Federal High Court Rules against Access Real Estate in 72m Br Case

Access real estate (ARE) lost its case against Gabby Investment. The Federal High Court passed a verdict against the real estate company in which it was ordered to pay 47 million Br on February 24, 2015.

The case between the two parties arose when the plaintiff, Gabby Investment, filed an accusation against the real estate developer on September 16, 2013. In its charge, Gabby claimed that ARE had failed to fulfill a payment of 33.18 million Br to the accuser, a result of contractual relations entered into in April 2011. The contractual relations were for the construction of houses by the plaintiff in two projects, Laura and Meeraf. The projects are named after the sister companies of ARE, Meeraf Real Estate and Laura Trade & Industry.

The contractual payment agreed upon for the first project, Laura, was made on February 19, 2010 and was 174m Br., whereas the second project, Meeraf, was agreed to be accomplished by 108m Br on May 12, 2010. However, both of these contracts were amended for the projects to be finished for an elevated amount, 224 million Birr and 136 million Birr respectively on April 2011.

According to the statement of claim of the accuser, ARE paid an amount after the amendment of the contract worth 327 million Birr. However, it failed to pay the remaining 33.18 million Birr explaining to the accuser that it would pay the remaining amount when the financial capacity of the real estate improved.

As the payments were not made, Gabby notified ARE of its intention to terminate the contract but shortly afterwards, reconsidered and continued with the projects when ARE remunerated 10.5pc interest. However, the forwarded payments still were not emancipated by ARE, which forced the accuser to terminate the contract altogether. Having reached this decision, Gabby Investment attempted to take out its construction machinery from the site, but it was banned by ARE.

The accuser instituted a court action for payment of services rendered including damages incurred due to the ban made on the machinery. The damages which it alleged, is 39 million Birr.

ARE came up with preliminary objections saying that the Court had no prerogative to hear the case. Rather, it should be settled through arbitration based on the contract of the parties. It also defended stating that the construction work done by the accuser was not established to fit the standard in the contract, adding that in such cases payment should not be made to the accuser.

ARE also rejected the presence of the varied contract stating that there is no contractual document proving the amendment of the contract due to inflation of construction inputs. Thus, it asked the Court to cause the discontinuance of the case as well as to reject Gabby’s claim, noting that the accuser did not provide an ascertained document for the existence of the varied contract.

The Court, having examined the case, rejected ARE’s defense after looking at the documentary evidence provided by the accuser, which shows the presence of variation of contract.

The Court also rejected ARE’s defense that the standard of the works done by the accuser were not ascertained, noting that the defendant was discharging payments because it had accepted the standard of the works.

Thus, the Court ordered ARE to pay 33.18 million Br payment to Gabby investments and 13 million Birr, less than the claimed amount, as compensation for damages incurred by the accuser.

“To comment on whether the court had passed a satisfactory decision on our claim or not, I should first take a copy of the judgment and discuss with my client on the next step,” stated Solomon Gebre Micheal, attorney of the plaintiff, adding that the technical committee will not be concerned on the case at hand, because the defendant is the contractor not homebuyer.

The defendant’s lawyer, Tibebe Sirak, also declined to comment on the Court’s final decision, noting that the committee will call a press conference in the coming few weeks.

Established with a capital of 35 million Birr in 2008, Ermias T. Amelga being its majority shareholder, ARE has been facing challenges in delivering houses for its 2,703 homebuyers. The company is charged with 81 pending and final separate suits on which two committees were established in July 2014 to resolve the real estate company’s problems with its homebuyers and shareholders.

Gabby Investment Plc is a Grade 1 contractor whose major shareholder is Benyam Mebratu, former shareholder of ARE.


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