IN THE SUPERIOR COURT OF JUDICATURE
IN THE HIGH COURT (COMMERCIAL DIVISION)
ACCRA - A.D 2016
DANIEL ADDO - (Plaintiff)
PSC TEMA SHIPYARD LIMITED - (Defendant)
DATE: 24TH MARCH, 2016
SUIT NO: BDC 47/2014
JUDGES: SAMUEL K. A. ASIEDU, JUSTICE OF THE HIGH COURT
MR. MBEAH FOR THE PLAINTIFF
MR. KWEKU ADU MINTAH FOR THE DEFENDANT
By an amended writ the plaintiff claims from the defendant
a. Damages for breach of contract
b. Order for the payment of cash the sum of GH₵36,000 being cost of spare parts supplied to the defendant and labour cost for the repair of the defendant’s mobile crane.
c. Interest on the said sum of money from October 2012 at the current bank rate to date of final payment.
After the close of pleadings and the failure of pre-trial settlement, the matter was set down for hearing after the parties had filed their witness statements. At the trial, the plaintiff gave evidence and called one witness to close his case. The defendant also gave evidence per the Head of Human Resource and Administration and then called one witness to close its case.
From the pleadings filed by the parties, it is not in dispute that the plaintiff is a mechanic. It is also not in dispute that the defendant is a shipyard company which repair ships. The court also finds from the pleadings that there has been a contractual or working relationship between the parties in view of the admission by the defendant that the plaintiff some time ago repaired the defendant’s compressor and also changed the engine of the defendant’s Neoplan bus from a 6 cylinder to 8 cylinder engine and for which work, the defendant paid the plaintiff.
The plaintiff contends that he was contracted by the defendant to repair the defendant’s crane which had broken down. According to the plaintiff, as a result of the said contract, he purchased various parts to repair the crane and that whiles the work was ongoing, there was a change in the management of the defendant company after which the new managing director of the company ordered the plaintiff to stop work even before he could finish executing the contract. The plaintiff then put in a claim for the cost incurred by him but the defendant refused to reimburse the plaintiff alleging that no contract ever existed between the defendant and the plaintiff. The plaintiff therefore initiated the instant suit claiming the reliefs endorsed on the writ of summons. The following issues arise for determination from the pleadings: Whether or not there is a contract between the plaintiff and the defendant for the repair of the defendant’s crane; whether or not the plaintiff supplied spare parts to the defendant; whether or not the plaintiff has repaired the defendant’s crane; whether or not the defendant is in breach of contract and finally whether or not the plaintiff is entitled to his claim.
CONTRACT FOR THE REPAIR OF CRANE
On the issue whether or not there is a contract between the plaintiff and the defendant for the repair of the defendant’s crane, the plaintiff’s pleading and evidence is that he was verbally contracted, in 2012, by the defendant per Mr. Seth Kugblenu the then managing director of the defendant company to repair the crane of the defendant which had then broken down. The plaintiff stated that the defendant had difficulty in obtaining the spare parts of the crane so he was verbally informed that if he could obtain the needed parts, he would be given the contract to repair the broken down crane. Eventually the contract was awarded to the plaintiff. The plaintiff’s testimony about the award of the contract to him was corroborated by PW1 Kporvie Koku Bless who was, at that time, the Mechanical Engineer of the defendant company and the Head of Yard Services and he testified to the effect that the contract was purely an oral one.
In its statement of defence the defendant, in paragraph 4 thereof, simply denied the plaintiff’s averment on the oral contract and proposed to demand strict proof from the plaintiff. Likewise, in the witness statement, the defendant’s representative, at paragraph 3 and 7 again denied the contract alleged by the plaintiff without giving any reason for the denial. The reasons for disputing the existence of a contract between the plaintiff and the defendant company surfaced in an answer to the last question posed to the defendant’s representative under cross examination. The question runs thus:
“Q. So Mr. Kugblenu at the time was right in making verbal contracts without informing you.
A. There again before contracts are given in PSC Tema shipyard we have got a standard procedure. If it is in respect of an equipment, a defect form is filled by the user department then if we don’t have the expertise internally to repair or provide such services then it is referred to procurement with a recommendation to subcontract it and the sub-contracting is done by the procurement department by also filling the subcontract requisition form giving the justification why the job should be subcontracted then based on that, approval is given. Here again there was no defect form, no such subcontract form on this particular equipment.”
