OCEANIC BANK INTERNATIONAL PLC v. ABEOKUTA COMMERCIAL & IND. COMPANY LIMITED
(2014)LCN/7016(CA)
In The Court of Appeal of Nigeria
On Monday, the 24th day of March, 2014
CA/I/139/2012
RATIO
WHETHER A CONDITION PRECEDENT IS A SINE QUA NON FOR THE HONOURING OF AN AGREEMENT
As stated by the Supreme Court in Tsokwa Oil Marketing Co. Nig. Ltd. vs. Bank of the North Ltd. (2002) 11 NWLR part 777 p.163 at p.170 once a condition precedent is incorporated into an agreement, that condition must be fulfilled before the effect can follow. The condition precedent is therefore a sine que non for the agreement being honoured. One must not forget the doctrine of pacta sunt servanda meaning agreement of parties to a contract are to be observed. Per OBIETONBARA DANIEL-KALIO, J.C.A.
CONTRACT: SPECIAL DAMAGES IN TERMS OF MERELY SPCULATIVE CLAIMS PROVIDED FOR BY THE TERMS OF THE CONTRACT
I think that the guiding principles on damages in contract were well explained by the Supreme Court in Wahabi v. Omonuwa (1976) LPELR – 3469 per Idigbe JSC thus:-
“In the presentation of the claim for; as well as in the consideration of an award in consequence of a breach of contract, the measure of damages is the loss flowing naturally from the breach and incurred in direct consequence of the violation. The damages recoverable are the losses reasonably foreseeable by the parties and foreseen by them at the time of the contract as inevitably arising if one of them broke faith with the other. In the contemplation of such a loss, there can be no room for claims which are merely speculative or sentimental unless these are specially provided for by the terms of the contract. It is only in this connection that damages can be properly described as ”special” in the conception of contractual awards and it must be borne in mind that damages normally recoverable are based on the normal and presumed consequences of the breach complained of …… Thus the terms ’general’ and ’special’ damages are normally inept in the categorization of damages for the purposes of awards in cases of breach of contract”.
It is important to note from the above, the con in which one can speak of special damages in contract. But one cannot begin to talk about damages unless a breach of contract has been established. The measure of damages in contract is determined on the principles enunciated in the rule in Hadley vs. Baxendale 9 Exch. At 354, 156 ER at 451. This is the loss flowing from the breach and is incurred in direct consequences of the violation. See Agbanelo vs. Union Bank (2000) 4 KLR part 102 p.1261 at 1295. Per OBIETONBARA DANIEL-KALIO, J.C.A.
JUSTICES
CHIDI NWAOMA UWA Justice of The Court of Appeal of Nigeria
HARUNA SIMON TSAMMANI Justice of The Court of Appeal of Nigeria
OBIETONBARA DANIEL-KALIO Justice of The Court of Appeal of Nigeria
Between
OCEANIC BANK INT’L PLC Appellant(s)
AND
ABEOKUTA COMMERCIAL & IND. CO. LIMITED Respondent(s)
OBIETONBARA DANIEL-KALIO, J.C.A. (Delivering the Leading Judgment): This appeal is over a banker customer relationship. Succinctly stated, the facts show that the Respondent, Abeokuta commercial and Industrial Company Limited was persuaded or allowed itself to be persuaded to change bank from Afribank to the Appellant bank in the hope of enjoying a more beneficial loan facility from the Appellant.
After Correspondences, negotiations and assurances, the expected loan facility did not materialize. As a result, the Respondent sued the Appellant in the Lower Court and sought various amounts of money in damages for losses suffered.
After hearing the case, the Lower Court came to the conclusion that the Respondent fulfilled the conditions precedent that qualified it to enjoy a loan facility from the Appellant. The court therefore awarded the Respondent amounts on different heads of damages for losses suffered as a result of the failure of the Appellant to fulfill its part of the contract. N2,072,000 was awarded in total as damages. The Respondent was also awarded costs of N30,000. Judgment was delivered on 14/11/11. Also on that day i.e. 14/11/11, the learned trial judge made a report in which he acknowledged that judgment was delivered outside the constitutionally prescribed period of 3 months. The delay, the trial judge explained, was due to the vacation period of the court and the additional administrative duties he was saddled with.
Dissatisfied with the judgment, the Appellant filed a Notice of Appeal on 10/2/2012. In it, the Appellant marshaled 7 grounds of its dissatisfaction with the judgment. The grounds without the accompanying particulars are –
1. The learned trial judge erred in law when after the conclusion of evidence and final addresses on the 3rd of June 2011, he assumed jurisdiction to deliver the judgment on 14th November, 2011 outside the three months provided for by Section 294 of the Constitution and thereby occasioned a miscarriage of justice.
