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JUDGMENT:
Vanguard Assurance Company
Limited (the Defendant herein),
an insurance company, guaranteed
the successful execution and
completion of a contract between
the Plaintiff herein, Sharp
Pharmaceuticals Ltd on one hand,
and Decision Resource (the
Contractor) on the other by
issuing Advance Payment Bond and
Performance Bond. Sharp
Pharmaceuticals says that the
Contractor has refused, failed
or neglected to enforce the
Contract “as agreed per the said
bonds.” And even though they
have informed the Defendant of
the breach and demanded the
immediate settlement as per the
Bonds, the Defendant has failed
or refused to honour same. The
Plaintiff has therefore sued the
Defendant seeking the following
reliefs:
“ (i) An order for the
enforcement of the Performance
and
Advance Payment Bonds
(ii). Costs .”
The Plaintiff’s case as per its
pleadings and evidence of its
Managing Director, Kwabena
Abankwa-Yeboah is that in August
2008 it entered into an
agreement with the Contractor
for the supply, fabrication and
installation of glazed aluminium
windows, doors, curtain walls
and internal partitioning of its
offices at Adabraka, Accra (the
Contract); Exhibit “A”. It paid
85% of the total Contract Sum to
the Contractor for the
installation of glazed aluminium
windows, doors, curtain walls
and internal partitioning of
office. The Defendant, as a
condition for the award of the
contract, provided an Advance
Payment Bond and Performance
Bond as guarantee for the
successful completion by the
Contractor of the said works.
Mr Abankwa - Yeboah testified
further that the Performance
Bond and the Advance Payment
Bond issued in the first
instance were valid for the
period between the 13th
August 2008 and 12th
November 2008. However by 12th
of November 2008, the Contractor
had failed to deliver on the
Contract and the Plaintiff
called on Defendants to pay up
on the guarantee. This caused
Defendant to invite the
Contractor and after their
discussions decided to extend
the Advance Payment Bond and the
Performance Bond to June 2009.
The Plaintiff agreed to these
terms to allow the Contractor
more time to deliver on the
Contract. But in spite of the
above extension, as at June 2009
the Contractor had failed to
install the glazed windows and
doors except for installing some
erroneous curtain wall.
The Defendant admits issuing the
Advance Payment Bond and
Performance Bond to guarantee
the performance of the Contract
by the Contractor. The
Defendant, however, contends
that the readiness of the site
for the contracted works was a
condition for the Contractor’s
performance of the Contract and
further that, at all material
times, the site had not been
ready. To the extent that the
site was ready the Contract had
been fully performed by the
Contractor. The Contractor has
not been able to complete the
contracted works because of the
Plaintiff’s own default. The
Defendant is also contending
that the Plaintiff is not vested
with an accrued or present cause
of action against the Defendant.
The Defendant further contends
that Plaintiff had only paid 37%
of the total contract sum to the
Contractor and not 85% as
pleaded by the Plaintiffs.
Defendant also contends that
Plaintiffs action against the
Defendant was time barred and
that the action had to be
brought within three (3) months
of the expiry of the bonds and
that consequently the instant
action is out of time.
The issue as to whether or not
the Plaintiff’s claim should be
submitted to arbitration in
accordance with provisions of
the contract between the
Plaintiff and the contractor is
moribund in my opinion. It is
trite learning that an
arbitration agreement need not
be separate from the main
contract; it may be a clause in
the contract. Apart from the
fact that there was no evidence
of an arbitration agreement
placed before the Court, the
position of the law is that the
mere presence of an arbitration
clause in an agreement does not
oust the jurisdiction of the
Court. The Court’s duty if an
application is made is to
consider it and in appropriate
cases make an order to stay
proceedings; as stated in the
case In Re. Ghana Private
Road Transport Union (GPRTU);
Tetteh v. Essilfe [2001-2202]
SCGLR 786. In the instant
case no application has even
been made for stay of
proceedings.
In my opinion therefore the main
issues to be determined by the
Court are:
1.
Whether or not the Plaintiff has
a present or accrued cause of
action against the Defendant.
2.
Whether or not the Plaintiff is
out of time in bringing the
instant action.
3.
Whether or not the Plaintiff is
entitled to its claim.
Whether or not the Plaintiff has
a present or accrued cause of
action against the Defendant.
