Brookside wins Sh1.6 billion in breach of contract lawsuit

Dar es Salaam. A clearing and forwarding company has been ordered to pay Brookside Dairy Tanzania Limited Sh1.6 billion for breach of a contract relating to importation of dairy products from Kenya.

The Commercial Division of the High Court said there was sufficient evidence that the breach by Liberty International Limited has caused the dairy products dealer huge loss and damages.

Brookside was established in Tanzania in 2001 and licensed to import dairy products from Kenya.

Brookside brought a suit against Liberty International and its managing director John Kyenkungu allegedly for receiving over Sh900 million but failed use the money to settle import duties, taxes, levies and other charges relating to importation of dairy products from Kenya.

Court records show that the dairy company hired Liberty International since 2004 for clearing and forwarding dairy products from Kenya.

Under the agreement, Liberty International, through its managing director Kyenkungu was receiving cash from the Brookside to pay import duties, taxes and secure work permits to comply with all legal and regulatory requirements.

Brookside claimed it remitted all the statutory fees and taxes relating to importation of dairy products for remittance to relevant authorities including the Tanzania Revenue Authority (TRA).

The money was also to be paid as fees to the Tanzania Dairy Board and Veterinary, the Tanzania Food and Drug Authority (TFDA) and procure work permit for plaintiff’s employees.

The company resorted to court action after learning that defendants had not remitted the amount to the relevant authorities as agreed and failed to account for the money.

At the hearing of the suit, the plaintiff was represented by advocates Hadija Kinyaka, Beda Kapinga and Mariam Sereni while the defendants enjoyed the service of Mr Robert Rutaiwa and Mr Derick Kahigi.

Brookside Tanzania director of finance Kennedy Githeru told the court that his company hired Liberty International to clear and forward the company’s dairy products from Kenya.

It was also an express term of their agreement that Liberty International will work to procure resident and import permit on their behalf.

He tendered in court emails to prove existence of contractual relationship between them and the two defendants as well as terms of engagement.

“Despite receipt of the amount, the defendants neglected, refused and failed to remit the amount to the government authorities,” said the witness.

The witness claimed the refusal plunged them into financial difficult that they had to find alternative means to raise fund to pay government taxes, fees and levies including payment of Sh120.3 million VAT to TRA.

Their company was also banned from importing milk into Tanzania over failure to pay taxes, fees and levies to the government as the result of the breach.

He claimed financial losses including loss of profit, business and investment and loss of reputation in business fraternity and the government and loss of goodwill.

The director of Liberty International Limited, Mr Aron Byamungu, admitted that Brookside Dairy used to be their client but they had no permanent contract with the company nor any written form of agreement.

“We only act on single assignment upon instruction from Brookside Dairy Tanzania Limited and the payment was based on such assignment,” he said.

Regarding claim that they breached express terms and conditions of the contract, he contended that he had never seen the alleged contract. He said a single assignment they did had no express terms and conditions rather a mere instruction to clear and forward the consignment.

“Liberty International Limited was licensed to do business of clearing and forwarding, and not to make follow-up for business licence, tax clearance or other government permit from government agencies,” he claimed.

He denied to have any agreement with the plaintiff for the purpose of receiving any amount and remit the same to the Ministry of Livestock and Fisheries, TRA, TFDA and renewal of plaintiff’s employee work permit.

He however admitted to have partially received the money for work permit and license and he partially acknowledged the liability.

Liberty defence fails

Judge Dunstan Ndunguru said it was evident there was a correspondence between the plaintiff and the defendants made by way of e-mail concerning the business arrangement and money transactions made as from January 2916 to December 2018.

“The e-mails correspondence suggests that the parties are not stranger to each other, they have business relationship, this is typical an implied contract which is legally binding on the parties and it has the same legal forces like an express or written contract as the obligations derives from the action and conduct of the parties.

“In this case there is no doubt that there was a breach of contractual obligation entered between the plaintiff and defendants. Exhibits show that the defendants did not execute their obligation of paying regulatory fees and importation fees and taxes despite the plaintiff advanced payment,” said the judge.

The court said the defendants contributed to the breach of the terms of the contract which occasioned loss and damages to the plaintiff for the failure to fulfil the requirements of the implied contract.

“As the result the plaintiff was banned from importing milk to Tanzania. The plaintiff also was forced to find alternative source of finance to facilitate payment of unpaid amounts to the responsible authorities.

The court ordered Liberty international to pay the plaintiff Sh935.3 million and $2,800 in unclaimed amounts advanced to the defendants.

They have also been ordered to pay Brookside Sh500 million for the loss of business as from May 2018 when the dairy products dealer was banned from importing milk to Tanzania by the Ministry of Livestock and Fisheries.

The defendants will also pay the plaintiff Sh200 million in general damages for breach of terms of the contract.