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ARYEETEY, J.A.
A background to this
appeal is as follows: The plaintiff/respondent, as
Sub-Contractor, entered into an agreement, exhibit A,
with the second defendant/appellant-company, as
Contractor, on 15th June 1998 for the excavation of
foundations and erection of 221 steel towers for
electricity transmission of 34.5 KV line between
Kumbungu and Daboya in the Northern Region. The contract
price payable to the respondent is stated in the
agreement. It is the case of the respondent that the
appellants unilaterally reduced the number of towers to
be erected to 42 without any justification, which was in
violation of clause 1.7 of exhibit A. The respondent
contends further that while he was making excavations in
respect of Towers Numbers 1-42 the appellants stopped
him without giving him the notice required under Clause
1.7 of exhibit A. According to the respondent the
termination of the contract by the appellants was also
contrary to Clauses 2.1, 3.1. and 3.2. of exhibit in
that when the appellants terminated the contract they
failed to pay moneys due to him as well as the cost of
materials.
Since the respondent
referred to Clause 3.1 and Clause 3.2 as having been
violated by the respondents I would reproduce them in
full for a better appreciation of the nature of his
claim. They area as follows:
“3.1 Contractor may, at
its option, terminate Sub-Contract at any time in whole
or in part by written notice hereof to Sub-Contractor
whether or not Sub-Contractor is in default and whether
or not Main Contract is subject to termination. Upon
receipt of any such notice, Sub-Contractor shall, unless
the notice directs otherwise, immediately discontinue
works on the date and to the extent specified in the
notice, place not further orders or Sub-Contracts for
materials, equipment, services or facilities except as
may be necessary for completion of such portion of the
works as is not discontinued, promptly make every
reasonable effort to proceed with cancellation upon
terms satisfactory to Contractor of all orders.
Sub-Contracts and rental agreements to the extent they
relate to the performance of works discontinued and
shall thereafter do only such work as may be necessary
to preserve to protect works already in progress and to
protect materials, plant and equipment at the project
site or in transit thereto.
3.2 Upon such
termination, Sub-Contractor shall be entitled to be paid
the value, calculated on the basis of the payment
provisions of the Sub-Contract, of all the works
properly carried out on the site by Sub-Contractor
together with reasonable costs occasioned by and
directly resulting from such termination and not
previously paid for, less such sums as Sub-Contractor
has already received on account of the work performed.
If, at the time of such termination, Sub-contractor has
properly prepared or fabricated off the site any goods
for subsequent incorporation at the site and if
Sub-Contractor delivers such goods to the site or to
such other place as Contractor shall reasonably direct,
the Sub-Contractor shall be paid for such goods or
materials.
Also, according to the
respondent even though he was permitted to work on 42
towers which would cost ¢69,416,803.00 he ended up with
only 40 and was therefore paid ¢13,360,762.28 less than
the contract price. The other assignments carried out by
him for which he was not paid by the appellants were
excavation works for the foundations and construction of
Tower Numbers DE4, DE42, SS104, SS107, SS110, and SS111
at a total cost of ¢10,530,000 as well as survey work in
respect of Towers 43 to 164. Therefore in the court
below the plaintiff/respondent's claim against the first
defendant and second/defendants/appellants jointly and
severally was for the following reliefs:
(a) Special and General
damages for breach of contract entered into between the
plaintiff and 2nd defendant on or about 15th day of June
1998 for the erection of Steel Tower of 34.5 KV Lines
between Kumbungu and Daboya in the Northern Region of
Ghana.
(b) Balance of payment
for work done but which the defendants have not yet paid
to the plaintiff.
(c) Cost of Survey from
Tower 43 to Tower 164.
(d) ¢400,000.00 being
the cost of 4 trips of River Sand.
All along the
appellant's stand has been that the reduction in the
number of the steel towers to be worked upon by the
plaintiff was not a unilateral action by them but was in
exercise of their right under exhibit A, which allowed
them to incerase or decrease the number of steel pillars
to be constructed. According to them the plaintiff
indeed agreed to the decrease in the number of steel
towers to be erected to avoid the payment of penalties
to be incurred if the project is not executed on
schedule. That was after they had written to the
plaintiff complaining about the unsatisfactory manner in
which he carried out the work and instructing him to
complete the foundations of Towers Nos. 2 to 41 before
15th July 1998. Even then the plaintiff was unable to
complete the work on schedule in spite of several
letters written to him cautioning him about the delay.
