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High Court of Fiji |
IN THE HIGH COURT OF FIJI AT SUVA
CIVIL JURISDICTION
Action No.531 of 2004
BETWEEN
WESTERN EQUIPMENT HIRE LIMITED
PLAINTIFF
AND
M Y TRANSPORT COMPANY LIMITED
DEFENDANT
Appearances: Mr A.Vesikula for the plaintiff
Mr V. Maharaj for the defendant
Hearing: 30th January, 2012
JUDGMENT
The statement of claim proceeds to state that the stop work notice required the defendant to perform some preliminary work before continuing with the development, in terms of the contract. The plaintiff states that the defendant refused to comply with the conditions of the stop work notice and instead, engaged the services of another contractor to complete the development, thereby unilaterally terminating the contract with the plaintiff. The plaintiff states that it had already completed a significant development of the land. The plaintiff claims a sum of $ 37,839.71, as the balance due in terms of a payment certificate dated 21st May,2004, for work done before the stop work notice was issued; and a sum of $ 5000, as cost of a bond paid to the Council . The plaintiff states he had paid this to the Council, on behalf of the defendant, as agreed by the parties.
The defendant, in its statement of defence, denies the claim and states that the contract was properly terminated, as the plaintiff had failed to perform the contract strictly according to its terms, and its work was not the standard expected by the defendant. In its counter claim filed thereafter, the defendant states that the parties agreed that the contract was to be governed by New Zealand Standard Conditions of Contract for Building and Civil Engineering Construction of 1987 and 1998 (NZS 3910), and all disputes between the parties were to be resolved by arbitration.
The counter claim proceeds to state that by letter dated 16th September,2003, the contract was terminated by Pro Survis and Development Consultants, pursuant to clause 9.3 of NZS 3910 of 1987, on account of the failure of the plaintiff to complete the works within the extended period agreed to by the parties. The defendant claims liquidated damages at the rate of $ 500 per day in terms of clause 2.1.10 and 9.5.1 of NZS 3910, totalling a sum of $ 140,500 for a period of 281 days. Loss of rental income from 15th September,2003 to 15th November,2003, in a sum of $ 45,000, is also claimed.
The plaintiff, in its reply to the counter claim, denies the claim and states that the action of the defendant lead to frustration of the contract, in that the defendant's actions made the contract impossible of performance. The particulars of frustration pleaded include the failure to comply with the stop notice and engaging another contractor to complete the works.
On 24th February 2011, the defendant moved court for a stay of the court proceedings in terms of Section 5 of the Arbitration Act. On 22 July,2011, I delivered my Ruling dismissing the application for the reason that the defendant had sought a stay of court proceedings, after pleadings had closed and the pre trial conference concluded. Section 5 contemplates an application for stay of proceedings to be made after appearance and before delivering any pleadings. I also held that the issue as to whether parts of NZS 3910 of 1987 have been incorporated in the contract dated 3rd June,2002, could not be decided at that stage, as it involved questions of fact.
Mr Pradeep Kumar testified that he was a representative of the plaintiff company. He stated several sections of the NZS 3910 of 1987 were incorporated in the contract between the parties. He referred particularly to the clauses, which permitted extensions of time due to wet weather. He stated he paid a sum of $ 5000 to the Council, which was refundable on completion of the works. The Council however, had not issued the completion certificate. Prosurvis & Development, the Engineers were to ensure that the plaintiff meets the expected standard. He explained that the contract between the parties was a measure and value contract and payments were made progressively to the plaintiff by the defendant, upon the Engineer certifying that payments were due.
