Court name
Court of Appeal of Tanzania

Sugar Development Corporation vs Construction Engineers and Builders Ltd () [1986] TZCA 1 (01 January 1986);

Law report citations
1986 TLR 172 (TZCA)
Media neutral citation
[1986] TZCA 1

  A Mustafa, J.A.: The appellant (Sugar Development Corporation, hereinafter called the Corporation) had entered into an agreement with the respondent (Construction Engineers and Builders Limited, hereinafter called the Builders) for the Builders to erect a multistorey building for the Corporation in Dar es Salaam.  The Agreement (hereinafter called the   B Agreement) was dated 19.9.80, the contractual sum was about 33.5 million shillings, the completion date was 3.1.83, the time for completion was 120 weeks, from 15.9.80 to 3.1.83.  Shortly after the Builders had commenced building a variation of the Agreement was made between the Corporation and the Builders by which additional storeys were to be  C added to the original building and the price was increased to about 52.7 million shillings and the completion date was extended to 3.7.84.  The Agreement was on the lines of the usual Royal Institute of British Architects (R.I.B.A) form of contract.
  D In terms of clause 25 (1) (b) of the Agreement the Architect served notice of default on the Builders on 7.6.82 on the ground of the Builders "failure to proceed regularly and diligently with the works".  In January, 1983 the Architect found that such default was repeated and on 4.2.83 notice was served on the Builders terminating the contract.  In April, 1983  E the Corporation employed another contractor to erect the Building.
The Builders filed a suit in the High Court for breach of contract, and the matter was, in terms of the arbitration clause in the Agreement, eventually referred to a single arbitrator, Mr. A.G.I. Shayo, then President, Institute of Engineers,  F Tanzania, for arbitration.
The Arbitrator heard evidence and made his award.  The Arbitrator found in favor of the Corporation and the Builders appealed to the High Court alleging misconduct on the part of the Arbitrator and asking for the award to be set aside.   G The High Court (Mapigano, J.) held that the notice of termination by the Corporation was invalid and that the Arbitrator had misconducted himself.  The judge, apart from remitting the amount claimed for compensation to the Arbitrator for a fresh hearing, in effect set aside the award.  From that Ruling the Corporation has appealed to this Court. H
In his award the Arbitrator made a number of findings.  The main ones were:
   (1)   The Builders' responsibility was limited to the scope of works as defined in the original Agreement of 19.9.80 including any I variations that were issued but did not extend to the overall

A       increased scope of work.  The sum involved would be Shs. 33.54 million less Shs. 8.04 million for supplies and sub-contracts, i.e. Shs.25.5 million only.
   (2)   The Architect's notice of default dated 7.6.82 was valid.
   (3)   That there was an element of negligence on the part of the Architect in dealing with applications for extension of time by the Builders. B
   (4)   The notice of termination of 4.2.83 issued by the Corporation to the Builders was in conformity with the Agreement and was valid.
   (5)   In view of the finding that the termination was valid there was no point in considering the issue of extension of time. C
   (6)   The Builders to compensate the Corporation as follows:
      (i)   extra cost of completing works   38,384,558.45
      (ii)   extra cost of consultant's fee     3,294,409.30 D
                        41,678,967.75
   (7)   The Corporation to return to the Builders the equipment and tools in good condition, fair wear and tear excepted, on the completion of the work. E
The judge found that the Arbitrator had (1) misconstrued clause 25 (1) (b) of the Agreement, and he held that the notice of termination given by the Corporation to the Builders was bad, (2) that the Arbitrator did not adequately consider the Builders' application for extension of time which was of vital importance and (3) the amount awarded to the Corporation  F was unwarranted.  He found that the Arbitrator had misconducted himself and he set aside the award and directed G
   (a)   The Builder's plant, equipment and tools be released forthwith to the Builders.
   (b)   The award concerning compensation be set aside and will be the subject of a new hearing. H
   (c)   The costs of the application be borne by the Corporation.
The Corporation appeals to this Court on two main grounds.  Mr. Mkude for the Corporation submitted that the judge  I had erred in holding first, that the Agreement had been unlawfully terminated

