Barclays Bank ordered to pay Tanzania roads agency Sh5.5 billion

Dar es Salaam. The High Court (Commercial Division) has ordered Barclays Bank PLC to pay the Tanzania National Roads Agency (Tanroads) Sh 5.5 billion over alleged failure to en-cash bank guarantees for the upgrading of the 26-kilometre Kia-Mirerani road.

The court was satisfied that the bank had failed to perform its obligation of paying performance bank guarantee and bank guarantee for advanced payment stipulated in the road work contract.

“Since the first defendant (Barclays Bank PLC) has not performed its duty of payment of the guarantees, then this court rules that the first defendant is to pay the plaintiff (Tanroads) Sh2.1 billion as performance of bank guarantee and Sh3.2 billion as the payment of advanced guarantee,” said Justice Mosses Mzuna in his recent decision.

The amount will also attract a 12 percent interest from the date of the decision to its satisfaction in full plus costs of the suit.

Tanroads brought a suit against Barclays and Ms Strada International in 2016 for the payment of Sh5.5 billion and general damages over the alleged failure to en-cash the guarantees.

It all started on March 27, 2013 when the national roads agency and Strada entered into a 17-month contract for the upgrading of the Kia-Mirerani road to a tarmac standard.

Under the terms and conditions of the contract, Strada was also required to provide advance payment guarantee and furnish Tanroad with a performance bank guarantee that Barclays bank guaranteed the performance of the work.

The company had made it clear that Barclays would pay Tanroads Sh2.1 billion unconditionally in the event it failed to perform the works.

Strada also furnished Tanroads with another bank guarantee in which Barclays guaranteed the advanced payment made to Strada (the contractor) for mobilisation purposes.

The company stated that the bank had commited to pay Sh3.2 billion in case it failed to perform the work.

Following the agreement, Tanroads issued a letter to allow Strada to commence the work. The agency also issued an advance of Sh3.2 billion for the work.

The Tanroads-Strada relationship turned sour after the later allegedly failed to carry out her contractual obligation and abandoned the site.

This prompted Tanroads to jointly sue the company and Barclays bank.

Although summons were issued to the two defendants to appear in court to defend their case, only Barclays was able to enter defence. Strada failed to show up. This caused the case to proceed without representation of the contractor.

Tanroads claimed in court through Engineer Mgeni Jumbe that there was poor performance of work by Strada, a situation that led to the calling of a meeting to discuss the situation.

A monthly progressive report tendered in court further revealed further that Strada had poor performance of work which necessitated Tanroad’s Resident Engineer Consultant to write the company over the alleged poor work.

Tanroads terminated the contract to Strada after also allegedly abandoned the site.

However, the claims were not opposed by any of the defence witnesses.

The main question that the court dealt with was to whether Barclays had issued Performance Guarantee and Advance Payment Guarantee to Tanroads in favour of Strada.

While Tanroads maintained that the guarantee issued to it were genuine and was issued by Barclays in favor of the contractor, Barclays claimed that all the documents were forged by Tanroads and that there was no due diligence.

Tanroads position was that Strada issued them with a performance bank guarantee issued by Barclays bank. It was issued by Joe McGhrath who was Head of Corporate Banking & Financing

Another witness for Tanroads, Kingdom Mbangula who deals with contracts and procurement had told the court that the address used to communicate with Barclays Bank was copied from the performance guarantee and advance payment guarantee.

On their part, Barclays alleged that it did not issue the performance guarantee or the advance payment guarantee.

Their two witnesses--Paul David Dimon and Catherine Emily Farthing—had told the court that there was no correspondence over the guarantees because the address used by Tanroads was not proper, hence communication failed to reach them.

They tendered in court the bank’s Annual Reports of 2013 and 2014 to evidence their proper address as opposed to the address used by Tanroads.

In his recent decision, Judge said Barclays had failed to discharge the burden of proving it did not issue the advance guararntee of performance bank guarantee in favor of Strada and that the correspondences were wrong and never reached proper destination.

“The performance guarantee and the advance guarantee received in court were signed by Mr J Freedman (Business Manager) Mr S Cooper (Accounts Manager), Joe McGrath (Head Corporate Banking & Financing).

“However, upon being cross examined by Mr Changa stated that Mr S Cooper was the head of business in UK and that he was ot the accounts Manager and when asked about the signature he stated that he cannot state if it was an authentic signature.

“This implies that according to DWI that one of the signatories of those documents was known by the 1st defendant (Barclays) as being the worker of the 1st defendant,” said the judge.

The judge went on: “If I may hasten to add, if at all the signature of Mr S. Cooper was in question, the defence side was duty bound to summon the said witness to clear doubts that it was not the defendant who issue the said documents but they never bothered to do so without justifiable reasons.

The court said also that the genuineness of the seal of Barclays was not even challenged by the defence at the hearing of the case. “The company seal as used in Exhibit P3 was not challenged by the defence instead they challenged the issue of address. There is no clear seal that was adduced in opposition of the said seal,” said the judge.

The judge also questioned why evidence of one of Barclay’s witness who claimed to have reported the fraud to police in London was not brought in court.

“This implies that there was no any fraud and if any, then appropriate measures had to be taken in respect of it by the first defendant.

“I say that because it was the defendant who raised the issue of fraud, still it was the first defendant’s duty to prove or even to prosecute the said fraud which she had failed to prove. This need cogent proof not mere words,” said the judge.