Best (Nigeria) Limited V. Blackwood Hodge (Nigeria) Limited & Ors. (1998)
LawGlobal-Hub Lead Judgment Report
PATS-ACHOLONU, J.C.A.
The appellant went to court based on a contention that the 1st respondent backed out and unilaterally breached the contract for assignment of the residue of years in a property variously described as No. 11 and 15 Burma Road, Apapa. The appellant who was the plaintiff stated that it had agreed with the 1st defendant (now 1st respondent) to sell to it the property herein before described, for the sum of N3 million with an agreement to pay the withholding tax. It further stated that a receipt ‘No. 5980 was issued on 13/6/86. The payment was made on 4/6/86. On the full payment of this money, the 1st respondent, it was alleged, promised to do all that is necessary to obtain the governor’s consent for the actualization of the contract agreement. However, surprisingly on 16/7/96. Messrs Osagie Okekc and Otegbola, the 2nd defendant, wrote and informed the appellant that the firm (apparently agent of the 1st respondent) had previously agreed to assign the property to someone else who turned out to be the 3rd respondent. However, it transpired that the 3rd respondent paid the balance of the money after be paid the deposit of N1 million in 1985. When the appellant warned the 1st respondent about the consequences of its act in dribbling it and not abiding by terms of the agreement and got no favourable reaction indicating that it was not ready to budge from its standpoint, which was that it stood by a sale to the 3rd respondent, it was forced to issue a writ of summons after the 1st defendant returned its money with interest.
The 1st defendant in its pleadings while agreeing that it was negotiating with the appellant for the purchase of its property and admitting having received money from it said that the cornerstone of the sale, that is to say, that it was a condition precedent that any purchaser of the property should pay the withholding tax of N450,000.00. On the payment and receipt of the money of the appellant and inspite of the appellant having promised to pay the withholding tax after which the letters of consent would be lodged with the governor, no such payment was made. The appellant was silent in this important ground when contacted, it alleged. The 1st respondent alleged that the appellant was very much aware that there was a prior intending purchaser who bad made an advance payment as far back as 14/6/85 and that negotiation had only been entered between it and the appellant because the 3rd respondent could not perform the conditions of sale. Therefore it did not hold itself bound to the appellant when nothing was done about the withholding tax particularly as it brought up the subject mailer several times to it. The 1st agreement to sell the property, it pointed out, was made as far back 1985 when its agent the 2nd respondent made a move to sell the property, and it was bound by the acts of his agents. The 3rd respondent averred that he bought the property through the agents of the 1st respondent for the sum of N3.5 million. He now enjoys the occupation of the property by virtue of a valid contract and he counter-claimed for a declaration that he is entitled to be registered as the proprietor of the property, and for perpetual injunction.
After hearing evidence of the parties and their witnesses, the court below held inter alia as follows
“In contracts for the sale of an interest in land, it is the almost invariable practice for the parties to strike a bargain but to make it clear that they do not intend to enter into a binding contract until a formal agreement has been drawn up by their solicitors. Such an intention is commonly indicated by the parties expressly making their agreement ‘subject to contract’. Where an agreement is made in the above mentioned circumstances, even a signed written offer, prima facie, cannot be accepted so as to conclude a binding contract, the reason being that the offeror clearly does not intend to be bound at this stage. I must however make reference to three exceptional cases. First, where both parties employ the same solicitor it may be that no exchange of contracts is possible, in which case the contract may come into existence when signed – Smith v. Mansi (1962) 3 All E.R.857. Secondly, where the document amounts to a deed, it takes effect on ‘delivery’ and not on exchange – Vincent v. Premo Enterprises (Voucher Sales) Lid. (1969) 2 Q.B. 609: D’Silva v. Lister House Development Ltd (1971) Ch. 17; (1970) 1 All E. R. 858. Thirdly, it is quite competent for the parties to remove the ‘subject to contract’ or other suspensive condition, with the result that there is from that moment a binding provisional agreement – Griffiths v. Young (1970) Ch. 675; (1970) 3 All E.R. 601; or for them to agree on a new ‘open contract’ – Law v. Jones (1973) 2 All E.R. 437.”
