WEMA BANK PLC. & ANOR v. ALARAN FROZEN FOODS AGENCY NIGERIA LIMITED & ANOR
(2015)LCN/8047(CA)
In The Court of Appeal of Nigeria
On Friday, the 11th day of December, 2015
CA/L/360/2007
RATIO
CONTRACT: TERMS OF CONTRACT; WHETHER PARTIES ARE BOUND BY THE TERMS OF THEIR CONTRACT
There is plethora of case laws on the principle that parties are bound by the terms of their contract. See LARMIE V. DATA PROCESSING MAINTENANCE & SERVICES (D.P.M.) LTD. (2005) 12 SC (PT. 1) 93 AT 103; BABA V. NIGERIAN CIVIL AVIATION TRAINING CENTRE, ZARIA (1991) 5 NWLR (PT. 192) 388; UNION BANK OF NIGERIA LTD. V. B.U. UMEH & SONS LTD. (1996) 1 NWLR (PT. 426) 565; S.C.O.A. NIGERIA LTD. V. BOURDEX LTD. (1990) 3 NWLR (PT. 138) 380 and KOIKI V. MAGNUSSON (1999) 8 NWLR. per. CHINWE EUGENIA IYIZOBA, J.C.A.
PRACTICE AND PROCEDURE: AWARD OF COST; WHETHER THE COURTS ARE EMPOWERED BT THE RULES TO AWARD COST, WHETHER IT IS A THE COURT’S DISCRETION TO AWARD COST AND WHETHER A SUCCESSFUL PARTY IS ENTITLED TO THE SAME
The law is trite that cost follows event and the Courts are empowered by the Rules to award cost. See the case of NNPC v. CLIFCO NIG. LTD. (2011) LPELR-2022 (SC); MUDUN & ORS. V. ADANCHI & ORS. (2013) LPELR-20774 (CA); OLOKUNLADE V. SAMUEL (2011) 17 NWLR (PT. 1276) 290. It is at the discretion of the court to award cost. The ultimate requirement is that such discretion must be exercised judicially and judiciously. In the case of NNPC v. CLIFCO NIG. LTD. (supra) Rhodes-Vivour, J.S.C. 26 paras E-G postulated: “The award of cost is entirely at the discretion of the court, costs follow the event in Litigation. It follows that a successful party is entitled to costs unless there are special reasons why he should be deprived of his entitlement. In making an award of costs the court must act judiciously and judicially. That is to say with correct and convincing reasons. See Anyaegbunam v. Osaka (1993) 5 NWLR Pt. 294 p. 449 Obayagbona v. Obazee (1972) 5 SC p. 247” per. CHINWE EUGENIA IYIZOBA, J.C.A.
PRACTICE AND PROCEDURE: AWARD OF COST; WHETHER A PARTY NEED ASK FOR COST BEFORE IT CAN BE AWARDED IN LITIGATION
Thus, since cost follows events in litigation, a party need not ask for cost before it can be awarded. That is why it is at the discretion of the court. Whether or not the award of cost is arbitrary is dependent on the peculiarity of each case. The only circumstance under which an appellate court will interfere with the award of cost is when such award is so high or low that there was an entirely extraneous estimate of damages. See OGUNSAKIN V. EDU LOCAL GOVT. AREA KWARA STATE & ORS. (2011) LPELR-8816 (CA). per. CHINWE EUGENIA IYIZOBA, J.C.A.
JUSTICES
UZO. I. NDUKWE-ANYANWU Justice of The Court of Appeal of Nigeria
CHINWE EUGENIA IYIZOBA Justice of The Court of Appeal of Nigeria
JAMILU YAMMAMA TUKUR Justice of The Court of Appeal of Nigeria
Between
1. WEMA BANK PLC.
2. MISS ROSE OKODUGHA – Appellant(s)
AND
1. ALARAN FROZEN FOODS AGENCY NIGERIA LIMITED
2. MRS. MARGARET APINKE ALARAN – Respondent(s)
CHINWE EUGENIA IYIZOBA, J.C.A. (Delivering the Leading Judgment): This appeal is against the judgment of the High Court of Lagos State in suit No. ID/1591/2000 delivered on 6/7/06?by Akande J. in which judgment was entered in favour of the Claimants now Respondents.
This suit arose from a banker/customer relationship over an account originally maintained personally by the 2nd Respondent with the 1st Appellant. The account was later restructured and taken over by 1st Respondent upon its incorporation as a limited liability company. An import finance facility was granted to the 1st Respondent in the sum of 50 Million Naira in 1998 for the importation of frozen fish with a 10 Million Naira overdraft facility. The facility was supposedly granted on the personal guarantee of the 2nd Respondent and a mortgage on two of her landed properties. The guarantee was undated and the mortgage was in place long before the incorporation of the 1st Respondent for the loans granted to the 2nd Respondent when she was operating as a sole proprietor. By the terms of the facility, the 1st Appellant was to insure the imported frozen fish to cover the total value of the amount of
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1facility of the expense of the 1st Respondent. The 1st Appellant initially engaged Great Nigerian Insurance Company Limited its customary insurers to insure the imported fish but later changed to Oasis Insurance Company Limited. It regularly debited the account of the 1st Respondent for the insurance premium. The frozen fish on arrival and delivery were stored at Jobitex and Beststore cold rooms. A loss amounting to Thirty-Five Million Naira allegedly arose from fish spoilage due to deterioration caused by break down of refrigerating equipment in the cold stores. The 2nd Respondent claimed she discussed the problem with the officials of the 1st Appellant who were coming once or twice a week to monitor the sales of the imported fish. When it dawned on the Respondents that the officials of the 1st Appellant did not as promised make a report of the spoilage to their headquarters, the 2nd Respondent took the initiative by personally reporting the situation to the headquarters of the 1st Appellant. When the 1st Appellant submitted a claim under the insurance policy to OASIS, the claim was rejected by the insurers on the ground that the location covered by the
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2 policy was Tokelat coldroom and not Jobitex or Beststores; that the insurers were not promptly informed of the spoilage before disposal and that the insurance was for “gradual deterioration”. The Respondents claimed that it was not a term of the facility agreement that Tokelat cold room or any particular cold room was to be used to store the imported frozen fish on arrival and that the officials of both the 1st Appellant and 1st Respondent jointly took the decision to store the imported frozen fish at Jobitex cold room and Beststore cold room. At the trial, it emerged that the 1st Appellant did not take out the insurance in the name of the 1st Respondent. Contrary to the impression given the Respondents and in clear breach of the agreement, what 1st Appellant purportedly insured was the 2nd Respondent in person. The 1st Appellant by auction purportedly sold the properties of the 2nd Respondent to the 2nd Appellant during the pendency of the suit. By an amended writ of summons and statement of claim dated 16/4/01, the Respondents as claimants claimed against the appellants as Defendants as follows:
“(1) A DECLARATION that the 2nd plaintiff, now to be referred to as
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3 the 2nd claimant is the owner of the landed properties at 13, Oremeji Street, Alimosho, Agege, Lagos by virtue of a Certificate of Occupancy dated 25th January, 1983 registered as No. 26 at page 26 in Vol. 19821 of the Lagos State Land Registry Office at Ikeja, despite the existing legal mortgage which is still subsisting thereon in favour of the 1st Defendant.
