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JUDGMENT
DR. SETH TWUM, JSC:
On 17th February 1999 The
Plaintiff/Respondent (hereafter
called "the Respondents") issued
a Writ of summons accompanied by
a statement of claim in the High
Court Accra, against the
Defendants/Appellants. In the
course of the trial, the
Respondents wholly discontinued
their action against the 2nd
Defendant, namely GLAHCO HOTELS
& TOURISM DEVELOPMENT CO. LTD.
and its name was struck out from
the suit, leaving SKANSKA JENSEN
INTERNATIONAL (hereinafter "the
Appellants")
The Writ of Summons was indorsed
with the following reliefs:—
(1) Payment of the sum of USD
224,533.29 or its cedi
equivalent at the current Forex
Bureau rate of exchange at the
date of payment being the
Plaintiff's bill for the supply
of equipment and materials and
engineering services for HVAC
works executed by the Plaintiff
at the New Executive Guest Rooms
Wing of Golden Tulip Hotel at
the request of the 1st Defendant
as the main Contractors for
itself and on behalf of the 2nd
Defendant as the contract owners
from December, 1996 to March
1997 and which bill the
defendants have failed or
refused to pay despite
persistent demands up to this
day.
(ii) Interest on the said USD
224,533.29 from 15th April, 1997
up to the date of final payment
at the current bank rate.
(iii) Damages for breach of
contract.
(iv) Any other relief found due.
Statement of Claim
This contained 22 paragraphs.
For the purpose of this appeal
we set out below the most
important paragraphs.
4. In the latter part of 1996,
the 1st Defendant, as the main
contractor, for itself and on
behalf of the 2nd Defendant, as
the contract owner, invited the
Plaintiff to undertake the HVAC
works (ie. to supply engineering
and installation of
air-conditioning system) for the
2nd Defendant's New Executive
Guest Room Wing of the Golden
Tulip Hotel.
5. Pursuant thereto the
Plaintiff per its Managing
Director, Mr. George Zoudros, on
the one hand, and the 1st
Defendant's Manager, Mr. Chris
D. Kragh, on the other hand
executed documents on 23rd
December 1996, containing the
main terms of the agreement
reached between the parties.
6. On the same date (23rd
December 1996) the parties
discussed and initialled in
draft form a detailed
sub-contract document which the
parties mutually intended to
govern the execution of the HVAC
sub-contract. It was further
mutually agreed that the formal
sub-contract agreement based on
the draft would be drawn up by
the 1st Defendant for execution
by the parties.
7. Due to differences
subsequently arising between the
parties, the formal agreement
was never finalised and executed
and therefore never became
effective between the parties.
10. Despite the non-preparation
and non-execution of the formal
contract agreement, the
Plaintiff nevertheless proceeded
to utilize its own resources in
executing the HVAC works which
it had in fact already commenced
under pressure from the 1st
Defendant from 1st December
1996, to the best of its
abilities. By a letter dated 3rd
April 1997 the 1st Defendant
without any lawful excuse or
justification whatsoever
terminated the Plaintiffs HVAC
subcontract upon the sole ground
that the Plaintiff had failed to
furnish the 1st Defendant with a
Performance Guarantee.
16. The Plaintiff says that
having performed over 90% of the
HVAC contract works as at the
date of the said unlawful
termination, it is entitled to
its full value of the agreed
contract price thus so far
performed ie. USD 224,533.29 for
the Supply of Equipment and
Materials and Engineering and
other works executed, and the
Plaintiff duly billed the
Defendant.
17. Further or in the
alternative, the Plaintiff says
that at the stage of the
unlawful termination, it became
entitled forthwith to the
payment of the value of services
thus far rendered on the
quantum. Despite this the
Defendant has wrongfully failed
or refused to pay the
Plaintiff's initial bill for the
Supply of Equipment and
Materials and Engineering
services thus far rendered to
Defendant in the sum of USD
224,533.29.
Statement of Defence
Similarly, we reproduce
important paragraphs only.
1. The 1st Defendant admits
paragraphs 1,2,3 and 4 of the
statement of claim.
3. Save that the said draft
agreement was subsequently
varied, paragraph 6 is admitted.
4. in answer to paragraph 7, the
1st Defendant admits that the
formal agreement was never
finalised and executed but
insists that the draft
sub-contract referred to in
paragraph (2) of this statement
of defence as subsequently
varied constituted an effective
and binding agreement between
the parties.
10. In further answer to
paragraph 12, the 1st Defendant
says that the provision of
performance guarantee/bond was a
condition precedent of the
agreement and that failure to
provide it constituted a
fundamental breach of the terms
of the agreement.