According to Kpegah JSC in the
case of NPP v NDC and Others
(2000 civil motion no.36 2000),
the term “Cause of Action” can
be defined as an occurrence
which gives right to an
enforceable claim or relief in
law or equity. Thus in the
instant suit, the moment that
the Contractor’s alleged
default/breach occurred, based
on the Defendant’s guarantee,
the Plaintiff had a cause of
action. The Defendant has not
denied Plaintiff’s assertion
that it immediately notified
Defendant of the Contractor’s
breach. It is also trite
learning that the mere issuance
of the writ by the Plaintiff
constituted notice to the
Defendant by the Plaintiff of
the alleged breach of the
Contractor.
I will therefore find that the
Plaintiff has a cause of action.
Whether or not the Plaintiff is
out of time in bringing the
instant action.
According to the terms of the
Advance Payment Bond and the
Performance Bond any action or
suit brought in respect of the
said Bonds was to be brought
within three (3) months of the
expiration of the Bonds. The
evidence before the Court is
that the original Bonds issued
on 12th August 2008
(Exhibits “B” and “B1”), and
which were to expire on 12th
November 2008, were re-issued by
the Defendant (Exhibit “C” and
“C1”). The renewed period was
from 12th November
2008 to 30th June
2009. The instant action was
filed on 24th August
2009, within two months of the
expiration of the Bonds. It is
therefore very clear that the
Plaintiff is not out of time in
instituting the instant action,
and I will so find.
Whether or not the Plaintiff is
entitled to its claim.
The Plaintiff’s action is
founded upon the Defendant’s
Advance Payment Bond and
Performance Bond. The Plaintiff
entered into the Contract with
the Contractor for the works
described above. To protect
itself from loss in case of
default by the Contractor in the
performance of the Contract the
Plaintiff requested for
guarantee in the form of Advance
Payment Bond and Performance
Bond; Exhibits “B” and “B1”
which were subsequently extended
(Exhibits “C” & “C1”). The
guarantee was provided by the
Defendant on behalf of the
Contractor.
In the construction industry
cash-flow problems are common.
The employer therefore runs the
risk of a project worth millions
being abandoned at a critical
stage because the contractor has
suddenly become insolvent.
Traditionally in the
construction industry, these
problems were met by the
practice of requiring the
contractor to provide guarantee
from a bank or, more often, an
insurance company, to secure the
performance of his obligations.
These guarantees would normally
take the form of a conditional
bond or “surety bond”.
Such bonds will contain an
undertaking that the contractor
will perform a particular
obligation such as repay a
deposit or simply to do the work
which he has contracted to carry
out. In the absence of a
specific provision to the
contrary effect, he would
normally have to prove the
contractor’s default and how
much it has cost him, before he
can recover under the bond; see
Nene Housing Society v
National Westminster Bank [1980]
16 B.R.L. 22; Guyana and
Trinidad Mutual Fire Insurance
Co Ltd v Plummer and Associates
Ltd [1992] 8 Const. L.J. 171;
Perar v General Surety and
Guarantee Co Ltd [1994] 66 B.L.R
72.
The Advance Payment Bond is a
guarantee supplied by a party
receiving an advance payment to
the party advancing. It provides
that the advanced sum will be
returned if the agreement under
which the advance was made
cannot be fulfilled. It is given
by the contractor that he will
repay or settle the advanced
cash paid by the owner related
to contract. This bond ensures
that the principal will perform
his obligation as mentioned in
the contract. If he fails to
perform his obligation, then
this bond makes the obligator to
repay the advance as per
contract.
The Advanced Payment bond is
used by building contractors to
fulfil his contract within the
contract period. If any loss
incurred to the purchaser, then
the loss will be covered by the
insurance company. Surety
Company will cover the loss only
when the builder cannot be able
to use the down payment given by
the customer or the builder
cannot be able to refund the
amount given by the customer.
This ensures that the contractor
will complete his contract as
per the agreement.
The type of suretyship most
frequently encountered in the
construction context is the
Performance Bond (or Performance
Guarantee). A Performance Bond
is a surety by an insurance
company or a bank to guarantee
satisfactory completion of a
project by a contractor. For
example, a contractor may cause
a performance bond to be issued
in favour of a client for whom
the contractor is constructing a
building. If the contractor
fails to construct the building
according to the specifications
laid out by the contract, the
client is guaranteed
compensation for any monetary
loss up to the amount of the
Performance Bond.
