DAILY TIMES OF NIGERIA PLC v. SKYE BANK PLC (2017)

DAILY TIMES OF NIGERIA PLC v. SKYE BANK PLC

(2017)LCN/10582(CA)

In The Court of Appeal of Nigeria

On Monday, the 17th day of July, 2017

CA/L/309/2014

RATIO

WHETHER A STATE HIGH COURT CAN ADJUDICATE UPON MATTERS INVOLVING BANKER AND BORROWER
Section 251(1)(e) of the grund norm of our land, the 1999 Constitution confers exclusive jurisdiction on the Federal High Court in civil cases and matters arising from the operation of the Companies and Allied Matters Act or any other enactment replacing that Act or regulating the operation of companies incorporated under the Companies and Allied Matters Act. Similar provision is found in Section 7(1)(e) of the Federal High Court Act. In AMALGAMATED TRUSTEE LTD v. ASSOC. DISCOUNT HOUSES LTD (2007) 15 NWLR (Pt. 1056) 118 at 156, the Court held that it is the Federal High Court that has the exclusive jurisdiction to hear and determine such civil cause and matter if the complaint deals with actions involving regulating, control or management of companies, but if it deals with ordinary routine business of a company, and does not involve the control or administration of company, the State High Court has jurisdiction. Similarly, in FAGBOLA & ANOR v. KOGI CHAMBERS OF COMMERCE, INDUSTRY, MINES & AGRIC & ANOR (2006) 6 NWLR (Pt. 977) 433; (2006) LPELR-5392 (CA), this Court, per RHODES-VIVOUR, JCA now JSC (as he then was) held that:
“… Exclusive jurisdiction vest in the Federal High Court where the Suit involves: (a) regulating, running or management or control of companies; (b) formation winding up of a company; (c) consideration in some detail of the memorandum and articles of association, shares and shareholding; (d) the appointment, removal, alteration or change of Directors; (e) appointment of Receiver and his various obligations and claims arising from the conduct of a Receiver. See Tanarewa Nig. Ltd v. Plastifarm Ltd. (2003) 14 NWLR (Pt. 840) p. 355. Once the claims before the Court pertains to the provisions of the Companies and Allied Matters Act, the Memorandum and Articles of Association of the Company concerned and any enactment regulating operation of companies under the said Act the Federal High Court would have exclusive jurisdiction over the matter.” See also BAMAK PHARMACY & STORES LTD & ORS v. ABUJA MUNICIPAL AREA COUNCIL (2010) LPELR-3850 (CA). Appellant’s counsel has argued that the facts and circumstances of the instant case takes the matter away from the realm of causes and matters that can be dealt with by the High Court of a State, it is his contention that the kernel of this appeal is the guaranteeing of a loan by its Director/Shareholder for the acquisition of its own shares. I am unable to agree with him. In my considered view, the subject of the instant case revolves around the liability or otherwise of the Appellant in respect of a simple contract of guarantee executed with the Respondent. The coloration of the suit is not altered merely because the Defendant raised the issue as to the non-compliance with the provision of the Companies and Allied Matters Act. It is beyond dispute that the contract of guarantee subject of dispute between the parties was entered in by the Appellant, who by that contract, guaranteed a loan granted to its core investor, Folio Communication Limited to enable it acquire shares in the Appellant’s company. It is a liquidated money claim between a bank and a customer, to the tune of N559,643,559 accruing to the bank as at 31st July, 2009 together with interest and foreclosure of property which served as collateral of the loan and sale thereof. The instant suit does not involve the day to day running cum internal management of the Appellant neither is it a dispute among the directors and/or between the directors of the company. It is simply a case of a borrower calling in its loan. Therefore, it does not in my firm view, fall within the ambit of Section 7(1)(e) of the Federal High Court Act and Section 251(1)(e) of the 1999 Constitution (as amended) so as to vest exclusive jurisdiction on the Federal High Court. The learned trial judge was therefore correct when he held that this is a simple case of banker and borrower, which the State High Court can adjudicate upon. PER ABIMBOLA OSARUGUE OBASEKI-ADEJUMO, J.C.A.

