give Vintage Wines & Liquors Ltd 500,000 for courtroom representation fee, and 200,000 Rwf for the incurred case costs and 20,000 Rwf for the deposited case filing fee.

All respondents appealed the above ruling before the Commercial High Court and they lamented the annulment of the auction. Briefly, Counsel Karasira Colette Ratifa argued the auction was legally conducted, Club House la Palisse submitted that the Commercial Court misinterpreted legal provisions while Equity Bank Rwanda Plc argued that they had all the inalienable rights on the loan collateral, and they therefore had a right to have it auctioned.

Vintage Wines & Liquors Ltd argued that the Commercial Court’s decision of invalidating the auction constitutes no error, since the auction had been done in disregard of the plaintiff’s claim requesting for initiating insolvency proceedings and the appointment of the provisional administrator. While for the appeal made by Equity Bank Rwanda Plc, the representative of Vintage Wines & Liquors Ltd argued that such an appeal must be dismissed because it was filed late, and therefore time-barred.

For case RCOMA 00374/2023/HCC & CMB RCOMA 00376/2023/HCC rendered on the 1st September 2023, the Commercial High Court held that the appeal made by Club House la Palisse, and the one made by Counsel Karasira Collette Ratifa, and that of Equity Bank Rwanda Plc are all relevant, the Court stayed the auction of the 15 June 2023, conducted on Nzamukosha Sylvie’s property registered under UPI 1/02/13/02/635, which Vintage Wines & Liquors Ltd gave Equity Bank Rwanda Plc for a loan collateral; and it ordered Vintage Wines & Liquors Ltd to give Club House la Palisse, Counsel Karasira Colette Ratifa and Equity Bank Rwanda PLc., each 1,200,000 Rwf for Counsel fee and proceedings costs, and 40,000 Rwf for the deposited court fee.

Vintage Wines & Liquors Ltd appealed the above ruling before the Court of Appeal, and lamented that the Commercial High Court disregarded the provisions of article 12(5) of the insolvency Law n0 075/2021 of 06 December 2021, and hence it did not examine the underlying issue of determining whether the Commercial Court ruling was or was not fair. They argued that the court has rather entertained the unrelated, nay newly presented issues, and it ended up making a wrong decision. And, they therefore prayed the court of Appeal to entirely overturn the appealed ruling.

All respondents argued that the appeal made by Vintage Wines & Liquors Ltd has no justification. Counsel Karasira Colette Ratifa and her attorney submitted that the appellant presents nothing that debunks the Commercial High Court; since they only kept interpreting a legal

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provision that has already been clarified by the previous court. They therefore concurred with the Commercial High Court’s ruling. For Equity Bank Rwanda Plc, its representatives argued that the provisions of article 12 (5) have already been discussed, and the court thereby found nothing that could prevent the auctioning of the collateral. For Club House la Palisse, its lawyers argued that the appellant failed to highlight the auction’s irregularities, neither could they blame Club House la Palisse for any wrong. They also argued that the plaintiff deliberately disregards provisions of paragraph 4 and 5 of the above mentioned article 12, coupled with a fact that the plaintiff’s pretext of a claim on insolvency proceedings has actually been dismissed. They however insisted that should the court find it otherwise, Club House la Palisse should be refunded for the auction price, plus a variety of related interests computed at a rate of 18% and the involved damage- compensations.

Meanwhile, one Nzamukosha Sylvie made a voluntary intervention into the case, and argued that she has an interest into the case since the disputed property is her own house that she had lent to Vintage Wines & Liquors Ltd, and she prayed for the auction annulment owing to facts that the formalities to do with payment of auction security fee, distribution of auction proceeds, and returning the price balance to the property owner; were all illegally conducted.

All respondents argued that Nzamukosha Sylvie has no interest into this case; and besides, her intervention consists into new claims that cannot, at their very first time, be admitted before the Court of Appeal, and they therefore requested that her intervention should be dismissed. The representatives of Club House la Palisse have also added that a fact that the plaintiff’s concerns have never been brought to the attention of RDB Registrar General for a prior decision is another fact that makes her claim inadmissible to the Court of Appeal.

