In the recent Supreme Court ("the Court") case of SC.332/2009; Julius Berger Nigeria Plc. & Anor. v. Toki Rainbow Community Bank Ltd, Julius Berger, the appellant, by a local purchase order requested a Contractor to make a supply to it ("the Contract"). The Contractor approached Toki Rainbow Community Bank Ltd, the respondent, to grant it a loan to enable it execute the Contract. The respondent's condition for giving the Contractor the loan was for the Contractor to domicile all payments under the Contract with it. The respondent signed a loan agreement and domiciliation agreement with the Contractor before granting the loan.
Upon failure of the appellant to domicile payments under the Contract with the respondent, the respondent commenced an action against the appellant for payments due to the Contractor under the Contract. Both the trial Court and the Court of Appeal held that the domiciliation agreement between the Contractor and respondent amounts to an assignment of the Contract to the respondent.
Upon an appeal to the Supreme Court, the appellant's Counsel contended that domiciliation of payments under the Contract was not the same with assignment of the Contract. The Counsel further contended that the respondent was not entitled to the interest under the loan agreement between the respondent and the Contract because the appellant was not privy to the Contract. The Counsel submitted that though the Statement of Claim determines jurisdiction but in some cases, the Court would use the facts deposed to in the affidavit in support as well as the counter-affidavit and exhibits attached thereto to resolve the question of jurisdiction.
On his own part, the respondent's Counsel contended that all the conditions for assignment of the contract to the respondent were present. This is because assignment of contract is absolute in writing and the appellant had notice of the assignment. The Counsel contended that the appellant was liable to pay the respondent the interest under the loan agreement with the Contractor. The Counsel submitted that the Court cannot look outside the pleadings to determine question of jurisdiction.
In its lead Judgment, Per Odili JSC, the Court found that the appellant entered into a Contract with the Contractor under a local purchase order on one hand and on the other hand, the respondent had a contractual loan agreement and domiciliation agreement with the Contractor. The Court held that the domiciliation arrangement did not concern the appellant who was not a party to it. Since there was no privity of Contract between the respondent and the appellant, the respondent cannot sue the appellant for the alleged failure to domicile the payments in its Bank or even claim interest under the loan agreement against the appellant.
The Court held that even though there was a tripartite domiciliation agreement between the respondent, appellant and Contractor for domiciliation of payments under the Contract, it does not make the appellant a party to the loan agreement between the respondent and the Contractor to entitle the respondent to sue the appellant on the agreement as it would under a Contract of Guarantee.
Interestingly, the Court further held that though it is settled law that the writ of summons and Statement of Claim are the materials in which the issue of competence and jurisdiction of court is settled, when an objection is made by means of a motion on notice, facts deposed to in the affidavit in support as well as the counter-affidavit and attached exhibits are also utilized to resolve the question. Therefore the Court of Appeal erred in law in holding that the trial Court was correct to determine objection solely on the writ of summons and Statement of Claim.
From the foregoing, the main principles in the case are;
- Domiciliation of payments under a Contract does not amount to assignment of the Contract.
- A Bank cannot claim interest under a loan agreement against a non- party to the agreement.
- A Contract of Guarantee is more binding than a tripartite domiciliation agreement.
- In determining its jurisdiction, the Court would not only look at the Writ of Summons and Statement of Claim but on all the processes in its record.
This article was co-authored by Fred Young & Evans.
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