2. The learned trial judge misdirected himself on the facts when he held that “….The claimant performed every bit of its own obligation towards concretizing the relationship” under the contract thereby rendering the defendant liable.
3. The learned trial judge erred in law when having correctly stated the law that all the conditions precedent in a contract must be fulfilled by a claimant before the effect can flow, he nonetheless failed to apply the law to the undisputed facts before the court.
4. The learned trial judge erred in law when having granted to the claimant special damages claimed by him under various heads, he proceeded to award general damages of N1,000,000 (one million naira) to the claimant which award offends the principle of double compensation.
5. The Lower Court erred in law when having held that the claimant was entitled to only “nominal damages”, it proceeded to award as “nominal damages” to the claimant the amount of one million naira (N1,000,000) which in law and in relation to the N3 million naira specially claimed by the claimant itself, is excessive, arbitrary, unreasonable and not nominal.
6. The learned trial judge erred in law by awarding damages for breach of contract to the claimant under various heads when there was no evidence to establish the defendant’s liability for the damages awarded and when such damages did not flow or arise from the breach complained about.
7. The learned trial judge erred in law by holding the defendant liable for breach of contract when there was no evidence before the court to establish the breach.
The Appellant’s Brief of Argument was settled by Oluwole Aina Esq. It was filed on 10/7/12. In it, 6 issues were identified as the issues capable of determining this appeal. The issues are –
1. Whether on the facts of this case, the Lower Court was correct in holding as it did that “the claimant performed every bit of its own obligation towards concretizing the (contractual) relationship.
2. Whether the decision of the learned trial judge in awarding damages for breach of contract to the claimant was correct when the claimant failed to discharge the onus of showing that he had performed his own side of the contractual obligation.
3. Whether in the absence of a positive demand for the loan by the claimant and a refusal by the defendant to advance the loan, the Lower Court was right to hold that a breach of the contract has been established.
4. Whether having regard to the legal principles governing the award of special damages, the award of special damages to the claimant under various heads was justified.
5. Whether the award of one million naira (N1,000,000) to the claimant as general damages in the circumstances of this case did not offend the rule against double compensation; and
6. Whether the amount of one million naira (N1,000,000) awarded to the claimant is not excessive and unreasonable having regard to the holding of the learned trial judge that the claimant was entitled to only “nominal damages”.
The Respondents Brief of Argument was settled by Prince P. A. Adesemowo. It was filed on 9/8/13. Two issues were suggested by the Respondent’s Counsel as proper for the determination of this appeal.
They are –
(1) Whether the Lower Court was right in holding that Respondent had concluded, performed and fulfilled all conditions of the contract; and
(2) Whether the Lower Court was right in awarding nominal damages and cost of all expenses incurred by the Respondent in breach of the contract by the Appellant.
The Appellant filed a Reply Brief on 11/1/13 but same was deemed as properly filed and served on 19/2/2014.
The issues for determination in this appeal as suggested in the Appellant’s Brief encompass those suggested by the Respondent. I will consider this appeal by considering the issues suggested by the Appellant.
The Appellant’s Counsel argued issues 1 – 3 together. The issues he contended are distilled from grounds 2, 3 and 7 of the grounds of appeal. He submitted that the summary of the three issues is that upon a proper application of the relevant laws to the facts and circumstances of the case, the conclusion of the Lower Court that the Appellant was liable for breach of contract is erroneous.
Learned Counsel referred us to pages 196 to 198 of the Record of Appeal and argued that the learned trial judge correctly stated the law when he stated that a party seeking to enforce a contract must show that all the conditions precedent have been fulfilled. Learned Counsel referred to the contract document executed by both parties, Exhibit K. He referred specifically to the conditions precedent in the contract document and submitted that the Respondent did not fulfill any of the stipulated conditions.
He drew the court’s attention to the fact that no third party legal mortgage on the Managing Director’s property to be used as collateral was signed and that none of the other collateral and/or security documents required in the contract document was executed. In view of the failure to meet the stated conditions, learned counsel argued that it was surprising that the Lower Court held that “the claimant performed every bit of its own obligation towards concretizing the relationship”. It was contended that the Lower Court came by that conclusion because it relied on Exhibit O which is a letter from Afribank Nigeria Plc. to the Respondent.
