• IN THE SUPERIOR COURT OF JUDICATURE
  IN THE HIGH COURT (COMMERCIAL DIVISION),
  ACCRA- A.D 2019
  

AUGUSTINA ENGMANN -(Plaintiff)

vs.

PELICAN GROUP LTD - (Defendant)

JUDGMENT

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Plaintiff claims against the Defendant in her writ the following:

 

i. A declaration that under and by virtue of the contract for the lease of all that piece and parcel of land measuring 0.23 acre together with building thereon situate at Dzorwulu, Accra, made on the 16^th September, 2013 between Plaintiff as the lessor and Defendant as lessee of the other part, Defendant was enjoined to develop real property on the parcel of land and which project involved the redevelopment of property into a modern complex of apartments (‘residential units’) and two (2) levels of car parking space.

 

ii. A declaration that under and by virtue of the contract for the lease of all the piece or parcel of land made on 16^th September, 2013, between Plaintiff and Defendant, Defendant was obligated to complete the construction of the project in not more than twenty-four (24) months after cutting sod, and if Defendant was unable to complete the project within the specified period an extension of time of not more than a cumulative total of three months.

 

iii. A declaration that the neglect and/or failure of defendant to complete the construction of the project in not more than twenty-four (24) months after cutting sod, and subject to further extensions, constitutes a breach of contract.

 

iv. An order of the Court terminating the contract for the lease of all that piece or parcel of land measuring 0.23acre situate at Dzorwulu, Accra made on 16^th September, 2013 between Plaintiff and Defendant, for non-performance.

 

v. An order directed at Defendant to reimburse/pay to Plaintiff to full replacement cost and/or value of the land and buildings thereon demolished by Defendant preparatory to the fulfillment to the contract for the lease of the land.

 

vi. An order directed at Defendant to take all appropriate, ancillary and necessary steps to transfer into Plaintiff’s name the title deeds registered in its name, consequent upon the due execution of the contract for the lease of the land.

 

vii. Mesne profits for loss of use.

 

viii. Recovery of possession.

 

ix. General damages for breach of contract.

 

x. Payment of legal fees on a full indemnity basis.

 

xi. Costs.

 

 

 

Plaintiff claim to be the owner of a piece of land at Dzorwulu with a building thereon and by a lease agreement between the parties, the property was leased to the Defendant for a term of fifty years. And that the purpose of the lease was for the Defendant to develop the property into a modern residential development with two levels of car park complex. That Defendant was to procure and pay for all regulatory and planning approval from the authorities and comply with all the relevant laws with a term of twenty four months for completion after the cutting of sod. To Plaintiff the buildings on the land which consisted of a single storey building, outhouse with an attached garage, a two storey ancillary building was demolished by the Defendant to pave way for the construction as agreed by the terms of the contract. Plaintiff avers that Defendant has not taken any step towards the development besides the demolition of her property and digging of ground notwithstanding persistent demands by the Plaintiff.

 

 

 

That the replacement value of the property was GH¢440.000 as at April, 2016. And that the failure of Defendant to commence construction and complete same constitute a breach of the contract between them. And with Defendant having transferred the property into his name after the signing of the agreement and with its failure to abide by the terms of the agreement, steps ought to be taken to revert the change of registration of the land into Plaintiff’s name. With Defendant failing to comply with the terms of the agreement her anticipated profits from the operation of the apartments as a business concern have all been stultified and ought to be compensated due to the suffering of financial hardship occasioned her and hence her claim before the court.

 

 

 

Defendant has answered the Plaintiff with what is usually referred to as confession and avoidance style of pleading by admitting the presence of a contract between them for the development of a building complex as encompassing three phases of preparation, development and post development. The first stage of preparation involved professional drawings and permit obtaining, second stage being sod cutting and actual development which Defendant claim cannot commence until permit had been obtained from the City Authorities. To Defendant it communicated to Plaintiff that the necessary permit had been applied for but the Accra Metropolitan Assembly (A.M.A) directed Defendant to stop work it had started until a written approval had been given to it.

 

 

 

That further, a hydrological report indicated that the water table for the land was high and was imprudent to develop a two level car park as initially conceived. Defendant further claim to have expended an amount of $236,737.00 in demolition, architectural, structural and related drawings, payment of rent to Plaintiff, permit application fees, excavation and re-filling costs. And that it was in the process of having the drawings revised for approval from A.M.A. and any delay was due to attacks by land guards on its workers by local chiefs. And that it was desirous of completing construction within 24 months after sod cutting and this can only be done when A.M.A had approved the drawings which calls for patience. Defendant accordingly contend that the action is premature as it cannot break the law and commence development. As it had been stopped twice by A.M.A for working on the land.

 

 

 

With the pre-trial conference unable to amicably resolve the matter the following were agreed as the issues for trial:

 

1. Whether or not the procurement and payment of all requisite regulatory planning permits and approvals by the Defendant was a fundamental term of the agreement?

