B.F.N. Limited V. Alhaji Balarabe Ibrahim (1987)
LawGlobal-Hub Lead Judgment Report
MAIDAMA, J.C.A.
This is an appeal by the plaintiff (now appellant) against the judgment of the High Court of Justice, Kano, delivered on the 7th June 1985; in which a sum of N5,250.00 (Five Thousand Two Hundred and Fifty Naira) which was less than the amount claimed by the appellant was awarded to him. In the High Court, the appellant’s claim as endorsed on the writ of summons, was for the sum of N8,739.75 (Eight Thousand, Seven Hundred and Thirty Nine Naira, Seventy- Five Kobo) being the balance of rentals in respect of a vehicle with registration No. KNA 9577 K which was let to the defendant (now respondent) on hire purchase agreement, dated 2nd of February 1977. Under clause 3 of the agreement, which was tendered and admitted as Exhibit ‘B’, it was provided inter alia –
“that the hirer shall pay to the owners on the signing of this agreement, the initial payment set out overleaf in consideration of the option to purchase hereby granted and pay the balance of the hire purchase price by monthly instalments set out overleaf to the owners at 1, Davis Street, Lagos, or such other address as the owners may direct in writing as long as the hiring shall continue…. ”
In accordance with these terms, the respondent made a deposit of N6,209.25k (Six Thousand, Two Hundred and Nine Naira, Twenty-Five Kobo) and undertook to liquidate the outstanding amount over a period of twelve consecutive monthly instalments of N1,750 on the 20th day of each month commencing 20th February 1977. Having done that, he took delivery of the vehicle and subsequently defaulted in the payment of monthly instalments for the months of February, March and April 1977. Unfortunately for him, the vehicle was in May 1977 involved in an accident and got damaged beyond repairs. Thereupon he contacted his insurers, The Lion of Africa Insurance Company – who asked him to take the vehicle to the U.T.C., the U.T.C. in turn contacted the appellant and informed them about the accident and the respondent’s claim. Later the appellant re-possessed the salvaged vehicle and sold it for N8,500.00 (Eight Thousand Five Hundred Naira) and in accordance with clause 5 of the agreement, which provides:-
“(a) ………………
(b) If the hired goods shall be lost, stolen, damaged or damaged to such an extent as to be in the opinion of the owners incapable of repair, the insurance monies payable to the owners under the said policy shall be applied in the order following, i.e.
(i) In paying to the owners the unpaid balance of the hire purchase price together with interest due in clause 4 hereof and –
(ii) In paying any surplus to the hirer.”
they also received from the insurers the sum of N3, 762.25k (Three Thousand, Seven Hundred and Sixty-Two Naira, Twenty-Five Kobo). Exhibit ‘C’ which was the respondent’s account with the U.T.C. showed a balance of N8,739.75k, after deducting the deposit paid by the respondent on signing the agreement, the salvage proceeds and the insurance claim from the Hire Purchase price of N27,211.25k. The appellant therefore asked the respondent to pay this amount but he did not do so.
It is relevant here to refer to clause 4 of the Hire Purchase Agreement which deals with the payment of rentals even if the goods hired were destroyed. Clause 4 of Exhibit ‘B’ provides:-
“During the continuance of the hearing the hirer shall –
(a) Punctually pay without previous demand all sums specified under clause 3 hereof when the same shall respectively become due and interest at the rate of 12 per cent per annum on all over due instalments until payment thereof.
(b) Keep the hired goods in good and serviceable repair and condition (fair, wear, and tear only excepted) and if the hired goods (or any part) be lost, destroyed or damaged will continue to pay the rents specified and will repair or replace the missing or damaged goods (or any part thereof) at the hirer’s cost and expense all replacements being in good repair condition and working order and of similar construction or capacity to those missing or damaged (provided always that the hirer shall not be deemed to have the owner’s authority to create a lien upon the hired goods)”.
It is in this wise that the appellant brought this action in the High Court to recover the outstanding balance. Pursuant to the order of the High Court, pleadings were filed and exchanged by the parties. In paragraphs 5, 6 and 7 of their Statement of Claim, the appellants averred as follows:-
- During the existence of the said agreement apart from the deposit made by the defendant to the plaintiff, which was N6,209.25, the defendant subsequently made rental payment of total sum of NI2,262.25 leaving the balance which is N8,739.75 unpaid despite repeated demands by the plaintiff.
