Kembe Estates Limited has dragged First National Bank (FNB) Zambia Limited to the Lusaka High Court seeking a declaration that the bank breached terms of two crop credit facilities worth over US$1.2 million.
Kembe Estates, a private company carrying out the business of farming, is further seeking damages for breach of the two crop facilities, special damages for loss of profits and an order that restructuring of the two term facilities should commence in April, 2020.
It is further seeking, among other claims, an order of quiatimet injunction restraining FNB, whether by itself, agents, its officers or directors or assigns from appointing a receiver, placing it under administration, liquidation (provisional or otherwise), or commencing a mortgage action for possession, foreclosure and right of sale of any of its security contained in the facility letter dated May 22, 2019.
In a statement of claim filed in the Lusaka High Court principal registry, December 23, Kembe Estates stated that it has had a long standing business relationship of customer and banker with FNB, through the bank’s agent AFGRI leasing.
It stated that owing to the long standing business relationship between the two, the parties developed a mutual understanding which enabled it (Kembe Estates) to take up credit facilities with FNB in form of term and crop/seasonal credit facilities.
“The term credit facilities were understood between the plaintiff and the defendant as ones that were to run and be serviced for a particular period or term and hence called Term Credit Facility, while the crop/seasonal credit facilities were understood as ones that were meant to finance Kembe’s cultivation and harvesting of the crop during the crop season and were to be serviced from the plaintiffs earnings from the sale of the crop harvested,” read the statement of claim.
Kembe Estates stated that in that regard, the season in which the particular crop was to be planted or cultivated was of particular importance as it triggered the disbursements of funds from the bank under the crop or seasonal credit facilities.
It stated that around 2013/2014, FNB started using its agent, AFGRI Leasing Services, in dealing with Kembe Estates over the credit facilities it was offered by the bank.
Kembe Estates stated that in 2015, FNB, through AFGRI, entered into a term credit facility with Kembe in the sum of US$910,000 for the purchase of a farm in Chibombo District and it was to run for a period of seven years.
It explained that as security for that facility, it mortgaged its farm in Chibombo District.
Kembe Estates stated that in March 2018, FNB, through its agent, AFGRI, furnished it with another term credit facility in the sum of US$330,000 to run for a period of five years.
It further stated that in November 2017, the two parties entered into the summer/seasonal credit facilities for the crop season for soya beans.
Kembe Estates stated that it was the understanding of the parties that amounts under the soya crop facilities were to be disbursed in early November 2017 so as to enable them plant and cultivate soya beans in the summer of November 2017.
It, however, stated that despite the parties agreeing, FNB delayed to disburse the funds, saying the farm valuation was from a valuator not on the list of the bank’s approved valuators.
“It turned out that the valuator was in fact already existing on the said bank’s list. The plaintiff complained to the defendant and its agent on the delay in disbursing the funds under the crop facility. The plaintiff avers that this greatly affected the yield of the crop and caused the plaintiff great losses in terms of the moneys it would have realised had it cultivated, harvested and sold the crop in time and within the crop season,” read the statement of claim.
Kembe Estates stated that as a result of the bank’s failure in disbursing funds, it had suffered loss in terms of profits from the low yields of wheat and soya beans.
Kembe is now claiming a declaration that FNB breached the terms of the two crop facilities and it is entitled to and does have a right of redemption to a mortgage relating to the farm in Chibombo.