Niger Progress Limited V. North East Line Corporation (1989)

LawGlobal-Hub Lead Judgment Report

OBASEKI, J.S.C. 

The short point in this appeal is whether the appellant is entitled to have proceedings in the claim before the High Court stayed pending its reference to an arbitrator and the hearing and determination of the arbitration.

The appellant’s brief gave a brief genesis of this action when it reads:

“The suit arose out of a contract agreement Exhibit “A” entered into on 19th July, 1981 between the respondent on the one hand and a Yugoslavian duly incorporated company called SOUR FAP-Farnos Beograd. The contract agreement incorporated in Article seven (7) reference to arbitration in the event of “any dispute that may arise from this agreement.” As at the time the respondent took out the writ, no reference was made to arbitration. Thereupon, the appellant filed the objection in limine aforementioned.”

The preliminary points of objection raised by the appellant before the High Court of Justice, Borno State of Nigeria, holden at Maiduguri are as follows:

“(i) That the action is incompetent;

(ii) The suit is not properly constituted and it should be dismissed, and

(iii) The Honourable Court has no jurisdiction.”

The grounds upon which the said objection was founded were:

(a) A condition precedent to the institution of this suit has not been fulfilled by the plaintiffs, that is to say, compliance with the provisions of Article SEVEN (7) of the Contract Agreement between Sour Fap-Famos Beograd and the 1st plaintiff (defendant erroneously put down in the record) of 19th July, 1981 relating to reference to settlement by arbitration;

(b) The 2nd plaintiff is not a juristic person with capacity to sue and be sued eo nomine. In the result the second plaintiff has no locus standi.

The Contract Agreement was concluded between SOUR FAP-FAMOS BEOGRAD of BELGRADE, Francusha 61-65 (hereinafter referred to as Seller) which expression within the con of this Agreement shall also include its successors and assignees. AND the Company, Messrs. NORTH EAST LINE CORPORATION, Maiduguri, Nigeria (hereinafter referred to as Buyer) which expression within the con of this Agreement shall also include its successors and assignees. Article 7 of the Contract Agreement reads.

“Any dispute that may arise from this agreement, the contracting parties will try to solve in a peaceful way. Otherwise, the contracting parties will solve the dispute in accordance with Arbitration Laws of Nigeria or Yugoslavia provided however that any party not satisfied with the decision of the Nigerian or Yugoslav Arbitration can apply for appeal to the Arbitration Council of the Chamber of Commerce in Zurich, whose decision is final.”

After hearing arguments of counsel on the preliminary objection, the learned trial Judge, Ikeotuonye, J. delivered a considered ruling upholding the objection and made the orders prayed for in the following terms;

“(1) The Borno State Government, the second plaintiff is struck out from this action;

(2) The action itself is stayed pending reference to arbitration in terms of Article 7 of the Contract Agreement Exhibit ‘A’. I make no order as to costs.”

Before making the second order, the learned trial Judge said in his Ruling:

“The learned defendant’s counsel has also submitted that for the plaintiffs suit to be properly constituted, the plaintiff must have capacity to take out the writ and the defendant must have capacity to defend the action. He contended that the taking out of the action was a violation of sections 2 and 5 of the Arbitration Act, Cap.13, Laws of the Federation of Nigeria and Lagos 1958. He argued that it was a condition precedent to the commencement of the action under Article 7 of the Exhibit ‘A’ that any dispute that might arise under that Agreement, the contracting parties would try to resolve it in a peaceful way, failing which they should resolve the dispute in accordance with the Arbitration Laws of Nigeria or Yugoslavia. This, he said, the plaintiffs have failed to do. The defendant’s principal, the foreign company, by affidavit evidence had disclosed its readiness and willingness to arbitrate.

The learned plaintiff’s counsel had countered that submission by contending that there was no evidence before this Court, whether affidavit or otherwise, that the defendant had authority of the foreign company to receive the sum of N620,000.00 from the plaintiff – a contention which this Court rejected.”

After quoting section 5 of the Arbitration Act, the learned trial Judge said:

“In the matter in hand, I am satisfied that the question in dispute, that is the payment by the first plaintiff to the foreign company of the sum of N620,000.00 representing 15% of the contract amount shown in Exhibit’ A’. It has never been disputed that the first plaintiff and the foreign company entered into Exhibit ‘A’ which I consider a binding contract.

