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Senior Reporter
CMED (Pvt) Ltd managing director, Mr Davison Mhaka has been cleared of obstructing justice in the long-running dispute between CMED and First Oil over the US$2,7 million paid by CMED for the supply of 3 million litres of diesel.
The High Court recently ruled that First Oil had not supplied the diesel and ordered it to refund all that CMED paid, at the current bank rate plus interest at the prescribed rte but so far First Oil has not refunded the money.
The two companies had 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 being charged with fraud after it misrepresented to CMED that they had capacity to supply 3 million litres of diesel.
During that time Mr Mhaka was also arrested on allegations of obstructing the course of justice after being accuse of cooking up papers showing how $2,7 million in the botched fuel deal was spent. Mr Mhaka then appeared in court facing charges of defeating or obstructing the course of justice and violating the Money Laundering and Proceeds of Crime Act. He has since been cleared of the charges by the courts.
In an interview, Mr Mhaka yesterday confirmed the developments and also said that CMED had also not received the refund from First Oil.
During a hearing in February 2021, 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 to pay duty 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 non-performance of the deal, but that was also rejected.
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