Justicia Shipena
The High Court has placed Omuthiya Classic Investment CC, trading as Omuthiya Build It, under provisional liquidation after finding that the business cannot pay its debts as they fall due.
The ruling, delivered on 16 January, follows an application by The Spar Group Limited, which asked the court to wind up the Omuthiya-based retailer.
Spar and Omuthiya Build It began a commercial relationship in 2015.
Under several agreements, Spar supplied building materials and related services to the retailer on credit through warehouse and drop-ship transactions.
Ownership of the goods remained with Spar until full payment.
Omuthiya Build It’s sole member is businessman Herman Ando Nekomba.
The business forms part of the Nekomba group of companies, which also includes Okahandja Build It and Omuthiya Spar and Tops.
As the relationship continued, debts across the group increased.
In August 2022, the parties signed a master settlement agreement and an acknowledgment of debt.
Under this agreement, the respondent and related entities admitted that they were jointly and severally indebted to Spar in the amount of N$113.9 million and agreed to repay the debt in instalments. The payments did not follow.
Spar later perfected two general notarial bonds over the respondent’s movable assets and took over management of the business under a management agreement in an effort to stabilise operations and recover the money owed. Despite these steps, more than N$95 million remains unpaid.
The court said the central issue before the court was whether Omuthiya Build It was commercially insolvent.
“Moot disputes aside, the question is whether the respondent is able to pay its debts as and when they become due in the ordinary course of its business,” reads the judgement.
The court found that the debt was largely admitted, had not been paid, and that the respondent failed to show any real ability to settle it.
“The best proof of solvency is payment of debts. The respondent’s continued failure to pay, despite acknowledging some level of indebtedness, is powerful evidence of insolvency.”
Omuthiya Build It opposed the application. It argued that Spar mismanaged the business while it was under Spar’s control and claimed that the agreements were unfair, unlawful and against public policy.
Omuthiya Build It also filed a counter-application seeking to have the credit agreements, suretyships, acknowledgement of debt and management agreement declared invalid. The court dismissed these claims.
“Hard bargaining is not the equivalent of duress. In commercial dealings, parties rarely have equal bargaining power. A large wholesaler like Spar will naturally have greater economic power than a small retailer. This does not, without more, render contracts unconscionable,” the court said.
According to the court, the agreements were standard commercial arrangements and the respondent failed to show they were unlawful or unfair.
The court also rejected claims that Spar unlawfully took over the business.
“The management agreement was not a permanent transfer of control but a temporary arrangement pending repayment of the debt or realisation of security.”
After reviewing the evidence, the judge found that Spar had met the legal requirements for provisional liquidation.
“The only inference to be drawn is that the respondent is commercially insolvent.”
The court ordered that Omuthiya Build It be placed under provisional liquidation in the hands of the Master of the High Court.
Omuthiya Build It will now have to appear in court on 3 March to show why the business should not be finally liquidated.
Caption
Omuthiya Build It has been placed under provisional liquidation after it failed to repay millions owed to Spar.
- Photo: Contributed
