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The plaintiff
was employed as a main
contractor to construct the
Accra Mall by the Defendant by
appointment letter dated 14th
December 2005. The construction
contract was governed by the
Fourth Edition (1987) of the
Conditions of Contract for Works
of Civil Engineering
Construction produced by the
International Federation of
Consulting Engineers, or
Federation International Des
Ingeneurs-Conseils popularly
called the FIDIC 4 contract or
The Red Book because of the
color of its cover. A partial
version of the General
Conditions Of Contract Was
tendered by plaintiff as exhibit
B and the full version by
defendant as exhibit 8. The
Conditions of Particular
Application to this contract
were tendered as exhibit 9. It
is the case of the plaintiff
that after sectional handing
over of parts of the mall from
July 2007 to February 2008, the
parties reached substantial
completion of the project in
November 2007 and every portion
of it was handed over by
February 2008. On 28th October
2008, the Engineer produced what
was described as the Final
Account Statement on the project
on which representatives of the
parties and the engineer signed
that the final agreed full and
final value of all works
executed by the Contractor stood
at 23,544,152.12$. On 17th
December 2008, the Engineer
issued Payment Certificate
Number 24 in the sum of
$254,478.63. On Certificate 24,
tendered as exhibit 1 and which
was described as the Final
Payment Certificate, the
Engineer certified that the
current 'Contract value stood at
24,668,783.00$ and that the
Contractor was due payment of
254,478.63$. The disparity in
figures between the Final
Account Statement agreed on 28th
october and this certificate
dated 16th December 2008 showed
that in the space of those
weeks, for whatever reason, the
value of the contract works had
been identified as being more
than one million dollars over
and above what the final Account
Statement agreed. Before the
Contractor could issue its
invoice for payment of the
certified sum on Certificate
Number 24, the Employer issued
an email the very next day
through its Fatima Wadiwalla
stating that 'all the payments
made to DeSimone and related
sub-contractors totaled
$23,943,378 which exceeds the
final account by 329,066.35$.
Without making any comment On
the directions issued by the
Engineer for Contractor to
prepare invoice for payment on
Certificate 24, she suggested
the way forward as the need for
all the parties to confirm the
payments and cross check her
spread sheet setting out the
payments and advise her of any
reconciled differences. It is
the plaintiff's case that
following this communication and
the position that payments to
the contractor had exceeded the
values on the final account, the
Contractor was unable to prepare
an invoice pursuant to
Certificate 24 for payment, but
was compelled to abide the
outcome of this reconciliation
exercise. The defendant's
Witness, Phillip Cobbina
testified that by the end of
this reconciliation exercise in
March 2009, the parties had
agreed that the overpayment
amounted to 73,296.5$ dollars
and not 329,066.35$. The
plaintiff remains unpaid the
amount certified on Certificate
Number 24 and has instituted
this action claiming the sum
identified on the Final Account
Statement as the difference
between the value of the
contract works and payments made
to the contractor as at 28th
October 2008. This sum is set
out on the last page of exhibit
C as 516,061.65$. The defendant
has resisted the claim on
several grounds. Firstly, they
argue that their records show
payment to the Contractor in
excess of 73,296.52$ and this
sum is agreed by the Contractor
and therefore the Contractor is
not entitled to any further
payments. Their second argument
is that exhibit C which was
described as the Final Account
Statement is the Final Statement
that ought to be submitted to
the Engineer for consideration
under clause 60.6 of the General
Conditions of Contract. And that
this clause provides that
following the issue of this
Final Statement, if there is a
dispute as to the sum Owed to
the Contractor, the Engineer was
required to issue an Interim
Payment Certificate for those
parts of the draft final
statement which are not in
dispute. Consequently,
Certificate Number 24 is an
interim final certificate (IPC)
issued pursuant to clause 60.6.
