Guaranty Trust Bank PLC v Fox Glove Nigeria Limited (CA/L/620/2013) [2016] NGCA 86 (23 March 2016)

CL|Breach of Contract|Termination of Contract|Bank-Customer Relationship|Bank Guarantee

In the Court of Appeal
Holden at Lagos









JOSEPH SHAGBAOR IKYEGH, J.C.A.(Delivering the Leading Judgment): The appeal is from the judgment of the High Court of Justice of Lagos State (the Court below) whereby it awarded N10 million with 21% per cent interest thereon and 4% post judgment interest to the respondent against the appellant for a breach of contract of bank guarantee.

Briefly stated, the respondent was at all material times a distributor with MTN Communications Ltd. He applied for a bank guarantee of N10 million from the appellant to guarantee its trading capacity with MTN. A letter of offer dated 26-02-07 with the terms and conditions of the facility was issued to the respondent by the appellant. The parties agreed in the letter of offer that the appellant reserved the rights to withdraw the guarantee by giving a 60 day period of notice to the respondent and MTN Nigeria Communications Limited (MTN).

Notwithstanding the termination clause, the appellant unilaterally terminated the agreement prematurely upon which the respondent sued and obtained judgment at the Court below for breach of the contract occasioning the appeal.

ý??The appellant formulated two issues

for determination in the brief of argument filed on 29-08-13 as follows-
"1. Whether the termination of the Bank Guarantee by the Appellant is lawful having regard to the circumstances of this case.
2. Whether the Lower Court was right in awarding the sum of N10 million as damages against the Appellant together with interest thereon when the respondent did not prove negligence which it anchored its claim on damages for wrongful termination of Bank Guarantee."

Tying the first issue to ground one of the notice of appeal, the appellant submitted that the offer letter, Exhibit H, and the bank guarantee, Exhibit G, constituted the terms and conditions voluntarily entered into by the parties and are binding on them vide ID Ltd. v. AIB Ltd. (2002) 4 NWLR (pt. 758) 660 at 682; that there was fundamental breach of the contract which entitled the appellant to terminate the contract by tendering notice of its termination, Exhibit 11, to MTN and Exhibit 1 to the registered office of the respondent, within 60 days stipulated by the contract vide the cases of Savannah Bank Plc v. Ibrahim (2000) 6 NWLR (pt. 662) 591, Oceanic Bank International (Nig)

Ltd. v. Chitex Industries Ltd. (2000) 6 NWLR (pt. 661) (no pagination), Boshali v. Allied Commercial Exporters Ltd. (1961) 2 SCNLR 322, Niger Insurance Co. Ltd. v. Abed Brothers Ltd. (1976) 6 ECSLR 131; that the Court below was wrong to hold that the dropping of Exhibit 1, the letter of termination, at the registered office of the respondent when by Section 78 of the Companies and Allied Matters Act (CAMA) read with the case of Texaco Nig. Plc v. Lukoko (1997) 6 NWLR (pt. 510) 651 at 655 the said service was good and sufficient in law; that a party in breach of the terms and conditions of a contract cannot rely on any clause in the contract; and that the innocent party has the right to rescind the contract vide Oceanic Bank International Ltd. v. Chitex (supra) and Dantata v. Mohammed (2000) 7 NWLR (pt. 664) 184.

Tying grounds two and three to the second issue for determination, the appellant submitted that the reliefs sought by the respondent at the Court below were based on negligence without pleading and proving the particulars of the negligence, so the respondent did not discharge the onus of proof under Section 131 of the Evidence Act read with the cases of Onagoruwa v. JAMB (2001) 10 NWLR (pt. 722) 742 at 755 and N.A.B. Ltd. v. Felly Keme (Nig) Ltd. (1995) 4 NWLR (pt. 387) 100 at 114; that in awarding the damages the Court below did not confine itself to the claim for damages reflected in the writ of summons and statement of claim contrary to established principles of law that the Court must confine itself to the case before it; and that the initial burden of proof on the claimant must be discharged before the onus would shift to the opponent vide the cases of Okoya v. Santili (1994) 4 NWLR (pt. 338) 256 at 303, Akinfolarin v. Akinnola (1994) 3 NWLR (pt. 335) 659 at 680-681, Haruna v. Modibo (2004) 16 NWLR (pt. 900) 487 at 557, Ewo v. Ani (2004) 3 NWLR (pt. 861) 610 at 630, 636 and Sections 131 and 136 of the Evidence Act.

