⦿ CASE SUMMARY OF:
Afrotec Technical Services (Nig) Ltd. v. MIA & SONS Limited & Anor (2002) – SC
by PaulPipar
⦿ THEME(S)
Sale of goods;
Conditional sale;
Romalpa clause;
⦿ PARTIES
APPELLANT
- Afrotec Technical Services (Nig) Ltd.
v.
- MIA & Sons Limited
- AFCON Engineering Limited
⦿ CITATION
(2000) LPELR-219(SC);
⦿ COURT
Supreme Court
⦿ LEAD JUDGEMENT DELIVERED BY:
KUTIGI, J.S.C.
⦿ LAWYERS WHO ADVOCATED
- FOR THE APPELLANT
- FOR THE RESPONDENT
⦿ FACT
Below is the letter (Exhibit 1) containing the agreement between the parties.
“28 March 1978,
Afrotec Technical Services Nig. Ltd.,
P. M. B. 1061, Oshodi,
Lagos State.
Dear Sirs,
SUPPLY OF ITEMS OF PLANT AND EQUIPMENT
We hereby unconditionally and irrevocably undertake to pay Afrotec Technical Services Nigeria Limited (hereinafter referred to as Afrotec the total sum of N702,900.00 (Seven hundred and two thousand, nine hundred Naira) in consideration of their supplying us with the under-mentioned equipment on the following terms and conditions.
EQUIPMENT
Ex-Isolo 1 No. Parker Mobile Crushing Plant Model 5245/4’/7606 – N476,000.00 No.;
Foden Quarry dump Truck Model FC27 – N84,000.00;
Fast moving recommended spare parts to value – N39,900.00;
BD 440 440KV A Generating Set – N66,000.00
PRICES
The agreed prices are as detailed above and are understood to be on the basis of delivery Ex Afrotec’s yard at Isolo Industrial Estate.
DELIVERY
The items of plant detailed above are to be delivered to site at an additional agreed price of N28,000.00 (Twenty-eight thousand Naira).
COMMISSIONING
Afrotec to attend to commissioning and to provide skilled engineer to supervise installation at an additional cost of N10,000.00 (Ten thousand Naira) being five weeks at the rate of N2,000.00 per week.
TERMS OF PAYMENT
We confirm that the total contract price of N702,900.00 is to be paid to Afrotec on the following terms. 40% cash deposit of N281,160.00 (Two hundred and eighty-one thousand, one hundred and sixty Naira) payable in advance of delivery. Balance of 60% payable by six equal instalments of N70,290.00 (Seventy thousand, two hundred and ninety Naira) each secured by post-dated cheques payable on the 27th April, 27th May, 27th June, 27th July, 27th August and 27th September respectively.
INTEREST
The interest charged on the instalmental payments is to be for Afrotec’s account. We unconditionally and irrevocably agree that Afrotec shall have a lien on all the machinery until such time as Afrotec receive payment of the full contract amount of N702,900.00.
We also confirm that should we fail to pay, any of the instalments detailed above within one month of the due date, Afrotec shall take immediate possession of those properties in specie that remain unpaid for within the subject of this transaction without hinderance and without recourse.
Yours faithfully,
For: MIA & SONS LIMITED.
(SIGNED)
The plaintiff’s claims against the defendant read as follows: “(1) Perpetual injunction restraining the defendant, its servant, or agents of other officers acting on its behalf from disposing of by sale or otherwise the equipments. (2) Damages. (3) Specific Performance of Agreement of installation of equipments i.e. (a) Parker 5245/4 Crushing plant combination. (b) Foden Model Dump Truck (c) BD 440 Generating Set. (d) Spare parts for crushing plant at the Kaduna Quarry site of the plaintiff by the defendant or the alternative refund of all monies paid by the plaintiff to the Defendant on the said equipments.”
In a considered judgment delivered on 21/7/89, the learned trial Judge Ibiyeye J. after reviewing all the evidence before him, came to the conclusion that the transaction between the parties was a conditional sale and that the plaintiff had acted in violation of the conditions of sale i.e instalmental payments. The learned trial Judge, therefore dismissed plaintiff’s claims in their entirety as lacking in merit.
Dissatisfied with the decision of the learned trial Judge, the plaintiff appealed to the Court of Appeal, holden at Kaduna. In a reserved judgment delivered on 10/4/91, the Court of Appeal unanimously allowed the appeal, set aside the judgment of the Kaduna High Court.
