Raghunath Singh & Company Ltd v National Maintenance Training and Security Company Ltd
| Jurisdiction | Trinidad & Tobago |
| Judge | Rajkumar, J. |
| Judgment Date | 06 August 2012 |
| Neutral Citation | TT 2012 HC 279 |
| Docket Number | CV 2193 of 2007 |
| Court | High Court (Trinidad and Tobago) |
| Date | 06 August 2012 |
High Court
Rajkumar, J.
CV 2193 of 2007
Mr. Ashraph for the claimant.
Mr. Colin Kangaloo instructed by Ms. Nadia Kangaloo for the defendant.
Damages - Breach of contract — Quantum.
The claimant responded to the invitation of the defendant, acting as agent for the Government of Trinidad and Tobago to tender for a contract for the construction of the Palo Seco High School (the school). The defendant's tender of $22,297,672.32 was accepted on February 28th 2002. The claimant was asked to provide a performance bond, which it did on March 21st 2002 at a cost of $81,548.67.
The invitation to tender provided at clause 5(1) that the claimant was advised to visit the proposed construction site and its surroundings prior to tender.
The site was 15 feet away from a producing oil well. Petrotrin – the operator of that well declined to abandon it.
The cost of abandoning oil wells on the site was estimated to be $400,000.00 but the defendant was of the view that it could escalate to $1 million.
It also came to the view after it accepted the tender that the Environmental Management Authority would be reluctant to issue a certificate of environmental clearance for the site, which was to be used for a school.
The claimant received no further written communication from the defendant until September 11, 2002, when the defendant informed it that its client had issued instructions to cease the commencement of activities, and that it was “seeking arrangements to acquire an alternative site”. “…MTS is unable to enter into a formal agreement with your firm and handover of the site for commencement of the works.”
The defendant declined to proceed with the contract.
The claimant claimed against the defendant for:
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(a) Damages for breach of contract made between the plaintiff and the defendant on or about the 28th day of February, 2002 for the construction by the plaintiff of the school
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(b) Further and/or in the alternative damages for loss or profit.
The claimant specifically pleads a claim for loss of profit under the contract in the amount of $2,297,672. 32 or 10% of its value, as well as the cost of the performance bond.
(a) Whether a contract had been concluded between the claimant and the defendant.
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(b) If so, whether the contract between the claimant and the defendant had been frustrated thereby relieving the defendant of any obligations and/or liability under it.
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(c) Whether the claimant proved its claim for damages in relation to its claims for loss of profit, to cost of performance bond, and loss of profit arising from inability to use its equipment.
a. A contract was concluded by the letter, (wrongly dated February 28th 2001), and issued on February 28th 2002, accepting the claimant's tender. No further contract document was required to constitute a binding contract.
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b. The circumstances in which the defendant elected not to proceed with the contract do not amount to events of frustration and the defendant cannot claim to be absolved from its obligations and liability under the contract.
The claimant is under an obligation to prove its damages and loss.
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c. It has not been disputed that the claimant was called upon to provide a performance bond after acceptance of its tender and that it indicated to the defendant that it had complied by letter of March 21st 2002. It claimed that it incurred a cost of $81,548.67 to do so, which evidence I accept, as it was not disputed.
Given, however, that the major part of its claim is for in excess of $2 million representing loss of profits of 10% of the contract value, I find that it has failed to supply sufficient evidence of appropriate probative value in respect of that aspect of its claim.
In the circumstances I find that, in default of such evidence, the claimant has established, a claim to nominal damages with respect to this aspect of its claim, and an award of nominal damages is therefore made, in addition to the cost to it of establishing the performance bond.
The claim for loss of profit arising from inability to use its equipment was not pleaded, and I find that it has not been proved.
The defendant is to pay to the claimant:–
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i. The sum of $81,548.67, (the cost of the performance bond).
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ii. Interest thereon at the rate of 6% per annum from March 21” 2002.
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iii. Nominal damages in the sum of $20,000.00 in respect of loss of profit.
