EAGLE FLIGHT MICRO FINANCE BANK LTD v. MOSDEL ROYAL VENTURES LTD & ANOR (2022)

EAGLE FLIGHT MICRO FINANCE BANK LTD v. MOSDEL ROYAL VENTURES LTD & ANOR

(2022)LCN/16386(CA)

In The Court Of Appeal

(ASABA JUDICIAL DIVISION)

On Friday, May 27, 2022

CA/AS/208/2015

Before Our Lordships:

Misitura Omodere Bolaji-Yusuff Justice of the Court of Appeal

Joseph Eyo Ekanem Justice of the Court of Appeal

Abimbola Osarugue Obaseki-Adejumo Justice of the Court of Appeal

Between

EAGLE FLIGHT MICRO FINANCE BANK LTD APPELANT(S)

And

1. MOSDEL ROYAL VENTURES LIMITED 2. MOSES EMUJAKPORUE RESPONDENT(S)

RATIO:

POSITION OF LAW WHERE THERE IS NO ARGUMENT IN RESPECT OF AN ISSUE

The law is that where argument is not offered in respect of an issue, the issue is deemed abandoned and therefore liable to be struck out. JOSEPH EYO EKANEM, J.C.A.

WHETHER A PARTY THAT TAKES BENEFIT UNDER A CONTRACT CAN AVOID HIS OBLIGATION

The law is that where a party takes benefit under a contract, it does not lie in his mouth to seek to avoid his obligations under the contract voluntarily entered into by him on the ground that the contract is illegal or void. See Solanke v. Abed (1962) 1 SCNLR 371, Oilfield Supply Center Ltd v. Johnson (1987) 2 NWLR (Pt. 58) 265, Ayanru v. Mandillas Ltd (2007) 147 LRCN 1036, B. B. Apugo & Sons Ltd v. Orthopaedic Hospitals Management Board (OHMB) (2016) 13 NWLR (Pt. 1529) 206, Okechukwu v. Onuorah (2000) 15 NWLR (Pt. 691) 597, Fasel Services Ltd v. NPA (2003) 8 NWLR (Pt. 821) 73, Inyang v. Ebong (2002) 2 NWLR (Pt. 751) 284 , Chachangi Airlines (Nig.) Ltd v. AP Plc (2015) 4 NWLR (Pt. 1449) 256 and Attorney-General of Rivers State v. Attorney-General of Akwa Ibom State (2011) 8 NWLR (Pt. 1248) 31. JOSEPH EYO EKANEM, J.C.A.

CATEGORIES OF INTEREST IN A FINANCIAL TRANSACTION

In the case of Veepee Industries Ltd v. Cocoa Industries Ltd (2008) 13 NWLR (Pt. 1105) 486, 506, the Supreme Court identified the following categories of interest in a financial transaction:
1. Accrued interest which is interest earned but not yet paid;
2. Accumulated interest which is the one on bonds and other debts which is due or overdue but not yet paid;
3. Compound interest which is interest paid on principal sum plus accrued interest;
4. Simple interest which is interest paid on principal or sum lent at a certain rate or allowance made by law or agreement of parties. It is calculated on the principal lent as distinguished from compound interest;
5. Conventional interest which is the one in which the rate of interest is agreed upon and fixed by the parties themselves as distinguished from that which the law would prescribe in the absence of an explicit agreement. JOSEPH EYO EKANEM, J.C.A.

POSITION OF LAW ON ISSUE OF CONVENTIONAL INTEREST

POSITION OF LAW WHERE THERE IS NO EXPRESS AGREEMENT AS RELATING TO ISSUE OF INTEREST

In UBA Plc v. Lawal (2008) 7 NWLR (Pt. 1087) 613, 630, Okoro, JCA, as he then was, opined that:
“It is now trite that in a banker-customer relationship, where there is no express agreement as relating to issue of interest, the bank is entitled to charge interest on the basis that there is a custom and usage to that effect or that the customer has impliedly consented where he, without protest allows his account to be so debited. Where however, as in the instant case, the parties have expressly set out the details of the terms that would govern the loan facilities granted, then they by implication made it clear that the transaction is not governed by the general rules of banking relating to charging interest on the loan or overdraft facilities.” JOSEPH EYO EKANEM, J.C.A.