Performance Bonds may be
considered as falling into two
categories. Conditional
performance bonds exist where
the guarantor only becomes
liable to the party entitled to
claim the bonded sum (the
beneficiary), on proof of breach
of the terms of the underlying
building contract, or on proof
of both breach and loss as a
result of the breach.
Unconditional or (more usually)
“on demand” bonds exist where,
on a true construction of the
words used in the bond, the
guarantor is liable to pay the
beneficiary the bonded sum when
demand is made in the manner
provided for in the bond,
without the need for the
beneficiary to prove the breach
of the underlying building
contract or damage (or both). It
is a question of construction in
each case whether a bond taken
as a whole, is conditional or
“on demand” and, in the former
case, the nature of the
conditions attaching to the
bond, will also be a matter of
the construction of the language
used.
The Performance Bond in the
instant suit, Exhibit “C1” reads
inter alia as follows:
“NOW THEREFORE,
the Condition(s) of this
Obligation is such that, if the
Contractor shall promptly and
faithfully perform the said
contract (including any
amendments thereto) then this
obligation shall be null and
void; otherwise it shall remain
in full force and effect.
Whenever the Contractor shall
be, and declared by the Employer
to be in default under the
Contract, the Employer having
performed the Employer’s
obligations there under, the
Surety may promptly remedy the
default, or shall promptly.
(1)
Complete the contract in
accordance with its terms and
conditions; or
(2)
Obtain
a Tender or Tenders from
qualified bidders for submission
to the employer for completing
the Contract in accordance with
its terms and conditions, and
upon determination by the
Employer and the Surety of the
lowest response bidder, arrange
for a Contract between such
bidder and Employer and make
available as work progresses
(even though there should be a
default or a succession of
defaults under the Contract or
Contracts of completion arranged
under this Paragraph) sufficient
funds to pay the cost of
completion less the Balance of
the Contract Price: but not
exceeding, including other
cost(s) and damages for which
the Surety may be liable
hereunder, the amount set forth
in the first paragraph hereof.
The term “Balance of the
Contract price” as used in this
paragraph shall mean the total
amount payable by the Employer
to the Contractor under the
Contract, less the amount
properly paid by the Employer to
Contractor; or
(3)
Pay
the Employer the amount required
by the Employer to complete the
Contract in accordance with the
terms and conditions up to a
total not exceeding the amount
of this
Bond...............................
The surety shall not be liable
for a greater sum than the
specified penalty of this Bond.”
Under the said Performance Bond
therefore, whenever the Employer
declares the Contractor to be in
default under the Contract “the
surety may promptly remedy the
default or shall promptly;” (1)
complete the contract; (2)
obtain a Tender or Tenders from
qualified bidders for submission
to the employer for completing
the contract in accordance with
its terms and conditions; (3)
pay the employer the amount
required by the Employer to
complete the Contract.
As indicated above, the
liability of the surety or
guarantor is determined by the
wording of the guarantee. He is
bound only in accordance with
the proper meaning and effect of
the written agreement he has
entered into. Lord Chancellor
Lord Westbury said in Blast
v. Brown (1962) 45 ER 1225 at
1229 as follows:
“It must be recollected in what
manner a Surety is bound. You
bind him to the letter of his
agreement. Beyond the proper
interpretation of that
engagement you have no hold on
him.”
In my opinion from the wording
of the Performance Bond, Exhibit
“C1”, it is a conditional
performance bond and therefore
the Plaintiff had to prove that
the Contractor had breached the
terms of the agreement between
them. Conditional bonds are
based upon breach of the
underlying contract by the
contractor, and because they are
based on a failure by the
principal to perform,
conditional bonds are in the
nature of contracts of
guarantee.
The position of the law and this
is common knowledge, is that for
every case there is a burden of
proof to be discharged and the
party who bears the burden will
be determined by the nature and
circumstances of the case. Our
Evidence Decree 1976 (NRCD
323) as interpreted in
Ababio v Akwasi 111 [1994-95]
Ghana Bar Report, Part 11, 74
in which case it was held that a
party whose pleadings raise an
issue essential to the success
of the case assumes the burden
of proving such issue. In
Takoradi Flour Mills v Samir
Faris [2005-06] SCGLR 882
Ansah JSC exhaustively dealt
with the burden of proof as
follows:
“ a great deal of the submission
made on the behalf of second
defendant in support of the
grounds of appeal, centered on
the burden of proof, or the onus
probandi, by which it is the
duty of the party who asserts
the affirmative to prove the
point in issue. This was
expressed in classical terms ei
incumbit probation qui dicit,
non qui negat. As it was the
Plaintiff who made the claim and
asserted the positive, he had to
adduce evidence sufficient to
establish a prima facie case, as
required by section 14 of the
Evidence Decree, 1975 because
in law where a fact is essential
to a claim, the party who
asserts the claim has the burden
to persuade the Court of
existence of that fact. The
standard of proof is by a
preponderance of the
probabilities: see section 12(1)
of the Decree section 17(1)
states that the burden of
producing any particular fact is
on the party against whom a
finding on that issue would be
required in the absence of
further proof ”.
