Oceanic Bank International Plc (Formerly Oceanic Bank International (Nig) Limited) V. Broken Agro Allied Industries Limited (2008)
LawGlobal-Hub Lead Judgment Report
MONICA BOLNA’AN DONGBAN MENSEM, J.C.A. JP+
The summaries of facts presented by the Respondent as modified in this judgment are as follows:
The Federal Government of Nigeria had set up the National Economic Reconstruction Fund (NERFUND) by statute whose object was to provide soft loans to industrialists for the purposes of promoting industrialization in Nigeria. This objective is stated in section 1 (1) (b) of the Decree NO. 2 of 1989 (now Act) as follows:-
“b. Provide medium to long-term loans to participating commercial and merchant banks for on-lending to small and medium-scale enterprises for the promotion and acceleration of productive activities in such enterprises.”
The said Decree shall hereinafter be referred to as the Act while NERFUND will be referred to sometimes simply as the FUND.
The Act made provisions which spelt out the duties of the obligor bank towards the borrower. Section 5(1) (a) and 5(2) of the Act set out the functions and obligations of the participating banks.
At the trial Court, the Respondent’s case was that after it had received the loan from NERFUND, the Appellant who was the obligor bank in this case is said to have retained the sum of money for more than six months (inspite of repeated demands made to it by the Respondent to release same) and contrary to the provisions of section 5 of the Act. The Appellant is said to have eventually released only part of it to the Respondent to wit – the sum of $995,741.22 Withholding the balance of $2,848. 78.
The Appellant is also alleged to have failed to provide any working capital for the Respondent as required by the Act. Instead it relied on a “purported” private agreement between itself and the Respondent. (Refer:- Pg 43 (last paragraph) and 44 of the records).
As a result of the delay by the Appellant in releasing the funds, the costs of the Plants and Machinery as well as Customs duties are said to have increased. The exchange rate of the dollar to the Naira also increased against the Naira from N22 – N80 to $1.00.
Up to the date of the Judgment in this suit, it is alleged that the Plants and Machinery were yet to be installed and the project for which the loan was provided by NERFUND was yet to take off. Judgment was pronounced on the 5th April, 2006 by the learned trial Judge.
The Respondent pleaded that the project had been designed to yield a monthly profit of N1, 000, 000 (One Million Naira) to it, if it had been completed on schedule. (Refer: – the pleadings of the Respondent paragraph 23 of the Statement of Claim at 8 of the record).
That the Fund eventually vacated the project and handed same over to the Respondent.
The reliefs sought by the Respondent as Plaintiff before the Federal High Court (Lagos) are legion; they are as follows:-
“(a) A declaration that the ceding of the Plaintiffs project to the 1st Defendant is illegal, ultra vires and null void”.
(b) The sum of $2,848.78 with interest thereon at the rate of 4% from February, 1995 till the determination of the suit against the 1st Defendant being the balance of the loan of $998,590 it withheld”.
“(e) Interest accrued on $998.590 for the period between 18th February, 1995 at 18th July, 1995 at the rate of 4% against the 1st Defendant.
“(d) An order of Court expunging from the Plaintiff’s account all interests charged by the 1st Defendant from February, 1995 till the determination of the suit.”
“(e) The sum of N10m working capital for the project payable to the Plaintiff by the 1st Defendant.”
“(f) An order of Court mandating the Defendants to refund all unauthorized charges deducted from the Plaintiffs account.”
“(g) An order of injunction restraining the 2nd Defendant from ceding the project to the 1st Defendant.”
“(h) N100m General damages against the Defendants or breach of contract.”
“(i) N94m special damages.”
“PARTICULARS OF SPECIAL DAMAGES
(i) Loss of profit from the refinery from 1995 at N1m per month N84m
(ii) Salary for the staff who are maintaining the refinery equipments N10m
Total N94m
OR IN THE ALTERNATIVE
An order compelling the 2nd Defendant to completely take over the project in accordance with the tripartite agreement.”
The Appellant denied any liability and Counter-claimed in these terms: –
“(i) Judgment in the sum of USD998, 590.00 (Nine Hundred and Ninety Eight Thousand, Five Hundred and Ninety United States Dollars) being the balance of the Dollar denominated loan granted to the 1st Defendant by counter-claim by the Plaintiff (by counter-claim) and guaranteed by the 2nd Defendant (by counter-claim) and owing and due to the Plaintiff (by counter-claim) as at the close of business on the 31st day of December, 2000 or it’s equivalent in the local currency i.e. Naira at the current rate of foreign exchange of the Autonomous Foreign Exchange market.”
“(ii) Judgment in the sum of N7, 906.250.00 (Seven Million, Nine Hundred and Six Thousand, Two Hundred and Fifty Naira) being the balance of the Naira Denominated loan granted to the 1st Defendant (by counter-claim) and guaranteed by the 2nd Defendant (by counter-claim) by the Plaintiff (by counter-claim) and owing and due to the Plaintiff (by counter-claim) as at the close of business on the 31st day of December, 2000.”
“(iii) Interest on the aforesaid sums at the rate of 18% per annum from the 1st day of January, 2001 until the date of Judgment.”
