Fortune News | Oct 17,2020
A dispute between MIDROC Foundation Specialist and a former employee and shareholder continues even after a court closed the six-year-old legal wrangling. Although the Court ordered the company to pay the former employee 23 million Br six months ago, he claims not to have received the payment.
The legal battle between MIDROC Foundation and Achim Braun and his company Mediterranean Group EA was started in 2014, after the latter took the case to the Federal High Court, suing MIDROC Foundation. Mediterranean Group claimed that MIDROC Foundation did not deliver payments due for construction machinery rental services. While working together, the two had 86 machinery rental agreements.
For the services, MIDROC Foundation paid a little over 29 million Br but left with outstanding payments of 21.8 million Br, according to a claim filed by Mediterranean.
"However, MIDROC sent us a letter stating that the remaining payment was just 16.1 million Br," reads Mediterranean's claim. "And we requested a meeting with company management to discuss the payment, but they refused to do so."
Mediterranean also claimed that MIDROC Foundation had to pay an additional 3.9 million Br, bringing the total unpaid value to 25.86 million Br. MIDROC Foundation then paid 6.4 million Br, leaving 19.5 million Br unsettled. Mediterranean requested the Court to order the Foundation firm to settle the unpaid value along with nine percent interest.
In its statement of defense, MIDROC Foundation stated that Achim, who was previously the general manager of MIDROC Foundation, is the major shareholder at Mediterranean Group EA where he owns 98pc of shares. MIDROC Foundation's defense statement further stated that Achim owns a 20pc stake in MIDROC Foundation, which leads to a conflict of interest regarding the allotment of contracts to Mediterranean.
The contractual agreements for machinery rentals were signed between Achim and Mishame Yohannes, general manager of Mediterranean, who also happens to be Achim's spouse, according to the defense statement.
A.W. Thomas Certified Chartered Accountants, who was hired to audit the transactions, has proven a conflict of interest and that Mediterranean was hired for the contract without a proper bidding process, claims MIDROC Foundation's statement.
MIDROC Foundation, which specialises in geotechnical investigation, foundation recommendation, and design and construction of pile foundations, called for the contract's termination on the basis that the machinery rental timesheets were not authenticated and lacked clarity, thus freeing it from affecting any payments.
MIDROC Foundation likewise filed a counter claim at the Federal High Court, accusing Achim of letting Mediterranean take spare parts from MIDROC Foundation's machinery by saying that the machinery had deteriorated. It also accuses the former general manager of using the information he obtained while working at MIDROC for his personal benefit.
Achim allegedly refused to avail documents for audit, exposing MIDROC Foundation to losses and causing its insolvency through 8.5 million Br in debts, according to the counter claim. MIDROC Foundation, which was established in June 1998 as a grade-one specialised foundation contractor, also accused its former manager of mismanaging 27.3 million Br.
For the counterclaim, Achim did not file a statement of defense even though he received the charge. In April 2016, the High Court had merged the two files and started reviewing the case.
After examining the case in 2018, the presiding judge Sintayehu Zeleke ruled in favour of Mediterranean in the first case. MIDROC Foundation won a partially favourable ruling under the second one. Under the first one, the court ordered MIDROC to pay 19.5 million Br to Mediterranean along with interest.
In the second file, the Court rejected MIDROC's call to make Achim liable for the 27.2 million Br in damages. Still, it decreed that Mediterranean should pay five million Birr to MIDROC Foundation for the machinery spare parts that were transferred to the former.
Displeased with the lower court's ruling, MIDROC Foundation appealed to the Supreme Court, which sustained the lower court's verdict. This triggered the Foundation to then take the case to the Cassation Bench, which accepted the appeal and started reviewing the case. However, the five justices who presided over the case rejected MIDROC Foundation's appeal in July 2020.
After the final ruling, Mediterranean jumped into execution to recover the payments by auctioning off properties, machinery and vehicles belonging to MIDROC Foundation.
However, it could not proceed as most of the company's properties were under an injunction for a 15-million-Br loan it took from Dashen Bank, which took the properties as collateral, according to Getachew Kitaw, lawyer of Mediterranean, which was established in 2007 to work on pile drilling, advanced foundation solutions and engineering services.
"When asked by the execution court, the management of MIDROCFoundation responded that they don't have money since the former general manager led the company to a loss," Getachew told Fortune, adding that they were able to get just 365,000 Br from its account.
Mediterranean is trying to find properties that are free from any claim or injunction and auction them off, according to the lawyer.
Mekonen Teshome, communications and public relations manager at MIDROC Ethiopia, asserted that the company could not comment on the issue since it is proceeding with possible ways forward as they are unhappy about the courts' decisions.
PUBLISHED ON Jan 16,2021 [ VOL 21 , NO 1081]
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