Harare — LIQUIDATORS of Petter Trading, a South African company, are embroiled in a legal battle with Schweppes Zimbabwe Limited over equipment the former bought before it was placed under reconstruction.

In the application before the Supreme Court, the liquidators for Petter Trading are seeking to assert the company's rights over the assets that it bought before its beneficial shareholder; Mr Mutumwa Mawere's business empire was taken over by the State over allegations of impropriety.

Mr Mawere's vast business empire which includes Shabani Mashava Mines was placed under the administration of Mr Afaras Gwaradzimba in accordance with the Reconstruction of State-Indebted and Insolvent Companies Act, a law whose constitutionality is now subject of the present court challenge.

The dispute between the two companies involves ownership of injection moulding equipment, a blow moulding machine and a bottling equipment.

In papers filed before the court, SZL managing director, Mr Charles Msipa opposed the challenge, submitting that the company had been wrongly cited arguing that Petter Trading ought to have cited Coca-Cola Central Africa, and Mr Gwaradzimba whom the bottling company says settled with when he took control.

He also argued that Petter Trading had no legal right to bring the case as SZL had entered into the agreement with Fidelity Life Asset Management, which he said had the obligation to procure the equipment, according to their agreement.

Mr Msipa contended that FLAM had defaulted to fulfill the investment agreement which was supposed to have been through by February 2004.

It was submitted that Coca-Cola Central Africa's rights to recover the shares in SZL from FLAM arose not from the implementation of the reconstruction laws but rather from the breach of the agreement.

But in their response, one of the liquidators, Mr Harry Kaplain argued that by retaining the equipment procured by Petter Trading, this amounted to holding it culpable, something the company views as fundamentally wrong as they are a third party, and not party to the agreement.

"No proof has been provided confirming that FLAM was in default prior to the commencement of the operation of the reconstruction laws and how that alleged default would affect the right, title and interest of the applicant (Petter Trading) in the equipment."

It is the contention of Petter Trading that the letter claiming that FLAM was in default was written well after the reconstruction laws had taken effect, an indication that they were just hiding behind the letter to seize equipment.

Mr Kaplain averred that Petter Trading was a South Africa incorporated company whose role in the project was pursuant to an agreement it concluded with Africa Resources Limited, its parent company incorporated in the British Virgin Islands.

He said Petter Trading would procure the equipment, a financial obligation FLAM could not perform on its own since it required exchange control approval and had no balance sheet of its own.

In 2003, FLAM entered into an agreement with CCCA and SZL in which FLAM would purchase SZL for a price of US$1 on top of a 100 percent equity ownership price.

The upgrade was to meet international standards while CCCA had to dispose of the stake to comply with the Zimbabwe Competition and Tariff Commission directive to localise the company.

Since Flam had no access to hard currency it approached ARL which then instructed Petter Trading to procure the equipment.

"We have no record of FLAM providing any funds for the equipment and in any event as an asset management company, it would have been impossible to secure foreign currency funding for the project," said Mr Kaplain.

"What is evident is that the notice of default was served on a party whose control had changed pursuant to the operation of the disputed laws. SZL would have known that any deal negotiated with the Fourth Respondent (Mr Gwaradzimba) would have been in furtherance of the objective of implementing the disputed expropriation laws."