“(iv) Interest after Judgment.”
A bird’s eye view of the Judgment of the trial Court is effectively made by the learned Counsel for the Appellant at pg 4 of the Appellant’s brief of argument. It is as follows: –
“… DECISION OF THE FEDERAL HIGH COURT
(i) That the agreement between the Appellant and the Respondent had a statutory flavour.
(ii) That the Appellant and the Respondent had no capacity to dispense with provisions of the NERFUND ACT.
(iii) That the Appellant has statutory Obligation to provide working capital tor the Respondent.
(iv) That as a Result of the failure of the Appellant to provide working capital for the Respondent’s project there had been a frustration of same.
(v) That as a result of the frustration of the Respondent’s project by the Appellant, the Respondent was entitled to special damages which was assessed at N84, 000. 000.00 (Eighty Four Million Naira).
(vi) That because the Appellant frustrated the contract between it and the Respondent, it could not seek to recover from the Respondent the various sums of monies in Local and Foreign Currency advanced to it.” (Refer Pgs 153 – 158 of the record for this appeal)”.
The Appellant formulated four issues as follows:-
“(1). Whether the Lower Court was right when His Lordship held that the agreement between the Appellant and the Respondent has a statutory favour and that the Appellant has a statutory obligation to provide working capital for the Respondent’s project (Grounds 1 & 2).”
“(2). Whether the Lower Court was right in holding that there had been a frustration of the Respondent’s Project caused by the failure of the Appellant to provide working capital for the project (Grounds 3 & 4).”
“(2). Whether the Lower Court was right in holding that there had been a frustration of the Respondent’s Project caused by the failure of the Appellant to provide Working capital for the Appellant (Grounds 5).”
“(3) Whether the Lower Court was right in awarding the sum of N84 Million as special damages in favour of the Respondent against the Appellant (Ground 5).”
“(4). Whether the Lower Court was right in holding that the Appellant having frustrated the Contract between it and the Respondent could not seek to recover from the Respondent the various sums of monies in Local and foreign currency advanced to it and whether in the circumstances the Lower Court was right dismissing Counter-Claim of the Appellant. (Grounds 6 & 7).”
I find the issues formulated by the Respondent as more concise and reflective of the grounds of appeal. Accordingly, this appeal shall be determined on the said issues which are as follows: –
“(1) & (2). Whether the trial Court was right in, holding that Appellant frustrated the project for which the NERFUND loan was provided for the Respondent? (Grounds 1 to 4).” (Same as issues 1 and 2 of the Appellant).
“(3) Whether the Lower Court was right in awarding the sum of N84 Million as special damages in favour of the Respondent against the Appellant (Ground 5) and (same as issue 3 of Appelant).
“(4). Whether the trial Court was right in dismissing the Appellant’s counter-claim? (Grounds 6 and 7).”
(Same as issue 4 of the Appellant).
Issue One
The case of the Appellant on this issue is that the question of the transaction between the Appellant and the Respondent being one of statutory flavour was never canvassed by the Respondent at the trial Court. Nor was the issue of frustration. Issues were merely raised at the point of address, no pleadings were made nor evidence adduced on the said issues.
Further on “statutory flavour” and the provisions of section 5(1) of the Act learned Counsel submits that not in all cases will the use of the word “shall” in a statute be taken as mandatory or compulsory. Counsel propounds that in commercial transaction, the Courts have held “shall” to be directory or permissive only thereby adopting a liberal interpretation. Cited in support are the following cases: –
(1) Katto Vs C.B.N (1991) 9 NWLR (Pt. 214) 126 @ 147
(2) Ozumah Vs Edo Broad Casting Service (2004) 17 NWLR (Pt 902) 332 @ 351
(3) Zakhem Construction Company Ltd Vs Nneji (2002) 5 NWLR (Pt 759) 55 @ 75
(4) Total (Nig) Plc V Akinpelu (2004) 17 NWLR (Pt.903) 509 @ 524
(5) Ukachukwu V Uba (2005) 18 NWLR (Pt 956) 1.
Counsel cites “Exhibit 2” paragraph 10 to buttress the submission that the learned trial Judge was wrong in holding that the Appellant had an obligation to provide a working capital. “Exhibit 2″ is a mini agreement between the Appellant and the Respondent only.
The issue of frustration argues the learned Counsel is premised on the failure of the Appellant to give to the Respondent, the working capital claimed. The head of claim, maintains the learned Counsel was subsequently abandoned by the Respondent and consequently dismissed. The trial Court was therefore functus officio on the said issue and could not validly come to the conclusion that there had been a frustration of the project.
Reliance is also placed on the following cases in support of the Appellant’s argument:
(1) Total (Nig) Plc Vs Akinpelu (supra) @ 523
(2) N.B.C V Standard (Nig) Eng Co. Ltd (2002) 8 NWRL (Pt 768) 104 @ 131
The learned Counsel urges us to hold that the trial Court was wrong in holding that the Appellant caused the frustration of the Respondent’s project.