13. The 1st defendant denies
that the Plaintiff had completed
more than 90% of the works under
the HVAC sub-contract and
contends that apart from the
preliminary drawing and listing
of sources of purchase of
equipment for which payment was
made by the Defendant, the
Plaintiff did not even start the
work.
Counterclaim
18. As result of the breach of
contract by the Respondent the
Appellant claimed it was forced
to complete the HVAC works
itself at an extra cost of USD
245,600.00 and counter claimed
for it.
Summons for Directions
In all, a total of some 21
issues were raised by all the
parties. The trial High Court
judge made an order that "the
issues filed by the Plaintiff
and the additional issues to be
issues set down for trial". We
do not propose to indulge in the
luxury of setting out those 21
or so issues since they are not
really critical for the purpose
of disposing of the appeal.
The Facts
The Appellant who carries on
business in Ghana as civil
engineers had secured a contract
from Glahco Hotels & Tourism
Development Co. Ltd, owners of
the Golden Tulip Hotel, to do
civil engineering works in the
new Executive Wing of the hotel.
Their contract permitted
subcontracting. The Respondents
are renowned refrigeration
engineers. They are based in
Cyprus. The Appellants invited
them to be Sub-Contractors, for
the supply, engineering and
installation of a Heating
Ventilation and Air-Conditioning
System (HVAC) in the Executive
Wing of the Hotel.
Between May and November 1996,
discussions took place between
the Appellants and the
Respondents about the
subcontract, but nothing
concrete materialised from those
discussions. The Appellants
themselves signed their
agreement with Glahco Hotels,
etc, in September 1996.
According to the Respondents,
the Appellants warned them in
November 1996 not to expect any
sub-contract. However, on or
about the 26th of November 1996
the Appellants informed the
Respondents that the
sub-contract was available and
that if they were still
interested they should come down
to start the job immediately.
This urgency was probably due to
the fact that according to the
Appellants their own contract
with the owners required them to
have an air-conditioning
engineer on the site by October
1996. The Respondents replied,
accepting the offer, and
prepared feverishly to move to
the site. The Respondents'
Managing Director testified that
he came to Ghana on 7th December
1996, expecting to sign a
sub-contract but the Appellants
contract Manager was busy and
did not have time to go through
the details of the sub-contract
with him. Between 19th and 21st
December 1996, the Respondents
held discussions with the
Appellants on the terms of the
subcontract and on 23rd December
1996, minutes of their meeting
were signed. The minutes were
tendered in evidence as Exhibit
G. It contained the main terms
of their contract. The parties
further considered a draft
sub-contract. It was a standard
form contract used in the
building industry. They made
several changes there-to, by way
of additions, outright
cancellations or substitution.
The draft sub-contract was
tendered in evidence as Exhibit
H. In this case, the parties
merely initialled each page and
each addition, cancellation or
other amendment. In particular,
even though page 25 was printed
with the usual concluding words:
"IN WITNESS whereof the parties
hereto etc.." and spaces were
provided for their signatures,
the parties did not sign it.
Paragraph 9 of Exhibit G
explained that they agreed that
"the subcontract will be
prepared and signed as per
attached draft". From the
Respondents' evidence, they
expected that the sub-contract
would be prepared and made ready
for signature soon thereafter.
But that did not happen. The
Appellants' representative who
was to prepare it became somehow
inaccessible to the Respondents.
When eventually he surfaced, he
promised the Respondents that he
would have the subcontract ready
for signature by the end of
January 1997. Later, he informed
the Respondents that a director
of the Appellants' was coming
into the country and, he the
director, would like to discuss
the terms of the sub-contract
with the Respondents'
representative. A meeting
actually took place on 27th
January 1997 between the
Appellants' said director and
the Respondents' Managing
Director. According to the
Respondents, this meeting
confirmed the main issues of the
contract. On 19th March 1997
three documents were submitted
to the Respondents. These were
tendered as Exhibits K, K1 and
K2. Exhibit K was a letter which
explained what was involved in
having the draft subcontract
prepared. K1 was the new
subcontract and K2 was "Bill of
Quantities." Meanwhile the
Respondents were carrying out
the HVAC works in the hotel.
The Respondents were unhappy
about a number of important
matters which had been discussed
and agreed upon but had been
left out. They did not take this
new development lying down and
wrote a letter dated 20th March
1997 to the Appellants objecting
to the unauthorised deletions
from the subcontract and
demanding that the terms as
agreed between them be
reinstated in it. A copy of this
letter was tendered as Exhibit
"L". The record does not show
that exhibit L evoked any
response from the Appellants. On
3rd April 1997 the Respondents
wrote a further letter to the
Appellants - Exhibit "M" in
which they gave a summary of the
HVAC works they had executed on
the West Wing between 3rd
December 1996 and 25th March
1997. On the same 3rd April 1997
the Appellants sent a letter to
the Respondents terminating the
Respondents' employment because
according to them, the
Respondents had failed to
provide the performance
guarantee mentioned in Exhibit
H. This letter was tendered as
Exhibit S.
