KEUNEMAN J.—•Mohamed v. Wijeyewardene.
1947Present: Keuneman and Canekeratne JJ.
MOHAMED, Appellant, and WUEYEWARDENE, Respondent.
232—D. C. Colombo, 14,579
Building contract—Provision for payment of liquidated damages for delay incompletion of building—Condition precedent for applicability of suchprovision.
In a building contract a provision for payment of liquidated damagesfor delay in completion of the building applies, unless otherwise expresslyprovided for, only when the Contractor has in fact completed thebuilding, and has no application where he does not complete the work.
^^PPEAL from a judgment of the District Court of Colombo.
The plaintiff sued the defendant for damages on an alleged breach ofa building contract. He alleged that the defendant, the builder, ''’hadwithout justification stopped the execution of the works and failed toproceed with and complete the same.
The defendant had in fact agreed to complete the buildings ready foroccupation by May 21, 1942. This was under clause 21. Clause 22 ofthe agreement ran as follows : —“ 22. If the contractor fails to completethe works by the date named in clause 21 or within any extended time towhich he may become entitled under these presents and if the architectsshall certify in writing on or before the date of issue of their certificatefor the last payment to which the contractor may become entitled here-under that the works could reasonably have been completed by the saiddate or within the said extended time, then the contractor shall pay orallow to the employers the sum of Rs. 500 per month as agreed and liqui-dated damages and not by way of penalty for every month beyond thesaid date or extended time, as the case may be, during which the worksshall remain unfinished, and such damages may be deducted from anymoneys due or which may become due to the contractor.”
It was argued on behalf of the appellant that clause 22 coujld onlyoperate if the builder or contractor in fact completed the building and hadno application where he did not complete the work.
V. Perera, K.C. (with him C. Thiagalingam), for the defendant,appellant.
N. Nadarajah, K.C. (with him Ivor Misso), for the plaintiff, respondent.
Cur. adv. vult.
February .26, 1947. Keuneman J.—
This is an action for damages on an alleged breach of building contract.The plaintiff alleged that- the defendant, the builder, had without justi-fication stopped the execution of the works and failed to proceed with andcomplete the same. Plaintiff claimed as damages (1) Rs. 4,000 from thedate of the alleged breach until date of action at the rate of Rs. 500 permonth, and (2) Rs. 2,651.25 being the balance due out of an advance ofRs. 6,000 with interest at five per cent, less the sum of Rs. 3,723".75 beingfor work done by the defendant.
KEUNEMAN J.—Mohamed v. Wijeyetoardene.
The defendant raised various defences to the plaintiff’s claim andcounterclaimed on various grounds in the sum of Rs. 2,035.76.
The District Judge as regards plaintiff’s claim (1) awarded him Rs. 3,000and as regards claim (2) Rs. 1,587.66, making a total of Rs. 4,587.66.
The principal matter which was argued before us related to plaintiff’sclaim (1). The only issue framed regarding damages was issue 5 as amen-ded, viz., “ Has defendant become liable under clause 22 of the contracttc pay plaintiff as agreed and liquidated damages Rs. 500 per mensemfor every month the work remains unfinished after May 21, 1942 ? ”.The defendant in fact agreed to complete the buildings ready foroccupation by-May 21, 1942. This was under clause 21.
Clause 22 of the agreement P 1 runs as follows : —
“ 22. If the contractor fails to complete the works by the datenamed in clause 21 or within any extended time to which he maybecome entitled under these presents and if the Architects shallcertify in writing on or before the date of issue of their certificate forthe last payment to which the contractor may become entitled here-under that the works could reasonably have been completed by the saiddate or within the said extended time, then the contractor shall payor allow to the employers the sum of Rs. 500 per month as agreedand liquidated damages and not by way of penalty for every monthbeyond the said date or extended time, as the case may be, duringwhich the works shall remain unfinished, and such damages may bededucted from any moneys due or which may become due to thecontractor.”