The plaintiff was sending to the defendant statement of account on the said vehicle purchased from the plaintiff by the defendant on hire purchase.
(a) The defendant refused to pay the said sum of money i.e. N8,739.75 to the plaintiff or return the said vehicle.
(b) Particulars of Claim
Hire Purchase price ……………………… N27,211.25k
Deposit paid ……………………………… N6,209.25k
Rental received N12,262.25…………….. N18,471.50
N8,739.75
(c) Interest at the court rate from the date of judgment until the whole judgment – debt is liquidated.”
After denying the appellant’s averrment seriatim, the respondent also in his statement of defence counter claimed the sum of N100 as damages for the loss of earning from 24th February 1978 to the day of judgment. In this respect, the respondent in paragraphs 8, 9 and 10 of his Statement of Defence and Counter Claim averred as follows:-
- The defendant denies the content of paragraph 5 of the Statement of Claim and the defendant will prove at the trial of this case that the defendant had made a total payment of N18.471.50k and that at the time the said vehicle was involved in an accident the defendant had only the sum of N8,739.75k outstanding against him and which sum the defendant’s Insurance Company could have paid if it were not because of the plaintiff’s wrongful demand and acceptance from the defendants’ Insurers the sum of N3,762.25k as complete settlement of the accidented vehicle.
- The contents of paragraph 6 of the Statement of Claim is denied and the plaintiff is put to the strictest proof.
- The defendant denies the contents of paragraph 7 and all the particulars contained therein and the plaintiff at the trial of this case will be put to the strictest proof of the allegations contained in the said paragraph.
COUNTER CLAIM
(a) The defendant claims from the plaintiff the sum of N100 per day from the 24th of February 1978, to the day judgment in this case is delivered, this being the damages the defendant has incurred to loss of earning.”
At the trial, two witnesses testified on behalf of the appellants, their 1st witness, one Mr. Francis Adonogo, an Account Executive, resident in Lagos tendered and admitted as Exhibit ‘A’ the appellants’ certificate of incorporation and Exhibit ‘B’ the hire purchase agreement in respect of the vehicle in question. According to Exhibit ‘B’, the respondent made an initial deposit of N6,209.25 and undertook to make twelve instalmental payment of N1,750.00 on the 20th of each month commencing on 20th of February 1977. He took delivery of the vehicle hut defaulted in the payment of the instalments for the months of February, March and April, 1977. In May, the vehicle was involved in an accident and was damaged beyond repairs. A letter to that effect was received by the appellant who later re-possessed the salvage vehicle and sold it for N8,500; which amount was credited to the respondent’s account. After deducting this sum from the total amount of the hire purchase price, there was a balance of N8,739.25k outstanding in the respondents’ account. This balance was confirmed by the 2nd appellant’s witness, an account supervisor with U.T.C. who tendered and admitted as Exhibit ‘C’ the respondent’s account.
In his evidence, the respondent told the court how he approached the Director of the U. T.C. and negotiated the purchase of the tractor. After the negotiation was completed, he made a deposit of N6,209.25k and promised to settle the balance of the purchase price by twelve monthly instalments of N1,750. Having completed all the documentation, he took delivery of the vehicle and insured it with the Lion of Africa Insurance Company and Four months later, it was involved in an accident; he reported the matter to the Insurance Company and submitted his claim. The Insurance Company offered to pay him N3,762.25 which he rejected. He admitted that he did not pay ten instalments to the U.T.C. and finally he stated that he was earning about N3,000 per month before the accident.
At the close of the hearing, both counsel who appeared for the parties addressed the court. In his address, learned counsel for the respondent Mr. Yaro, relying on the cases of Bentworth Nig. Ltd v. Sani Bakori (1973) NNLR 50; Bentworth Finance Ltd. v. Salami (1968) NCLR 102 contended that the agreement Exhibit ‘B’ had been frustrated because of the damage, and therefore, urged the court to dismiss the appellant’s’ claim. Responding, learned counsel for the appellant, Mr. Offiong, submitted that the cases relied upon by the respondent’s counsel are not applicable to the facts of this case. According to him, the applicable case is the case of Crusader Insurance Nig. Ltd. v. Anunike (1975) I ALL NLR 96. He therefore, urged the court to enter judgment for the appellant as claimed by him.
