20101026 TZHC Dar es salaam

IN THE HIGH COURT OF TANZANIA (DAR ES SALAAM DISTRICT REGISTRY) AT DAR ES SALAAM CIVIL CASE N0d24 OF 2010 MEIS INDUSTRIES COMPANY LIMITED oe .PLAINTIFF VERSUS THE GOVERNMENT OF THE GREAT SOCIALIST PEOPLE'S LIBYAN ARAB JAMAHIRIYA....... DEFENDANT JUDGMENT This case, to put it in the simplest terms possible, is about a breach of contract • caused by the defendant's abstinence, in the performance of its obligations, spelt out in the said contract, mutuaily agreed and structured upon good faith, between these two sides. The plaintiff, MEIS INDUSTRIES COMPANY LTD, has sued the dfendant, THE GOVERNMENT OF THE GREAT SOCIALIST PEOPLES LIBYAN ARAB JAMAHIRJYA 1 (GSPLAJ), seeking among other things, a declaratory order that the defendant's refusal and/or default to disburse and/or cause the release in favour of the plaintiff, of the amount of Tanzania Shillings, equivalent to United States Dollars Twenty Million (USD 20,000,000), plus accrued interest, currently held in Account No. 004-200- 0002216 - 01 at the Tanzania Investment Bank (TIB), is unreasonable, unfair, arbitrary and unjustifiably injurious to the plaintiff; an order for immediate disbursement or release in favour of the plaintiff the said amount of Tanzania shillings equivalent to, plus accrued interest from Account No. 004 - 200 - 0002216 - 01 held at TIB; and an order for payment of general damages, interest, costs and any other reliefs, as the Honourablé Court may deem fit to make and issue, in the premises hereof. Briefly, the genesis and the scope of the plaintiffs, case, is best recited by two' witnesses, who spoke on behalf of the 2 & plaintiff and from the voluminous information contained from a heap of documents tendered in court as exhibits P I to p 24. These witnessed were, Joseph Tadayo Ananiä, who stood as PWI and Merey Ally Saleh, who testified as PW 2. These two witnesses are employed by the plaintiff's company. Tadayo (Pwl) is an advocate of the High Court. He is retained by the plaintiff's company as a full-time legal adviser and serves the company in the capacity of the company secretary. He is,. therefore, part of the management team. His main duty is to ensure that the company operations are within the parameters of the legal framework. Merey Salehe (Pw2), is the Managing Director of the plaintiffs company. Both these two witnesses, had the opportunity of dealing with the current case. They are actually, well versed with the facts of this case. They both told the court that initially, the plaintiffs company was 3 engaged with water business. However, sometimes in 2007, the plaintiff opted for cement production. The plaintiff approached the Ministiy of Energy and Minerals, with whose assistance, a feasibility study was carried out (Exh P4), at a location in Lindi Region, precisely at Machole area, where the plaintiff decided to construct a cement manufacturing plant. It is said that the surrounding land, is so rich in gypsum, limestone and red soil deposits, that are so vital in the production of cement. All these minerals were identified at Mchinga Area. The plaintiff's biggest challenge, after the identification exercise was carried out, was how to get the funds to service the project. The plaintiff contacted : severa l banking institution, withifl and outside the country and in the process, Pwl and one Ambassador Islam Saleh Balhabou, the plaintiff's chairman of Board of Directors, and the Consular of the Union of Comoros in Tanzania, went to Libya in search of financial 4 .1: I I j H a assistance and contacted the Government of the Great Socialist People's Libyan Arab Jamahiriya. They presented Exh. P4, to officials in Libya. The defendant was satisfied that the plaintiff's project was financially and economically viable. While in Libya, Pwl and Ambassador Islam Balhabou, leant of Debt Swap Agreement between the Government of the United Republic of Tanzania (GURT) and the defendant. It was said that the GURT owed the defendant the sum of USD 101,687,077.50 and that as a result of successful negotiations between the two states, a Debt Swap Agreement was reached. That agreement was sealed on 20th July, 2005. According to the terms of the agreement, obtainable in Exh P5 and P9, the Addendum No 1 to the Debt Swap Agreement and the Investment Agreement, respectively, the defendant had agreed to cacel interest an penalty interest amounting to United 5 I States Dollars one hundred and one Million Six hundred eighty seven thousand seventy seven and fifty cents (USD 10i 087,077.50 .) of the consolidated amount and further in accordance with the terms of the