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Business Reporter
The High Court has suspended an earlier judgment restoring ownership of a Harare commercial property to former ENG Group directors Gilbert Muponda and Nyasha Watyoka, which was sold during the group’s liquidation.
Belgravia House was owned by ENG before it was sold to pay off the group’s creditors at the height of its troubles nearly 18 years ago. ENG owned the property through an investment called Theright Investments, which was in turn 100 percent owned by Enganein, also owned by ENG. It had bought the property from one Michael Clinton in September 2003. ENG group comprised ENG Capital and ENG Asset.
Watyoka and Muponda alongside dozens of properties linked to them were specified in terms of the Prevention of Corruption Act in May 2004 after failing to pay depositors.
This was after the directors placed the group under voluntary liquidation in January 2004. Regis Saruchera of Camelsa was appointed the liquidator of the firm while the Government also appointed him the investigator of the specified persons.
Enganein Investments was among the properties disposed of to pay off the creditors.
It was sold to Prosdeng Investments, which took over Theright Investments as the beneficial owner. The property was later sold to Kunze Kwayedza Enterprises in 2021.
Muponda and Watyoka took Kunze Kwayedza to court, claiming to be the rightful owners of the Theright Investment and that the sale of Belgravia House was irregular.
On September 14, 2022, Justice Owen Tagu declared the transfer of the property to Kunze Kwayedza on January 26, 2021 “null and void and accordingly deregistered.”
The judgment effectively restored ownership of the property to Theright Investment, which Muponda and Watyoka are claiming to be bona fide shareholders.
When Kunze Kwayedza learned about the judgment, they filed an application for rescission.
But on December 7, 2022, Justice Happias Zhou suspended Justice Tagu’s judgment pending the finalisation of the application for its rescission. Pending the determination of the application for rescission of judgment, Muponda and Watyoka, who are being cited as first and second respondents were interdicted from performing any duties as directors, shareholders or officers of Theright Investments.
“There are allegations and counter allegations of fraud which must be investigated by the court,” ruled Justice Zhou. “These relate to how the first and second respondents lost control of the company in the first instance, and how they regained such control.
“It is just that until those allegations are investigated the situation will be frozen to avoid irreparable prejudice to the applicant in the event that it is ultimately found that the first and second respondents are not authorized to represent it. “In the circumstances, I conclude that this is an appropriate case for execution to be suspended pending determination of the application for rescission of judgment.”
ENG Asset took deposits from the public for investing in short-term money market investments, but upon maturity, ENG Asset failed to settle its obligation to the depositors an amount of $133 billion, including interest.
Its failure to pay the depositors, due to liquidity constraints, was a result of ENG’s alleged illegal transactions involving the diversion of short-term deposits to buy long-term assets such as shares on the equities market, vehicles, commercial and residential properties, financial assets and companies, according to the liquidator’s report.
In December 2003, its directors passed resolutions for voluntary liquidation. The depositors of ENG Asset demanded their deposits plus interest following the maturity of the short-term investments. Century Discount House, the second largest creditor, filed a report with the police citing allegations of fraud by the ENG directors.
A joint liquidation consent order was sought by First Mutual Life, the largest creditor and the directors of ENG Asset. This consent order was granted by the High Court.
ENG Asset and ENG Capital were consequently placed under provisional liquidation on January 12, 2004, in terms of the consent order issued by the High Court.
The effect of the liquidation order was that the directors of ENG were divested of all powers and duties regarding the management of ENG and all related assets.
As part of the liquidation process, Muponda and Watyoka signed affidavits empowering the liquidator to deal with the companies and assets owned by ENG Group to settle amounts due and payable to the creditors and contributories of ENG.
This included the shares acquired and assets owned by companies that had been bought by ENG. The Government specified Muponda and Watyoka and their related companies in a notice published in the Government Gazette Extraordinary of the 20th of May 2004. The specification order had the effect of freezing any activity within the companies thereby preventing asset stripping or any interference with the management.
ENG wholly owned Engagein, which was bought using ENG’s depositors’ funds. Engagein wholly owned and controlled Theright Investments, which in turn owned Belgravia House.
Engagein and Theright, being wholly owned subsidiaries of ENG Capital, were part of its assets that were supposed to be disposed of in the liquidation process to generate cash for settling debts owed to the creditors of ENG. The entire share capital of Engagein and Theright Investments was disposed to Prosdeng Investments.
This disposal transferred ownership and control of Engagein and Theright Investments and ultimately the Belgravia House from ENG Capital to Prosdeng Investments.
Muponda and Watyoka legally ceased to be the shareholders and directors of Engagein and Theright. Any rights to the Belgravia House ceased as well, the report says.
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