The hearing was conducted in public on the 13 May 2024 with Vintage Wines & Liquors Ltd represented by Counsel Micomyiza Liliane together with Counsel Rugwizangoga Marcellin, and these are the same people who represented Nzamukosha Sylvie. Counsel Karasira Colette Ratifa was represented by Counsel Murekatete Henriette, Club House la Palisse was represented by Counsel Sebukonoke Innocent together with Counsel kayitare Jean Pierre, while Equity Bank Rwanda Plc was represented by Counsel Muhiganwa Damas. RDB Registrar General did not appear for the hearing yet he had been legally summoned. Parties argued the case, the hearing closed and the pronouncement was slated on the 29 May 2024. When the Court was deliberating the litigated issues, the court deemed it so important to first reopen the hearing and let litigants give more clarifications on their later filed submissions. The court slated the reopening on 10 June 202. When the day came, all litigants appeared represented like before, except Equity Bank Rwanda Plc that was now represented by Counsel Murindabigwi Mariam, and Club House la Palisse that for this time, came represented by Counsel Sebukonoke alone.

With reference to the above highlighted parties’ contentions, the Court shall examine the following issues: - Whether Nzamukosha Sylvie has an interest into making a voluntary intervention into this case; - Whether Nzamukosha Sylvie’s complaints that seek the annulment of the auction are just new claims that cannot, at their very first time, be admitted before the Court of Appeal;

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- -Whether Nzamukosha’s admitted complaints have any justification; - Whether the Commercial High Court made any error when it stayed the contested auction by disregarding a fact that the auction was conducted in the violation of a prior six- month time period that is granted upon a court’s decision on the request for initiating insolvency proceedings as provided under article 12 (5) of the Insolvency Law n0 075/2021 of 06 December 2021. - Whether parties’ requests for the courtroom representation fees and the incurred case- related expenses are worthy-considering.

II. ISSUES OF THE CASE AND THEIR ANALYSIS 1. Whether Nzamukosha Sylvie has an interest into making a voluntary intervention into this case.

In General, all respondents argued that Nzamukosha Sylvie has no interest to defend into this case, and requested that her voluntary intervention into the case must be dismissed. The attorney for Counsel Karasira Colette Ratifa, argued that Nzamukosha Sylvie has no direct interest to defend into this case; it is even more so, since by the time she consented to give her property out, and let it to in the hands of Vintage Wines & Liquors Ltd for them to use it as a loan collateral, she had already surrendered her ownership rights and consented to all related effects. Besides, she is not able to make a clear demarcation between herself and Vintage Wines & Liquors Ltd. The representative of Equity Bank Rwanda Plc has as well argued that Nzamukosha Sylvie lost her direct interest, when she decided to lend Vintage Wines & Liquor Ltd her property to serve as a loan collateral; while the representatives of Club House la Palisse argued that by the time Nzamukosha Sylvie learnt about the public auction against her property, she should have either opposed it , or thereby sought its’ lawful annulment.

Nzamukosha Sylvie’s attorneys argued that she has a legitimate, direct and personal interest into making a voluntary intervention into this case, since the case a hand relates to a claim made by Vintage Wines & Liquors seeking the annulment of the auction conducted on a property she lent them, and which they mortgaged with Equity Bank Rwanda Plc. for a loan collateral. She therefore argued that her claim must be admitted with reference to article 114 (2) of the Law n0 22/2018 of 29/04/2018 relating to civil, commercial, labor and administrative procedure. DETERMIANTION OF THE COURT

Article 114 of the Law n0 22/2018 of 29/04/2018 relating to civil, commercial, labor and administrative procedure provides that: “anyone who needs to intervene into a case where he/she is neither a claimant nor a respondent, must file a claim to the court and makes court fee deposits. For the claim to be admitted, the intervening party must prove that he/she has a legitimate, direct and personal interest to defend.

With regard to the plaintiff’s interest into a case, the Supreme Court gave related explanation along a certain case RC 0002/16/CS rendered by the Supreme Court on the 27 January

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2017, whereby in paragraph 19, the court made reference to legal doctrines, and explained that the party’s interest into a case must be direct and personal. The plaintiff can only be allowed to file a claim, when the claim is in his/her personal interest; that is, when the eventual court decision serves the plaintiff’s personal interests.

