Yangts Jian Enterprises Limited (In Receivership) and Anor v Society House Development Company (2021/HPC/0553) [2024] ZMHC 304 (18 June 2024)

IN THE HIGH COURT OF ZAMBIA AT THE COMMERCIAL REGISTRY HOLDEN AT LUSAKA (Civil Jurisdiction) BETWEEN: YANGTS JIAN ENTERPRISES LIMITED (In Receivership) ABBEYCON ZAMBIA LIMITED AND 2021/HPC/0553 1 ST PLAINTIFF 2ND PLAINTIFF SOCIETY HOUSE DEVELOPMENT COMPANY LIMITED DEFENDANT SOCIETY HOUSE DEVELOPMENT. COMPANY LIMITED CO JlJD1c,A~ AND YANGTS JIAN ENTERPRISES (In Receivership) O)' BANK OF CHINA ZAMBIA LIMITED ST DEFENDANT 2ND DEFENDANT (BY COUNTERCLAIM} Delivered before the Honourable Mrs. Justice K. E. Mwenda-Zimba this 18th day of June, 2024. For Yangts For Abbeycon For Society House For Bank of China Mr. M . Nkunika of Simeza Sangwa & Associates Ms. A. Nsonga & Mr. T. Fambo of Mosha & Company Mr. L . Phiri, Ms . C. Sakala & Mr. K. Nkunta of August Hill & Associates Mr. M. Chileshe & Mr. N. Silwamba of Eric Silwamba, Jalasi & Linyama Legal Practitioners JUDGMENT Cases referred to: 1. Morex Contractors Limited v. Nakawa Division Local Government and Kampala City Council (HCT-00-CC-CS 34 of 2010 (2012}. 2. National Drug Company Limited and Zambia Privatisation Agency v. Maro Katongo Appeal No. 79 of 2001. 3. Husamuddin Gulamhussein Pothiwala Administrator, Trustee and Executor of the Estate of Gulamhussein Ebrahim Pothiwalla v. Kidogo Basi Housing Corporative Society Limited and 31 Others Civil Appeal No. 330 of 2003. / r 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17 . . 18. 19. 20. 21. 22. 23. 24. 25. 26. . Catherine Mgendi v. Utumishi Investments Limited Kenya Police Staff Sacco Society Limited Nairobi ELC Appeal No. 1601 of 1999 (eKLRJ. Housing Finance Co. of Kenya Limited v. Gilbert Kibe Niuguna Nairobi HCCC No; 1601 of1999 (eKLRJ. Photo Production Limited v. Securicor Transport Limited (1980) A All ER 556. Rapid Global Freight Limited v. Zambia Railways Limited CAZ Appeal No. 216 of2016. (Unreported} Turnpan-Lonhro Zambia Limited v. Leasing Finance Limited 2009/HKl285. (Unreported} Hughes v. Metropolitan Railway (1887} 2 AC 439. Mpongwe Farms v. Dar Farms and Transport Limited (2016} 3 ZR 1. Mpongwe Farms v. Dar Farms and Transport Limited 201 l/HPI0512 (Unreported). Bank of Nova Scotia v. Hellenic Mutual War Risks Association (Bermuda} Ltd, The Good Luck (1991} 3 All ER 1. Zonal General Manager. MIS freon International Limited v. MIS Vinay Heavy Equipment Appeal No. 4211 of 2015. (Unreported} Van Lynn Developments Limited v. Pelias Construction Company Limited (1968) 3 All ER 824. Kapilaben and Others v. Ashok Kumar Jayantilal Sheth through POA Gopalbhai Madhusudan Patel and Others Civil Appeal No. 10683-86 of 2014. Central London Property Trust Ltd v. High Trees House Ltd (1947) 1 KB 130. Durham Fancy Goods v. Micheal Jackson (Fancy Goods) (1968} OB 839. The Scaptrade (1983) OB 529. Alan Co Ltd v. El Nasr Export & Import Co. (1972) 2 OB 189. D & C Builders v. Ress (1965) 2 OB 617. Combe v. Combe (1951} 2 KB 215. Fedco (P) Ltd &Another v. SN Bilgrami & Others 1960 AIR 415. Tui Ltd v. Grif(i.ths (2023) UKSC 48. Blyth v. Birmingham Waterworks Company (1856) 11 Ex 781. Fluid Base Industries Limited and Barclays Bank Zambia Limited PLC 2010/HKl506. (Unreported) Brenda Kachasu (Suing as Administrator of the estate of the late Paul Kachasu} v. Mwelwa Manda (Sued as the Administrator of the late Francis Manda), University Teaching Hospital and Attorney General- Appeal No. 163 of 2021. 27. Brian Mataka v. Prisca Kachinga & Joel Chitambala, CAZ Appeal No. 155 of 2021. 28. Kitwe Supermarket v. Southern Africa Trade Limited 2007/HKl243. (Unreported} 29. Zambia Oxygen Limited and Zambia Privatisation Agency v. Paul Chisakula, Francis Phiri Yesani Chimwala, Rumbani Mwandira and Richard Somanie (2000) ZR 27. 30. Teichmann Zambia Limited v. Mumana Pleasure Resort Limited & Puma Energy Zambia PLC 2014/HPCI0025. (Unreported) 31. Kitwe City Council v. William Nguni (2005) ZR 57. 32. Barclays Bank v. Tom (1923} 1 KB 221. 33. Constantine Line v. Imperial Smelting Corporation (1942} AC 154 at page 174. 34. Khalid Mohamed v. The Attorney General (1982} ZR 49. 35. Akashambatwa Mbikusita Lewanika. Hicuunga Evaristo Kambaila. Dean Namulya Mungomba, Sebastian Saizi Zulu, Jennifer Mwaba v. Frederick Jacob Titus Chiluba (1998} ZR 79. 36. Anderson Kambela Mazoka and Others v. Levy Patrick Mwanawasa and Others (2005} ZR 138. 37. Tiens Kahenya v. The Attorney General (2013} 2 ZR 285. 38. Wilson Masauso Zulu v. Avondale Housing Project Limited (1982) ZR 172. -J2- 39. Derry v. Peek (1889} 14 AC 337. 40. Nkongolo Farms Limited v. Zambian National Commercial Bank & 2 Others (2005} ZR 78. 41. Bater v. Bater (1951} P 35. 42. Hornal v. Neuberger Products Ltd (1957} 1 OB 247. 43. Victor Koni v. Attorney General Appeal No. 7 of 1990. (Unreported) 44. Madison General Insurance Company Limited v. Avrill Cornhill and Micheal Kakoma, Appeal No. 19 of 2017. (Unreported) 45. Ng'onga v. Alfred H. Knight Zambia Ltd Appeal No. 203 of 2016. (Unreported) 46. Zambian Breweries PLC v. Lameck Sakala Appeal No. 173 of 2009. (unreported) 47. YB and F Transport Limited v. Supersonic Motors Limited (2000} ZR 22. 48. Box v. Barclays Bank Plc (1998} Lloyd's Rep. Bank 185. 49. Caparo Industries Plc v. Dickman (1990} 2 AC 605 at page 618. 50. Lloyd v. Grace. Smith & Co /1912} AC 716 at 742. 51. CavmontBank Ltd v. Spancrete Zambia Ltd & 2 Others Appeal No. 13 of 2019. 52. Colgate Palmolive (Zambia} Inc. v. Able Shemu Chuka & 100 Others Appeal No. 181 of2005. (Unreported) 53. City Express Limited v. Southern Cross Motors Limited (2007} ZR 263. 54. Malas (trading as Hamzeh Malas and Sons) v. British Imex Industries (1958} 1 All ER 262. 55. UCM v. Royal Bank of Canada (1983} AC 168. 56. Montrad Limited v. Grundkotter Fleischvertriebs GmbH (2002) 3 All ER 697. 57. Birmingham and District Land Co v. London and North Western Railway Co (1886} 34 ChD 261, CA. 58. Myers v. N & J Sherick /1974} 1 WLR 31. 59. Barclays Bank Plc v. Frank Mutambo, Mutaz Ltd. CAZ Appeal No. 8 of 2019. 60. Shipe (Trustee the Salvation Army Zambia} and Others v. Mung'ambata and Others Appeal No. 150 of 2009. 61. Lumwana Mining Company and Another v. Lumwana Plant Hire and Construction Appeal No. 192 of 2016. (Unreported} 62. Edward Owen Engineering Ltd v. Barclays International Limited /19 78} 1 ALL ER 976. 63. BP Refi.nery (Westernport) Pty Ltd. v. Shire of Hastings (1977) 52 AL JR. 64. Henry Nsama and 134 Others v. Zambia Telecommunications Company Limited SCZ Appeal No. 158 of 2016. (Unreported) 65. Jonathan Van Blerk v. Attorney General and 5 Others, SCZ/8/03/2020. 66. Attorney-General v. Sam Amos Mumba (1984} ZR 16. Legislation referred to: 1. The Limitation Act, 1939. 2. The Rules of the Supreme Court of England, 1965, 1999 edition, White Book, Order 16 Rule 1 and order 15 Rule 3 (1). 3. The High Court Rules SI No. 58 of2020 (as amended}. Chapter 27 of the Laws of Zambia. Order 14 Rule 4. 4. The Law Reform (Limitation of Actions e.t.c} Act, Chapter 72 of the Laws of Zambia. Works referred to: 1. Chitty on Contracts 25th edition, Vol.1, pages 1, 12, 122, 967 and 969. 2. Halsbury's Laws of England, 4 th edition, Vol. 9 paragraph 335. 3. Michael Furmstones, "The Law of Contract," 4 th edition, United Kingdom, Lexis Nexis pages 697 and 1504. 4. Garner BA, Black's Law Dictionary, 10th edition, pages 1411. -J3- 5. Hon. Sir Anthony "Keating on Building Contracts." 5 th edition. London: Sweet & Maxwell at page 245. 6. Halsbury's Laws ofEngland, Volume 34, 3rd edition, pages 1, 110,399,439, 440 and 669. 7. Halsbury's Laws of England, Butterworths & Co (Publishers) Ltd. (1954) at page 257. 8. Halsbury's Laws of England 3 rd edition, Vol. 8 at page 262, paragraph 460. 9. Halsbury's Laws of England, 5 th edition Volume 48, Financial Institutions (2021) paragraph 246. 10. Oxford Dictionary ofLaw, 6 th edition at page 353. 11. Charlesworth and Percy on Negligence (London, Sweet & Maxwell) 2010 at paragraph 1-01 at page 3. 12. Howard MN "Phipson on Evidence," 14th edition, paragraph 402 at page 50. 13. Charaniit Singh and Mohamed Ramiohn. "Unlocking Evidence," 3 rd edition, 2016. New Yori Routledge. 14. Halsbury's Laws ofEngland, 3 rd edition, Volume 15 at page 267. 15. Howard MN. Phipson on Evidence, 15th Edition, 2000, London: Sweet and Maxwell paragraph 4-35 at pages 80 and 81 . . 16. David Warne and Nicholas Elliot QC (Ed) Banking Litigation, 2 nd edition London Sweet and Maxwell (2005). 17. Ross Cranston QC "Principles of Banking Law" Oxford University Press, Oxford 1997. 18. John Odgers (KC) and Ian Wilson KC "Pagets Law of Banking", 16th edition, London, LexisNexis. 19. ICC Uniform Rules for Demand Guarantees 458, Articles 16, 20 and 24. 20. Geraldine Andrews and Richard Millet "Law of Guarantees," 5 th Edition, London, Sweet and Maxwell at page 576. 21. Mark Hapgood, QC, in Sir J. Paget and M. Hapgood QC, "Paget's Law of Banking", 12th edition, (London: Butterworths, 2002) paragraph 34.2. 22. Halsbury's Laws of England, 4 th Edition, Volume 41, paragraph 960, page 819. 1.0. INTRODUCTION AND BACKGROUND 1. 1. The dispute in this matter involves a construction con tract of the remodelling of renowned buildings in Lusaka known as Society House and Central Arcade. The Defendant (by original action), Society House Development Company Limited, which I shall hereinafter refer to as "Society House" engaged, Zambezi Consortium represented by the 1st plaintiff (by original action), Yangts Jiang Enterprises Limited (In Receivership), which I shall refer to as "Yangts", as lead contractor, to construct or -J4- remodel the buildings. Along the way, sub-contractors were engaged among them, the 2nd plaintiff (by original action), Abbeycon Zambia Limited , which I shall refer to as "Abbeycon". 1.2. One of the requirements in the contract between Yangts and Society House was that Yangts provides an advance payment guarantee and performance guarantee. It is alleged that Yangts obtained these guarantees from the 2 nd defendant (by counter claim), Bank of China Zambia Limited, hereinafter referred to as "Bank of China". Bank of China denied ever issuing the guarantees which are also in dispute in this matter. 1.3. Disputes arose amongst the parties as regards completion of the building construction, the quality of the construction works and validity and payment of the guarantees. The disputes are contained in the pleadings below. 2.0. YANGTS' CASE 2.1 . In its statement of claim of even date, Yangts averred that on 26th May, 2011, it entered into a contract for the design, supervision and re-development of Society House and Central Arcade, Lusaka, Zambia at an agreed sum of K407,776,66 l,303.10 (unrebased). -JS- 2.2. Subsequently, the following addenda to the contract were signed namely- (i) Addendum Agreement 1 between Yangts, Society House and African Brothers Company Limited dated 3rd March, 2015; (ii) Addendum Agreement 2 between Yangts, Society House and African Brothers Company Limited dated 21 st September, 2015; (iii) Addendum Agreement 3 between Yangts, Society House and African Brothers Company Limited dated 8th April, 2016; and (iv) Addendum Agreement 4 between the Yangts and Society House dated 29 th April, 2016. 2.3. It alleged that according to Clause 48 of the contract, Society House was to retain 50% of each interim payment due to Yangts which was to be made to it upon completion of the works. That the remaining 50% would be paid to Yangts after the defects liability period had elapsed. 2.4 . On the 13th of July, 2018, and following practical completion of the works, Yangts invoiced Society House ZMW19,201,064.82 as accumulated retention amounts. Yangts alleged that Society House did not dispute the debt but declined to settle it on grounds that the sum was being held as security for unrecovered advance payments. That there was no justification for Society House and it was not a term of the con tract to -J6- withhold retention money on account of unrecovered advance payments as Yangts obtained the guarantees from the Bank of China. Therefore, Society House ought to pursue the Bank of China for recovery of the said monies. 2.5. It averred that in pursuance of Clause 57, Yangts was to supply Society House, through the Project Manager, with a detailed account of the total sum Society House considered payable before the defects liability period was over. Further, Society House was to issue a Defects Liability Certificate and certify any final payment due to the plaintiff. It added that it submitted a final claim to Society House on numerous occasions and as early as 1st September, 2017 which had not been paid to date. 2.6. Yangts stated that even after its scope of works was reduced by way of addendum 2, it carried out the remaining works through its sub-contractors. It was also Yangts' position that it was an implied term of the contract that Society House would provide it with preliminary and general expenses such as overhead costs for the management of the employees, personnel and staff on the project and demobilization, among others, which costs Society House had failed to pay. -J7- 2.7. It alleged that Clause 44 of the contract provided that it would be entitled to costs associated with extension of time on the occurrence of a compensation event. Further that by virtue of the 3 rd and 4 th addenda, time was extended within which to complete the works but without costs which was contrary to Clause 44. Further, that despite extending the contract by virtue of Addenda 3 and 4, Society House made deductions of liquidated and unliquidated damages. That as a result of the foregoing, Yangts suffered loss and damage in that- 1. the contract sum was increased from K473,044,127.12 to K952,966,441.16 through the addenda thereby revising the rates and prices quoted in the bills of quantities; 2. the claims by other contractors were at revised prices as opposed to those of Yangts contrary to addendum 4; and 3. loss of profits premised on unrevised prices. 2.8. As a result, Yangts claimed- 1. payment of the retention sum as pleaded; 2. payment of the final claims as pleaded comprising: (i) preliminary and general expenses; (ii) attendance to works by sub-contractors; (iii) costs for extension of time; (iv) deducted liquidated and unliquidated damages; (v) loss of profits. 3. damages for breach of contract; 4. interest on the sums found due; 5. costs. (Sic) -J8- 3.0. ABBEYCON'S CASE 3.1. On 21 st April, 2023, Abbeycon filed its statement of claim. It averred that in accordance with the requirement of the law that all major government or quasi-government projects subcontract 20% of the works to local contractors, on 23rd September, 2023, Yangts and Abbeycon entered into a subcontract for the ceilings, partitioning access at a contract pnce of Kl3,897,612,436.80 (unrebased). 3.2. Abbeycon moved on site and commenced works in accordance with the provisions of the contract. It would, accordingly, present interim payment certificates (IPCs) to Yangts, which Yangts would in turn include in a combined claim to Society House. Society House would in turn pay Yangts for onward remittance to the sub-contractors. 3.3. It alleged that all progressed smoothly until Yangts was placed in receivership following a High Court Order of 9 t h October, 2015, when Yangts experienced various problems including work stoppages by its workers on account of non-payment of wages. 3.4. As a result, Society House convened a meeting with the Receiver where it expressed dismay at the state of affairs of Yangts and -J9- it was agreed that the payment to the subcontractors would be made directly by Society House in order to ensure that the works were not disrupted. Further, that the payments of the subcontractors would not be subject to the order of priority of payments in insolvency provisions. 3.5. When the Receiver notified and requested the subcontractors that going forward they present their IPCs to Society House for direct payment, they all agreed and continued working. 3.6. That Society House and the subcontractors continued with this agreement from 2015 to 2018 and all IPCs were submitted to Society House which would pay into the account of the subcontractors directly. Abbeycon claimed that the change of payment modalities was a novation of the contract and that Society House is estopped from denying the fact. 3.7. It was Abbeycon's averment that due to Yangts' continued legal woes, Society House terminated the contract and engaged third parties to complete the project. That it was then discovered that there were defects in some areas of the project namely, supporting columns, which led to Society House withholding payment to Yangts as part of the retention amount during the defect period. -JlO- 3.8. It averred that despite paying all the sub-contractors, Abbeycon was excluded from the final list despite Society House having agreed to not only settle the certified works but the forex losses and additional transport charges due, whose total was ZMW56,759,804.83. It was Abbeycon's position that it had suffered loss and damage and claimed the following: 1. payment of the sum of ZMW56, 759,804.83; 2. interest of the sum found due and payable; 3. costs; and 4. any other relief that the court may deem fit and just. 4.0 . SOCIETY HOUSE'S CASE 4.1. On 24th January, 2022, Society House entered appearance and filed its defence. Society house contended that the details and effects of the various addenda were as follows: a) 1st addendum between Yangts and Society House dated 3rd March, 2014 whose object was to vary the contract sum from ZMW226,554,703.44 inclusive of VAT thus bringing the total revised project cost to ZMW699,598,850.55 inclusive of VAT: for the execution and completion of all the works and remedying of any defects therein; b) 2nd addendum dated 21 st September, 2015, between Yangts and Society House with the object that since Yangts had failed to expeditiously proceed with the execution of the works, Yangts was desirous that African Brothers Corporation ("Sub Contractor") executes and completes concrete works and -Jll- block work to retail, hotel and service lane in order to speed up project completion, for the total sum ofZMW11,802,451.32 VAT inclusive of the execution and completion of such works and the remedying of any defects therein; c) 3rd addendum dated 8 th April, 2016 between Luwita Sayila, as Receiver of Yangts, and Society House and the sub-contractor with the object that it was acknowledged that Yangts had no capacity to complete the project and that sub-contractor be replaced as the main contractor to complete the works at the cost of ZMW46,669,504.54; d) 4 th addendum dated 9 th April, 2016 between Luwita Sayila, as Receiver of Yangts, and Society House in which the parties agreed that the revised contract sum be further revised upwards in accordance with Clause 64 of the Agreement, from ZMW699,598,850.55 to ZMW952,966,441.47. 4.2 . With regards to Clause 48 of the contract, Society House alleged that it was to retain 50% of each interim payment due to Yangts which was to be paid to Yangts upon completion of the works and the other 50% would be paid upon lapse of the defects liability period. That Clause 48.2 of the Special Conditions of Contract (SCC) amended the retention percentage to 5% of each interim payment due to Yangts. That GCC 48.2 provided that 50% of the total retained amount would be released to Yangts upon completion of the works whilst the second 50% due to Y angts would be made not only after the lapse of the defect's -J12- liability period but after Society House's representative had certified that all the defects notified by its representative to Yangts had been rectified. 4.3. Society House denied Yangts' claim that it invoiced Society House the sum of Kl9,201,064.82 of accumulated retention amounts and that Yangts is not entitled to the retention amount or to any other sum for the following reasons: a . Yangts did not complete the works as contracted or at all and abandoned the project mid-way in breach of contract as evidenced by addendum 3; b. the work which Yangts actually performed was of very poor quality and had to be remedied at immense cost to Society House; c. Yangts committed various acts of fraud; d. Yangts' inability to perform the works to the required standard and to complete the project within the contractual period caused Society House colossal financial loss; and e. to date, the said defects have not been corrected and the building has not been cleared for occupation. 