FIRS v. A. G. LAGOS STATE & ANOR
(2022)LCN/16677(CA)
In The Court Of Appeal
(LAGOS JUDICIAL DIVISION)
On Friday, July 01, 2022
CA/LAG/CV/333/2020
Before Our Lordships:
Onyekachi Aja Otisi Justice of the Court of Appeal
Muhammad Ibrahim Sirajo Justice of the Court of Appeal
Adebukunola Adeoti Ibironke Banjoko Justice of the Court of Appeal
Between
FEDERAL INLAND REVENUE SERVICE APPELANT(S)
And
1. ATTORNEY GENERAL OF LAGOS STATE 2. THE REGISTERED TRUSTEES OF HOTEL OWNERS AND MANAGERS ASSOCIATION OF LAGOS RESPONDENT(S)
RATIO
THE POSITION OF LAW ON A COUNTER-CLAIM
The nature of a counter-claim is well settled. It is an independent and separate action from that in which it was raised. See First Bank Plc v. Momoh (2020) LPELR-51517(CA), Hyperia Limited v. Ibeziako (2021) LPELR-56359(CA), UBA Plc v. Joel Okunrinboye Farm Export Co. Ltd & Ors (2021) LPELR-54824(CA), Kuro v. Gozo (2021) LPELR-54582(CA). In his dissenting opinion in Okonkwo v. Cooperative & Commerce Bank (Nig) Plc & Ors (2003) LPELR-2484(SC), Tobi, JSC at pages 43 – 44, explained:
“A counter-claim, though related to the principal action, is a separate and independent action and our adjectival law requires that it must be filed separately. The separate and independent nature of a counter-claim is borne out from the fact that it allows the defendant to maintain an action against the plaintiff as profitably as in a separate suit. It is a weapon of defence which enables the defendant to enforce a claim against the plaintiff as effectually as an independent action. As a matter of law, a counter-claim is a cross-action with its separate pleadings, Judgment and costs. It is almost in a world of its own. But a counter-claim cannot be inconsistent with the plaintiff’s claim in the sense that it cannot erect a totally different case from that of the plaintiff. See Oyegbola v. Esso West Africa Ltd (1966) 1 All NLR 17; Nigerian Ports Authority v. CGFC (1974) 12 SC 81; Biode Pharmaceutical Industries Ltd. v. Adsell Ltd. (1986) 5 NWLR (Pt. 46) 1070; Fabunmi v. Agbe (1985) 1 NWLR (Pt. 2) 299; Phillips v. Rajaiye (1961) LLR 15; Elliot Saville and Company v. Mallam Lansari (1957) NNLR 165; Emaphil Limited v. Odili (1987) 4 NWLR (Pt. 67) 915 at 938.”
(Emphasis mine).
Being a separate and independent action, it is usually filed in accordance with the rules of the particular Court in which it is filed. See Ogli Oko Memorial Farms Ltd & Anor v. NACB Ltd & Anor (2008) LPELR-2306(SC), Jos Electricity Distribution Plc v. Muhammed (2015) LPELR-24461(CA). In the instant case, the counter-claim was required to comply with the Rules of Practice and Procedure of the Federal High Court. The relevant procedural rules relevant herein was the Federal High Court (Civil Procedure) Rules, 2009, specifically, Order 10 Rule 3(1) and (2), which provided:
3. (1) Subject to Sub-rule (2) of this Rule, a defendant in any action who alleged that he has any claim or is entitled to any relief or remedy against the plaintiff in the action in respect of any matter (whenever and however arising), may instead of bringing a separate action, make a counter-claim in respect of that matter; and where he does so, he shall add the counter-claim to his defence.
(2) Sub-rule 1 of this rule shall apply in relation to a counter-claim as if the counter-claim were a separate action and as if the person making the counter-claim were a plaintiff and the person against whom it is made, the defendant. PER OTISI, J.C.A.
