bq contractors limited vs dangote cement limited 2022 tzhccomd 173 31 march 2022

IN THE HIGH COURT OF TANZANIA

COMMERCIAL DIVISION

AT PAR ES SALAAM COMMERCIAL CASE NO. 59 OF 2020 BQ CONTRACTORS LIMITED..............................PLAINTIFF

VERSUS DANGOTE CEMENT LIMITED.........................DEFENDANT Date of Last Order: 18/03/2022 Date of Judgment: 31/03/2022

JUDGMENT MKEHA, J. This is a suit for recovery of USD 2,236,582.31 being specific damages for delayed payments and the total sum due under a contract dated 19th October 2017 between the Plaintiff and the Defendant. The contract was for design engineering, procurement, installation and commissioning of gas pipeline infrastructure from the TPDC tapping point to Dangote Cement Limited, Tanzania at Hiyari. The Plaintiff further claims general damages i associated with delayed payments of the contract price and those related to breach of contract. When the plaint was filed, the following were the reliefs claimed by the Plaintiff against the Defendant: (i) An order for payment of USD 936, 582.31 being balance of the contract price due and payable by the Defendant to the Plaintiff; (ii) An order for payment of USD 1,300,000 being amount of specific damages due to costs and expenses incurred by the Plaintiff due to the prolonged delay of works caused by the Defendant's failure to timely pay the contract price when due; and finance charges, interest, fees, costs and expenses incurred by the Plaintiff in obtaining bank loan and alternative third party financing utilized to pay eligible suppliers in execution and completion of works envisaged under the contract; (iii) An order for payment of general, punitive and related damages at such rate as the Honourable Court finds reasonable due

to the Defendant's breach of contract; 2 (iv) An order for payment of compound interest due on the outstanding amount and damage amount claimed under items (i) and (ii) above, computed at the rate of 20% per annum charged from the date of accrual of each claim to the date of filing this suit; (v) An order for payment of compound interest computed at the rate of 20% per annum on the total amounts claimed in paragraphs (i), (ii) and (iii) above, calculated from the date of filing this suit to the date of judgment and thereafter at the court's rate of 12% on the decretal sum computed from the date of judgment to the date when full payment is made; (vi) An order for costs and (vii) Any other relief as the Honourable Court deems just, necessary and fit to grant. Before commencement of hearing of the case, the following were framed as issues for determination: 3 (a) Whether payments of the contract price were made in accordance with the terms and conditions of the contract between the plaintiff and the defendant; (b) To what reliefs are the parties entitled. Mr. John Mao Bura testified as the first witness for the Plaintiff's case. At all material times relevant to this case, this witness was the Chairman, Director and Chief Executive Officer of the Plaintiff. According to his own witness statement which this court admitted and adopted as evidence in chief of the witness, it was on

19/10/2017 when a formal contract for the Works subject of this case was signed between the parties (Exhibit P3). The said witness statement indicates that, the 1st invoice for payment of the advance payments was issued by the Plaintiff on 12/08/2017, more than two months before the signing of the contract for the works. According to the witness, signing of the contract was delayed for over three months and during all this period, the Plaintiff had commenced working using its own finances in the spirit of fast tracking the Project. According to PWl's witness statement, after undue delay of about eight months, on the 22nd January 2018, the Defendant started paying. It is worth noting that, invoices for each of the completed milestones were 4 payable 30 days after submission of the invoice. The invoice for second milestone was issued by the plaintiff on 10th February, 2018. It was for the amount of USD 939,421.60. The plaintiff stated in his witness statement that, despite receipt of the invoices for the Advance payment and Milestone 2, the defendant did not pay the amount invoiced except for USD 200,000 whose payment was made on 22nd January 2018, which was after four months of delay. The statement indicates further that, on 30th April 2018 the defendant paid USD 1,092,898.88 thereby making a total payment of USD 1, 292,298.88. According to the plaintiff's witness statement,

