Swazi Media Commentary: KING WINS JET CASE ON A TECHNICALITY

The company that sued King Mswati III of Swaziland for US$3.5 million in unpaid bills relating to his luxury private jet has lost its case on a legal technicality.

But, the Appeal Court in Ontario, Canada, said the issue of the unpaid debt could still be pursued at a different court.

Air Leasing (SG Air) had sued in the Canadian courts under the Repair and Storage Liens Act. It said it had paid the money for repairs and upgrades to the King’s private jet, a MacDonnell Douglas DC-9 jet (also known as MD87). It had expected the money to be repaid by King Mswati, but this did not happen.

The Appeal Court in Ontario in a judgment dated 17 June 2015 decided that SG Air was not eligible to sue under the Repair and Storage Liens Act because the company was not an aircraft repairer and it did not undertake the repairs to the jet aircraft itself. The court accepted that SG Air might have paid the money for other companies to make upgrades to the jet.

The court said the issue of the unpaid debt was not within its jurisdiction and this would have to be pursued elsewhere.

The Appeal Court denied a request from King Mswati’s lawyers to release a US$3.5 million letter of credit the Swazi Government was forced to deliver in order to get the jet released from the custody of the court in May 2015.

The letter will still be held in trust in a bank in case SG Air decides to appeal the decision to the Canadian Supreme Court.

SG Air has not yet said if it will appeal the decision.

This should bring to a conclusion a story that began in May 2010 when, in the depths of Swaziland’s worst financial crisis in its history, King Mswati III secretly bought himself a private jet for US$11.45 million.

He then committed himself to paying another US$6 million over five months for luxury modifications.

While this was happening the Swazi Government, which he handpicked, was slashing department budgets and public services by E1.5 billion (US$150 million) in an attempt to keep the kingdom out of bankruptcy. Seven in ten Swazis continue to live in abject poverty with incomes of less than US$2 per day.

In December 2010, unable or unwilling to pay his debts, the King sold the plane to Millers Capital, a Singapore-based investment company, for US$7.5 million – US$3.95 million less than he paid for it five months earlier. In April 2012, he bought the plane back from Millers for US$9.5 million – US$2 million more than he had sold it. He then claimed to the Swazi people that the plane had been donated to him by development partners.

Papers presented to an Ontario court on 9 April 2015 revealed that on 20 May 2010, SG Air, a company incorporated in the British Virgin Islands, sold the jet to Inchatsavane, a company whose sole shareholder was King Mswati, for US$11.45 million. The sale was for the shell aircraft and engines and did not include the interior.

There was an additional agreement between Inchatsavane and Goderich Aircraft Inc (GAI) of Ontario, Canada, to modify the interior of the aircraft for a price of US$6 million, which was to be paid by the King’s company in instalments between 7 June 2010 and 8 November 2010.

In November 2010 GAI said that Inchatsavane was in arrears of payments by about US$2.6 million.

A close business associate of King Mswati introduced him to Millers Capital to assist Inchatsavane to obtain financing to pay off the debt.

On 30 December 2010, Millers Capital bought the aircraft from Inchatsavane for US$7.5 million, of which US$3 million went to GAI to pay off the arrears and US$4.5 million went to the King through his company Inchatsavane.

The court papers alleged that there was a verbal agreement between Millers Capital and Inchatsavane that the King would be allowed to repurchase the plane at a later date for US$9.5 million.

While the King was making this secret deal to secure the future of his private luxury jet, the Swazi economy was in free-fall. The mismanagement of the Swazi economy was so grave that in August 2010 both the International Monetary Fund and the World Bank refused to support Swaziland’s attempt to raise a US$500 million loan from the African Development Bank.

In August 2011, GAI said it was insolvent and could not complete the upgrading of the aircraft. SG Air agreed to fund the continuing upgrading on the understanding that the King’s company Inchatsavane would repurchase the aircraft from Millers Capital for US$9.5 million.

The court papers stated that if Inchatsavane did not buy back the plane, SG Air had an understanding with Millers Capital that the aircraft would be sold and SG Air would recover its expenses from that sale.

As of 17 April 2012, the costs paid by SG Air on behalf of Inchatsavane for the modifications to the jet totalled US$3.275 million.

SG Air paid a further US$1.37 million in connection with repairs and improvements to the plane. This took the total amount payable to more than US$4.6 million.

The upgrades were all to increase the luxuriousness of the jet and had nothing to do with ensuring the King’s security. The court papers stated the jet had nothing in it ‘making it unique or necessary for HMK [His Majesty the King] to conduct any state / sovereign business’.

The papers added the aircraft had, ‘no missile detection system, no military radar, no ammunition resistant steel, no in-flight refuelling connection, nor does it have any advanced avionics and defences or electronic counter measures to interfere with enemy radar.

‘Practically speaking, the aircraft is an “ordinary” airplane retrofitted with luxury amenities.’

The King through his company Inchatsavane repurchased the jet on 18 April 2012 for US$9.5 million from Millers capital, through Wells Fargo in its capacity as trustee. This was in line with the verbal agreement they had made in December 2010.

The government which is hand-picked by King Mswati, who rules Swaziland as sub-Saharan Africa’s last absolute monarch, made several public statements in April 2012 to say the jet had been donated to the King as a gift by ‘development partners’.

This was the first public announcement made about the plane, although it had originally been purchased nearly two years earlier in May 2010.

The King’s Prime Minister Barnabas Dlamini, said on government-controlled radio that the King had been given the jet as a birthday gift, ‘from development partners and friends of the King, to be used by their majesties for travels abroad’.

Government spokesperson Percy Simelane said at the time, ‘The donor has asked to remain anonymous and we stand by that agreement. We don’t owe anybody an apology for having been lucky to have someone purchase a jet for the King.’

In April 2015, the court papers stated that although Inchatsavane had not remitted the outstanding monies owed, SG Air did not press for payment ‘aggressively’. But, by November 2014, more than two-and-a-half-years after the plane’s repurchase, SG Air told the King it was ‘imperative’ that it be repaid.

To facilitate a speedy resolution, SG Air agreed with King Mswati that US$3.5 million should be paid to SG Air as ‘full and final’ settlement of the costs in connection with the aircraft. By making this offer, SG Air wrote off US$1.1 million of the debt.

By 16 December 2014, the debt had not been paid and SG Air succeeded in obtaining an attachment of the plane for unpaid debts of the aircraft which was in Goderich, Ontario, for routine maintenance. The plane was eventually released after the Swazi Government delivered a letter of credit for US$3.5 million which is being held in trust in a bank until the court case is concluded. This guarantees the King will be able to pay the debt if the court orders him to.

Swazi Media Commentary

Monday, 22 June 2015

KING WINS JET CASE ON A TECHNICALITY

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