By Tamuno Boboye
The recent decision of the Supreme Court in Appeal No: SC/CV/374/2023 – 11 Plc v. Milan Industries Limited signposts a doctrinal refinement of two critical issues that have hitherto, presented practitioners with doubts and uncertainties. While the judgment highlights a number of key legal positions, ranging from jurisdiction and competence of the court, to salient lines of discourse on company law, this article considers two central legal points, which signal a redefinition of the law, in relation to the jurisdiction of the courts over sales of eligible bank assets by the Assets Management Corporation of Nigeria (AMCON) and the limited effect of stamp duty on secured credit transaction.
Brief summary of the appeal
Milan Industries Limited (Milan) had obtained credit facilities from Skye Bank Plc (a predecessor company to Polaris Bank Limited/Polaris). In obtaining the loan, Milan pledged its property at Plots 244 and 255 Kofo Abayomi Street, Victoria Island, Lagos (housing the Lagos Continental Hotel), as continuing security for the loan, through a Deed of Legal Mortgage. The said deed was perfected with the land registry and the Corporate Affairs Commission in line with the Companies and Allied Matters Act. However, in the payment of stamp duties, Skye Bank made statutory payment on an assessment of 2 billion Naira.
Milan eventually defaulted in liquidating the loan, which at the time, had accrued interest way beyond 15 billion Naira. The facility became a non-performing loan, thus, rendering it an eligible bank asset, pursuant to the Asset Management Corporation of Nigeria (AMCON) Act. Same was accordingly purchased by AMCON as a collateralised and secured loan, and the property used as security was subsequently sold to 11 Plc.
Milan was dissatisfied with this sale and accordingly filed an action at the Federal High Court, against Polaris Bank, AMCON and 11 Plc., seeking inter alia, the setting aside of the sale by AMCON. It was the position of Milan that though its credit liability had risen beyond 15 billion Naira, it had discharged the debt obligation of N2 billion for which the instrument was assessed and stamped. To that extent, in Milan’s view, the creditor could no longer resort to the security, which it considered already discharged upon the payment of N2 billion. Milan relied substantially on the provision of section 202 of the Companies and Allied Matters Act (CAMA), 1990, which has been reenacted as section 227 of CAMA, 2020. Though the trial court dismissed Milan’s suit, the Court of Appeal agreed with Milan and held that “the maximum amount secured was N2 billion and the 1st Respondent cannot use the property charged to liquidate any amount in excess of the maximum amount secured and when where the maximum amount secured is paid the security is discharged.”
Miffed by the finding of the Court of Appeal, 11 Plc through its lead counsel, Chief Wole Olanipekun, CFR, SAN, filed a Notice of Appeal containing 27 grounds of appeal. In the Appellant’s Brief of Argument settled by Chief Olanipekun, 11 Plc impugned the decision of the Court of Appeal on diverse grounds, two of which touched on the jurisdiction of the court to interfere with a sale by AMCON and the appropriate interpretation of sections 197, 199 and 202 of CAMA.
Jurisdiction of the Court over AMCON sale
In addressing this point, Olanipekun contended on behalf of 11Plc that by the combined provision of sections 33A and 34 of AMCON Act, the court lacked the jurisdiction to entertain any action which challenges the acquisition of an eligible bank asset by AMCON under the AMCON Act. He further submitted that the decision of the Court of Appeal which subjected the application of the provision to the condition of an existence of a valid acquisition was an infusion of elements not contained in the provision of section 33A of AMCON Act. Relying on the decision of the Supreme Court in Abegunde v. Ondo State House of Assembly (2015) 8 NWLR (Pt.1461) 314 at 371-372, it was submitted that the Court of Appeal had a duty to give the unambiguous statutory provisions, their ordinary meanings.
While arguing that section 33A of the AMCON Act was totally inapplicable to the case, lead counsel for Milan, Mr Ahmed Raji, SAN, submitted inter alia, that the referenced sections of AMCON Act constituted ouster clauses, and thus, could not be sustained in the face of the judicial powers of the court prescribed under section 6 of the Constitution of the Federal Republic of Nigeria, 1999 (as amended).
In concurring with the appellants, the Supreme Court , per Nwosu-Iheme, JSC observed that section 34 (6) of AMCON Act, was indeed an ouster clause and further held that “while a person’s access to the courts to have his civil rights adjudicated upon may be restricted or ousted by a statute or Act, it must be construed rather strictly. Ouster of jurisdiction needs express words.” Pronouncing on the implication of section 34 (6) of the AMCON Act, the apex court noted thus:
“As submitted by the Appellants, and I agree, if the reliefs are not grantable by virtue of section 34(6) of the AMCON [amendment] Act, then the Court had no jurisdiction to grant same or even entertain the suit. The powers of the Court to that extent was ousted by the Act. Clearly, the prohibition enacted in that section is a mandatory provision employing the word “shall.” The Act went on to prescribe the only remedy available to a successful litigant in such an action. Again, as cited by the Appellants, it is the duty of a Court to enforce mandatory provisions of an enactment.” On his part, His Lordship, Abiru, JSC., identified the effect of the combined provisions of sections 33A, 34(1)(a), 34(2), 34(3) and 34(6) of AMCON Act, “was to extinguish the right of action of anyone to challenge and seek for the setting aside of the purchase of an eligible bank asset by [AMCON].” His Lordship went on to note that “the provision limits the right of action of anyone that has a grievance against the purchase of an eligible bank asset [by AMCON] to a claim in monetary compensation only and the provisions were given retrospective effect and made applicable to all eligible bank assets including but not restricted to assets acquired by [AMCON] before May 2015.”