 

2. Whether or not Defendant has breached the terms of the agreement executed by the parties on 16^th September, 2013.

 

3. Whether or not Plaintiff can recover from the Defendant the full replacement cost and/or value of the land and building thereon demolished by Defendant?

 

4. Whether or not Plaintiff is entitled to recover from Defendant her anticipated and/or envisaged profits that would have been realized from the operation of the apartments as a business concern upon completion?

 

5. Whether or not the suit is premature?

 

6. Whether or not the Plaintiff is entitled to her claims?

 

7. Any other issues arising from the pleadings?

 

 

 

TRIAL

 

Plaintiff testified in person and called her husband Rudolf Engmann as her only witness. She tendered exhibits ‘A’ to ‘F’ which included land certificate of Plaintiff over the land, the lease agreement between the parties, a contract for the lease of the land dated 16^th September, 2013 and a valuation report on the demolished property. Defendant on the other hand testified through its representative and Chief Executive Officer, Kofi Asmah and also tendered Exhibits ‘1’ to ‘3’ and these are a letter from the A.M.A to Defendant, a report of architectural design from Infinite Group Ltd and finally Geotechnical investigations report on the project that was to be undertaken.

 

 

 

ANALYSIS AND EVALUATION OF THE EVIDENCE

 

From Ex ‘B’ and ‘C’ the agreements between the parties was for the lease of the property of Plaintiff at Dzorwulu to Defendant for a period of fifty years with a further term of twenty years for the construction of modern complex of apartments into residential units and two level of car parking space subject to statutory planning permission. It was part of the term of the agreement that construction of the project was to be completed within twenty four months after sod cutting. The Ex ‘C’ was signed on the 16^th of September, 2013 and in the Plaintiff’s reckoning the sod cutting is when the key to the property to be demolished was handed over to the Defendant and for which commencement of construction should have started in January, 2014. Even if this date cannot be accepted as the period for which construction should have begun there is no dispute that per the agreement construction should have completed in 2016 if all matters had gone according to plan. The reason for the non-commencement is what Plaintiff claim to be a breach of the contract for non-performance on the part of Defendant.

 

 

 

A breach of contract in law is defined by Professor Treitel in his work The Law of Contract as:

 

“A breach of contract is committed when a party without lawful excuse fails to perform what is due from him under the contract, or performs defectively or incapacitates himself from performing”.

 

A breach is one ground for the discharge of a contract. Where a contract has been repudiated the innocent party may treat the contract as having come to an end and sue for damages. See MOSCHI v LEP AIR SERVICES [1973] A.C 331.

 

 

 

It has been the claim of Plaintiff that the failure of commencement of construction on the part of Defendant constitute a breach for which she demands damages. This is contained in paragraphs 8, 9, 10 and 11 of the witness statement of the Plaintiff. Defendant has disputed the claim of a breach of the contract on its part and rather has attributed it to a cause beyond its control. That is the failure of the planning authorities being A.M.A to issue it with the necessary permit for it to commence the construction. For instance when Plaintiff came under cross examination she was confronted with the claim of Defendant in the statement of Defence and the witness statement of Kofi Asmah in the following:

 

“Q: Mrs Engmann, you know that the per the agreement the construction of the project was subject to the approval and permit of the City Authorities

 

A: Well he told me that it was not my business, it was his business to do all those things because he was a real estate developer

 

Q: You are aware that nobody can construct a building of the nature in this agreement without permit from the City Authorities

 

A: Yes My Lord

 

Q: And this obligation to obtain permit and approval of the City Authorities was incorporated into the agreement with Defendant

 

A: No it was not incorporated. He told me he was going to handle that side so we did not talk about this side in detail”

 

 

 

In fact the Clause 5.1 of Ex ‘C’ that Defendant rely on to claim that the contract notes that the commencement was subject to Defendant obtaining permit does not actually state anything about permit but that construction should be completed within twenty four months after cutting sod with a reasonable period of extension of three months if construction is not completion on schedule. Nonetheless, it is implicit that the construction could not go ahead without the Defendant obtaining the necessary permit from the A.M.A. And I think with a defence of the Defendant implying that the refusal of A.M.A to issue the permit to it as the cause of the non-performance, I have wondered whether the contract has not been discharged by frustration and find it necessary to explore if indeed the defence of frustration will avail the Defendant even though Defendant does not specifically state so but the nature of its defence implies so. Any unforeseen contingency that occurs after the contract had been entered into that makes the performance of the contract physically impossible or radically change the nature of the obligations of the parties can be said to be frustration. So in the case of TAYLOR v CALDWELL [1863] 3 B&S 826 which involved a contract for the hiring of a music hall for performance but before the contract could be performed, the hall was burnt down.

