Gov't sues LC bikes insurer, wants sh1.1b

By Andante Okanya

Government has sued insurance firm NIKO Insurance Company, demanding sh1.1b for breach of contract when the company acted as guarantor to the firm that was supposed to supply the 70,000 local council bicycles.

Amman Industrial Tools and Equipment Limited was contracted to supply the bicycles worth sh4.2b meant for chairpersons of parish and village councils countrywide.

The insurance firm undertook a Performance Guarantee Bond of sh1.1b in favour of Amman on November 25, 2010, to be paid in the event of breach of contract.

In the suit filed on Tuesday at the Commercial Court  in Kampala by Government's chief legal advisor -the Attorney General(AG) Peter Nyombi - he contends that the insurance company has deliberately declined to make good its obligation.

"The plaintiff [AG] contends that the defendant[insurance firm] has no plausible defence to the claim  of $489,650 after the plaintiff demanded for the same pursuant to the terms of the performance bond furnished by the defendant on behalf of Amman Industrial Tools and Equipment Limited," the AG contends.

Government is also demanding general damages with a 28% annual interest from the date of judgement till payment in full.

It also wants costs for the suit in addition to a 28% annual interest on the $489,650 from May 24, 2011 till full payment.

In the plaint, the AG asserts that on November 26, 2010, the local government ministry on behalf of government awarded Amman the contract to supply the bicycles. The Performance Bond was to be valid from November 25, 2010 to May 24, 2011.

However, the AG states that on May 10, 2011, the local government ministry permanent secretary John MuhanguziKashaka (now suspended) wrote to the managing director of the insurance firm, informing him that Amman had failed to deliver the bicycles.

The AG notes that Amman had agreed to deliver the bicycles by February 25, 2011. He claims that although the deadline was extended to May 25, 2011, the company still failed to comply.

The AG subsequently wrote to the company on May 23, 2011, informing it that the bond's expiry date was two days away. A bank payment advice form was attached to the letter.

Subsequently, in a letter dated August 4, 2011, the insurance firm's claims manager wrote to the AG, and informed him that the firm had started the process of paying the bond.

But the AG asserts that in a letter dated September 11, 2011, the firm drew his attention to a parliamentary probe when the subject of the LC bicycles became a stormy topic of debate. The firm stated that Government officials had been implicated in the purported fraud.

The AG states that on October 4 last year, he expressed discontent when the firm introduced new conditions like the parliamentary probe, which were not part of the agreed terms.

Court documents indicate that the AG in a letter to the firm dated January 3 this year, threatened to sue within 14 days.

The court's registrar Margaret Tibulya in summons dated June 19, 2012, has ordered the firm to file its defence within 10 days, from the day it received the summons.

The case has been allocated Justice Christopher Madrama. However, a hearing date is yet to be fixed.