After reviewing the evidence adduced by both parties and considering the submissions made by the learned counsel, the learned trial judge came to the following conclusion:-
“In my opinion and in view of the evidence before me the breach of the rentals started from February 20th 1977as per Exhibit ‘B’ to April 20th 1977. Even though the accident occured in May and he plaintiff took possession thereabout, the plaintiff has not proved the exact date in May. As such it is difficult to ascertain if the defendant defaulted in May after the 20th before the accident. The instalment for three months at N1,750 each month comes to a total of N5,250. I therefore give judgment in the sum of N5,250.00 (Five Thousand, Two Hundred and Fifty Naira) in favour of the plaintiff against the defendant.”
Before arriving at this conclusion, the learned trial judge considered the question of frustration raised by the defence counsel in his address and was of the view that although, the defence was not pleaded, yet the facts of the case showed that the contract had been frustrated and relied on the case of Bentworth Finance Nig. Ltd. v. Sani Bakori cited above. According to the learned trial judge, the only difference between that case and the present one is that in the case of Sani Bakori there was no evidence of the instalment due, while in the present case, the appellants have proved that such arrears were due and this was also confirmed by the respondent himself.
It is against this decision that appellant appealed to this court and filed four grounds of appeal which read thus:-
-1. The learned trial judge erred in law and misdirected herself when she declined to enter judgment for the whole of the sum claimed by the plaintiff on the grounds that the effect of the involvement of the vehicle No. KN 9577k the subject matter of the hire purchase agreement in this suit between the defendant and plaintiff was to bring to an end the obligation to continue instalmental payment with effect from the date of the accident.
PARTICULARS
(a) The learned trial judge completely ignored terms of Exhibit ‘B’ whereunder the defendant was obliged to continue the payment of the instalments on the hire agreement whether or not the subject matter was lost, damaged or destroyed.
(b) The decision in Bentworth Finance Nigeria Limited vs. Sani Bakori 1973 Nigeria Commercial Law Reports 426 is clearly distinguishable from the present case on the grounds that in the former case the parties never contemplated the destruction loss or damage of the subject matter of the hire agreement whereas in the present case the parties contemplated such event and made provision for it.
- The learned trial judge erred in law and misdirected herself when having held that the issue of frustration of the contract of hire was not pleaded by the defendant proceeded to disallow part of the plaintiffs claim on the basis of frustration of the hire agreement.
- The learned trial judge erred in law and misdirected herself when she failed to note that even if the principle of frustration could have applied in this case it was completely excluded by the terms of the hire purchase agreement in this case.
- Part of the judgment appealed against was unreasonable and cannot be supported having regards to the weight of evidence.”
In compliance with our rules, a brief of argument covering all the grounds were filed on behalf of the appellants. This brief was duly served on the respondent who failed to file any reply thereto. Also, at the hearing, of this appeal, the respondent failed to appear despite service on him with the hearing notice. As there was no reason given for his non-appearance, the court proceeded to hear this appeal in his absence. At pages 3 and 4 of the appellant’s brief, the following issues were formulated for determination:-
(a) Whether the Common Law principle of frustration can be invoked into this agreement in the face of the clear words of Exhibit ‘B’, the Hire Purchase agreement entered into by the parties particularly clause 4 which states as follows:-
During the continuance of the hearing, the Hirer shall:-
(a) Punctually pay without previous demand all sums specified under Clause 3 hereof when the same shall respectively become due and interest at the rate of 12% per annum on all over-due instalments until payment thereof.
(b) Keep the Hired Goods in good and serviceable repair and condition (fair, wear and tear only excepted) and if the Hired Goods (or any part) be lost, destroyed or damaged will continue to pay the rents specified and will repair or replace the missing or damaged goods (or any part thereof) at the Hirer’s cost and expense……………..
Whether the decision of Supreme Court in Crusader Insurance Co. Ltd. vs. Anunike (1975) A.L.R. commencing at page 33 construing an identical provision is not binding on the High Court.
QUESTIONS FOR DETERMINATION
(i) Whether it is proper for the trial judge to have entered judgment for a sum less than the amount claimed when the plaintiff had proved its case conclusively on the balance of probabilities?
(ii) Whether having held that frustration was not pleaded, it was open to the trial judge to rely on the same principle in holding that the accident of April 1977 constituted a frustrating event?
