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EZ Company Ltd v Republic of Vanuatu [2015] VUSC 3; Civil Case 04 of 2013 (5 February 2015)

IN THE SUPREME COURT
OF THE REPUBLIC OF VANUATU
(CIVIL JURISDICTION)


CIVIL CASE No. 04 OF 2013


BETWEEN:


EZ COMPANY LIMITED
First Claimant


AND:


GEORGE LAPI
Second Claimant


AND:


REPUBLIC OF VANUATU
Defendant


Coram: Justice Mary Sey
Counsel: Eric Molbaleh for the Claimants
Christine Lahua and Jennifer Warren (SLO) for the Defendant


JUDGMENT


Introduction


  1. On 25 January 2011, George Lapi (second Claimant) on behalf of EZ Company Limited (first Claimant) entered into an Agreement ref. 113/11/malampa (the Agreement) with the Defendant through the Department of Public Works (PWD). The nature of work was specified as road side clearance, pothole patching and re-grading of Malekula roads on Malekula Island.
  2. It was a term of the Agreement that the Claimants would supply fuel and 4 machines [1 dump truck, 1 loader, 1 grader and 1 roller] at the rate of VT10,000 per hour per machine for the specified works to be carried out.

Claim and Reliefs Sought


  1. By an Amended Claim filed on 12th August 2013, the Claimants allege breach of the said Agreement and they claim the following reliefs:

“1. A declaration that the Defendant’s decision to suspend work undertaken by the first Claimant amounts to a breach of contractual obligations;


2. An order that the Defendant compensates the first Claimant by paying the Claimant the remaining 44 days of the Agreement pursuant to the terms and conditions set out therein;


3. An order that the Defendant pays the Claimant’s loan arrears with Credit Corp;


4. An order that the Defendant pays to the first Claimant compensatory damages in the amount of VT6 Million;


5. An order that the Defendant pays the second Claimant for compensatory damages in the amount of VT4 Million;


6. Interests;


7. Costs;


8. Any other orders the Court deems fit.”


Defence


  1. In the Defence to the Amended Claim, filed 18th September 2013, the Defendant says it will refer to the Agreement for its full terms and effect. Further, that the maximum period of the contract was 6 months and a further 2 months period for maintenance. The Defendant also says that the Agreement did not include the Claimants’ loan facility with Credit Corp.
  2. The Defendant contends that Mr. Lapi commenced work on or about 28 March 2011 and finished on 10 February 2012 and that he exceeded the contract period of maximum 6 months by an additional 5 months. Further, that this caused financial constraints to the Defendant as a result of which the Defendant sent a suspension letter dated 20 February 2012 asking Mr. Lapi to cease work.
  3. In further answer to the Claim, the Defendant says the Claimants breached the Agreement entered into on 25 January 2011 and that the Defendant ended the Claimants’ work for reasons that Mr. Lapi had worked beyond the contract period causing financial constraints to the Defendant and says that the Claimants are not entitled to the reliefs sought or to any other reliefs.

The Evidence


  1. The Claimants rely on the following sworn statements:

a) George Lapi filed on 20 December 2013 in support of the Amended Claim – Exhibit “C1”;


b) George Lapi filed on 9 May 2014 in response to the affirmed statement of Samuel Namuri - Exhibit “C2”; and


c) George Lapi filed on 20 June 2014 in support of the Amended Claim - Exhibit “C3”.


  1. Mr. Lapi contends that the Agreement he signed was for a maximum period of six months during which he had only 60 days of maintenance work. He says he started road maintenance work between Leuru River and Lebetiarr Village in the North West of Malekula on 23 December 2011 and that he only did 16 days of work because of the Christmas and New Year holidays and also because there was heavy rain sometimes which disturbed work on the road. He went on to say that the Defendant paid him VT1,085,000 by cheque number 2226816 vide LPO number 780-034189 dated 24th May 2012 and VT135,000 by cheque number 2233731 vide LPO number 780-034321 dated 16th October 2012 for the 16 days of works carried out by him.
  2. It is also the evidence of Mr. Lapi that after signing the Agreement with the Defendant, he obtained a loan facility of VT3,230.740 and he purchased machines to carry out the works as specified in the Agreement. He says the loan balance as at 5 December 2013 was VT2,219,674 and he alleges that the suspension of the works by the Defendant has caused the Claimants to default in repayment of the loan.
  3. The Defendant called Mr. Samuel Namuri as a witness and his affirmed statement dated 28th day of January 2014 (together with annexure “SN1” – “SN14”) was admitted in evidence as Exhibit “D1”. Mr. Namuri said he is the Director of the Department of Public Works in Port Vila. He confirmed that the Defendant signed the Agreement with the Claimants on 25 January 2011 for the hiring of 1 dump truck, 1 loader, 1 grader and 1 roller to be used for road maintenance on Malekula Island.
  4. It is the evidence of Mr. Namuri that the commencement date of the contract was 28 March 2011 and the contract was supposed to end on 28 November 2011. He said that the Claimants performed work under the contract on 28 March 2011 and he then went on to give details of the payments which were made to the Claimants. He referred to annexure “SN3” which is the Claimants’ first invoice reference CN 113/11/m-01 amounting to a total of VT 1,276,875 in respect of the hiring of 2 tipper trucks at a rate of VT10,000 per hour from 28.03.11 to 12.04.11 and from 28.03.11 to 9.04.11 respectively. On 15 April 2011, a Certificate of Work Completion (“SN4”) was issued by Mr Ian Iercet certifying the use of the two tipper trucks and on 21 April 2011 an LPO (“SN5”) was prepared by the Government of Vanuatu and the Claimants were paid VT 1,276,875.