Mr Pradeep Kumar stated that due to the wet weather in Suva, the work on the works progressed at a slow pace, until a landslide occurred. The landslide could have been remedied. The Council had requested the defendant to submit detailed plans and specifications for the rehabilitation of the landslide. Consequent to the stop work notice, the plaintiff had stopped work, until the defendant took steps to comply with the directions given by the Council. In the meantime, the defendant had engaged a third party to complete the works. Pradeep Kumar stated further that he had then removed the machines, in order to do work in other sites. The basis of termination by Prosurvis & Development, the Engineers, was that the plaintiff was not carrying out the work and his machinery was not on the site. Mahendra Singh was the Engineer of Prosurvis & Development. Michael Whippy was the owner of that company. The payment certificate in dispute had been signed by Mr Whippy, as Mahendra Singh had left the company.
Mr Michael Whippy, Land Surveyor and Manager of Prosurvis & Development also testified for the plaintiff company. He stated that Mahendra Singh, the works Engineer was overseeing the works. He signed only on the advice of Mahendra Singh. When he was not available, he would sign a payment certificate on his instructions. The disputed payment certificate was the only certificate signed by Mr Whippy, for the reason that Mahendra Singh was no longer then, in the employment of Prosurvis & Development. Mr Whippy admitted that this payment certificate was subject to the defendant's approval for delay. Mr Vesikula referred Mr Whippy to clause 2.7 of the "Special Conditions of Contract" attached to the contract dated 3rd June, 2002. This clause requires the Engineer to "obtain the specific approval of the principal in writing before ..(c) approving payments to be made".
Mr M Yaseen, Director of the defendant company gave evidence .He stated Mahendra Singh, an engineer employed by Prosurvis & Development had made eleven progress payments. Progress payment no 13 was disputed and not paid for the reason that the contractor had taken his machines away before the landslide and had not performed the works. Mr Yaseen' s position was that the Council had issued a temporary stop notice .On the day he received the notice he had a site meeting with the Council. The Council asked him to protect the portion that had a landslide, obtain a new design for that portion and carry on the work in the rest of the area .The plaintiff was told by the defendant to carry on with the work. After the termination of the plaintiff 's contract, Mr Yaseen had hired Babu Ali,(now deceased), to complete the works and paid him $ 31,000. It transpired in the cross-examination of Mr Yaseen, that the Council had not issued a completion certificate for the works.
Counsel for the plaintiff, Mr Vesikula, at the close of the defendant's case sought to call an officer from the Council. Counsel for the defendant, Mr Maharaj objected to this application. I upheld the objection.
The matters for determination before me are: the two claims of the plaintiff for reimbursement of the bond paid by the plaintiff to the Council and for work completed; and the counter-claim of the defendant for liquidated damages and damages suffered as a result of loss of rental.
The main issues for determination, as recorded at the pre-trial conference, are as follows:
Who was required to comply with the Suva City Council Stop Work Notice?
Whether the defendant was required to pay to the Suva City Council a Bond in the sum of $ 5000,which was paid by the Plaintiff and whether it was agreed that the Defendant would reimburse the said sum of $ 5000 to the Plaintiff?
Why was another contractor given a contract to develop the land without informing the Plaintiff when there was an existing stop work notice issued by the and when the Plaintiff was prepared to complete its contractual obligations?
Whether the Plaintiff or the Defendant had acted in breach of the Contract?
Whether the contract in its entirety was governed by NS 3910 of 1998?
Whether there was a payment certificate issued by Pro Survis & Development Consultants dated 21st May,2004 for work done until 16th September,2003?
Whether the issue of estoppel is applicable in the instant case?
3.1 I will first clear the plaintiff's subsidiary claim of $ 5000, which Pradeep Kumar stated was paid to the Council. It transpired in Pradeep Kumar's evidence, that there was no discussion with the defendant on this matter. This was a deposit paid to the Council by the contractor, the plaintiff. It was refundable by the Council upon completion of the works. The Council however, had not issued a completion certificate. In these circumstances, in my judgment, the claim against the defendant for refund of same, falls by the way.
