Gov’t seeks $700M from Synergy over non-completion of Amaila road

Attorney General Anil Nandlall is seeking over $700M in damages from Fip Motilall’s Synergy Holdings Inc. for not completing works on the Amaila Falls Access Road within the agreed timeframe.

Nandlall, on March 9, filed a counterclaim against Synergy Holdings Inc, which moved to the court in January seeking a declaration that the government was not entitled to terminate their agreement, in addition to $100M in damages for breach of contract or alternatively for work done under the terms of the contract, plus interest.

Synergy, in a statement of claim filed by Miles Fitzpatrick, S.C, and attorney Timothy Jonas, said that the company on March 18, 2010 entered into an agreement with the government for the clearing of forest and the construction of the Amaila Falls Access Road. The agreed value of the project payable to Synergy Inc. was US$15.4M in instalments during the course of the works.

Anil Nandlall

According to the company, it was specified under the terms of the original agreement that it would be liable in liquidated damages, in the event that the construction was not completed within the stipulated timeframe. Further, it was also agreed that the construction of the road would be completed within 240 days after a government-issued “notice to proceed,” while Synergy would be required to supply government with a performance bond subsisting for a period of sixteen months from the date of the execution of the lump sum agreement to guarantee due performance of the project.

“In actuality, a first Construction Notice to Proceed was not issued to the plaintiff by the [Government of Guyana] until 5th October, 2010, and a second Notice on 11th January, 2011, ten months after the execution of the Lump Sum Agreement by the parties, as a result of which delay the parties agreed that 11th January, 2011 would be considered the start of the project,” it said.

Fip Motilall

The document stated that between January and March, 2011, the company began clearing the forest and constructing the road. However, it said in or around April, 2011, after the company  commenced placing and digging drains along the intended road, government indicated that the specifications of the road had to be altered “to require a nine metre-wide sub-base capped with seven metre-wide laterite top. This was the based on the need for the road to be a two-lane road.

In July, 2011, Synergy said the life of the Performance Bond expired with the knowledge of both parties and following negotiations there was an agreement the following month to place the value of the specification variation (excluding fuel costs) at US$2,401,513.05 and fix December 31, 2011 as the new deadline for completion of the project.
It added that in August, 2011, the government informed the company of its desire once again to change the specifications, which necessitated additional material for use in compaction of the road. It said too that the new changes also necessitated the further widening of ditches to accommodate the angle of the slope for the higher elevation of the road, and therefore caused extensive delays.

Synergy Inc. agreed to undertake this new request but said the timeframe for completion and the cost thereof were not definitively settled between the parties until October 31, 2011, when after negotiations the cost of the variations was settled in the preliminary sum of US$3,236, 914.50. The new time frame was proposed to be the end of March this year but no “express agreement” was reached, it added.

It was pointed out that during the course of the project the company used machinery and equipment valued approximately UD$2, 571,500 and that as at December, the project together with the two modifications was approximately 60% complete.

Duress

Synergy stated that on December 16, 2011, the company’s CEO, Motilall, was summoned by the Office of the President (OP) to a meeting with President Donald Ramotar. At the meeting, the company said he was met Ramotar, former president Bharrat Jagdeo, Transport Minister Robeson Benn, and Minister of Finance Ashni Singh among other persons and he was given two options:  either the government would terminate the agreement, seize all the equipment and reassign the agreement to a number of contractors already identified or the company would immediately undertake in writing to complete the project by April 30, 2012, failing which the government would seize the equipment and charge the company liquidated damages of US$10,000 per day, backdated to January 2012.

“The CEO was informed that these terms were not negotiable and was directed to meet the Minister of Public Works the next business day (Monday, 19th December, 2011) and to return to the Office of the President the following day,” the statement of claim said.

Thereafter, the document said, the company was directed to procure a new bond or government would terminate the Lump Sum Agreement forthwith, seize all the equipment and reassign the agreement to a number of other contractors.

Being faced with these alternatives, the document said, the company signed the agreement for completion by 30th April, 2012.

The company contends that the agreement signed, which only records that 40% of the works were complete, is ineffective and unenforceable by the government by reason “of its having been obtained as a result of duress and further or in the alternative.” It is also contending that a clause in the agreement is equally unenforceable and ineffective as being imposed by the government “in terrorem to force the Applicant to meet the stringent requirements set out and without any genuine attempt or any attempt at all to estimate in advance the loss which would result to the government from the failure of the Plaintiff to conform to its terms.”

As a result of the issues raised, it was noted that the company suffered damage and the document outlined that the loss of profit on completion of the agreement was to a tune of US$2,989,300, while the value of work done and performed under the Project but not paid for was US$1,301,664.

Breach

In his defence, Nandlall argues that there was non-completion of work within the agreed timeframe. He noted that Synergy failed to achieve even 40% of the programmed work, which is the main factor that caused the company’s failure to meet the substantial completion deadline, making it obligated to pay the liquidated damages.

It was noted that even though the construction notices to proceed were issued, the company still had not completed all that was required under a section of the agreement. This was done in an effort to move the project forward, Nandlall said in his defence.

The documents said that a section of the agreement contemplated and created an obligation on the company to provide a valid and subsisting performance bond to cover the period necessary to complete the scope of works agreed to, which by then had a new completion date of December 31, 2011.

Nandlall contended too that the CEO voluntarily signed the Agreement of Completion and the terms were made known to him four days earlier. “…the plaintiff was not threatened and/or coerced into signing the Agreement of Completion, and at all times had other recourse available to him,” he stated. “The Plaintiff, by its failure to provide a valid Performance Bond for the period of execution of the remaining works and for the Defects Liability Period, has breached a fundamental term of the Lump Sum Agreement and Agreement for Completion and as a result, the Defendant has suffered damage,” he said.

As a result, Nandlall is seeking over US$3,880,029 (equivalent to $776,587,940.79) in monetary damages for the non-completion of work within the agreed time frame; the value of 20% of the works remaining to be completed; loss of the value of the performance bond which the company failed to provide; and the loss of the advance sum paid to the company at the start of the agreement.

Acting Chief Justice Ian Chang last Monday discharged a Conservatory Order granted to Synergy Inc, allowing the government to take possession of the equipment which was being used to build the road.

The case comes up in the commercial court later this month.

Around the Web

Comments