CMED wins US$2,7m fuel suit

A private fuel supplier, First Oil, has been ordered to refund CMED US$2,7 million it received from the State-run transport entity for the supply of three million litres of diesel in a botched fuel deal, in which the High Court found both companies to have breached their own agreement.

The money would be paid at the current bank rate plus interest at the prescribed rate.

The two companies have been slugging it out in court since 2014, arguing over the return of the money paid to First Oil, which reneged on its promise to supply the commodity until full payment of the agreed purchase price and duty fees amounting to US$720 000 was made.

The deal led to First Oil company being charged with fraud for unlawfully and with intent to defraud, misrepresented to CMED that they had capacity to supply three million litres of diesel.

During the hearing, both companies were accusing each other of breaching the contract.

CMED had argued that it was entitled to specific performance as a right arguing that First Oil could not expect it to have paid the US$720 000 for import duties when the product was not delivered at all. It was argued that the obligation was not to the amount of the duties and levies to First Oil, but directly to Zimra.

First Oil sought to argue that the release of funds to it without a signed agreement brought about by the breach of the agreement.

The agreement was signed after CMED deposited the US$2,7 million into First Oil's ZB Bank account. It also argued that CMED breached the agreement as it did not pay the full purchase price by failing to pay the import duty that was due to Zimra. However, in a recent judgment, Justice Owen Tagu found that both parties breached their own agreement, but would not allow First Oil to unjustly enrich itself. It was the court's finding that the specific performance sought by CMED could not stand as the State-run entity did not fully comply with the terms of the agreement.

On the part of First Oil, the judge ruled that it would be unjustly enriched because it received the money, but did not supply the fuel to CMED. Justice Tagu criticised First Oil ,saying it could not claim that the agreement was unenforceable because it signed the agreement with eyes wide open, well after the amount of US$2,7 million had been deposited into its account.

"By signing the defendant (First Oil) rectified the contract, hence the agreement is valid and binding," he said.

"If the defendant's position is correct that the signed agreement is unenforceable because the plaintiff (CMED) paid before the agreement was signed, then in my view it follows that the defendant has no right to hold onto the US$2,7 million because doing so would unjustly enrich the company.

"Equally, the defendant would has also breached the contract by signing the agreement when the money had already been deposited into its account. It should have refused to sign the agreement."
 
CMED was also seeking to recoup US$1 276 611,84 damages for cost of finance and loss of business stemming from the scam at the State-run transport entity two years ago involving First Oil directors.