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Agreement -
Construction projects -
Contract period –
Frustration
- Termination - Arbitration
- Dispute resolution mechanism -
valuation of the works executed
– Provision for extension of
time – payment of liquidated and
ascertained damages - Guarantee
bonds –
Whether or
not as at 8th April,
2005 when the 3rd
defendant purported to terminate
the agreement the agreement
between the parties was still
binding - Whether the 3rd
defendant’s refusal to extend
the contract amounted to a
breach of the agreement -
HEADNOTES
The plaintiff
is a building contractor and the
3rd defendant is an agency of
the Government of Ghana in
charge of providing facilities
for educational institutions
among other functions. The
agreement was comprehensive and
spelt out the rights, duties and
obligations of all the parties
and stated what should happen in
the event of, practically, all
the known contingencies in
construction projects.
The facts of the case are
largely documentary and its
resolution ought to have
consisted in applying the
detailed provisions of the
agreement to the facts and
arriving at a decision which, in
our opinion, should have taken
far less judicial time than
happened in this case. Also, if
the alternative dispute
resolution mechanism provided
for in the agreement had been
applied, the controversies
regarding the technical aspects
of the case would have been
resolved by building industry
experts so that any outstanding
issues of pure law could then
have been brought to the courts
for determination. However, for
reasons that do not concern us
in this appeal, the court
refused to grant an application
for reference of the case for
arbitration. But it ought to be
stated, that from the record, a
considerable amount of the time
was used up by the parties to
attempt settlement and for
valuation of the works executed
before the dispute arose
HELD
In
conclusion, the 3rd
defendant/appellant/appellant’s
appeal fails in part and
succeeds in part. The judgments
of the High Court dated 29th
July, 2011 and of the Court of
Appeal dated 3rd
November, 2016 are hereby set
aside and in their place we make
the following orders;,The
counterclaim of the 3rd
defendant is hereby dismissed.
The plaintiff’s
relief (a) is granted.
Consequently, the 1st
defendant is perpetually
restrained from paying on the
guarantee bonds.
The plaintiff’s
reliefs (b), (c), (d) and (e)
are hereby dismissed but the
plaintiff is awarded general
damages against the 3rd
defendant in the sum of
GHS70,000.00 for the 3rd
defendant’s breach of Clause 19
of the agreement by failing to
extend the contract time.
STATUTES
REFERRED TO IN JUDGMENT
CASES
REFERRED TO IN JUDGMENT
Kolex Ltd (No.2) v Field [2000]
SCGLR 175.
Fattal v
Wolley [2013-2014] 2SCGLR 1070
In Re Timber
and Transport Kumasi-Krusevac
Co. Ltd
Zastave v
Bonsu & Anor [1981] GLR 256
Wallis, Son &
Wells v. Pratt and Haynes [1910]
2 K.B. 1003, C.A.
Sweet &
Maxwell Ltd. v. Universal News
Services Ltd. [1964] 3 All E.R.
30
Joseph v.
Boakye [1977] 2 G.L.R. 392 at p.
402, C.A.”
Gaymark
Investments Pvt Ltd v Walter
Construction Group [1999] NTSC
143.
Delmas Agency
Ghana Ltd vrs Food Distributors
International Ltd [2007-2008]
SCGLR 748
Skanska
Jensen International v
Klimatechnik Engineering Ltd
[2003-2004] SCGLR 698
Lodder v.
Slowey (1904) AC 442
Afordi & Ors
v Ghana Publishing Corporation
[2005-2006] SCGLR 1104.
Wells v Army
& Navy Cooperative Society
[1902] 86 LT 764.
Percy Bilton
Ltd v Greater London Council,
[1982] 1 WLR 794,
Peak
Construction (Liverpool) Ltd
v
McKinney Foundations Ltd, [1970]
BLR 111
BOOKS
REFERRED TO IN JUDGMENT
Analysis of
Concurrent Delay on Construction
Claims. (2018) Long
International, Inc by Richard J.
Long. P.E;
DELIVERING
THE LEADING JUDGMENT
PWAMANG,
JSC:-
COUNSEL
EFIBA AMIHERE
FOR THE
PLAINTIFF/RESPONDENT/RESPONDENT.
ELSIE GOH FOR
THE 1STDEFENDANT/REPONDENT/RESPONDENT.
NANA AGYEI
BAFFUOR AWUAH WITH THERESA TABI
AND NAA AMAKUMA BANNOR FOR THE 3RD
DEFENDANT/APPELLANT/APPELLANT
PWAMANG,
JSC:-
My Lords,
this case comes before us as the
final appellate court of the
Republic. The case stems from an
agreement made on 26th
June, 2003 by which the
plaintiff/respondent/respondent
(the plaintiff) undertook to
build two hostels at Tamale
Polytechnic for the 3rd
defendant/appellant/appellant (3rd
defendant). The plaintiff is a
building contractor and the 3rd
defendant is an agency of the
Government of Ghana in charge of
providing facilities for
educational institutions among
other functions. The agreement
was comprehensive and spelt out
the rights, duties and
obligations of all the parties
and stated what should happen in
the event of, practically, all
the known contingencies in
construction projects. The
agreement provided for a dispute
resolution mechanism for
industry experts to arbitrate
any dispute that may arise.
Despite all this, the parties
ended up in court and the case
has taken fifteen years to be
brought to closure.
The facts of
the case are largely documentary
and its resolution ought to have
consisted in applying the
detailed provisions of the
agreement to the facts and
arriving at a decision which, in
our opinion, should have taken
far less judicial time than
happened in this case. Also, if
the alternative dispute
resolution mechanism provided
for in the agreement had been
applied, the controversies
regarding the technical aspects
of the case would have been
resolved by building industry
experts so that any outstanding
issues of pure law could then
have been brought to the courts
for determination. However, for
reasons that do not concern us
in this appeal, the court
refused to grant an application
for reference of the case for
arbitration. But it ought to be
stated, that from the record, a
considerable amount of the time
was used up by the parties to
attempt settlement and for
valuation of the works executed
before the dispute arose.