Mr. Namuri said that on 9 June 2011, the Claimants issued another invoice (“SN8”) reference CN 113/11/m-02 for the work done by 1 tipper truck which amounted to a total of VT 1,608,750 and enclosed with it a copy of the Work Completion Certificate. On 31 December 2011, the LPO (“SN9”) was prepared by the Government of Vanuatu and payment of VT 1,608,750 was made to the Claimants.


The Issues


  1. Whether or not the commencement date of the contract was 28 March 2011?
  2. Whether the defendant breached the contract?
  3. Whether the alleged damage suffered by way of the Claimants’ loan facility was caused by the alleged breach of contract?

Submissions


  1. It is the Claimants’ submission that the Agreement does not say when the works should start but an instruction was issued by the Defendant (“SN13”) for the Claimants to start work around mid December 2011 and works started on 23rd December 2011. The Claimants submit that annexure “SN11” shows the invoice for the 16 days of works by the Claimants using only one machine which is the grader and there is a certificate of payment attached showing that the payment was made.
  2. The Claimants submit that the Defendant has breached the Agreement and so is liable and must pay the remaining 44 days of the contract which provides that four machines were to be used at the rate of VT 10,000 per machine per hour. Further, that the failure of the Defendant to provide notice to the Claimants before the suspension of the works means that the Defendant is fully responsible for the damages caused to the deteriorating machines and the default in repayment of the loan obtained by the first Claimant from the Credit Corporation (Vanuatu) Limited to purchase the machines and ship them to Malekula to carry out works as agreed between the Claimants and the Defendant.
  3. The Defendant submits that the commencement date of the contract was 28 March 2011 and the contract was supposed to end on 28 November 2011 and that the works carried out by the Claimants from 28 March 2011 to May 2011 were performed pursuant to the Agreement dated 25 January 2011.
  4. Furthermore, that annexure “SN8” shows that a tipper truck was hired and the nature of work carried out with the tipper truck was for road clearance and pothole patching from 9 April 2011 to 16 May 2011. Further, that it is also in evidence that invoices annexed as “SN3” and “SN11” were issued by the Claimants to the Defendants for the hiring of two tipper trucks and a grader pursuant to the contract and the Claimants were paid in accordance with the invoice as per the contract.

Discussion


  1. The Defendant contends that the commencement date of the contract was 28 March 2011 and the contract was supposed to end on 28 November 2011. Further, that Mr. Lapi performed work under the contract on 28 March 2011 and that such works carried out by him from 28 March 2011 to May 2011 were performed pursuant to the Agreement dated 25 January 2011.
  2. During cross examination, Mr. Lapi denied that works commenced in March 2011. He said that the hiring of the 2 tipper trucks was for emergency works on Malekula Island for the PWD and that such works were separate and distinct from the Agreement dated 25 January 2011. Furthermore, at paragraph 14 of his sworn statement dated 20th December 2014, (Exhibit “C1”, Mr. Lapi stated as follows:

“The other two LPO payments which were made by the defendant to me LPO number 780-030104 dated 19 April 2011 at an amount of VT1,276,875 and LPO number 780-033057 dated 19 December 2011 at an amount of VT1,608,750 were not payments for the works I did on the road but were for my machine (a Tipper truck) that the defendant hired from me for the work carried out by Mr. Kuvu Noel of Santo roads and construction company which was engaged by the defendant to do maintenance work on Malekula road between Vao and Archin village, North East area of Malekula.”


  1. However, when asked by the Defendant’s counsel as to whether there was any other contract either verbal or written between the Defendant and the Claimants (apart from the Agreement of 25 January 2011), Mr. Lapi stated that there was only one contract signed on 25 January 2011 between the Claimants and the Defendant. He said:

“There is no agreement. It was for emergency works done on Malekula. I did not sign any works contract for them. Yes I had only one contract.”


