Golden Lotus Insurance Company Limited v Zesco Limited and Ors (APPEAL No. 206 of 2022) (9 December 2024) – ZambiaLII

IN THE COURT OF APPEAL OF ZAMBIA APPEAL No. 206 of 2022 ..-~J'~UC OF Z<j'11 HOLDEN AT LUSAKA ~bf I , (Civil Jurisdiction) 0 9 DEC 2D24 l Rt. BETWEEN: u..._ GOLDEN LOTUS INSURANCE CO APPELLANT AND ZESCO LIMITED 1st RESPONDENT LIAONING-EFACEC ELECTRICAL EQUIPMENT 2nd RESPONDENT COMPANY LIMITED AND ELECTRICAL DESIGN AND RESEARCH INSTITUTE AND CHINA NATIONAL ELECTRIC ENGINEERING COMPANY LIMITED (LEEC-CNEEC JOINT VENTURE) CORAM: SIAVWAPA JP, CHISHIMBA AND PATEL SC, JJA On 22nd January & 9th December 2024 For the Appellant: Mr. P. Chomba Messrs Mulenga Mundashi Legal Practitioners For the pt Respondent: Mr. K. Mwemba In House Counsel JUDGMENT Patel, JA delivered the Judgment of the Court. J1 : Cases referred to: 1. Edward Owen Engineering Ltd v Barclays Bank International (1978) 1 All ER 976. 2. Wilson Masauso Zulu v Avondale Housing Project Limited (1982} ZR, 172. 3. Kafula Kabaso v Premier Choice Finance Limited & 2 Others (HP/C 213 of 2018} [2020] ZMHC 241. 4. Sithole v State Lotteries Board (1975) Z.R. 106. 5. Addis v Gramophone Co Limited (1909} AC 488. 6. Zambia National Building Society v Nayunda- SCZ Judgment No.11 of 1993. 7. Chainama Hills Gold Club Limited v Golf Consultancy and Tourism LimitedCAZ/08/2022. 8. Herbert ljegalu Okwa Ozokwo v The Attorney General No. 1 (1985} Z.R 163 9. Mandava Mohan Rao v. Mandava Venkata Ramana (AIR 2011 SC 2439}. 10. Cutter v Powell (1795} 6 TR 320. 11. Finance Bank Zambia Limited v Simata Simata Selected Judgment No. 21 of 2017. Legislation & Rules referred to: 1. The Rules of the Supreme Court, 1965 (White book), 1999 Edition, Volume 1 2. The Court of Appeal Act No. 7 of 2016. Other works referred to: 1. FIDIC Briefing Note on Guarantees, Bonds and Retentions relating to Professional Services, June 2019. J2 = : 2. Mark Hapgood, QC, in Sir J. Paget and M. Hapgood QC, "Paget' s Law of Banking'' 12th Edition, London: Butterworths, 2002}. 3. Black's Law Dictionary, {7th ed. 1999}. 1.0 INTRODUCTION 1.1 At the hearing of this appeal on 22nd January 2024, Counsel indicated that they had filed a consent summons to adjourn the hearing pending a possible negotiated settlement. We advised that if the proposed settlement was not filed by or before 29th February 2024, the Court would proceed to deliver Judgment from the documents before it and without further hearing. 1.2 There being no settlement, this is the reserved Judgment of the Court. The delay in delivering this judgment is sincerely regretted and is attributed to the substantial workload of the Court and the extensive documentation involved in this appeal. 1.3 We have also discovered that there was an application in the form of a preliminary objection taken out by the 1st Respondent, which essentially challenged the propriety of the appeal as it was argued that the same had been made without leave of the lower Court. 1.4 The single Judge of this Court delivered her Ruling on 2nd May 2023, deferring the determination of the challenge to the full Court. This is the reserved Judgment of the Court, on the preliminary issue as well as the appeal. 1.5 Performance Bonds are a common feature of tenders in this Country. It is an assurance to the beneficiary that the contracted party will fulfil their obligations under the contract. This form of assurance or security is issued J3 by a bank or an insurance company, as was the case in this appeal. In this appeal, Mwenda-Zimba J, in her judgment delivered on 28 th June 2020, found in favour of the pt Respondent (Plaintiff in the Court below) and ordered the Appellant (1st Defendant) to pay the amount it undertook to pay under a Performance Bond. The Court also made orders against the 2nd Respondent (2nd Defendant in the Court below) for a refund of monies disbursed in accordance with an Advance Payment Guarantee (APG) as well as reimbursement for a damaged transformer. 2.0 BACKGROUND 2.1 For the purposes of this section, the parties shall be referred to as they are in this Court. 2.2 The genesis of the appeal can be traced from the Invitation for Bids (IFB) advertisement in the Times of Zambia News Paper of 27th June, 2017. The tender was for the procurement of Transmission Overhead Lines and Substation. The pt Respondent invited sealed bids from eligible and qualified bidders for the procurement of 132kV Transmission Overhead Lines from Roma to Lusaka West and construction and installation of Avondale Substation with Switching stations. 2.3 The IFB further stated that the Bidding will be conducted through International Competitive Bidding (ICB) procedures indicated in the World Bank's Guidelines: Procurement under IRBD Loans and IDA Credits January 2011, revised in July 2014 edition. As per requirement, the 2nd Respondent J4 submitted, to the p t Respondent, a Bid Bond on 4th September 2017 issued by the Appellant. 2.4 On 19 th March 2018, the 2nd Respondent was awarded the Contract. Subsequently, on 5th April 2018, the Appellant proceeded to issue a Performance Bond in the sum of USD 2,082,835.10 in favour of the pt Respondent. However, the contract was terminated by a letter dated 19th May 2020, wherein the 1st Respondent elaborately indicated the reasons for the termination. Consequently, the Appellant called in the Performance bond on 11th June 2020. 