An Arbitration Tribunal sitting in Lagos State has ordered SANEF Creatives Ltd, a company owned by the Bankers’ Committee of the Central Bank of Nigeria (CBN), to pay N19.4 billion to Hanson Dredging and Marine Service Ltd, HDMS, for the unlawful termination of its contract for the dredging and reclamation work of Lagos Creative Entertainment Centre (LCEC), popularly known as the National Theatre.
Sole Arbitrator of the Tribunal, Ayo Fanimokun, an engineer, gave the order on December 30, 2024, in his final arbitral award in the settlement of the contractual dispute between HDMS and SANEF Creatives- a special purpose vehicle of the Bankers’ Committee, which composed of the CBN and the Body of Banks in Nigeria.
HDMS had dragged SANEF Creative before the Council for the Regulation of Engineering in Nigeria (COREN) constituted the Arbitration Tribunal in 2023 after its contract for the dredging and reclamation of LCEC was unlawfully terminated in May 2022.
In its claims before the Tribunal through a team of lawyers led by Dr. Charles Mekwunye (SAN), HDMS averred that having signed the contract for the dredging and reclamation of LCEC with SANEF on November 11, 2021, it mobilised to site and had completed over 60 per cent of the contract when SANEF suddenly cancelled the contract on the ground that the 36 weeks completion date stated in the contract terms had elapsed.
The firm further stated that following some unanticipated risk factors and the prevailing economic situation in the country compounded by the Covid-19 pandemic, which delayed the execution of the contract, it requested a review of the contract sum but that instead of conceding to its request, SANEF Creatives unlawfully terminated the contract and the CBN interfered with the contract between HDMS and SANEF by directly debiting the full amount of N4.2 billion made to HDMS.
Among the 13 reliefs sought by HDMS before the Tribunal include a declaration that the purported termination of the contract for the dredging and reclamation works for LCEC was unlawful, premature and against the spirit and letters of the contract documents executed by the parties.
HDMS also sought a declaration that SANEF Creatives, having willfully elected not to insist on the time frame stipulated for the completion of the first phase of the contract within 12 weeks after advance payment, as a clear indication that it realised that there are obvious challenges that delayed the project, is therefore estopped from subsequently terminating the contract prematurely while citing time provision in the contract.
The firm also sought a declaration that the decision of SANEF Creatives acting through CBN to withdraw the N4.2billion advance payment for the project was unlawful and further order directing SANEF to pay it, N35 billion and N9.1 billion as general and special damages respectfully for the unlawful termination of the contract.
SANEF, through its team of lawyers, led by former Nigerian Bar Association (NBA), President, Mr Paul Usoro (SAN), in its response insisted that its decision to terminate the contract was lawful and made N70 billion counterclaim against HDMS for the alleged losses it suffered following the breach of the contract and HDMS’s refusal to remove its equipment from National Theatre ground to enable the execution of a landscaping contract with another company.
Delivering a verdict on the dispute after eight sittings and tendering of about 46 exhibits, with two expert witness testimonies, Fanimokun raised six issues for determination and resolved five in favour of the HDMS award against SANEF.
On the issue of whether SANEF can insist on time being the essence of the contract given its conduct and condoning action before and after its purported termination letter dated May 26, 2023, Fanimokun held that SANEF’s failure to terminate the contract on the actual due date of February 11, 2022, was a clear waiver of its right to insist that time was of the essence.
He held: “The Articles of Agreement on the Dredging and Reclamation Works did stipulate in Clause 8(ii) that ‘Time shall be of the essence to this contract’. Clause 3 required the claimant to execute the said works within 36 weeks (with Phase 2A not exceeding a total of 12 weeks).
“The advance payment was made on November 19, 2021, and the claimant would have been expected to conclude the execution and delivery of Phase 2A by February 11, 2022.
“The claimant did not conclude Phase 2A of the Contract as of this date and the respondent did not issue a Notice of Default or Notice of Termination in accordance with the Contract.
“But, on May 11, 2022, the respondent issued a Notice of Default in the terms of Clause 12.1 of the contract to the Claimant and demanded immediate remediation from the claimant within 14 days from the date of this letter of May 11, 2022. Respondent’s letter of May 26, 2022, to the claimant subsequently terminated the contract.
“….. From the foregoing, if time was strictly of the essence of the contract as claimed by the respondent, then the respondent’s failure to terminate the contract on February 11, 2022, was a breach of Clause 8(ii) by the respondent, but also a waiver of the respondent’s right to insist that time was of the essence.”
Referring to the general conditions of the contract, which took cognisance of risks, exceptional events, variations and extension of time as expressed in Clause 6, 13, 13.4, 10 and 7.3, Fanimokun held: “The claimant was delayed in the completion of the works through the risks factors that arose during the execution of the contract and which are known to the respondent through the Agents/Consultants/Engineers who were on Site at all material times with the Contractor.
“Significant in these factors are the Covid-19 pandemic and the re-routing of the pipes four times which is as a result of the erroneous initial Site route given by the Respondent about the SIFAX route. Also, community compensation/relocation issues and various approval delays with stop work orders given by the Government Agencies cannot be discounted.
“The respondent rightly stated that the claimant never applied for an extension of time, but the report of its agent on March 25, 2022, exhibit D8 clearly tabulated an extended timeline for the completion of the contract. A new Work programme was agreed upon by the Parties at a meeting held on April 1, 2022, at Access Bank and hosted by a Director of the respondent.
“The provisions for Risks, Exceptional Events and Variation in the FIDIC Blue Book have made time to be of no more essence once these events occur. The Respondent kept their Agents/Consultants/Supervisors on Site to continue to supervise the claimant’s works till November 15, 2022, that is even after the termination of the contract on May 26, 2022, for a contract that should have been completed on February 11, 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.”
Having held that time was no longer of the essence in the contract since it was deemed waived by SANEF, the Tribunal declared the termination of the contract solely on that ground as premature and unlawful.
The Tribunal also faulted the abuse of power by the CBN under its former governor, Godwin Emefiele, in interfering with the contract by unlawfully recalling the advance payment made to HDMS by SANEF in the custody of Globus Bank.
“The CBN interfered with the Contract by debiting the account of Globus Bank Limited with the total amount of the APG, N4,228,530,000:00 only on August 8, 2022 which caused the bank to debit the same amount into the claimant’s account making it liable to the full sum of the APG.
“The respondent definitely abused its relationship with the CBN to have resulted in this action, without minding the level of work already executed by the claimant and against the express provisions of the APG. This is unlawful and gross abuse of power,” it held.
The Tribunal went on to award special and general damages of N9.1 billion and N5 billion respectively against SANEF in favour of HDMS for damages it suffered as a result of the contract termination.
On whether HDMS was entitled to the value of the over 60 per cent job it had already done assessed as N5.33 billion, the Tribunal held: “The claimant, having already executed and or completed the contract job to over 60 per cent stage as at the time the respondent unlawfully terminated the Parties’ Contract by forceful collection of the APG sum through the CBN, and ordered the claimant to demobilise out the Site.
“The claimant is entitled to be paid by the respondent for all the unpaid balance of the value of the work already executed by the claimant pursuant to Clause 12.4 of the Parties’ Dredging Agreement accessed at the total sum of N5,331,532,738,13 plus accruing interest, and this Tribunal so hold.”
In its conclusion, the Tribunal held that HDMS was able to prove the existence of the fact to warrant the grant of the reliefs sought and granting HDMS N19.4 billion and 25 per cent interest per annum from the date of the arbitral award.
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