Purpose of an Undertaking as to Damages

In the Federal High Court 

Holden at Lagos

On Friday, the 24th day of March, 2023

Before His Lordship

Yellim S. Bogoro 

Judge, Federal High Court

FHC/L/CS/1553/2017

Between

ECOBANK NIGERIA LIMITED             PLAINTIFF/RESPONDENT

                                  And

1. VIGEO LIMITED             DEFENDANT/RESPONDENTS

2.MR. VICTOR OSIBODU

IN RE:

1. CITISERVE REFRESH SERVICES LIMITED                           APPLICANTS

2. VG ESTATE LIMITED

(Judgement delivered by Honourable Yellim S. Bogoro, J)

Facts

On 7th November, 2017, the Federal High Court upon the application of the Plaintiff made an ex-parte order of mareva injunction freezing 147 bank accounts belonging to certain companies and persons including the Applicants. The 1st Applicant’s bank accounts were listed as Nos. 109 – 129 in the annexure to the ex-parte order while the 2nd Applicant’s bank accounts were listed as Nos. 2 and 3. The ex-parte order of mareva injunction was granted by the court based on the Plaintiff’s representations that the Defendants which the Plaintiff alleged were indebted to the Plaintiff, had substantial interests and investments in these companies and that they would dissipate the said interests if an order of mareva injunction was not urgently made against the bank accounts as listed in the Plaintiff’s application. In the affidavit in support of its ex-parte application, the Plaintiff undertook to pay to these persons and companies, any damages they may suffer, if it is eventually discovered that the order of mareva injunction was wrongly granted. 

As a result of the court’s ex-parte order, the Applicants’ bank accounts were frozen and they were unable to carry out any transaction on the said accounts. Further to this, the Applicants filed a summons on notice to set aside the ex-parte order made against them, on the ground that the Plaintiff concealed material facts from the court and wrongfully obtained the said ex-parte order. The Applicants’ application was not opposed by the Plaintiff, and the court consequently vacated the order of mareva injunction/ex-parte freezing order it made against the Applicants’ accounts. 

Subsequently, the Applicants filed an application to enforce the undertaking made by the Plaintiff, to pay the persons affected by the ex-parte order any damages they may suffer as a result of the wrongful grant of the said order. The Applicants claimed that the wrongly obtained ex-parte order crippled their respective businesses and gravely affected their cashflow, goodwill, business and reputation, and occasioned extensive damages on them; hence, they were entitled to compensation from the Plaintiff. They sought an order of court appointing a firm of chartered accountants to be nominated by the President of the Institute of Chartered Accountants of Nigeria (ICAN), to conduct an independent audit into the Applicants’ accounts and business dealings to determine the total damage they suffered as a result of the ex-parte order mareva injunction, and an order awarding to the Applicants against the Plaintiff, the total amount of damages suffered by the Applicants as may be determined by the independent auditor. The Applicants also sought an order directing the Plaintiff to be solely responsible for the cost of the independent audit exercise.

The Plaintiff filed a counter-affidavit and a written address in opposition to the Applicants’ application, and in response, the Applicants filed a further affidavit together with a reply on points of law. 

Issue for Determination 

After due consideration of the facts and issues presented by parties, the Court proceeded to determine the Applicants’ summons on the basis of the following issue: 

Whether the Applicants are entitled to the damages sought or not, considering the undertaking made by the Plaintiff. 

Arguments

Senior counsel for the Applicants, T. Oshobi, SAN submitted that the Applicants were neither parties to the contractual relationship that gave rise to the suit, nor parties to the suit itself, and the ex-parte order was improperly obtained by the Plaintiff against the Applicants. Counsel maintained that the Plaintiff failed to disclose to the court that the accounts that were sought to be frozen belonged to the Applicants and not the Defendants, and misled the court into granting the said ex-parte order which occasioned severe damage to the Applicants and their businesses since 7th November, 2017 when the order was made to date. He argued that the court is enabled to require an undertaking from a Plaintiff seeking for an interlocutory injunction to temporarily restrain a person, to pay damages should it turn out that a party who suffered damages was needlessly enjoined. He referred to WEST AFRICAN OILFIED SERVICES v PELFACO LIMITED & ANOR. (1994) 1 NWLR (PT. 319) 164 @ 189 B-C. He urged the court to invoke its powers under Order 44 Rules 2 and 3 of the Federal High Court (Civil Procedure) Rules, 2019 and order an independent enquiry into the Applicants’ accounts to determine the extent of the damages they suffered as a result of the wrongly obtained order of mareva injunction, and compel the Plaintiff to pay the same based on its undertaking.