THE DEFINITION OF TAX
Now, Tax is defined in the Black’s Law Dictionary, Ninth Edition at page 1594 as a charge, usually, monetary, imposed by the government on persons, entities, transactions or property to yield revenue. Most broadly, the term embraces all government impositions on the person, property, privileges, occupations, and enjoyment of the people, and includes duties, imposts, and excises. Prof. Taofeeq Abdulrazaq in his Treatise: Cases and Materials on Nigerian Taxation, 2016, at page 5, defined tax as:
“…a financial charge or levy imposed upon an individual or legal entity by a State, or a component of the State. A tax is usually a monetary charge on a person’s or entity’s income, property or transaction and is usually collected by a defined authority at the Federal and State level.”
Taxation is the means by which a government or the taxing authority imposes or levies a Tax on its citizens and business entities; Mtn Nigeria Communications Limited v. Benue State Internal Revenue Board Service (BIRS) (2021) LPELR-56259(CA), per Nimpar, JCA. Black’s Law Dictionary, Ninth Edition at page 1598 defines taxation as the imposition or assessment of a tax, the means by which the state obtains the revenue required for its activities.
Taxation is therefore a strong factor in generating revenue for any Country or State. Taxation could be the backbone of the economy of a Country or a State. The formulation of a Country’s tax policies can, for this reason, constitute a highly contentious political issue. PER OTISI, J.C.A.
THE DEFINITION OF AN “AGENT”
Black’s Law Dictionary, Ninth Edition at page 72 defines an agent as, “One who is authorized to act for or in place of another, a representative”. See also Osigwe v. PSPLS Management Consortium Ltd & Ors (2009) LPELR-2807(SC); Cotecna Intl Ltd v. Churchgate Nig Ltd & Anor (2010) LPELR-897(SC). The agent acts as if it is the principal who does the act; Asafa Foods Factory Ltd v. Alraine (Nig) Ltd & Anor (2002) LPELR-570(SC). PER OTISI, J.C.A.
WHETHER OR NOT AN AGENT WHO ACTS ON BEHALF OF A KNOWN PRINCIPAL INCURS LIABILITY
It is a settled principle of law that an agent who acts on behalf of a known and disclosed principal, incurs no liability. See Osigwe v. PSPLS Management Consortium Ltd & Ors (supra), Uwah & Anor v. Akpabio & Anor (2014) LPELR-22311(SC), Okafor v. Ezenwa (2002) LPELR-2417(SC), Niger Progress Ltd v. North East Line Corporation (supra), (1989) LPELR-1996(SC); The Federal Government of Nigeria & Ors v. Shobu Nigeria Ltd & Anor (supra). The Appellant herein was the agent of a disclosed principal – the Federal Government. PER OTISI, J.C.A.
ONYEKACHI AJA OTISI, J.C.A. (Delivering the Leading Judgment): This appeal was lodged against the judgment of the Federal High Court of Nigeria, Lagos Judicial Division, Coram R.M. Aikawa, J., delivered on October 3, 2019, in which the 2nd Respondent’s suit, filed by way of Originating Summons was dismissed, while the counter-claim of the 1st Respondent succeeded.
The facts leading to this appeal can be summarized in this manner: The 2nd Respondent as plaintiff in the lower Court, by an Originating Summons sought the following reliefs:
I. A DECLARATION that the Value Added Tax Act Cap VI Laws of the Federation of Nigeria 2004 has covered the field on the imposition of tax on goods and services (consumable items) in Nigeria including goods and services consumed in hotels. restaurants and event centers in Lagos State.
II. A DECLARATION that the Hotel Occupancy and Restaurant Consumption (Fiscalisation) Regulations 2017 particularly including but not limited to paragraphs 4, 5, 6, 7, 8, 9, and 11 of the said Regulations are inoperable and of no effect in view of the fact that VAT Act has fully covered the field on the subject of consumption tax.
III. A DECLARATION that by virtue of the Section 7(1) of the VAT Act, the 2nd Defendant is the only lawful and constitutional agency empowered to collect taxes on consumption of goods and services in hotels, restaurants and event centers in Lagos State.” (pages 7-51 of Record of Appeal).