(2) DECLARATION that the Defendants are not entitled to foreclose and redeem the mortgage on the aforesaid properties until the conditions for the exercise of such powers are met.
(3) DECLARATION that the Defendants are not entitled to assign, sell, lease or alienate in any way the aforesaid properties and other collaterals pledged for loan and facilities granted by the 1st Defendant to the 1st plaintiff in 1998 prior to its restructuring in July 1999 and or thereafter.(4) A DECLARATION that no insurance policy and or no valid and or enforceable insurance policy was taken out in favour of or for the protection of the 1st Plaintiff against the peril of fish spoilage as contracted or undertaken by the 1st Defendant to so do for the period of July 1998 to June 1999 as a term of the facilities enjoyed by
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4 the 1st Plaintiff during the said period in consequence whereof the claim of the 1st Plaintiff in the event of the intended peril in the sum of approximately N35,000,000.00 only could neither be made good nor be applied to reduce the debt obligation of the 1st Plaintiff to the 1st Defendant as of June 1999.
(5) A DECLARATION that the failure and or neglect of the 1st Defendant to establish an insurance cover and or valid and or enforceable insurance policy in favour of/or for the protection of the 1st Plaintiff against the peril of fish spoilage as contracted or undertaken to be done by the 1st Defendant for the period of July 1998 to June 1999 as a term of the facilities enjoyed by the 2nd plaintiff during the said period and guaranteed and secured by the 2nd plaintiff personally and with her assets was unlawful and an inequitable clog on the 2nd plaintiff’s equity of redemption and constitute a fundamental breach of the term of the securities/collaterals furnished by the 2nd Plaintiff on 1st Plaintiff’s accounts maintained with the 1st Defendant.
(6) AN ORDER granting relief from forfeiture of Plaintiff’s mortgaged properties aforesaid and
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5 releasing/discharging the 2nd Plaintiff’s personal guarantee and mortgagor’s obligations to the 1st Defendant to avoid clogging 2nd Plaintiff’s equity of redemption.
(7) A DECLARATION that the amount restructured as due and owing by the 1st Plaintiff to the 1st Defendant in July 1999 upon the then existing collaterals of the 1st and 2nd Plaintiffs and further securities procured thereafter in support of the restructuring were procured based on fundamental misrepresentation by the 1st Defendant on which the Plaintiffs reasonably relied in agreeing thereto and should therefore be set aside totally.
Six other alternative reliefs were claimed which were all dismissed by the lower court and are not the subject of this appeal. There is consequently no need to set them out here. The Appellants as Defendants filed a Statement of Defence and a counterclaim dated 7th September, 2001 of pages 104-111 of the record, while the Respondents’ reply and Defence to the counterclaim are of pages 112-121 of the record. The parties led oral and documentary evidence at the trial. They also filed and adopted their respective final written addresses before the trial court. At the end of
6the trial, the learned trial judge granted the seven reliefs claimed by the Respondents and dismissed the counterclaim of the Appellants.
Very much dissatisfied with the judgment, the Appellants appealed to this court. From the seven grounds of appeal in their amended notice of appeal, the Appellants formulated four issues as follows:
1. WHETHER THE TRIAL COURT JUDGMENT HOLDING TO THE EFFECT THAT THE CLAIMANTS/DEFENDANTS BY COUNTER-CLAIMANT/RESPONDENTS’ CLAIMS HAS MERIT WAS RIGHT IN VIEW OF THE FACTS OF THIS CASE?
2. WHETHER THE TRIAL COURT WAS RIGHT IN ITS JUDGMENT GIVING JUDGMENT TO THE RESPONDENTS OUTSIDE THE CLAIMS AND ON ISSUES RAISED SUO MOTU BY IT?
3. WHETHER THE TRIAL COURT POST JUDGMENT AWARD OF N600,000 AGAINST THE APPELLANTS IS JUSTIFIABLE IN THE CIRCUMSTANCES OF THIS CASE?
4. WHETHER THE TRIAL COURT JUDGMENT IS AGAINST THE WEIGHT OF EVIDENCE?
The Respondents in their brief formulated the following two issues for determination:
?1. WHETHER THE JUDGMENT OF THE LOWER COURT IN FAVOUR OF RESPONDENTS WAS SUPPORTED BY THE EVIDENCE REVIEWED AND THE APPLICABLE LAW. (Grounds 1, 3, 4, 5, 6 & 7 of the Amended Notice of Appeal)
?2. WHETHER THE LEARNED TRIAL JUDGE
7 RIGHTLY AWARDED COST IN THE MAIN SUIT AND THE COUNTERCLAIM RESPECTIVELY? (Ground 2)
I shall adopt the issues formulated by the Respondents in the determination of this appeal as they encompass the Appellants’ issues and are more concise.