Judgments of the Courts below:
High Court: After an extensive
review of the evidence, the
learned High Court judge gave
judgment on 9th November 1999.
She found as a fact that the
only binding contract between
the Appellant and the Respondent
was contained in the minutes of
the meeting held by them on 23rd
December 1996, Exhibit G. This
she found, the Respondents had
partly performed. She also found
that the draft subcontract
Exhibit H was not a binding
contract between the parties.
The Appellants therefore could
not rely on any part of that
document to terminate the
contract. She said the provision
of a performance bond was not a
condition in the minutes of the
meeting of 23 December 1996.
Consequently, the termination of
the Respondents' contract on
that ground was unlawful. She
dismissed the 1st Appellants'
counterclaim as a "sham" and
then proceeded to consider what
relief was available to the
Respondents. She said the
Respondents' alternative claim
was based on "quantum meruit,
i.e, it was claiming the sum of
USD 224,533.29 as a reasonable
remuneration for the services
rendered". She upheld the
Respondents' said claim and
entered judgment for them in the
sum of USD 224533.29 or its
equivalent in cedis at the Forex
Bureau rate of exchange at the
date of payment.
Court of Appeal
On 9th November 1999 the
Appellants appealed against the
judgment of the High Court to
the Court of Appeal. The ground
of appeal particularised in the
Notice of Appeal was the omnibus
ground -"that the judgment was
against the weight of evidence
adduced at the trial". On 15th
January 2001, the Appellants
filed the following Additional
Grounds of Appeal.
(a) That the learned Trial Judge
erred by ignoring the assessment
of quantum by the independent
consultant to the project and
granted the relief as set out in
the claim for breach of contract
by the Plaintiff as
"liquidated."
(b) That the learned Trial Judge
erred by dismissing the
application of the
Defendant/Appellant invoking the
Arbitration clause in the
contract and thereby ousting the
jurisdiction of the court.
(c) The learned Trial Judge
wrongly assumed jurisdiction in
the case.
(d) That the award in dollars in
a quantum meruit matter is wrong
as the dollar is not legal
tender in Ghana.
On the 20th December 2001 the
Court of Appeal gave judgment.
It found that the learned trial
judge was justified in
dismissing the Appellants'
counterclaim which she had
described as a "sham" It further
upheld the Respondents' claim in
quantum meruit for the sum of
USD 224,533.29 or its equivalent
in cedis at the Forex Bureau
rate of exchange at the time of
payment. In the result the Court
dismissed the Appellants'
appeal. In view of the fact that
the Respondents' claim was in
foreign exchange, the court
ordered that the rate of
interest should rather be based
on the prevailing dollar rate at
the material time.
In this Court
On the same day that the Court
of Appeal gave its judgment
(i.e. 20 December 2001) the
Appellants appealed to this
court. Five grounds of appeal
were particularised in the
Notice of Appeal. These were:-
(a) The judgment is against the
weight of evidence on record.
(b) The Learned Justices of
Appeal erred in holding that the
only valid contract between the
Appellant and the Respondent is
Exhibit "G", thereby separating
Exhibit "H" from Exhibit G
(c) The Learned Justices of
Appeal did not consider the
principles governing quantum
meruit and did not apply the
said principles of reasonable
quantum independently assessed.
(d) The Learned Justices of
Appeal erred in ignoring the
assessment of quantum meruit by
the independent consultant to
the project and affirmed the
decision of the High Court of
Justice granting the
Respondent's claim for breach of
contract as liquidated claim.
(e) The Learned Justices of
Appeal failed to consider the
effect of the arbitration clause
on the action of the
Respondents.
We propose to tackle ground (e)
first, because if indeed the
matter ought to have been
referred to arbitration, then
this court must consider whether
even at this late stage, the
reference ought to be made.
Ground (e)
"The Learned Justices of Appeal
failed to consider the effect of
the arbitration clause on the
action of the Respondents"
In his statement of case and
also at the hearing of the
appeal, learned counsel for the
Appellants, Mr Amarkai
Amarteifio, submitted that the
issue of "quantum meruit" should
be referred to arbitration as
contained in clause 24 of the
draft sub-contract. He said the
learned trial judge wrongly
failed to refer the entire
dispute to arbitration. With all
respect to learned counsel it is
our opinion that his strictures
against the learned trial judge
are wholly misplaced. On 19th
July 1999, he filed a "Notice of
Amendment" by which he sought to
amend his statement of Defence.