2. The defendant has taken no step in the proceedings alter entering a conditional though unnecessary, appearance.
3. The foreign company, that is, Sour Fap-Famos Beograd, was ready and willing to arbitrate before the commencement of this suit and has stated in its further affidavit that the time for arbitration has not expired.
4. There is no sufficient reason why this matter should not be referred to arbitration in accordance with the Agreement Exhibit ‘A’.”

What were the claims made against the appellant. They are as endorsed in the writ of summons and set out at page 2 of the record and read:

“1. The first plaintiff is a state owned corporation established under the Borno State Law and has its main office at Commercial Road, Maiduguri while the 2nd plaintiff is the Borno State Government.

2. The defendant on or about the 25th day of January, 1982 received from the plaintiff the sum of N20.000.00 representing 15% of total contract value of vehicles to he supplied by the defendant’s partners Sour Fap-Famos Beograd of Belgrade under a written contract dated 19th June, 1981.
3. The defendant undertook to remit the money through the Central Bank of Nigeria to the said defendant’s partners in Belgrade.
4. The defendant did not remit the money to Sour Fap-Famos of Belgrade and the vehicles were by that reason not supplied to the plaintiff.
5. In the premises, the consideration for the payment of N620.000.00 has wholly failed and the defendant has had and received the said sum to the use of the plaintiff:-

Being dissatisfied with the Ruling, the 1st plaintiff appealed successfully to the Court of Appeal. Two grounds of appeal were filed and argued. Without some of their particulars, they read:

Ground (1) The learned trial Judge misdirected himself in law in holding that under the written contract reference to arbitration was a condition precedent to the institution of the action against the respondent

Particulars

(a) Omitted

(b) The respondent was never a party to the written agreement; (Exhibit A) and cannot take the benefit arising from that agreement

(c) The terms of the contract cannot consistently with settled principles of Nigerian Law, be construed as giving the respondent any right to demand reference to arbitration as a condition precedent to the institution of the action;

(d) Omitted

(e) The appellant had no action against Sour Fap Famos Beograd, the party to the Agreement because of the stipulations in Article 9 of the Agreement read in conjunction with Article 4 and the respondent had not set up further stipulations contrary to the written Agreement;

Ground 2 The learned trial Judge misdirected himself in law in holding that under Article 8 of the written Agreement (Exhibit A) the respondent was the Agent of Sour Fap Famos Beograd.

Particulars of Misdirections

Since the contract has been reduced into writing, it is the writing that the learned trial Judge must look (a) for the whole of the terms made by the parties. Article 8 relates to matters yet to be agreed between Sour Fap Famos Beograd and the respondent and can only mean that the parties mentioned therein have not agreed on all the essential terms.”

After reading the briefs of argument filed by the parties and hearing counsel to the parties in oral arguments, the Court of Appeal (coram Akanbi, Abdullahi and Joe Jacks, JJ.C.A.) unanimously allowed the appeal, set aside the ruling of the learned trial Judge staying proceedings in the suit and referring the matter to arbitration and ordered the hearing of the substantive suit. Akanbi, J.C.A., delivering the lead judgment of the Court of Appeal, said in the closing paragraphs:

“Indeed, the learned trial Judge found and I agree that the respondent is not a party to (the agreement) Exhibit A. He held this to be common ground. No where in Exhibit A was it alleged that the respondent was to act as the agent of the foreign company. And the learned trial Judge must have appreciated this when in his judgment, he said:

“It is reasonable to infer the circumstances of the case that the defendant was to play the role of the agent of the foreign company.”

With respect, I do not think that on the materials before the court, that can be a proper and legitimate inference to draw.

That said, I am led to the conclusion that the trial Judge was wrong to have held that the respondent was/is an agent of the foreign company. Exhibit A clearly did not create such relationship.

In the circumstances, the respondent ought not have been allowed to invoke Article 7 to stay the action in the High Court. In the results, I allow this appeal, set aside the ruling of the Maiduguri High Court in suit No.M/I5/86 delivered on 16th July, 1986 and order that the hearing of the substantive suit be proceeded with accordingly.”

