CHIEF OBASEKI V AFRICAN CONTINENTAL BANK LTD. & ANORUncategorized
CHIEF OBASEKI V AFRICAN CONTINENTAL BANK LTD. & ANOR
In the Supreme Court of Nigeria
Wednesday, November 17, 1965
Case Number: :FSC. 538/1963
BAIRAMIAN, JUSTICE, SUPREME COURT
ONYEAMA, JUSTICE, SUPREME COURT
AJEGBO, JUSTICE, SUPREME COURT
AFRICAN CONTINENTAL BANK LTD. & ANOR
(Delivering the judgment of the Court):-
The plaintiff (above appellant) sued the Bank and the auctioneer who conducted the sale on the Bank’s behalf, for specific performance and damages on the ground that the Bank refused to execute a conveyance; the High Court dismissed his suit, and he has appealed.
The Bank had a manager at its Yaba branch, who asked the auctioneer to give notice of sale and sell a house mortgaged to the Bank with (among other conditions of sale) a condition that:-
“The highest bidder shall be the purchaser, subject to approval of the mortgagees.”
That condition was known to the plaintiff at the auction. He was the highest bidder, and some days later he was taken by the auctioneer to the branch manager, who asked him to give a crossed cheque for the price to the auctioneer; he did so, and the auctioneer gave him a receipt for the purchase price: (the money found its way into the Bank). The manager gave the plaintiff the documents relating to the house and asked him to prepare a conveyance; he did so through his solicitor, and the manager sent it with the documents of title to the head office. The solicitor to the board of directors wrote on 5th January, 1960 to the manager requesting him to ask the plaintiff to make space for the signature of two directors and the secretary in a certain manner, and went on to say that he would like to have the original deed of mortgage or a certified copy, the copy of notice served on the mortgagor before the sale, and a statement of when and how the notice was served, or if the sale was made by order of court, then a copy of the order.
It came to light that no notice of sale had been given; and when the board of directors met, they did not approve the sale owing to want of notice to the mortgagor. Their secretary wrote to the plaintiff on 5th May, 1960 to inform him of that, and added that the board decided that proper notice should be given to the mortgagor, and if he did not pay the house would be sold to the plaintiff at the price he had offered. Thereafter the plaintiff sued both the Bank and the auctioneer. In fact he had no complaint to make against the auctioneer; and in this appeal nothing was said about his being liable. The dispute was, and is, with the Bank.
A little must be said on the intermediate correspondence. The plaintiff’s solicitor wrote on 19 January, 1960 to the branch manager asking him about the execution of the conveyance; he wrote again on the 26th to the manager to say that if he did not execute the conveyance, proceedings would be taken against the Bank. The manager answered on 6 February to say that if the board of directors approved, they would execute the transfer, and in the meantime the money deposited would be held in suspense. The solicitor wrote to him on the 11th to say that the money was not a deposit but the purchase price, and would he kindly have the conveyance submitted, executed, and returned. The manager wrote on 29 February to say that when the plaintiff was bidding he knew that any price agreed upon with the auctioneer must be approved by the management of the Bank, and that according to the Articles of Association it was the board of directors who could give formal approval. It appears that the plaintiff and his solicitor saw the solicitor of the Bank, who also told them that the sale would need the approval of the board of directors.
We have given a summary of the letters because the judgment under appeal states that-
“The handing over of the title deeds and the instructions given by the manager to the plaintiff to prepare his conveyance were, according to the correspondence that I have referred to, done subject to the fact that the directors of the Bank had to approve the sale.”
Mrs. Marke has argued that when the manager wrote about the need for the approval of the directors, it was an afterthought. We have no doubt it was: in between the manager had realised that no notice of sale had been given to the mortgagor; and we have no doubt that in December, 1959, when the auctioneer took the plaintiff to the manager, the manager thought all was well and the conveyance would be executed. Neither the manager nor the auctioneer was called by the Bank to testify to what happened at the interview, and we must accept it as true that nothing was said about the directors.
The dominant fact is that the manager gave the plaintiff certain documents and asked him to prepare a conveyance that might mean either that he would recommend approval; or that he approved the sale on behalf of the Bank. The latter is the meaning urged on the plaintiff’s behalf as the one he would reasonably put on the manager’s conduct at the interview, and it is his case that the Bank became bound by the manager’s approval and ought to have executed the conveyance. We shall consider that in a moment.
We must fast deal with the argument that the condition of sale already quoted means no more than approval of the purchaser or, rather, of the price, and that the Bank did not object to either. The condition is:-
“The highest bidder shall be the purchaser, subject to approval of the mortgagees.”
In our view that means that the sale made by the auctioneer to the highest bidder is not binding until it is approved by the mortgagees, and the condition cannot be narrowed down to approval of the purchaser or of the price.
On the basis that the manager apparently approved the sale on behalf of the Bank, the two crucial questions are (a) whether the agent was exceeding his actual authority and (b) whether the plaintiff was in law fixed with notice that he was.
