Court Rejects UGX293billion Claim Against UTL

The High Court in Kampala has rejected a claim by four companies against the distressed telecommunication company; Uganda Telecom Limited-UTL. 

High Court Judge Musa Ssekaana in his ruling said that the claims against UTL now in receivership of $80174139 is not supported by any existing documentation. 

The judge however allowed another a claim against UTL of  $4,900,237 (UGX17.95billion) by another  company. 

In 2020, Ruth Sebatindira, the administrator of UTL ran to court to seek guidance whether to accept claims for money made by a number of UTL creditors. In her court filings through her Law Firm, Ligomarc Advocates, Sebatindira said she received competing claims from five companies;Lapgreenn Limited, Huawei Technologies Co. Limited, Huawei International Pte Limited, Huawei Technologies (Uganda) Co. Limited and ZTE Corporation for the services rendered to UTL. 

She said however some of the transactions regarding the claims appeared doubtful and unclear. The filings show that among the claims received for verification and settlement which were doubtful included those of Huawei Technologies Co. Limited which claimed $14,253,059.01, Huawei International Pte. Limited which claimed $ 14,399, Huawei Technologies (Uganda) Co. Limited which claimed $4,900,237 and LAPGreenn, which claimed $61,006,444.47.  

For ZTE Pte, the court papers show that it claimed $ 6,138,270. In his ruling, Ssekaana observed as Sebatindira had told court that indeed the documentation about the claims by the three companies were unclear and therefore, could not be honoured. 

Ssekaana held: “The court agrees with the submission of the applicant that the Administrator has to apply the professional standards on how to treat the 1st Respondent’s (LAPGreenn) claim which is highly suspect largely because of the conduct of the 1st Respondent in the financial management of the company. It should follow that where the Administrator should make reasonable effort to inquire into claims, creditors and affected parties should also make equal effort to provide all relevant information to dispel any suspicions that may arise regarding their claims…A review of the documents and the facts as presented by the 1st – 4th Respondents appears to demonstrate that the 2nd – 4th Respondents signed away their rights to claim against UTL…Therefore, 2nd – 4th Respondent’s right or recourse appears to be against the 1st Respondent only. The above position is also buttressed by the fact that the parties signed consent which removed any rights that had accrued and any such right was also extinguished when the parties signed a Consent Order…under which the 2nd Respondent stated that UTL has performed all its obligations.”

For ZTE Corporation, the judge held that there was evidence that its claim arose out of a contract for the design, implementation and maintenance of a backbone link for UTL. However, the record show that UTL disputed the claim in its written statement of defence contending that the ZTE had breached the terms of the contract and failed to perform its obligations under the agreement. 

However, in his judgement, Ssekaana held that ZTE’s claim seemed to be supported by the nature of the services rendered which may not be in dispute thus: “The contention by the company is simply a statement that they were paid without any proof of such payment. The Company equally had the burden to produce the supporting evidence for the payment which was not done. This court would be inclined to believe that this debt was due and owing. The claim should be considered among the unsecured creditors unless there is any evidence to the contrary to prove payment.”

Meanwhile, Ssekaana also allowed Sebatindira to use her law firm of Ligomarc Advocates to represent UTL in court. During the hearing of the case,Alex Kibandama  the lawyer of ZTE raised concerns about the choice of Ssebatindira lawyers in the case yet she is the administrator of ZTE. 

The lawyer contended that UTL has a functional legal department that ought to have represented her in matter to save unnecessary costs for an already distressed company. He added that Sebatindira’s choice of representation also raised conflict of interest issues and runs contrary to the Anti-Corruption Act especially in view a lack of clarity about the manner of the firm’s appointment and mechanisms for determination of fees. 

However, in his ruling, Ssekaana said that he was not persuaded that the choice of Ligomarc Advocates raised issues of impropriety. He thus held:“I agree with Counsel for the Administrator that this practice is a custom in insolvency practice, and I am inclined to believe that the sort of legal support offered here is exactly what this Court expected when exercising its discretion to appoint the applicant as Administrator in Companies cause 30 of 2019. I have had the benefit of reading the ruling of Justice Lydia Mugambe in the above matter and it is apparent to me that that fact that the reputation of Ligomarc Advocates as arguably the largest insolvency firm in Uganda played a key role in the exercise of her discretion to appoint Mrs. Ruth Sebatindira. It is therefore reasonably expected that the skill and size of the firm would be made available to the resolution of the UTL distress problems.”  

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