COMPANY LAW: THE EFFECT OF A CONTRACT OF GUARANTEE EXECUTED WITHOUT THE PRIOR APPROVAL OF THE COMPANY GIVEN AT A GENERAL MEETING
It is evident from the above provisions of C.A.M.A., particularly Section 270 thereof, that the Act merely prohibits the giving of loan or entering into guarantee in certain circumstances, without the prior approval of the company given at a general meeting or where the approval was not obtained at the annual general meeting, on condition that the loan shall be repaid or the liability under the guarantee or security shall be discharged within six months from the conclusion of the annual general meeting of the company. The consequence of non-compliance with Subsection (1) and (2) of Section 270 is aptly stated in Subsection (3) which is to the effect that “the directors authorizing the making of the loan or the entering into the guarantee, or the provision of the security shall be jointly and severally liable to indemnify the company against any loss arising therefrom.” This provision is devoid of any ambiguity and will be accorded its ordinary literal meaning. See AJISEGIRI v. F.R.N. (2010) LPELR-3676 (CA); ABAYOMI BABATUNDE v. PAN ATLANTIC SHIPPING AND TRANSPORT AGENCIES LTD & 2 ORS (2007) ALL FWLR (Pt. 372) 1721 at 1752; ALHAJI SHEHU ABUL GAFAR v. THE GOVT. OF KWARA STATE & 2 ORS (2007) ALL FWLR (Pt. 360) 1415. It is certainly not the duty of the Court to interpret the unequivocal provision of the statute so as to avoid its consequence. See dictum of MUHAMMED, JSC when he stated in AMAECHI v. I.N.E.C. (2008) 5 NWLR (Pt. 1080) 227 SC; (2008) LPELR-446 (SC)
“It is certainly not the duty of a Judge to interpret a statute to avoid its consequence. The consequences of a statute are those of the legislature, not the Judge. A Judge who regiments himself to the consequences of a statute is moving outside the domain of statutory interpretation. He has by that conduct engaged himself in morality which may be against the tenor of the statute and therefore not within his judicial power.”
The draftsmen thought it wise and for good reason to make the directors who authorized the giving of the loan or executed the guarantee, to be jointly and severally liable to indemnify the company, in the event that the company is found to be liable under such guarantee executed with a third party, as in the instant case; thus being a loss to the company. It is certainly not the purport of that provision that the company shall avoid liability; rather the scope is that the directors shall be liable to the company for any loss suffered as a result of its liability under the contract of guarantee. To bow to the submission of the Appellant would amount to making nonsense of the plain provisions of the statute.
The Learned Author, Professor Joseph Abugu, in his , Principles of Corporate Law in Nigeria, Lagos: MIJ Professional Publishers, 2014, at page 490 under the topic “LOANS TO DIRECTORS” comprehensively considered the purport of Section 270 of the Companies and Allied Matters Act, when he enumerated thus:
“By Section 270 of CAMA, it is unlawful for a company to grant a loan to its director or director of its holding company or to provide security for a loan made to such person. This is a rule of maintenance of capital. Loans to directors have the potentials of undermining capital. They readily create a conflict of interest situation giving rise to liabilities for breach of fiduciary duties. The prohibition does not draw any distinction between loans to executive and non-executive directors. Executive directors in addition to statutory obligations as directors also work under contracts of employment with the company. Under such contracts loans such as these for cars, housing, furniture and other employment benefits may be granted in advance. These are not affected by Section 270 as the root of such facilities is in employment law by virtue of their employment contracts and not in their capacity as directors simpliciter. Notwithstanding, Section 270 provides for a few exceptions to the prohibitions. Firstly, loans may be granted to provide funds to enable a director meet expenditures incurred for purposes of the company or to enable him to perform his duties properly. Also where the ordinary business of the company includes the lending of money or giving of guarantees for loans made by other persons. In the second case, the loan or guarantee must first be approved by the company in general meeting or a condition imposed that if it is not approved at or before the next general meeting, the loan must be repaid or the guarantee discharged within six months from the conclusion of the meeting.”
I am therefore not hesitant to conclude that the provision of Section 270 of C.A.M.A. does not ipso facto render any guarantee executed without complying with the provision, illegal and unenforceable but merely renders the Directors/themselves who authorized it liable to the company for losses arising therefrom. In other words the loan/guarantee shall not be affected by the reason of failure to obtain prior approval of the members in general meeting.

In the instant case, the Appellant, a juristic person, who in law has a distinct mind of its own, cannot be heard to complain having not been compelled to enter into the contract of guarantee. It is certainly not the complaint of the Appellant that it lacks the capacity to enter into the contract rather the Appellant seeks to abdicate the responsibility owed to the Respondent in respect of the contract of guarantee. This Court will clearly not lend its hand to such act; the Appellant will not be allowed to contend that the guarantee backing this act is illegal thus reneging from the contract.
Ipso facto, it does not lie in the mouth of the Appellant to raise the issue of estoppel having regard to the instant case. See MAIYEGUN & ORS v. LAGOS STATE & ORS (2010) LPELR-4459 (CA) where BODE RHODES-VIVOUR, JCA (as he then was) at pages 18-19, paras. F-G held thus:
“Estoppel may be described as a rule by which a party will not be allowed to plead the opposite of a fact which he formerly asserted by words and conduct. That is to say a party shall not be allowed to say one thing at one time and the opposite of it at another time. The rule of estoppel is based on equity and good conscience.”
The Appellant’s complaint here has nothing to do with its outstanding obligation owed by it to the Respondent; the issue as to non-compliance with Section 270 does not have any bearing on the substance of the contract of guarantee, in so far as it affects the interest of the Respondent; it is an internal affair of the Appellant to which the Respondent is not party to. Section 270 is predicated on the nature of fiduciary duty imposed on a director to the company.
See Section 279 of C.A.M.A. which clearly states:
“A director of a company stands in a fiduciary relationship towards the company and shall observe the utmost good faith towards the company in any transaction with it or on its behalf.”
In this case, a BANK GUARANTEE issued to the RESPONDENT BANK on 19th February, 2007 and the Appellant deposited a deed of conveyance in respect of the Appellants property to the Respondent. See FAIRLINE PHARMACEUTICALS IND. LTD. & ANOR v. TRUST ADJUSTERS (2012) LPELR-20860 (CA). I am therefore in agreement with the findings and conclusions of the learned judge at page 457 of the records of appeal that:
“It is the highest degree of dishonesty for a party who has knowledge or who is presumed to have knowledge of the existence of an illegality in a transaction to enter into the transaction, draw benefit therefrom and then turn back to condemn such transaction and label it as illegal and illegality as a defence. Equity shall not condone that as one cannot approbate and reprobate it as both morally and legally despicable.” . PER ABIMBOLA OSARUGUE OBASEKI-ADEJUMO, J.C.A.

Before Their Lordships

MOHAMMED LAWAL GARBAJustice of The Court of Appeal of Nigeria

YARGATA BYENCHIT NIMPARJustice of The Court of Appeal of Nigeria

ABIMBOLA OSARUGUE OBASEKI-ADEJUMOJustice of The Court of Appeal of Nigeria

Between

DAILY TIMES OF NIGERIA PLCAppellant(s)

AND

SKYE BANK PLC
(Formerly Mainstream Bank Ltd)Respondent(s)

ABIMBOLA OSARUGUE OBASEKI-ADEJUMO, J.C.A.(Delivering the Leading Judgment): This is an appeal against the decision of Honourable Justice J. E. OYEFESO (MRS.) of the High Court of Lagos State delivered on the 17th of December, 2012, wherein the Court entered judgment in favour of the Respondent as per its Amended Originating Summons in terms of monetary claim, foreclosure of the Appellant?s pledged property, order for sale of the pledged property, order for vacant possession and an order of perpetual injunction restraining the Appellant and its privies from dealing with the Respondent’s power to sell the pledged property of the Appellant sequel to a bank guarantee between the Appellant and the Respondent. It is against this judgment that the Appellant’s appeal lies before this Court.

