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First Oil Company Ordered To Refund CMED US$2,7 million In 8-Year-Old Saga

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By Mary Taruvinga


CMED (Pvt) Limited will finally recover its US$2, 7 million paid to First Oil Company back in 2013 after High Court judge, Owen Tagu ordered the oil dealer to pay compensation for 3 million litres of diesel which were not delivered.

The two companies have been at each other’s throats over the past eight years with the case having landed some top officials at First Oil company in the dock back in 2014.

Parties had entered into an agreement of supply and delivery of diesel in terms of which First Oil Company, the defendant in this case, was to supply 3 million litres of diesel to the plaintiff, CMED, upon payment.

According to court papers, pursuant to that agreement, albeit before its signature, CMED paid a total of US$2 700 000 towards the purchase of 3 million litres of diesel.

In terms of the agreement, the plaintiff was to pay a further US$720 000 direct to ZIMRA in lieu of duties and levies.

First Oil Company received the payment of US$2 700 000 through its ZB account held at Avondale but CMED did not pay the sum of US$72 000 that would have been paid to ZIMRA in terms of duty and levies.

Parties went on to sign an agreement after payment of US$2,7 million.

First Oil Company then failed to deliver the fuel as promised prompting CMED to file a case against the company arguing that First Oil had an obligation to deliver the fuel to CMED or refund the value of 3 million litres of fuel.

In its plea, First Oil Company admitted receiving the money but defended itself saying CMED breached the agreement by failing to pay US$720 000 for duty.

They also argued that a court could not enforce a refund because CMED had paid the amount before signing the agreement.

First Oil submitted that if CMED was to be given 300 million litres it would be unjust enrichment.

In his judgement, Tagu said it is common cause that parties had an agreement and that CMED paid US$2, 7 million as such it cannot run away from the obligation because an agreement was signed after the money was paid.

“Having analysed the submissions made by the parties and reading bundles of documents filed by the parties, the court noted that terms of the agreement were very clear.

“The defendant cannot claim that the agreement is unenforceable because it signed the agreement with eyes wide open well after the amount of US$2,7 million was paid into its account.

“The defendant does not allege that when it signed the agreement, it did not know that money had been deposited into its account. By signing, the defendant rectified the contract hence the agreement is valid and binding,” said the judge.

Tagu further ruled, “If the defendant’s position that the signed agreement is unenforceable because the plaintiff paid before the agreement was signed, then in my view it has no right to hold onto the US$2,7 million because by doing so, it would be unjustly enriched.

“The defendant would also have breached the contract by signing the agreement when money had already been deposited into its account. It should have refused to sign the agreement.”

The judge said it would be in the interest of justice that First Oil be made to refund the amount already received.

CMED wanted to be refunded in the alternative the value of diesel to have been delivered at the current rate of US$1.04 or $86.36/litre as per letter from Zimbabwe Energy Regulatory Authority dated October 1 2020.

But the judge said there is no justification for using this rate because no diesel was delivered to the plaintiff, the available diesel was at Msasa depot already procured at the rate applicable at that time.

“The plaintiff must be refunded US$2,7 million that it paid together with interest and costs. It cannot recover the full US$3,120 million as this includes duties and levies that it did not pay.

“It is ordered that the claim for specific performance is dismissed, the alternative claim is granted.

“Defendant is to pay the plaintiff an amount of US$2, 7 million at the current rate bank rate, being a refund of the value of diesel that the plaintiff had paid for, but was not delivered by the defendant, interest on the said amount at the prescribed rate plus costs of suit,” ruled Tagu.