Huawei Technologies Petitioner v Hits Africa The Company
| Jurisdiction | Cayman Islands |
| Judge | The Hon. Mr. Justice Charles Quin |
| Judgment Date | 29 November 2013 |
| Court | Grand Court (Cayman Islands) |
| Docket Number | Cause No: FSD 96/2013 |
| Date | 29 November 2013 |
In the Matter of the Companies Law
And in the Matter of Hits Africa Ltd.
The Hon. Mr. Justice Charles Quin
On the 16th July 2012, Huawei Technologies Co. Ltd. (the ‘Petitioner’) presented a Petition for the winding up of HiTs Africa Ltd. (the ‘Company’) pursuant to the provisions of the Companies Law on the ground that the Company is insolvent and unable to pay its debts.
The Petition is grounded by a Statutory Demand dated the 8th March 2013 issued by the Petitioner and served on the Company pursuant to s.93 of the Companies Law (2012 Revision) (‘The Law’). The Statutory Demand claims that the Company owes the sum of US$21,303,468.26 and interest of US$6,314,347.95 calculated up to including the date of the Statutory Demand, being a total indebtedness of US$27,617,816.21.
On the 23rd September 2013 the Company issued a Summons for leave to file and serve affidavits in opposition to the Petition upon the Petitioner out of time.
On the 27th September 2013 the Court granted the Company leave to file and serve the affirmation of Santosh Kumar Das1 (‘Mr. Das’) and adjourned the hearing of the Petition for the winding up of the Company to the 28th and 29th November 2013.
On the 28th and 29th November 2013 the Court heard the winding up Petition presented by the Petitioner. The Petition was grounded by the affidavit of Mr. Yu Han, sworn on the 29th May 2013 and supported by the affidavit of Mr. Yang Ce (‘Mr. Yang Ce’), sworn on the 4th November 2013.
In opposition to the Petition the Company filed the affirmation of Mr. Santos Kumar Das (‘Mr. Das’), dated the 25th September 2013.
The Company is a Cayman Islands exempted company incorporated on the 24th May 2007 under the laws of the Cayman Islands, with its registered office at the offices of Trident Trust Company (Cayman) Ltd. P.O. Box 847 GT 1 Capital Place, Shedden Road, Grand Cayman, Cayman Islands.
The Company is engaged in business operations in the sub-Saharan Telecoms market, predominantly in the United Republic of Tanzania, the Democratic Republic of the Congo and the Republic of Equatorial Guinea.
The Petition states that the Company is 92.82% owned by HITS Telecom Holding Company K.S.C. (‘HITS Telecom’) — a telecom holding company listed on the Kuwait Stock Exchange, with market capitalization of approximately KD 90 million as of September 2009.
The Petitioner is a multinational networking telecommunications, services and consumer electronics company based in Shenzhen, in the People's Republic of China (‘PRC’) and is one of the largest manufacturers of telecommunications equipment in the world.
Pursuant to a Purchase Long Form Agreement (‘PLFA’) dated the 28th April 2006 as amended by the First Amendment to the PLFA dated the 27th January 2009 (the ‘First Amendment’) and the Second Amendment to the PLFA dated the 24th June 2009 (the ‘Second Amendment’) and as supplemented by the Binding Letter of Intent dated the 29th April 2008 (the ‘Binding Letter’) (together with the First Amendment, the Second Amendment and the Binding Letter, the ‘Agreement’)) entered into between the Company and Excellentcom Tanzania (‘Excellentcom’)2, on the one part, and the Petitioner and Huawei Technologies (Tanzania) Co., Ltd. (‘Huawei Tanzania’)3 on the other:
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a) The Petitioner and Huawei Tanzania were to provide telecom equipment and services to Excellentcom; and
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b)The Company was to be ‘jointly and severally responsible with Excellentcom…in respect of all obligations including but not limited to payments, repayments and provision of security.’
The Petitioner contends that pursuant to Clause 42.4 of the PLFA, the Company was to make payment in respect of offshore portions and onshore portions of the work done, under the PLFA, to the Petitioner and to Huawei Tanzania respectively. ‘Onshore’ work represents work done within the United Republic of Tanzania, while ‘Offshore’ work represents work done elsewhere, including in respect of the manufacturing and shipping of telecommunications equipment from China.
