3 February 2013

Ethiopia: Supreme Court Sustains 21 Million Br Ruling Against Ayat SC

Complicated business relationship results in disparity in revenues leading to Supreme Court intervention

The Supreme Court has sustained a 21 million Br verdict against Ayat SC, in favour of Gize Meri Marketing, a company it set up together with its own employees and sister companies.

Ayat SC, established in 1996, owns Ayat Real Estate and a number of other companies in the hotel, agriculture and construction sectors. Ayat has a 30 percent share of Gize Meri, with former employees and other companies it owns, such as Menor Plc and Faka Plc.

The two had a deal, in 2008, for Gize Meri to sell 930 houses for a five percent commission and also to collect payment for the houses sold. Two years later on February 18, 2010 it terminated the deal it had with Gize Meri, although it had been selling houses.

The two parties do not agree on the total amount of money collected from buyers from the sale of the houses. Ayat says it was 565 million Br, whilst Gize Meri claims 655 million Br was collected. Nevertheless, Ayat only paid Gize Meri 4.6 million Br, which would still have been short by 23.65 million Br according to Ayat's calculations, of the five percent commission agreed to in 2008.

Gize Meri first went to court in 2010, winning an award of 5.4 million Br and the right to claim more in the future. It claimed a small amount since Ayat had only received 205 million Br out of the total anticipated revenue. In January 2012, it filed a claim at the Federal High Court for an additional 21 million Br, in an attempt to collect the rest of the five percent commission it expected from Ayat.

The court rejected Ayat's figure for the sale of the houses, the lower commission of 28.25 million Br, and its claim that it had agreed to a phased payment of the commission. The Court ruled for 21 million Br to be paid to Gize Meri, with interest to be computed from January 6, 2012. Additional evidence, the Court used to rule in favour of Gize Meri, was that the Ethiopian Revenues and Customs Authority (ERCA) had demanded the plaintiff to pay nine million Br in taxes, plus a penalty, for the entire 31 million Br that Gize Meri claimed it was owed in commissions.

Ayat contested the High Court's November 9, 2012, ruling with an appeal to the Supreme Court, three days later. However, Ayat was informed that it did not have the legal grounds for appeal and a High Court ruling was sustained in its totality on January 23, 2012.

"We did not expect this," a legal official at Ayat told Fortune after the ruling.

Ayat's official told Fortune that they will be appealing their case to the Cassation Court.

"Since we have a 30pc share in Gize Meri, we will indirectly get back what we pay them," he added.

An official at Gize Meri told Fortune that they were happy with the ruling, although not totally satisfied on account of the interest, which they had wanted to be computed from the first suit they filed months earlier.

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