Proprietary Engineering Limited v S R Nicholas Limited (Commercial Case No.6 of 2007) [2008] MWCommC 10 (08 February 2008);

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IN THE HIGH COURT OF MALAWI

 

BLANTYRE REGISTRY

COMMERCIAL DIVISION

 

COMMERCIAL CASE NO.6 OF 2007

 

BETWEEN:

 

PROPRIETARY ENGINEERING LIMITED…………………………….. ………………….PLAINTIFF

-AND-

S R NICHOLAS LIMITED………………………………….…………….…..……………………..DEFENDANT

 

 

 

CORAM: HON. MR JUSTICE F.E. KAPANDA

Messrs Mwangomba and M’meta of Counsel for the Plaintiff

T.C. Nyirenda SC of Counsel for the Defendant

Mrs. M. Pindani, Court Reporter

Fatch , Court Clerk

 

Place and Dates of hearing : Blantyre, 7th November 2007, 9th November 2007, 15th November 2007, 16th November 2007, 23rd November 2007

 

Place and Date of Judgment : Blantyre, 8th February 2008

 

 

 

 

_____________________________________________________________

JUDGMENT

_____________________________________________________________

 

Kapanda, J:

 

INTRODUCTION

 

The Plaintiff has brought this action against the Defendant claiming the following:-

  1. The price of goods sold and delivered to the Defendant and services supplied to the Defendant. It is said that the goods sold and supplied and services rendered are evidenced by invoices and delivery notes numbered 5008, 6327, 6325, 6328,6071 and 6072.

  2. Euro 2,595 .39 allegedly due on a penultimate certificate and

  3. Euro 2,450.89 said to be retention fee calculated at 5% of the contract sum.

Further, it is prayed that the costs of and incidental to this action be for the Plaintiff.

The Defendant denies having requested the plaintiff to supply services or ordered or received the goods in issue. The Defendant, whilst agreeing that some money is due on the penultimate certificate, contends that the calculation on the certificate is not correct, as it is not in line with the contract. With regard to retention fee the Defendant contends as follows:

  1. That the retention fee is not due as the Architect has not issued the final certificate.

  2. That the Defendant did not complete the job in breach of the contract.

  3. In the alternative that the Plaintiff negligently executed the contract

In essence the Defendant avers that the Plaintiff’s claims regarding retention fee are premature as no cause of action has accrued. Further, the Defendant counterclaims damages arising out of the breach of or negligent performance of the contract, the subject matter of this action.

 

FACTUAL BACKGROUND

 

The facts of this case are lengthy. They will have to be summarized. The said facts are to be discerned from the evidence on record. As far as this court was able to discern from the said record, an outline of the facts obtaining in this matter is as follows:-

Claimant’s case

It would appear that the Plaintiff entered into a subcontract with the Defendant to supply and install air conditioning and ventilation facilities at Zomba Central Hospital. As it were, the installations were handed over by the Plaintiff on 13th March, 2006. The Plaintiff further contends that a sum of Euro 49,017.70 was due under the said contract to the plaintiff. It is further said that the Defendant has since paid Euro 43,971,42 leaving a balance of Euro 5046.28. It is this sum that is the subject matter of this action.

Moreover, it is alleged that the sum of Euro 5,046 is made up of the following:-

(a) Valuation No. 5 Penultimate Certificate dated 06/03/06 - Euro2,595.39 which was due to be paid within 35 days from the date of the certificate.

(b)Euro 2,450.89 being retention which the Plaintiff argues was due to be paid as follows: 50% on the issue of a certificate of practical completion on 13th March 2006; and the other 50% upon the expiry of the defects liability period on 12th March, 2007 or on the date of certificate of making good the defects, whichever is latter.

It is said by the Plaintiff that during the defects liability period the Plaintiff was called upon to attend to the installed facilities at Zomba Central Hospital. They allege that it was discovered that the facilities were tampered with and/or vandalized. The Plaintiff claims that it replaced the stolen items and repaired the system. Hence, invoice numbers 6071 and 6072 for K140, 295.00 and K28, 785.70 respectively were raised for settlement by the Defendant. The Plaintiff continued to aver that invoices were issued because the replacements and repairs were not defects that are envisaged in a defects liability period. The said invoices, so it is argued, have not been settled to date.

Further, it is said that on various dates in 2006 the Defendant requested the Plaintiff to supply flush adaptable boxes and meter board. Consequently, the Plaintiff issued invoices numbers 6324, 6325, 6327 and 6328 which have not been settled.

The long and short of it is that the Plaintiff’s case is that, in pursuance of the said subcontract, it duly performed his part of the agreement but it has not been paid fully for the services rendered and goods supplied.