The defendants further contend that they did not
terminate the agreement wrongfully and that on the
plaintiff's own admission in an agreement on his
letterhead dated 12th October 1998, signed by both
parties, the agreement was lawfully terminated and both
partied were discharged from all further obligations.
The
defendants/appellants filed four grounds of appeal
namely:
(a) That the judgment
is against the weight of the evidence
(b) That the trial
judge erred when he held that the defendants had
breached the contract agreement executed between the
parties;
(c) That the trial
judge erred when he found as a fact that the defendants
owed the plaintiff ¢13,360,762.28 and ¢10,530,000.00 for
works done;
(d) That the trial
judge erred in not giving proper consideration to
exhibit 2 executed between the plaintiff and the
defendant
The plaintiff
cross-appealed and his grounds were:
(a) The quantum of
damages awarded is too small in view of the fact that
the contract entered into by the plaintiff and the
defendants provides a penalty clause of 1 to 15 percent
of the contract price per week.
(b) The learned judge
applied wrong principle in his assessment of damages in
this case that has led to a miscarriage of justice
against plaintiff/appellant.
(c) The learned judge
erroneously considered the principles of vicarious
liability and this has led to the erroneous exclusion of
the first defendant/respondent from liability in this
case.
However it appears from
the written submissions of plaintiff's counsel that no
attention was paid to the grounds of the cross-appeal.
So I take it that the plaintiff does not to pursue the
cross-appeal any longer and so what we have to look at
are only the grounds of the appeal.
I would first like to
take grounds (a) and (b) of the defendants grounds of
appeal together, namely: "(a) That the judgment is
against the weight of the evidence and (b) That the
trial judge erred when he held that the defendants had
breached the contract agreement executed between the
parties”. It is worthy of note that paragraphs 5-7 of
the plaintiff's Statement of Claim specify the Clauses
in the agreement, exhibit A in respect of which the
defendants' breach of the agreement relates. They read
as follows:
“5. By Clause 1.7 of
the agreement ‘in the event of default, failure or delay
on the part of Sub-Contractor, Contractor may nominate 8
days after prior notice to Sub-Contractor, a specified
person, firm or company to carry out any part(s) of the
Works where Contractor considers such action appropriate
and on receiving contractor’s notice, Sub-Contractor
shall leave the site.’
6. When plaintiff was
engaged in the excavation of foundation for towers 1 to
42 and the erection of the towers the first defendant
without giving the required notice to the plaintiffs
stopped them from the excavation of some of the
foundations for the towers. This action of the 1st
Defendant was in breach of Clause 1.7 of the agreement
between the plaintiff and the defendants.
7. The defendants
verbally and wrongfully terminated the plaintiff’s
Sub-contract contrary to Clauses 1.7, 2.1, 3.1 and 3.2
of the agreement.”
It would be convenient
at this stage to look at Clause 1.7 of exhibit A. It
reads:
"1.7 Without Prejudice
to any other applicable provision herein contained and
at the sole option of the Contractor in the event of
default, failure or delay on the part of Sub-Contractor,
Contractor may nominate 8 days after prior notice to
Sub-Contractor, a specified person, firm or company to
carry out any part(s) of the Works where Contractor
considers such action appropriate and on receiving
contractors notice, Sub-Contractor shall leave the site.
After quoting the
contents of Clause 1.7 of exhibit A the learned trial
judge in his judgment had his to say at pages 75 and 76
of the record of appeal respecting the meaning and
effect of the sub-clause as follows:
"Counsel for the
defendants submitted that the Contractor has very wide
discretion under the contract including this Clause 1.7.