POSITION OF LAW FOR A BANK FOR CHARGING INTEREST ABOVE THE LIMIT PRESCRIBED BY CENTRAL BANK GUIDELINES

There is no penalty or sanction such as fine or imprisonment prescribed by law for a bank for charging interest above the limit prescribed by Central Bank guidelines and so it cannot even be said that the transaction was illegal. A contract is said to be illegal if it is prohibited by statute or at common law coupled with provisions for sanction in the event of its contravention but where no sanction is imposed or if the law requires certain requisite formalities to be performed as condition precedent for the validity of the transaction without imposing any penalty for non-compliance, failure to comply with the formalities renders the transaction void. See Pan Bisbilder (Nig.) Ltd v. First Bank of Nigeria Plc (2000) 74 LRCN 109, UBA Ltd v. Samba Petroleum Co. Ltd (2002) 16 NWLR (Pt. 793) 361, Fasel Services Ltd v. NPA Supra and First Amalgamated Building Society Ltd v. Ibiyeye (2008) 14 NWLR (Pt. 1107) 375. JOSEPH EYO EKANEM, J.C.A.

WHETHER THE COURT WILL ENFORCE AN ILLEGAL CONTRACT

Generally, a Court will not come to the aid of a party to an illegal contract who wishes to enforce it. JOSEPH EYO EKANEM, J.C.A.

JOSEPH EYO EKANEM, J.C.A. (Delivering the Leading Judgment): The appellant, a micro-finance bank, offered to the 1st respondent a loan facility in the sum of N5,000,000.00 vide a letter of offer dated 7/8/2006. The 1st respondent accepted the offer of the loan facility and over time drew down the loan. The period of the facility was 180 days with the total amount due for repayment being N6,600,000.00. As security for the loan, the respondents deposited with the appellant, inter alia, a certificate of occupancy No. DSTR 11017 issued in the name of the 2nd respondent.

The respondents contended that they had repaid a total sum of N2,600,000.00 until a dispute arose between the parties as to the true state of the account in respect of the loan. The respondents therefore filed a suit at the High Court of Delta State, Orerokpe Judicial Division( the trial Court) and, according to the respondents, during the pendency of the action, the appellant delivered to them two statements of account made up for the purpose of the case in which the appellant unilaterally imposed an illegal monthly interest of N250,000.00 , i.e., 5% and a further N100,000.00 i.e. 2% on the account of the respondents which they contended are at variance with the letter of offer. The appellant foreclosed the redemption of the property offered as security for the loan.

The respondents therefore claimed the following reliefs in their amended writ of summons and statement of claim:
i. A DECLARATION that the imposition of a monthly interest of N250,000.00 i.e. 5% of the loan granted and another N100,000.00 i.e. 2% monthly on the account of 1st Claimant is illegal, and void as same is ultra vires the Letter of Offer dated August 7, 2006 and against the Central Bank of Nigeria guidelines/regulations on interest rates at all times material to this case.
ii. A DECLARATION that by the provisions of the Letter of Offer dated August 7, 2006, the Claimants indebtedness to the defendant is N6,700,000.00 (principal, interest and charges) and N100,000.00 (i.e. 2% flat penalty charges for default) less the amount already paid to the Defendant.
iii. AN ORDER directing the Defendant to release to the Claimant all the documents deposited with them including (a) Certificate of Occupancy No. DSTR 11017; (b) Valuation Report, (c) Approved Building plan of Meeco Guest House Limited (d) receipts of PHCN Transformer, Crusher Equipment, Man diesel trailer lorry and a lorry Truck on payment by the Claimants to the Defendant of the due amount as per relief (ii) above.
iv. AN ORDER of PERPETUAL INJUNCTION restraining the Defendant by herself, agents or privies form alienating, selling or assigning any of the properties including the land covered by Certificate of Occupancy No. DSTR 11017, PHCN Transformer, Crusher Equipment, two Lorries whose documents were deposited with the defendant as security for the loan granted.
v. Special damages as follows;
(a) N350,000.00 which is the price differential in the cost of repairs/purchase of equipment due to the delay of Defendant in releasing the loan amount to the Claimants.
(b) N4,500,000.00 being loss of revenue for forty-five days occasioned by Defendant’s delay in releasing the loan amount to the Claimants.
vi. N50,000,000.00 being general damages for breach of contract, Defendant having failed or refused to disburse the loan sum to Claimants in line with the Letter of Offer dated August 7, 2006.”