The learned Counsel to the Respondent cites paragraphs 3, 4, and 20, of the statement of claim (pgs 7 and 8 of the record for this appeal) in submitting that the transaction between the parties was regulated by the NERFUND Act. Also cited are pages 27 and 44 of the records being part of the testimonies at the trial admitting that NERFUND Act provisions regulated the transaction).
The learned Counsel for the Respondent submits that the obligation imposed on the bank by the provisions of sections 5(1) (a) (d) and 5(2) of the Act are expressed in mandatory terms. Sections 1(2) (b) and (5) are said to state the objective of the NERFUND Act.
The learned Counsel for the Respondent submits that in view of the purpose for which the NERFUND loan was given, the Court should adopt the interpretation of the term ‘shall” which will be beneficial to the Respondent as was done the case in Osumah Vs Edo (supra) cited by the learned Counsel for the Appellant. Counsel submits that the decisions in Total Nigeria and Zakhem construction (supra) do not apply to the instant case as those were private transactions.
It was further the submission of the learned Counsel that the Appellant’s breach of the provisions of section 5 (2) of the NERFUND Act frustrated the project in that the delay accessioned increase in prices of the Plants and Machinery and the Custom Duty Part of the funds were withheld and the Appellant failed to provide the working capital. Exhibit “17” referred.
The following cases are cited in support of the Respondent’s submission:-
(1) Okapla Vs D.G.N.C. for M.M. (1996) 4 NWLR (pt 444) 585 @ 592-593 G-A And 598 G-D.
(2) Akun Vs Mangu L.G.A. (1996) 4 NWLR (Pt 441) 207 @ 216 G-H
(3) Amadi Vs N.N.P.C (2000) 10 NWLR (Pt 674) 76 @ 97 G – H, 98 B – C and 107-108 H – C
(4) Adisa V Ayinwola (2000) 10 NWLR (pt 674) 116 @ 191 C-F
(5) Sonnar (Nig) Ltd Vs Nordwind (1987) 4 NWLR (Pt 66) 520 @
(6) Dale Power Systems Plc Vs Witt and Bush Ltd (2001) 8 NWLR (Pt716) 699 @
(7) Batalha Vs West Canst. Co. Ltd (2001) 18 NWLR (Pt 744) 95 @
(8) Auchi Polytechnic Vs Okuoghae (2005) 10 NWLR (Pt 933) 279 @ 291- 292 H-A
(9) Ogualaji Vs A – G Rivers State (1997) 6 NWLR (pt 508) 209.
In the Judgment at the trial Court, the learned Judge found and held that the Appellant as Defendant and Counter-claimant failed to effectively controvert Some aspects of the Plaintiff’s claim, Those averments were therefore taken as admitted.
I crave indulgence to quote extensively from the Judgment of the trial Court as follows: –
“The issue whether the allegations in the statement of claim have been specially traversed has been vehemently canvassed by the learned Counsel for the Plaintiff in his address. He also contended that the allegations in paragraphs 5.10-13, 15, 17 – 23, 25, 25, 28, 29, 31 and 32 of the statement of claim have not been specially traversed and that therefore the allegations should be deemed to have been admitted. The law as settled by the authorities is that a mere denial by the statement of defence of averments contained in the statement of Claim without answering to the material points raised therein is not a proper answer to the averments contained in the statement of claim and such imperfect denial is deemed an admission of the facts contained in the statement of claim. See Adaleke Vs Asenifa (supra) at page 113 – 114, Nwadike V Ibekwe (1987) 4 NWLR (Pt.67) 718, Odiba Vs Muemue (supra) at pages 187 and 188 and Lewis and Peat (N.I.R.) Ltd Vs Akhimien (1976) 1 FNLR 80.
…the pleading of the Defendant that “the Defendant is not in a position to admit or deny certain paragraphs of the statement of claim is a general denial to a positive and distinctive allegations in the statement of claim and therefore does not constitute a valid denial of the allegations in the statement of claim. It is an imperfect denial.
…in the present case the 1st Defendant pleads in paragraph 4 of the amended statement of defence and counter-claim thus:-
“4. The 1st Defendant categorically and specifically denies paragraphs 10,11,12,13,14,15,16, 17, 18, 19,20,21,22, 23, 24, 25, 26, 27, 28, 29, 30, 31 and 32 of the statement of claim and put the Plaintiff to the strictest proof of the averments contained therein”.
The 1st Defendant by paragraph 4 of the amended statement of defence and counter-claim above reproduced has denied generally the allegations in the twenty-two paragraphs of the statement of claim mentioned in paragraph 4 of the amended statement of defence and counter-claim. The 1st Defendant further down in its pleading explained or qualified the denial of some of the facts contained in the statement of claim. The Plaintiff (sic) thereby made a special traverse or specific denial of the allegations in the twenty-two paragraphs of the statement of claim referred to in paragraph 4 of the amended statement of defence and counter-claim.
In Odiba Vs Muemue (supra). The Supreme Court per Othman, JSC, as he then was stated thus:-
“Learned Counsel is right that positive and distinctive allegations in the statement of claim must be specifically denied. This is called a special traverse. In a special traverse the Defendant shall explain or qualify the denial of facts in a statement of claim.”