2.5 The Appellant, in a letter dated pt July 2020, wrote to the p t Respondent requesting for more time to look into the matter. Over a month later, on 6th August 2020, the 1st Respondent wrote back to the Appellant giving them a further extension of 14 days to respond to the claim. What followed after this letter was another letter from the 1st Respondent referring to a meeting between them and giving them another 30 days to respond to the claim. 2.6 Regrettably, the Appellant failed to pay the amount under the Performance Bond prompting the p t Respondent to commence an action for the recovery of the monies under the bond. 2.7 The 2nd Respondent did not participate in the prosecution of this matter. 2.8 Evidence in support of the 1st Respondent's case was to the effect that the procedure and criteria of bidding documents, together with the World Bank st Guidelines, was employed in the preliminary evaluation process. The 1 Respondent's Bid Evaluation Committee verified the legal requirements JS including the letter of bid, written power of attorney and the Joint Venture Agreement (hereinafter referred to as 'JV') submitted. 2.9 Further, a post qualification evaluation was also conducted and this evaluation included verifying the following: 1. Eligibility by the financiers; ii. Whether or not debarred on the World Bank List; and iii. Conflict of interest 2.10 All this information was based on the information supplied by LEEEC (Liaoning-EFACEC Electrical Equipment Company Limited) which company was part of the JV that was awarded the contract. After the World Bank gave a "No Objection", the 1st Respondent requested for a performance bond which is now subject of this appeal. 2.11 On the other hand, the Appellant's evidence was in relation to inspection of the bid documents and the failure to perform the contract. The Appellant had inspected the Bid Bond documents and believed that the JV was the same one awarded by the ist Respondent. In essence, the Appellant relied on the World Bank and the ist Respondent to vet the JV. 2.12 The Appellant contended that there was fraud/misrepresentation in the manner in which the Performance Bond was awarded, based on the fact that the documents used, belonged to China National Electric Engineering Company Limited (CNEEC), a company that was not part of the JV. J6 2.13 The Appellant did, however, admit to assessing the JV before issuing the bid bond and at each stage, the documents given to the Appellant by the 2nd Respondent were inspected. 3.0 DECISION OF THE COURT BELOW 3.1 Upon considering the evidence on record and the arguments advanced by the parties, the learned Judge began by considering the pt Respondent's claim against the Appellant on the Performance Bond. 3.2 The learned Judge found that it was undisputed that the Appellant issued a performance bond in favour of the 1st Respondent and that the 2nd Respondent failed to perform on the contract, resulting in the 1st Respondent calling the bond on 11th June, 2020. She found that what was in dispute, was whether the pt Respondent was entitled to call the bond. 3.3 In resolving the issue, the learned Judge had recourse to several authorities on performance bonds/demand guarantees, including the case of Edward Owen Engineering Ltd v Barclays Bank lnternational1 She opined that a . demand guarantee is one that contains provisions that the guarantor is liable to fulfil the obligations under the guarantee "on demand" and, that this type of contract of guarantee is independent from the underlying supply contract between the seller and the buyer or contractor and employer, as the case may be. She further opined that what governs payments that are to be made, is what was agreed in the performance guarantee and that fraud on the part of a beneficiary is an exception to the rule on payment on demand. J7 3.4 The learned Judge proceeded to consider the performance bond issued by the Appellant. She found that the conditions set by the performance bond were as follows: i. The pt Respondent was to make a demand in writing with a written statement that the 2nd Respondent had breached its obligations under the contract. ii. Further, that demand was to be made on or before 4th October, 2020. 3.5 In determining whether the conditions had been met, the learned Judge examined the correspondence between the parties and found that the pt Respondent, by a letter dated 19th May 2020, terminated the contract with the 2nd Respondent and on 11th June 2020, made a demand on the performance guarantee from the Appellant. However, she also found that the 1st Respondent did not include a statement stating that the contractor had breached its obligations. 