Chemical and Allied Products Plc V. Vital Investments Limited (2006)

LawGlobal-Hub Lead Judgment Report

OGUNBIYI, J.C.A.

This is an appeal against the judgment of the High Court of Lagos State. Coram: Silva, J., delivered on the 28th day of September, 1999 in suit No. LD/2206/96. The respondent was the plaintiff at the lower court and claimed against the appellant as the defendant a total sum of N15,923,250.00 (fifteen million, nine hundred and twenty-three thousand, two hundred and fifty Naira) with interest at the rate of 6% per annum from the date of judgment until the final sum is fully repaid.

Briefly, the facts of this case are as follows:- The appellant and respondent are limited liability companies incorporated in Nigeria, carrying on business respectively at No. 24 Commercial Road, Apapa and 92 Ikorodu Road, both in the Lagos State of Nigeria.

The case for the respondent at the court below was that on the 14th and 15th July, 1995, it supplied some chemicals worth N21.9 million (twenty one million, nine hundred thousand Naira) to the appellant at the appellant’s request under two local purchase orders (L.P.G.) Nos. 5258 of 10th July, 1995 and 5255 of 7th July, 1995, (exhibits 1 and 2). The respondent contended that the LPG’s were revalidated replacements for the ones earlier issued to it, vis LPG’s No. 4745, 4750 and 4754 marked exhibits 3, 3A and 3B respectively.

The respondent contended further that under the terms of the contract, the appellant was to pay the full value of the goods to the respondent within 30 days of delivery, but contrary to the payment terms, the appellant did not complete payment until 12th April, 1996, a period of eight months beyond the due date. The respondent averred in the circumstance that it sourced the funds for the execution of the contract from a financial company, one Summit Finance Company Limited to the knowledge of the appellant, and that under the terms of the finance facility, it was liable to pay a penalty charge of N1,135,750.00 (one million, one hundred and thirty-five thousand, seven hundred and fifty Naira) per month in the event of delay in repayment of the facility. The respondent alleged that it could not repay the loan due to the default of the appellant to pay within thirty (30) days of delivery. Consequently, the respondent therefore claimed against the appellant for the penalty charges it was surcharged by the said Summit Financial Company Limited. By its further amended statement of claim dated 29th March, 1999, evidenced at pages 12-17 of the record, the respondent therefore claimed in these terms at paragraph 24 here under:

“24. Whereof the plaintiff claims against the defendant as follows:

(a) (i) Penalty charges incurred on borrowed funds N11,243,250.00

(ii) Loss of profit on contract N 1,710,000.00

(iii) Loss of Goodwill, reputation, custom etc. N3,00,000.00

Total N15,953,250.00

(b) Interest on the total sum due at the rate of 21% per annum from August 15th, 1995 until judgment and subsequently at the rate of 6% until the entire sum is liquidated.”

In its further amended statement of defence at pages 18 – 20 of the record, the appellant denied the claims of the respondent in its entirety. In other words, it denied that exhibits 1 and 2 were revalidated replacement for exhibits 3, 3A and 3B. It further denied that it was an express condition of the contract that payment would be made within any specified time frame. It was the appellant’s contention that the parties agreed subsequently on a repayment plan by which the price of the said goods was to be paid in nine installments between 15th November, 1995 and 15th April, 1996.

The appellant also denied knowledge of any sourcing of funds from Summit Finance Company Limited or any Finance Company at all by the respondent for purpose of execution of the contract and asserted that if there was any such contract, the appellant was neither a party nor privy thereto and therefore cannot be bound by its terms which was unknown to it. It was the appellants’ contention that the respondent supplied the goods in question from its stock and averred further that the respondent did not have to import the goods purposely for the execution of the contract between the parties as alleged.

At the trial of the case, two witnesses testified on behalf of the respondent in proof of their claims, in the persons of Tochukwu Chukwuneta Orajiaku, Managing Director of the respondent and Raymond Chukwugozie Obieri, Managing Director of Summit Finance Company Limited. One Olajuwon Akinlaja, Purchasing Manager testified for the appellant, as its sole witness. These are evidenced at pages 24 – 39 of the record of appeal. There were a total of ten exhibits tendered and admitted in evidence at the trial and same which were all reproduced at pages 42 -63 of the said record.

At the end of the day and on the 28th September, 1999, the learned trial Judge after evaluating the case found in favour of the respondent wherein he granted the claim for penalty charges on the borrowed funds, and the loss of profit on the contract. The claims for loss of goodwill, reputation etc was however refused. The judgment of the lower court is at pages 85 – 89 of the record.

The appellant being dissatisfied with the said judgment has therefore appealed against same vide the notice of appeal dated 28th September, 1999. By leave of this court, the appellant has filed an amended notice and grounds of appeal encompassing additional grounds of appeal. The same is dated 26th and filed on the 27th May, 2003 and containing six grounds of appeal.

From the said grounds and on behalf of the appellant, three issues were formulated for determination and same reproduced are as follows:

(i) whether the learned trial Judge was right in holding that the appellant was aware that the plaintiff sourced for funds from Summit Finance Company Limited for procuring chemicals from abroad.

(ii) whether the learned trial Judge was correct in holding the appellant liable to pay the sum of N11,243,250.00 (Eleven million, two hundred and forty three thousand, two hundred and fifty naira) said to be penalty incurred by the respondent on funds borrowed from Summit Finance Company Limited.

(iii) whether the award of N1,710,000.00 (One million, seven hundred and ten thousand Naira) on the footing of loss of profit is justifiable in the circumstances of this case.

On behalf of the respondent, two issues were also formulated as follows:

1. Did the appellant commit a breach of the contract, between it and the respondent?
2. If the answer to question (1) above is in the affirmative, what is the measure of damages for which the appellant would be liable, or put differently: given the facts and circumstances of this case, are the awards for penalty charges incurred on borrowed funds and loss of profit on contract, made by the lower court justifiable?

On the 1st issue raised, the appellant’s counsel submitted that the learned trial Judge was not correct in holding that the appellant was aware that the respondent sourced for funds from Summit Finance Company Limited for procuring the chemicals in issue in this case from abroad. The counsel in further arguments posed two questions as follows:-

a) Was the appellant aware that the respondent sourced for funds from Summit Finance Company Limited.

b) Did the respondent sourced funds from Summit Finance Company Limited in order to procure from abroad, the chemical in issue in this case?

In answering the 1st question raised, counsel argued the absence of evidence before the learned trial Judge on how the appellant became aware as alleged, during or prior to the time it entered into the contract of supply with the respondent that the latter sourced or was going to source funds for its execution from Summit Finance Company Limited. Counsel referred to the evidence of PW1 and garnered that the said witness did not say that he disclosed to the appellant that his company, Summit Finance Company Limited had advanced or was going to advance a loan to the respondent for the execution of the L.P.O.s. That in any event, the confirmation of the genuiness of the L.P.O.s as basis upon which the facility by Summit Finance was advanced means that the contract constituted by the LPO’s had been concluded prior to the separate contract for a loan between the respondent and Summit Finance Company Limited.

On the second question posed, learned counsel argued the obvious confirmation from the documentary evidence presented before the court that the alleged said funds sourced could not have been for purposes of procuring the chemicals in issue in this case. Specific reference was made to exhibit 6 wherein the proforma invoice for the importation of the chemicals was opened on 30th November, 1994. Similarly, that the application of the respondent to purchase foreign exchange to import these chemicals form “M” were dated 8th December, 1994 and 21st December, 1994 respectively.

