Where a person alleges frustration of contract, the onus lies on him to prove it

WECO ENGINEERING AND CONSTRUCTION COMPANY LIMITED v. DUFAN NIGERIA LIMITED & ANOR
CITATION: (2019) LPELR-47211 (CA)

In the Court of Appeal
(Benin Judicial Division)

ON THURSDAY, 4TH APRIL, 2019
Suit No: CA/B/185/2009

Before Their Lordships:

HELEN MORONKEJI OGUNWUMIJU Justice, JCA
PHILOMENA MBUA EKPE, JCA
SAMUEL CHUKWUDUMEBI OSEJI, JCA

Between

WECO ENGINEERING AND CONSTRUCTION COMPANY LIMITED – Appellant

And

1. DUFAN NIGERIA LIMITED
2. ATLANTIC INSURANCE CO. LTD – Respondent

LEAD JUDGMENT DELIVERED BY SAMUEL CHUKWUDUMEBI OSEJI, J.C.A.

FACTS OF THE CASE
This is an appeal against the judgment of the Federal High Court, sitting in Benin Division. The Appellant and the 2nd Respondent were the 1st and 2nd Defendants respectively at the Federal High Court while the 1st Respondent was the plaintiff.

The facts according to the plaintiff’s (1st Respondent) case was that it was the owner of the houseboat known as DUFAN VI which was hired by the Appellant. By the written contract, the Appellant was to return the Houseboat to the 1st Respondent at the expiration of a period of two months from the date of commencement. The said houseboat was stationed in Warri Delta State where the Appellant took possession of same and moved it to Port-Harcourt, Rivers State where unfortunately it got submerged. The Houseboat upon eventual recovery from the water had remained in the custody of the Appellant.

Appellant has however, refused or failed to return the houseboat or pay the rents accruing from it; hence an action was instituted in the Federal High Court where various financial reliefs were sought. The Appellant as Defendant filed their defence and a counter-claim. Based on an application by the Appellant the 2nd Respondent was joined as 2nd Defendant. The trial Court granted the reliefs sought by the 1st Respondent and struck out the Appellant’s counter claim. The Appellant, dissatisfied appealed to the Court of Appeal.

ISSUES FOR DETERMINATION
The Court determined the appeal on the following issues: 1. Whether the Learned Trial Judge was right when he failed to find that the submerging of DUFAN VI (the subject matter of the contract – Exhibit “B”), an event not contemplated by the parties, frustrated the contract between the Appellant and the 1st Respondent and consequently held that the Appellant was in breach of Exhibit “B”;

2. Whether the Learned Trial Judge was right when he failed to consider the question as to whether the 1st Respondent had discharged the onus on it to establish that the submerging of DUFAN VI was due to overloading by the Appellant and held that the 1st Respondent need not plead and prove negligence and/or particulars of negligence; 3. Whether the 1st Respondent was still entitled to rental hire and not mitigate its losses having become aware that the House Boat DUFAN VI submerged on its own even before it was put to use by the Appellant. 4. Whether the Trial Court’s assumption of jurisdiction in the suit was proper having regard to the contract and alleged hire rental sum flowing there from; 5. Whether the Learned Trial Judge was right when he relied solely on Exhibit “B” in determining the dispute between the parties without recourse to Exhibit P1 (Marine Hull Insurance Policy) and held that the Appellant did not make out any claim against the 2nd Respondent thereby striking out the 2nd Respondent from the suit.

APPELLANT’S COUNSEL SUBMISSIONS
On issues five, the Appellant submission is that the trial Court erred in law when it entertained the suit which is founded on alleged breach of contract and alleged rental debt flowing from the contract. According to Appellant, the claim is not founded on admiralty matters but on contract because the Admiralty Jurisdiction Act Cap A5 Law of the Federation 2004 did not expressly provide that a hire rental accruing from a submerged Houseboat or even ship is a general maritime claim. Relying on TEXACO OVERSEAS (NIG) PETROLEUM CO. UNLIMITED VS. PEDMAR NIGERIA LIMITED (2002) FWLR (PT. 726) 885 he stated that the issue of submerging of DUFAN VI which, frustrated the contract and payment of rental has nothing to do with Admiralty Jurisdiction of the Federal High Court as it is a matter of debts accruing from rentals and contract.

On issues one and two, the Appellant submitted that none of the parties envisaged a situation of the boat submerging and that this fell under the circumstances under which a contract could be discharged.

He submitted that (Exhibit B) the contract for the hire of DUFAN VI having been frustrated owing to the submerging of the houseboat is incapable of being breached as both parties are consequently discharged of their contractual obligations there under.

On issues three, the Appellant submitted that the submerging of DUFAN VI completely frustrated the contract of hire, Exhibit B, thereby terminating any further obligation on the part of the Appellant to pay further rental hire sums as there was no longer any effective contract of hire upon which the Respondent could claim and that the 1st Respondent ought to have taken steps to mitigate its losses arising from the submergence of DUFAN VI and since it failed to act reasonably, it cannot now recover any sum than is reasonable.

