This week, Tuesday morning to be precise, the Senior Partner of one of the largest law firms in the country, Parks Tafa of Collins Newman & Company, sat on a bench at the photocopying section of the High Court Building in the CBD of Gaborone. It was late morning and the Senior Partner was surrounded by his fellow Collins Newman & C0. lawyers. Tafa had serious business to attend to.
One of the firm’s most important clients, The Bank of Botswana, was facing execution of a default judgement in the sum US2.5m against it, a result of a suit from the messy Kingdom Bank winding up. The High Court had granted EBC Guernsey, “default judgment” against the Bank causing the financial oversight body the embarrassment of facing the deputy sheriffs attaching its properties.
The nub in the matter being that, EBC Guernsey were granted judgment against BoB on Court papers that allege BoB did not adhere to its statutory obligations, without even a single argument in court. The judgment was granted, inside sources state, after Bank of Botswana failed to comply with High Court processes. The law firm Minchin and Kelly (also one of the largest firms in the country), on behalf of their client EBC Guernsey, applied for default judgment and were granted it, but when the deputy sheriffs sought to attach BoB property Collins Newman & Company moved to the High Court to stop the sheriffs in their tracks.
It was therefore a last minute attempt by the lawyers to prevent public embarrassment of their client, the Bank of Botswana.
The background being that earlier this year when the Bank of Botswana took over control of the defunct Kingdom Bank (KBAL). KBAL was placed under temporary management by Bank of Botswana (BoB) due to acute liquidity constraints that resulted in creditors being unable to access their funds and with KBAL staff going unpaid for several months. An inventory of the balance sheet compiled by the temporary managers, Delloite Botswana, showed that KBAL liabilities outweighed its assets by approximately $17 million (P163 million), leading to the BoB, as the regulator, to petition the courts for an order to close down the offshore bank.
According to the daily newspaper Mmegi, in a statement released in March this year, the central bank said that during the temporary management period, Deloitte found out that the asset base of the bank had been severely eroded due to a number of factors that gave rise to the liquidity problems and ultimate insolvency. The petition for the final winding-up of KBAL was brought before the High Court of Botswana on May 12, 2015, and an order was subsequently granted with Max Marinelli and Chris Bray being appointed to act as joint liquidators.
An inventory of the bank’s assets released by the BoB showed that liabilities outweighed assets by as much as $16.7 million (P160 million) with an estimated minimum recovery rate of 12 percent on deposits. KBAL’s creditors and debtors are predominantly in Zimbabwe where the bank originates.
The British financial services company EBC Guernsey approached the High Court early this year, seeking to sue Bank of Botswana over its failing to properly regulate Kingdom Bank which in turn caused EBC losses in the sum of P25 million.
Minchin and Kelly acting for EBC filed its law suit at the High Court where it was allocated to Justice Kebonang. However, the matter was not determined by the presiding Judge as due to the failure of the Bank of Botswana to respond to its claims in time, EBC was granted default judgment. The result was that the BoB faced the prospect of forking out around P25m as a result.
Collins Newman & Company on behalf of BoB this week submitted papers in an urgent application to stay the execution and set aside the granting of the default judgment, and save, BoB, not just millions but, face. According to sources, EBC Guernsey, got default judgement on 15th July. The implications for Bank of Botswana were that EBC could attach the bank’s property and recover its losses. However on Monday 28th and Tuesday the 29th Tafa’s team went to court to seek the High Court to set aside the default judgment.
So it was that Parks Tafa and his legal team, this past Tuesday were to be found by the photocopying machines at the High Court, urgently seeking to file documents whilst waiting to argue this matter before Judge Sechele. Bank of Botswana made its arguments, and EBC Guernsey will present its side of the story sometime later in the month. In the meantime the Court has ordered that the Deputy Sheriff halt their plans for now.
It is a reprieve, albeit a temporary one, to save Bank of Botswana, and one of the most powerful law firms in the country, public embarrassment.