Accordingly, that arrangements (including relevant payments) for the importation of the chemicals were concluded even before Summit Finance Company Limited was said to have granted a facility to the respondent by virtue of exhibit 7 dated March 6, 1995. That the said facility therefore, even assuming it was granted, could not have been for purposes of importing the chemicals for which arrangements were already concluded.

Counsel in the circumstance submitted a number of significant deductions from the foregoing extrapolations. The first which showed that the chemicals, subject of exhibit 6 were not imported to satisfy any request from the appellant, especially since at the time necessary documentation for the importation were being put together, the appellant had not issued any L.P.O.s – be it exhibit 1, 2, 3, 3A or 3B to the respondent That it also supports the appellant’s contention that the chemicals supplied to it were supplied from the respondent’s stock and did not have to be specially imported for the appellant. Additionally and most importantly, counsel argued, that the strengthening evidence that the facility said to be granted to the respondent by Summit Finance Company Limited could not have been for the importation of the chemicals in issue in this case which he argued were supplied from the respondent’s stock. That the question of penalty charges included in the contract between the respondent and Summit Finance Company Limited being transferred to the appellant should not in the circumstance have arisen at all.

That the case of the appellant was that exhibits 1 and 2 are not revalidated replacements of exhibits 3, 3A and 3B, but are in themselves distinct contracts. He further contended that the two sets of exhibits are radically different in form and substance and therefore, one cannot be said to revalidate the other. That for all intent and purposes, exhibits 3, 3A and 3B were extinct once the validity dates elapsed. Counsel submitted the error by the trial Judge therefore in considering exhibits 1 and 2 as revalidation of exhibits 3, 3A and 3B. That in view of the radical differences in title, quantity, quality and prices, the latter L.P.O.s could not be a revalidation of the earlier ones.

That by equating the said exhibits, it will be seen that exhibit 7 (the letter of offer of credit facility) predates exhibits 1 and 2. That the respondent could not have purported to source funds to execute contracts four months before the award to it of such contracts, whereas the facility in question (as stated on the face of the document) is for a three months duration. That there is no nexus connecting exhibit 7 with exhibits 1 and 2. Furthermore, that the respondent did not lead evidence to show that the L.P.O.s referred to in exhibit 7 are either exhibits 3, 3A and 3B or exhibits 1 and 2. That there is nothing further in exhibit 7 that tied it to the particular LPO’s in issue in this case. That it could as well have related to any other LPO’s between the appellant and the respondent.

In response to the said issue, the learned respondent’s counsel re-echoed the testimonies before the lower court which were unchallenged and in particular, the exhibits 1 and 2 which counsel argued were clear cut. Reliance was also made to the evidence of DW 1 as well as the pleadings of parties wherein paragraph 4 of the plaintiffs’ statement of claim was clearly admitted by the defence of the delivery having been made on the 14th and 15th July, 1995. That although instalmental payment was made over a period of eight months, the appellant could not prove any agreement between both parties to this effect. That the appellant had failed to prove the existence of any agreement by the respondent to a variation in respect of period of payment. Counsel urged this court to hold that no such agreement existed, and consequent to which the appellant had committed a fundamental breach of contract. That the 1st issue ought therefore be answered in the affirmative.

For the determination of the 1st issue raised, can the appellant be said to have known that the plaintiff/respondent sourced for funds from Summit Finance Company Limited as alleged on the statement of claim?

As a preliminary consideration, it would be relevant to reproduce certain paragraphs of the pleadings by both parties. By paragraphs 3 – 9 of the further amended statement of claim for instance, the plaintiff states as follows:

“3. Sometimes between 14th July, 1995 and 15th July, 1995, the plaintiff supplied 60 metric tons of Titanium Diodide (TR – 92) and 3.75 Metric Tons of Busam 11 m2 to the defendant at the defendant’s request under two L.P.O. Nos. 5258 of 10/7/95 and 5255 of 7/7/95. These LPO’s were revalidated replacements for the ones earlier issued to the plaintiff, viz. LPO Nos. 4745, 4750 and 4754 dated 18 January, 1995, 18th January, 1995 and 19th January, 1995 respectively. The plaintiff shall rely on these LPO’s along with the letter dated 24th February, 1995 from the defendant, asking the plaintiff to execute i.e. L.P.O.s, and the plaintiffs letters dated 20th June, 1995 and 26th June, 1995 confirming arrival of the goods and seeking revalidation of the L.P.O.s. The plaintiff hereby gives notice to the defendant to produce the originals of LPO Nos. 4745, 4750 and 4754 which were returned to the defendant for revalidation and the originals of plaintiffs letters of 20th and 26th June, 1995.

On 14th July, 1995 and 15th July, 1995 the plaintiff duly delivered the said goods to the defendants. The plaintiff shall, at the trial rely on the delivery notes and invoices in respect thereof. The plaintiff hereby gives the defendant notice to produce the originals.

5. Under the terms of the contract the defendant was to pay the full value of the goods to the plaintiff within 30 days of delivery.
6. The value of the goods supplied by the plaintiff to the defendant was N21.9 million.
7. Contrary to the payment terms of the contract, which stipulated payment within 30 days, the defendant did not complete payment to the plaintiff until 12th April, 1996, eight (8) months beyond the due date.
8. The plaintiff avers that it sourced the funds for the execution of the contract from a Finance Company, namely Summit Finance Company Limited. The plaintiff shall at the trial, rely on the letter of offer of the said facility from the said company, dated March 6, 1995.
9. The defendant was at all material times aware that the plaintiff sourced the funds for the execution of the contract from the said Summit Finance Company Limited”

In response, the defendant’s further amended statement of defence at pages 18 – 19 also had this to say vide paragraphs 2, 3, and 5 – 12.

“2. The defendant admits paragraphs 2 and 4 of the amended statement of claim.

3. The defendant denies paragraphs 1, 3, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 21, 22 and 23 of the amended statement of claim and will at the trial put the plaintiff to the strictest proof thereof…
4. By local purchasing order Nos. 5255 of 7th July, 1995 and 5258 of 10th July, 1995 the defendant requested the plaintiff to supply 5 metric tons of Titanium Dioxide (TR – 92) and 3.75 metric tons of Busam 11m2 from stock.
5. The local purchasing orders referred to in paragraph 5 above which were accepted by the plaintiff were separate and distinct contract of supply between the plaintiff and the defendant and not a replacement of any local purchasing order as alleged by the plaintiff.
6. The defendant denies that it was an express condition of the contract with the plaintiff that payment would be made within 30 days of delivery or any stipulations to time of payment.
7. The defendant made payment for full value of the goods supplied by FBN cheques Numbers 04636, 05066, 05309, 905365, 05140 and 05480 variously issued and honoured before the commencement of this action.
8. In further answer to paragraphs 5, 6 and 7 of the amended statement of claim, the defendant entered into subsequent agreement that the price of the said goods should be paid by nine (9) installments spread over a period of 8 months beginning from 15th November, 1995 and ending on 15th April, 1996.
9. The defendant further avers that the said variation of payment term was in fact the idea of the plaintiff who invited the defendant to join it and work out a payment plan. The defendant will at the trial rely on the plaintiffs’ letter dated 19th September, 1995.
10. The defendant states that agreement was subsequently reached between the parties through correspondence and meetings. The defendant will at the trial rely on such correspondences, minute of meetings and particularly the defendant’s letter of 20th May, 1996.
11. The defendant denies knowledge that the plaintiff sourced the Funds for the execution of the contract from Summit Finance Company Limited or any Finance Company at all.”