this second payment in respect of the advance payment was made after seven and a half months of delay. In view of the plaintiff, up to that time, the defendant did not pay the sum invoiced in relation to Milestone 2 although then due and payable. The statement indicates further that, because of delays on part of the defendant in effecting payments, the plaintiff sought and obtained extension of time for execution of works. Time for completion of works was extended for eight weeks commencing from 30th August 2018. According to PWI's witness statement, by September 2018, the entire works on-site and off-site were reasonably completed and the plaintiff issued invoice for 5 payment of Milestone 3. By its letter dated 12th October 2018, TPDC approved payments for the works in relation to completed Milestones 2 and 3. It was PWl's statement that, on 14/08/2018 the defendant paid USD 400,267.21 and on 19/11/2018 USD 939,421.60 was paid followed by payment of USD 191,997.80 thereby making a total payment of USD 1,531,686.61 received by the plaintiff in respect of Milestones 2 and 3 leaving an unpaid balance of USD 159, 272.

27. By 23rd December 2018, both TPDC and the defendant took over the Works and commenced beneficial utilization of the Works envisaged in the contract. That marked practical completion of the Works in view of the plaintiff. Invoice relating to Milestone 4 was issued on 27th September 2019. According to the plaintiff, in terms of sub-clause 5.10 of the contract, payment in respect of the said invoice became due and payable on 27/10/2019. The handing over of the entire Project was on 23/09/2019. The witness statement further indicates that, by 18th December 2019, the Defect Liability Period ended and on 17th April 2020, the plaintiff issued an invoice for final payment of USD 187,884.32 being the last instalment of the Contract Price. Failure of the defendant to pay compelled the plaintiff to issue written demands for payment. In paragraph 54 of PWl's witness 6 it is stated that, by intervention of the TPDC, the parties were able to meet on 22/12/2020 in which meeting an agreement for payment of the outstanding amount was reached. PW1 confirmed through his witness statement that, pursuant to the terms of the parties' agreement, a sum of USD 386, 582.31 comprising of the outstanding amount claimed in the plaint was paid on 19/02/2021. According to PW1, following receipt of the said payment, the plaintiff remained claiming the Damage Amount, interest due on the delayed payment of

the outstanding amount, payment of interest and associated costs. During cross examination, PW1 admitted that, all the claimed amount in the plaint had been paid except payments in respect of delayed payments. There was no evidence regarding additional manpower or third party claims resulting from delayed payments. PW1 admitted during cross examination that there was no evidence of specific damages suffered. He also agreed that Advance Payment Guarantee which was a condition precedent for payment of advance payments was issued on 22/12/2017 and that, contract for the Works was executed on 19/10/2017 and further that, up to April, 2018 the first invoice had been paid for. PW1 admitted that, Tax Invoice relating to the first invoice was issued to the defendant in 7 March 2018. PW1 further agreed during cross examination that, delays to make payments were occasioned by delays in submitting bank guarantee and tax invoices on part of the plaintiff on one hand and processing of payments from the defendant's Head Quarters in Nigeria on the other hand. Upon being further cross-examined, PW1 admitted that, litigation commenced after 90% of the debt had been paid. He further admitted that, whereas the 2nd payment would be due in July 2018, the final payment was to be made in November 2020. Mr. Lorenco Simon appeared in court as PW2. Like PW1, this witness stated in his statement that, on

12th August 2017, the plaintiff issued an invoice for payment of advance payment but the defendant did not pay. The witness stated further that, the defendant's delays and failure to timely make the advance payments resulted into the plaintiff's failure to pay third party suppliers of the key equipment and materials. This, according to the witness, caused corresponding delays to completion of the Works. In all other aspects, the statement of PW2 was similar with that of PW1. 8 Responding to questions put to him by way of cross examination; PW2 told the court that, whereas having bank guarantee was a condition precedent for being paid advance payments, an invoice in respect of such payments was issued by the plaintiff before securing the bank guarantee. The witness admitted that, there was no breakdown of losses incurred by the plaintiff as a result of delayed payments. Upon being questioned by the court, the witness told the court that, he did not indicate in his statement, the workforce and materials on site up to the time the delay commenced. Mr. Nassoro Abubakar appeared in court as the third witness (PW3) on part of the plaintiff's case. This happened to be an accountant and employee of the plaintiff at a time relevant to this case. In his statement, the witness made reference to various invoices raised by the plaintiff and the extent of delay in effecting payments in