 

Defendant’s assertions

 

The Defendant’s version of what transpired is absolutely different from what the Plaintiff said in this court. The Defendant asserts that it never requested the Plaintiff to supply services or ordered or received the goods in issue. As stated earlier, whilst agreeing that some money is due on the penultimate certificate, the Defendant continued to aver that the calculation on the certificate is not correct, as it is not in line with the contract. It was further put in evidence as follows:

  1. That the retention fee is not due as the Architect has not issued the final certificate.

  2. That the Defendant did not complete the job in breach of the contract.

  3. In the alternative that the Plaintiff negligently executed the contract

Additionally, the Defendant avers that that the Plaintiff’s claims regarding retention fee are premature as no cause of action has accrued. Furthermore, the Defendant is of the opinion that it should be paid damages arising out of the breach of or negligent performance of the subcontract, the subject matter of this action.

 

ANALYSIS

 

As mentioned earlier, the Defendant opposes the action herein. For all intents and purposes it has been submitted on its behalf that the action by the Plaintiff be dismissed. Naturally, the Plaintiff is of the view that it has made out its case against the Defendant. For lack of terseness I will summarize and replicate the arguments of the parties. The said arguments were put into categories as follows:-

 

On order of goods and services represented by invoices and delivery notes numbered 5008, 6327, 6325, 6328, 6071 and 6072

 

The Defendant submits that it neither ordered the goods nor asked for the Plaintiff’s services as represented by the invoices and delivery notes quoted above. The Defendant continued to argue that that the Plaintiff must therefore prove that the Defendant ordered the goods and requested the Plaintiff’s services. It is the view of Counsel for the Defendant that the obligation arises from the principle that he who asserts must prove his assertion and not for the Defendant to disprove it.

The Defendant says that there is no cogent evidence to establish the fact that the Defendant’s servant or agent ordered any goods or services from the Plaintiff. Accordingly, it is said that in the absence of such evidence it cannot be said that the Defendant ordered the goods or requested the Plaintiff’s services.

In sum, the Defendant opines that Plaintiff has not proved that the Defendant ordered the goods or requested the services in issue.

 

Did the plaintiff deliver the goods?

 

The Defendant argues that the Plaintiff has not proved the delivery of the goods it is seeking to be paid for. Indeed, it is the Defendant’s case that Mr. Fry conceded that he did not prepare the delivery notes and was not present when the delivery notes were signed. He could not tell whether the persons who signed were employees of the defendant or the plaintiff’s own employees. Thus, there is no proof of delivery of the goods.

Is Euro 2,595.39 due on any penultimate certificate?

 

It is observed that the Plaintiff takes issue with the mode of calculating payments and when the payment on the penultimate certificate and retention fee were to be made. The Defendant is the opinion of that whether the amount quoted in the above question is due has to be found in the contract document which unfortunately is not there. However, the argument continued, the agreement has to be discerned from the correspondence and documents that the parties exchanged and what the parties appear to agree as having been the terms of the contract.

I must point out that both parties have called in aid page 34 of the contract as part of their evidence on the issue of what the terms of the contract were. The last paragraph of page numbered 34 reads:

Sub-clause 32(11) Foreign Exchange Conversions, insert sub-Clause

Sixty five percent of the amounts payable will be converted to Euro (EUR) at the fixed tender rate exchange rate of 58.37 MK/EUR (converted from the agreed 29.8438 MK to one DM); thirty five percent of the amounts payable will be converted to Euro at the exchange selling rate on the date of valuations.’

Using the 65/35% formula the Defendant concluded that K335, 408.65 is the right amount due on the penultimate certificate. The Plaintiff has however contended that because the first four interim certificates were fully pegged to the Euro and paid this means the contract was fully pegged to the Euro. The Defendant’s position is that it honored those interim certificates by mistake. It is argued that the mistake arose from the fact that the Plaintiff used a wrong formula.

The Defendant further opines that even though the Plaintiff prepared the four interim certificates, in terms of Clause 31 (1) of the contract it was the responsibility of the Supervisor/Architect to prepare interim certificates. It is therefore submitted that the Plaintiff cannot rely on documents it prepared without authority.

 

Retention fee, is it due as claimed?

 

I have noted that the Defendant is of the view that the retention fee is payable after issuance of the final certificate and not practical completion certificate as is being argued by the Plaintiff. Indeed, it is the Defendant’s submission that Clause 31 sub-clause 6 (b) of the contract is the applicable clause.

Further, it is submitted that a cause of action had not accrued at the commencement of these proceedings. This, it said by the Plaintiff, is because the final certificate had not been issued and the Plaintiff had not completed the job. The Defendant has further argued that even if retention fee is due the amount can not be Euro 2,450.89.

Did the Plaintiff perform its part of the contract?

 

The Plaintiff believes that it performed the contract and relies on Handover/Acceptance Certificates that were signed by a Mr. Gonani as proof of performance. The Defendant thinks otherwise. It observes that although the Defendant was the Plaintiff’s employer the latter chose to handover the installation to M&E an agent of Kanjere/Gitec who were employed by the Malawi Government. In the opinion of the Defendant the fact that Kanjere/Gitec were satisfied with the work does not mean that the Plaintiff carried out their work satisfactorily. It is submitted that it was the Plaintiff’s obligation to satisfy its employer and not otherwise.