3.6 Further, on 1st July 2020, the Appellant wrote to the 1 st Respondent acknowledging the claim and asked for time to look into the matter. On 6th August 2020, the 1st Respondent wrote to the Appellant extending the time frame up to 14thAugust 2020, to settle the demand in full. In another letter dated 23rd September 2020, the 1st Respondent wrote to the Appellant, stating as follows: "As you are aware, all matters to enable you make a decision were discussed at the meeting held with yourselves on 9th September 2020 and further due to time constraint, the matter has been handed over J8 to our advocates to pursue the matter in court if we do not receive a favourable response by 30th September 2020." th 3.7 Further, by letter dated 28 September 2020, the 1st Respondent informed the Appellant that it terminated the contract due to the fact that the 2nd Respondent breached its obligations under the contract and which position st the Appellant had acknowledged in its letter of 21 August 2020. 3.8 Based on the foregoing, the learned Judge took the view that the conditions th set were met by the ist Respondent as the demand was made by 4 October th 2020 and in its letter of 28 September 2020, a statement that the contractor had breached its obligations under the contract was made. 3.9 Regarding the Appellanf s refusal to pay on account of fraud, the learned Judge found that prior to the award of the contract and issuance of the Performance Bond, the Appellant had issued a bid bond in favour of the 2nd Respondent. According to the learned Judge, this proved that the Appellant was satisfied that the 2nd Respondent had met the criteria required for it to be issued with a bid bond. This was confirmed by the Appellanfs witness, (DWl}. In the learned Judge1s view, the Appellant was not obliged to issue a st bond simply because there was a contract between its client and the 1 Respondent. th 3.10 Regarding the World Bank Press Statement of 28 October 2020, the learned Judge was of the view that the said Statement only alleged fraudulent st activities by the 2nd Respondent and not the 1 Respondent who was the beneficiary under the Performance Bond. She was of the view that there was no proof that the 1st Respondent engaged in any fraud or any exceptional J9 ! circumstances that would prevent the pt Respondent from claiming on the Performance Bond. It was her view that although the 2nd Respondent's names were described differently in the contract and in the JV, it still did not prove any fraud on the part of the 1st Respondent. 3.11 Turning to whether the 1st Respondent is entitled to claim 100% of the amount guaranteed, the learned Judge was of the considered view that there was nothing from the Performance Bond stating that the demand could be for less the amount guaranteed. In any event, the 2nd Respondent re tendered the bid and awarded it to another company at a higher cost. In its final analysis, the learned Judge found that the 2nd Respondent had proved its claim against the Appellant for the sum guaranteed under the bond. 3.12 Regarding the claims against the 2nd Respondent, the learned Judge relied on the uncontroverted evidence of DW2 to the effect that the 2nd Respondent was paid 25% advance payment and was also paid for the delivery of 3 transformers, one of which was damaged. 3.13 Relying on the case of Masauso Zulu v Avondale Housing Project 2 the , learned Judge was satisfied that the 1st Respondent proved its claims against the Appellant and the 2nd Respondent on a balance of probabilities and entered Judgment in favour of the 1st Respondent as follows: 1. Against the Appellant in the sum of US$ 2,082,835.10 and 2. Against the 2nd Respondent in the sums of US$ 2,519,556.16 and US$ 334,137. 67[damaged transformer]. JlO 3.14 The learned Judge further ordered that the awarded sums would carry interest at the London Inter-Bank offered Rate from the date of Writ of Summons to date of full payment. 4.0 THE APPEAL 4.1 Dissatisfied with the decision of the lower court, the Appellant launched an appeal before this Court advancing six (6) grounds of appeal couched as follows: 1. The learned trial Judge erred in law and fact when she ignored the fact that the Respondent neglected to serve the Appellant with a statement stating the obligations breached by the 2nd Respondent as required under the Performance Bond which was issued by the Appellant. 2. The learned trial Judge erred in Jaw and fact when she disregarded and/or failed to place due weight on the evidence that the 1st Respondent unilaterally and fraudulently awarded a contract to a different name of a joint venture partner in the bid documents without any justification. 3. The learned trial Judge erred in law and fact when she held that the Respondent did not commit any fraud despite the evidence and particulars off raud specifically outlining the nature and gravity off raud committed by the 1st and 2nd Respondent. 4. The learned trial Judge erred in law and fact when she glossed over the evidence suggesting that the 1st Respondent made it impossible for the 2nd Respondent to inter alia fully perform the contract timeously owing Jll to the 1st Respondent's frequent changes in the design's specifications, refusing to make further payments to carter for changes in designs and delaying in approving the proposed designs. 5. The learned trial Judge erred in Jaw and fact when she proceeded to unjustly enrich the 1st Respondent by ordering the Appellant and the 2nd Respondent to pay the sum of US$2,082,835.19, US$2,519,556.16 and US$334,137.67. 