Court rules in favour JNHPP contractors in breach of contract case

DAR ES SALAAM: THE Court of Appeal has saved the bank account used for daily operations of Julius Nyerere Hydropower Project (JNHPP) from being garnished to satisfy a decree for over 12bn/- payments in favour of Tanzanian Company, Acclaim Construction Supplies Limited.

Justices Barke Sehel, Patricia Fikirini and Amour Khamis reached into the decision after granting an application for stay of execution lodged by the Arab Contractors (Osman Ahmed Osman & Co.) Limited and El- Sewedy Electric Company AC-EE Joint Venture, who are main contractors of the project.

They allowed the application and grant the order for stay of execution of the judgment and decree of the High Court, Commercial Division, issued in favour of the Acclaim company, the respondent, pending final determination of the intended appeal lodged by the two companies, the applicants.

“We find and hold that the applicants have fulfilled the requirements for grant of an order for stay of execution of the judgment and decree of the High Court pending appeal as stipulated under rule 11 of the Court of Appeal) Rules,” the Justices declared in their ruling delivered on November 1, 2023.

They directed each of the applicants to separately execute and present to the Court a corporate guarantee aggregating the decretal sum in accordance to the percentage of each applicant in the joint venture agreement, in favour of the respondent for the due performance of the decree.

The justices gave the applicants 30 days of the date of delivery of the ruling to comply with such requirement of depositing the guarantee as one of the conditions set out under the Rules for the grant of the application in question.

According to them, it was not disputed that the applicants are main contractors engaged in the construction of the JNHPP and they have a registered office and bank accounts that are operational in Tanzania.

The justices pointed out further that the applicants undeniably own and operate top quality heavy-duty equipment used in construction.

They said that machines such as excavators, backhoe, dragline excavator, bulldozers, graders, wheel tractor scraper, trenchers, loaders, tower cranes and compactors are expensive and where necessary, can offset the decretal sum.

The justices further noted that the application for stay of execution was filed timely without delay, the notice of appeal made under rule 83(1) of the Rules and lodged in the High Court on 1st day of March, 2023.

During hearing of the application, the applicants had submitted that as the main contractors in the JNHPP, a strategic national project, they were bound to pay employees and subcontractors through the bank account that was attached in execution of the decree.

The applicants further contended that, if the attachment continues, employees and subcontractors will not be able to effectively perform their duties and therefore, the strategic national project is likely to lag behind and cause irreparable damage to the applicants’ reputation.

Counsel for the applicants asserted that, a bank guarantee was not an ideal manner of security as it required actual deposit of the decretal sum to the bank that would in turn, offer the guarantee required.

He explained that, if such happens, the applicants’ operations will be paralysed as the amount involved is colossal and mainly, on the general damages.

The counsel further submitted that the balance of convenience, common sense and logic tilts in favour of granting the order sought as the respondent has not demonstrated that it will be able to compensate for the loss if the appeal succeeds.

On the other side, the respondent’s counsel delved into the type of security to be provided by the applicants and registered no objection for the order sought.

The respondent’s claim was founded on the alleged breach of contract entered between the parties in the year 2019.

Under the said arrangement, Acclaim Construction undertook to supply to the joint venture, concrete superpiasticiser, the admixture prepared on a special formula for construction works at the JNHPP.

The supply was to be done upon issuance of the purchase orders by the joint venture. Initially, the parties’ contract was smoothly implemented with both sides striving to make it operational.

However, the dispute arose when the joint venture’s procurement manager cancelled three purchase orders which cancellation was viewed by Acclaim Construction as a breach of contract. It was at that point in time when the respondent decided to take the matter to the High Court.

In defence, the joint venture companies admitted cancellation of the purchase orders and justified its decision on the ground that, contrary to the terms of the contract, Acclaim Construction supplied the admixture that was unsuitable for use in the project.

Upon trial, the High Court entered judgment and decree in favour of Acclaim Construction, thereby ordering the joint venture companies to immediately return and or make payment of 140 intermediate bulk containers valued at 12,174 US dollars.

The Court further ordered the applicants to pay general damages to the tune of 5,000,000 US dollars and interest on the general damages at the rate of 7 per cent from the date of judgment to the date of full and final payment.

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