28 February 2013

Zimbabwe: Telone Wins U.S $16 Million Case

The Supreme Court has upheld a decision by an arbitrator ordering Gold Driven Investments to pay US$16,4 million to TelOne in settlement of a debt accrued in some tobacco selling deals between the parties eight years ago. TelOne had entered into an agreement with a Chinese company, Huawei Technology Investments, for the supply of telecommunications equipment.

This was during the Zimbabwe dollar era. TelOne had to make arrangements to raise the required foreign currency to pay for the equipment.

TelOne struck a deal with Gold Driven, in which it would provide Zimbabwean dollars to Gold Driven for the purchase of tobacco from farmers.

Gold Driven, a tobacco buyer also involved in tobacco contract farming, would then sell the crop on the international market in foreign currency.

Gold Driven, according to the agreement, would channel the realised foreign currency to Huawei to service TelOne's debt. TelOne and Gold Driven ran their contract in the 2005/2006 tobacco farming season and the debt was partly serviced. A sum of US$4 million was paid to Huawei.

In the 2006/2007 farming season tobacco was bought and sold, but nothing was paid to TelOne. Demands for the cash were made to Gold Driven -- to no avail. This prompted TelOne to refer the matter for arbitration in 2010. An arbitrator ruled in favour of TelOne and ordered Gold Driven to pay US$5 097 842, the sum being arrears for the 2005/6 sales and another US$11 392 352 for the 2006/7 sales.

Gold Driven was also ordered to pay legal costs incurred by TelOne in the proceedings.

The arbitrator also ruled that the witnesses for Gold Driven were not credible. It was the arbitrator's finding that Gold Driven's key witness, Mr Liu, was argumentative and evasive in answering questions.

The same arbitrator also ruled that two witnesses who testified for TelOne were "credible and good".

Dissatisfied with the award, Gold Driven, through its lawyers, Gill Godlonton and Gerrans, applied to the High Court to set aside the award. In the High Court application, Gold Driven challenged the legality of the two contracts for the two farming seasons.

But the High Court dismissed the application, which drove Gold Driven to appeal to the Supreme Court.

Deputy Chief Justice Luke Malaba on Monday threw out the appeal, which meant TelOne would receive its US$16,4 million. Gold Driven will also pay interest on the US$16,4 million at the rate of 5 percent from the date of the claim.

TelOne will pay 40 percent of the arbitration fees while Gold Driven will pay 60 percent.

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