The 1st Respondent, as 1st defendant, filed a Counter-Affidavit to the Originating Summons, and also filed a Counter – Claim seeking the following reliefs:
I. A DECLARATION that the provisions of the VAT Act Cap VI Laws of the Federation of Nigeria particularly Sections 1, 2, 4, 5 and 12 which seek to impose tax on customers for goods and services consumed in hotels, restaurants and event centres in Lagos State is inconsistent with the provisions of Sections 4(2), (4)(a) & (b) and Section 4(7) (a) & (b) of the Constitution of the Federal Republic of Nigeria, 1999 (as amended) and therefore unconstitutional and invalid.
II. A DECLARATION that by virtue of the provisions of Section 4(7) of the Constitution of the Federal Republic of Nigeria, 1999 (as amended), the provisions of the Taxes and Levies (Approved List for Collection) Act Cap T2 Laws of the Federation of Nigeria (as amended by Schedule to the Taxes and Levies (Approved List For Collection) Act (Amended) Order 2015) and the provisions of Hotel Occupancy and Restaurant Consumption Tax Law of Lagos State 2009 the Counter claimant is the only Constitutional and lawful body empowered to assess, impose and collect tax from customers of the 1st Defendant to counter-claim for goods and services consumed in hotels, restaurants and event centres in Lagos State.
III. A DECLARATION that the 1st Defendant to counter-claim is obliged to comply and implement the provisions of the Hotel Occupancy and Restaurant Consumption Law of Lagos State and the Regulations made pursuant thereto in relation to goods and services consumed in hotels, restaurants and event centres in Lagos State.
IV. AN ORDER OF PERPETUAL INJUNCTION to restrain the 2nd Defendant to counter-claim its staff, agents, and howsoever from implementing or enforcing the provisions of VAT Act on customers of the 1st Defendant to counter-claim for goods and services consumed in hotels, restaurants and event centres in Lagos State (pages 779 – 905 of record).
The Appellant as 2nd defendant in the lower Court did not file a counter-affidavit in opposition to the Originating Summons but filed a Notice of Preliminary Objection, which challenged the jurisdiction of the trial Court, to entertain 1st Respondent’s Counter-Claim.
The lower Court heard arguments on both the Originating Summons and Counter-Claim and dismissed the 2nd Respondent’s claim but granted the reliefs sought by the 1st Respondent in the Counter-Claim. The Appellant was restrained from implementing or enforcing the provisions of the Value Added Tax (VAT) Act against customers of the 2nd Respondent with respect to goods and services consumed in Hotels, Restaurants and Event Centres in Lagos State. The 1st Respondent was adjudged, by the lower Court, as the sole tax authority entitled to collect consumption taxes from the 2nd Respondent’s customers.
Dissatisfied with the judgment of the lower Court, the Appellant lodged this appeal by Notices of Appeal filed on 14/10/2019 and 24/12/2019, pages 1053 – 1056 and pages 1068 – 1071 of the Record of Appeal Vol. 2, respectively. With leave of Court, an Amended Notice of Appeal on ten grounds of appeal, was filed on 23/9/2020 but deemed properly filed and served on 26/1/2021.
Briefs of argument were filed, pursuant to the rules of this Court. The Appellant’s brief was filed on 23/9/2020, but deemed properly filed and served on 26/1/2021. The 1st Respondent’s brief, settled by Moyosore Onigbanjo, SAN, Attorney-General of Lagos State, was filed on 8/3/2021, while the Appellant’s reply brief was filed on 27/4/2022. Both the 1st Respondent’s Brief and the Appellant’s reply brief were deemed properly filed and served on 10/5/2022.
At the hearing of the appeal on 10/5/2022, Yusuf Ali, SAN, and Prof. Taiwo Osipitan, SAN, appeared for the Appellant, with A.M. Salman, Esq., A.O. Abdul, Esq., and Tola Akinduro, Esq. For the 1st Respondent, Adebayo Haroun, Esq., Deputy Director, Ministry of Justice, Lagos State, appeared. Ms. A.D. Taiwo-Nsirim, holding the brief of O. Badejo Okunsanya, Esq., appeared for the 2nd Respondent. Learned Senior Counsel, Mr. Ali, adopted and relied on the Appellant’s briefs as their arguments in support of the appeal. He further cited and relied on Governor of Imo State & Ors v Delu Enterprises Ltd (2021) LPELR-54724(CA), Ehuwa v Ondo State Electoral Commission (2006) LPELR-1056(SC) in urging the Court to allow the appeal and, dismiss both the 2nd Respondent’s claim and the counter-claim of the 1st Respondent.
