Contractor Interim Payment Claim - DOC by vei11999

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									REPUBLIC OF TRINIDAD AND TOBAGO

                      IN THE HIGH COURT OF JUSTICE

CV 04052 of 2006
                                     BETWEEN


                     GENERAL EARTHMOVERS LIMITED

                                                                          CLAIMANT
                                        AND


     ESTATE MANAGEMENT AND BUSINESS DEVELOPMENT COMPANY

                                                                        DEFENDANT

Before the Honourable Madam Justice Dean-Armorer


Appearances:        H.R.M. Seunath, S.C. for the Claimant
                    S. Maharaj, S.C. and Roger Kawalsingh for the Defendant


                                      RULING


FACTS

1.    The Claimant is a building contractor and had been engaged by the Defendant, on
      behalf of the Government of Trinidad and Tobago to execute development works
      at Hermitage South Trinidad.

2.    The Claimant, as Contractor and the Defendant, as Employer entered into a
      written contract on 22nd February, 2006.      The works were described in the
      contract as requiring “the provision of construction infrastructure services
      associated with the development of approximately fifty-five (55) acres of land for
      residential purposes …”




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3.   The signed contract referred to and incorporated six other documents, the most
     significant of which, for the purpose of this decision, is the document entitled
     “General Conditions of Contract” published by the International Federation of
     Consulting Engineers (FIDIC), an acronym based on the French designation –
     “Federation Internationale Des Ingenieurs – Conseils”.


4.   The FIDIC General Conditions of Contract provided for the appointment of an
     Engineer by the Employer.     The firm of Project Control Associates Limited had
     been appointed as Engineer by the Employer.


5.   One of the functions of the Engineer under the FIDIC Conditions of Contract was
     the issue of interim payment certificates. The Engineer was required to consider
     the Contractor’s Claims.    If the Claims were approved, the Engineer would be
     required to issue payment certificates. By Cl. 14.6, the Employer was required to
     pay to the Contractor the amount certified in the interim payment certificate,
     within fifty-six (56) days of the date on which the claim was received by the
     Engineer.


6.   By this action, the Contractor contends that Employer has failed to honour interim
     payment certificates #5 and #6 issued by the Engineer and that the time stipulated
     as the deadline for payment has passed.


7.   Interim payment certificate #5 was issued by the Engineer on the 27th September,
     2006, and authorized payment to the Contractor in the sum of $2, 331, 688.56.


8.   Interim Payment Certificate #6 was issued on 31st October, 2006 and authorized
     payment to the Contractor in the sum of $10, 764, 902.58.


9.   There is no dispute that on the date, at which this action was filed, that is to say
     the 14th December, 2006, the Defendant had omitted to honour the two interim
     payment certificates which to the present remain outstanding.



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10.   Following the filing of this action, the Employer, as Defendant entered an
      Appearance on 19th December, 2006, indicating its intention to defend.


11.   The Defendant failed to serve a Defence and the Claimant applied for and
      obtained judgment in default of defence on the 15th January, 2007.


12.   The Claimant, as Judgment Creditor applied to attach the Judgment Debt to funds
      held in the name of the Judgment Debtor at the Valsayn Branch of Republic
      Bank.


13.   In the application which now engages the Court’s attention, the Defendant seeks
      to set aside the judgment which had been obtained in default of defence.


14.   The Defendant moved the Court to set aside the default judgment on the 30th
      January, 2007. The Defendant seeks as well an order that the “Writ of Execution”
      be suspended.    In his affidavit of the 30th January, 2007, Anup Jaimungalsingh,
      on   the Defendant’s behalf sought to explain the events which led to their
      application to set aside the default judgment.


15.   Mr. Jaimungalsingh indicated that the Defendant entered an appearance, with an
      indication of the Defendant’s intention to defend the claim which had been made
      against it.


