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Does Domiciliation Of Payment Under A Contract Amount To An Assignment Of The Contract Under Nigeria Law?

posted 4 years ago

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;


  1. Domiciliation of payments
    under a Contract does not amount to assignment of the
    Contract.
  2. A Bank cannot claim
    inte
    rest under a loan agreement against a non-
    party to the agreement.
  3. A Contract of Guarantee is
    more binding than a tripartite domiciliation
    agreement.
  4. 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. 

Author

posted 6 days ago

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