Fortune News | Apr 13,2019
A three-year court battle ended last month after judges at the Federal High Court rejected 77.5 million Br in compensation claims by the Federal Police Commission. Presided by Judge Yacob Mekuria, the Federal High Court has passed a verdict favouring the defendants, Abay Insurance and Eyad Construction Plc.
The Commission claimed the amount after a 100 million Br project was delayed from completion. Lawyers representing the defendants argued that delays and subsequent costs were partly caused by the Commission, which runs a police academy in the outskirts of Addis Abeba.
The Commission first took the defendants to court in March 2018 following a dispute over the stalled expansion project at the Ethiopian Police University in Sendafa, 40Km north of the capital. It alleged that the duo owed it 77.5 million Br in compensation for the costs incurred due to the delays and as settlement for guarantee bonds provided by Abay Insurance.
The Commission hired Eyad Construction for the expansion project in June 2014, which involved building a series of structures serving as dormitories, a cafeteria, a meeting hall, a health centre, and a model police station. Construction was scheduled to be completed in two years, but the Commission alleges that less than a fifth of the work was completed by the deadline. The Commission terminated the contract in February 2016.
It took 10 months before the Commission hired two contractors – Yohannes Haile Construction and Tilahun Abebe Construction – awarding them 70 million Br and 70.1 million Br, respectively.
Lawyers representing the Commission subsequently filed a suit against the insurance firm claiming 22 million Br and Eyad Construction for 55.5 million Br.
Abay Insurance provided the contractor with a 9.9 million Br in performance guarantee bond and a 14.8 million Br in advance payment guarantee bond, 12.1 million Br of which remained outstanding.
However, judges at the Federal High Court ruled in favour of the defendants, finding the Commission liable for the additional costs incurred during the delay as it took nearly a year to hire new contractors. The Court also gave the ruling that the 11.1 million Br in assets under the custody of the plaintiff is sufficient to cover the additional costs incurred as well as the performance bond.
Price escalation for construction materials and inflation are to be blamed for growing disputes in the construction industry, according to Yohannes Woldegebriel, a lawyer with over two decades of experience.
“There should be a clear provision that compensates these consequential damages," said Yohannes. "it should be specifically stated in the contract.”
A representative of Abay Insurance has declined to comment, anticipating a potential appeal from the Commission may be underway. The Federal Police Commission and Eyad Construction were not available for comment.
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