16.   Thereafter, according to Mr. Jaimungalsingh, Counsel for both parties embarked
      on negotiations with a view to settling the claim.     According to his evidence
      negotiations continued after the default judgment had been signed on 17th
      January, 2007.      According to Mr. Jaimungalsingh, letters continued to pass
      between the parties until the 24th January, 2007, when attorneys-at-law for the
      Claimant finally refused to refrain from moving to enforcement of the default
      judgment.



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17.   In the action before me, the prospective defences of the Employer are set out in
      the affidavit of Anup Jaimungalsingh, Project Coordinator in the employment of
      the Employer.




18.   The Defences, which emerge from that affidavit may be summarized as follows:


      (i)     At para 24 of the Jaimungalsingh affidavit, the deponent contends that the
              Interim Payment Certificate #6 had been issued in error and that a revised
              interim payment certificate was subsequently issued by the Engineer for a
              lesser amount.


      (ii)    At para 27 of the Jaimungalsingh affidavit, the deponent contends that the
              amount claimed in the interim payment certificate #5 was in respect of
              additional works to which the Employer had not agreed.


      (iii)   That under the General Conditions of Contract, the dispute herein, ought
              properly to be resolved by procedures set out at Clause 20 of the General
              Conditions of Contract.


19.   Intertwined with the foregoing defences, are claims which the Employer could
        properly have included as counterclaims:


      (i)     There appears to be the hint of a claim for delay, is so far as the Employer
              contends that the Contractor ought to have commenced contract works on
              18th October, 2005 and completed same by 17th October, 2006.        In fact,
              according to the evidence of Mr. Jaimungalsingh, mobilization works
              began on the 19th November, 2005. By the Progress Statement Exhibited




                                                                             Page 4 of 12
        as AJ8 to the Jaimungalsingh affidavit, as at December, 2006, the works
        were only 60% completed.


(ii)    The Defendant also raises the contention that the Contractor had been
        overpaid and that there are no outstanding monies now due to the
        Contractor. In the Jaimungalsingh affidavit, the deponent has alleged that
        in August, 2006, there had been a substantial reduction in the scope of the
        works from the development of three hundred and forty (340) lots on fifty-
        five (55) acres to one hundred and ninety (190) lots on thirty-four (34)
        acres.


        Mr. Jaimungalsingh has suggested that the Contractor tacitly concurred
        with the reduction in the scope of works, by removing its plant and
        equipment from the excised acreage.      Nonetheless, Mr. Jaimungalsingh
        has alluded to the Contractor’s current position that there had been no
        discussions or agreement on the revised contract.


(iii)   By virtue of the alleged reduction in the scope of works, the Defendant has
        alleged that the contract price had been reduced from $22, 099, 733.43 to
        $12, 055, 617.26, that earlier payment certificates, ought to be adjusted
        and that following such adjustment there would be no sums due and owing
        to the Contractor.


(iv)    The Defendant has also claimed that the Contractor abandoned the works
        and has served notices of suspension and termination.      The Defendant
        accordingly contends by the Skeleton Arguments of Counsel that virtue of
        the termination, the question of honouring interim payment certificates is
        now overtaken by the provisions of the General Conditions of Contract.




                                                                      Page 5 of 12
General Conditions of Contract


In considering whether the Defendant has a realistic prospect of success, the Court
considered the following provisions of the General Conditions of the Contract:
“
       Clause 3.1 – The Engineer


           “The Employer shall appoint the Engineer who shall carry out the duties
           assigned to him in the contract.


           The Engineer shall have no authority to amend the Contract …”
    “
       Clause 14 – Contract Price and Payment


           “14.1      Unless otherwise stated in particular conditions


                      1.      the Contract Price shall be agreed or determined under
                              Sub Clause 12.3 and be subject to adjustments in
                              accordance with the Contract …”


           “14.3      Application for Interim Certificates. The Contractor shall submit
                      a Statement in six copies to the Engineer after the end of each
                      month … showing in detail the amounts to which the Contractor
                      considers himself entitled…”