  A and secondly that the Arbitrator did not adequately consider the question of extension of time.
On the issue of termination, the point turns on the construction of clause 25 (1) of the Agreement.  It reads:
B    25. (1)    If the Contractor shall make default in any one or more of the following respects, that is to say:
   (a)   if he without reasonable cause wholly suspends the carrying out of the Works before completion thereof, or
C    (b)   if he fails to proceed regularly and diligently with the Works,or
   (c)   if he refuses or persistently neglects to comply with a written notice from the Architect requiring him to remove defective work or improper materials or goods and by such refusal or neglect the Works are materially affected, or D
   (d)   if he fails to comply with the provisions of clause 17 of these Conditions,
E    then the Architect may give to him a notice by registered post or recorded delivery specifying the default, and if the Contractor either shall continue such default for fourteen days after receipt of such notice or shall at any time thereafter repeat such default (whether previously repeated or not), then the Employer without prejudice to any other rights or remedies, may within ten days after such  F continuance or repetition by notice registered post or recorded delivery forthwith terminate the Employment of the Contractor under this Contract, provided that such notice shall not be given unreasonably or vexatiously ... G
The Arbitrator gave detailed reasons for his finding.  As regards the notice of default, he was satisfied that the default notice of 7th June, 1982 was reasonably issued, the default being that the Builders failed to proceed regularly and  H diligently with the works.
The Arbitrator held that the default was repeated on 26th January, 1983 when, on a site visit, it was discovered that the labour force had dropped from 49 to 12, and there was no foreman on the site.  And by a letter of 28th January, 1983, the Builders stated that building on the site had stopped.  The notice of termination was given on 4.2.83, within 10 days  I of the repetition of the default on

  A 26th January, 1983, and 28th January, 1983.
The judge was not satisfied as to when the Builders had repeated the default, which in his view, was crucial, as the notice of termination had to be given within 10 days of the repetition of the default.
  B Mr. Lakha for the Builders submitted as follows: First even if the default notice of 7.6.82 was valid, he contended that the notice of termination of 4.2.83 was not made within 10 days of the repetition of the default.  He said that there could be no continuance of the default the subject of the notice of 7.6.82, as there was an interval of 8 months; and during such interval the Builders had done satisfactory work.  There could only be a repetition.  It was not established that the default  C discovered on 26th January, 1983 was repeated the first time that day.  To be a repetition Mr. Lakha contended that the default must have occurred the first time after a lapse of time.  If the occurrence had happened on an earlier date it would be continuation, not a repetition.  He emphasised that "continuance" and "repetition" are mutually exclusive, a  D continuation cannot be a repetition.
I am not persuaded by this argument, ingenious though it is.  If after a default has been established, and it has ceased or  E has been remedied, a repetition of such default occurs when it takes place again.  It matters not when one becomes aware of the default, whether on the first day it was repeated or on some subsequent date, so long as the default  F continues.  A repetition of a default can have no exclusive reference to the date of its first occurrence, it is repeated every time the default occurs.  The repetition of a default is the act of the default itself being repeated, and once the default is repeated, then a notice of termination within 10 days of such occurrence complies with the provisions of clause 25 (1) (b).
Mr. Lakha also contended that there was no or no sufficient evidence of the default being repeated.  The Arbitrator had  G relied on two matters for his finding that the default was repeated, (1) the site visit on 26.1.83 and (2) the Builders' letter of 28.1.83.  Mr. Lakha submitted that the site visit was referred to only in the final written submission to the Arbitrator made by the Corporation and was not a matter given in evidence.  As regards the letter of the Builders Hdated 18.1.83 he submitted that the sentence "the project has come to a standstill", should not be taken out of its context.  The Builders were complaining of the attitude and stance adopted by the Architect in respect of the work done by the Builders. I
Mr. Mkude for the Corporation referred to the large number