He then gave judgment to the respondent. Being dissatisfied with the judgment of Segun, J., the plaintiff filed 7 grounds of appeal from which the counsel for the appellant framed 8 issues (this is a case in which more issues were formulated from fewer number of grounds of appeal.I shall set down the issues put as questions in controversy to be determined by the court:
i. Was there a valid contract as between the plaintiff (the appellant herein), and the 1st defendant (the 1st respondent herein), for the assignment to the plaintiff by the 1st defendant of the lease of the property at No. 15 Burma Road, Apapa, in the Lagos State of Nigeria, enforceable in equity by an order for specific performance?
ii. Was there such a contract subsisting between the 1st defendant and the 3rd defendant acting through the 2nd defendant on the 3rd of June, 1986, when negotiations between the plaintiff and the 1st defendant had been finalized or at all?
iii. Was the learned trial Judge not in error in refusing to make the order for specific performance in favour of the plaintiff in the light of the evidence before him?
iv. In the circumstances of this case, would not the end of justice have been met by the application of the doctrine of substantial justice?
v. Was the 2nd defendant agent for:
(a) the 1st defendant
(b) the 3rd defendant; or
(c) the agent for both the 1st and 3rd defendants?
vi. Was the 3rd defendant an innocent purchaser for value without notice?
Vii. Costs, no doubt, are in the discretion of the court, but as cost follow the event, should not an award of N75,000.00 carry some costs or for the very breach of the contract itself?
viii. Did the learned trial Judge fully evaluate the evidence adduced by all the parties? Did he put them on the imaginary scale of justice to see which side preponderated?
The 1st respondent/cross-appellant framed the following issues:
3.1 Whether on the evidence accepted by the learned trial Judge the appellant proved that there was a valid and enforceable contract between the 1st respondent/cross-appellant and that such did not exist between the 1st respondent/cross-appellant and the 3rd respondent.
3.2 Whether in the circumstance of this case an order or specific performance should have been made in respect of sale of the property in question.
3.3 Whether the 3rd respondent was a bona fide purchaser for value without notice.
3.4 Whether the 2nd respondent was the agent of the 1st respondent or of the 3rd respondent.
3.5. Costs.
After carefully x-raying the various issues set out by either party, I am of firm view that the issues formulated by the 1st respondent (4 in all), and apparently supported by the 3rd respondent, show distinctly the questions to be determined by the court.
As between appellant and the 1st respondent/cross-appellant From the evidence adduced, it is to be seen and noted that quite apart from the purchase price of N3,000,000 the Is1 respondent had insisted on the payment of N450,000.00 consent fee i. e. the withholding tax. In his evidence, Mr. Tarachand Utoomal Punjabi testified on the matter of payment of the withholding tax as follows:
“I asked him if he could pay the withholding tax and we refund it to him later …. He said it was it was difficult and he would place that before the Board.”
Then he paid 1.5million naira deposit and he was told that whichever potential purchaser paid first would get the property. Continuing he said,
“On 4/6/86 I paid the full amount of N3,000,000.00 and the former cheque of N1.5 million was returned to me. Fraser-Allen i. e. (the Managing Director of the 1st respondent company) repeated to me again after full payment that my company would be responsible for the withholding tax and j agreed to that.”
The question then that would normally arise is whether the sum of N450,000.00 was at any time paid, I shall come to this later. Mr. Michael Fraser-Allen for the 1st respondent from his evidence informed the court that his company started dealing with the 3rd respondent through the 2nd respondent, its agent. According to him, he told the appellant at the early stage of negotiation that his company had had an offer of N3,5 million although he did not mention the name of the 3rd party intending purchaser but in the process of negotiation the appellant told him that N3 million in hand is worth more than 3.5 million naira to be thereafter paid. The 1st respondent 1st witness had said that they had doubted whether the appellant had really enough money to pay the withholding fee after payment of the price. Was the payment of the consent fee of N450,000.00 condition precedent to the finalizing of the contract?
It would seem that even though the 1st respondent had given the 2nd respondent authority to sell the property it unwittingly went on to discuss the buying and selling of the property with a buyer. There is no doubt that the appellant was the first to pay the amount it agreed with the 1st respondent. The problem is the issue of non-payment of whooping N450,000.00 which the appellant never paid for reasons best known to it but which the 1st respondent alleged to be due to inpecuniousity, I shall restate the last page of a letter addressed to the 1st respondent on 27/3/86:
“We hereby authorize you to pay withholding tax in respect of the transaction on our behalf to the Lagos State Government and undertake to repay the same free of interest on or before the 31st of December, 1988 as well as secure the repayment thereof with a bank guarantee from the Union Bank of Nigeria”.
