AIC gets $10 million damages from Shoprite for contract breach

Nigerian firm, AIC Limited has been awarded $10 million as damages against South African retail giant, Shoprite Checkers (PTY), Limited and its business partner, Retail Supermarkets Nigeria Limited for a breach of contract.

The award was contained in a judgment delivered by Justice Lateef Lawal-Akapo of a Lagos High Court, Igbosere.

Apart from the $10million award, the defendants are to pay N1million as well as an interest rate of 10 percent per annum effective from the date of judgment until final liquidation of the entire sum.

AIC, the claimant in the suit has sought for an order of court for payment of $2.23 million and another N13.6 million as special damages from the defendants.

It also sought among other reliefs an order for the payment of 50 percent of $92.3million as loss of profit it suffered as a result of the incorporation of Retail Supermarkets Nigeria Limited (second defendant) by the first defendant for the breach of the agreement for the period of 2005 to 2009.

The claimant in the suit filed by its counsel Prof Taiwo Osipitan (SAN), has sought for a declaration that by virtue of its agreement with the first defendant, (Shoprite Checkers Limited), for a joint venture to be formed by the claimant and the defendants, it is entitled to exclusively operate and manage the first defendant‘s Shoprite brand in Nigeria and elsewhere in the coast of West Africa except Ghana.

The claimant claimed that the agreement was breached when the first defendant sidelined it and incorporated the second defendant to handle its affairs.

In a 35-paragraph amended statement of claim filed at the court, AIC stated in course of its business sometime in 1997, it conceived of the business idea of developing and establishing mega stores/ retail supermarkets in Nigeria similar to Shoprite Chain Store Supermarket in South Africa and Sainsbury Supermarket of the United Kingdom for profit and further enhance its good will and reputation in the Nigerian Business community.

According to the claimant, Bonnita (now Parmalat) Pty of South Africa introduced the first defendant to it in the ordinary course of its business and the chairman; Chief Harry Akande established a business contact with the first defendant.

It was the contention of the claimant that it initiated discussions with the first defendant on its idea of developing and establishing Shoprite chain of stores/retail supermarkets in Nigeria and the cost of West Africa except Ghana, where Shoprite Checkers PTY Limited has already established its retail supermarket brand.

After a preliminary meeting with officials of the first defendant on the business idea, the claimant contended that a further meeting was held on April 16, 1998 at the first defendant’s Brackenfell Cape Town Head Office, the first defendant indicated through its Chief Executive Officer, Mr. J. Whitey Basson, that it had no interest in establishing its chain stores/ supermarkets in Nigeria as it did not have knowledge of the market potentials in the country.

The claimant submitted that it introduced the Nigerian market potentials to the first defendant and provided first hand knowledge of the country’s potential for megastores/ retail supermarkets and business climate for operation of same by providing the first defendant with demographic statistics and income bracket in major cities in Nigeria.

The claimant claimed that its initiative exposed the lucrative potentials of the Nigerian market to the defendant and this kindles its interest in establishing its chain store supermarket in Nigeria.

This development, the claimant submitted, culminated in an agreement between the parties for the establishment of Shoprite chain of stores/retail supermarket with the first defendant’s Shoprite Brand in Nigeria in joint venture with it.

The terms of the agreement, the claimant stated were as follows ‘ the claimant and the defendant will come into the joint venture individually, a new company to be formed by the first defendant will enter into a joint venture with the claimant or with ay other company formed or nominated by the claimant, the joint venture will be owned by the parties in equal proportion, the joint venture will exclusively operate the first defendant Shoprite Brand in Nigeria and elsewhere in the West Coast of Africa except Ghana.

Under the agreement, the claimant was to source and negotiate for potential locations of the chain of supermarkets in Nigeria and elsewhere in the West Coast except Ghana.

In performance of the agreement, the claimant stated it used its financial resources, good will and reputation to develop business intelligence; feasibility survey and marketing strategy for the establishment of Shoprite megastores in Nigeria and the West Coast of Africa except Ghana and disclosed same to the first defendant.

Some of the documents, the claimant said it prepared include, Investment Applications checklist dated April 16, 1998, investment in Nigeria Applications, Checklist answers, Capital Importation by Foreign Investors, Guidelines for Establishing Business in Nigeria and Criteria Guiding the Grant of Business Permit and Expatriate Quota.

It was also the submission of the claimant that it used its financial resources and goodwill to facilitate the issuance of entry VISA to Nigeria of Messrs.’ Hennes Schreuder and Freddie Niemand being the delegation of the first defendant for the first time ever to Nigeria.

