Why Commercial Contract Disputes Mustn’t Give Rise To Criminal Litigation?

By Stephen Ubimago

At a Magistrates’ Court in Ebute Meta on Monday, a criminal suit was brought against a defendant over failed contract. STEPHEN UBIMAGO writes that the remedial procedure for failed contracts ought to be civil in nature, not necessarily criminal, and wonders why in Nigeria they’ve often given rise to criminal litigation.

A Chief Magistrate Court sitting in Ebute Meta on Monday and presided over by Magistrate O. Oloruntoba has reserved March 9 for the continuation of trial of one Daniel Nedum, 37, against whom the police instituted a criminal lawsuit for allegedly defrauding a former Lagos State Police Commissioner (CP) and another senior police officer to the tune of N4.2 million.

Nedum is facing a four count charge of fraud and stealing arising from a joint business venture involving him (for the one part) and (for the other part) a former Lagos CP, now Deputy Inspector General of Police, as well as a former Ojodu Divisional Police Officer.

However, the question agitating keen observers of the development is: why should a criminal charge be filed against a party in a contract only because the transaction failed, or merely because the said party failed to perform his side of the bargain?

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According to reports, not a few of the financial crimes cases being handled by the Economic and Financial Crimes Commission (EFCC) are merely disputes arising from failed commercial contracts – disputes whose resolution could readily be pursued outside the criminal litigation framework.

According to the charge sheet read in open court at Nedum’s recent arraignment, the case against the accused is to the effect that: “You Daniel Nedum, sometime in 2018 at Ojodu did obtain the sum of N4, 254, 000 (Four Million Two Hundred and Fifty Four Thousand Naira) from one Umar Sango, m, and Mamman Idris, m, (real names withheld) under the pretence that you could assist them import cooking stoves and ceramic tiles from China, a representation you knew to be false and thereby committed an offence contrary to s. 311 of the Criminal Law of Lagos State of Nigeria, 2011.

“Count 2: That you, Daniel Nedum on the same date, time and place did steal the sum of N4, 254, 000 Four Million Two Hundred and Fifty Four Thousand Naira) property of one Umar Sango and Mamman Idris and thereby committed an offence punishable under s. 285 of the Criminal Law of Lagos State of Nigeria, 2011.

“Count 2: That you, Daniel Nedum on the same date, time and place did steal the sum of N4, 254, 000 Four Million Two Hundred and Fifty Four Thousand Naira) property of one Umar Sango and Mamman Idris and thereby committed an offence punishable under s. 285 of the Criminal Law of Lagos State of Nigeria, 2011.

“Count 3: That you Daniel Nedum on the same date, time and place, with intent to defraud, did obtain the sum of N75, 000 (Seventy Five Thousand Naira ) from one Umar Sango under the pretence that you could process Chinese visa for him , a representation you knew to be false and thereby committed an offence contrary to s. 311 of the Criminal Law of Lagos State of Nigeria , 2011.

“Count 4: That you Daniel Nedum on the same date, time and place did steal the sum of N75, 000 (Seventy Five Thousand Naira) property of Umar Sango and thereby committed an offence contrary to s. 285 of the Criminal Law of Lagos State, 2011.”

The defendant had however pleaded not guilty to all the charges. The court therefore granted him bail in the sum of N1 million.

Speaking to newsmen following Nedum’s arraignment, his counsel, Mr. Oluwaseun Ayedun, lamented that the trial of his client in a criminal court reeked of malice.

He contended that since the dispute arose from a commercial contract, the appropriate mechanism for resolving it ought to have been mediation or arbitration.

He added that all moves toward the amicable resolution of the matter prior to the court action was rebuffed by the complainants. “Sango failed to honour all our invitation for the amicable resolution of the dispute,” the defendant’s counsel told Daily Independent.

Earlier, the accused person had petitioned the Inspector General of Police; the Lagos State Ministry of Justice; the Commissioner of Police, Lagos Command; and the National Human Rights Commission for legal assistance.

He’d petitioned them to intervene and forestall the actuation of the complainants’ threats. The complainants, who are senior police officers, had threatened that they would harass Nedum and his family to no end save and until they’d fully exacted their pound of flesh from him.

While the complainants alleged that the accused had premeditated intentions of defrauding and stealing their money by conversion; the history of the transaction, going by the defendant’s testimony, indicates that the transaction rather started on a cordial note, cemented by mutual trust and confidence.

However, subsequent failure of the defendant to meet his obligations within the terms of the contract, led to suspicion on the complainants’ part.

Speaking in this connection, Sango, one of the complainants and prosecution witnesses, alleged that the accused had a history of subtlety, duplicity and heist, adding that the instant dispute is only one of many involving the accused to which he’d been privy.

This is against the backdrop that as former DPO of Ojodu Police station, he’d had cause to intervene in similar matters involving the accused and other persons in the Ojodu area.

He noted that having given the accused the sum of N75, 000 for procurement of Chinese visa (on the strength of his representation that he would help him secure the document) but failed to do so, and coupled with his failure to refund the money upon repeated demands, he became suspicious that he was dealing with a skillful fraudster

The accused however insisted that his inability to meet his contractual obligation and satisfy his business partners’ expectations in respect to their investment was due to the poor state of the national economy.

The bad economy, according to him, made the quick disposing of the goods, and turning in of profits to his partners, rather a tall order.

According to the lodged complainant, the transaction consisted in a contract in which the complainants were to provide the accused, who was into the business of importation, with funds to import cooking stoves and ceramic tiles from China. He was to turn in profits once he was done selling off the goods in Nigeria.

At the first transaction cycle, the accused did indeed import the goods into the country, and sold them off rather quickly; and the sales did indeed produce a handsome profit, which the accused had turned in to his business partners. This was the happy narrative in the first two transaction cycles.

Encouraged by the seeming profitability of the business, and estimating it to make good investment sense, the complaints ploughed their profit back into the business, to expand it.

However, sometime during the pendency of the transaction, and having ploughed a cumulative sum of about N6.5 million into the business while expecting a commensurate earning, the accused failed to turn in any profit to the chagrin of his business partners.

Neither was he, upon demand, able to turn in their original investment capital. For the contract had either failed or was being frustrated by the prevailing circumstances.

He wasn’t even able, according to the prosecution, to show that he’d imported any goods for which the investors had committed so much.

Against this backdrop, the question arises: why should a dispute arising from a commercial contract be reduced to a criminal matter just because the contract failed?

Were there gaps in the draft contract which failed to provide a definite civil means for resolving any dispute that could arise from it?

The issue now before the court is whether ab initio the accused had intended to defraud his business partners. This is because a guilty mind on the part of the accused must be established in order for the prosecution to establish his guilt as charged.

It suffices to note that whether or not the accused would be convicted as charged would depend on the court’s finding as per whether or not there had been a premeditated, voluntary intention (mens rea) on the accused person’s part to defraud his business partners either before the parties entered the contract or during its pendency.

Above and beyond litigation, the instant dispute, as one arising from a failed contract, is one for which the common law has provided adequate remedies. And here the remedy simply turns on debt recovery, to the extent of the capital committed by the complainants into the contract.

It suffices to note, against this backdrop, that with the advent of Small Claims Court in the Lagos jurisdiction, the adverse party could access speedy remedy by approaching the Court for easy, informal, inexpensive and speedy resolution of the dispute.