The appellant also submitted that pre-judgment interest was not pleaded and proved as required by law, therefore the Court below was wrong in awarding the pre-judgement interest vide Petgas Res Ltd. v. Mbanefo (2007) 6 NWLR (pt. 1031) 545 at 558-559, FBN Plc v. Excel Plast. Ind. Ltd. (2003) 13 NWLR (pt. 837) 412 at 456, S.J. Maskin Fabric A/S v. Olaogun Enterprises Ltd. (1999) 14

NWLR (pt. 637) 128, Res Ltd. v. Abafor  Nigeria Ltd. (2007) 6 NWLR (pt. 1030) 221 at 233, upon which the appellant urged that the appeal be allowed and the decision of the Court below set aside in its entirety.

The respondentý??s brief of argument dated 13-11-13 and filed on 15-11-13 formulated these issues for determination-
"??3.1 Whether the Appellant/Defendant complied with the conditions for withdrawal of the Bank Guarantee as agreed in the Letter of Offer dated 26th February, 2008 when it withdrew the bank guarantee granted in favour of MTN Communications Limited.
3.2 Whether the Respondent/Claimant is entitled to be awarded damages and interest thereon for injury occasioned its business when the Appellant/Defendant terminated the bank guarantee contrary to the terms of the letter of offer and acceptance dated 26th February, 2008."

It was argued that there was a valid contract in Exhibits B and H between the appellant and the respondent comprising offer, acceptance, intention to enter into a legal relation and valuable consideration vide B.C.C. Plc v. Sky Insp. (Nig) Plc (2002) 17 NWLR (pt. 795) 86, Okubule v. Oyagbola

(1990) 4 NWLR (pt. 147) 723; that the appellant unilaterally withdrew the bank guarantee from MTN without complying with the terms and conditions as to the 60 days notice agreed upon in Exhibits B and H, pursuant to which MTN terminated its distribution agreement with the respondent which occasioned damage to the responden'??s business which was emphasized in the evidence of CW1 in paragraphs 5, 6, 7 and 8 of the witness statement on oath in pages 1-3 of the additional record of appeal (additional record) when any of the two conditions for termination of the contract - 60 days notice or 5 days notice in the event of default in the performance of the contract were not consummated vide Njikonye v. MTN Nig. Comm. Ltd. (2008) 9 NWLR (pt. 1092) 339 at 363; that the appellant withdrew the bank guarantee because the respondent had committed a breach of the fundamental terms of the contract without giving the respondent the 5 days notice required by their agreement for the termination of the contract, therefore the appellant did not discharge the burden of proof that indeed it served the requisite notice on the respondent before it terminated the contract vide Adighije v. Nwaogu (2010) 12 NWLR (pt. 1209) 419 at 459-460, Ajuwon v. Akanni (1993) 9 NWLR (pt. 316) 182 at 200 and Section 131(1) and (2) of the Evidence Act.

It was also submitted that delivery of the notice of termination was not proved either by the dispatch book indicating receipt or evidence of dispatch by registered post and/or evidence of a witness that served the document, nor did Exhibit 1 indicate that service of the notice of termination of the contract was received by the respondent showing there was no service of the notice of termination on the respondent vide Tsokwa Oil Marketing Co. v. B.O.N. Ltd. (2002) 11 NWLR (pt. 777) 163 at 197-198, Nlewedim v. Kalu Uduma (1995) 6 NWLR (pt. 402) 383 at 394, N.A.C.B. Ltd v. O.F. Dev. CO. (Nig) Ltd. (2006) 9 NWLR (pt. 985) 323 at 334-335, N.A.B. Ltd. v. Felly Keme (Nig) Ltd. (1995) 4 NWLR (pt. 387) 100, Bello v. N.B.N. Ltd. (1992) 6 NWLR (pt. 246) 246, Ranco Trading Co. v. U.B.N. Ltd (1998) 4 NWLR (pt. 547) 566; and that counselýs address that the notice was ýdroppedý with the respondent not having been covered by the evidence should be ignored as counselýs address cannot

replace evidence vide N.B.C.I. v. Alfijir Minning Nig. Ltd. (1993) 4 NWLR (pt. 287) 346, Nigeria Arab Bank Ltd. v. Femi Kana Ltd. (1995) 4 NWLR (pt. 387) 100 at 106.