It is defendant's case that the
next step after the issue of
this IPC is a written discharge
from the Contractor confirming
that the Final Statement
represents full and final
settlement of all monies due to
the Contractor and that without
the written discharge, a final
certificate for payment is not
due for payment. Thus the
plaintiff's action is premature,
not having waited out the
contractual processes set out in
the Red Book for arriving at a
final certified sum for payment.
The third argument of the
defendant, which is in tandem
with the just set out argument
is that the figure identified on
the Final Account Statement -
exhibit C - is only the value of
the contract works and does not
signify a certified sum for
payment and therefore it cannot
form the basis for a claim in
court. They urge the court to
dismiss the claim of the
plaintiff and direct the parties
to return to the processes of
the contract set out in Clause
60.6. A collateral argument
which was not developed to any
conclusion was that a Taking-
Over Certificate for the whole
of the works had not been issued
by the Engineer and the Defects
Liability Certificate for the
works had consequently not been
issued and so the project had
not gone through the Defects
Liability period. This argument
is denied by plaintiff. The
issue for determination by this
court is whether the plaintiff
is entitled to payment of the
sum stated on the Final Account
Statement as claimed or it has
failed to prove any entitlement
in this court and the parties
should be directed back to
conclude the final contractual
processes as prayed by the
defendant. On a study of the
pleadings, evidence and exhibits
before me, it is clear that
there is considerable confusion
in the arguments of both parties
regarding: what the parties and
the Engineer sought to do
between October and December2008
and the implications of those
processes and that this
confusion has been fueled
largely by the failure of the
Engineer to decisively do the
impartial work expected of the
Engineer in the dying phases of
the Contract. The FIDIC 4
contract is extremely popular
because of the regime it creates
for the Engineer, although paid
by the Employer, to act as a
neutral arbiter of the work
program and payments. He
achieves this position by the
decisions and processes he
issues to declare his decisions.
In clause 2.6, captioned
'Engineer to Act impartially',
the contract provides that 2.6
Wherever, under the Contract,
the Engineer is required to
exercise his discretion by: a.
giving his decision ,opinion or
consent, b. expressing his
satisfaction or approval c.
determining, value, Or d
otherwise taking action which
may affect the rights and
obligations of the Employer or
the Contractor he shall exercise
such discretion impartially
within the terms of the contract
and having regard to all the
circumstances Any such decision,
opinion, consent, expression of
satisfaction, or approval,
determination of value or action
may be opened up, reviewed or
revised as provided in clause
67. It is clear to this court
that the befuddled position of
the Engineer on this case,
leading to its officer appearing
as the first witness of the
employer in this court has
contributed greatly to this
dispute. It is the case of the
plaintiff that the whole of the
works reached substantial
completion in February 2008
following sectional taking over
of various parts of the mall
from July 2007 to February 2008.
Exhibit 3 shows that the last
part of the Mall taken over was
the Media Center and this was on
2nd February 2008. This is not
denied by the defendant. Thus,
in addition to the Sectional
Taking Over Certificates issued
pursuant to clause 48.1 such as
exhibit J dated November 2007,
by which date only 4 zones were
outstanding, the contractor
ought to have requested for and
the Engineer ought to have
issued a Taking Over Certificate
for the substantial part of the
works completed and taken over
by the employer after pursuant
to clause 48.2(b) and (c). This
was not done and although no
evidence was placed before the
court to establish that pursuant
to clause 48.1, the contractor
Was notified of any defects
affecting substantial completion
between November 2007 to
February 2008, to date there is
no final Taking Over Certificate
on this project. Be that as it
may, the parties testified that
following the handing over of
the project, a snagging list for
defects was given to the
Contractor who claimed to have
rectified all defects, though
the defendant denies this
alleged rectification. But
within the evidence before the
court, I can find that by
operation of clause 49.1, the
Defects Liability Periods for
the parts covered by the Taking
Over Certificates issued
pursuant to clause 48.1 such as
exhibit H commenced from the
date certified on those
