NICIL vs Guyana Stores …Court hears about letter of guarantee written by Brassington

Sep 24, 2013 News

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Head of NICIL, Winston Brassington, was again called to testify in the High Court yesterday when the legal issue between Guyana Stores Limited (GSL) and the National Industrial and Commercial Investments (NICIL), continued.
NICIL and the Government of Guyana are suing the Guyana Stores Limited (GSL) majority shareholder, Royal Investments Inc, to recoup monies claimed following the privatization of the company.

NICIL/the Privatisation Unit moved upon claims that GSL failed to pay an outstanding balance of US$2 million of the purchase price of US$6 million for the acquisition of GSL. The matter was subsequently called up before the High Court in the latter part of 2010.
According to NICIL, under the terms of the privatization agreement, the balance was due by September 2002; however, Royal Investments Inc, (GSL) which acquired 70 per cent of the company shares in the sale, failed to make this payment.  In June 2004, NICIL, the government holding company, initiated legal action against Royal Investments Inc for the recovery of the US$2 million plus interest.
Attorney at law Rafeek Khan who is representing NICIL and the government yesterday questioned Brassington on a letter dated May 3, 1999 which was written by the witness. The Attorney enquired from the witness if he remembered that letter and he answered in the positive.
Mr. Khan then asked Brassington if he recalled stating in that letter that he was guaranteeing that at the date of closure, the defendant would get $200M in Net Current Assets and $400M in Inventory.  Brassington said he recalled doing that.
He was then asked why it was necessary for NICIL to give the guarantee. According to Brassington, Guyana Stores Limited as a Company was continuing to do business for the period leading up to the privatization of the Company and the Net Current Assets would be constantly changing.  He explained that the changing levels could have become a source of dispute when dealing with the sale of shares.
Brassington further told the court that Guyana Stores was also going through the sale of certain properties that would have affected its financial position so therefore, the letter of 3rd May, 1999 was to set a predetermined level of the assets.
The witness was then asked about how the figures $200M in Net Current Assets and $400M in Inventory were arrived at. Brassington told the court that the Inventory level was fixed at a level roughly equivalent at what the GSL inventory would have been and the Net Current Assets was set at a number that would give a net positive working capital.
The lawyer then referred to a letter dated 3rd October, 2000 in which it was stated that NICIL and the defendant, represented by Mr. Tony Yassin, had agreed to have an audit of Net Current Assets and Inventory by an independent Auditor as at September 30, 2000.
According to Brassington the date when the Audit was carried out was 30th September, 2000 and the date of closure was 4th October, 2000.
Brassington was asked whether he knew that the audit was carried out by Nizam Ally & Company. The lawyer also asked Mr. Brassington if he knew Mr. Verasammy. Brassington, in reply, said “yes” to both questions.
A copy of the report was given to Mr. Brassington so that he could verify them and he affirmed that it was a true copy.  Khan noted that the Audit Report had found that the Net Current Assets was $10.8M and the Inventory was $385,945.
Khan pointed out to Brassington that those figures were less than the figures guaranteed in the letter of 3rd May, 1999 and he agreed.
Khan then asked Brassington if there was any provision in the Share Sale and Purchase Agreement which would address that issue. In reply, Brassington said that there was a clause in the Share Sale and Purchase Agreement which addressed that issue.
Khan noted that the Promissory Note was executed for $292.0M and questioned Brassington if any adjustment was made to the Promissory Note. According to Brassington, the adjustments were made both to the Net Current Assets and the Inventory.
Khan then enquired from Brassington if the adjustment was made in relation to the Audit Report. According to the witness the Promissory Note was reduced from $292.0M to less than $100.0M.
The lawyer further asked Brassington if as a consequence of the adjustment, he would say that the guarantee in respect to the letter dated 3rd October, 1999 was met.  Brassington said that by reducing the Promissory Note to less than $100.0M, it meant that the Net Current Assets had increased by the reduced amount to $200M effective 4th October, 2000. He also told the court that the Agreement provided for fifty percent difference of the Audited value ($385.0M) and the agreed value of $400.0M.
Counsel for the defendant, Senior Counsel Rex McKay and Senior Counsel Edward Luckhoo said that they need some time to look at the evidence given before any cross-examination is done. The matter was set for Monday, September 30, 2013 for continuation.

 

 

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