Rebold Industries Ltd V Mrs. Olubukola Magreola & Ors (2015)
LAWGLOBAL HUB Lead Judgment Report
JOHN INYANG OKORO, J.S.C.
This is an appeal against the judgment of the Court of Appeal, sitting in Lagos, delivered on 17th November, 2007 wherein the court dismissed the appellant’s appeal, primarily on the ground that the respondent herein as plaintiff in the High Court of Lagos State, had locus standi to institute the action to enforce a contractual provision in a Deed of sublease between the appellant and Mandilas Group Limited.
A synopsis of the facts leading to this appeal will suffice. Sometimes in 1995, the service of the Respondent as a firm of solicitors, were retained by the Mandilas Group Limited for the preparation and engrossment of a deed of sublease between the Mandilas Group Limited and Rebold Industries Limited (being the appellants herein). The sublease was in respect of the property known and situate at 7A Creek Road, Apapa, Lagos.
It was a term of the agreement that the appellant would be responsible for the legal fees incurred in preparing the Deed of Lease. The appellant failed to make good the said terms of the agreement.
On the 14th day of May, 1997, the Respondent took out a writ of summons endorsed with a statement of claim against the appellant for the recovery of the said fees incurred in the preparation and engrossment of the deed.
The appellant having failed to respond to the summons of the respondent, a default judgment was entered for the respondent on the 19th of June, 1998.
On 26th day of November, 1998, the Appellant filed a motion before the Lagos State High Court challenging the
jurisdiction of the said High Court on the ground that the respondent lacked the locus standi to have instituted the action in the first place. The High Court dismissed the motion in a ruling pronounced on the 21st day of February, 2000. Aggrieved by the said Ruling, the appellant filed an appeal at the Court of Appeal on 14th May, 2002.
The court below in its judgment dismissed the appellant’s appeal on the ground that even though the respondent was not a party to the Deed of sublease, he still had locus standi to sue on the representation made by the appellant in the agreement to pay the respondent’s fees. Still dissatisfied with the judgment, the appellant has appealed to this court. Notice of appeal which contains four grounds of appeal, was filed on the 17th day of September, 2007. Out of the four grounds of appeal, the learned counsel for the appellant, Dr. Wale Olawoyin, has distilled two issues for the determination of this appeal. The issues are:-
- Whether the Respondent who was not a party to the Deed of sublease had the locus standi to enforce a clause in the sublease which was to his benefit, that is, the payment of professional fees in respect of the preparation of the Deed of sublease.
- Whether the Respondent who was not a party to the Deed of sublease may nevertheless have locus standi to sue in contract by simply showing a sufficient interest or injury to be suffered.
In the Respondent’s brief settled by Jim A. Omoigberale Esq, of counsel, one issue has however been formulated which states thus:
“Whether the Lower Court was right in deciding that the Respondent has the locus standi to sue for the payment of his professional fees in respect of an agreement he prepared between Mandilas Group Limited and the Appellant to which he, (Respondent) is not a party”
Without much ado, it is crystal clear that the two issues distilled by the appellant are but one issue. They both ask the same question to wit: whether the Respondent had the locus to enforce a clause in the sublease when he was not a party thereto. I shall therefore treat appellant’s two issues as one which is in tandem with the respondent’s lone issue. This appeal shall, in the circumstance, be determined based on the said issue.
Learned counsel for the appellant started his argument with the definition of Locus Standi which he states denotes the existence of a right of an individual or a group of individuals to have a court enter upon adjudication of an issue brought before the court by proceedings instigated by the individual or group. He submits that at common law, as a general rule, a contract cannot confer rights or impose obligations on strangers to it. These cases were cited in support: Thomas v. Olufosoye (1986) 1 NWLR (Pt 18) 669, Tweddle v. Atkinson (1861) 1 B & S 303 and Dunlop Pnuematic Tyre Company Ltd. V Selfridge (1915) AC 843.
Furthermore, he submitted that a person who is not a party to an agreement cannot enforce it even if the agreement was made by deed and for his benefit, relying on the cases of Ikpeazu V African Continental Bank Ltd (1965) 1 NWLR 374 at 379. Makwe v. Nwukor (2001) FWLR (Pt.63) 1 at 14, Union Beverages Ltd v. Pepsi Cola Int’l Ltd (1994) 3 NWLR (Pt.330) 1.
Learned counsel submitted that the reliance by the court below on the decision of Okezie, JCA in Shuwa v. Chad Basin Development Authority (1991) 7 NWLR (Pt 205) 55, being a decision of the Court of Appeal, cannot stand in the face of the plethora of authorities of the Supreme Court to the contrary on the issue. Referring to the case of Drive Yourself Hire Company (London) Ltd v. Strutt (1954) 1 QB 250, 271 M – 275 where the revered Lord Denning, while interpreting S. 56 (1) of the English Law of Property Act 1925, suggested that the section should be read as abrogating the doctrine of privity of contract in the case of contracts in writing affecting property, the House of Lords in Beswick V Beswick (1967) 2 All ER 1197 at 1203 – 4, rejected the suggestion and reaffirmed the age long doctrine of privity of contract.
