Together with interest, the Guyana Rice Development Board (GRDB) has been ordered to pay Vilvoorden Investment Inc., for the US$77,000 worth of rice it had supplied for exportation to Panama for which it was never paid.
Costs in the sum of one million dollars was also imposed against the rice board, in favour of the rice milling company.
In a separate case brought by Nazeemul Hakh—trading as Golden Fleece Rice Investment—the GRDB has also been ordered to pay that rice milling company US$308,620; along with interest also, for supplying rice it has never been paid for.
It also has to pay a million dollars in court costs to Hakh.
In a ruling handed down on Wednesday, High Court Judge Gino Persaud, found that contrary to the contentions held by the GRDB, it had a duty to pay under the contract it had with both rice milling companies.
The Nazeemul Hakh case was decided on the identical principles as those in the Vilvoorden case.
The claim brought by the Essequibo rice milling company, Vilvoorden Invest-ment Inc., (the Applicant), was for a liquidated sum for the supply of a quantity of rice which was delivered to the GRDB for export to Panama.
The imbroglio between the parties has been an ongoing one for years— where the Applicant has not been paid—because GRDB (the Respondent) has not been paid.
The position of the rice development board has been that it could not pay or is not bound to pay Vilvoorden, unless it has itself been paid.
Following the GRDB’s exportation of the rice to Panama, it had never received any payment. Consequently, the GRDB had not paid its supplier—the Applicant—which has given rise to the court action.
The GRDB’s contention had been that because they were not paid for the rice by Panama, they are unable to in-turn pay the Applicant. In support of this contention, they sought to rely on a “pay when paid” clause in the contract.
In seeking to have the action struck out, the GRDB argued vehemently that since it had not received any payment, its obligation to pay the sum due to the Applicant had not yet arisen and crystallized.
The issue which had to be resolved by the Court, was whether there was a “pay-when-paid” arrangement between the parties and whether it was enforceable.
Back in 2022, the Applicant instituted proceedings against the GRDB seeking among other things; the full sum of US$77,000.20 which it said it had been owed by GRDB which had requested that it supply long grain white rice between August 1st and November 7th, 2018.
In a defending affidavit, the GRDB contended that the proceedings brought by Vilvoorden were premature; relying on their agreement, that the Applicant would only receive payments if the Respondent is paid.
The GRDB asserted before the court, that the rice milling company accepted the terms and conditions of their contract and consequently believed them to be bound by the payment clause.
The clause specifically provided; “by signing this contract, the seller agrees and acknowledges that the buyer will pay the seller the value for the white rice purchased for the Panamanian market after deductions as stated are made by the buyer on receipt of payment from Panama.”
And further, “Invoices for each weekly shipment are to be submitted to the Guyana Rice Development Board. Payment will not be made if the seller does not submit the invoices to the Guyana Rice Development Board.”
The Court noted in its ruling that while the Applicant did not contest agreeing to those terms, it asserted that it had expected and was led to believe that it would have been paid within a reasonable time as was done in previous times when it supplied rice to the Respondent to be sold on the Panamanian market.
Justice Persaud noted that unfortunately for the Applicant, the Respondent has not paid the Applicant despite repeated demands.
While the Respondent acknow-ledges that it is indebted to the Applicant for the sum being demanded, it argued that its obligation to effect payment was conditional and contingent on itself receiving payment from the Agriculture Marketing Institute in Panama.
Therefore, since it claims that it had not received any commission from the Agriculture Marketing Institute, the GRDB believes that its obligation to pay the Applicant has not yet arisen.
Moreover, the Respondent asserted that it had made and continues to make diligent efforts and has taken reasonable steps to demand payment from the Agricultural Marketing Institute of Panama but Panama has not fulfilled its contractual obligation to pay the institute so that the Respondent could be paid and in-turn pay the Applicants.
In his analysis of the law, to the issue which the case raises, Justice Persaud said the general legal principle regarding the time of performance, is that where a contract does not specify a time for performance, performance must usually take place within a “reasonable time.”
Codified in the Sale of Goods Act, Justice Persaud said that a corollary to the entire performance rule in Contract Law is “the duty to pay.”
In deference to legal authority, the Judge explained that the duty to pay a promised sum of money and the time for payment under a contract are generally expressly regulated by its terms, but may be implied. In either case, the creditor has a right of action in debt, he said.
He went on to note that thus, where one party has undertaken to work upon the materials of another, the right of action for the agreed remuneration arises when that party has done the work and given the employer a reasonable opportunity of ascertaining whether it has been properly done.
He noted that a sub-contract may contain a provision that the sub-contractor is only to be paid when the head contractor is paid—such as a pay-when-paid term/clause.
