Stephen Okongwu Vs Nigerian National Petroleum Corporation (1988) LLJR-SC

Stephen Okongwu Vs Nigerian National Petroleum Corporation (1988)

LawGlobal-Hub Lead Judgment Report

NNAEMEKA-AGU, J.S.C.

The only issue in this appeal is that of quantum of damages. Learned Senior Advocate for the respondent has, rightly I hold, conceded it that the respondents were in breach.

The plaintiffs claim before the High Court was for the sum of N3.5 Million being general damages for breach of contract of employment. The defendant had offered to the plaintiff, a highly qualified Oil Engineer, an employment as a Production Programme Engineer (Technologist) in the defendant’s refinery at Warri. The letter of offer, Exh. D., dated 19th September, 1976 was accepted by the plaintiff by his letter, Exh. E, dated 5th October, 1976.

As Exh. D. required the plaintiff lo commence work immediately, he had to pay one month’s salary in lieu of notice to get out of his employment as a Senior Lecturer at the Petroleum Training Institute, Warri. The plaintiff travelled to the head office of the defendant on the 6th of October, 1976, to report for duty.

When the plaintiff reported to the defendant’s Project Manager, Mr. Kufeji, in Lagos on the 6th of October, 1976, his troubles began, Several and conflicting reasons were given why the plaintiff could not commence work: but as these go to the question of liability which is not in issue in this appeal, I need not go into them here.

For purposes of assessment of damages, it is, however, necessary to state that three offers were made to the plaintiff on behalf of the defendant corporation. These offers and their rejection or acceptance by the appellant, as the case may be, formed the real back-bone of the difference between the decision of the learned trial Judge and the Court of Appeal on the Quantum of damages awarded to the appellant. While the learned trial Judge held that the appellant was right to have refused to accept the third one made on 29/7/79 by Mr. Marinho who was both a Director of the respondent corporation and the Chairman of the Petroleum Training Institute, Warri, the Court of Appeal held that he should have accepted it.

I shall come back to these when I shall discuss the issue of mitigation of damages. Suffice it to say that, having rejected this offer, plaintiff went to court on 30th January, 1978. Hard as the plaintiff tried to get an alternative employment, he could not get one until 15/8/78 when he secured employment as the Head of Chemical Engineering, Bida College of Technology.

After hearing, the learned trial Judge, Eluaka, J., found the defendant corporation liable. Also, based on the salary he would have earned for 22 months, that is between the date of the breach on 6th October, 1976 and the date he secured another employment on 15th August, 1978 at N7,764.00 per annum he awarded to the plaintiff N14,234.00 as damages.

On appeal to the Court of Appeal, Benin Division, Coram, Omo Eboh, Okagbue and Ikwechegh, JJ.C.A., that Court held that the plaintiff had a duty to have mitigated his loss and should have, pursuant thereto, accepted the third offer of Mr. Marinho. The date of his rejection to accept that offer, therefore, terminated the liability of the defendants. They, therefore, reduced the period for the assessment of damages to ten months. Their Lordships also held and I agree with them, that there is no reason why the sum of N7 ,764.00 which was plaintiffs salary in his new employment at Bida should have been used as the basis for assessment of damages. They therefore based their computation on the sum of N7,104.00 per annum, according to Exh. D and therefore awarded him the sum of N5,920.00 over months.

The plaintiff (hereinafter called the appellant) has further appealed to this Court. Arising from the grounds of appeal filed, the issues for determination were framed by the learned counsel, Senator N.N. Anah, S.A.N… on his behalf thus:

“3.1 Whether the learned trial Judge made a finding that the appellant mitigated damage up to the time he secured a new job after the receipt of Exhibit ‘M’ and whether the Justices of the Court of Appeal were right to reverse this finding, if made, and limit the period of mitigation to the time when the appellant received Exhibit ‘M’ without showing that the finding was perverse or not the proper exercise of judicial discretion.

3.2 Whether the appellant’s loss of salary will be computed or assessed on N7,104.00 per annum or on N14,000.00 per annum at least from April, 1977 which was admitted by the defendants as the appellant’s salary under the salary structure in the Oil Industry at the time he was offered appointment by the defendants.

3.3. Whether in computing or assessing the damage suffered by the appellant account should not be taken of the one month salary which the appellant paid in lieu of notice in order to take up the appointment which the defendants later breached.