With regard to this case, the file indicates that it is related to a claim made by Vintage Wines & Liquor Ltd who sought annulment of the public auction conducted on 15 June 2023. The auction was effected on Nzamukosha Sylvie’s property registered under UPI 1/02/13/02/635, located in Kigabiro II Village, Nyarutarama Cell, of Remera Sector in Gasabo District, in the City of Kigali. The aforementioned property was given to Vintage Wines & Liquors Ltd to be used as a loan collateral.

The concerned property belonged to Nzamukosha Sylvie long before the auction as it is indicated by a long-term lease deed which shows that she is the rightful owner of the property with a lease contract that started on the 30 March 2017, and slated to end on 05 April 2037; it is also clear that the property was lent to Vintage Wines &Liquors Ltd for them to submit it as a collateral for a loan they contracted from Equity Bank Rwanda Plc; as it is corroborated by the loan agreement concluded between the borrower and the Bank. For the aforementioned agreement, nothing proves that Nzamukosha Sylvie no longer has the property ownership right, and nothing proves that she surrendered the ownership right on her property.

The court found that all respondents have no evidence to present before this appellate court so as to rebut the above highlighted argument. Therefore, they cannot argue that Nzamukosha Sylvie has surrendered her property ownership right by lending it to Vintage Wines & Liquors Ltd, since such an argument has no justification due to lack of supporting evidence.

The Court has also found that Nzamukosha Sylvie as a physical person, is legally speaking different from Vintage Wines & Liquors, the Business Company. Those are two separate individuals, and as it has been explained in the preceding paragraph, it is therefore clear that she has a personal and direct interest into intervening in the case since the dispute concerns a property she lent Vintage Wines & Liquors Ltd. As a third party, who moreover has never been a litigant at any instance of this case, it is quite clear that her interests might be at risk. Considering all the above provided clarifications, the respondents’ argument by which the plaintiff has no interest into the case is total void. 2. Determining whether Nzamukosha Sylvie’s objections on conducted auction are new claims that cannot, at their very first time, be admitted before the Court of Appeal.

The representatives of respondents concur on a fact that Nzamukosha Sylvie’s objections on the auction are new claims which cannot, at their very first time, be admitted before the Court of Appeal. They argued that at the first instance of the case, the Commercial Court held for the annulment of the auction due to a simple fact that the auction was conducted regardless the existence of a pending claim made by Vintage Wines & Liquors Ltd seeking the court’s decision on initiating the insolvency proceedings; arguing that it is this very issue that was appealed before the Commercial High Court, and for which, the latter held that the auction was to stay. And, it the same issue that was brought before this honorable Court. They therefore argued that Nzamukosha Sylvie’s objections are actually new claims, which have never been debated before the previous courts, and which contain nothing that proves defects in the appealed judgment. They therefore

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argued that her complaints are new claims, and they cannot be admitted for any examination as per the provision of article 154 of the Law n0 22/2018 of 29/04/2018 relating to civil, commercial, labor and administrative procedure which prevents the admission of new claims into the Court of Appeal; together with article 155 of the same Law which provides that the appellate court hears and decides the case in the exclusive limits of the appealed issues.

The representative of Club House la Palisse Ltd added that the plaintiff’ complaints have just landed in the Court, and they have never been presented to the office of RDB Registrar General for a prior assessment as it is so required by article 260 (6) of civil, commercial, labor and administrative procedure.

The representatives of Nzamukosha Sylvie argued that the respondents’ defense makes no sense, and reminded that the law allows parties to intervene into a case at stage of proceedings; and they added that the plaintiff’s concerns well align with the principal claim made by Vintage Wines & Liquors Ltd which sought the annulment of the contested auction, they therefore argued that their client’s complaints should not be considered as new claims. They also added that her claim supporting evidence were found late after she had already file her claims; and they in no way alter the principal claim as they rather emphasize it, since they all seek the annulment of the disputed auction. DETERMIANTION OF THE COURT

Article 154 (1) of the above mentioned Law n0 22/2018 of 29/04/2018 provides the following: “No new claims may be lodged at the appeal level, unless it concerns the compensation of the disputed debts or when it consists into a counter-claim against the principal claim before the Court of Appeal; while article 156 of the same law provides that the appeal court hears and exclusively decides on the appealed issues.