(iii) Whether the accident of April 1977 is in fact frustrating having regard to the terms of the Hire Purchase agreement entered into by the parties – Exhibit ‘B’
(iv) Whether the case of Bentworth Finance Nigeria Ltd. vs. Sani Bakori is relevant in assessing the amount owed to the plaintiff in this case?
(v) Whether the case of Crusader Insurance Co. Ltd. vs. Anunike (1975) A.L.R. Commercial page 33 is not on all fours with this case and should not have been regarded as binding on the trial court being a decision of a Superior Court of record.
The crux of the appellant’s argument is that since frustration was not pleaded as a defence, the learned trial judge ought not to rely on it. He cited the cases of Overseas Construction Co. (Nig) Ltd. v. Creek Enterprises (Nig) 1 Ltd. and Anor. (1985) NWLR Part 13 at 409; Adeniji v. Adeniji (1972) 4 S.C. 10; George & Ors v. Dominion Flour Mills Ltd. (1963) 1 ALL NLR 71 at 77. He further submitted that the learned trial judge was wrong in holding that the decision in the case of Crusader Insurance vs. Anunike cited (supra) is not applicable. He submitted that although, the facts are different, yet the ratio of the decision is applicable and binding on the trial court. Therefore, the destruction of the vehicle did not constitute the discharge of the obligation imposed upon the party by virtue of the hire purchase agreement Exhibit B. He cited the case of Tsakiroglou & Co. Ltd. v. Noblee Thorl (1962) A. L. 93 at 118-119; Davies Contractor Ltd. vs. Freeham U.D.C. (1956)
A.C. 696 at 721-723; to show that if parties to a written contract have expressly provided for a given situation, they are bound by the clear words of the contract. Therefore, in the face ‘of an express provision that destruction and damage notwithstanding the parties are still bound to honour their obligation in the agreement. In his submission, learned counsel distinguished the case of Sani Bakori from the present one by submitting that frustration was specifically pleaded in the case of Sani Bakori, while in this it was not pleaded but only raised in the defence. He referred to a passage in the case of Crusader Insurance vs. Anunike cited (supra) where a similar situation arose and Fatayi Williams JSC (as he then was) held:-
“That in any case, the respondent did not plead frustration and it was therefore not open to the learned trial judge to countenance it, let alone consider it. However, he had based his judgment on it, we will consider its applicability to the facts of the case. Condition 6 if we may recall has made the policy free from all restrictions brought about by war. For this reason, we are not in any doubt that the learned trial judge was in error when he held that the contract had become frustrated on May 31st 1967.”
He therefore submitted that the trial judge should have found the respondent liable for the sum due notwithstanding the destruction of the subject matter. Learned counsel finally urged this court to allow this appeal and enter judgment in favour of the appellant in the sum claimed on the writ of summons.
I will first of all begin with the question of whether it is proper for the learned trial judge to have entered judgment for a sum less than the amount claimed when the appellant had proved its case conclusively on the balance of probabilities. From the facts of this case, it is common ground that a purchase agreement – Exhibit ‘B’ – in respect of the vehicle registered KNA 9577k, had been entered between the appellant and the respondent. It is not also in dispute that the respondent, having signed the under-taking as to how he will settle the balance of purchase price, collected the vehicle; this vehicle was subsequently involved in an accident as a result of which it was damaged beyond repairs. The respondents’ account which was maintained by the U.T.C. showed that there was an unpaid balance of N8,739.75k (Eight Thousand Seven Hundred and Thirty-Nine Naira, Seventy-Five Kobo). The question now is whether the appellant is entitled to recover this amount from the respondent. In his pleadings, the respondent in answer to the appellant’ a paragraph 5 of the Statement of Claim admitted in paragraph 8 of his Statement of Defence and Counter Claim that, “at the time the said vehicle was involved in an accident, the defendant had only the sum of N8.739.75k (Eight Thousand. Seven Hundred and Thirty-Nine Naira, seventy-Five Kobo) outstanding against him which sum the defendant’s insurance company could have paid if it were not because of the plaintiffs wrongful demand and acceptance from the defendant’s insurers the sum of N3,762.75k (Three Thousand. Seven Hundred and Sixty-Two Naira, Seventy-Five Kobo) as complete settlement of the accidented vehicle.”