In order to give effect to the agreement of the parties for the formation of a joint venture, the claimant stated that it through its directors incorporated a company known as Shoprite-AIC Nigeria Limited as well as commissioned among other things a survey of the traffic flow of the respective locations visited by the first defendant’s delegation.

The claimant stated that the first defendant appropriated all information disclosed to its own advantage and wrongly in breach of its agreement proceeded too incorporate the second defendant to operate its Shoprite Brand in Nigeria, thereby unjustly enriching itself and other third parties whose identities are at the moment unknown.

By the reason of the wrongful abandonment of the agreement between partiers and other infractions, the claimant stated that it has been denied and is being denied the enhancement of its goodwill and reputation in the Nigerian Business Community and deprived of the benefit of its agreement with the first defendant.

The suit, which commenced through a writ, was accompanied with exhibits, which included correspondences with the first defendant, recording of minutes of meetings held in South Africa and Nigeria by parties and affidavits in support.

But the defence through their counsel, Funke Adekoya SAN, contended that there was no joint venture agreement between the claimant and the first defendant.

The defendant contended that the claimant has failed to discharge the burden of proof, but attempting to support its week case and argument by piecing disjointed material together.

In their reply on point of law filed in response to the claimant final address dated September 7, 2016, the defence submitted that it was wrong for the claimant to rely on request for the first defendant’s specimen joint venture agreement in its letter of April 23, 1998, which the defendant never obliged the claimant.

The defence also submitted that the establishment of Shoprite in 2005 was not as a result of the feasibility study of the claimant but as a result of a different report in December 2004.

The defence team, who called five witnesses, urged the court to dismiss the claims for the claimant’s failure to adduce concrete evidence of non-execution of a joint venture agreement.

In the suit, counsel in their addresses dated April 4, 2016, formulated two issues for resolution, namely; Has the claimant established the existence of a joint venture agreement or any other agreement between it and the first defendant.

The court was also asked by the parties to resolve whether the claimant has established any claim against any of the defendants.

In the resolving two issues set before him, the trial judge in a 57 paged judgment, held that there were business discussions between parties leading to meetings held both in South Africa on April 16, 1998 and at the Claimant Office in Victoria Island on May 27, 1998. which amounted to an agreement.

It was also the affirmation of the court that the first defendant sent representatives, who flew into Lagos in furtherance of the on-going business discussion and were conducted to some specific locations, like Lekki Roundabout, Lekki Peninsula, near Victoria Island, Trade fair Complex, Lagos National Theatre, Iganmu and others.

The court further looked at extracts from the meetings in South Africa and Lagos before reaching a conclusion that the two meetings took place in 1998 prior to the establishment of Shoprite out let in Nigeria in 2005

In the judgment, the court held that the defendants were in breach of the agreement when they (Shoprite and Supermarkets) went secretly behind AIC Limited promoted by Chief Harry Akande to establish Shoprite outlet in one of the locations earlier shown to them by the claimant.

“By not expressly rejecting the offer made, when it had opportunity to do so at the meeting of 27th May, 1998 held subsequent to the making of exhibit P29. By agreeing to come to Nigeria with procurement of their Visa by the claimant as reflected in Exhibit P6. “Inspection tour of possible locations which includes Lekki Peninsula where the defendant eventually established Shoprite outlet in2005 by not reacting or objecting to the registration of Shoprite – AIC Limited as shown in exhibit P15 constitutes acceptance of the offer made”, the court held

The court also held that the claimant was duly entitled for compensation for such a breach and awarded the sum of N1 million against Shoprite as cost of the action as well as an interest at the rate of 10 percent per annum effective from the date of judgment until final liquidation of the entire sum.

According to the court, the claimant has as a follow up of South Africa meeting of April 16, 1998 incurred expenses, which included preparing and registering Shoprite-AIC limited. Preparing feasibility reports, applying and procuring visas for the defendant’s representatives that visited Nigeria on May 27, 1998 as well as organizing another meeting at its own expense slated for its office in Victoria Island on May 27, 1998.

The court, however, declined to make an order on the $92.3 million claims, on the ground that the claimant did not lead evidence as to how he came about the figure.

According to the court, “the claimant having been denied the opportunity of participating in the operation of the outlet by the reason of the breach will not in my view be entitled to expect profit as that loss can be properly compensated under another heed of claim”.