With regard to the case at hand, the case file indicates that Vintage Wines & Liquors Ltd seized the Commercial Court seeking the annulment of a contested auction alleging the following reasons: the auction was conducted in disregard of an existing pending case on initiating the Company’s insolvency proceedings; the auction was conducted in blatant violation of procedures relating to seizure, surety and auction publication; the collateral was auctioned at a derisory price. While deciding the case, the Commercial Court held that the concerned auction is annulled due the plaintiff’s first complaint (that of conducting an auction regardless the existence of a pending request for initiating the company’s insolvency proceedings, whereas the rest of the complaints were found irrelevant. Vintage Wines & Liquors Ltd appreciated the ruling on the issue, and sole respondents appealed it, and it is the very issue that Vintage Wines & Liquors re- appealed before this Honorable Court. Apparently, this is the only disagreement that remained between litigants (Vintage Wines & Liquors Ltd, and respondents) before the Court of Appeal. For Nzamukosha Sylvie, she intervened into the case at this level seeking a revocation of the conducted auction and she brought forth the following reasons: All procedures to do with payment of auction security fee, distribution of the auction proceeds, returning the price balance to the collateral owner, were illegally conducted.

The Court found that Nzamukosha’s complaints are squarely new and have nothing to do with a claim that Vintage Wines & Liquors Ltd made at the first instance of the case (though both

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of them sought the annulment of the disputed auction, still her complaints are different from an appeal that was filed before the Commercial High Court, the same appeal issue that Vintage Wines & Liquors Ltd brought to this Court. It is therefore held that Nzamukosha Sylvie’s argument by which her claim completes and emphases a claim made by Vintage Wines& Liquors Ltd, is null and void; and this Court cannot afford examining her claim as such an attempt would contradict the provisions of the above mentioned articles 154 and 156 which provides that the Court of Appeal cannot admit new claims, and that it must hear and decide the case in the exclusive limits of the appealed issues.

Considering all the above provided explanations, the court found no need of examining the issue of Nzamukosha’s failure to first present her complaints before RDB Registrar General for a prior assessment, neither should the court look into the relevance of her complaints since her claims are new and are not admissible before the appellate court.

3. Whether the Commercial High Court made any error when it stayed the auction conducted on a collateral that Vintage Wines & liquors Ltd has pledged, an auction that violated the six-month time period provided for court-granted insolvency proceedings.

The representatives of Vintage Wines & Liquors Ltd argued that article 12(5) of the Law n0 075/2021 of 06/12/2021 on Insolvency provides that when the Court happens to decide on the debtor’s request for initiating insolvency proceedings within a period of six months, the creditor immediately loses the right to make an application for auctioning the loan collateral; adding that such was the stance of the Commercial Court for its ruling on case RCOM 01117/2023/TC whereby it held that the auction conducted on a loan collateral that Vintage Wines & Liquors Ltd pledged is revoked due to a fact that the auction was conducted before the elapsing of the time period provided under article 12 of the above mentioned Law for court-granted insolvency proceedings; lamenting that while in the appeal before the Commercial High Court, the latter stayed the auction without examining the provisions of the above mentioned article 12, and determining the relevance of the Commercial Court’s decision as expected .

They went on and explained that the court rather entertained some unrelated and undiscussed issues such as application for initiating the company’s business reorganization , whereby in paragraph 40 of the appealed judgment, the court took a stance that blatantly contradicts the provisions of the above mentioned article 12; by which the court held that the company’s business reorganization is not initiated by the party’s claim filing, adding that the company’s business reorganization is rather permitted by the Judge’s decision that confirms the existence of a concrete business recovery plan.

Representatives of Vintage Wines & Liquors Ltd made reference to the above explanations, and requested the Court of Appeal to rectify an error that the Commercial High Court made while interpreting the provisions of the above mentioned article 12. They also requested the Court of Appeal to annul a judgement that stayed the auction.

All respondents’ representatives concurred to say that the appeal made by Vintage Wines & Liquors Ltd has no justification; they argued that the Commercial High Court has well analyzed the provisions of article 12, and looking at the content of the appealed judgement, the court’s

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decision staying the concerned auction contains no error; arguing that it is rather Vintage Wines & Liquors Ltd that misinterpreted the provisions of article 12 since they deliberately discarded a fact that when a period of six months elapses without any court decision that approves the existence of a concrete business plan that can assure the proper restricting of the business, such a situation gives the creditor a right to enforce the due payment. They therefore argued that the Commercial High Court did not have any single reason that could make it annul the auction. The representatives of Equity Bank Rwanda Plc. and those who stood for Club House la Palisse Ltd, added that another fact that rebuts the annulment of the auction is the current Commercial High Court’s decision that still dismissed Vintage Wines & Liquors Ltd ‘s request for initiating business reorganization.