…. Order 26 Rule 14 of the Rules of this Court provides in relation to denial of fact thus: –
Order 26 Rule 14 (1) when a party denies all allegation of fact he shall not do so evasively, but shall answer the point of substance.
(2) When a matter of fact is alleged with diverse circumstances it shall not be sufficient to deny it as alleged along with those circumstances but a full and substantial answer shall be given.” Considering the totality of the pleading of the 1st Defendant in the amended statement of defence and Counter-claim it seems to me a full and substantive answer to the points raised in the twenty two paragraphs of the statement of claim have been given. I hold that there is no evasive denial of the allegations in paragraphs 10-13, 16, 17-23, 25, 26, 28, 29, 31 and 32 of the statement of claim. On the authorities, the aforesaid paragraphs of the statement of claim cannot be deemed to have been admitted along with the allegations in paragraphs 1,2,3,4,6,7,8 and 9 of the statement of claim which have by the averment in paragraph 2 of the amended statement of defence and counter-claim been expressly admitted.
.. ..The pleading in paragraph 3 of the amended statement of defence and counter-claim is evasive. I hold that paragraph 5 of the statement of claim has not been specially traversed. Paragraph 5 of the statement of claim is therefore deemed to have been admitted.
…. The law is that facts admitted need not be proved. The allegations in paragraphs 1, 2, 3, 4, 5, 5, 6, 7, 8 and 9 are therefore deemed to have been established. See Archibong and Ors. Vs Ibe and Ors. (2004) 2 NWLR (Pt.857) 590 @ 628 and R.C.L. (Nig) Ltd. (supra) at page 628. By the admissions of the allegations in paragraphs 1,2,3,4,5,6, 7,8, and 9 it has been established that there was a NERFUND loan transaction between the parties and that the sum of $998,590 U.S. Dollars was released by the 2nd Defendant to the 1st Defendant on the 7th of February, 1995. The 1st Defendant by the averments in paragraphs 10 and 11 of the amended statement of defence and counter-claim has admitted that it opened a letter of Credit in July 1995 and that it thereafter disbursed all the sums approved by the 2nd Defendant to the Plaintiff. The pleadings and the evidence on both sides show that the money which was released to the 1st Defendant by the 2nd Defendant on the 7th of February, 1995 was not released to the Plaintiff until sometime in July 1995. The delay in opening the letter of credit and the delay in releasing the fund has been some of the main complaints of the Plaintiff in this case. The evidence of PW1 relating to the delay has not been impugned. I accept his evidence and on the basis of his evidence and the pleadings in this case I find that the letter of credit was opened in July 1995 subsequent to which the sum of $995,741.22 was released to the Plaintiff leaving a balance of $2,848.78. I find that the…. 1st Defendant kept the fund released to it by the 2nd Defendant for not less than six months before it disbursed it to the Plaintiff.” (All emphasis by underlining is mine)
Uncontroverted facts in an affidavit ordinarily stand admitted and facts admitted need no further proof. With pleadings, the averments are not depositions made under oath and therefore, have to be supported by evidence which is usually by sworn testimonies in Court. Non-effectively traversed pleadings are however often deemed to be admitted facts. My humble opinion is that such facts admitted by a general denial which do not constitute an effective traverse are enhanced by the adduction of credible evidence. Such evidence could be very minimal since that which is admitted need no further proof. The counterpart of this principle is that facts averred to in pleadings but which are not supported with evidence is deemed abandoned. (Refer: – Ojo V Garoro (1999) a NWLR Pt 615 P 374 and Adegbite Vs Ogunfaolu (1990) 4 NWLR Pt 146 P 578).
Upon the provisions of the FUND, the appellant secured the loan for the Respondent from the FUND.
Section 5 of the NERFUND Act which is captioned.
(1) “The participating bank” provides that the Participating bank shall:-
(a) Provide the working capital required by eligible enterprises and projects under this Decree;
(2) Each participating bank shall disburse funds to approved enterprises or projects not later than three working days of release of the funds by the Fund to the bank.
By the provisions of the Act and the facts as evaluated by the learned trial Judge and reproduced (supra) it was well established that the sum of $995.741.22 was released by the FUND to the Appellant for onward release to the Respondent.
The grouses of the Respondent against the Appellant at the trial are that the Appellant failed to release the loan within 3 days of the receipt of the money by the FUND. The Appellant retained the said sum for six months. The Appellant was totally silent. The silence of the Appellant about its failure to release the sum within the time stipulated by the Act is most remarkable.
No explanation whatsoever was advanced by the DW1 who testified for the Appellant. Chidima Okpala who took an oath on the Holy Bible stated @ page 41 that it is not true that Oceanic Bank was to be the obligor (sic) Bank in the transaction.
It is instructive that “Exhibit 2” which is the contract document relied upon by the Appellant, does not have the first page, it starts from Pg.2 (Refer:- Pg. 161 of the records). The page has on it “continuation sheet” and each page is so marked upto the last page which bears the names and signatures of the contracting parties. On Pg.166 of the records, the last paragraphs captioned “Acceptance”, states as follows:-
“ACCEPTANCE: If the terms and conditions of the facility are approved by you, please indicate the company’s acceptance by signing, sealing and returning the enclosed copy of this letter to us. Please note that the Bank reserves the right to vary, alter or amend any of the terms and conditions above should the need arise for us to do so”.