settlement agreement, the defendant opted for a debt swap of the United States Dollars forty Million (USD 40,000,000) emanating from USD 101,687 5 077.50. The two countries agreed that two accounts be opened in local banks, one be operated at the National Bank of Commence (NBC) at Corporate Branch and the other at Tanzania Investment Bank (TIB). Each of these accounts be credited with USD 20,000,000. It was further agreed that the money deposited in these two accounts would be invested in project mutually agreed by these two Governments. r;i I. WIT en the plaintiffs project was presented in Tripoli Libya and approved after it was found to be financially and economically viable, the defendant resolved that the money held in Account No 004 - 200 - 000 2216 01 maintained at TIB plus the accrued interest, be invested in the plaintiff's project after the plaintiffs proposals were presented in a meeting of the two Heads of State, which took place in Tripoli Libya on the 1 9 th November, 2008. As a result, Addendum No. 1 (Exh P5) was drawn. This basically amended and introduced a new article in the Debt Swap Agreement that spelt out how the amount of USD 40,000,000 was to be spent. Article 4.02 and 4.03 that are relevant to our case are subscribed in the following phrases: 4.02 The amount of Tanzanian Shilling equivalent to United States Dollars Twenty Million (say USD 7 ' •$ 20,000, 000.00) pius accrued interest currently held at the Tanzania Investment Bank Account No, 004- 200-0002216 01 shall be advanced to MEIS Industries for a cement factory to be constructed in Lindi 4.03 Subject to article 4.02. MEIS shall repay the loan plus accrued interest to Account No 004 -200 -000 2216 - 01 held at Tanzania Investment Bank within the terms to be agreed upon between the parties herein mentioned and MEIS Industries. Pwl informed the Court that the defendant's initial reaction was very positive and they exerted pressure on the GURT and TIB to prepare and sign the Investment t Agreement, pursuant to Article 403 above. The defendant enthusiasm is evident in two letters wrote by the defendant's Ambassador in Tanzania, Exh P6 (a) and P6 (b). In response to these letters, the Ministry of Finance and Economic Affairs (MOFEA) called a Meeting inviting all Stake holders in the matter, to discuss the credit facility to the plaintiff by TIB. The MOFEA letter of invitation to that meeting, which took place on the 9 th June, 2009 and 10th June, 2009 was admitted as Exh P7. As mentioned, the meeting was held and the Minutes drawn Exh P8. The meeting was well attended. It attracted representatives from MOFEA, IBOT, TIB, METS and even the President's office was represented. The meeting resolved to prepare and executed the Investment Agreement and indeed, the Investment agreement, Exh P9, was drawn. The parties to that agreement were the GURT; the defendant; the plaintiff and .1 9 TIE. All respective parties signed Exh P9, except the defenñant. Five sets of Exh P9 were forwarded to Libya for the defendant's signature. The forwarding letter dated 19th June 2009, Exh PlO, written by MOFEA, addressed to H.E. Dr. Ahmed A. Elashhab, the Ambassador of the defendant in Tanzania, has not been acted upon to date. The defendant is indifferent and has assigned no reasons at all for the distance. The plaintiff pressured the GURT, to persuade the defendant to sign the agreement, but in vain. Perhaps, at this juncture I should permit PW1 to speak by his own words on how the plaintiff squeezed the GURT to pressurize the defendant to implement the investment agreement. He is recorded to have said: "we reminded the gout times and times again. We complained to the Ministry of Finance and the Ministry of Foreign Affairs. At times we copied our complaint letters to 10 ) CO ci) 0 ci) 0) C/) ci) 0 ci) 0) ci) p ci) ci) ci) ci) ci) 0 I' co ci) ci) ci) ci) c) L Th .%- ci) ci) ci) C) C') CO C) CO ci) CO C') ( ci) co ci) CJ CO co c) C) c) C) Qo C) Cl) "S cC) C') ci) I C) : ci) c) ci) (I) co ' ci) Cl) 1 ci) CO I' 0 ief No TYc/E1440123 dated 11312010. We were supplied with copies of these letters. The letters vividly evidenced how serious our gout was in following up this matter. There is yet another letter from TIB. It was dated 231312010 it was addressed to the Ministry of Finance... All these letters expressed the desire of the Govt of the URT to have the agreement implemented. The defendant was asked to release the ftinds. For instance, TIB complained that the money deposited there was left in abeyance. TIB is holding this money in a non interest earning call account. They can not invest these funds in a proper manner. This is because the funds are supposed to be disbursed to the plaintiff. 