Akinwunmi O. Alade V Alic (Nigeria) Limited & Anor (2010) LLJR-SC

Akinwunmi O. Alade V Alic (Nigeria) Limited & Anor (2010)

LAWGLOBAL HUB Lead Judgment Report

SULEIMAN GALADIMA, J.S.C

The Appellant as Plaintiff sued the Respondents as Defendants jointly and /or severally at Oyo State High Court, Ibadan claiming as follows:

“The sum of N3,296,528.08 (Three Million, two hundred and Ninety-six thousand five hundred and twenty eight Naira eight kobo) as particularized hereunder being damages suffered as a result of the 1st defendant’s breach about March, 1988 of partnership agreement entered into in Ibadan between the Plaintiff and the 1st defendant on 1st July, 1987, and which breach was masterminded, procured and instigated by the 2nd defendant as agent of the 1st defendant in fraud (sic) of the plaintiff.”

In proof of his case, the Appellant called four witnesses and testifying himself as the fifth witness. He tendered six exhibits that is, Exhibits “P1 – P6.” On the other hand the Respondents, in defence of the suit, called three witnesses. The 2nd Respondent testified as the 4th witness Three Exhibits, D1-D3 were also tendered.

At the end of the trial the learned trial Judge entered judgment in favour of the Appellant and against the Respondents jointly and severally for:-

1. The refund of loan capital of N240,000.00 procured for the 1st defendant and guaranteed by the Plaintiff through Marine and General Insurance Company Limited.
2. The sum of N70,000.00 (Seventy thousand naira) being the Plaintiff’s 40% agreed share of profits on business transacted with Kopek Limited between 1st December, 1987 to 18th February, 1988.
3. 10% compound interest per annum on the N240 000.00 loan obtained from IBWA from 1988 up till today 10th June, 1991 and 5% interest thereafter until the total sum is paid.
4. Claim for damage is dismissed.”

The counter claim of the respondents was dismissed.

The respondents being dissatisfied with this judgment, appealed against same to the Court of Appeal, Ibadan Division on eight grounds.

The Court of Appeal in a unanimous decision set aside judgment of the trial Court and dismissed the Appellant’s claims.

The Appellant was not satisfied; he has come on further appeal to this Court on three grounds. The parties have through their Counsel filed and exchanged their briefs of argument. In the Appellant’s brief of argument prepared by Babatunde Kasunmu Esq., the following two issues were formulated for determination:

“1. Was the Court of Appeal right in dismissing the appellant’s claim against the Respondents

(a) having earlier held, that the Plaintiff’s claim in special damages for loss of profit was particularised and proved and

(b) having allowed the respondent’s appeal in part by virtue of (a) above,

2. Whether the Respondents, can be held jointly and severally liable for damages occasioned as a result of a breach (fraudulent or otherwise) of the partnership agreement between the Appellant and the 1st Respondent”

On behalf of the Respondents Omokayode A. Dada Esq. formulated the following three issues for determination in the Respondents brief filed on 22nd October, 2009.

1. Whether having regards to the fact that the Court of Appeal allowed the appeal in part, it was right for the appellant’s claims to be dismissed in its entirety (Ground 1 of the Notice of Appeal)
2. Whether the Court of Appeal was justified in law in holding that the Appellant did not prove beyond reasonable doubt allegation of fraud against the 2nd Respondent (Ground 2 of the Notice of Appeal)
3. Whether the Respondents can be held liable jointly and severally for damages allegedly suffered by the Appellant arising out of breach of Partnership agreement between the Appellant and the 1st Respondent’ (Ground 3 of the Notice of Appeal)

Let it be noted that the learned counsel for the Appellant having been served with the Respondent’s brief, went further to file a reply brief

On 28th September, 2010 this appeal was heard. Learned Counsel for the parties adopted their briefs of argument while the Learned Counsel for the Appellant has urged this Court to allow the appeal learned counsel for the Respondents, on the other hand, has urged us to dismiss the appeal.

In my consideration of the appeal, I am of the view that Appellant’s two issues would suffice to dispose of the appeal, I shall therefore proceed hereafter, shortly to consider the Appellant’s two issues. It is however, necessary that the facts leading to the dispute, out of which this appeal arose, be carefully examined and exposed. I have already set out the Appellant’s claim. A summary of his claim, as can be gleaned from the pleadings, is that he entered into a partnership agreement with the 1st Respondent to trade on produce for the 1987/88 season. The profit accruing from the partnership was to be shared between the Appellant and the 1st Respondent on a 40% and 60% basis, respectively. For this reason, the Appellant procured a loan of N240,000.00 from the international Bank for West Africa(IBWA)for the 1st Respondent for the take off of the partnership. The loan was guaranteed by the Marine and General Insurance Company Limited upon an Indemnity given by the Appellant to the Insurance Company. It is the Appellant’s case that the 2nd Respondents thereafter fraudulently failed to disclose the 1st Respondents prior indebtedness to the International Bank for west Africa and this consequently resulted in a substantial sum of loan procured to be deducted from the 1st Respondent’s account which it once deposited with the bank. There was further diversion by the Respondents of the sum of N453.584.50 into the 2nd Respondent’s account and non-disclosure of the sum of N165,000.00 from a produce purchaser under the partnership.