It was also submitted that Exhibits B and H in pages 11-15, 90-94 of the record of appeal (the record) did not contain any provision for turnover so the parties cannot vary, alter or add to the terms of Exhibits B and H vide A.-G., Rivers State v. A.-G., Akwa Ibom State (2011) 8 NWLR (pt. 1248) 31 at 83, S.C.O.A. Nigeria Ltd. v. Bourdex Ltd (1993) 3 NWLR (pt. 138) 389 and Section 125 of the Evidence Act; and that going by Exhibit G in pages 87-88 of the record, the bank guarantee was given to MTN in the common course of business which raised a presumption in law that the usual and common course of business were followed before the appellant released the bank guarantee and that formal requisites for its validity were complied with vide Sections 167(c) and 168(1) of the Evidence Act.

It was contended on the second issue that by Exhibits A, B, G and H, there was a valid contract between the parties and that the termination and withdrawal of the contract by the appellant was not done within

the terms set out in the contract document, Exhibits B and H, vide paragraphs 5, 6, 7, 8, 9 and 10 of the statement of claim read with the principal relief in pages 2 and 5 of the record together with the monetary reliefs which were anchored on breach of contract, not negligence; and that even if negligence had been pleaded it would not have precluded the respondent from claiming in contract and negligence once the remedies are available to it vide C.A.C. v. R.T. C.C.C. (2009) 11 NWLR (pt. 1151) 40 at 54-55, Egbuonu v. BRTC (1997) 12 NWLR (pt. 531) 29.

The respondent argued that the damages for breach of contract were alleged in pages 2 and 6 of the record and the evidence of CW1 in page 149 of the record was supported by Exhibits D, D1-D6, F1-F4 in pages 49-60 of the record, therefore the Court below was entitled to award the damages so claimed and proved vide Beta Glass Plc v. Epaco Holdings Ltd. (2011) 4 NWLR (pt. 1237) 223 at 246 and UBN Ltd. v. Odusote Book Stores Ltd. (1995) 9 NWLR (pt. 421) 558 at 599 to the effect that general damages are losses which flow naturally from the defendant and need not be pleaded and proved and Fayemi v. Oni (2010) 17 NWLR (pt. 1222) 326 at 342 on unchallenged evidence of damages.

The respondent also argued that there is no ground of appeal in pages 212-214 of the record on the award of pre-judgment interest, so the arguments on it should go to no issue vide Obiekwe v. Obi (2005) 10 NWLR (pt. 932) 60 at 72; upon which the respondent advocated for the dismissal of the appeal.

The reply brief dated and filed on 6-12-13 submitted that an appeal is argued and decided on the part of the judgment appealed against vide Degbeyi v. Pada (2002) FWLR (pt. 120) 1778 at 1789 therefore ground 3 of the notice of appeal in page 213 of the record having been with respect to the issue of pre-judgment sum, it was properly raised and argued as an issue in the appeal vide Okolo v. Union Bank of Nigeria Ltd. (2004) ALL FWLR (pt. 197) 981 at 995 or (2004) 1 S.C. (pt. 1) (no pagination); consequently, the appellant solicited for the appeal to be allowed.

In my considered opinion, the issues formulated by the appellant are appropriate for the discussion. I hereby adopt the said issues for the resolution of the appeal.

ý??The reliefs claimed by the respondent against the appellant

are stated in paragraph 17 of the statement of claim in pages 5-6 of the record, unedited as follows-
"WHEREFORE the Claimant claims against the Defendant as follows:
1. A declaration that the termination of the bank guarantee by defendant without informing the claimant as stated in the offer letter and conditions of the bank guarantee dated is unlawful and consequently void.
2. A declaration that the claimant is entitled to damages as a result of the negligent act of the defendant and the resultant effect the defendant negligence had on the claimant business with MTN Nigeria Communications Limited.
3. An order for the payment of N20,000,000.00 (Twenty Million Naira) as special damages suffered by the claimant as a result of the termination.
4. The sum of N50,000,000.00 (Fifty Million Naira) from the period of 1st June 2008 to the determination of this suit as damages for the unlawful and arbitral termination of the bank guarantee.
5. Cost of this action in the sum of N500,000.00"?ý.