           “14.6      …Thereafter the Engineer shall within twenty-eight days after
                      receiving a statement and supporting documents, issue to the
                      Employer an Interim Payment Certificate which shall state the
                      amount which the Engineer fairly determines to be due…




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               However, prior to issuing the Taking Over Certificate for the
               works, the Engineer shall not be bound to issue an Interim
               Payment Certificate … the Engineer shall give notice to the
               Contractor accordingly …”


“An interim payment Certificate shall not be withheld for any other reason,
although:


   (a)      If any thing supplied or work done by the Contractor is not in
            accordance with the Contract, the cost of rectification or replacement
            may be withheld until rectification or replacement has been
            completed; and/or


   (b)      If the Contractor was or is failing to perform any work or obligation in
            accordance with the Contract, and had been so notified by the
            Engineer, the value of this work or obligation may be withheld until
            the work or obligation has been performed.


The Engineer may in any Payment Certificate make any correction or
modification that should properly be made to any previous Payment Certificate.
A Payment Certificate shall not be deemed to indicate the Engineer’s acceptance,
approval, consent or satisfaction.”


“Cl. 14.7      Payment – The Employer shall pay to the Contractor…

               (a)     …


               (b)     the amount certified in each Interim Payment Certificate
                       within fifty-six days after the Engineer receives the
                       Statement and supporting documents…”




                                                                       Page 7 of 12
       Clause 16.1


              Suspension and Termination by Contractor
“
        16.2   The Contractor shall be entitled to terminate the Contract if:
               (a)       …
               (b)       …
               (c)       the Contractor does not receive the amount due under an Interim
                         Payment Certificate within forty-two days after the expiry of the
                         time stated in Sub-Clause 14.7 (that is to say fifty-six days from the
                         date on which the Engineer receives the Statement of the
                         Contractor …)


              Payment on Termination


               After a Notice of Termination under Sub-Clause 16.2 … has taken effect,
               the Employer shall promptly:


                      i. Return of the Performance security to the Contractor.


                     ii. Pay the Contractor in accordance with Sub-Clause 19.6 (Optimal
                         Termination).


                     iii. Pay to the Contractor the amount of any loss or profit or other loss
                         or damage sustained by the Contractor as a result of termination.


        “Cl. 20          Claim Disputes and Arbitration


        20.1   If the Contractor considers himself to be entitled to … any additional
               payment under any Clause of these Conditions or otherwise in connection
               with the Contract, the Contractor shall give notice to the Engineer …



                                                                                 Page 8 of 12
             The notice shall be given as soon as practicable and not later than twenty-
             eight days after the Contractor became aware … of the event or
             circumstance.”


      20.2   Disputes shall be adjudicated by a DAB (Dispute Adjudication Board) in
             accordance with Sub-Clause 20.4”


      Cl. 20.4


      “If a dispute arises between the Parties in connection with or arising out of, the
      Contract or execution of the Works, including any dispute as to any certificate,
      determination, instruction, opinion or valuation of the Engineer, either party may
      refer the dispute in writing to the DAB for its decision.”

Law


1.    Under Part 13.3 the Civil Proceedings Rules 1998, the Court is empowered to set
      aside judgment in default of defence in the following circumstances:


             “The Court may set aside judgment entered under Part 12 if –
                     2.      the Defendant has a realistic prospect of success in the
                          claim and;
                     3.      the Defendant acted as soon as reasonably practicable
                          when he found out that judgment had been entered against him.


2.    The term “realistic prospect of success” has been construed as meaning
      something more than “arguable.” In the case of ED and F Man Liquid Products
      Limited v. Patel [2003] EWCA 472, Lord Justice Potter quoted Moore-Bick, J in
      International Finance Corporation Utexafrica Sprl. (2001) CLC 1361:
             “… to say that the case has a realistic prospect of success suggests
             something better than that it is merely arguable … A person who holds a



                                                                             Page 9 of 12
               regular judgment even a default judgment has something of value and in
               order to avoid injustice he should not be deprived of it without good
               reason.   Something more than a merely arguable case is needed to tip the
               balance of justice to set the judgment aside.   In my view … “realistic
               prospect of success”… means a case which carries a real conviction.”