4.4. That even if the retention was due, it was not payable to Yangts but to the substituted main contractor and that payment of ZMWS,419,928.23 was made to the Consortium in respect of retention payments due upon practical completion. -J13- 4.5. Society House said that according to Clause 43.1 of the GCC, it could deduct any advance payment from amounts due from Yangts thus justifying the non-payment on account of unrecovered advances amounting to ZMW76,636,490.80. That under Clause 43. 1 Society House had the right to exercise a general lien over the retention sum until the defects were corrected. 4.6. Society House contended that it was an express and/ or implied term of Clause 51 of the Contract, that Yangts would provide a validly issued and genuine advance payment guarantee to the sum equivalent to the advance payment. That the award of the contract was also on condition of presentation of a validly issued and genuine irrevocable performance guarantee. 4 r ·• . I. Society House contended that in breach of the contract, Yangts deliberately and fraudulently submitted forged advance payment guarantees and performance guarantees. It gave the particulars of the fraud as follows: a) Yangts submitted advance Bank Guarantee No. BOCZLG135/2011 and irrevocable performance bank guarantee No. BOCZLG137/2011 as well as various purported renewals of the two guarantees; -J14- b) On 20 th September, 2016, Society House wrote to Bank of China that Yangts was unable to perform its obligations under the contract and demanded the payment of the unrecovered amount of ZMW76,636,490.80 pursuant to the Advance Payment Guarantee and ZMW47,302,092. 71 on the Performance Guarantee; c) On 2nd November 2016, the Bank of China advised that it could not honour the Guarantees for the following reasons: i) the guarantees, as reflected in the Bank's system were issued to ZESCO Limited on 26 th May, 2011 and not to Society House on behalf of Yangts; ii) the signatures of the persons purporting to have signed the guarantees did not match the staff signatures in the Bank's database; and iii) Bank of China received a letter dated 31 st October, 2016 from Yangts where it confirmed to not have any outstanding guarantees with the Bank; d) On 8 th December 2016, Mr. Luwita Sayila, as Receiver of Yangts, wrote to NAPSA, being the owner and financier of the Project, stating that Yangts was willing to offer for sell Collum Coal Mine, a company owned by the directors of Yangts, to NAPSA at a tentative price of USD61,000,000.00 with the intention of Yangts offsetting amounts that NAPSA may be owed from the advance payment guarantee or howsoever; e) On 14th December 2016, Mr. Luwita Sayila, again as Receiver, wrote to NAPSA pointing out that Yangts was willing to identify and sell Collum Coal Mine and surrender all the proceeds to NAPSA for the unrecovered amount of ZMW75,360,490. 79, in exchange for NAPSA dropping criminal charges for the fraud -JlS- committed by Yangts in relation to the Advance Payment Guarantee; and f) The fraud was reported to law enforcement agencies by Society House and the matter is still under investigation as the directors of Yangts are at large. 4_g_ It averred that even if Yangts was entitled to retention payment, it could not have submitted its final claim on 1st September, 201 7 as the practical completion certificate for the final part of the works was only issued on or around 3 rd April, 2019 upon completion of all the works. Further, that the 3 rd addendum, which made the sub-contractor the main contractor was signed on or around 8 th April, 2016 therefore, Yangts cannot say it submitted a final claim in 201 7. 4.9. Society House alleged that Yangts is in breach of the express and/ or implied terms of the contract to perform its obligations to the standard stipulated in the contract and/ or to the highest industry standard as its workmanship was so poor that the building collapsed and/ or was declared unsafe and structurally defective. According to Clause 35 of the contract, Yangts would not be entitled to be paid the claimed sum as the defects liability continues to be extended for as long as the defects remain uncorrected. -J16- 4.10. It was Society House's position that completion occurred in phases with the completion and commission of the hotel which occurred in August, 2018 marking what was completion of the "whole of the works" and as such Yangts cannot claim that it submitted its final claim in 201 7. 4.11. It averred that Yangts is not entitled to overhead and demobilization costs as they were not provided for in either the General Conditions of Contract (GCC) or Special Conditions of Contract (SCC). That in the alternative, Yangts abandoned the work site and failed to perform its end of the contract. 4.12. Further, that, the sub-contractor, being on site, did not relieve Y angts of its responsibility spelt out in Clause 7 of the GCC. It added that Y angts was charged liquidated damages for failure to complete the works by the agreed date which evidenced that they were in breach of contract. In addition, Yangts did not provide any supervision to the subcontractors on the site and that another con tractor was engaged to complete the works and Yangts, through its Receiver, made it clear that it was unable to continue the works. 4.13. That liquidated damages were charged to Yangts in accordance with Clause 49 of the contract and that no compensation event -J17- occurred. Yangts had not suffered any loss or damage at the hands of Society House. 4.14. In its defence to Abbeycon's claim dated 9 th May, 2023, it averred that it was not party to the contract between Yangts and Abbeycon. That Yangts was required to submit IPC's to Society House's representative who was Bicon Zambia Limited in accordance with GCC 42 who would review and certify the amount to be paid for the specific works done on the project as a whole before onward transmission for payment to Society House. 4.15. Society House averred that it did not receive any IPC's directly from any sub-contractors as no contractual relationship existed. That the decision to pay sub-contractors directly into their accounts was not a permanent decision and was carried out for administrative ease as Yangts was facing challenges to complete the project and there was need for works on the project to continue. As a result, this temporary administrative change was never reduced into writing using an addendum. 4.16. It disclosed that, owing to challenges faced by Yangts, Yangts and Society House executed addendum 2 in September, 2015 which introduced African Brothers Corporation Limited to -J18- complete the construction works. This was followed by addendum 3 executed in April, 2016 signed on behalf ofYangts by the Receiver and, in essence, acknowledging that Yangts had no capacity to complete the Project as such African Brothers replaced Yangts as main contractor. Additionally, that the contract was never novated to the individual sub-contractors and any monetary claims which Abbeycon has must be made directly to Yangts who contracted it. That the contract entered into between Society House and Yangts did not contain any exchange loss clause or provision for additional transport charges. Society House denied all of Abbeycon's claims for the sum of ZMW56,759,804.83, interest and costs. 5 .0. SOCIETY HOUSE'S COUNTER-CLAIM 5.1. On 27th January, 2022, Society House filed its counterclaim. It was more or less a repetition of its defence. However, Society House also added that in the contract it entered into with Yangts, Yangts acted as lead contractor on its own behalf and on behalf of a consortium of consultants known as "The Zambezi Consortium", which was made up of the following entities: a. Yangts; -J19- b. Bicon Zambia Limited; c. Louis Karol and PJB Associates; d. Bicon Zambia Ltd and BWK (Pty) Ltd; and e. HB Chalwa Associates and Turner & Townsend (Pty) ltd. 5.2. Society House averred that by Clause 51 of the GCC and Clause 51. 1 of the SCC, it was to advance Yangts the sum amounting to 40% of the contract sum as an advance payment. That it made this advance payment to Yangts. Further, that under Clause 51.1, there was need for a validly issued advance payment guarantee. 5 .3. Further, that as stipulated in Clause 51.3 of the GCC, it would deduct the advance payment until the amounts advanced were recovered. 5.4. Society House averred that it was an express, alternatively implied term of the contract in Clause 52 of the GCC as read with Clause 52.1 of the SCC that as a condition of the award of the contract to Yangts, Yangts was to deliver a validly issued and genuine irrevocable performance guarantee to and acceptable by Society House . 5.5. It averred that Yangts was to complete the project in 36 months, that is, by 10th June 2014. However, the project was only fully handed over to Society house in August, 2018 when the hotel -J20- was completed and commissioned. In addition to the contract, a number of addenda were executed. 5.6. Society House claimed that Yangts failed and/or omitted to complete the project on the stipulated date or on dates extended by Society House on at least four occasions in breach of the express and/ or implied term of the contract. 5.7. On 9 th August, 2016 , Society House granted an extension to the contract completion date of 4 months with costs and 5 months without costs and further that the contract completion date was revised from 31 st March, 2016 to 31 s t December, 2016. That Society House expressly intimated that this extension did not apply to Yangts as they caused the delay of the .project completion and as a result, liquidated and ascertained damages were applicable against Yangts effective 1st April, 2016 until full project completion. 5.8. In line with the contract, Yangts submitted an Advance Payment Guarantee for K189,208,370,844.64 (unrebased) and a Performance Guarantee for the amount of K47,302,092,711.16 (unrebased), dated 11 th June, 2011, purportedly issued by the Bank of China. The particulars of fraud outlined above were repeated. -J21- 5.9. Society House averred that Yangts was further in breach of the express and/ or implied terms of the contract to perform its obligations to the standard stipulated in the contract to the highest industry standard in that the workmanship of Yangts was so poor that portions of the building were declared unsafe and structurally defective, requ1nng Society House to undertake extensive remedial work on the project and losing tenants in the process. That the Engineering Institute of Zambia (EIZ) has, to date, refused to clear the building for occupation. 5.10. That Bank of China is liable on the two guarantees as they were issued by them or alternatively, if the guarantees are found to be forgeries, on the basis that it was negligent and caused Society House loss. The particulars of negligence were given as follows: a) the guarantees were issued on the Bank of China letter head and thus demonstrating a want of care in safeguarding its stationery; b) the stamp on the guarantees has not been disavowed by Bank of China demonstrating a want of care in that, either; (i) the Bank of China did not care to ensure that a special stamp was reserved for bank instruments such as guarantees; or -J22- (ii) it did not put in place robust measures to ensure that such a stamp is not affixed on forged documents by ensuring it was kept in safe custody. c) The Guarantee numbers are genuine demonstrating a want of care in ensuring it kept guarantee details confidential and indicating complicity within the Bank in the forging of the Advance Payment Guarantee and the Performance Guarantee. 5.11. That in consequence of the aforementioned breaches, Society House suffered loss and damage as follows: a) as against Yangts- i. on account of the Yangts' failure to complete the Project on time, Society House was forced to increase the contract sum due to increase in the cost of materials and labour so that the contract sum escalated from ZMW699,598,850.55 to ZMW952,966,441.00; ii. on account of Yangts' failure to complete the Project on the Project Completion Date, Society House suffered loss of revenue, amounting to ZMW21,550,957.48 as at 31 st December 2021 as the entire office block was and is still unable to take in tenants as envisaged; iii. on account of Yangts' poor workmanship, parts of the building were found to be structurally defective and therefore unsafe, necessitating Society House incurring additional costs to remedy the defects and losing tenants and attendant revenue; iv. on account of the forged guarantees, Society House was unable to claim on the Advance Payment Guarantee and the Performance Guarantee. -J23- b) as against the Bank of China: i. on account of its negligence, Society House lost the sums constituted in the guarantees. 5.12. Society House, therefore, seeks the following reliefs: a) as against the Yangts- 1. payment of the escalation in the contract sum in the amount of ZMW253,367,590.45; 2. payment of the sums on the two guarantees as follows; unrecovered amount in the sum of ZMW76,636,490.80 pursuant to the Advance Payment Guarantee and ZMW189,208,370.84 on the Performance Guarantee; 3. damages for breach of contract in relation to non completion of the project on the completion date or at all and for subsequent defects on the buildings at Central Arcade; 4. damages for loss of business as pleaded; 5. interest on the sums found due; and 6. costs. b) as against the Bank of China- 1. damages for negligence as pleaded; 2. alternatively, payment of the sums on the two guarantees as follows; unrecovered amount in the sum of ZMW76,636,490.80 pursuant to the Advance Payment Guarantee and ZMW189,208,370.84 on the Performance Guarantee; 3. interest on the sums found due; and 4. costs. -J24- 6.0. YANGTS' REPLY TO DEFENCE 6.1. On 1st February, 2022, Yangts filed its reply to Society House's defence. Yangts stated that the object of the 3rd addendum was that Yangts and the sub-contractor execute and complete works indicated in the 1st and 2nd schedules. 6.2. Yangts insisted that by virtue of the Advance Payment Guarantee between Society House and Bank of China, the Bank of China irrevocably undertook to pay Society House the advance payment on Society House's first demand for payment in writing. That the Bank of China is under a contractual duty to honour Society House's demand for the advance payment. 6.3. Yangts also insisted that Society House made deductions for advance payments and retention amounts based on the submitted IPC's and not according to Clause 43.1 of the GCC as claimed by Society House and that Society House withheld the retention amount as security for the unrecovered advance payment from Bank of China. It added that it maintained valid Advance and Performance Payment Guarantees with the Bank of China. 6.4. In relation to Society House's contention that Yangts could not have submitted its final claim on 1st September, 2017 as the -J25- practical completion certificate for the final part of the work was only issued on 3 rd April, 2019, Y angts averred that by virtue of the 4 th addendum, it was to execute and complete the works indicated in the 1st and 2nd schedules of the 3rd addendum in order to bring the project to completion. 6.5. Yangts also insisted that the preliminary and general expenses as pleaded were implied terms of the contract and that it performed all its obligations under the cohtract and various addenda. Contrary to Society House's contention, addendum 4 required Yangts as contractor to execute and complete the works as indicated in the 1st and 2 nd schedules of the 3rd addendum. 7.0. YANGTS' DEFENCE TO COUNTERCLAIM 7.1. On 10th February, 2022, Yangts filed its defence to counterclaim. 7.2. In response to Society House's claim that Yangts failed to complete the project on the stipulated dates and on extended dates on at least four occasions or to complete the project at all, Yangts averred that the extension of time was premised on compensation events. That additionally, Clause 44 of the -J26- contract expressly provided that Yangts would be entitled to extension of time on the occurrence of a compensation event. 7. 3. That by virtue of the 3rd and 4th addenda, time was extended within which to complete the works and the extension was without cost contrary to Clause 44 and that instead Society House made deductions of liquidated and unliquidated damages . 7.4. Yangts insisted that it maintained valid advance payment and performance guarantees with the Bank of China. That by virtue of the Advance Payment Guarantee, Bank of China irrevocably undertook to pay Society House the advance payment on Society House's first demand for payment 1n writing. Additionally, that Bank of China is under a contractual duty to honour Society House's demand for the advance payment and has no claim against Y angts in con tract. 7 .5. In respect of Society House's claim that the project was only fully handed over to it in August, 2018 when the hotel was completed and commissioned, Yangts denied this position and added that according to the 4 th addendum, Society House was to execute and compete the works indicated in the 1st and 2nd -J27- schedules of the 3rd addendum in order to bring the project to a successful and full completion. 8.0 . THE BANK OF CHINA'S DEFENCE TO COUNTERCLAIM 8.1. On the 15th of February, 2022, the Bank of China filed its defence to counterclaim. It denied issuing the two guarantees and that the documents were forgeries. 8.2. It was the Bank of China's position that it issued the guarantee number BOCZLG135/201 land BOCZLG 137 /2011 in favour of BONLE (FAZHOU) International Limited Co. Ltd of China as security for a transaction relating to supply of various goods to ZESCO under two separate bids bearing numbers ZESCO / 016 / 11 and ZESCO / 01 7 / 11 and the same expired on 24th September, 2011 and 1st October, 2011, respectively. 8.3. That the claim made by Yangts in the counterclaim as regards the performance guarantees, being issued by the Bank of China for the project, are false. The purported guarantees are a forgery whose validity was not confirmed by the Bank of China. The Bank of China averred that it would rely on Society House's own admissions in the counterclaim where it asserted and confirmed its full knowledge of the forgery . -J28- 8.4. The Bank of China denied owing Society House any duty of care relative to the performance guarantee as alleged in the .. particulars of negligence. In addition, the Bank of China also alleged that the cause of action herein accrued in September 2016 and is thus statute barred by Section 2 of the Limitation Act, 1939 as amended by Section 3 of the Law Reform (Limitation of Actions, etc.) Act, Chapter 72 of the Laws of Zambia. 9.0. SOCIETY HOUSE'S REPLY TO YANGTS' DEFENCE TO COUNTERCLAIM 9.1. On 21 st September, 2023, Society House filed its reply to Yangts' defence to counterclaim. It was more or less a repetition of the contents of its counterclaim. In addition, Society House averred that the following were the only compensation events in accordance with the contract: a. The employer does not give access to a part of the site by the site possession date pursuant to GCC Sub-Clause 21 .1. b. The employer modifies the schedule or other contractors in a way that affects the work of the contractor under the contract. c. The employer's representative unreasonably does not approve a subcontract to be let. d. The advance payment is delayed. e. The effects on the contractor of any of the employer's Risks. f. The employer's representative unreasonably delays issuing a certificate of completion. -J29- 9.2. That accordingly, the extension of time was not premised on any compensation events as there was no occurrence of any of the said compensation events. 9.3. That the final project completion report indicates that the hotel was completed and commissioned in August, 2018. 10.0. SOCIETY HOUSE'S REPLY TO BANK OF CHINA'S DEFENCE TO COUNTERCLAIM 10.1. On21 st September, 2023, Society House filed its reply to Bank of China's defence to counterclaim. It averred that the Bank of China is being disingenuous by claiming it had no knowledge of the guarantees as the said guarantees are not only on its' letterhead but also bear its stamp. 10.2. That in addition to the above, the Bank of China also issued various purported renewals of the alleged guarantees and that in any case, the letterhead and stamps as well as guarantee numbers are in its custody. 