In summary, it is the submission of the Defendant that there was a deficiency, insufficiency in the performance of the works. Further, it is argued that the installation was incomplete. Thus, having failed to do the job in a satisfactory manner the Plaintiff was not justified in demanding or expecting payment from the Defendant.

 

Was the plaintiff negligent in the performance of the contract?

 

It is the submission of Counsel that the evidence on record demonstrates that the Plaintiff failed to supervise its employees during the installation of the equipment. Thus, in their judgment, the Plaintiff was negligent.

Damages under the counterclaim

 

The Defendant is counterclaiming damages from the Plaintiff. It is submitted that if the court finds that the Plaintiff failed to fulfill its obligation under the contract or negligently performed the contract then the court should find in favour of the Defendant and enter judgment.

I wish to express my sincere gratitude to Counsel for their careful and cogent written submissions on the issues that arise for consideration in this matter. Any clarity in this judgment is really due to the said submissions. It has not, however, been possible to refer to each and every detail of their points of view. That notwithstanding, I have only given a sketch of the essence of the arguments of all the parties. However, the parties are advised that all their points of view will be taken into account before arriving at a decision in this matter.

Without much ado, I now proceed to reflect on the pertinent issues for consideration in this action. This is now an appropriate time for me to enumerate the issues for determination in the matter.

 

ISSUES FOR DETERMINATION

 

The questions that have been isolated herein below arise from my reading of the pleadings, and the arguments of Counsel. As I see it, the following are the issues that call for determination in this matter:-

  1. Whether or not the Defendant ordered the goods and services represented by invoices and delivery notes numbered 5008, 6327, 6325, 6328,6071 and 6072

  2. Whether or not the Plaintiff delivered the goods or rendered the services.

  3. Whether or not Euro 2,595 .39 is due on any penultimate certificate and

  1. Whether or not retention fee is due as claimed and, if retention fee is indeed due, whether Euro 2,450.89 is the amount due.

  2. Whether or not the Plaintiff performed its part of the contract.

  3. Whether or the Plaintiff negligently performed the contract.

There are other secondary questions that will also be alluded to later in this judgment. As mentioned previously, the questions that have been isolated herein arise from the pleadings and the arguments of Counsel. There are other ancillary questions that will also be alluded to later in this judgment. I will now, without much ado, proceed to deal with the issues that arise and fall to be resolved.

 

 

LAW AND DISCUSSION

 

Whether the Defendant ordered the goods and services from the Plaintiff.

The Defendant has denied ordering the goods and asking for the Plaintiff’s services represented by invoices and delivery notes numbered 5008, 6327, 6325, 6328,6071 and 6072. Accordingly, it is Claimant’s duty to prove that the Defendant ordered the goods and requested the Plaintiff’s services. The obligation arises from the well known principle that he who asserts must prove his assertion. It is not for the Defendant to disprove it.

Turning to the instant case, it is noted that the only witness for the Claimant says in his testimony that the Defendant ordered the goods. The Defendant on the other hand states that it did not order the goods. Thus, it was incumbent upon the Plaintiff to name the person who ordered the goods on behalf of the Defendant. In saying thus the court is alive to the fact that the Defendant is a limited liability company and can only operate through individuals.

What then did the Claimant offer in evidence? I will go no further than what Mr. Fry, the only witness for the Plaintiff, averred in his witness statement. In this regard the pertinent paragraphs of the said witness statement must be set out. In paragraph 6.20 the said Mr. Fry states:

The plaintiff also had to supply goods and services at the defendant’s request as particularized in paragraph 2 of the statement of claim. I hereby exhibit copies of invoices and supporting delivery notes…’

Further, in paragraph 6.21 it is put as follows:-

The goods and services were supplied to make good not the defects to the work done by the plaintiff but vandalism done to the work done by the plaintiff. The defendant was alerted about vandalism of air conditioning system by our letter dated the 12th November 2006.’

He then continues to say in paragraph 6.22 that:-

the work being outside the defects the defendant is obliged to pay for the same.’

In my judgment the above paragraphs imply that the invoices in issue relate to goods and services supplied to the Zomba General Hospital Project at the request of the Defendant. However, as the first defence witness was testifying it emerged that some invoices were not for Zomba General Hospital but for Mozambique. It is well to point out that Mr. Fry does not say anything in the three paragraphs about who ordered or requested the goods and services on behalf of the Defendant. I am not surprised with this as the record will show that Mr. Fry conceded that he neither prepared the invoices nor was he present when they were being signed. He further accepted that he would not know whether it was the Plaintiff’s or Defendant’s employee or another person who signed the invoices.

What then does this show? In my opinion, the nonexistence of evidence as to who ordered the goods and services on behalf of the Defendant only leads one to conclude that it cannot be said for sure that the Defendant ordered the goods or requested the services. In the event that I am found to have been wrong to come to this finding I wish to make another observation.