The Appellant further claimed that the profit, which occurred to the partnership was over N1,000,000,00 (One Million naira only) and that his 40% share of the profit was therefore N436,649,44.

Due to the above facts and inability of the Appellant to realize anticipated profit, the Appellant filed an action for damages.

On their part’ the Respondents filed their statement of defence and counter claimed for the sum of N25.000.00 being moneys obtained from the 1st Respondent on account at his request and which sums were never retired to the Accounts or refunded to the 1st Respondent.

On the 1st issue learned counsel for the Appellant has noted that the learned trial judge entered judgment in favour of the Appellant for N70,000.00 being his share of the profit. It is therefore submitted that having answered this issues in favour of the Appellant the court below should have therefore upheld the judgment of the learned trial judge on profit as contained in the second order of that court at page 67 of the Record. Learned counsel has urged this court to hold that the court below was wrong on dismissing the Appellant’s claim against the Respondents, particularly the 1st Respondent after having held that the Appellant’s claim in special damages for loss of profit was particularized and also having, by virtue of this, allowed the Respondents’ appeal in part only.

On the second issue learned counsel for the Appellant has submitted that the trial court has rightly formulated the issue for determination at page 60 of the record thus: “(a) Whether or not the joining of the second defendant as a party is proper having regard to the basis of agreement by the parties,” but the court below, that is, the Court of Appeal was wrong in formulating a general issue not related to the Appellant’s claim nor to the surrounding circumstance of the case. It is submitted that the 2nd Respondent can be held liable in damages for instigating the 1st Respondent’s breaching of Exhibit. P.5, the “Partnership Agreement.” Relying on the Appellant’s claim at pages 2 and 6 of the record of appeal, learned counsel has contended that the Appellant was claiming damages as a result of the 1st Respondent’s breach of Exhibit 5 which was master-minded, procured and instigated by the 2nd Respondent. He therefore, submitted that the Court below was in error when it held that the Appellant did not prove the allegations of crime against the 2nd Respondent beyond reasonable doubt by law and that he was not a party to the partnership agreement and, could not be held liable on it. It is further submitted that the Court below did, not appreciate the Appellant’s claim, which is not that the 2nd Respondent was liable on the Exhibit. P.5, partnership agreement, but that he should be equally liable for damages for the breach as he instigated and masterminded it. Learned Counsel argued further that even if the Court below was right that the fraud pleaded was not proved beyond reasonable doubt, evidence has been led by PW4 in support of the Appellant” averments and this is enough to prove that the terms of Exhibit 5 were breached and that the 2nd Respondent was the instigator of the breach.

As I have noted above the Respondents brief of argument dated on 21st October, 2009 was filed on 22nd October, 2009. This was in response to the earlier Appellant Brief dated 21st day of October, 2002 but filed on 1st November, 2002. I must however’ put the record straight. Appellant’s motion on Notice dated 19th day of February, 2010 for an order to amend his brief was filed on 1st March, 2010. It was heard on 6th May 2010 and granted. The brief was accordingly deemed filed on that date. Whilst the Appellant’s brief filed on 1st November, 2002 contains 3 issues the one deemed filed on 6th May, 2010 has 2 issues. The Learned Counsel for the Respondents responded to the appellant’s earlier brief of 1st November, 2002 not the amended brief deemed filed on 5th May, 2010. It would be recalled that when this matter came up for hearing on 10th December, 2009, the Appellant sought to amend his brief orally by abandoning issue 2, argued in the brief. This court refused counsel oral application and advised that a formal application be made, Hence, the Appellant’s application of 1st March, 2010, as granted, and the brief deemed filed, does not contain issue 2 in the old brief. In effect, the Respondents, in my opinion, did not respond to the Appellant’s amended brief of argument deemed filed on 6th May, 2010. I am therefore bound to consider the Appellant’s two issues raised in his amended brief of argument. I shall take the two issues serially.