certificates and by necessary
application of the terms of the
contract in clauses 48 and 49,
to the extent that by November
1st , more than 90% of the works
had been taken over and a Taking
Over Certificate issued, the
Defects Liability Period for the
substantial part of the works
would run for 90 days from 1st
November 2007 to 31st January
2008. The defendant took over
the remaining insignificant
number of shops — precisely 2 —
on 2nd February 2008. What is
the import of this for the
accounts that triggered the
controversy? Clause 60 of the
General Conditions of Contract
deals with certificates and
payments. The regime set out is
that payments would be triggered
by the contractor submitting to
the Engineer monthly statements
showing the amounts it considers
itself entitled to. 28 days
after receipt of such
statements, the Engineer would
issue an interim payment
certificate stating the amount
of payment the Engineer
considers as due to the
Contractor pursuant to the
monthly statement. In every IPC,
the Engineer is allowed to
modify and correct any previous
one. Through the issue of these
statements,. their verification
and the eventual issue of IPC's,
the Engineer is able to keep
track of the value of works
executed, payments made to the
Contractor, and the due
administration of all aspects of
the project, including payments
made to or due and owed from sub
contractors. Under clause 60.5,
84 days following the issue of
the Taking Over Certificate in
respect of the whole of the
works, the contractor shall
submit to the engineer six
copies of what is now called a
'Statement at Completion' with
supporting documents showing the
final values of the works and
sums which the Contractor
considers to be due to him under
the contract. The certificate to
be issued pursuant to this
statement at completion is still
an Interim Payment Certificate
in the nature of the Clause 60.2
certificates. 56 days after the
issue of the Defects Liability
Certificate, the contractor
commences the final account
statement by submitting a draft
to the engineer. This is where I
see that the problems began.
Although it placed no evidence
before this court to prove that
particular defects were seen by
February 2008 which plaintiff
failed to rectify, the Engineer
testified that he failed to
properly bring this contract to
an end by issuing a Defects
Liability Certificate as
required by Section 62.1 because
there were defects in the
project. Thus, while abdicating
his duties to properly manage
the rectification of defects
through notices and follow up on
the contractor, the Engineer
took the position not to issue
the Defects Liability
Certificate. Under clause 61.1,
only: the Defects Liability
Certificate shall be deemed to
constitute approval of the
Works. And clause 62.1 provides
for the issue of this
certificate under three
alternate circumstances 'The
Defects Liability Certificate
shall be given by the Engineer
28 days after the expiration of
the Defects Liability period,
or, if different Defects
Liability periods shall become
applicable to different Sections
or parts of the Permanent Works,
the expiration of the latest of
such period, or as soon
thereafter as any works
instructed, pursuant to clauses
49 and 50, have • been completed
to the satisfaction of the
Engineer.' The literal
understanding of these alternate
scenarios for issuing the
Defects Liability Certificate is
that in the absence of
identifiable defects which the
Engineer instructs the
Contractor to remedy under
clauses 49 and 50, the Engineer
'shall'; and this is mandatory,
give the Contractor the Defects
Liability Certificate 28 days
after the expiration of the
Defects Liability Period, which
in this case would be by 31st
January 2008 - being 90 days
after substantial completion on
1st November 2007, or at the
worst, 30th April, which is 90
days after the last two zones
were handed over to the
Employer. From the evidence,
although the Engineer did not
identify that any instructions
of his for rectification of
defects were outstanding in that
crucial 90days period, it failed
to issue this certificate and
left the matter in limbo. It now
seeks to rely on the part of
clause 62.1 which provides that
.the' Contract shall not be
considered as completed until a
Defects Liability. Certificate
shall have been signed by the
Engineer and delivered to the
Employer, with a copy to the
Contractor, stating the date on
which the Contractor shall have
completed his obligations to
execute and complete the works
and remedy any defects to the
Engineer’s satisfaction'. Its
representative, Mr. Bovell who
testified as the defendant's
witness argued before this court
that there are still defects in
the project and the Defects
Liability Certificate has not
been issued as a result of this.