12 PW I further told the court that failure to implement the investment Agreement is also holding back other funds held in the NBC account, whose release is conditioned of the release of funds held in the TIB Account. This Credit facility required the plaintiff to repay the loan within a period of six years. from draw down date. However, the first two years constituted a grace period within which the plaintiff needed to complete the construction of the plant and commerce production. On his part, Meriy Ally Saleh, Pw2, the plaintiff Managing Director, took time in the witness box, to reveal the damages sustaineçl by the plaintiff, as a result of the defendant defiance to sign and implement the Investment Agreement. Pw2, described how the plaintiff depended on the defendant's promise, when the plaintiff embarked on the extensive preparation Of the pre-constnicted •1 commitments and took general undertakings. The plaintiff commenced by purchasing land for the factory site, as well as, the one that has huge deposits of raw materials for the production of cement, which was also used to cover for the security of the loan. The plaintiff purchased 250 acres of land, in all, from South Coast Cement Co. Ltd, for USD 3,815, 700. The plaintiff executed a deed of sale with the cement company, Exh P18. The company paid on the spot, as part payment, USD 815,700 for the land Each acre of land was valued at USD 15,000. The balance USD 3,000,000 was to be paid after the production of cement commenced. Moreover, the plaintiff purchased the requisite 37 Mining Licences. They were tendered in Court, as Exh P17. On the 161-h July, 2008, the plaintiff executed a contract with Ms• China Machine Building International 14 I Corporation, for the construction of the big factory. The construction of the plant revolved around engineering, procurement and construction of the factory, with the capacity of producing 1200 tons of cement a day. In fact, it was a turnkey project. The contractor was required to design, supply, install, commission, perform test and train the plaintiff's personnel. The total price was set at USD 50,000,000. According to the terms of the contract, Exh P19, the commencement and time for the completion of the construction of the plant was set. Survey, design and execution of work, was to commence immediately. The construction work was set to start in July 2009 and was to be completed by December 2010. The factory was fixed to be commissioned by January, 2011. On behalf of the plaintiff, Pw2, insisted that the plaintiff has suffered and it will continue to suffer, in many ways. This is because the defendant has refused to 15 L disburse funds for the implementation of the project. The project is behind schedule. The plaintiff will not be able now to catch up with the challenges of cement market that was gauged. They had intended to capture the East African Common Market. They will now fall behind by two years. The plaintiff had open market in the great lakes Regions such as Kenya, Uganda, Rwanda, Burundi, and Democratic Republic of Congo and even in Malawi. The defendant has thwarted the plaintiff's efforts to prosperity. They took other business undertakings with third parties, well in advance, in anticipation that production would be smooth and commence as scheduled by January 2011. The plaintiff regrets• that those cOmmitments can no longer materialize.. Those undertakings will definitely invite suits. The plaintiff has exposed itself to be sued for failing, to honour part of its obligations, contracted with those third parties. One of 16 & those awaiting suits is contained in Exh P22, whereby the plaintiff undertook, with effect from February 2010, to supply clinker at the minimum average of 400 tons per day to Ms Dar es salaam Cement Company. The defendant's inaction will definitely falter the plaintiff from discharging its commitment. The plaintiff is bound to spoil its name. Otherwise, they will have to import the clinker from foreign lands to satisfy the quest of Dar es Salaam Cement Company. PW2 was persistent that such undertaking will be damn expensive and will stir up production costs, as the clinker will have to be purchased by using foreign currency. The plaintiff will have nothing left but to lose the business advantage and profits and its reputation will definitely be damaged. The contractor, •Ms. China Machine - Building International Corporation, has also started questioning the reliability of the plaintiff: The project price has already 17 gone up by USD 