ISSUE ONE:
WHETHER THE JUDGMENT OF THE LOWER COURT IN FAVOUR OF THE RESPONDENT WAS SUPPORTED BY THE EVIDENCE REVIEWED AND THE APPLICABLE LAWS. (Grounds 1, 3, 4, 5, 6 & 7 of the Amended Notice of Appeal)
APPELLANTS’ ARGUMENTS:
Learned counsel on the above issue submitted that the bone of contention is not whether an insurance policy was taken in the name of the 1st or 2nd Respondent, as the point was not a major concern of the insurance company, OASIS; that the real issue was whether there was indeed spoilage of fish which would have entitled the respondents to claim under the insurance policy. Counsel argued that the evidence of the Appellants’ witnesses as contained in the record of Appeal is to the effect that the Respondent stored the fish imported at Jobitex Cold Storage instead of Tokelat cold store as agreed and as contained in the Insurance policy. Secondly, that the respondents did not make any official report of
8 the alleged spoilage of fish either to the appellants or the Insurance Company until about six months after its alleged occurrence. Thirdly, that the alleged spoilt fish were never sighted by the officials of the Appellants before they were allegedly buried. Fourthly, that the supposed burial site of the fish was never shown, indentified nor located and no evidence was supplied at the trial as to what steps the Respondents took to inform authorities of Jobitex cold store of the alleged spoilt fish. That in fact, the Appellants at the trial Subpoenaed the Managing Director of Jobitex cold store and he attended court and testified that non of the allegation of breakdown in power, spoilage of and burial of fish worth about N30 Million took place at their compound and no proof of same in their record, and no evidence of sighting of any alleged spoilt fish.
Counsel submitted that the Appellants’ 1st witness, a staff of the 1st Appellant and the accounting officer of the account the subject matter of this case testified to the effect that the 1st Defendant did not sight any spoilt fish. When asked as to how he came about the report, the said witness informed the
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9 court that, it was only a report prepared by the Respondents and given to him that, he compiled months after the alleged spoilage took place. The witness also testified that at all the material time, there were sale of fish at the retail point of the Respondents which was monitored and reported by officers of the 1st Defendant. The Respondents did not contest the fact that the 1st Appellant did not at any time witness any burial of fish of whatever quantity throughout the period of the alleged spoilage. Counsel submitted that the onus is on the respondents to prove at the trial that the fish imported with the facility actually spoilt and that once the onus was not discharged, the 1st Appellant should not be held liable for repudiation of the insurance policy. Counsel argued that it was evident at the trial court that, concrete proof was not shown as to the alleged spoilage of fish. He submitted that the Respondents admitted that the policy that was undertaken on the fish was for gradual deterioration and not total deterioration. Counsel submitted that the 1st Appellant and the insurance company should have been made aware immediately when deterioration
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10 commenced in order to carry out inspection and confirm the situation.
Learned counsel submitted that the learned trial court erred in rejecting the report of the loss adjuster on the ground that it was not tendered by the maker after it had been admitted in evidence as exhibit E without objection. The contents of Exhibit E were not denied by the Respondents. Further, counsel submitted that what determines whether a policy holder is entitled to insurance claim is whether a loss actually occurred; that in the instant case no concrete evidence exists in form of insurance report to show that the insurance company actually was aware of spoilage of the fish. No insurance company will pay on insurance policy whose insured event cannot be traced or confirmed to have ever existed. Learned counsel argued that what was borrowed by the Respondents was N50 Million and the alleged spoilt fish was said to be worth N35 Million and wondered what happened to the balance of N15 Million and the interest on the amount. Counsel argued that it should have entitled the Appellants to the benefit of dismissal of the Respondents claims of the trial court and a grant of their
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11 counter-claim. Counsel submitted that where a mortgagor is indebted to the mortgagee in whatever amount, and the right of sale arose, the mortgagee’s right of sale will be upheld. He cited the cases of NWANKWO V. CCB (1997) 6 NWLR PT. 507 Pg. 48 at Pg 50-51; OKWUNAKWE V. OPARA (2000) 14 NWLR Pt 687 Pg. 334 at Pg. 336 ratio 2: 3 & 4 Pg. 339-340 Paragraph C-D and E-F; GBADAMOSI V. KABO TRAVEL LIMITED (2000) 8 NWLR Pt. 668 Pg. 243 at Pg. 448-250.
Counsel submitted that under insurance law, there is the principle of subrogation which goes to deduct actual loss from value of recovered property. He submitted that the Appellants’ witness testified that, fish were sold regularly and monitored at the point of sale which shows that assuming without conceding that there was spoilage of fish at all, it could not have been total, and what was recovered should have been shown and should have been deducted from total claim but all the Appellants got was belated information that, fish got spoilt and were buried and no evidence except written report. Counsel submitted that the trial court’s holding on the issue was tantamount to calling on Appellants not only to accept the unfounded
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12 allegation of spoilage of fish but to arm twist the insurance company to pay for damages not confirmed to have occurred. Counsel submitted that the evidence of the Appellants’ witnesses at the trial were credible and urged the court to so hold. Relying on the cases of OSUJI V. EKEOCHA (2009) 16 NWLR PT. 1166 PG. 81 SC and AGBI V. OGBE (2006) 11 NWLR PT. 990 PG. 65 SC counsel submitted that the relief granted by the trial court that the Mortgage deed and personal guarantee were void were not claimed by the Respondents and that the law is that a court cannot grant a party a relief not claimed. He urged us to resolve the issue in their favour and to set aside the judgment of the trial court.