I find the arguments at best
disingenuous and at worse
evidencing lack of candor. None
of the copious exhibits tendered
by the defendant showed that
between November 2007 when it
issued a Taking Over Certificate
for substantially the entire
mall, and April 2008, when the
Defects Liability Period for the
last two zones handed over in
February 2008 should be deemed
to have ended, the Engineer
sought any rectification of any
defects. The language of Clause
62.1 is clear that in the
absence of instructing any works
pursuant to clauses 49 and 50,
the Engineer is compelled by
reason of the contract to issue
the Defects Liability
Certificate. Although this
Certificate was not issued, by
reason of the mandatory stance
of the contract, I find my way
clear to finding that the
Defects Liability Period for the
entire mall came to a
satisfactory final end on April
30th 2008 and there being no
outstanding un-remedied defects
that have been shown to this
court, the Contractor was
discharged from an obligation to
remedy defects that Were not
latent defects. The failure of
the Engineer to issue the
Defects Liability Certificate is
a process that is outstanding
for fulfillment but it cannot
serve to hold the entire
contract hostage It is not too
late for the Engineer to fulfill
his obligations under the
contract since he failed to
tender evidence to prove that
during the Defects Liability
Period he raised instructions
for remedying defects what were
not complied with. Of course,
this would not preclude the
defendant from seeking
rectification of latent defects
in any part of the works, but
such a demand would be pursuant
to its rights under the general
law of contract, neither would
it preclude liability on the
part of either party for the
fulfillment of any obligation
incurred under the Contract
prior to the cessation of the
Defects Liability Period as
provided for Under clause 62.2.
However, even without the
official declaration of the
contract coming to an end
through the clause 48.1 taking
over certificate and the issue
of the Defects Liability
Certificate, the records show
that the parties entered into
the preparation of the Final
Statement pursuant to clause
60.6. There are two comments I
must make here. Although Mr.
Bovell originally denied that
the plaintiff as contractor ever
submitted a statement of
completion as required by clause
60.5 to be issued by the
contractor before the
preparation of the Final
Statement, he later conceded to
this. Plaintiff's witness Mr.
Amankwaah also claims that the
contractor sent its statements
at completion and draft final
statement be email and this is
what led to the preparation of
the Final Account Statement
tendered as exhibit C. Secondly,
although the Final Statement
issued pursuant to clause 60.6
is supposed to be a document
emanating from the Contractor,
the tenor of exhibit C shows
that this was a document
prepared by the Engineer and not
the Contractor as anticipated by
the contract. But be that as it
may, whether or not the
contractor initiated the issue
of the Final Statement by
presenting a Statement at
Completion, and produced drafts
for the preparation of the Final
Statement, Clause 60.6 makes it
clear that unlike the monthly
statements issued by the
contractor and interim payment
certificates issued by the
engineer, the Final Statement is
a document concluded through
agreement of the Contractor and
the Engineer. And indeed,
exhibit C, the Final Account
Statement is an agreed document
signed not only by the
Contractor and Engineer but also
by the. Employer. By the terms
of clauses 60.5 and 60.6 of the
contract, it is anticipated that
this document will be completed
not less than 140 days or almost
five months after the taking
over of the whole of the works.
