MOBIL OIL (NIGERIA) LIMITED (APPELLANTS)
J. M. JOHNSON (RESPONDENT)
(1961) All N.L.R. 102
Division: Federal Supreme Court
Date of Judgment: 22nd March, 1961
Case Number: FSC 75/1960
Before: Ademola, C.J.F.
Under terms of agreement set out in a letter from the appellant company to the respondent dated November 14th, 1955, the respondent agreed to operate one of the appellant company's petrol service stations in Ibadan on what was described as a "dealer basis." The respondent was, inter alia, to take possession of the station to run it at a standard to run it at a standard set by the Company and was to be remunerated on the basis of rebate and commission. He was to employ staff, subject to the approval of the Company and was to be responsible for their pay. It also provided that "the station will be given to you with the firm understanding that upon receipt of thirty days' notice in writing by either party, you may leave or be replaced." A "service fee" of £25 per month was charged by the Company and was attributed to maintenance, etc., of the building and equipment by the Company
The appellant company gave notice in writing dated July 31st, 1956, to the respondent requiring him to deliver up the station to the appellant company. He received this notice on the 7th of August, 1956. On August 30th, the appellant company took possession. The respondent then sued the appellant company for, inter alia, damages for unlawful entry.
The High Court held that the agreement created the relationship of Landlord and Tenant between the parties and awarded substantial damages to the respondent for unlawful entry. The Company appealed.
On appeal it was
(1) The decisive consideration in this type of transaction is the intention of the parties.
(2) The respondent was given no definite term of occupancy in this case, as the Agreement merely provided for its termination upon notice. No interest in the land was given to him by the Company. He received a mere right to occupy and use the filling station premises and equipment for the purposes set forth in the Agreement.
(3) The clear intention of the parties was to create no more than the relationship of Licensor and Licensee.
(4) The respondent was not entitled to damages for trespass; but as the notice given him was short by seven days, he was entitled to damages for loss of earnings for those seven days only.
Appeal allowed. Judgment of trial court set aside and Judgment for the respondent for loss of earnings for seven days substituted.
Cases referred to:-
Isaac v. Hotel de Paris, Limited (1960) I All E.R. 348;
Booker v. Palmer (1942) 2 All E.R. 674; 87 Sol. Jo. 30:
Balogun v. U.A.C. Limited (1958) N.R.N.L.R. 77.
S.C.O.A. Limited v. Ogena (1958) W.R.N.L.R. 141.
Balogun v. U.A.C. Limited et al., FSC 121/1958 (Decided 16th February, 1959).
Minister of Health v. Bellotti & Holiday, (1944)1 All E.R. 238; (1944) 1 K.B. 298; 113 L.J.K.B., 436; 170 L.T. 146; 60 T.L.R. 228.
APPEAL from High Court (West)
Ademola for Appellants.
Moore for Respondents.
The following Judgment was delivered:
Ademola, C.J.F.:-This was a claim by the plaintiff arising out of an agreement between the parties relating to the operation of a petrol filling and service station at Mokola, Ibadan. It was not in dispute that the petrol station was the property of the defendant nor was it in dispute that the defendant did operate the station under an agreement contained in a letter exhibit A dated the 14th November, 1955.
On the 31st day of July, 1956 the defendant Company by a letter bearing that date gave the plaintiff 30 days notice for the termination of the relationship between them under the agreement exhibit A. The letter was not received by the plaintiff until the 7th August, 1956. On the 30th August, 1956, the defendant took possession of the petrol station. The plaintiff thereby brought an action against the defendant Company claiming as follows:-
(A) £5,000 general and special damages for unlawful entry of the defendants on the petrol filling station.
(B) An account of the stock taken over by the defendant at the filling station on the 30th August, 1956 and payment over of what is found due to the plaintiff upon the taking of the said account.
(C) The return of all documents belonging to the plaintiff and which were at the Station on the 30th August, 1956.