Mr. Haroun adopted and relied on the 1st Respondent’s brief as their arguments in urging the Court to dismiss the appeal. Ms. Taiwo-Nsirim confirmed to the Court that the 2nd Respondent did not file any brief.
The Appellant distilled seven issues for determination of this appeal:
(1) Whether the Counter-Claim was properly constituted, despite (A) the fact, that the 2nd Respondent who was the Plaintiff in the Court below was not primarily affected by the reliefs claimed in the Counter-Claim and (B) the non-joinder of the primarily affected party to the Counter-Claim (Attorney General of Federation) – Ground 1.
(2) Assuming the counter-claim was properly constituted, whether the counter-claim was not time barred at the time of its institution thereby depriving the Court below of the jurisdiction to entertain same – GROUND 8
(3) Whether having regard to the binding decision of the apex Court in the Eko Hotel case on the validity of the Value Added Tax Act, as an existing Act of the National Assembly, the counter-claimant can still challenge the constitutionality of Value Added Tax Act in the Court below – GROUNDS 2, 4, 5 AND 10
(4) Whether learned trial Judge was right in his interpretation and application of the judgment of the Supreme Court in the Eko Hotel case namely, that the Supreme Court held in the said case, that covering of the field of consumption taxes by VAT Act, was irrelevant to its decision. GROUNDS 3
(5) Whether learned trial Judge was right or wrong when he held that some provisions of VAT Act were impliedly repealed and/amended by the Minister of Finance vide a ministerial order ie Taxes and levies (approved list of collection) Act, (amendment order of 2015, despite the fact that the VAT Act is an existing Law of the National Assembly under Section 315 of the 1999 constitution (as altered) which can only be amended by the National Assembly – GROUND 6
(6) Whether learned trial Judge rightly upheld validity of the powers donated to the Minister of Finance under section 1(2) of the Taxes and Levies (Approved List for Collection Act, to amend provisions of schedule to the said Act, despite the fact that the said Minister, who is a member of the Federal Executive Council is not a member of the National Assembly that is solely responsible for amending an Act of National Assembly – GROUND 7
(7) Whether learned trial Judge was right in his decision (agreeing with 1st Respondents counsel) that the issue of constitutionality of Section 1(2) of the Taxes and Levies (Approved List for Collection) Act was improperly raised Suo motu by the Court, and therefore the issue should not be decided by the Court below. GROUND 9
For the 1st Respondent, the issues were framed thus:
1. Whether the Federal High Court was right to have entertained the Counter-Claim filed by the 1st Respondent (Ground One).
2. Whether the Counter-Claim of the 1st Respondent is anyways affected by the decision of the Supreme Court in the Suit between Attorney General of Lagos State v. Eko Hotels Limited & Anor. (2018) 7 NWLR (Pt. 1619) 518 and suit between Princely Court v Attorney General of Lagos State All NTC 213 (Federal High Court Judgment). (Grounds Two and Ten).
3. Whether the Federal High Court was right when the Court held that consumption tax on individuals or goods and services consumed in hotels is absent in either the exclusive or concurrent legislative lists as it is a residual matter and the provisions of VAT if they did cover the field are unconstitutional and therefore a nullity. (Grounds Three, Four and Five).
4. Whether the amendment to the Schedule Taxes and Levies (Approved List for Collection) Order, 2015 by the Minister of Finance in exercise of the power under Section 1(2) of Taxes and Levies (Approved List for Collection) Act, 2009 amounts to usurpation of legislative power. (Grounds Six and Seven).
5. Whether the Counter-Claim of the 1st Respondent was statute barred so as to rob the Federal High Court of jurisdiction to entertain same. (Ground Eight).
6. Whether the learned trial Judge failed to decide on the issue of Section 1(2) of Taxes and Levies (Approved List for Collection) Act, 2009 which the Court raised suo motu. (Ground Nine).