Learned Counsel argued that Exhibit O is the reaction of Afribank to Exhibit Q in which Exhibit, that is to say Exhibit Q, the Appellant requested Afribank to give a commitment letter to release original documents in its custody to it, i.e. the Appellant.
Afribank instead of issuing the requested commitment letter, learned counsel submitted, chose not to reply the letter but instead, wrote Exhibit O to the Respondent. Learned Counsel submitted that judging by Exhibit O, Afribank manifested an intention not to release the document to the Appellant. It was submitted that Exhibit O cannot avail the Respondent because it was between Afribank and the Respondent and therefore not binding on the Appellant under the doctrine of privacy of contract. He cited the case of UBA Plc vs. Jargaba (2008) Vol. 157 RCN p.28 at p.47. Furthermore he submitted, going by the content of Exhibit O, the 3rd condition in Exhibit K was not complied with since Exhibit O was not a commitment from Afribank to the Appellant. Further still, he submitted that, even if Exhibit O was capable of fulfilling the 3rd condition in Exhibit K, that fact would not relieve the Respondent from fulfilling all the other conditions prescribed in Exhibit K. He urged us to resolve issue 1 – 3 in the Appellant’s favour.
In his argument in reply, Respondent’s Counsel referred to what he considered to be findings of facts by the Lower Court. They were a total of nine, including that the lower made finding that Exhibit K was fulfilled through Exhibit O. We were urged not to disturb the said findings. Learned Counsel contended that in paragraph 1 of the Appellant’s statement of Defence before the Lower Court, the Appellant admitted all the statements of facts pertaining to this case in paragraph 12 of the statement of claim and consequently same required no further proof. Learned Counsel urged us to hold that the Respondent has fulfilled all the conditions precedent required of it.
In his argument in Reply, Appellant’s Counsel reiterated his submission, that the conditions precedent in Exhibit K were not fulfilled by the Respondent. He submitted that there is no evidence to show that the said conditions were satisfied. He argued that the address of learned counsel cannot supplement or make up for evidence that was not made available to the court. He cited Yoye vs. Olubode (1974) ANLR 657 at 661 and Kazeem vs. Mosaku (2007) 150 LRCN 1818.
No issue was distilled from the 1st ground of the grounds of appeal. That ground is therefore abandoned. See Ayinde vs. Labisi (1970) ALL NLR 172.
It is very clear that the main bone of contention under issues 1 – 3 is whether or not the trial court was right to have held that the conditions precedent in Exhibit K were fulfilled by the Respondent through Exhibit ‘O’.
As stated by the Supreme Court in Tsokwa Oil Marketing Co. Nig. Ltd. vs. Bank of the North Ltd. (2002) 11 NWLR part 777 p.163 at p.170 once a condition precedent is incorporated into an agreement, that condition must be fulfilled before the effect can follow. The condition precedent is therefore a sine que non for the agreement being honoured. One must not forget the doctrine of pacta sunt servanda meaning agreement of parties to a contract are to be observed.
I think that in order to see whether the trial judge was right in his conclusion regarding the conditions precedent in Exhibit ‘A’ all that needs be done is to examine Exhibit ‘A’ vis-a-vis what transpired or did not transpire between the parties regarding it. Exhibit K was reproduced by the learned trial judge in his judgment at page 194 to 195. The relevant portion reads:
“Further to your request dated February 12, 2008, we are pleased to inform you that the management of Oceanic Bank International Plc is offering you a facility of N25,000,000 (Twenty-Five Million Naira only) overdraft facility under the following terms and conditions
………………………………………..
………………………………………..
………………………………………..
CONDITIONS PRECEDENT TO DRAW DOWN
The facility shall be made available upon compliance with the following conditions:
1. Acceptance of Oceanic Bank’s offer letter;
2. Execution of all necessary collateral and security documentation;
3. A written commitment from Afribank Plc to release the original title documents and Registered Deed of Release in respect of the property pledged as collateral to Oceanic Bank Plc. after the full liquidation of the Company’s existing facility;
4. A written commitment from Abeokuta Commercial and Industrial Company Ltd acknowledged by Chellarams Plc. stating that the Stocks and Chemical/products would only be released to an Oceanic Bank Representative with the name and Oceanic Bank identity Card of the staff clearly stated in the letter”.
It is my considered view that there was no evidence before the trial court that any or all of the above conditions precedent were complied with by the Respondent. The learned trial judge held in his judgment at page 200 of the record thus:
“The condition precedent to the draw down of the loan and of course the agreement between the parties as stipulated in Exhibit K was fulfilled in Exhibit O dated 12/9/2008 and to the knowledge of the defendant banks”.
