DDL 'has no first call on molasses'
- Guysuco responds
Stabroek News
May 28, 2004
The Guyana Sugar Corpora-tion (Guysuco) says that while it admits that Demerara Distillers Limited (DDL) has been given the first opportunity to purchase molasses in the past it denies that DDL is entitled to a first call if this means an entitlement to all the molasses it requires for the indefinite future to the detriment of Guysuco's business expansion programme and commercial feasibility.
DDL has filed legal proceedings against Guysuco because it felt its supply of molasses on which it depends for the manufacture of its world famous rums might be jeopardised after Guysuco entered into a Memorandum of Understanding with Angos-tura for the setting up of a distillery.
In the affidavit, filed in opposition to an application by DDL for writs of certiorari and prohibition, Acting CEO of Guysuco, Michael Knight denies that DDL and Guysuco have had a lengthy commercial relationship with regard to the sale and purchase of molasses. He says DDL was supplied with most or all of its molasses requirements by the Caribbean Molasses Company Limited (CMC) up to and including the year 2001.
DDL, Knight says, has since the year 2000 and the demise of CMC, been offered the option of purchasing molasses from the Respon-dent before it is offered to any other purchaser merely because of the convenience of doing so, DDL being located in Guyana. At the end of each year, DDL and Guysuco would engage in discussions leading to an agreement or agreements regarding the price and quantity of the annual production of molasses for the following year which DDL would purchase, he deposed.
Knight denies that Guysuco is a monopoly as regards the production of molasses as a result of being the sole producer of sugar in Guyana. Guysuco is the only producer of sugar of which molasses is merely a by-product. Guysuco has the only supply of molasses in Guyana only because it is the only sugar producer and does not fall within the definition of a monopoly, as understood by section 21 of the Civil Law Act, Chapter 6:01 of the Laws of Guyana, or at all.
The Government of Guyana does not control and direct Guysuco, Knight says. While the government exercises the rights and duties of a shareholder it does so through the Board of Directors of Guysuco on which the main Opposition Party is normally represented. The Government of Guyana does not impose control and direction as implied by DDL.
Guysuco contributes by law to the Sugar Industry Labour Welfare Fund which provides limited loans to sugar workers for housing and pays for the provision of some health services. But Knight denies that because some of these responsibilities are now enshrined in legislation Guy-suco is a public authority as claimed by DDL. Addition-ally, the overwhelming business of Guysuco is the commercial production of sugar and its by-products, including molasses.
DDL and its predecessors obtained its requirement of molasses from CMC from the year 1930 until 2001 to the extent to which the Demerara estates of Guysuco and its predecessors fell short of DDL's total requirement. In any event, on many occasions in the past, Knight says, DDL did not purchase all or any of the molasses produced by Guysuco. In such cases Guysuco would sell the molasses overseas or discard it. Further, he denies that DDL always received the quantity of molasses it required from Guysuco.
'First call was mere courtesy'
With respect to the issue of a "first call" as claimed by DDL, Knight denies that Guysuco conducted itself and/or represented that DDL would perpetually have a "first call." In any event, he says, that which DDL refers to as a "first call" was merely intended to be a courtesy extended to DDL because it is a Guyanese company and for the convenience and mutual benefit of DDL and Guysuco. The courtesy of extending to DDL the first opportunity to purchase the molasses was never intended to be effected to the detriment of Guysuco's business, its development and to commercial feasibility and sustainable business practices. The supply of molasses by Guysuco to DDL was based on an annual agreement between the parties. Guysuco was free at any time to sell its molasses to whomever it pleased.
He denies that this amounts to, or was intended to be, a practice or representation or contractual term. If this were so, there would have been no necessity to have discussions at the end of each year regarding the disposition of the following year's molasses production.
Guysuco, he says, is a commercial entity, that is, of necessity, governed by the rules of the market and the possibility of maximising its profitability in every aspect of its business including its sale of molasses.
This is achieved by entering into agreements of sale for its molasses with DDL and/or others depending on the commercial feasibility thereof. In any event, he denies that Guysuco ever had the intention of extending its commercial decisions, notwithstanding the regularity thereof, into fundamental and unalterable contractual terms of legally enforceable representations without regard to Guysuco's business plans for the development and expansion of its business.
Knight denies that any expansions and investments undertaken by DDL were as a result of reliance on its purported preferred access to molasses, or in any event, solely as a result thereof. In any event, he says, DDL has alternative sources of molasses available to it internationally, including from Brazil, Nicaragua, Mexico and other countries in South America from whom shipping costs would be minimal.
And as the current price paid by DDL to Guysuco for molasses is that of the New Orleans price less shipping, if DDL were to source any shortfall in supply from Guysuco from an international supplier, such as one of those above, its cost would increase only insofar as the cost of the shipping of the molasses to Guyana.
The matter comes up in court on June 14.