ALLIANCE BUILDERS CONTRACTORS LTD v COOLKOTE ENTERPRISE LTD

2017 SCJ 383

Record No. 1154

THE SUPREME COURT OF MAURITIUS

(Court of Civil Appeal)

In the matter of:

Alliance Builders Contractors Ltd

Appellant

v.

Coolkote Enterprise Ltd

Respondent

------

JUDGMENT

The respondent (“Coolkote”) obtained as plaintiff in the Supreme Court sitting at first
instance, a judgment for the sum of Rs. 550,000 for waterproofing works it carried out, after
entering a plaint with summons before the trial court against the appellant (“Alliance Builders”).
The latter filed a counterclaim for Rs 2,440,000 against Coolkote which was dismissed. Alliance
Builders is now appealing from the judgment of the trial judge. The grounds of appeal in fact
challenge only the decision in relation to the counterclaim.

Alliance Builders, as the contractor, had entered into a contract (“the main contract”)
dated 07 February 2003 with Société Aresvi, (“the Employer”), for the construction of a building
called Grand Bay Business Park.

Alliance Builders also entered into a separate domestic subcontract (“the subcontract”)
with Coolkote as subcontractor for waterproofing works to be carried out on the Grand Bay
Business Park building, by way of a letter of award dated 16 February 2004 for the sum of
Rs 270,000.
 2

The plaint with summons of Coolkote before the trial court was for payment for the
supply, installation and maintenance of water proofing carried out by it for Alliance Builders on
the Employer’s building. Alliance Builders denied being liable for this sum and, in a
counterclaim, claimed the sum of Rs 2,440,000 as damages for a delay of 120 days, on the
ground that Coolkote completed the works on 30 June 2004 instead of 28 February 2004.
Alliance Builders relied on the terms of the subcontract which stated that the documents of the
main contract formed part of the subcontract. The main contract contained a penalty clause
indicating the amount of liquidated damages in the event of delay.

After considering the evidence adduced, the learned trial judge found that it was not in
the contemplation of the parties nor the undertaking of Coolkote that it would have to pay as
much as Rs 20,000 per day of delay. He also found that it had not been established that the
penalty clause in the main contract had been brought to the notice of Coolkote at the time of the
signature of the subcontract.

He therefore concluded that the penalty clause could not be relied upon by Alliance
Builders to make Coolkote responsible for the “delay damages” provided for in the main
contract.

There are five grounds of appeal which Alliance Builders relies upon to challenge the
reasoning, analysis and findings of the trial judge:

1. The Learned Judge erred in the appreciation of the facts by equating the
agreement between Alliance Builders (then Defendant) and the client to
the main contract, namely Aresvi Ltd, to evidence of lateness by Alliance
Builders (then Defendant) which necessarily exonerated Coolkote (then
Plaintiff) of its own laches, hence wrongly concluded against Alliance
Builders (then Defendant).

2. The Learned Judge erred further in his appreciation of the testimony of

witness d’Unienville, who was never requested to assess the delays of
the works by Coolkote (then Plaintiff) and wrongly determined that the
latter was not at fault.

3. The Learned Judge erred in Law by stating that the penalty clause did not
apply to the contractual documents binding the parties, when they were
legally bound by same.
 3

4. The Learned Judge erred in Law by not addressing his mind as to

whether the penalty clause should not have been varied in line with the
provisions of the Civil Code.

5. The Learned Judge erred in rejecting the counterclaim in toto.

It is appropriate that Ground 3 be dealt with first as the issues raised in the other
grounds can only be considered in the light of the determination of that ground.

Ground 3 deals with the question whether the penalty clause was legally binding on
Coolkote.

Now the main contract (between Alliance Builders and the Employer) which consisted of
over three hundred pages, comprised a two-page ‘‘Form of Agreement’’ and a number of
documents deemed to form part of the agreement. The list of contract documents was as
follows:

 Instructions to Tenderers
 Form of Tender
 Bills of Quantities Phase 1
 Annexures 1 to 9
 Relevant correspondence including letters, Engineer’s specification and
Drawings.

