S. O. N. Okafor & Sons Ltd V. Nigeria Housing Development Society Limited & Anor (1972)
LawGlobal-Hub Lead Judgment Report
SIR I. LEWIS, J.S.C.
In Suit 0/136/63 in the Onitsha High Court it was given in evidence that the Plaintiffs had on the 10th of September, 1960, entered into an indenture (Exhibit E) with the 1st Defendant in respect of land with buildings thereon numbered as Plot 21 within the Nkissi Road layout in the Government Residential Area, Onitsha, and the parts of that indenture material to this appeal read as follows:
“THIS INDENTURE is made the 10th day of September, 1960 BETWEEN STEPHEN OKOYE NZEMALI OKAFOR & SONS LIMITED WHOSE REGISTERED OFFICE IS AT 42A, OGUTA ROAD ONITSHA, EASTERN REGION OF NIGERIA. (hereinafter called “the Borrower”) of the one part and NIGERIA HOUSING DEVELOPMENT SOCIETY LIMITED whose registered office is at Akuro House, 5 Custom Street, Lagos (hereinafter called “the Nigeria Building Society”) of the other part. WHEREAS:
(A) The Borrower is entitled to the leasehold land and premises described in the Schedule hereto (hereinafter called “the mortgaged premises”) for the unexpired residue of the term of years created by the lease (hereinafter referred to as “the lease”) mentioned in the said Schedule, subject to the yearly rent and to the covenants on the part of the Lessee and the conditions by and in the Lease reserved and contained.
(B) The Nigeria Building Society at the request of the Borrower has agreed to advance to the Borrower the sum of 11,330pounds (Eleven Thousand Three Hundred and Thirty Pounds), of which the sum of 10pounds (Ten pounds) is payable on the execution hereof and the balance shall, subject to hereinafter provided, be paid in accordance with the provisions hereinafter appearing upon having the repayment thereof together with payment of interest thereon secured in the manner hereinafter appearing:
NOW in pursuance of the said agreement and in consideration of the sum of 10pounds (Ten Pounds) paid by the Nigeria Building Society to the Borrower (the receipt whereof the Borrower hereby acknowledges) (and in consideration of the Covenant by the Nigeria Building Society hereinafter contained for making further advances.
THIS INDENTURE WITNESSETH:
1. The Borrower covenants with the Nigeria Building Society to pay to the Nigeria Building Society on the 10th day of March, 1961 the said sum of 10pounds (Ten Pounds) with interest thereon at the rate hereinafter prescribed from the date hereof AND ALSO to pay to the Nigeria Building Society the money which shall hereinafter be advanced to the Borrower pursuant to the covenant for that purpose hereinafter contained on the 31st day of December or the 30th day of June which next happens after the date of the advance, with interest thereon at the rate hereinafter prescribed from the date of each advance. AND ALSO so long as any principal money remains due hereunder after the date for payment thereof (and whether or not any order or judgment in respect thereof has been obtained) to pay to the Nigeria Building Society on the last day of every month interest calculated in the manner hereinafter appearing at the rate hereinafter prescribed.
2. The Borrower as Beneficial Owner hereby grants and demises unto the Nigeria Building Society ALL the mortgaged premises TO HOLD UNTO the Nigeria Building Society for the residue of the term granted by the Lease except the last three days thereof, but subject to the proviso for redemption hereinafter contained.
3. PROVIDED ALWAYS that on payment on the date hereinbefore fixed for payment thereof by the Borrower to the Nigeria Building Society of the principal sum hereinbefore convenanted to be paid with interest thereon from the date aforesaid at the rate hereinafter prescribed the mortgaged premises shall at the request and cost of the Borrower be duly surrendered to him.
4. The Nigeria Building Society hereby covenants with the Borrower that the Nigeria Building Society will, unless the power of sale applicable hereto shall have become exercisable, advance to the Borrower the balance of the said sum of 11,330 (Eleven Thousand Three Hundred and Thirty Pounds) in one sum or by instalments if and when the Nigeria Building Society is satisfied that the state of the mortgaged premises justifies the advance.
5. (1) Subject to the provisions of clause 6 hereof, if the Borrower pays to the Nigeria Building Society on the 10th day of October, 1960 and on the last day of every succeeding month the sum of 143:19:9d (One Hundred and FortyThree Pounds Nineteen Shillings and Nine Pence) until the whole of the principal money hereby secured and interest calculated in accordance with clause 6 hereof has been fully paid, and if there shall not have been any breach of any obligation, statutory or otherwise, binding on the Borrower or of any of the covenants, whether express or implied, herein contained and on his part to be observed and performed (other than the covenants in clause 1 herein for payment of the principal money and interest thereby secured) than the Nigeria Building Society shall accept payment of the principal money and the interest thereon by instalments at the times and in manner aforesaid, and will not require payment of such Principal money otherwise than by such instalments.