?The Appellant’s brief is dated and filed 5th April, 2016 but deemed 2nd December, 2016 and a reply brief also dated and filed the same date. The brief was settled by Norrison I. Quakers, SAN; Oloruntobi Adebola, Esq.; Abisola Omibeku, Esq.; Bobo F. Ajudua, Esq.; Onyeka Ofoegbu, Esq.; Olatokunbo Fatai, Esq.; Onyinye N. Okonkwo, Esq. and Michael Ogunjobi, Esq. of Jireh & Greys Attorneys.

The Respondent’s brief dated 3rd November, 2016 was filed on 8th November, 2016 and settled by Chief A. A. Aribisala, SAN and Williams Bello, Esq. of A.O.S. Practice.

The Respondent filed a Notice of Preliminary Objection dated the 24th Day of March, 2015 urging this Court to strike out grounds one and two of the Notice of Appeal for being incompetent. The grounds of the said objection are:
1. Grounds one and two of the Notice of Appeal are challenging the lower Court’s decision on the Appellant’s Notice of Preliminary Objection which was delivered along with the final judgment.
2. Grounds one and two of the Notice of Appeal are of mixed law and fact.
3. This appeal is against interlocutory decision of the Court below and by virtue of Sections 241 and 242 of the Constitution of the Federal Republic of Nigeria, 1999 leave of Court is required before an appeal against an interlocutory decision may be filed.
4. The Appellant did not obtain the leave of the Court below or the Honourable Court before filing this appeal.
5. The grounds of appeal in the Notice of Appeal are incompetent and liable to be struck out.

Arguing the Preliminary Objection, the Respondent’s Counsel submitted that the instant Appeal is an interlocutory appeal and cannot be classified as an appeal against the whole decision of the lower Court as erroneously stated in the Notice of Appeal. He relied on Section 241 (1) (a) and 242 of the Constitution of the Federal Republic of Nigeria (as amended).

On determination of whether a ground on law alone or mixed law and facts he referred to ASOGWA v. P.D.P. (2013) 7 NWLR (Pt. 1353) 207 at 251, para E; ENTERPRISE BANK LTD v. AROSO (2014) 3 NWLR (Pt. 1394) 256 at 281-282, paras H-A; UNITY BANK PLC v. NWADIKE (2009) 4 NWLR (Pt. 1131) 352 at 374, para. B; F.B.N. PLC v. T.S.A IND. LTD (2010) 15 NWLR (Pt. 1216) 247 at 291 paras. C-F.

He contended that the summation of the grounds needed facts to decide especially disputed fact in the affidavit on who applied for the bank guarantee hence it requires leave to appeal.

?On ground 2, the Respondent Counsel submits that the challenge is on the existence of interest of any third party on the mortgage property subject matter of litigation and it’s a complaint based on facts alone and submitted that in the

absence of leave it should be struck out.

Appellant Counsel’s response to the objection and argument of the Respondent is contained in the Appellant’s Reply brief. Counsel distilled a sole issue from the grounds of the Respondent?s Preliminary Objection thus:
“Whether the judgment/decision incorporating the Appellant’s Preliminary Objection on jurisdiction which was struck out by the Court and wherein same has been appealed against is a final decision of the lower Court.”

He submitted that the decision appealed against is the judgment of the lower Court of 17th December, 2012 and it is a final judgment. He referred to ONYEBUCHI v. I.N.E.C. (2004) 4 SC (Pt. 11) 27; USUNG v. NYONG (2010) 2 NWLR (Pt. 1177) at 94; ALABI v. ALABI (2008) ALL FWLR (Pt. 418) 245 at 265 page 279, paras D-G; OANDO PLC & ORS v. ADEWUYI & ORS (2013) LPELR-22037 CA in support of his submission that leave is not required provided it is a final decision. He relied on UNITY BANK PLC v. NWADIKE (2009) 4 NWLR (Pt. 1131) 352 at 374, paras B.

RESOLUTION OF THE PRELIMINARY OBJECTION

The real issue here is whether the decision appealed against

is a final or an interlocutory decision in order to effectively determine whether the appeal to this Court will be as of right or with leave. In IWUEKE v. IMO BROADCASTING CORPORATION (2005) 17 NWLR (Pt. 955) 447, the Apex Court, EJIWUNMI, JSC on when judgment/decision is final held thus:
“Now, it is settled law that a decision between parties to an action can be regarded as final when the determination of the Court disposes of the right of the parties in the case, and not merely the rights in issue. Where only an issue is the subject matter of an appeal, the determination of that Court which is final on the issue before it but does not finally determine the right of the parties in the action, is an interlocutory decision.”
See RAPHAEL OGUMKA v. CORPORATE AFFAIRS COMMISSION (2010) LPELR-4891 (CA) at 10-11; AKINSANYA v. U.B.A. LTD (1986) 4 NWLR (Pt. 35) page 273; FALOLA v. UBN PLC (2005) 2 NWLR (Pt. 924) at 405-419.

In the instant case, and in manifest compliance with the settled position of law, the learned trial judge profoundly stated at page 448, Volume 2 of record of appeal, that “because this Preliminary Objection challenges the

jurisdiction of this Court to hear this matter, I will determine it first and then will, if necessary go on to read on judgment.” This is in line with the position that once preliminary objection is raised before the Court, it must be completely considered and pronounced upon by the Court before considering the merit of the suit before it. See B.A.S.F. (NIG) LTD v. FAITH ENTERPRISES LTD (2010) 4 NWLR (Pt. 1183) 104; SPDCN LTD v. AMADI (2011) 14 NWLR (Pt. 1266) 157.

Now, as it relates to the issue at hand, the learned judge held at page 452 thus:
“… the fact still remains that this is a simple case of banker and borrower which is well within the jurisdiction of this Court….” for the reasons given above the Preliminary Objection fails and is hereby dismissed.
Now that the Preliminary Objection has failed and has been dismissed, I can now go on to deliver my judgment.”