The appellant contended that the loan account balance as at 30/11/2011 stood at N4,450,000.00 while the current account balance as at that date stood at N15,770,272.62 and therefore counter-claimed for the following reliefs:
a. A declaration that the 1st Defendant is liable to repay to the Claimant the loan taken from the Claimant in addition to the interest charged on the loan as well as the default charge on the loan that arose as a result of the delay in repayment of the loan.
b. An order that the Claimants pay to the Defendant/Counter-claimant the sum of N20,220,272.62 as the 1st Claimant’s indebtedness to the Defendant/Claimant as at the 31st of November, 2011.
c. The 1st Defendant is liable to pay to the Claimant the loan of N5,000,000.00 given to the Defendant by the Plaintiff as well as interest of 7% per month made up of 5% interest flat rate per month and 2% default charge per month with effect from December 1, 2011 until the entire loan is liquidated.
d. An order for the sale of 2nd Claimant’s property, Meeco Guest House and the appurtenances covered by a certificate of Occupancy No. DTSR (DTSR) 11017 in satisfaction of the debt.
e. General damages of N5,000,000.00.”

After hearing and taking of addresses, the trial Court found in favour of the respondents and granted reliefs (i), (ii), (iii), (iv) and (v) of their claim. It dismissed the counter-claim.

Aggrieved by the decision, the appellant appealed to this Court by the means of a notice of appeal.

In the appellant’s brief of argument which was settled by E. L. Umuze, Esq., the following issues have been proposed for the determination of the appeal:
1. Assuming without conceding that the 5% interest per 180 days (i.e 6 months) or 30 days (1 month) and accepted by both parties to regulate the loan transactions was illegal, whether a party who has benefited from an illegal transaction can rely on the illegality as a defence? Grounds 1 and 2.
2. Whether the learned trial judge gave a painstaking evaluation of the evidence adduced especially Exhibits C1 and C5 before granting the Respondents’ claim and demising (sic) the Appellant’s counter-claim
OR (Ground 4)
3. Whether the none consideration of issue of the Roll-over of the loan (based on Exhibit C5) did not occasion a miscarriage of justice? (Ground 4).

In the amended respondents’ brief of argument settled by R. A. S. Ahon, Esq., the following issues have been distilled for the determination of the appeal:
1. Whether the learned trial judge was right when His Lordship declared as illegal, null and void the attempt of the appellant to impose a monthly interest of 5% and a further monthly charge of 2% on the respondents’ account after the expiration of the term loan granted to the respondents? (Ground 1)
2. Whether the learned trial judge was right in giving judgment in favour of the respondents and dismissing the appellant’s counter-claim in view of the totality of the pleadings and evidence led in the case by both parties? (Ground 4)

It is clear from the issues formulated by the appellants’ counsel and the identification of the grounds from which they were formulated that no issue has been formulated from ground 3 of the grounds of appeal. It is therefore deemed abandoned and I accordingly strike out the same. See Eke v. Ogbonda (2007) 144 LRCN 391, 400.

There is no room for alternative formulation of issues in our rules of Court and so the alternative issue 3 formulated from the same ground of appeal which gave birth to issue 2 of the appellant cannot stand. I hereby strike out the same. A close reading of the appellant’s brief of argument shows that the only issue argued by appellant’s counsel is issue 1. No argument is proffered in respect of issue 2.

The law is that where argument is not offered in respect of an issue, the issue is deemed abandoned and therefore liable to be struck out. So I strike out issue 2 of the appellant.

It follows from the foregoing that the labour of respondents’ counsel in arguing issue 2 in his brief of argument is in vain. There was no argument for him to respond to in respect of the issue. I shall therefore discountenance his argument on his issue 2.

What is left therefore for the consideration of this Court is issue 1. I will be guided by appellant’s counsel’s formulation of the issue in determining the appeal since the appellant is the aggrieved party.

Counsel for the appellant submitted that the respondents having taken the benefit of the loan to resuscitate their business cannot later complain that the loan transaction and the charges made thereunder are illegal. He noted that it was common ground that the conditions for the loan are as contained in the letter of offer (Exhibit C1) which he said the respondents read, understood and accepted. He posited that if any illegality arose in the transaction, such was brought about by the failure of the respondent to ensure that the transaction was done properly and in accordance with all the enabling legislations, guidelines and rules governing such transaction. He placed reliance on UBA Ltd v Ibhafidon (1994) 1 NWLR (Pt. 318) 90. He referred to the evidence of CW1 and posited that it is the highest degree of dishonesty for the respondents who have knowledge of the existence of the alleged illegality in the transaction to enter into it, benefit from it and then run back to condemn the same transaction as illegal. He added that the respondents acquiesced to the rate of interest charged on their account by accepting the terms in Exhibit C and utilizing the loan by making draw down of the money and applying it to their use.