On the first issue. This issue is to determine whether the Appellant particularised and proved his claim in special damages on the profit due to him. The Court below considered and determined this issue in favour of the Appellant. It is worthy to note that the trial court entered judgment in favour of the Appellant for N70,000.00 being his share of the profit. It is to be further noted that the court below in its judgment decided this issue in favour of the Appellant. This court, therefore, having decided this issue in favour of the Appellant, it should have upheld the judgment of the trial court on profit as contained in the 2nd order of that Court thus:

‘The sum of N70,000.00 (Seventy Thousand Naira) being the Plaintiff’s 40% agreed share of Profits on business transacted with KOPEK Limited between 1st December, 1987 to 10th February, 1988.”

In my respectful view, the Court below erred in dismissing the Appellant’s claim against the Respondents, particularly the 1st Respondent, after having held that the Appellant’s claim in special damages for loss of profit was particularized and also having, by virtue of this, allowed the Respondents’ appeal in part.

ISSUE TWO: This is whether the Respondents can be held jointly and severally liable for damages occasioned as a result of a breach of the partnership agreement between the appellant and the 1st Respondent. It is trite law that a person who is not a party to a contract cannot be held liable. I have earlier held that the 1st Respondent can be held liable for a breach of the partnership agreement expressed in Exhibit p.5. With respect to the 2nd Respondent however, he can equally be held liable in damages for instigating the 1st Respondent’s breach of Exhibit 5. By virtue of the Appellant’s writ of summons and the statement of claim, the Appellant was claiming damages as a result of the 1st Respondent’s breach of Exhibit 5, masterminded and instigated by the 2nd Respondent. The law is that he who asserts must prove, The language of S.135 (1) of the Evidence Act’ Chapter E 14 LFN, 2004 is that whoever desires any court to give judgment as to any legal right or liability, dependent on the existence of fact which he asserts, must prove that those facts exist: See ADEGOKE v ADIBI (1992)5 NWLR (pt.242) 410 AMODU v AMODE (1990) 5 NWLR (pt.150)356. The Appellant has the burden to prove the allegation of 1st Respondent’s breach of Exhibit 5 and also that the 2nd Respondent masterminded the said breach. It is my respectful view that the court below erroneously held that the Appellant did not prove the allegation of crime against the 2nd Respondent beyond reasonable doubt as provided by law and that he was not a party to the partnership agreement and could not be held liable on it. It would appear that the court below failed to appreciate the Appellant’s claim. He never claimed that the 2nd Respondent was liable on the partnership agreement because he was a party to it, but that because the 2nd Respondent masterminded and instigated the breach and as result of this he was equally liable in damages. It would appear to me that the Appellant’s stance as it related to the breach of partnership agreement is that even if he did not prove the allegation of crime beyond reasonable doubt which is not conceded, there was still sufficient evidence, (not necessarily related to fraud or crime to establish the Respondents’ breach of the partnership agreement. Relating his stance to the breach, the Appellant refers to clauses 1 and 2 of Exhibit P.5. They provide thus:

“(1) Alic (Nig.) Limited and Mr. Akinwunmi Olagoke Alade shall maintain a proper and comprehensive system of account of all financial transaction between the parties.

(2) All incidental expenses incurred in the normal course of business shall be charged to the operational cost.”

The Appellant at paragraph 5 and 6 of his statement of claim and in his evidence maintained that the sum of N240,000.00 was procured for the purpose of the partnership business, which he was to use for the 1987/1988 produce season which ran from December, 1987 to February, 1988. Appellant has shown that the Respondents did not disclose that they owed their bank certain sum of money which resulted in the deduction of N83, 188.99 from the initial capital’ The Respondents’ failure to account for the financial transactions gave rise to the institution of the suit. It is not disputed that the sum of N240.000.00 was raised for the take off of the partnership business; but it was contended that an outstanding debt was deducted from this sum, leaving a balance of 117,000.00. They further maintained that after a number of expenses were made the actual sum for the take off of the produce trade from August – February was N71, 840.00. Further, evidence of thefts, expenses and losses sustained by the Respondents was given to show that they did not make any profit. However, PW2, the Manager of KOPEK Limited the company that purchased produce from the 1st Respondent during the relevant period tendered Exhibit “P1” showing the magnitude of the 1st Respondent’s sales. Furthermore, PW3 an accountant, commissioned to examine the transaction between the 1st Respondent and the Appellant tendered Exhibit D.3, the Report of Revenue Accounts of the 1st Respondent between 1st July, 1987 and May 31st, 1988; but as it can be seen later, the trial court rightly disregarded Exhibit D3.