10.3. In relation to Bank of China's allegation that Society House was aware that the guarantees were forged, Society House contented that the pleaded fraud was only discovered upon the Bank of China's letter dated 2nd November, 2016. That liability is -J30- properly extended to the Bank of China on the ground that it issued the fraudulent guarantees. 10.4. That if the Bank of China did not issue the guarantees, it acted negligently and caused Society House loss in that- a. the guarantees were issued on Bank of China letterhead and thus demonstrating a want of care in safeguarding its stationery; b. the stamp on the guarantees has not been disowned by the Bank of China demonstrating a want of care in that, either: i. the Bank of China did not care to ensure that a special stamp was reserved for bank instruments such as guarantees; or ii. the Bank of China did not put in place robust measures to ensure that such a stamp is not affixed on forged documents by ensuring it was kept in safe custody. c. The guarantee numbers are genuine demonstrating a want of care in ensuring it kept guarantee details confidential and indicating complicity within the Bank in the forging of the Advance Payment Guarantee and the Performance Guarantee. 10.5. Society House further denied Bank of China's claim that this matter is statute barred and insisted that it is properly before this Court. 11.0. THE EVIDENCE PRESENTED IN THIS MATTER 11 . 1. The 1st witness was Clement Mugala, the Receiver and Manager of Yangts and called on behalf of Yangts. -J31- 11.2. His evidence was more or less a repetition of the pleadings by Yangts. In addition, he referred to various documents contained in Yangts' bundle of documents. He testified that he was appointed Receiver and Manager of Yangts on 3 rd June, 2020. 11.3. Following his appointment, he reviewed documents relating to this matter which show that in October, 2015, Luwita Sayila was appointed Receiver of Yangts. On 11 th December, 2017, Zambia National Commercial Bank, by deed, appointed Luwita Sayila as Receiver and Manager under a floating debenture of 10 th May, 2012. That by a supplemental deed of 28 th May, 2018, Luwita Sayila continued but on 3 rd June, 2020, he was removed and this witness appointed in his place. He went on to talk about the contract between Yangts and Society House for the design supervision and re-development of Society House and Central Arcade. 11.4. He testified that during a meeting of 24 th May, 2011, Society House informed the members present that works could not commence within 14 days of signing the contract because some tenants were still on notice and would only leave the premises sometime in June, 2011 and it was agreed that the compensation events for the delay under Clause 44.1 should -J32- not apply. He went on to refer to the 1st addendum and that as regards the 2 nd addendum, his understanding was that the scope of works was reduced. That even though the scope of works was reduced, Yangts carried out the remaining works through the attendance by sub-contractors. He referred to this addendum at page 116 of Yangts' bundle of documents. He went on to refer to the 3rd and 4th addendum. He relied on Clause 48 of the contract on the 50% retention and the invoice for the sum ofK19,201,064.82 as retention amounts. He added that Society House did not dispute the debt but declined to settle it on grounds that the sum was being held as security for unrecovered advance payment made to the plaintiff. He referred to a letter by Luwita Sayila at pages 232 to 233 of Yangts' bundle where Society House acknowledged owing the retention sum but insisted that the same was only being held as security for the unrecovered advance amounts. 11.5. He testified that the guarantees were valid and Society House ought to pursue the Bank of China for the recovery of the amounts on the guarantees. That it was not a term of the contract that the defendant could withhold retention sums on grounds of unrecovered advance payments. That by Clause 57 -J33- of the contract, Yangts was to supply Society House, through the project manager, with a detailed account of the sum total that the defendant considered payable before the defects liability period. That Society House was to issue a defects liability certificate and certify any final payment due to the plaintiff. In pursuance of Clause 57, Yangts submitted a final claim to Society House on numerous occasions and as early as 1st September, 2017. These claims are on page 221 of Yangts' bundle of documents. However, Society House refused or neglected to pay the final claim. 11.6. He testified that Clause 44 of the contract provides that Yangts would be entitled to costs associated with the extension of time on the occurrence of a compensation event. That his understanding, from the documents in his possession, was that by virtue of the 3 rd and 4 th addenda, time was extended within which to complete the works and that the extension was without costs contrary to Clause 44. That despite the extension by the 3rd and 4th addenda at the instance of Society House, it proceeded to make deductions of liquidated and unliquidated damages. -J34- 11 .7. When cross-examined by Mr. Phiri, Mr. Mugala testified that to understand what demobilisation costs are, Yangts needed another document that should have been submitted to the project engineer for final verification in accordance with industry practice and that the final verification had not yet been done. He testified that as receiver, he is the agent and officer of Yangts. That he was aware that the obligation of Yangts on the contract was to complete the project. He agreed that the successful completion period was to include the defects liability period. 11.8. He further testified that payments towards the advance payment were made but he could not confirm whether the entire 40% of the advance payment was made. According to him, Yangts provided valid advance payment and performance guarantees. He testified that the one at page 3 of Society House's supplementary bundle is the guarantee that Yangts provided. He agreed that he was aware that Bank of China stated that the guarantees were a forgery. 11. 9. When referred to the performance guarantee at page 2 of Society House 's supplementary bundle, he confirmed that this is the performance guarantee presented. He explained that the -J35- guarantees are valid because from his expenence and the structure and content of the issuer and standard clauses in the guarantees did not give him reason to doubt them. That further, there is indication in the contract that the employer would accept the guarantees after it was satisfied that they are correct. That on that basis, the employer accepted them at the time of the contract. Therefore, his assumption is that they were verified. He agreed that African Brothers took over the site because Yangts could not expeditiously complete the works but that they were to be sub-contracted in full and not to take over the contract. He agreed that addendum No. 3 shows that African Brothers was not only to deal with concrete works but subsequent works were also taken over by them. He agreed that it was envisaged that the project would be concluded in 36 months but that it was not completed in this period. 11.10. When referred to Clause 49.1 of the contract, he agreed that Y angts was to pay liquidated damages for each date that completion was delayed. He agreed that the last date agreed for completion was not met. He explained that the retention amount is supposed to be used for rectifying any defects as specified in design of the project in the defects period and in -J36- this case, it said 12 months. He testified that he was not aware that the defects period was extended. That the ZMW19,000,000.00 retention sum claimed, is the balance after the defects had been attended to. That however, he was not aware that the ZMW19,000,000.00 had almost been depleted. 11.11. When referred to a letter written by Mr. Luwita Sayila at page 360 of Society House's bundle of documents, he agreed that Mr. Sayila noted that there was a recovery of ZMW76,000,000.00 and that in that letter, Mr. Sayila said that the advance payment was found not to be in good legal standing. 11. 12. When cross-examined by Mr. Chileshe, he testified that Bank of China disputed the guarantees and when referred to guarantees in the bundle for Bank of China and in the bundle for Yangts, he noted the numbers and dates and pointed out the differences. When referred to a letter at page 9 of Bank of China's bundle of documents, he agreed that from what he had read, Yangts said it did not have any outstanding guarantee with Bank of China. Further, when referred to a letter at page 370 of Society House's bundle, from Zambia Police to the Director General of NAPSA and asked to read the findings, he explained that he was seeing the letter for the first time. -J37- 11. 13. When re-examined by Mr. Nkunika, he testified that his understanding was that Society House had the obligation to ensure that the guarantees were in the form acceptable to it. Further, that from the documents he had been referred to, they suggest that at the point of signing the contract and receiving the guarantees, Society House may not have undertaken a verification of the documents. That according to Clauses 52.1 and 51. 1, Society House was to ensure that the guarantees were acceptable. He stated that he could not confirm whether the different guarantee documents he was shown are the same because the ones to ZESCO appeared to have had cancellations. 11.14. He added that Yangts' claim for retention is based on documents given to him on the status of the projects. That the records show a retention outstanding based on the works Yangts performed and provisions of the contract. 11.15. As regards the 3rd addendum, he testified that Yangts and African brothers were mandated to execute and bring the project to completion as main contractor and sub-contractor. That despite Clause 6 of the 3 rd addendum, the claim by Yangts was based on the fact that Society House did not dispute the retention money outstanding and the final claim but that they -J38- needed to undertake certain independent verifications and secondly, that they needed the works to be commissioned and completed and a certificate issued. 11.16. The 2 nd witness to be called was Luwita Sayila, the Receiver and Manager of Yangts and called at the instance of Abbeycon. 11.17. He testified that after being appointed, he examined the books of Yangts and discovered that one of the largest receivables due to Yangts was from a company called Society House. This was a special purpose vehicle created by NAPSA for the re development of Society House. He requested for a meeting to discuss his appointment and it was attended by 4 people from NAPSA, amongst them, the assistant Director-General, Mr. Yollard Kachinda and Mr. Philip Muyumbana, the assistant Project Director as well as himself and the legal counsel for Yangts, Mr. Nganga Yalenga. That the assistant Director General was concerned about the status of Yangts and its impact on the completion of the project. That he informed them that NAPSA was proposing to change the payment structure so that sub-contractors would present their claims directly to NAPSA which would in turn pay them directly subject to the certification process. Further, that Yangts would present its -J39- claims separately, exclusive of the sub-contractor claims, and that this was agreed. That from the time he was appointed, all payments to sub-contractors, including to Abbeycon, were paid directly and that all sub-contractors engaged directly with Bicon Zambia, which was the project manager. To this end, he relied on payments at pages 22-31 of Abbeycon's bundle of documents which shows bank transfers. 11.18. With passage of time, NAPSA called for a meeting where he was instructed to sub-contract African Brothers to complete the civil works remaining to be completed by Yangts. This resulted in execution of addendum No. 4 on 29th April, 2016. 11.19. That NAPSA agreed new rates with African Brothers which rates were incorporated in the new agreement. That execution of addendum No. 4 effectively ended Yangts' participation in the project. He submitted a claim for works done by Yangts and all other entitlements under the contract amounting to ZMW270,234,962.82 plus interest and this claim included the sum of ZMW40,443,691.01 due to Abbeycon for exchange rate loss, inclusive of interest, as at 1st September, 2017. The letter from Yangts is at pages 21 to 24 of Abbeycon's supplementary bundle of documents and payment of foreign exchange losses -J40- were agreed outside the contract and contained at pages 12 to 48 and 51 to 54 of Abbeycon's supplementary bundle of documents. He confirmed that Yangts met all its contractual obligations to complete the development of Society House including- 1. signing addendum 2 to 4 of the main contract for contracting new contractors at the behest of NAPSA; and 2. approving deductions from the retention sum when requested by NAPSA for payment of repairs and remedial works. 11.20. That he was aware that the re-development of Society House and Central Arcade was completed around 2018 and that the defect period was 1 year from date of completion of works. That NAPSA and Society House were not being truthful when they refused to pay Abbeycon on grounds that the sub-contract was with Y angts as they had handled all the payments save for 30% advance payment which was made by Yangts. That the payment referred to included forex losses as well as transportation costs of which only a statement would be presented to Yangts for deduction from the main contract sum. 11. 21. When cross-examined by Mr. Nkunika, Mr. Sayila testified that the contract in this case was in two volumes and the volume adduced before Court is the first one. That there was a second -J41- volume as shown at page 34 of Yangts' bundle of documents. That execution of the contract was supposed to be in accordance with both volumes and that if the employer alleges that the works were not done, there is need to refer to both volumes of the contract. He testified that the contract required the employer to have a representative on the project. 11.22 . When referred to Clause 1. l(u) of the contract, he stated that the employer's representative was to supervise the works and administer the contract and that one of the mechanisms for quality control of the work is at Clause 33 of the contract. That it required the employer's representative to identify defects and bring these to the employer's attention. That from the final completion report, the employer's representative was Philip Muyumbana and that he generated the said report. That as at April, 2019, all the works had been completed and commissioned and that this is at paragraph 8. 0 of the completion report. That as a result, he proceeded to make a final claim and a retention claim. That the retention claim was made pursuant to Clause 48.1 of the contract. He testified that at page 8 of Society House's supplementary bundle of documents is the same completion report and it shows the final -J42- account attached as an appendix and that all the parties signed and agreed the final account. That under this final account, the retention sum agreed to be paid to Yangts was ZMW22,273,234.68. That the projected final account is ZMWl,539,238,695.64 which encompasses all the final claims by the main con tractor. 11.23. When referred to the letters he wrote offering Collum Coal Mine to NAPSA, he stated that he wrote the letters without a conclusion that the guarantees were forged. 11.24. When cross-examined by Mr. Nkunta, Mr. Sayila testified that the parties contracted in May, 2011 and 36 months thereafter is May, 2014. That Y angts was expected to construct the building as a commercial building. 11.25. That as at July, 2014, as can be seen from the emails at pages 177 to 178 of Society House's bundle, the building was not ready for occupation. He confirmed that pages 113 to 115 of the same bundle shows a response to Yangts from Society House, on Yangts' request for an extension of time. He admitted being aware that the project had defects. 11.26. He confirmed that addendum number 4 effectively ended Yangts' participation in the project. That the amounts claimed -J43- by Yangts are as at September, 2017. That the claims he submitted were made a year after Yangts ended participation in the project. That the novation had the effect of terminating the relationship between Yangts and Society House . He did not agree that Yangts was no longer privy to the payments process between the sub-contractors and Society House. That the certificates were circulated to all sub-contractors to include the main con tractor. 11.27. When cross-examined by Mr. Phiri, he explained that there are two receivers acting on behalf of Y angts and he handed over to the receiver with priority appointed by Zanaco, Dr. Mugala. He agreed that as at the date of hearing, Dr. Mugala was better placed to respond as regards the claims by Yangts. That he was aware of the contract between Yangts and Abbeycon at pages 1 to 21 of Abbeycon's bundle of documents. He agreed that Society House is not a party to the contract. Further, that the contract does not address foreign exchange losses or transport costs. That Abbeycon was not a party to Zambezi Consortium and is not a party to the main contract. That according to Clause 12 of the contract between Abbeycon and Yangts, Abbeycon could only have a right to the main contract through -J44- Yangts. That he was aware that Yangts tendered as part of the consortium and that the team leader was Bicon Zambia Limited who was the representative of the main contractor. That the employer's representative was Philip Muyumbana and not Bicon Zambia Limited. 11.28. He explained that initially Abbeycon would submit IPCs to Yangts which were handed over to Bicon for certification . After certification, Bicon would hand them over to Society House. He denied that Bicon was the employer's representative . That the interim payments were submitted to Bicon and then to Mr. Muyumbana. He agreed that the contract between Yangts and Society House was never terminated. 11. 29. He disclosed that the last portion of the hotel was completed in August, 2018 and that the defects liability period started running from August, 2018 meaning that it ended in August, 2019. That the final completion report is dated April, 2019 meaning that it was within the defects liability period. That as at the date of the letter of 1st September, 2017 claiming retention of ZMWl 9,000,000.00, it was within the defects liability period. That he was not aware that the defects liability period had been extended because defects had not been -J45- remedied. That he was aware that they were remedial works by an Italian company called Mapei Construction but that he did not know that they were still on going as at the date of the hearing. 11.30. He testified that the exchange rate claim was allowed by Society House based on commercial considerations at the discretion of Society House. He testified that the managing director from Yangts was no longer within Zambia and that he never confirmed or denied the issue of the validity of the guarantees but that it was Yangts that tendered the guarantees. 11.3 l. When cross-examined by Mr. Chileshe, he confirmed that Abbeycon had no claim against Bank of China. 11.32. In re-examination, he testified that Abbeycon was party to the contract as regards what they were required to perform that is why Society House was comfortable to pay it directly. That they were variations to the contract which would include any escalations that would arise during the construction and did not include exchange losses at the same time. He reiterated that Clause 51.1 requires the guarantee to be in a manner acceptable by Society House. That the contract is clear that Bicon was part of the consortium hence not the em player's -J46- representative. He clarified that he was appointed Receiver in October, 2015. 11.33. The 3 rd witness in this matter was Christopher Chikwamo, an accountant at Abbeycon. 