State moves to court to ‘cash in’ on performance bond guarantees

THE Attorney-General and Minister of Legal Affairs, Anil Nandlall, has moved to the Commercial Division of the High Court to file three actions on behalf of the State, seeking to enforce performance bond guarantees and advanced performance guarantees put up by three companies in different infrastructural contracts with Government.

The AG is claiming a total of $186M from Citizens Bank Guyana Inc., CARICOM General Insurance Company Inc., and North American Fire and General Insurance Company.
According to a statement from the AG’s Office, the bonds and guarantees were put up by the companies to assure and guarantee satisfactory performance of the contractors in executing various contracts.

Government’s contention is that the contractors have failed to discharge their contractual obligations, and through the court case, the State is seeking to “cash in” on the bonds and guarantees.

DEFAULTED
The statement pointed out that, on August 18, 2005, Citizens Bank Guyana Limited executed a performance bond/guarantee in favour of the Government of Guyana at the request of Golden Star Contracting Services Company Ltd., following the inking of a contract between the Government and the company for rehabilitation of the access road to Parika Stelling. On January 11, 2008, the Government terminated the said contract because of the company’s repeated failure to correct defects within the time frame specified by the engineer.

The statement added that, on April 23, 2008, the Ministry of Public Works and Communications, in accordance with the terms and conditions of the contract, wrote to Citizens Bank making a first demand on the performance bond in the amount of $38.4M, but despite the claim, Citizens Bank has, to date, failed, refused and neglected to effect payment of the monies.

The second company, CARICOM General Insurance Company Inc., on September 19, 2011, executed a performance bond and advance guarantee in favour of the Government of Guyana at the request of Maurice Balgobin, in accordance with a contract between Maurice Balgobin and the Government of Guyana for the rehabilitation and re-construction of Kaburi Village Road, in Region 7 (Cuyuni/Mazaruni).

On September 24, 2012, the Government terminated the said contract because the contractor failed to substantially complete the works, even after an extension of 260 days had been granted.

On December 6, 2012, the Ministry of Public Works and Communications, in accordance with the terms and conditions of the contract, wrote to CARICOM General Insurance, making a first demand on the performance bond and advance guarantee in the amounts of G$4.9M and G$1.8M respectively, but no payments have been made.

The North American Fire and General Insurance Company faced a similar situation, in that the company, on May 7, 2012, executed performance bonds in favour of the Government of Guyana at the request of Bovell Construction Services, following a contract between that company and the Government of Guyana for the Amaila Falls Road and Transmission Line Clearing Project, Section Six: Issano Junction to Kuribong River.

On December 27, 2012, the Government terminated the contract because the contractor had removed equipment from the site, which resulted in a stoppage of work, constituting a fundamental breach of contract in accordance with the general conditions of the contracts.

On January 4, 2013, the Ministry of Public Works and Communications, in accordance with the terms and conditions of the contract, wrote to North America Fire and General Insurance Co. Ltd., making a first demand on the performance bonds in the amounts of $56.3M and $84.5M, which have not been paid.

The actions are scheduled to be heard on June 18, 2014, in the Commercial Division of the High Court.

(Vanessa Narine)