The law is well settled that where a defendant admits a fact in dispute by his pleadings, the fact is taken as established therefore, there will be no need to prove the agreed fact. See Chief Akparaeke & Ors. v. Egbuonu & Ors (1941) 7 WACA 53 at 55 where it was held:-
“But before leaving the matter, we think it desirable to point out that in our view, the learned trial judge was wrong to go into the question of whether the land now in dispute is the same as that in dispute in the Uruala Native Court in 1933 and to find that identity was not proved.
The identity was one of the agreed facts in the case, it was relied upon by both parties in their pleadings and since one of the objects of pleadings is to shorten proceedings by ascertaining what facts are agreed so that evidence need not be led to prove them, the court should have accepted this agreed fact as established without proof.”
See also the case of Akinlaye vs. Bello Eyinlola (1968) NMLR 92 at 95. On this principle, the learned trial judge should have entered judgment for the appellant for the whole amount claimed.
The next question is whether the Common Law principle of frustration can be invoked into this agreement in the face of the clear words of Exhibit ‘B’. At Common Law, where the performance of a contract becomes impossible after its formation due to certain causes, the contract is said to have been frustrated. One of such causes is the destruction of the subject matter of the contract, Lord Goddard, in the case of Tatem Ltd. v. Gomboa (1939) 1 K.B. 152 has this to say:-
“If the formation of the contract goes either by the destruction of the subject matter or by reason of such long interruption or delay that the performance is really in effect a different contract and the parties have not provided what in that event is to happen, the performance of the contract is to be regarded as frustrated.”
Another example of discharging a contract by frustration is where there is a significant change in the obligation, to the extent that a thing undertaken would if performed, be a different thing from that contracted for. See the case of Krell v. Henry (1903) 2 K.B. 740 where the plaintiff had agreed to let a room to the defendant for the purpose of viewing the coronation procession of Edward VII, it was held that the cancellation of the procession owing to the illness of the King discharged the parties. This proposition however, does not include a situation where the parties to a contract have made adequate provision for the contigency in which case, the parties are bound by the clear words of their contract. See the case of College of Medicine v. Adegbite (1973) 5 S.C. 149.
In the present case, the hire purchase agreement Exhibit ‘B’ contained a clause which provides:-
“4. (a) ……………………….
(b) Keep the hired goods in good and serviceable repair and condition (fair, wear and tear only excepted) and if the hired goods (or in part) be lost, destroyed or damaged will continue to pay the rents specified and will repair or replace the missing or damaged goods (or any part thereof) at the hirer’s cost and expense.”
It is obvious that by inserting this clause, the parties have foreseen the possibility of the destruction of the property, while the agreement is in force and therefore made provision for it. The respondent is therefore bound by the clear words of the contract. This is exactly the situation in the ease of Crusader Insurance v. Anunike (1975) 1 ALL NLR 96 more especially at page 103 where Fatayi Williams JSC (as he then was) said:
“In our view it is this condition which the defendant company with justification if we may say so, has invoked in the case in hand, and we are therefore unable to see how the question of frustration due to the civil war ever came into it. In any case, the plaintiff did not plead frustration and it is therefore not open to the learned trial judge to countenance it, let alone consider it. However, as he has based his judgment on it, we will consider its applicability to the facts of this case. Condition 6, if we may recall, has made the policy free from all restrictions brought about by war. For this reason, we are not in any doubt that the learned trial judge was in error when he held that the contract had become frustrated on 31st May, 1967.”
It is my view therefore, that the accident in the present case did not frustrate the hire purchase agreement Exhibit ‘S’. The case of Sani Bakori which was cited by the learned counsel for the respondent and relied upon by the learned trial judge is not applicable to the facts of this case. For this reason, the defence of frustration even if pleaded would not apply.
In the circumstance, this appeal succeeds on all grounds and it is hereby allowed. The judgment of the High Court dated 7th of June 1985, awarding the sum of N5,250.00 (Five Thousand, Two Hundred and Fifty Naira) is hereby set aside and in its place is substituted a judgment for the sum of N8,739.75k (Eight Thousand, Seven Hundred and Thirty-Nine Naira, Seventy-Five Kobo). The appellant is entitled to costs of this appeal which I assess at N250.00.
Other Citations: (1987) LCN/0038(CA)