That finding by the trial judge with due respect, is perverse. Exhibit ‘O’ was not a silver bullet. It did not fulfill conditions 1, 2 and 4 of the conditions precedent. It did not satisfy condition 3 either. Exhibit O which is reproduced in the judgment (see at page 199 of the Appeal Record) read in the relevant portion thus:-
“However the Bank will be willing to release the security documents at your instance if you repay the facilities and surrender the Bank Guarantee”.
Exhibit O therefore is a promise to the Respondent to release the security documents if the loan to Afribank is released. It does not satisfy the condition in clause 3 which requires a written commitment from Afribank after that Bank might have been fully paid its indebtedness by the Respondent. Exhibit O did not say that the Respondent has fully paid Afribank its indebtedness.
For the condition precedent in Exhibit K to have been satisfied, there must have been, to borrow the words of the Supreme Court per Iguh JSC in Alfotrin Ltd. vs. A.G. of the Federation (1996) 9 NWLR part 475 p.634 at p.656 “a concluded bargain which has settled all essential conditions that are necessary to be settled and leaves no vital term or condition unsettled’. That was not the case with regard to Exhibit K. Issues 1 – 3 are resolved in the Appellant’s favour.
Appellant’s Counsel argued issue 4 separately and issues 5 and 6 together. I think however that issues 4, 5 and 6 can be considered together since they all deal with the issue of damages. Appellant’s Counsel submitted that the award of special damages to the Respondent under various heads is not supported by the law as well as evidence before the court. On the award of N542,000 paid to Oceanic Insurance Company Limited, learned counsel submitted that Oceanic Bank International Plc. (which is now the Appellant) was not a party to the insurance contract between Oceanic Insurance Limited and the Respondent and consequently the Appellant cannot be bound by that contract. We were referred to the case of UBA Plc. vs. Jargaba (2008) vol.157 LRCN 28.
On the award of N450,000 as the excess amount charged as Commission on Turn Over (COT), learned counsel submitted that it ought to have been specifically pleaded and specifically proved. It was submitted that the claimant failed to tender the teller by which it purportedly lodged the sum of N150 million into its account and also failed to tender its statement of account to show that N5 per mille was charged by the Appellant.
On the sum of N80,000 awarded in place of N50,000 paid to the firm of Jide Taiwo & Co. for valuation of the property, learned counsel referred to the statement of claim and the evidence in chief at page 4 and 11 respectively of the Record of Appeal. The Respondent, learned counsel submitted testified that upon the Appellant’s request, it paid the sum of N80,000 to the firm of Jide Taiwo & Co. for the valuation of the property to be used as collateral for the loan. The Respondent, Counsel to the Appellant argued, tendered a receipt, Exhibit J issued by Jide Taiwo & Co. for the sum of N50,000 “being full payment of valuation of property at Iduganran, Idumota, Lagos”.
Inspite of Exhibit J, the Lower Court awarded the sum of N80,000 as damages under that head. Learned Counsel submitted that Exhibit J was at variance with the pleadings and therefore went to no issue, the sum of N50,000 shown in Exhibit J was not paid to the Appellant but to Jide Taiwo & Co. and therefore the Appellant is a stranger to the transaction in Exhibit J. Exhibit J was issued on 26/3/2008 long before the contract in Exhibit K on 8/9/2008 and the valuation paid for by the Respondent was actually carried out by the firm of Jide Taiwo & Co. and therefore the Respondent suffered no loss or damages.
On the award of the sum of N1,000,000 as general damages, learned counsel submitted that the award is contrary to laid down legal principles and highly excessive. It was submitted that the award contravened the rule against double compensation. He referred to the case of Soetan vs. Ogunwo (1975) ANLR 359 at 363. It was submitted that the Respondent having itemized what it considered to be its losses and supported same by Exhibits tendered by it; was not entitled to be awarded the sum of N1,000,000 as general damages. The award, he contended, amounts to double compensation. It was submitted that general damages is not usually awarded for breach of contract. The case of Ndinwa v. Igbinedion (2000) WRN 47 at 57 was cited in support. It was contended that even if the Lower Court was justified in awarding general damages; the amount awarded was excessive. It was submitted that the Lower Court having held that the Respondent was entitled only to nominal damages, had no justification in awarding one million naira in the Respondent’s favour.
