Andreas I. Koumoulis V. Leventis Motors Limited (1973)

LawGlobal-Hub Lead Judgment Report

UDOMA, J.S.C. 

In this appeal which is against the judgment of the High Court of Lagos State, two issues fall for decision by this court. The first is: on the facts and circumstances of this case as to whether or not the Covenant contained in Clause 6 of the Agreement of Service dated 19th September, 1967 Exhibit A, in the proceedings between the plaintiffs, now respondents, and the defendants, herein appellants, is too wide and therefore unenforceable in law; and the second is: as to whether or not the amount awarded the respondents as damages in terms of the provisions of Clause 8 of the said Agreement is a penalty and therefore unenforceable in law. By their writ of summons in Suit No. LD/204/70 the respondents claimed against the appellants the sum of 1,000(pounds) as “liquidated damages” for a breach of Agreement of Service. There was also a claim for an injunction.

The facts of the case may be summarised as hereunder appearing as the same are not in dispute, the evidence being all one way, the appellant not having given evidence but had rested his case on the evidence given by the respondents.

The respondents are Automobile Engineers and Merchants dealing in motorcars, lorries and spare parts and have their headquarters at Apapa, Lagos. They sell vehicles for which they have agency and are obliged to store large quantities of spare parts for their maintenance. They have branches in different parts of this country but none in other parts of West Africa.

The appellant, who is a spare parts specialist, was employed by and worked for the respondents as a Spare Parts Sales Manager. His employment was regulated by an Agreement of Service. He was recruited specifically from Cyprus by the respondents to serve them in that capacity for a period of two years from the date of his arrival in this country, at the initial salary of 1,500(pounds) with an additional sum of 100(pounds) per annum, described as a consideration for his acceptance of the Covenant contained in Clause 6 of the Agreement of Service aforesaid; and, in the event of a breach thereof, the appellant agreed to pay to the respondents the sum of 1,000(pounds) described in Clause 8 of the said Agreement as liquidated damages.

Pursuant to the Agreement aforesaid, the appellant arrived in this country and entered into the employment of the respondents on 13th November, 1967 at the agreed salary of 1,500(pounds) per annum; and within a short period of time his salary was increased to 1,750(pounds); and finally by the time the appellant resigned his appointment, he was earning the sum of 2,000(pounds) per annum. In addition, he also regularly received the special annual payment of 100(pounds) in consideration of the Covenant in Clause 6 of the said Agreement. While in the employ of the respondents, the appellant was in full charge of sales operation and had full knowledge of the movement of spare parts. As regards the placing of orders for spare parts overseas on behalf of the respondents for vehicles for which the respondents are agents, the appellant dealt directly with LAFRO organisation, one of the suppliers or sellers of spare parts to the respondents, the other being York Trailer Company Limited of the United Kingdom and Blumhardt Trailer and Spare Parts in West Germany. The appellant was also in possession of the respondents’ trade secrets.

Within 400 yards of the business premises of the respondents at Apapa, there is established another company known as the Nigerian Technical Company Limited, which is also engaged in the same line of business as the respondents. The Nigerian Technical Company Limited deals in motor cars and lorries and, especially for the purpose of this appeal, in spare parts of the make and type of cars of which the respondents are agents. During the time the appellant was in the employ of the respondents, it not infrequently happened that the respondents used to buy spare parts from the Nigerian Technical Company Limited. Now both the respondents and the Nigerian Technical Company Limited are competitors or rival in business, and sometimes compete for agencies from Overseas’ Dealers.

The appellant by notice dated 5th December, 1969 resigned his appointment. The resignation took effect on 31st December, 1969.

The appellant left this country on 7th January, 1970 but within three weeks he was back working for the Nigerian Technical Company Limited, in their premises situate as already stated at about 400 yards away from the business premises of the respondents at Apapa.

In the ordinary course of business, the respondents received from the Nigerian Technical Company Limited Exhibits F and G, both of which were signed by the appellant. Exhibit F is a letter. It is headed, “Re: Original Spare parts for ZF Gear Boxes, AK-6-55.” Attached thereto there is what is described as “A Comprehensive List of Spare Parts in ZF and Mercedes Benz Parts Nos. with our Net Prices.” Exhibit G is also a letter. It is headed “Re: Spare Parts for York Trailer.” It reads:-

“We have been advised by York Trailer Co. Ltd., that you placed your order No. NE/7858 dated 11/8/70 for the items which are available ex our Central Stores Department via your London Office.

2 TB 5 Hook

4 T A 20 Bearing Bolt

2 TA 35 Bearing Nut