As stated by Justice
Mensa-Boison JA, in the case of
Acquaye v Awotwi [1982-83] 2
GLR 110, the testimony of a
plaintiff is presumptive
evidence which is rebuttable.
The well-known rule of evidence
is that although proof in a
civil case rested on the
plaintiff, that burden was
discharged once the plaintiff
had introduced sufficient
evidence of the probability of
his case. It would then rest on
the defendant to rebut the
plaintiff’s evidence. Thus in
Re Ashalley Botwe Lands: Adjetey
Agbosu & Ors v Kotey & Ors
[2003-04] SCGLR 420, it was
held as follows:
“….the burden of producing
evidence in any given case was
not fixed, but shifted from
party to party at various stages
of the trial depending on the
issue(s) asserted and/or
denied.”
So did the Plaintiff prove the
breach? The evidence of Mr.
Abankwa-Yeboah was that the
Contractor had earlier on
breached the Contract consequent
to which the Plaintiff, upon
terms specified by the
Contractor and the Defendant
accepted an extension of the
guarantee. Plaintiff’s evidence
on this issue was not
controverted in any way by the
Defendant.
Mr. Abankwa- Yeboah tendered in
evidence as Exhibit “A” the
Contract in question. The
Contract indicated how much was
involved and how much the
Contractor had received in
respect of the Contract. Mr.
Abankwa-Yeboah led evidence to
show that at least 85% of the
Contract Sum had been paid to
the Contractor who had provided
the Performance Bond and Advance
Payment Bond from the Defendant
as guarantee for the successful
completion of the Contract from
August 2008 to November 2008.
But for the period of twelve
(12) weeks covered by the said
guarantees, the Contractor
failed to perform except that
the Contractor only began
installing some aspects of the
curtain wall with wrong
materials.
Mr. Abankwa - Yeboah’s further
testimony was that when the
Contractor failed to perform he
made attempts to call in the
guarantee provided by the
Defendant who advised that the
Contractor extend the
guarantee. This extension was
duly done by the Defendant from
November 2008 to June 2009. In
spite of this extension the
Contractor failed to perform the
works on the site and has since
failed to carry on any works on
the site. Mr. Abankwa-Yeboah’s
led evidence to show that the
site’s readiness was upon the
instruction of the Contractor
and the site was made ready and
it was based on the readiness
that the Contractor was able to
install the curtain walling.
However, the Manager of the
Contractor, Christopher Kobla
Darkey (D.W.1) testified that
the non-readiness of the site
contributed to his breach. I
find it rather difficult to
believe that the Plaintiff who
needs his premises for the
conduct of its business and had
paid 85% of the contract sum to
the Contractor, as admitted by
D.W.1 during cross-examination,
would not make the premises
ready for instalment. This is
what D.W.1 said under
cross-examination:
Q: As per the Agreement,
60% advance payment was to be
made to you to begin the
contract, a further 25% and the
15% when u are done with the
job; As we speak, have you
received the first 60% and
second 25% of final payments?
A: Yes my Lord.
I will make a finding at this
point that the Contractor was
paid 85% of the Contract Sum and
not 37% as pleaded.
Mr Abankwa –Yeboah’s evidence
was that the site was ready for
the Contractor to do the works;
the site had been ready since
August 2008. That, it was
because the site was ready that
the Contractor even started with
the glazing windows in the first
place. He said that he rented
scaffoldings and sent them to
the site but had to send them
back as a result of the default
of the Contractor. Plaintiff
tendered pictures of the site
through D.W.1 (Exhibit “D”, “D1”
– “D6”) to show the readiness of
the site. His further evidence
was that the Contractor did not
set foot on the site after the
extension of the guarantee by
the Defendant. This piece of
evidence was not challenged by
the Defendant.