All respondents prayed the Court to stay the appealed ruling, but the representatives of Club House la Palisse added that in case the court finds it otherwise, Equity Bank Rwanda Ltd should refund them for the auction price, together with all related interests that must be computed at a rate of 18% DETERMIANTION OF THE COURT

For the above issue, the parties’ underlying disagreement resides into determining whether the annulment of the public auction conducted on a certain loan collateral which Vintage Wines & Liquors Ltd had handed to Equity Bank Rwanda Plc, was supposed to be stayed due to a fact that the contested auction was hastily conducted yet the creditors’ rights, and the Bank’s inclusive, to force Vintage Wines & Liquors Ltd for the payment had been suspended owing to the latter’s court-granted request for initiating their business reorganization, thus violating the six-month period provided under article 12 (5) of the Law n0 075/2021 of 06/12/2021 relating to Company’s ‘ Insolvency .

Article 12 of the Law n0 075/2021 of 06/12/2021 relating to Insolvency that provides about the suspension of enforcing a payment on secured loan says the following: - “The secured creditors and holders of the right of retention are not stayed by the commencement of insolvency proceedings. - However, when the debtor shows an intention to submit a reorganization plan along with the application, all claims including the secured debts, and rights of retention are stayed effective from the date of application. - The debtor must submit to the court a reorganization plan within a period not exceeding three (3) months from the date of instituting the court case. - The period of stay does not exceed six (6) months, including the three (3) months of submitting the reorganization plan. - If the period referred to in paragraph 4 of this article lapses without a court decision on the application, the secured creditor is automatically entitled to enforce the payment in accordance with relevant laws. - The creditor may petition the court to lift the suspension when there is a justifiable cause” - With regard to suspending secured debt repayment enforcement, the court found that the analysis of the above article brings out the following important details:

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- -that seizing a court for initiating the debtor’s insolvency proceedings does not necessarily suspend the secured creditors’ right and any other person with a right of retention to enforce the debt repayment. - The existence of an exception whereby the debtor’s intention of accompanying his/her application with the submission of a concrete business restructuring plan can suspend the above mentioned creditors’ right of repayment enforcement. - -That on one hand, the above mentioned suspension is meant to make the debtor wait as the court analyses his/her submitted business restructuring plan and determining whether it is promising enough to ensure repayment of the due debts without resorting to the auctioning of collaterals. - That on the other hand, the above mentioned article cannot keep the secured debtors’ right suspended till the final court decision on the debtor’s claim; the article rather provides for a maximum time period of six months, at the end of which and with no the court’s grant on the debtor’s application, the secured creditors stop waiting, and automatically resumes their right of repayment enforcement and collateral acquisition. - Considering a fact that suspending secured debt repayment enforcement is actually an exception justified by the debtor’s intention of initiating his/her business recovery and ensuring repayment of all the due debts without resorting to the auctioning of the attached collaterals, and the provision of a maximum time period at the end of which , the secured debtors resume their right of repayment enforcement and collateral acquisition, denotes the Legislator’s intention of delimiting the suspension of the secured debtors’ right, so as not to keep them wait for long just because the debtor has filed an insolvency related application , and especially when the application secured no court’s decision for initiating the debtor’s business recovery arrangement. In other words, the Legislator wanted that when a period of six months’ elapses with no court’s permission on initiating the company’s business recovery plans, then the secured creditors regain their right of collateral acquisition. - The above provided elucidations denote that the creditor’s right of repayment enforcement can only remain suspended if in the course of a six- month time period, effective from the debtor’s application, the court has honored the debtor’ application request, and hence approved and permitted the company’s business recovery plans; but when the court remained silent or when it dismissed the debtor’s application, the debt repayment enforcement suspension is thereby lifted , and the secured creditors regain their right of repayment enforcement and collateral acquisition in the limits of the relevant laws.