6. The learned trial Judge erred in Jaw by awarding post Judgment interest at a contractual rate as opposed to the interest that is applicable in accordance with the Judgments Act. 5.0 APPELLANT'S HEADS OF ARGUMENT 5.1 We have duly considered and appreciated the Appellant's Heads of Argument filed on 6th September 2022. We make the following pertinent observations: 5.1.1 The opening paragraph reads as follows: "May it please this Honourable Court, these are the respondent's Final submissions in response to the Complainant's submissions filed before this Honourable Court on JthJ uly 2020 as they relate the Complainant's claims herein." This can only be attributed to a classic case of 'copy paste' gone wrong. 5.1.2 We also note that while the Appellant raised six {6) grounds of appeal in the Memorandum of Appeal, it appears to have only argued three J12 (3) grounds in its Heads of Argument, and from what we have been able to tally with the grounds of appeal, it has presented arguments specifically under grounds 2, 3 and 5. 5.1.3 We also bemoan the haphazard numbering with respect to paragraphs and sub-paragraphs under paragraph 4 of the arguments. Paragraph 4.1.12 is followed by 4.4.1. 5.1.4 Paragraph 4.4.7 is followed by 2.33 to 2.35. 5.1.5 Paragraph 4.4.18 is then followed by 4.2. 5.1.6 Paragraph 4.2.9 is then followed by paragraph 4.6.1. 5.1. 7 We have nonetheless considered the Appellant's heads of argument as they are intended to be. From what we have been able to decipher, we take it that grounds 1, 4 and 6 have been abandoned. 5.2 As it relates to ground 2, the Appellant drew the Court's attention to the law that regulates the issuance of performance bonds and the effect of illegality on performance bonds. The Appellant referred to the International Chamber of Commerce (the "ICC"} which defines a demand guarantee in Article 2 (a) of its Uniform Rules for Demand Guarantees 458 (the "URDG 458"} as follows: For the purpose of these Rules, a demand guarantee (hereinafter referred to as "Guarantee") any guarantee, bond or other payment undertaking, however named or described, by a bank, insurance company or other body or person (hereinafter called "the Guarantor") given in writing for the payment on a written demand for payment and J13 ! such other document(s) (for example, a certificate by an architect or engineer, a judgment, or an arbitral award) as may be specified in the Guarantee, such undertaking being given: (i) At the request or on the instructions and under the liability of a party (hereinafter called "the Principal"); or (ii) At the request or on the instructions and under the liability of a bank, insurance company or any other body or person (hereinafter "the Instructing Party") acting on the instructions of a Principal to another party (hereinafter "the Beneficiary"). 5.3 The Appellant also referred to the learned author, Goode Guide to the URDG who defines a "demand guarantee" as an undertaking given for payment of a fixed or maximum sum of money on presentation to the party giving the undertaking of a demand for payment (nearly always required to be in writing) and such other documents (if any) as may be specified in the guarantee, within the period and in conformity with the other conditions of the guarantee. 5.4 The essence of the Appellant's argument is that the rule of autonomy of demand guarantees is not absolute. It was the submission that a bank or an insurance company may refuse to make payment of the guaranteed amount where it can prove that there was fraud on the part of the beneficiary or that that underlying contract was tainted with illegality that it would be against public policy to allow the beneficiary to proceed to claim for the guaranteed amount on the basis of the illegal underlying contract. J14 5.5 As it relates to ground 3, the Appellant proceeded to address the evidence that was before the lower Court via-a-vis the High Court Judgment and assess the prospects of successfully appealing against the High Court Judgment. 5.6 It was the submission that the defence of fraud must be specifically pleaded and proved. Further, the burden of proving fraud lies on the party alleging fraud and is on the basis of a higher standard than the standard required in ordinary civil matters. 5. 7 The Appellant referred to the case of Kabaso v Premier Choice Finance Limited 3 in which the Court held that it is trite that if fraud is to be a ground in proceedings, then it should be pleaded with utmost particularity. The Court further held as follows: "As per Practice Notes 18/8/16 and 18/12/18 of the White Book 1, any charge off raud or misrepresentation must be pleaded with the utmost particularity and fraudulent conduct must be distinctly alleged and as distinctly proved, and it is not permissible to leave fraud to be inferred from the facts. 11 5.8 The Appellant placed further reliance on the case of Sithole v State Lotteries Board4 in which Supreme Court held that fraud must be proved on a standard higher than the balance of probabilities. 