That Notice did not specify in
what manner the statement of
defence was being amended. It
merely stated: "6.a. It was an
express term of the draft
subcontract that any dispute
existing between the parties be
referred to arbitration and as
such this action contravenes a
fundamental term of the
agreement." On that same day
learned counsel filed
"Additional issues for the
Summons for Directions". Issue
(e) was "whether under the said
agreement a dispute between the
parties should be referred to
Arbitration". The Summons for
Direction was taken on 26th July
1999 and the court ordered that
"the issues filed by the
Plaintiff and the additional
issues be the issues set down
for trial". Obviously then,
additional issue (e) would be
resolved after the trial. That
notwithstanding, on 2nd May
2000, learned counsel for the
Appellants filed a "Notice of
Intention to Raise Legal Points
for Determination under the
Inherent Jurisdiction of the
court and Order 25". The Notice
was to the effect that at the
hearing of "this Summons......
counsel ......... shall raise
the following Legal points for
determination by the court".
Incidentally, no summons had
been filed. The fourth legal
point set down in the Notice was
"whether or not the agreement
provided for recourse to an
arbitration in relation to
termination before taking any
further step". We believe that
what learned counsel really
wanted was an order staying the
Respondents' court action in the
High Court so that the dispute
might go to arbitration.
Unfortunately, none of the
flurry of activity on the part
of learned counsel could produce
that result.
Section 8 of our Arbitration Act
1961 (Act 38) provides: "if any
party to an arbitration
agreement or any person claiming
through him, commences any legal
proceedings in any court against
any other party to the agreement
or any person claiming through
him in respect of any matter
agreed to be referred, any party
to these legal proceedings may
apply to that court to stay the
proceedings and that court, if
satisfied that there is no
sufficient reason why the matter
should not be referred in
accordance with the agreement,
and that the applicant was, at
the time when the proceedings
were commenced, and still
remains, ready and willing to do
all things necessary to the
proper conduct of the
arbitration, may make an order
staying the proceedings"
The section requires that an
application must be made to the
court specifically praying for
an order that the proceedings be
stayed. The application must be
by motion, supported by an
affidavit setting out the facts
upon which the applicant relies.
The other party may file an
affidavit in opposition to the
motion. The court has a
discretion whether or not to
grant a stay of the proceedings.
In De Graft-Johnson and Anor v.
Ghana Bank and Anor (1973) 2 GLR
100, Aboagye J. held that the
court has a discretion to grant
or refuse a stay and that
generally the court would not
grant a stay of proceedings if
the matter in dispute involved
difficult questions of law or if
the matter was more convenient
and suitable for determination
by the court rather than an
arbitrator who might have to
state a case for the decision of
the court, and in Kusi v. Shell
Company of Ghana Ltd (1973) 1
GLR 173, the Court of Appeal
pointed out that since there was
no formal application for a stay
of proceedings before the trial
judge he was justified in
refusing the request for
arbitration. In the
circumstances as learned counsel
for the Appellant made no
application for stay of
proceedings, the learned High
Court judge could not have made
an order suo motu. As a matter
of practice the application
would be made under section 8 of
the Arbitration Act 1961 (Act
38) and order 72 rule 1 of the
High Court (Civil Procedure)
Rules 1954, (LN 140A). Now under
order 72 rule 2, no application
to set aside any proceedings for
irregularity shall be allowed
unless made within a reasonable
time, nor if the party applying
has taken any fresh step after
knowledge of the irregularity.
The Appellants, with full
knowledge of the alleged
wrongful commencement of the
action in the court by the
Respondents, proceeded to file
all those processes, enumerated
above, including the filing of
even a statement of defence and
counter claim. They effectively
waived any right they had for
applying to stay the
proceedings. There is also the
procedure laid down in the
alleged agreement, which ought
to have been complied with by
the Appellants. Assuming without
ruling on it at this stage, that
Exhibit H was a binding
agreement between the parties,
clause 24 required the party who
wishes to go to arbitration to
take a number of important steps
to activate the arbitration
process, not least, the service
of the Notice of Dispute. There
is no evidence that the
Appellants did anything pursuant
to clause 24.
Clearly then, ground (e) of the
grounds of appeal is
unmeritorious and the same is
accordingly dismissed.
Should this court, now refer the
matter to arbitration? As we
have pointed out above, the
right to go to arbitration is
vested in the parties. Our
Arbitration Act 1961 (Act 38)
contains no provision which
empowers the court to refer
matters to arbitration when
there is no valid request from a
party to the arbitration
agreement. When counsel for the
Appellants suggested to us in
argument that the matter should
be referred to arbitration, he
did not cite any authority in
support. It is our opinion that
this court has no power to refer
to arbitration this litigation
which, by the clear choice of
the parties, has travelled all
the way from the High Court
through the Court of Appeal, to
it. And even if we had power, it
is clear that the Appellant had
not satisfied the mandatory
provisions of clause 24. The
invitation to us to refer the
matter to arbitration is
accordingly declined as
unwarranted by any rule of law
or of practice or procedure.