3.2 I now proceed to determine the plaintiff's substantive claim in this action.
The terms of the contract between the parties are contained in the "Special Conditions of Contract" attached to the contract dated 3rd June, 2002. The "Special Conditions of Contract" incorporate the specific clauses in the NZS 3910, as referred to therein. This provides that the contract is a "Measure and Value Contract ", in terms of which the defendant was required to pay the plaintiff, the sum ascertained by the Engineer for each item of work carried out. It also provides that a Contractor's bond payable to the Principal is required, not a Principal's bond. The time of completion of the contract is stated to be six weeks. Clause 2.16 contemplates extensions of time due to exceptional weather resulting in rainfall, and works affected by damage carried out as a result of a cyclone or recorded earthquake.
The mainstay of the plaintiff's case is that the stop work notice prevented the plaintiff from carrying out the works and that the defendant, contrary to the stop work,notice engaged the services of another contractor to complete the development. The defendant's position was twofold. The first was that it clarified with the Council, that the stop work notice was only in respect of the portion of the land that was subject to a landslide. The second was that the development works were delayed, due to the lack of progress by the plaintiff .Hence the contract was terminated by the Engineers.
The stop work notice issued by the Council on 26th August,2003, to the defendant, (copied to the Engineers and Mr Pradeep Kumar) reads as follows:
" Re: Proposed Container Storage yard – Lot 1 DP 8342, Mavoa Road
Notice is hereby given to cause an immediate STOP WORK on site.
Our inspections reveal that the excavation works are not conforming to the approved plans and geotechnical reports, therefore you are to fulfil the following requirements before commencing any further work.
The stop work notice clearly required the defendant to cease work immediately. The notice depicts however, that the primary concern of the Council was that the excavation works were not conforming to the approved plans and geotechnical reports. It also transpired in the cross-examination of Mr Whippy and the evidence of the defence, that there was negotiation with the Council to carry on the development works, after the stop work notice. Mr Yaseen, Director of the defendant company, in his testimony, elaborated that on the day he received the stop work notice, he had a site meeting with the Council . The Council asked him to obtain a new design for the landslide area and protect that area, but permitted the works to be carried on in the rest of the land .
I accept Mr Yaseen's evidence on the above matter, supported as it is by the evidence of Mr Whippy, a witness for the plaintiff. I treat Mr Pradeep Kumar's evidence with great reserve. His testimony that he was a representative of the plaintiff company was an untruth. In cross-examination, he admitted that he was no longer a Director of the plaintiff company and had resigned on 9th August,2004, as borne out by the extract of the "Particulars of Directors and Secretaries".
It was suggested to Mr Pradeep Kumar in re-examination, that the plaintiff's work was satisfactory and was not at any time penalised for delay in completing the work. The documentary evidence reveals that the Engineers was not satisfied with the plaintiff's performance. The letter dated 30th October,2002, from Mahendra Singh, the Engineer to the plaintiff, expresses their concern on the progress of the works . This provides that:
"Our inspection of the site reveals that your performance in good weather has been of sub standard as you have not been employing enough machines for this types of works. Also your planning of this nature of work has been very poor. However, we wish to remind you that the deadline of this project must be met by new completion date of 18th November, 2002 as the Principal is eager to carry out other works on this site".(emphasis mine)
The letter dated 16th September,2003, from the Engineers to the plaintiff terminating the contract also depicts their concern on the plaintiff's performance The plaintiff admittedly did not respond to this letter, which is in these terms:
"Attention: Mr Pradeep Kumar
Container Storage Yard at Reservoir Road
With reference to our meeting dated 4th September, 2003 concerning the completion of above project by 15th September, 2003 and wish to write to you once again that the principal is very much concerned with your attitude on performance.
Also we have noted that without notice you have removed your equipment from the site and currently there is no equipment on site and this in breach of contract. Your extension time of 9th December, 2002 has now expired and we are let to believe that you are not showing keen interest in this project at all and in accordance with clause 9.3 of NZS 3910: 1987 we terminate your contract with your company. We also remind you that in past we have warned you for the delay on the progress of the work.