In this case this document was
agreed 9 months after the taking
over of the whole of the works
in February 2008. Thus although
exhibit C does not say
explicitly that it is issued
pursuant to clause 60.6, its
preparation and structure was in
compliance with that provision -
as testified by representatives
of both parties. I totally agree
with defendant counsel's
arguments on addresses that by
the terms of Section 60.6, the
declaration of a figure as the
sum agreed to be due to the
Contractor on the Final
statement does not create a
legal or contractual liability
for its payment. What I do not
agree with him is that the
certificate issued following the
final statement is by operation
of the contract an interim
payment certificate. The answer
lies in the last paragraph of
clause 60.6 which reads 'If
following discussions between
the Engineer and the Contractor
and any changes made to the
draft final statement which may
be agreed between them, it
becomes evident that a dispute
exists, the Engineer shall
deliver to the Employer an
Interim Payment Certificate for
those parts of the draft final
statement, if any, which are not
in dispute. The dispute may then
be settled in accordance with
clause 67' Clearly, the issue of
an interim payment certificate
after a clause 60.6 statement is
done only arises where there is
a dispute regarding the values
on the final statement. At that
point in time, the contract
regime provides for the Engineer
to -certify by an interim
certificate the undisputed sums,
and subject the outstanding
balance to his own decision, an
amicable settlement of the
parties or arbitration pursuant
to clause 67. But in the current
case, there was no dispute as to
the values on the final account
statement. It was so agreed that
even the employer signed it. In
such a situation, the next
process is not an interim
certificate but a written
discharge by the Contractor
under clause 60.7 and a final
payment certificate under clause
60.8. Clearly, the Contractor
served no separate written
.discharge on the Employer. But
notwithstanding this, the
Engineer went ahead and
certified a final payment
certificate in Certificate
number 24. And I do not find
that the non-issue of the
written discharge is fatal to
the validity of the final
certificate. Indeed the words of
the final statement invite the
finding that it also constitutes
a. written discharge. Under
clause 60.7, the written
discharge confirms that 'the
total of the final statement
represents full and final
settlement of all monies due to
tile contractor arising out of
or in respect of the contract.'
The opening paragraphs of the
final Account in Exhibit C has
these words ‘I/we hereby agree
that the above amount represents
the full and final value of all
work executed by us under the
above contract and all claims
that we have against the
employer in connection with the
above contract. 'It will take a
stretch of imagination to deny
that these words do not satisfy
the discharge anticipated under
clause 60.7. And it would seem
that the Engineer recognized
this hence it went ahead to
issue certificate 24 as a final
certificate. It has been argued
by defendant that certificate 24
is an interim certificate and
not a final certificate. I must
respectfully disagree. At the
top of the certificate, two
boxes are provided to indicate
whether the certificate number
is interim or final. The
engineer clearly filled that box
with the information '24 Final
Account'. And following on the
heels of the Final Account, it
is clear that this certificate
was issued as the final payment
certificate required under
clause 60.8. Contrary to the
arguments of plaintiff, there is
no contractual obligation for
the Engineer to certify payment
in total tandem with the final
statement as if nothing else may
occur after the issue of the
final statement. It must be
remembered that as a necessary
part of this contract,
additional works, variations and
extra Works may be ordered by
the client and the contractor
has a duty to execute them,
subject to claims for payment.
In the same way, the cost of the
project may be reduced by reason
of omission of works or even the
remedying of defect. Thus, it is
no surprise that certificate 24
has a value different from that
acknowledged on the final
statement. An examination of the
Certificate shows that since the
final statement was completed in
October 2008, the contract value
changed from 23,544,152.12 $ to
$24,668,783.00. Indeed Fatima
Wadiwalla's email of 17th
December 2008 which alleged the
overpayment being contested
identified that 'the subtotal of
23,943,378 excludes any payments
that were made for the fire
damage works and the new
retaining wall.' Please see
exhibit F. This clarifies that
between October and December,
there could easily have been
reason for the contract works
value to change. Clause 60.8
thus gives the Engineer the room
to certify what is in his
opinion finally due under the
contract in the final payment
certificate. Thus I do not find
that it is open at all to this
court admit the contention that
plaintiff should be entitled to
the values on the final account
statement but not the value on
the final certificate which is
certificate 24. That contention
by the plaintiff is dismissed.