5.9 It was the submission that a review of the defence filed before the lower Court clearly demonstrates that the Appellant had pleaded fraud and advanced evidence to support the fact that there were irregularities in the manner in which the Main Contract was awarded. JlS • 5.10 It was the Appellant's argument that the totality of the evidence before the Court below, clearly demonstrated that the Contractor fraudulently presented information to the Appellant in an effort to acquire the Performance Bond. It was further argued that the 1st Respondent illegally awarded the Main Contract to a Joint Venture (JV) that did not lodge in the Bidding Documents in contravention of the provisions of the repealed Public Procurement Act. 5.11 It was the submission that the lower Court turned a blind eye to the fact that there was a disparity in the name of the joint venture that lodged the bidding documents and the joint venture that was awarded the Main Contract and that the Press Release that was issued by the World Bank confirming the fraudulent activities that existed in the Project managed by the 1st Respondent. 5.12 As it relates to ground 3, the Appellant referred to the English case of Addis v Gramophone Co Limiteds in which the Court held that: ". .. damages for breach of contract were in the nature ofc ompensation, not punishment." 5.13 The Appellant placed further reliance on the case of Zambia National Building Society v Nayunda6 which cited with approval the decision of the English courts in the Addis cases aforementioned, and proceeded to hold as follows: "The essence of damages has always been that the injured party should be put as far as monetary compensation can go in about the J16 • same position he would have been, had he not been injured. He should not be in a prejudiced position nor unjustly unriched. 11 6.0 THE 1st RESPONDENT'S HEADS OF ARGUMENT 6.1 We have also considered and appreciated the 1st Respondent's Heads of Argument in Opposition filed on 14th October 2022. These too, will not be recast save for emphasis where appropriate. It goes without saying that the ist Respondent sought to justify and uphold the decision of the lower Court. 7.0 THE 2No RESPONDENT'S HEADS OF ARGUMENT 7.1 The 2nd Respondent did not participate in the appeal and did not file any arguments. 8.0 THE HEARING 8.1 As noted in paragraph 1 above, we have dealt with the preliminary objection within the main appeal. 8.2 We have considered the preliminary objection and the competing arguments of Counsel. We believe the law is settled that section 22 as read with sections 23 and 25, of the Court of Appeal Act2 empowers a party to appeal against an open Court judgment, automatically, and without leave of the High Court. This has been the subject of judicial interpretation as was established in a decision of this Court rendered in the case of Chainama Hills Gold Club Limited v Golf Consultancy and Tourism Limited 7 • J17 8.3 The Supreme Court in the case of Herbert ljegalu Okwa Ozokwo v The Attorney General8 guided that Judgments ordinarily determined in open Court do not require leave of Court before appealing. The consequence of that interpretation is that a matter determined in open Court, which for convenience only, the Judgment is delivered in Chambers, as was the case in casu, does not make such matter, a chamber matter, requiring leave of Court. 8.4 We are of the considered view that the Judgment appealed against does not fall within the restrictions outlined in section 23 of the Court of Appeal Act2 and the Appellant did file its appeal within the 30-day period as required by section 25 of the Act. 8.5 We therefore see no merit in the preliminary challenge and dismiss it as the Appellant did not need leave of the lower Court. 9.0 DECISION OF THIS COURT 9.1 At the outset, we must express our displeasure at what appear to be poorly constructed heads of argument of the Appellant. Our observations have been adequately cited at paragraph 5.1 to 5.1.7 above. 9.2 It goes without saying that sitting as an appellate Court, we will not look beyond the heads of argument filed, defects and all notwithstanding. 9.3 We have carefully considered the grounds of appeal reproduced in paragraph 4 above, the impugned Judgment and the arguments of Counsel respectively. We shall proceed to address grounds 2 and 3 together as they are inter-related and deal with ground 5 separately. J18 • 9.4 We shall begin with grounds 2 and 3 in which the Appellant has alleged that the learned trial Judge erred in fact and law when she disregarded and or failed to place due weight on the evidence that the 1st Respondent unilaterally and fraudulently awarded a contract to a different name of a joint venture partner in the bid documents without any justification; and that the learned trial Judge erred in law and fact when she held that the Respondent did not commit any fraud despite the evidence and particulars of fraud specifically outlining the nature and gravity of fraud committed by the 1st and 2nd Respondent. 