As will have been noted above the, Claimant relies on some invoices and delivery notes that its employees prepared. A general remark on these invoices is apposite. An invoice dated 2nd November 2006 refers to repairs to air-conditioning equipment at Zomba New Theatre. It does not specify the nature of repairs. The order is said to be verbal. The person who made the order is not indicated. There was an attempt to link this invoice to a letter from the Claimant to the Defendant dated 12th November 2006. But, it is so clear that the said letter of 12th November 2006 was written 10 days after Invoice number 6071 dated 2nd November 2006. Further, the said letter of 12th November 2006 indicates that valves were opened and gas leaked out. The work done was to re-gas. Although the last paragraph of the letter refers to an acceptance form being attached, it is not attached. Both the said letter and the invoice do not state who requested the Plaintiff to undertake the alleged repairs. In my view the so called acceptance form, if attached, would have thrown some light on what was and who accepted. Additionally, this court would have been in a position to form an opinion as to whether the signature on the acceptance form is the same as that on the invoice.

It is also important to observe that the author or authors of these two documents did not testify before this court. As stated earlier, the only witness for the Claimant was Mr. Fry who actually is not the author of same. Given that Mr. Fry neither authored the letter nor prepared the invoice. He was not even involved in the day-to-day management of the project. For that reason, he is not in a position to link the said letter to the invoice in issue. Indeed, whatever he says is hearsay.

Furthermore, there is evidence indicating that the work reflected in the invoice was in essence a repeat job. A Mr. Gonani of M&E Associates confirmed that the Claimant was a subcontractor who installed the air conditioning equipment at the Zomba project. Further, he told this court that there was a defects liability period during which the Plaintiff was required to attend to defects. During the said defects liability period the Plaintiff was on several occasions required to attend to complaints from the hospital. These were complaints that the equipment installed was not functioning. It seems therefore that the Plaintiff’s visits to Zomba General Hospital were in response to its obligations under the subcontract. Such a response cannot be said to be a request by the Defendant that the Plaintiff should carryout repairs at the cost of the Defendant. The position would have been different if the problem was not a defect falling under the defects clause in the contract.

Further, the Claimant’s assertion that there was tampering is not substantiated. It is alleged that someone opened the valves and gas leaked. But it is equally possible that the valves were not in a closed position in the first place. If indeed somebody opened the valves why claim from the Defendant and not the Hospital to whom the Plaintiff had handed over the installation.

In short, the Claimant has not proved that the Defendant ordered the goods or requested the services in issue. It is so found.

 

Whether the Plaintiff delivered goods to the Defendant

 

As I understand it, in a claim for goods sold and delivered proof of delivery is essential. Further, delivery has been defined as the ‘voluntary transfer of possession from one person to another’1 and failure to prove delivery is fatal.2

Now turning to the instant case, it is observed that there is no cogent evidence as regards the author of the delivery notes. In point of fact, the only witness for the Plaintiff conceded that he did not prepare the delivery notes and was not present when the delivery notes were signed. He could not tell whether the persons who signed were employees of the Defendant or the Plaintiff’s own employees. In saying this I am aware that the Claimant’s said witness, inter alia, contended as follows in his amended statement:

 

6.23 The signature of the person who signed for delivery notes mentioned in paragraph 6.20 is a servant or agent of the defendant. I do not know his name.’

6.24 It is not the practice of our company to be taking down names of people signing delivery notes on behalf of our clients and probing them on whether they have authority to sign for the company.’

I wish to make the following remarks respecting these assertions. Firstly, the content of paragraph 6.23 cannot be correct in view of the fact that Mr. Fry’ was not present when the delivery notes were signed and that he did not know who signed them. Secondly, it is well to remember that it is conceded by him that he does not know whether the person who signed the delivery note is an employee of the Plaintiff or not. Thirdly, the contents of paragraph 6.24 are inopportune. They show how reckless the Plaintiff is in dealing with its property and how the Plaintiff creates opportunities for fraud. Any of its employees can arrange with an outsider to collect goods in the name of a person who has not ordered the goods and the Plaintiff will not enquire.

There was an attempt by Mr. Fry to demonstrate in paragraph 6.25 that the signatures on the invoices in issue are similar to those on some delivery notes which were signed on prior transactions and not disputed. I have noted that the signatures on one of the delivery notes of 23rd January 2006 can hardly be read. The one dated 24th October 2005 bears the name AGRITEC but a line has been drawn across and the name PE written above it. The cancellation has not been explained. Further, the delivery note of 17th October 2005 has the Plaintiff’s name rubber stamped on it. The original name is painted over. Furthermore, the signature on 25th March 2006 is not clear. Again no explanation has been given for the use of such stationery. Of critical importance is the fact that Mr. Fry did not tell this court how he came to recognize the signatures realizing that he is not a handwriting expert. Besides, and more importantly, there is no evidence that these delivery notes were not disputed. If they were not disputed then surely they would have been settled. Yet there is no evidence that they were paid. The obligation to adduce evidence to prove that the invoices were not disputed rests on the Claimant. It is not for the Defendant to disprove it. In my judgment the Claimant has not only failed to prove delivery of the goods in question but also that the goods were not paid for.