Grounds (a) and (b)
(a) "The judgment is against the
weight of evidence on the
record".
(b) "The Learned Justices of
Appeal erred in holding that the
only valid contract between the
Appellant and the Respondent is
Exhibit G; thereby separating
Exhibit H from G".
We believe that these two
grounds of appeal may profitably
be dealt with together. That is
how learned counsel for the
Appellants dealt with them in
the statement of case for the
Appellants. After all, the major
controversy was whether or not
the courts below were right in
rejecting Exhibit H as a binding
agreement between the parties.
In other words, that holding was
against the weight of the
evidence on the record. At page
6 of the statement of case,
learned counsel referred to the
last sentence of Exhibit G which
he quoted as follows: "The
subcontract will be presented
and signed as per attached
draft." That is a misquotation.
The sentence used the word"
prepared" not "presented".
Learned counsel complained that
the courts below found that
Exhibit H was not a binding
contract and thereby separated
it from Exhibit G. With all
respect, Exhibit G was the
minutes of a meeting held on
23rd December 1996. Exhibit H
was a standard form contract
used in the building industry
which was provided by the
Appellants to be adapted for use
in the preparation of the
sub-contract between the
parties. This was referred to as
the "draft" in paragraph 9 of
Exhibit G. If the court found
that Exhibit H was not a binding
agreement, it did not
necessarily also invalidate
Exhibit G, the minutes of 23d
December 1996. In those
circumstances, the two documents
would be separated.
Learned Counsel's position
nonetheless was that the draft
was authenticated by the
initials of the parties'
representatives. Consequently it
was the binding sub-contract
between the parties. Before we
decide this let us consider one
related matter. If Exhibit H was
a binding agreement as argued by
learned counsel for the
Appellants, did the parties
intend that Exhibit H should
come into effect on 23rd
December 1996? If not, why not?
After all, according to learned
counsel for the Appellants,
there was nothing left to be
done. Every page had been
initialled by the parties. And
all the terms had been agreed
upon. If it was not intended to
come into effect on that day,
then when did it come into
effect?
One other important issue.
Paragraph 9 of Exhibit G
provided that "the subcontract
will be prepared and signed as
per attached draft". Did the
parties attach any importance to
paragraph 9 of Exhibit G? Not
unnaturally, either party
construed paragraph 9
differently, and of course,
arrived at different
destinations. What were the
rival arguments? Learned Counsel
for the Appellant argued that
Exhibit H was the only binding
agreement between the parties
and must be applied by the
court, we think that argument is
over-enthusiastically put.
Indeed, that argument begs the
question because the pith of the
problem is whether Exhibit H is
a binding agreement. Further, it
cannot be denied that Exhibit G
contained some of the terms by
which the relationship between
parties was to be governed. If
learned counsel means that
exhibit G was encapsulated in
Exhibit H, it was paragraph 9,
that said so. Of course, if we
are persuaded that Exhibit G was
irrelevant, then paragraph 9
would be otiose.
Learned Counsel for the
Respondents, for his part,
strongly urged this court to
hold that Exhibit H was not a
binding contract because the
Appellants' representative who
had undertaken to have the
sub-contract prepared from
Exhibit H failed to do so. That
much is partly true, but in our
view, that failure, ipso facto,
would not necessarily make
Exhibit H not binding on the
parties if "to prepare" in this
context simply means to retype
with all the amendments
handwritten by the Appellants'
representative. Learned Counsel
further argued that instead of
preparing the subcontract from
the draft (exhibit H), the
representative rather
unilaterally removed some of the
matters agreed upon at the
meeting of 23rd December 1996
and added others not discussed
at all. Again if this was the
only problem, the answer would
be to ignore the unauthorised
changes and construe the draft
(ie Exhibit H), again applying
the meaning we have suggested
above for "prepare". So what was
the intention of the parties
vis-a-vis paragraph 9 of Exhibit
G? Was it really true that on
23rd December 1996 the parties
settled all the terms of the
sub-contract? The evidence is
overwhelming that they did not.
The way the Appellants treated
Exhibit H was decisive of that
intention. Their conduct
persuades us that when Exhibit
G, paragraph 9, used the words
"to prepare", it meant "to bring
into existence a sub-contract
from the draft Exhibit H", not
merely to have Exhibit H retyped
to produce a fair copy. Here are
our reasons. First, there is
evidence on record that even
after Exhibit H had been
initialled on 23rd December
1996, the Appellants' director
requested to revisit it with the
Respondents' representative. It
was merely fortuitous that they
apparently agreed on what had
been decided before. As we have
pointed out above, the
Appellants submitted to the
Respondents, Exhibits K, Kl and
K2. For a proper understanding
of what the Appellants'
representative understood the
word prepared" to mean, let us
quote the substance of Exhibit
K. It is a letter from the
Appellants to the Respondents.