On the other arm of the issue which the appellant calls “issue 2”, the learned counsel for the appellant submitted that Section 6 (6) (b) of the Constitution of the Federal Republic of Nigeria, 1999 (as amended) did not prescribe the basis of locus Standi in all doctrinal cons. He picked holes on the reliance of the Lower Court on the case of Josiah Kayode Owodunmi V Registered Trustees of Celestial Church of Christ & Ors (2000) 10 NWLR (Pt.675) 315 which had restated and reaffirmed the interest/injury test as the yardstick for determining the locus standi of a complainant. He also faulted the reliance on S.16 of the Legal Practitioners Act which the Lower Court held, gave the Respondent locus standi to institute the action. Learned counsel opined that this court in Owodunmi’s case (supra) clearly made a definitive pronouncement on the issue which the Lower Court failed to advert their minds. He also cited the cases of Senator Abraham Ade Adesanya V President of the Federal Republic of Nigeria & Anor (1981) 2 NCLR 358, Olawoyin v. Attorney General Northern Nigeria (1961) A11 NLR 269 and Gamioba & Ors v. Esezil 11 & Ors (1961) All NLR 584.
In conclusion, learned counsel submitted that a person, who is not a party to a contract or deed, does not have a justitiable cause of action in contract. He further stated that a plaintiff who has no privity of contract with the Defendant will fail to establish a cause of action for breach of contract as he will simply not have a locus standi to sue the defendant on the contract. On S. 16 of the Legal Practitioners Act, he submitted that the court below focused on the wrong issue rather than whether the appellant at any point in time instructed the respondent to prepare the Deed of sublease on its behalf so that a contract of service may be so founded. On the contrary, he argued, it was not in dispute that the respondent was instructed by Mandilas Group Limited to prepare the Deed. According to him, there is no nexus between the appellant and the respondent in regard to the payment of his professional fees. He then urged the court to resolve this issue against the appellant.
In response, the learned counsel for the respondent concedes that as a general rule, a contract cannot confer rights or impose obligation on persons who are strangers to it. He however submits that this general principle has been watered down by many exceptions to which he referred to Halsbury’s Laws of England Vol. 9, 4th Edition at paragraphs 335 – 342 for which he cited as common law exceptions in para 336, equitable exceptions in para 339 and statutory exceptions in para 342. He also relies on the case of Chuba Ikpeazu v. ACB Ltd (1965) NMCR 374 at 379.
It is his argument that general principles of law are not applied in the abstract but must be tied down to the peculiar and particular facts of each case in order to ascertain whether they are applicable or whether the particular case falls into one of its recognized exceptions. Learned counsel submits that the facts of this case makes an exception to the general rule; referring to the case of Taofik Disu & 13 Ors v. Alhaja Salifat Ajilowura (2006) 7 SCNJ 134 at 145.
Learned counsel then submitted that the authorities of Owodunni v. Registered Trustees of Celestial Church of Christ (supra) and Senator Adesanya v. President of the Federal Republic of Nigeria (supra) cited by the appellant are very relevant and apposite to the present appeal. It is his view that the issues raised by the appellant especially as to the basis of locus standi in all doctrinal cons are not live issues necessary for the determination of the present appeal. He then urged the court to resolve this issue against the appellant.
In the reply brief filed by the appellant, learned counsel submitted that the instant appeal does not fall under any of the exceptions sought to be relied on by the respondent or any other known exception to the rule of privity of contract. He contended that none of the exceptions to the general rule was proved before the trial court or the court below. Referring to paragraphs 336, 339 and 342 of Halsbury’s Laws of England relied upon by the respondent; he opined that they do not support the case of the respondent at all. It is his further view that Ikpeazu’s case relied upon by the respondent inures to the appellant rather than the respondent. He further urged the court to allow the appeal.
Every appeal or suit filed before a court of law is based and anchored on its peculiar facts and the reliefs sought are not made in vacuum but relate to and derive from the raw facts of the case.
The courts, in their task of determining the rights and obligations of parties are usually guided by the facts adduced before the court and the law applicable thereto. Before a party files a matter in court, he must possess what is called a cause of action which usually is against some person, persons or institutions. That is to say, a plaintiff must show by his pleadings that he has a cause of action maintainable in a court of law against the defendant. He cannot sue just anybody. It must be someone who has wronged him one way or other. You cannot sue someone who has not done you any wrong.
