Court orders Crown Realities Plc to refund N44.9M to property subscriber for total failure of consideration: Lessons

By: Stephen Azubuike

The Story

Mr. Dan Ngerem v. Crown Realties Plc [2021] 4 NWLR (Pt. 1767) 476

Mr. Dan Ngerem (“The Appellant) entered into a contract under which Crown Realties Plc (“The Respondent”) agreed to sell six houses in Crown Estate, Lekki, Lagos owned by Crown Realties. The agreed completion period was nine months from the date of the initial deposit. Mr. Ngerem paid the agreed initial deposit of N39.08 Million. Crown Realties failed to complete the house at the agreed time. The company completed the houses six months after the due date.

Mr. Ngerem did not complain. On his part, he failed to pay the balance. Instead, he made a proposal to pay the balance in installments. To this end, he paid further deposit of N34 Million, making it a total of N73.08 Million paid to the company.

Crown Realties had something up its sleeves. When Mr. Ngerem presented further payment, the company returned the cheque and revoked the contract on the ground that Mr. Ngerem was in breach of the payment terms of the contract which did not stipulate payment by installments.

On a clever move, the company applied part of the payments made by Mr. Ngerem (i.e. N28.1 Million) as payment for one house, out of the six houses. The company undertook to refund the balance of about N44.9 Million as soon as the other properties are sold. For undisclosed reasons, Crown Realties sold the remaining five houses to other interested buyers but failed to refund Mr. Ngerem’s money.

Aggrieved, Mr. Ngerem sued Crown Realties claiming a refund of the N44.9M and damages for breach of contract. The trial Court made some interesting findings. The Court dismissed the claims of Mr. Ngerem on the ground that both parties were caught up in a mixed show of contract breaches. While Crown Realties breached the contract by not delivering within the nine-month period, Mr. Ngerem waived the breach by accepting delivery after additional six months. In the same way, Mr. Ngerem breached the contract by not paying the balance, instead, he opted for payment by installments. The trial Court held that Mr. Ngerem was not entitled to damages for breach of contract as claimed.

Dissatisfied, Mr. Ngerem appealed to the Court of Appeal. The Court agreed with the trial Court’s position on contract breaches by both parties. It held that Mr. Ngerem had the option to treat the contract as breached the moment Crown Realties failed to deliver within the agreed time. This would have entitled him to damages for the breach. But he ignored the breach and kept the contract alive by subsequently proposing to pay the balance by installments. Failure to pay the balance forthwith was also a breach in itself.

Nevertheless, the Court of Appeal held that Mr. Ngerem was entitled to a refund of the N44.9M. Ogakwu, JCA took time to explain:

Be that as it may, from the analysis herein of the facts pleaded and joinder of issues, it cannot be repudiated that the Appellant (Mr. Ngerem) paid the total sum of N73.08 million to the Respondent (Crown Realties Plc), which amount the Respondent duly acknowledged and which is further established by the documentary evidence on record. From this payment, the Respondent only transferred one house valued at N28.1 million to the Appellant. It does not require rocket science to decipher that based on this, the Respondent still held on to the funds of the Appellant amounting to the total sum of N44.9 million which is the difference between N73.08 million (amount paid) and N28.1 million (value of house transferred). The evidence on record established this and the Appellant is definitely entitled to judgment for the refund of the said amount since the consideration for which it was paid had failed as a result of the Respondent’s revocation of the contract and subsequent transfer of five houses to other purchasers. On the preponderance of evidence or balance of probabilities, the Appellant was entitled to judgment for the refund of the said sum of N44.9 million…

See page 509 of the report.

Thus, failure to refund the N44.9M was an essential aspect of the case which, according to Ogbuinya, JCA, “did not arrest the attention of the lower Court.” Hear him:

It is decipherable from the record, the bible of the appeal, that the feuding parties share consensual view that the Respondent (Crown Realties Plc) has been a custodian of the Appellant’s deposit of the whopping sum of N44.9 Million without a corresponding delivery of any housing unit. The act, in the eyes of the law, is a classic exemplification of total failure of consideration. Where there is a total failure of consideration, the creditor is entitled to a refund of his monetary consideration.

See pages 512-513 of the report.

The Court of Appeal ordered Crown Realties to pay Mr. Ngerem the N44.9M plus interest.

This article was first published on April 20, 2021 by https://stephenlegal.ng/court-orders-crown-realties-plc-to-refund-n44-9m-to-property-subscriber-for-total-failure-of-consideration-lessons/

AUTHOR: STEPHEN AZUBUIKE is 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.