It is dated 19th March 1997.
"For the formalization of our
agreement for the subcontract in
respect of the HVAC works for
the Golden Tulip Project, Please
find copy of subcontract
agreement prepared from the
draft on 23rd December 1996.
(Emphasis ours). This is
forwarded for your perusal and
for signing Friday 21st March
1997. You will notice some
amendments are made which are
for clarification and for the
agreement to be contractually
correct. (Emphasis supplied).
Further, you will notice that
draft amendment to clause 7.4 ©
is deleted. The reason for this
is that clause 7 describes
delays in time only, so deletion
does not imply that the
subcontractor cannot claim for
loss and expenses - this is
anyway covered in the
subcontract, and the main
contract, only he cannot claim
for costs with reference to
clause 7. Further retention of
materials is adjusted to follow
the main contract for material
on site, anyway the maximum is
still 5%.
Bill of Quantities have been
worked out to correspond to the
contract price. (Emphasis
supplied). We expect you will
find documents to be in order
and look forward to hearing from
you."
This letter shows clearly that
it was at this stage that the
sub-contract can be said to have
been prepared. An examination of
both exhibits G and H will not
reveal any mention of Bill of
Quantities (Exhibit K2) which
forms a very pivotal part of the
subcontract. There are other
matters of substance in exhibit
K1 which were not in exhibit H.
On 20th March 1997, the
Respondents sent its comments
(Exhibit L) to the Appellants.
Exhibit L shows that the parties
were clearly not ad idem on very
important aspects of the
subcontract, (exhibit K1). For
example, paragraph 5 pointed out
that "in the BOQ'S which were
given to us in order to submit
our tender, the supply rate and
installation rate were
included". Then at page 95 of
volume 1 of the Record, the
Respondents' comments continued
thus. "We do not wish to
continue with any further
analysis, because we think it
does require a specialist to
review and study it ........" It
had taken the Appellants between
23rd December 1996 and 19th
March 1997 to have the
subcontract prepared even from
the draft - exhibit H. It was
therefore not unreasonable for
the Respondents to have
commented that they needed time
to study it. In the
circumstances, it will be
unconscionable to accept the
Appellants' argument that on
23rd December 1996 all the terms
of the subcontract were agreed
upon. That is factually not
true. It is also clear that the
parties intended their
relationship to be governed by
exhibits K1, and K2 , not H.
The main contract was
incorporated into the
subcontract because the
subcontractor was a nominated
contractor. In accordance with
the main contract, the
subcontract was made with the
contractor, but it contained the
contractor's printed terms and
conditions. Now, the
subcontract, being of the same
provenance as the main contract
there had to be a symbiotic
relationship between them. For
example, Exhibit H did not have
annexed to it the Bill of
Quantities. Exhibit K1 did and
Exhibit K explained how the
figures in Exhibit K2 were
computed; ie. based on the main
contract.
It is almost axiomatic that
building contractors and
subcontractors and architects
advising building owners, know
far more about the building
trade than any judges can hope
to do. So, when they have
carefully considered a matter
and made explicit provision for
it we should not over-rule them
unless there are compelling
reasons for doing so. In their
respective statements of case, a
lot of space and industry was
devoted to that erudite learning
applied by the courts to decide
when a "subject to contract"
stipulation does not mean what
it says. That completely
obfuscated the search for the
intention of the parties when
they stated in paragraph 9 of
Exhibit G that "the subcontract
will be prepared and signed as
per attached draft". Generally,
the "subject to contract" rules
apply to sales of land and
leases of land. This is because
in land cases, it will be easy
to say that all the terms were
agreed. All that is required is
a sufficient memorandum of the
terms in writing. This is
satisfied if you have the
description of the property, the
price and the names and
descriptions of the vendor and
the purchaser, respectively. In
our view, those rules are
clearly not suitable to be
applied to building contracts.
We do not see anything strange
in a subcontractor (director)
who does not write English,
without legal advice, clearly
aware of his comparative
disadvantage and wishing to
avoid the insidious temptation
to improvidence, believing that
paragraph 9 of Exhibit G meant
what it says. After all, the
word "prepare" means "to bring
to state of completeness". It
seems to us to be putting an
undue strain on the words
"prepared and signed as per
attached draft" to construe them
as connoting merely retyping the
draft. The evidence is that it
took the Appellants'
representative between 23rd
December 1996 and 19th March
1997 to have the subcontract
prepared as per the attached
draft. That to us was the true
intent of the parties.