The defendant/respondent was not satisfied with the judgment and has accordingly brought this appeal to the Supreme Court against the decision of the Court of Appeal Six grounds of appeal were filed but as the length of the grounds will not permit full reproduction here, I will set out the part germane and relevant to the issues raised:

1. The Court of Appeal, Jos Division erred in law and misdirected itself when it adjudged that the appellant was not an agent of a disclosed principal, a foreign company.

Particulars

(i) The respondent is in law, in fact and on record an agent of a disclosed principal, the foreign company, Sour Fap Famos Beograd of Belgrade Yugoslavia (hereinafter called “the foreign company”);

(ii) Omitted

(iii) Omitted

(iv) Omitted

(v) The respondent ought to have sued the foreign company since the hitherto legal inhibition that a foreign company (as the disclosed principal) could not be sued in Nigeria has been lifted by the Court of Appeal in suit FCA/4/17/82 Kitchen Equip. v. Steins (unreported) decided on 28th February, 1983).

Ground 2 – Omitted

Ground 4 – Omitted

Ground 5 – Omitted

Ground 6 – Omitted

Ground 7 – The decision is against the weight of evidence.”

Briefs of argument were filed by the parties in this appeal and the appellant’s counsel was heard in oral argument before this Court. The appellant’s counsel formulated 5 issues as questions for determination in this appeal in his brief and they read as follows:

“1. whether the writ of summons is not void for failure of the respondent to endorse on the writ the statutory mandatory endorsement as required by section 97 of the Sheriffs and Civil Process Act (Cap.189) Laws of Nigeria;

2. whether sections 97, 99 and 102 of the Sheriffs and Civil Process Act, Cap. 189, Laws of Nigeria are not violated with reference to the constitution of this suit;
3. whether the action is properly constituted;
4. whether the action is not properly stayed by the High Court or the ground that the condition precedent to the taking out of the writ that is to say, reference to arbitration was not fulfilled;
5. whether ‘the appellants are agents of Sour Fap-Famos Beograd’ a disclosed principal on record.

Having regard to the grounds of appeal and the decisions of the Court of Appeal, issues Nos. 1, 2 and 3 do not arise for decision in this appeal. The appellant agrees with this opinion when he stated in his brief at page 2 paragraph 3.1 that:

“Questions No.1 and 2 as formulated above did not arise in either the trial High Court or in the Court of Appeal.”

If the grounds on which the preliminary objection were based did not raise these questions in the High Court, they could not possibly be raised in any ground of appeal in the Court of Appeal and in this Court. The two issues identified and formulated by the respondent are:

“(1) whether the plaintiff (appellant in the Court of Appeal complied with Order 6 Rule 10 of the Court of Appeal Rules relating to the filing of briefs.

(2) whether or not, on the materials before the Court, the defendant is an agent of Sour Fap Famos Beograd, a foreign company and can take the benefit of any arbitration clause contained in the contract between the appellant and Sour Fap- Famos Beograd.”

The first issue does not arise for determination in this appeal in that it does not arise from a complaint against the decision of the Court of Appeal in any of the grounds of appeal.

Questions or issues for determination in any appeal must be issues culled from the grounds of appeal. They are not complaints of failure to comply with the Rules of Court governing the filing of briefs. It is desirable for counsel to examine the grounds of appeal argued or to be argued to ascertain the issues raised. Issues from complaints of failure to comply with Rules of Court, although issues for determination by the court, are not questions for determination in the appeal. They are issues for determination before hearing the appeal in which issues for determination are raised.

In the instant appeal, issue No.1 no longer arose for determination because before the hearing of the appeal application was made for enlargement of time in which to file appellant’s brief. The only issue properly formulated in the respondent’s brief which arise for determination in the appeal is issue No.2.

What were the facts placed before the learned trial Judge (Ikeotuonye, J) There was no oral testimony. All the facts were contained in the affidavit evidence filed with the motion and the counter-affidavit evidence filed in opposition. The affidavit was deposed to by Stojan Zdravic, Managing Director of the defendant company. The counter affidavit was deposed to by Alhaji Kaumi Abba Kyari, the General Manager of the 1st plaintiff company now respondent. Paragraphs 3, 1 and-5 of the affidavit and paragraphs 4, 5, 7 and 8 of the counter-affidavit are very relevant and portray the respective contention of the parties. Paragraphs 3, 4 and 5 of the affidavit read:

“3. That a contract agreement which forms part of the subject-matter of this suit was reached between a Yugoslavian duly incorporated company named Sour Fap Famos Beograd and the 1st plaintiff in this case on 19th July, 1981 for the purchase of 45 buses of various categories. Attached herewith is a copy of the said agreement marked Exhibit ‘A’.