(2) Notwithstanding the provision for the payment of the principal money thereby secured by instalments, but without prejudice to that provision, such principal money shall be deemed to become due within the meaning of the Conveyancing and Law of Property Act 1881, and for all the purpose of that Act, on the date or dates prescribed by clause 1 hereof’.
Interest was subsequently provided for at the rate of 81/1 per annum.
The 1st Defendants had advertised the property in question, and to which Exhibit “E” pertained, for sale and paragraphs 8, 9, 10, 11 and 18 of the Statement of Claim read:
“8. By an Indenture dated the 10th day of September, 1960, the 1st Defendant agreed to advance the Plaintiffs, the sum of 11,330(pounds) to enable the Plaintiffs complete the building and made initial payment of 10(pounds) to the Plaintiffs. The Plaintiffs will rely on this agreement at the trial.
9. For this consideration of 10(pounds) and a covenant to pay the balance on instalmental basis, if and when the state of the mortgaged premises justifies the advance, the Plaintiffs mortgaged 21 Nkissi Road, Onitsha to the 1st Defendant, with a covenant by the Plaintiffs to pay 143.19 .9d(pounds) every month until the principal money hereby secured and interest calculated at 81/2% had been fully paid.
10. That the 1st defendant had paid part only of the agreed loan leaving a balance of 330(pounds) and are still withholding the same despite repeated demands. By letter of 26th March 1962 to the first defendant, the plaintiffs unsucessfully demanded the said balance which was earmarked for furnishing part of the flats.
11. That by this, the 1st defendant are grossly in breach of the contract of mortgage, as a result of which the plaintiffs were unable to furnish the flats for occupation. The flats, therefore remained vacant for a period of 11 (eleven) months from March 1962 to February 1963, whereupon the plaintiffs fell in arrears of the monthly payment. .
18. The 1st defendant as the mortgagee without bringing a foreclosure action advertised the property for sale, thus causing the plaintiffs great embarrassment. The plaintiffs will found on this irregularity.”
And the plaintiffs then sought in the Statement of Claim reliefs in the following terms: – .
“Whereof the plaintiffs claim:
(a) An injunction to restrain the defendants their servants and/or agents from proceeding with the said sale, either by private contract or by public auction.
(b) Cancellation of the contract or mortgage dated the 10th day of September 1963, as a clog on the equity of redemption.
(c)(i) Special damages …. 2,640(pounds) (being loss of rents occasioned by the defendants for 11 months at 60(pounds) per flat per month.)
(ii) General damages for the breach
Paragraphs 5, 6, 7 and 18 of the Statement of Defence read:
“5. Defendants admit paragraphs 8 and 9 of the Statement of Claim. In further reply to paragraph 9 of the Statement of Claim, the 1st defendant states that under the indenture dated 10th September, 1960, the plaintiff was to start repayment of the loan and interest on the 10th October, 1960 and thereafter on the last day of every succeeding month at the rate of 143.19. 9d(pounds) a month. The 1st defendant as an act of grace allowed the plaintiff to be paying only the interest on the amount advanced pending the drawing of the final instalment when the plaintiff will then start repaying as convenanted.
6. 1st defendant admits that the sum of 330(pounds) was not paid to the plaintiff but make no further admissions in respect of the paragraph 10 of the Statement of Claim. In further reply to paragraph 10 of the Statement of Claim the 1st defendant states that from 10th September 1960 to 10th June 1962 the 1st defendant advanced to the plaintiff the sum of 11,000(pounds). The interest due to be paid on this advance up to the 30th June, 1962 was 505: 19:9d(pounds) out of which the plaintiff paid nothing.
7. In his letter dated the 30th August, 1962 to the plaintiff the 1st defendant drew the plaintiff’s attention to it and suggested that since the sum of 330(pounds) was payable to the plaintiff to complete the loan and as this could not be released to him when the interest due have not been paid, it will be easier to set off the two amounts leaving a balance of 175: 19:9d(pounds) which the plaintiff should pay.
18. The 1st defendant in exercise of his statutory right of sale of the mortgaged property engaged the 2nd defendant a licensed auctioneer to sell the property at a public auction. In exercise of this statutory right of sale no foreclosure proceedings are essential.”
