DDL takes Guysuco to court over molasses deal
Stabroek News
March 1, 2004
Guysuco will have to go to court to justify why it entered into an agreement giving Angostura of Trinidad first call on its Berbice molasses at the expense of Demerara Distillers Ltd (DDL) despite a long-running arrangement with DDL.
Justice Dawn Gregory-Barnes yesterday granted DDL's application for an order nisi to be directed to Guysuco show cause as to why a Writ of Certiorari should not be issued against it quashing the decision to offer by public tender preferred access to its Berbice molasses and to enter into an August 18, 2003 agreement with Angostura for the sale of the said molasses to it. DDL is arguing that the said decisions were made "arbitrarily, were unreasonable, unfair and are contrary to the expectation created in favour of the applicant having a first call on molasses (produced) by Guysuco". Molasses is a key input in the company's distillery operations.
The judge also decreed that an order or rule nisi of prohibition be issued to Guysuco to show cause why it should not be prohibited from further proceeding with any agreement with anyone but the applicant for the sale or supply of molasses.
In a supporting affidavit DDL's managing director Komal Samaroo outlined what he said was a four-decade long history first between the Demerara Company and Bookers and later with Guysuco which "was and continues to be that by the first week in November in each year DDL.... would indicate their estimated requirement of molasses for their distillery production for the coming year."
Samaroo says DDL always obtained the quantity... it wanted from Guysuco who by their conduct and representations at all times led DDL to believe ...that DDL would have first call on and receive all the molasses... required."
He added that in the last 20 years, DDL had expended US40M in investments based on that reliable supply. Samaroo recalled DDL receiving an invitation to tender from Guysuco for companies interested in entering into a business venture to develop a distillery business in the Berbice region using molasses produced at the Guysuco Berbice estates. He notes that on the document Guysuco stated it would commit all of its Berbice molasses in the form of a long-term supply agreement.
DDL protested that statement while at the same time putting together its own proposal to develop a distillery in conjunction with West Indies Rum Distillery.
Mid-last year it also pressed its concerns with President Bharrat Jagdeo noting the possibility that even though Guyusco might assure it first call on molasses from Demerara, these estates might be closed down.
This was taken by DDL to be "a direct threat to its future supplies"
DDL argues in the affidavit that given Guysuco's monopoly position and its established practice, that it must give DDL first call on all molasses it produces and that DDL has a legitimate expectation of consultation before Guysuco enters into any agreement with Angostura.
Samaroo in his affidavit also related details of a series of meetings and correspondence involving Guysuco, President Jagdeo and DDL Chairman Yesu Persaud.
Samaroo deposed that on July 28, 2003 DDL met with the President and was assured by him that its current requirements for molasses - then estimated at 95,000 tonnes per annum would be met first from Guysuco's molasses production to ensure the continuity of DDL's operations. However, Samaroo swore that in a letter dated July 30, 2003 Guysuco gave DDL the "limited assurance" that DDL would have the first lien on molasses from the Demerara estates only subject to agreement on price. Since the Demerara molasses has never been more than 40% of DDL's annual requirement and because the future of the Demerara estates was under review this was apprehended by DDL as a "direct threat" to its future molasses supplies. On July 30, too, DDL was notified that Guysuco had decided to award the distillery contract to another company. DDL, Samaroo's affidavit said, then wrote the President confirming the terms of the July 28 meeting DDL had with him and apprising him of the latest correspondence from Guysuco. On August 18, Guysuco announced the Angostura Memorandum of Understanding (MOU). "At no time prior to concluding" the MOU "did Guysuco discuss with DDL, or give DDL an opportunity to discuss, the existence of DDL's first call on Guysuco molasses", the affidavit said.
On August 19, Persaud met with President Jagdeo at the President's request who related that he had met with the Guysuco board and that he had instructed the board "that DDL must be guaranteed a first call on all molasses produced by Guysuco in respect of its then yearly requirement of molasses of 95,000 tons irrespective of source".
On September 4 Persaud wrote Guysuco's Chief Executive Michael Boast referring to the letter of July 30 and advising of the assurance from the President. On September 12, 2003, the affidavit says, the Guysuco Chief Executive replied saying "we wish to state that Guysuco intends to (assure) DDL of its supply of molasses at the current level of 90,000 tons". This was followed by a letter from the Minister of Agriculture Satyadeow Sawh to Persaud assuring that DDL would be supplied with sufficient molasses.
As a result of the uncertainties arising from Guysuco's statements, Samaroo said that Persaud met Guysuco Chief Executive Boast on October 7, 2003 but was unable to get an assurance from him that DDL would have the first call on Guysuco's molasses. By letter dated October 13, 2003 DDL then sought urgent confirmation in 10 days that DDL would have the first call on the agreed amount of molasses. DDL did not receive this confirmation and after a further meeting with Guysuco on February 19, 2004 DDL received a February 26, 2004 letter from the Guysuco Chief Executive saying that DDL would be supplied with 90,000 tonnes of molasses annually but in the event of a shortfall in supplies to DDL and Angostura's distillery the shortfall would be shared 9:5 (DDL to Angostura). DDL replied to this by letter dated March 10, 2004.
Samaroo said the cementing of a contract with Angostura would deprive DDL of its first call and may thereby cause DDL to operate its distillery below capacity seriously affecting the production of its alcohol products. Further, the distillation process produces by-products necessary for the manufacture of other DDL products.
The matter is returnable for April 19, 2004.