  A of site visits made as mentioned in minutes in the record prepared  for the Arbitrator.  These were not in dispute and in fact he stated there was evidence adduced before the Arbitrator of such visits.  The site visits, at that period, used to be about once every week or ten days.  The letter of 28.1.83 clearly established that the work had come to a standstill. B
The Arbitrator was satisfied that the site visit of 26.1.83 did take place.  There was certainly evidence to support his finding.  He construed the letter of 28.1.83 as evidence that at that time the work on the site had stopped.
  C On this point the judge stated that he was not satisfied as to when the Builders repeated the default.  In my opinion if he had properly directed his mind to the Arbitrator's finding that such evidence was to be found in the site visit on   D 26.1.83 when the labour force had fallen to 12 and the foreman was absent, as well as to the admission in the Builder's Letter of 28.1.83 that work had come to a standstill, I think he would have concluded that the default was repeated on 26.1.83 and 28.1.83.  The default, let me repeat, was failure to proceed regularly and diligently with the works".
The notice of termination was given on 4.2.83, within 10 days of the repetition of such default in terms of Clause 25 (1)  E (b) of the agreement.
On the issue of extension of time Mr. Lakha submitted that the Arbitrator had found that the Builders had applied to the Architect for extension of time for 377 days.  The Arbitrator was of the view that the Builders were entitled to some at  F least of those days, and that there was an element of negligence on the part of the architect in dealing with such application for extension of time.  I am not at the present concerned with another  extension for 254 days which relates to the extra work connected with the variation in the original Agreement.  Mr. Lakha submitted that if the Builders were  G granted the full extension of time applied for, it could be found that there was no undue delay by the Builders in carrying out their building work.  He went into figures and time frames and sought to establish that if the Builders had obtained such full extension there would be no default.  He contended that the Arbitrator ought to have decided how much extra  H time was due to the Builders, so as to assess the progress of the work done, but the Arbitrator had failed to do so.  He submitted that this matter of extension of time should be remitted to the Arbitrator for a fresh hearing.  From Mr. Lakha's arithematical calculation he estimated that at the time the Agreement was I

  A terminated about two thirds of the work in the original Agreement had been completed.
Mr. Mkude, from his arithmetical calculation, claimed that by the time the agreement was terminated, only one third of the work in the original Agreement was completed.  He maintained that in any event the default was basically concerned with  B the progress aspect of the work, that work had to be done "regularly and diligently".  The issue of when the work was to be completed has to be viewed in the context of the progress of the work being carried out "regularly and diligently".  The evidence, he contended, established that work had come to a standstill on 18.1.83.  The issue of extension of time  C was not of importance in the numerical context, but in the context of the concept of proceeding with the work "regularly and diligently".  He admitted that there was no evidence based on quantities about the portion of work completed when the Agreement was terminated.  The estimates given were based on the amounts of money paid and the balance remaining unpaid. D
On the question of extension of time the judge was of the view that it was of vital importance and deserved a "deep and careful consideration".  He thought that if the Arbitrator had granted the full extension of time asked for by the Builders,  E he would have dismissed the Corporation's contention that he  had committed the default of failing "to proceed regularly and diligently with the works".  The judge did not hold that the claim for extension was well-founded, but he held that the  F Arbitrator did not adequately consider this issue.  The judge however had held that the notice of termination was bad on the ground that there was no evidence that a repetition of the default had occurred within 10 days when the notice of termination was given.  He did not link this question of the extension of time directly with the issue of the validity or otherwise of the notice of termination. G
The Arbitrator dealt in great detail in his award with the extension of time issue.  He dealt with it when considering the issue of extension of time proper and in connection with the issue of the validity of the notice of termination of 4.2.83.  He considered the reasons for some of the extra time asked for as being due to lack of materials, and he concluded that the  H "conditions which existed during the contract period as far as the availability of the said material is concerned, were not different from those that existed in 1981, when the Contractor prepared his tender bid".  He went carefully into the arguments and submissions put forward by the parties, and the Arbitrator devoted several pages in his award to this  I matter.