The signatories are:
(1) TANVEER SADIQ (GENERAL MANAGER)
(2) CECILIA A. O. IBRU (EXECUTIVE DIRECTOR)
(3) CHIEF KENNETH OBIEKEA (CHAIRMAN MANAGING DIRECTOR)
(4) CERTIFIED TRUE COPY CHIEF REGISTRAR FEDERAL HIGH COURT
LAGOS.
On page 163, which is part of “Exhibit 2” paragraph x elicits an undertaking in these terms: –
“An undertaking to indemnify Oceanic Bank International (Nigeria) Limited of all cost over-runs including exchange rate fluctuations.”
I should observe here that NERFUND was not a signatory to the said Exhibit.
Exhibit “3” refers to “Oceanic Bank sponsored NERFUND assisted project…”
The said Exhibit is signed by Chief (Mrs.) C.A.O. Ibru (Executive Director) and Kola Alyedogbon (Managing Director).
There is also “Exhibit 17″ paragraph x of which stipulates as follows: –
Ox) The Bank shall comply at all times with all conditions and terms stipulated by the NERFUND, and the Bank shall at the instance of the NERFUND provide all such information or documents, ancillary or in support of this and any other loan application or project or enterprise under this programme as shall be required by the NERFUND.” (Pg. 204 A of the records emphasis mine).
The said “Exhibit 17” has as the last sentence, the following: –
“Accepted for and on behalf of Oceanic Bank International Nigeria Ltd.”, Followed by the signatures and names respectively, of Chief (Mrs) Cecilia Ibru as Executive Director and Kola Aiyedogbon as Managing Director – each of whom inserted the date 09/12/94 following their respective names and before their official designations.
Nevertheless, the DW1 Mrs. Chidima H. Okpala, a branch Manager of the Appellant denied any liability by the Appellant. Part of the OW1’s testimony is as follows:-
“… “Exhibit 2″ is the document evidencing the transaction … if is not true that Oceanic Bank was to be the obligor Bank in the transaction …”
It is uncertain, what standard and principle of interpretation the DW1 used to arrive at the conclusion that the Appellant is not the obligor bank in the transaction.
“Exhibit 17” which is the contract document executed by NERFUND has Oceanic Bank as Obligor. The effect of “Exhibit 2” is to re-write “Exhibit 17” but excluding the NERFUND as a party to the transaction. It is like a contract within a contract binding the Respondent to the Appellant.
It is the law that when the words of a statute are clear and unambiguous, they should be given their natural and literal interpretation. (Refer: – Arowolo Vs Akapo(supra), Awolowo Vs Shagari (1979) 6 – 9 SC 79). I am of the respectful view that the provisions of section 1 (a) and (b) and 5 (1) and 5(2) of the NERFUND Act are so clear that no interpretation is necessary.
By incorporating the FUND into “Exhibit 2” as the source of its relationship with the Respondent, the Appellant accepts and is therefore bound by the provisions of the Act establishing the FUND. “Exhibit 2” bears no clause exempting the Appellant from the obligations imposed by the FUND’s Act as a participating bank. The Appellant’s denial of its status as a participating bank is balderdash, untenable and unsupported by the evidence placed before the trial Court. The Appellant has taken one too many steps to fern non-participation in the NERFUND founded project of the Respondent. The main contract document is however “Exhibit 17”.
Rather, the Appellant has failed to keep to its own side of the contact. Inspite of its cumbersome conditions as embodied in “Exhibit 2”, the Appellant never followed through with any of its obligations under the Act and under the main contract “Exhibit 17”.
Did the Appellant frustrate the realization of the project? Yes, it did. This is however frustration in the layman’s sense, not in the legal sense. In law, the Appellant failed to keep to the terms of the contract; it breached the contract. The breach by the Appellant rendered the Respondent impotent to execute the project. The exacerbating consequences of the breach by the Appellant are as captured in the Judgment of the trial Court as follows:- (Pg 154 of the record).
“The evidence of the PW1 which I accept is that the consequences of the failure of the 1st Defendant to open a letter of credit for the Plaintiff to facilitate prompt importation of the machinery, the failure of the 1st Defendant to disburse the funds in accordance with the requirements of Section 5 (2) of the NERFUND Act; and the failure of the 1st Defendant to provide working capital for the project are:-
- Importation of machinery was delayed and clearance of the goods when they arrived was stalled.
- The goods arrived late and at the time the goods arrived the exchange rate had increased from N22 per U.S. $1 to N80 per U.S.$1 and custom duties payable on the goods had been reviewed upwards to the detriment of the Plaintiff.
- The machinery cannot be installed and the project cannot take off with the result that the Plaintiff suffered financial Losses;
- To enable the Plaintiff clear the goods the Plaintiff was forced to obtain a loan from Diamond Bank Plc”.
A breach as a breach to mean a breach of a contract is a breach whether it is called frustration or consternation, it is a breach as in a breach of contract which can be termed as a project, the execution of which is frustrated, stalled by the refusal or failure or neglect of the Appellant to honour its own part of the contract.
