“When a contract is ex facie illegal, whether it is pleaded or not, a court would not close its eyes against it, because it is duty of every court to refuse to enforce such a transaction, even where illegality is not pleaded”
In the Supreme Court of Nigeria
Holden at Abuja
On Friday, the 16th Day of June, 2017
Before Their Lordships
Mary Ukaego Peter-Odili
Musa Dattijo Muhammad
Kumai Bayang Aka’ahs
Amina Adamu Augie
Justices, Supreme Court
Prince Kayode Olowu …….. Appellant
- Building Stock Ltd
- Mr. Oluwole Adeniran
- International Capital Resources Ltd ……..Respondents
Lead Judgement delivered by Hon. Amina Adamu Augie, JSC
The Appellant was the owner of the property situate at Plot 2, Block 3, 2nd Avenue, Ikoyi, Lagos State. He needed funds, to pay the school fees of his children schooling in the United Kingdom. He was therefore, interested when he saw the Respon- dent’s billboard with the informa- tion: “Need Cash Got Property?” He was informed that the service offered was a Purchase and Buy Back Arrangement, whereby a client enters into a conditional sale agreement in respect of his property which could be repurchased within six months.
The Appellant signed documents to effect the sale of the property to the 1st Respondent for the sum of N6,850,00.00, with an option to buy back the property at a purchase price of N8,700,000.00 within six months. The Appellant failed to re-purchase the property within six months, and the 1st Respondent sold the property to the 3rd Respondent who promptly took possession and commenced reconstruction work on the property. The Appellant, unhappy with the transaction, went with thugs to the construction site and chased all the workmen away.
The 1st Respondent thereafter, commenced an action against the Appellant at the High Court of Lagos State, seeking inter alia, a declaration that by the sale agreement between the Appellant and the Company, it acquired an equitable interest in the property. The Appellant filed a Counter-claim seek- ing inter alia, an order setting aside the sale of the property to the 1st and 2nd Respondents. The trial Court granted the reliefs sought by the Respondents, and made an order of specific performance against the Appellant compelling him to complete the sale to the 3rd Respondent. Dissatisfied, the Appellant ap- pealed to the Court of Appeal, which Court affirmed the decision of the trial Court. The Appellant further appealed to the Supreme Court.
Issues for Determination:
- Whether the Court of Appeal was right in affirming the decision of the trial Court, that the transaction between the Appellant, the 1st and 2nd Respondents was a sale and buy back transaction, without considering the Appellant’s contention that the transaction was a loan agreement.
- Whether the Appellant’s contention that the agreement between him and the 1st and 2nd Re- spondents was a loan agreement, which transaction should have been declared illegal having regard to the provisions of the Money Lender’s Act and which issue the Court of Appeal failed to decide upon.
On Issue 1, the Appellant submitted that the lower Courts failed to grasp that, the main issue for determination in the case, was whether the transac- tion in question was a money lending transaction or a sale and buy back transaction. He contended that the Court of Appeal in affirming the decision of the trial Court relied on Exhibit H – Purchase Receipt and Acknowledgment of Sale – without reference to the intention of the parties. He argued that, it has always been recognised by the Courts, that it might be necessary to go beyond the legal terms used in a document to discover the real intentions of the parties as to the nature of the legal relationship created, particularly where the transac- tion documents were not prepared by lawyers. He relied on MOBIL OIL (NIG) LTD v JOHNSON (1961) All NLR 93 at 96 and 99. The Respondents contended that, the Appellant wanted the Court to import into the written contract, terms not included in the contract, which will violate settled principles relating to the evaluation of written documents. They relied on ANYANWU & ORS v UZOWUAKA & ORS (2009) 6-7 SC (Pt. II) 44 in arguing that matters discussed before a binding contract is entered, do not form part of the contract and that no Court will engage in the importation of terms not listed in it. They argued that the loan element now being imported by the Appellant, did not identify percentage of interest and none was expressed in the contract. They urged the Supreme Court to hold that Courts do not rewrite contracts for parties, where the terms of the contract are clear. They relied on ALADE v ALIC (NIG) LTD (2010) 12 (SC) (Pt. II) 59. On Issue 2, the Appellant argued that, issues were joined between all the parties, as to whether or not the transaction was illegal having regard to provi- sions of the Money Lenders Law of Lagos State. The Respondents argued that, the Appellant did not raise this new point of Money Lender’s Law in his Notice of Appeal and that he only raised it in his Reply brief, and that he did not obtain leave of Court to canvass fresh points which were not considered by the Court of Appeal. They contended that the failure to seek leave, now makes it very difficult for the Supreme Court to consider the issue. They relied on GLOBAL TRANSPORT OCEANIC O.S.A. v FREE ENTERPRISES (NIG.) LTD (2001) 2 SC 154 at 161 to submit that, the Appellant cannot raise a fresh matter that involved evaluation of evidence adduced at trial.