3.4 Whether the appellant is not entitled to general damages.

The defendant through its learned counsel, Chief Sobo Sowemimo. S.A.N., filed a Brief and a supplementary Brief. Each of them is a running commentary on some aspects of the appellant’s brief. He framed no issues and did not expressly adopt the issues as framed by the learned counsel for the appellant. It must be assumed, however, that he adopted them by implication.

The first question I wish to deal with is the period to be used for computation of damages. The High Court held that his losses should be assessed as the salary he would have earned over twenty-two months during which he could not get an acceptable employment. The Court of Appeal, on the other hand, held that in so far as the defendants (hereinafter to be referred to as the respondents) offered the plaintiff (hereinafter to be called the appellant) an alternative employment, the period to be used for the computation of damages must be limited to the date of the third and firm offer. This was a period often months. The reason given for this was that the appellant was by law obliged to mitigate his losses. Pursuant to that duty, therefore, he should have accepted the alternative employment when it was offered to him.

It is necessary to mention an outline of the facts, with particular reference to facts relevant to the issue of mitigation. The appellant accepted an employment from the respondent as Production Programme Engineer (Technologist) in the respondents oil refinery at Warri. As the appellant was required to commence work immediately he had to pay a month’s salary in lieu of notice in his previous employment as a Senior Lecturer at the Petroleum Training Institute at Warri. When he reported for duty, the respondents refused to allow him to start work. This was the breach, which is not in issue in this appeal.

The respondent however made to the appellant three different offers for an alternative employment: these are relevant to the live issue of mitigation of damages. The first was made orally by Mr. Kufeji the Project Manager of the respondents on 6th October, 1976. This was merely posting the appellant back to his former post in the Petroleum Training Institute (P.T.I.) a post from which he had resigned by paying a month’s salary in lieu of notice in order to take up the post which the respondents have now denied him. The Court of Appeal did not think much of this offer and I consider it a most unreasonable one. The second offer was on 28/1/77 by the Permanent Secretary (Special Duties). N.N.P.C., Lagos, as per Exhs. H1. K. and L. This was an offer to appellant to go back to his former post at P.T.I.. pending the determination of issues raised with regard to his employment with the respondent. His employment in his former post was also to be regarded as continuous. The appellant accepted this offer because of the extreme hardship to which he was exposed by reason of several months of unemployment. But the respondent resiled from this offer. The third offer was by Mr. Marinho, the Managing Director of the respondents, per Exh. dated 29/7/77, who was hoth a Director of the respondents and the Chairman of the P.T.I .. at the time. The letter. Exh. M.. gave the appellant permission to report for duty at the P.T.I .. in his former post. But the period during which he had to wait to commence work with the respondent, that is from 20th October, 1976, till he could commence work, as a result of Exh. M – a period of nearly ten months – was to be treated as leave without pay. It is noteworthy too that he was going to return to P.T.I., to be reinstated to his former post as Senior Lecturer and continue there permanently. He was not being deployed there temporarily pending determination of the issue relating to his employment with the respondents.

He rejected this offer. The Court of Appeal decided that pursuant to his duty to mitigate damages upon the breach, he should have accepted the offer. Based on this conclusion their Lordships held that he was not entitled to damages for any period subsequent to that third firm offer.

In fairness to their Lordships of the Court of Appeal, let us say straight away that if they were right in holding that acceptance of that third offer of respondent was a course which the appellant ought to have reasonably taken in order to mitigate his loss but one which he failed to take, they would have been right to have reduced the period for which the appellant could recover accordingly. For as a general law, the fundamental basis of assessment of damages for a breach of contract is compensation for plaintiff’s pecuniary loss naturally flowing from the breach.

But that first principle is qualified by a second, which imposes upon the plaintiff the duty of taking all reasonable steps to mitigate the loss consequent on the breach, and debars him from claiming any part of the damage which is due to his neglect or refusal to take such steps. See British Westinghouse Electric & Manufacturing Co. v. Underground Electric Railway Co. of London (1921) A.C. 673 at p. 689.