respect of each invoice. According to the witness, on 27/12/2017, the plaintiff issued profoma invoice No. BQ -59-2017 for payment of USD 1,315,190.24, being 35% advance payment for the mobilization and material importation as provided under paragraph 5.6.1 of the contract, but the defendant refused to timely pay the plaintiff as per the terms of contract. It was the witness' statement that, on 22/01/2018, the defendant paid the amount of USD 9 200,000.00 (four days after due date of the invoice), and on 30/04/2018 the defendant paid USD 1,092,898.88 after a delayed period of 3.5 months thereby causing losses and accrued interest to the tune of USD 35,063.84 on the amount paid. The witness further stated that, pursuant to Clause 5.6.2 of the contract, on 13/10/2018, the plaintiff issued invoice No. BQ-44-2018 amounting to USD 939,421.60 being 25% for second payment after satisfactory completion of factory acceptance test. The defendant paid on 19/11/2018 (six days after due date of the invoice). The witness went on to state that, the other invoice was issued on 10/08/2018. It was for payment of USD 400,267.21 being 20% of interim progress payment during construction in terms of Clause 5.6.3 of the contract. It was invoice No. BQ -35-2018. He also made reference to invoice No. BQ-45-2018 issued on 13/10/2018 for payment of USD 191,997.80 being third payment for the certification

progress claim for the works as per clause 5.6.3 of the contract. According to the witness, the defendant only paid USD 71,158.93 on 19/11/2018 leaving the remaining amount unpaid contrary to clause 5.10 of the contract. The witness stated that, it was until 12/03/2019 when the defendant paid USD 98,305.08 after io delayed period of four months thereby causing accrued interest of USD 3,604.52 on the amount paid. Also that, on 11/09/2019, the defendant paid USD 10,606.23 after a delayed period of nine months thereby causing losses of USD 875.01 on the paid amount. And further that, on 19/02/2021 the defendant paid USD 25,772.78 after a delayed period of 22 months causing accrual of interest of USD 5,197.51 on the amount paid. The witness went on stating that, on 27/09/2019, the plaintiff issued invoice No BQ-40-2018 for USD 159,272.27 being fourth interim progress payment for the works pursuant to Clause 5.6.3 of the contract. According to the witness, the defendant paid on 19/02/2021, after delaying these payments for sixteen (16) months causing losses and accrued interest of USD 16,059. 95 on the paid amount. The witness stated also that, On 18/12/2018, the plaintiff, after completion of the works, issued the Gas Pipeline Completion Certificate which was signed by both parties. Consequently, on 27/09/2019, the plaintiff issued invoice No. BQ-41-2018 for payment of USD

563,652.96 being 15% payment after practical completion pursuant to Clause 5.6.4 of the contract. According to the witness, the plaintiff paid on 19/02/2021 thereby ii delaying payments for 16 months causing interest of USD 82,669.10 on the paid amount. According to the witness, on 23/09/2019, the plaintiff handed over the works performed to the TPDC and the defendant. Then on 17/04/2020, the plaintiff issued invoice No BQ-12-2020 for payment of USD 187,884.32 being final payment after defect liability period. The evidence of PW3 was to the effect that, these payments were delayed for 10 months until 19/02/2021, thereby causing losses and interest of USD 17,222.73 on the paid amount. During cross examination, PW3 told the court that the first invoice was due for payment on 27/12/2017 after submission of Advance Payment Guarantee. The witness admitted that, when the said invoice was issued, condition for issuance of the same had not been met. When the fourth witness for the plaintiff attempted to tender his witness statement as his evidence in-chief, an objection was raised. The objection was to the effect that, the said statement had been signed outside Tanzania before an advocate not allowed to practise in Tanzania. I sustained the said objection for reasons contained in my ruling dated: 12 17/02/2022. Following the said decision, Mr. Mwakingwe learned advocate prayed that the