Whether Euro 2,595 .39 is due on a penultimate certificate

 

Before delving into this question let me say this for the record. It is trite law, contrary to popular belief, that commercial contracts do not generally have to be in writing. As a matter of sensible commercial practice, contracts often are in writing, but this is not because of a requirement of law. I now turn to the instant case.

There is no single document labeled a contract. Accordingly, one has to carefully analyze the correspondence exchanged in order to determine the point at which the contract was formed and what its terms were. In observing thus I am aware that there are certain terms that appear not to be in dispute. However, some of the terms are in dispute such as pricing and method of payment. I shall now proceed to make a finding on the question raised above. The said issue can only be determined if this court goes on an exercise of determining what were terms of the contract between the two parties. I will now proceed on that exercise.

By its letter dated 4th November 2003 the Claimant submitted a quotation for the supply and installation of fans and air conditioners at Zomba General Hospital. The pricing was in European Currency. The Plaintiff proposed that the terms of payment be generally in line with the main contract. The Claimant added that it would

accept a handling period of one week between…submission and certification, thus would expect payment in 35 days from date of claim/valuation. A down payment of 20% of the contract value will be appreciated.’

There is the evidence of Mr. Katola to the effect that there were negotiations after this letter. This is borne out by the letter dated 18th November2003 from the Claimant to the Defendant. The said letter was converting the prices from Euro to Kwacha. Indeed, the Bill of Quantities shows that the prices were in Malawi Kwacha. It is further in evidence that the Claimant failed to raise a performance bond to cover the 20% it said it would. Thus, to assist the Plaintiff with funds a valuation certificate was issued in May 2004 as if the Plaintiff had done some work when it had not.

It is well to point out that the validity period of the Claimant’s letter of 4th November expired on 31st December 2003. There is no evidence that all the terms of letters of 4th November 2003 and 18th November 2003 from the Claimant to the Defendant were incorporated into the final contract. In its letter dated 7th January 2004 the Defendant accepted the quotation for the supply and installation of the air conditioners and fans. However, there is no mention of the terms on which the quotation was accepted. Be that as it may, what appears to have survived out of this offer letter is that payment was to be in line with the main contract. I so find and conclude.

As it were, this court has further found that the main contract provides for amongst other things defects liability period, practical completion certificate, final certificate, retention fee, mode of calculating payments and when the retention fee was to be released. In point of fact, the Plaintiff agrees that the following facts are not in contention:-

 

1. That there was a defects liability period of twelve months

  1. That there was a retention fee

  2. That a practical completion certificate was to be issued

  3. That a final certificate was to be issued.

However, the Claimant takes issue with the mode of calculating payments. It also differs with the Defendant on the question of when the payment on the penultimate certificate, and retention fee, were to be made.

What then is the true position regarding the issues in dispute? Both parties have exhibited the contract document as part of their evidence. The relevant part of the said contract document reads:

Sub-clause 32(11) Foreign Exchange Conversions, insert sub-Clause

Sixty five percent of the amounts payable will be converted to Euro (EUR) at the fixed tender rate exchange rate of 58.37 MK/EUR (converted from the agreed 29.8438 MK to one DM); thirty five percent of the amounts payable will be converted to Euro at the exchange selling rate on the date of valuations.’

The Defendants is of the opinion that if one uses the 65/35% formula the amount due on the penultimate certificate would be K335, 408.65. I agree with the formula being advocated by the Defendant. The Claimant has contended that because the first four interim certificates were fully pegged to the Euro and paid this means the contract was fully pegged to the Euro. I find this argument attractive but it is not supported by terms of the contract as analyzed. As I see it, apparently the Defendant honored those interim certificates by mistake. The error arose from the fact that the Plaintiff, when preparing the interim certificates, used a wrong formula.

Further, it is to be observed that although the Plaintiff prepared the four interim certificates, it was the responsibility of the Supervisor/Architect to prepare interim certificates. This is well articulated in Clause 31 (1) on page 25 of the contract document. For the reasons given above, the Claimant cannot rely on documents it prepared without authority as a basis of that claim. For the avoidance of any doubt, this court finds that there is no amount due on the so called last but one certificate in the said sum of Euro 2,595.39 or any other sum or at all.

 

Whether any retention fee is due and as claimed.

 

Retention Fee

 

As already seen, the contract is clear as regards when retention fee is due and payable. Clause 31(6) of the main contract clearly states that payment of the final retention fee shall be made when a final certificate has been issued. At that point it becomes a debt recoverable by action. In the case of Rawley vs. Rawley3 the word ‘debt’ is defined as a liquidated money demand recoverable by action. An action for debt can only be initiated when the debt is due for that is the time that a cause of action accrues. As pointed out earlier, Clause 31(6) of the main contract specifies when the retention fee becomes a debt recoverable by action. In other words it has specified when the cause of action for the recovery of the debt shall accrue. And that is when the final certificate is issued.