9.5 In support of these grounds of appeal, the Appellant has gone to great lengths to enlighten the Court on the law relating to the operationalization of performance bonds aforementioned. We note that from the law referred to, a performance bond is in so many ways like an insurance contract. In this case, the Appellant entered into a contract with the 2nd Respondent concerning a tender awarded to the 2nd Respondent following a successful bid. 9.6 According to the International Federation of Consulting Engineers (commonly known as FIDIC) in a briefing Note (June 2019) on Guarantees, Bonds and Retentions relating to Professional Services 1, the purpose of a bid bond is two-fold. Firstly, to ensure that a bidder does not change his mind and cancel his bid and, secondly, to exclude non-serious bidders. Whereas a performance bond is designed to guarantee the proper and timely completion of the Consultant's or contractor's duties under the Agreement. The said notes go on to provide that the wording of such a bond J19 is very important as it will specify the conditions under which the bond may be forfeited. Non-performance has to be established before the bond can be called. 9.7 From the foregoing, it is clear that the purpose of a bid bond is completely different from that of a performance bond and the two are mutually exclusive. They arise at different points. It is also clear that a performance bond is based on a contract. In this instance, the Performance Bond was issued on a contract executed between the pt Respondent and the 2nd Respondent. 9.8 However, the Appellant contends that the Performance Bond was void ab initio, on the basis that the underlying contract was tainted with illegality. The Appellant believed that CN EEC was part of the JV that had been awarded the main contract following the lodgment of the bidding documents. It was therefore submitted that the Appellant reasonably believed that the 1st Respondent had conducted due diligence on the nature and type of JV before being awarded the main contract. In this regard, the Performance Bond was issued after it further considered the balance statement and financial statements of CNEEC. 9.9 On the totality of the above submissions, it was argued that the Contractor, (2nd Respondent), fraudulently presented the information to the Appellant in an effort to acquire the Performance Bond. 9.10 In opposing this line of submission, the 1st Respondent stated that they used the standard evaluation methodology and that the documentation received showed the entity's name and abbreviation to be used. This being a project J20 funded by the World Bank, in conducting its due diligence, it conducted a search on the World Bank website and established that there were no issues of debarment in relation to the 2nd Respondent. It was on this premise that the World Bank gave a 'No objection" to the pt Respondent to enter into the contract and it proceeded to fund the project. 9.11 We were directed to the Joint Venture (JV) on pages 296-298 of the Record of Appeal (Record) which reflects all three companies. It was submitted that the parties were the 2nd Respondent (LEEEC) and the second party included CEDRI (Electric Design and Research Institute) which was shortened as CNEEC. In this vein, the registration documents for CNEEC, as the parent company, are being submitted. The JV further provided that the documents to be used were those of CNEEC. Lastly, it was argued that the positioning of the letters "JV" in the Bid Bond, the Contract and Performance Bond, was neither here nor there. 9.12 It is clear from the Record, that before the award of the contract, the Appellant issued a Bid Bond in favour of the 2nd Respondent. This, in our view and in agreement with the i5t Respondent's submission, confirms that there was a contractual relationship with the Appellant. It was from this relationship that the Appellant issued a Performance Bond. This position was confirmed by DWl who went further to confirm that due diligence was conducted before the Bid Bond was issued. 9.13 We find it rather surprising, that the Appellant would now argue that there was an attempt to defraud it into issuing a Performance Bond when it had already issued a Bid Bond in relation to the same Client over the same J21 contract. It would appear to us that the Appellant is trying to rely on third party due diligence which, in our view, is negligence on their part 9.14 We find no reason to depart from the finding of the lower Court in arriving at the conclusion that the allegation of fraud was not proved to the required standard. Having found that the 2nd Respondent was the correct party, the next question to consider is whether or not the 1st Respondent is entitled to payment under the Performance Bond. 9.15 The learned author Mark Hapgood, QC, Sir J. Paget and M. Hapgood QC, "Paget's Law of Banking" 12th Edition, para 34.2 2 stated as follows: "The principle that underlines demand guarantees is that each contract is autonomous, in particular, the obligations of a guarantor are not affected by disputes under the underlying contract between the beneficiary and the principal. If the beneficiary makes an honest demand, it matters not whether as between himself and the principa'1 he is entitled to payment. The guarantor must honour the demand, the principal must reimburse the guarantor (or counter-guarantor) and any disputes between the principal and the beneficiary, including any claim by the principal that the drawing was a breach of the contract between them, must be resolved in separate proceedings to which the bank will not be a party." 9.16 It is a settled principle that demand guarantees are payable "on demand". From the foregoing, it is clear that the obligations that arise from a performance bond are separate from and not dependent on those existing J22 under the contract between the contractor and the employer, in this case, st nd the 1 and 2 Respondent. 