In 1999 PZU Życie granted a mortgage loan to Metro-Projekt Sp. z o. o. (henceforth “Metro-Projekt”) with a 5-year tenor. The amount of the loan was the equivalent of USD 25,500 thousand. The loan was collateralized by maximum value mortgage on real property, including the land perpetual usufruct and a building owned by Metro-Projekt, located in Warsaw at Al. Jerozolimskie 44.
The loan had not been repaid and in November 2002 Metro-Projekt was declared bankrupt.
On 15 September 2004, the receiver of Universal SA in bankruptcy (“Universal”) brought an action to the District Court in Warsaw demanding exclusion of the property located in Warsaw at Al. Jerozolimskie 44 from the bankruptcy assets of Metro-Projekt due to an entry in section III of the land and mortgage register of a warning regarding the proceedings pending between Universal and BI Code SA (“BI Code”) for cancellation of a transaction involving sales of the property by Universal to BI Code from which Metro-Projekt acquired the property. In view of the above, on 21 September 2004 the District Court in Warsaw issued a decision suspending the liquidation of assets of Metro-Projekt until the lawsuit for exclusion of the aforementioned property from the bankruptcy assets is settled.
The action for cancellation of the agreement transferring the perpetual usufruct right and ownership title to the office building located in Warsaw at Al. Jerozolimskie 44 was settled on 7 March 2006. The Court of Appeals in Warsaw dismissed the lawsuit brought by Universal against BI Code. However, in August 2006 the receiver of Universal made a final appeal to the Supreme Court with respect to the aforementioned decision.
After the judgment of the Court of Appeals of 7 March 2006 became final, Metro-Projekt applied for deletion of the warning entered in section III of the land and mortgage register regarding the pending court proceedings instituted by Universal against BI Code for cancellation of the aforementioned sales agreement. The decision to delete the above entry was issued on 3 November 2006.
On 14 March 2007 the Supreme Court reversed the judgment of the Court of Appeals and ordered that the case to be re-examined by that court. On 21 November 2007 the Court of Appeals reversed the judgment of the District Court and ordered that the case be re-examined by that court.
On 11 September 2009, the District Court issued a judgement in the lawsuit filed by the receiver of Universal against the receiver of BI Code for cancellation of the sales agreement for the land perpetual usufruct right and the ownership title to the building, entered into between Universal and BI Code, pursuant to which the aforementioned sales agreement was cancelled. The receiver of BI Code SA appealed against the judgment which was dismissed in a decision of 29 July 2010. The receiver of BI Code made a final appeal to the District Court but it has not been accepted to consider. Therefore the proceeding was terminated.
In January 2011 the receiver of Metro-Projekt requested that the proceedings before the District Court brought by the receiver of Universal for exclusion of the land perpetual usufruct right and the separate title to the building on that land suspended in 2005 were resumed. On 30 May 2011, the Regional Court dismissed the claim of Universal.
The decision was not final and binding; on 12 September 2011 the Receiver of Universal appealed against it. In a decision of 23 February 2012, the District Court in Warsaw dismissed the appeal of the Receiver of Universal regarding separation of the property located at Aleje Jerozolimskie 44 in Warsaw from the bankruptcy estate of Metro-Projekt. The litigation ended with a binding ruling.
On 9 May 2012, the Receiver of Metro-Projekt motioned the Magistrate in Bankruptcy to allow settlement with the Receiver of Universal with regard to disputable claims between the bankruptcy estates of the companies. Following the settlement, in exchange for resigning from claims for the bankruptcy estate of Universal, that of Metro-Projekt was to be charged with the additional amount of PLN 5,722 thousand to be transferred to the former. Magistrate in Bankruptcy approved the settlement in a decision of 31 May 2012. The decision is final and binding.
Following irrecoverable resignation from claims against Metro-Project submitted in the form of a notarized deed by the Receiver of Universal, the Receiver of Metro-Projekt transferred the above amount to the bankruptcy estate of Universal on 5 July 2012.
On 10 January 2013, 18 March 2013, 19 June 2013 and 30 September 2013, the Receiver of Metro-Projekt announced the sale of the enterprise of the bankrupt company under a single-source contract, with a proviso that it should have the form of a tender/auction. The starting price for the enterprise was PLN 110 million, PLN 99 million, PLN 93 million and PLN 90 million, respectively. As no tenders were submitted, the procedure was not carried out.
Regarding unsuccessful attempts to sell the business constituting the bankruptcy estate of Metro-projekt (consisting mainly of real property) the fair value of the property was verified and consequently the decrease in recovery amount of which PZU Życie expects the additional impairment loss in the amount of PLN 15,170 thousand has been recognized with respect to receivable form Metro-projekt. As at 31 December 2013 the total impairment loss amounted to PLN 26,275 thousand.
In the opinion of the Management Board of PZU, the mortgage established for the benefit of PZU Życie does exist and the Company has the right to pursue the related claims from any owner.