Indeed this is true. However, the discretion under this
Clause 1.7 is a conditional one. The conditions
precedent to the invocation by the Contractor of the
discretion under this clause are (1) There must be a
default, failure or delay on the part of the
Sub-contractor, and (2) There must be 8 days prior
notice to the Sub-contractor. The onus is on the
Contractor to establish that these pre-conditions
existed at the time he purported to exercise his
discretion. If both or any one of these preconditions
did not exist the exercise by the Contractor of his
discretion would be wrongful... At the time the 2nd
defendant exercised its discretion to stop the plaintiff
from the further works the first precondition did not
exist and I so find... There was no evidence before me
that any notice of default, failure or delay was given
to the Sub-contractor. This is quite understandable. The
notice was to be given if there was a default, delay or
failure on the part of the Sub-contractor. I have
already held that the Contractor had not shown the
existence of any default, failure or delay on the part
of the Sub-contractor. Hence no notice could properly
have been given and I find that no notice had been given
when the Contractor suspended all work in respect of the
steel towards beyond T42.
In asking the plaintiff
not to perform the works beyond T42 the 2nd defendant
was unilaterally repudiation the contract, exhibit A, in
respect of Towers T43 to T221, i.e. 179 towers in all.
The request was in breach of the contract. It was then
up to the plaintiff to treat the contract as at an end
in respect of T43 to T221 and make a claim for breach of
contract later while the contract continued to exist in
respect of TI to T42.
Subsequently by exhibit
1 Towers 1 and 42 were also taken out of the contract.
This constituted another breach of contract as here,
too, the necessary preconditions did not exist for the
termination of the contract even under clause 2 or 3.1.
For the 2nd defendant to purport to terminate the whole
of exhibit A on 12th October 1998 was an exercise in
futility. By that date exhibit A had long ceased to
exist because of prior breaches by the 2nd defendant.”
In his preoccupation
with Clause 1.7 of exhibit A the learned trial judge did
not take cognisance of the opening words of the Clause,
that is, "Without prejudice to any other applicable
provision herein contained". If he had it would have
been obvious to him that the defendants' right to
exercise his discretion is not limited to the instance
depicted in Clause 1.7 of exhibit A. What the learned
trial judge sought to do was to fit the conduct of the
defendants as depicted by exhibit 1 into the straight
jacket of Clause 1.7 which admittedly lists
preconditions for the exercise of discretion by the
defendants, as amplified by the portion of the judgment
of the court quoted above. What the trial judge should
have done was to have looked at the whole agreement as
suggested by the opening words of Clause 1.7 quoted
above. Looking at the contents of exhibit 1, what took
place was that the defendants did not terminate the
whole of the agreement. They merely reduced the number
of steel pillars the plaintiff was to construct. The
question to ask is, “Were the defendants by the
agreement entitled to do that?” A look at Clause 2.1 of
exhibit A provides a clear answer. It reads:
“2.1 In lieu of giving
notice of termination, Contractor may notify its
decision to take part only of Sub-Contract Works out of
the hand of the Sub-Contractor and may by itself, its
servants or agents execute, complete and maintain such
part and in such event Contractor may recover the cost
of so doing from Sub-Contractor, or deduct such costs
from monies otherwise becoming due to Sub-Contractor.”
It cannot be denied
that exhibit 1 for all intents and purposes did not
constitute termination of the contract. It falls in line
with what Clause 2.1 of the agreement, exhibit A, which
permits the defendants to reduce the number of towers
the plaintiff was to construct under the contract
without assigning reasons for so doing. However in this
case the defendants in exhibit 1 pointed out to the
plaintiff, as sub-contractor, his delay in the execution
of the contract, which might result in the payment of
penalty by the defendants as contractors. From all
indications the plaintiff did not challenge the
defendants' exercise of their right under Clause 2.1 of
the agreement. In fact he initialled the document
containing the new arrangement and followed what exhibit
1 required him to do to the letter. The evidence is that
he co-operated fully with the defendants and carried out
what he was required to do under exhibit 1. It appears
to me that the reason why the learned trial judge came
to the conclusion that the defendants had breached the
agreement was the fact that he restricted himself to the
provision in the agreement which relates to termination,
that is Clause 1.7 of exhibit A. It is ironical that
Clause 1.7 itself by its opening phrase that is:
"Without prejudice to any other applicable provision
herein contained', puts one on notice that there are
other options in the agreement open to the defendants
apart from their right to terminate the agreement under
specified circumstances stipulated in Clause 1.7 and
highlighted in the judgment of the court below at pages
75 and 76 of the record of appeal as follows:
“Counsel for the
defendants submitted that the contractor has very wide
discretion under the contract including this Clause 1.7.