In fact terming it frustration is like dressing a mad man in a beautiful dress.
The learned Counsel for the Appellant is right in stating that parties are bound by the terms of the agreement they enter into.
The case of Osumah Vs Edo Broad Casting Service (2004) 17 NWLR (Pt 902) 332 @ 351 cited by the learned Counsel is apposite; parties are bound by the written and express terms of their contract (Refer also: – Total (Nig) Plc Vs Akinpelu (2004) 17 NWLR Pt 903 P509 @ 524). Unfortunately for the Appellant, the contractual document which has the binding seal in law is “Exhibit 17” and not “Exhibit 2”. “Exhibit 17” is the document which was drawn up in terms of the provisions of Section 5 (2) of the NERFUND Act. One has shown severally in the course of this Judgment that the Appellant is neck-deep in its association with the Respondent and the Fund, it cannot therefore recant. The attempt of the Appellant to recast the terms of “Exhibit 17” by absolving itself from all liabilities through “Exhibit 2” is wrong in law and socially irresponsible.
The Appellant stalled the execution of the project which is now plagued with numerous problems due to changes in the market place.
By “Exhibit 17”, which the learned trial Judge terms a “contract with statutory flavour’, the Appellant is the obligor bank in the contract. This fact cannot be denied by the testimony of the Appellant’s sale witness when the contract documents state otherwise.
The responsibility of the obligor bank is well stated in Section 5 (2) of the NERFUND Act and have been reproduced (supra).
It has been shown that the Appellant failed totally to execute its own side of the agreement. By “Exhibit 2”, the Appellant shows that it went into the agreement with a pre-determined intention of not honouring the terms of the contract in “Exhibit 17”.
The learned Counsel for the Appellant has cited the case of Katto Vs CBN (1991) 8 NWLR Pt, 214 Pg.126 @ 147 on the interpretation of the word “shall”. The interpretation given by the Apex Court placed a premium on the “benefit” of the interpretation to be adopted. As used in Section 5 (1) of the NERFUND Act (supra) only the obligatory, the command interpretation makes any sense. Here is a Government determined to improve the economy of its nation. It sets up a National Fund to assist small and medium scale industries to go into production. In marching words with action, it invites banks in Nigeria and investors outside the country to participate in the realization of this objective. A loosely worded legislation would most certainly not advance the attainment of this objective.
I agree entirely with the submission of the learned Counsel for the Respondent on the need to interpret “shall” as conveying a command in the present circumstance.
The further submission of the learned Counsel that the terms of “Exhibit 17” re-enforces the mandatory provisions of Section 5 (1) (a) of the Act is also correct of particular focus is the clause which states that “… The bank shall provide evidence of the availability of working capital for the project.”
It appears, this is a condition precedent for the grant of the NERFUND Act. The Appellant cannot escape responsibility for its actions or lack of it. To uphold this appeal will be tantamount to elevating a fraudulent intent to the ivory tower for an award of a Doctorate degree which is totally unearned.
The law is that the parties cannot by consent, render competent, that which the law declares incompetent. In the circumstance, “Exhibit 17” which is premised upon a statutory provision cannot be jettisoned nor varied by “exhibit 2”. I totally endorse the decision of the trial Court to the effect that the parties are bound due to the presence of a statutory element in the transaction.
Issue Two:
The learned Counsel for the Appellant submits that the trial Court erred in awarding special damages against the Appellant. The reason is that the Respondent had abandoned the head of claim for working capital and the said claim was dismissed.
In the alternative and upon the clause 10 in “Exhibit 2” (Pg.164 of the records) the learned Counsel maintains that special damages have not been proved. The learned Counsel cites the case of Neka BBB Manufacturing Co. Ltd Vs A.C. B. Ltd (2004) 2 NWLR (PL858) 521 @ 540 and Ijebu-Ode Local Government Vs. Balogun and Co. Limited (1991) 1 NWLR (Pt.166) 136.
It is also the contention of the Appellant that the Respondent failed to take steps to mitigate his lost if at all he suffered any lost.
The learned Counsel for the Respondent cited the Appellant’s default and breach which resulted into the damages claimed. These facts maintain the learned Counsel were pleaded and supported by the evidence of PW1. (Refer:- Pg 8, paragraph 23 and pgs 32, 36 – 38 of records). The evidence was neither challenged nor contradicted. The learned trial Judge was therefore right in making the award for damages and the said decision should be upheld, says the learned Counsel. Cited in support of this submission is the case of Nakoju Vs Adeleke (supra) @ 607 D – E.
By paragraphs 1, 2, 3, 4, 5, 6, 7, 8 and 9, the trial Court found as admitted all the facts therein averred. The reason is the failure of the Appellant to specially answer to the positive assertions made in the said paragraphs by the Respondent as Plaintiff.
The main crux of the Respondent’s case before the trial Court is that it suffered damages due to the failure or neglect of the Appellant to release to it within three days as stipulated in Section 5 (2) of the Act, the total loan sum. The Appellant’s sole witness seemed to have suffered from a memory lapse on this point. She could not remember the date.