The defendant Company filed a counter-claim against the plaintiff, but for the purposes of this appeal we are concerned mainly with the claim of £5,000 damages for unlawful entry as in (A) above.
In a considered Judgment, the learned trial Judge stated that the two main issues which arise are:-
1. What is the legal relationship between the plaintiff and the defendant company?
2. In view of that relationship, is the notice a valid notice?
He arrived at the conclusion that the relationship was that of a lessor and a lessee and that the notice to quit was bad in law. He then proceeded to assess the plaintiff's claim for loss of earnings at the rate of £150 per month and allowed him £75 for loss of earnings for two weeks.
In his treatment of general damages, the learned trial Judge said as follows:-
That the action of the defendant was high-handed, insolent and showed a contempt of the plaintiff's rights as well borne out by evidence which showed inter alia that defendant acted not only in breach of the legal provision as to the requirements of a valid notice but in fact in breach of their own notice exhibit "C." In addition their haste in taking stock or inventory in the absence of the plaintiff or his representative or an uninterested third party; their selling his stock without his consent and in his absence as well as causing the loss of the plaintiff's books of account and properties he had on the premises showed a contempt for his rights This is a case in which I should award exemplary damages, but in my view the plaintiff's claim is highly exaggerated. I do award the sum of £900 as general damages. I have further taken into account the fact that I must dismiss the plaintiff's third claim owing to the defendant's action under consideration.
The learned trial Judge therefore entered Judgment for the plaintiff for £975 and £113-0s-6d costs.
The following grounds of appeal were filed and argued:-
1. The learned trial Judge erred in law in construing that the agreement between parties exhibit "A" created the relationship of Landlord and Tenant.
(a) That the judge erred in law when he arrived at the conclusion that the fact that plaintiff was in exclusive possession of the petrol/service station created a relationship of Landlord and Tenant between the parties without taking sufficiently into consideration the intention of the parties at the execution of exhibit "A" and the subsequent conduct of the parties to the said exhibit "A" since its execution.
(b) That the judge was wrong in construing that the sum of £25 mentioned in the agreement exhibit "A" is a rent when in fact there was no evidence that the amount was so paid by the plaintiff and even if it was paid (which was not the case) it would not in law have created the relationship of Landlord and Tenant having regard to the intention and conduct of the parties to exhibit "A."
(c) The Judge erred in holding that the words "The station will be given to you with the firm understanding that upon receipt of 30 days notice in writing by either party, you may leave or be replaced" occurring in the agreement.
Exhibit "A" do create a lease between the parties when in fact the context in which they occur does not show any intention to confer any proprietary interest in or on the premises to the plaintiff.
2. The judge erred in awarding damages on the basis that the relationship of Landlord and Tenant existed between the parties whereas the position is otherwise; therefore the assessment of damages (if any) could have proceeded on a different principle.
Counsel on either side, as did the learned trial Judge, relied on the letter exhibit A, hereinafter referred to as the agreement. It is clear from the whole case that although regard must be had to the substance of the agreement between the parties, the intention of the parties is the dominant factor. An agreement which is contained in a business letter of this nature must be read together as a whole and too much reliance can not be placed on specific words or legal terms as used. The learned trial Judge whilst not doubting the correctness of the decisions in Balogun v. U.A.C. Limited (1958) N.R.N.L.R. Part III 77 and section C.O.A. Limited v. Ogana (1958) W.R.N.L.R. Part III 141-both of which dealt with the legal relationship between petrol dealers or operators and principal oil companies-stated that the case before him could be distinguished from these class of cases on account of, what he called, seven provisions in the agreement (exhibit A), and which he set out as follows:-
1. The responsibility for the efficient operation of the station to a standard demanded by the defendant company is that of the dealer.
2. The dealer is responsible for hiring of suitable staff subject to the minimum of 10 imposed by the defendant company.
3. The station is to be operated 24 hours a day.
4. Apart from the sale of petrol and oil products, there is provision for the sale of motor care accessories and servicing of motor cars.