With regard to this case, the Commercial High Court overturned the Commercial Court’s ruling on case RCOM 01117/2023/TC, and held that the public auction of 15 June 2023 conducted on a property Nzamukosha Sylvie lent Vintage Wines & Liquors Ltd for a loan collateral, stays. The Court held it so with reference the following reasoning:

The fact that the auctioned property never belonged to Vintage Wines & Liquors Ltd. It is a property the latter borrowed from Nzamukosha Sylvie, and it was not among the borrower’s listed assets that might help the borrower in the business recovery; more so that an applicant for the business restructuring normally intends to keep and utilize his assets for boosting the business and repay all the debts that led the company into insolvency; the

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aforementioned position contradicts the provisions of article 12 of the Law n0 075/2021 of 06/12/2021 relating to Insolvency. The Commercial High court moved that the debt repayment enforcement could only be suspended if the pledged property is listed among the debtor’s business recovery assets, and it must belong to the applicant, or else the latter must prove the property owner’s formal consent for its’ use in the business recovery plan.

Besides, even if the concerned property was listed among Vintage Wines & Liquors Ltd.’s assets for use in its business recovery, such a situation is still helpless since the Company’s business restructuring is not simply granted by depositing a claim into the court, it is rather permitted by a Judge’s decision that confirms the existence of a concrete business recovery plan; the court has therefore held that the mere filing of a claim cannot call for the annulment of the public auction .

The appeal made by Vintage Wines and Liquors intends to indicate that the Commercial High Court discarded the provisions of the above mentioned article 12, which provides that when the court happens to permit the company’s business reorganization before a period of six months’ elapses, the company creditors lose the right to auction the pledged collateral, and creditors must wait for a final ruling on the insolvency proceedings, just as the Commercial Court has found it. They therefore lamented that the Commercial High Court just entertained some undisputed, nay previously undebated issues.

Looking at the provisions of the above mentioned article 12, the court found that the secured debtor’s right on repayment enforcement can only be suspended if the debtor has at same time submitted the application for insolvency proceedings together with a concrete business recovery plan. However, the above article does not separate a debt that is secured by the debtor’s own property from a debt that might be secured by a borrowed property. Still, the above article does not provide that the suspension of creditors repayment enforcement right is exclusively limited to the sole debtor’s charged property when such assets are listed to help the debtor in the business financial recovery plans. Therefore, the Commercial High Court’s stance by which the auctioned collateral was not in the assets of Vintage Wines & Liquors Ltd, and neither was it listed among the assets meant for its business recovery plans, as a reason for which Equity Bank ‘s repayment enforcement right was not supposed to suspended makes no sense; as such a reasoning differs from the provisions of article 12 above mentioned.

The court has also found the above provided reason, together with the argument according to which the Company Business restructuring is not launched by filing a claim in the court, as it is rather permitted by a Judge’s decision that confirms the existence of a concrete and promising business recovery plan; since they both revolve around the application for initiating the Company’s insolvency proceedings. Therefore, considering all the above provided details, the Commercial High Court should not have based its decision of staying the contested auction on such grounds.

Nonetheless, though the court found that the above highlighted grounds were not supposed to justify the staying of the contested auction as above explained, the court has to examine the relevance of the appeal made by Vintage Wines & Liquors Ltd seeking the staying the Commercial Court’s ruling which annulled the contested auction.

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As it has been above explained, the appeal made by Vintage Wines & Liquors Ltd consists into explaining that article 12 of Law n0 075/2021 of 06/12/2021 relating to insolvency provides that when seized court happens to permit the launch of the company’s business restructuring within a period of six months or less, the creditor automatically loses a right to apply for the auction certificate, and has to wait until the final ruling on the insolvency proceedings; the appellant has therefore prayed the Court to consider the above interpretation and annul the contested auction since it was conducted in disregard of the appellant’s pending Commercial Court-permitted launch of business reorganization scheme, and moreover, the auction was so conducted before the elapsing of a six- month time period. - Considering all the explanations provided under paragraph 43 of this case for the interpretation of the above mentioned article 12, the Court found the argument by Vintage Wines & Liquors Ltd null and void, since as it has been above explained, the secured debtor’s right of repayment enforcement can only remain suspended, if in the course of a six month time period, effective from the plaintiff’s application, the court happened to permit the launching of the Company’s business reorganization, but when the court dismisses the application, creditor’s repayment enforcement suspension is no more, and the secured creditor regains the right of repayment enforcement and mortgage acquisition in the limits of applicable laws .