He said that the law relating to the pay-if-paid and paid-when-paid clauses has been the subject of judicial discussion and statutory control in other jurisdictions. These types of clauses are usually common in construction contracts.
In this regard, he said that pay-when-paid clauses establish the required payment timeliness of the upstream contractor’s payment obligation to pay lower-tiered subcontractors and are triggered only after the upstream contractor is paid.
The trigger for obligation the Judge said will typically have timing provisions associated with the clauses; before going on to note that a pay-when-paid clause governs the timing of a contractor’s payment obligation to the subcontractor, usually by indicating that the subcontractor will be paid within some fixed time period after the contractor itself is paid by the owner.
Justice Persaud went on to explain thus, that generally, if a contingent payment provision simply requires the contractor to pay the subcontractor “upon receipt of payment from the owner” (or similar language), the clause will be considered to be a “pay-when-paid” clause that merely acts as a timing mechanism.
The clause, he said, does not expressly excuse a contractor’s ultimate liability if it does not receive payment from the owner, so the clause does not transfer the risk of insolvency from contractor to subcontractor and on down the chain.
Such clauses he said, are utilized in subcontracts in an effort to prevent the general contractor from being required to pay the subcontractor before receiving payment for their work from the owner.
The controversy the Judge said, is whether the phrase should be construed as creating a condition precedent to the main contractor’s liability to the sub-contractor. It would seem that it does not, he said.
In contrast, he said that “pay-if-paid” describes a clause in which the upstream/general contractor’s payment obligation(s) to pay downstream subcontractors’ claims is/are triggered only, if and after, the receipt of payment, in full, from a higher-tiered contractor or owner, for the lower-tiered subs’ work.
Thus, he said that as the name suggests, it provides that a subcontractor will be paid only if the contractor is paid. The intent of this type of clause Justice Persaud said, is that if the owner does not pay the general contractor, the general contractor is not required to pay the subcontractor.
Justice Persaud said the Court drew a distinction between a pay-if-paid clause, from a paid-when-paid clause. An ‘if’ clause he said, makes it plain that payment will only be made after payment has been received.
On the other hand, the ‘when’ clause he said, was considered by courts to indicate the time for payment only and that payment up the line was not a condition of payment down the line.
In the case between the GRDB and Vilvoorden, Justice Persaud said he considered the payment clause to be a ‘when’ clause, and reasoned that therefore non-payment by Panama, was no excuse for non-payment to the Applicant.
Justice Persaud said that the payment clause in the contract must carefully be examined; noting that the words “the buyer will pay the seller the value for the white rice … after deductions as stated are made by the buyer on receipt of payment from Panama” in the contract does not suggest that payment is contingent on being paid by the Agricultural Marketing Institute.
The language of this clause, therefore, suggests a pay-when-paid clause, Justice Persaud said.
He went on to say, however, that the language used in the clause is ambiguous and does not specifically refer to the entity in Panama which payment would be made from. Further confusion is added he said, by the latter part of the clause which stated:
“Invoices for each weekly shipment are to be submitted to the Guyana Rice Development Board. Payment will not be made if the seller do not submit the invoices to the Guyana Rice Development Board.”
Justice Persaud said that clause suggests that payment would be made after invoices are supplied by the subcontractor on a weekly basis.
The Judge said that having regard to all the observations, the GRDB could not rely on the pay-when-paid clause since the clause is unspecific and ambiguous. He said that moreover, the Applicant completed its obligation under the contract four years ago.
“Thus, the Applicant is entitled to be paid within a reasonable time for the rice supplied,” Justice Persaud said; before going on to add that the pay-when-paid clause did not absolve the Respondent’s liability to pay the Applicant even if it had not been paid.
This, therefore, defeats the Respondent’s contention that its duty to pay the Applicant had not yet arisen, the Judge said.
He said that by relying on the clause, the Respondent had to advance all means possible to obtain payment from the Agricultural Institute but from the evidence provided it had not done so.
“Merely, sending letters to demand payment is not sufficient, given that four years have passed,” he asserted.
As a result, Justice Persaud granted judgment in favour of the rice milling company in the full sum of USD $77,000.20 or its equivalent in Guyana dollars, together with interest on that sum.
He also imposed costs in the sum of one million dollars to be paid in the next six weeks.
The Nazeemul Hakh case was decided on the identical principles as those in the Vilvoorden case.
Background
Just last month, this newspaper reported that a protracted outstanding multi-million-dollar debt owing to Guyana by the Government of Panama for rice sold to the country through GRDB has now reached the level of the International Chamber in The Hague, according to Attorney General Anil Nandlall.
The debt, which goes back to export contracts signed back in 2018 and 2019, remains outstanding despite efforts being made over those years to recover the amounts owed for rice delivered to that country.