Where, in a contract of employment such as this, an employer, who is in breach by dismissing his employee wrongly, offers to the employee a reasonable alternative employment but the employee refuses to, accept, such an employee would be disentitled to damages from the date of such an offer. See on this Brace v. Calder (1895) 2 Q.B. 253; also Shindler v. Northern Raincoat Co. Ltd. (1960) 2 All E.R. 239 at p. 249. What I have to decide, therefore, is whether the third offer was such that the appellant ought to have accepted.

That decision clearly raises the question: what is the nature of a plaintiff’s duty to mitigate his loss in a case of breach of contract As I see it, that duty is one imposed by law on a plaintiff to take all reasonable steps to mitigate the loss caused by the breach of contract. I must, however, emphasize that that duty imposed upon the plaintiff is to act reasonably: See Payzu Ltd. v. Saunders (1919) 2 K.B. 581. Watson Norie v. Shaw 111 S.J. 117. Whether or not the plaintiff has failed to take a reasonable opportunity of mitigation of his loss is a question of fact depending upon the particular circumstances of each case. The burden of proving that the plaintiff has failed to take such an opportunity is always on the defendant and is a heavy one. In cases of contract of employment where, upon a breach, the defendant has offered to the plaintiff an alternative employment and the plaintiff has refused to accept that alternative, the question is always whether his refusal was reasonable: See Yetton v. Eastwoods Froy Ltd. (1966) 3 All E.R. 353 at p.365. the firmness of the offer notwithstanding. The Court below did not appear to have adverted to this. This question invariably raises the question whether the alternative offered was a reasonable substitute.

In the instant case, learned counsel for the appellant in his letter, Exh. P.. gave two reasons why the appellant refused to accept the third offer. Those reasons were that he would not accept to be reinstated permanently to his former post in P.T.I .. a post he had resigned from and had to pay one month’s salary in lieu of notice to get out from. Secondly, that it was unreasonable to impose additionally on him a condition that he had to lose his salary for a period of about ten months by the respondent’s insistence that the intervening period would be treated as one of leave without pay. In my judgment those two conditions were intolerably unreasonable in the circumstances of the case.

The duty to mitigate does not imply that a plaintiff whose contractual right has been breached is automatically relegated to a position inferior to the defendant’s wherein he is obliged to pick up, as it were, the crumbs that fall from the master’s table. The true position is that a defendant who is already in breach of his contract is, as it were, demanding a positive action from the plaintiff who is innocent of blame. For this simple reason, the law has never taken the view that such a plaintiff has to undertake an onerous burden in the name of mitigation of damages.

The duty of mitigation on a plaintiff is that of a reasonable man, acting reasonably. In Pilkington v. Wood (1953) 2 All E.R. 810 it was held that the plaintiff was not obliged to have undertaken, in mitigation, an action which would have involved him in a complicated litigation in an area of law under the Law of Property Act, 1925, which was recondite. In the instant case, I am of the view that the Court of Appeal was in error to have insisted that the appellant should have accepted the third offer which imposed upon him the above two unreasonable conditions. Those two conditions placed him in a position of decided disadvantage to the respondent, who was in breach.

The High Court took into account the specialization of the appellant in quite an uncommon area of learning and the attendant difficulty of his securing employment as well as his proven efforts at securing another employment and held that the measure of damages should be the period of 22 months between the breach and his securing of another employment. I am persuaded that this was only fair and reasonable. I shall, therefore, resolve this issue in favour of the appellant and hold that the period for assessment of damages is twenty-two months, and not ten – as decided by the court below.

The next question is the amount which will form the basis of the assessment. Is it the sum of N7,764.00 per annum which the learned trial Judge used Or is it the sum of N7,104.00 which the Court of Appeal used Or is it the sum of N7,104.00 for six months and between N12,000.00 and N14.000.00 for the balance of the period, as the learned counsel for the appellant claims

The whole question of the quantum of the award raises the old question of the basis of award of damages in a case of breach of contract. That old question depends upon an equally hackneyed authority, the old and hackneved case of Hadley v. Baxendale (1854) 9 Exch. 341 where Alderson, B., held at p.354:

“Where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and

reasonably either arising naturally, i.e. according to the usual course of things, from such breach of contract itself or such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it.”

The above ratio clearly identified two distinct arms for assessment of damages. The first is what flows naturally and proximately from the breach and so is presumed to have been in the contemplation of both parties at the time of the contract. This is therefore subject to the rule of remoteness of damages.