With regard to the application made by Vintage Wines & Liquors Ltd for the court’s permission on initiating the business reorganization, this court found no court’s permission for initiating their business restructuring since the court’s decision for case RCOM 00438/2022/TC ( a decision which the appellant considered to make Equity Bank Rwanda Plc lose their right on mortgage acquisition) dismissed their request owing to lack of the important legally required application details, the above stance is emphasized by the Commercial High Court’s ruling on the appeal case RCOMA 00617/2022/HC of 19 January 2024; Therefore, as it has been explained, this court found no defects in the auction of 15 June 2024 that has been conducted on a collateral that has mortgaged to repay Equity Bank Rwanda Plc , the mortgagee; since nothing could prevent the latter from regaining the right of repayment enforcement and mortgage acquisition, it is therefore hereby held that the appeal made by Vintage Wines & Liquors Ltd has no justification .

4. Determining the relevance of the requested damage-compensations

The representatives of Counsel Karasira Colette Ratifa prayed the court to allow her 1,000,000 Rwf for courtroom representation and all case-related costs incurred at this appeal level. Club House la Palisse Ltd requested for 1,000,000 Rwf for Counsel fee and 500,000 Rwf compensation for being dragged into unnecessary court cases. Vintage Wines & Liquors Ltd never commented on the opponents’ requests.

Nzamukosha Sylvie’s attorneys have as well prayed the Court to order all respondents to jointly give her 20,000,000 Rwf for compensation over dragging her into unnecessary lawsuits, and refund for courtroom representation fee and case related expenses. DETERMIANTION OF THE COURT

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Article 111 of the Law n0 22/2018 of 29/04/2018 relating to civil, commercial, labor and administrative procedure provides the following: “the claim for representation fees is incidental to the principal claim, and it aims at repaying expenses incurred during judicial proceedings; the claim for legal costs is adjudicated at the same time with the principal claim, and it can be admitted and adjudicated even when the principal has not been admitted”

The court found that it is Vintage Wines & Liquors Ltd has appealed the case, and such an appeal made all respondents to hire lawyers for the appeal, and make the necessary case follow- up; and as it has been above demonstrated, the appeal has been found irrelevant. Therefore, with reference to the above reminded article 111, Vintage Wines & Liquors Ltd must give Club House la Palisse, Counsel Karasira Colette Ratifa, and Equity Bank Rwanda Plc, each 700,000 Rwf for courtroom representation fee and 200,000 Rwf for the incurred case-related costs. The above compensation is determined in the sole discretion of the court, since the beneficiaries requested for an excessive amount, and moreover unaccounted for. While for Nzamukosha Sylvie, her compensation request was not honored since her claim was not admitted. III. DETERMINATION OF THE COURT

Holds that the appeal made by Vintage Wines & Liquors Ltd has no justification

Holds that the claim made by Nzamukosha Sylvie seeking a voluntary intervention into a case is not admitted for examination

Stays the ruling on case RCOMA 00374/2023/HCC & CMB RCOMA 00376/2023/HCC on the public auction of 15 June 2023 conducted on Nzamukosha Sylvie’s house property registered under UPI 1/02/13/02/635 that Vintage Wines & Liquors Ltd pledged as a Bank loan collateral.

Holds that Vintage Wines & Liquors Ltd should give Counsel Karasira Colette Ratifa, Equity Bank Rwanda Plc and Club House la Palisse, each 700,000 Rwf for appeal courtroom representation fee and 200,000 Rwf for the expenses incurred at this appeal proceeding.

Stays the public auction of 15 June 2023 conducted on a house property registered under UPI: 1/02/13/02/635 of Nzamukosha Sylvie which Vintage Wines & Liquors Ltd pledged for a Bank loan collateral.

Orders Vintage Wines & Liquors Ltd to give Counsel Karasira Colette Ratifa, Equity Bank Rwanda Plc and Club House la Palisse, each one million and two hundred thousand (1,200,000 Rwf) for courtroom representation fees and for the incurred case-related costs and some forty thousand (40,000 Rwf) as ordered in the appealed judgement, adding to seven hundred thousand (700,000 Rwf) for second appeal courtroom representation cost and two hundred thousand (200,000 Rw) incurred for case-related expenses this appeal level.

Rules that the deposited case filing fee covered the proceedings expenses.