This is an instance when the scourge of silence negates its virtue; when silence is not golden;
“Silence is the best tactic for him who distrusts himself,” wrote Francois La Rochefoucauld, (1613 – 1680). Also, a writer and novelist: – Elizabeth Bowen (1899 – 1973) declared that:-
“Silence has a climax, when you have got to speak.” Culled from: – “The Heat of the Day.”
The silence of the Appellant, the sudden lost of memory of the DW1, a branch manager and only witness for the Appellant, as to the date on which the loan was released to the Respondent “screams guilty” at the Appellant.
The consequences of the failure gave rise to the damages claimed. The ominous silences of the Appellant on these issues are uncomplimentary and must be held against it.
An award of damages made upon pleaded facts which are supported by unchallenged evidence will not be overturned by an appellate Court (Refer; – Obare Vs Board of Management Eku Baptist Hospital (1978) 6 – 7SC P.5, and Nwa Prints Nig Ltd Vs Investment Trust Co. Ltd. (1988) 5 NWLR Pt 92 P110.
The learned trial Judge has in a well considered and adequately fortified evaluation of the evidence before him, found that the Respondent has suffered damages occasioned by the conduct of the Appellant.
The sole witness for the 1st Defendant who testified as DW1 did not materially contradict the evidence of PW1 in relation to the consequences of the failure of the 1st Defendant to comply with the requirements of the NERFUND Act stated by the PW1 in his evidence.
In making the award of damages. The trial Court reasoned in these terms: –
“If the 1st Defendant had complied with the provisions of Section 5 (1) and (2) of the NERFUND Act, by disbursing The funds as required by the NERFUND Act and providing The Plaintiff with working capital as required by the NERFUND Act and the project was completed within the moratorium Period the Plaintiff should have been earning N1 million as Profit monthly from the end of the moratorium period. To Award the Plaintiff general damages after the award of loss of profit will amount to double compensation.
On the whole the Plaintiffs action succeeds. Judgment is Hereby entered for the Plaintiff against the 1st Defendant In the sum of:-
(A) $2, 848.78 plus interest on the sum of $2.848. 78 at the rate of 4% per annum from 7th February 1995 to today the 5th of April, 2006.
(B) N84 million is loss of profit from July 1996 to May 2005 at the rate of N1 million per month.
I find no perversion in this pronouncement of the trial Court. Right from inception, the Appellant set out to scuttle the realization of the Respondent’s project. It must therefore bear the consequences of its own scheme.
Issue 3
The Appellant as Defendant had filed a Counter-claim before the trial Court. The learned trial Judge dismissed the counter-claim in these terms:-
“The evidence led on both sides show that the project for which the loan was taken by the Plaintiff has not taken off because the 1st Defendant frustrated the project by not complying with the mandatory provisions of section 5(1) and (2) of the NERFUND Act, I think until the project is completed the 1st Defendant which is an obligor adjudged of not having performed its obligation under the loan agreement is not entitled to repayment of the loan until it has performed its obligation under section 5 (1) and (2) of the NERFUND Act. The right of the 1st Defendant, which is not the lender but the obligor in the Transaction to a refund, is predicated on it Having performed its obligations under the NERFUND Act.
Furthermore the law as settled by the authorities is that the usual way of proving a debt and entitlement to interests thereon is by putting in the statement of account or secondary evidence thereof where admissible. See Oforunfemi V Nigerian Educational Bank Ltd. (2003) 5 NWLR (pt. 812) 1 @ page 24-25 and Union Bank of Nigeria, Plc. Vs Sparkling Breweries Ltd. (2000) 15 NWLR (pt. 689) 200.
In Olorunfemi Vs Nigerian Educational Bank Ltd. (supra) the Court of Appeal, per Mustaphar, JCA, as he then was stated at page 24 thus:
“There was no evidence that alpha had charged any penalty. The trial Court was wrong to have inferred that alpha or the Respondent Had charged the penalty. In any event there is no statement of account. The only evidence which one might say is credible is contained in “Exhibit 9″ which put the total indebtedness and interest as at 31/7/1993 at the sum of N724,828 — The usual way of proving a debt is by putting in the statement of account or secondary evidence where it is admissible”.
The learned Counsel submits that the counter-claim was dismissed for the reason that the Appellant had frustrated the project. Counsel maintains that a counterclaim is a cross-action, an independent action which is not part of the original action (Refer: Gowon Vs Iko-okongwu (2003) 6 NWLR P.815 P38 @ 48-49). The learned Counsel argues that the Respondent never led credible evidence to show how the Appellant frustrated the contract. It was also the contention of the learned Counsel that the Respondent had admitted taking the said sums of;-
“(i.) $995,741.22 (Nine Hundred and Ninety Five Thousand, Seven Hundred and Forty One Dollars, Twenty Two) which was used by the Appellant to open Letters of Credit on its behalf.”
There was therefore no need for a formal proof by the Appellant.
Upon the authority of Macaulay Vs NAL MB Ltd (1990) 4 NWLR (Pt 144) 283 @ 308, the learned Counsel submits that in an action to enforce the repayment of a loan, once the Defendant admits the receipt of same, the burden of proof as to re-payment or as to reasons for non-payment is on him.