11.34. He testified that Abbeycon submitted a tender to Yangts on 6th July and it was notified of having been the successful bidder and consequently signed a contract with Yangts on 23rd September, 2012 at a consideration of K13,897,612,436.00. However, work only commenced in April, 2014. It was also agreed that forex fluctuations would apply as a bulk of the materials were imported. He referred to the contract at pages 1 to 21 of Abbeycon's bundle of documents. He testified that initially, the procedure under the contract was that all completion certificates were to be addressed to Yangts who, in turn, would present them to Society House to be paid as a global payment. 11.35. That from the moneys due to Abbeycon under the sub-contract, only 30% of the advance payment was made by Y angts and all other payments were made by Society House. He referred me to documents at pages 22 to 34 of Abbeycon's bundle of documents which are proof of payments and reconciliations of -J47- payments made as well as pages 50 to 53 of the supplementary bundle of documents, which is Abbeycon's statement of account, of unpaid sums due from Society House. 11.36. He disclosed that Yangts went into receivership and this impacted the project as Yangts was subjected to numerous work stoppages, attempted execution of court processes and other disruptions. As a result, sub-contractors were instructed to invoice Society House which would pay the sub-contractors directly on an individual basis. At the time Society House assumed responsibility of paying sub-contractors, it also assumed the condition relating to payments due to fluctuations in the exchange rate. A fact admitted at page 114 of its bundle of documents, at Clause 8, as well as page 119, in Clause 7.0. He gave examples of payments of IPC 35 in the sum of ZMW58,023.98 referred to as exchange loss 1 was paid as well as the sum of ZMW675,814.72 on IPC 44. That as a result of the huge forex fluctuations, in July, 2016, contractors suffered massive forex losses and put pressure on the project consultants Bicon Zambia to address the issue. 11.37. By an email of 26 th August, 2016, the consultant informed sub contractors that it was only availed ZMW15,000,000. O0 to pay -J48- all sub-contractors who had forex losses. That this email is at page 30 of Abbeycon's supplementary bundle of documents. 11.38. He testified that on 31 st August, 2016, the consultant wrote an email to Abbeycon to the effect that in order to pay IPC 47, Abbeycon needed to accept being paid its forex losses out of the ZMWlS,000,000.00 available to pay all sub-contractors on a yet to be explained formula. He referred to pages 31 to 32 of Abbeycon's supplementary bundle of documents. 11.39. That Abbeycon wrote to Society House's consultant to point out errors in calculations as regards the forex losses it suffered and this letter is at pages 32 to 33 of Abbeycon's supplementary bundle of documents. 11.40. That as a result of the discussion, a sum of ZMW880,53 l.32 was paid on IPC 4 7 which was the last time forex loss was paid. That Abbeycon submitted forex losses up to and including IPC 59 of ZMW28,856,938.37 and Society House only paid a sum of ZMWl,614,368.00 towards forex losses. 11.41. That over and above the forex loses, there is also an amount for transport costs that has never been settled in the sum of ZMWl,911,904.61. As a result, the outstanding amount is- 1. Forex losses ZMW27,242,570.37; -J49- 2. Transport costs ZMW1 ,911,904.61; and 3. Interest ZMW20, 159,502.07 as at 30 th June, 2018, total ZMW49,313,977.05. 11.42. That when Abbeycon approached Society House for settlement of this sum, Society House referred it to Yangts on grounds that Yangts was responsible for payments to sub-contractors. That this is despite the fact that from IPC 22 to IPC 59 all payments had been made to Abbeycon directly by Society House. 11.43. He referred me to documents at pages 7 to 11 of Abbeycon's bundle of documents. That to date, Society House has never raised any complaints about any defects in the works undertaken by Abbeycon and Abbeycon believes that Society House is attempting to evade payment by hiding behind its problems with Yangts. 11.44. In answer to questions in cross-examination by Mr. Nkunta, Mr. Chikwamu testified that there is no clause in the contract that forex losses would apply or that forex losses or transport costs would be paid. 11 .45. He explained that a domestic sub-contractor is engaged by the main contractor without involvement of the employer while a nominated contractor is one freely selected by the employer. -JSO- That Abbeycon was engaged as a domestic sub-contractor at the discretion of Yangts. 11.46. He explained that Abbeycon would initially submit its payment certificate to Yangts. That Yangts would then submit to Bicon for certification. 11.47. When referred to paragraph 13 of Abbeycon's statement of claim, he confirmed that the import of that paragraph is that Society House terminated the contract. He conceded that at no point did Abbeycon submit an IPC directly to Society House for payment. 11.48. When cross-examined by Mr. Phiri, he testified that payments for exchange losses were based on a commercial decision. He explained that the statement of claim has forex losses, transport and interest but that he did not know the rate of interest applicable. He further agreed that there was no agreement on the application of interest between Abbeycon and Society House. 11.49. When cross-examined by Mr. Chileshe, he testified that Ab beycon has no claim against Bank of China. 11.50. In re-examination, he testified that interest was charged on the difference in the IPCs paid by Society House. -J51- 11.51. The 4 th witness, Mervin Mwansa, who was called at the instance of Society House, is a Quantity Surveyor and Acting Director of Projects at NAPSA. 11.52. His evidence was more or less a repetition of Society House's pleadings except that he referred to various documents in the bundles of documents. He also referred to the contract, joint venture agreement, the various addenda and outlined various portions in these documents. 11.53. He testified that Society House made an advance payment of ZMW183,272,635.10 and that Yangts was to provide a validly issued and genuine advance payment guarantee to this effect. 11.54. He testified that on 26 th May, 2011, Yangts as lead contractor, on its own behalf and on behalf of Zambezi Consortium, entered into the subject contract. That the agreed sum was ZMW407,776,661,303.00. 11.55. He outlined the members of Zambezi Consortium as- 1. Yangts (main contractor); 2. Bicon Zambia (project manager, lead consultant, civil and structural engineering consultants); 3. Louis Karol and PJP Associates (the Architects); 4. Bicon Zambia Limited and BWK (PTY) Limited, (the mechanical and electrical engineering consultants); and -J52- 5. HB Chalwa Associates and Turner and Townsend (PTY) Limited, (the quantity surveyors). 11.56. That this joint venture is at pages 143 to 170 of Society House's bundle of documents. 11.57. He testified that Society House made the advance payment on or around 6 th June, 2011 and to this end, he referred to a tax invoice and transfer funds instructions at pages 4 to 7 of Society House's supplementary bundle of documents. 11.58. That it was an express or implied term of the contract that Yah.gts would perform its obligations as stipulated in the contract, the project proposal and generally to a reasonable quality expected in a commercial building contract. That they were delays in completion of the works and some of the works were substandard and on 31 st July, 2014, Louis Mifsud of Hilton Hotel, wrote an email to Yangts ' Project Manager to the effect that based on the Hilton team's site, they did not believe the building would be ready for handover by 1st June, 2015, as was previously scheduled, for the following reasons- 1. lack of appropriately qualified construction management and finishes supervisors; 2. lack of a credible program of works with key trackable milestones; -JS3- 3. lack of attention to detail resulting in a large number of defects; and 4. inability to complete the two mock-up rooms in a timely manner and to the quality required. 11. S9. He referred to this email at pages 177 to 178 of Society House's bundle of documents. 11.60. That on 1st December, 2014, NAPSA, on behalf of Society House, wrote to BICON advising that the NAPSA Board of Trustees, at its meeting of 21 st November, 2014, considered the revised cost for the project and gave additional approval of the cost variation of ZMW226,554,703.44 subject to the following conditions: 1. that the cost variations be fixed contracts with guarantees from each of the members of the consortium, with no further escalations in the total project cost estimated at ZMW699,598,830.55 inclusive of tax; 2. that management puts in place stop gap measures that would ensure that the project was delivered within the timelines and revised costs; and 3. that an independent project manager be engaged. 11.61. He referred to documents at pages 125 to 127 of Society House's bundle of documents. 11.62. That on 5 th August, 2015, Yangts requested for extension of time citing the following reasons- 1 . inclement weather; -J54- 11.66. On 3rd March, 2016, Bicon Zambia wrote to Society House intimating that Yangts had financial difficulties completing the work. Therefore, the consortium resolved that the remaining scope of work be sub-contracted in full to African Brothers and this was because African Brothers had already fully mobilized on site since being sub-contracted in November, 2015. 11.67. Bicon requested for ZMW46,669,504.54 for African Brothers to complete the said works. This request is at pages 185 to 188 of Society House's bundle of documents. 11.68. He testified that on 10th June, 2016, Bicon wrote to Society House referring to Zambezi Consortium's application for extension of time of 25 th February, 2016 as well as email correspondence from Mr. Muyumbana raising queries over the submission for extension of time number 3 where Society House was asking for justification as to why it should be given an extension. That ultimately, the letter proposed the following revised project completion dates: 1. Retail mall, BO date 30 th June, 2016; 2. Office block completion date 30 th August, 2016; and 3. Hotel completion date 31 st December, 2016. 11.69. He referred to pages 179 to 183 of Society House's bundle of documents. That on 9th August, 2016, Society House responded -JS6- to the letter of 10th June granting an extension of 4 months with costs and 5 months without costs. The contract completion date was revised from 31 st March, 2016 to 31 st December, 2016 . However, this extension did not apply to Yangts who caused the delay of the project completion. Thus, liquidated and ascertained damages were applicable to Y angts effective 1st April, 2016, until full project completion. He referred to a letter at pages 189 to 194 of Society House's bundle of documents . That this letter was acknowledged on 4 th October, 2016 by the project manager on behalf of Yangts. That ultimately, the project manager requested Society House to reconsider its position on the above. This request is at pages 175 to 176 of Society House's bundle of documents. 11. 70. That on 5th December, 2016, Bicon further made an application for extension of time number 4 detailing reasons for delay and proposing the revised hotel completion date be set at 31 st July, 201 7. This is contained in a letter at pages 1 71 to 174 of Society House's bundle of documents. That on 22 nd February, 2017, Society House responded to the request for extension number 4 and granted the extension particularly, 6 months with costs and 1 month without costs. The contract completion date was -J57- revised from 31 st December, 2016 to 31 st July, 2017. It was also stated that this was the final extension of time and this 1s contained at pages 195 to 198 of the defendant's bundle of documents. That further, the project was completed on the following timelines: 1. Shopping mall and Parkade completed and commissioned in August, 2016; 2. Office block completed and commissioned in June, 2017; 3. Hotel which marked completion of the whole of the works completed and commissioned in August, 2018. 11.71. He referred to pages 132 to 142 of Society House's bundle of documents particularly page 137 for the project status as well as pages 8 to 19 of Society House's supplementary bundle of documents being appendix A and summary of final account. That on 1st September, 2017, Yangts requested an escalation of the sums due to it as well as an extension of time with costs for completion of the project. That on 11 th October, 2017, Society House responded to the request of 1st September, 20 1 7, were Y angts requested a number of payments due to increased costs in the following manner: 1. Increase costs associated to with material cost fluctuations; 2. Increase costs with labour cost fluctuations; 3. Exchange rate fluctuations; -J58- 11.75. That as a result of Yangts' failure to complete the project and remedy the defects, Society house rightfully withheld the retention sum. 11. 76. It was his evidence that on 8 th January, 2020, Society House wrote to Engineering Institute of Zambia lodging a formal complaint for below standard structural engineering services rendered by both design and construction structural engineers on the project which resulted into office block concrete column failure. He referred to a letter at page 99 of the defendant's supplementary bundle of documents. 11.77. He disclosed that due to Yangts sub-standard works, around 25th March, 2020, NAPSA wrote to Bicon in response to Bicon's request for strengthening of sample columns. That NAPSA approved the said strengthening of the sample column and indicated that the cost would be offset against Yangts' retention money. This letter appears at pages 103 to 104 of Society House's supplementary bundle of documents. That on 29th January, 2020, NAPSA, on behalf of Society House, wrote to Yangts indicating that Yangts' claims would be offset against the retention amount. That this letter is at pages 100 to 102 of Society House's supplementary bundle of documents. -J60- 11. 78. He testified that on or around 9th November, 2022, NAPSA proposed that the parties engage an impartial and credible structural engineering consultancy firm to investigate the integrity of the building's structural elements. That the cost would be borne by Bicon as design and supervision engineers and Yangts. This letter is at pages 106 to 107 of Society House's supplementary bundle of documents. That around 11th November, 2022, Bicon agreed with the said proposal in a letter at pages 108 to 109 of the same bundle. 11.79. Around 13th April, 2023, NAPSA wrote to Bicon indicating that it was concluding the tender process for the independent investigation and needed confirmation on whether Bicon and Yangts had funds to cover the costs of investigation. That in a letter of 14th April, Bicon responded admitting that Yangts' works were not up to standard. That as a result, Bicon had to repair column TS and the 4 columns affected as a result of the failure of column TS at its own cost. That Bicon, therefore, requested for reconciliation of the retention funds available for any services to be conducted by the independent engineer. This letter is at pages 112 to 113 of Society House's supplementary -J61- bundle of documents. That to date, remedial measures are still been offset which are as follows: Activity Structural evaluation Supervision of strengthening works Supply and construction works Fees and allowance for hosting meetings Structural review - project expenditure Additional working capital Total direct expenditure From final account Correction of defects Available balance from retention sum Expenditure (ZMW) 1,601,646.22 785,885.79 7,394,747.10 200,433.00 9,262,417.30 2,418,151.84 21,663,281.25 22,273,234.68 21,663,281.25 609,953.43 11.80. That the excel worksheet tabulating the above is at page 116 of Society House's supplementary bundle of documents. He went on to outline IPC number 1 to 8 at pages 117 to 173 of Society House's supplementary bundle of documents on remedial works carried out by KMA. That further, the value of remedial works done by MAPEi construction team and ABC installation as indicated in the excel worksheet above are supported by the project final account of August, 2021 at page 174 of Society House's supplementary bundle of documents. That Society House cannot ascertain how much remedial works will cost because the second independent engineer is on site carrying out a detailed structural assessment of the entire development -J62- since all structural reports issued so far are partial and limited 1n scope. He went on to testify on the advance payment guarantee and performance guarantees and their various renewals. 11.81. He testified that on 2nd November, 2016, Bank of China wrote to Society House referring to Society Houses' call on the guarantees and stating that it could not honour them for the following reasons; 1. That they were issued to ZESCO Limited on 26 th May, 2011 and not Yangts; 2. That the signatures of the persons purporting to have signed did not match the staff signatures; and 3. That it received a letter of 31 st October, 2016 from Yangts where Yangts confirmed not to have outstanding guarantees with Bank of China. 11. 82. That Bank of China further proposed a meeting among all three parties and possibly look into criminal investigations to establish the facts. That this letter is at pages 111 to 112 of Society House's bundle of documents. 11.83. He also disclosed that the Receiver, Luwita Sayila, wrote to Society House proposing and offering Collum Coal Mine to cover the costs of the unrecovered sum of ZMW75,360,490.79 of the advance guarantee in exchange for Society House to drop -J63- criminal charges for fraud committed by Y angts and further to offset amounts owed by Yangts on the guarantees. That these letters are at pages 363 to 364 and 360 to 361 of Society Houses' bundle of documents and 358 to 359 of the same bundle. 11. 84. That the Zambia Police, in a letter of 2 nd October, 2 0 1 7, provided a progress report which rehashed sentiments of Bank of China. Therefore, Society House requested for further investigations on the issue. 11.85. As regards Abbeycon, he testified that Society House had no contract with Abbeycon. That there was never an agreement regarding the works or payments for works which Abbeycon was carrying out under the project. That Society House would only make payments directly to Abbeycon once an IPC was prepared and certified by the consultant. That the !PC's would be accompanied by a schedule of sub-contractors or suppliers who were due to be paid from the certified amount. He referred to documents at pages 374 to 396 of Society House's bundle of documents. Further, that the change in payment modalities from payment directly to Yangts originally to payment to sub contractor or supplier as listed by the consultant arose to -J64- ensure that there was no further delay 1n works following Yangts' financial challenges. 11.86. In cross-examination, Mr. Mervin Mwansa agreed that he was not with Society House between May, 2011 and September, 2016, having joined in September, 2016. That however, he interacted with the records on the issues in this case. 11.87. When referred to minutes at pages 9 and 10 of Society House's bundle of documents, he testified that he could not confirm if as at 26th May, 2011, all the tenants had vacated the premises. That however, 1st June, 2011 was a cut-off date, therefore, the tenants could have vacated by this date and some tenants could have even vacated earlier. 11.88. He agreed that the employer's representative was required to supervise works and administer the contract. Further, that the employer's representative under the contract had the responsibility to search for defects. 11.89. He disclosed that the defects liability period was 12 months as contained in Clause GCC 1.1 (m). Further, that at paragraph 8.0 of the final completion report, is a project status but there were still defects after commissioning. He disclosed that the office block and parkade are not being used. -J65- 11. 90. He agreed that there's a conclusion at paragraph 13 of the final completion report but that this is not what is on the ground . That the building is a danger to the public. 11. 91. It was his evidence that there was excessive rock and absence of a geotech report at tender. That the consortium should have done a geotech report. 