2,000,000 Pw2 further asserted that the contractor' has in fact, reviewed the building agreement, Exh P21, and is likely to review it further, to top up the project price, in light of the increasingly strong Chinese economy, if the construction works will not have started any time soon. That was not all. The Managing Director of the plaintiff company, winded up by saying and perhaps, 1 should now allow him to speak in his own words. He said: "BOT guaranteed the debt to Exim Bank. We had to secure these funds to complete the project We also obtained a certificate of Incentives. By this certificate we were exempted to pay certain taxes. However, failure to commence the project within a period of 18 1 two years invalidates the certcate. The certificate expires in December 2010. Indeed, by the defendant deflance, we shall not use the certficate. We shall incur more heavy losses. We will not be entitled to exemption." Both the BOT letter of guarantee to Exim Bank, Exh P23, and the Certificate of Incentive, Exh P.24, were tendered in Court. On further losses expected, PW1 went on to conclude: "We expect our plant to employ 250 • permanent employees and 1500 casual labourers. The gout would have received a substantial amount in income tax revenues. In concluding we ask to be granted the reliefs asked for in the plaint: 19 This is a b1 project. The sum of USD 14 Million that we have asked as general damages is peanuts in light of the losses that we expect to suffer. The profit margin will definitely he high. We expect a turn over of almost USD 150 Million. That is all." The hearing of this case, was directed to proceed one sidedly, pursuant to the provisions of ORDER VIII Rule 14 (2) (b) of the Civil Procedure Code, (Cap. 33 R.E. 2002). The defendant was duly served. However, it did not present its Written Statement of Defence within the required period of 21 days. Neither has the defendant entered appearance to pursue this matter. Consequently, ORDER VIII Rule 14 (2) (b) of the CPC was invoked. CI - a.) a) a) -1 a.) t-\J I. - a) CL) Cd H 'ci o Q) a) C,) Cd 2 ' a-) Cd 0) co a) Cd Cl) a) ,..D H (_ ) CO Cd 0 Cd Cd Cd () • -.4 0 C.) 0 o _ '-4 C/) •' • --4 0 • C,) -4_) 0) .'-4 Cd +- •— II a) 0) CO — a-) - _0 o _ - Cd i) 0 4) 0 0) a) a) a.) . o C') Cd 0 biD a) a) (1) a-) CO 0 — 0 o• - 1-4 biD •- a..) () 0 '1 H I. Cd - -D C6, Q -o a) a). -ci ° Ci) 0 +- a) .2 0 Ci) a) 0 0 , a) _ . +-) o • D _ Ci) - cd cd a) -1 0 co 0 - a.) o Cd 0 a) --) – -6 - Cl) a) -41 a) E H 0 0) L a) C,) a) 0 - ci 0 09 Cld 0 a) -4 in turn, produced a heap of documents, in support of the plaintiff's case. I have subjected the evidence of these two witnesses, to a thorough convolution. With respect, I am duly bound to pronounce, as I hereby do, that I am persuaded from my perusal of the court record and having considered the voluminous information, contained in the heap of documents, supplied to the court by the plaintiff's witnesses, especially, Exh P4, the feasibility study; Exh P5, addendum to the Debt Swap Agreement, Exh P6 (a) and P6(b), the two letters by the defendant's ambassador vividly showing his approval of the Investment Agreement; Exh P8 stakeholders Meeting Minutes; Exh P9, the Investment Agreement; Exh P10, the letter that dispatched the Investment Agreement to the defendàiat for signature and release of funds; Exh P11, P12, P13 and P14, the follow up letters by the Government of United Republic of Tanzania; 22 Exh P15, e thValuation report and worthness of the landed property and its title deed Exh P20, which was said to be worth over 100 Million USD; And from the summary and the ebb or rather effervescence flow of Mr. Kamara's commendable submission, which indeed, assisted the Court a lot; I am satisfied without mincing words, that the plaintiff case, as amply demonstrated, must be sustained and that the plaintiff must be entitled to the reliefs sought. It was established, in uncontroverted evidence that the defendant undertook to finance the plaintiff's project. The defendant fully involved itself in the plaintiff's commercial undertaking. The defendant was satisfied with the economic financial viability of the plaintiff's project. There was, indeed, the meeting of the minds. Upon the defendant's promise, the plaintiff embarked on extensive pre-construction commitments and undertakings. Then suddenly the defendants backed off. It failed to perform 23 t. - .,s. - -j. • F 1' part of its obligation. Failure to perform, in this case, accounted for the breach of a contract. Mr. Karnara put it in these words: "The evidence on record irresistibly point to the defendant's unexplained unjustifiable