Judge berates First Oil for failure to compensate CMED US$2.7m
THE High Court has once again lashed out at First Oil Company for its failure to settle US$2.7 million to CMED (Pvt) Limited 10 years after the company failed to deliver three million litres of diesel after having been paid.
Justice Siyabona Musithu, sitting at the Harare High Court, said CMED should be paid even if First Oil wants to appeal his judgement.
CMED won the case last year, following a dragging legal battle after another High Court judge, Justice Owen Tagu, ordered First Oil to pay the amount.
However, First Oil rushed to the Supreme Court where it appealed Tagu’s judgement, complaining that it was erroneous.
The appeal automatically blocked CMED from recovering its money. However, CMED later applied for execution of Tagu’s judgement on grounds that First Oil was not being sincere in its appeal, which they argued was only meant at avoiding compensation.
But in the latest ruling, Musithu upheld CMED’s application ruling that the appeal by First Oil was frivolous and only aimed at evading fulfilling its 2013 agreement.
He ruled:“The court determines that on the evidence available, it is CMED that stands to suffer irreparable harm if execution pending appeal is not granted.
“The applicant parted with a huge amount of money, but received nothing in return. It is common cause that the applicant is in the business of procuring and dispensing fuel.
“Because of the instability in the pricing of fuel globally, it is also common cause that the amount advanced to the respondent may never procure the same quantities of diesel as would have been procured when the parties signed the agreement.
“At any rate, the applicant is not even going to be refunded the sum of US$2 700 000 in the same currency it was paid to the respondent.
“On its part, the respondent has failed to justify its retention of the said amount in the absence of any claim against the applicant. The balance of convenience is clearly in favour of granting the relief sought herein.”
He then granted CMED leave to execute Tagu’s judgement.
Musithu said in the event of an appeal being noted against his order, his ruling will remain operative and should not be suspended.
In the main matter, the court determined that the relief of specific performance was not sustainable because CMED had breached the contract by the failure to make the direct payment to the Zimbabwe Revenue Authority.
The court also determined that having failed to deliver the diesel, First Oil had no reason to hold on to the funds that had been paid for the purchase of the diesel.
Given this, Musithu said, First Oil’s appeal warrants some attention. “In the first ground of appeal, the respondent attacks the court’s decision to grant the alternative relief in favour of the applicant despite having determined that the applicant committed a material breach of the agreement.
“From my reading of the judgment (by Tagu), the finding by the court that the agreement was enforceable was made in the context of the defendant’s preliminary position that the sum of US$2 700 000.00 was paid before the agreement was signed.”
Tagu had ruled that First Oil cannot claim that the agreement is unenforceable because the company signed the agreement with eyes wide open, well after the amount of US$2 700 000 was deposited into its account.
He said by signing, First Oil rectified the contract, hence the agreement is valid and binding.
Tagu ruled First Oil had no right to hold on to the US$2.7m because by doing so it would be unjustly enriched.
Musithu concurred, stating that the merits of First Oil cannot therefore be determined on the basis of non-existent grounds of appeal.
“The respondent failed to point to any prejudice or harm that it will suffer if the said relief is granted.
“It merely said that it will suffer prejudice without pointing out to any such prejudice. Further, the mere fact that the court found the applicant to be in breach did not preclude the court from granting any alternative remedy available.”
The two companies have been at each other’s throats over the past eight years.
First Oil Company was to supply three million litres of diesel to CMED upon payment.
According to court papers, pursuant to that agreement, albeit before its signature, CMED paid a total of US$2.7m towards the purchase of three million litres of diesel.
In terms of the agreement, CMED was to pay a further US$720 000 directly to Zimra in lieu of duties and levies.
First Oil Company received the payment of US$2.7m through its ZB Bank account held at Avondale but CMED did not pay the sum of US$720 000 that would have been paid to Zimra in terms of duty and levies.
Parties went on to sign an agreement after payment of US$2.7 million. First Oil Company then failed to deliver the fuel as promised, prompting court action.
CMED insisted First Oil had an obligation to deliver the fuel or refund the value of three million litres of fuel.
In its plea, First Oil Company admitted receiving the money, but defended itself saying CMED breached the agreement by failing to pay US$720 000 for duty.
First Oil also argued that a court could not enforce a refund because CMED had paid the amount before signing the agreement.
First Oil submitted that if CMED was to be given three million litres it would amountto unjust enrichment. — Staff Writer.