RESPONDENTS’ ARGUMENTS:
Learned counsel for the Respondents in his brief submitted that the real issue in this appeal is as regards lender liability and the disposal of mortgaged property pendente lite. Counsel examined the reliefs sought and granted by the trial court and submitted that contrary to the terms of Exhibits A & B, the 1st Appellant did not insure the 1st Respondent but insured the 2nd respondent and that this amounted to a fundamental breach of the term of the
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13 finance importation facility agreement. Counsel argued that it is trite that facts admitted need no further proof and that the documents speak for themselves as the insurance policy -Exhibit F – was in the name of the 2nd Respondent who had no insurable interest in the imported frozen fish. Counsel submitted that lack of insurable interest in the subject matter of the insurance rendered the transaction invalid and the insurance policy incapable of enforcement. Counsel submitted that Exhibit F did not stipulate specifically that the imported frozen fish be stored at Tokelat cold room only; and is therefore not a fundamental condition. He contended that the submission of the Appellant that the 1st Respondent was to use only Tokelat cold room to warehouse its stock is to read a different meaning into the insurance policy what was never intended. Counsel further argued that the 1st respondent is a limited liability company and it was with it that the transaction in Exhibit A and B were made. Therefore, since Exhibit F relates to the 2nd Respondent, as the insured and not the imported frozen fish of the 1st respondent, the 1st Appellant failed to insure the imported
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14 frozen fish as agreed. Counsel submitted that it is the duty of the 1st Appellant to give the insurance company all the necessary information and documents required for the insurance policy and also to communicate and deliver executed documents and policies to the 1st Respondent to enable it take note of the terms and stipulations in the insurance policy. Learned counsel contended that the breach of the contract for the finance facility, Exhibit A & B by the 1st Appellant discharged the 2nd respondent from any guarantee signed by her for the benefit of the 1st Respondent. He contended that at any rate, the obligation of a guarantor to the principal creditor is secondary and will only arise upon the default of the principal debtor. Relying on the case of G.S. & D IND. LTD. V. NAFDAC (2012) 5 NWLR (PT. 1294) 511 he opined that the contract of continuing guarantee was rightly discountenanced by the court even though not raised by the parties.
On the sale of the mortgaged property, counsel submitted that Exhibits O and O1, which are Auction notices, show that the purported auction took place on 4th October, 2000. Exhibit P, which is the photocopy of the cheque
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15 paid for the property auctioned, is dated 30th August, 2000. He argued that it is clear that the 2nd Appellant had paid for the property; ever before it was put up for sale by auction and that it rendered the purported public auction highly irregular. Counsel further submitted that apart from this irregularity, the public auction took place when this suit was already pending and that the doctrine of lis pendens prevents the effective transfer of rights in any property which is the subject matter of an action pending in court. Counsel submitted that the doctrine of lis pendens vitiated the sale of the property to the 2nd Appellant. He cited OGUNTOYINBO V. OGUNTOYINBO (2000) 2 NWLR (Pt. 646) 586.
On the counter-claim, counsel submitted that it is trite that any bank which is claiming a sum of money on the basis of the overall debit balance of a statement of account must adduce both documentary and oral evidence to show how the overall overdraft balance was arrived at and that the Appellants did not provide the necessary documents. He cited HABIB NIG. LTD. V. GIFTS UNIQUE (NIG.) LTD. (2004) 15 NWLR (Pt. 896) 405; YESUFU V. AFRICAN CONTINENTAL BANK (1981) NSCC 36;
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16WEMA BANK PLC. V. OSILARU (2008) 10 NWLR (PT. 1094) 150. Counsel urged us to resolve issue in their favour. While adopting the brief, learned counsel for the Respondent had submitted that there is no appeal on the dismissal of the counterclaim itself and no appeal against the decision of the Court that there was a fundamental breach of the contract.
RESOLUTION:
From the reliefs claimed in the trial court, the main substance of this case is the purported sale of the 2nd Respondent’s landed property known as 13, Oremeji Street, Alimosho, Agege, Lagos by the Appellants upon an assumed maturation of the right of sale arising out of a mortgage created on the said property for a loan of Fifty Million Naira (N50,000,000) for the importation of fish. The 2nd respondent claimed that the 1st respondent to whom the loan was advanced was not a party to the mortgage agreement as it was made by the 2nd respondent when she was doing business with the 1st Appellant as a sole proprietor; and that as such the property mortgaged by her as a sole proprietor when the 1st respondent was not even in existence cannot be collateral for a loan advanced to the 1st respondent. The trial
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17 court agreed with her in the following words:
“…Exhibit CC tendered through DW1 is a deed of legal mortgage executed on 18th July, 1989. It was between the 2nd Claimant and the 1st Defendant. It was made by the 2nd Claimant as the then sole proprietress before the incorporation of the 1st Claimant in 1994. CW1 testified as follows in her evidence in chief:-
“I was trading in fish as a sole proprietor before the incorporation of the 1st Plaintiff. I used to enjoy overdraft facility with the 1st Defendant. But when I became the Managing Director of the 1st Plaintiff, I was still enjoying the overdraft facility granted to the 1st Plaintiff”
?A look at Exhibit CC will establish that it was executed by the 2nd Claimant as a sole proprietor of the then firm and not for the 1st Claimant as a limited liability company Exhibit F is dated 10th August, 1998, it relates to the financing of importation of frozen fish. This was not in existence in 1989 when exhibit CC was executed. There is therefore no evidence of any outstanding agreement between the 2nd claimant and the 1st Defendant before the court before the incorporation of the 1st Claimant in 1994 and in 1989 when
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18 exhibit CC was executed which covers the subject matter of the financing of importation of frozen fish entered into in 1999. There ought to have been a specific agreement executed to this effect after the 1st Claimant came into being in 1994. The evidence of CW1 in this regard was not controverted at the trial by the Defendants. A person who carries on a one man business under the name of a firm is competent to sue in his personal name in respect of transaction of that firm. This was why Exhibit CC was executed by the 2nd Claimant when she was carrying on the business of fish trading as a one man business. This was why she entered the said transaction then with the 1st Defendant in Exhibit CC in her personal name. As such Exhibit CC can no longer be used in the transaction the 1st Defendant entered into with the 1st Claimant as in Exhibits A and B in 1998 and 1999 respectively. To this extent it is my considered view that Exhibit CC is inconsistent with the contents of Exhibits A and B.”
The learned trial judge is right. Although the 2nd respondent testifying as CW1 said:
?”I was trading in fish as a sole proprietor before the incorporation of the
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19 1st Plaintiff. I used to enjoy overdraft facility with the 1st Defendant. But when I became the Managing Director of the 1st Plaintiff, I was still enjoying the overdraft facility granted to the 1st Plaintiff’.
The 2nd respondent obviously spoke out of ignorance. Her business as a sole proprietor is an entirely different entity from her limited liability company. The 1st appellant committed a grievous error in not rectifying the processes to reflect that they are now dealing with a limited liability company. Although the 2nd respondent is a party to the suit what ever document she signed without any indication that she was signing as managing director of the 1st respondent but as a sole proprietor is of no use to the 1st appellant as this is not one of the instances when it is allowed to lift the veil of incorporation. The terms of Exhibit CC which she signed as a sole proprietor is bound to be inconsistent with Exhibits A and B to the extent that the 1st appellant cannot hold the 2nd respondent liable on the mortgage for the loan facility granted the 1st respondent.