It is trite law that the onus of proof lies upon him who asserts. The plaintiff in the matter at hand had the duty to adduce evidence in proof thereof of the claim laid. The court’s findings at the end of the day are determinant on the balance of probability. In otherwords, in as much as the averments on the pleadings are significant, that in itself is not sufficient a proof but same which must be substantiated by evidence. Any averment which is not therefore backed up by evidence is of no effect.

On the pleadings of parties, it is not in controversy that delivery of goods was made to the defendants on the 14th and 15th July, 1995 at the defendants’ request under L.P.O.s Nos. 5258 and 5255. This, the defendant admitted at paragraph 2 of its further amended statement of defence. One of the central bone of controversy is, while the plaintiff/respondent alleges the revalidation of the said two L.P.O.s thus replacing earlier ones issued, the defendant/appellant vehemently denied such and alleged their distinct and separate contract of supply. The question is, what is the relationship between the two sets of L.P.O.s? In otherwords, is there a nexus between the two as contended by the respondent. The burden of proving the relationship if any is upon the plaintiff who made the assertion; the proof which is dependant upon the evidence adduced before the trial court.

The plaintiff as earlier indicated called two witnesses with the evidence of PW 1 by name Tochukwu Chukwuneta Orajiaku, the Managing Director of Vital Investment Ltd. (the plaintiff) at page 27 stating this in chief:

“Exhibits 1 and 2 are replacement L.P.O.s for earlier L.P.O.s. The first set of L.P.O.s was given to us in January, 1995. There were three of these original L.P.O.s. ‘When the goods arrived at the port, I asked the defendant to revalidate the L.P.O.s … I wrote to them in this respect and after discussions with them, they issued exhibit 1 and 2 in replacement for the original L.P.O.s which they collected back and which are still in their possession … The plaintiffs delivered the goods shown on L.P.O.s 1 and 2 to the defendant.”

The three copy L.P.O.s were tendered through the witness and admitted as exhibits 3, 3A and 3B which are Nos. 4745, 4750, and 4754 respectively. Copies of the two letters dated 20/6/95 and 26/6/95 written to the defendant for revalidation of the L.P.O.s were also admitted as exhibits 4 and 4A. Exhibit 4 is in respect of L.P.O. No.4754 and the last paragraph at page 47 of the record which reads as follows:-

“We are therefore expecting a replacement LPO to enable us deliver the stock as soon as it is cleared from the wharf.

Exhibit 4A at page 48 of the record is also in respect of LPO Nos. 4745 and 4750 with the last paragraph stating as follows:

“We therefore request for replacement LPO to enable us deliver the consignment.”

It is significant to restate that the two exhibits 4 and 4A were written and signed by Orajiaku, T.C., the witness PW 1, as Managing Director to the plaintiff/respondent. The witness further stated that the defendant on taking delivery of the goods on exhibits 1 and 2, did sign delivery notes marked exhibits 5 and 5A. It is also of note to emphasize that the admission of the exhibits were without objection by the defence. At pages 28 and 31 of the record the witness further stated and said:

“The defendants were to pay for the goods 30 days from the date of delivery. The defendant did not pay within that period. They eventually started paying in installments. This was not our agreement with them. It took the defendant about eight (8) months to pay fully for the goods from the date of delivery … The plaintiff never entered into an agreement with the defendant for instalmental payment for the chemicals.”

Under cross-examination by the defence, the witness reaffirmed exhibits 1 and 2 as the subject matter of this suit. He also re-iterated the lack of agreement to pay instalmentally. The plaintiffs’ witness Raymond Chukwugozie Obieri, the Managing Director of Summit Finance Company Limited testified as PW2. At pages 33 and 34 the witness said as follows:

“I know the plaintiff. I know the defendant. The plaintiff came to Summit Finance Co. Ltd. and requested for finance to execute an order which they received from Chemical & Allied Products Plc. (the defendant). The plaintiff wrote an application to us in this respect. We were shown L.P.O.s given to them by the defendant. It was clearly stated that payment will be made 30 days after supply of the goods. Before Summit granted this facility I telephoned Mr. Ekenobi, the Executive Director, Paints of the defendant company to confirm that the L.P.O.s were genuine. There was confirmation that the L.P.O.s were genuine. We approved the facility for the plaintiff to execute the order.

I have seen exhibits 1, 2, 3, 3(a) and 3(b), They are the LPO’s which were confirmed to be genuine. The facility was granted in writing. I have seen exhibit 7. It is the letter by which the facility was granted. The facility granted was N17.5 million. The repayment term was 3 months from the date of the drawn down. The facility was drawn. The purpose for which the facility was granted was clearly stated in the offer letter exh. 7. It was for the purpose of financing L.P.O.s from the defendant. This was not the first time we were financing L.P.O.s issued by the defendant (CAPL). The plaintiff did not pay within the three months. This was because the defendant failed to pay under the terms of the L.P.O.s. Because of the default of the plaintiff in repaying the facility they will be charged interest as stated in the penalty charge at page 2 of exhibit 7. I have seen exhibit 8. It emanated from Summit Finance. The annexure to exhibit 8 is the statement of account of the plaintiff company. When the plaintiff failed to pay we became worried. I then got in touch with Mr. Ekenobi, the Executive Director paints, and complained that the plaintiff was being ruined by delayed payment. On 7th December, 1995, I received a phone call from the Managing Director of the defendant, Otunba Awofusi who invited me for a meeting which I went with the plaintiff on 11th December, 1995 at the defendant’s office, at Apapa. He told us that his, company was going through a difficult period but he assured us that the debt will be fully repaid including any resulting interest charges. We waited, but we did not get any repayment until early in 1996 when they started paying gradually. All the cheques issued to the plaintiffs by the defendant were passed to us at Summit Finance Co. I cannot now remember how many installments. At the end of the day the payment covered only the principal amount of the L.P.O.s. It did not cover the interest. We then had to write to the plaintiff to complain bitterly. The accumulated interest was about N12 million. Up to now, this has not been paid.”

Under cross-examination by the defence the witness said:

“The L.P.O.s are for chemicals for paint manufacturing.”

Under re-examination he also said:

‘The value of the LPO was N21.9 million. The facility which we granted the plaintiff was N17.5 million. The balance was to the plaintiff as profit.”

It is expedient to mention at this point that with reference to the penalty condition which is clearly spelt out on exhibit 7 at page 56 of the record, same reproduced states:

“Based on the terms and conditions on the CAPL LPO, that payment will be made within one month of delivery, there is a penalty charge of N1,135,750.00 per month or part thereof, until this facility is fully repaid.”

In response to the plaintiffs’ two witness, the defence only witness Olajuwon Akinlaja the Purchasing Manager of defendant testified as DW1 and at page 36 of the record said: “I have seen exhibits 1 and 2. They are the L.P.Os which the defendant issued to the plaintiff in July 1995. Before these L.P.O.s we had issued three L.P.O.s to the plaintiff in January, 1995. I have seen exhibits 3, 3A and 3B. They are the L.P.O.s which the defendant company issued to the plaintiff by the defendant in January 1995. There is no connection between the first set of L.P.O.s issued in July 1995 and second set issued in January 1995. None of the sets of L.P.O.s is a replacement of the other set. The chemicals ordered in the July, 1995 L.P.O.s were supplied. The defendant company did not pay in time. The reason for this is that the defendant company was in financial difficulty. It was agreed at the meeting to spread payment through (8) installments i.e. from November 1995 to April, 1996. A letter was written to the plaintiff about the payment plan.”