The subcontract was in the form of a letter of award dated 16 February 2004 which
consisted of four pages and included the following clauses:

1.0 DOCUMENTS

The following documents shall form part of the contract agreement:

1.1 This letter of Award

1.2 Main Contractor’s Contract Documents

1.3 Messrs. Coolkote Enterprise Ltd’s offer dated 20th January

2004, as amended by this letter.
….
….
 4

12.0 Your attention is drawn to the liquidated and ascertained

damages at the rate specified in the appendix to Conditions
of the Main Contract.

(The emphasis is ours.)

The penalty clause referred to in this appeal and in Grounds 3 and 4 is found in clause
8.7 of the main contract and, in the contention of Alliance Builders before the trial judge, also
applied to Coolkote.

Clause 8.7 of the main contract states:

If the Contractor fails to comply with Sub-Clause 8.2 [Time for Completion], the
Contractor shall subject to Sub-Clause 2.5 [Employer’s Claims] pay delay
damages to the Employer for this default. These delay damages shall be the
sum stated in the Appendix to Tender, which shall be paid for every day which
shall elapse between the relevant Time for Completion and the date stated in the
Taking Over certificate. However, the total amount due under this Sub-Clause
shall not exceed the maximum amount of delay damages (if any) stated in the
Appendix to Tender.

These delay damages shall only be the only damages due from the Contractor
for such default, other than in the event of termination under Sub-Clause 15.2
[Termination by Employer] prior to completion of the Works. These damages
shall not relieve the Contractor from his obligation to complete the Works, or from
any duties, obligations or responsibilities which he may have under the Contract.

(The emphasis is ours.)

The appendix referred to above and in the subcontract at clause 12.0, is found only in
the main contract, gives the figure of Rs 20 000 per day as being the rate of damages payable
and is set out in the following manner:

Item Sub-clause Data

Delay damages for works 8.7 & 14.15 (b) MUR 20,000 per day
for Phase 1
MUR 30,000 per day
for Phase 1 and 2
 5

Maximum amount of delay 8.7 10% of the final

damages Contract Price

Learned counsel for Alliance Builders pointed out in his skeleton arguments that the
letter of award which specifically drew attention to the penalty clause (clause 12.0 reproduced
above), was signed by the representative of Coolkote with the remarks “Read and approved for
Coolkote Ltd”. He submitted that this reflected the will of the contracting parties and their
consent.

Learned counsel for Coolkote, whilst not disputing that the subcontract did provide for
the main contractor’s contract documents to “form part” of it, submitted that even
Mr Boodhonee, the witness for Alliance Builders, was not clear when giving evidence as to what
was meant by “form part”.

Now, the letter of award signed by the representative of Coolkote contained the clauses
reproduced above and the reference to the main contract. However, as pointed out by the
learned judge, it was not established that the penalty clause in the main contract was brought to
the notice of Coolkote at the time of the signature of the subcontract.

We have perused the record and noted that it was never contended that a copy was
given to Coolkote to read before or soon after signing the letter of award or that such copy was
attached to the subcontract. In fact, the penalty clause and its quantum only came to the
forefront after a notice served in 2007 by Alliance Builders on Coolkote and subsequently
referred to in the proceedings before the trial court.

In La Notion de Clause Pénale, by Denis Mazeaud , (1992), to which we were referred

by Counsel for Coolkote , we read under the heading “La Clause: La garantie de l’exécution”,
the following note on the clause pénale:

Note 12

Libre dans son expression, la volonté des parties de conclure un contrat de

clause pénale doit se manifester par un accord réel et loyal.

1) En ce qui concerne l’acceptation de la clause, on sait que dans le

domaine des contrats d’adhésion, la question de sa portée s’est posée avec une
certaine acuité. Il s’agissait de savoir si la partie qui avait adhéré à un tel contrat
avait, du même coup, consenti à toutes les clauses stipulées dans le contrat
 6

principal ou dans des documents post-contractuels. En règle générale, la

jurisprudence s’est montrée plus exigeante pour admettre l’existence de
l’acceptation lorsque la clause litigieuse ne se trouvait pas insérée dans le
document contractuel principal.

(The underlining is ours).