It is obvious from the above excerpt that the trial Court did not merely determine issues that are interlocutory in the proceedings as erroneously contended by the Respondent’s counsel, rather upon considering the preliminary objection, the learned trial judge proceeded to deliver his judgment, a

final decision, which determined the substantive rights of the parties before it. The grounds of appeal shorn of their particulars are reproduced hereunder:

“Ground One
The Learned Judge erred in law in entering Judgment in favour of the Respondent relying on the void Bank Guarantee dated the 1st January, 2007.
Ground Two
The learned Judge erred in law in entering judgment in favour of the Respondent in the face of disclosed third party rights.”

It is evident that the above grounds encompass the Appellant’s complaint against the final decision of the lower Court. I therefore have no hesitation in concluding that the Respondent’s preliminary objection is misconceived. It is hereby dismissed.

SUBSTANTIVE APPEAL
With respect to the main appeal, the Appellant?s Counsel formulated two issues for determination of this appeal thus:
1. Whether the trial Court was right to have entered judgment in favour of the Respondent in the face of a void bank guarantee that purports to enable the Respondent as a company guarantee a loan for its Director to buy and acquire its own shares contrary

to the provisions of Sections 159, 160, 161 & 270 of the Companies and Allied Matters Act, L.F.N. 2004.
2. Whether the learned trial judge was right in entering Judgment in favour of the Respondent, in the face of disclosed third party rights.

On the part of the Respondent, two issues were formulated for determination thus:
1. Whether Section 270(2) of the Companies and Allied Matters Act, L.F.N. 2004 operates to render the loan agreement between the parties unenforceable in law.
2. Whether the learned trial judge was right to enter judgment in favour of the Respondent to foreclose and sell the mortgaged property notwithstanding the Appellant’s purported claim that there was third party interest or right on the mortgaged property.

On the first issue of the Appellant, the Counsel submitted that the trial Court lacked the jurisdiction to adjudicate on the provisions of the Companies and Allied Matters Act, L.F.N. 2004. The contention of the Appellant is that by the provisions of Sections 159, 160, 161 & 270 of the C.A.M.A., the bank guarantee issued in favour of the Respondent for a credit facility towards the acquisition of

shares is illegal and unlawful, which illegality the Court cannot enforce and that the interpretation of the provisions of the C.A.M.A. is within the exclusive jurisdiction of the Federal High Court. He cited Section 7 (1) (e) of the Federal High Court Act, LFN 2004; A.G. LAGOS STATE v. EKO HOTEL LTD & OHA LTD (2006) 18 NWLR (Pt. 1011) 378 at 428-430; SODIPO v. LEMMINKAINEN & ORS (1985) 16 (Pt. 11) N.S.C.C. 1102; Page 416 of the COMPANIES AND ALLIED MATTERS LAW AND PRACTICE BY DEJI SASEGBON, SAN; CONSOLIDATED BUSINESS SUPPORT SERVICES LTD v. ACCESS BANK OF NIG. & ORS (2004) CA; ANIBI v. SHOTIMEHIN (1993) 3 NWLR (Pt. 282) 461 at 473, paras. B; ONUORAH v. K.R.P.C (2005) 6 NWLR (Pt. 921) 393 SC; AFRIBANK NIG PLC v. AKWARA (2006) 5 NWLR (Pt. 974) 619 SC; KLM AIRLINES v. KUMZHI (2004) 8 NWLR (Pt. 875) 231; IBRAHIM v. OSIM (1998) 3 NWLR (Pt. 82) 257 at 279 CA; BLACKS LAW DICTIONARY 6TH EDITION at page 747.

?On the Respondent’s first issue, the Counsel submitted that the facts in the affidavit supporting the Originating Summons of the Respondent were not disputed or denied by the Appellant in their counter-affidavit because they are true and

are therefore deemed admitted by the Appellant and that the Appellant expressly admitted a material fact in paragraph 3(i) of their counter-affidavit. That the only attempt by the Appellant to challenge the bank guarantee was in the affidavit in support of the Appellant’s preliminary objection. That the Appellant admitted that the Appellant guaranteed the loan but without the approval of its member in general meeting. He cited OWNERS, M/V GONGOLA HOPE v. S.C. NIG. LTD (2007) 15 NWLR (Pt. 1056) 189 at 215, paras. H-A. The Respondent Counsel submitted that the trial Court was right to hold the Appellant liable on the offer letter and the bank guarantee.

?The Respondent Counsel submitted that the combined effect of Section 270(1) (2) (3) of the C.A.M.A. is that the right of a third party in respect of the loan or guarantee given thereof shall not be prejudiced by the reason that the prior approval of the company in general meeting is not obtained and that the loan or guarantee will be enforceable by a third party against the company, subject to the right of the company to seek for compensation against its directors that authorize the loan or guarantee.

He submitted that the bank guarantee in this suit is therefore enforceable against the Appellant. He submitted that their submission is premised on the principles of “res inter alios acta alteri nocere non debet”, and “ubi jus ubi remedium”. He cited FASEL SERVICES LTD. v. N.P.A. (2003) 8 NWLR (Pt. 821) 73 at 101, paras E-F; YUSUF v. ADEGOKE (2007) 11 NWLR (Pt. 1045) 332 at 393, para H; SALEH v. MONGUNO (2006) 15 NWLR (Pt. 101) 26 at 60, para D-E; BFI GROUP CORP v. B.P.E. (2012) 18 NWLR (Pt. 1332) 209 at 243, paras E-G.

The Respondent Counsel contended that it will be inequitable and unjust to allow the Appellant to wriggle out from its contractual obligation to the Respondent on the mere ground that the Appellant did not obtain the prior approval of its general meeting before it applied for the bank guarantee most especially when the Board of Directors of the Appellant sanctioned the loan. That the issue of approval by the general meeting was a matter within the internal arrangement of the Appellant which the Respondent was not privy to.

?He submitted that it will be wrong to allow the Appellant benefit from its own wrong most especially when the

Appellant knew that it ought to seek for the approval of its general meeting but claimed not to have obtained same. He cited ACHU v. C.S.C., CROSS RIVER STATE (2009) 3 NWLR (Pt. 1129) 475 at 500-501, paras. G-A. That assuming that the bank guarantee by the Appellant is unlawful; the contract between the Appellant and the Respondent is a simple and legitimate one which ought not to be affected by the purported unlawful contract between the Appellant and N.D.I.C. He cited ONWUCHEKWA v. N.D.I.C. (2002) 5 NWLR (Pt. 760) 371 at 389, paras B-D, 391, paras D-E, 392, paras B-D.