The Petition alleges that, in accordance with the PLFA, and as acknowledged by an Acknowledgment Letter dated the 25th June 2010 (the ‘Acknowledgment Letter’), Excellentcom has accepted receipt of equipment and services in the amount of US$34,001,148.88. Against this, the Petitioner set off the sum of US$12,697,680.62 (of which US$4,070,000.00 was deposited into the bank account of the Petitioner, and US$8,627,680.12, was deposited into the bank account of Huawei Tanzania) which had already been paid as a deposit in accordance with Clause 1.2 of the Second Amendment. Accordingly, the Petitioner contends that the resulting sum of US$21,303,468.26 (the ‘Outstanding Debt’) remains due and owing despite several requests for payment from the Company.
The Petitioner also draws the Court's attention to Clause 4 of the Second Amendment which reads:
‘The Company accepts and agrees to pay the penalty at the rate 0.03% of the outstanding amount calculated on a daily basis from the due date until full settlement of such outstanding amount.’
As a result, the Petitioner contends that from the date of the Acknowledgment Letter4 to the 9th July 20135, interest has accrued in the sum of US$7,094,054.93, and continues to accrue at the rate of US$6,391.00 per day. The Petitioners claim the outstanding debt and the accrued interest is now US$28,397,523.19.
The Petitioner presents the Petition as a creditor of the Company and submits that it is entitled to do so pursuant to s.94(l)(b) of the Companies Law of the Cayman Islands, Further, the Petition is presented on the basis that the Company is unable to pay its debts within the meaning of s.93 of the Companies Law.
In his affirmation dated the 25th September 2013 Mr. Das states that he is the HiTs Africa Group Chief Technical Officer, providing technical services to the Company since June 2010. Mr. Das avers that he has been actively involved in the Company's business operations in the United Republic of Tanzania, the Democratic Republic of the Congo, the Republic of Equatorial Guinea and the Republic of Liberia. Mr. Das further avers that his knowledge of the Company's business operations in Tanzania is through Excellentcom — a joint venture partner in which the Company has a majority shareholding. Mr. Das confirms that he has been authorised to make his affirmation on behalf of the Company and in opposition to the Petition.
Mr. Das states that the PLFA dated the 28th April 2008 was entered into by the Company and the Petitioner to manufacture and install on a turnkey basis a full mobile telecommunications network in Tanzania, capable of serving at least two million subscribers. The PLFA also provided for the construction, in three phases, of 734 base transceiver stations at a total price of US$182,386,574.90.
Mr. Das alleges that the Petitioner failed to meet many of the timelines for the implementation of the project. Mr. Das says that as a result of this there were two amendments to the PLFA — first on the 8th January 2009 and then on the 24th June 2009. By the two Amendments the network was to be constructed in two phases, with an option to agree a third phase. As part of Phase 1 the Petitioner would manufacture and supply all of the plant machinery, computer hardware and software, apparatus material and articles for the network, and, construction of 204 base transceiver stations (BTS) in Dar es Salaam City, Tanzania, by 28th June 2010. Phase 1 provided for the commissioning of the network core and the installation of telecommunications equipment and the 204 BTS. Mr. Das said that the agreed cost for Phase 1 was US$73,876,586.19. Mr. Das said that the Company paid the sum of US$12,697,680.62 as an advance payment towards the agreed price for Phase 1.
In his affirmation Mr. Das avers that the Petitioner failed to complete the works by the completion date. Mr. Das further complains that at the completion date the Petitioner had constructed only 40 of the 204 BTSs required in Phase 1, and had failed to construct the remaining 164 sites as required by the PLFA. Mr. Das also says that of the 40 sites constructed none were ready to radiate any telecommunications signals, and not a single acceptance test was carried out as required under the PLFA. Mr. Das says that none of the sites constructed by the Petitioners were ever integrated into the network.
As a result of the purported failures in breach of the PLFA by the Petitioner, Mr. Das states that the Petitioner is not entitled to any further payments. Mr. Das avers that the Company is unable to provide telecommunications services to its customers and thus the Company suffered significant loss of revenue and income and it‘damaged our brand and commercial reputation’.
Mr. Das states in his affirmation that on the 16th May 2011, as a consequence of the Petitioner's failure to provide the network as agreed, the Company's attorneys wrote to the Petitioner and, by way of a demand notice, sought damages of US$991,427,224.00.
Mr. Das further states that on the22’nd June 2011 the Company's attorneys wrote to the Petitioner demanding that they remove their equipment which was left on approximately 141 sites.
Mr. Das says that the purported Acknowledgment Letter dated the 25th June 2010 in the amount of US$34,001,148.88 is not a valid Acknowledgment Letter because the author, Mr. John Paul (‘Mr. Paul’), did not have any authority — ostensible or otherwise — to execute this document on behalf of the Company.
Furthermore Mr. Das said that execution of this alleged Acknowledgment Letter is completely...
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