In the instant appeal, there is no doubt that the respondent prepared a deed of sublease in favour of Mandilas Group Limited and the appellant herein. Evidence also shows that it was the Mandilas Group Limited which invited the respondent to prepare the said agreement. There is nowhere in the evidence which states that the appellant herein invited the respondent to prepare the lease agreement. That being the case, why then did the respondent decide to sue the appellant when his legal fees were not paid. Was the appellant his client for which he can sue under Section 16 (1) of the Legal Practitioners’ Act Cap 207 Laws of the Federation, 1990 The Section states:
“16(1) Subject to the provisions of this Act, a Legal Practitioner shall be entitled to recover his charges by action in any court of competent jurisdiction.”
Sub section 3 of Section 16 is also relevant and states:
“16(3). In any case in which a legal practitioner satisfies the court, on an application made either ex parte or if the court so directs after giving the prescribed notice –
(a)That he has delivered a bill of charges to a client and
(b) That on the face of it the charges appear to be proper in the circumstances; and
(c) That there are circumstances indicating that the client is about to do some act which would probably prevent or delay the payment to the practitioner of the charges,
then, notwithstanding that the period mentioned in paragraphs (b) of subsection (2) of this section has not expired, the court may direct that the practitioner be authorized to bring and prosecute an action to recover the charges unless before judgment in the action the client gives such security for the payment of the charges as may be specified in the direction.”
There is certainly no doubt that Section 16(1) of the Legal Practitioners’ Act empowers a legal practitioner to sue for the recovery of his charges. Sub section 3 thereof refers to the practitioner’s “client”. As I stated earlier, was the appellant the client of the respondent There is evidence that it was the Madilas Group Ltd which engaged the respondent to draft the agreement.
The Mandilas Group Ltd appears to be the “client” of the respondent in the circumstance and all processes to recover the charges ought to have been directed to her. Why then did the respondent sue the appellant for the recovery of the charges The simple answer is that clause 2(t) of the sublease agreement provides that the appellant shall pay legal fees or charges of the Lessor’s solicitors. Let me reproduce the paragraph for ease of reference. It state:
“2 We, the Lessee for ourselves and our assigns and to the intent that the obligations shall continue throughout the term hereby created covenant with the Lessor as follows:
(t) To pay the proper scale costs of the Lessor’s solicitors for the preparation, engrossment, stamp duty Registration and Professional fees in respect of this lease and the counterpart thereof.”
The above quotation clearly shows that the respondent was the solicitor of Mandilas Group Ltd. The respondent, based on the above provision decided to sue the appellant for his legal fees.
The question is, under the present state of our jurisprudence on the doctrine of privity of contract, did the respondent possess the locus standi to sue under the agreement. And also, was the court below right to uphold the trial court’s decision that it had jurisdiction to entertain the suit as constituted
I must state clearly that there is in the law of contract what is referred to as privity of contract. It is always between the contracting parties who must stand or fall, benefit or lose from the provisions of their contract. That is to say, their contract cannot bind third parties nor can third parties take or accept liabilities under it, nor benefit there under. See Ogundare V Ogunlowo (1997) 6 NWLR (Pt. 509) page 360, Ikpeazu v. ACB Ltd (1965) NMLR 374-378. Put differently, only parties to a contract or an agreement can enforce it. A person who is not a party to it cannot do so even if the contract was made for his benefit as in this case. See Kano State Oil and Ahmed Products Ltd v. Kofa Trading Company Ltd (1996) 3 NWLR (Pt. 436) 244, Lagos State Development Property Corporation V Nigerian Land & Sea Food Ltd (1992) 5 NWLR (Pt 244) 653, Union Beverages Ltd v. Pepsi Cola International Ltd. (1994) 3 NWLR (Pt.330) 1 and Chukwumah V Shell Petroleum (1993) 4 NWLR (Pt.289) 512.
As far back as 1881, this principle of law that a stranger cannot sue upon a contract entered into between two parties, he not having furnished any consideration for it, was settled. See Tweddle V Arkhinson I. B. & S reported (1881 83) All ER Rep 369. See also Dunlop Pneumatic Tyre Company Ltd v. Selfridge & Company Ltd (1915) AC 847.
Even though it was the respondent herein who was engaged by Mandilas Group Ltd to draft this sublease agreement, he was not a party to the agreement. Not being a party to the agreement, by the well established principle of privity of contract, the respondent had no locus standi to sue under the said agreement.
That is the simple truth in this matter. Let me state for emphasis that only parties to a contract can maintain an action under the said contract. Even where a clause of the contract agreement is made for the benefit of a third patry, the said third party cannot sue under the contract. See Ebhota v. Platean Investment & Property Development Company Ltd (2005) 15 NWLR (Pt.948) 266, All of the Federation v. AIC Ltd (2000) 10 NWLR (Pt. 675) 293.
