CORAM

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PARTIES

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PROSPER FUNDS LIMITED APPELLANTS

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1. RAY-MART COMPANY LIMITED2. ENGR. R. O. MARTINS3. TOTAL NIGERIA PLC RESPONDENTS

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AREA(S) OF LAW

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SUMMARY OF FACTS

The appeal is against the judgment of the High Court of Justice of Lagos State, which dismissed the Appellant’s action for a breach of contract in favour of the 3rd Respondent. The case at the court below was instituted by the Appellant against the Respondents wherein it was alleged that the 1stRespondent was awarded a contract by the 3rd Respondent. The 1st Respondent approached the Appellant to finance the contract. Based on the request the Appellant granted a loan of N720, 000.00 to the 1st Respondent in June 2005, to finance the contract and same was guaranteed by the Respondent. The 3rd Respondent was not a party or privy to the contract. When the 1st – 2nd Respondents failed to repay the whole loan, the Appellant sued claiming the balance of the loan in the sum N699, 970.59 at the rate of 7% interest per month from 01.03.06 until the entire debt is repaid plus N104, 995.58, as special damages for breach of contract and N1 million general damages for the same breach of contract. It was the Appellant’s case that a meeting was held in the office of the accountant of the 3rd Respondent which resulted in two letters assigning a portion of 2 Local Purchase Orders (LPOs) of contract money to be paid to the Appellant by the 3rd Respondent before the loan was granted to the 1st Respondent. The 3rd Respondent by the agreement reached at the meeting which was reduced into writing and had its official stamp appended to the two letters, agreed to pay directly to the Appellant the sum of N837, 501.00 as security for the loan together with interest thereon. The sum of money was the proceeds of the two local purchase orders. That the Appellant relied on the agreement to disburse the loan to the 1st Respondent. Later the 3rd Respondent paid part of the money to the 1st Respondent and paid only N443, 690.48 out of the N837, 501.00 to the Appellant, hence the action at the court below which dismissed the case against the 3rd Respondent. The Appellant has filed this appeal against that decision.

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HELD

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Appeal Dismissed

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ISSUES

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None

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RATIONES DECIDENDI

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CONTRACT OF GUARANTEE OR SURETYSHIP – MEANING OF CONTRACT OF GUARANTEE OR SURETYSHIP

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“Now a contract of guarantee or suretyship is a distinct and separate written contract from the main contract of debt between the borrower where a person personally guarantees or undertakes to be answerable or responsible for the debt, liability or obligation of the debtor or borrower in the event the principal debtor fails, neglects or is unable to repay the debt and is enforceable by the creditor against the guarantor/surety without prior demand against the guarantor/surety and without first proceeding against the principal debtor and/or without the necessity of joining the principal debtor in the proceedings to enforce the same vide Dragetonos Construction (Nig.) Ltd. v. FAB Madis Ventures Ltd. and Ors. (2011) 16 NWLR (pt. 1273) 308, Chami v. U.B.A. Plc (2010) 6 NWLR (pt.1191) 474 following Olujitan v. Oshatoba (1992) 5 NWLR (pt.241) 326 at 329, Ekereba v. Efeizorma II (1993) 7 NWLR (pt.307) 588 at 601, Moschi v. Lep Air Service Ltd. (1973) AC 331 at 348, Esso Pet. C. Ltd. v. Alastonbridge Properties (1975) WLR 1474 and Chitty on Contracts, 24th Edition vol.2 paragraph 4831. See also South Trust Bank and Ors. v. Pheranzy Gas Limited and Ors. (2014) 16 NWLR (pt.1432) 1 at 34 – 35, Nwankwo and Anor. v. Ecumenical Development Co-operative Society (2007) 5 NWLR (pt.1027) 377 at 410”.

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CONTRACT OF GUARANTEE – PARTIES IN A CONTRACT OF GUARANTEE – WHEN DOES THE LIABILITY OF THE GUARANTOR ARISES?

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It was added by the Supreme Court in the case of Fortune International Bank Plc v. Pegasus Trading Office (GmbH) and Ors. (2004) 4 NWLR (pt.863) 369 at 389 following Africa Insurance Development Corporation v. Nigeria Liquefied Natural Gas Ltd. (2000) 4 NWLR (pt.653) 494 that there are three parties in a contract of guarantee namely the creditor, the principal debtor and the secondary debtor or guarantor; and that the liability of the guarantor arises either where the guarantor may not primarily undertake to discharge the liability but only if the principal debtor failed in his obligation in which case the principal debtor has to default before the liability of the guarantor would arise; or the guarantor by his undertaking makes himself the real debtor in which case the principal debtor drops out and the guarantor replaces him and becomes solely liable for the debt or obligation. It is thus an assurance that a contract or legal act will be carried out.” –

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DOMICILIATION ARRANGEMENT-WHETHER A DOMICILIATION ARRANGEMENT IS THE SAME AS A CONTRACT OF GUARANTEE

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“In my considered opinion, a domiciliation arrangement is not the same as a contract of guarantee. A domiciliation arrangement is a way of reducing risk and has an assurance that a third party who has agreed to domicile the payment due to the person entitled to the payment will not pay the money directly to the said person but to the person that person is indebted to. A domiciliation arrangement may not specify when the payment will be made. It does not also release the debtor from his primary obligation to pay back the loan to the lender at the agreed time. And the person who agrees to domicile the payment is not a party to the loan agreement such that the lender can sue him on the agreement as he would under the contract of guarantee vide Peter Tiwell Nig. Ltd. and Anor. v. Inland Bank Nig. Ltd. v. A.-G., Bauchi State and Anor (1997) 3 NWLR (pt.494) 408 at 419.” –