Please remove all your belongings from site immediately."(emphasis mine)
I am satisfied on the totality of the evidence that the contract was lawfully terminated by the defendant, due to non-performance on the part of the plaintiff, despite the extensions of time granted.
I now turn to the plaintiff's claim for work done in terms of the payment certificate signed by Mr Whippy. The disputed payment certificate dated 21 May, 2004, is stated to be in respect of work carried out by the plaintiff, prior to the stop work notice was issued on 26 August,2003.
It is an agreed fact, as recorded at the pre-trial conference,that the Engineers were to assess the work completed and thereafter issue the payment certificate. Mahendra Singh, the Engineer of Prosurvis & Development, supervised the entire works carried out by the plaintiff on the project. Michael Whippy, the owner of the engineering company testified that ordinarily, he signed only on the advice of Mahendra Singh. If he was not available, he would sign on his instructions. He signed the payment certificate in dispute, as Mahendra Singh had left the company. On certain occasions, Mr Whippy said, he sent his survey team to measure and verify the work claimed to be completed. This he said, he did, in respect of the work claimed in this payment certificate.
Mr Maharaj, in his closing submissions, has referred to clause 2.7 of the " Special Conditions of Contract", which provides that payment shall be in terms of section 12 of NZS 3910: 1998. Section 12.1.1 titled "Contractor's payment claims" states that "payment claims shall be submitted in respect of works carried out during periods of not less than one month".
Section 12.2 requires several matter to be identified in the claim including the relevant period to which the payment claim relates and the manner in which the claim has been calculated. The answer of Pradeep Kumar to Mr Maharaj's question as to why the payment certificate did not set out the matters stipulated in clause 12.2 was that the breakdown was submitted by the Engineers and "should be somewhere".
I am not convinced that the plaintiff carried out the works claimed in the disputed payment certificate for the following reasons. The payment certificate did not comply with section 12 of NZS 3910: 1998 and was not signed by Mahendra Singh, the Engineer who supervised the entire works carried out by the plaintiff. I am not satisfied that Michael Whippy, a land surveyor, was competent to certify a payment certificate. I also find it strange that the payment certificate was sent nine months after the contract was terminated. Moreover, it transpired in the cross-examination of Pradeep Kumar, that the original was not sent to the defendant. In all the circumstances, I am not inclined to accept the plaintiff's claim and dismiss same.
3.3 The defendant's counter-claim
The defendant has made a counter-claim for liquidated damages in a sum of $ 140,500.00 in terms of clause 2.1.10 and 9.5.1 of NZS 3910 for 281 days at the rate of $ 500 per day from 9th December, 2002, to 16th September,2003, as a result of the failure of the plaintiff to complete the contract within the agreed time .
The plaintiff was given an extension of time for completion of the contract up to 9th December, 2002, as provided in the letter of termination dated 16th September,2003.This was not disputed.
The plaintiff, in its reply to the counter claim, states the defendant cannot justify the loss claimed for the reason that the plaintiff was incapable of continuing with the works due to the stop work notice issued by the Council. On this matter, I have accepted the evidence of the defendant, as supported by the evidence of a witness for the plaintiff, that the Council permitted the rest of the works to be carried on, excluding the landslide area .
It transpired that the Council admittedly had not issued a completion certificate in respect of the works. In my judgment, this is irrelevant to the defendant's claim. The defendant is entitled to liquidated damages in terms of clause 2.1.10 and 9.5.1 of NZS 3910 at the rate of $ 500 per day for the stated period.
The defendant also claims loss of rental income from 15th September,2003, to 15th November, 2003, on the basis that the land is rented as a container yard to Pacific Agencies and Neptune Shipping. The defendant has not produced the rental agreements entered into with these entities to support its claim and hence I disallow this claim.
A.L.B.Brito- Mutunayagam
Judge
23rd August, 2012
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URL: http://www.paclii.org/fj/cases/FJHC/2012/1293.html