A Harare construction company is demanding that Victoria Falls Stock Exchange (VFEX) listed West Property (WestPro) must publish a comprehensive cautionary statement informing its shareholders about a recent High Court ruling that might have a major impact on its asset base.
High Court judge Justice Nyaradzo Munangati-Munongwa last month ordered that WestPro’s prime land in Harare’s Pomona area worth US$105 million must be attached and sold to settle a debt dispute with Fairclot Investments over the Harare Airport Road project.
WestPro went on to publish a notice to shareholders informing them that it had appealed against the judgment at the Supreme Court and that contingent measures had been put in place to protect the business if the appeal does not succeed.
Fairclot, however, has since written to the Securities and Exchange Commission of Zimbabwe (SecZim), saying the notice did not go far enough.
The company’s lawyer Shingi Mutumbwa argued that the Supreme Court appeal did not make it unnecessary for WestPro to issue a cautionary statement in terms of the VFEX rules.
Mutumbwa said the statement should include the fact that the High Court judgment meant that WestPro was liable to pay “US$4,800,000.00 to our clients (and) also loses its flagship property worth half of its balance sheet as indicated in the listing prospectus, where the proposed Pomona City development was intended to be sited”
“These losses would not include the potential claims from those that have already paid for residential stands in the proposed development, which must also be referenced in the announcement,” he added in the letter dated May 15.
Mutumbwa said WestProp’s "notice to shareholders" did not comply with the Twentieth Schedule to the VFEX rules, which prescribes "the minimum disclosure requirements acceptable to the VFEX."
He said the cautionary statement should include the fact that the events mentioned in the announcement "may have a material effect on the price of the company's securities” and that it must also include the statement that "shareholders are advised to exercise caution when dealing in the company's securities until a full announcement is made."
The statement should also give details regarding information that is the subject of the cautionary announcement and not what the company has done about a potentially “deleterious event and their assessment of their chances going forward.”
“In addition, please note that despite the rosy picture painted by WestProp's legal advisors and the "notice to shareholders" regarding the putative appeal and its effect, our clients also have a right to apply for execution of the judgment pending appeal.
“The effect of this if pursued would be to render any appeal academic,” Mutumbwa wrote.
In response, SecZim said it noted Fairclot’s concerns and directed the firm to the VFEX, saying the regulator can only intervene as a last resort.
“For exhaustion of administrative remedies, we advise you to raise concerns pertaining to the listings rules directly with the listing authority, the Victoria Falls Stock Exchange,” wrote Anymore Taruvinga, the SecZim chief executive officer, in a letter to Mutumbwa dated May 17.
“Should you be aggrieved by the decision of the Exchange, you may then appeal to us in terms of section 108 of the Securities and Exchange Act (Chapter 24:25),” wrote
WestPro’s lawyers Scanlen and Holderness, however, insisted that the appeal suspended the High Court ruling and things were at the stage they were before the judgment.
“If it has prospects of success on appeal, its remedy is to file a court application for leave to execute pending the appeal,” the lawyers wrote.
“In the absence of a High Court order directing execution pending appeal, the position obtaining is exactly the same as it was at the time of issue of the supplementary prospectus.
“The matter is pending determination by the court in exactly the same manner as it was at the time the supplementary prospectus was issued.
“We have no desire to enter into litigation by correspondence. We are in fact not the legal practitioners dealing with the litigation.”
WestPro, which listed on the VFEX last month, emerged from businessman Ken Sharpe’s Augur Investments.
Fairclot was contracted by Augur Investments to construct the Harare Airport Road, but abandoned the project following a dispute over payments.
It approached the High Court to challenge Augur Investments’ move to pay for a US$4.8 million debt in local currency using a 1:1 rate to the US dollar after the introduction of Statutory Instrument 33 of 2019.