defIance. In no one correspondence from the defendant is it expressed, even remotely, why the defendant would have to renege on its undertaking and assurance after the plaintzff had zealously embarked on extensive pre-construction commitments and undertakings. The defendants undertaking and assurance had placed the plaintiff into legitimate expectation, more so, when these assurances and 24 I undertakings traced their origin from an instrument/accord between the two Heads of States. The plaintiff would have no reasOn to question or doubt the spirit of. the Debt Swap Agreement and Addendum No 1 thereto (Exh P5) in the absence of any explanation to the contrary effect by the defendant. Indifference and or in action to operationalise the said instruments can not be just fled in any way whatsoever. The defendant refusal and or default to disburse or to cause the released of the fuds in favour of:the plaintiff is, in our humble submission, unreasonable, unfair,, arbitrary and unjustifiably injurious to the plaintiff" 25 With respect, I cannot part from this statement by Mr. Kamara. in light of this and in sum therefore, the evidence and the circumstances are in favour of a comfortable finding, that the defendant refusal and or default to disburse and or cause the release in favour of the plaintiff of amount of Tanzania shilling equivalent to USf) 20,000,000 plus accrued interest currently held in Account No. 004 - 200 - 000 2216 - 01 at TIE is unreasonable, unfair, arbitrary and unjustifiably injurious to the plaintiff. The defendant failed to perform the contract without a legally valid excuse and failed to live up to its responsibility under the contract. The plaintiff therefore, is entitled to that relief. Accordingly, it is so declared. The plaintiff, in light of relief (b), is free from any blame. However, every single day that passes, the plaintiff is caught up with heavy losses. As demonstrated hereinabove, the project is late by more than a year. As 26 - rightly submitted by the learned counsel, the damages is attributed to and blamable upon the defendants failure to disburse or to cause the release of the funds in the TIB Account to the plaintiff. This is because they have failed to perform in accordance with the promise made. Mr. Kamara, has listed down the adverse consequences, that the plaintiff has suffered and likely to suffer. These, as already demonstrated, include, to mention only a few, the initial costs, that saw the purchase of landed properties, without forgetting travel, air fare tickets plus inland transportation and accommodation for the plaintiff officials, while in Libya; the clinker supply commitment to Ms. Dar es Salaam Cement Company; the plaintiff had planned and indeed expected to have a head start in the cement supply in the common market availed by DRC, Rwanda, Burundi, Malawi, Zambia and the Great lakes. However, because of the delay brought by the defendant, 27 loss of expected income will obviously occur. Again, these delays, will deal a blow, to the plaintiff, with regard to the incentives that would have accrued to the plaintiff, by virtue of a Certificate of Incentive that was issued to the plaintiff by TIC. To properly gauge the actual of loss, Mr. Kamara listed ten (10) benefits that are associated with investments under the TIC regime, that I need not mention here. According to Mr. Kamara, the plaintiff plight demands for the immediate remedial reliefs. The remedy has to be immediate. That an order for immediate disbursement be released in favour of the plaintiff of the USD 20,000 2 000 plis accrued interest from Account No. 004 - 200 - 000 2216-01 held at TIB. I have followed and considered Mr. Kamara's argument d I would in all circumstances of this case, respectfully W. acknowledge. It is uncontroverted that the construction of this plant, will contribute immensely, to the development of the important infrastructural needed to speed up the economic development of this country and it will certainly speed up social and economic development in the Southern Zone Regions. PW2, told this Court that the plant will create employment opportunities to almost 1750 people and thereafter it will improve the lives 'of the residents of Lindi Region and its surrounding area. The government of URT will definitely benefit, as stated by PW2, from tax revenuds including sales from bags of cement. I would, therefore, without slightest hesitation, order and direct that the sum of USD 20,000,0.00 held in Account No. 004 - 200 - 000 2216 - 01 at TIB plus its accrued interest be handed over immediately to the plaintiff and the plaintiff