The reasons given by the defendant’s representative for the defendant’s refusal to accept that there was a verbal contract between the plaintiff and the defendant was re-echoed by the only witness of the defendant- Yussif Nurudeen, DW1 herein in his witness statement and also in his answers to questions under cross examination.
In sum, the court finds that the reasons given by the defendant for denying the contract between it and the plaintiff are all about the non-observance by the defendant of its own internal procedures which include the issuing of a Defect Form by the User department to the Yard Services Department; the issuing of a Sub-Contract Form by the Yard Services department to the Procurement department; then the issuing of a Local Purchase Order (LPO) for the approval of the Chief Executive Officer or the Entity Tender Committee.
It is clear from the evidence adduced that during the tenure of Mr. Kugblenu as the Managing Director, the Entity Tender Committee was not in place. This fact was admitted under cross examination by the defendant’s representative as well as the only witness called by the defendant. The question which ought to be answered is whether the plaintiff can be made to suffer for the non-observance by the defendant of its own internal procedures? And can the defendant be allowed to take advantage or benefit from its own wrong? As already observed the evidence by the plaintiff on this issue has been corroborated by Kporvie Koku Bless who was at the material time the Head of the Yard Services Department of the defendant company.
The plaintiff asserts an oral contract. The contention of the defendant seems to create the impression that the defendant company is not permitted and has no right or power to enter into oral contracts. The type of contract in issue is an ordinary contract for the repair of an unserviceable crane. The defendant’s counsel has not made reference to any law which requires such contracts to be in writing before it could be enforced.
At common law contracts could be formal or informal and except a statute specifically says so, contracts entered into by verbal agreements are enforceable. For instance, there is a specific requirement under section 14 of the Contracts Act 1960, Act 25 that makes it mandatory that a contract of guarantee must be in writing and signed by the guarantor in order to be valid. Again, as an example, the Conveyancing Act 1975, NRCD 175 provides in section 2 as follows
“A contract for the transfer of an interest in land is not enforceable unless
(a) it is evidenced in a writing signed by the person against whom the contract is to be proved or by a person who was authorised to sign on behalf of that person, or
(b) It is relieved against the need for a writing by section 3.”
Even then, in Fofie vs. Zanyo  2 GLR 475 it was pointed out at page 477 of the report that “The court was entitled in certain cases to permit a contract to be proved by oral evidence, even though of a kind required to be proved in writing, when the party seeking to enforce the contract had done acts in performance of his obligations under it. The court would exercise its discretion where (a) the act of part performance was referable to only the contract alleged; (b) they were such as would render it a fraud in the defendant to take advantage of the contract not being in writing; (c) the contract by its own nature was enforceable by the court; and (d) there had to be proper parol evidence of the contract let in by the act of part performance.”
Indeed section 144 (c) of the Companies Act 1963, Act 179 permits companies to enter into oral contracts in appropriate cases. The section provides that
“144. Form of contracts
A contract on behalf of a company may be made, varied or discharged
(c) if the contract, if made between individuals would be valid although made by parol only and not reduced to writing or could be varied or discharged by parol, may be made, varied or discharged, by parol on behalf of the company.”
By the provision in section144 (c) of Act 179, the yardstick for the assessment of the validity of the contract in question is whether individual persons could validly make an oral contract for the repair of an unserviceable crane or equipment. To the extent that no statute law prohibits individuals from entering into such contracts orally, or, in other words, to the extent that such contracts are not required by any statute to be in writing as a condition for their validity or enforcement, companies, like the defendant company, which are legal entities can and do have the power to also enter into such contracts orally. The Supreme Court in Godka Group of Companies vs. PS International Ltd [2001-2002] SCGLR 918 stated the position of the law simply when it held that:
“Under section 144 of the Companies Code, 1963 (Act 179), a company might enter into a contract in the same way as an individual might.”
The court will hold that the oral contract in question made between the plaintiff and the defendant company is a valid contract.
Furthermore, section 139 and 142 entitles the plaintiff to presume that the Managing Director of the defendant company, in this case Mr. Kugblenu, has the right and the power to enter into the contract in question and bind the company to the agreement. Section139 provides that
139. Acts of the company
(1) An act of the members in general meeting, the board of directors, or a managing director while carrying on in the usual way the business of the company shall be treated as the act of the company itself; and accordingly the company shall be criminally and civilly liable for that act to the same extent as if it were a natural person.