The letter was admitted in evidence as exhibit 10, and the witness continued and said:

“We told the plaintiff in the letter that if the payment plan is not agreeable to them, they could come and collect the chemicals and sell to other users. The plaintiff agreed to our instalmental payment plan as indicated in exhibit 10.”

Under cross-examination the witness had this further to say:

“It is true that the transactions concerned here took place in 1995 i.e. before I became the Purchasing Manager. It is true that I did not sign any of the L.P.O.s exhibits 1, 2, 3, 3A and 3B … I agree with the suggestion of counsel that the defendant sometimes revalidates L.P.O.s. I agree that the defendant company is aware that the chemicals were to be imported from abroad in view of the remarks about opening of letter of credit in the hand written note on exhibits 3 and 3A. The goods indicated in exhibits 3, 3A and 3B were net supplied by the plaintiff, I do not know why they were not supplied: … It is possible that a meeting was held between the plaintiff and the defendant and the L.P.O.s exhibits 3, 3A and 3B were revalidated … I have seen exhibit 10 which was written in May, 1996, i.e. eleven months after delivery of the chemicals. At the time that exh. 10 was written to the plaintiff, the defendant had used part of the chemicals … It is stipulated in exhibits 1 & 2 that payment was to be made within 30 days after delivery of the chemicals. I cannot say when and where the meeting at which agreement as to installment payment was reached, was held … There is no indication on exh. 10 that it was received by the plaintiff. I do not know if there was a reply to exhibit 10 … The defendant did not pay in time. By this I mean they did not pay within 30 days.” (Italics mine).

Exhibit 8 is a letter from Summit Finance Co. Ltd. to the respondent and the statement of their account which settlement of indebtedness was overdue. As a consequence of exhibit 8, the respondent wrote exhibit 9 to the appellant seeking compensation incurred on the L.P.O.s Nos. 5258 and 5255 being exhibits 1 and 2 respectively. Exhibit 10 was a purported reply to exhibit 9 by the appellant, which same alleged a meeting between parties and suggested the respondent taking back the stock. Reference was also sought to be made to an earlier letter by the respondent dated 19th September, 1995 wherein a suggestion was made as to the payment plan, supposed to have been agreed upon by both parties. It is pertinent to state that the minute of a meeting relied upon by the appellant on the agreement was neither put in evidence nor expatiated upon by any of the members alleged in attendance. There is also no evidence indicating that the letter exhibit 10 was ever served on the respondent talk less of any reply accepting the contains therein.

In my humble view and from all deductions, having regard to the evidence of DW1, it is not sufficient for him to state that there was no connection between exhibits 1 and 2 on the one hand with exhibits 3, 3A and 3B on the other. This I say having regard to the totality of the witness’s testimony especially under cross-examination that a meeting having been held for such revalidation of the L.P.O.s was very possible. By reading in between the lines, it is obvious that the evidence of DW1 is a confirmation of that by PW1 on the revalidation which was not contradicted in any material particular by the defence.

Further still and on the evidence by the defence in respect of goods not supplied on exhibit 3, 3A and 3B, it needs no far fetch answer that with the validation of the L.P.O.s, exhibits 1 and 2 had taken the places of exhibits 3, 3A and 3B. With the supply having been made on exhibits 1 and 2 therefore, exhibits 3, 3A and 3B were no longer relevant.

By the appellant alleging a meeting having been held by parties for instalmental payment, the onus had shifted onto it to prove the assertion. The law is trite that he who asserts has the burden of proof. The appellant ought to have called evidence to that effect or produce a document evidencing same. It is not enough as submitted by the appellant on his reply brief that the instalmental payment was pleaded on their further amended statement of defence. The law is trite that pleadings not substantiated by evidence go to no issue. On the evidence of the appellant’s only witness, there is no indication in proof of such allegation. The same witness who for instance sought to introduce a meeting having been held at page 36 of the record had this to say also at page 38 under cross-examination.

“I cannot say when and where the meeting at which agreement as to instalmental payment was reached, was held.”

Suffice now on the questions of revalidation of the L.P.O.s and whether parties agreed to an instalmental payment of the loan. These are mere subsidiaries to the main issue of contention. The central bone of the said issue No. 1 still remains and questions whether the defendant/appellant had the knowledge and was aware of the fund sourced for by the plaintiff/respondent from the Finance House in question.

It is pertinent at this juncture to reproduce the learned trial Judge’s findings and conclusions in his judgment at pages 87 – 88 of the record wherein he said this amongst others:

“The evidence before me establishes that the defendant is aware that plaintiff sourced for funds from Summit Finance and Company Limited for procuring the chemicals from abroad …

There is also evidence which I believe, that the defendant was aware that the plaintiff was expected to pay back the facility to Summit Finance and Company Limited within 30 days of supply, and that interests and penalty charges will be incurred if this condition was not met. This is so because the 2nd plaintiff witness stated in his evidence, and I believe him, that he got in touch with the Executive Director of the defendant company. The Managing Director of the defendant company Mr. Awofusi called him on the phone and invited him to a meeting which he attended. He said Mr. Awofusi assured him that the debt will be fully repaid including any resulting interest charges. In other words Mr. Awofusi knew that interest charges will be incurred if there is default in payment. The only witness for the defendant feigned ignorance of the existence of Summit Finance Company Limited. He agreed however that at the time of writing exhibit 10 to the plaintiff the defendant had used part of the chemicals. I then wonder how the chemicals, as supplied, can be returned to the plaintiff for resale to other users.”

Greater and relevant applicable evidence relied upon by the trial court had been reproduced per the testimonies of PW2 and DW4 (supra). The crux of the appellant’s 1st issue as re-iterated above is whether the learned trial Judge, on his findings, was right in holding that the appellant was aware that the plaintiff sourced for funds from Summit Finance Company Ltd. for the purpose of procuring chemicals from abroad.

A relevant and correlative question to also pose at this juncture is, having regard to that adduced before the lower court, can the defendant now appellant be said to have had the knowledge of the penalty charges as conclusively determined by the lower court? While the appellant vehemently denied and argued in the negative, the respondent submitted in the affirmative. The learned trial Judge’s ground of believe was centered on the evidence of PW2.

In the case of Victoria Laundry (Windsor) Ltd. v. Newman Industries Ltd. (1949) 2 KB 528, the House of Lords held at pages 539 – 540 that:

“For this purpose, knowledge ‘possessed’ is of two kinds; one imputed, the other actual. Everyone, as a reasonable person, is taken to know the “ordinary course of things” and consequently what loss is liable to result from a breach of contract in that ordinary course. This is the subject matter of the “first rule” in Hadley v. Baxendale (2). But to this knowledge, which a contract breaker is assumed to possess whether he actually possesses it or not, there may have to be added in a particular case knowledge which he actually possesses, of special circumstances outside the “ordinary course of things”, of such a kind that breach in those special circumstances would be liable to cause more loss …”

The same principle is also enunciated in the case of Koufos v. C. Czami-Kov Ltd. (The Heroni) 1969 1 A.C. 350. The position of the law is that, depending on the peculiar circumstances of each case, the parties particularly the contract breaker are presumed to have within contemplation, certain possible consequences of a breach. In the case at hand, can the appellant be presumed to know that in the event of its breach of payment, the respondent was going to be liable to the Finance House. The appellant must also be presumed to know that it is customary for a Finance House to charge interest and penalty fees for default in payment.

Furthermore and also in the case of Monarch Steamship Company Ltd. v. Karlshamns Oljefabriker A/B (1949) A.C. 196 at 224, Lord Wright stated that the test for imputed knowledge was:

“What reasonable business men must be taken to have contemplated as the natural and probable result if the contract was broken. As reasonable business men, each must be taken to understand the ordinary practices and exigencies of the other’s trade or business.”