I shall adopt the issues as formulated by the Appellant and consider alongside the arguments of the 1st Respondent. In my view, it is expedient to consider issues 1 and 2 together.
Issues 1 and 2.
The case of the Appellant, in the preliminary objection raised before the lower Court, was that the Attorney General of the Federation was a necessary party to the counter-claim and, that non-joinder of the Attorney General of the Federation was fatal to the suit in the lower Court. All the reliefs in the counter-claim affect the validity of a Federal legislation, the Value Added Tax Act.
Lagos State and Government of the Federation do not collect Taxes directly from Tax payers, but through their agents/agencies, being Federal Inland Revenue Service (FIRS) and Lagos State Internal Revenue Service (LIRS). The counter-claim was not filed in the name of LIRS but in the name of the Attorney General of Lagos State. The Attorney General of the Federation was therefore a necessary party to the counter-claim wherein constitutionality or validity of the Federal enactment, the VAT Act, was tested against the backdrop of a State Law Hotel Occupancy and Restaurant Consumption Tax Law of Lagos State of 2009.
It was submitted that failure to join the Attorney-General of the Federation as a defendant to the counter-claim was fatal to the competence of the Counter Claim. The Counter-Claim, being improperly constituted, ought to have been dismissed on ground of non-joinder of proper defendant, citing Elelu-Habeeb v. A.-G., Federation (2012) 12 NWLR (PT. 1318) 423, Ndoma Egba v. Govt of Cross Rivers State (1991) 4 NWLR (PT.188) 773 at 788, Ayoade v Spring Bank Plc (2014) 4 NWLR (PT. 1396) 93 at 130, Lawal v. P.G.P. (Nig.) Ltd. [2001] 17 NWLR (Pt 742) 393 at 406; Bello v INEC (2010) 2-3 SC (Pt I) 128.
It was contended that the counter-claim particularly the affidavit in support of the counter-claim, revealed that the gravamen of the 1st Respondent’s suit was a dispute between the Federation and the 1st Respondent on the taxing powers of the Federation and a State. Paragraphs 12 -17 of the affidavit in support of 1st Respondent’s counter-claim underscored the nature of the 1st Respondent’s claim and the necessity for joining the Attorney General of the Federation as a party to the Counter-Claim. The depositions, which revealed a dispute on division of taxing powers between the Federation and the 1st Respondent (Lagos State), the Attorney General of the Federation was the appropriate defendant to the Counter-Claim and who ought to have been sued.
It was further submitted that the Appellant at all material times acted and still acts as agent of a disclosed principal namely Government of the Federation on whose behalf it collects taxes from tax payers. Where, as in the instant case, that the Appellant acted on behalf of a disclosed principal, the principal, not the agent, is the proper party to sue and be sued. An action against the agent for acts done on behalf of the principal is incompetent, citing Niger Progress Ltd v. N.E.L Corporation (1989) 3 NWLR (Pt. 107) 68, FGN & Ors v. Shobu Nigeria (2013) LPELR-21457(CA) at page 16. The Court was urged to hold that non-joinder of the Attorney General of the Federation fatally affect the competence of the Counter-Claim.
The Appellant had also challenged the competence of the Counter-Claim at the lower Court on the ground, that the 2nd Respondent, which was the plaintiff in the lower Court, was not primarily affected by the reliefs sought in the Counter Claim. The Appellant’s objection to the Counter-Claim was dismissed by learned trial Judge who held, page 1049 of the Record of Appeal, that:
“Reliefs 2, 3 and 4 in my view are sought against the 2nd Defendant (Appellant) while relief i is directed to all the parties. The Counter-Claim is therefore competent. I therefore find no merit in the Preliminary Objection. It is accordingly dismissed.”