In reply, the Appellant citing the cases of FASEL SERVICES LTD v. N.P.A. (2003) 8 NWLR (Pt. 821) 73 at 101; PAN BISBILDER (NIG.) LTD v. F.B.N. (2000) 1 NWLR (Pt. 642) page 644 at 693, paras. D-F submitted that in the instant appeal, the conditions stipulated by the said provisions of Section 270 of the CAMA with the penalty for the contravener is a clear indication that the transaction is not only void but illegal and that the Court will not come to the assistance of any party to an illegal contract who wishes to enforce it. That the illegal contract as the facts of this

appeal presents is not enforceable against the Appellant.

He submitted that the Respondent’s interpretation of the provisions of Section 270(1) (2) & (3) at paragraph 5.17 of the Respondent?s brief is not tenable. That the interpretation of statutory provisions should be given their ordinary and literal meaning. He cited ALHAJI SHEU ABDUL GAFAR v. THE GOVERNMENT OF KWARA STATE & 2 ORS (2007) 4 NWLR (Pt. 1024) 375. He also submitted that the latin maxim, ubi jus ubi remedium relied upon by the Respondent is not applicable to this appeal as the equitable maxim cannot be used to circumvent statutory provisions of the law.

On issue 2, the Appellant Counsel submitted that the Respondent?s application for an order of foreclosure and sale of the vast (9.688) acres of the Appellant’s premises and the subsequent pronouncement of the Court in that regard, in the absence of disclosed third party rights with their contending interest makes such an order a nullity. That it is trite law that where third parties will be affected in a matter, they should be made a necessary party to suit and that a Court cannot exercise jurisdiction against parties not before it.

He cited the case of AWONIYI v. REG. TRUSTEES OF AMORC (2000) 10 NWLR (Pt. 676); MUDASHIRU KOKORO-OWO v. LAGOS STATE GOVT. & ORS (2001) 5 M.J.S.C. page 166 at 176, para G.

The Counsel urged the Court to resolve the issue in favour of the Appellant.
The Respondent on its issue 2 submits that the examinations of Exhibits 1, 2, 3, 4 & 9 clearly shows that the Appellant is the rightful owner of the mortgaged property and that there is nowhere in the said exhibits where it is stated that a third party have any interests or rights on the mortgaged property and that it is not in dispute that the only parties that executed the offer letter are the Appellant and Respondent. That the Appellant cannot be allowed to evade its contractual obligation on the mere existence of a third party’s interest or right which is not contemplated by the contract. He cited U.B.A. PLC v. JARGABA (2007) 11 NWLR (Pt. 1045) 247 at 266-267, paras H-A.

?The Respondent Counsel submitted that in the absence of any clear averment disclosing the third party and his interests or rights over the mortgaged property, the trial

Court was right when it resisted the temptation to engage in any voyage of discovery with the Appellant.
He urged this Court to resolve the issue in favour of the Respondent and uphold the decision of the trial Court.

RESOLUTION
Section 251(1)(e) of the grund norm of our land, the 1999 Constitution confers exclusive jurisdiction on the Federal High Court in civil cases and matters arising from the operation of the Companies and Allied Matters Act or any other enactment replacing that Act or regulating the operation of companies incorporated under the Companies and Allied Matters Act. Similar provision is found in Section 7(1)(e) of the Federal High Court Act. In AMALGAMATED TRUSTEE LTD v. ASSOC. DISCOUNT HOUSES LTD (2007) 15 NWLR (Pt. 1056) 118 at 156, the Court held that it is the Federal High Court that has the exclusive jurisdiction to hear and determine such civil cause and matter if the complaint deals with actions involving regulating, control or management of companies, but if it deals with ordinary routine business of a company, and does not involve the control or administration of company, the State High Court has jurisdiction.

Similarly, in FAGBOLA & ANOR v. KOGI CHAMBERS OF COMMERCE, INDUSTRY, MINES & AGRIC & ANOR (2006) 6 NWLR (Pt. 977) 433; (2006) LPELR-5392 (CA), this Court, per RHODES-VIVOUR, JCA now JSC (as he then was) held that:
“… Exclusive jurisdiction vest in the Federal High Court where the Suit involves: (a) regulating, running or management or control of companies; (b) formation winding up of a company; (c) consideration in some detail of the memorandum and articles of association, shares and shareholding; (d) the appointment, removal, alteration or change of Directors; (e) appointment of Receiver and his various obligations and claims arising from the conduct of a Receiver. See Tanarewa Nig. Ltd v. Plastifarm Ltd. (2003) 14 NWLR (Pt. 840) p. 355. Once the claims before the Court pertains to the provisions of the Companies and Allied Matters Act, the Memorandum and Articles of Association of the Company concerned and any enactment regulating operation of companies under the said Act the Federal High Court would have exclusive jurisdiction over the matter.”
See also BAMAK PHARMACY & STORES LTD & ORS v. ABUJA MUNICIPAL AREA COUNCIL (2010) LPELR-3850 (CA).

Appellant’s counsel has argued that the facts and circumstances of the instant case takes the matter away from the realm of causes and matters that can be dealt with by the High Court of a State, it is his contention that the kernel of this appeal is the guaranteeing of a loan by its Director/Shareholder for the acquisition of its own shares. I am unable to agree with him. In my considered view, the subject of the instant case revolves around the liability or otherwise of the Appellant in respect of a simple contract of guarantee executed with the Respondent. The coloration of the suit is not altered merely because the Defendant raised the issue as to the non-compliance with the provision of the Companies and Allied Matters Act. It is beyond dispute that the contract of guarantee subject of dispute between the parties was entered in by the Appellant, who by that contract, guaranteed a loan granted to its core investor, Folio Communication Limited to enable it acquire shares in the Appellant’s company. It is a liquidated money claim between a bank and a customer, to the tune of N559,643,559 accruing to the bank as at 31st July, 2009 together with interest and

foreclosure of property which served as collateral of the loan and sale thereof. The instant suit does not involve the day to day running cum internal management of the Appellant neither is it a dispute among the directors and/or between the directors of the company. It is simply a case of a borrower calling in its loan. Therefore, it does not in my firm view, fall within the ambit of Section 7(1)(e) of the Federal High Court Act and Section 251(1)(e) of the 1999 Constitution (as amended) so as to vest exclusive jurisdiction on the Federal High Court. The learned trial judge was therefore correct when he held that this is a simple case of banker and borrower, which the State High Court can adjudicate upon.