In response, the learned Counsel for the Respondent submits that the counter-claim is neither sufficiently supported by neither pleadings nor material evidence on record. The burden, maintains the learned Counsel, was on the Appellant to prove every material fact in the counter-claim. Cited in support of this argument are the following cases: –
- Nwadiogbu V Nnadozie (2001) 12 NWLR (pt. 717) 315 @ 330 D-F
- Nwachukwu V the State (2002) 2 NWLR (Pt 751) 366 @ 385 – 386 E-H
- F.C.D.A. Vs NAIBI (1990) 3 NWLR (Pt 138) 270 @ 281 D-E and F-G and
- Adegbite V Ogunfaolu (1990) 4 NWLR (Pt.146) 578 @ 590 B.
It was further the contention of the learned Counsel that the Appellant failed to plead and tender any admissible statement of account in support of the alleged indebtedness. A relief which is not supportted by pleadings and evidence must be dismissed submits the learned Counsel who cited the under listed cases to buttress his submission
- Oluremi Vs N.E.B. Ltd (2003) 5 NWLR (pt 812) 1 @ 24-25 H – A
- N.N.B. Plc Vs Denclag Ltd (2005) 4 NWLR (Pt 916) 549 @ 614D
- Alao V Akano (2005) 11 NWLR (pt 935) 160 @ 180 D-E and
- Egba V Appah (2005) 10 NWLR (Pt.934) 464.
The learned Counsel also raised the issue of a material contradiction in the Appellant’s case. Counsel points out that whereas a Deed of Mortgage which is undated bears the date of execution to be 24/02/98, the evidence on record shows that draw down was sometimes from July 1995. Further, submits counsel, a certificate of Registration of Mortgage or charge is dated 27th June, 1995, a date, earlier than 24th February, 1998. The charge, argues the learned Counsel cannot predate the transaction upon which it is founded. Learned Counsel urges us to hold upon these contradictions, that the alleged Deed of Legal Mortgage, Deed of Mortgage Debenture and Certificate of Registration of Charge are unreliable. The case of Ugo Vs Indiamaowei (1999)13 NWLR Pt 633 P.152 @ 165.
A financial institution which exhibits little or no reverence for documentation and the accuracy of dates cannot be taken seriously and cannot most certainly successfully prosecute a case without supporting its processes with a well kept statement of accounts. In the case of Oluremi Vs NEB Ltd (2003) 5 NWLR Pt 812 P1 @ 24-25, this Court prescribed the manner in which a financial institution should establish a claim:
“The usual way of proving a debt by a bank is by putting in the statement of account or secondary evidence thereof where it is admissible. In the instant case, there was clearly no proof of the loan as required by law.”
The learned Counsel for the Appellant elected the easy way out; in that facts admitted need no further proof. The question to ask is what facts are admitted? The Respondent squarely placed on the shoulders of the Appellant, the failure of the project for which the NERFUND loan was secured with the active participation of the Appellant. Once the loan was secured however, the Appellant embarked on a frolic of its own totally against the objective and purpose of the loan. In the case of AP Ltd Vs Owodunni (1991) 8 NWLR Pt 210 Pg 391 @ 421, the Supreme Court declared that:- “The law will not allow any person to reap any benefit from his own wrongful act. To allow such is manifestly unjust and will portray the law as an instrument of injustice.”
The learned trial Judge found the Appellant culpable for the failure of the project.
His lordship finds no justification in the counter-claim of the Appellant. The reason is that the project which should have yielded the proceeds from which any loan obtained should have been repaid was frustrated by the Appellant. I cannot help but agree with the reasoning of the trial Judge. Herein lies the essence of the statutory “flavour” of the contract between the parties. The Fund was established to assists small and medium scale industries to produce goods. No goods came out or the project under consideration. How can the acclaimed loans be paid up?
I have reviewed the findings and considered the application of the law and decided cases made by the trial Judge. I am unable to agree with the learned counsel for the Appellant that the learned trial Judge fell into any error which has occasioned a miscarriage of justice to the Appellant. It is a trite principle of law that a decision of a Court of competent jurisdiction shall not be overturned if it accords with the pleaded facts and the evidence adduced and the principle of law applicable. (Refer: – 1. Dagaci Dere V Dagaci of Ebwa (2006) 7 NWLR (Pt 979) 386 @ 432 B-C
- Ajiboye V Ishola (2006) 13 NWLR (pt 998) 628 @ 657
- Onisaodu v. Elewuju (2006) 13 NWLR (Pt 998) 517 @ 533 – 534 C-A).
I find no aspect of the judgment to be perverse. In the circumstance I must affirm the decision of the trial Court.
This appeal lacks any iota of merit; it must be and is hereby dismissed.
The decision of the Federal High Court coram Obutu J. pronounced on the 5th day of April, 2006 is hereby affirmed. All the orders made therein are hereby upheld.
A cost assessed at N30, 000.00 is awarded to the Respondent; and against the Appellant.
It is hereby so ordered.
Other Citations: (2008)LCN/2833(CA)