witness be discharged. I granted the said prayer. Lastly, pursuant to Rule 56 (2) and (3) of the Commercial Court Rules, witness statement of Cyprian Kiiza was admitted in court. The witness was on the date of hearing bereaved. In terms of the Rules, the said statement is to be accorded lesser weight. Mr. Aravind Naik (DW1) appeared as the sole witness on part of the defence case. His witness statement was admitted and adopted in court as his evidence in- chief without objection. According to DWl's witness statement, in terms of Clause 5.1 of the contract, the contract price was USD 3,757,686.40 payable by the Defendant to the Plaintiff in instalments as per each milestone achieved. Conditions for payment of each milestone were made clear under Clause 5.6 of the contract as indicated hereunder. The 1st Milestone of 35% of the contract value (USD 1,315,190.24) was to be paid after submission of a bank guarantee of equivalent value; The 2nd Milestone of 25% of the contract value (USD 939,421.60) was to be paid after satisfactory completion of Factory Acceptance Test signed by the 13 Client or its approved representative, recognized third party and delivery to the freight forwarder/release for shipment; The 3rd Milestone of 20% of the contract value (USD 751,537.60) was to be paid as interim progress payment during construction; The 4th Milestone of 15% of the contract value (USD

563,652.96) was to be paid after Practical Completion, commissioning and handover; The 5th and last Milestone of 5% of the contract value (USD 187,884.32) was to be paid as final payment after Defect Liability Period from the date of commissioning. The witness statement indicates that, immediately a day after the kickoff meeting the Plaintiff issued a proforma invoice claiming payment of USD 1,315,190.24 being 35% of the contract price for site mobilization. The said invoice was issued on 12/08/2017. According to DW1, the invoice was not paid by the Defendant because it was issued prematurely. According to DW1, by then, contract for the Works was yet to be signed and being registered at CRB. Again, the Plaintiff had not submitted Advance Payment Bank Guarantee equivalent with the claimed sum. According to DW1, it was until 19/10/2017 when the contract for the Works was signed. DW1 stated that, on 22/12/2017, advance payment bank guarantee for payment of the first milestone was presented. In response thereto, the 14 Defendant released USD 200,000 and USD 1,092,898.88 on 22/01/2018 and 30/04/2018 respectively. He added that, by 30/04/2018, the first Milestone had been paid in full. DW1 blamed the Plaintiff for delay in presenting the advance bank guarantee for two months after execution of the contract on 19/10/2017. The statement indicates further that, on 10/02/2018, the

Plaintiff presented an invoice for payment of the second milestone. However, the defendant could not pay the presented invoice because the Plaintiff failed to fulfill the conditions antecedent stipulated under the contract. According to DW1, whereas the Plaintiff fulfilled the condition regarding satisfactory completion of Factory Acceptance Test, the delivery to the freight forwarder was not fulfilled. The statement indicates also that, at the instance of the Plaintiff, the contract was amended for purposes of extending time within which to complete the Works. Whereas the first amendment was made on 30/04/2018, the second one was made on 30/08/2018. As a result of the said amendments the Works were to be completed eight weeks as from 30/08/2018. 15 DW1 stated that, though the Plaintiff was not eligible for payment of the second milestone, the defendant on good will released USD 400,000 as part payment of the partial performance of the 2nd milestone. Also that, the Defendant extended USD 550,000 to the Plaintiff as a loan. This loan, according to the witness statement of DW1, with interest of 11%, was reflected in the second amendment of the contract for the Works. The statement indicates further that, on 13/10/2018, the Plaintiff presented to the Defendant an invoice claiming payment of USD 191,997.80 as payment for the 3rd milestone. In view of the witness, the actual amount

which the Plaintiff was eligible was only USD 74,307.55. DW1 stated that, as of September 2019, the defendant had already made total payments of USD 3,322,546.84 to the Plaintiff. In view of the witness, the Plaintiff's claims for payment of USD 936,582.31 were baseless and unfounded. The witness stated that, as a matter of fact, the Plaintiff was entitled to the payment of USD 386,582.31 in November, 2020 and not before that time. According to the witness, the Defect Liability Period ended on 07/11/2020. The witness admitted that, this last payment was delayed for more than three months. This admission is contained in his 16 statement when he stated that, the last payment was made on 19/02/2021. The witness tendered in court, documents evidencing payments made to the Plaintiff, collectively as Exhibit DI. He also collectively tendered mail correspondences between PW1 and DW1 as exhibit DW2. Responding to questions put to him by Mr. Mwakingwe learned advocate, DW1 told the court that, whereas the Plaintiff submitted Bank Guarantee on 22/12/2017, the defendant received the tax invoice in March, 2018. DW1 insisted that, up to 30/04/2018, the invoice for the first milestone had been paid in full. The witness insisted that, delay in effecting payments was occasioned by the Plaintiff's delays in submitting the bank guarantee, tax invoice and processing of payments from the Head