In a letter dated 16/7/86, the 1st respondent stated in clear terms that it could not continue with the agreement and the company had accepted a cheque for purchase of the property from someone who had paid N3.5 million. In a reply to this letter the appellant wrote as follows:
“It is as you are aware the beneficiary who pays the withholding tax but in the interest of good business relations my client agreed to pay same, but did not for the indulgence that you pay same on their behalf and they refund it later. One was left with impression that the Managing Director Mr. Fraser-Allen agreed to this in principle but when he referred the matter to the Board of Directors it would appear that they did not approve of it,”
The kernel of the argument of the appellant is that it was never informed that there was a third party interest. It should have confined itself to the statement of agreement with the 1st respondent i.e. whether or not it has fulfilled that condition laid down. It was no business of the 1st respondent to tell it who and who are interested. We come back to the question whether there was a firm agreement between the appellant and the 1st respondent and whether a decree of specific performance should be made, In his judgment the court below held thus:
“One of the reliefs being claimed by the plaintiffs was an order directing specific performance of the contract entered into by the plaintiff and the 1st defendant for the assignment to the plaintiff by the defendant of the residue of the lease and the right of occupancy in or over the property known as 15 Burma Road, Apapa registered as MO 5770 and dated 19th April, 1968. There can be no specific performance unless there is a complete and definite contract Gibson v. Manchester City Council (1979) 1 WLR 294. The question whether or not there is a complete contract often arises where negotiations for the sale of property have been carried on by correspondence. If the contract is subject to a condition precedent specific performance will not be decreed unless the condition has been fulfilled. In the case herein, there is a condition for the payment of the consent fee, fixed at N450,000.00 which the plaintiff should pay and which was never paid by them. Apart from this, a third party has acquired interest in the same property and this is the 3rd defendant. He is already in possession and has applied for the governor’s consent for the assignment, but for this action. He has also been paying tenement rates, water rates, advertisement fees etc. on the property and is in effective control of it. It will therefore be difficult, if not impossible for the court at this stage to order any specific performance of the contract or order all necessary inquiries to be made and accounts taken in the matter”.
In an action for breach of contract in which a claim for specific performance is made there must be a valid, solid and subsisting and enforceable contract. The contract should not be colourable or based on mere speculation or intuitiveness or guesswork. The parties must both have understood each other that they have entered into a binding contract and it is no business of the court to create or devise a new contract where none existed before. There must have been understanding between the parties of the nature of the deals between them. See Alfotrin (the owners of MV Fotini) v. The Attorney-General of the Federation & another. (1996) 9 NWLR (Pt. 475) at 634. Thus in Mrs. Florence Coker v. Gabriel Ajewole (1976) 1 NMLR p.78 the Supreme Court per Idigbo JSC held as follows:
“…a person seeking to enforce a contract must show that all conditions precedent have been fulfilled and that he has either performed or is ready and willing to perform all the terms which ought to have been performed by him ….
Again, where the plaintiff in an action for specific performance has been guilty of delay in performing his own part of the agreement, the delay will bar his claim to specific performance if either:
(a) time was, in equity, of the essence of the agreement; or
(b) if although originally time was not of the essence of contract it was subsequently made so by agreement implied or express; or
(c) if by his conduct the delay on the part of the plaintiff was such as may be regarded as evidence of abandonment of the contract.. ..”The appellant submitted that the learned trial court ought to have given judgment in the court below to the appellant on the doctrine of substantial performance. This was not claimed or addressed in the court below. What is or what denotes substantial performance depends on the nature of the contract. The doctrine of substantial performance is rooted on the severability of the obligation imposed on the plaintiff. There is no doubt that payment of the sum of N3 million is a large amount but where the seller persisted in his demand of the consent fee to paid which is part of the contract agreement and this condition was known to the appellant as he asked the 1st respondent for credit to pay the money and for the appellant to repay the sum before on or about December, 1988, it is definitely obvious that payment of the N3 million exclusive of N450,000.00 which the appellant had appeared to demur in making payment cannot be said to amount to a substantial performance. The receipt of the sum of N3 million presupposes that the consent fee would be paid. All throughout the negotiation the 1st respondent had insisted on the consent fee and is not after thought. The appellant tried through various means to waive it off but to no avail. It is important to state that at all times that the 1st respondent reserved the right to sell the property to any buyer who fulfilled the conditions of the sale. The appellant could not make the consent fee which is indeed a prerequisite condition for sale. When therefore a third party paid N3.5 million through a firm – the 2nd respondent – described by the 1st respondent as its agent, it sold the property lock stock and barrel to it. Where a party to a contract fails or shows reluctance to abide by the full terms of the contract, that act might be understood to show that it is unwilling to fulfill the obligation that would create a binding contract of sale; a decree of specific performance will not be made by the court.