(2) For the purposes of subsection (1),
(a) the company shall not incur civil liability to a person if that person had actual knowledge at the time of the transaction in question that the general meeting, board of directors, or managing director, did not have the power to act in the matter or had acted in an irregular manner or if, having regard to the position with, or relationship to, the company, that person ought to have known of the absence of power or of the irregularity;
(b) if in fact a business is being carried on by the company, the company shall not escape liability for facts undertaken in connection with that business merely because the business in question was not among the businesses authorised by the company’s Regulations.
Section 142 (1) (a) (b) also states that
142. Presumption of regularity
(1) A person having dealings with a company or with someone deriving title under the company is entitled to assume,
(a) that the company’s Regulations have been duly complied with;
(b) that a person described in the particulars filed with the Registrar pursuant to sections 27 and 197 as a director, managing director or secretary of the company, or represented by the company, acting through its members in general meeting, board of directors, or managing director, as an officer or agent of the company, has been duly appointed and has authority to exercise the powers and perform the functions customarily exercised or performed by a director, managing director, or secretary of a company carrying on business of the type carried on by the company or customarily exercised or performed by an officer or agent of the type concerned; and the company and those deriving title under it are estopped from denying the truth of that assumption.”
In Godka Group of Companies vs. PS International Ltd (supra) the court pointed out that
“A person contracting with a company was not required to demand the production of a resolution authorizing the board, the general meeting, an officer or agent of the company, as the case might be, to enter into the contract. And under the Rule in Turguand’s Case or the “Indoor Management” Rule, a person dealing with a company was entitled to assume, in the absence of facts putting him on notice or inquiry, that there had been due compliance with all matters of internal management and procedure required by the regulations of the company. The rule had been codified in sections 139-143 of Act 179. Under section 142(2), if the company had held out someone as its agent, it would be estopped from denying the appointment; and a de jure or de facto officer of the company could be assumed to have the usual powers and duties of that sort of officer. Royal British Bank v Turquand  ALL ER Rep 435.
And in Oxyair Ltd & Darko v Wood & others [2005-2006] SCGLR 1057 the court delivered itself on the law that
“The common law rule in Turquand’s case … had been codified in sections 139-142 of the Companies Code, 1963 (Act 179). In terms of section 139 of the Code, unless the defendants were able to establish that the plaintiffs had actual knowledge, before the conclusion of the oral contract, of any defect in the second defendant’s authority to bind his company or that he had acted in an irregular manner, then the company would be bound. Section 141 of the Code had also abolished the common law rule that a party dealing with a company was deemed to have constructive notice of the contents of all the companies’ public documents filed at the Companies Registry. The provision in section 141 implied that at the time that the plaintiffs entered into their oral parol contract with the defendants, they had no constructive notice of the contents of the regulations of the company. Accordingly, any restrictions on the authority of the managing director contained in the regulations did not affect the validity of the contract entered into by him, unless the plaintiffs’ actual knowledge of such restriction was proved. Furthermore, section 142(a) of the Code had the effect of affirming the rule in Turquand’s case. Thus in terms of section 142(a), an outsider, such as the plaintiffs were when they entered into the oral agreement with the second defendant, was entitled to assume, on application of the presumption of regularity that all the internal rules of the company had been complied with. Royal British Bank v Turquand (Turquand’s Case) (1856) 6 E1 & B1 327 considered.”
In the instant case not a shred of evidence has been offered by the defendant to prove that the plaintiff herein had knowledge of any incapacity on the part of the then Managing Director of the defendant company to enter into the oral contract with the plaintiff wherein the plaintiff was contracted to repair the broken down crane of the defendant. It has even not been suggested by the defendant that the then Managing Director lacked the competence to enter into the contract as he did. The defendant’s main concern has to do with the non-observance of laid down procedure in the award of contract in the defendant’s company. As stated above the plaintiff is entitled to presume that all internal mechanisms and procedures in the award of contract unique and or peculiar to the defendant company has been complied with by the defendant. The plaintiff cannot be blamed for the laxity in the defendant company. The oral contract is therefore binding on the defendant company.