This decision of the Supreme Court lays to rest, the protracted debates on the constitutionality of the referenced provisions of the AMCON Act, amidst decisions of the Court of Appeal. In the unreported decision of the Court of Appeal in Appeal No: CA/L/1266/2019 – AMCON v. Shittu, delivered on 15th December, 2020, the Court of Appeal had earlier held the view that since section 34(6) of the AMCON Act seeks to curtail the discretion of the court and the right of citizens to seek redress from the court, same is inconsistent with the provisions of the Constitution, and consequently, null and void. See also Jumbo V AMCON & Others (2020) LCN/14278 (CA).
The recent position of the Supreme Court, however, puts into perspective, the fact that much as the court would jealously guard its jurisdiction and naturally lean against an ouster clauses, where a statute is clearly worded to oust the jurisdiction of the court, the court would in such circumstance, be constrained to observe the ouster as prescribed.
Stamping and up-stamping
One of the principal reliefs sought at the trial court by Milan was “a declaration that the security of the Plaintiff under the Deed of Legal Mortgage is void in relation to any amount in excess of the N2 bullion secured and up stamped.” Though this position was rejected by the trial court, the Court of Appeal found in favour of same, while holding that “the law regulating enforcement of charges does not permit the 1st Respondent to recover any sum of money in excess of the amount secured and where the amount secured has been repaid the security is discharged and the excess amount is treated as an unsecured debt to be recovered through a debt action.”
At the Supreme Court, the appeal turned on the proper interpretation of sections 197, 199 and 202 of CAMA, 1990 (now sections 222, 224 and 227, respectively, of CAMA, 2020). Chief Olanipekun on behalf of 11 plc relied on the one hand, on the equitable right arising from the parties’ contractual obligations evinced through the Deed of Legal Mortgage. On the other hand, however, he emphasised that a proper interpretation of the relevant provisions of CAMA would arrive at a result contrary to the position of the Court of Appeal.
It was his position that by the provision of section 199 of CAMA, the duty to register and pay the appropriate stamp duty was that of Milan, and that having failed to appropriately upstamp to the full extent of its liability, it could not rely on its own default to escape liability. Olanipekun argued that even if the bank had made payment of the stamp duty on behalf of Milan, the latter would yet, have remained liable to reimburse the bank for the registration. Therefore, the obligation remains with Milan at all times material to the contract.
Reliance was further placed on judicial decisions, including Omobare v. New Nigerian Bank Limited (1986) 1 N.S.C.C 32 at 36 and Adedeji v. National Bank of Nigeria (1989) 1 NWLR (Pt. 96) 212 at 226 to the effect that a court of equity would not allow a party take benefit of credit facilities and at the same time, disclaim liability for them, by raising issues which would have made the transaction void or irregular. The Supreme Court was also taken on a comparative excursion to foreign jurisdictions, in consideration of decisions on similar provisions, facts and circumstances. Of a particular note, is the decision of the Chancery Division of the English High Court in Independent Automatic Sales Ltd v Knowels and Foster [1962] 3 ALLER 27 at 30-31, which called for an interpretation of section 95 of the Companies Act of 1948, a provision in pari materia with section 197 of CAMA, 1990. In that case, the court concluded that it did not lie in the mouth of the company to contend that charges were void for lack of registration, as such position could only be rightly taken by the liquidator or creditors of the company.
Submitting per contra, on behalf of Milan, learned Senior Advocate Nigeria, Mr Ahmed Raji, maintained that the correctness of the interpretation proffered by the Court of Appeal on the provision of section 202 of CAMA, was unassailable.
According to Mr Raji, SAN, it is CAMA which regulates the creation, registration, and enforcement of Charges and not the Deed of Legal Mortgage, which is an agreement of parties. He further contended that section 202 of CAMA creates a condition subsequent, which ties enforceability to the amount of stamp duty paid and voids the continuing security to the extent that it charges the mortgage property beyond the sum assessed and paid as stamp duty.
In the lead judgment of the Supreme Court, Honourable Justice E.N. Nwosu-Iheme, observed thus:
“It appears to me that the 1st Respondent is approbating and reprobating in the same breath. While it acknowledges that it is indebted to the 2nd Respondent to the tune of N13 billion, it at the same time argues that the property which it used to secure the debt cannot be used to liquidate same. The 1st Respondent wants to eat its cake and still have it. This is instructive, because the requirements of compliance with the registration of the charge Sections 197 and 202 of CAMA, 1990 rests on Respondent.”
In his supporting judgment, Honourable Justice H. A. Abiru, noted that the discovery of the intention of the law maker as conveyed by the words of the statute, is the whole essence of statutory interpretation and that in doing this, it must be understood that the legislature does not intend to create injustice or an absurdity. Agreeing with the appellant, his Lordship identified that “it is obvious that the essence and purpose of registering charges created on the assets of a company under the Companies and Allied Matters Act 2004 was not for the protection of the debtor company creating the charges, but to protect the liquidator and creditors of the company.”
CONCLUSION.
Beyond the issues in dispute between the parties, it is instructive to note that the Supreme Court has by its decision in 11 Plc v. Milan Industries Limited, streamlined the persons with locus standi to invoke the provisions of sections 222, 224 and 227 of CAMA, 2020, in relation to the adequacy or otherwise of payment of stamp duty. While the decision reaffirms the position of the law that a person cannot be allowed to take benefit of a contract and turn around to contend the invalidity of the same contract, it also condescends on the obligation for the registration of a charge on a company property. Not only has it activated the practical essence of section 224 of CAMA, 2020, the summit court has also put in perspective, with judicial finality, the implication of default and extent of liability under the said section.
Boboye, a legal analyst, wrote from Lagos.
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