5. The dealer is to pay to the defendant company the sum of £25 a month as a service charge for the expenses involved in depreciation and maintaining the building and equipment of the company.
6. Finally it is stipulated that:-"The station will be given to you with the firm understanding that upon receipt of thirty days' notice in writing by either party, you may leave or be replaced."
7. Although it is not apparent from the wording of the agreement exhibit "A" it came out in evidence that the keys of the safe and the premises under his dealership were kept by the plaintiff and in addition he was free to sell his own accessories pertaining to cars on the premises.
Some of these provisions, which appear to have been taken out of their context or abbreviated, need some consideration. The first and second provisions above form part of Clauses 1 and 2 of the agreement. A perusal of the agreement, to my mind, shows no indication of a surrender to the respondent of the exclusive rights of the petrol station; they appear on the other hand to show user by the respondent in a certain way and on certain terms.
I now read the relevant portion of the letter exhibit A, containing the agreement. It reads:-Confidential
Mr J. M. Johnson,
I would like to summarise the proposal of the Mobil Oil Nigeria Limited to you for the operation of our new Training Station in the Mokola area on the Oyo Road, Ibadan.
The company proposes that this Station will be operated on a dealer basis, which means that the responsibility for the efficient operation of this Station to a standard demanded by Mobil Oil Nigeria Limited will be delegated to a dealer whose compensation will be based on rebate and commission; rebate and commission being based on the volume of product sold and the cash turnover at selling. The dealer will be responsible for the hiring of suitable staff and the minimum number of staff recommended by Mobil Oil Nigeria Limited as sufficient to carry out satisfactory services at the Station. Mobil Oil Nigeria Limited expect that the station will be operated twenty-four hours per day and that the dealer work and spend sufficient time at the Station to ensure that each period of the day is operated to the highest possible standard of Service Station operation.
The company believes that the requirements of staff at the Station will be at least ten men. Six of these men will be classified as drive-away attendants whose sole job it will be to service automobiles at the pump island for the requirements of Gasoline and Motor Oil, observing the needs of the car as regards special services and/or accessories, and soliciting these sales in the right way. One high type clerical assistant will be needed to be able to relieve the dealer and to act as an assistant to the dealer. Two men will need to be libratory men whose main function will be the lubrication and servicing of cars in the lube bay. Hence together with the dealer, there will be a staff of ten at this Station. In the future, the drive-away attendants and the libratory men must be trained to be interchangeable but, due to the lack of training and the innovation of this special service in this new Station, that will have to come as a result of training at the Station, which will be supervised and arranged by the Mobil Oil Nigeria Limited Training Instructor. For the beginning, when the libratory is not busy, the men engaged for this work will be expected to work as drive-away salesmen, I would like you to bring the men you propose to employ at this Station to my office for interview tomorrow. When they have been agreed upon as suitable employees, you will arrange for their immediate transfer to Lagos to commence training of not less than three weeks at the Mobil Oil's Training Station at Moloney Street in Lagos. You are expected to report to Lagos as soon as possible for the same training, which will also include, the proper system of book-keeping, stock control and Service Station management while these people are in Lagos, Mobil Oil Nigeria Limited proposes to pay their monthly salaries. They will also offer you a per diem allowance to assist you in your personal living expenses while in Lagos. You and your men will be expected to be in this Station in uniform at all times, and always to be neat and clean so that the efficient service which is to be offered will be assisted by suitable looking representative employees. The first set of uniforms will be supplied by Mobil Oil Nigeria Limited and you will be expected to replace these uniforms as needed for your own account.
To start the Station operation, it has been agreed that you will purchase the opening inventory of Mobil gas, Sunflower Kerosine, and Mobil diesel and all the lubricants which are considered necessary for ideal inventory. It is, therefore, being confirmed that this inventory costing in the neighbourhood of £1,500 must be purchased by you prior to the opening of the Station; and that you will purchase subsequent requirements of these products on a cash basis. The ideal inventory of tyres, batteries and accessories which will be established by Mobil Oil Nigeria Limited after the opening of the Station will remain the property of Mobil Oil and you will pay for them as they are sold. The rebates applicable to you are as follows:-
Mobil gas-1d per Imperial Gallon
Mobil diesel 1d per Imperial Gallon
Sunflower Kerosine-1d per Imperial Gallon
Mobil oils-8d per Imperial Gallon
Mobil greases-8d per 9-1b.