The trial court held the 1st Appellant liable for the N35 Million Naira, the 1st respondent would
20 have received if the insurance had been taken out in the name of the 1st respondent on the ground that the 1st appellant breached the agreement to insure the 1st Respondent against the loss but instead insured the 2nd Respondent. In other words, the court took the view that the 1st Respondent’s risk was not insured and that the bank must bear the consequence of not taking out the insurance cover as agreed. This in my view is the correct interpretation of the circumstances of this case. The 1st appellant is with respect jumping the gun in dwelling totally on whether or not there was proof of the spoilage. Even though Oasis did not repudiate the insurance because it was taken in the name of the 2nd respondent the claim was eventually rejected as advised by their appointed loss adjusters in Exhibit E dated 6/6/99 for the following three reasons:
1. The location covered by your policy is Tokelat Cold room and not Jobitex or Beststores;
2. When the rottening occurred, you did not promptly inform your insurer or Wema Bank Plc before disposal;
3. The cover provided by your policy is “gradual deterioration” of the fish stock due to mechanical breakdown of refrigerating
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21 machinery.
The question is: Who should be held responsible for these deficiencies? It is my considered view that the 1st appellant should be held responsible. The obligation to insure the imported fish against spoilage was placed squarely on the 1st appellant by clause 6(d) of Exhibits A & B. PW1 had testified in court that the place of storage of the fish and the fact of spoilage was known to the 1st appellant whose officials were in joint control of the consignment by reason of a letter of hypothecation tendered as exhibit DD by DW1. Clause 2(a) of the exhibit provides:
?”that you have dual control and custody of the warehouse/s and/or factories in which the goods or stocks are held jointly with the company and the company undertakes not to take out or sell any goods or stocks from warehouses and/or factories without any prior consent.”
It was agreed that the 1st Appellant would create an insurance cover to protect both the lending 1st Appellant bank and the borrowing 1st Respondent Company. All these were contained in an agreement. There is plethora of case laws on the trite principle that parties are bound by the terms of their contract. See LARMIE V. DATA
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22PROCESSING MAINTENANCE & SERVICES (D.P.M.) LTD. (2005) 12 SC (PT. 1) 93 AT 103; BABA V. NIGERIAN CIVIL AVIATION TRAINING CENTRE, ZARIA (1991) 5 NWLR (PT. 192) 388; UNION BANK OF NIGERIA LTD. V. B.U. UMEH & SONS LTD. (1996) 1 NWLR (PT. 426) 565; S.C.O.A. NIGERIA LTD. V. BOURDEX LTD. (1990) 3 NWLR (PT. 138) 380 and KOIKI V. MAGNUSSON (1999) 8 NWLR. By implication, the Respondents were bound by the terms of their contract to sell and remit money to the Appellants and the 1st Appellant was bound to, after making available the sum of N50,000,000, to open the letters of credit for the importation of the fish and to insure the fish against spoilage. The responsibility of insuring the imported fish against loss was squarely on the 1st appellant. The 1st respondent knew nothing about the insurance. The terms were known only to the 1st appellant who according to the letter of hypothecation Exhibit DD had joint control and custody of the fish with the 1st respondent. The 1st appellant ought to have ensured that the terms of the insurance policy were fully complied with to the last detail. If the insurance policy covered fish stored in Tokelat Cold room only the 1st
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23 appellant ought to have directed that the fish be stored in that cold room and not in Jobitex. It ought to have monitored the warehoused fish closely along with the respondents to know when spoilage commenced and how to go about claiming on the insurance promptly. The 1st appellant eventually submitted a claim to the insurance company belatedly. At the time of the submission, the 1st appellant did not query the alleged spoilage. It submitted the claim because it believed there was spoilage. It cannot therefore turn round on repudiation of the policy by the insurance company to claim that spoilage was not established by the 1st respondent. A bank assumes a huge responsibility when it lends money for importation of goods which is to be in the joint custody of the bank and the borrower with sales to be supervised by the bank. If the bank defaults in carrying out its responsibility under the arrangement, it cannot turn round to hold the borrower responsible. The 1st Appellant should be held responsible for all the defaults that gave rise to the refusal by the insurance company to cover the loss because it is the 1st appellant that took out the insurance. Its terms
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24 were unknown to the respondents until repudiation by the insurance company. The 1st appellant failed to carry out the obligations placed on it by the agreement it entered into with the 1st respondent on the loan facility. It was in breach of the contract to insure. It cannot now claim to be blameless like Pontius Pilate and attempt to shift the blame on the respondents who had nothing to do with insuring the imported fish against spoilage. The lower court was right that the 1st Appellant should bear the loss it caused by its own inexcusable breach of Clause 6(d) of Exhibits A & B. It cannot benefit from its own wrongdoing at the expense of the respondents.
To compound an already bad situation, the 1st Appellant during the pendency of this suit, sold the mortgaged property to the 2nd appellant! On the sale of the mortgaged property pendente lite, the learned trial judge at page 5 of the judgment (299 of the printed record) observed:
?”……The court finds as of fact that from the uncontroverted available evidence before it that whilst the suit was still pending the 1st Defendant by an auction sold the property of the 2nd Claimant to the 2nd Defendant. The
25 writ of summons was filed on 21st June, 2000, whereas by Exhibits O and O1 the Auction Notice, the public auction took place on the 4th of October, 2000. Exhibit P which is the photocopy of the cheque paid for the property auctioned is dated 30th August, 2000, which was issued before the said public auction on 4th October, 2000. The legal implication is that the public auction conducted in Exhibits O and O1 apart from being irregular took place during the pendency of this action. A case in law is said to be pending in court when any proceeding can be taken in it. See the case of Abey vs. Alex (1999) 14 NWLR (Pt. 637) 150 Supreme Court Decision. By the doctrine of lis pendens a person who buys a property, subject to on going litigation acquires no interest. See the case of Oguntoyinbo vs. Oguntoyinbo (2000) 2 NWLR (Pt. 646) 586. It is also the law that the doctrine of lis pendens applies notwithstanding the fact that the purchaser has no notice – actual or constructive. There is therefore no need to give notice to the purchaser as he buys at his own risk. See the case of Osagie vs. Oyeyinka (1987) 2 NSCC 841. The 2nd Defendant in my view bought the 2nd Claimant’s
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26 property which is in dispute in the pending suit at her own risk during the pendency of this action. Therefore the public auction of the sale of the property in question to the 2nd Defendant is void and of no effect. Since the said sale has been established in this judgment to be void it will be inappropriate in law to set aside what is already void. See the case of Ayanboye vs. Balogun (1990) 5 NWLR (Pt. 151) 392 Supreme Court Decision. Where a deed of conveyance is said to be void or voidable and the plaintiff seeks that it be declared void, the court can only declare it to be void without setting it aside even though the plaintiff also prays that it be set aside. For it is inappropriate to set aside what is void.”