The principle is stated in Article 82 of Bowstead on Agency (1959) at page 186 as follows:-
“No act done by an agent in excess of his actual authority is binding on the principal with respect to persons having notice that in doing the act the agent is exceeding his authority.
Where the regulations of a company are registered, persons dealing with the directors and other agents of the company are for the purposes of this article deemed to have notice of such regulations.
A signature ‘per procuration’ on a bill of exchange, promissory note, or cheque, operates as notice that the agent has but a limited authority to sign, and the principal is only bound by such signature if the agent in so signing was acting within the actual limits of his authority.”
We are not concerned with the third paragraph but with the first two. The second paragraph is based on Balfour v. Ernest (1859) 5 C.B. (N.S.) 601, which can be read in 141 English Reports at page 242. The judges there cite one or two earlier cases for that principle, and we are in no doubt that the principle applies without unfairness seeing that our Companies Act provides in section 231, subsection (5) that:-
“Any person may inspect the documents kept by the Registrar on payment of such fees as may be appointed by the Minister not exceeding one shilling for each inspection; and any person may require a certificate of the incorporation of any company, or a copy or extract of any other document or any part of any other document, to be certified by the Registrar, on payment for the certificate, certified copy, or extract, of such fees as the Minister may appoint, not exceeding five shillings for a certificate of incorporation, and not exceeding four shillings for each folio of one hundred words or part thereof for the first three folios of a certified copy or extract and two shillings for each subsequent folio of one hundred words or part thereof.”
It is in evidence that the Bank’s Articles of Association were registered. The plaintiff was asked to prepare a conveyance and he or his solicitor could, by looking at the Articles of Association, learn who were competent to sign and seal the conveyance on the Bank’s behalf and realise that it was not the manager who was to authorise or execute the conveyance, as his solicitor mistakenly thought, but that the approval for the execution of the conveyance had to come from the board of directors according to Reg. 76 in Table A, which is appended to the Bank’s Articles of Association. Reg. 76 provides that:-
“The seal of the Company shall not be affixed to any instrument except by the authority of a resolution of the board of directors, and in the presence of at least two directors and of the secretary or such other person as the directors may appoint for the purpose; and those two
directors and secretary or other person as aforesaid shall sign every instrument to which the seal of the company is so affixed in their presence.”
We accept the argument for the Bank that the board of directors was the body to approve the sale. The finding that they did not approve it is not in question.
Mrs. Marke concedes that if the plaintiff had known of the manager’s want of competence, he could not be covered by the doctrine of ostensible authority on which he was relying to make the manager’s apparent approval binding on the Bank, but she submits that the doctrine of constructive notice would only come into play after the conveyance was executed, if trouble arose later.
For this submission no authority was cited. On the Bank’s behalf Mr. Okafor referred to para. 833 at p. 430 of Halsbury’s Laws (3rd ed.), vol. 6, on Companies, which begins as follows:
“Notice of constitution of company. Persons contracting with the company, whether they are shareholders or not, are bound to know, or are precluded from denying that they know, the constitution of the company and its powers as given by statute and the memorandum and articles.”
A number of cases are cited in the footnote; as to outsiders the two cases cited are Ernest v. Nicholls (1857) 6 H. L. Cas. 401, and Mahony v. East Holyford Mining Co. (1875) L.R. 7 H.L. 869 at 893; we quote from p. 893 of the latter case where Lord Hatherley said that:-
“Every joint stock company has its memorandum and articles of association; every joint stock-company, or nearly every one, I imagine (unless it adopts the form provided by the statute, and that comes to the same thing) has its partnership deed under which it acts. Those articles of association and that partnership deed are open to all who are minded to have any dealings whatsoever with the company, and those who so deal with them must be affected with notice of all that is contained in those two documents.”
That reinforces Balfour v. Ernest (supra) and Art. 82 in Bowstead on Agency (quoted above). The plaintiff must be taken to be acquainted with the Bank’s registered Articles of Association as soon as he knew that he was dealing with the Bank. Thus, on the basis that the manager apparently approved the sale on the Bank’s behalf, he was exceeding his actual authority and the plaintiff was in law fixed with notice that the manager was exceeding his authority.
The Court is able to decide this appeal on the ground that the Bank was not bound by the manager’s apparent approval of the sale (which was taken as the basis of argument) and there is no need to say more.
Here it was open to the Bank to refuse approval of the sale under the condition of sale, which was known to the plaintiff at the auction, and his appeal must fail. We think, however, that the Bank ought to have only half its costs of the hearing of the appeal. The other defendant appeared through counsel for the Bank and will not be allowed separate costs.
The appeal from the judgment of Duffus J. dated 14 September, 1961 in Suit HK/50/60 in the High Court of the Western Region (Ikeja Judicial Division) is dismissed with costs to the defendant African Continental Bank Ltd. allowed at thirty guineas.