My Lords, in
the agreement, the cost of
building the two hostels in
today’s Ghana Cedis is
GHS1,388,763.80 (Thirteen
Billion, Eight Hundred and
Eighty Seven Million, Six
Hundred and Thirty Seven
Thousand, Nine Hundred and Fifty
Eight Cedis, Fifty Two Pesewas
at the time). The contract
period was fixed at eighteen
months within which the
plaintiff was to practically
complete and hand over the works
as set out in detailed drawings.
There was however a provision
for extension of time to be
granted to the plaintiff if
certain stated conditions
outside the control of the
plaintiff occurred and caused
delay in completion within the
contract period. It was provided
in the agreement that if the
plaintiff shall fail to complete
and hand over the works within
the 18 months, which was stated
to end on 29th
December, 2004, or within such
extended time granted pursuant
to the provisions of the
contract, plaintiff was liable
to pay liquidated and
ascertained damages. The
agreement provided a formula for
calculating those damages.
The 3rd
defendant paid to the plaintiff
an advance fee of GHS180,000.00
for it to mobilise and commence
the works. By the terms of the
agreement, the plaintiff was
required to provide guarantees
in respect of the advance fee
and the liquidated and
ascertained damages so it got
the 1st
defendant/respondent/respondent
(1st defendant) to
issue guarantee bonds to that
effect. The bond for the
liquidated and ascertained
damages is in the sum of
GHS416,800.00. It meant that if
the plaintiff failed to utilise
the advance fee for the works,
or if it became liable to pay
the liquidated and ascertained
damages, then 3rd
defendant could request the 1st
defendant to pay on the bonds.
In accordance with the terms of
the agreement, the 3rd
defendant appointed a consortium
of consultants as the Contract
Administrator to represent it in
all dealings with the plaintiff
as far as the contract was
concerned.
My Lords, it
bears noting that the above
provisions in the agreement of
the parties are normal terms of
modern construction contracts.
In this case, the plaintiff was
unable to complete the works
within the contract period so it
wrote a letter dated 13th
December, 2004 to the Contract
Administrator applying for
extension by six additional
months in order to complete. At
the time of applying for the
extension, the project was
clearly far behind schedule with
the plaintiff putting most of
the blame on the Contract
Administrator who in turn
accused the plaintiff as being
the cause of the delay. The
plaintiff alleged that the
Contract Administrator and the 3rd
defendant breached a number of
terms in the agreement and that
those breaches in addition to
inclement weather were the cause
of the delay. The Contract
Administrator on the other hand
argued that the delay was
because the plaintiff failed to
undertake the works with due
diligence for which they had
written several letters to it
and even threatened to terminate
the agreement at some point.
Notwithstanding these
complaints, when the plaintiff
applied for the extension, the
Contract Administrator was
prepared to consider it, so they
requested plaintiff to present a
programme for completion of the
remaining works. This the
plaintiff provided and there was
a meeting on 23rd December, 2004
which did an overview of the
project and discussed the
plaintiff’s programme for
completion. In a written report
on what transpired at that
meeting, this is what the
Contract Administrator stated
with regard to plaintiff’s
request for extension;
“The Contract
Administrator informed members
that he would accept the
contractor’s new programme as it
is and communicate any findings
to the contractor later. He went
on to say that a letter would be
written to that effect.”
The Contract
Administrator did not write to
the contractor before the end of
the contract period, which is 29th
December, 2004. However, on 5th
January, 2005 they wrote to the
plaintiff stating that it had by
then completed only 15% of the
works so the six months
extension requested for
completion was not realistic and
plaintiff needed to justify it.
The letter concluded as follows;
“As
activities on the site indicate
you have failed to execute the
works with reasonable diligence
and in fact there has been no
work on the site since 23rd
November, 2004.”
The above
letter did not directly state
whether the request for
extension was granted or
rejected so the plaintiff
continued to stay away from the
site. On 27th
January, 2005 it wrote again to
the Contract Administrator for a
definitive extension of the
contract but there was no
response.
Then by a
letter dated 8th
April, 2005 the 3rd
defendant wrote to determine the
contract with effect from 18th
April, 2005 pursuant to Clause
20(b) of the agreement. The
reasons stated for the
determination include
plaintiff’s failure to return to
the site to continue with the
project after the meeting of 23rd
December, 2004 and its failure,
generally, to execute the works
with reasonable diligence
despite nine letters written to
it earlier. By a copy of the
termination letter, the 1st
defendant was requested to pay
to the 3rd defendant
the sums guaranteed under the
advance fee and performance
bonds.
The
plaintiff’s reaction was to file
the present case in the
Commercial Division of High
Court, Accra on 11th
May, 2005. In its amended writ
of summons the plaintiff claims
the following reliefs;
a. An
order of perpetual injunction
restraining the 1st Defendant
from paying up on the Advance
Payment Guarantee and the
Performance Bond issued as
securities for the GET Fund
Hostels project in Tamale
Polytechnic.
b. A
declaration that termination of
the contract is unlawful and
breach of contract on the part
of the Client and occasioned by
breaches of professional duty by
the Consultant.
c. A
declaration that the contractor
was frustrated in its ability to
complete the contract on time
owing to the breaches of
contract and duty by the client
and its consultant and by
natural and elemental factors.
d.
Damages, including special
damages in the sum of
¢3,970,071,624.64 and costs of
this action.
e. An
order compelling the Parties to
submit the dispute raised in
this action to an Arbitrator for
settlement in accordance with
section 32 of the Main Contract.
