Turkish Airlines says that it tried to use every means possible to recover its money from KK Fresh but failed, which left it with no option but to seek court intervention. PHOTO / FILE
Court has granted Turkish Airlines’ prayer to recover about Shs2.3b from a fresh foods exporter over failure to pay for freight services offered between October 2021 and May 2022.
In a ruling issued by the Commercial Division of High Court, Turkish Airlines had sought legal protection after it failed to recover $576,334.8 (Shs2.13b) from KK Fresh Produce and two others incurred in freight services.
The airline, details indicate, failed to liquidate a bank guarantee that had been issued in respect to services offered to KK Fresh to export fresh foods out of Uganda.
The two companies, in the four years to 2022, had built a business relationship, in which Turkish Airlines would occasionally offer freight services on a non-cash basis, which were secured by bank guarantees.
However, the relationship soured in October 2021 when KK Fresh, without reason, refused to make payments for services offered for about 10 months and attempts by Turkish Airlines to recover the money in January 2022 were issued with a fresh guarantee from United Trust Bank.
With this trust, the airline continued to offer services until May 2022, at which point, following a reconciliation to verify the amount due discovered that at least Shs2.13b had not been paid and attempts to liquidate the guarantee was frustrated.
Details filed before the Commercial Division of the High Court indicate that on April 19, 2022, Turkish Airlines wrote to United Trust Bank in United Kingdom to recoup the amount due, to which, in response, the bank pointed out that the guarantee would only be liquidated through SWIFT messages, which Turkish Airlines did not have.
However, the airline requested its banker - Standard Chartered Bank - to open a SWIFT channel, details of which were shared with United Trust Bank, but the payment was not honoured until September 22, 2022 when the bank informed the airline that for the guarantee to be liquidated it needed to obtain KK Fresh’s consent.
Indeed, court documents indicate, Turkish Airlines sought out KK Fresh for the consent, which “was purportedly issued”, but was informed by United Trust Bank that the consent had to be obtained from Dattatrey Nagireddy, one of KK Fresh’s directors, who the bank indicated had objected to the liquidation of the guarantee, adding that James Kanyije, also a director in KK Fresh, who had issued the consent, did not have the required authority.
In an October 10, 2022 letter to United Trust Bank, KK Fresh revoked the consent to liquidate the guarantee, forcing Turkish Airlines to seek court redress, in which it accused the fresh foods exporter of purposefully misrepresenting the airline when they provided a guarantee that appeared to be unconditional but was actually contingent upon the approval of Dattatrey.
The airline contended that this was fraud, praying that court declares interest, punitive, exemplary, aggravated, special, and general damages, along with cost of suit.
However, in its defence, KK Fresh argued that the refusal to liquidate the guarantee could not be held against the directors, who despite the case being adjourned twice on March 11 and April 25, this year to allow them appear in court ,did not.
However, acting through JOSKA Advocates, KK Fresh refuted claims that the bank guarantee was unconditional or that it was meant to be so, which Turkish Airlines dismissed, contending that Kanyije, in his capacity as the KK Fresh managing director, intentionally cheated the airline by using the company as a means of obtaining freight services, from which he unfairly benefited.
Turkish Airlines also accused KK Fresh and its directors of fraud, which, because of its gravity, required the airline to adduce strict proof, with a standard that is higher than the ordinary balance of probabilities.
Evidence presented before court, indeed pins Kanyije, and Justice Thomas Ocaya O R agreed that the accused knew the guarantee was contingent upon the approval of Dattatrey, who was the issuer and not KK Fresh.
Unpaid freight fees
In a ruling issued on Monday, Justice Ocaya noted that Kanyije, Dattatrey and KK Fresh were jointly liable for the payment of $576,334.8 (Shs2.13b) due to unpaid freight fees, in addition to payment of $10,000 (Shs37m) in general damages at an interest of 10 percent from the date of judgment until it is paid in full.
The trio, Justice Ocaya ruled will also have to pay Turkish Airlines Shs46.4m in special damages and $29,390 (Shs108.6m), in addition to Shs50m as aggravated damages, which brings the whole amount to Shs2.37b.
Court also ordered KK Fresh to pay for the cost of the suit.