The evidence before me clearly shows that the work was not completed. There is no doubt in this court’s mind that there is cogent evidence to demonstrate that an extractor fan had not been connected. Actually, it never worked. Further, there was uncontroverted evidence that there were defects leading to leakage of gas. In certain places the duct was not properly supported. It is trite that the function of the air conditioners was that the rooms could be cooled. The purpose of extractor fans was to extract air from the areas they were installed. Both purposes were not achieved. There was therefore only partial performance of the contract. Hence, the retention fee did not crystallize into a debt as is being contended by the Claimant.

 

As I understand it, reliance on Clause 31(5) to determine when final retention fee is payable would be wrong. This clause deals with interim payments.

Further, it has been found that retention fee is to be calculated on the 65/35% formula. I agree with the Defendant that the amount payable is K428, 957.25. It is arrived at by adding K110,542.50 representing 35% and 318,414.75 representing Euro 1,593.89. However, this does not dispose of the issue of retention fee. It is well to remember that in terms of the contract retention fee is payable after issuance of the final certificate and not practical completion certificate as the Plaintiff argued. The misunderstanding as to when the fee becomes payable could have arisen partly from the fact that the Defendant’s earlier pleadings referred to practical completion certificate. However, the defence was amended to state that the retention fee is payable when the final certificate is issued. There is strong evidence that the Supervisor/Architect has not issued the said final certificate.

Further, the court is of the view that the Plaintiff’s contention apparently arose from its understanding of Clause 31 sub-clauses 1-4 of the contract document. In my judgment clause 31 sub-clauses 1-4 does not apply to the retention money in question. Why do I say so? It is observed that there are two types of retention money provided for in the said contract document. The first is a retention of money due on interim certificates stipulated in Clauses 31 (1) 31(2), 31 (3) and 31 (4). As I see it, payment of such money is in accordance with Clause 31(4) (c) and it seems that the Claimant relies on this clause. The second type of retention money is a percentage of the overall contract sum. Payment of retention money is in accordance with Clause 31 sub-clause 6 (b) the relevant parts of which reads as follows:

So soon as is practicable but before the expiration of the period the length of which is stated in the appendix to these Conditions from the end of the Defects Liability Period also stated in the said appendix or from completion of making good defects under clause 15 of these Conditions or from receipt by the Architect/Supervising Officer of the documents referred to in paragraph (b) of sub-clause (5) of this Condition, whichever is the latest, the Architect/Supervising Officer shall issue the Final Certificate. The Final Certificate shall state:

  1. the sum of the amount paid to the Contractor under Interim Certificate and the amount named in the said appendix as Limit of Retention Fund, and

  2. the Contract Sum adjusted as necessary in accordance with the terms of these Conditions, and the difference (if any) between the two sums shall be expressed in the said certificate as a balance due to the Contractor from the Employer or to the Employer from the Contractor as the case may be, and subject to any deductions authorized by these Conditions, the said balance shall, as from the last day of the period for the honouring of certificates as named in the appendix to these Conditions after the issue of the said certificate, be a debt payable as the case may be by the Employer to the Contractor or by the Contractor to the Employer.’ (emphasis supplied)

It is my conclusion that Clause 31 sub-clause 6 (b) is the pertinent clause. Simply put, the retention fee in dispute is not the fee retained on the interim certificates but on the whole contract. Payment of that retention fee can only be made when a final certificate is issued. Thus, at that point the retention fee becomes a debt due for payment. The said debt is payable on demand and an action will lie if it is not paid on demand. Now, it is settled law that an action can only lie if there is a cause of action4 at the time the demand is made. As an illustration, it is trite that in a contract of guarantee if demand on the borrower is a precondition for demanding payment from the guarantor the liability of the guarantor does not arise until the demand is made.5

I now turn to the present case. It is a condition precedent that retention fee be paid after the final certificate has been issued. The certificate has not been issued. So no cause of action arose. The Claimant’s demand is premature.

Would the position have been different if the payment was not conditional on the issuance of a final certificate? It is this court’s view that the answer to this question is in the negative. Indeed, payment would only be due on completion of the work under the contract. There is no doubt in this court’s mind that the Plaintiff did not complete the work it was contracted to do. The extractor fan was not connected. The air conditioning equipment was not working properly. Accordingly, the payment on the said penultimate certificate cannot be said to be due and owing. In saying this I am alive to the fact that the discovery of the failure to complete the job was after the proceedings had been commenced. The foregoing notwithstanding, it is still my finding that a cause of action had not accrued at the commencement of these proceedings as the final certificate had not been issued. Further, the Claimant had not completed the job.

 

Is 50% of Retention fee payable?

 

The position at law is that no party can place reliance on matters that are not pleaded. Further, a court cannot enter judgment on matters that are not pleaded6. It is correct that the main contract provides for 50% of retention fee. However, the Plaintiff did not claim it. In its pleadings the payment or failure of payment of 50% retention fee is not an issue. Accordingly, the court will advisedly ignore it.

 

Was the contract price in Euro?