The law on lis pendens as stated above by the learned trial judge is indeed trite. There is a very long line of Supreme Court judgments affirming the law. See in addition to the cases cited above the following cases: Barclays Bank of Nigeria Ltd. v. Ashiru (1978) 6/7 SC 99 @ 124; Ogundiani v. Araba & Anor (1978) 6/7 SC 55 @ 78; Ebueku v. Amola (1988) 2 NWLR (Pt. 75) 128; Ikeanyi v. A.C.B. Ltd. (1991) 7 NWLR (Pt. 205) 626; Bangboye v. Olusoga (1996)
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27 4 NWLR (Pt. 444) 520; Bua v. Dauda (2003) 13 NWLR (Pt. 838) 657 Amaechi v. INEC (2008) 5 NWLR (Pt. 1080) 227; EFP Co. Ltd. v. NDIC (2007) 9 NWLR (Pt. 1039) 216 Oronti v. Onigbanjo (2012) LPELR-7804 (SC).
It is not in dispute that the mortgaged property was sold during the pendency of this suit. It amounted to sale of a lis pendens when the propriety or maturity of the threatened exercise of power of sale of the property under the mortgage deed was being challenged by the Respondents. The Claimants/Respondents had in their Relief 13 prayed for an Order setting aside any purported sale of any of the collateral securities they provided in support of the facility accounts maintained with the 1st Defendant/Appellant. Having come to the conclusion that the sale was made lis pendens and void, the lower court was right in not setting aside a void sale as it did not exist and there was nothing to set aside. Declaring the sale void was a natural consequence of the finding of the learned trial judge that the sale was made lis pendens. See Ajuwon v. Akanni (1993) 9 NWLR (Pt. 316) 182 @ 198 B-F per Iguh JSC:
“The sale of property, the subject matter of litigation, during
the
28 currency of such litigation is by the doctrine of lis pendens void and where any conveyance and agreement is subsequently made pursuant to and in furtherance of such transaction after the end of the litigation, it would in the same vein be void. In the instant case as the conveyance, Exhibit 3 was made pursuant to and in furtherance of the 1972 sale made pendente lite it too would be void and could not operate to transfer any title to the appellant as it originated from the transaction that is void.”
The sale of the mortgaged property pendente lite did not pass any title to the 2nd Appellant as the learned trial judge was right in declaring the sale void.
Assuming however that the continuing guarantee and the mortgage deed provided by the 2nd Respondent when she was a sole proprietor covered the facility granted to the 1st Respondent, can the 2nd Respondent be held liable on them given the breach committed by the 1st Appellant? The contention of the 2nd Respondent is that by virtue of the breach of the contract for the finance facility, Exhibit A & B by the 1st Appellant, she had become discharged from any guarantee signed by her for the benefit of the 1st
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29Respondent. If the guarantee was indeed applicable, the 2nd respondent was a mere guarantor. Halsbury’s Laws of England, 4th Edition Vol. 2, at paragraph 101 defined contract of Guarantee thus.
“A guarantee is an accessory contract by which the promissor undertakes to be answerable to the promise for the debt, default or miscarriage of another person whose primary liability to the promise must exist or be contemplated.”
As rightly argued by learned counsel for the Respondents a contract of guarantee presupposes the existence of another prior contract in form of a loan undertaking which the principal debtor is primarily liable. The obligation of a guarantor to the principal creditor is secondary and will only arise upon the default of the principal debtor. Here the primary contract resulting in the secondary contract-contract of guarantee is the facility loan agreement which has a fundamental term that the 1st Respondent be insured. The 1st Appellant failed to insure the 1st Respondent; the breach of that fundamental term discharged the 2nd respondent from her obligations under the continuing guarantee. In the case of GUPARA SEC. & FIJN LTD. V. T.I.C. LTD. (1999)
30 2 NWLR (Pt. 589) 29 at 46-47 cited by the Respondents, the Court of Appeal restated the principle guiding the liability and discharge of a guarantor thus:
“A guarantee will only extend to a liability precisely answering the description contained in the guarantee. And the onus is upon the creditor to show that the surety consented to any alteration. But the surety can afterwards ratify his liability, though the principal contract has been varied or only partially performed. It must always be recollected, said Lord Westbury in BLEST v. BROWN in what manner a surety becomes bound. You bind him to the letter of his engagement. Beyond the proper interpretation of that engagement you have to hold upon him. He receives no benefit and no consideration. He is bound, therefore merely according to the proper meaning and effect… if the written engagement be altered in a single line no matter whether it be altered for his benefit, no matter is no longer that for made, he has a right to say the conduct is no longer that for which I engaged to be a surety you have put an end to the contract that I guaranteed and my obligation is at an end.”
I agree with counsel for the
31 Respondents that the 1st Appellant unilaterally expanded or altered the obligation of the 2nd respondent by having her collaterize and guarantee an uninsured risk as against an insured facility loan agreement which she guaranteed the financing bank. Another major hurdle was that the contract of guarantee was undated and was not witnessed. In respect of that anomaly, the trial court observed at page 300 of the printed record:
“Again Exhibit S, the continuing guarantee signed by the 2nd Claimant is undated and unwitnessed as required by law and for it to be binding and enforceable. Being undated it is difficult for the court to ascertain when it was actually made. Whether before 1989 when exhibit CC was made or in 1998 and 1999 when Exhibit A and D were made. Same is hereby discountenanced. It is the law that a Court does not speculate on the content of documents not before it.”