Counsel contended that the trial Court did not properly appraise evidence that was adduced before it. He lamented that the trial Court in one breath upheld the letter of offer and in another breath voided the charges agreed upon by the parties. He argued that the trial Court relied solely on the letter of offer and gave it an erroneous interpretation and it failed to consider the exceptions to Section 132 of the Evidence Act which allows extrinsic evidence in proof of any matter which if proved would produce an effect on the validity of any document. Let me quickly say that this argument is outside the scope of the issue under consideration. The law is that all arguments in an appeal must flow from the issues(s) for determination. An argument that is not related to an issue is incompetent. See BPE v. Dangote Cement Plc (2020) 5 NWLR (Pt. 1717) 322, 343. I therefore discountenance the argument summarized immediately above.

Respondents’ counsel submitted that the trial Court was right in declaring as illegal the attempt by the appellant to impose a monthly interest of 5% and a further monthly charge of 2% on the account of the respondents after the expiration of the term loan. He submitted that Exhibit C contained all the terms of the loan contract between the parties and that the appellant cannot be heard to say that there are other unwritten terms. It was his further submission that by imposing a monthly interest rate of 5% and a further monthly charge of 2% after the expiration of the term loan, the appellant breached the Central Bank of Nigeria guidelines on interest charges in the country which he said is an illegality. He posited that the Central Bank regulates the activities of all banks operating in the country including the appellant. He referred to Exhibits C19 and C18 which he stated showed that when the loan was granted, the maximum interest rate chargeable by banks in Nigeria was 18.7% per annum.

It was his argument that all banks in Nigeria are by law obliged to comply with all Central Bank of Nigeria directives and guidelines including interest rate. He placed reliance on Keystone Bank Ltd v. Shemoma Nig. Ltd (2016) ALL FWLR (Pt. 828) 957. He in addition referred to Exhibit D4 which is titled Regulatory and Supervisory Guidelines For Microfinance Banks (MFBs) in Nigeria and submitted that the right to agree on interest with customers and generally to charge interest is not at large but it is subject to existing guidelines as contained in exhibits C17 and C18. Citing the case of Ilokson & Co. (Nig.) Ltd v. Union Bank of Nig. Plc (2007) 6 CLRN 25, he urged the Court to hold that the attempt of the appellant to impose interest of 7% on the respondents after the expiration of the loan granted is illegal and ultra vires the loan agreement.

The issue that requires resolution is very narrow and simple despite the concerted efforts by counsel on both sides to expand and even obfuscate it. The issue is focused on the propriety of a party, after taking the benefit of a contract, contending that the contract is illegal or void. This issue arises from the finding of the trial Court at pages 457 – 459 of the record which may be summarised as follows:
1. The authorized prime lending rate and the maximum lending rate, under the Central Bank of Nigeria guidelines during the period that the transaction was entered into by the parties was 17.3% and 18.7% per annum.
2. That for the period of the contract, which was for 180 days, the appellant charged 60% interest.
3. That the interest rate was not supported by Exhibit C18.
4. That the appellant ought not to have fixed interest rate at 5% per month instead of annually.
5. That the appellant fixing interest rate at 5% per month acted contrary to Sections 2.1 (k) and 14.4 of Exhibit D4A, Central Bank guidelines.
6. That the interest rate charged by the appellant exceeded the Central Bank ceiling and Exhibit D4a.

It is pertinent to note that the respondents, as I have already stated, eventually drew down the whole sum of the loan and utilized the same for their benefit. They paid back only the sum of N2,600,000.00 leaving a balance of N4,000,000.00. When the appellant demanded for the payment of the loan and sought to foreclose the redemption of the deposited properties, the respondents sued and claimed in relief 1 as earlier stated in this judgment. It seems clear that the respondents accepted the charges as contained in the letter of offer which charges interest for the duration of the loan agreement which is 180 days. The charges are as follows:
“Amount of facility =N5,000,000.00 (Five Million Naira Only)
Period of Payment: 180 days
Charges: =N=
Interest 5%/180 days 1.500.000.00
Management Fee I% 50.000.00
Commitment fee 1% 50.000.00
The Block facility amount and charges of N6,600,000.00 (Six Million Six Hundred Thousand Naira only) would be paid from your current account NO. 1210200221; Mosdel Royal Ventures Ltd.”

In relief No. ii the respondents prayed for a declaration that by the provisions of the letter of offer dated August 7, 2006, the Claimants indebtedness to the defendant is N6,700,000.00 i.e. N6,600.000.00 (principal, interest and charges) and N100,000.00 (i.e. 2% flat penalty charges for default) less the amount already paid to the Defendant. This was calculated from the interest rate as agreed by the parties in the letter of offer. The trial Court therefore erred in pronouncing upon the legality of the interest rate stipulated in the letter of offer for the period of the loan. This is because the respondents accepted it and did not make an issue of it.

