MAJOR CONCEPT LIMITED & ANOR. v. PRINCE (ENGR.) ARTHUR EZE
FACTS
Major Concept Limited and Mr Major E. Okwuosa (the Appellants) entered into a contractual agreement with Prince Arthur Eze (the Respondent) sometime in November 2010 for the supply of a Maybach 62 S armoured Mercedes-Benz vehicle. The agreed purchase price for the vehicle was Eight Hundred and Thirty Thousand United States Dollars (USD 830,000). By the terms of the agreement, the Respondent was required to make an initial deposit of Seven Hundred Thousand United States Dollars (USD 700,000), while the balance of One Hundred and Thirty Thousand United States Dollars (USD 130,000) was to be paid upon delivery of the vehicle. Pursuant to the agreement, the Respondent transferred the initial deposit of USD 700,000 into the Appellants’ nominated account with the Bank of America. It was also expressly agreed that the Maybach 62 S armoured vehicle would be delivered within four months from the date of payment. However, the Appellants failed to honour this obligation. Instead of taking steps towards timely delivery, the Appellants allegedly adopted several diversionary tactics, including unilaterally altering the amount of the outstanding balance payable by the Respondent.
The Appellants further demanded the sum of Three Hundred Thousand United States Dollars (USD 300,000) as the final payment before delivery of the vehicle. In a bid to facilitate completion of the transaction and relying on the personal guarantee of the 2nd Appellant, who is the Director and the alter ego of the 1st Appellant, the Respondent paid the additional USD 300,000. This brought the total amount paid to the Appellants to One Million United States Dollars (USD 1,000,000). Despite receiving the full amount and notwithstanding repeated assurances and the personal guarantee of the 2nd Appellant the Appellants failed to deliver the vehicle. They continued to offer various excuses, none of which resulted in the performance of their contractual obligation. Frustrated and dissatisfied with the Appellants’ conduct, the Respondent instituted an action seeking a refund of the USD 1,000,000 on the ground that the consideration for which the money was paid had wholly failed.
After commencing the action at the trial court, the Respondent brought a motion on notice for summary judgment in the sum of USD 1,000,000. The Appellants filed a notice of intention to defend supported by an affidavit. The trial court, in its ruling, held that the Appellants’ affidavit disclosed no reasonable defence to the Respondent’s claim and accordingly entered judgment in favour of the Respondent. Dissatisfied, the Appellants appealed to the Court of Appeal, which dismissed the appeal. Still aggrieved, they further appealed to the Supreme Court.
One of the issues raised for determination was: Whether the lower court was right when it affirmed the decision of the trial court, which found the 2nd Appellant liable for breach of contractual obligations to the Respondent in the absence of privity of contract between both parties.
ARGUMENTS
Learned counsel for the Appellants argued that the decision of the court, which held both Appellants liable for the contract despite the fact that the 2nd Appellant was not privy to the agreement between the 1st Appellant and the Respondent, offends the settled principle of privity of contract and thereby occasioned a miscarriage of justice against the 2nd Appellant. Counsel contended that the notice of intention to defend clearly showed that it was the 1st Appellant, a limited liability company incorporated in Nigeria, that entered into the contract for the purchase of the vehicle for the Respondent. According to counsel, the only alleged basis for proceeding against the 2nd Appellant was the claim that he acted as the alter ego of the 1st Appellant. It was further submitted that, as a matter of law, a company incorporated in Nigeria is a separate and distinct legal entity from its directors, and the 2nd Appellant cannot ordinarily be held liable for the acts or obligations of the 1st Appellant. Since there was no contractual relationship between the 2nd Appellant and the Respondent, counsel argued that he could not, in any circumstance, be held liable for any breach of the contract executed solely between the Respondent and the 1st Appellant.
Responding to the argument of learned Appellants’ counsel, learned counsel for the Respondent contended that the facts and documentary evidence tendered in the case clearly demonstrated that the 2nd Appellant was not merely a passive director but an active participant in the transaction. Counsel argued that several paragraphs of the affidavit in support of the motion for summary judgment expressly stated that the contract was made with both Appellants. This position, it was argued, was further strengthened by an email authored by the 2nd Appellant instructing that the funds for the transaction be wired directly to his personal account. Counsel also argued that the additional documents attached as exhibits showed ongoing communications, representations, and commitments made personally by the 2nd Appellant throughout the negotiation and execution of the contract. Counsel maintained that these documents unequivocally established the 2nd Appellant’s direct involvement, making it impossible for him to distance himself from the agreement or evade responsibility. Based on the totality of the evidence, counsel submitted that both Appellants were clearly parties to the contract and must bear liability jointly.
DECISION OF THE COURT
In resolving the issue, the Supreme Court found that:
A director or managing director of a company may be held personally liable, together with the company, for a breach of contract where it is established that he personally guaranteed the performance of the contract by the company. The Supreme Court added that where a director enters into a contract in the company’s name, liability falls on the company and not the director. However, if the director fails to disclose his principal and enters into the contract in his personal capacity, he will be personally liable for any breach arising from the contract.
The Supreme Court further held that, although the 2nd Appellant contended that he acted solely as the alter ego of the 1st Appellant and signed the contract on its behalf, the evidence on record demonstrated that his involvement went far beyond merely representing the company. In his communications and correspondence with the Respondent, the 2nd Appellant consistently referred to himself in his personal capacity rather than as a company representative, and the emails were sent from his personal address rather than the company’s official email, clearly demonstrating his direct participation in the contract. In these circumstances, he could not claim to be a stranger to the contract or rely on the separate legal personality of the company to avoid liability, nor could he use the 1st Appellant as a smokescreen to escape personal responsibility. By personally guaranteeing the performance of the contract, the Court held that he had assumed personal responsibility and was therefore held jointly liable with the 1st Appellant for the breach arising from the contract.
Issue resolved in favour of the Respondent.
Babatunde Ige, Esq., Daniel Peter, Esq. for the Appellants.
Chief Chris Uche, SAN, Chief S. T. Hon, SAN, Marvel Akpoyibo, Esq., Abdu-Jalil Musa Esq., Christian S. Hon. Esq., David T. Agashua, Esq., Leonard E. Ogboo, Esq., Mike Uche, Esq. and Marcel T. Idye, Esq. for the Respondent
This summary is fully reported at (2025) 12 CLRN in association with ALP NG & Co.
See www.clrndirect.com ; www.alp.company.