It is very significant therefore to carefully consider the effect of the witness PW2’s evidence, which same would easily raise a question determining the time the contract of supply was entered into as well as the time the various conversations were made as evidenced in the said witness’s testimony. It is also relevant to note that at the lower court, the amended writ of summons and the amended statement of claim were taken out between Vital Investments Ltd. as plaintiff and Chemical and Allied Products Plc. as defendants all evidenced at pages 8 – 11 of the record of appeal.

At paragraph 8 of the further amended statement of claim for instance, the plaintiff said:

“18. The defendant was at all material times aware that the plaintiff sourced the funds for the execution of the contract from a Finance Company namely Summit Finance Company Limited.”

A facility letter to the plaintiff’s claim in paragraph 8 above, dated 6th March, 1995 was relied upon by the plaintiff. The terms of the facility letter was “a liability to pay a penalty charge of N 1,135,75.00 per month in default of payment of the facility”. That the defendant totally defaulted to the terms so stated as claimed by the plaintiff at paragraphs 9 – 11 of their claim and consequent to the total sum claimed. The said claim was totally denied by the defendant, who bluntly refused any knowledge of a loan from a Finance House. The two L.P.O.s, subject of the contract of supply between plaintiff and defendant were Nos. 5258 dated 10th July, 1995 and 5255 dated 7th July, 1995 which were concluded as being, in controversy as per the determination of revalidation arrived at (supra.) The said L.P.O.s are exhibits 1 and 2. As evidenced on the two LPO’s, the terms of payment stated was to be within 30 days on delivery with the contract of supplies which were concluded on 10th July, 1995 and 7th July, 1995 respectively. It is also significant to restate further that the lower court’s reason of belief and grounding its conclusion was the testimony of PW2. From the said witness’s evidence, the question to pose is whether the conversation between PW2 and the Executive Director of the defendant company is of legal effect and therefore binding on the defendant. The question is relevant because it was the very witness’s testimony that formed the basis upon which the Finance House alleged and approved the facility for the plaintiff to execute the LPO.

Exhibit 7 the letter by which facility was granted the plaintiff by the Finance House emanated from the Summit Finance Company Ltd. and written to the Managing Director of the respondent who was the plaintiff at the trial. It was dated March 6, 1995, and in respect of an offer of a “short term contract finance facility” in response to the respondent’s letter of application dated 27th February, 1995. Exhibit 8 also emanated again from Summit Finance Company Ltd. to the same plaintiff/respondent captioned “Re: overdue contract finance facility dated 22nd April, 1996” The said letter sought to attach the detailed statement of the plaintiffs’ account following the approved finance facility granted per exhibit 7.

Further reference can also be made to exhibit 9 written by the plaintiff’s Managing Director to the defendant company for the compensation on the loss sustained on the two L.P.O.s, the subject matter of claim. Exhibit 10 is a response to exhibit 9 from the defendant to the plaintiff refuting the penalty charges and the profit compensation claimed.

It is expedient to emphasize that having regard to all exhibits under reference (supra), while exhibits 7, and 8 were between the Summit Finance Company Ltd. and the plaintiff/respondent, exhibits 9 and 10 were between the plaintiff and the defendant. Consequently, exhibits 7 and 8 do not in anyway, prima facie, have connection with the defendant/appellant. As rightly submitted by the learned appellant’s counsel therefore, exhibits 7 and 8 have no nexus with exhibits 1 and 2. The stipulation in exhibit 7 regarding the penalty charges cannot in any way howsoever bear a relationship, remotely or otherwise, with the contracts constituted in exhibits 1 and 2. The onus lied squarely on the respondent to have adduced evidence of their connection or any nexus in that respect. With the evidence of PW2, tempting it might be for the plaintiff to rely thereupon, there ought to be further confirmation evidencing the knowledge of the defendant. Knowledge as restated (supra), can be actual or imputed which duty lied on the plaintiff to have proved either or both.

Having regard to the evidence of PW2 even though uncontroverted, same cannot be binding on the defendant. This is especially where the communication was between the plaintiff and the finance company. In other words, the evidence of PW2 that he personally made contact with the appellant to confirm the genuineness of the L.P.O.s cannot be regarded as knowledge on the part of the appellant of a loan and/or financial transaction or commitment between the respondent and Summit Finance Company Ltd. There was no equivocal disclosure by the witness that he did disclose to the appellant of an advanced loan or any such intention by his company to the appellant. By the confirmation of the genuineness of the L.P.O.s as a basis upon which the facility by Summit Finance was advanced, meant that the contract constituted by the L.P.O.s had been concluded prior to the separate contract for a loan between the respondent and Summit Finance Company Ltd. Further still, it is clear that the respondent already had the L.P.O.s from the appellant before it commenced negotiation for a loan with Summit Finance Company Ltd. It would not therefore be possible that the contract between the appellant and respondent (as reflected in the L.P.O.s) which was concluded even before the respondent and the alleged financiers opened negotiation, to be logical that same could have been within their knowledge, or contemplation.

The issue at stake therefore, is not only to determine whether the defendant knew of the penalty interest but also the need to substantiate when and at what point they got to know. The responsibility of proving this, rest on the respondent, who has the duty to prove. The plaintiff succeeds on the strength of his case and not the weakness of the defence. Relevant authorities in support are: Kodilinye v. Odu (1935) 2 WACA 336; Atuanya v. Onyejekwe (1975) 3 SC 161 and Imah v. Okogbe (1993) 9 NWLR (Pt. 316) 159.

From the documents exhibits 1 and 2, the L.P.O.s, it is as rightly submitted by the respondent’s counsel that a clear stipulation of payment is to be made within 30 days of delivery. It is however, also relevant to draw the said learned counsel’s attention to the fact that the exhibits 1 and 2 are contracts between the plaintiff/respondent and the defendant/appellant, which has no relationship affecting the finance house, Summit Finance Co. Ltd., who is not a privy to the contract and consequent to which no consideration was given. The issue at hand therefore is not whether or not delivery was made on the 14th and 15th July, 1995 as contemplated by the respondent’s counsel. Rather, it is whether the defendant/appellant had the knowledge of the loan alleged from the Finance House to execute the contract. The authorities of Ude v. A.-G. Rivers State (2002) 4 NWLR (Pt. 756) p. 66 and Sufianu v. Animashaun (2000) 14 NWLR (Pt. 688) p. 650 cited by the respondent’s counsel are not in controversy.

Furtherstill, I would also restate that having regard to that before the lower court, it was for the plaintiff to produce either documentary evidence or any other, confirming the knowledge of the penalty charges known to the defendant. This up hill task was not discharged by the plaintiff who, in my humble opinion, went on a wild goose chase which did not suffice as credible evidence. The appellant, as rightly submitted by its counsel and contrary to the findings by the lower court, could not by any stretch of evidence on the record before us, have been aware that the respondent sourced for funds from Summit Finance Company Ltd. The question per the 2nd leg of the appellant’s 1st issue was whether the respondent did in fact source for the funds for purpose of procuring abroad, the chemicals in issue.

The answer to this question has been adequately taken care of with the negative response to the earlier 1st question. In other words, with the second predicated on the 1st, the absence of the 1st automatically makes the 2nd non-existent.

