After several court applications by Absa to have the “apartheid” oil company, Uwoyela Environment Services (UES), pay the bank millions of rands, the war rages on.
On Wednesday last week, the Supreme Court of Appeal dismissed Absa’s application for leave to appeal.
This was after the banking group decided that Christopher Rosenberg and Terrence Rosenberg, the respondents and owners of UES, were responsible for the debts owed to the appellant [Absa] under a guarantee agreement that was signed between the parties.
The agreement effectively secured the debts of the credit grantee.
The dispute between Absa and UES arises from a deed of agreement executed by the Rosenbergs in August 2019 and countersigned on behalf of the appellant in March of the following year.
The contemplated agreement was a contract in terms of which the respondents’ guaranteed payment on demand of the debts owed to Absa by UES.
Accordingly, Absa claimed that UES owed it R46-million plus interest, for which the bank stated that it sought to hold Terrence and Christopher to account to pay the debt for their company.
Absa’s application dismissed
The court dismissed Absa’s application to enforce the performance of the guarantee agreement against the respondents.
“It is not altogether easy to fathom the court’s reasons for dismissing the claim,” read the court papers in part.
“It does seem, however, that it decided that the operation of the guarantee furnished by the respondents was indeed contingent upon the provision by Absa of additional funding to UES.
“The respondents resisted the claim and relied on a number of defences in support of their repudiation of it.
“We shall revert to the issue of the nature of the defences raised by the respondents and what such defences entailed in a moment therewith.”
Ogies Project
According to the judgment, the nature of the issue at the heart of the dispute between the parties is that a couple of years prior to 1994, and as a result of the oil embargo then existing against South Africa, one of the world’s largest oil storage facilities, owned and operated by the Strategic Fuel Fund (SFF), a state-owned business entity, was developed in Mpumalanga.
SFF’s substantial quantities of oil were stored in a number of old coal mines at a depth of between 40 and 80 metres underground.
Read the court papers: “During 2013, UES was awarded a tender by the SFF to recover and reprocess oil sludge from an underground storage facility known as the Ogies Storage Facility [Ogies Project].
“UES was required, for its own account, to recover the oil sludge, process the product, and sell it as either fuel oil and/or crude oil and/or sludge residue to its off-takers.
“The majority shareholder of UES was Oakbrook Holdings, of which Terrence was the majority shareholder.
“UES approached Absa and applied for overdraft facilities to fund the Ogies Project.”
Primary lending facility
Both Absa and UES concluded an agreement on August 10 2018, when the bank made a primary lending facility of $2.5-million (R46.6-million) available to UES, as well as a commercial asset finance facility of R199 000.
The conditions that the bank wanted from UES in order to get security to cover its debts to the latter were met.
These conditions were a release of debtors by UES, a limited guarantee from Enviroshore Project Financing (Mauritius), and a subordination of debt agreements by the latter company.
It is stated that although the Ogies Project commenced in 2014, it was put on hold in 2019 due to operational health and safety concerns, as well as serious cash-flow challenges confronting UES.
That resulted in the project being delayed.
Accordingly, in March 2019, UES approached Absa for additional funding to finance the legal arrangement account required by SFF in the amount of $14 653 500 and for operational finance in the amount of $8.5-million.
Due diligence investigation
In May 2019, Absa undertook a due diligence investigation of the Ogies Project to confirm its viability, and the bank’s findings were that the original contemplated bridging loan was revised and reduced from $23 153 500 to $18.5-million (comprised of the aforementioned sum for the escrow account and $3 846 500 for general corporate purposes) to be effected by way of an increase to the existing facility under the facilities letter.
The bank indicated, however, that the envisaged increase would only be effected upon the fulfilment of several conditions precedent.
“Of relevance to the current matter, the conditions precedent included the provision of a guarantee by the respondents in terms of a deed of agreement prepared by the bank.
“The respondents signed the guarantee agreement on August 7 2019 in the course of the endeavours by UES to achieve satisfaction of all the stipulated conditions precedent for the release of the contemplated increased facility.”
UES was tasked with recovering millions of barrels of crude oil stashed underground in Mpumalanga by the apartheid government, and it was reported that the project never took place, which led to the bank demanding the cash it had injected in the company be returned with interest.