 

 

 

The court held that the performance of the contract had become impossible as the parties did not anticipate the occurrence of such an event. Any occurrence that seems to fundamentally alter the obligations of the parties to the contract will suffice. A better definition was given in the case of DAVIES CONTRACTORS v FAREHAM U.D.C [1956] A.C. 696 as follows:

 

“frustration occurs whenever the law recognises that without default of either party a contractual obligation has become incapable of being performed because circumstances in which performance is called for would render it a thing radically different from that which was undertaken by the contract…”.

 

 

 

It has been noted that hardship, inconvenience or material or financial loss cannot be relied upon as having called into operation frustration of a contract. The frustrated event must affect the subject matter of the contract or the fundamental obligation created by it and the event must render the contractual obligation radically different from what was originally undertaken. See DAVIES CONTRACTORS supra. MARITME NATIONAL FISH LTD v OCEAN TRAWLERS LTD [1935] A.C 524; JOSEPH CONSTANTINE STEAMSHIP v IMPERIAL SMELTING CORPORATION [1942] A.C. 154. Acquah JSC (as he then was) in the case of BARCLAYS BANK LTD v SAKARI [1996-97] SCGLR 639 emphasised the common principle as follows:

 

“under the common law frustration occurred where an external event of some kind which was not the responsibility of either party rendered further performance of a contract impossible or radically different from what had been contracted for. No valid finding of frustration could therefore be made without the court construing the contract to determine the nature of the obligation created on the parties—the obligation if unfulfilled by a party would entitle the other to sue for a breach of it —because on the authorities the unexpected event should affect the subject matter of the contract or the fundamental obligation created by the contract and not just any term of the contract”.

 

 

 

The consequences of a frustrated contract has been spelt out in sections 1-3 of the Contracts Act, 1960, Act 25. That when a contract is frustrated the parties are discharged from further performance of their obligations under the contract.

 

 

 

Can the order of the A.M.A as contained in its letter of 14^th of September, 2015 stopping the work, being Ex ‘1’ be deemed to have frustrated the contract so as to discharge Defendant from the performance of its obligations under the contract? Ordinarily such an event should be deemed to have frustrated the contract but not in this case in view of the peculiar circumstances that transpired before Ex ‘1’ was written and which I evaluate infra. In Ex ‘1’ the letter note that Defendant before putting in an application for building permit had already commenced work which is contrary to section 10(1) of the Town and Country Planning Ordinance, 1945, Cap 84. It is also instructive to note that Defendant before applying for the permit had already marshalled equipment and labour to site and completely demolished the structure of Plaintiff that was already on the land. Defendant proceeded initially to prepare the ground for use as a temporary car park until Plaintiff protested. Defendant per paragraph 18 of the witness statement admit of the demolition that it carried out.

 

 

 

If the defence of the Defendant is that it cannot carry out the construction of the works, my question is was Defendant at liberty to have demolished the property on the land without permit from the City Authorities? For paragraph 10 of the witness statement of Kofi Asmah states that the first stage in the whole process consist of preparation state that involves commissioning drawings, obtaining permit and preparing the land, then there is sod cutting that commences actual development after permit. It means therefore that in Defendant’s won reckoning permit was a prerequisite and part of the preparations before moving to site to demolish the house that was on the land.

 

Regulation 2 of the National Building Regulations, L. I. 1630 states as follows:

 

“Any person who intends to—

 

(a) erect any building; or

 

(b) make any structural alteration to any building; or

 

(c) execute any works or install any fittings in connection with any building

 

shall apply in Form A specified in Part I of Schedule 1 to these Regulations to the District Planning Authority of the district where the building, structure or works is or is intended to be and shall submit in duplicate the relevant plans”

 

 

 

What was on the land before Defendant demolished it was a building and any changes, demolition or alteration that was intended to be made was subject to the necessary approval from A.M.A which Defendant ignored to obtain. Regulation 10 of L.I 1630 makes it mandatory for any person intending to do acts including excavation, foundation, trenches was supposed even after the grant of the permit to give 28 hours’ notice to the Authorities of the intention to do. Defendant had engaged in demolition, excavation and other works. Did he seek the necessary approval? Surely not.

 

Regulation 54 of the same L.I 1630 further makes it abundantly clear in the following words that:

 

“All demolition works shall be conveyed to the District Planning Authority or the police prior to the commencement of the demolition works and it shall be ensured that sufficient warning is given to the public of the danger posed by the works”.

 

 

 

Having done the demolition, removal of debris and excavation on the blind side of A.M.A, and had actually commenced construction when it applied to AMA for permit to build, Defendant had grievously flouted the building regulations and I find and hold that Defendant cannot claim that the refusal of A.M.A to issue permit was an act beyond its control. In other words, if Defendant had not placed the cart before the horse by demolishing Plaintiff’s property and beginning construction and had applied for permit before the activities he engaged in had been carried out and AMA had refused the application then as a matter of fact and law Defendant’s defence would have legitimately been upheld and frustration would have discharged him from any liability under the contract.