After my careful perusal of the terms of the Partnership

Agreement, Exhibit P.5, accountability, in view, is germane to the said Agreement, the absence of which has occasioned a fundamental breach of the terms of the agreement. Lack of accountability has made it impossible for the parties to know the financial situation of the partnership business. While the Appellant stated that 1st Respondent’s bank, as a result of undisclosed prior debt, deducted the sum of N83,000.00, the Respondents pleaded a deduction of N123,000.00 (Refer paragraph 6 of the statement of claim and paragraph 23 of the statement of defence, All considered from the totality of the evidence before the Court below there was no clear, proper and comprehensive system of account of all financial transactions between the parties. No scintilla of evidence that the deducted sums claimed by the Respondents that brought the capital to N171,000.00 were incidental expenses incurred in the normal course of business.

The 2nd Respondent held a very responsible position of the Managing Director of the 1st Respondent, charged with the burden of rendering proper accounts of the business. Not satisfied with the whole scenario the learned trial Judge stated thus:

“The other point in issue is that up till now, there has not been audited account of Alic (Nig.) Limited whose day to day activities are solely managed by its Managing Director, Mr. Ladipo Falemu (the second defendant). How then does he know the state of the accounts of the Company Albeit, there I have painstakingly high lighted his misgivings in the whole episode. He must therefore, be ready for the consequences of his act.” (see page 63 of the Records).

The trial Court further observed at P.65 of the Records thus:

“On relief (a)(ii), the Plaintiff claims 40% agreed share of profit on the business transacted with KOPEK Limited between 1st December 1987 and 18th February, 1988. This claim is in consonance with the Partnership agreement – Exhibit p.5. The first dependent Alic (Nig.) Limited … has not declared any profit but neither has it declared any loss. It has failed to produce the audited balance sheet of the trade transaction … The presumption therefore, is that if it had produced it, it might not have been favourable to him. This is in view of the section 148 (d) of the Evidence Act which deals with the failure to produce evidence …”

In the light of the foregoing, having regard to the failure of the 1st Respondent to comply with the terms of Exhibit P5, it should be liable for damages. Also contrary to the provisions of the term contained in the said Exhibit P.5, the 1st Respondent did not declare or share the profit that accrued from the transaction despite the clear evidence adduced on this.

I agree with the learned counsel for the Appellant when he submitted that the 2nd Respondent can still be equally liable for damages, for the breach of partnership agreement because he masterminded it. Proof of the fraud was given in the testimony of PW4 at pages 28 – 29 of the Records in support of the averments of the Appellant in his pleadings’ Proof of this needs not be beyond reasonable doubt. The testimony of PW4 was not controverted by the Respondents it must be accepted and given full effect: KANO ILE PLC v G & H (NIGERIA) LTD. (2002) 2 NWLR (Pt.751) page 420 pt 429. One of the occasions when the veil of incorporation will be lifted is when the Company is liable for fraud as in the instant case. In FDB FINANCIAL SERVICES LTD. v ADESOZA (2002) 8 NWLR (Pt. 668) 170 AT 173, the Court considering the power of a Court to lift the veil of incorporation held thus:

“The consequences of recognizing the separate personality of a company is to draw a veil of incorporation over the Company. One is therefore generally not entitled to go behind or lift this veil. However, since a statute will not be allowed to be used as on excuse to justify illegality or fraud it is a quest to avoid the normal consequences of the statute which may result in grave injustice that the Court as occasion demands have to look behind or pierce the corporate veil.”

See further ADEYEMI v LAN & BAKER (NIGERIA) LTD. (2002)7 NWLR (pt.663) 33 at 51.

A party should not be allowed to benefit from his own wrong.

This is encapsulated in the Latin Maxim “nullus commodium capere potest de injuria sua pria.” It is abundantly clear that the 2nd Respondent was responsible for the management of the 1st Respondent Company and on him fell squarely the responsibility of rendering proper accounts of the partnership business on behalf of the said 1st Respondent. It was as a result of this that the trial court rightly looked beneath the facade and lifted the veil of incorporation to discover the thread that ties the 1st Respondent and the 2nd Respondent together as parties in conspiracy to commit fraud and committing that fraud. The 2nd Respondent is therefore jointly and severally liable with the 1st Respondent to make good all sums improperly paid out or accrued due to his failure to exercise the care necessary in the running of the 1st Respondent.

It is for this reason the Court below should have held the 2nd Respondent also liable with the 1st Respondent for breach of Exhibit p5; not because he is a party to it but because the veil of incorporation was lifted and he was found to be the one who masterminded the breach of the Partnership agreement.

It is in the light of the above this appeal succeeds. The judgment of the trial court is confirmed while I set aside that of the Court below.

I assess and award costs of N50,000.00 in favour of the Appellant but against the Respondents.

SC.169/2001