  1. It is trite law that he who asserts must prove. No evidence has been adduced by the Claimants as to who Mr. Lapi made the contract with or how and when any such small works contract was entered into between him and the PWD for emergency works on Malekula roads.
  2. I fail to see how Mr. Lapi can justify that the Claimants’ issuance of invoices which bear the same ref. number of 113/11 as that of the Agreement dated 25 January 2011 was in respect of separate emergency works on Malekula roads. In my view, Mr. Lapi seems to have reached the conclusion that the works he had undertaken on Malekula Island between March 2011 and May 2011 were unrelated to the Agreement dated 25 January 2011 and that all the payments he had received from the PWD during that period were not payments made in respect of the Agreement.
  3. I am inclined to accept the Defendant’s submission that all invoices issued by Mr. Lapi bearing the contract reference number of 113/11 were issued in respect of the Agreement signed by the Claimants and the Defendant. Furthermore, the Work Completion Certificate attached to “SN8” clearly shows that the work carried out by the Claimants from 9 April 2011 to 16 May 2011 was for road clearance and pothole patching as specified under “Nature of Work” in “SN1”.
  4. It appears from annexure “SN13” that Mr. Lapi did not complete his performance of the contract within the required contractual period because, in September 2011, he engaged his 12G Avelling Barford Grader under a subcontract arrangement with Dihn Trading Ltd up until early December 2011 when Dihn’s contract with the PWD was terminated.
  5. Mr. Lapi contends that even though the Agreement was signed on the 25th of January 2011, the performance of the works started much later, that is, on 23rd December 2011 after an instruction was issued by the Defendant for the Claimants to start work. In his closing submissions for the Claimants, counsel submitted that the Agreement was to be performed for two months within the period of six months. He said this was to allow the Claimants time to still perform even if there is interference such as natural disaster (cyclone, heavy rainfall etc.)
  6. It is further submitted that after the instruction was issued, Mr. Lapi commenced work and he performed 16 days work out of the 60 days and that he is left with 44 days of work to complete at the rate of VT10,000 per hour per machine and that the Defendant must pay for those remaining 44 days as follows:

“VT10,000 rate per hour per machine x 8 hrs per day

= VT80,000 per day per machine x 44 days = VT 3,520,00

X 4 machines (namely 1 roller, 1 grader, 1 dump truck and 1 loader) = a total amount of VT14,080,000.”


  1. To buttress his argument about the commencement period, counsel for the Claimants referred the Court to annexure “SN13” which is the letter written by Mr. Nixon Fanai (Acting Divisional Manager). It is dated 29 March 2012 and addressed to Mr. Samuel M. Namuri. Paragraphs 5 and 6 read as follows:

“Around mid December 2011, Mr. Lapi approached me about his PWD contract and I advised him to seek further advice from Mr. Harry Arrivet (Acting Divisional manager) and Mr. Ian Iercet. (PMU Architect – provisional advisor to Harry Arrivet). An agreement was reached and instruction given to start of works then.


Works began on 23rd December 2011 through to February 17th 2012 when it ceased upon a suspension of works (see attached) through my office. This decision was made following the recent Divisional managers meeting in Port Vila (6-10th February 2012), when the Acting Director Mr. Harrison Luen cautioned all that no further financial commitments were to be made because of the financial state of the Department. The 12G Avelling Barford Grader was the only machinery utilized for the works. Inspected works measured (see attached) covered 4.9km of road length starting from Leuru River to Lebetiarr Village on the North West A. road.”


  1. Having considered annexure “SN13” in light of the Works Agreement made on 25 January 2011 as well as all the evidence adduced before me, I am satisfied that the Claimants commenced work in accordance with the Agreement on 28 March 2011. I do not accept Mr. Lapi’s contention that he only commenced work on 23rd December 2011 after “an instruction was issued by the Defendant for the Claimants to start work.”
  2. The basis of a contract is nsecous ad idem or a meeting of the minds between the parties. There must be an agreement to the same thing where all understand and have accepted the contractual commitments made by each other, respectivelis is a basic requirement for each contract and it is essenessential to the creation of the contract that both parties agree to the same thing in the same sense. See Dickinson v Dodds (1876)&# Ch D 463.
  3. Standing back and looking at the Agreement in fontext, incluincluding the 160;in which the partiparties treated it afterwards, I am of the view that there was no meeting of the minds between the Claimand the Department of Public Works throughout their dealings.ings. The arrangement appears to have been relaxed with no connecting threads tying up all the loose ends. Invoices were presented by the Claimants and settled by PWD without close scrutiny even though they bore the same reference number as the Works Agreement No. 113/11.
  4. The Claimants submit that the Defendant suspended the Agreement without issuing any notice to them. Further, that the failure to give notice renders the Defendant liable for the damages caused to the Claimants such as the deteriorating machines and also their default in the re-payment of their loan. I reject the Claimants’ submission on this issue. Rather, I find from the wording of “SN10” dated 20th February 2012 that Mr. Fanai had previously discussed the issue with Mr. Lapi. The body of the letter reads:

“Dear Sir,


This letter serves to inform you of your Small works Contract agreement # 113/11/malampa under EZ Company Ltd, for road maintenance works – on the North West A. Road commencing on the 17th April 2012 in support of my advice to you and our discussion.


The department financial constraints may cause difficulties with the continuation of this engagement, therefore all your physical operations must cease forthwith and remain suspended pending further advice.”


  1. Judging from the totality of the evidence before me, I find that there was justification for the suspension of works – Contract # 113/11/malampa by the Defendant. I am equally satisfied that the Defendant had not breached the contract and that services rendered by the Claimants were paid for accordingly.
  2. In the circumstances, the Claimants’ claim fails and it is hereby dismissed with costs to the Defendant on the standard basis to be taxed if not agreed.

DATED at Port Vila, this 2nd day of February, 2015.


BY THE COURT


M.M.SEY


Judge

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