At paragraph
29 of the amended statement of
claim the plaintiff pleaded the
following as special damages;
Particulars
of Special Damages
a. The Value
of Works done as at April, 2005
-¢839,608,624.64
b. 30%
interest on the said amount from
September 2004 to April
2006-¢630,463,000.00
c. Compound
interest of 40% per anum from
August 2004 to April 2006 on the
short term Loan of
¢390,000,000.00 granted by CDH
Finance Holding Ltd when the
cash flow problem arose. This
was guaranteed by GETFund And
Provident Insurance Company
Limited. ¢480,000,000.00
d. Value of
outstanding works for entire
contract of ¢14,000,000,000.00,
out of which the Plaintiff was
entitled to 15% amounting to
¢1,750,000,000.00
e. 5% of
profit for attendance for value
of works
for sub-contractors and
nominated suppliers in the sum
of ¢320,000,000.00
It added the
Attorney-General as 2nd
defendant but the office did not
actively participate in the
proceedings. The 1st
defendant filed a defence, which
substantially supported the case
of the plaintiff, and denied
liability to pay on the bonds
contending, that midstream in
the project, the 3rd
defendant entered into a
Supplementary Agreement with the
plaintiff so the guarantee was
no longer binding on it. It also
associated itself with the case
of the plaintiff that the
employer was responsible for the
delay in completing the works so
it was not entitled to
liquidated and ascertained
damages. The 3rd
defendant filed a defence
maintaining that the
determination of the agreement
was in accordance with Clause
20(b) of the agreement so it was
lawful. It counterclaimed for
payment by plaintiff of the
amount it would cost to complete
the project. In fact, by the
time the trial commenced in the
High Court, the 3rd
defendant had re-awarded the
works to two other contractors
to complete.
The High
Court and the Court of Appeal
found for the plaintiff,
declared the termination of the
contract by the 3rd
defendant as unlawful and
granted all the damages
including special damages
claimed by the plaintiff in the
sum of GHS397,007.63. Being
aggrieved, the 3rd
defendant has filed this appeal.
An appeal is
a rehearing, so we are required
to rehear the case and determine
if the findings in the judgment
of the Court of Appeal are
supported by the evidence on the
record and further, if the court
correctly applied the relevant
law to the evidence in arriving
at its conclusions in the case.
See the case of
Kolex
Ltd (No.2) v Field [2000] SCGLR
175.
As pointed
out earlier in the judgment,
there is very little dispute as
to the essential facts of the
case which are largely
documentary and the rights and
obligations of the parties are
expressly set out in the written
agreement. But, a matter of
grave concern to us is, that
both the High Court and the
Court of Appeal approached the
case without considering some
important legal questions that
arise on the pleadings and
evidence but which are relevant
for a correct determination of
the case in accordance with law.
At the pre-trial conference in
the Commercial Court, after
settlement failed, the parties
set down fourteen issues for
trial with the main issue being
whether the termination of the
agreement by 3rd
defendant is lawful. However,
the agreement in question
contained a time limitation
which expired before the
purported termination and
appears not to have been
extended as provided in the
agreement. So, the foremost
legal question is
whether,
as at 8th April, 2005
when the 3rd
defendant purported to determine
the agreement under Clause
20(b), the agreement between the
parties was still binding on
them? This question escaped the
High Court and the Court of
Appeal but it ought not to have.
In the case
of
Fattal v Wolley [2013-2014]
2SCGLR 1070 at page
1076 Georgina Wood, C J said
as follows;
“Admittedly,
it is, indeed, sound basic
learning that courts are not
tired down to only the issues
identified and agreed upon by
the parties at pre-trial. Thus,
if in the course of the hearing,
an agreed issue is clearly found
to be irrelevant, moot, or even
not germane to the action under
trial, there is no duty cast
upon the court to receive
evidence and adjudicate upon it.
The converse is equally true. If
a crucial issue is left out, but
emanates at the trial from the
pleadings or the evidence, the
court cannot refuse to address
it on the ground that it is not
included in the agreed issues.”
The agreement
was clear that unless the time
was extended, the agreement will
automatically terminate on 29th
December, 2004. The plaintiff’s
case at all material times is
that the Contract Administrator
failed to extend the contract
and for that reason it did not
return to the site. It argued
that by industry practice,
extension of contract period
must be explicit. That is
correct, because the time for
completion was explicitly stated
in the agreement so the
extension which is provided for
in the agreement ought to be
explicit. In fact, the Contract
Administrator at the meeting of
23rd December, 2004
promised to write to the
plaintiff on their findings on
the request for extension and
when it wrote on 5th
January, 2005 it, in effect,
rejected plaintiff’s request for
six months extension. That
notwithstanding, the 3rd
defendant now argues, that by
the statement of the Contract
Administrator that they would
accept the contractor’s
programme of completion and
communicate in writing, the
contractor should have taken
that as the extension and
returned to the site and resumed
work. The question is; on what
length of extension did they
expect the contractor to be
working if it went back to the
site? This argument is
untenable, because by their
conduct they rejected the
request for the six months
extension before 8th
April, 2005 when they purported
to exercise a right under the
agreement to determine it. In
our opinion, the 3rd
defendant failed to extend the
contract so there was no
agreement binding on the parties
at the time it purported to act
under Clause 20(b) to determine
the agreement. The Court of
Appeal faced a similar situation
in the case of;
In Re
Timber and Transport
Kumasi-Krusevac Co. Ltd; Zastave
v Bonsu & Anor [1981] GLR 256.
At page 262 of the Report
Sowah JSC, delivering the
unanimous judgment of the court
said as follows;
“The crucial
issue which in our view was
avoided by the High Court is
whether the agreement was still
binding on the parties. On this
issue, we are thrown back on
first principles and
particularly on the effect of
breaches of an agreement by one
or other of the parties. The
principle which emerges from a
long line of decisions is that
where one party manifests a
clear intention to be no longer
bound by the terms of his
contract or where he openly
repudiates it, the innocent
party may treat the contract as
at an end and seek such remedies
as are open to him. Where the
breach hits at the root or
substance of the contract, in
other words, where the breach is
fundamental, the innocent party
may accept the breach and treat
it as absolving him from his own
obligations under the contract.
The question whether a breach is
fundamental is, of course, for
the court to determine: see
Wallis,
Son & Wells v. Pratt and Haynes
[1910] 2 K.B. 1003, C.A.; Sweet
& Maxwell Ltd. v. Universal News
Services Ltd. [1964] 3 All E.R.