COST OF SPARE PARTS AND LABOUR
The plaintiff claims from the defendant the sum of GH₵36,000 representing the cost of spare parts purchased for the repair of the crane and the cost of labour. The evidence of the plaintiff is that after he had been contracted to repair the crane, he went and assessed it and subsequently purchased the parts he would need to repair the crane. Indeed the plaintiff got the parts he had purchased transported into the yard of the defendant company whereupon he fixed these parts onto the crane and was able to move the crane from its original position at Dock 2 to the Auto shop. The plaintiff was in the process of fixing the swing motor onto the crane when the new Engineer informed the plaintiff that the new Managing Director of the defendant company has directed the suspension and termination of further works on the crane. The plaintiff tendered in evidence exhibit ‘A’ the invoice which he prepared when the contract was terminated. The testimony of the plaintiff in respect of the spare parts purchased and also on the works done by him is corroborated in all material particular by the evidence of Kporvie Koku Bless who also testified to the effect that he personally conveyed some of the parts purchased into the yard of the defendant company where they were fixed onto the crane by the plaintiff.
Again the defendant’s opposition to and denial of the parts purchased by the plaintiff is amply captured in paragraphs 5 and 6 of the witness statement filed by the defendant’s representative as follows:
“5. Defendant has never received any spare parts either directly from plaintiff or through Bless Koku Kporvie in so far as this matter is concerned. Defendant has since the institution of this suit looked through its records and there is no indication whatsoever that the items plaintiff claims to have supplied defendant were ever received.
6. The defendant has never received any parts from Bless Koku Kporvie who until recently was a manager in the employment of defendant company. Bless Koku Kporvie worked with defendant for about 18 years and is very much aware of the fact that any item that is intended to be paid for by defendant must be declared at the gate and properly documented.”
Thus the defendant’s reason for refusing to admit that the plaintiff purchased the parts in question is that there was no declaration or records at the security gate of the defendant. In the opinion of the court whether or not a person is required to declare items purchased for works in the premises of the defendant before the defendant can take cognizance of such items, is a matter that borders on the internal arrangement of the defendant company for which a person who is not an employee of the defendant cannot be held responsible in the absence of proof that that person has personal knowledge of such requirement. It is very instructive to state that PW1 who was, at the time of the contract, the Yard Services Manager of the defendant company stated that the plaintiff was not bound to declare any item purchased by him at the security gate of the defendant. The following answers given by PW1 under cross examination throw more light on this assertion by PW1:
“Q. You know of incoming items declaration form of the defendant company. Correct?
Q. And you know the essence of this particular form is to keep record of items that defendant is required to pay for which enters the yard. Is that correct
A. It is correct but that form actually is for internal process. When we purchase items on emergency basis, it means the items should go to stores so the recording starts from security and the demand is made as to the items.
Q. And what you have just described applied to every single item and not just what are purchased in your words emergency basis
A. Every items going to stores that is supposed to be used by PSC Shipyard.
Q. And there is no record of a single part that you claimed plaintiff supplied to defendant. Is that not correct?
A. You are 100% right and there are reasons for that. Just as I said earlier on that he was supposed to do the request and when he finishes bill us the same way other companies whether they take the equipment out or do the repairs in the yard were treated and are still being treated the same way.
Q. Which are these other companies you refer to?
A. Pasico e.g. comes into the yard, carries out repairs and maintenance of our equipment when they are unable to send it to their yard and e.g. Japan motors that we send our equipment to when they carry out the repairs because they don’t draw materials from our warehouse. So it is not necessary that it passes through that process.”
From the evidence above, the court finds that the plaintiff is not bound to declare, at the defendant’s security gate, items purchased by him for use on the defendant’s crane and this is so because those items were not meant for the defendant’s stores but to be used for the repair of the broken down crane. Even then the court holds that the need for declaration is part of the internal arrangement of the defendant company and in the absence of evidence that the plaintiff knew of this internal arrangement of the defendant company, the plaintiff cannot be made to suffer for the non-observance of an internal arrangement known only to the defendant.
In respect of the cost of the items purchased, PW1 gave the following answers to questions under cross examination:
“Q. Did the plaintiff present the defendant with a receipt covering these items that he alleges he had bought for the defendant?
A. He was not supposed to present those receipts immediately he purchased those items because at the end of the day he was going to bill the company all the charges that went into the repairs of those items with the exception of the converter. Because he wasn’t given any mobilization fee so agreement was reached that any expensive parts that he may require the company will look into it and decide whether to give him money for those parts. So the converter was paid by the company.