However, and on the question of whether the appellant committed a breach of the contract between it and the respondent, recourse ought be had to the documents of contract between the parties. In this case, exhibits 1 and 2 which are binding on them. It is not in conflict that initial payment ought to have been made within 30 days of delivery which by paragraph 4 of the plaintiff/respondents claim was made on the 14th and 15th July, 1995. This averment was admitted at paragraph 2 of the defendant/appellants further amended statement of defence. DW 1 also in his testimony confirmed payment having been made outside the terms of agreement. However, and despite the failure to pay within the terms stipulated per exhibits 1 and 2, exhibit 10 is a clear variation of the terms of the initial agreement. In other words, the instalmental payments made by the appellants are squarely within the contemplation of parties. This is in view of non-controversy over the said exhibit 10 at the time it was admitted in evidence. There was also no rejection by the respondents of the various instalmental payments made to them by the appellants. By accepting the alternative mode of payment, the respondents are therefore estopped from insisting on the 30 days initially agreed upon. They cannot both eat their cake and have it.

In the circumstance therefore, the appellant’s 1st issue is resolved in its favour. In his submission on the 2nd issue, the learned appellant’s counsel challenged as incorrect, the decision by the lower court in holding the appellant liable to pay N11, 243,250,00 being penalty incurred by the respondent on funds borrowed from Summit Finance Company Limited. Learned counsel argued that L.P.O.s in this case could not have been financed by the respondent from the funds alleged to have been borrowed vide exhibit 7. Further-still, that no evidence was adduced indicating the appellant’s knowledge before issuing the L.P.O.s or at the time the contract of supply was being entered into that the respondent borrowed or was going to borrow to execute the contract; that the knowledge should therefore not be imputed to the appellant. Learned counsel argued further that the L.P.O.s in themselves represent a complete contract between the parties which did not need elsewhere to look for terms of the agreement. Cited in support was section 132(1) of the Evidence Act on the exclusion of extrinsic evidence in the interpretation of documents of this nature. A further authority is the case of Union Bank of Nigeria Ltd. v. Ozigi (1994) 3 NWLR (Pt. 333) 385 at 400.

That there was no indication on the L.P.O.s that the respondent either borrowed the money or that the appellant was going to bear the liability or responsibility accruing from non repayment of any funds borrowed by the respondent. Counsel further relied on exhibit 10 at page 63 of the record. That in the absence of any express provision on the penalty charges, it is difficult to understand on what principle the learned trial Judge could have transferred to the appellant a liability which was extraneous to the contract between the parties. A recapitulation of the reasoning by the lower court in imputing knowledge of the penalty clause to appellant at page 87 of the record was made by counsel. Also, the evidence by PW2 at page 34, which counsel argued did not show that the witness either told the Executive Director or that the latter was otherwise aware of the specific penalty charges said to have been incurred in this case. That even if the witness did tell, such a disclosure would not be of any effect, especially where same was coming well after the contract had been concluded and which can no longer constitute a knowledge attributable to the defendant, at the time it contracted as the likely consequences of any breach. That there is also no indication of exactly when the discussion took place. Counsel urged that the part of the evidence of PW2 to the effect that Otunba Awofusi assured him of full payment of the debt “including any resulting interest charges” not being pleaded, must be discountenanced as going to no issue. That parties are bound by their pleadings on the authority in the case of Ahuchaogu v. Ufomba (1998) 12 NWLR (Pt. 577) 293, 304. That Otunba Awofusi talked of the interest and not penalty charges. The assurance by Otunba, counsel argued, cannot be the basis to impute knowledge, and hence liability for payment of penalty, to the appellant. That it is clear from exhibit 9, the letter from the respondent that it was by this document, written after the appellant had repaid the debt in full, that the respondent brought to the appellant’s notice for the first time, the fact that it had entered into a credit transaction with Summit Finance Company Ltd., which had been attracting penalty charges all the while. That by the evidence of PW2 at p. 35 of the record, same had confirmed that the appellant never knew of any penalty charges at the time it contracted with the respondent. That the respondent’s two witnesses testified that negotiation for the loan was done after the LPO’s had been issued. That there was also no evidence before the court below that the appellant was a party or privy to the loan transaction between the respondent and Summit Finance Company Ltd; hence liability under that transaction cannot be transferred to the appellant under any guise. Counsel in support cited the cases of J. E. Oshevire Ltd. v. Tripoli Motors (1997) 5 NWLR (Pt. 503) 1; and Savannah Bank Plc. v. Ibrahim (2000) 6 NWLR (Pt. 662) 585, 601. That exhibit 7, the letter of offer does not mention the appellant as a party to the contract and also that the L.P.O.s themselves say nothing about the respondent having to borrow to execute them.

Learned counsel further argued that the award of damages for breach of contract against the appellant under the lead of penalty charges, do not reflect a correct application of the principles guiding the award of compensation in cases of breach of contract, as laid down in Hadley v. Baxendale (1854) Exch. 341, or the principle laid down by their Lordships of the apex court in the case of Maiden Electronics Ltd. v. Attorney-General of the Federation (1974) 9 NSCC 45, 65. Further authorities cited were Union Bank of Nigeria Plc. v. Sparkling Breweries Ltd. (1997) 5 NWLR (Pt. 505) 344, 367; Okongwu v. N.N.P.C (1989) 4 NWLR (Pt. 115) 296, and Doherty v. Ighodaro (1997) 11 NWLR (Pt. 530) 694 at 705. That penalty on borrowed funds will neither arise naturally nor was it within the reasonable contemplation of the parties at the time the contract was made herein. That the sum of N1,135,750.00 per month charged as penalty in default of payment was never in the appellant’s contemplation. Furtherstill, that even if delayed payment of the contract sum constitutes a breach of contract, which is not conceded, penalty charge on borrowed funds is too remote to be recovered from the appellant in the absence of such knowledge. Further reference was again made to the case of Hadley v. Baxendale (supra) at p. 3 54 per Alderson B.

That the obnoxious penalty clause attached constitutes a special circumstance with the respondent having to borrow to execute the contract awarded to it. That the injury alleged here do not “arise generally in a great multitude of cases not affected by special circumstances”, and which makes the circumstances in this case indeed quite special.

Furtherstill, the learned counsel re-iterated the absence of evidence before the court stating that the respondent paid the sum of N11,243,250.00 as penalty to Summit Finance Company Ltd. This he argued, is necessary to enable the respondent be vested with the locus to claim that sum from the appellant, even assuming but without conceding, that the appellant is liable for breach of contract. This assertion is in view of the testimony of PW 1 at page 32 under cross-examination where he said that the plaintiff still owes Summit Finance Company Ltd. PW2 also testified to same. That damages for breach of contract (as indeed damages generally) are awarded on the basis of actual not contingent losses or losses which have not been incurred. That it was not established before the lower court that any breach of contract occurred on the part of the appellant, hence the question of liability for such breach ought not to arise at all. Counsel therefore argued the involvement of Summit Finance Company Ltd., in this matter as only an after thought. This counsel submitted in view of the respondent having waited until the appellant had finished payment in April 1996 before it suddenly remembered that it was liable to a penalty clause and wrote the appellant on 23rd April, 1996 for the first time in respect of the matter. Furtherstill that it is safe to say that assuming in reality there was such a liability, the respondents’ letter of April 23rd, 1996 should not have been the first formal notification to the appellant of such far-reaching penalty. That this again was a confirmation that the reference to penalty charges was nothing but an after thought on the part of the respondent.

The learned counsel further emphasized that with the parties having agreed upon a repayment plan as evidenced at exhibit 10, same was outlined in graphic details, which the appellant argued had been kept and religiously followed by them. That in the absence of the respondent writing back to deny or contest the content of exhibit 10, counsel argued the legal implications as obvious.