9.17 The Performance Bond in issue reads as follows: " Performance Bond Bene. ficiary: ZESCO Limited Stand No. 6949, Great East Road P.O. Box 33304 Lusaka, Zambia Date: 05th April, 2018 Performance guarantee No: GLI/BOND/PERF/0504-1/2018 We have been informed that Liaoning EFACEC Electrical Equipment Co. JV China National Electrical Design and Research Institute (LEEEC JV CNEEC) (hereinafter called "the Contractor") has entered into Contract No. ZESCO/LTDRP/G/ 027/ C2/ 2018 dated 19th March 2018 with u, for the supply of Procurement of Transmission and Distribution Works Supply, Construction and Installation of Avondale 132/ 33/ 1 lKV Substation and Switching Stations (hereinafter called "the contract"). Furthermore, we understand that, according to the conditions of the contract, a performance guarantee is required. At the request of the contractor, we Golden Lotus Insurance Company Limited, Plot No. 7911 Off Central Street, Chudleigh, Lusaka, Zambia hereby irrevocably undertake to pay you a sum or sums not exceeding in a total of amount of USD 2,082,835.10 (United States Dollar Two Million Eighty-Two Thousand Eight Hundred Thirty-Five and Ten Cents only) such sum being payable in the types and proportions of currencies in which the contract price is payable, upon receipt by us of your first demand in writing accompanied by a written statement stating that the contractor is in J23 breach of its obligation(s) under the contract, without your needing to prove or show grounds for your demand or the sum specified therein. This guarantee shall expire, no later than the 4th day of October 2020 and may demand for payment under this guarantee must be resolved by us at this office on or before that date. This guarantee is subject to the Uniform Rules for Demand Guarantees, ICC Publication No. 458, except that sub-paragraph (ii) of sub-article 20(n) is hereby excluded." 9.18 A perusal of the Performance Bond reveals that a statement, stating that the contractor was in breach of its obligations was to accompany the demand and that the demand was non-negotiable. 9.19 As correctly noted by the learned trial Judge, there was no statement of the breach in the demand letter. However, gleaning from the correspondence between the pt Respondent and the Appellant, which correspondence the learned Judge placed reliance on, we are equally satisfied that the Appellant was fully aware of the 2nd Respondent's breach of obligations. This can be seen from the letter dated 28th September 2020 exhibited at page 129 of the Record. In any event, the correspondence was all done before the expiration of the Performance Bond, which was due to expire on 4th October 2020, evident from pages 128-133 of the Record. 9.20 The Appellant appears to have argued the issue of part-performance in its heads of argument at paragraph 4.2.8 thereof and have canvassed the nd position that the lower Court erred when it ordered the Appellant and 2 Respondent to pay back all sums to the pt Respondent without offsetting the J24 ? sums or value thereof which had been acquired by the pt Respondent. We have carefully considered this line of argument. 9.21 In the case of Mandava Mohan Rao v. Mandava Venkata Ramana9 the , Supreme Court reiterated that the doctrine of part performance is based on equitable principles and is intended to prevent injustice. The Court emphasized that the essential requirements for part performance are payment of consideration and delivery of possession, along with acts unequivocally referable to the contract. 9.22 In the English case of Cutter v Powell10 the defendant contracted with a , sailor, promising to pay him thirty guineas to provide services as a second mate aboard a ship until it reached Liverpool. This was substantially more money than normal sailor contracts, which tended to pay a smaller sum per week of service. The sailor did his job but died before the ship reached Liverpool. Consequently, the sailor's estate sued for his wages under the contract. The question arose as to whether the sailor was entitled to payment for his substantial performance of the contract as an implied term within the contract. 9.23 The Court, (in that case), held that where parties conclude an express contract, no terms can be implied into the contract. On the facts, the contract between the parties expressly provided that the payment was conditional upon the completion of the voyage and only payable after the ship's arrival. Thus, under the express terms of the contract, the sailor was entitled to receive the payment, if the whole duty of the contract was performed, and not entitled to any payment if the contract was only partially J25 performed. The Court noted that the contract made payment conditional on performance of the full voyage as a form of insurance for the employer. Accordingly, the Court held that, even though the sailor was not to blame for failure to perform the contract, the express terms of the contract renders payment conditional on the full performance of the contract. Ultimately, the Court found that no payment was due for partial performance. 