STATUS Capital Building Society has dismissed as a fraudulent fabrication a counterclaim of E176 million lodged by the Swaziland Debt Factoring Firm (SDFF).
it described this as a last-ditch attempt to frustrate and delay the court proceedings in its winding-up application.
The Building Society, which is seeking the provisional liquidation of SDFF, told the High Court that the alleged counterclaim is baseless, unsupported by evidence, and lodged only to obstruct the court’s determination of the main application.
Eswatini Observer WhatsApp Channel
The matter, which was argued before Judge John Magagula, has been reserved for judgment.
Status Capital is the applicant in the matter, while SDFF is cited as the first respondent.
The Financial Services Regulatory Authority (FSRA) is the second respondent. Status Capital seeks an order for the provisional winding-up of SDFF, alleging that the firm is indebted to it in the amount of E87 922 551.
SDFF, however, contends that it is not indebted to the Building Society. Instead, it claims to be owed E176 193 914 by Status Capital, which it says arises from a counterclaim filed in an ongoing civil action between the parties.
According to SDFF Director Michael Noel Hodgkiss, the counterclaim stems from what he termed the applicant’s wrongful conduct and far exceeds the debt alleged by Status Capital.
Hodgkiss, in his affidavit, said the Building Society had failed to file a plea to the counterclaim, rendering its claims of indebtedness uncontested.
He added that the existence of the counterclaim and Status Capital’s failure to respond to it was a material fact that should influence the court’s discretion in determining the winding-up application.
It was argued that under insolvency law, a bona fide and reasonable counterclaim may be sufficient grounds for the court to stay or dismiss a winding-up application, especially if the counterclaim is already the subject of pending litigation.
SDFF had also filed an application for leave to rely on a supplementary affidavit, in which it sought to formally introduce the counterclaim as evidence in the winding-up proceedings. However, that application was dismissed by the court, which stated that written reasons will follow.
ALSO READ: I have delivered commitment to King – Dave
In its submissions, Status Capital argued that SDFF’s attempt to rely on the new affidavit was nothing more than a tactical and belated attempt to manoeuvre a further postponement of the matter.
“The fact that SDFF has lodged a counterclaim does not mean it has a valid claim or that any evidence exists to support it,” said Status Capital’s Sanele Kunene, who deposed to the affidavit on behalf of the applicant.
He told the court that SDFF was trying to supplement its case at the 11th hour to cover weaknesses in its answering papers.
Kunene said the alleged counterclaim which he described as an “unliquidated and unsubstantiated claim for damages purportedly arising from a newspaper article” was an afterthought intended solely to delay the winding-up proceedings.
The court was informed that the winding-up application was initially set down for hearing on September 25, 2024, but could not proceed because SDFF had, a day earlier, filed an application for security for costs.
The matter was postponed to December 4, 2024, when only a preliminary issue raised by the FSRA was argued, namely, that the winding-up could not proceed without the regulator’s approval under section 73(1) of the Financial Services Regulatory Authority Act of 2010.
On February 5, the High Court dismissed the FSRA’s point in limine, clearing the way for the main application to proceed.
It later emerged that on the same day the FSRA’s argument was heard, Status Capital instituted a separate civil action against SDFF under case number 2767/2024. SDFF subsequently filed its plea and counterclaim on March 3, demanding over E176 million in damages.
SDFF argues that the existence of this counterclaim should bar the winding-up application until the dispute in the main action is resolved.
Kunene insisted that the counterclaim was fabricated and unbacked by any financial or documentary evidence. He accused SDFF of using the claim as a smokescreen to avoid accountability for investor funds that it allegedly transferred outside the country without regulatory approval.
“The Building Society has suffered and continues to suffer significant prejudice because SDFF has not paid monies that it cannot dispute owing to the Building Society and its members,” Kunene said.
He stated that the money owed by SDFF belongs to ordinary Eswatini citizens, who invested their life savings through the Building Society with the expectation that the funds would be safely managed and easily accessible.
“SDFF unlawfully and without FSRA’s permission transferred funds outside Eswatini’s borders,” Kunene continued.
“The only realistic remedy to recover those funds is to place SDFF under liquidation in the hands of the Master of the High Court so that liquidators can trace and recover the money.”
He argued that SDFF’s persistent refusal to disclose where the funds were invested or how they were used amounted to bad faith. “Despite an avalanche of demands for disclosure regarding where the funds are invested and what has happened to them, SDFF has refused to openly play cards with the court and with the Building Society’s members,” Kunene submitted.
Status Capital also reminded the court that SDFF’s own application for security for costs lodged in September 2024 had yet to be determined. According to the applicant, the hearing of the main winding-up application was delayed primarily because of this pending issue.
Kunene said Status Capital had proceeded in good faith despite SDFF’s multiple procedural manoeuvres, including the late filing of affidavits and what he called a pattern of tactical delay.
During oral arguments, Judge John Magagula reportedly queried why SDFF had waited so long to lodge its counterclaim, especially since the facts underpinning it were allegedly known as early as 2023.
Kunene echoed that concern in his affidavit, saying SDFF’s failure to include the claim in its initial answering affidavit showed that it was not genuine. “There is no satisfactory or genuine explanation for failing to include this evidence earlier,” he said. “The facts were known long before 2023. This counterclaim was simply lodged as a stalling tactic,” Kunene submitted.
Eswatini Observer Press Reader | View Here
