Under Nigerian law, a person who practises a profession and renders professional services to another party at its request is entitled to receive remuneration or professional fees from the beneficiary of such services, unless he or she voluntarily waives the payment.(1) In the case of a legal practitioner, one option for the recovery of fees or costs due to him or her in a professional capacity is a court action.(2) Under Section 16(2) of the Legal Practitioner's Act(3) the conditions precedent to bringing an action to recover legal practitioner fees in court are as follows:
- A bill for the charges containing particulars of the principal items included in the bill and signed by the legal practitioner or, in the case of a firm, by one of the partners or in the name of a firm has been served on the client personally or left at or sent to his or her last known address; and
- A one-month period beginning from the date of delivery of the bill has expired.(4)
In instituting an action before a competent court there must be an actionable cause of action against a person or an institution. A cause of action is a fact or combination of facts which gives rise to a right to sue and consists of two main elements:
- a wrongful act of the defendant; and
- the consequent damages or facts on the part of the defendant.(5)
Another prerequisite is 'ocus standi, which denotes the legal capacity to institute proceedings in a court of law and is used interchangeably with terms such as 'standing' or 'title to sue', which is the right of a party to appear and be heard on an issue before any court or tribunal.(6) Where successful, an objection based on the lack of locus standi affects the competence and jurisdiction of the court, as the court must strike out the action without considering the merits of the case.
A recent case(7) highlights the importance of the doctrines of locus standi and privity of contract in an action for recovery of legal practitioner fees, particularly where the legal practitioner has rendered services in circumstances where the obligation to pay the fees has been passed by the client which engaged the legal practitioner's services to another person.
In 1995 the services of the respondent, a firm of solicitors, were retained by the Mandilas Group Limited for the preparation and engrossment of a deed of sub-lease between Mandilas and the appellant, Rebold Industries Limited. The sub-lease was in respect of a property situated at 7A Creek Road, Apapa, Lagos. It was a term of the agreement that Rebold would be responsible for the legal fees incurred in preparing the deed. Rebold failed to make good the terms of the agreement. On May 14 1997 the respondent took out a writ of summons endorsed with a statement of claim against Rebold to recover the fees incurred in the preparation and engrossment of the deed. Rebold failed to respond to the summons and a default judgment was entered in favour of the respondent on June 19 1998.
On November 26 1998 Rebold filed a motion before the Lagos State High Court challenging the jurisdiction of that court on the grounds that the respondent lacked locus standi to have instituted the action in the first place. The court dismissed the motion on February 21 2000. On May 14 2002 Rebold filed an appeal.
Rebold urged the Lagos Court of Appeal to set aside the trial court's ruling. In its judgment the appeal court dismissed Rebold's appeal on the grounds that, even though the respondent was not a party to the deed of sub-lease, it still had locus standi to sue based on Rebold's representation in the agreement to pay the respondent's fees. Still dissatisfied, Rebold appealed to the Supreme Court.
Before the Supreme Court, the main issue for determination was whether the respondent had locus standi to enforce a clause in the sub-lease when the firm of solicitors was not a party to the sub-lease. Rebold argued that the respondent lacked locus standi to bring an action for fees because, as a general rule at common law, a contract cannot confer rights or impose obligations on strangers to that contract. Rebold further argued that the Lagos Court of Appeal had erred and should have found that there was no privity of contract with the respondent to attract payment obligations for its fees. Rebold also stated that Section 16 of the Legal Practitioners Act, on which the appeal court relied heavily, could not have given the respondent locus standi to institute the suit, as the provision gives the right to a legal practitioner to sue "his client" only.
In response, the respondent conceded that in general, a contract cannot confer rights or impose obligation on persons who are strangers to it. However, it argued that the general principle has been watered down by many exceptions, citing Halsbury's Laws of England as confirming the common law exceptions, equitable exceptions and statutory exceptions. The firm submitted that general principles of law are not applied in the abstract, but must be tied down to the particular facts of each case. It further urged the court to resolve the issue against Rebold.
In its reply, Rebold argued that the appeal did not fall under any of the exceptions on which the respondent sought to rely – especially Chuba Ikpeazu v ACB Ltd,(8) in which the court held that a contract cannot be enforced by a party which is not a party to the contract, even if the contract was made for its benefit. Rebold argued that this decision supported not the respondent's case, but rather its own.
In a unanimous decision the Supreme Court allowed Rebold's appeal. The apex court agreed with Rebold and set aside the decisions of the trial and appeal courts. The Supreme Court held that a plaintiff must show from its pleadings that it has a cause of action maintainable in a court of law against the defendant. As such, the court stated that: "He (a plaintiff) cannot sue anybody. It must be someone who has wronged him one way or other. You cannot sue someone who has not done you any wrong." The court further stated that the fact that the respondent had prepared a deed of sub-lease in favour of Mandilas and Rebold did not give the respondent the right to sue in respect of that deed because the firm was not a party to the deed. Further, the court stated that the respondent could not rely on Section 16(3) of the Legal Practitioners Act because that section helps legal practitioners to recover fees from their clients. The evidence showed that Mandilas, not Rebold, had engaged the respondent to draft the agreement; thus, the proceedings to recover the charges should have been targeted Mandilas.
Further, the court upheld the principle of privity of contract to the effect that only the contracting parties can benefit from or suffer liability in respect of a contract. A contract cannot bind third parties; nor can third parties accept liabilities or benefits thereunder. As a result, only parties to a contract can maintain an action under the contract. Even where a clause of the contract agreement is made for the benefit of a third party, that party cannot sue under the contract.
The court further examined the exceptions raised by the respondent and held that while there are always exceptions to a general rule, such exceptions must be properly placed before the court and must not destroy the general principle which has guided and stabilised contractual relations for a long time. The exceptions of agency relationship, trusteeship and statutory exceptions had nothing to do with this appeal.
The court held that the doctrine of privity of contract is deeply rooted in Nigerian jurisprudence, as much as in English law. Therefore, as the respondent was not a party to the sub-lease, it lacked capacity or locus standi to sue under the agreement. Therefore, the trial judge had had no jurisdiction to hear the case in the first place. Thus, the Supreme Court set aside the judgment of both the trial court and the appeal court.
This decision confirms the legal position that a party which is not privy to a contract cannot benefit from that contract, even if the contract is made for its benefit, and loses locus standi to institute an action to enjoy benefits in respect of that contract. The decision clearly extends the doctrine of privity of contract to legal practitioners whose clients pass the remuneration obligation to third parties: a legal practitioner cannot sue the third party because the Legal Practitioners Act creates a cause of action in favour of a legal practitioner against his or her client only.
Therefore, a legal practitioner who intends to recover his or her fees from a person other than the client should enter into a separate contract with the party responsible for the fees.
For further information on this topic please contact Funke Agbor or Kemi Kayode at ACAS - LAW by telephone (+234 1 462 2094) or email (email@example.com or firstname.lastname@example.org).The ACAS - LAW website can be accessed at www.acas-law.com.
(2) Other options are the common law right to retain property already in the legal practitioner's possession until he or she has been paid outstanding fees or costs, and the right to direct that the recovered property stand as security for the costs of recovery. See Sagoe v Queen ((1963) 3 NSCC 233 at 236.
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