Alval Ltd v Attorney General of Jamaica
| Jurisdiction | Jamaica |
| Judge | Edwards, J. |
| Judgment Date | 28 October 2011 |
| Judgment citation (vLex) | [2011] 10 JJC 2804 |
| Court | Supreme Court (Jamaica) |
| Docket Number | CLAIM NO. 2004/HCV00380 |
| Date | 28 October 2011 |
IN THE SUPREME COURT OF JUDICATURE OF JAMAICA
CLAIM NO. 2004/HCV00380
Mr. Debayo Adedepi for the Claimant.
Mr. Curtis Cochrane Instructed by the Director of State Proceedings for the Defendant.
Contract - construction contract- time fixed for completion- delay- whether breach of contract- operation of extension of time clause- termination of contract under forfeiture clause- validity of forfeiture clause- acts of prevention- equitable estoppel- waiver of right to forfeit- seizure of equipment- claim for loss of use- measure of damages.
BACKGROUND
The claimant, Alval Limited, was a construction company and Mr. Alvin Dixon its Managing Director. Mr. Dixon had been a building contractor for 36 years. In April 1997, Alval Limited (the contractor) secured a building contract from the Government of Jamaica (the employer), through its authorized agents, the then Ministry of Local Government (Works), Public Works Department, to construct a modern Revenue Centre in May Pen, Clarendon, Jamaica. At the time of signing, the company had been in business for twenty three years.
The duration of the contract was 18 months and was to commence 19 th May 1997. The date fixed for completion was October 15 th , 1998. The Works was to be executed in accordance with the General Conditions of Government Contracts for Building and Civil Engineering Works, (1956 edition). This was incorporated into the agreement. By condition 23, time was stated to be of essence of the contract and there was provision for the contractor to pay liquidated damages for failure to complete on time. However, there was a delay in completion and the contract was eventually terminated by the employer.
This claim and counter claim are as a result of the termination of the contract. It was terminated under a forfeiture clause contained in the agreement. The claim alleges that the termination was wrongful. It, therefore, begs the question whether the employer is liable to pay damages for wrongful termination. The employer's counter claim raises a separate issue of whether the contractor is liable to make good, the costs of completing the Works, after the termination.
The material facts in this case are not in dispute. The contract was for 18 months and the contractor was to be paid $73,495,000.00. However, after 44 months and millions of dollars in costs over runs, the project remained incomplete. It was terminated on January 25, 2001.
On the facts, there appeared to be several reasons for the contractor's failure to complete on time. Firstly, the site for the construction was occupied by squatters. It was the duty of the employer to have the site vacated and to give possession to the contractor to begin building works. Five months after the signing, the contractor obtained only partial delivery of the site. The contract was signed in April; there was only partial delivery until November 1997.
The second reason appeared to be that, at the time of the contract, the general area was plagued with criminality and personnel on the site was subjected to a racket perpetrated by extortionists. In recognition of this, and by agreement between the parties, the employer made substantial payments to the contractor, for additional security. The contractor also developed cash flow problems as a result of which the employer also agreed to make advance payments for worker's wages.
The contract continued to run and the contractor was given an extension of time to complete as a result of the delay caused by the presence of squatters on the site. It was never disclosed in the evidence exactly how much of an extension was granted for this purpose. There was some indication in correspondence from the employer to the contractor that based on the extension of time given; the Works should have been completed in January 1999.
Forty-four months into the contract and at a time when 85% of the work had been completed, the contract was terminated. This came about because in November 2000, the employer refused to continue to pay additional security as previously agreed. There was also a delay in the payment of the salary advances, which resulted in the site being closed down by the so called ‘security operatives’.
In December 2000, whilst the site was still closed down, the employer gave written notice to the contractor ordering him to proceed efficiently with the works, invoking condition 37 of the contract which was the forfeiture clause. This notice was given 12 days before Christmas and required the site to be remobilized within 7 days of the notice. The contractor indicated to the employer that the site could not reasonably be mobilized within that time. The site was remobilized in January 2001. However, despite this, a determination notice was served on the contractor and thereby the contract was terminated on January 25, 2001.