The Defendant have herein appealed to the Supreme Court.
⦿ ISSUE(S)
- Whether the sale or transaction between the parties amounted to an outright sale or a conditional sale?
⦿ HOLDING & RATIO DECIDENDI
[APPEAL: ALLOWED]
- Issue was resolved in favour of the Appellant.
RATIO:
i. I have reproduced above, the Sale Agreement (Exhibit 1), say straight away that I am in no doubt whatsoever that the facts of this case show clearly that the equipment or machinery were sold to the defendant conditionally. The conditions being that “the defendant shall have a lien on all the machinery until a time that the defendant received payment of the full contract amount of N702,900.00” and that “the defendant shall take immediate possession of the machinery within one month should the plaintiff fail to pay any of the instalmental payment detailed in Exhibit 1”. In other words, I am of the view that the property in the equipment or machinery had never passed to the plaintiff when the defendant effected the seizure which is the subject matter of this action. The parties are clearly bound by the provisions in the Sale Agreement (Exhibit 1) without any subtraction or addition.
ii. One of the facts not in dispute in this case is that the six post-dated cheques issued by the plaintiff to the defendant in accordance with Exhibit 1 each bounced one after the other. Twenty one other post dated cheques for smaller amounts as replacements also were returned unpaid. And all efforts to collect the balance of the sale price as agreed in (Exhibit 1 ) proved abortive. There is no doubt at all that the defendant is an unpaid seller under the Act. It was therefore acting within its rights when though acting as an agent of the plaintiff, it seized the machinery which had lawfully come into its possession at the relevant time. The short of it all is that the contract of sale between the parties being conditional, the defendant was entitled to exercise its right of lien both under the contract agreement (Exhibit 1) and under the Act, the plaintiff having woefully failed to satisfy the conditions of sale of paying the 60% balance of the sale price.
iii. I therefore resolve issues 1,2,3 and 4 in favour of the defendant as follows:
(1) The Court of Appeal was wrong in its view that ownership in the equipment passed to the plaintiff on proper construction of Exhibit 1.
(2) The Court of Appeal was wrong in its view that acceptance of negotiable instruments or cheques as payment for the equipment had converted the conditional sale into an absolute sale.
(3) The Court of Appeal was wrong in its view that the only remedy open to the defendant was an action for the balance of the sum unpaid.
(4) The Court of Appeal was wrong in holding that the plaintiff had established a legal right in the equipment as to entitle it to equitable reliefs sought.
[AYOOLA JSC; DISSENT]
- Those terms gave certain rights to the defendant and did not by themselves indicate that the plaintiff should do anything in order to acquire property in the goods. The proper approach to the relevance of the terms is whether the grant to the defendant of lien over the goods and right to take immediate possession of the goods in case of default of payment raise an inference that delay in passing of property until payment of full purchase price by the plaintiff was intended.
- A legal lien was described in Halsbury’s Laws of England, Vol 28 (4th Edition) paragraph 702 thus: “In its primary or legal sense, lien means a right at common law in one man to retain that which is rightfully and continuously in his possession belonging to another until the present and accrued claims of the person in possession are satisfied. In the primary sense, it is given by law and not by contract.”
- Enough, I believe, has been said to show that the term as to lien contained in the agreement of the parties does not by itself raise any inference of an intention to delay the passing of property to the buyer. If anything, the inference which it raises is that which is consistent with the nature of lien, and that is, that property has passed to the buyer.
- By the agreement of the parties, the defendant was given a right to “take immediate possession of those properties in specie that remains unpaid for within the subject of this transaction without hinderance and without recourse” should the plaintiff fail to pay any of the agreed instalments within one month of the due date. I do not interpret this right as suggesting an intention to delay passing of property to the plaintiff. The entire agreement must be read as a whole. By the agreement, the plaintiff bought the equipment and agreed to pay an additional agreed price of N28,000.00 for delivery and an additional cost of N10,000.00 for commissioning of the plant. Interest was charged for delayed payment.
- Where payment is by negotiable instrument, the legal position is clearly put in Benjamin’s Sale of Goods (op cit) paragraph 695 thus: “The seller’s remedy to sue for the price is suspended during the currency of the instrument. If the instrument is honoured at maturity, the amount expressed therein is effectively paid; if it is dishonoured, the seller’s remedy revives.”