On the 21st of December, 1962, Kaine, J., dismissed with 100 guineas costs the Plaintiff’s claim saying inter alia in his judgment:
“The Counsel for the Plaintiff-company also contended that since the Defendant-company is still owing the Plaintiffs the sum of 330(pounds), they cannot exercise their statutory power to sell. I have to say that there is evidence before me that when the Plaintiff-company was owing about 505(pounds) by way of interest alone the Defendantcompany wrote to them the letter Exhibit “L” saying that the balance of 330(pounds) has been deducted from the amount and requested the Plaintiff’s company to pay the balance. There is also evidence before me that after several letters written by the Defendant company had been received, the Plaintiff company paid the sum of 200(pounds) in Exhibit “L5” and them promised to continue to pay and the amount then remaining unpaid by way of interest shows that the sum of 330(pounds) has been taken into consideration. I am of opinion that the Plaintiff’s company cannot now be heard to say that the sum of 330(pounds) had not been paid to them for it can be said from Exhibit “L5″ that they agreed to the arrangement. I therefore see no breach on the part of the Defendant’s company with regard to the total sum of 11,330(pounds) which they promised to advance to the Plaintiff company. Also there is evidence before me that when the Plaintiff company could not afford to pay the instalments due the Defendant company gave them the concession to pay only the interest due on the amount already advanced and they also failed to do so. I am satisfied that at the time the Defendant’s company decided to exercise their statutory power to sell the house that the Plaintiff company was in arrears of the instalments due and that they were given due notice before the property was advertised for sale. I do not see any justifiable reason why this court should then grant the Plaintiff company the injunction sought to prevent the Defendant company from exercising their power to sell the house. I am therefore of opinion that the claim for an order of injunction must fail”.
It was solely as to this refusal of an injunction that the plaintiffs have appealed from the decision of Kaine, J., to this court.
Chief Williams for the Appellants first argued that the 1st Defendants had no right of sale under the indenture (Exhibit “E”) because thereunder the 1st Defendants had to advance to the Plaintiffs 11,330(pounds) and had only in fact advanced 11,000(pounds) and were therefore in default of their liability. He submitted that when the 1st Defendants wrote to the Plaintiffs, Exhibit “L” which reads:
“Ref:- E. M. 956.
S.O.N. Okafor & Sons Ltd., 30th August, 1962.
P.O. Box 40,
Up to 30th June, 1962, an amount of 505: 19:9d(pounds). was owing by you to the Society in respect of interest on the advance which have been made to you.
On the other hand 330:0:0(pounds): is payable to you by the Society in order to complete your loan, and as I cannot release this to you until you have paid the above interest, it will be easier to set off the two amounts which leaves a balance of 175: 19:9(pounds) which you should pay.
The total advance of 11,330(pounds) is now to be paid by instalments and you should ensure that the first is sent to the Society on 1st October, 1962, and after that regularly on the 1st of every month. The amount required is 143:19:9(pounds).
A form for you to use to ask your banker to make these payment is enclosed, and I recommend it as the most convenient way.
Your account number is M 956. Please quote it whenever paying or writing to the Society.
K. C. WILD
they were purporting to exercise a right of set off which they did not have unless the Plaintiffs agreed to it and in his submission they never did. He relied, for his submission that there must be agreement, on Halsbury’s Laws of England, 3rd Edition, Volume 8 para. 384 which reads:
“384: Rights of set off and counterclaim. Where a right of action has accrued for breach of contract, the parties may agree that there shall be set off against the creditor’s claim the amount of a debt due from him to the debtor. This is equivalent to payment to the extent of the amount set off.
Where an action has been brought in respect of a breach of contract, the Defendant may set off or set up by way of counterclaim against the Plaintiff’s claim any right or claim whether sounding in damages or not, and such set-off or counterclaim has the same effect as a cross-action so as to enable the court pronounce a final judgment in the same action both on the original and on the cross-claim”.
He also referred us to Chitty on Contracts 23rd Edition Volume 2 dealing with Specific Contracts para. 1106 on the remedies of a borrower for breach of an executory contract and further submitted that set off was different to payment and that as set off did not amount to tender a fortiori it cannot amount to payment and referred us as well to Halsbury’s Laws of England 3rd Edition Volume 34 para. 672. He then submitted that the 1st Defendant had no power of sale under Section 19 of the Conveyancing Act, 1881, which reads in so far as is material to this appeal:
“19 (1) A mortgagee, where the mortgage is made by deed, shall, by virtue of this Act, have the following powers, to the like extent as if they had been in terms conferred by the mortgage deed, but not further (namely):
(1) A power, when the mortgage money has become due, to sell…the mortgaged property, or any part thereof’.