The learned counsel for the respondent concedes that as a general rule, a contract cannot confer rights or impose obligation on persons who are strangers to it. He had referred to paragraphs 336, 339 and 342 of Halsbury’s Laws of England, Vol. 9, and 4th Edition. I shall briefly examine these exceptions. paragraph 336 relates to common Law exceptions, 339 to equitable exceptions while 442 relates to statutory exceptions. I have read the paragraphs referred to but I am unable to locate the facts of this appeal in any of the exceptions listed above. For instance, as was rightly pointed out by the learned counsel for the appellant in his reply brief, paragraph 336 of Halsbury’s Laws of England (supra) is an exception which touches and relates to the case of an agency relationship between a party to the contract as the principal and a third party as an agent, whereby the principal authorizes the agent to contract on his behalf with a second party. By this paragraph, the agent, though a stranger to that contract which is between his principal and another, would nevertheless assume rights and liabilities personally where among other circumstances, the principal is undisclosed, unnamed or the agent exceeds his authority. This is not the case in the instant appeal and as such, does not apply.
Again, paragraph 339 thereof relates to a situation where a trust is created for the benefit of a third party who was not a party to an agreement containing a promise creating the said trust. In such circumstance, the said third party can enforce the promise against the promisor only if he can show the contracting promisee is a trustee for the 3rd party and that the promise was intended to create a trust and that the third party joins the promisee in the action to enforce the promise. Again, the respondent herein has failed to show why his case should fall within this exception. Finally, none of the statutory exceptions listed in paragraph 342 of Halsbury’s Laws of England has anything to do with the instant case. Accordingly, the said paragraph is inapplicable in this case.
I know that in every general rule, there is always an exception. But such exception has to be properly placed before the court and must be such that will not destroy the general principle which has guided and stabilized contractual relations for a long time irrespective of how one feels about it. In the instant appeal, there is nothing to remove it from the general principle on privity of contract.
On page 212 of the record is the conclusion of the court below in its judgment. It states inter alia:
“The point here is the unique position of the Respondent in the agreement, annexed as Exhibit A2 before the trial court. Clause T therein confers not a benefit but remuneration for consideration already executed, a service already rendered. It would be difficult if the Respondent sought to enforce the agreement because his benefit lies in the fact of the enforcement. Again, the agreement has been executed and both parties have reaped the benefit of the Deed. Herein lies the distinction between this appeal and that of Ikpeazu’s (supra). The Respondent has a locus standi which the trial court competently recognized and acted upon.”
With due respect to their Lordships of the Lower Court, I do not agree. Clause T is part of the agreement between Mandilas Group Ltd and the Appellant herein. The respondent is a stranger to that agreement. Clause T is made for the benefit of the respondent herein. Whether what the respondent is entitled to under the agreement is called “benefit” or “remuneration”, the fact remains that he, not being a party to the agreement, cannot sue under it to claim same. The court below tried to bring in focus the views of Okezie, JCA in Shuwa v. Chad Basin Development Authority (1991) 7 NWLR (Pt. 205) 55 wherein it held that the decision in that case was neither obiter nor in conflict with the decision of this court in Ikpeazu v. ACB Ltd (supra). I think the view of his Lordship in that case was clearly obiter because his conclusion in that case did not justify that position.
It has to be noted that Okezie, JCA, may not have been the only one suggesting that a third party may be able to sue under a contract made for his benefit. In Beswick V Beswick (1967) 2 All ER 1197 at 1203 – 4, the House of Lords, per Lord Reid noted that:
“In Smith V River Douglas Catchment Board, Denning, L. J, after stating his view that a third person can sue on a contract to which he is not a party referred to S 56 as a clear statutory recognition of this principle, with the consequence that Millers case was wrongly decided. I cannot agree with that. In Drive Yourself Hire Company (London) Ltd V Struft, Denning L.J. again expressed similar views about section 56” (Emphasis mine).
All I have tried to say above is to buttress and underscore the fact that the doctrine of privity of contract is deeply rooted in our jurisprudence as much as English Law. The respondent herein, not being a party to the sublease agreement lacked the capacity or locus standi to sue under the said agreement. There was therefore a feature in the suit which deprived the learned trial judge of the jurisdiction to entertain the matter. The feature in the said suit being that the plaintiff (now respondent) did not possess the requisite ground to sue the appellant under the agreement. See Madukolu v. Nkemdilim (1962) 2 SCNLR 341.
The court below was, with due respect, in error to have upheld the decision of the learned trial judge not to set aside the judgment which handed down without jurisdiction. In the circumstance, this issue is hereby resolved in favour of the appellant.
Having resolved the only issue adopted for the determination of this appeal in favour of the appellant, I hold that this appeal is meritorious and is hereby allowed. The judgment of the Court of Appeal which upheld the decision of the trial court is hereby set aside. Accordingly, the judgment of the trial court is also set aside. I make no order as to costs.
SC.259/2007