Liquidated VBS Mutual Bank has failed in its bid to recoup over R100 million which it said it was owed by state-owned entity (SOE) the Universal Service and Access Agency of South Africa (USAASA).
The Johannesburg High Court recently ruled in favour of the SOE after VBS’s liquidator last year launched a court application to recover a loan of R102.5 million together with interest and costs from USAASA.
The loan in question was paid to Leratadima Marketing Solutions, one of the chosen-three companies to manufacture the first batch of government-subsidised set-top boxes (STBs) for the digital migration project.
In 2019, ITWeb reported that Leratadima Marketing Solutions was placed under liquidation after delivering approximately 350 000 STBs to USAASA.
In line with the Broadcasting Digital Migration programme, the South African government promised to supply free STBs to over five million households that depend on social grants and those with an income of less than R3 200 per month. The STBs are required to convert digital broadcasting signals on analogue TV sets.
Yesterday, EWN reported that at the heart of the case is VBS’s position that in order to put up the loan, it had required security in the form of written confirmation from USAASA that all monies payable to Leratadima would be deposited into its VBS account and further that the SOE had in a subsequent letter, dated 18 January 2016, agreed to this but that R102 million was, in breach of this undertaking, paid into the company’s Absa account instead.
Prior to coming under curatorship in 2018, VBS gained notoriety in 2016 when it gave a R7.8 million loan to then president Jacob Zuma when he was ordered to repay the state for controversial improvements to his personal homestead at Nkandla.
In the judgement seen by ITWeb, Judge Avrielle Maier-Frawley says USAASA was tasked to implement government’s Broadcasting Migration Policy, which entails the acquisition of STBs which are designed to convert the outdated analogue television set to receive digital content.
VBS required Leratadima to procure USAASA’s written confirmation that all monies payable to Leratadima for goods supplied by it to USAASA under the supply agreement would be paid into Leratadima’s banking account held at VBS for the duration of the loan.
On 18 January 2016, USAASA addressed a letter to VBS in which it undertook to make all payments regarding the supply contract into Leratadima’s account at VBS.
“USAASA made payment into the VBS account for a period of time but later commenced making payments into Leratadima’s Absa bank account, as opposed to making payments into Leratadima’s VBS bank account,” Maier-Frawley says.
VBS alleged USAASA breached its obligations under its payment undertaking in so doing.
USAASA opposed the application, arguing the payment undertaking did not create any enforceable payment obligations on the part of USAASA to VBS.
The SOE also said Zami Nkosi, the then CEO of USAASA, who signed the payment undertaking on its behalf, had no authority to do so.
Zami left the parastatal in March 2018 after his contract was not renewed.
USAASA also contested that its obligation had always been to pay its supplier (Leratadima) any amounts due and payable to it under the supply contract by way of electronic transfer of funds into Leratadima’s nominated account.
In terms of the payment undertaking, all payments to be made by USAASA were still to be made to Leratadima, not VBS, it added.
The judge adds that subsequent to the winding-up of Leratadima, USAASA demanded performance by Leratadima of its remaining obligations under the supply contract.
She notes Leratadima, represented by its appointed liquidators, procured the manufacture of the STBs and delivered same to USAASA.
A total amount of R1 624 033.08 was paid by USAASA to the liquidators of Leratadima in respect thereof, says the judge.
“I, therefore, agree with USAASA’s submission that the ‘payment undertaking’ provided in USAASA’s letter was akin to a letter of comfort to VBS, providing the bank with no more than an assurance that funds were in place to meet USAASA’s payment obligations to Leratadima under the supply contract and that all payments to be made under the supply contract would be paid into the VBS account in accordance with the acknowledged and accepted change of account details,” she notes.
“For all the reasons given, the respondent’s main defence must succeed. This carries the consequence that the application falls to be dismissed. The general rule is that costs follow the result.
“I am not persuaded that there are any facts militating against the application of the general rule. Both parties were represented by senior and junior counsel in these proceedings.”
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