Whether a non-contractual third party can be held accountable for damages resulting from a party’s contract breach.

CASE TITLE: TKM MAESTRO (NIG) LTD v. VERITAS KAPITAL ASSURANCE PLC (2023) LPELR-61411(CA)
JUDGMENT DATE: 13TH DECEMBER, 2023
PRACTICE AREA: CONTRACT
LEAD JUDGMENT: JIMI OLUKAYODE BADA, J.C.A.

SUMMARY OF JUDGMENT:

INTRODUCTION:
This appeal borders on Law of Contract.

FACTS:

This is an appeal against the judgment of the High Court of Lagos State.

Appellant approached the Respondent on 14/1/2013 for a loan facility in the sum of N100,000,000.00 (One Hundred Million Naira), to enable it to invest in a commercial paper MTN project worth N1,500,000,000,000.00 (One Billion Five Hundred Million Naira). The Respondent confirmed the existence of the contract between the Appellant and the MTN Nigeria and thereafter entered into a loan agreement with the Appellant, whereof the terms of the loan agreement upon which the relationship between the Respondent and the Appellant was based were clearly spelled out unambiguously before the Respondent disbursed the sum of N100,000,000.00 (One Hundred Million Naira) to the Appellant.

Appellant failed to meet its financial obligations as per the agreement for the liquidation of the loan. It applied to the Respondent and sought that the loan be rolled over for another 90 days at the same interest rate of 19% and the Respondent approved the Appellant’s request. Appellant again failed to pay the sum of N100,000,000.00 (One Hundred Million Naira) together with interest due to the Respondent within the 90 days of rollover. It again pleaded for more time to fulfill its financial obligation under the loan agreement to the Respondent. The Appellant claimed that MTN Nigeria failed to settle it and again promised to pay up the loan and interest before December 31, 2014.

The Appellant also failed to make the loan payment.

Respondent commenced an action against the appellant at the trial Court. At the conclusion of the hearing, the trial Court found in favour of the Respondent and granted the reliefs sought by the Respondent.

Appellant appealed.

ISSUES FOR DETERMINATION:

The Court determined the appeal on the following issues, viz.

1. The evidence before the trial Court reveals that the underlying contract between the Appellant and the Respondent was an investment contract and not a loan transaction agreement. Having failed to properly evaluate the documentary evidence before it, was the trial Court right when it held that the facility offered to the Appellant was a loan and not an investment?
2. The Claimant/Respondent’s request for the sum of N146,964,383.51 and accrued interest was unsupported by any document or statement of account showing the Defendant/Appellant’s indebtedness. Rather than make an Order of non-suit, was the trial Court right when it granted the reliefs sought by the Claimant/Respondent?
3. The Defendant/Appellant adduced evidence showing that the Claimant/Respondent was aware that any financial obligation under the Offer Letter will be satisfied from the proceeds of the contract with MTN Nigeria Communication Ltd. Was the trial Court right when it held that there was no privity of contract between the Respondent and MTN Nigeria Communications Limited despite manifest evidence showing otherwise?”

DECISION/HELD:
In the final analysis, the Court dismissed the appeal.

RATIOS:
• INTERPRETATION OF DOCUMENT – CONSTRUCTION OF DOCUMENT(S)/INSTRUMENT(S) – How unambiguous words of an instrument/document are to be interpreted
• COMMERCIAL LAW – DEBT – Difference between loans and investments
• EVIDENCE – CROSS-EXAMINATION – Effect of evidence elicited during cross-examination
• EVIDENCE – UNCHALLENGED/UNCONTROVERTED EVIDENCE – Whether the Court is entitled to act on unchallenged evidence
• EVIDENCE – ADMISSION/ADMITTED FACT(S) – Whether admission/admitted facts need further proof
• JUDGMENT AND ORDER – ORDER OF NON-SUIT – Circumstance where an order of non-suit will not be made
• CONTRACT – PRIVITY OF CONTRACT – Whether a third party who was not privy to a contract can be held responsible for damages incurred by default of one of the parties in a contract
• PRACTICE AND PROCEDURE – PRELIMINARY OBJECTION – Effect of failure to seek leave to move or argue a preliminary objection

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