30 and Joseph v. Boakye [1977] 2
G.L.R. 392 at p. 402, C.A.”
On the facts
in this case, when the 3rd
defendant failed to extend the
agreement, the plaintiff refused
to return to the site, meaning
it considered the agreement at
an end. The plaintiff considered
itself discharged from its
contractual obligations to
continue the works. Therefore,
the issue whether the 3rd
defendant was justified in
terminating the agreement is not
the crucial issue in this case
but rather,
whether
the 3rd defendant’s
refusal to extend the contract
amounted to a breach of the
agreement, and if it was,
was it fundamental as to entitle
the plaintiff to treat the
agreement as discharged, as
explained above by Sowah JSC?
In order to
answer that question, we need to
refer to the terms of the
agreement on extension of time,
which is Clause 19. It provides
as follows;
“19. Delay
and Extension of time
If in the
opinion of the Contract
Administrator the works be
delayed:
(i)
By force majeure, or
(ii)
By reason of any exceptional
inclement weather, or
(iii)
By reason of loss or damage by
any one or more of the
contingencies referred to in
Clause 16 of these conditions,
or
(iv) By
reason of civil commotion, local
combination of workmen, strike
or lockout affecting any of the
trades employed upon or in
connection with the works, or
(v) By
reason of the Contract
Administrator’s Instructions
given in pursuance of Clause 2
of these conditions (variations
by the employer), or
(vi)
Because the contractor has not
received in due time necessary
instructions from the contract
Administrator for which he shall
have specifically applied in
writing, or
(vii) By
delay on the part of nominated
sub-contractors or nominated
suppliers which the Contractor
has in the opinion of the
Contract Administrator all
practicable steps to avoid or
reduce, or
(viii) By
delay on the part of other
Contractors or tradesmen engaged
by the Employer in executing
work not forming part of this
contract, or
(ix) By
the Contractor’s inability for
reason beyond his control and
which he could not reasonable
have foreseen at the date of
this Contract to secure such
labour, goods or materials as
are essential to the proper
carrying out of the works;
then in any
such case, the Contract
Administrator shall make a fair
and reasonable extension of time
for completion of the works.
Upon the happening of any such
event causing delay the
contractor shall immediately
give notice thereof in writing
to the CONTRACT Administrator,
but he shall nevertheless use
constantly his best endeavours
to prevent delay and shall do
all that may reasonably be
required to the satisfaction of
the contract Administrator to
proceed with the works.
Provided that the Contract
Administrator shall not be bound
to grant any such extension
unless the contractor has within
28 days after the occurrence of
any of the aforesaid matters
given written notice to the
contract Administrator of a
claim for extension of time with
full and detailed particulars of
the matters alleged to justify
such a claim.”
The clause
gives a number of situations the
presence of any one of which
entitle the plaintiff, as of
right, to extension of time for
it states, that in those
circumstances, “the Contract
Administrator shall
(emphasis supplied) make a fair
and reasonable extension of time
for completion of the works.”
The use of the word “shall”, by
section 42 of the
Interpretations Act, 2009, (Act
792) connotes a mandatory
requirement.
On the
evidence, there was variation of
drawings in relation to the
foundation and starter columns
of one of the hostels as a
results of the discovery of clay
deposits when the contractor
started the excavation. The
employer had the duty to have
correctly tested the soil and
making the appropriate drawings
so it meant that was a failure
on the part of the employer.
From the evidence, when this was
brought to the attention of the
Contract Administrator, it took
some time for new drawings to be
provided to the contractor. This
undoubtedly took part of the
time plaintiff was to use to
complete the works. This
qualifies plaintiff to be given
extension under Clause 19 (v) of
the agreement.
Then, the
Contract Administrator delayed
in responding to the
contractor’s written request for
instructions in respect of using
high tensile rods. At page 367
of volume 3 of the record, there
is a letter from the Contract
Administrator giving
instructions to the plaintiff
with regard to high tensile
rods. That letter was in
response to a letter by
plaintiff seeking instructions
on that matter. The Plaintiff
made the request in a letter
dated December 2, 2003 but the
directions are dated March 2,
2004, three months later.
Additionally, the plaintiff
experienced unforeseen
challenges in respect of
materials required for the
works. The quarry at Pwalugu
near Bolgatanga that had been
earmarked to supply aggregate
for the works broke down in the
course of the construction,
meaning they had to source for
aggregate from a longer distance
and that affected the time
within which they could execute
the works. There was also the
issue of unusually heavy rains
between July and November that
disrupted availability of sand
and prevented them from working.
These matters are contained in
letters and reports that the
plaintiff submitted to the
Contract Administrator before
the purported termination of the
agreement and they are in
evidence. The Contract
Administrator acknowledged the
challenges the plaintiff faced
regarding materials in a report
appearing at page 402 volume 3
of the record. It states as
follows;
“Tamale
Polytechnic. Material Supply.
This is the
worst hit contractor in terms of
materials procurement.
Contractor is unable to get
coarse aggregate, timber and
iron rods to the site. So acute
are these shortages that there
has been no meaningful work on
site since February 25th
this year (2004).”
These without
doubt affected the time within
which the plaintiff had to
execute the works and are
covered by Clause 19 (vi) &(ix)
of the agreement.
Clause 19
states that, “if in the opinion
of the Contract Administrator”,
these events occurred, it shall
grant the extension. Though,
generally, the Contract
Administrator is the agent of
the employer, when considering
the existence of factors that
entitle the contractor to
extension of contract time, she
is required to act honestly and
impartially. See the Australian
case of Peninsula Balmain v
Abigroup Contractors [2002]
NSWCA 211. Consequently,
the plaintiff is justified in
saying that it was entitled to
extension of time under the
terms of the agreement.
But the 3rd
defendant has countered by
saying, that by the same Clause
19, the Contract Administrator
was not bound to grant any
extension unless the application
for extension was made by the
Contractor within 28 days of the
occurrence of the matter forming
the basis for the application.