The other is deducible from the terms of agreement of the parties. It depends on special knowledge as evidenced by the terms of the contract. It is again what could be rightly said to have been in the contemplation of both parties at the time of the contract as the result of the breach of it as could be deduced from the terms of the contract. Knowledge of the party in breach is material in both arms: but as Lord Asquith pointed out in Victoria Laundry (Windsor) Ltd. v. Newman Industries Ltd. (1949) 2 K.B. 528; (1949) 1 All E.R. 997 at pp.1002-1003, in the first arm, that knowledge is imputed whereas in the second arm, it is actual in that it depends upon what the parties agreed upon. In Koufos v. C. Czarnikow Ltd. (The Heron II) (1969) 1 A.C. 350, the House of Lords explained that the criterion is not whether the damage should have been foreseen by the defendant, but whether the possibility of its occurrence should have been within the reasonable contemplation of both parties at the time they entered into the contract, having regard to their knowledge at the time.

The common law rule in Hadley v. Baxendale (supra) has been fully received and applied in our courts. One of the results of the application of the foreseeability test to the area of breach of contract is that no question of award of general damages in the sense of damages outside the two arms of the rule in Hadley v. Baxendale arises. See on this Nigerian Produce Marketing Board v. Adewunmi (1972) All N.L.R. (Part 2) 433, at p.438; also P.Z. & Co. Ltd. v. A.J. Ogedengbe (1972) 1 All N.L.R. (Pt.1) 202 at pp.205-206. In the instant case I do not, particularly as there was a period of over one month between 17/9/76, the date of Exh. D., and 20/10/76 when he was required to commence work with the respondent, now think that the appellant would be entitled to claim back the one month’s salary he paid in lieu of notice in the Petroleum Training Institute.

Such a damage was neither natural and normal nor foreseeable from the terms of the agreement. On the same principle, and particularly taking into account the facts pleaded in this case, I cannot see my way to the appellant being entitled to exemplary damages. Such was never in the contemplation of the parties nor can it fit into any of the two arms of the rule in Hadley v. Baxendale (supra). The case of Rookes v. Bernard (1964) A.C.1129, at p.1226 which the learned counsel for the appellant has cited is not in point in that it was a case not in contract, and was between the government and its servants who had been unconstitutionally and arbitrarily oppressed by the government. In our law, the N.N.P.C., is just a corporation, just a legal person.

It is not a government. It appears to me that the appellant cannot recover anything for his personal injuries, injured feelings, humiliation and mental suffering on the facts of this case. I am in agreement with Lord Loreburn, L.C. where he stated in Addis v. Gramophone Company (1909) A.C. 488 at page 491.

“If there he a dismissal without notice, the employer must pay an indemnity, but that indemnity cannot include compensation either for injured feeling of the servant…”

In the instant case, if the appellant wanted all the facts he relied upon to claim exemplary damages, he might have considered whether he could found his case on another cause of action other than a breach of contract. Unless those facts of special knowledge on which the claim to exemplary damages is based could be said to have been incorporated into the terms of the contract and therefore became foreseeable to the parties I do not see how exemplary damages could be ordinarily germane to cases of breach of contract. On the facts of this case that class of damages does not arise.

It is from the background of the Hadley v. Baxendale decision that I shall now consider the outstanding question, that is the amount I should use as the basis for my computation. As this was a contract in writing by correspondences, the best source in my inquiry into the intention of the parties is the letter of offer, Exh. D., which was accepted by Exh. E., dated 5th October, 1976. Exh. D., dated 17th September, 1976, runs thus:

“Dear Sir,

OFFER OF APPOINTMENT

1. I have pleasure in conveying to you the decision of the Project Management to offer you appointment to the post of Technologist in the Refinery Project on an initial salary of N7,104 per annum.
2. The appointment shall take effect from the date you assume duties with the Company which, in view of the critical stage reached in the training programme should not be later than 20th October, 1976.
3. You are being recruited to be trained for a specialised position in the Warri Refinery Operation. Extensive training of up to 18 months may be involved in some cases consequently I we would expect to enjoy for a minimum period of about 3 years the benefit of the experience gained from the training. You may therefore be required to give an undertaking to abide by the above. Your appointment will be governed by the Conditions of Service operative in this project.
4. Kindly confirm your acceptance of the offer and inform us of your arrangement to report for duty.

