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Lubowa Hospital War: Judge Issues Injunction Against Eviction of Roko

High Court Judge Andrew Bashaija has issued a temporary injunction restraining Italian company Finasi from evicting Roko Construction from “interfering with Roko Construction’s execution of the contract works and possession of the site” for the International Specialised Hospital in Uganda at Lubowa, Wakiso District.

Bashaija ruled on Thursday that Roko must stay on the site until the petition it filed against the Special Purpose Vehicle (SPV), comprising Roko Construction and Italian Firm Finasi, is heard and disposed of.

Justice Bashaija also barred the SPV from “entering into a contract with anyone or from engaging any contractor other than Roko Construction” to build the hospital until the resolution of the case.

Roko Construction and Finasi incorporated a joint venture company solely to finance, design and equip the hospital.

According to Roko’s application before the High Court, it was agreed by all parties that Roko would execute the construction of the hospital and the construction firm took possession of the site, graded, hoarded, drained and secured it and provided water and electricity services.

The SPV (Finasi and Roko Construction) would later entered into a project works investment agreement with government to design, finance, build and equip the hospital and that Roko would carry out the construction works.

Roko said despite raising the financing for the project and obtaining a Performance Security and a Letter of Comfort, the SPV is threatening to alienate and stop Roko from carrying out the construction works and to remove it from the site which unfairly prejudices the construction firm.

Roko argued that only an injunction would save them from an “irreparable financial losses to the financial institutions” and “heavy default damages to the government of Uganda.

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The fighting between Roko and Finasi has raised fears that banks could pull out of the project which has so far delayed for six months.

Incorporated on July 25, 1969 Roko has since constructed high profile buildings that grace Kampala’s skyline such as Mapeera House, Bank of Uganda headquarters, Communications House, Workers’ House, Crested Towers and Lotis Towers among others.

How it started

According to Roko’s Managing Director, Mark Koehler, after signing a Memorandum of Understanding with Finasi that Roko would be the “sole contractor” for the construction works of the hospital, the Solicitor General cleared the agreement.

Koehler says he approached and brought on board financial institutions which include African Export-Import Bank (AFRIEXIM Bank) Eastern and Southern African Trade and Development Bank (TDB), Barclays Bank of Uganda (BBUL) and Amalgamated Banks of South Africa (ABSA Bank) who agreed to finance the project and contributed $250M. On October 22, 2018, the SPV made and filed a resolution to secure the funding.

On December 4, 2018, government and the SPV amended the Project Works Investment Agreement (PWIA) by signing a direct agreement with AFRIEXIM Bank, TDB Bank and BBUL under which government would issue promissory notes to AFRIEXIM Bank who would act as a purchaser, administrative agent and security agent and the SPV would act as the seller who in turn would sell and endorse the promissory notes at a discount to the purchaser for the total face value not exceeding $379m.

On December 4, 2018, government as the issuer of the promissory notes entered into a fixed rate advisory mandate agreement with ABSA and SPV, AFRIEXIM , BBUL and TDB would act as arrangers. AFRIEXIM would act as administrative agent.

In March 2019, the Attorney General gave a legal opinion in support of financing and the Parliament passed a resolution supporting the project by issuing promissory notes for $379.6m.

According to court documents seen by ChimpReports, Government went ahead to contract a British consultant firm, M/S Turner & Townsend, which carried out a due diligence on the SPV and on July 9, 2018 submitted a report that Roko had the “necessary competence” and “capability to deliver the project.”

Government later handed over the site to SPV which also immediately handed it over to Roko in May 2015 as the contractor.

Works

Roko says, at its own cost, it hoarded off the entire perimeter of the project site, graded the areas, connected utility services and has since paid for water, electricity and telephone services carried out drainage works and did soil tests, set up containers for offices and storage, put up toilets and provided security.

Roko says it obtained a performance security worth $7m for the construction works of the project which was handed over to the SPV.

In May 2019, Roko also provided a letter of comfort to the SPV from the construction firm’s bankers – TDB.

Roko says a draft construction contract for the project which was reviewed and agreed upon with minor amendments by both parties is yet to be signed by the SPV.

Koehler said he was shocked upon being informed by Willie Swanepoel and Ainea Ashaba, Roko’s operations Director and manager respectively, who were at the project site at the material time preparing to commence construction works on June 10, 2019 that Enrica Pinetti, the chairperson of Finasi accompanied by people in military attire, police officers and several Chinese people came to the project site and told Roko’s staff to hand over the site to Chinese persons and vacate the site.

Koehler instructed Roko’s staff not to hand over or move from the site and all the company’s security stayed put on the site and never handed it over to the Chinese.

Roko says no meeting was held by the SPV to remove them from the site.

In the application, Roko said actions of Finasi would “cause calamitous repercussions to the entire project and upon Roko which has over the last four years spent colossal sums of money and man hours to design, plan for construction slated to star on June 10, mobilise resources, plant, machinery tools, materials, hired senior specialized construction managers and supervisors from abroad, secured the construction site by hoarding and providing security staff to guard the site.

Roko said it faced irreparable financial loss and damage to Roko hence seeking an injunction from court.

The company said it had, alongside the SPV, concluded financial contracts with several financial institutions and if the threatened actions of Finasi were not stopped, the firm would be in breach and liable to financial institutions in damages of millions of dollars.

Finasi speaks out

Finasi’s lawyers argued that Roko was not in possession of the project site at the time of filing the application as it was still in the hands of SPV.

They further said no contract or undertaking granting Roko mandate to carry out construction works on the project was signed.

They further said Finasi representatives would regularly meet with Koehler until he stopped responding to requests for meetings and that he was no longer cooperative in running affairs of the SPV.

Roko is also accused of not paying for its shares of five percent in the SPV.

Finasi also argued that it was agreed between government and SPV that design, construction and financing of the hospital would be performed or procured by the SPV which has not assigned or undertaken to subcontract the construction works.

That it’s the SPV’s chairperson who sourced financing, leading to the direct agreement with government and the financiers.

Ruling

The judge warned that “there is no telling whether the financiers may not pull out of the whole financial arrangements if Roko that played a crucial role in the financial mobilisation as part of the SPV is edged out of the construction contract. This puts the entire project at a potentially high risk of failure.”

He further added that, “Any order of court issued in the circumstances would therefore take into account all these considerations to grant an injunction; if for anything to salvage the statusquo and ensure that the hospital project on course as initially arranged by parties and does not suffer disruptions.”

Status

Bashaija also ruled that what constitutes the statusquo in the instant case is purely a question of fact.

The PWIA was executed in May 2015 between government and SPV for the sole purpose of the construction of the hospital.

“A careful reading and proper interpretation of the documents attached to the affidavits in support and reply, particularly the e-mails, letter of comfort, project performance security, promissory note, purchase agreement, finance agreements, convey the idea and meaning that for a long time now, there has essentially been a series of interactions between Roko and SPV, demonstrating their clear intention that Roko shall execute the constructions works for the project in accordance with the terms of the PWIA entered into between SPV and government,” said the judge.

“Under the promissory note purchase agreement between PSV and various financiers, Roko is variously recognised as the contractor of the works,” he emphasised.

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