4. That further to paragraph 3 above, the defendant in this suit are the agents/representatives in Nigeria of the said Sour Fap-Famos Beograd who are the principal.
5. That Article seven (7) of Exhibit ‘A’ herein attached which is still subsisting and binding to parties to the said contract Agreement of 19th July, 1981 provides:

“Any dispute that may arise from this Agreement, the contracting parties will try to solve in a peaceful way. Otherwise, the contracting parties will solve the dispute in accordance with Arbitration Laws of Nigeria or Yugoslavia provided however that any party not satisfied with the decision of the Nigerian or Yugoslavian arbitration can apply for appeal to the Arbitration Council of the Chamber of Commerce in Zurich.

Paragraphs 4,5,7,8 and 9 of the counter-affidavit read:

4. That the contract agreement referred to in paragraph 3 of the affidavit of Stojan Zdravic and attached to the said affidavit marked ‘Exhibit A’ is an agreement between the 1st plaintiff and a Yugoslavian company named Sour Fap Famos Beograd and the defendant is not a party to the agreement.
5. That the said agreement referred to as Exhibit ‘A’ in paragraph 3 of the affidavit of the said Stojan Zdravic has never come into force because one of the conditions for its coming into force as stipulated under Article 9 read in conjunction with Article 4 of the said “Exhibit A” that 15% down payment be made to Sour Fap-Famos Beograd to their account No.60811-628-05-25730-421-01259 with Investbank of Belgrade was never made to that account.
6. That it was as a result of the intention of the plaintiffs to bring the contract agreement ‘Exhibit A’ into force that it paid the sum of N620.000.00 to the defendant company, which undertook to remit the same into the foreign account of Sour Fap Famos Beograd in the manner referred to in paragraph 5 above but it did not and also neglected or refused to return the money to the plaintiffs despite repeated demands hence the institution of the action.
7. That the decision to pay the said N620,000.00 to the defendant by the plaintiffs for the purpose of remitting the same to the foreign account of Sour Fap Famos Beograd was based on a separate arrangement between the plaintiffs and the defendants, the Yugoslavian company Sour Fap Famos was not committed in the arrangement which was not part of the agreement ‘Exhibit A’ and the defendant did not, in receiving the N620,000.00, act as the agent of Sour Fap Famos.
8. That no dispute has arisen between the plaintiffs and Sour Fap Famos which may necessitate the coming into operation of Article 7 of “Exhibit A.”

I do not intend to deal with issues No. 1, 2 and 3 as they are not issues for determination in this appeal. With regard to issues No.4 and 5, the argument of the appellant is twofold. According to the submission of learned counsel for the appellant, Chief Akinrinsola, in any dispute arising from the contract agreement between the respondents and Sour Fap-Famos Beograd, it is to an arbitration that the dispute must first be submitted. Learned counsel relied on the provision of section 5 of the Arbitration Act Laws of the Federation of Nigeria, 1958, as authority for this submission.

Secondly, it was submitted by counsel that the appellants are agents of a disclosed principal Sour Fap-Famos Beograd and that the proper party to be sued under Nigerian Laws is Sour Fap-Famos Beograd the disclosed principal. Learned counsel then cited the case of Dommit Khonam v. Elizabeth Fife John (1939) 15 N.L.R. p.12 at 15 where Butler Lloyd held that a defendant acting on behalf of a known and disclosed principal incurs no liability. The fact that the disclosed principal incurs foreigner does not affect the question of liability.

This submission, in my view, totally determines the appeal in favour of the respondent. If the appellant is an agent of a disclosed principal and is not a party to the contract Exhibit A, he cannot exercise any power under Exhibit A, which properly belongs to his principal who is a party to the contract.

Learned counsel to the respondent’s short submission in reply is that the appellant is not a party to the contract Exhibit A between Sour Fap Famos Beograd and the respondent. The further submission is that the finding of the High Court that the appellant was an agent of the foreign company was expressly reversed by the Court of Appeal when it held that Article 8 of Exhibit A does not constitute the appellant an agent of Sour Fap-Famos Beograd.