The Appellant argued that, contrary to the holding of the learned trial Judge, an examination of the reliefs sought in the counter-claim would show that, relief 1 in the 1st Respondent’s Counter Claim lacked logical connection with the 2nd Respondent. Relief 1 seeks determination of the extent of the taxing powers/legislative competence of the Government of the Federation and Lagos State Government on goods and services consumed in Hotels Restaurants and Event Centres in Lagos State. None of the reliefs affect the 2nd Respondent. It was submitted that where the plaintiff is not primarily affected by the reliefs claimed by a counter-claimant in the counter-claim, the counter-claim is incompetent, citing A.-G., Cross River State v. A.-G., Fed. [2005] 15 NWLR 71 at 112, SCOA(Nig) PIc v. T. A. A. N (2018) LPELR 44545. The Court was urged to uphold the incompetence of the 2nd Respondent’s Counter-Claim.
Senior Counsel for the Appellant submitted in the alternative, assuming without conceding that the Counter-Claim was properly constituted, that the Counter-Claim was statute or time barred, and as such, that the lower Court was stripped of jurisdiction to entertain same.
The VAT Act was enacted in 1993. The 1999 Constitution, came into force on 29/5/1989. It was common ground that between 1993-2018 the 1st Respondent acted as Appellant’s collecting agent by collecting and remitting VAT to the Appellant. The 1st Respondent, as Counter-Claimant in the lower Court, did not challenge the validity of the VAT Act between 1993 -2018. The counter-claim challenging the constitutionality of the VAT Act was filed in 2018, after over 25 years of acting as the Appellant’s collecting agent. On this ground, it was submitted that the 1st Respondent’s Counterclaim was statute barred when it was filed. The lower Court was therefore deprived of jurisdiction to entertain the said counter-claim.
The Appellant, a tax Agency of the Federal Government of Nigeria, enjoys the benefit of the limitation period for commencement of actions against Pubic Officers under the Public Officers Protection Act, with the result that suits against the Appellant must be instituted not later than three months of the accrual of the cause of action, citing Ibrahim v JSC (1998) 14 NWLR (Pt. 584)1 at 36; C.B.N. v. Ukpong [2006] 13 NWLR (Part 559) 569.
The Court was urged to hold that the learned trial Judge wrongly assumed jurisdiction over the 1st Respondent’s Counter – Claim, which had become statute barred when it was filed.
The 1st Respondent submitted, in response, that a counter-claim is a separate and independent action, even though it exists within main claim, citing Oroja & Ors v Adeniyi & Ors (2017) LPLER-41985 (SC); Obianwu & Ors v Obianwu & Ors (2017) LPELR-42767 (CA). It was submitted that Order 10 Rule 2 and 3 of the Federal High Court (Civil Procedure) Rules, 2009 permitted the use of a counter-claim in action commenced by way of originating summons, also citing Apapa Bulk Terminal Ltd & Ors v Nigerian Shippers Council & Ors (2018) LPELR-44802 (CA), Transocean Support Services (Nig) Ltd & Ors v NIMASA & Anor (2019) LPELR-48163 (CA).
It was argued that the Reliefs 1, 2 and 4 of the counter-claim were against the Appellant while Reliefs 2 and 3 are against the 2nd Respondent. There was no relief sought against the Attorney General of the Federation, who, in this case, need not be sued. Reliance was placed on the decisions in Attorney General of Kano State v Attorney General of Federation (2007) LPLER-618 (SC); Attorney General of Lagos State v Attorney General of Federation (2014) 9 NWLR (Pt.1412) 217 at 260-261. It was submitted that the non-joinder of Attorney General did not affect the counter-claim, as pronounced upon by the lower Court.
It was further argued that the reliefs claimed against the Appellant by way of counter-claim had an affidavit in support to which the Appellant failed to file a counter-affidavit, thereby admitting the facts as stated therein, relying on Honda Place Ltd v Globe Motors Holdings (Nig.) Ltd (2005) 11 M.J.S.C. 1 at 15. That having failed to file counter-affidavit to the affidavit in support of the counter-claim, the facts are deemed to have been admitted by the Appellant and the lower Court was right to have entertained the counter claim.