In the case of G.S. & D. Ind. Ltd. v. NAFDAC (2012) 5 NWLR (Pt. 1294) 511 at 538 para H, the court held that it is trite that an unsigned and undated document is a worthless piece of paper that has no evidential value in law. It referred to the cases of Amizu v. Nzeribe (1989) 4 NWLR
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32 (Pt. 118) at page 755 and Tsalibawa v. Habiba (1991) 7 NWLR (Pt. 174) at Page 461. The contention of learned counsel in his reply on law that a continuing guarantee need not be dated does not represent the law. Even if it is a continuing guarantee, the date the document was actually made ought to be indicated for authenticity.
Learned counsel for the Appellants is right in his contention that the issue of the continuing guarantee and the mortgage deed being void were not raised by the parties and that the learned judge while he may raise the issue suo motu ought to have invited the parties to address him on it before determining the issue. I agree with respect that the learned trial Judge erred in that regard. However what the Claimants/Respondents prayed for in Relief 6 of their prayers is AN ORDER granting relief from forfeiture of Plaintiff’s mortgaged properties aforesaid and releasing/discharging the 2nd Plaintiff’s personal guarantee and mortgagor’s obligations to the 1st Defendant to avoid clogging 2nd Plaintiff’s equity of redemption; which relief was in fact rightly granted by the lower court.
I have perused the grounds of appeal in the amended Notice of
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33Appeal, learned counsel for the Respondent is right that there is no ground of appeal challenging the dismissal of the counterclaim and the decision of the court that there was a fundamental breach of contract. However, I shall go ahead to deal with the issues. The claims of the Defendants/Appellants as plaintiffs in the counterclaim are as follows:
?(i) The 1st Plaintiff claims the sum of N80 Million being the total balance due and outstanding from the Defendants to the 1st Plaintiff as at 31st December, 2000 arising from credit facilities granted the 1st Plaintiff to the 1st Defendant and guaranteed by the 2nd Defendant, which sum has become due but remains unpaid by the Defendants in spite of repeated demands.
(ii) Interest in the said sum of N80 Million at the rate of 25% per annum from 1st January, 2000 till final payment.
(iii) A declaration that the sale of the property situate at No. 13, Oremeji Street, Alimosho, Agege by the 1st Plaintiff to the 2nd plaintiff is legally valid and subsisting.
(iv) An order that the Defendants shall surrender physical possession of the said property at 13, Oremeji Street, Alimosho, Agege Lagos to the 2nd Plaintiff
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34 forthwith.
(v) An order that the Defendants shall surrender forthwith to the 1st Plaintiff physical possession of the property situate at 3, Ogunbowale Street, Alimosho, Agege, Lagos.
(vi) An order of perpetual injunction restraining the Defendants, by themselves or their servants, agents and/or privies from continuing to occupy, collecting rent, exercising any rights or doing anything whatsoever in respect of the properties situate at 13, Oremeji Street, Alimosho, Agege and 3, Ogunbowale Street Alimosho, Agege, Lagos.
In view of the grant of reliefs 1-7 in the Respondents’ amended writ and amended statement of claim, reliefs (iii) – (vi) of the counterclaim above are bound to fail. The learned trial Judge was right in dismissing them. With respect to reliefs (i) and (ii), the Court has also held in the main claim rightly in my view that out of the N80 Million claimed, the 1st Appellant must be held responsible for the consequence of its failure to take out a proper insurance on the risk of fish spoilage as agreed by the parties. It could not therefore pass on to the Respondents the N35 Million resulting from fish spoilage which claim the 1st Appellant had presented
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35 to the insurance company but was rejected by the company for defaults ascribable to no other than the 1st Appellant. In respect of the balance outstanding, there was no evidence presented to the court by way of proper statement of account to show how the balance and interest was arrived at. In WEMA BANK PLC. V. OSILARU (2008) 10 NWLR (PT. 1094) 150 referred to by the Respondents, a Counter-claim entered for a bank in a similar suit of the trial Court was reversed on appeal. It was held at page 180 A-F per OKORO JCA citing the cases of HABIB NIG. LTD. V. GIFTS UNIQUE (NIG.) LTD. (2004) 15 NWLR (Pt. 896) 405 and YESUFU V. AFRICAN CONTINENTAL BANK (1981) NSCC 36 that:
“It is not the duty of the court to embark on a voyage of discovery. In the instant case, it was not sufficient for DW1 to dump the statement of accounts on the court without explaining clearly the entries therein particularly since the debt is constituted by interest charged after the final demand notice….
His lordship then concluded at paragraph E as follows:
“By Section 38 of the Evidence Act, entries in books of accounts, regularly kept in the course of business art (sic) relevant whenever they refer
36 to a matter into which the court has to inquire, but such statements shall not alone be sufficient evidence to charge any person with liability.”
I am of the view that the learned trial judge in considering the counterclaim was rather too general in his consideration of the arguments raised in the briefs and did not condescend on them specifically. For example, in the Claimants’ final written address, their counsel A.J. Owonikoko Esq. at page 282 of the printed record observed as follows:
“4.58. We beg to submit that the success of the Claimants’ claims in this action is fatal to the success of the counter claim. All that learned counsel for the defendants urged in support of the six distinct heads of reliefs set out in paragraph 15 of their counter claim was alleged admission by the Claimants. See paragraphs 4.40 – 4.44 of the Defendants’ final written addresses.
4.59. With the greatest respect, the learned counsel’s submission is grossly misconceived. The Claimants filed a copious Reply and Defence to the Counter-Claim and led evidence in support thereof. A lot of evidence was also elicited from the Defendants’ witnesses under cross-examination in proof of the
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37 defence to the counter claim. The law is trite that a Defendant can rely on evidence of the Claimant’s witnesses which support his case and vice versa.
4.60. Furthermore, admission of a general nature by an adversary will not relieve a Claimant of the proof of his case founded upon documents, where only the tendering of such documents will enable the court to interpret and find for the party tendering it in proof of his case. See [26] ASAFA FOODS FACTORY V. ALRAINE (2002) 12 NWLR (PT.781) SC 353 at 370-371 paras H-B.