11.92. He testified that the retention amount withheld or deducted according to the final project account was ZMW22 ,273,234.68. He disclosed that Yangts suffered a penalty of ZMW75 ,570 ,238.81 for delaying the contract. That this is on IPC at page 23 of 3 rd December, 2019. That this is what accumulated as liquidated and ascertained damages against Yangts apart from the ZMW76,000,000.00 advance payment. That liquidated damages reflect in the main contract but not in the addendum. l l. Y3. He testified that Clause 51.1 of the contract does not use the word genuine acceptance by employer. That guarantees are security documents with a template in the contract for the con tractor to use. 11.94. When cross-examined by Ms. Nsonga, he testified that Yangts and not Society House had the obligation to pay Abbeycon. -J66- When referred to page 22 of Abbeycon's bundle of documents, he testified that it shows the final claim. Further that he could not confirm that the ceiling and partitioning was done by Abbeycon. Further that Abbeycon was paid for the work that was certified and that all certified amounts for all sub contractors had been paid. 11.95. When referred to an email at page 25 of Abbeycon's bundle of documents, he stated that according to the email, all payments of costs were paid discretionarily. 11.96. When cross-examined by Mr. Chileshe, he stated that he could not confirm if NAPSA contacted Bank of China to confirm the validity of the guarantees. That according to the Police Report, the signatures of Klaus Fundanga, Mr. Zhang Chan and Mr. Gao Hong on the guarantees were simulated forgeries. 11. 97. In re-examination, he testified that Mr. Muyumbana was the employer's representative but at some point, MLN Associates were appointed in that role and were removed and BICON assumed the role of supervision of contractor, certifying payment, quality control, valuation of IPCs for sub-contractors and preparation of monthly progress reports. That all the IPCs were signed and certified by BICON having been prepared by -J67- the professional teams, Turner and Townsend and HB Chalwa. He added that the defects liability period could still be extended beyond the defects liability period if there are still uncorrected defects. That beyond practical completion, there were known defects being carried out. 11.98. He explained that retention is money held on value of work done in a month and a percentage of which the client retains. That the purpose is for use to correct unknown defects that arise after practical completion. 11.99. He testified that the ZMW75 million relates to liquidated and ascertained damages which were charged to Yangts by its failure to complete the project by the revised completion date. That the IPC of 3rd December, 2019 reflected ZMW75 million as damages payable to NAPSA. 11.100. As regards Abbeycon, he testified that the letter at pages 21 to 23 of Abbeycon's bundle shows that the debt was not admitted because it was not contractual. 11.101. The 5th witness in this matter, and called at the instance of Bank of China, was Sandra Kabungwe Namukombo, the Public Relations Officer and Head of Security at Bank of China. She confirmed that Bank of China issued letters of guarantees -J68- bearing numbers BOCZLG 135/2011 and BOCZLG 137 /2011, respectively, in favour of BONLE(FAZHOU) International Company Limited of China as security for a transaction relating to supply of various goods to ZESCO Limited and not Society House under two separate bids bearing numbers ZESCO / 016 / 11 and ZESCO / 01 7 / 11, respectively. She explained that the guarantees expired on 24 th September, 2011 and 1st October, 2011, respectively. She referred me to pages 1 and 2 of Bank of China's bundle of documents. 11.102. That the advance payment guarantee and irrevocable performance guarantee purportedly issued by Bank of China to Society House are a forgery, a fact that has been admitted by Society House in paragraph 18 of the counter-claim. She referred to pages 3, 4 and 5 of Bank of China's bundle of documents. She further confirmed that on 31 st October, 2016, the Managing Director of Yangts authored a letter to Bank of China where he stated that Yangts did not have any outstanding guarantee with Bank of China and that all of its credit facilities held with Bank of China had long expired. She referred me to this letter at page 9 of Bank of China's bundle of documents. -J69 - 11.103. In cross-examination, Sandra Namukombo testified that she is an Economist and has a degree in International Trade, Fraud and Prevention. That she works as public relations and head of security at Bank of China under the executive office. 11.104. She explained that where a matter of suspected fraud is brought, her team conducts an internal investigation by reviewing documents and interviewing people alleged to have signed the document. They compare the specimen signatures and speak to the person who deals with that customer on day to-day transactions. In some circumstances, they are also approached by Zambia Police, Anti-Corruption Commission and Drug Enforcement Commission through court warrants. That in this case, the two guarantees were investigated. 11.105. That she generated an advisory to the executive department after speaking to the risk department. As per procedure, the risk department ought to have prepared a report. She confirmed that the two guarantees and their renewals are a forgery. 11.106. That however, it's not possible that the forgery could have been done with the assistance of someone within the bank. When referred to the guarantees at pages 2 and 3 of Society House's -J70- bundle of documents, she stated that on their face, they appear to meet the standards recommended by Bank of China. Further, that the last sentence on both guarantees is a prerequisite . 11. 107. When referred to a letter of demand from Society House at pages 6 and 7 of Bank of China's bundle of documents, she confirmed that the letter passed through her office. That this demand was rejected as seen at pages 111 and 112 of Society House's bundle of documents and that the reasons for the rejection were indicated. 11.108. She explained that the executive office is a custodian of the bank's letterhead and that the bank stamp is kept by the executive office in a safe. She added that the settlement department takes documents to the deputy managing director's office who looks over them and approves them and the documents are taken to the executive office and the individual who takes them signs a ledger where he indicates his name, position and time. 11.109. That the executive director opens a safe where the stamp 1s kept and inks the document. -J71- 11.110. She added that the bank guarantee number is generated through a central system accessed by corporate department. That the ICT center is in London and Beijing and Bank of China can only put names and dates on the guarantees and everything else is generated via the system. 11.111. She explained that the guarantee numbers on the guarantees are genuine but that they relate to a different customer. 11. 112. She explained that Mr. Zhang Chong left Bank of China in 2013 while Mr. Gao Hong is in Germany or one of the branches for Bank of China. That Mr. Fundanga is still with the bank. When referred to the report from the Zambia Police, she disputed the portion that says that the stamp is authentic. 11.113. She agreed that she had seen part of the report before. She explained that she had tried to reach out to Mr. Xue, the CEO for Yangts, but that she failed to get in touch with him. That she did not push this matter further because a third party who receives any guarantee is supposed to contact the bank to verify the guarantee. 11. 114. When cross-examined by Mr. Nkunika, she explained that at the time Mr. Xue wrote the letter at page 9 of Bank of China's bundle of documents where he was saying that Yangts had no -J72- outstanding guarantee with the Bank of China, Yangts was already in receivership as Mr. Sayila was appointed Receiver in 2015. 11.115. This witness was not re-examined. 12.0. YANGTS' FINAL SUBMISSIONS 12. 1. On the 21 st of February, 2024, counsel for Yangts, Mr. Nkunika, Mr. Ngoma and Mr. N. Mwila filed final submissions on Yangts' behalf. On the claim for retention, counsel argued that Yangts has met the requirements of Clause 48 of the GCC to be entitled to the retention sum as pleaded. That the works were certified by Society House's representative thus entitling Yangts to the other half of the retention sum. In this regard, counsel referred me to the case of Morex Contractors Limited v. Nakawa Division Local Government and Kampala City Council.( 1l Counsel pointed out that on 19th October, 2018, Society House acknowledged that Yangts is entitled to the retention sum but merely declined to settle on grounds that the sum was being held as security for unrecovered advance payments made to Yangts. 12. 2. Counsel also referred me to the letter of 19th October, 2018 at page 234 of Yangts' bundle of documents. They argued that in this letter, Society House did not dispute that the retention sum -J73- is due and owing to it but that it seeks to pay it once it recovers the unpaid sums on the two guarantees. They submitted that this approach taken by Society House contravenes Clause 48 of the GCC. They referred me to the case of National Drug Company Limited and Zambia Privatisation Agency v. Mary Katongo< 2 > and argued that this court is bound to enforce the agreement freely entered into by the parties. 12.3. In relation to the final claims, they submitted that the claims constitute the final claims that Yangts was supposed to make in relation to the contract. That following completion and certification of the works, the final account, signed by all the parties indicated the sums that were due and owing. They referred me to the statement at pages 12-16 of Society House 's supplementary bundle of documents to support this position. That all the claims were settled by the Project Final account and as such, no claims should be made outside the project final account by any of the parties. In this regard, they relied on the cases of Husamuddin Gulamhussein Pothiwala Administrator. Trustee and Executor of the Estate of Gulamhussein Ebrahim Pothiwalla v. Kidogo Basi Housing Corporative Society Limited and 31 Others Civi1.< 3 > Catherine Mgendi v. Utumishi Investments Limited Kenya Police Staff -174- Sacco Society Limited Nairobi ELC<4 ) and Housing Finance Co. of Kenya Limited v. Gilbert Kibe Njuguna Nairobi HCCc.<5 ) 12.4. In relation to the claim for preliminary and general expenses, counsel argued that it is as set out in item 1. 1 of the Final Project Account at page 12 of Society House's supplementary bundle of documents and confirmed by both Mr. Sayila and Mr. Mwansa in their respective cross-examinations . 12.5. With regard to attendance to works by sub-contractors, it was counsel's position that the claim is based on the works done by the sub-contractor which are shown as specialist works in the final account. 12.6. In relation to the costs for extension of time, counsel argued that it is also based on the Final Account sum of ZMWlS,733 ,837.77 appearing at item 11 of the final account which stems from Clause 44 of the GCC which provides for costs associated with extension of time on the occurrence of a compensation event and agreed by the parties. 12.7. Regarding the loss of profits, he also argued that it is set out in the final account which includes the escalation costs appearing on item 1.9 of the final account as ZMW16,253,605.55 , exchange loss appearing on item 10.0.0 of the final account as -J75- ZMW47,428,606.93, and import and customs duty appearing on item 12 of the final account as ZMW7, 148,400.97. 12.8. With regard to the deductions of liquidated and unliquidated damages amounting to ZMW75,570,238.81 that Society House deducted from the amount due to Yangts, it was counsel's position that it was never agreed by the parties in the final account but was unilaterally deducted. That these deductions were made contrary to the final account and in breach of the agreement of the parties and that Yangts is entitled to the liquidated and unliquidated damages by Society House. 12.9. In regard to the claim for breach of contract, counsel argued that by refusing to pay the retention sum and the final claims as agreed, Society House breached the contract. In this regard, placed reliance on the cases of Photo Production Limited v. Securicor Transport Limited(sJ and Rapid Global Freight Limited v. Zambia Railways Limited( 7l that discuss breach of contract. 13.0. ABBEYCON'S FINAL SUBMISSIONS 13.1. On 21st February, 2024, Ms. Nsonga, for Abbeycon filed final submissions. She argued that the under Clause 7 of the contract dated 26th May, 2011, Yangts was permitted to sub contract. That it was pursuant to the provisions of this clause -J76- that Yangts subcontracted Abbeycon to do work related to ceilings, partitioning and access on 3rd September, 2012. 13.2. Counsel's position was that Abbeycon's contract was with Yangts. She referred me to the authors of Chitty on Contracts, 25 th Edition, Vol.1 at page 122 and the case of Turnpan-Lonhro Zambia Limited v. Leasing Finance Limited<0l that discuss the doctrine of privity of contract. She argued that the doctrine of privity of contract is a general rule and that it has an exception. She referred me to the learned authors of Halsbury's Laws of England, Volume 9 (4th edition) at paragraph 335. She argued that it is clear that Society House had agreed with Y angts to vary one aspect of the contract between Society House and Yangts as regards the payment of subcontractors and had insisted that it pays the subcontractors their portion of the claims. That this was done when Yangts was in receivership. 13.3. She argued that Abbeycon was made to believe, by Society House , that the best way to ensure that the precarious position of Abbeycon did not affect the project was if payment was not made to Yangts for work done by the sub-contractors. That this amounted to an assignment by act of the parties. She relied on an excerpt at paragraph 337 of Halsbury's Laws of England. -J77- 13.4. In addition, she referred me to the definition of novation according to Chitty on Contracts and argued that there was nothing illegal in the stance taken by Society House. That for novation to be valid, there should be consideration and in this case, it is not disputed that Abbeycon did works in accordance with the schedule of works in the contract between itself and Yangts. 13.5. She argued in the alternative, that Society House is estopped from denying the fact that it assumed Yangts' role in relation to the payments to sub-contractors. She referred me to the case of Hughes v. Metropolitan Railway( 9l which established the principle of promissory estoppel by which a party is prevented from backing out of a promise which the other party had relied on even though the promise was not supported by consideration. She further referred me to the case of Mpongwe Farms v. Dar Farms and Transport Limited( 10l and Mpongwe Farms v. Dar Farms and Transport Limited( 11 l on acquiescence and argued that the issue of acquiescence and waivers arises from the fact that Society House, by paying the subcontractors directly as opposed to through Yangts as the main contractor, waived its right to claim -J78- privity of contract. It was his position that Society House 1s, therefore, bound to pay the claims by Abbeycon. 14.0. SOCIETY HOUSE'S FINAL SUBMISSIONS 14. 1. On 13th March, 2024, Mr. Phiri and Mr. Nkunika filed their final submissions. They began their submissions by giving a recollection of Society House's version of the evidence in this matter. They argued that Yangts is not entitled to its claim as it did not satisfy certain conditions precedent to the triggering of the said claims as per the contract. They argued that Yangts did not satisfy the conditions relating to the payment of the retention sum and was therefore in breach of the condition precedent to the payment of the retention sum. In this regard, they invited me to take note of Clause 48 of the contract. They referred me to the definition of "condition" in Micheal Furmstones, "The Law of Contract," 4 th edition, United Kingdom, Lexis Nexis at page 697 and condition precedent in Black's Law Dictionary 10th edition. They argued that a "condition precedent" is one that must be fulfilled for either the contract to be valid or certain contractual obligations to come into effect as expressed in the case of Bank of Nova Scotia v. Hellenic Mutual War Risks Association (Bermuda) Ltd, The Good Luck.(12) -J79- 14.2. They argued further that Yangts failed to complete the works to the standard required by the con tract as shown by the evidence on record that the works conducted by Y angts were below standard and some selected portions of the office block and parkade did not meet the design structural specifications. They pointed out that the Final Project Report appearing at page 132 of Society House's bundle of documents indicated that the project was plagued with defects and was issued during the defects liability period as per the evidence of Abbeycon's witness and corroborated by Yangts' first witness. The purpose of the retention sum is to remedy any defects which would arise from the work done by Yangts and that as demonstrated, the work done by Y angts was plagued by defects which are still being remedied to date. 14.3. In the alternative, counsel argued that if the Court finds that · Yangts is entitled to retention, then Society House has a right to set off and right to lien. 14.4. In regard to the final account claims, it was counsel's position that Society House was only entitled to payment for the final claims in accordance with Clause 57 of the contract. That Yangts failed to complete the works as per the terms of the -J80- contract and that the building had many defects not adequately addressed hence the defects liability certificate remaining unissued to date. That apart from the document Yangts purports to be the final account at page 236 of its bundle of documents; Yangts has not submitted any supporting documents to substantiate its claims. 14.5. Counsel argued that Yangts are not entitled to the claim for preliminary and general expenses as it has not satisfied the conditions for payment of the preliminary and general expenses. In relation to the attendant to works by sub contractors, counsel argued that Yangts never rendered any services to sub-contractors beyond subcontracting to African Brothers who were paid. That according to Clause 43. 1 of the signed contract, interest is only chargeable on certified amounts that remain unpaid beyond 28 days from the date of certification and is not applicable to this case. In regard to the costs for extension of time, counsel argued that there is no compensation event entitling Yangts to costs associated with extension of time and that it has not led any evidence to prove that there was an occurrence of any compensation event. They also highlighted Clause 28 of the contract which guides on the -J81- circumstance and manner in which an extension of time can be awarded. That Yangts had scaled down construction works on site due to incapacity and thus a need for an extension did not arise. 14.6. In relation to loss of profit, counsel argued that Yangts' claim is baseless. They relied on Clause 4 7 of the contract to argue that it is clear that the contract was a fixed price contract and any fluctuations were to be covered under the contingency sum unless there was a major variation by Society House. They also argued that the evidence on record reveals the contract escalation was as a result of Yangts' inability to complete the works on time. 14.7. With regard to the deduction of the liquidated and unliquidated damages, counsel argued that Yangts' assertions that neither the contract nor its addenda provide for liquidated and unliquidated damages is inaccurate. They relied on Clause 49.1 of the GCC and Clause 49.1 of the SCC. 14.8. With regard to Yangts' claim for breach of contract, it was their position that since Yangts is not entitled to its claims, Society House is therefore not in breach of the contract. That Yangts should instead be held liable for breach of contract as it was -J82- in breach of the contract by failing to complete the project in the stipulated time and by submitting invalid guarantees and the non-payment of the guarantees. 