Oteng-Gyasi advocates cap on judgment debt
An industrialist, Mr Tony Oteng-Gyasi, has called for legislation to limit the amount in damages contractors and the government can claim in the event of default or breach of a public sector contract.
He explained that putting a ceiling on damages in public sector contracts was the surest way to tackle judgment debts, which had generated a national debate after increasing in volumes and values in recent times.
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Mr Oteng-Gyasi made the call when he delivered the keynote address at the launch of a book on Company Law in Accra last Wednesday.
Titled: 'Modern principles of Company Law in Ghana', the book is authored by Mr Ferdinand Adadzi, a partner of AB & David Law firm.
It examines the legal regime governing companies in the country, with specific emphasis on the Companies Act, 2019 (Act 992).
Mr Oteng-Gyasi was a member of the committee of experts that led the process to replace the now defunct Companies Act 1963 (Act 179), starting from 2008, to the eventual passage of Act 992 in 2019.
Concern
Addressing the participants, made up mostly of lawyers, the Chairman of the Tropical Cable and Conductor Limited (TCCL) said the concern of many over judgment debts incurred by governments was a subject that should be tackled both during contract negotiation and ultimately by legislation.
“In the private sector, it is common to limit damages arising out of breach contractually. The time has come to have such limits drafted and standardised in all government contracts as a matter of policy.
“Eventually, legislation should be passed to limit judgment debts. There are termination formulae which will spare the public purse such huge payments. Law can and should help solve our problems or limit them, at the very least,” he added.
Private sector experience
The former President of the Association of Ghana Industries (AGI) later explained that damages arising from contracts in the private sector were already limited and wondered why the government would not apply that experience to contracts involving the public sector.
“You can put a term in the contract which says effectively that this is the maximum an aggrieved party can claim. It does not have to be a figure. There are formulae for that and we can include that in the law,” Mr Oteng-Gyasi said.
He said the ceiling could also apply to interest on the damages to help discourage contractors from using the judgment debt window to exact resources from the State.
He said while the call for legislation might be too drastic, it was the surest way to tackle the judgment debt conundrum, which had cost the national purse billions of cedis in the past.
“Even if ceiling on damages to be claimed is in the contract, people will not put the clauses there. But if it is law, you will be forced to abide by it and that is why we should actually make a law that every government contract should have clauses that limit damages in case of default, breach of contract or litigation.
“So that if you sign a contract, you will know, and that way, it will force people to execute their side of the contract on time and according to the terms,” Mr Oteng-Gyasi, who is also a lawyer, added.
NDK
The advice by the business executive comes days after the state escaped the payment of GH¢1.2 billion in judgment debt to NDK Financial Services.
The company was seeking payment for the amount as outstanding balance and interests on a judgment debt that it was awarded years ago.
In its ruling, however, the Supreme Court said NDK Financial Services was entitled to only GH¢14,699.74.
The Minister of Finance, Mr Ken Ofori-Atta, said in July 2019 that the government had paid GH¢283 million as judgment debt to various aggrieved parties.
He said the amount was part of a total judgment debt of GH¢679.48 million that had so far crystalised.