Office. When DW1 was questioned regarding delay in making the final payment, the witness shifted blames to the Plaintiff for having commenced litigation at the time when the defendant had already paid almost 90% of the debt. Responding to questions put to him by Mr. Axwesso learned advocate during re-examination, DW1 told the court that, payments in respect of the first milestone was made in April 2018 on the basis of a tax invoice issued 17 by the Plaintiff sometimes in March, 2018. DW1 told the court that, the 2nd milestone would be due in July, 2018 and not in May, 2018. The witness insisted that, the defendant failed to make the final payment in November, 2020 because of pendency of this case. Responding to a question put to him by the court, DW1 stated that, the defendant did not attempt to effect the final payments at all because of pendency of this suit. I have read and considered final written submissions by the learned counsel for the parties. Briefly, the learned advocate for the Plaintiff insisted that the Defendant delayed paying in respect of all the Milestones thereby attracting interest on the paid amount. It was also the position of the Plaintiff that, delays in making payments delayed completion of the Works. Also that, the Plaintiff had to retain additional manpower and working tools for more time than the expected time. According to the learned advocate for

the Plaintiff, all these, attracted third party claims and specific damages on part of the Plaintiff. On the other hand, the learned advocate for the Defendant was insistent that, all the payments were timely made to the Plaintiff and in some instances; payments were made before they became due. It was further submitted on behalf of the 18 Defendant that, delays if any, resulted from the Plaintiff's failure to fulfill the conditions precedent for making of payments. The issue for determination is whether the payments of the contract price were made in accordance with the terms and conditions of the contract between the Plaintiff and the Defendant. Through testimonies of the witnesses of the parties this issue is determined. It was the Plaintiff's position through PW1 and PW3 that, there were delays in paying the first invoice for 3.5 months; That, the second invoice was delayed for 22 months; That, the third invoice was delayed for six days; That, the fourth invoice was delayed for 16 months; That, the final invoice was delayed for 10 months. The sole witness for the Defendant's case testified that, the Plaintiff issued the first invoice before the signing of contract and that, even when the contract was signed, the Plaintiff had an obligation of submitting a bank guarantee of equal value with the amount of the invoice which the Plaintiff failed to do in time. Whereas the first

invoice was issued on 12/08/2017, the contract for the Works was signed on 19/10/2017. It was until 22/12/2017 when the requisite bank guarantee was submitted by the 19 Plaintiff. According to PWl's own evidence, in terms of the contract, an invoice would be due for payment 30 days after issuance of a tax invoice. PW1 does not deny the fact that tax invoice for the first milestone was submitted in late March, 2018. The Plaintiff does not deny that, until 30/04/2018 the invoice for the first milestone had been paid in full. As such, it is my holding that the Plaintiff did not justify through evidence, 3.5 months 'delay in paying the first invoice. Whereas the Plaintiff was of the position that the second invoice had been delayed for 22 months, the Defendant's witness testified that, the condition regarding delivery to the freight forwarder had not been fulfilled by the Plaintiff to make the invoice payable. This fact was not disputed by the Plaintiff in any way. Therefore, claims associated with delay in effecting payments cannot succeed in favour of a claimant who failed to fulfill the condition precedent for the payments. That notwithstanding, the defendant released USD 400,000 as part payment of the partial performance of the 2nd milestone and USD 550,000 as a loan to the Plaintiff, which had to be counted as part payment of the next milestones. This was not