The reliefs are thus for alleged breach of contract and negligence. The respondent did not plead and give evidence of the particulars

of negligence thus abandoning relief (2) (supra) for negligence which is hereby struck out as evidence not led on a pleaded material issue goes to no issue and/or evidence led on an unpleaded material matter goes to no issue vide George and Others v. Dominion Flour Mills Ltd. (1963) 1 ALL N.L.R. 71 at 77, National Investment and Properties Co. Ltd. v. Thompson Organization Limited and others (1969) N.M.L.R. 99 at 104 and Emegokwue v. Okadigbo (1973) 3 E.C.S.L.R. (pt. 1) 267 at 270.

The claim for breach of contract is however, extant in paragraph 17 (1), (3) and (4) of the statement of claim in pages 5-6 of the record (supra). The crux of the case as found by the Court below in part of its judgment in page 203 of the record to which the parties do not appear to contest is not whether the appellant was justified to terminate the contract, but whether the termination of the contract was done in accordance with the agreement between the parties. And the terms of the contract in question appear in the record to be the days of notice the appellant was to serve the letter of termination of the contract on the respondent before terminating the contract. Parties

are bound by the terms of their contract and the duty of the Court is to enforce the terms of the contract vide NITEL v. Ikpi (2007) 8 NWLR (pt. 1035) 96 and Adetoun Oladeji Nig. Ltd v. NB Plc (2007) 5 NWLR (pt. 1027) 415 relied upon by the Court below in its judgment in page 208 of the record and B.F.I. Group v. B.P.E. (2012) 18 NWLR (pt. 1332) 209.

The Court below found as a fact that the appellant who asserted that it served the respondent the requisite notice before termination of the contract did not establish the said service of the notice of termination of the contract as required by the contract between the parties. Indeed Exhibit 1, the notice of termination of the contract, was expected to be served on the respondent before the termination of the contract as stated in the contract documents.

Being an incorporated body, the service on the respondent should have been under Section 78 of CAMA which states that-
ýA Court process shall be served on a company in the manner provided by the Rules of Court and any other document may be served on a company by leaving it at, or sending it by post to, the registered office or head office of

the company."?ý (My emphasis).
There was no such proof of service of the letter of termination of the contract by the appellant on the respondent in accordance with Section 78 of CAMA, therefore the Court below was right in holding that the appellant did not serve the respondent the notice of termination of the contract as required by Section 78 of CAMA read with the case of Mark v. Eke (2004) ALL FWLR (pt. 200) 1455 or (2004) 5 NWLR (pt. 865) 54 at 79-80 thus-
"??The mode of service on a limited liability company under the relevant rules of Court is different from service of process on a natural person such as the 1st appellant. The Companies and Allied Matters Act by Section 78 makes a provision as how to serve documents generally on any company registered under it. By this, a Court process is served on a company in the manner provided by the Rules of Court. A service on a company, as this provided, must be at the registered office of the company and it is therefore bad and ineffective if it is done at a branch office of the company; see Watkins v. Scottish Imperial Insurance Co. (1889) 23 QBD 285. The procedure is by giving the writ to any

director, trustee, secretary or other principal officer at the registered office of the company or by leaving the same at its office." (My emphasis).
By "??leaving"?ý it at the registered office means leaving the document with a human being who must acknowledge the receipt of it by endorsing on the document that it was so left with him, which was not the case here. Service of the notice of termination, Exhibit 1, on the respondent was therefore not established.

Breach of the contract was accordingly established thereby by the respondent as rightly held by the Court below in page 211 of the record to wit-
"??In the instance case, it has been held that the defendant was liable for breach in the manner it withdrew the bank guarantee leading ultimately to loss/termination of the distribution agreement."?ý

Which finding is supported by the weight of evidence in the record of the Court below. I would affirm the finding (supra) as there is no basis to depart from the said finding of fact which is neither perverse nor unreasonable vide Ebba v. Ogodo (1984) 4 SC 84, Okafor v. Idigo (1984) 1 SCNLR 481, Akinloye v. Eyijola

(1968) N.M.L.R. 92, Woluchem v. Gudi (1981) 5 S.C. 319 at 326.