In any event, as I have already stated, the respondents received benefit from the contract by drawing down and utilizing the loan. The law is that where a party takes benefit under a contract, it does not lie in his mouth to seek to avoid his obligations under the contract voluntarily entered into by him on the ground that the contract is illegal or void. See Solanke v. Abed (1962) 1 SCNLR 371, Oilfield Supply Center Ltd v. Johnson (1987) 2 NWLR (Pt. 58) 265, Ayanru v. Mandillas Ltd (2007) 147 LRCN 1036, B. B. Apugo & Sons Ltd v. Orthopaedic Hospitals Management Board (OHMB) (2016) 13 NWLR (Pt. 1529) 206, Okechukwu v. Onuorah (2000) 15 NWLR (Pt. 691) 597, Fasel Services Ltd v. NPA (2003) 8 NWLR (Pt. 821) 73, Inyang v. Ebong (2002) 2 NWLR (Pt. 751) 284 , Chachangi Airlines (Nig.) Ltd v. AP Plc (2015) 4 NWLR (Pt. 1449) 256 and Attorney-General of Rivers State v. Attorney-General of Akwa Ibom State (2011) 8 NWLR (Pt. 1248) 31.

The interest agreed upon and fixed by the parties in this instance is conventional interest and the trial Court ought not to have interfered with it as parties are, in the absence of fraud, duress and undue influence or misrepresentation, bound by the terms of the contract entered into by them even if it is not favourable to one of them, and it is not the business of the Court to rewrite a contract for the parties. See BFI Group Corporation v. BPE (2012) 18 NWLR (Pt. 1332) 209, Attorney-General of Rivers State v. Attorney-General of Akwa Ibom State supra. and Obanye v. UBN Plc (2018) 17 NWLR (Pt. 1648) 375.
In UBA Plc v. Lawal (2008) 7 NWLR (Pt. 1087) 613, 630, Okoro, JCA, as he then was, opined that:
“It is now trite that in a banker-customer relationship, where there is no express agreement as relating to issue of interest, the bank is entitled to charge interest on the basis that there is a custom and usage to that effect or that the customer has impliedly consented where he, without protest allows his account to be so debited. Where however, as in the instant case, the parties have expressly set out the details of the terms that would govern the loan facilities granted, then they by implication made it clear that the transaction is not governed by the general rules of banking relating to charging interest on the loan or overdraft facilities.”

Generally, a Court will not come to the aid of a party to an illegal contract who wishes to enforce it. However, as I have already stated, no party will be permitted to contend that a contract is illegal or void after taking benefit from the same.

The trial Court therefore ought to have entered judgment in favour of the appellant in the outstanding sum of N4,000,000.00 plus N100,000.00 being 2% flat charges for default which the respondents admitted in paragraph 14 of their statement of claim and in respect of which they sought of a declaratory relief.

I therefore enter an affirmative answer to the lone issue for determination and resolve it in favour of the appellant.

On the whole, the appeal succeeds and the decision of the trial Court dismissing the counter-claim of the appellant is set aside. In its place, the counter-claim is granted in the following terms:
1. It is declared that the respondents are liable to pay to the appellant the amount that is outstanding in the loan transaction.
2. It is ordered that the respondents shall pay to the appellant the sum of N4,100,000.00 being the balance that due and owing in respect of the loan transaction and the default charge.
3. The respondents shall pay interest on the above sum at the rate of 10% per annum from the date of the judgment of the trial Court, namely: 23rd day of December, 2014 until the same is liquidated.

I assess the costs of this appeal at N300,000:00 in favour of the appellant to be paid by the respondents.

MISITURA OMODERE BOLAJI-YUSUFF, J.C.A.: My Lord, J. E. EKANEM, JCA. obliged me with the draft of the leading judgment in this appeal, I agree with the reasoning and conclusion therein. I abide by the consequential orders made therein.

ABIMBOLA OSARUGUE OBASEKI ADEJUMO, J.C.A.: I have read in advance the judgment of my learned brother, JOSEPH EYO EKANEM, JCA.

I have no hesitation in agreeing with the reasoning and conclusion arrived at by my learned brother.

I too hold that the appeal has merit and I allow the same. I abide by all consequential order (s) in the lead judgment.

Appearances:

E. L. UMUZE, ESQ, with him, U. N. Foghola, Esq, For Appellant(s)

E. E. OGHONOGHOR, ESQ, holding the brief of R. A. S. AHON, ESQ, For Respondent(s)