It has argued that all the
issues relied upon by the
plaintiff to request for the
extension occurred more that 28
days before the application for
extension of time. To our
understanding, this proviso
affords the Contract
Administrator a ground to refuse
to consider the application for
extension on its merits. In this
case, the when the plaintiff
applied for the extension, the
Contract Administrator did not
exercise that right of rejection
but actually accepted the
request and considered it on the
merits. In those circumstances,
they are deemed to have waived
the time provision and cannot
now rely on the proviso in their
defence. In one breath, the 3rd
defendant has argued that it in
deed granted the extension so it
lies ill in its mouth to turn
round and rely on the proviso.
See the case of
Gaymark Investments Pvt Ltd v
Walter Construction Group [1999]
NTSC 143.
Therefore, in
our view, the Contract
Administrator breached Clause 19
of the agreement when they
failed to grant plaintiff a
reasonable extension of time to
complete the works. What we
understand by reasonable
extension is, that the Contract
Administrator ought to have
considered all the matters that
constituted excusable delay and
estimated how much time was lost
to the project on account of
those matters and granted an
extension to cover the estimated
lost time. We do not think that
when a contractor applies for
extension, the Contract
Administrator is bound to grant
the length of time requested by
the contractor, but may only
grant such time as would cover
the time justifiably lost. It
appears the Contract
Administrator was of the
mistaken view that if at the
time of requesting for
extension, the contractor is in
breach of its obligations, it
would not be entitled to grant
of extension. That is not what
the agreement the parties signed
stated and they are bound by the
agreement. They are therefore in
clear breach of the agreement by
failing to grant any extension
at all.
The question
that follows is whether that
breach was so fundamental as to
be considered by the plaintiff
as bringing the agreement to an
end. That is beyond dispute on
the facts of this case. Without
the time extension, it was
impossible for the plaintiff to
discharge its obligation in the
agreement to carry out the
construction so the breach was
fundamental and plaintiff was
entitled to accept the contract
as ended and sue for damages.
On the issue
of special damages, in the
plaintiff’s pleadings at
paragraph 29 of its amended
statement of claim, and in the
testimony of its managing
director, who was its only
witness, it stated that if
reasonable time were extended it
would have completed the
project, would be paid the
remaining contract sum, 15% of
which would have been its
profit. It would also have
earned 5% of the value of
sub-contracts for works and
materials supplies. The 3rd
defendant has challenged these
claims of the plaintiff and
argued that it did not prove the
special damages pleaded. That
aside, the question is, is it
probable that the plaintiff
would have completed the works
within the six months it
requested for and thereby earned
the whole remainder of the
contract sum? The Contract
Administrator doubted this and
based their challenge on the
analysis, that it took plaintiff
18 months to achieve only 17% of
the works so six extra months
would not have taken it far.
This is a valid argument and the
plaintiff is not to expect that
the court would just award its
speculative claim of earning a
certain amount without offering
concrete proof.
The 3rd
defendant has argued before us
that the plaintiff did not
tender any documents to justify
its claims for special damages
and this is a matter that there
should have been documentary
evidence. It is trite learning
that special damages must be
pleaded and proved strictly. In
Delmas
Agency Ghana Ltd vrs Food
Distributors International Ltd
[2007-2008] SCGLR 748 at
page 760 this court said as
follows;
“Where the
plaintiff has suffered a
properly quantifiable loss, he
must plead specifically his loss
and prove it strictly. If he
does not, he is not entitled to
anything unless general damages
are also appropriate.”
The 3rd
defendant has criticised the
High Court and the Court of
Appeal for failing to evaluate
the evidence before endorsing
all the amounts pleaded by the
plaintiff as special damages.
There is merit in this charge.
The High Court, after concluding
that 3rd defendant
had breached the agreement, did
not review and analyse any
evidence led on the special
damages but proceeded to grant
the figure endorsed on the
amended writ of summons. The
Court of Appeal too did not
advert their mind to the
requirement of the law that
special damages ought to be
proved strictly.
As we are
rehearing the case, we shall
examine the evidence to
determine if the plaintiff
proved its claims for special
damages. The plaintiff’s claim
that it would have made a profit
of 15% out of the contract sum
could have been proved by
showing that, of the amount paid
to it that far, its profit was
15%. Then its claim that it
would have earned 5% on
sub-contracts and material
supplies was not proved. Clause
22 of the agreement provides for
Nominated Sub-Contractors to be
appointed upon the
recommendation of the contractor
and by Clause 22 (b), in paying
the sub-contractor, the employer
may pay a retention to the
contractor as the contractor may
be entitled to under an
agreement with the
sub-contractor. The plaintiff
could have tendered a prototype
contract with a materials
supplier to the project in which
it was to be paid 5% of the
value of the materials, or at
least led evidence to that
effect. It did not.
In any event,
in the assessment of damages
that the plaintiff would be
entitled to in this case, the
court has to take into account
the fact that the delay in
completion was partly as a
result of the defaults of the
plaintiff. This is referred to
as concurrent delay in
Construction Law. Clause 19 of
the agreement states in part as
follows;
“………Upon the
happening of any such event
causing delay the contractor
shall immediately give notice
thereof in writing to the
CONTRACT Administrator, but he
shall nevertheless use
constantly his best endeavours
to prevent delay and shall do
all that may reasonably be
required to the satisfaction of
the contract Administrator to
proceed with the works.”
By this
provision, the plaintiff was
obligated to continue with the
works with reasonable diligence
notwithstanding the variations
and the challenges with the
supply of materials that it
faced. The case of the 3rd
defendant is that the plaintiff
did not use reasonable
endeavours to prevent further
delay of the project. The
reports and letters by the
Contract Administrator on the
reviews of the project which
were written before the
litigation were tendered in
evidence to corroborate this
aspect of the case of the 3rd
defendant. As there are
documents in this case, we do
not see any justification for
the trial court and the Court of
Appeal to have discredited the
evidence of Sir Knight Akwaboah.
His testimony was based on
official reports he received as
a member of the consortium of
consultants on the project so
his evidence deserved to be
accorded weight.