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ASSIGNMENT –MEANING AND NATURE OF ASSIGNMENT

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“There is the illuminating case of Julius Berger Nigeria Plc and Anor. v. Toki Rainbow Community Bank Ltd. (2010) 9 NWLR (pt.1198) 80 at 105 – 111 where the Court (coram: Garba, Abdullahi and Kekere-Ekun JJ.C.A.) held per the incisive lead judgment prepared by his lordship Garba, J.C.A., (which I gratefully copy at length below) that –
“ In the ordinary and every day English Language which the parties to this appeal used in the transactions leading to the dispute between them, assignment means to give something to some body for their use or benefit. It also may mean to transfer rights, property or title from the person/s legally entitled to them to some body else for their benefit. See page 61 of the Oxford Advanced Leamer’s Dictionary (of Current English) 5th edition by A.S. Hornby. In this context, a person/party legally entitled to property has the exclusive authority and power to give or transfer them to somebody else in any manner permitted by law. That can be done either directly or by proper directives to that effect. This meaning of assignment is not far from the connotation of the word in law as defined in Black’s Law Dictionary 6th Edition; page 119 as:
“The act of transferring to another all or part of one’s property, interest or rights”.
From the above definitions it is clear therefore that a person entitled to any rights, benefits, interests or title to property can validly transfer them to another who will thereupon be entitled thereto. …. what in law are the essential requirements which make an assignment of such benefits, interests or title to property effective? Speaking generally, they include:-(l) ownership of or entitlement to the benefits, interest, rights or title to property by the assignor; (2) the absolute transfer in writing of such benefits, interests, rights or title to property to person/named therein; (3) Where, as in the present appeal, the benefits, rights and interests are in possession or custody of 3rd party there is the requirement that the assignor should notify that 3rd party in writing of the assignment. See Chitty on Contracts Vol.1 paragraph 19 -007 at page 1 J 66, Halsbury’s Laws of England, 4th edition, volume 6 paragraph 12 at page 9.
It is, however, to be noted that no particular form or mode is prescribed or required by law for a legal assignment as long as the assignor absolutely and unequivocally indicates the transfer of the benefit, interest or title to the assignee. Once the above requirements are met, an assignment will be effective in law and the assignee would be entitled to the subject of the transfer and a claim thereto. The subject of the assignment in this appeal are the benefits or interest in a contract.
It is applicable in our legal and judicial systems. Under the common law, a debt or other legal thing in action includes the benefit of a contract or a debt arising out of contract from which payment was to be made at a future date. Such debt is capable of being assigned under section 136 of the Law of Property Act 1925. See Brice v. Bannister (1978) 3 Q. B.D. 569, James v. Humphreys (1908) l.KB. 10; Contrast Law v. Coburn (1972) 1 WLR 1238. Furthermore, is was held that the benefit of a contract is only assignable in cases where it can make no difference to the person on whom the obligation lies to which of two persons he is to discharge it. Tolhurst v. Assoc Portland Cement Manufacturers Ltd. (1902) 2 K.B. 660 at 668, (1903) A.c. 414. A party to a contract can in equity also assign a contractual right in one of two ways (a) he can inform the assignee that he transfers the chose to him or (b) he can instruct the debtor to discharge the obligation by payment to or performance for, the assignee. Thus an agreement by traders or merchants with a bank that payment for goods sold by them should be remitted direct by the purchasers to the Bank has been held to constitute a valid equitable assignment of the amount to the Bank. Brandts Soils & CO. v. Dunlop Rubber Co. (1905) A.C. 454.
Generally, however, a mere direction by a creditor to his debtor to pay money to a third party is not necessarily an assignment unless the instructions can be said in their context, to amount to an irrevocable mandate to the debtor. See Curran v. Newpark Unemas Ltd. (1957) I All E.R. 295, British Eagle Int’l Airlines Ltd v. CIE National Air France ( 1973) 1 Lloyd’s Rep. 414 at 427.
Another principle of the common law on assignment in that an assignment made by letter is complete as soon as the letter is posted to the assignee as was held in the case of Alexander v. Steinhardt Walker & Co. (1903) 2K.B. 208.”
In other words, assignment is an agreement binding the conscience of the assignor addressed to the debtor to pay to the assignee the debt owed the assignor.” –

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FINDINGS OF FACT- ATTITUDE OF THE APPEALLATE COURT TO FINDINGS OF FACT SUPPORTED BY EVIDENCE

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“Findings of fact supported by evidence as in this case should not be disturbed as they have not led to a miscarriage of justice, nor perverse, nor unreasonable, and are within the exclusive arena of the court below as the trial court which had the singular opportunity of seeing and watching the demeanour of the witnesses while testifying in the witness-box vide Ebba v. Ogodo (1984) 1 SCNLR 372 at 378 – 379, Ikpezu v. Ndem (1991) 6 NWLR (pt. 196) 229, Akpan v. Utin (1996) 7 NWLR (pt. 463) 634 at 664, Ibrahim v. Barde (1997) 9 NWLR (pt. 474) 513, Abasi v. Onido (1998) 5 NWLR (pt. 548) 89 at 104.” –

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CASES CITED

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Not Available

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STATUTES REFERRED TO

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Not Available|

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CLICK HERE TO READ FULL JUDGMENT

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