In my view therefore, there was not an enforceable contract between the appellant and the 1st respondent. In Ngwu v. Nnaji (1991) 5 NWLR (Pt. 189) 18 at 34 Tobi J.C.A. stated thus:
“In determining whether specific performance must be decreed or not, the court should examine very carefully the competing interests of the parties. These are the interest of the party who wants the relief to benefit from the raw terms of the contract and that of the opponent to pay damages in lieu. In the balancing exercise, the court is exercising its equitable jurisdiction and this it must invoke to the egalitarian advantage of the parties. Let the only discrimination in the matter be the factual position which the court cannot manufacture in favour of one of the parties to the disadvantage of the other party. In determining the competing interests, the court should also take into consideration the very nature of the contract in terms of its compelling character and whether from the entire transaction, the contract could be specifically performed.”Therefore the order of specific performance should not be made. This disposes of issues No. 1 and 2 of the questions to be determined. The fourth issue was whether the 2nd respondent was the agent of the 1st respondent.
The 1st respondent in a letter to the appellant’s counselor agent written on 16/7/86 began thus:
“As you know we had originally entered into an agreement with Messrs Osagie, Okeke, Otegbola and Company whereby we undertook to assign the said lease to their client for the sum of N3.5 million net. At that time they paid to us a deposit of N1 million. As you also know their client made very little progress with the arrangements to pay the balance and it was for that reason that we entered into negotiations with your clients”,
The tone of this letter seems to denote that the appellant was at all times aware that the 2nd respondent was the appointed agent for the sale of that property. The letter, Ex. K, from the 1st respondent company to the firm of Osagie, Okeke. Otegbola & Co. can be understood to mean that for the sale of the property in question the firm was asked to find a buyer willing to pay a certain sum of money. In that letter the 1st respondent harped on the importance of getting a buyer who would make payment that will take into consideration capital gains tax. A letter from the firm to the 1st respondent, Ex. L, indicated that indeed the firm of solicitors is the agent of 1st respondent. Agency rises when one party – the principal- appoints another to stand in its stead. This is elementary. The letters show that the 2nd respondent was empowered to negotiate on behalf of the principal, the 1st respondent. Therefore, any payment which the 2nd respondent received on behalf of the principal is definitely in order. I am unable to infer, read or interpret the action of the 2nd respondent as denoting that it was agent of the 3rd respondent. The letters Exs. K and L showed in unmistakable terms that the contents are for consumption of the 1st respondent and 2nd respondent. In otherwords, these letters showed the existence of agency as between the principal and the firm of solicitors. This takes care of issue No.4. Let me address myself on issue 3. The appellant said it did not know that there was a third party in offing. It was warned early in the negotiations that the 1st respondent was prepared to sell the property to whoever fulfilled its conditions of sale. The 1st person to be contacted about the sale as between appellant and the 3rd respondent was obviously the 3rd respondent as far back as 1985 when he had made initial deposit of N1 million. In his evidence, Chief Umanah testifying said that he could not complete the amount then for 2 reasons:
(a) he was flown to London due to ill health; and
(b) he wanted a property search to be made.
In otherwords, he was the first to fulfill the condition of full purchase by the payment of money that would take care of consent fee. There is no evidence that he was aware of another negotiation between the 1st respondent and the appellant. No one, it would appear, mentioned to the 3rd respondent of any form of interest of another party in respect of that property. The court below however accepted that the evidence of D.W.1., Mr. Fraser-Allen, that the appellant was well aware of interest in the land being shown by another person who himself did not appear to have been informed of the existence of the appellant as far as the contract is concerned. That acceptance of that evidence by the trial court below cannot be faulted by this court and this court shall be very slow indeed to disregard this finding unless it is based on perverse ground. See Ladipo v. Ajani (1997) 8 NWLR (Pt.517) 356: Abdullahi v. State (1985) 1 NWLR (Pt.3) 523 at 528; Chukwueke v. Nwankwo (1985) 2 NWLR (Pt.6) 195; Mogaji Ors v. Odofin & Ors (1978) 4 S.C. 91 at 93. The respondent was ignorant of any negotiation between the appellant and the 1st respondent. But considering that I pointed out that the payment of the consent fee was sine qua non to the perfection of the contract, he performed first and bought the property with the condition attached. The appellant by its stance did not appear willing or interested to pay any further money. I do not know therefore how it could have succeeded in the action in court below.
On the issue of costs, there was a judgment against the 1st defendant i.e. the 1st respondent. Although most of the claims of the appellant were dismissed, still, the court below found that the appellant suffered some damages. Costs were probably not awarded because of the dismissal of most of the claims of the appellant in the court below.
The award of damages is difficult to explain since there was no such claim. But as the court below had made such an award, the appellant should be happy and contented with it.
On the whole, I am convinced that the court below came to the right decision that a decree of specific performance cannot be made. The appeal lacks merit and is hereby dismissed. The judgment of the court below is hereby affirmed. The appellant to pay costs of N3,000.00, N2,000.00 and N2,000.00 respectively to the 3 sets of respondents.
Other Citations: (1998)LCN/0452(CA)