“…….there are circumstances in which documents are pleaded and although admitted by the other party, will need to be tendered in evidence in order for the court to be aware of their contents and to give them proper interpretation. In such situation, a party relying on the effect of such documents must not be content with the admission of the other party. He must go further to prove their contents and this is best done by producing the documents themselves or secondary evidence of them”.
In this case, the Claimants/Respondents did not admit owing any sum. They admitted that a finance facility was being enjoyed and that the facility was being managed
38 by the 1st Appellant in their head office but serviced by the Respondents through their current account on which overdraft facility was also created. This cannot by any stretch of imagination be interpreted as admission by the Respondents that they owe the 1st Appellant N80 Million. The facility was not disbursed to the Respondents. It was used to open an LC for the frozen fish imported. The parties agreed that repayment on the facility was being effected as at and when due up until March 1999. How much was paid out of the facility and how much was outstanding? It is only a full statement of account that can creditably show how much is outstanding. The 1st Appellant tendered only the statement of account in respect of the current account and interest statement of account without the principal sums outstanding managed at the head office of the 1st Appellant, and worst of all limited to the year 2000 when the facility had expired and when this suit was already pending in court. How then does the 1st Appellant expect the trial court to accord the statements probative value? The learned trial judge rightly dismissed the counterclaim in its entirety. The issue is
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39 resolved against the Appellants.
ISSUE TWO:
WHETHER THE LEARNED TRIAL JUDGE RIGHTLY AWARDED COST IN THE MAIN SUIT AND THE COUNTERCLAIM RESPECTIVELY? (Ground 2)
APPELLANTS’ ARGUMENTS:
The Appellants’ counsel argued that the award of the cumulative sum of N600,000 (N350,000 on the main claim and N250,000 on the Counter-Claim) is arbitrary. Counsel submitted that it was not on record that the Respondents asked for cost. He argued that since the Respondents did not make a formal request for cost, the court not being a Father Christmas cannot grant cost. He cited the cases of INTEGRATED TIMBER AND PLYWOOD PRODUCT LTD. V. UNION BANK OF NIGERIA PLC. (2006) 12 NWLR (PT. 995) 483 SC; JULIUS BERGER V. NWAGWU (2006) 12 NWLR (PT.995) 518 CA; EKE V. OGBONDA (2006) 18 NWLR (PT. 1012) 506 SC.
RESPONDENT’S ARGUMENTS:
The respondents’ counsel however contended that the award of cost is purely at the discretion of the court and not the parties. He submitted that it is not the requirement of the law that since the Respondents did not specifically ask for cost, the court’s discretion to award cost will not be exercised as cost is statutory under the law. He cited Section 122(2)(m),
40 Evidence Act: Order 49 Rules 1(1) & (2) and 6 of High Court of Lagos State (Civil Procedure) Rules, 2004 and the cases of ADELEKUN V. ORUKU (2006) 11 NWLR (PT. 992) 62; OLOKUNLADE V. SAMUEL (2011) 17 NWLR (PT. 1276) 290
RESOLUTION:
The law is trite that cost follows event and the Courts are empowered by the Rules to award cost. See the case of NNPC v. CLIFCO NIG. LTD. (2011) LPELR-2022 (SC); MUDUN & ORS. V. ADANCHI & ORS. (2013) LPELR-20774 (CA); OLOKUNLADE V. SAMUEL (2011) 17 NWLR (PT. 1276) 290.
It is at the discretion of the court to award cost. The ultimate requirement is that such discretion must be exercised judicially and judiciously. In the case of NNPC v. CLIFCO NIG. LTD. (supra) Rhodes-Vivour, J.S.C. 26 paras E-G postulated:
“The award of cost is entirely at the discretion of the court, costs follow the event in Litigation. It
41 follows that a successful party is entitled to costs unless there are special reasons why he should be deprived of his entitlement. In making an award of costs the court must act judiciously and judicially. That is to say with correct and convincing reasons. See Anyaegbunam v. Osaka (1993) 5 NWLR Pt. 294 p. 449 Obayagbona v. Obazee (1972) 5 SC p. 247”
Thus, since cost follows events in litigation, a party need not ask for cost before it can be awarded. That is why it is at the discretion of the court. Whether or not the award of cost is arbitrary is dependent on the peculiarity of each case. The only circumstance under which an appellate court will interfere with the award of cost is when such award is so high or low that there was an entirely extraneous estimate of damages. See OGUNSAKIN V. EDU LOCAL GOVT. AREA KWARA STATE & ORS. (2011) LPELR-8816 (CA)The Court awarded N600,000 to the Respondents- N350,000.00 in the main suit and N250,000.00 in the counterclaim. The award is supported by law because the counterclaim is a separate suit from the main claim. The award of cost is completely a matter within the discretion of the trial judge as cost follow events.
42There is nothing in the circumstances of the case to suggest that the cost is extremely too high justifying interference by this court. This issue is also resolved against the appellants. Having resolved the two issues in this appeal against the appellants, I hold that the appeal lacks merit. The judgment of the lower court is affirmed. I make no order as to costs.
UZO. I. NDUKWE-ANYANWU, J.C.A.: I had read in draft form the judgment just delivered by my learned brother Chinwe Eugenia Iyizoba, JCA.
The issues identified by the parties have been painstakingly resolved in the lead judgment, I cannot expatiate further.
I dismiss this appeal and abide by all the consequential orders contained therein including that as to costs.
JAMILU YAMMAMA TUKUR, J.C.A.: I agree.
Appearances
OLAOLUWA E. ALE DANIEL ESQ WITH GIBSON ELUMELU ESQ AND TOPE DAVID
FOR APPELLANTS
A. J. OWONIKOKO SAN WITH LADY E. UDUJI, T.T.P. OLATUNDE FASOGBO (MRS) AND LINDA EMANOR (MS)
FOR RESPONDENTS
43
Appearances
Olaoluwa E. Ale-Daniel Esq. with Gibson Elumelu Esq. and Tope DavidFor Appellant
AND
A.J. Owonikoko SAN with Lady E. Uduji, T.T.P. Olatunde Fasogbo (Mrs.) and Linda Emanor (MS)For Respondent
