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Real reason why Shoprite is leaving Nigeria

  • Exiting has more to do with breach of agreement issues against it

Shoprite Checkers (PTY) Limited, Africa’s biggest grocery retailer, has joined other international companies who are exiting from the continent’s most populated country, Nigeria.

In a statement on Monday from Johannesburg, South Africa, Shoprite, which has been in Nigeria since 2005, said the results for the year do not reflect any of their operations is Nigeria as it will be classified as discontinued operation.

But sources said that Shoprite may not be leaving for the same reason of hostile trading environment as given by the Cape Town-based retailer, Price, which exited the market after Woolworths did the same in November 2013.

It is exiting Nigeria not leaving because of regulatory issues and under-performance of their business but for reasons arising from a court case over the way it entered into the Nigerian market after breaching an agreement which awarded $10 million damages against it. This judgment and the issues surrounding it had already fouled up its operating environment.

The Court of Appeal sitting in Lagos had in May this year affirmed the judgment of a Lagos High Court that awarded $10 million damages against it in a suit filed by AIC Limited which submitted that the retail giant breached an agreement to set up its Nigerian arm.

The appellate court, however, rejected a cross appeal AIC instituted against Retail Supermarket Limited, Nigeria’s subsidiary of Shoprite Group, asking it to award 50 percent of $92.3 million against the subsidiary as loss of profit incurred due to the breach of contract by its parent company.

In an unanimous judgment delivered on May 21, the court’s three-man panel affirmed the award against Shoprite Group, thus upholding the decision of the lower court that Shoprite Group breached contract in its dealing with AIC.

Before the appeal was instituted, the trial court presided over by Justice Lateef Lawal-Akapo had awarded $10 million damages against the South African retail giant and its Nigerian subsidiary for a breach of contract

Apart from the $10million award, the court had directed the South African retail giant to pay 10 percent per annum on the damages with effect from the date of judgment until final liquidation of the entire sum.

Dissatisfied with the judgment of the trial court, Shoprite and its Nigerian subsidiary jointly filed a notice of appeal with several grounds, asking the appellate court to quash the decision of the lower court.

On its part, AIC filed a cross appeal, demanding 50 percent of $92.3million as loss of profit it suffered due to the incorporation of Retail Supermarkets Limited, which it contended amounted to the breach of the agreement for the period of 2005 to 2009.

In its decision, the three-man panel, comprising Justice Joseph Ikyegh, Justice Tijjani Abubakar and Justice Ugochukwu Ogakwu, threw out the appeal of Shoprite Group having established it breached agreement it entered with AIC to jointly set up the Nigerian subsidiary.

Ikyegh, who delivered the lead judgment, ruled: “I agree with the appellants that since the court below did not find Retail Supermarket liable, the award of damages and costs against it cannot stand. The court below was therefore wrong to have awarded damages against Retail Supermarket.”

The judge declared that he would “allow the appeal in part on this issue and set aside the award of damages and costs against Retail Supermarket; while the appeal of Shoprite Checkers is dismissed for lacking in merit and the decision of the court below as it affects Shoprite is hereby affirmed.

“The trial court held in its judgment that there was a subsisting contract by conduct between the respondent and Shoprite with respect to the joint venture, which the latter had breached upon which it awarded $10 million damages and post-judgment interest thereon in favour of the respondent against the appellants,” he declared.

He noted that since Shoprite had by its conduct shown an assurance of intention or representation to enter into legal relation with the respondent with respect to the partnership venture and the respondent acted upon it, it could not afterward be allowed to retreat or resile from the promise of assurance.

It added that the South African retail giant “must accept its legal relations as modified by it even though it is not supported in point of law by any consideration, but only by its word or conduct using the yardstick of a reasonable man.

“Accordingly, by allowing AIC to expend time, energy and resources in the partnership endeavour and altering its position in the belief based on the probability of both of them working together in partnership, good conscience will not allow Shoprite to avoid liability for altering AIC’s position.

“Even if there was no binding contract by conduct between Shoprite and AIC, the dictates of good conscience grounded the liability of Shoprite. The appeal on liability therefore lacks merit.