 

There are two divergent views on this question. The Claimant’s argument is that the contract price was in Euro while the Defendant is of the contrary view. The Plaintiff’s contention that the contract was priced in Euro is not borne out by the evidence. Indeed, it is erroneous as the Plaintiff thinks that an offer is a contract. It is well to point out that the letter of 4th November 2003 from the Claimant to the Defendant is a mere offer. It does not, unless accepted, constitute a contract. The Plaintiff ignores the fact that the letter of 4th November 2003 expressly provides for its validity period i.e. 31st December 2003. Indeed, the Claimant has not demonstrated that the terms of the said letter of 4th November 2003 were accepted by 31st December 2003. Additionally, the Claimant’s letter of 18th November 2003 unmistakably indicates that the documents attached are tender options in Malawi Kwacha but tied to the Euro. Further, the Defendant’s letter to the Claimant dated 7th January 2004 accepts quotation for York Air Conditioners and Alstrom fans. The price is quoted in Malawi Kwacha.

As a further demonstration that the price was agreed to be in Malawi Kwacha the following observations are significant. On 20th July 2007 the Plaintiff filed summons for summary judgment, which was heard on 2nd August 2007. The application was supported by an affidavit to which is exhibited JVG4. It is not in dispute that the Claimant prepared JVG4. The contract value is shown as K6,316,714.26. This figure is close to the figure that appears on the quotation. The difference is K419,185.74. Suffice to say that the contract sum is expressed in Kwacha. The Claimant is therefore not justified in alleging that the contract was in Euro. The said JVG4, for reasons not explained, has not been included as part of the Plaintiff’s witness statement. It is however part of the court record and ought not to be ignored.

Finally, I have noted that Counsel for the Plaintiff asserts that Mr. Fry was not cross-examined on pricing and mode of payment. I disagree with him. I have read the record. He was cross-examined on the terms of the contract. It is clear that Mr. Fry said he did not negotiate the contract but Mr. Hougard. I find that Mr. Fry was not competent to speak on the terms of the contract apart from referring to the documents that the court should be able to construe.

Did the Plaintiff satisfactorily execute its part of the contract

 

The Claimant believes that it satisfactorily performed part of the contract. It relies on Handover/Acceptance Certificates that were signed by Mr. Gonani.

There is no denying of the fact that the Claimant was subcontracted by the Defendant. The Claimant was therefore employed to carry the electrical works by the Defendant and nobody else. The observation to make is that although the Defendant was the Plaintiff’s employer the latter chose to handover the installation to M&E an agent of Kanjere/Gitec. It is in evidence that M &E signed on behalf of Kanjere/Gitec and the Plaintiff signed on behalf of the defendant. Yet, M&E were engaged by the Malawi Government. In my view no satisfactory reason is given for not handing over the installation to the Defendant their employer. It was the Plaintiff’s obligation to satisfy its employer.

The argument that since Messrs Kanjere/Gitec were satisfied with the work, the Defendant should not complain is idle talk. Indeed, it is well to point out that Mr. Gonani testified that he did not check the plaintiff’s work before signing the Handover/Acceptance Certificate. Actually, he said that it was his belief that everything was in order but he later realized that this belief was not well founded. Most significantly he was also aware of the numerous complaints that the hospital made during the defects liability period. There is actually evidence that he personally spoke with Mr. Vernon or Mr Van Gelder on the matter. Furthermore, he said that on 28th February 2007 he wrote to the Plaintiff about the defects and that the Claimant had at some stage informed him that it could not go on site because it was not being paid.

What then do these defects signify? I can only answer this question if we get the meaning of a defect. Black’s Law Dictionary is instructive in this regard. It defines ‘defect’ as

‘…deficiency; imperfection; insufficiency;…the want or absence of something necessary for completeness or perfection, a lack or absence of something essential to completeness; a deficiency in something essential to the proper use for the purpose for which a thing is to be used.’

I should now turn to the case at hand. The evidence of Fernando Franco backed by photographs displays the manner in which the ducting was installed. It was improperly secured by tape and in some cases secured to a conduit and not connected to the extractor fan. He in addition said there were leaks. Indeed, Bestobell had to re-gas the units. The Claimant attributed that to tampering but no evidence of tampering was proffered.

The long and short of it is that the installation was incomplete. There was a deficiency in something essential to the proper use of the air conditioning installation and extractor fan. There were gas leaks. The extractor fan never worked. At the time that the Plaintiff handed over the installation the air conditioning appeared to work but it stopped. It stopped because gas leaked. The Claimant had to re-gas it. Even after re- gassing the equipment worked for a short time and stopped again. The Hospital’s Administration complained of malfunction of the equipment. The Plaintiff’s servants made several visits to the hospital but the equipment continued to malfunction.

As I see it, from what I have discussed above, the conclusion is that the Plaintiff failed to identify and arrest the problem with the installations it made at the hospital. In short, the installation was incomplete. There was a deficiency in something essential to the proper use of the air conditioning installation and extractor fan. Thus, the Plaintiff was actually not justified in demanding or expecting payment in respect of work done during defects period. As it were, the Claimant wanted to be paid for unsatisfactory and incomplete work.