In his submission in response, learned counsel argued that the Appellant induced or caused the Respondent to take certain steps and embark on some financial expenditure in anticipation of a loan from the Appellant. He contended that the Lower Court in its wisdom assessed damages that were the natural or probable consequences of the breach complained about irrespective of whether such damages were described as special or general damages. It was submitted that in a claim for breach of contract, it is not necessary to distinguish between an amount claimed as special and general damages. A number of cases were cited including Ndinwa v. Igbinedion (2000) FWLR p.2673 at p.2686; Mobil Oil Nig. Vs. Abraham Akinfosile (1969) 1 NWLR 217.
It was submitted that the Lower Court was right in awarding the sum of N542,000 since the expenditure for insurance was done in pursuance of the loan offer by the Appellant.
With respect to the sum of N80,000 awarded with regard to the money expended on the valuation of the property to be pledged as collateral, learned counsel submitted that the Lower Court was right to have made the award since the Appellant defaulted in performing its own side of the contract. The case of Obmiami Brick and Stone Nig. vs, ACB (Nig.) Ltd. (1992) NWLR part 229 at 93 – 94 was cited in support.
With regard to the submission of Appellant’s Counsel that the sum of N1 million awarded to the Respondent was not “nominal” learned counsel referred to the case of Badmus vs. Abegunde (1999) 7 SC part 1 p.78 at 85 where the term “nominal damages” was explained. It was submitted that “nominal damages” does not mean “small damages”. We were urged to uphold the damages awarded by the Lower Court.
Appellant’s Counsel made further submissions in the Reply Brief essentially re-iterating his earlier arguments. He made the point that it is wrong that the learned trial judge made no distinction between ‘general’ and ‘special’ damages.
I think that the guiding principles on damages in contract were well explained by the Supreme Court in Wahabi v. Omonuwa (1976) LPELR – 3469 per Idigbe JSC thus:-
“In the presentation of the claim for; as well as in the consideration of an award in consequence of a breach of contract, the measure of damages is the loss flowing naturally from the breach and incurred in direct consequence of the violation. The damages recoverable are the losses reasonably foreseeable by the parties and foreseen by them at the time of the contract as inevitably arising if one of them broke faith with the other. In the contemplation of such a loss, there can be no room for claims which are merely speculative or sentimental unless these are specially provided for by the terms of the contract. It is only in this connection that damages can be properly described as “special” in the conception of contractual awards and it must be borne in mind that damages normally recoverable are based on the normal and presumed consequences of the breach complained of …… Thus the terms ‘general’ and ‘special’ damages are normally inept in the categorization of damages for the purposes of awards in cases of breach of contract”.
It is important to note from the above, the con in which one can speak of special damages in contract. But one cannot begin to talk about damages unless a breach of contract has been established. The measure of damages in contract is determined on the principles enunciated in the rule in Hadley vs. Baxendale 9 Exch. At 354, 156 ER at 451. This is the loss flowing from the breach and is incurred in direct consequences of the violation. See Agbanelo vs. Union Bank (2000) 4 KLR part 102 p.1261 at 1295.
While considering issues 1 -3, I came to the firm conclusion that the Appellant was not in breach of the contract, Exhibit K. That being the case, the question of the Appellant being liable for damages for breach of contract, does not arise.
For the above reasons, I find that the appeal has merit. It is accordingly allowed. N30,000 costs is awarded in favour of the Appellant.
CHIDI NWAOMA UWA, J.C.A.: I read in advance the draft of the judgment delivered by my learned brother, Obietonbara Daniel-Kalio, J.C.A. I agree with his Lordship’s reasoning and conclusion arrived at in holding that the appeal has merit, I allow same. I abide by the order made as to costs in the leading judgment.
HARUNA SIMON TSAMMANI, J.C.A.: I had the advantage of reading in draft form, the judgment just delivered by my learned brother, O. Daniel-Kalio, JCA.
My learned brother has succinctly and adequately considered and resolved all the germane issues that arose for determination in this appeal. I agree with the reasoning and conclusion that the appeal has merit. Exhibit K formed the fulcrum of the contract agreement in this case. There is however no evidence that any of the terms of Exhibit K, which are conditions precedent to a valid claim thereon was breached. As no breach was found to have occurred, the issue of damages cannot therefore arise. The principle is damnum sine injuria, i.e, where there is no breach or wrong there can be no damages. This appeal thereby has merit and is accordingly allowed.
I abide by the order on costs.
Appearances
Oluwole Aina with E. E. ItaFor Appellant
AND
Prince P. A. Adesemowo with Abioye MrsFor Respondent