 

 

 

Before Ex ‘1’ was written by A.M.A the property had long been demolished and the claim of hydrological report showing that the water table was high should have all been done before the demolishing of the property that would have made Defendant take an informed decision as to carry out the plan for the building of the car park or not. Having taken steps not warranted by the laws of Ghana by destroying the property on the land without permit, the defence of the construction of the property being subject to the City Authorities approval as Defendant has indicated and claimed cannot be a good and legitimate defence at all and I reject same and further find that Defendant is in breach of the agreements he signed with Plaintiff. Defendant has further pleaded that the suit is premature. The reason for such a claim is that permit has not been granted by AMA and therefore sod cutting has not taken place. Defendant’s lawyers in Ex ‘D’, a response letter to the lawyers of Plaintiff seeking explanation for the inordinate delay in the commencement of the work, stated among others that for technical reasons including a hydrological report, Defendant was unable to construct a two level car park, and was amenable to any decision of Plaintiff to terminate the contract subject to the rules of fairness and equity. If as far back as February, 2016, Defendant had intimated that he had no objection if the contract with Plaintiff was terminated how come such same party is now claiming that the action seeking termination of the contract and damages for non-performance is premature? Defendant has not given any slightest indication of its preparedness to meet the conditions laid down by AMA for it to get the permit and if Plaintiff was to wait for that permit then it would be waiting ad infinitum.

 

 

 

It appears application for permit does not years but rather at length just months. Defendant has not shown its commitment to meet the requirements specified in Ex ‘1’ by A.M.A and I find that the action is not premature and hold that it was right on time. Accordingly the first four reliefs of Plaintiff from my analysis and findings supra succeeds. Plaintiff seeks the recovery of the value of its building that was demolished by Defendant. With the building having been demolished how does the court assess its replacement value? Plaintiff tendered Ex ‘E’ being a Valuation Report for the replacement cost of the demolished building. The date of valuation as per the exhibit is 4^th April, 2016 and the value is placed at Gh¢440,000.00. This became a subject of exchanges when Plaintiff was under cross examination in the following:

 

“Q: In paragraph 12 of your witness statement you stated that you commissioned an insurance valuation report of the property to be undertaken on the 5^th if April, 2016. Are you telling this court that you caused the property to be valued after it had been demolished?

 

A: No My Lord

 

Q: What was the purpose of the valuation you caused to be done. Were you going to insure the property”.

 

A: … I called for the valuation after I wrote a letter to Mr. Asmah and he replied that he was ready to settle the contract that he had breached peacefully. I already had a valuation report long ago which I used for my own insurance purposes but because the building had already been demolished, I decided to use the old valuation report. I took it to the one who did the valuation for me at the time long ago just to revalue it because he told me he was going to settle the matter, so I did not make this valuation for him. I just did it so that it will make matters simple for both of us..

 

Q: And you want this court to believe that the value of your property remained the same since its valuation in 1999 in the year 2016

 

A: No My lord. We used this valuation just because he said he was going to settle peacefully. We can go and re-value now but the property is demolished, it is not there. And I had this valuation report which I had done for my own use, so I decided to go to the same valuer who did this valuation in 1999 to just bring it up”.

 

 

 

I think there is no better way now to determine the value of the property that is no longer there due to its demolishing than a valuation document that was done almost twenty years and had been scaled up in today’s market value. And find the claim of Plaintiff on this ground to be sound. I accordingly grant Plaintiff the recovery of an amount of Gh¢440.000 as the replacement value of the demolished property and further decree that Defendant caused an execution transfer of the land back into the name of the Plaintiff. Plaintiff seeks for the payment of mesne profit. And it is defined as the profit which have accrued while there was a dispute over land ownership.

 

 

 

If it is determined the party using the land did not have legal ownership, the true I grant to Plaintiff for the profit or rent to be assessed from the date that the property should have been completed to the date of final payment. Plaintiff is equally entitled to recovery of possession. And I grant Gh¢10,000 as general damages as such damages are at large and no particular infringed right need to be proved. See DELMAS AGENCY GHANA LTD v FOOD DISTRIBUTORS INT. [2007 – 2008] SCGLR 748. See also the recent decision of the Supreme Court in ASKUS LTD v HARRY BOAKYE & OTHERS J4/14/15 dated 20^th April, 2016, judgment of Appau JSC.

 

 

 

COST

 

Guided by the principles governing cost under Order 74 of the High Court (Civil Procedure) Rules, C. I. 47, to remunerate a successful party and to cover for the expenses incurred during trial, I will exercise my discretion and award cost of Gh¢15,000 in favour of Plaintiff.