The second arm of the issue at hand deals with crucial question on the validity of the contract of guarantee executed by the Appellant. The crux of this issue however revolves around the interpretation and application of Sections 159, 160, 161, and 270 of the Companies and Allied Matters Act, Cap C.20, L.F.N., 2004. For easy comprehension, the provisions are set out herein:
159 (1) in this section, financial assistance includes a gift,

guarantee, security or indemnity, loan, any form of credit and any financial assistance given by a company, the net assets of which are thereby reduced to a material extent or which has no net assets.
(2) Subject to the provisions of this section ?
(a) Where a person is acquiring or is proposing to acquire shares in a company it shall not be lawful for the company or any of its subsidiaries to give financial assistance directly or indirectly for the purpose of that acquisition before or at the same time as the acquisition takes place; and
(b) Where a person has acquired shares in a company and any liability has been incurred (by that or any other person), for the purpose of this acquisition, it shall not be lawful for the company or any of its subsidiaries to give financial assistance directly or indirectly for the purpose of reducing or discharging the liability so incurred.
(3) Nothing in Subsection (1) of this section shall be taken to prohibit –
(a) The lending of money by the company in the ordinary course of its business, where the lending of money is part of the ordinary business of a company;

(b) The provision by a company, in accordance with any scheme for the time being in force, of money for the purchase of or subscription for, fully-paid shares in the company or its holding company, being a purchase or subscription by trustees of or for shares to be held by or for the benefit or employees of the company, including any director holding a salaried employment of office in the company;
(c) The making by a company of loans to persons, other than directors, bona fide in the employment of the company with a view to enabling those persons to purchase or subscribe for fully-paid shares in the company or its holding company, to be held by themselves by way of beneficial ownership;
(d) Any act or transaction otherwise authorized, by law.
(a) If a company acts in contravention of this section, the company and every officer of the company who is in default shall be liable to a fine not exceeding N500.
160. (1) Subject to the provisions of Subsection (2) of this section and its articles, a company may not purchase or otherwise acquire shares issued by it.
(2) A company may acquire its own shares for the purpose of -<br< p=””

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(a) Setting or compromising a debt or claim asserted by or against the company; or
(b) Eliminating fractional shares; or
(c) Fulfilling the terms of a non-assignable agreement under which the company has an option or is obliged to purchase shares owned by an officer or an employee or the company; or
(d) Satisfying the claim of a dissenting shareholder; or
(e) Complying with a Court order.
(3) A company may accept, from any shareholder, a share in the company surrendered to it as a gift, but may not extinguish or reduce a liability in respect of an amount unpaid on any such share, except in accordance with Section 106 of this Act.
161. Notwithstanding any provision in the articles, a company shall not purchase any of its own shares except on compliance with the following conditions, that is ?
(a) Shares shall only be purchased out of profits of the company which would otherwise be available for dividend or the proceeds of a fresh issue of shares made for the purpose of the purchase;
(b) Redeemable shares shall not be purchased at a price greater than the lowest price at which they are redeemable or shall be redeemable at the next date thereafter at which

they are due or liable to be redeemed;
(c) No purchase shall be made in breach of Section 162 of this Act.
270. (1) It shall not be lawful for a company to make a loan to any person who is its director or a director of its holding company, or to enter into any guarantee or provide any security in connection with a loan made to such a person as earlier mentioned by any other person; provided that nothing in this section apply ?
(a) subject to Subsection (2) of this sections, to anything done to provide any such person as mentioned in this subsection with funds to meet expenditure incurred or to be incurred by him for the purposes of the company or for the purpose of enabling him properly to perform his duties as an officer of the company; or
(b) in the case of a company whose ordinary business includes the lending of money or the giving of guarantees in connection with loans made by other persons, to anything done by the company in the ordinary course of that business.
(2) Proviso (a) to Subsection (1) of this section shall not authorize the making of any loan, or the entering into any

guarantee, or the provision of any security except ?
(a) with the prior approval of the company given at a general meeting at which the purposes of the expenditure and the amount of the loan or the extent of the guarantee or security, as the case may be, are disclosed; or
(b) on condition that, if the approval of the company is not given as in Subsection (1) of this section at or before the next following annual general meeting, the loan shall be repaid or the liability under the guarantee or security shall be discharged, as the case may be, within six months from the conclusion of that meeting.
(3) Where the approval of the company is not given as required by any such condition, the directors authorizing the making of the loan, or the entering into the guarantee, or the provision of the security, shall be jointly and severally liable to indemnify the company against any loss arising therefrom.” (Underlining Mine).
It is evident from the above provisions of C.A.M.A., particularly Section 270 thereof, that the Act merely prohibits the giving of loan or entering into guarantee in certain circumstances, without the prior approval of the

company given at a general meeting or where the approval was not obtained at the annual general meeting, on condition that the loan shall be repaid or the liability under the guarantee or security shall be discharged within six months from the conclusion of the annual general meeting of the company. The consequence of non-compliance with Subsection (1) and (2) of Section 270 is aptly stated in Subsection (3) which is to the effect that “the directors authorizing the making of the loan or the entering into the guarantee, or the provision of the security shall be jointly and severally liable to indemnify the company against any loss arising therefrom.” This provision is devoid of any ambiguity and will be accorded its ordinary literal meaning. See AJISEGIRI v. F.R.N. (2010) LPELR-3676 (CA); ABAYOMI BABATUNDE v. PAN ATLANTIC SHIPPING AND TRANSPORT AGENCIES LTD & 2 ORS (2007) ALL FWLR (Pt. 372) 1721 at 1752; ALHAJI SHEHU ABUL GAFAR v. THE GOVT. OF KWARA STATE & 2 ORS (2007) ALL FWLR (Pt. 360) 1415. It is certainly not the duty of the Court to interpret the unequivocal provision of the statute so as to avoid its consequence. See dictum of MUHAMMED, JSC when