The respondent on its brief of arguments considered the appellant’s issues 2 and 3 together. Convenience would dictate that I should also take the two alongside each other.

Appellant’s issue No.3 therefore relates to the award of N1,710,000 to the respondent on the footing of loss of profit, which learned appellant’s counsel submitted cannot be justified in the circumstance of this case. Counsel made reference to pronouncement by the lower court at page 88 of the record wherein the claim of profit by the respondent was affirmed as being within the contemplation of parties and therefore not too remote a damage to claim. The reasoning of the court learned counsel argued, gave the impression that no profit was derived by the respondent from the contract in question. The conclusion was disputed having regard to the total contract sum of N21,000,000.00 paid to the respondent, which was inclusive of profit. Reference in support was made to the case of Kyaure Construction Ltd. v. Agbana (1998) 2 NWLR (Pt.539) 581, 590. That taken for granted that profit was not included, loss of same ought not have been awarded as it was neither specifically pleaded, nor strictly proved at the trial. That in the further amended statement of claim dated 29th March, 1999; there was no attempt at particularization of how the sum claimed as loss of profit was arrived at. That the averment at paragraph 24(a) of the claim was not sufficient as the statement of claim is bereft of particulars. Further-more that neither PW1 nor PW2 gave evidence in strict proof of the sum claimed under this head. Learned counsel in support cited the case of Imana v. Robinson (1979) 3 – 4 SC 1, 23 a Supreme Court decision; also the case of Nwobosi v. A.CB Ltd. (1995) 6 NWLR (Pt. 404) 658, 680.

Learned counsel therefore urged us to allow the appeal in the circumstance and set aside the decision arrived at by the learned trial Judge to the extent of the findings against the appellant by awarding damages against it.

In response to the 2nd and 3rd issues raised by the appellant, the learned respondent’s counsel re-iterated the authority in the case of Hadley v. Baxendale cited by the appellant’s counsel. He then submitted that in the consideration of whether the penalty charges incurred on the borrowed fund and the loss of profit could be natural losses or damages arising or flowing naturally from act of breach by the appellant, certain points are necessary for consideration. That the appellant had the knowledge that the funds used to purchase the goods supplied to them were sourced from a finance house. This learned counsel submitted in view of the testimony of PW2 which he argued was quite instructive. That the evidence of the said witness was unchallenged or uncontradicted and unshaken and must therefore be deemed true and correct. Counsel cited a number of authorities in support as follows:

1) Saipem SPA v. Tefa (2002) 16 NWLR (Pt. 793) p. 410 at 435.

2) Aweni v. Olorunkosebi (1991) 7 NWLR (Pt. 203) p. 336.

3) Adejumo v. Ayantegbe (1989) 3 NWLR (Pt. 110) p. 417.

4) Hassan v. Atanyi (2002) 8 NWLR (Pt. 770) p. 581.

Learned counsel urged this court to hold that the award of damages to cover penalty charges on the borrowed funds by the lower court was in order as the same was within the reasonable contemplation of the contract and the parties. Also on the award of profit, counsel argued, clear evidence as to what profit the respondent is expected to make consequent to the breach by the appellant which had robbed it of same. He therefore contended that the lower court was right to have made an award in the respondent’s favour in this regard.

In response to the arguments contained in the appellant’s, brief of argument in particular on the remote nature of the penalty charges, learned counsel argued same as completely unfounded as it flies in the face of clear evidence on the record per the testimony of PW2 at page 33 of the record, wherein the appellant was concluded to have been well in the knowing. Further reference was again made to Hadley v. Baxendale (supra) on the expansion of remoteness of damages. A restatement was also relevantly made in Victoria Laundry (Windsor) Ltd. v. Newman Industries Ltd. (1949) 2 K.B. 528 by the House of Lords. A further related authority is the case of Koufos v. C. Czamikov Ltd. (The Heroni) (1969) 1 A.C. 350. That in the circumstance, it was clearly shown on the evidence that the respondent was going to obtain a loan from a finance house to finance the contract, especially as the finance house in due diligence confirmed from the appellant before proceeding to grant the facility. Counsel also referred to the write up by the learned Authors of Chitty on Contracts – General Principles, 27th Edition by Sweet and Maxwell, on the test of remoteness of damage. A further principle applicable and restated by the counsel has been laid down in the case of Monarch Steamship Company Ltd. v. Karlshamns Oljefabriker A/B (1949) A.C. 195, at 224. That the appellant from the evidence of PW2 was familiar with the custom or trade practices of the said Summit Finance Company regarding charging of penalties for late payment.

On the appellant’s submission that the facility could not have been for purpose of importing the chemicals for which arrangements were already concluded, the respondent’s counsel garnered, same as nothing more than sheer speculation or supposition which cannot stand in the face of clear and uncontradicted evidence. That the evidence of PW1 and PW2 are both relevant, as well as that of the defence witness DW1. Learned counsel therefore urged us to totally ignore the argument especially where it is well – established that a court does not act on speculation or unsubstantiated assumptions, but only on hard evidence with probative value.

On the argument of non actual payment of the penalty charges to the finance company, learned counsel emphasized the liability having been incurred as a result of breach by the appellant. That it is also immaterial whether it had been paid or not.

On the question of instalmental payment submitted thereon by the appellant which he argued was agreed upon by the parties, the respondent emphatically denied same and relied on paragraph 3 of the plaintiff’s amended reply to the statement of defence dated 27th February, 1997. That it is clear that both in its pleadings and testimony, the respondent clearly denied the existence of any agreement for a re-scheduled or an instalmental payment as contended in paragraph 4.29 on page 14 of the appellant’s brief.

In his further submission relating to the award of N1,710,000.00 for loss of profit, counsel heavily criticized the argument proffered by the appellant’s counsel in contending that the issue was not pleaded. Counsel in that regard referred to pages 14 – 17 of the record, and in particular para 13 of the further amended statement of claim dated 29th March, 1999. That there was no doubt that the loss of profit on contract was not only adequately pleaded, but also proved by unchallenged evidence which was accordingly and justifiably awarded by the trial court.

With the conclusion arrived at the appellant’s 1st issue, to the effect that knowledge of the loan was lacking, the determination of the 2nd issue is closely related and linked. In other words, the award of penalty charges against the appellant on the alleged borrowed sum from Summit Finance Co. Ltd. was a great error by the learned trial Judge. It follows therefore that the submission by the learned respondent’s counsel in that regard and in favour of the award was, with the greatest respect, wrongful as misconceived and had no firm ground. As rightly submitted by the appellant’s counsel, penalty on borrowed funds was too remote a claim to be recovered from the appellant in the absence of any knowledge of such a stipulation or indeed that the respondent had to borrow in order to execute the contract. In otherwords, the notion of loan was not within the contemplation of the parties at the time of the contract and could not reasonably have been so. Consequently, it is therefore obvious from the circumstance of the case that the question of loan was only a ploy lately conceived by the respondent as an after thought and outside the initial contemplation of its contract with the appellant, which had no connection with the finance house. The appellant’s 2nd issue is also resolved in its favour.

The 3rd issue raised by the appellant relates to whether the award of N1,710,000.00 (One million, seven hundred and ten thousand Naira) on the premise of the loss of profit was justificable.

On the same pedestral co-relating to the said issue, is the respondent’s question of the breach earlier suspended on its 2nd issue, committed consequent to the delayed payment made of the contract. In other words, with regard not having had for penalty charges, was the loss of profit on contract made by the lower court justifiable?