The contractor's equipment remained on site after termination and was never collected by him or delivered to him until October 2002. Condition 38 of the contract warranted the seizure of equipment, plant and machinery, if the contract was terminated by default of the contractor. Thus, there is also a claim by the contractor for loss of use of certain equipment which was left on site.
After the contract was terminated, the employer drew down on the performance and mobilization bonds which the contractor had entered into with Workers Bank/Union Bank & RBTT Bank. The contractor also averred that following the termination, he made claims for work done for a certificate 51 dated February 16, 2001, which was not honoured. The employer denied that there was any such certificate.
A new contractor was engaged to complete the Works and took nine months to complete. Ironically, it too failed to complete on time and was given an extension of time to complete. The employer has counter-claimed a net amount of four million, six hundred and seven thousand, four hundred and fifty-five dollars and ninety four cents ($4,607,455.94) as a balance due and owing from the contractor, for the cost to complete.
THE ISSUES
There are five substantive issues to be conclusively determined in this case. These are:
THE APPLICABLE LEGAL PRINCIPLES
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1. Whether the contract was wrongfully terminated.
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2. Whether, as a consequence, the employer wrongfully drew down on the performance bonds and the mobilization funds.
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3. Whether the contractor is entitled to damages for wrongful seizure of equipment under the forfeiture clause.
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4. Whether the contractor is entitled to payments on a certificate dated February 16, 2001?
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5. The question of damages if any, and whether the employer is entitled to the sums claimed in the counter-claim or any sums at all.
This is a case where the law involving time, delay and notice with regard to contracts in general and construction contracts in particular, will be of general importance. Therefore, before making specific reference to the case at hand, I think it may be necessary to expound somewhat on aspects of the relevant law which I found to be applicable to the issues to be determined in this case.
Halsbury's Laws of England, 4 th ed. Vol. 9 (1974), para. 481 reads:
‘The modern law, in the case of contracts of all types, may be summarized as follows. Time will not be considered to be of the essence unless: (1) the parties expressly stipulate that conditions as to time must be strictly complied with; or (2) a party who has been subjected to unreasonable delay gives notice to the party in default making time of the essence.
In contracts generally, time will be of the essence if the contract so states or if after a delay the other party serves notice making time of the essence. The courts will require strict compliance with stipulations as to time where it is the intention of the parties for time to be of the essence. However, time is not usually of the essence in construction contracts which are subject to notorious delays, without express words making it so. See for example the case of Charles Rickards Ltd v Oppenheim (1950) 1 KB 616.
Usually in construction contracts finishing late does not entitle the employer to dismiss but is a breach of warranty entitling him to damages. An exhaustive review of the authorities reveals that construction contracts are rarely determined for lateness. Damages are usually provided for in the contract calculated as a fixed sum for delay for each day, week or month. This is referred to as liquidated damages. For liquidated damages to be payable there must be a fixed date for completion, that is, a definite date from which to act as a starting point in calculating the damages due.
In cases where time has not been made of the essence of the contract, or where although time was originally of the essence of the contract, the time for completion has ceased to be applicable by reason of waiver or otherwise, the employer still has a right, by notice, to fix a reasonable date within which to require completion of the work and in such a case, if the contractor does not complete by that date, the employer may dismiss him. See Taylor v Brown (1839) 9 LJ CH 14; 2 Beav. 180; 48 E.R. 1149.
A fixed completion date does not necessarily make time of the essence unless the contract so states. The nature of the property and the surrounding circumstances would have to be considered. Time only becomes of the essence if express to be so, is made so by notice or where the nature of the contract or its subject matter implies that it is so.
If the completion date passes due to the act or default of the employer and no extension is given, the employer has no right to claim liquidated damages, as there would now be no new completion date. Time then becomes at large. This means that the time...
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