But having certified the final
certificate sum, is it open to
the employer to dispute this sum
and refuse to pay same on the
ground that it has over paid the
contractor, such that the
contractor is bound to enter
into reconciliation exercises
directly with the employer's
team as Ms Wadiwalla directs in
her email? I am afraid not. And
this is where I find that the
Engineer terribly let down the
parties in what was his
contractual function. There is
no contractual provision that
allows the contest of this final
certified payment in the manner
that interim payment
certificates are open to review
and corrections by further
interim certificates.Clause
60.10 provides that with the
exception of situations where
the contractor is liable to pay
liquidated ascertained damages
for late delivery under clause
47, the employer 'shall' pay the
amount certified under clause
60.8 within 56 days -after such
final payment certificate has
been delivered to the employer
or pay interest for late
payment. This obligation is not
negotiable. To my mind, the
danger in this stance is
validated by the alleged
reduction of the alleged
overpayment from approximately
325,000$ to 73,000$ during this
reconciliation exercise that
seemed that seemed to have been
done through the presentations
of spread sheets etc and outside
the purview of the Engineer's
administration and creating what
could easily be an arbitrary
result. Evidence has been
tendered before this court to
prove this alleged overpayment.
But without a doubt, this
evidence only leads to what Mr.
Kobbina referred to as
'mathematical figure'. An
interesting point was made in
cross examination of Mr. Kobbina.
He was asked 'so the overpayment
is just an arithmetic figure?'
A. Yes Q. And so when you said
that when the project manager
put a figure of 516,000$ as the
amount due the contractor and
you considered that a
mathematical figure, what does
that mean, it means the same as
yours isn’t it? A No because I
have been able to prove that and
I have given you a listing.1n
exhibit 2 which shows
reconciliations of what happened
and it gives a reconciled
overpayment amount Clearly, Mr.
Kobbina was of the opinion that
as long as he could prove
payments, it was legitimate to
set off the payments against the
value of the works, whether or
not this conflicted with the
certification of the Engineer in
Certificate 24. One of his final
statements was extremely telling
of the mindset accompanying the
exercise that the defendant is
inviting this court to endorse.
He said 'We took out those that
we were comfortable with and
that it should be taken out'.
When questioned by the court as
to the extent to which he
averted his mind to the
Conditions of Contract in
pursuing the alleged
reconciliation, he said 'My
Lord, I did not use the book at
all'. I must whole heartedly
disagree with his presentations
based on these positions - if
for none other. The duty of a
court in contract adjudication
is simply to enforce the terms
of the contract. The contract is
clear that the only person with
the function of determining the
sums due the contractor is the
Engineer and he has no business
abdicating that role to a team
comprising whichever persons
come from the offices of the
parties. Whether the defendant
has paid the sums stated on the
final statement, or on the final
certificate, and whether the
payments constitute overpayment
to the Contractor, the import of
what payments have been made is
a matter of contract
administration and that is the
preserve of the Engineer under
the FIDIC 4 contract that the
parties have chosen to bind
themselves to and not the
function of the parties. It must
be premised on what is allowed
to either party by reason of the
contract, and arrived at in
proper form - not through an
office, email and phone call
reconciliation exercise
dominated by the employer, when
the contract has not officially
been brought to an end. This
court finds that as at date, by
operation of Certificate 24, the
contractor has been found to be
owed $254,478.63. Mr. Bovell's
purported endorsement of the
review done by the employer as
testified in court has not been
set down as a part of the
contractual records of this
project. The engineer has not
given a decision on the protests
of Fatima Wadiwalla dated 17th
December and unless and until he
does so, in proper contractual
form those communications cannot
be recognized by this court.
This is not the forum for
protesting a Certificate and as
such, the Defendant is ordered
to pay the Plaintiff the sum of
$254,478.63 being the sum
certified on the Final Payment
Certificate with interest from
December 2009. Unfortunately I
do not have the expertise to
determine the exact figure due
the contractor following
examination of the certified
payments and the alleged claims
of the employer. Costs awarded
at $15,000 being 5% of the
Contract sum and provision for
court expenses. COUNSEL: MR.
ADDO WITH MR. AGYEMAN AND MR.
OSEI ASARE FOR PLAINTIFF MR.
ARHIN WITH MS.MARTINSON FOR
DEFENDANT |