In reaction, counsel for the Plaintiff argued that the enforceability of the Plaintiff’s undertaking, is dependent on whether there was merit and reasonable basis for the grant of the ex-parte order sought in the first place. He submitted that the Plaintiff reasonably sought the ex-parte order to prevent the Defendants from dissipating the monies in the bank accounts of the companies that were linked to him, and the court granted the same meritoriously after the Plaintiffs had duly satisfied all the conditions for its grant. He relied on INTERNATIONAL FINANCE CORPORATION v DSNL OFFSHORE LTD (2008) 7 NWLR (PT. 592). 

Counsel argued further that the Applicants’ attribution of their economic losses to the ex-parte order is misplaced, and that the Applicants already had a poor credit standing prior to the grant of the ex-parte order, and cannot therefore legitimately claim that the order interfered with their business activities and profit-making opportunities. He also submitted that the undertaking to damages cannot be enforced, because the Plaintiff in its request for the ex-parte order, did not suppress any facts. He contended that the Applicants’ claims were tortious claims of business interference, loss of income/profit and business opportunities, and the Federal High Court lacks the jurisdiction to entertain the same.

Responding on points of law, counsel for the Applicants argued that the position of the law with respect to damages is that it can still be enforced even though the party that obtained the injunction has not been found guilty of misrepresentation, suppression or any other default in obtaining the injunction. He contended that this position is the same where it was granted by mistake in law or in facts, more so as the ruling of the court setting aside the ex-parte order in the instant case resulted in the conclusion that the order was improperly obtained. He submitted that the Federal High Court being the same court that granted the ex-parte order, has the requisite jurisdiction to grant redress for any injury suffered on the basis of the ex-parte order. He argued that the rules of court permit the Applicants to enforce the undertaking given by the Plaintiff for damages, occasioned by the improperly obtained ex-parte order.

Court’s Judgement and Rationale 

The Court held that an undertaking as to damages, is the price which an applicant for interim or interlocutory injunction has to pay for its grant. By the undertaking, the party obtaining the order undertakes to abide by any order as to damages which the court may make, in case it is afterwards of the opinion that the person against whom the order was made, by reason of the order, has sustained any damages which such party ought to pay. The Court referred to the decision of the Court of Appeal in ONYEME LUKWE v ATTAMACH (1993) 3 NWLR (PT. 293) PG 350 at 366. Placing reliance on on VICTORY MERCHANT BANK v PELFACO LTD (1993) 9 NWLR (PT. 317) 340 at 356, the Court held further that the amount of any undertaking as to damages to be extracted as a price for the granting of an interlocutory injunction, is not fixed at the time the injunction relief is granted; it is fixed afterwards at the dissolution of the injunction, or after trial and after due enquiry. 

The Court held that before the court can order for enquiry or make an order enforcing an undertaking as to damages, it must be satisfied that the injunction was obtained improperly, and that the injunction ought not to have been given, for example, (a) where the Plaintiff discontinues the action; (b) where the interlocutory injunction granted by the court has been discharged by the Court of Appeal; (c) where an ex-parte injunction has been obtained improperly and is accordingly discharged on hearing inter parties; (d) where the Plaintiff obtained a mareva injunction and served it on the Defendant back, despite lack of evidence that the Defendant is likely to dissipate his asset. The Court held that from the evidence before the court and the depositions in the Applicants’ affidavit in support of their application, the Applicants demonstrated how the ex-parte order obtained by the Plaintiff against their accounts affected them and occasioned grave damage to their businesses. This was buttressed by the fact that the court had vacated the ex-parte order, upon the application of the Applicants without any objection by the Plaintiff to the Applicants’ application. It thus, meant that the facts deposed to in the Applicants’ affidavit in support of their application to set aside the ex-parte order which demonstrated how the Plaintiff had misrepresented material facts to the court and improperly obtained the ex-parte order of mareva injunction stood unchallenged, and had been admitted by the Plaintiff. 

The Court came to the conclusion that the Applicants are entitled to damages based on the Plaintiff’s undertaking, and made an order directing an enquiry into the Applicants’ account by a firm of chartered accountants to be nominated by the President of ICAN and paid for by the Plaintiff, to determine the total damage suffered by the Applicants as a result of the ex-parte order. The Court also made an order awarding to the Applicants against the Plaintiff, the total damages suffered by the Applicants as may be determined by the independent auditor.

Representation

Akin Iwilade with Peter Ordam for the Plaintiff. 

Winifred Udeogu Osita with Taw-Kalt Ibidunni for the Defendants 

Reported by Optimum Publishers Limited, Publishers of the Nigerian Monthly Law Report (NMLR)(An affiliate of Babalakin & Co.)