14.9. They argued that in relation to Abbeycon, there was no privity of contract between Abbeycon and Society House and that the claims by Abbeycon are not contractual. They also referred me to the case of Turnpan-Lonhro Zambia Limited v. Leasing Finance Limited,(BJ Zonal General Manager, MIS lrcon International Limited v. MIS Vinay Heavy Equipment(13 > and Micheal Furmstones, "The Law of Contract," 4 th edition, United Kingdom, Lexis Nexis to discuss the doctrine of privity of contract. They contended that the redevelopment of Society House and Central Arcade was managed through a team of consultants with a project manager. That one of Society House's responsibilities under the project was to facilitate the payment of any IPC which had been verified by the consultants. It was their position that Society House and Abbeycon did not, at any time, have an agreement regarding the works or payments that Abbeycon was carrying out. That it is evident that Abbeycon has no direct claim/interest under the agreement between Yangts and Society House as it has a separate agreement with Yangts. -J83- 14.10.ln relation to Abbeycon's claim that there was assignment and novation among the parties, they began their argument by referring me to the learned authors of Halsbury's Laws of England at page 257, Butterworths & Co (Publishers) Ltd. (1954) and Michael Furmstones, The Law of Contract, 4 th edition, United Kingdom, 2010, Lexis Nexis at page 1504 and the case of Van Lynn Developments Limited v. Pelias Construction Company Limited( 14l on the law on assignments. They submitted that from the authorities, there must be notice in writing of the assignment and no such evidence was produced by Abbeycon. 14.1 l. In respect of the law on novation, they referred me to the case of Kapilaben and Others v. Ashok Kumar Jayantilal Sheth through POA Gopalbhai Madhusudan Patel and Others Civil,( 15) Halsbury's Laws of England 3 rd edition, Volume 8 at page 262 paragraph 460. They argued that neither Yangts nor Abbeycon led evidence to show that there was consent between all the parties to substitute the sub-contract between Yangts and Abbeycon with a new contract between Abbeycon and Society House. 14.12.ln relation to Abbeycon's arguments on promissory estoppels, they argued that Abbeycon's reliance on the principle of estoppel is erroneous. That, promissory estoppel cannot be -J84- used to enforce a right. They referred me to the following authorities on promissory estoppel to augment their argument: 1. Central London Property Trust Ltd v. High Trees House Ltd:(16) 2. Durham Fancy Goods v. Micheal Jackson (Fancy Goods) ;(17l 3. The Scaptrade;( 1 Bl 4. Hughes v. Metropolitan Railway Co;(9l 5. Alan Co Ltd v. El Nasr Export & Import Co.;( 19l 6 . D & C Builders v. Ress (1965) 2 QB 617Y0l and 7. Combe v. CombeY1 l 14.13. I.n relation to acquiescence, they submitted that there was no acquiescence and that the principle of acquiescence does not arise as there is no question about whether either of the parties' rights were infringed upon and the said party decided to sit on its rights. They also argued that the claims made by Abbeycon are not contractual as they were not provided for by either the main contract or the sub-contract. 15.0. BANK OF CHINA'S FINAL SUBMISSIONS 15.1. Mr. Chileshe, counsel for the Bank filed final submissions on 13 th March, 2024. He gave a recount of the Bank of China's version of the evidence in this matter. He submitted that the bank produced evidence to show that the advance payment -J85- guarantee and performance guarantee were fabricated without the knowledge or consent of the bank. He added that the Zambia Police issued a report that confirmed that the signatures on the advance payment guarantee and performance guarantee were simulated forgeries and there were no records to show that the guarantees were issued by the Bank. He relied on the case of Fedco (P) Ltd &Another v. SN Bilgrami & Others( 22 ) to argue that the bank can raise the defence of fraud if there is a dispute on whether a creditor or debtor concealed or misrepresented the true nature and terms of a loan and guarantee. He submitted that neither Yangts, Abbeycon nor Society House produced any evidence to rebut or challenge the findings of the police report and thus the evidence remains uncontroverted. In this regard he referred me to the case of Tui Ltd v. Griffiths_{2 3 ) 15.2. Additionally, counsel submitted that Yangts offered a solution to Society House on how to recover the sum of ZMW75,360,490.79 arising from the forged guarantees in order to avoid the directors of Yangts facing criminal charges. He referred me to page 358 of Society House's bundle of document -J86- which was a letter addressed to the directors ofYangts authored by Luwita Sayila to support this position. 15.3. He referred me to the learned authors of Halsbury's Laws of England, 5th edition, Volume 48, Financial Institutions (2021), to submit that the evidence on record is that the guarantees were forgeries and, therefore, a fraud and are null and void. 15.4. He submitted that the only inference that can be reached is that the bank did not issue the bank guarantees as there is no record of any bank guarantees recorded or reflected in the books and accounts of the bank in relation to the contract between Yangts and Society House. He also referred me to the procedure undertaken by the Bank before issuing any payment guarantee. 15.5. It was also counsel's contention that Society House was negligent in the way it handled the issue of the guarantees as it did not contact the Bank to find out whether the guarantees were genuine. He submitted that Society House should have conducted its own due diligence to verify the guarantees and should not blame the Bank for a clear fraud that was occasioned by Yangts. -J87- 15.6. It was his contention that the Bank was not negligent or involved in any forgery and was a victim of the fraud. He argued that the Bank is not liable under the guarantees as they were forged and invalid. He referred me to the following authorities that deal with negligence and the assignment of liability: 1. Oxford Dictionary of Law. 6 th edition at page 353: 2. Blyth v. Birmingham Waterworks Company;( 24 l 3 . Charlesworth and Percy on Negligence (London, Sweet & Maxwell) 2010 at paragraph 1-01 at page 3: 4 . Fluid Base Industries Limited and Barclays Bank Zambia Limited PLC;( 25 > and 5. Brenda Kachasu (Suing as Administrator of the estate of the late Paul Kachasu) v. Mwelwa Manda (Sued as the Administrator of the late Francis Manda), University Teaching Hospital and Attorney General. (25 > 15.7. On the effect of a fraudulent or forged advance payment guarantee and performance guarantee, counsel submitted that the payment guarantees are null and void. He referred me to the case of Brian Mataka v. Prisca Kachinga & Joel Chitambala(27 > and Kitwe Supermarket v. Southern Africa Trade LimitedY0 > 15.8. On privity of contract, it was counsel's position that the Bank is not privy to the agreement between Society House and Yangts and is correctly not a party to the proceedings by the original action. He submitted further that Yangts admitted, by a letter -J88- on page 9 of the Banks bundle of documents, that Y angts does not have any credit facilities with the bank. In this regard he referred me to the following authorities on privity of contract: 1. Zambia Oxygen Limited and Zambia Privatisation Agency v. Paul Chisakula. Francis Phiri Yesani Chimwala. Rumbani Mwandira and Richard Somanje;(29l 2. Chitty on Contracts Volume 1 at page 967 and 969; and 3. Teichmann Zambia Limited v. Mumana Pleasure Resort Limited & Puma Energy Zambia PLC.( 30l 15.9. In regard to the alternative argument on third party proceedings, it was counsel's contention that the counterclaim is not the proper procedure to bring such claims against the Bank as it is not a party to the contract between Society House and Y angts and that the guarantees are not a part of the original action. 15.10. That Society House invoked the wrong process when it issued a counter-claim instead of third-party proceedings against the bank. He argued that the Bank never took out a claim against Society House which makes the counter claim against it irregular and absurd. In this regard he referred me to the following authorities on third-party proceedings and counter claims: -J89- 1. Order 14 Rule 4 of the High Court Rules SI No. 58 of 2020 (as amended). Chapter 27 of the Laws of Zambia: 2. Order 16 of the Rules of the Supreme Court of England 1999 edition; 3. Kitwe City Council v. William Nguni: 131 > and 4. Barclays Bank v. Tom.<3 2 > 15.11. In regard to the burden of proof, he submitted that the onus is on Society House to prove that the Bank was negligent and that the Bank cannot be faulted for the fraudulent activities of Yangts and should be absolved from liability. He placed reliance on several authorities that discuss the burden of proof- 1. Phipson on Evidence, 14th edition paragraph 402 at page 50; 2. Constantine Line v. Imperial Smelting Corporation;< 33 > 3. Khalid Mohamed v. The Attorney General:<34 > 4. Akashambatwa Mbikusita Lewanika, Hicuunga Evaristo Kambaila, Dean Namulya Mungomba, Sebastian Saizi Zulu, Jennifer Mwaba v. Frederick Jacob Titus Chiluba:<35 > 5. Anderson Kambela Mazoka and Others v. Levy Patrick Mwanawasa and Others.<36 > 15.12. In his conclusion, he submitted that the bank would rely on the principle of Ex turpi cause non oritur action to assert that the demand for payment made by Society House is birthed out of an illegality as the bank guarantees were fraudulent. -J90- 16.0. SOCIETY HOUSE'S AMENDED FINAL SUBMISSIONS ON THE COUNTER-CLAIM 16.1. On 3 rd April, 2024, counsel filed amended final submissions on the counter-claim. Counsel gave a recollection of Society House's version of the evidence in this matter. They also pointed out that the burden of proof and standard of proof lies on Society House to prove its claims against Yangts and the Bank. In this regard, they referred me to the following authorities: 1. Charanjit Singh and Mohamed Ramjohn. Unlocking Evidence. 3rd Edition. 2016. New Yorj Routledge: 2. Tiens Kahenya v. The Attorney General:(37 > 3. Halsbury's Laws of England. 3rd Edition. Volume 15 at page 267: 4. Howard MN. Phipson on Evidence. 15th Edition. 2000. London: Sweet and Maxwell paragraph 4-35 at pages 80 and 81: 5. Wilson Masauso Zulu v. Avondale Housing Project Limited;(3a> and 6. Khalid Mohamed v. The Attorney-GeneralY4 > 16.2. They submitted that the main thrust of Society House's claim against Yangts is that Yangts was in breach of the contract because of failure to complete the project on time, poor workmanship and submitting forged or fraudulent guarantees. -J91- 16.3. In relation to the delay in completion of works, they referred me to various correspondence at pages 125 to 127, 113 to 115, 132 to 142, 177-183 and 185 to 194 of Society House's bundle of documents which showed instances in which Yangts delayed to complete the works and asked for extension of time until the project was complete. 16.4. In terms of the substandard works, counsel referred me to page 99 of Society House's supplementary bundle of documents, a formal complaint for the standard of services rendered on the project. That as a result of the above breach, Society House has suffered colossal financial loss. 16.5. In regard to the payment of the guarantees, counsel argued that Society House has been unable to successfully claim on the guarantees and as such, Yangts should be held liable for the alleged fraud committed. He submitted that from the law and evidence on record, Yangts committed fraud as it submitted forged and fraudulent bank guarantees knowing that they were not authentic for the purpose of inducing Society House into entering into the contract. They referred me to the following cases that deal with fraud: 1. Derry v. Peek;t39l -J92- 2. Nkongolo Farm Limited v. Zanaco & 2 Others:(40 > 3. Bater v. Bater:(41 > and 4. Hornal v. Neuberger Products Ltd.(42 > 16.6. They gave instances in which fraud was admitted by Yangts in Society House's bundle of documents to buttress his point. 16. 7. On the claim for loss of business, it was their submission that due to Yangts failure to complete the project on the project completion date, Society House lost revenue amounting to ZMW21,550,957.48 as at 31 st December, 2021 as it was unable to take in tenants as envisaged. They argued that despite insufficient evidence of the same claim, the court should still rely on the pleadings of Society House and the evidence adduced by its witness . They referred me to the cases of Victor Koni v. Attorney General(43 > and the case of Madison General Insurance Company Limited v. Avrill Cornhill and Micheal Kakoma.(44) They also submitted that Society House had mitigated its losses resulting from Yangts' breach of contract by proceeding with African Brothers as opposed to sitting and letting the losses run as guided by the case of Ng'onga v. Alfred H. Knight Zambia Ltd.(45)They also invited me to award interest in the event that I find that -J93- Society House is entitled to its reliefs as per the guidance in the case of Zambian Breweries PLC v. Lameck Sakala.(46) 16.8. In regard to costs, they submitted that costs should also be awarded to Society House should the matter be settled in its favour and placed reliance on the case of YB and F Transport Limited v. Supersonic Motors Limited.<47l 16. 9. In relation to the Bank of China, they submitted that the crux of Society House's claim is that it is entitled to the relief claimed against the Bank as the Bank was negligent for its involvement in issuing the guarantees. They submitted that the evidence on record demonstrates that the Bank, whether by itself or through its employees, was negligent. They submitted that banks may also be open to claims by third parties for negligence. In support of this position, they referred to the learned authors of Banking Litigation, 2 nd edition London Sweet and Maxwell (2005) at page 6 and the cases of Box v. Barclays Bank Plc<45l and Caparo Industries Pie v. Dickman.<49l It was their argument that banks generally have a tortuous duty of care when providing references and guarantees. That a third party's request for a reference creates the necessary proximity and puts the bank on notice that the third party's will rely on the reference. -J94- 16.10. They submitted that in instances where employees have involved themselves in fraudulent activities without the knowledge of the bank, the bank will only be held liable if such acts were within the servant's authority as was the case in Lloyd v. Grace. Smith & Co.(50) 16.11. They submitted that the Bank was negligent as the guarantees were issued on their letterhead and had the Bank's stamp thus showing that the Bank did not care in safeguarding its stationary and instruments and the guarantee number was genuine which shows that the Bank did not ensure that details were kept confidential. 16.12. In regard to the second relief for payment of the sums on the two guarantees, counsel referred to the following authorities on guarantees: 1. "Principles of Banking Law" Oxford University Press. Oxford 1997: 2. John Odgers (KC) and Ian Wilson KC "Pagets Law of Banking". 16th edition. London. LexisNexis: 3. URDG 458. Articles 16. 20 and 24: 4. Cavmont Bank Ltd v. Spancrete Zambia Ltd & 2 Others.<51 ) 16 13. They submitted that the Bank was under an obligation to pay the unrecovered sums on the guarantees as soon as it received the demand from Society House. In the alternative, they -195- referred to Article 24 of the Uniform Rules for Demand Guarantees (URDG's) to argue that the rejection of the demand did not conform to the URDG's and was therefore invalid and that the Bank ought to pay the unrecovered sums on the guarantees as Yangts' guarantor. They reiterated their submissions on interest and costs above. 17.0. YANGTS' REPLY TO SOCIETY HOUSE'S OPPOSITION TO ORIGINAL ACTION AND IN OPPOSITION TO SOCIETY HOUSE'S SUPPORT OF THE COUNTER-CLAIM 17. 1. On 28th March, 2024, Mr. Nkunika, Mr. Ngoma and Mr. Mwila, filed Yangts' submissions in reply to both the main action and in opposition to the submissions in support of the counter claim made by Society House. 1 7 .2. In reply to the main action, counsel's submissions were more or less a repetition of Yangts' final submissions dated 21 st February, 2024. They referred me to the case of Colgate Palmolive (Zambia) Inc. v. Able Shemu Chuka & 100 Others(52 > and National Drug Company Limited and Zambia Privatisation Agency v. Mary Katongo( 2 ) and contended that Yangts is entitled to its claim for the retention sum as no lien or set-off was available to Society House and that the court is duty bound to ensure that Society House upholds the terms of contract. -J96- 17.3. In reply to the submissions in opposition to the counter-claim, counsel argued that Society House's claim for breach of contract is statute barred. In this regard, they referred to Section 2 of the Limitation of Actions Act of 1939 and the case of City Express Limited v. Southern Cross Motors Limited.(53l 17.4. In relation to the argument that the building was structurally defective, they argued that the claim by Society House cannot be sustained as shown by Clauses GCC 33, 34, 35 and 36.1 and the issuance of a certificate of completion of works by Society House's representative. That Society House is not entitled to any claim for breach stemming from the alleged defects in the works. 17 .5. In reply to the claim that Yangts submitted forged guarantees, counsel contended that Society House has no locus standii to bring this claim against Y angts and should have instead brought it against the Bank. They referred me to the learned authors Geraldine Andrews and Richard Millet of Law of Guarantees 5 th Edition, London, Sweet and Maxwell at page 576. That being unconditional, the Bank was under a contractual obligation to pay the sums under the guarantees based on their construction or interpretation. They added that Yangts was a stranger to the -J97- guarantees and by virtue of privity of contract cannot be pursued. He relied on the case of Malas (trading as Hamzeh Malas and Sons) v. British lmex lndustries.(54lThey argued that Yangts was not aware it was a party to the fraud based on the evidence that was presented before court. That the Bank is bound to pay the beneficiary the demands made under a falsified document despite it being tainted by fraud. He relied on the cases of UCM v. Royal Bank of Canada(55 > and Montrad Limited v. Grundkotter Fleischvertriebs GmbH( 55l and Order 16 Rule 1 of the Rules of the Supreme Court of England to support his submissions. 18.0. ABBEYCON'S REPLY TO SOCIETY HOUSE'S FINAL SUBMISSIONS ON THE COUNTER-CLAIM 18.1. On 27th March, 2024, counsel filed submissions 1n reply to Society House's submissions. Her submissions were more or less a repetition of her earlier submissions dated 21 st February, 2024. 18.2. In regards to privity of contracts, counsel clarified that at no time did Abbeycon postulate that it was seeking relief as a result of the non-observance of the contract between it and Society House. It was her position that there were certain acts by Society House, in this case, assumption of direct verification -J98- and payment of claims by the subcontractors from which it can be inferred that Society House had assumed a contractual role outside the main contract. That by going outside the provisions of Clause 43.1 of the main contract, Society House altered the manner of paying the sub-contractors and it is this conduct that created legal relations. In this regard, she referred me to the learned authors of Chitty on Contracts 25 th edition, at page 12 on implied and express contracts. 18.3. In relation to the assertion that Abbeycon did not make any or submit any IPC to Society House, counsel argued that the reason for this was that the contract provided for submission of claims to Society House's representative for verification prior to the payment. She placed reliance on Clause 1 and Clause 42 of the main contract. 