YOUNG SHALL GROW MOTORS ATTEMPTS TO BUY PROPERTY WITH PHOTOCOPIES OF BANK DRAFT BUT THE COURT STOOD IN THE WAY

The Story

Young Shall Grow Motors Ltd. v. Onalaja [2021] 3 NWLR (Pt. 1763) 300

The facts of this case are quite interesting. A popular transport company, Young Shall Grow Motors Ltd, also known as “The Young” (“the Appellant”) was a tenant to the Onalaja Family (1st – 4th Respondents) at the property known as No. 1, Ikorodu Road, Jibowu, Yaba, Lagos. The Young has been there for many years.

The Onalaja Family eventually advertised the Property for sale. The Young indicated interest as a sitting tenant. Surprisingly and for some inexplicable reasons, negotiations spanned through some years. But the real drama began when parties agreed to meet at the office of the Solicitors to the Onalaja Family on 5 May 2001. On that date, members of the Onalaja Family showed up but no representative of The Young was available.

On 7 May 2001, The Young eventually forwarded to the Onalaja Family photocopies of Zenith Bank draft in the sum of 18 Million Naira issued on 4 May 2001 in the name of the Solicitors and in favour of the Family.

The Onalaja Family was displeased. The Family eventually sold the Property to the 5th Respondent (Mr. Mamah) for the sum of 20 Million Naira.

The Young sued the Family and the 5th Respondent claiming an Order of Specific Performance of the agreement to sell the Property to the Company. The Family members filed their defence, contending that they went into another deal with the 5th Respondent because The Young failed to consummate the transaction. The 5th Respondent counter-claimed for a declaration of title. The 5th Respondent gave evidence that The Young’s Chief Executive expressly informed him that the Company was no longer interested in buying the Property.

The trial Court and the Court of Appeal dismissed the case of The Young. The Company further appealed to the Supreme Court. It argued that it furnished consideration in the form of concrete promise – the issuance of a Zenith Bank draft in the sum of 18 Million Naira requested by the Family as purchase price and the delivery of the photocopies of the draft to the Family. The Young further urged the Court to allow the appeal as the loss of the Company cannot be remedied in damages having been a sitting tenant in the Property in dispute since 1998 and still in possession as at the material time of the suit.

The Supreme Court was not persuaded at all. In the Judgment delivered on 19 June 2020, the Court expressed shock as to why the Company preferred to play hide and seek games through the years instead of concluding the transaction promptly. The Supreme Court held that a bank draft can be accepted as cash equivalent in some business transactions and all depends on the contractual terms and agreement between the parties. However, a photocopy of a bank draft issued by the Appellant to the Onalaja Family did not qualify as consideration.

At page 318 of the report, Abba Aji, JSC expressed the opinion of the apex Court thus:

In the instant appeal, although the bank draft issued the 1st – 4th Respondents’ Counsel may suffice and qualify as a bill of exchange to bind the parties, these points must be carefully examined: 1. The 1st – 4th Respondents did not have the bank draft but the photocopies. 2. The Appellant instructed that they should not be given the original. 3. The Appellant nor its representative did not show up to conclude the transaction. 4. The 1st – 4th Respondents decided not to deal with the Appellant any more on the land transaction following the conduct of the Appellant. 5. The Appellant supposedly informed the 5th Respondent (the present purchaser of the Property) that he was no longer interested in the transaction. All the above are pointers that the Appellant by express conduct did not want to conclude the transaction and to establish a valid contract. Therefore, where an agreement is inchoate and has not gone beyond negotiations, it cannot be enforced as concluded contract.

The Supreme Court also considered the issue of possession of the Property by The Young. Abba Aji, JSC quoted with approval the holding of the trial Court before arriving at a valid conclusion thus (at page 319):

“It is surprising that a purchaser who initiated bank drafts towards payment would for some clever reasons withhold the original drafts and hand-over photocopies and insist that such serves as sufficient consideration, this is certainly far from it…” The implication of this is simple: the Appellant did not pay the price of the said Property; hence there was neither consideration nor contract. Where the purchase price is not fully paid, there can be no valid sale; notwithstanding that the purchaser is in possession. Possession cannot defeat the title of the vendor. 

The Supreme Court ultimately dismissed the claims of The Young, unanimously, and upheld the claims of the 5th Respondent that he was a bona fide purchaser for value without notice of any encumbrance; and therefore entitled to the Property.

Part of the lessons to be learnt from the above is that while it is important to be circumspect in land transactions, prospective purchasers must bear in mind the core principles of contract. For there to be a binding and enforceable contract, there must be some positive conduct(s) which will point to that direction, to enable the Court make necessary orders for specific performance in deserving cases. In this case, The Young stretched its advantage of being in possession too far. It ended in disaster. Photocopy of a bank draft is worthless as evidence of payment, when the original was never handed over. The Supreme Court was right. 



Stephen Azubuike
Author: Stephen Azubuike
Stephen is a lawyer with expertise in Commercial Dispute Resolution and Technology Law practice. He is a Partner at Infusion Lawyers. He has successfully argued cases from the High Courts of various jurisdictions to the Appellate Courts on behalf of financial institutions, other corporate bodies and multinationals. He has worked with a number of startup tech companies. He tweets @siazubuike.

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