Mobilises-8d per Imperial Gallon
Metro Motor Oil-1d per Imperial Gallon.
The commission applicable on the above items is one per cent of total sales value. Commissions applicable on other merchandise are as follows:-
Tyres and Batteries-Two and one half per cent of the selling price. Accessories (complete line to be advised)-Ten per cent of the selling price. Spark Plugs-Six pence per plug.
We anticipate that your monthly gross income from the sale of the above products will be approximately £175. We also anticipate that you will have an income of not less than £50 per month from the services in your libratory. It is expected that your wages for the employees will be approximately £100 per month and that you will pay to Mobil Oil Nigeria Limited £25 per month as a service charge for the expenses involved in depreciating and maintaining the building and equipment by the company. The commissions mentioned above will be credited to a security account opened on your behalf by Mobil Oil Nigeria Limited and drawings against this account must be justified by you and agreed by the Management of the Mobil Oil Nigeria Limited.
The Station will be given to you with the firm understanding that upon receipt of thirty days' notice in writing by either party, you may leave or be replaced. I am sure that you will appreciate that this is merely a safeguard for the investment which this Station represents to Mobil Oil Nigeria Limited and that if you fulfil the standard of operation at this Station, which you have verbally confirmed, it will be a highly successful venture for both yourself and the Mobil Oil Nigeria Limited.
This is the relevant portion of the letter. The respondent accepted the terms of the agreement by a letter (exhibit B) dated 15th November, 1955 which was admitted in evidence.
The second Clause of the agreement stated that at least a staff of ten men would be necessary at the petrol station and stated the work to be allocated to them; it provided that they must come up for interview by the Company before employment and also for training by the Company. The respondent himself was to receive training.
Next comes provisions 5 and 7 set out by the Judge. To these provisions he attached so much importance because a certain sum of money (£25) was to be paid monthly to the appellants by the respondent. The amount is stated to be service fee, but the learned Judge treated it as rent. He found that this payment coupled with the fact that the keys of the premises and of the safe are in the hands of the respondent, are all elements creating a lease.
The learned trial Judge considered the somewhat exclusive character of the occupation of the petrol station by the respondent and gave weight to some expressions used in the agreement as words indicating that a tenancy as distinct from a licence is the subject matter of the agreement. I have not the slightest doubt he was right in considering these expressions: he was right in considering the character of the occupation; but it appears to me it was his duty to do more than this. It was also his duty to consider the conduct of the parties as well as their intention, particularly when such intention is ascertainable from the document or agreement as a whole.
Principles for determining whether agreement creates lease or licence are set out in 23 Halsbury 3rd Edition at 427, paragraph 1022, as follows:-
In determining whether an agreement creates between the parties the relationship of landlord and tenant or merely that of licensor and licensee the decisive consideration is the intention of the parties. The parties to an agreement cannot, however, turn a lease into a licence merely by stating that the document is to be deemed a licence or describing it as such; the relationship of the parties is determined by law on a consideration of all relevant provisions of the agreement, nor will the employment of words appropriate to a lease prevent the agreement from conferring a licence only if from the whole document it appears that it was intended merely to confer a licence.
Looking at the substance of the matter, the agreement (exhibit A) aforesaid, can one conclude that the intention of the parties was to create a tenancy? A tenancy, when created, would be for a definite period; exhibit A states no determined period except that, with 30 days notice, either party may determine the agreement. Also the respondent would be earning commission on sales whilst he in turn would pay £25 per month for service charges and depreciation and maintaining of the building and equipment of the Company. He was to give personal attention to the work and must go through some training himself.