My best regards for success in the new job.

Yours faithfully,

(Sgd.) E. I. Nwokedi:

E.I. NWOKEDI (Miss)

for: PROJECT MANAGER.”

Paragraph 1 spells out the salary as N7,104.00 per annum. Ordinarily this would have been the basis of the assessment. To that extent I agree with the learned Justices of the Court of Appeal when they said that they cannot understand why the learned trial Judge chose to use the sum of N7 ,764.00, the appellant’s salary in his new job at Bida, as the basis for the computation.

Senator Anah has further submitted that on the pleadings and evidence, the use of N7,104.00 would be for a period of six months only, and that a higher salary of between N12,000.00 and N14,000.00 would be used after six months, according to the Conditions of Service which were offered to the appellant under the third paragraph of Exh. D.

That the Conditions of Service were offered to the appellant in Exh. D., paragraph 3, is not in doubt. Now in paragraph 14 of the statement of claim, it was pleaded as follows:

“14. Subsequent to the said interview the plaintiff received in Warri in the jurisdiction of this Honourable Court a letter dated 17/9/76 signed by the said Miss E.I. Nwokedi for Project Manager offering the plaintiff employment as Production Programme Engineer (Technologist) on an initial salary of N7,104 per annum. This scale of salary, in the new salary structure applicable to the Oil Refinery since April, 1977 puts the plaintiffs salary around N12,000 to N14,000 per annum.”

This was expressly admitted in paragraph 1of the statement of defence. So it can be said that the effect of Exh. D., the pleading, and other evidence before the Court is that the appellant has made out a case for – the enhanced salary, effective from 1st April, 1977.The effect is thatfrom 1st April, 1977, the appellant would have been on a salary of between N12,000.00 and N14,000.00 per annum, but for the breach of the contract.

Unfortunately, the learned counsel for the respondent did not deal with this issue. He appeared to have concentrated his attention on showing that the appellant did not get the N3.5 million he was claiming as exemplary damages. In theory, therefore, by his omission to deal with this point, it is deemed to have been conceded. For every material point canvassed in an appellant’s brief which is not countered in the respondent’s is deemed to have been conceded to the appellant.

Applying the second arm of the rule in Hadley v. Baxendale (supra) I am satisfied that that increase was in the contemplation of the parties at the time the contract was made and its loss was a probable result of the breach of it. I do not, however, agree with Senator Anah that on the pleading and the evidence the upper limit of N14,000.00 should be accepted.

I see no basis for it. I would rather accept the lower limit of N12,000.00. The principle of assessment of damages for breach of contract which has been applied by the courts is restitutio in integrum – that is, that in so far as the damages claimed are not too remote, the plaintiff shall be restored, as far as money can do it, into the position in which he would have been if the breach had not occurred (Wertheim v. Chicoutini Pulp Co.) (1911) A.C. 301, at p.307). The principle is not restitutio in opulentiam – giving him a windfall. If I base the assessment on N14,000.00 a salary he might not have achieved at the time if the breach had not occurred, it would be against the fundamental principle of restitution in integrum. I shall therefore, take the lower limit of N12,000.00.

The last question is, therefore, what damages will adequately compensate the appellant for the breach It is noteworthy that although by Exh. E dated 28th September, 1976 the appellant accepted the offer made to him in Exh. D, in the second paragraph of Exh. D he stated that he would wish to commence work by the middle of October. I take this to reasonably mean the 15th of October, 1976. This is a fair date for the commencement of his monetary compensation for the breach, that being the date he was effectively prevented from performing his own part of the bargain. In the result, damages due to the appellant shall be as follows:

1. From 15/10/76 – 31/3/77 at

N7,104 per annum N3,246.00

2. From 1/4/77 – 15/8/78 at

N12,000 per annum N16,500.00

Total N19,746.00

The appeal against damages is therefore allowed. The judgments of the High Court and the Court of Appeal are set aside. In their place there will be judgment for the appellant in the sum of N19,746.00.

The appellant shall have the costs of this appeal which I asses at N500.00 against the respondent in this Court and N300.00 in the Court below.

Other Citation: (1988) LCN/2391(SC)