A penalty clause should be agreed to by the parties “d’un commun accord” and should
normally be found in the contract signed by the parties. Here Coolkote which, as pointed out by
the learned judge, was “a domestic subcontractor as distinct from one nominated by the client”,
was referred to another set of documents, comprising several hundreds of pages, of a contract
entered into by Alliance Builders with a 3rd party. Even though the representative of Coolkote
signed “read and approved”, this does not suffice, in our view, to make the penalty clause in the
main contract applicable to Coolkote. We find that the clause should have been included in the
subcontract or a copy of the main contract should have been provided simultaneously or the
amount of “delay damages” should have been specifically stated, for it to have effect. This
would have consisted of only a few lines instead of referring Coolkote to the main contract, a
document consisting of a few hundred pages. In fact the terms of this penalty clause are so
unfairly weighted in favour of Alliance Builders that it is inconceivable that Coolkote would have
agreed to be liable for such an amount and that this was a true reflection of the will of the
parties. The trial judge was alive to this and in his judgment he rightly stated:

As far as the defendant’s counterclaim is concerned, the admissions of the

defendant’s representative in cross examination show that it was not the
contemplation of the parties, nor the undertaking of Coolkote that it would have to
pay as much as Rs 20,000 per day of delay in delivery. The defendant’s
representative, Mr Boodhonee, its Contract Manager, has had to admit in cross
examination that such penalty for late delivery was for the whole contract the
value of which was Rs 40 million. In any event it is difficult to imagine that
Coolkote could have agreed to risk paying the kind of damages being claimed
(Rs 20,000 per day of delay) for an initial contract for the capital sum of
Rs 270,000 excluding VAT, which contract value was not very substantially
increased on account of minor additional work totaling some Rs 67,820 as seen
above.
 7

We accordingly find that Ground 3 must fail and that the trial judge came to the correct
conclusion that the penalty clause did not apply to the second contract and that as a result the
rate of Rs 20,000 per day could not be levied.

Grounds 1 and 2 can conveniently be considered together. It is incorrect, in our view, to

say that the learned judge relied on the evidence of delay in relation to the main contract to
reject the counterclaim. A careful reading of the judgment shows that he in fact rejected the
counterclaim on the ground that the penalty clause in the main contract was inapplicable to
Coolkote.

It is true that the learned judge laid emphasis upon the evidence of witness D’Unienville
that “works forming part of the domestic subcontract for waterproofing works were not in
question in the overall assessment of critical delays on the project”. This emphasis appears to
us to have been unduly laid as that evidence from Mr D’Unienville was not directly relevant to
the question of applicability of the clause pénale. However the said emphasis was placed by
the learned judge whilst reciting the evidence in the case and could in no way affect his
conclusion that the penalty clause was, for the reasons he gave, inapplicable. Accordingly
Grounds 1 and 2 fail.

Grounds 4 and 5 can be dealt with together.

Article 1152 of our Civil Code reads as follows:

“Lorsque la convention porte que celui qui manquera de l’exécuter payera une
certaine somme à titre de dommages-intérêts, il ne peut être allouée à l’autre
partie une somme plus forte ni moindre. Néanmoins, le juge peut modérer ou
augmenter la peine qui avait été convenue, si elle est manifestement excessive
ou dérisoire. Toute stipulation contraire sera réputée non écrite.”

(The emphasis is ours).

If the penalty clause had been found to apply, this would have been an eminently
suitable situation to effect a variation and to substantially reduce any amount due. However, as
Ground 3 has failed and the penalty clause has been found not to be applicable, the issue
raised in Grounds 4 and 5 does not arise and those grounds must accordingly fail.

It is noteworthy that there was a specific provision in the subcontract (clause 11.4) which
catered for any delays caused by Coolkote to the works under that contract, namely that it “shall
 8

be held responsible for all costs incurred in making up such a delay, including inter alia the cost
of acceleration of the Main Works/or any subcontract works and/or other contract works and
such costs shall be deducted from monies due or that may become due to the subcontractor”.
However Alliance Builders did not avail itself of that clause clearly spelt out in the subcontract to
make up for any loss sustained by it as a result of the alleged delay by Coolkote.

For the reasons stated earlier, the appeal has no merit and is dismissed with costs.

E. Balancy
Senior Puisne Judge

R. Teelock
Judge
12 October 2017

Judgment delivered by Hon R. Teelock, Judge

For Appellant: Mr P. V. Mootoosamy, Attorney at Law

Mr R. Rault, of Counsel together with
Mr A. Sookhoo, of Counsel

For Respondent: Mr J Robert, Attorney at Law

Mr G Glover SC