The evidence is that exhibit L
did not evoke any response from
the Appellants. The impasse
therefore persisted until 3rd
April 1997, when the Appellants
purported to terminate the
Respondents' contract of
employment. We have explained
above that exhibit G referred to
exhibit H (the draft) but
exhibit H was not intended to be
the subcontract. That was yet to
be prepared. Unfortunately, the
first effort to prepare it ended
up in a fiasco. The subcontract
which contained the clause under
which the Appellants purported
to terminate the Respondents'
employment never came into
force. The Appellants could not
therefore revert to exhibit H.
In the result we hold that the
Respondents did the HVAC works
under a purported sub-contract
that never came into force. That
means this court must consider
whether or not the Respondents
are entitled to be paid anything
for the work they did: and if
so, how much? Our answer will
appear from a consideration of
grounds (c) and (d) below.
Ground "(c) The Learned Justices
of Appeal did not consider the
principles governing quantum
meruit and did not apply the
said principles of reasonable
quantum independently assessed"
"(d) The Learned Justices of
Appeal erred in ignoring the
assessment of quantum meruit by
the independent consultant to
the project and affirmed the
decision of the High Court of
Justice granting the
Respondents' claim for breach of
contract as liquidated claim"
Ground (c) and (d) really cover
the same complaint - how the
courts below assessed quantum
meruit. In particular, they both
criticize the Court of Appeal
for not considering the
principles of quantum meruit and
at any rate for not accepting
the assessment of the quantum
allegedly made by an independent
consultant to the project. It is
certainly correct that the Court
of Appeal did not consider
whether the sum of USD
224,533.29 was reasonable
compensation or remuneration for
the work done by the
Respondents. Counsel's complaint
was that the figure was too
high. "Reasonable" in this
context must mean just right;
not too little or too much. The
record shows that the Court of
Appeal simply indorsed the
findings of the trial judge. If
it turns out that the trial
judge erred then it also erred.
But we must also point out that
the Court of Appeal did consider
the principle of quantum meruit,
perhaps a little too briefly.
Further, contrary to what
learned counsel for the
Appellants said, there certainly
was no independent consultant to
the project who made an
assessment of quantum meruit.
Mr. Adotey Brown whose firm
acted as the principal
consultant for building the new
Guest Wing of the Golden Tulip
Hotel, gave evidence for the
Appellants (D.W.1). In his
evidence-in-chief he said his
firm certified the value of work
executed by all the
subcontractors as and when they
put in claims for payment. He
further testified that between
April and May there were 2
claims valued between USD
2,800.00 and USD 12,000.00.
"This will represent the minimum
and maximum work done but this
will not include any
prefabricated work done outside
the site or as materials on
site".
We have taken the trouble to
reproduce this piece of evidence
because learned counsel for the
Appellants picked this up and
wrongly argued that this witness
had estimated that the total
value of the work done by the
Respondents was no more than USD
12,000.00. As we have pointed
out above this was no
independent witness and he
certainly did not make any
assessment of quantum meruit.
The USD 12,000.00 was estimated
in respect of 2 claims put in
between April and May 1997. They
were also subject to the
qualifications he mentioned in
his evidence. So, was the High
Court right or wrong in its
approach to the assessment of
quantum meruit for the work done
by the Respondents? The
Respondents indorsed their Writs
of Summons with a claim for the
payment of the sum of USD
224,533.29, being the bill for
the supply of equipment and
materials and engineering
services for HVAC works they
executed. In paragraph 16 of the
statement of claim the
Respondents pleaded that they
were entitled to the full value
of the agreed contract price so
far performed ie. USD
224,533.29. In other words, the
bill referred to in the Writ of
Summons was based on the
contract price. Was the High
Court right in accepting that
figure?
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
Plaintiff agreed to build a
tunnel under the property of a
local authority. The council
subsequently wrongly excluded
the contractor from the property
and prevented him from
completing the work in breach of
contract. The Plaintiff claimed
on a quantum meruit basis the
value of the works done by him.
The Privy Council held that
where a contractor was
wrongfully excluded from the
site after performance, and is
thereby precluded from
completing the contract, he is
entitled to treat the contract
as terminated and claim on a
quantum meruit basis for the
work done and the materials
supplied prior to the
termination. In this sort of
situation, the amount is really
an apportionment of the total
contract price. It is the ratio
which the work done bears to the
total volume of work required to
be performed under the contract.
From the pleadings and the
evidence, this is what the
Respondents were claiming. Where
there is no concluded contract
then the court must assess
reasonable remuneration having
regard to all the circumstances.
An example is where one party
does work at the request of
another during negotiations
which are expected to lead to a
contract between them but are
broken off and no contract
results. In Craven-Ellis v.