- When the defendant delivered the equipment to the plaintiff, it lost its statutory lien as an unpaid seller over the goods. Its possession of the goods as bailee of the plaintiff was possession by the plaintiff through it as bailee. The position is different from the case in which the seller had not at any intervening period been out of physical possession. In my judgment, the defendant, having delivered the equipment to the plaintiff had lost the statutory lien which it had pursuant to section 39(1) of the Act, notwithstanding that it subsequently regained possession, under a separate contract as a bailee of the plaintiff for purpose of transporting the equipment to Kaduna. Even if the defendant had not lost its lien, it has waived it by its conduct. The law is clear that lien is waived “where the party claims to retain goods on grounds different from those on which he rests his claim for lien, and makes no mention of lien.”
- A waiver arises where one party leads the other to believe that he will not insist on the precise stipulation in the contract e.g. as to the time of performance, and the other party has acted on that belief and has thereby prejudiced his position, the first party cannot afterwards insist on the terms of the original contract, e.g. as to time or otherwise: Bullen & Leaks & Jacob’s Precedents of Pleadings.
⦿ REFERENCED
S. 1, 38, 39, 40, 43(1) of the Sale of Goods Act;
⦿ SOME PROVISIONS
⦿ RELEVANT CASES
⦿ NOTABLE DICTA
- PROCEDURAL
- SUBSTANTIVE
It, ought to be stressed from the onset, however, that a contract of sale reduced into writing, such as Exhibit 1, must be construed and given effect to like any other written contract. – Iguh, JSC. Afrotec v. MIA (2002)
Accordingly, section 17(1) of the Act provides that where there is a contract for the sale of specific goods, the property in them is transferred to the buyer at such time as the parties thereto intend it to pass. No difficulty can therefore arise where the contract between the parties expressly states when or at what time the property in such goods passes to the buyer. Section 17(2) of the Act, however, provides that for the purpose of ascertaining the intention of the parties, regard must be had to the terms of the contract, the conduct of the parties, and the circumstances of the case. – Iguh, JSC. Afrotec v. MIA (2002)
I think the question of the property in goods must be distinguished from the possession of them. In particular, it needs be emphasized that property in the goods does not connote possession of such goods. The property in the goods may be transferred to the buyer before or after he has taken possession of them or, indeed, at the time the goods are delivered to him. In the present case, it is common ground that the contract of sale which is binding on the parties and governs the transaction in issue is Exhibit 1. The question which must now be asked is whether from a close interpretation of Exhibit 1, one can come to a definite conclusion that the intention of the parties was that the property in the goods passed to the 1st respondent on the installation of the plant at its Kontagora site. – Iguh, JSC. Afrotec v. MIA (2002)
The law is long settled that in interpreting the provisions of a written contract, no addition thereto or, subtraction therefrom is permissible. The words used must be given effect to and no word should be ignored in the interpretation of the intention of the parties, otherwise the court will be seen as rewriting the agreement between the parties. – Iguh, JSC. Afrotec v. MIA (2002)
A lien, broadly speaking, is a right to retain that which is in one’s possession belonging to another till certain demands of the person in possession are satisfied. The unpaid seller’s lien however, is his entitlement to retain the goods in his possession until the buyer has paid or tendered the whole of their price. – Iguh, JSC. Afrotec v. MIA (2002)
Lien arises if the following conditions are satisfied, namely: 1. The seller is unpaid; 2. The goods have been sold without any stipulation as to credit, or the stipulated period of credit has expired, or the buyer has become insolvent; and 3. The seller is in possession of the goods or part of them. – Iguh, JSC. Afrotec v. MIA (2002)
Such unpaid seller is not liable in conversion as the original buyer, being in default, is not entitled to possession of the goods. – Iguh, JSC. Afrotec v. MIA (2002)
Accordingly, if the contract between the parties expressly creates a lien, a right of retention of the goods, repossession thereof or other form of security for the price, such express terms will prevail over, and therefore exclude the statutory implication of a lien etc., at least to the extent of any inconsistency with the express terms. – Iguh, JSC. Afrotec v. MIA (2002)
The fundamental rule is that specific performance will not be decreed if there is an absolute remedy at law in answer to the plaintiff’s claim, that is to say, where the plaintiff would be adequately compensated by the common law remedy of damages. – Iguh, JSC. Afrotec v. MIA (2002)