18.4. In regard to the claim that there was assignment and novation, she argued that there was evidence that it was decided that payments would be made directly to the sub-contractors and not to Yangts once the payments were verified. -J99- 19.0. SOCIETY HOUSE'S REPLY TO BANK OF CHINA'S SUBMISSIONS ON THE COUNTER-CLAIM 19.1. In the submissions dated 27 th March, 2024, counsel placed reliance on the final submissions on the counter-claim dated 21 s t February, 2024. With regard to the applicability of third party proceedings, counsel referred me to Order 16 Rule 1 and the explanatory note 16/1/4 of the Rules of the Supreme Court of England, 1965, 1999 Edition, White Book. They also referred me to the case of Birmingham and District Land Co v. London and North Western Railway Co( 57>on the right to be indemnified. That the White Book also provides for the remedy of contribution under third party proceedings in addition to indemnification in Order 16 Rule 1 (a) which does not spring from a contractual relationship as per the explanatory note 16/1 /3 of the White Book. They argued that Sub Rules (b) and (c) of Order 16 Rule 1 of the White Book are also not applicable in this case. They referred me to the case of Myers v. N & J Sherick.( 58 ) 19 .2. Counsel argued that the counter-claim is not irregular and relied on Order 15 Rule 3 (1) of the Rules of the Supreme Court of England, 1965,1999 Edition and its explanatory note 16/3/2. They submitted that this claim has been raised too late in the day -JlOO- and as such should not be entertained. They relied on the case of Barclays Bank Pie v. Frank Mutambo, Mutaz Ltd<59l that dealt with what purpose submissions serve. They added that the court cannot depart from the issues raised by the pleadings. In this regard, they referred to the cases of Shipe (Trustee the Salvation Army Zambia) and Others v. Mung'ambata and Others< 60 ) and Lumwana Mining Company and Another v. Lumwana Plant Hire and Construction. (61) 20.0. CONSIDERATIONS AND FINDINGS 20 .1. I have painstakingly considered the var10us claims in this matter, the evidence adduced, parties' submissions and authorities cited. 20 .2. From the evidence, the following matters are not in dispute: 1. On the 26 th of May, 2011, Society House and Yangts, as authorised contracting party of Zambezi Consortium, entered into a contract for the design, supervision and re-development of Society House and Central Arcade, Lusaka; 2 . The contract had General Conditions of Contract (GCC) and Special Conditions of Contract (SCC); 3. The contract was to run for a period of 36 months; 4. A total of 4 addenda were signed post signing of the contract. 5. Along the way, Yangts faced financial challenges and was subsequently placed in receivership; and 6. Yangts requested for various extensions of the date of completion . -J101- 20.3. The.major issues to be resolved, however, are- 1. whether there are defects in the works contracted; 2. whether the advance guarantees and performance guarantees, presented by Yangts to Society House, are forged; and 3. whether Yangts, Abbeycon and Society House are entitled to the reliefs sought. 20.4 The first issue to be resolved is whether there are defects in the works contracted. Connected to this, I will also discuss retention. 20.5. Clause 48 of the GCC provides for retention. It says- "48.1 the employer shall retain from each payment due to the the sec until the proportion stated contractor in completion of the whole of the works. 48.2 on completion of the whole of the works, half the total amount retained shall be repaid to the contractor and half when the defects liability period has passed and the Employer's Representative has certified that all defects notified by the Employer's Representative to the contractor before the end of this period have been corrected. 48.3 On completion of the whole works, the contractor may substitute retention money with an "on demand" Employer guarantee. 20.6. From the above clause, on completion of the whole of the works , 50% or half of the total amount retained was to be paid to -J102- Yangts and the other 50% or half when the defects liability period passed and the employer's representative has certified that all the defects notified by the Employer's Representative to the contractor before the end of this period have been corrected. 20. 7. According to Clause GCC 1.1 (m) and 35.1, the defects liability period is 12 months from the date of practical completion of the project. Clause 35 on correction of defects adds- "35.1 The Employer's Representative shall give notice to the contractor of any Defects before the end of the Defects Liability Period, which begins at Completion, and is defined in the sec. The Defects Lability Period shall be extended for as long as Defects remain to be corrected. 32.2 Every time notice of a Defect is given, the contractor shall correct the notified Defect within the length of time specified by the Employer's Representatives notice. 20 .8. In the present case , Yangts contends that it completed the works and is entitled to the retention. It relies on the Final Project Completion Report of April, 2019 where in Clause 8 it gives the Project Status as- "8.0 Project Status 8.1 The shopping mall and parkade were completed and commissioned in August, 2016; -J103 - 8.2 The offices were completed and commissioned in June, 2017; and 8.3 The Hotel was completed and commissioned in August, 2018. 20 .9. As noted above, the Defects Liability Period shall be extended for as long as the defects remain to be corrected. The question I ask myself is whether the defects liability period remains extended in this case. 20.10. There is evidence that the contract was not completed within the agreed period. This is evidenced by the requests for extensions of the completion date made by Yangts on 5th August, 2015, 10th June, 2016 and 5th December, 2016. Further, the Final Project Completion report was authored in April, 2019, however, there is evidence that as at 18th March, 2020, there were defects that were being rectified. This can be seen from the documents from Kiran Musonda Associates at page 117 to 173 of Society House's supplementary bundle of documents and page 174 of the same bundle which shows repair of 149 columns in the office block by Mapei. The aforementioned documents show that defects remained uncorrected all through to 2021. They further give detailed -1104- It is in the light of this, we are of the view and propose that NAPSA in conjunction with the Quantity Surveyor, HBC undertake reconciliation of the said Retention funds to confirm the amount available for any services to be done by the 2 nd Independent Engineer to be engaged for the investigations. We propose that the Project Quantity Surveyor, HBC working with the NAPSA Projects Team reviews the cost of services to be provided by the 2 nd Independent Engineers to be engaged by NAPSA in order to ensure value for money taking into account the funds available from YJL's retention." [underlining for emphasis only] 20.13. The above letter confirms that there were defects which Bicon, at its own cost, corrected because Yangts had financial challenges. This letter and the one at pages 108 and 110 of the same bundle confirm that there were defects being worked on as at April, 2023. The evidence of Mervin Mwansa, was also emphatic that there are defects to date and that the building remains a danger to the public. 20.14. From the above, I accept the evidence by Society House that there were defects beyond the Completion Report and that there are defects to date and I accordingly find that since there are defects that remained uncorrected as at April, 2023 and to -J106- date, the defects liability period was extended as a result in accordance with Clause 35 referred to above. 20.15. The next issue to be resolved is whether the advance payment guarantees and performance guarantees were forged. 20.16. I will begin by discussing the law as regards demand guarantees. A demand guarantee is one that contains provisions that the guarantor is liable to fulfil the obligations under the guarantee "on demand". The learned author Mark Hapgood, QC, in Sir J. Paget and M. Hapgood QC, "Paget's Law of Banking", 12th Edition, (London: Butterworths, 2002) para 34.2 put it as follows: "The principle which underlines demand guarantees is that each contract is autonomous. in particular the obligations of a guarantor are not affected by disputes under the underlying contract between the beneficiary and the principal. If the beneficiary makes an honest demand, it matters not whether as between himself and the principal, he is entitled to payment. The guarantor must honor the demand, the principal must reimburse the guarantor (or counter-guarantor), and any disputes between the principal and the beneficiary, including any claim by the principal that the drawing was a breach of the contract between them, must be resolved in separate proceedings the bank will not be a party." [underlining for emphasis only] -J107- 20.17. Further, the learned authors of Halsbury's Laws of England, 4 th Edition, Volume 41, para 960, p.819, put it aptly as follows: "Some commercial contracts include provision for one party, often the seller, to procure a so-called performance guarantee or bond from a bank or an insurance or other company in favour of the other contracting party. A performance guarantee or bond commonly provides for payments to be made on the demand of the beneficiary. The contractual obligations arising under such guarantees or bonds are separate from and not dependent upon those existing under the sale contract between the seller and the buyer. Under a performance guarantee or bond payable on demand. the legal position is similar to that under a letter of credit. Thus, once the beneficiary has made a demand (within the time and in the form, if any, stipulated in the guarantee or bond) the bank or other issuer is. apart from fraud on the part of the beneficiary, under a duty to pay, and the other party to the sale contract (at whose instance the guarantee or bond was issued) cannot prevent the bank paying in any case other than one of clearly established fraud or. possibly. other very exceptional circumstances." [underlining for emphasis only] 20.18. In the 5 th Edition of Halsbury's Laws of England, Volume 48, paragraph 246, the learned authors put it as follows: "By issuing a performance bond or performance guarantee, a bank assumes obligations to a buyer or other beneficiary analogous to those assumed by a confirming bank to the seller under a documentary credit. A bank which gives a -J108- performance guarantee must honour that guarantee according to its terms: it is not concerned in the least with the relations between the supplier and the customer: nor with the question whether the supplier has performed his contractual obligation or not: nor with the question whether the supplier is in default or not: and. subject to the fraud exception, the bank must pay according to its guarantee. on demand. if so stipulated, without proof of conditions. A performance bond is virtually a promissory note payable on demand. and certainly has much more of the characteristics of a promissory note than of a guarantee. The bank is simply concerned to see whether the event has happened upon which its obligation to pay arises. Where a performance bond is payable on demand upon the occurrence of a specified event, the beneficiary's demand must state that the event has occurred." [underlining for emphasis only] 20.19. Lord Denning, in Edward Owen Engineering ltd v. Barclays Bank International Ltd<52l in adding to the jurisprudence on demand guarantees, held that- "A bank which gives a performance guarantee must honour that guarantee according to its terms. It is not concerned in the least with the relations between the supplier and the customer: nor with the question whether the supplier has performed his contracted obligation or not: or with the question whether the supplier is in default or not. The bank must pay according to its guarantee, on -J109- demand as so stipulated, without proof of conditions." [underlining for emphasis only] 20.20. The principle that is clear from all the authorities reviewed is that demand guarantees are payable "on demand". Further, that this type of contract of guarantee is autonomous from the underlying contract in that its performance is not dependent on the underlying supply contract between the seller and buyer or contractor and employer, as the case may be. In addition, that a performance guarantee must be honoured according to its terms. 20.21. From the above authorities, it is also clear that apart from the general principles on guarantees, what governs payments that are to be made is what was agreed in the performance guarantee. Further, fraud is an exception to the rule on payment on demand. 20.22. In the present case, Bank of China denied ever issuing the two guarantees in issue to Yangts and in favour of Society House. Yangts insists that it obtained the guarantees from Bank of China. Y angts and Bank of China add that Society House ought to have verified the guarantees. -J110- 20.23. I note the above submissions. However, there is no law that requires an employer to verify a bank guarantee or that failure to verify a guarantee entails that any loss be borne by the employer. Yangts argued that the contract required the guarantees to be acceptable to the employer. My interpretation of the contract is that the form should be acceptable. This can be seen from the sample guarantee in the contract at pages 51 and 52 of Society House's bundle of documents. It does not entail that Society House ought to have verified them. In the present case, Yangts does not dispute presenting the two guarantees and their subsequent renewals to Society House. It insists that it maintained valid guarantees with the Bank of China. The question remains whether the guarantees were genuine. 20.24. It is curious that in all this, there has been no evidence presented by Yangts to show any formal correspondence on the steps it took to apply for the guarantees and that they were approved. It simply insists that they are genuine guarantees. Bank guarantees are security documents whose issuance follows a strict approval protocol. Therefore, I would expect -Jlll- some documentation from Yangts to show the process or steps it undertook to have them issued. 20.25. I must add that the letters of 8 th December, 2016 from Luwita Sayila, as receiver of Yangts to NAPSA, as project funder, makes me more curious. It says, in part, that- "a th December 2016 ' The Director General NAPSA Levy Business Park Church Road Lusaka Dear Sir, Outstanding Advance Payment Recovery-offer of Collum Coal Mine The above captioned matter refers. As you are aware. there is an outstanding issue of recovery of the sum of from the advance payment that was made to YJL on the strength of the Advance Payment Guarantee number BOCZLG135/2011 dated 2011 issued by the Bank of China. As a result of the said anomaly, NAPSA has withheld the payment of the latest IPC presented by Yangts Jiang Enterprises Limited (YJL). In an attempt to reach a win-win situation and resolve this matter. YJL is willing to offer for sell to the NAPSA the above mentioned mine tentatively and subject to negotiations, at USD61,000,000.00. -J112- The current directors and shareholders of YJL are the same directors and shareholders of the said mine and they have mandated myself to dispose of the mine in the manner suggested. Should there be agreement, the necessary legal documents shall be executed to convey the legal interest to NAPSA and to cover the recovery of the advance payment. It is intention of YJL to offset the amounts that NAPSA may be owed whether from the Advance Payment Guarantee or howsoever. The said mine has enormous reserves and the potential for the conversation into thermal energy generation is limitless. We await your response at your earliest convenience. Yours faithfully, Signed Luwita Sayila Yangts Jiang Enterprises Limited (In Receivership) Cc: Director Projects-NAPSA." [underlining for emphasis only] 20.26. From the above, it can be discerned that Yangts offered Collum Coal Mine to NAPSA as a way of offsetting amounts owed by it from "the advance payment guarantee or howsoever". 20.27. Apart from the above, the following day, on 9 th December, 2016, the Receiver wrote another letter to NAPSA which says- "9 th December, 2016 The Director General NAPSA -J113- Levy Business Park Church Road LUSAKA Dear Sir, Outstanding Advance Payment Recovery - NAPSA Interest in Proceeds of Collum Coal Mine. The above captioned matter refers. As you are aware, there is an outstanding issue of recovery of the sum of K76,000,000 (before taking account of retention) arising from the advance payment that that was made to Yangts Jiang Enterprises Limited (YJL) on the strength ofthe Advance Payment Guarantee number BOCZLG135/2011 dated the year 2011 issued by the Bank of China. The said Advance Payment Guarantee has been found not in good legal standing. As a result of the said anomaly, NAPSA has withheld the payment of the latest IPC presented by Yangts Jiang Enterprises Limited (YJL). In an attempt to reach a feasible solution and resolve this matter. YJL shareholders and directors through the Receiver proposes to grant NAPSA rights to sale proceeds of the above mentioned mine which is on the market for sale at a value of $61,000,000. The current directors and shareholders of Y JL are the same directors and shareholders of the said mine and they have mandated myself to dispose off the mine. Should there be agreement; the necessary legal documents shall be executed to convey the legal interest to NAPSA and to cover the recovery of the advance payment. It is the intention of YJL to pay amounts that NAPSA may be owed whether from the Advance Payment Guarantee or howsoever. -J114- perusal, comment and/or execution in order to facilitate the above remedy to the matter at hand. Thus, we await receipt of the executed copies. Yours faithfully, Signed Luwita Sayila Yangts Jiang Enterprises Limited (in Receivership) Cc: Director General Authority Secretary - Director Projects Nganga Yalenga and emphasis only] NAPSA NAPSA NAPSA Associates." [underlining for 20.30. As can be seen from the above letter too, the spirit was to resolve the issue of the guarantee. There was also recognition that the guarantee was not in good standing. 20.31. In addition, on the 31 st of October, 2016, the director of Yangts, Mr. Xue, wrote a letter to Bank of China acknowledging that Yangts had no outstanding guarantees with the Bank and that its credit facility expired a long time ago. This letter is at page 9 of Bank of China's bundle of documents. Yangts contended that Mr. Xue, the director, had no authority to write a letter on behalf of Yangts at that time as Yangts was already in receivership. I agree with this contention . However, the above notwithstanding, the 3 letters -J118- by the Receiver, Mr. Sayila, referred to above confirm Mr. Xue's position. They confirm that Yangts knew that it had no valid guarantees with Bank of China. If it did, one would expect it to protest to Bank of China on the Validity of the guarantees. In fact, this letter by Mr. Xue was copied to Mr. Sayila as Receiver and there is no evidence of any protest. 20.32. I must add that Bank of China produced guarantees with the same numbers as those issued in favour of Society House. They produced the original guarantees which were issued in favour of ZESCO. This further buttresses my point above. 20.33. In addition, there is a report by the Zambia Police whose findings, after a forensic examination, indicate that the signatures on the disputed guarantees are simulated forgeries while the stamp was authentic. This report further confirms that the guarantees were not genuine. 20.34.l must add that the evidence of Sandra Namukombo, from Bank of China, was that the form in which the guarantees were., was, on their face, in accordance with what Bank of China issues. Further, that because she was shown photocopies, she could not tell whether the letter heads were -1119- authentic. She rejected the findings in the report by the Police that the stamp was authentic. She insisted that the guarantees were forged and that the originals were issued in favour of ZESCO. Considering the competing evidence, I rely on the evidence of Sandra Namukombo, the letters by Mr. Sayila which show that the guarantees were forged and the lack of any evidence that they were correctly issued. This is also consistent with the report by the Police that they were not genuine. 20.35. Having said the above, I am of the view and I do not hesitate find that the two guarantees were forged. 20.36. Having dealt with the first two issues to be resolved, I will now deal with the reliefs sought by Yangts, Abbeycon and Society House. 