Radar | Oct 11,2020
The Chancery of Libya Embassy, which failed to settle a 28.76 million Br court order, was auctioned off to a local construction and building materials supplier for 205 million Br.
Hadeed Trading Plc placed the highest offer to acquire the Chancery that rests on 4,920Sqm of land near Bisrate Gabriel in Nefas Silk Lafto District. Hadeed vied with 21 bidders during the opening that was held on June 28, 2019. The floor price for the building was 19 million Br.
The Federal Supreme Court Execution Directorate auctioned off the Embassy property when it failed to settle payments due to NHK Construction Plc from the construction of the building. Embassy representatives did not make an appearance at the auction.
The bidding started with 19 million Br but quickly jumped to 40 million Br with the first bid. The fierce competitive bidding saw 28 bids being placed in less than five minutes culminating with Hadeed winning the property.
The Embassy and NHK have been embroiled in an 11-year court battle following contract disputes after the embassy failed to pay the construction firm. The Libyan Embassy entered into a contract with NHK after the latter won a tender for 35.2 million Br to construct the Chancery. The contract stipulated that delivery was due within one year, however, the delivery was delayed by four years.
The Embassy, when called upon to accept the Chancery from the contractor, sent delegates to inspect the work. The delegates refused to accept the building, claiming that it was not in accordance with the contractual agreement, as it failed to incorporate a diesel generator, CCTV cameras, fire safety equipment, compound lights and other requirements.
It also hired another firm that estimated the cost of the remaining work to be around seven million Birr and filed a lawsuit at the Federal High Court demanding compensation for the unfinished work from the contractor and failure of the consulting firm hired to oversee the construction.
NHK, in its defence, argued that it was not its responsibility to install the listed items and that, in any case, it has not received any payment for them. It also claimed that the Embassy had violated the contract as it refused to accept the building after it was certified by the consulting firm.
NHK also filed a counterclaim arguing that the delivery date was delayed, because the civil war in Libya led the Embassy to continuously change its decisions and fail to make timely payments resulting in a 25.5 million Br loss to the contractor. NHK also claimed that the devaluation of the Birr caused the contractor to lose 24.4 million Br.
NHK also requested that the court transfer 1.9 million Br the Embassy has withheld in a retention account as a guarantee, since the contractor has properly executed its duties under the contract.
The Libyan Embassy defended the counterclaim, stating that it has been making payments on time and cannot be liable for the delays. It also asserted that it cannot be held responsible for the devaluation of the Birr.
After reviewing the case, the High Court ruled in favour of NHK, saying that the company is not liable either for the seven million Birr nor for equipping the building with the items listed. The Court stated that according to the contract, payment was effective after the work was done and approved by the consultant and thus concluded that the Embassy does not have grounds to ask for compensation of unfinished work as it did not make the payments in the first place.
Under NHK's counterclaim, the Court ruled that the Embassy should pay 25.5 million Br in compensation for the delay of the project along with 24.4 million Br in compensation for loss of revenue the contractor suffered as a result of the devaluation of Birr.
The court also ruled that the Embassy should receive the building in its current condition and that 178,000 Br was enough to complete the unfinished work. It ordered the Embassy to return the 1.9 million Br it held in the retention account, after deducting the value for the unfinished work.
Displeased with the High Court's ruling, the Embassy took the case to the Supreme Court. In its claim, the Embassy said that it was not the actions of the Embassy that resulted in the delay, and the civil war in Libya had nothing to do with it. Since both parties are in Ethiopia, it should not be forced to make payment in a foreign currency, claimed the Embassy.
In rebutting the claims, NHK argued that the contracting company was not in Ethiopia and that embassies, by international conventions, are considered foreign territory. In addition, the bid document stipulates that the Embassy make payments in Libyan Dinars and, if not possible, convert it to either the dollar, euro or pound.
The Federal Supreme Court, in its judgment, framed the issue on the grounds of why the delivery was delayed for four years and whose fault it was. The court argued that neither of the litigants brought evidence that showed whose fault it was, and there was a concurrent liability.
It stated that the consulting firm had ordered the delivery of the building a year and a half ago, before the case was filed in court, and that the other delays were the result of the failure of the two parties to reach an agreement. The Court ruled that the Libyan Embassy should not make 25.5 million Br in compensation payments when both of the parties were at fault and reversed the lower court’s ruling that ordered the compensation.
In ruling over the devaluation claim, the Court stated that the contract stipulated that the payment should have been paid in relation to the foreign exchange rate and there was evidence that showed that at the beginning of the construction payments were made in foreign currency equivalence. The Court ruled that the contractor was entitled to 25.4 million Br in compensation for the loss of revenue as a result of the devaluation of the Birr, upholding the decision of the High Court.
The Court also sustained the decision of the lower court that ordered the Embassy to accept the building in its current condition and return the money in the retention account after deducting for the unfinished work. The Supreme Court ordered the Embassy to pay 28.76 million Br to NHK as compensation.
When the Embassy failed to make the payments, the Executive Court put the property on the auction block.
Haddad is expected to make full payment within 15 days of the auction. NHK will receive the 28.76 million Br judgment and the balance will go to the Libyan Embassy. Both Hadeed Trading Plc and NHK Construction Plc declined to make comments.
PUBLISHED ON Jul 06,2019 [ VOL 20 , NO 1001]
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