All these seem to me to be matters purely between a licensor and a licensee and not enough to create a tenancy. Nor does the agreement refer specifically to any interest by the respondent in the land or premises other than the petrol filling station. One assumes that the building referred to in the agreement is no more than the filling station equipment and buildings on in it as was described in R.A. Balogun v. U.A.C. and another-FSC 121/1958 decided 16-2-59.
In the case Booker v. Palmer (1942) 2 ALL. E.R. 674, it was stressed that the decisive consideration in these types of cases is the intention of the parties. Lord Greene, M.R., delivering the Judgment of the court in that case, said:-
To suggest there is an intention there to create a relationship of landlord and tenant appears to me to be quite impossible. There is one golden rule which is of every general application, namely, that the law does not impute intention to enter into legal relationships whether the circumstances and the conduct of the parties negative any intention of the kind. It seems to me that this is a clear example of the application of that rule.
In the more recent case of Isaac v. Hotel de Paris Limited (1960) 1 ALL E.R. 348, it was held that the intention of the parties and the conduct of the parties must be the deciding factor whether a tenancy has been created or the relationship was merely that of a licensor and licensee even though there was exclusive possession by the appellant and the acceptance of the amount of the rent by the respondent company. This was an appeal before the Privy Council from the Federal Supreme Court of the West Indies. Their Lordships of the Privy Council referred to, with approval, the statement of the law by Archer, J. in the Federal Supreme Court. This is what he said:-
It is clear from the authorities that the intention of the parties is the paramount consideration and while the fact of exclusive possession together with the payment of rent is of the first importance, the circumstances in which exclusive possession has been given and the character in which money paid as rent has been received are also matters to be considered. The circumstances in which (the appellant) was allowed to occupy the Parisian Hotel show that Joseph never intended to accept him as a tenant and that he was fully aware of it. The payments he made were only part of the disbursements for which he made himself responsible and the so-called rent was in the nature of a reimbursement of the rent payable by the (respondent company).
In the present appeal, it is clear to me from the agreement itself (exhibit A) as well as from the circumstances of the whole matter and the conduct of the parties that it was never intended that a tenancy should be created; that the relationship between the parties was no more than that of a licensor and licensee.
This disposes of the first part of the appeal. There is a second question. Was the respondent wrongly ejected? Was the notice served on him a good and valid notice? The plaintiff in his writ claimed £5,000 for trespass committed by the defendant for unlawful entry. In paragraph 8 of his Statement of Claim he said the unlawful entry was in breach of the agreement exhibit A. The claim was made and the damages of £900 were awarded on the basis that he (the respondent) was a lessee. It is clear that as a licensee (which was his true relationship to the appellant) he cannot maintain this action for a claim for damages for trespass. He would, of course, be entitled to 30 days notice under the agreement exhibit A. It is not disputed that a notice was served upon him. But according to his (the respondent) evidence, which the learned Judge accepted, the respondent did not receive the notice till the 7th August, 1956, and not on the 1st August, 1956 as was intended. As his privilege as a licensee could only be withdrawn by giving him 30 days notice under the agreement, it would appear the notice which was served upon him late was unreasonable to the extent of the seven days delay and he would be entitled to damages on the principle of Minister of Health v. Bellotti and Holiday (1944) 1 ALL E.R. 238. The damages, it was agreed, would be for loss of earnings for the seven days prior to the 7th August, 1956, the date he received the notice. On the calculation of the learned trial Judge when he awarded £75 for half a month's earning, it would appear that all the respondent is entitled to is the sum of £37-10s-0d.
In view of the foregoing this appeal succeeds.
I would allow the appeal by setting aside the Judgment of the learned trial Judge in the court below, and will substitute for it an order entering Judgment in favour of the plaintiff for £37-10s-0d and 15 guineas costs and this will be the Judgment of the court. The court below to carry out this order. The appellant is entitled to costs of the appeal in this Court which is assessed at 45 guineas.
Brett, F.J.:- I concur.
Unsworth, F.J.:- I concur.