Accra-Ghana, Nov. 26, GNA – An Accra High Court Commercial Division has dismissed a GHS39.7 million claim made by Magnate Technology and Services against the Ghana Revenue Authority for breach of agreement.
The amount, the company said, would have been revenue or fees that would have accrued to it over the remaining period or unexpired term of the Addendum based on the average of the historically verifiable figures between the parties.
The court, in its ruling, held that it was unable to grant the reliefs being sought as there was not enough evidence from Plaintiff (Magnate Technology and Services) for it to accept the claim that was based on an illegal contract.
It said there was no evidence before the court showing the investment made over the period, revenue recouped over the course of performance and the deficit suffered.
“I am inclined to make an order for the Plaintiff to recoup its investment but as l have stated above, the paucity of evidence does not offer any guidance.There is not sufficient evidence on record for me to know the exact investment made by the Plaintif,” HIS Lordship Justice Constant K. Hometowu, said in his ruling.
“Simply stating in letters that over USD7million dollars has been invested is not sufficient under the circumstances,” the court said.
“The grant of this relief would be an enforcement of the contract I have established to be illegal. If I were to grant such relief, I would be condoning the statutory breach and granting immunity to the parties.
“I am unable to make an order for the Plaintiff to recoup its investment because there is nothing to assist me determine the deficit (if any) based on the reconciliation of investment made and revenue so far made,” the court said.
Consequently, the action is dismissed in its entirety, with no order as to costs, Justice Hometowu said in his ruling.
Magnate Technology and Services in its writ of summons sought, among other reliefs, a true interpretation of the Agreement and a restoration to its previous position, breach of contract, special damages of GHS39.7 million being the minimum revenue it would have earned if the Agreement was not wrongfully terminated of the Agreement and Interest from 1st June, 2020 to date of payment and a legal cost of GHS3 million.
The facts of the case were that Magnate Technology and Services in September 2007 entered an Agreement with the Ghana Revenue
Authority after it won an international bidding process to provide a system for securing all bonded warehouses in the country for a 10-year period.
Although the agreement was made on September 26, 2007 for an initial period of 10 years the actual operations began three years later in August 2010, largely due to administrative delays on the part of the beneficiary agency, the then Ghana Customs Excise and Preventive Service.
The Agreement was structured as a long term public–private partnership in recognition of its capital intensive nature. The project was to be funded exclusively by Magnate Technology and Services.
The company was to have the exclusive right to provide the services in Ghana with the deliberate view to allow it to recoup its investments.
During the 10-year period, the parties agreed to a fee structure of 95% of net revenue for Magnate Technology and 5% for the GRA.
Magnate claimed it made heavy investment for the project (in excess of USD 7million) and this was acknowledged by the GRA.
However, due to the inadequacy of fee structure to enable the Plaintiff recoup its investment and make reasonable profit, the GRA agreed to renew the Agreement for a further term of six (6) years with a new fee structure to reflect 97% for Magnate Technology and 3% for the GRA.
According to the Magnate Technology and Services this investment was to be recouped from the net revenue over the renewed period for which an Addendum was executed for a further term of six (6) years.
In its defence, the GRA argued that the Addendum was not a renewal of the Agreement, which had expired as of August 2017.
It said the Addendum must be considered as a fresh contract which required approval by the Board of the Public Procurement Authority and the Ministry of Finance in the same manner that the two bodies sanctioned the earlier agreement.
The GRA submitted that the purported Addendum executed by the parties after the expiration of the Agreement was without any legal basis as same had expired at the time of execution of the Addendum in December 2017 or thereafter since the date of execution cannot be ascertained.
According to the GRA, correspondence between the parties dated 4th September, 2017 and 13th September, 2017 were made after the expiration of the agreement.
Notwithstanding correspondence between the parties, the GRA said that because the main Agreement was for 10 years, it reasonably expected the Magnate Technology to have recouped its investment and made reasonable profit over the period of time.
The GRA asserted that “the Addendum executed to the original Agreement is invalid and ill procured on the basis that the amendment or variation was not made during the subsistence of the initial Agreement.”
It said the parties could not have made an addendum to the expired contract and that the Addendum lacked the crucial statutory approval and it is illegally procured and same was void and unenforceable.
In its determination, the court held that the undisputed evidence on record was a Main Agreement, which was executed by the parties in September 2007.
However, the execution of the Addendum breached ACT 663 as amended and ACT 921, which are aimed at protecting the public purse by ensuring the judicious use of state resources and it is for a good reason that there must be strict compliance.
Curiously, even though the original Agreement was executed by the Ministry of Finance, the Addendum did not have the signature of any representative from the Ministry of Finance.
No explanation was offered by either party to justify the absence of the Ministry of Finance, a crucial party to the original Agreement.