By Exhibits
“9b”, “9c” and “9d” dated
between 1st April, 2004 and 30th
April, 2004, the Contract
Administrator complained to the
plaintiff that for three months
no work was going on at the site
and threatened to terminate the
agreement pursuant to Clause 20
(1) (b). Following those
letters, the plaintiff wrote
Exhibit “P3” dated 29th April,
2004 in which report it sought
to explain away the reasons for
the delay of the project and
pointing to the challenges it
was facing. In the Exhibit 9
series, the Contract
Administrator had stated that
the challenges the plaintiff
faced had been addressed and it
should have been on the site
working. Exhibit “AA” at page
446 of Volume 3 of the record is
a letter dated 21st October,
2004, that is after the
plaintiff had explained why the
work had slowed. It is signed by
the Chief Consultant, Nana Y. B.
Karikari on behalf of the
Contract Administrator. It
referred to the earlier letters
written to the plaintiff
complaining that it was not
executing the works with due
diligence, meanwhile payments
had been made to it, cement,
iron rods and chippings
requested by plaintiff had been
paid for by the employer, and
concluded as follows;
“It is our
view that all the required
actions by the client and
consultants to encourage you to
proceed with the works with
reasonable diligence had been
taken. We expect that you will
on your part take appropriate
measures to meet your
contractual obligations.”
Despite the
above letters to the plaintiff,
it appears it did not attend to
the work with diligence. In
Exhibit “8” the Contract
Administrator stated that no
work had been done on the site
since 23rd November, 2004,
meaning the plaintiff was not
working immediately before the
completion date. From the above
exhibits, we have come to the
conclusion that the plaintiff
did not employ reasonable
diligence in executing the works
during the contract period and
that if it had done so, a
greater percentage of the works
would have been completed within
the contract period than was
accomplished. That would have
reduced the cost of completion
of the works that the 3rd
defendant bore and that extra
cost has to be applied in
reducing whatever damages the
plaintiff may be entitled to.
Courts in
different jurisdictions have
grappled with how to award
damages for failure to extend
time in cases of concurrent
delays. The difficulty is how to
apportion the delay between the
contractor and the employer.
Common law courts evolved tools
of analysis such as the dominant
cause approach and the critical
path cause approach, but these
are not applicable in this case
since there is a clear
contractual provision on the
matter. See the book by Richard
J. Long. P.E; “Analysis of
Concurrent Delay on Construction
Claims. (2018) Long
International, Inc.
Apportionment and calculation of
damages in concurrent delays is
a specialized field where
persons trained apply matrixes
to adjust the claims. In that
exercise, they make use of the
planned programme of work that
the contractor submitted to the
employer at the start of the
project and the adjustments made
to it in the course of executing
the works. Such adjustments
would have taken account of
delays and recorded the amount
of time lost on account of each
factor causing delay so there
would be a record of how much
delay was caused by the
employer’s defaults and the
contractor’s. Then the site
records kept by the contractor
would also be referred to in the
exercise.
From the
evidence on record, the
plaintiff is supposed to have
presented work programmes to the
Contract Administrator and kept
a book at the site in which all
activities are recorded. In the
letters written by the Contract
Administrator, there were
requests at each stage for the
plaintiff to present a programme
of work but it never really
acted on the failure of the
plaintiff to provide such
programme, except at the last
stage when the plaintiff
requested for the extension of
time. These records that are
required for a competent
apportionment of delay in this
case are not in evidence so the
court will not attempt such an
exercise.
What is clear
to us is, that since some of the
delay is attributable to the
employer, the contractor was
entitled to some extension of
time and general damages are
appropriate for the breach by 3rd
defendant in not granting the
reasonable extension. Extension
would have enabled plaintiff to
undertake additional works and
earned some profit from it. When
we deduct the time lost through
the delay caused by the
plaintiff, a reasonable
extension, on the probabilities,
would not have led to a
completion of the project for
the plaintiff to be paid the
remainder of the contract sum.
By the calculation at paragraph
29(d) of the amended statement
of claim, the plaintiff avers
that it would have earned profit
of GHS175,000.00 if it completed
the project and was paid the
remaining contract sum. Taking
all the circumstances into
consideration including the
delay caused by the plaintiff,
we award plaintiff general
damages in the sum of
GHS70,000.00.
We shall next
consider the plaintiff’s claim
of special damages for works
completed but not paid for at
the time of the determination of
the contract. This, to all
intents and purposes, is a claim
for quantum meruit. In
the case of Skanska Jensen
International v Klimatechnik
Engineering Ltd [2003-2004]
SCGLR 698 this Court said as
follows;
“The law in
this area draws two clear
distinctions. There are two
bases for fixing the value of
that quantum meruit: (a)
reasonable remuneration fixed by
the court. (b) quantum meruit
assessed at the contract rate.
Where one party starts to
perform the contract but is
prevented from completing it by
the other party's breach, he can
claim quantum meruit at the
contract rate. In Lodder v.
Slowey (1904) AC 442,”
The agreement
in this case had a contract rate
for calculating the value of
works executed by the plaintiff
and it is the rate that was
applied in raising certificates
for payment of the plaintiff.
Therefore, this claim is a
matter of evidence. In the
statement of case of the
plaintiff in this appeal it
states the amounts it was paid
at paragraph 1.3 thereof and
contends that the total amount
is less than the value of works
it executed in all. In his
evidence, the managing director
of the plaintiff testified in
one breath that the amount owed
it for unpaid work is
GHS83,960.82 as pleaded in
paragraph 29 of its amended
statement of claim, then in
another breath, he gave the
amount as GHS252,756.44. He
claimed that this figure was
arrived at by measurement of the
works by officials of the
plaintiff. But as the 3rd
defendant pointed out in its
statement of case, the plaintiff
did not tender any document to
support either the first or the
second figure both of which were
challenged.
The practical
way to resolve this issue is to
value the works executed by the
plaintiff and the costs of any
materials and machinery at the
site at the date the contract
came to an end and deduct the
total amount paid to the
plaintiff. If the result is a
positive figure, then that would
be the amount owed the
plaintiff, but if the result is
a negative figure, then it would
mean the plaintiff was overpaid.