In the alternative it was submitted that, even assuming but not conceding that the Appellant is liable in damages or rental to the 1st Respondent, the said 1st Respondent is not entitled to the huge sums as claimed but a sum within the period allowable for a diligent person to mitigate his losses.

On issue six, the Appellant submitted that the learned trial Judge was in error to have relied solely on Exhibit B in determining the dispute between the parties without recourse to Exhibit P1 by which DUFAN VI is covered by a Marine Hull Insurance Policy of the 2nd Respondent and the 1st Respondent’s claim being covered by the risks insured against even if it involves third parties by virtue of the Institute Yacht Clause contained in Exhibit P1. He added that given such provision, the damage to DUFAN VI and losses suffered there from are covered by Exhibit P1.

RESPONDENT’S COUNSEL SUBMISSIONS
On issues five, the Respondent submission is that the 1st Respondent’s claim was founded on Admiralty and as such the Federal High Court had the jurisdiction to entertain same. In support, reference was made to Section 1 (1) (d), Sections 26, 2(3) (f) and 3(b) of the Admiralty Jurisdiction Act.

On issues one and two, it was submitted that the DUFAN VI submerged as a result of overloading by the Appellant and that the appellant is bound by the terms of Exhibit B to return the DUFAN VI to the 1st Respondent in good condition of use and service on the expiration of the period of hire as agreed.

On issue three, the Respondent submitted that the 1st Respondent did all that was reasonably necessary to mitigate the loss in relation to DUFAN VI. That the Appellant is obliged to pay the present market price of DUFAN VI to the 1st Respondent by the said Exhibit B.

On issue six, the 1st Respondent submitted that Exhibit B is the document to be looked at in order to ascertain the term of the hire contract between the parties and by its content, there is no representation whatsoever from the 1st Respondent relating to the issue of insurance of DUFAN VI and that Exhibit B is conclusive of the terms negotiated by the parties.

Respondent submitted that the Appellant not being a party to the insurance contract as per Exhibit P1 between the 1st and 2nd Respondent, he cannot benefit therefrom and this is so even if Exhibit P1 was made in favour of the Appellant and this is based on the principle of privity of contract.

RESOLUTION OF ISSUES
The Court in resolving the issues began with issues five, because it is a threshold issue bordering on jurisdiction of the trial Court to entertain the suit.
In resolving this issue, the Court held that a community reading of the reliefs as claimed, together with the averments in the Amended statement of claim discloses convincingly that the claim in the main borders more of Admiralty and not simple contract or rent as alluded to by the Appellant.

The Court held that the 1st respondent was right when he submitted that the Houseboat and Generator barge falls within the definition of a ship as per Section 26 of the Admiralty Jurisdiction Act and also that a claim in respect of an agreement for the use or hire of a ship or related objects, is within the exclusive jurisdiction of the Federal High Court. The issue was resolved against the Appellant.

On issues one and two, the Court held that, frustration in contract occurs wherever the law recognizes that without default of either party, a contractual obligation has become incapable of being performed because the circumstances in which performance is called for would render it radically different from what was undertaken by the contract.
However, that where a person alleges frustration as a defence to a claim for breach of contract, the onus of proving the occurrence of the event culminating in the frustration is on him.

The Court held that the Appellant failed to adduce satisfactory evidence that the submerge of DUFAN VI, the subject matter of the contract between the Appellant and the 1st Respondent was due to frustration. The issue was resolved in favour of the Respondent.

Resolving issue three, the Court held that although it is trite that a plaintiff is required to take all reasonable steps to mitigate the loss resulting from the defendant’s wrong as no damages will be awarded in respect of any part of the loss which he could have averted by taking reasonable steps to do so. However, a plaintiff is not obliged to accept conditions, which are both onerous and demonstrably intolerable in the name of mitigation. This issue was partly resolved in favour of the Appellant.

Finally, in resolving issues six, the Court held that only a person who is a party to a contract can sue or be sued on it. The Court’s reasons were that parties are always free to vary or discharge their contract by agreement and that the creation of a third party would impede this freedom unless an agreement for such third party involvement has been made part of the agreement. Thus, this follows the general principle that a contract affects parties to it and cannot be enforced by or against a person who is not a party, even if the contract is made for his benefit and purports to give him the right to sue or to make him liable upon it. Consequently, a Court cannot sanction an unwarranted departure from terms of contract into which two free and able parties entered unless such a contract or any part of it has been lawfully discharged. This issue was also resolved in favour of the 1st Respondent.

HELD
On the whole, the Court found no merit in the appeal and accordingly dismissed same. The award of the sum of N1, 800,000 was amended to read N1, 200,000. The judgment of the Federal High Court delivered on the 23rd day of June, 2006 was affirmed.

Appearances:
E.E. Ileoba – For Appellant
Chief E.E. Esusuakpo with him, Okiemute Akpofure for the 1st Respondent.
Chief I. A. Atikueke for the 2nd Respondent – For Respondents

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