NICON INSURANCE LIMITED V. SONA BREWERIES LIMITED & OTHERS (2019)

Background

This appeal arose from a claim before the Federal High Court, Lagos, concerning missing spare parts from a vandalised 1250KVA gas generator and synchronising panel. Sona Breweries Limited, the first respondent, claimed that the equipment and goods were in the custody of the Nigeria Ports Authority, the third respondent, and that the loss was covered by insurance. Royal Exchange Assurance (Nig.) Plc, the second respondent, had indemnified Sona Breweries in the sum of N11,119,594.33 and, by subrogation, sought recovery from NICON Insurance Limited, which was alleged to be an insurer connected with the relevant risk. The total claim was N14,044,210, together with pre-judgment interest at 21 per cent per annum and post-judgment interest at 6 per cent per annum.

NICON denied liability and challenged the competence of the action. It argued that the claim was statute-barred under section 21(1) of the National Insurance Corporation of Nigeria Act and that the respondents had failed to serve the statutory pre-action notice required by section 26(2) of the Act. NICON also contended that correspondence exchanged with Royal Exchange did not constitute an admission of liability and that the award of pre-judgment interest was unsupported. The Federal High Court rejected the objections, held NICON and the Nigeria Ports Authority liable, and awarded the claimed sum with interest. NICON appealed. The Nigeria Ports Authority also brought a cross-appeal, arguing that the Public Officers Protection Act protected it from the claim.

Issues

1. Whether the Federal High Court had jurisdiction to entertain the respondents’ action, having regard to limitation and the alleged failure to serve pre-action notice.
2. Whether NICON’s letters dated 28 October 2004 and 23 February 2005 amounted to waiver, estoppel by conduct, or an admission of liability.
3. Whether the trial court was entitled to award pre-judgment interest at 21 per cent per annum.
4. Whether section 2(a) of the Public Officers Protection Act applied to the contractual claim against the Nigeria Ports Authority.

Ratio Decidendi

The Court of Appeal held that section 26(2) of the NICON Act imposes a mandatory pre-action notice requirement. The use of the word shall requires the intending claimant to serve written notice at least one month before commencing proceedings, and the notice must state the cause of action, particulars of the claim, the claimant’s name and address, and the relief sought. However, the court found that the requirement had been satisfied. A letter dated 4 November 2005 expressly notified NICON that the respondents intended to commence proceedings and stated the amount sought. The writ was issued on 5 December 2005, after the expiry of the required notice period.

On limitation, the court distinguished between a cause of action and a right of action. A cause of action consists of the facts which, if proved, entitle a claimant to a remedy. The right of action is the remedial right to invoke the court’s process. The limitation period begins when the cause of action is complete and the right to sue accrues. Although the vandalisation was discovered on 18 March 2004, the court held that the respondents’ actionable right against NICON accrued on 7 June 2005, when NICON expressly repudiated liability. Since the action was commenced within the applicable period, it was not statute-barred.

The court further held that an objection based on limitation affects jurisdiction and may be raised at any stage. Nevertheless, the trial judge had erred procedurally by first deferring the limitation objection until evidence was called and then purporting to dismiss it at the interlocutory stage. A dismissal ordinarily follows a final determination of the merits of an application. Despite that error, the issue was eventually considered on the pleadings, evidence and documents, and the conclusion that the action was competent was upheld.

Court Findings

The Court of Appeal upheld the finding that NICON was bound by its conduct. Its letters of 28 October 2004 and 23 February 2005 requested documents, referred to the insurance claim, and stated that NICON was liaising with co-insurers to resolve the matter speedily. Those communications did not indicate an intention to repudiate liability or rely on breach of a policy warranty. In the circumstances, they created the reasonable impression that NICON accepted responsibility and was prepared to process and settle the claim. Having induced the respondents to act on that belief, NICON could not subsequently rely on a policy condition to deny liability. This amounted to waiver and estoppel by conduct within section 169 of the Evidence Act 2011.

The court, however, partially interfered with the award of interest. It held that pre-judgment interest may be awarded on a liquidated monetary claim where the claimant has been deprived of the use of money wrongfully withheld over time. The respondents had pleaded interest and were entitled to some pre-judgment interest because NICON had refused payment after repudiating liability. Nevertheless, a claim for a specific rate of interest is in the nature of special damages and must be strictly proved. The respondents had produced no evidence establishing the contractual, statutory, mercantile or equitable basis for the rate of 21 per cent. The date selected by the trial court, 27 September 2004, was also inconsistent with its own conclusion that NICON’s liability was repudiated only on 7 June 2005. The Court therefore substituted 20 per cent per annum from 7 June 2005 until judgment.

On the cross-appeal, the court held that section 2(a) of the Public Officers Protection Act did not apply. The relationship involving the Nigeria Ports Authority was founded on a specific contract of bailment or commercial custody. The established exception to the protection afforded by the Act is that it does not apply to claims founded on contracts. The Nigeria Ports Authority therefore could not rely on the three-month limitation period in the Act.

Conclusion

The main appeal was allowed only in part, in relation to the rate and commencement date of pre-judgment interest. In all other substantial respects, the judgment of the Federal High Court was affirmed. The cross-appeal by the Nigeria Ports Authority was dismissed. Costs of N1,000,000 were awarded against NICON in favour of Sona Breweries and Royal Exchange, while N500,000 were awarded against the Nigeria Ports Authority in favour of the cross-respondents.

Significance

The decision clarifies that statutory pre-action notice requirements must be strictly observed, but also confirms that such requirements may be waived where the protected party voluntarily proceeds without objection. It reinforces the importance of determining limitation from the claimant’s pleadings and identifying the precise event that completes the cause of action. The judgment is also significant for its application of waiver and estoppel to insurance correspondence: an insurer that communicates an apparent willingness to settle may be prevented from later relying on a policy defence that it failed to raise promptly. Finally, it confirms that the Public Officers Protection Act generally does not shield public bodies from liability arising out of specific contractual obligations.