Court’s Judgement and Rationale
The Supreme Court, in deciding issue 1, held that the lower Courts may not have specifically stated that the issue is whether the transaction was a loan or a sell and buy back arrangement; nonetheless, the trial Court made it clear that, it did not believe the Appellant. Their Lordships accepted the admission of the Appellants in his brief, stating that he signed all the documents relied upon by the Respondents relating to sale of the property. The Court relied on CHIKERE & ORS v OKEGBE & ORS (2000) FWLR (Pt. 22) 1005 at 1038 where it was stated that “the Appellants are bound by the unequivocal admission of their counsel and this Court would be right acting on the admission of counsel on behalf of his clients”. The Court therefore, agreed with the decision of the Court of Appeal affirming the decision of the trial Court, to the effect that there was a valid contract between the parties to sell the property to the 1st Respondent with an option to repurchase same within six months, and that since he defaulted, the 1st Respondent had every right to claim the said property.
On issue 2, the Court held that it is too late to raise a matter in the Supreme Court that was not canvassed at the trial nor in the Court of Appeal, unless it involves substantial points of law; no further evidence will be needed; and such a course of action is actually necessary to prevent obvious miscarriage of justice. OKONKWO v OGBOGU (1996) 5 NWLR (Pt. 449) 420 SC. The Court found that the Appellants never joined issues with the Respondents on the legality of the transaction at the lower courts, and that it was too late to raise same at the Supreme Court. On the substantive issue of illegality, the Court held that when a contract is ex facie illegal, whether it is pleaded or not, a Court would not close its eyes against it, because it is the duty of every Court to refuse the enforcement of such transaction even where illegality is not pleaded. SODIPO v LEMMINKAINEN OY & ANOR R (No. 2) (1986) 1 NWLR (Pt. 15) 220.
However where the contract is not illegal on the face of it, and the question of it being illegal de- pends on the surrounding circumstances of the case, then as a general rule, the court will not entertain the question of its illegality unless it is raised in the party’s pleadings. In the instant case, the Appellant admitted that he did not raise illegality in his plead- ings; he only raised it in his reply brief at the Court of Appeal. The Court affirmed the position of the Court of Appeal, which stated that “this transaction, the Appellant claims is illegal, I am hard put to discover the illegality arising therein. It certainly is not disclosed ex-facie”
The Supreme Court in resolving the other issues raised in the appeal held that, the remedy of specific performance operates in the field of contract, which means there must be a concluded contract, complete and certain, in accordance with the law of contract. Thus, a party who seeks specific performance must show that he has performed the conditions precedent to the performance of the contract or that he is ready to perform the terms which he ought to have performed. ANAEZE v ANYASO (1993) 5 NWLR (Pt. 291) 1. The Court held that since there was no privity of contract between the Appellant and the 3rd Respondent, the lower Court ought not to have made an order of specific performance in favour of the 3rd Respondent; the order was consequently set aside.
Representation: Appellant not represented. O.A Uzegbu Esq with 13 Ors for the 1st and 2nd Respondents Princess Monica Akiri with Otega Kafohro Esq. for the 3rd Respondent Reported by Optimum Law Publishers Limited (Publishers of the Nigerian Monthly Law Reports (NMLR))
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A Report Of The Judgement Of The 16 Divisions Of The Court Of Appeal In Nigeria