I must say here that I believe
Mr Abankwa – Yeboah, and will
accept his evidence as against
that of Mr Darkey, D.W.1 who I
did not find to be a credible
witness. I shall expatiate on my
reasons later in the judgment.
D.W.1 testified that aluminium
profiles he had procured were at
Korle- Bu, and the glass in his
warehouse at Labone Junction.
While it had been agreed that
60% advance payment and a
further 25% payment was to be
made upon delivery of materials
unto the site prior to
installation, D.W.1 had
collected the monies without
delivering the materials. It
was further suggested to him
that the position that hacking
ought to have been done before
manufacturing of the glazed
doors and windows was not a true
professional position. This is
so because D.W.1 admitted that
he ought to manufacture the
window or door and when it was
done, he would the hack the
windows and fit it in what he
had manufactured. This was
contrary to his earlier position
that the windows and doors had
to be hacked before
manufacturing the glazed windows
and doors.
Mr Abankwa – Yeboah, in his
evidence, denied the Defendant’s
assertion that there were no
final levels for the
installation of windows and
doors, and that the the walls
had not been tiled. Mr.
Abankwa-Yeboah also led evidence
to show that filing was to be
done after the installation of
doors and windows. D.W.1
however sought to deny this but
his answers were with
inconsistencies. This is what
transpired:
Q: Let us consider this
scenario, is it not the case
that if we lay
tiles considering these two
windows it is possible that you
will have the tiles tilting from
this angle up until we get it
the other angle, is it not the
case?
A: It is not the case
Q: So it is not possible to
have tiled tilting from that end
to other end?
A: I am saying that is
possible but that will be very
bad construction.
Q: So you agree that that
is the case?
A: I do not agree
Q: I am asking is it not
the case that if we do have such
bad construction then by the
time we get to that level, if we
pick window levels from this
angle to that angle, the windows
would have tilted and not been
on the same level?
A: That it possible but in
as much as the levels will more
or less determine the window
production, the other essential
factors that we have been
overlooking all this while is
that we could not have installed
sub frames. The sub frames
could not have been installed
because the openings of the
windows have not been hacked
off. So the level alone should
not determine the production and
installation of the windows,
there are other factors and then
for me, I think you are more or
less ignoring them.
These answers is an admission on
the part of D.W.1 that his
position that window levels had
to be taken from the tiles was
not the truthful position and
that he was to manufacture
windows and doors regardless of
whether or not the tiles had
been laid.
D.W.1’s evidence was that the
site was to be ready for the
Contractor to install what he
had manufactured, yet he claimed
that he had not manufactured any
of the windows, doors and
partitioning to date and that
the materials were at his
warehouse.
The case of Kayiofi v Wono
(1967) GLR 463 at 466
provides the relevance of the
question of credibility of a
witness as follows:
“The question of impressiveness
on convincingness are products
of credibility and veracity. A
court becomes convinced,
impressed or unimpressed with
oral evidence according to the
opinion it forms of the veracity
of the witnesses.”
D.W.1 the sole witness of the
Defendant contradicted himself
throughout his testimony and
this comes out clearly as
whatever he said contradicts the
Defendant’s defence as well as
his own evidence.
The dictum of Edward Wiredu J.A.
(as he was then) in Atadi v
Ladzekpo (1981) GLR 218 at
224 states that it is not
open for a trial court to gloss
over conflicts when adducing
evidence, and make a finding in
favour of the party whose case
contains the conflicting
evidence.
Also, in Obeng v Bempoma
(1992 – 93) Ghana Bar Law
Reports, 1029, Lamptey J
remarked that:
“Inconsistencies, though
colourless may cumulatively
discredit the claim of the
proponent of the evidence.”
In my opinion the Plaintiff has
satisfied the requirement of the
law with regard to proof and has
presented the court with
sufficient and cogent evidence
of the breach of the agreement
by the Contractor and is
entitled to its claim against
the Defendant.
In conclusion, I will order the
enforcement of the Performance
Bond and Advance Payment Bond by
the Defendant.
Costs assessed at GH¢3,000 in
favour of the Plaintiff.
(SGD)
BARBARA ACKAH-YENSU (J)
JUSTICE OF THE HIGH COURT
COUNSEL
YAW SARPONG BOATENG - PLAINTIFF
OFORI ADUENI - DEFENDANT
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