Indeed this is true. However, the discretion under this
Clause 1.7 is a conditional one. The condition precedent
to the invocation by the Contractor of the discretion
under this Clause are (1) There must be a default,
failure or delay on the part of the sub-contractor, and
(2) There must be 8 days prior notice to the
sub-contractor. The onus is on the contractor to
establish that these pre-conditions existed at the time
he purported to exercise his discretion. If both or any
one of these pre-conditions did not exist the exercise
of the contractor of his discretion would be wrongful.
As can be seen the
defendants in real terms did not purport to terminate
the agreement under Clause 1.7 of exhibit A. They
exercised their options as permitted by Clause 2.1 of
exhibit A and therefore their conduct in reducing the
number of towers to be constructed would not amount to
wrongful termination of the contract. As shown in
exhibit 1 the reduction of number of towers to be
constructed by the plaintiff did signify a variation of
the terms of exhibit A, which was permitted by Clause
2.1 of the agreement.
I would now have a
brief look at grounds (c) and (d) of the grounds of the
appeal, which I intend to take together. As a reminder
they read as follows:—
"(c) That the trial
judge erred when he found as a fact that the defendants
owed the plaintiff ¢13,360,762.28 and ¢10,530,000.00 for
works done;
(d) That the trial
judge erred in not giving proper consideration to
exhibit 2 executed between the plaintiff and the
defendants. "
As contended by the
defendants, when they made their final payment to the
plaintiff on 12th October 1998 they entered into
agreement not to pursue any more claims. The agreement,
exhibit 2, appears at page 87 of the record of appeal on
the plaintiff's own letterhead and signed by both
parties. It reads:
“AGREEMENT BETWEEN
NOROLEC GHANA AND BUSHIE ENTERPRISE
The two companies
agreed to solve the issue between them, according to the
terms of the Contract No. CB 97143.
NOROLEC paid all the
amount according to the work done by Bushie Enterprise,
from tower No. 1 to tower 42 excluding tower No. 4 and
No. 42. The two companies agreed in principle not to
come back for any moneys, and stop all future
co-operation "
The defendants' project
manager, Stephen Graff, who testified on the defendants'
behalf gave the circumstances under which exhibit 2 was
made at page 35 of the record of appeal as follows:
"When he was not doing
the work we informed him formally in September 1998 that
we were terminating the contract; and invited him to our
office on 12/10/98 to do the final reconciliation
together. He came to the office on 12/10/98. We
discussed all the matters in terms of payment, work done
and final agreement. Plaintiff issued his final invoice
for payment… on 12/10/98 when we met we paid the
plaintiff ¢10,300,000 which represents ¢4,800,000.00 as
payment of the retention on the previous invoice
submitted by plaintiff plus ¢5,500,000.00 to buy some
materials from plaintiff. Money paid him included work
done by plaintiff. After paying all these monies we
signed final agreement specifying that nobody would come
back to claim any money.”
The plaintiff has not
denied appending his signature to exhibit 2 and did not
lead any evidence to suggest that the contents of
exhibit 2 should be understood to mean anything other
than conveyed by its plain language, namely: The
plaintiff was paid what he was entitled to and each
party agreed not to pursue any further claim for money.
I am therefore of the view that taking into account the
contents of exhibit 2, the conclusion of the trial court
that the defendants owed the plaintiff various sums of
money was erroneous. For the reasons given in this
judgment I would allow the appeal and set aside the
judgment of the court below. The plaintiff's
cross-appeal is dismissed.
B.T. ARYEETEY
JUSTICE OF APPEAL
I agree. I have nothing
useful to add.
V. AKOTO-BAMFO (MRS)
JUSTICE OF APPEAL
I also agree.
A. ASARE-KORANG
JUSTICE OF APPEAL
COUNSEL
MISS BRENDA SEMEVOR FOR
EKOW AWOONOR FOR
APPELLANT
MR. IBRAHIM MAHAMA FOR
RESPONDENT
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