Canons Ltd. (1936) 2 KB 403, the
Plaintiff, Craven-Ellis, was
engaged by the Defendant
company, initially in the
capacity as a valuer and estate
agent. From 1928 to 1931 he
worked for the company without a
formal contract. Then in 1931 a
formal agreement was executed
with the company's seal setting
out the terms from which
Craven-Ellis was to act as the
company's managing director.
However, none of the directors,
including Craven-Ellis, was
capable of making such an
agreement as none of them held
the necessary qualification
shares as required under the
company's articles of
association. Accordingly, the
contract was void ab initio. The
Court of Appeal held that he was
entitled to recover on the basis
of quantum meruit in respect of
the services rendered.
We have shown above that exhibit
K1 did not come into effect and
that as the parties intended
that their relationship should
be governed by that and not
exhibit H, there was no valid
contract between the parties. In
the circumstances, the
Respondents became entitled to
what we will describe as
"orthodox" quantum meruit - ie,
reasonable remuneration assessed
by the court and not the type
assessed at the contract rate.
In the result both the High
Court and the Court of Appeal
erred in accepting the figure of
USD 224,533.29 claimed by the
Respondents which was based on
the contract price. Accordingly
we set that award aside as
erroneous.
What is the correct award then?
The type of work the Respondents
claimed to have executed for the
Appellants is in a highly
technical and specialist field
of heating, ventilation and
air-conditioning. It included
engineering clarifications,
co-ordination and selection of
equipment, material and
accessories, shop drawings,
co-ordination with civil,
architectural, plumbing and
electrical drawings, fabrication
of air-ducts for fan coil units
etc. In order that the court may
be properly informed of the
correct amount, it appointed
court experts, under section 114
of the Evidence Decree 1972 (NRCD
323).
Section 114 of NRCD 323
provides: "in any action at any
time the court in its discretion
may, on its own motion, or at
the request of any party,
appoint a court expert to
inquire into and report upon any
matter on which an expert
opinion or inference would be
admissible under section 112".
With the consent of both parties
this court appointed AESL to
visit the site, study the work
and submit a report to the court
as to the correct amount to be
awarded to the Respondents.
AESL duly entered upon the
assignment and submitted their
report dated April 2003 to the
court. Copies of the report were
also given to Counsel for the
parties. On 16th April 2003 a
representative of AESL, Mr
Egbert Kwadzo Hohoabu, a
Quantity Surveyor and a
signatory to the report,
formally tendered a copy in
evidence. This was marked as
Exhibit "SC 1" Counsel were then
given the opportunity to cross-
examine the witness.
In his evidence, the witness
explained that the work the
Respondents were expected to do
were grouped into 10 heads.
These had been listed in the
report. He said each group was
given equal weighting; ie 10%.
He said, in all, three heads
were not attempted at all. These
were Nos 2, 8 and 10. Two
others, Nos 5 and 9 were partly
done and these were each rated
at 5%. Five heads were fully
discharged, ie Nos 1,3,4,6 and
7. Hence the total percentage
work done was 60. The witness
explained that the total value
of the work for engineering was
$97,674.96 and 60% of that came
to $58,604.89
In our opinion we think items 5
and 9 were worth more than 5%
each. We will increase them to
8% each making the total
percentage 66. This will bring
the total value of the
engineering works to 66% of
$97,674.96
= $64,465.47
Add value of
ductworks =
$4,875.81
Total value of work
done =
$69,341.28
We accept the opinion of the
witness that the mobilization
fee of $25,000.00 is not
additional payment but rather
advance payment which ought to
be deducted from the total sum
due to the Respondents.
Therefore the net amount due and
payable to the Respondents is
$69,341.28 less $25,000.00 =
$44,341.28.
In the result, in place of the
sum of $224,533.29 awarded by
the courts below, the
Respondents are entitled to the
sum of $44,341.28 as reasonable
compensation for the HVAC works
they executed on the New
Executive Guest Rooms Wing of
the Golden Tulip Hotel.
Simple Interest shall be
calculated and paid to the
Respondents on the sum of
$44,341.28 at the dollar rate
from 4th April 1997 to the date
of this judgment.
MRS. J. A. BAMFORD-ADDO
JUSTICE OF THE SUPREME COURT
D. K. AFREH
JUSTICE OF THE SUPREME COURT
S. G. BADDOO
JUSTICE OF THE SUPREME COURT
DR. S. TWUM
JUSTICE OF THE SUPREME COURT
PROF. A. K. P. KLUDZE
JUSTICE OF THE SUPREME COURT
COUNSEL
MR. AMARKAI AMARTEIFIO FOR
APPELLANT
MR. D. K. ANYADI FOR RESPONDENT |
