Two firms ordered to pay VIP Engineering 15 billion/-

By Faustine Kapama

The High Court's Commercial Division has ordered two foreign companies to pay a local investment firm, VIP Engineering and Marketing Limited, over 15bn/- for negligence in a transaction relating to shipment of several tons of substandard rice in 1998. In a judgment delivered by Judge Jacobs Mwambegele last week, the court found that VIP Engineering Company, the plaintiff, had proved its case against Societe Generale De Survellance (S.A) and SGS (Tanzania) Limited, on the balance of probability as required by the law.

"I enter judgment for the plaintiff as follows; Specific damages for USD 650,359.08 (and) court fees of 22,000,000/-," declared Judge Mwambegele, who read the judgment on behalf of trial Judge Nathalia Kimaro, now a Justice in the Court of Appeal.

As for the general damages for consequential loss of profit and economic loss occasioned by the two SGSs, as defendants, the judge ruled that the evidence produced proved that the defendants were very negligent and the plaintiff suffered loss because of their acts and omissions.

The judge, therefore, used the court's discretion and awarded the plaintiff 6,000,000 US dollars, as general payments. All the respective payments, according to the judge, attracted 20 per cent interest from May 15, 1999 when the suit was lodged till date of judgment.

In the judgment, the judge ruled that SGS (S.A) had a duty under the contract to take all reasonable precautions, due care and reasonable alternative measures all with the objective of carrying out the terms and conditions on the importation by VIP of the rice in 1998. He said that there was evidence adduced by Mr James Rugemalira that the plaintiff paid for pre-shipment inspection fees as per contract but the defendants knowing that no inspection was carried out at all, issued a clear report of finding to signify that the goods imported matched required specification.

The judge noted further that while the contract had a provision for destination inspection in circumstances where pre-shipment was not done, the defendants refused to carry out inspection as requested by VIP although they were aware that the ship carried rice which had no the specifications.

"The consequences were that the rice could not be sold as the price anticipated by the plaintiff and its market was adversely affected. That led the plaintiff to suffer loss. The evidence of loss suffered by VIP because of the negligence of SGS S.A and SGS is there," the judge declared.

In January 1998, VIP ordered for purchase of 3,000 metric tonnes of rice (Pakistan long rice, 15-20 per cent broken) from M/S Orco International (S) Pte Limited of Singapore under a Warehousing Management and Sales Contracts at a price of USD 267.50 per metric tons, thus making the total to USD 802,500.

At the time the sales contract was negotiated, VIP, the buyer was in Dar es Salaam, while the seller in Singapore and the rice was in possession of a third party, M/S MAHMOOD PLC of Karachi in Pakistan. The respondent companies (SGS) came into the scene because of pre-shipment inspection of the rice.

In the period 1998, SGS (S.A) was the sole appointee of Tanzania Revenue Authority (TRA) for conducting pre-shipment inspection of the imports destined to Tanzania. This appointment was done through a Pre-shipment Inspection Contract executed between them.

TRA, being a government agency with public duties for supervision of imports into the United Republic of Tanzania for purposes of revenue collection, opted to have SGS (S.A) as its appointee in conducting pre-shipment inspection on goods destined to Tanzania for an agreed fees arrangements.

In the transaction, VIP anticipated that, SGS (S.A) to carry out their obligation with all due care, diligence and efficiency in accordance with generally accepted techniques and inspection agency profession in compliance with the World Customs Organization (WCO) and World Trade Organisation standards. VIP made the required payment for the consignment and the same arrived in Dar es Salaam in March 1998 on board MV RUAHA.

It was at the time of discharge that the plaintiff noted that the rice was of a poor quality and less quantity contrary to SGS (S.A) and SGS (Tanzania) reports on quality. Upon noting the discrepancy in the quality, VIP requested the respondents to carry out post shipment inspection and survey of the rice for a dup purpose, including ascertaining the difference in quality and quantity for establishing the exact extent of loss and work together to mitigate further loss.

VIP sued the respondents, demanding, among others, specific damages suffered of USD 656,359.08, general damages for consequential loss of profit and economic loss occasioned by the respondent's negligence and, or fraudulent breach of the duty of care at the rate of USD 2,000,000 per year.