Reasoning and Decision

1.    By its application to set aside the default judgment, the Defendant has raised a
      number of isolated defences. Of those put forward for the Court’s consideration,
      it seems that it is more than arguable that the dispute which has arisen in this
      matter falls properly to be adjudicated according to the dispute resolution
      procedures set out at clause 20 of the General Conditions of Contract.


2.    In answer to claims made by the Contractor on Interim Payment Certificates #5
      the Defendant contends that the amount claimed included payment for additional
      works, which were never agreed by the Employer.          The Claimant counters in
      their affidavit evidence, that the Employer had in fact agreed to the additional
      works.     In my view, however, whether the Defendant’s defence is viable is a
      matter in dispute, which cannot be resolved on the affidavit evidence.
      Moreover, being a matter in dispute, it falls within the broad terms of Clause 20,
      and should therefore be resolved by procedures agreed in the General Conditions
      of Contract.


3.    Similarly, the Defendant’s answer to interim payment certificate #6, is that no
      money was due and owing to the Contractor.      The underlying reason which was
      offered by the Defendant is that there had been a reduction in the scope of works
      and a consequential reduction in the contract price. The Defendant admitted that
      the Claimant contends that there had been no agreement to the reduction in the
      scope of the works, but suggests that there had been tacit agreement by the
      Claimant in clearing its plant and equipment from the excised portion of the



                                                                           Page 10 of 12
     subject lands. In my view, the Defendant’s answer to interim payment certificate
     #6 raises deeply rooted questions as to whether the scope of the works could have
     been reduced and whether the Contractor was agreeable to the reduction.


4.   In my view, it is clear that such questions surpass mere questions of contractual
     interpretation. They also include disputes of fact, which ought to be resolved
     according to the procedures agreed in the General Conditions of Contract.          It
     follows therefore that the Defendant’s contention that the disputes herein ought
     properly to be referred to arbitration enjoys a realistic prospect of success.


5.   The Court is now required to consider whether the Defendant acted as soon as
     reasonably practicable, on discovering the default judgment.


     It is a matter of the Court’s record that judgment was entered on the 15th January,
     2007.    The formal order bears the Court stamp for the 17th January, 2007. It is
     unlikely that notice of the default judgment came to the Defendant’s attention
     before 17th January, 2007.


     The Court has taken notice of the voluminous documentation in this matter.         It
     would seem unrealistic and unreasonable to expect that an application to set aside
     a default judgment could properly be made in less than the thirteen days taken by
     the Defendant. According, I am of the view and I hold that the Defendant acted
     as soon as reasonably practicable in moving to set aside the default judgment.


6.   In my view therefore the default judgment which had been entered on the 17th
     January, 2007 ought to be and is hereby set aside.       The Court will exercise the
     power vested in it by Part 13.5 of the Civil Proceedings Rules (CPR) and make
     the order conditional on the filing and service of a defence on or before 15th
     November, 2007.




                                                                             Page 11 of 12
7.      By its application of the 30th January, 2007, the Defendant applied for an order
        staying further proceedings in this matter. The Court will refuse at this stage to
        stay any further proceedings, but will hear further arguments thereon if a defence
        is filed in the time stipulated in the above order.


        The Court will also refuse to set aside the attachment order which had been
        obtained on 25th January, 2007.        Should the Defendant satisfy the condition
        stipulated in the above order, the default judgment will be set aside and the
        attachment order which is based on the judgment will also automatically be set
        aside.


Orders:



1.      The judgment which had been obtained in default of defence on the 15th January,
        2007 ought to and will be set aside upon the condition that the Defendant file and
        serve its defence on or before the 15th November, 2007.


2.      The Defendant to pay the costs of and associated with this application in any
        event.




Dated the 6th day of November, 2007




…………………………………..
Mira Dean-Armorer
Judge




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