he stated in AMAECHI v. I.N.E.C. (2008) 5 NWLR (Pt. 1080) 227 SC; (2008) LPELR-446 (SC)
“It is certainly not the duty of a Judge to interpret a statute to avoid its consequence. The consequences of a statute are those of the legislature, not the Judge. A Judge who regiments himself to the consequences of a statute is moving outside the domain of statutory interpretation. He has by that conduct engaged himself in morality which may be against the tenor of the statute and therefore not within his judicial power.”
The draftsmen thought it wise and for good reason to make the directors who authorized the giving of the loan or executed the guarantee, to be jointly and severally liable to indemnify the company, in the event that the company is found to be liable under such guarantee executed with a third party, as in the instant case; thus being a loss to the company. It is certainly not the purport of that provision that the company shall avoid liability; rather the scope is that the directors shall be liable to the company for any loss suffered as a result of its liability under the contract of guarantee. To bow to the submission of the Appellant would amount to

making nonsense of the plain provisions of the statute.
The Learned Author, Professor Joseph Abugu, in his , Principles of Corporate Law in Nigeria, Lagos: MIJ Professional Publishers, 2014, at page 490 under the topic “LOANS TO DIRECTORS” comprehensively considered the purport of Section 270 of the Companies and Allied Matters Act, when he enumerated thus:
“By Section 270 of CAMA, it is unlawful for a company to grant a loan to its director or director of its holding company or to provide security for a loan made to such person. This is a rule of maintenance of capital. Loans to directors have the potentials of undermining capital. They readily create a conflict of interest situation giving rise to liabilities for breach of fiduciary duties. The prohibition does not draw any distinction between loans to executive and non-executive directors. Executive directors in addition to statutory obligations as directors also work under contracts of employment with the company. Under such contracts loans such as these for cars, housing, furniture and other employment benefits may be granted in advance. These are not affected by Section 270 as the root of such facilities is

in employment law by virtue of their employment contracts and not in their capacity as directors simpliciter.
Notwithstanding, Section 270 provides for a few exceptions to the prohibitions. Firstly, loans may be granted to provide funds to enable a director meet expenditures incurred for purposes of the company or to enable him to perform his duties properly. Also where the ordinary business of the company includes the lending of money or giving of guarantees for loans made by other persons. In the second case, the loan or guarantee must first be approved by the company in general meeting or a condition imposed that if it is not approved at or before the next general meeting, the loan must be repaid or the guarantee discharged within six months from the conclusion of the meeting.”
I am therefore not hesitant to conclude that the provision of Section 270 of C.A.M.A. does not ipso facto render any guarantee executed without complying with the provision, illegal and unenforceable but merely renders the Directors/themselves who authorized it liable to the company for losses arising therefrom. In other words the

loan/guarantee shall not be affected by the reason of failure to obtain prior approval of the members in general meeting.

conduct. That is to say a party shall not be allowed to say one thing at one time and the opposite of it at another time. The rule of estoppel is based on equity and good conscience.”
The Appellant’s complaint here has nothing to do with its outstanding obligation owed by it to the Respondent; the issue as to non-compliance with Section 270 does not have any bearing on the substance of the contract of guarantee, in so far as it affects the interest of the Respondent; it is an internal affair of the Appellant to which the Respondent is not party to. Section 270 is predicated on the nature of fiduciary duty imposed on a director to the company.
See Section 279 of C.A.M.A. which clearly states:
“A director of a company stands in a fiduciary relationship towards the company and shall observe the utmost good faith towards the company in any transaction with it or on its behalf.”
In this case, a BANK GUARANTEE issued to the RESPONDENT BANK on 19th February, 2007 and the Appellant deposited a deed of conveyance in respect of the Appellant?s property to the Respondent. See FAIRLINE PHARMACEUTICALS IND. LTD. & ANOR v. TRUST ADJUSTERS (2012) LPELR-20860 (CA).

I am therefore in agreement with the findings and conclusions of the learned judge at page 457 of the records of appeal that:
“It is the highest degree of dishonesty for a party who has knowledge or who is presumed to have knowledge of the existence of an illegality in a transaction to enter into the transaction, draw benefit therefrom and then turn back to condemn such transaction and label it as illegal and illegality as a defence. Equity shall not condone that as one cannot approbate and reprobate it as both morally and legally despicable.”
The above finding and conclusion is in my modest view, unassailable.

On the issue of third party interest in the subject land, the counter-affidavit of the Appellant comes to play. The Appellant has argued that there are third parties occupying some portions of the 9.668 acres of the Appellant’s premises who are not party to the suits and who will be affected by the order of the Court.

?I have examined the counter-affidavit to the Originating Summon filed at page 122, and I find that there is no deposition as to third parties’ rights in the entire depositions

therein whereby the Appellant merely states that it had no power or authority to stand surety for the debt of Folio Communication Ltd. The deponent, one EMEKA NDUKWU, a clerk in the Defendant counsel’s law firm deposed to these facts with the consent and authority of the both defendants and his employers and he stated that the source of his information is Mr. Noel Anosike, a director of the Defendant/Appellant. See pages 121 to 122 of the record of appeal. In paragraph 3 of the counter affidavit, he deposed thus:
“I am informed by Noel Anosike, a director of the Defendant’s company of the following and I verily believe
i) That title documents in respect of the Defendants Agidigbi’s premises was delivered to the Claimant for the purpose of granting overdraft facility to the Defendant.
ii) That the memorandum of deposit and letter of undertaken marked Exhibit “9” by the Claimant is not a document of the Defendant.
iii) That the said overdraft was not eventually given to the Defendant by the Claimant because the Claimant paid same over to N.D.I.C.
iv) That the Defendant has no power or authority to stand surety for the Defendant Folio communication Ltd. shown to

mark Exhibit “DTNI” is a copy of certified true copy of the Defendant’s Memorandum and Articles of Association. Article 121 deals with seal of the company.
v) That the Defendant received no benefit from the ship with Claimant.”