is directed to commence the 29 ' - I construction of the plant immediately without further delays. I will pen off by throwing a glace at the general damages sought by the plaintiff. As a matter of principle, the rule governing general damages was set down long before anyone learned in law, in this country, was born. This was in 1854 in the case of Hadley Versus Baxendale (1854) 9 Ex 341. In that case, it was held that when a contract has been broken, the party who suffers by such breach, is entitled to receive from the party who has broken the contract, compensation for any loss or damage caused to him, which naturally arose in the usual course of things, from such breach or which the parties knew when they made the contract, to be likely to result from the breach of it. 30 Mr. Kamara, drew my attention to a passage in a book by Andrew Burrow, titled Remedies for Torts and Breach of Contract, 2nd Edition. The excerpt is this: "The corrpensatonj aims require the courts to assess not only the position the plaintiff would have been in if the breach of contract or tort had not been committed but also his actual position as a result of the tort or breach of contract, so that damages can make up the difference." Indeed, the duty of assessing general damages is the province of the court. However, that obligation must always be exercised judiciously. In this case, it is evident, that the plaintiff suffered heavy losses and is likely to continue to suffer more harm as a result of the defendant's mischief. The plaintiff dethanded USD 14 Million as 31 4 enerai damages. PW2 vividly expounded and in my view, he spoke quite well, that the contractual agreement between the plaintiff and the defendant was big business venture. The sum of USD 14 Million that they have invited the Court to grant as general damages, according to PW2, is nothing but a glass of water in the Ocean, measured by the losses that the plaintiff is likely to suffer. The construction costs of the plant, on its own, are put at USD 52 Million. The defendant was not the only financial provider. The rest of the costs were to be secured from Exim Bank, the loan guaranteed by the BOT. Mr. Kamara submitted that the envisaged annual turnover is estimated at USD 57.2 Million, at an estimated average profit margin of USD 11.5. Million to USD 12 Million. Indeed, this was big cement manufacturing project which would generate 1200 tons of cement a day. 32 The defendant, as demonstrated hereinabove, is in violation of this legal agreement without any valid excuse. While duly served, the defendant did not appear to shield and mitigate these general damages. In my considered opinion, this case does not call for a lenient consideration. After all, the plaintiff are really in short of cash for the construction of the needed plant, which will indeed, benefit this whole nation. In considering the award, I take into account loss of profits, present or future caused by the defendant's action. This in my considered view, would qualify for compensation, by way of general damages, including inconveniences and embarrassment caused, loss of production, at the time set for the commencement of production; adverse effect on business goodwill and so on and. so forth. These damages are the direct and natural consequences of the defendant breach of contract. 33 Obviously, I am persuaded that it is reasonably probable, that these profits would have been earned, except for the beach. In my views, Mr. Kamara, has ably assisted the plaintiff to prove the loss. I am therefore, once again, persuaded.; in light of all these demonstrated losses and taking into account the defendant failure to resist the general damage application, that the plaintiff is entitled to bç awarded all the general damages prayed for. I would therefore, allow the claim for general damages as presented. I am convinced that the sum of USD 14 Million asked for, by the plaintiff will adequately redress the damage caused by the defendant breach of contract. (2 Consequently, I enter judgment in favour of the plaintiff. All orders asked for be issued accordingly, as intructed hereinabove. The Tanzania Investment Bank is. directed to release the loan facility forthwith. 34 * The plaintiff, on the other hand, upon receipt of the loan facility, should abide by the conditions of the facility as spelt out in the Investment Agreement. The defendant is also condemned to pay interest and costs of this suit. I hf/i 4/Pf S. KARU4 JUDGE AT DAR ES SALAAM 26th October, 2010 For the plaintiff - Mr. M.D. Matunda, Learned Counsel For the defendant - Absent duly sened. 35 ,.. .. ...