It is to be noted that this Section 19 is in pari materia to Section 101 (1) of the Law of Property Act, 1995. He maintained that the power of sale could only arise when the full sum agreed to be paid in Exhibit “E” had been paid and in his submission this had never been done.
Mr. Coker, for the respondents maintained that the plaintiffs agreed to the set off by virtue of Exhibit “L5” which reads:
“Date: 21st June, 1963.
The Asst. General Manager,
Nigeria Building Society,
(Nigeria Housing Development Society Ltd.),
124, Broad Street,
P.O. Box 2078,
We have to confirm the receipt of your letters dated 23rd May, 1963 and 11th June, 1963 respectively.
Per our interview with Mr. R.E. Howard on 11th June, 1963, we have to state our proposals as follows:
(1) We pay herewith the sum of 200 (Two hundred pounds) in cash forthwith.
(2) By July ending to 1st week in August, 1963, we shall pay further amount and onwards.
(3) We have to inform you that we are arranging or have arranged to let the flats out in order to meet up our
(4) We agree to pay 2/3 of the rents to the Building Society as from next year 1964, because
this year is tentative year for us, in that we are furnishing the flats 100% according to European Standard in Nigeria, thereby lose a lot of money in furnitures.
(5) By 1964, we shall not spend money in furnitures and all the money earned from the rent we can surrender to the Society in order to liquidate our arrears and current dues on the loans due to your company without hardship.
for: S.O.N. OKAFOR & SONS LTD.
(Sgd.) S.O.N. OKAFOR
He then submitted in the alternative that, as the Plaintiffs were indisputably in arrears with the payment of interest at the time Exhibit “L” was written proposing the set off of the remaining 330pounds due to be paid under Exhibit “E” by the 1st Defendants to the Plaintiffs against the 505(pounds) owed in interest by the Plaintiffs on the amount then advanced, the 1st Defendants had the right of sale under Section 19 of the Conveyancing Act, 1881, because clause 4 of Exhibit “E”, which we have already earlier set out, showed that this was not to be a lump sum payment but instalmental payments after the initial payment of 10(pounds) and that the instalments were only to be paid “if and when the Nigeria Building Society is satisfied that the state of the mortgaged premises justifies an advance.” The 1st Defendants were accordingly in his submission not liable to advance the full sum till so satisfied but by virtue of clause 1 of Exhibit “E” the Plaintiffs were liable to refund all the principal sum then advanced plus interest as to each instalment by the 31st of December or 30th of June next after the payment of each instalment. He referred us to Payne v. Cardiff Rural Council (1932) 1 KB 241 as to the effect of instalment advances with reference to Section 19 of the Conveyancing Act, 1881.
In reply, Chief Williams submitted only that paragraph 18 of the Statement of Defence was not a sufficient pleading of the right of sale as the 1st Defendants should have pleaded the facts that entitled them to sell in the way in which Mr. Coker had advanced to us in his argument.
To deal with the last point first we would say that we think paragraph 18 of the Statement of Defence was sufficient pleading for the 1st Defendants to rely on their right of sale and if the Plaintiffs were in doubt then they should have sought further and better particulars of what was relied on. We further think Mr. Coker is quite right in his contention that clause 4 of Exhibit “E” contemplated payment by instalments only when the 1st Defendants were satisfied as to the state of the mortgaged premises justifying a further advance and that under clause 1 the Plaintiffs were liable in respect of the whole amount actually paid to the Plaintiffs namely 11,000(pounds). In Payne v. Cardiff Rural Council (1932) 1 KB 241 Lord Hanworth MR., at page 249 said.
“The short point we have to determine is this.
It is not disputed that the apportionment had been made and that the sum to be paid was to be paid by annual instalments. When these proceedings were taken three instalments were unpaid, with a sum due for interest, and there was a total sum due in December to the Rural District Council of 29. 6s. 5d.(pounds), and the question is whether or not the Defendants had the right to proceed with the sale. The powers which were originally to be found in the Conveyancing Act, 1881, Section 15 and following sections, are now to be found in the Law of Property Act, 1925, and the particular section which gives the power to sell is Section 101, subs.1, which runs as follows:
‘A mortgagee, where the mortgage is made by deed, shall, by virtue of this Act, have the following powers, to the Ike extent as if they had been in terms conferred by the mortgage due, but not further (namely): – (i) A power, when the mortgage money has become due, to sell, or to concur with any other person in selling, the mortgaged property, or any part thereof.’
