ATCL ordered to pay Liberian company $40 Million

Thursday February 27 2020

Minister for Works, Transport and Communication

Minister for Works, Transport and Communication Isack Kamwelwe 

By The Citizen Reporter @TheCitizenTZ news@tz.nationmedia.com

Dar es Salaam. Air Tanzania (ATCL) has suffered a blow after a United Kingdom court ruled that it will have to pay a Liberian company $30.1 million (Sh69.23bn) in compensation for an aborted aircraft leasing deal.

The case involved the 2013 Airbus leasing deal from Willis Trading by former ATCL managing director David Mattaka.

High Court Judge Christopher Butcher on Friday ordered ATCL to pay the money plus interest which was reported to amount to $10 million (Sh23 billion) to the Liberian company that buys and leases aircraft, Law360 has reported.

Yesterday, the Minister for Works, Transport and Communication Isack Kamwelwe told The Citizen that he had not been appraised yet of the court’s decision. However, he said he would get in touch with his Permanent Secretary to understand the decision and know the way forward.

Efforts to contact the PS Leonard Chamuriho and ATCL CEO Ladislaus Matindi proved futile because their phones were permanently switched off.

Willis Trading went to the Business and Property Courts of the High Court of Justice of England and Wales to enforce its claim after ATCL pulled out of the lease contract and subsequent compensation agreement for $45 million (Sh103bn) in 2014. The government had challenged the scandalous deal which President John Magufuli has publicly condemned.

Advertisement

Mr Mattaka was in March 2016 charged in court with abuse of office and abuse of position for signing the lease without complying with the relevant procurement legislation. The case is still pending in court.

The UK court rejected the national carrier’s efforts to shrug off the debt by blaming its former CEO Mattaka. Judge Butcher ruled that under a settlement agreement the parties had reached in 2013, Wallis Trading is entitled to $30.1 million plus interest.

The judge, according to the reports, also found that the October 2007 lease for the aircraft and an April 2008 guarantee provided by the Tanzanian government were enforceable agreements. Willis Trading separately pointed to an October 2013 settlement agreement it reportedly reached with Tanzania over the deal gone soar.

“I consider that Wallis is correct that it can successfully found its claim on what it describes as the settlement agreement,” Judge Butcher said in his decision.

The lease agreement stems from the Tanzanian government’s 2007 decision to expand and modernize the fleet of Air Tanzania which it partially owned then.

In May 2007, the Ministry of Infrastructure Development gave permission to Mr Mattaka to lease aircraft as an interim measure until certain Airbus aircraft were available starting in 2011.

After a draft lease had been reached with Wallis, Tanzania’s attorney general provided written comments saying that while he understood the deal needed to be “signed urgently so as not to miss the opportunity of getting the plane,” he had concerns that there were “too many disclaimers and waivers of liabilities” on Air Tanzania.

Before the agreement was signed, he said to the airline, “You are advised to act on the above comments.” Mr Mattaka renegotiated some parts of the agreement, which required the airline to pay $370,000 (Sh851m) per month for the used Airbus airplane.

But work needed to be done on the plane, which began operating flights in May 2008 and it was grounded in December 2008 for additional maintenance work in March 2009.

According to the judgement, after ATCL stopped paying for the lease, resulting in a debt due to Wallis of more than $45 million, the parties reached a settlement in August 2013, in which the government agreed to pay $42 million (Sh96.6bn). After making six payments up until October 2014, totaling more than $26 million (Sh59.8bn), the government stopped making payments.

After Wallis sued for the sums due, the airline and the Tanzanian government put forward a number of defenses, including that Mr Mattaka had entered into the lease “without consulting with, let alone obtaining approval from, the board of ATCL, and he did not have the approval of the board of ATCL to sign the lease.”

But the judge rejected that defense and the others. The government and ATCL were represented by Attorney General Adelardus Kilangi and Deputy Solicitor General of Tanzania Gabriel Malata.

“The contention that Mr Mattaka negotiated the lease without consulting with the board is clearly wrong, and was shown to be so by the defendants’ late disclosure, including in particular of the minutes of the Board meeting of 8 October 2007.”

The judge said he also found that the actions of the government, including granting retrospective approval for the lease by issuing the guarantee for the airline’s liabilities constituted an effective ratification of the lease on behalf of the airline.

And while the airline and the Tanzanian government counterclaimed, saying WIllis had been unjustly enriched since the lease was unconscionable, the judge said that argument also failed.

“The evidence indicated that it made a commercial bargain with an entity which was regarded as being subject to a number of risks, and in circumstances where it is not apparent that anyone else was prepared to offer ATCL better terms,” the judge said.