At page 88 of the record the learned trial Judge had this to say:

“It is my view that a modest profit is expected to accrue to the plaintiff from the contract. I do not think the profit of N 1,710,000.00 claimed is excessive. Profit will also be in the contemplation of the parties. It is not too remote a damage to claim.”

The learned respondent’s counsel greatly relied on the authority in the case of Hadley v. Baxendale (1854) 9 exch 341 wherein the courts since time immemorial expounded and restated the principles of remoteness of damages. The said authority was in my opinion wrongly used by the learned counsel for the purpose of penalty charges imputed to the appellant. There can be no damages either remotely or directly accruing to the respondent in the circumstance of the issue at hand as a result of imputing knowledge to the appellant. It is therefore pertinent to restate that the crux of the respondent’s issue No.2 flowing from issue No. 1 and centered on wrongful assumption of knowledge of the loan from the Finance House cannot avail it as a basis entitling it to profit. There must be clear cut spelt out basis for the claim, and evidence substantiating the proof.

The respondent did not indicate that the basis of its claim for the profit was as a result of the instalmental payment which both parties agreed to embark upon. It is relevant to reproduce the paragraphs relating to the question of profit at paragraphs 13, 21 and 24 (a) of the further amended statement of claim as follows:

“13. Also arising from the default from the defendant, the plaintiff lost a total sum of N1,710,000.00 (One million seven hundred and ten thousand Naira) representing 7.5 profit margin it ought to have made on the contract.

21. The plaintiff contends that its losses in this transaction arose purely from the failure of the defendant to honour its obligations under the contract of supply.

24(a) Whereof the plaintiff claims against the defendant as follows:- loss of profit on contract N1,710,000.00.”

The evidence of the respondent’s two witnesses PW 1 and 2 are clear cut. At pages 30 and 31 of the record, PW 1 had this to say:

“I want the court to order the defendant to pay … the N 11.2 million which is due to Summit Finance Nig. Ltd. and to pay to the plaintiff N1.71 million which is the profit the plaintiff would have made from the transaction … The profit of N1.71 million which we claim is about 7?% of the contract sum.”

I would wish to restate that the evidence by PW1 was about all there was relating to the profit sought for. It is without saying that loss of profit as an item of special damages must, as rightly submitted by the learned appellant’s counsel, be adequately particularized in the pleadings and also be proved by cogent and credible evidence at the trial. In the case of Imana v. Robinson (1979) 3 – 4 SC 1, at 23, their Lordships of the Supreme Court held and said:

“The term, strict proof … should therefore consists of evidence of particular losses which are exactly known or accurately measured before the trial. Strict proof … simply implies that a plaintiff who has the advantage of being able to base his claim upon a precise calculation must give the defendant access to the facts which make such calculation possible.”

The same principle was applied in the case Nwobosi v. A.C.B. Ltd. (1995) 6 NWLR (Pt. 404) 658 at 680.

In the case at hand per the decision arrived at by the learned trial Judge reproduced (supra), he simply assumed that a “modest profit” is expected to accrue to the respondent. That in itself is not sufficient a basis of awarding the special damages. It is also needful to restate that having regard to the further amended statement of claim, same did not particularize how the aggregate sum of N1,710,000.00 was arrived at as the basis of the claim presented. By the evidence of PW1 under reference, it did not show how the alleged profit would have been arrived at with reasonable accuracy. The number of authorities cited by the learned respondents’ counsel in that behalf are not with due respect relevant to support his contention. The court has the duty to work and act on facts and not to speculate. The concept by the respondent’s counsel on his submission relating to pleadings and evidence in claims of special damages, like the one in issue, is totally misconceived as rightly submitted by the learned appellant’s counsel. In other words, the cases of Victoria Laundry (Winsor) v. Newman Industries Ltd.; Koutos v. Czarnikov Ltd. (The Heroni) and Monarch Steamship Company Ltd. v. Karlshamns Olijefabriker cited by the learned respondent’s counsel under reference (supra), are not relevant with the same having been cited under the wrong notion that the appellant had knowledge of the sourcing of a loan from a finance house by the respondent at the time the parties contracted.

Further relevant guiding principles of law on pleading particularization, establishment and the strict nature of the standard of proof of special damages have been laid down in the following authorities.

Momodu v. University of Benin (1997) 7 NWLR (Pt 512) 325.

A.C.E. Plc. v. Haston (Nig.) Ltd. (1997) 8 NWLR (Pt. 515) 110.

F.B.N. Ltd. v. Owie (1997) 1 NWLR (Pt. 484) 744.

Ebe v. Nnamani (1997) 7 NWLR (Pt. 513) 479.

N.B.C. Plc. v. Ogundele (1997) 9 NWLR (Pt 521) 446

Unipetrol (Nig.) Plc. v. Bukar (1997) 2 NWLR (Pt 488) 472.

Shell B/P Pet. Dev. Co. (Nig.) Ltd. v. Isaiah (1997) 6 NWLR (Pt.508) 236.

U.B.N. Plc. v. Sparkling Breweries Ltd. (1997) 5 NWLR (Pt. 505) 344.

Yahaya v. Oparinde (1997) 10 NWLR (Pt 523) 126.

Benin Rubber Producers Co-operative Marketing Union Ltd. v. Ojo (1997) 9 NWLR (Pt 521) 388.

In the case of Kyaure Construction Ltd. v. Agbana reference (supra), it was held that the common usage of agreement by issue of a local purchase order is that the supplier of the items listed in the order will be paid for the items he supplied and no more. With the total contract sum agreed between the parties being N21,900,000.00, same logically must have included the profit which the respondent was to have derived from the transaction. There is conclusive evidence that a sum of N21,000,000.00 has been paid to the respondent. In the absence of proof of any other loss of profit, it suffices to conclude that the sum paid must have been all encompassive. The respondent has no reason or basis to ask for more.

That not withstanding and as rightly submitted by the learned appellant’s counsel, even if the sum paid did not include the profit the respondent was to make, the loss contemplated if at all, ought not to have been awarded as it was neither specifically pleaded, nor strictly proved at the trial in accordance to the specifications laid down in the various authorities under reference. The strict failure to comply with the legal provisions therefore is detrimental to the respondent’s case. Further authorities in substantiation are Ibro Hotels Ltd. v. Hotel Support Services Ltd. (2001) 8 NWLR (Pt. 714) 174 at 188; Artra Industries (Nig.) Ltd. v. N.B.C.I. (1998) 4 NWLR (Pt. 546) 357, 385 – 368; UBN Plc. v. Sparking Breweries Ltd. (supra) 367 and Omole & Sons Ltd. v. Adeyemo (1994) 4 NWLR (Pt. 336) 48 at 54.

In summary, with the loss of profit being an item of special damages which ought to be particularized in the pleading and specifically proved at the trial, the pleading and evidence tendered on the respondent’s behalf in the case at hand had fallen far short of the stipulated requirements. In the circumstance and having regard to the deduction arrived at (supra), the said issue No.3 like issues 1 and 2 are also resolved in favour of the appellant. In other words, the award of N1,710,000.00 (One million, seven hundred and ten thousand Naira), on the footing of loss of profit was in no way justifiable in the circumstances of this case.

Consequently and with all the appellant’s three issues having been resolved in its favour, the appeal therefore succeeds while the decision of Silva, J. of the High Court of Lagos State delivered on the 28th day of September, 1999 in suit No. LD/2206/96 is hereby set aside in its entirety. There shall be costs of this suit-which I would assess at N10,000 to the appellant.

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Other Citations: (2006)LCN/1880(CA)