Posted on January 15, 2025
An arbitration tribunal by Ayo Fanimokun in Lagos, on 30 December 2024, awarded N9.1 billion to Hanson Dredging in special damages and N5 billion in general damages for breach of contract terms by the respondent.
Hanson Dredging and Marine Services Limited, the contractor appointed in 2021 to execute dredging and reclamation work for Lagos Creative and Entertainment Centre, has won a multi-billion arbitration against Sanef Creatives Limited, which awarded the contract more than three years ago.
An arbitration tribunal overseen by Ayo Fanimokun in Lagos, on 30 December 2024, awarded N9.1 billion to Hanson Dredging in special damages and N5 billion in general damages for breach of contract terms by the respondent.
Hanson Dredging is also entitled to “interest on the total sum awarded as prayed in its point of claim since inflation has eroded the value of the money significantly,” according to a ruling document seen by PREMIUM TIMES.
Background
The two parties agreed that the claimant would deliver the N7 billion contract within 36 months, with Phase 2A not exceeding a maximum of 12 weeks, including mobilisation. The day the claimant received the advance payment, 19 November 2021, would mark the start date.
Globus Bank, the banker to Hanson Dredging, issued an advanced payment guarantee (APG) on behalf of the claimant to Sanef Creatives.
Based on economic situations and in line with the contract agreement, Hanson Dredging requested a review of the contract sum, which Sanef Creatives declined to oblige.
Instead of granting the respondent’s request, Sanef Creatives terminated the contract and recalled the advance payment guarantee, actions Hanson Dredging said were premature.
Afterwards, Hanson Dredging went to arbitration, asking it to be reimbursed for the amount of work it had executed and the expenses it incurred in the process.
The company sought a declaration that the termination of the contract is “unlawful, premature and against the spirit and letters of the contract documents executed by the parties.”
It also sought a relief that “the respondent having willfully elected not to hold onto and or insist on the time frame stipulated in the contract for the completion of the first phase of the parties’ contract (Phase 2A) within 12 weeks after the receipt of the first phase of the advance payment from the respondent is a clear indication that the respondent upon coming to terms with obvious realities and inevitable challenges that delayed the execution of the contract which qualified as defined risks under Clause 6 (k & l) inter alia, necessitating an extension of time under Clause 7.3 of the contract.”
Hanson Dredging claimed that having already executed the contract job to over 60 per cent stage at the time Sanef Creatives ended the contract and ordered the company to demobilise out of the site, it was to be paid for all the unpaid balance for the value of the work it already executed estimated to be N5.3 billion plus accrued and accruing interest.
According to the court document, Sanef Creatives, leveraging its relationship with the Central Bank of Nigeria (CBN), had the bank debit the sum of N4.2 billion, being the whole value of the APG, from the account of Globus Bank domiciled with the CBN after terminating the contract.
Hanson Dredging prayed the tribunal to order the respondent to pay the interest the latter accrued as a result of the “unlawful debit” at the rate of 21 per cent per annum on the total sum awarded from the date of the arbitral award until final liquidation by the respondent.
The ruling
The issue of whether the respondent can insist on time being the essence of a contract of this nature was central to the dispute. That became imperative given the conduct and condoning actions of the respondent and its agents after the letter of termination of the contract.
The articles of agreement for the contract between the two parties state that “time shall be of the essence to this contract.”
Hanson Dredging did not finish Phase 2A of the contract as of 11 February 2022, being the end of the 12-week timeframe agreed by both parties, and Sanef Creatives did not issue a notice of default or notice of termination in accordance with the contract.
Instead, the respondent issued a notice of default on 11 May 2022 and demanded immediate remediation from the claimant within 14 days.
The tribunal referred to the General Conditions FIDIC 2016 (Blue Book) Form of Contract for Dredging and Reclamation Works, which makes “provisions for extension of time and variation in the contract; waiver, conduct and condonement that were ignored by the respondent.”
“The contractor shall be entitled to an extension to the time for completion if he is or will be delayed in completing the works or any section by (a) any of the defined risks,” according to the General Conditions FIDIC 2016.
The tribunal established that Hanson Dredging was delayed in completing the work due to the risk factors that emerged while executing the contract. Among those constraints were the COVID-19 pandemic and the rerouting of the pipes four times, resulting from the erroneous initial site route the respondent gave.
The tribunal noted that community compensation/relocation issues and several approval delays with stop work orders issued by government agencies also threw a spanner in the works.
Sanef Creatives claimed that Hanson Dredging did not apply for an extension of time, but the tribunal established that the report of the contractor’s agents on 25 March 2022 clearly stated an extended timeline for the completion of the contract.
“The provisions for risks, exceptional events and variation in the FIDIC Blue Book has make time to be of no more essence one these events occur,” the arbitrator said.
“The respondent kept their agents/consultants/supervisors on site to continue to supervise the claimant’s works till 15th November 2022, that is, even after the termination of the contract on 26th May 2022, for a contract that should have been completed on 11th February 2022. The courts have held that where time is of the essence, and the respondent has compromised the time element by not terminating the contract at the alleged agreed time, it is a waiver.”
The CBN incurred the rebuke of the tribunal for its interference with the contract by debiting the account of Globus Bank held with the regulator with the total amount of the APG, describing the act as “unlawful and gross abuse of power.”
“The respondent definitely abused its relationship with the Central Bank of Nigeria to have resulted in this action, without minding the level of work already executed by the claimant and against the express provision of the APG.”
The tribunal failed to grant the claimant’s plea for reimbursement for the cost of arbitration and legal fees, saying parties are to bear their own legal costs.