As the parties were disputing
over these figures, the trial
court, with the consent of the
parties, appointed the
Architectural and Engineering
Services Ltd (AESL), a reputable
architectural and engineering
services company in Ghana, to
take an inventory of building
materials and machinery and
establish extent of works done
on the hostels project. Their
report is in the record and we
shall rely on it in resolving
this issue. The report of AESL
at page 606-632 gives the total
value of works including
variations as GHS207,937.04.
Against this value, the
plaintiff admits in its
statement of case to have
received the following payments;
i.
Certificate No 1; GHS180,000.00
(paid as Advance mobilization).
ii.
Certificate No. 2; GHS58,754.65
(paid on 26/11/2003)
iii.
Certificate No. 3; GHS27, 996.21
(paid on account)
iv.
Certificate No. 4;
GHS20,809.04 (paid partly for
works and fluctuations)
Total
GHS287,559.90
When the
assessed value of works is
deducted from the amount paid to
the plaintiff, we get an amount
of GHS79,622.86 in favour of the
3rd defendant. The
report of AESL at paragraph 6.6
is not clear as to whether
fluctuation claims that the
plaintiff is entitled to under
the Supplementary Agreement were
factored into their work. It is
possible that the amount of
GHS79,622.86 paid to the
plaintiff in excess of the value
of the works could be accounted
for by fluctuations in base
prices of material. Whatever it
is, the 3rd defendant
did not make a claim for
recovery of any over payment and
the plaintiff too did not lead
sufficient convincing evidence
to satisfy us that it is
entitled to the amounts it
claimed by way of works unpaid
for. In the circumstances, we
are of the view that the
plaintiff failed to prove that
it is entitled to be paid
quantum meruit.
The trial
High Court also granted
plaintiff’s relief (c) on the
amended writ of summons and the
Court of Appeal affirmed it. The
relief as stated above is as
follows;
“A
declaration that the contractor
was frustrated in its ability to
complete the contract on time
owing to the breaches of
contract and duty by the client
and its consultant and by
natural and elemental factors.”
Frustration
is a concept in law of contract
that refers to the occurrence
after a contract has been
entered into of unforeseen
contingencies through no fault
of the parties which make it
impossible to perform the
contract or radically change the
nature of the obligation under
the contract. When such event
occurs, the contract is said to
be frustrated and the parties
are discharged from future
performance of their
obligations. The drafting of the
relief above which says “the
plaintiff was frustrated” can
only mean that “frustrated” here
was used in its ordinary English
language sense and not as a term
of art. In contract law we only
talk of the contract being
frustrated and not a party being
frustrated. If the word
“frustrated” was used in its
ordinary English language
meaning, then it cannot be a
relief that a court can grant.
As explained above, in law, the
breach of terms of a contract
by one of the parties cannot
result in frustration. Also, the
case of the plaintiff is that
the inclement weather caused a
delay in the execution of the
works not that it made execution
impossible. A change in
conditions that make performance
of obligations of a contract
merely harder than it would have
been does not amount to
frustration. See the case of
Afordi & Ors v Ghana Publishing
Corporation [2005-2006] SCGLR
1104.
Consequently,
the use of the word “frustrate”
in relief (c) is misconceived
and the relief ought to have
been struck out in limine
so it is hereby dismissed.
We find no
merit whatsoever in the
plaintiff’s claim for special
damages in respect of the loan
it purportedly took from CDH
Finance. No documents on the
averment were tendered and it is
surprising that the plaintiff
who allegedly contracted the
loan has no documentation on it.
If the 3rd defendant
in deed guaranteed such a loan,
then it is for the lender to
proceed against it on the
guarantee and not the plaintiff.
We accordingly dismiss that
claim.
This leads us
to a consideration of the case
of the 1st defendant.
It has been shown above that the
value of the works executed by
the plaintiff is valued more
than the GHS180,00.00 the 1st
defendant guaranteed with the
advance fee bond. That means
plaintiff is not liable to
refund that money so there is no
liability on 1st
defendant to pay on that bond.
However, the performance bond is
still to be resolved since it is
clear that the plaintiff failed
to complete the works within the
time stated in the agreement.
The 1st defendant
argued that the Supplementary
Agreement fundamentally changed
the nature of the agreement and
consequently discharged it of
its obligations. But, as has
been rightly argued by the 3rd
defendant, in the bond, the 1st
defendant had agreed that no
change or addition or other
modification of the terms of the
contract shall release it of its
liability. The argument that the
Supplementary Agreement
fundamentally changed the terms
of the agreement is disingenuous
and unacceptable. The
Supplementary Agreement was
meant to change the formula for
calculating fluctuation claims
to the benefit of the plaintiff.
Additionally, it provided for
the 3rd defendant to
pay directly for construction
materials to be used by the
plaintiff. This was to ease the
burden on the plaintiff and make
it easier to discharge its
obligations. Therefore, the
Supplementary Agreement did not
radically change the terms of
the main contract as contended
by the 1st defendant.
The second
contention of 1st
defendant that the 3rd
defendant did not notify it of
the plaintiff’s default too is
not borne out of the agreement.
Though during the subsistence of
the agreement the 3rd
defendant made a number of
complaints of breaches of the
contract by the plaintiff, it
did not exercise its right to
determinate the contract so
there was no requirement to
notify the 1st
defendant as no liability of the
plaintiff to pay damages arose.
It was when it terminated the
contract and the plaintiff would
have become liable to pay
damages that it needed to notify
1st defendant which
it did by copying the letter to
1st defendant.