20.37. The first relief sought by Yangts 1s for payment of ZMW19,201,064.82 as retention. I have already stated that according to Clause 48, Yangts was entitled to 50% of the retention sum after completion of the whole of the works and the remaining 50% after the defects liability period. Since I have found that the defects remain uncorrected to date, the -J120- whole works were not completed and the defects liability period was extended. I have also found that there were defects beyond the Final Completion Report. The defects liability period was extended in accordance with Clause 35. Therefore, I find that the plaintiff is not entitled to the retention sum. 20.38. The second claim by Yangts was for payment of the final claim. Clause 57 of the contract states- "57.1 the Contractor shall supply the Employer's Representative with a detailed account of the total amount that the Contractor considers payable under the contract before the end of the Defects Liability Period. The Employer's Representative shall issue a Defects Liability Certificate and certify any final payment that is due to the Contractor within 56 days of receiving the Contractor's account if it is correct and complete. If it is not, the Employer's Representative shall issue within 56 days a schedule that states the scope of the corrections or additions that are necessary. If the final account is still unsatisfactory after it has been resubmitted, the Employer's Representative shall decide on the amount payable to the Contractor and issue a payment certificate." 20.39. From the above, a final claim was to be made before the defects liability period. Society House was to issue a defects liability certificate and certify any final payment due to Yangts before -J121- any payment. In this case, there is no defects liability certificate issued by Society House and the defects liability period was extended. Therefore, no payment can be made. Even if it where argued that the amount of ZMW270,234.962.82 was payable as the final claim to Yangts, there is no evidence as to how this amount has been arrived at. What is encompassed in preliminary and general expenses is not known. What kind of attendance on sub-contractors is not known. The loss of profits has not been outlined. 20.40. As regards the extension of time, it is clear from Clause (vi) of the 3rd addendum that the delayed completion was as a result of severe financial constraints faced by Yangts. This Clause says- "The Contractor has struggled to expeditiously proceed with the execution of the remaining works by virtue of being placed under receivership arising from severe financial constraints which has resulted into prolonged project completion and associated cost over-runs ." 20.41. According to Clause 49 of the contract, Society House was entitled to liquidated damages for each day that the completion was later than the completion date. It also follows that Yangts -J122- was not entitled to costs for extension of time as there was no compensation event in favour of Yangts as envisaged under Clause 44 of the contract. In any case, compensation events are defined in the contract under Clause 44. Yangts has not brought any evidence to prove that it is entitled due to the occurrence of any of the events listed thereunder. 20.42. From the above, I find that Yangts has failed to prove its entitlement to the final claim as stated above and as envisaged under Clause 57 referred to above. 20.43. Yangts also claims damages for breach of contact. As I have found above, there are defects being rectified to date. In a contract such as this one, it's an implied term that the works carried out will be of acceptable industry standards. I say so on the authority of BP Refinery (Westernport) Pty Ltd. v Shire of Hastings_(s3 ) In that case, the Court stated that for a term to be implied, the following conditions, which may overlap, may be satisfied: 1. It must be reasonable and equitable; 2. It must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; 3. It must be obvious that it goes without saying; -J123- 4. It must be capable of clear expression; and 5. It must not contradict any express term of the contract. 20.44. The Zambian Supreme Court had an opportunity to adjudicate this issue 1n Henry Nsama and 134 Others v. Zambia Telecommunications Company Limited.<54 > cited in the Claimant's initial submissions, the Supreme Court stated as follows: "This court would be very slow to read in an implied term into an employment contract, or indeed any other contract, that parties make for themselves especially where the terms are unambiguous.. . An unexpected term can be implied if and only if the court finds that the parties must have intended that term to form part of their contract: it is not enough for the court to find that such a term would have been adopted by the parties as reasonable men if it had been suggested to them." 20.45. I note the Supreme Court's guidance in Colgate Palmolive Zambia Inc. v. Able Shemu Chuka,1521 when it put it plainly that where men of full age and capacity who have the liberty to contract, so contract, their contract shall be enforced by the court. However, I also seek solace from its decision in Henry Nsama which I believe applies in this case. In this case, there is evidence that the defects related to columns that had collapsed. Clearly, implying a term that it was the expectation -J124- of both parties that the construction would be up to standard with no collapsing columns is reasonable and equitable; is necessary to give business efficacy to the contract; it goes without saying; is capable of clear expression and does not contradict any term of the contract. I therefore find that this is one case where the aforesaid term can be implied. 20.46. Apart from the above, Yangts failed to complete the work in the 36 months agreed. In addition, it failed to complete the work despite the various addenda signed. This is demonstrated below. 20.47. Clause 6 of the 3rd addendum was in the following terms: "The contractor and the sub-contractor undertake to carry out and complete the works on or before the 31 st day of May, 2016. Should the contractor refuse, fail or neglect to complete the works by the said date. the parties agree that the sub-contractor shall take up and carry out whatever works remain outstanding and the contractor shall have no claim against the Employer regarding the performance of its obligations under the Agreement, and this 3rd Addendum. or the payment by the Employer of any sum which would have otherwise been due to the contractor for the works." [underlining for emphasis only] 20.48. In Clause 3 of the 4th addendum, it was agreed that- -J125- "The parties agree that the contractor shall execute and complete the works as indicated in the 1 st and 2nd Schedules of the 3 rd Addendum in order to bring the project to a successful and full completion. The contractor undertakes to carry out the works in strict conformity and as outlined in the Bill of Quantities as set out in the 2 nd Schedule of the 3 rd Addendum." 20 49. The above excerpts however, show that the extension was upto 31st May, 2016 and further extended to 31 st December, 2016. There were also extensions given to Bicon upto 31 st July, 201 7. These extensions were not met. This can be seen from the defects that remain uncorrected and Clause 8 of the Final Project Completion Report referred to earlier. In fact, Clause 3 above also states that in the event of failure to complete the works by that date, as can be seen in this case, Y angts shall have no claim against Society House regarding the performance of its obligations under the agreement or the payment by Society House of any sum which would have otherwise been due to Yangts for the works. 20.50. Considering the above, I find that Yangts is not entitled to the claim for damages for breach of contract. As a result of the failure of the claim by Yangts for retention sums and the final -J126- claim, the claim for interest and costs cannot be sustained. Therefore, the entire claim by Yangts is dismissed. 20.51.1 wish to add that having found that the guarantees were forged, it follows that Yangts did not qualify to be awarded the contract as it did not meet the requirements. In Jonathan Van Blerk v. Attorney General and 5 Others,( 55 ) the Supreme Court restated the principle that "fraud unravels all". It follows that on this score alone, Yangts cannot succeed in its claims. Yangts cannot benefit or keep an advantage obtained by fraud. 20.52. I now come to the claim by Abbeycon. It claims ZMW56,759,804.83 for certified works, forex losses and additional transport charges. 20.53. From the evidence presented, Abbeycon came on this contract through a contract it entered into with Yangts. This contract says the following in Clause 12: "12. The contractor will so far as he lawfully can at the request and cost of the sub-contractor obtain for him any rights or benefits of the Building Contract so far as the same are applicable to the sub-contract works but not further or otherwise." -J127- 20.56. In the final submissions, counsel for Abbeycon invited me to find that there was an assignment amongst Society House, Yangts and Abbeycon. However, this issue was not pleaded. I shall, therefore, not consider it as parties are bound by their pleadings. 20.57. On forex losses, there was no provision for this in the Yangts and Abbeycon contract. The email relied upon at page 25 of Abbeycon's supplementary bundle of documents says that- "Dear all, Please be advised that the contract between SHDCL and ZC is a fixed contract hence not subject to fluctuations. However. SHDCL allowed for exchange rate claim No. 1 payment over the initial contract period based on commercial consideration as there is no contractual provision for it. This was and has been done to mitigate the financial risk ZC is exposed to given that the project was tendered for in 2010. With regard to exchange rate claim No. 2, the payment is strictly in relation to extension of time with cost periods granted i.e extension of time with cost 1 and 2 and likely 3 if there will be justifiable grounds. Regards, Philip Muyumbana Acting Direct National Pension Scheme Authority" [underlining for emphasis only] -J129- Abbeycon has failed to prove its claim on a balance of probabilities. 20.61. I now come to the counter-claim by Society House. The first claim by Society House was for ZMW253,367,590.45 being the sum for escalation of the contract sum. This is the difference between ZMW952,966,441.00 and ZMW699,598,850.55. 20.62. A review of the 4th addendum shows that Yangts and Society House agreed to revise the contract sum. Clause (vii) and (2) and (3) of the 4th addendum say the following respectively: "(vii) The 3rd Addendum further provided that in carrying out the works. the contractor would be bound to the price as had been indicated in the Addendum Agreement (1 ). that is. the sum of Six Hundred and Ninety-Nine Million Five Hundred and Ninety-Eight Thousand Eight Hundred and Fifty-Five Kwacha and Fifty-Five Ngwee (ZMK699.598.850.55) VAT inclusive." 2. The parties agree that the said revised contract sum be varied by the total sum of Two Hundred Fifty Three Million, Three Hundred and Sixty Seven Thousand, Six Hundred and Eleven Kwacha and Forty Seven Ng wee (K253,36 7,611.47) inclusive of Value Added Tax, thus bringing the total revised project cost to the sum of Nine Hundred and Fifty Two Million, Nine Hundred and Sixty Six Thousand, Four Hundred and Forty One Kwacha and Forty Seven Ngwee (K952,966,441.47) inclusive of Value Added Tax: for the -J131- execution and completion of all the works and the remedying of any defects therein. The breakdown of the cost variation is annexed as the Appendix to this 4 th Addendum. 3. The parties agree that the contractor shall execute and complete the works as indicated in the 1 st and 2 nd Schedules of the 3rd Addendum in order to bring the project to a successful and full completion. The Contractor undertakes to carry out the Works in strict conformity and as outlined in the Bill of Quantities as set out in the 2nd Schedule of the 3rd Addendum." [underlining for emphasis only] 20.63. From the above clauses, it is clear that the contract sum was locked at ZMW699,598,850.55 in the 1st addendum and this position was reiterated in the 3 rd Addendum. This amount was revised in the 4th Addendum to bring the project to a successful and full completion and remedy any defects. I have already found that there are defects that remained outstanding. This shows that despite revision of the contract sum to complete the project, Yangts failed to complete and remedy any defects as agreed. It follows that Society House is entitled to the amount of the revised sum. I accordingly find that Society House is entitled to the relief. 20.64. On the exact amount however, Clause 3 of the 4 th Addendum refers to completion of the works in strict conformity and as -J132- outlined in the Bill of Quantities as set out in the 2nd schedule of the 3rd Addendum. This entails that the revised sum was for purposes of the works as stated above. From the evidence, it is not clear whether no work was carried out as envisaged. Therefore, I order that the actual amount payable to Society House under this head be assessed by the Hon, Registrar. 20 .65. Coming to the amounts claimed under the guarantees, from the authorities cited above on this issue, it was stated that where there is fraud, the bank or other issuer is not liable to pay. I note the contention by Yangts that the guarantees ought to be honoured by the Bank according to its terms. I do not agree with this submission in the context of this case. The submission by Yangts would hold if the guarantees were issued by Bank of China. In this case, they were not. Therefore, a contractor cannot present guarantees that are forged and rely on the law on guarantees to demand that a Bank, that did not issue them, honours them according to their terms when no terms were agreed . In this case, I find that Bank of China is not liable to pay as the guarantees are a forgery. Society House cannot enforce the guarantees against the Bank of China. However, considering the fraud was by Yangts as it is -J133- the one that submitted the guarantees to Society House purporting them to have been properly issued by Bank of China, it bears the liability. 20.66. Yangts contended that the claim for payment under the guarantees is statute barred. Section 26 of the Limitation Act, 1939 states that time begins to run upon discovery of the fraud. It places limitation at 6 years. In this case, Society House discovered the fraud when Bank of China refused to honour the guarantees. This was on 2nd November, 2016 as seen from letter at page 10 of Bank of China's bundle of documents. The counter-claim was taken out on 27 th January, 2022 . This entails that the 6 years lapsed on or about 2 nd November, 2022. Therefore, the claim was within time. I accordingly find that Yangts is liable to pay Society House ZMW76,636,490.80 on the advance payment guarantee. As the project was not performed to its conclusion, I find that it is also liable to pay Society House ZMW189,208,370.84 on the performance guarantee. 20.67. As regards the claim for breach of contract against Yangts, I have already found that Yangts failed to complete the project. -J134- In addition, it submitted forged guarantees. Again, Yangts contended that this claim is statute barred. Section 2 of the Limitation Actions Act places the limitation at 6 years from the date the cause of action accrued. In this case, the breach occurred when Yangts failed to complete the works which was on 31 st December, 2016. If I take into account the extensions, its 31 st July, 201 7. Having commenced the counter-claim on 27th January, 2022, a period of 6 years had not lapsed in either case. I, therefore, do not hesitate to enter Judgment in favour of Society House for breach of contract. I order that these damages be assessed by the Hon. Registrar. 20.68. I now come to damages for loss of business Society House argued that it suffered loss of revenue, amounting to ZMW21,550,957.48 as at 31 st December, 2021 as the entire office block was and is still unable to take in tenants as envisaged. 20.69. The principles on the award of damages for loss of business are fairly settled. In the case of Attorney-General v. Sam Amos Mumba,1661 the Supreme Court held that- "Where loss of business forms part of the claim, it must be pleaded as special damages and strictly proved." -J135- 20.70. What the above holding entails is that Society House ought to have outlined the amount of damages for loss of business in its pleadings and produce evidence showing the loss suffered. 20.71. In the present case, there is evidence and it's not in dispute that the office block has not been occupied. The pleadings also show a claim for a special loss of ZMW21,550,957.48. However, there is no evidence as regards how this amount was arrived at. Society House has not shown this special loss. I, therefore refuse to award this claim. 20.72. The next claim is for interest. I have awarded sums for escalation of the contract sum and recovery of the guarantees. It follows that Society House is entitled to interest as it has been kept out of its money. I therefore award interest on the sums found and any sums that will be found due after assessment by the Hon. Registrar of this Court. 20.73. As regards the claim for negligence against Bank of China. It is trite that for a claim for negligence to succeed in this matter, it ought to be established that Bank of China owed a duty of care to Society House and that it breached that duty. -J136- 20.74. In this case, there is evidence that the guarantees are forged and that the signatures appearing are forgeries. In the circumstances of this case, I have not found any evidence that the guarantees where on genuine letter heads for Bank of China or that any of its employees were part of the forgery. Therefore, I am not satisfied that there was negligence. In any case, the limitation of Actions Act, 1939, in Section 2, as aniended by Section 3 of the Law Reform (limitation of Actions e.t.c) Act places the limitation at 3 years. Society House having discovered the fraud on 2nd November, 2016, had upto 2nd November, 2019 to commence the action. The claim having been commenced in 2022 is statute barred. 20.75. On third party proceedings, I do not agree with the argument by Bank of China. Society House was not claiming contribution from Bank of China to warrant third party proceedings. The Rules of the Supreme Court, 1999, allow counterclaims against additional parties who have not been sued by the original plaintiff. In this regard, Bank of China is guided to Order 15 Rule 3 of the said Rules and in particular, explanatory note under Order 15/3/3 which lays out an example. -J137- Therefore, Bank of China's argument that Society House ought to have taken out third party proceedings is dismissed. 20.76. Considering what I have said above that the guarantees were a forgery, the alternative claim for payment of amounts due on the guarantees fails. In any case, since I have already awarded this claim to Society House against Yangts, it cannot succeed here. 21.0. CONCLUSION 21. 1 In conclusion, I make the following order: 1. The claims by Yangts and Abbeycon fail. 2. The amount due to Society House as payment of the escalation in the contract sum shall be assessed by the Hon. Registrar of this Court. 3. Society House is entitled to and shall recover the sum of ZMW76,636,490.80 and ZMW189,208,370.84 for the forged advance payment guarantees and performance guarantees, respectively, from Yangts. 4. Society House is entitled to damages for breach of contract from Yangts. These are to be assessed by the Hon. Registrar of this Court. 5. The amounts stated above, and any to be found due after assessment, shall carry interest at the average of the short term bank deposit rate from date of writ to date of this Judgment or Judgment on Assessment, respectively. Thereafter, at the Bank of Zambia Policy rate until full payment. -J138- 6. I award costs in this matter to Society House against Yangts and Abbeycon. I also award costs to Bank of China against Yangts. These are to be taxed in default of agreement. Dated at Lusaka this 18th day of June, 2024. ~ Q ......... .:;;; ......................... . K. E. Mwenda-Zimba HIGH COURT JUDGE -J139-