There is a restriction on the exercise of that power to sell imposed by Section 103, which requires a notice to be served on the mortgagor in certain cases, but under sub.c1.2 it is not required if some interest under the mortgage is in arrears and unpaid two months after becoming due. Now the interest which is claimed here is the interest which has accrued due in respect of the three instalments which ought to have been paid in the successive years after the apportionment had been made, in accordance with the terms of the apportionment and the order to pay by instalments. Therefore, there was at the date when these proceedings were taken for sale undoubtedly more than two months interest in arrears. But it is said that having regard to the terms of Section 101 the mortgagees had no power to sell in respect of the part of the mortgage money due; that what the section contemplates is that the power of sale shall only arise when the whole of the mortgage money is due- a sum in this case of over 48pounds so that the Rural District Council had no right to exercise the power of sale conferred by Section 13 of the Act of 1892. In a few words the point we have got to decide is whether, where three instalments of the mortgage money had become due and not the whole, the mortgagees had power to sell. I find it impossible to attribute to the words which I have read a negation of the right to sell where the whole of the mortgage money has not become due. We are to treat the power to sell as if it had been one of the terms conferred by the mortgage deed. It is really admitted that if there is no power to proceed to a sale in respect of the instalments due and unpaid, and if the right of the mortgagee are postponed until such time as the total mortgage debt has become due, the mortgagee has no power to exercise any of the rights of a mortgagee in the interval. That would be an unfortunate and almost grotesque result. It seems quite clear that the purpose of the words of Section 101 of the Act of 1925 is not to cut down a mortgagee’s rights, but, just as in precedents providing for payment by instalments to which our attention has been called, if power is given to pay by instalments, so also there is power to sell when any instalment of the mortgage money has become due in the manner provided for in the mortgage deed. In the circumstances of this case the mortgagor had covenanted to pay it by instalments, and the right, therefore, of the Rural District Council to proceed seems to be established.”
That makes it abundantly clear that the 1st Defendants here had the right to sell when the Plaintiffs were in default, as they were, as to the payment of interest even if the principal sum mentioned in Exhibit “E” had not been paid in full because this was not a lump sum payment but payment by instalments.
We turn now however to the other point which is whether the full sum of 11,300(pounds) had in fact been paid by virtue of the set off If agreement to the set off was a necessity then in our view the 1st Defendants did establish it by Exhibit “L5” which specifically referred to two earlier letters which in turn referred back to the earlier letters including the vital one, Exhibit “L”, and in any circumstances in his evidence the 2nd P.W., Stephen Okafor, the managing director of the Plaintiffs said:
“We received the original of this dated 30/8/62- tendered no objection – admitted and marked Exhibit “L”. I made no payment after the letter Exhibit “L” until after some months. I received the original of this letter dated 19/12/ 62 – tendered – no objection – admitted and marked Exhibit “L2”, “L3” and “L4”. I then wrote this letter to the Defendant Company – letter dated 21/6/63 tendered – no objection – admitted and marked Exhibit “L5”. We paid nothing after the payment in Exhibit “L5″ because they ejected our tenants.”
and having accepted receipt of the letters and as the Plaintiffs did not protest we think the effect of reading them together with Exhibit “L5” was that the Plaintiffs at the least impliedly agreed to the proposed set off.
We must however indicate that we do not agree with the submission of Chief Williams that there could only be a set off by agreement as in our view the 1st Defendants could have done so without agreement.
The passage which Chief Williams relied on and which we have quoted from Halsbury’s Laws of England Volume 8 para. 384 is in fact exactly the converse position of what we have here and does not to our mind assist the argument. Indeed anyway that passage only said “where a right of action has accrued for breach of contract the parties may agree that there shall be set off against the creditor’s claim the amount of a debt due from him to the debtor.” (Our underlining). In our view the 1st Defendants could have set off without agreement but in any case as we have indicated quite apart from this the 1st Defendants had for the reasons we have earlier given the power of sale under Section 19 of the Conveyance Act, 1881.
We would only add that the separate appeal by the Defendants against the interlocutory order for a stay of execution of the decision of the High Court was not pursued before us and is accordingly dismissed with
no order as to costs in respect of it.
The appeal accordingly fails and is dismissed with 54 guineas costs to the Respondents.