Responding to the issue of whether the counter-claim was statute barred, the 1st Respondent submitted that this argument is a misconception of the position of the law. The instant case borders on the legislative competence, as well as the imposition and collection of taxes, which is a constitutional matter and, that the law is clear that when an action is in respect of the provisions of the Constitution, the Public Officers Protection Act will not apply to override the constitution. Reliance was placed on the decision in Tajudeen v FIRS (2018) LPELR-43856 (CA), Federal Republic of Nigeria v Ifegwu (2003) 15 NWLR (PT 842) 113 at 188. It was posited that the provisions of Section 2(a) of the Public Officers Protection Act do not avail the Appellant, and that the counter-claim of the 1st Respondent was not statute barred. The Court was urged to discountenance the argument of Appellant’s Counsel.
In the reply brief, the Appellant submitted that the authorities relied on by the 1st Respondent merely establish the right of a defendant to bring a counter-claim but concede to the Appellant’s position that a counter-claim must be primarily against the plaintiff, and not a co-defendant as done by the 1st Respondent in this case.
Resolution
The nature of a counter-claim is well settled. It is an independent and separate action from that in which it was raised. See First Bank Plc v. Momoh (2020) LPELR-51517(CA), Hyperia Limited v. Ibeziako (2021) LPELR-56359(CA), UBA Plc v. Joel Okunrinboye Farm Export Co. Ltd & Ors (2021) LPELR-54824(CA), Kuro v. Gozo (2021) LPELR-54582(CA). In his dissenting opinion in Okonkwo v. Cooperative & Commerce Bank (Nig) Plc & Ors (2003) LPELR-2484(SC), Tobi, JSC at pages 43 – 44, explained:
“A counter-claim, though related to the principal action, is a separate and independent action and our adjectival law requires that it must be filed separately. The separate and independent nature of a counter-claim is borne out from the fact that it allows the defendant to maintain an action against the plaintiff as profitably as in a separate suit. It is a weapon of defence which enables the defendant to enforce a claim against the plaintiff as effectually as an independent action. As a matter of law, a counter-claim is a cross-action with its separate pleadings, Judgment and costs. It is almost in a world of its own. But a counter-claim cannot be inconsistent with the plaintiff’s claim in the sense that it cannot erect a totally different case from that of the plaintiff. See Oyegbola v. Esso West Africa Ltd (1966) 1 All NLR 17; Nigerian Ports Authority v. CGFC (1974) 12 SC 81; Biode Pharmaceutical Industries Ltd. v. Adsell Ltd. (1986) 5 NWLR (Pt. 46) 1070; Fabunmi v. Agbe (1985) 1 NWLR (Pt. 2) 299; Phillips v. Rajaiye (1961) LLR 15; Elliot Saville and Company v. Mallam Lansari (1957) NNLR 165; Emaphil Limited v. Odili (1987) 4 NWLR (Pt. 67) 915 at 938.”
(Emphasis mine).
Being a separate and independent action, it is usually filed in accordance with the rules of the particular Court in which it is filed. See Ogli Oko Memorial Farms Ltd & Anor v. NACB Ltd & Anor (2008) LPELR-2306(SC), Jos Electricity Distribution Plc v. Muhammed (2015) LPELR-24461(CA). In the instant case, the counter-claim was required to comply with the Rules of Practice and Procedure of the Federal High Court. The relevant procedural rules relevant herein was the Federal High Court (Civil Procedure) Rules, 2009, specifically, Order 10 Rule 3(1) and (2), which provided:
3. (1) Subject to Sub-rule (2) of this Rule, a defendant in any action who alleged that he has any claim or is entitled to any relief or remedy against the plaintiff in the action in respect of any matter (whenever and however arising), may instead of bringing a separate action, make a counter-claim in respect of that matter; and where he does so, he shall add the counter-claim to his defence.
(2) Sub-rule 1 of this rule shall apply in relation to a counter-claim as if the counter-claim were a separate action and as if the person making the counter-claim were a plaintiff and the person against whom it is made, the defendant.
In line with these provisions, my noble Lord, Rhodes-Vivour, JSC in Oroja & Ors v. Adeniyi & Ors (2017) LPELR-41985(SC) at pages 21 – 22, said that, in a counter-claim, the parties in the main action are in reverse roles. The plaintiff becomes the defendant, while the defendant becomes the plaintiff.