 

Was the plaintiff negligent in the performance of the contract?

 

The court has already observed that the evidence of Fernando Franco backed by photographs show the manner in which the ducting was installed. There is no doubt in this court’s mind that it was improperly secured by tape. Further, it was in some cases secured to a conduit and not connected to the extractor fan. He in addition said there were leaks. Indeed, Bestobell had to re-gas the units. Furthermore, the evidence of Fernando Franco, and part of which Mr. Fry accepted, undoubtedly demonstrates the Plaintiff’s failure to supervise its employees during the installation of the equipment. It was clear that had the Claimant’s senior employees gone up the ceiling they would have quickly noticed the flaw and incompleteness of the work. This they failed to do. The failure to properly supervise the work is, in my judgment, indicative of negligently performing the subcontract.

Whether damages are due under the counterclaim

 

As observed elsewhere in this judgment the Defendant is counterclaiming from the Plaintiff. The Defendant is of the opinion that it should be paid damages arising out of the breach of or negligent performance of the subcontract, the subject matter of this action.

The Claimant thinks that particulars of negligence have not been given. I do not agree. In my view, paragraph 17 of the re-amended defence obviously refers to particulars in paragraphs 12 and 13 of that defence. For the avoidance of any doubt under the said paragraph 17 the Defendant pleaded thus:

the defendant avers that the equipment malfunctioned due to negligence of the plaintiff’s servants or agents particulars of which are specified in paragraphs 12 & 13 hereof”

And, the said paragraphs 12 and 13 of the Re-Amended Defence read as follows:-

12. However, the Consultant failed to observe that the installation was not complete in that the extractor fan motor was not enclosed in the duct.

13. Further the Consultant failed to observe that the duct in some places was secured by black tape to an electrical conduit pipe whilst in other places it was not clamped at all and the inlet to the Air Conditioner was not connected. The consequence of the latter was that air was discharged in the space above the ceiling.”

Further, as I see it, more particulars came up in the course of trial. The Plaintiff did not object to such clarifications. Actually, the Claimant cross-examined the Defendant on such further particulars. The Plaintiff cannot now turn around to say that there were no particulars of negligence in the pleadings.

The court has found and concluded that the Plaintiff failed to fulfill its obligation under the subcontract. Further, this court has concluded that the Claimant negligently performed the subcontract. I see no reason why this court should not find in favour of the Defendant and enter judgment for the sum of K375, 000 as quoted by Bestobell Malawi Limited. In coming to this conclusion I am alive to the fact that the Plaintiff refused to go back to site to attend to its poor workmanship. Surely someone had to make the equipment work. The cost for doing that work has been quoted at the said sum of K375, 000. It is for that reason that this court finds that judgment in the sum of K375, 000 should be entered in favour of the Defendant. It is ordered accordingly.

 

CONCLUSION AND DISPOSITION

 

The Plaintiff has not made out its case. In the circumstances, the action it commenced against the Defendant is dismissed. However, the court finds that the counterclaim by the Defendant is successful. Therefore, it is ordered as follows:-

The Plaintiff is adjudged to pay the Defendant the sum of K375, 000 being the amount required to make the equipment work.

The position at law is that costs of and incidental to all proceedings in the High Court shall be in the discretion of the High Court7. Additionally, it is trite law that costs normally follow the event. An instructive authority is Order 62 of the Rules of Supreme Court and also the case of Chihana v Speaker of the National Assembly and Malawi Electoral Commission8.

I have upheld the Defendant’s Defence and Counterclaim. Accordingly, the Plaintiff should be condemned in costs. It is so adjudged that the Plaintiff shall pay the costs of, and occasioned by, this action.

And the Plaintiff is hereby condemned to pay costs of, and occasioned by, these proceedings.

 

Pronounced in Open Court this 8th day of February, 2008 at the Commercial Division of the High Court of Malawi, Blantyre Registry.

 

 

 

F.E. Kapanda

JUDGE

 

1 Section 2 of the Sale of Goods Act

2 David Whitehead & Sons (Malawi) Limited v LFT Chipembere Civil Cause Number 19 of 1988 (unreported).

 

3 1QBD 460

4 A cause of action is ‘strictly speaking every fact which is material to be proved to entitle the plaintiff to succeed, every fact which the defendant would have a right to traverse …which accrues upon the happening of the latest of such facts’- Halsbury’s Laws of England 3rd Edition Vol. 1 at page 6.

5 Manda and Others vs. City of Blantyre [1992] 15 MLR 228; SEDOM vs Chinthuli 15 MLR 446.

6 Yanu-Yanu Company Limited vs. Mbewe 10 MLR 417 (SCA); Likaku vs. Mponda 11 MLR 411 (HC)

7 See S.30 Courts Act.

8 Misc Civ Cas. No. 2933 of 2005 (H.C) (Unrep.).

 

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