“General damages are presumed by law to be the direct, natural or probable consequence of the act complained of but the quantification thereof is at the discretion of the court.”

With respect to the cross appeal filed by AIC, Ikyegh ruled: “In the light of the fact that the award of $10 million general damages arose from and was based on the same set of facts obtainable in the other heads of damages, the court below was right to hold that to award damages on the other heads of damages would amount to double compensation.

“More so, the other distinct heads of damages were not proved. Therefore, the court below would have fallen into deep error if it had awarded the other heads of damages, which would have amounted to windfall much against the principle upon which damages are awarded.

“Pre-judgment interest was not established to have risen from mercantile custom or statute or in the contemplation of the parties and/or agreed upon by the parties at the making of the contract and could not have been awarded in the circumstances of the case.

“The argument on post-judgment interest having been withdrawn by AIC at the hearing of the cross-appeal are hereby struck out. In the final analysis, I find no merit in the cross appeal and hereby dismiss it and affirm the decision of the lower court. Parties are to bear their costs,” he declared.

The judge noted that AIC did not establish that Shoprite Group and its Nigerian subsidiary were aware or had knowledge of what became special damages in the case at the time the transaction in question occurred.

He, thus, ruled that AIC “cannot burden the cross-respondents with what they were not expected in law to carry. It has to be added, by way of emphasis, that damages are deemed to be in issue where claimed in civil cases, unless expressly admitted which was not the case here.”

Also, Ikyegh noted that AIC did not establish that what later constituted special damages in the action was in the contemplation of the parties at the time of making the contract.

He pointed out that at the time of making the contract, Retail Supermarket “was then not in existence at the material time. In this circumstance, the lower court could not have awarded the special damages against the appellants.

“Now, aggravated damages are meant to compensate the plaintiff for his wounded feelings. But a corporate body is an artificial entity and may not have the anatomy to experience wounded/injured feelings as distinct from injury to its credit or corporate image as a corporate body.

“So, I do not, with deference, think the purport of aggravated damages hinged on wounded feelings which may have to do with human dignity will not fit a corporate body in the realm of the law of contract. Exemplary damages also known as punitive or vindictive damages can apply only where the conduct of the defendant merits punishment.

“This may be considered to be so where the conduct is wanton in the sense that the conduct disclosed fraud, malice, cruelty, insolence or the like; or where the conduct is a contumelious disregard of the plaintiff’s rights or where there is infraction of statutory/constitutional right by public servants

“Projected loss of profits was documented. But AIC did not establish that the anticipated loss was delivered to Shoprite at the time of the contract. Shoprite and its Nigerian subsidiary cannot, therefore, be burdened with what they did not reasonably foresee or anticipate from the contract.

“The claim for loss of anticipated profit is by its nature prospective in that the loss has not actually occurred. The specie of claim is based on mere estimates, which suggests something that is not final or something to be ascertained with exactitude at a later date.

“But it does not mean the expenses had been incurred as it is a preliminary statement of the probable cost of proposed undertaking and is as good as an exercise in mere conjecture or guess-work which is the opposite of precise calculation of damages.”

Also supporting the lead judgment, Ogakwu said: “having read the records of appeal and the briefs of argument filed and exchanged by the parties, I find that the manner in which the issues thrust up for determination in the appeal and cross appeal were resolved in the lead judgement are in consonance with my view.

“Accordingly, I adopt the reasoning and conclusion in the lead judgment as mine. I equally allow the appeal in part, but only as it relates to Retail Supermarket Limited. The appeal, as it relates to Shoprite Group, is devoid of merit and it fails. In the same vein, AIC’s cross appeal is bereft of any merit and it equally fails.

“The decision of the lower court is consequently affirmed except as it relates to Retail Supermarket Limited. I abide by the consequential orders made in the lead judgment inclusive of the order to costs,” Ogakwu noted.

Likewise, Abubakar adopted the lead judgment, saying his learned colleague “has fully and sufficiently covered the field. I have nothing useful to add. I adopt the entire judgment as my own and endorse the consequential orders.”

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