9.24 Applying the reasoning to the facts in casu, the Performance Bond contained an express term/condition that the Appellant irrevocably undertook to pay the p t Respondent any sum or sums not exceeding in total an amount of USD2, 082, 835.10 which was pledged by the Appellant in the event of the 2nd Respondent breaching its obligations under the contract. The condition for payment by the Appellant in these circumstances, hinges on the fulfillment of the 2nd Respondent's contractual obligations. In our considered opinion, the Contractor's partial performance, in which they purchased one of the three transformers and delivered it to the p t Respondent, remains a breach of their contractual obligations, and the effect is that the Appellant must pay the amount specified in the Performance Bond. 9.25 We therefore find ourselves in agreement with the 1st Respondent's submission at page 22 of their Arguments in Opposition, in which it was argued that according to the terms and conditions of the Performance Bond, the Appellant is obliged to pay the said guaranteed amount to the 1st Respondent upon receipt of a written demand and statement declaring that the Appellant was in breach of its obligations under the contract. J26 9.26 Based on the foregoing, we find that the pt Respondent is entitled to full payment under the Performance Bond. 9.27 We now turn to ground 5 in relation to unjust enrichment. The Appellant cited the definition of 'unjust enrichment' as defined in Black's Law Dictionary 7th Edition3 · The term is defined as a benefit obtained from another, not intended as a gift and not legally justifiable, from which the beneficiary must make restitution or recompense. 9.28 It was further argued that the rationale for awarding damages is to compensate the claimant for the losses suffered as a result of the breach. The case of Finance Bank Zambia Limited v Simata Simata11 was relied , upon, in which the Supreme Court held that damages in the law of contract are awarded for the purposes of putting the innocent party in the position that they would have been had the contractual obligations been performed. 9.29 On that premise, the Appellant submitted that the High Court Judge awarded a total sum of US$ 4,936,528.93 when a reading of the statement of claim reveals a claim for US$ 3,971,207.47 broken down as follows: 1114. The Plaintiff will aver at trial that the contract value was US$13,885.36 and that the Plaintiff disbursed the value of US$3,971,207.47 comprising of US$2,881,733.25 as Advance Payment, US$870,490. 76 towards the power transformers, US$25,200.00 towards the Designs and US$193,783.46 towards the Site Establishment." J27 9.30 This, in the Appellant's view, shows the loss incurred by the 1st Respondent and the only loss it must be compensated for. That the amount awarded was over and above that which the 1st Respondent suffered. 9.31 In rejoinder, the pt Respondent agreed with the finding of the lower Court that the 2nd Respondent had defaulted on its performance, hence the Performance Bond was called. The 1st Respondent opined that the award did not amount to unjust enrichment but was merely based on the guarantee pledged by the Appellant in the event of the 2nd Respondent's default of the contract. 9.32 It was contended that based on the terms and conditions of the Performance Bond, the Appellant is obliged to pay the guaranteed amount upon receipt of a written demand and statement declaring that the 2nd Respondent was in breach of their contractual obligations. 9.33 The learned trial Judge found the 2nd Respondent liable in the sum of US$2,519.556.16 and US$334,137.67. We note that these two amounts are in relation to the advance payment and the payment which was made towards the purchase of the transformers. 9.34 Only one of the three (3) transformers was delivered in a damaged state. After evaluating the facts on the Record, the trial Court found in favour of the pt Respondent with respect to these amounts. 9.35 The claims in relation to the advance payment and the damaged transformer were claims against the 2nd Respondent for the loss incurred under the contract. Whereas the claim under the Performance Bond is in relation to and was always in relation to the Appellant's non-performance of its J28 obligations under the contract. The advance payment guarantee and the Performance Bond were separate and not related in any way. Therefore, any arguments that the ist Respondent stands to be unjustly enriched are dismissed in the circumstances of the different sets of documents. 9.36 We have already alluded to the effect that a performance bond guarantees performance of obligations under a contract to which it relates. It is a non negotiable instrument. In view of that, failure to perform contractual obligations, as was the case here, will result in the beneficiary of a performance bond, being paid, on demand, the amount guaranteed. The issue of unjust enrichment, in this case, does not arise. We find no merit in this line of argument and accordingly dismiss ground 5. 10.0 CONCLUSION 10.1 The appeal fails in its entirety and is accordingly dismissed with costs to the 1st Respondent to be taxed in default of agreement. M. J. SIAVWAPA JUDGE PRESIDENT F.M. CHISHIMBA A.N. PATEL SC COURT OF APPEAL JUDGE COURT OF APPEAL JUDGE J29