Shelter Afrique ordered to pay Blue Rose for breaches

The High Court in Accra has ordered a habitat and housing company, Shelter Afrique, to pay GH¢600,000 in costs and damages to Blue Rose Ltd, a real estate company, contracted from the Pan-African finance institution for the construction of housing units for sale.  

In a judgment delivered by Justice Samuel Djanie Kotey, the court was of the opinion that the failure of Shelter Afrique to disburse the over $5 million to the plaintiff, Blue Rose Ltd, after it had contributed its equity contribution, a precondition for the defendant to disburse the first tranche of the loan agreement, constituted a breach of contract.

The court held that the real estate company was justified when it repudiated the contract after injecting $3.03 million into the project, inclusive of legal fees, all in a bid to secure the loan facility from Shelter Afrique, only for the defendant to breach the contract by not releasing the loan facility.

“From the evidence adduced before this court, there is sufficient evidence that encourages a finding that Shelter Afrique had no lawful justification for refusing and/or failing to disburse the loan facility to Blue Rose Ltd; the latter having satisfied all the conditions precedent to first disbursement.

“Accordingly, this court finds that it constituted a breach of the loan agreement by the Shelter Afrique when it refused to disburse the loan despite the plaintiff's compliance with the terms of that agreement,” the judge stated.

The court has, therefore, awarded to the plaintiff general damages of GH¢500,000 against Shelter Afrique for breach of contract.

It has also awarded  costs of GH¢100,000 in favour of the plaintiff. 

Background

On December 15, 2016, Shelter Afrique and Blue Rose Ltd executed a loan agreement where the defendant undertook to advance to the real estate company, $5.2 million to enable it to construct 170 housing units of two, three and four-bedroom houses and associated infrastructure for outright sale to the public.

It was agreed between the parties that the $5.2 million was to represent 64 per cent of the total construction cost of the houses to be developed.

The parties further agreed that Blue Rose Ltd would contribute the remaining 36 per cent of the cost of the project, amounting to $2.92 million.

The December 15, 2016, the agreement was further amended on October 4, 2017 and signed by the parties.

The amendment reduced the loan amount, forming the defendant's equity contribution to the project from 64 per cent to 63.17 per cent and increased the plaintiff's equity contribution to the project from 36 per cent to 36.83 per cent. 

Under the agreement, Shelter Afrique was to be satisfied that the real estate company had injected its equity contribution into the project onsite and ascertained by the defendant before the facility would be disbursed.

After the real estate company had injected $3.03 million into the project, Shelter Afrique failed to disburse the loan because it believed that the plaintiff had not met the full obligations under the agreement. 

Suit

It, therefore, sued Shelter Afrique for failing to disburse the facility, averting that the failure to disburse the facility resulted in the plaintiff incurring some expenses.

The plaintiff also sought a declaration that the defendant's failure to disburse the facility constituted a breach of contract.

However, Shelter Afrique was of the view that it had refused to disburse the loan because the plaintiff did not abide by the terms of the agreement to satisfy the pre-disbursement conditions within the period agreed.

It averred that when the defendant could not meet its obligation under the contract, it indulged the plaintiff by proposing that it would provide a bank guarantee to make up for the shortfall in the plaintiff's equity contribution; however, the plaintiff could not meet that obligation.

Shelter Afrique further stated that the plaintiff did not have any lawful basis for unilaterally terminating the contract when it did.