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iv. Interest thereon at the rate of 12 % per annum from the date of service of the writ.
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v. Costs on the basis prescribed by the Civil Proceedings Rules for a claim in the total amount as calculated above.
The claimant alleges that on December 9, 2001 it submitted to the defendant a tender for a contract for the building of the Palo Seco High School at a price of $22,297,672.32.
Its tender was accepted by letter of February 28, 2002.
The claimant effected a Performance Bond incurring a cost of $81,548.67.
On or about September 11, 2002 the defendant informed the plaintiff that it was unable to proceed with the said contract and the works because it was making arrangements to obtain an alternative site for the construction of the said school.
The claimant alleged that it the defendant is in breach of the contract and the plaintiff has incurred and suffered financial loss and particularised this as follows:
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(a) Cost of establishing Performance Bond $81,548.67.
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(b) Loss or profit at 10% of contract price $2,229,762.20.
The defendant claims
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i. That the said contract was frustrated. It pleaded:–
…. Alternatively the alleged contract was frustrated in that it became impossible of performance without there being any fault on the part of the defendant and in the premises, the defendant was discharged from the performance of the alleged contract due to matters pleaded at paragraph 10 hereinabove.”. (See paragraph 11 of the Defence)
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ii. That by letter dated September 11, 2002 it indicated to the plaintiff that it was unable to enter into a formal agreement with the plaintiff.
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iii. That it is not liable to the plaintiff for its claim for loss of profit.
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i. The contract between the claimant and the defendant was frustrated and the defendant is therefore not liable under this contract.
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ii. The claimant has led no probative evidence of its loss of profit and is therefore not entitled to such damages.
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iii. Even if such sum is proven, the claimant has not mitigated its loss and is not entitled to the loss of profit claimed. I consider it unnecessary to this decision to address this last matter.
I find that it cannot seriously be contended that no contract had been concluded.
See for example Halsbury's Laws of England/CONTRACT (VOLUME 9(1) (REISSUE))/3. 669. Provisional agreements.
Where there is an informal agreement which expressly requires or envisages the subsequent execution of a formal contract, the legal effect of that prior informal agreement at common law depends on the intention of the parties, as with letters of intent.
They may have entered into a binding provisional agreement, whilst envisaging its subsequent replacement by a more formal one; or they may evince an intention only to be hound on the execution of the formal contract, the prior informal agreement being of no legal effect.
Where there is a definite acceptance of an offer to enter into a provisional agreement, the fact that it is accompanied by a statement that the acceptor desires that the arrangement should be put into a more formal shape does not relieve either party from his liability under the provisional agreement, for instance: …an informal acceptance of a tender for a large building contract;
If the envisaged formal contract does materialise, it may exactly reflect the terms of the prior provisional agreement. in which case it may have little more than an evidential value. Alternatively, it may differ materially from the provisional agreement, so that it may be material to decide whether it has replaced that provisional agreement.
In this case the tender provides the answer in that the form of tender, provided by the defendant, and duly completed by the claimant, at clause 5.5 provides “unless and until an agreement is prepared and executed, this tender, duly signed on the page overleaf together with your written acceptance thereof shall constitute a binding Contract between us.”
Further Clause 33.1 of the conditions of contract provides that the employer will notify the successful tenderer that his tender has been accepted (“by a letter of acceptance”).
Further under clause 33.2 – The notification of award will constitute formation of the contract.
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a. The tendering documents comprised (para 6–1) the invitation to tender, instructions to tenderers, the conditions of contract part 1 and part 2, specimen forms, technical specifications, bills of quantities and drawings.
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b. The tender itself comprised (para.I2–1) the form of tender, the bid bond, the priced bill of quantities. Obviously therefore the effect of acceptance of the tender was to create a binding contract, with at least conditions of contract and prices having been agreed at that stage.
The defendant's letter of acceptance dated the 28th February, 2002 (erroneously dated 28th February, 2001), constituted the notification of award.
There is therefore no ambiguity. A contract was concluded between the parties. At issue is whether that contract was frustrated.
The...
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