More important at page 272 of the record is a Further Affidavit verifying the location and status of the equitable mortgaged property pursuant to the directive of the honourable Court made on 26th April, 2012. It was deposed at paragraph 3 to the effect that the said property is developed and occupied by the Appellant herein. It reads:
i. That the subject property mortgaged to the Claimant bank is the same property where the head office of the Defendant is situate at Lateef Jakande Road, Agidingbi, Ikeja.
ii. That the said property was acquired by Daily Time Plc from Cadbury Nigeria Limited on 11th June 1975.
iii. That the plan showing the exact location of the property is attached Deed of Conveyance executed between Daily Times Nigeria Plc and Cadbury Nigeria Limited dated 11th June, 1975 and registered as No. 39 page 39 in Volume 1505 of the Land Registry Office in Lagos, a copy of which is marked

as Exhibit 8 in the affidavit in support of the Originating Summons.
iv. That the said property is developed and occupied by the Defendant herein.
v. That there has not been any dispute between the Claimant and Defendant as to the exact location of the property or that the fact that the said property was deposited as collateral for the facility availed the Defendant.”

There was no opposition from the Appellant with respect to the depositions reproduced supra; it is thereof deemed as admitted. See ALEX FINANCE AND MORTGAGE NIG LTD v. UKONU (2013) LPELR-22571 (CA).

Meanwhile, it is trite that deposit of title deeds with a bank as security for a loan creates an equitable mortgage as against legal mortgage. Foreclosure applies only where a deposit of title deeds has been accompanied by an agreement with the borrower to give a legal mortgage if required to do so or where having deposit of title deeds with a memorandum. See GWARZO v. ALHAJI AMEEN SULEIMAN MOHAMMED & ANOR (2012) LPELR-22375 (CA); YARO v. AREWA CONSTRUCTION LTD (2007) 17 NWLR (Pt. 1063) 33.

?In the case at hand, Exhibit “8” and “9” are the deed of

conveyance as well as memorandum of deposit and letter of undertaking covering the said property and from the evidence on record, it is undisputed that the sum of money due to the Respondent remains unpaid. The lower Court was therefore right to have made an order of foreclosure and sale of the Appellant’s property.

There is no indication of any third party interest from the evidence on record. It is the law that he who asserts must prove the existence of such facts which he asserts. See Section 131 and 132 of the Evidence Act, 2011; G & T INVESTMENT LTD v. WITT & BUSH LTD (2011) 8 NWLR (Pt. 1250) 500; IYERE v. BFFM LTD (2001) FWLR (Pt. 37) 166. The burden was clearly on the Appellant to prove that there are encumbrances or other third party interest in the nature of lease or tenancy. See IREKPITA v. FED. MORTGAGE BANK (2010) LPELR-8639 (CA).

A fortiori, the issue of third party interest was raised for the first time in the written Address filed by the Appellant. This was aptly noted by the learned trial judge who held at page 451 of the record that:
“…This is the first time, in Learned Silks written address that the issue of any 3rd parties has ever

come up before this Court. Who are these 3rd parties? What is their connection with the property, subject matter of this suit? There is no affidavit evidence whatsoever before me in respect of any 3rd parties. The Court cannot speculate or indulge in guesswork and conjecture about the possible existence of any 3rd parties.”

Indeed, since there is no evidence on the interest of the third parties, the Court cannot rely on conjectures or speculation on this issue. See HANI AKAR ENTERPRISES LTD v. INDO NIGERIA MERCHANT BANK LTD (2010) LPELR-4229 (CA); DALFAM NIGERIA LTD v. OKAKU INTERNATIONAL LTD & ORS (2010) LPELR-4012 (CA).
As a result, I resolve the issue herein against the Appellant.

On the whole, the appeal lacks merit and is hereby dismissed in its entirety. The judgment of the High Court of Lagos State, coram OYEFESO, J is hereby affirmed. Costs of N100.000.00 is awarded against the Appellant.

MOHAMMED LAWAL GARBA, J.C.A.: After reading a draft of the lead judgment written by my learned brother Abimbola Osarugue Obaseki-Adejumo, JCA in this appeal, I agree

completely with the views expressed and conclusions reached on the two (2) issues submitted for decision in the appeal. The issues have been fully dealt with in line with the extant principles of law applicable to them and I do not wish to say more than that. I too find no merit in the appeal and join in dismissing in terms of the lead judgment.

YARGATA BYENCHIT NIMPAR, J.C.A.: I was afforded the opportunity of reading in draft the judgment of My brother ABIMBOLA OSARUGUE OBASEKI-ADEJUMO, JCA just delivered and I agree with the reasoning and conclusion arrived at.

Jurisdiction is donated by the Constitution or statute and features of jurisdiction have been long settled in the case of MADUKOLU v. NKEMDILIM (1962) 1 ALL NLR 587. The Federal High Court has wide powers but limited or circumscribed by the constitution or statute unlike the State High Courts that have jurisdiction on civil law issues. Section 251(1) of the 1999 Constitution delimited the jurisdiction of the Federal High Court. Clearly, the subject matter of this case revolves around a simple contract of guarantee executed by the Appellant in favour of the Respondent which

is within the jurisdiction of the State High Court. The Appellant’s submission in this regard is therefore untenable.

?For this and the fuller reasons advanced in the judgment, I too see no merit in the appeal and hereby dismiss it. I also abide by the order as to cost.

Appearances:

N. I. Quakers, SAN with him, B. F. Ajuona, O.N. Okonkwo and T. AyorindeFor Appellant(s)

Williams BelloFor Respondent(s)

Appearances

N. I. Quakers, SAN with him, B. F. Ajuona, O.N. Okonkwo and T. AyorindeFor Appellant

AND

Williams BelloFor Respondent