Ailing MGM takes on Bank Windhoek
By Hilary Mare
MGM Properties, which was once the epitome of black owned construction firms but now on the verge of total collapse owing to a failed deal with Bank Windhoek has now sued the bank for at least N$61 million for unjustified breach of contract and damages suffered by the business as a result.
Before its imminent collapse, MGM Properties has in the past five years built 450 apartments in areas such as Otjomuise, Rocky Crest, Khomasdal and Katutura.
By 2015, the company had built Tulipohamba Court worth N$55 million, Luhl Court for N$13 million, Loftie Court at Otjomuise for N$7 million, Raili Court for N$29 million, and Nowaseb Court for N$12 million. The company also constructed flats such as Trina Vries Court, Grace Court, Arandis Court, MGM Court, Denzel Court, Elohim Court, Adonai Court and Sharon Court.
In a claim filed with the High Court on May 22, the plaintiffs, businessman Pieter Mbutu and his wife, Madeleine who are owners of MGM Properties allege that Bank Windhoek breached a contract in which the bank had agreed to lend and advanced an amount of N$27 425 000 to MGM Properties to acquire vacant properties, Erf No. 1448 and Erf No. 6656 in Khomasdal and a further N$70 000 000 to carry out construction work on these properties.
This, the plaintiffs say, led to collapse of the company sending at least 240 employees into the streets.
Documents seen by Confidente show that the loan would be made available to the plaintiffs subject to the completion of the formalities and the terms and conditions set out in commercial building loan facility and to the plaintiffs obtaining the required security of a covering mortgage bond in the amount of N$100 million with an additional amount of N$20 million over the properties.
“In compliance with the loan agreements, MGM Properties, on the 3rd of February 2017, gave written powers of attorney to their conveyancers to register a mortgage bond in the amount of N$100 million as well as an additional amount of N$20 million in favour of Bank Windhoek in respect of Erf 1448 and Erf 6656 in Khomasdal.
“Further, pursuant to the building loan facilities, MGM Properties carried out the initial phase of the project, namely earthworks, construction of the show house, as well as professional fees for quantity surveying. Phase 1 of the project was sold out,” court documents highlight adding that whilst MGM Properties had complied with all their obligations in terms of the commercial building loan facility agreement, Bank Windhoek breached the contract by refusing and/or neglecting to honour their obligations in terms of the loan agreements.
The claim further alleges that despite Bank Windhoek having credited a further loaned amount of N$70 million to MGM Properties’ bank account, the bank and/or its representatives and/or employees and/or agents, refused the MGM first draw down payment of N$5.7 million on the loan amount of N$70 million without furnishing any reasons whatsoever to the company.
“Further, Bank Windhoek persistently and without justa causa refused and/or failed to disburse the loan funds to the plaintiffs to carry out the developments despite the fact that defendant’s financial records indicate that the funds were indeed available in the MGM Properties bank account till the 16th of February 2017,” explains the claim further adding that the bank without any formal letter of cancellation furnished to MGM Properties, cancelled the N$70 million loan facility by reversing the interest charges; raising and administration fees; as well as stamps duty and payoff amount.
“To date, and despite numerous requests by MGM Properties’ representatives, Bank Windhoek is yet to proffer any explanation and/or justification of the cancellation of the building loan agreement.”
Subsequently, MGM Properties represented by Francois Bangamwabo is demanding a payment of N$42.4 million for loss of profit and business suffered by the business as a result of the bank’s unjustified breach of contract, interest at the rate of 20 percent per annum on the above amount to be calculated from the date of judgment to the date of final payment, payment of the sum of N$19.3 million as general damages suffered by plaintiffs pursuant to the bank’s unjustified breach of contract and an order directing the bank to release and cancel the mortgage bond in the amount of N$100 million as well as an additional amount of N$20 million in respect of Erf 1448 and Erf 6656, against repayment by MGM of any money paid and spent in respect of the purchase of the said properties.
MGM Properties is also seeking an order directing Bank Windhoek to halt and/or abandon the liquidation in respect of Namibia Star CC; Panorama Butchery CC; and Panorama Food Centre CC, three properties bought by MGM Properties using loans from Bank Windhoek which the company claims it failed to service owing to incapacitation emanating from the breach of contract.
In response and with intention to defend the claim, Bank Windhoek asked MGM Properties to pay N$450 000 security (within 10 days) for the costs of the bank in defending the case including the costs of one instructing and two instructed counsel.
An affidavit penned by Anton de Wit, Head – Legal Collections at Bank Windhoek notes that on July 21 the bank gave notice in terms of rule 59(1) that it seeks security for costs from MGM Properties on the grounds that there was reason to believe that MGM Properties would be unable to pay the bank’s costs of a successful defence.
“The origin of the bank’s belief that the company will be unable to pay the costs of a successful defence is because the company has unsatisfied judgments against it. The judgments obtained against the company are in favour of the bank and also Standard Bank. As a result of the judgments in favour of the bank being unpaid, liquidation proceedings have been instituted by the bank against the company,” notes de Wit adding that MGM Properties owes the bank in excess of N$53 million.
“The company is also being sued by Standard Bank for N$24 838 378. In that case the company has admitted being indebted to the bank … The company is in dire financial straits and is unable to pay its creditors. The company’s liabilities exceed its assets and it is de facto insolvent and unable to pay its debts,” further states de Wit in an affidavit seen by Confidente.
Ironically, MGM Properties has on numerous occasions scooped the Bank Windhoek property developer of the year award for Windhoek area.
MGM Properties started out as a family business in 2005, and went from having 10 employees in 2010 to employing 300 workers (including subcontractors) in 2015.