Businessman Amos Nzeyi is battling a multi-million shilling lawsuit in the High Court following a fallout with former business associate, Mr Menna Tewahade. Mr Tewahade accuses the city tycoon of defaulting on payments for shares in Nando’s restaurant, a city food joint the two owned.
At stake is a claim for more than Shs800 million which Mr Tewahade wants court to compel Mr Nzeyi to pay for shares in Innscor Uganda Limited, a company the two men co-owned which operated a franchise of the celebrated Dutch chain of Nando’s restaurants in Uganda.
Innscor and Nando’s Resorce B.V, the parent company that owns the brand and chain of Nando’s fast food restaurants, signed a Master Franchise Agreement (MFA) in December 2004, in which the Netherlands-based outfit granted the company the Nando’s Franchise to operate restaurants under the name and style of Nando’s.
According to documents filed at the Commercial Court Division of the High Court, the two businessmen entered into an agreement on August 31, 2009 with Mr Tewahade agreeing to sell his 29.5 per cent equity in the company to Mr Nzeyi, a majority shareholder with a 51 per cent stake at Innscor (U) Ltd, for $400,000 (about Shs 1 billion).
Mr Nzeyi had agreed to pay for Mr Tewahade’s equity; $50,000 (Shs132 million) on execution of the agreement, two separate instalments of $100,000 payable on or before March 31, 2010 and December 31, 2010 and a last instalment of $150,000 payable on or before March 31, 2011.
However, Mr Nzeyi, the documents show, made only one down payment of $50,000 and declined to issue any further payments, a matter that severed a business relationship spanning several years and one that prompted Mr Tewahade to seek legal redress two years after the botched sale of shares.
The case is now being mediated by a High Court judge in effort to strike a compromise over the row.
In declining to issue any more payments for the shares, Mr Nzeyi, according to a written statement of defence, cited a January 2010 decision by Nando’s Resource B.V to terminate the franchise agreement with Innscor on grounds that Mr Tewahade’s sale of equity had breached the MFA which required any shareholder selling shares to offer first right of purchase to Nando’s Resources B.V.
The MFA, Mr Nzeyi said, had also outlawed any change in control of Innscor without prior written consent from Nando’s Resource B.V.
“The plaintiff [Mr Tewahade] did not make such offer to the said Nando’s Resources B.V thus the purported agreement to sell to defendant [Mr Nzeyi] constituted a breach of the Master Franchise Agreement leading to the cancellation of the Franchise thus frustrating the company’s business interests and hence continued payment for shares,” wrote Mr Nzeyi’s lawyers KGN Advocates.
Mr Nzeyi proceeded to file a counterclaim in court and is now demanding a refund of the $50,000 (Shs 132m) he paid to Mr Tewahade with interest at 21 per cent per annum from August 31, 2009 “till payment in full.”
However, Mr Tewahade’s lawyers said Mr Nzeyi “was at all times” in control of the company by virtue of his majority shareholding and accordingly his acquisition of his partner’s equity could not “by any measure amount to a change in control of the Company to constitute a breach of the Franchise Agreement.”
“Accordingly, the defendant [Mr Nzeyi] has no basis both on law and fact for not effecting payment for the share purchase in accordance with the agreements,” wrote Mr Tewahade’s lawyers, MMAKS Advocates.