Q. Who reached this agreement which you have just spoken about with the plaintiff?
A. The former Managing Director Mr. Seth Kugblenu.
Q. Where was this alleged agreement reached?
A. It was in PSC yard actually it was a challenge thrown that is why this whole agreement seems not to follow the normal norms.
Q. A while ago you stated in your answer that plaintiff was not required to provide receipts for items purchased. How was the defendant at the end of everything going to ascertain the cost buildup whether it was the true reflection of the project.
A. You are right, in this case it was just the same way we handle contracts with companies like Japan Motors, Pasico as well as other companies. They bill us after the job has been done they don’t claim for individual parts that they purchased.”
The court finds from the answers above that the plaintiff was required to execute the contract by repairing the defendant’s broken down crane and upon completion submit a bill to the defendant for payment. The court also finds from the evidence on record that the plaintiff’s contract with the defendant was terminated by the new Managing Director of the defendant company when he gave instructions to the plaintiff to stop work on the crane. That act of the defendant amounts to a breach of contract.
It seems to the court that the defendant’s representative – Musah Issah Haruna, does not appear to know much about the relationship between the defendant and the plaintiff herein. This is evidenced by the fact that the defendant, by its statement of defence particularly at paragraph 3 thereof had admitted the plaintiff’s allegation that before the contract subject matter of dispute was made, the defendant company had contracted the plaintiff to work on the defendant’s compressor and also to work on the defendant’s Neoplan bus by changing the engine of the Neoplan bus from six cylinder to eight cylinder engine and that the defendant had paid the plaintiff for these works done by the plaintiff. Yet the defendant representative denied and or expressed total ignorance of these facts which have been admitted by the defendant in its statement of defence. Below is an extract of some of the denials made by the defendant’s representative during cross examination:
“Q. The plaintiff has stated in paragraph 4 that he worked on the company’s Neoplan bus when he changed the engine of the bus from 6 cylinders to 8 cylinders
A. The Neoplan bus was not repaired by him. I don’t have such records Q. But the engine was a 6 cylinder one A. Not that I know of
Q. I am putting it to you that the Neoplan bus which the plaintiff worked on was a 6 cylinder engine which was changed to 8 cylinder engine
A. I don’t know about that.
Q. The plaintiff again says the company paid him for this job that he did; the repair of the bus
A. We don’t have any record of the repair of the bus by the plaintiff.
Q. As head of admin did you take the trouble or the time to verify if the company has ever paid any money to the plaintiff in respect of any services rendered to the company?
A. Yes I asked from the Finance Department but I did not get any positive response
Q. How will anybody know that you did this?
A. I asked from the Finance department and did not get any positive Response.
Q. In respect of the parts that he brought, you told the court that you went through the records of the company but you did not find any records of these materials my question is with respect to the claim of payment that the plaintiff is making did you yourself go through any record to find this payment.
A. As the Head of Amin the security is under me and for such payment to be justified it should have the records at the security to see whether indeed the claim was justified and the procedure revealed that there was no contract, no material came for the repairs as purported by the plaintiff, and for that matter it cannot be justified from the security point of view.
Q. I am again putting it to you that the plaintiff was engaged by the company to repair the company’s compressor
A. I don’t know about that.
Q. Indeed he did the work and was paid by the company.
A. I do not know about that.
Q. All these assignments were verbal assignments that were given to the plaintiff by the former MD Mr. Kugblenu.
A. Because of the kind of standard requirement that we have at the security gate nobody at PSC Tema shipyard can violate or set it aside without express or written instruction if the CEO will do that he will write to the security telling them that this will be exempted and that will be filed so that if it is filed and a question is thrown one day why did this go against the procedure, then the document will be produced that it was an exception and this is the justification and again going through the documents, I did not find any such instruction from the CEO or whoever.”
In view of the glaring fact that the defendant’s representative denies even what the defendant company had admitted in its statement of defence, how can the court trust him to be speaking the truth in respect of his denial of knowledge of the works executed by the plaintiff as far as the performance of the plaintiff’s obligations under the contract in issue is concerned.
The court holds that the plaintiff is entitled to claim the cost of the spare parts he purchased and used for the repair of the crane from the defendant company in addition to the cost of labour. The court holds that the plaintiff succeeds in his claim against the defendant. Judgment is therefore entered for the plaintiff to recover from the defendant the sum of GH₵36,000.00. The court will also award the sum of GH₵2,000.00 to the plaintiff as damages for breach of contract. The plaintiff will have his costs assessed at GH₵2,000.00.