By FAUSTINE KAPAMA-Judiciary
THE High Court’s Commercial Division has ordered the
Citibank Tanzania Limited to pay over 3bn/- to Total Tanzania Limited for
breach of terms of Letter of Credit in a transaction involving supply of some
petroleum products.
Judge Stephen Magoiga ruled against Citibank, the
defendant, after allowing a commercial suit lodged by the Company, the
plaintiff. Such transaction related to the supply of 2,143 tons of mogas and
other petroleum products at 1,150,924.94 US dollars by Alchemist Energy Trading
to the plaintiff.
“I proceed to enter judgement and decree against the
defendant. I declare that the defendant is liable to refund a total of
1,150,924.94 US dollars negligently debited from the Plaintiff's account at
Citibank Dar es Salaam Branch,” he declared.
The judge further declared the defendant to have
breached the terms of the letter of credit by debiting such amount from the
plaintiff’s account in honoring the letter of credit without being issued and
strictly compliance presentation.
He also ordered the defendant to pay the plaintiff
company another sum of 300,000 US dollars as general damages and other payments
of various interests as well as costs of suit.
Before reaching into such a decision, the judge had to
determine some issues, including whether there was a breach of the terms of the
letters of credit, general agreement for issuance of letter of credit and
documentary credit and guarantee standby letters of credit in complying
presentation.
Having gone through the pleadings, testimonies of the
witnesses, exhibits tendered and rival submissions for and against the parties,
he answered such issue in the affirmative.
According to him, it was not disputed by parties that
plaintiff applied and defendant issued a Letter of Credit in favour of
Alchemist Energy Trading DMCC for the sum of 1,150,924.94 US dollars to finance
the supply of mogas and other petroleum products to the tune of 2143 Metric
tones to the company.
He also noted that that there was no dispute that the
plaintiff and the defendant entered into Letter of Credit arrangement via a
contract for tender in favour of Alchemist Energy Trading DMCC, which presented
a letter of indemnity and provisional invoice to Citibank Europe for payments.
Nevertheless, the judge pointed out that the letter of
credit could only be used in two ways, including where the beneficiary is
required to adhere to strictly compliance presentation upon arrival of the
goods in the destination port by presenting the required documents.
This means that presentation of signed commercial
invoice and seller's letter of indemnity and ascertainment of the quality and
quantity and certificates issued by independent inspector or using signed
commercial invoice and seller's letter of indemnity issued by beneficiary after
arrival of goods.
The second way, he said, could be in case of arrival
quantity and or the price at the port of destination or on the first day of
delivery laycan is not known at the time of Letter of Credit utilization.
“In the second scenario, in my considered opinion, the
beneficiary cannot utilize Letter of Credit unless and until the goods arrives
at the port of destination,” the judge said.
In that way, he said, the purchaser would equally be
protected and is the duty of both issuing and confirming banks to be satisfied
that delivery is done and very vital without which no payment can go safely but
at the detriment of the bank.
However, the judge noted, no arrival of quantity was
done but the defendant went on to authorize and pass payment despite resistance
by the plaintiff.
“This was wrong and it left the purchaser unprotected
and eroded the bedrock of international trade which is embedded on trust and
adherence to the terms and conditions of Letters of Credit,” he said.
Such failure, the judge said, undermined the
protection and promotion of international trade in using Letter of Credit
because without laycan (delivery), no way should payments have been allowed and
the wording of the Letter of Credit was to that effect.
According to the plaint, at the request of the
plaintiff, on March 1, 2021 the defendant issued Letter of Credit in favour of
Alchemist Energy Trading DMCC to undertake payments of the sum of 1,150,924.94
US dollars for petroleum products to be supplied to the plaintiff.
It was terms of agreement, among others, that the
defendant was to make payment upon presentation of signed commercial invoice,
certificate of origin, certificate of quality issued on arrival on ships tank
composite issued by independent inspector and certificate of quantity issued on
vessel arrival.
Where such document are not available payments were to
be made against presentation of signed commercial invoice and seller's letter
of indemnity.
Through the Petroleum Bulk Procurement Agency the
plaintiff ordered Alchemist Energy Trading DMCC to supply it with 1,520 metric
tons of petroleum products worth 1,150,924.94 US dollars which was to be
supplied to plaintiff between March 3 and 5, 2021.
Unfortunately, Alchemist Energy Trading was not able
to deliver the goods on agreed dates and was postponed to March 14, 2021 which
the same was not honoured leading to extension of delivery time between May 15
and 17, 2021 but which ended up in vain, thus the agreement was terminated.
Following that termination, the plaintiff requested
the defendant not to make any payment to Alchemist Energy Trading against
letter of credit for want of consideration. However, the defendant refused the
request because presentation of the document and discount of Letter of Credit
has already been made.
Hakuna maoni:
Chapisha Maoni