successfully challenged by the Plaintiff. 20 Whereas PW3 stated that the third milestone was delayed for six days, DW1 stated that, the Plaintiff had presented an invoice claiming payment of USD 191,997.80 at a time when only USD 74,307.55 was due. The Defendant's defence was not challenged regarding this aspect. The alleged interest on quantum of the delayed amount which was not real cannot be allowed. This is because, if the Plaintiff's failure to cross examine DW1 on this aspect is based on correctness of DWl's statement on what was at that time due, then, it goes without saying that, the Plaintiff wrongly added USD 117,690.25 as the delayed amount. I however take note of the Defendant's admission (through DWl's witness statement) in delaying paying USD 74,307.55 for six days. This may have bearing in assessing damages awardable, if any. During cross examination, PW1 admitted that, final payments were to be made in November 2020. In other words, he admitted that it was improper, issuing invoice for the final payment on 17/04/2020. He also admitted that, by 19th February 2021 the said final payment of USD 386,582.31 had been made by the Defendant. See: Exhibit DW1. As a matter of fact, the said payment was delayed for over three months. PW1 admitted also that, when he appeared in court to testify, the whole 21 contract price had been paid by the Defendant and that, his claims

were for delayed payments. PW1 further admitted that, the Plaintiff had kept no evidence regarding additional manpower. He also admitted that, there was no evidence regarding third party claims and specific damages suffered. When DW1 was questioned as to why the final payments were delayed, he was quick to respond that, it is pendency of this suit which delayed the said payments. Nevertheless, the said payments were made and accepted by the Plaintiff during pendency of this suit. The defendant therefore does not dispute having delayed the last payments of USD 386,582.31 for over three months. Following admission of PW1 that there was no evidence of specific damages suffered or that of third party claims, it follows therefore that the Plaintiff is not entitled to an order for award of specific damages. Again, following the Plaintiff's admission that the whole contract price had been paid as of 19/02/2021, it follows therefore that the Plaintiff is not entitled to an order for payment of the outstanding amount. As per the foregoing analysis of evidence it is not disputed that the Defendant delayed making payments of USD 74,307.55 for six days in 22 respect of the third milestone. It is also not disputed that the Defendant delayed making the final payments of USD 386,582.31 for over three months. These facts are considered and held to be admissions made by the Defendant through

DWl's witness statement. Regarding the final payment, DW1 was insistent that the delay was to be counted from November, 2020 when the debt became due. This was also the view held by PW1 while responding to questions put to him by way of cross examination. From the wording of Order XII rule 4 of the Civil Procedure Code a judgment on admission can be passed at any stage of a civil suit either on application of a party or suo motu. Interpreting a provision which is in pari materia with Order XII rule 4 of our Civil Procedure Code, Indian courts have held that, an admission may be contained in pleadings or otherwise, may be in writing or may even be oral and that, an admission can be inferred from the facts and circumstances of the case. See: Raj Kumar Chawla vs. Lucas Indian Services, AIR 2006 Delhi 266, 129 (2006) DLT 755. I subscribe to this position. Therefore, from the witness statement of DW1 and his own testimony in court, the Defendant's refusal of liability arising from delay in paying the 3rd milestone and final payments 23 to the extent indicated hereinabove, is without good reasons. The delay entitles the Plaintiff to an award of general damages for the extent assessed by the court hereunder. Save as indicated hereinabove, it is the holding of the court that, payments of the contract price were made in accordance with the terms and conditions of the contract between

the Plaintiff and the Defendant. Following the holdings of the court hereinabove, it is decreed in favour of the Plaintiff as follows: (i) The Defendant shall pay the Plaintiff USD 25,000 as general damages. (ii) The Defendant shall pay the Plaintiff an interest of 7% per annum on item (i) above from the date of judgment to the date of payment in full. (iii) The Defendant is condemned to bear costs of the suit. DATED at DAR ES SALAAM this 31st day of March 2022. 24

JUDGE 31/03/2022 Court: Judgment is delivered in the presence of Mr. Emmanuel Saghan learned advocate for the Plaintiff, the Plaintiff in person and Mr. Method Nestory learned advocate for the Defendant. C. P. M

JUDGE 31/03/2022 Court: Right of appeal is fully explained. 25 26 31/03/2022 I 26