Learned counsel further emphasised that:

“(1) there is nothing in Exhibit A (the written Agreement) to show that the appellant is the agent of the foreign company Sour Fap-Famos Beograd;

(2) the provision of Article 8 is irrelevant following the observation of Denning, L.J. in Nicolene Ltd. v. Simmonds (1953) 1 All E.R. 822 at 825.

(3) the respondent did not deal with the appellant as an agent of Sour Fap-Famos Beograd;

(4) Articles 4 and 9 cannot admit of any payment to the appellant as agent of Sour Fap-Famos Beograd.”

Since Exhibit ‘A’ is the principal document on which the appellant based his claim to agency and right to demand arbitration, it is necessary to examine the document particularly Articles 4, 7, 8 and 9 thereof.

I have already set out in full at the beginning of this judgment the full provision of Article 7. That article gives right to the parties to the agreement to demand arbitration in the event of any dispute between the parties. I have already set out the names of the parties to the agreement. The appellant is not mentioned in the agreement as a party. Article 4 of the agreement reads:

“The BUYER is obliged to pay agreed value of the goods from the Article 1, items I – 6 of this Agreement amounting to US $6,472,200 in the following way:

Down payment being 15% of the total value of vehicles and spare parts, what amounts to US $970.830 – will be paid to the SELLERS’ Account No.60811-620-05-25730-421-01259 with Investbank Belgrade within 30 days from the signing of this agreement. The remaining amount of US $5,501,370 – representing 85% of the total contract value of vehicles and spare parts will be paid in 10 equal semi-annual instalments with regular interest of 8% on reducing balance. First instalment being 8 months from the date of Bill of Lading of the last consignment. The buyer is obliged to pay due instalments to the seller’s above account with Investbank in Belgrade. For credit amount of the Agreement value, the seller will prepare annuity plan and send it to the buyer within 15 days upon the elate of coming of this Agreement into force.

Article 8 which mentions the appellant reads:

“The company Niger Progress Ltd. is engaged with the Seller in treatment and conclusion of this business, the seller and Niger Progress Ltd. will conclude a separate agreement on it (Italics mine).

The above provision of Article 8 does not and cannot constitute the appellant an agent of the seller under the contract. It only acknowledges the part played by the appellant in securing the contract for the seller and expressed intention to conclude a separate agreement on it with the appellant.

The respondent was not mentioned as a prospective party to that separate agreement. The Court of Appeal is right on the construction of the expressed provision of Article 8 and properly reversed the High Court Judge on the interpretation of the provision. There is no ambiguity in the expressed meaning of the provision. Where words are plain on the face of it, the literal meaning should, in accordance with the cannons of interpretation of contract documents, be given to it.

Article 9 contains a very important provision. It stipulates the conditions under which the agreement will come into force. Without the agreement coming into force the agreement cannot form the basis of the preliminary objection raised by the appellant. No claim can be founded on it. Article 9 reads:

“This agreement will come into force when signed by both contracting parties and approved by Borno State Government and the competent authorities of Sour Fap-Famos Beograd, upon effecting 15% down payment of the total Agreement value by the Buyer”

The respondent admits that it has not made the down payment and contends that the amount claimed from the appellant now was the amount the appellant was given and authorised by the respondent to pay into the account of Sour Fap-Famos Beograd as stipulated in Article 4 of the Agreement.

Even if the appellant were appointed agent of Sour Fap-Famos Beograd, he cannot demand arbitration until the 15% down payment has been made ‘in accordance with the terms of the Agreement. It is not a term of the agreement that the 15% of the total value be paid to the agent.

The law on agency governing disclosed agent, disclosed principal is not in doubt and their rights and liabilities to third parties are clearly set out in Bowstead on Agency 14th Ed. p. 231 Article 78.

A disclosed principal may sue or be sued on any contract made on his behalf and in respect of any money paid or received on his behalf by his agent acting within the scope of his actual authority (Duke of Norfolk v. Worthy (1808) 1 Camp 337).

The appellant has not established the existence of a contract of agency between Sour Fap-Famos Beograd and itself. It has also not established the scope of its actual authority and has failed to establish that he received the amount claimed from him as agent acting within the scope of his authority to enable it demand arbitration.

I see no merit in the appeal. The appeal fails and is hereby dismissed with N500.00 costs to the respondent. The decision of the Court of Appeal is hereby affirmed.

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SC.46/1988