It is trite that an appellate Court will not intervene with an award of damages by the Court below unless it is made under these peculiar circumstances as restated in the case of Ahmed v. C.B.N. (2013) 2 NWLR (pt. 1339) 524 at 541-542 thus-
"??Award of damages is an exercise of discretion by the trial Court. An Appellate Court will not interfere with an award of damages by a trial Court unless it is made under certain peculiar circumstances which include-
1. Where the exercise of discretion by the trial Court is perverse.
2. Where the Court acted under wrong principles of law; or
3. Where the Court acted in disregard of applicable principles; or
4. Where the Court acted in misapprehension of facts; or
5. Where the Court took into consideration irrelevant matters and disregarded relevant matters whilst considering its award or
6. Where injustice will result if the appellate Court does not act; or
7. Where the amount awarded is ridiculously low or ridiculously high that it must have been an erroneous estimate of the damages.
Zik'??s Press

Ltd. v. Ikoku (1951) 13 WACA pg. 188; Idahosa v. Oronsaye (1959) SCNLR pg. 407; Bola v. Bankole (1986) 3 NWLR (pt. 27) pg. 141; Elf (Nig) Ltd. v. Sillo (1994) 6 NWLR (pt. 350) pg. 258."

Following the principles (supra), I think the award of N10 million general damages is excessive or extremely high having regard to the circumstances of the case, therefore I would reduce the award to N5 million general damages.

With respect to the pre-judgment interest, ground 3 of the notice of appeal with its particulars in page 213 of the record reads-
"??The learned trial Judge erred in law when he failed to take into consideration the fact that the Respondent herein did not prove negligence which it anchored its claim on damages for wrongful termination of the Bank Guarantee, before proceeding to award the sum of N10 Million general damages and interest thereto against the Appellant.
(1) The fact that the Respondent herein did not prove negligence with which it anchored its claim for general damages ought to have swayed the mind of the trial Judge into not awarding excessive damages or damages at all in this matter

against the Appellant.
(2) The award of the N10 Million damages was premised on a claim for general damages based on negligent act of the Appellant in terminating the Bank Guarantee."

There is no little of evidence or fact in ground 3 of the notice of appeal (supra) to show that it particularised and discussed the award of pre-judgment interest on the judgment debt. Any of the issues for determination (supra) not having arisen from any of the grounds of appeal on pre-judgment interest is incompetent as well as the arguments built on it which are hereby struck out vide Chami v. U.B.A. Plc (2010) 6 NWLR (pt. 1191) 474, Ekiti State House of Assembly v. Fayose (2010) 2 NWLR (pt. 1179) 511.

On the whole, there is merit in the appeal only on the award of excessive general damages. I would dismiss the appeal on burden of proof but would reduce the general damages from N10 Million to N5 Million. The appellant shall pay N50,000 costs to the respondent.

UZO .I. NDUKWE-ANYANWU, J.C.A.: I had the privilege of reading in draft form, the judgment just delivered by my learned brother J. S. Ikyegh JCA.
I agree with his

reasoning and final conclusion.
I abide by all the consequential orders contained in the lead judgment and adopt them as mine.

CHINWE EUGENIA IYIZOBA, J.C.A.: I read before now the JUDGMENT just delivered by my learned brother, JOSEPH SHAGBAOR IKYEGH JCA. I agree with his Lordship'??s reasoning and conclusions. It is evident from the record of appeal that the lower Court was right in its finding that the appellant was in breach of the terms of the contract by withdrawing the bank guarantee without giving the requisite notice, or serving the notice as required by law.

?There is no reason therefore to disturb that finding. I agree with my learned brother that the N10 million general damages is excessive and ought to be reduced to N5 million for the reasons ably set out in the lead judgment. I abide by the consequential orders including the order as to costs.


Mr. J. Odionu with him, Miss J. Anyika) For Appellant

Mrs. O.A. Pedro For Respondent

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