  A The Arbitrator took into account all the relevant factors, and in arriving at his conclusion he took note of the extension of time claimed by the Builders, the reasons advanced by the Builders for the rate of progress and so on and so forth.  The Arbitrator was experienced in the matters in dispute between the parties, and he gave sound reasons for his conclusion.  I can find nothing that indicated that the Arbitrator had misdirected himself or had gone wrong, and, for my  B part, I am satisfied that the Arbitrator was entitled, on the evidence before him, to have reached the conclusion that despite the right of the Builders to some of the extra time he had asked for, it would not have really mattered for it was   C clear that the Builders had failed to proceed regularly and diligently with the works.  I do not agree with the judge when he found that the Arbitrator did not adequately consider the Builders' application for extension of time.  In my view that point was adequately considered by the Arbitrator. D
I now come to the matter of the monetary award made by the Arbitrator.  The judge found that the said award was unwarranted and directed that this issue be remitted to the Arbitrator for a fresh hearing.  I think the judge was right.  The Arbitrator had clearly erred in his assessment of the sum found due to the Corporation.  He gave no clear indication as to  E how he had arrived at his figure.  Mr. Lakha submitted, and Mr. Mkude eventually agreed, that this matter be remitted for a fresh hearing.
In deciding this matter of the monetary award the Arbitrator should take into account the following, among other, factors: F
   (1)   The Arbitrator had clearly found that the Builders' responsibility was limited to about 25.5 million shillings (to the scope of works as defined in the original Agreement)
G    (2)   The Builders had been paid about 12.8 million shillings for work done, leaving a balance of about the same sum.
   (3)   The sum paid to the Builders includes some of the extra work as contained in the variation to the original Agreement.
   (4)   An estimate has to be made as to when the works in the original Agreement would be completed if they have not yet been completed.  In this connection, it must be kept in mind that, the new contractor would be erecting on the basis of the HAgreement as varied including the extra work.  Any extra time due to the Builders has to be computed and taken into account. I
   (5)   If there is an element of inflation in connection with the

A       cost of the uncompleted work in the original Agreement, the escalation due to inflation assessed at 15% as contained in page 145 of the record of appeal will be of relevance.
   (6)   Whether liquidated damages at Shs.6,000/= per day of delay as contained in Clause 22 of the Agreement is applicable.
  B In connection with the Builders' plant, equipment and tools, the judge had ordered them to be released by the Corporation to the Builders "forthwith", i.e. on the date of his judgment, 21st September, 1985.  The judge made that order probably on the ground that the termination notice was invalid.  That order of the judge cannot now stand and I  C would restore the order of the Arbitrator on this matter.  In any event the Arbitrator will have to fix a completion date in respect of the uncompleted work involved in the original Agreement, either actual or notional.  The return of such plant and equipment would be related to such a date. D
In the final analysis, I would set aside the order and ruling of Mapigano, J., except for his order that the award in respect of monetary compensation made by the Arbitrator in his Award be set aside and be the subject of a fresh hearing.
I would restore the findings of the Arbitrator that the notice of default of 7.6.82 and the notice of termination of 4.2.83  E were valid and legal.  I also would restore the order of the Arbitrator that the costs of the Arbitration before him be borne by the Builders, as well as his order in respect of equipment and plant.
  F In regard to the fresh hearing on the issue of the monetary award, I would order that the matter be arbitrated by the same Arbitrator in terms of Section 14 of the Arbitration Ordinance.  He should file his award within 3 months of the date of the order remitting the award.  The Arbitrator should take note of the factors in regard to the monetary award mentioned earlier in this judgment. G
In the result in my opinion, the appellant has succeeded to the extent as above stated.  I would award the appellant half the costs of this appeal.  I would not certify for two advocates.  I would make no order in respect of the costs in the High Court.
As the other members of the Court agree, it is so ordered. H
Order accordingly.

A