It has been argued by appellant’s counsel that this clause can onlyoperate where the builder or contractor in fact completes the building,and has no application where he does not complete the work. It is clearthat under clause 23 of PI the Architect for various reasons set out in thatclause can make a fair and reasonable extension of time for completion,and this right of giving an extension of time is referred to in clause22. The latter clause appears to comtemplate a stage in the proceedingswhen the issue of the Architect’s certificate for the last payment to thecontractor has become due. The Architect at this stage has to considerwhether the delay in completion is unjustified, or whether some exten-sion of time is to be given to the contractor, and his decision will have abearing on the damages to be claimed from the contractor. I am inclinedto think that clause 22 has in view a stage when the building has beencompleted and all that remains to be done is to make the “ last payment ”.
At this stage the Architect has to take into consideration the fact thatthe work has not been completed by the appointed date and to determinewhether that date should be extended in consequence of the delaysbeing occasioned by one or other of the matters referred to in clause 23.If the Architect decides that the time is to be extended, then the Architectfixes the date of the extension and the contractor becomes liable to pay“ as agreed and liquidated damages ” at the rate of Rs. 500 per monthfor the period beyond the date so extended during which the buildingremains unfinished.
KEUNEMAN J.—Mohamgd v. Wejeyewardene.
I think it follows that the claim for agreed and liquidated damagesunder clause 22 can only arise when the contractor has completed thebuilding.
I may add that clauses 22 and 23 in PI are in all material particularsthe same as the corresponding clauses of the Form of Contract publishedby the Royal Institute of British Architects—see Creswell’s Law Relatingto Building and Building Contracts, 2nd Edition, page 281.
Our attention has been drawn to the decision of the House of Lords inBritish Glanzstoff Manufacturing Co., Ltd. v. General Accident Fire andLife Assurance Corporation, Ltd. Here the appellants claimed aspart of their damages for breach of contract a sum of liquidated damagesin respect of the non-completion of the contract within the stipulatedtime. The House of Lords held that upon the construction of clauses24 and 26 the clause as to liquidated damages applied only where thecontractors had themselves completed the contract and did not applywhere the control of the contract had passed out of their hands, in thiscase by the bankruptcy of the contractors.
Unfortunately the report does not clearly show the terms of the clauses24 and 26. But Halsbury’s Laws of England (Hailsham Edn.) Vol. HI.,p. 283 paragraph 517 seems to give to this decision general application. “ Aprovision for payment of liquidated damages for delay in completion,unless otherwise expressly provided for, applies only when the contractorhimself completes, and does not apply to completion by the employerafter suspension of the work by the contractor.”
In the present case clause 22, in my opinion, directly favours theapplication of the principle enunciated. In point of fact the owner ofthe premises at no time had the work completed, and at any rate as faras the plaint was concerned appeared to contemplate a payment ofRs. 500 a month to herself in perpetuity.
I have accordingly come to the conclusion that the decree for Rs. 3,000in reference to claim (1) by the owner cannot be sustained.
It has been argued for the respondent that in any event the plaintiffwas entitled to some damages in this case in consequence of the refusalof the builder to complete the contract. It is of course possible thatthe owner may have had a claim to unliquidated damages which he mayhave maintained. But I do not think we can entertain the argument inthis appeal. In the first place the damages were restricted under issue 5to the agreed and liquidated damages under clause 22. Further, therehas been no proof whatever that unliquidated damages have been incurred,and no opportunity has been afforded to the defendant to set out hisdefences to such a claim.
In view of my decision of these points it is unnecessary to considerthe arguments of the appellant that the time limit set in the contracthas been enlarged or abrogated either by the alleged new works inrespect of piling ordered by the plaintiff, or by reason of frustrationarising in consequence of D 15, i.e., Government Gazette Extraordinaryof February 21, 1942, forbidding the commencement or continuationof building operations except under the authority of a permit grantedby the Controller.
» £. R. (1913) A. C. 143.
SOERTSZ J.—njrahim Bai v. Herft.
The appellant has also contested the finding of the District Jodge asregards claim (2) of the plaintiff. I do not think there is any substancein this.
In all the circumstances I delete the figure of Rs. 4,587.66 which thedefendant has been ordered to pay the plaintiff and substitute thereforthe figure of Rs. 1,587.66.
As regards costs, the defendant-appellant will have the costs of thisappeal, and the plaintiff-respondent will have the costs of the courtbelow in the Rs. 1,587.66 class.
Canekeratne J.—I agree.
Appeal partly allowed.
MOHAMED, Appellant, and WIJEYEWARDENE, Respondent