The
formidable case put up by the 1st
defendant against the claim of
the 3rd defendant for
payment on the guarantee bonds
is the one on the defaults by
the Contract Administrators that
affected the time within which
the plaintiff could complete the
works. The general principle of
the common law is, that where a
contractor is prevented by the
owner from performing its
obligations by the contractual
completion date, the owner will
not be entitled to claim
liquidated damages for the
delay. See the case of Wells
v Army & Navy Cooperative
Society [1902] 86 LT 764. It
is referred to as the
“Prevention Principle”. As Lord
Fraser of Tullybelton put it in
Percy Bilton Ltd v Greater
London Council, [1982] 1 WLR
794, at 801:
"1. ...The
general rule is that the main
contractor is bound to complete
the work by the date for
completion stated in the
contract. If he fails to do so,
he will be liable for liquidated
damages to the employer.
2. That is
subject to the exception that
the employer is not entitled to
liquidated damages if by his
acts or omissions he has
prevented the main contractor
from completing his work by
completion date.... “
The principle
was explained by Salmon LJ in
Peak Construction (Liverpool)
Ltd v McKinney Foundations Ltd,
[1970] BLR 111, at 121.
He said;
“The liquidated damages clause
contemplates a failure to
complete on time due to the
fault of the contractor. It is
inserted by the employer for his
own protection; for it enables
him to recover a fixed sum as
compensation for delay instead
of facing the difficulty and
expense of proving the actual
damage which the delay may have
caused him. If the failure to
complete on time is due to the
fault of both the employer and
the contractor, in my view the
clause does not bite. I cannot
see how, in the ordinary course,
the employer can insist on
compliance with a condition if
it is partly his own fault that
it cannot be fulfilled.... I
consider that unless the
contract expresses a contrary
intention the employer, in the
circumstances postulated, is
left to his ordinary remedy;
that is to say, to recover such
damages as he can prove flow
from the contractor's breach.”
In the
instant case, and as has been
abundantly demonstrated above,
the failure to complete the
works by the contractual date
was due to the fault of both
plaintiff and the Contract
Administer who is 3rd
defendant’s agent. Even the
contractual term on damages for
non-completion in the agreement
in this case reflects the
prevention principle referred to
above. Clause 18 of the
agreement is as follows;
18. Damage
for non-completion
If the
Contractor fails to complete the
works by the date stated in the
appendix to these conditions or
within any extended time fixed
under Clause 19 of these
Conditions and the Contract
Administrator certified in
writing that in his opinion the
same ought reasonably so to have
been completed, the
Contractor shall pay or allow
the Employer a sum calculated at
the stated in the said appendix
as Liquidated and Ascertained
Damages for the period during
which the said works shall so
remain or have remained
incomplete, and the Employer may
deduct such damages from any
monies otherwise payable to the
Contractor under this contract.
On the facts
in this case, the Contract
Administrator, who is required
by law to act honestly and
impartially in certifying
matters of this nature, could
not, in all honesty, have
certified that the plaintiff
ought reasonably to have
completed the works within the
18 months, having regard to the
delays attributable to the
employer. In the circumstances,
the 3rd defendant would not be
entitled to the liquidated and
ascertained damages stated in
the agreement so the 1st
defendant is not required to pay
on the performance bond.
The provision
in building contracts for
extension of time is for the
benefit of the employer. If the
employer wants to preserve her
right to liquidated damages set
out in the contract, it has to
extend the time where she is
wholly or partly to blame for
the delay in completion. On the
facts of this case, the 3rd
defendant ought to have granted
the extension of time to
preserve its right to claim on
the liquidated and ascertained
damages provision.
We shall now
deal with the counterclaim of
the 3rd defendant
which was stated as follows;
a) An
order for assessment of
financial loss occasioned the
3rd defendant/employer
consequent upon the termination
of the contract between the
Plaintiff/Company and the 3rd
defendant/employer.
b) An
order for recovery of any
difference in cost between the
original contract sum and the
cost of completion of the
project
c)
Such further or other reliefs as
to the honourable Court may be
just.
The
counterclaim is premised on the
ground that the 3rd
defendant lawfully determined
the agreement in accordance with
Clause 20(b). However, we have
held that the case is governed
by the provisions of Clause 19
and not 20 of the agreement. The
contract was repudiated by the 3rd
defendant which repudiation was
accepted by the plaintiff so the
agreement came to an end on that
basis and we have considered the
rights and liabilities of the
parties under Clause 19. The 3rd
defendant who repudiated the
agreement cannot turn round to
seek remedies under provisions
of that agreement. See
Joseph
v Boakye [1977] 2 GLR 392. C.A.
Consequently, the counterclaim
is dismissed.
In
conclusion, the 3rd
defendant/appellant/appellant’s
appeal fails in part and
succeeds in part. The judgments
of the High Court dated 29th
July, 2011 and of the Court of
Appeal dated 3rd
November, 2016 are hereby set
aside and in their place we make
the following orders;
(i)
The counterclaim of the 3rd
defendant is hereby dismissed.
(ii)
The plaintiff’s relief (a) is
granted. Consequently, the 1st
defendant is perpetually
restrained from paying on the
guarantee bonds.
(iii)
The plaintiff’s reliefs (b),
(c), (d) and (e) are hereby
dismissed but the plaintiff is
awarded general damages against
the 3rd defendant in
the sum of GHS70,000.00 for the
3rd defendant’s
breach of Clause 19 of the
agreement by failing to extend
the contract time.
G.
PWAMANG
(JUSTICE OF
THE SUPREME COURT)
P.
BAFFOE-BONNIE
(JUSTICE OF
THE SUPREME COURT)
S. K.
MARFUL-SAU
(JUSTICE OF
THE SUPREME COURT)
A.
M. A DORDZIE (MRS.)
(JUSTICE OF
THE SUPREME COURT)
PROF. N. A. KOTEY
(JUSTICE OF
THE SUPREME COURT)
COUNSEL
EFIBA AMIHERE
FOR THE
PLAINTIFF/RESPONDENT/RESPONDENT.
ELSIE GOH FOR
THE 1STDEFENDANT/REPONDENT/RESPONDENT.
NANA AGYEI
BAFFUOR AWUAH WITH THERESA TABI
AND NAA AMAKUMA BANNOR FOR THE 3RD
DEFENDANT/APPELLANT/APPELLANT. |