My reading of these provisions, and of the nature of a counter-claim, as judicially pronounced upon, is that a counter-claim is an independent action filed by a defendant in the main suit against the plaintiff, in which the defendant/counter-claimant becomes or transmutes into the plaintiff in the counterclaim, while the plaintiff in the main claim becomes or transmutes into the defendant in the counter-claim. By the said reading, a defendant or one of the defendants to the counterclaim, as a third party may be joined as defendant to the counter-claim, must be the plaintiff in the main suit. A counter-claim that seeks no reliefs or makes no claim against the plaintiff in the main suit, or is inconsistent with or different from the plaintiff’s claim is an anomaly.
The question now is: was the counter-claim of the 1st Respondent an anomaly? An examination of the reliefs sought by the 1st Respondent would reveal the answer.
The counter-claim sought the following reliefs:
I. A DECLARATION that the provisions of the VAT Act Cap VI Laws of the Federation of Nigeria particularly Sections 1, 2, 4, 5 and 12 which seek to impose tax on customers for goods and services consumed in hotels, restaurants and event centres in Lagos State is inconsistent with the provisions of Sections 4(2), (4)(a) & (b) and Section 4(7) (a) & (b) of the Constitution of the Federal Republic of Nigeria, 1999 (as amended) and therefore unconstitutional and invalid.
II. A DECLARATION that by virtue of the provisions of Section 4(7) of the Constitution of the Federal Republic of Nigeria, 1999 (as amended), the provisions of the Taxes and Levies (Approved List For Collection) Act Cap T2 Laws of the Federation of Nigeria (as amended by Schedule to the Taxes and Levies (Approved List For Collection) Act (Amended) Order 2015) and the provisions of Hotel Occupancy and Restaurant Consumption Tax Law of Lagos State 2009 the Counter claimant is the only Constitutional and lawful body empowered to assess, impose and collect tax from customers of the 1st Defendant to counter-claim for goods and services consumed in hotels, restaurants and event centres in Lagos State.
III. A DECLARATION that the 1st Defendant to counter-claim is obliged to comply and implement the provisions of the Hotel Occupancy and Restaurant Consumption Law of Lagos State and the Regulations made pursuant thereto in relation to goods and services consumed in hotels, restaurants and event centres in Lagos State.
IV. AN ORDER OF PERPETUAL INJUNCTION to restrain the 2nd Defendant to counter-claim its staff, agents, and howsoever from implementing or enforcing the provisions of VAT Act on customers of the 1st Defendant to counter-claim for goods and services consumed in hotels, restaurants and event centres in Lagos State (pages 779 – 905 of record).
In my considered view, the only relief that can directly affect the 2nd Respondent herein, which was the plaintiff at the lower Court, is Relief No III. The further query is whether that relief was inconsistent with the main claim, as sought by the 2nd Respondent as plaintiff.
In Relief ii in the main suit, the 2nd Respondent claimed:
ii. A DECLARATION that the Hotel Occupancy and Restaurant Consumption (Fiscalisation) Regulations 2017 particularly including but not limited to paragraphs 4, 5, 6, 7, 8, 9, and 11 of the said Regulations are inoperable and of no effect in view of the fact that VAT Act has fully covered the field on the subject of consumption tax.
In other words, the main claim sought, inter alia, that the Hotel Occupancy and Restaurant Consumption Law of Lagos State and the Regulations made thereunder, be struck down, taking cover under the VAT Act. Relief No III in the 1st Defendant’s counter-claim, which sought a declaration that the 2nd Respondent was obliged to comply and implement the provisions of the said law and its Regulations, was therefore not inconsistent with the main claim. To this extent, it can be said that the counter-claim was not incompetently constituted. I shall return to this point.
The Appellant contended that the counter-claim was statute barred. It is trite that the words “Public Officer” or “any person” for the purpose of the Public Officers Protection Act not only refers to natural persons or persons sued in their personal names. The words extend to public bodies, institutions or persons sued by their official names or titles; F.G.N. v. Zebra Energy Ltd (2002) LPELR-3172(SC), (2002) 18 NWLR (pt. (798) 162, Ibrahim v. J.S.C. Kaduna State (1998) 14 NWLR (Pt. 584) 1.
The object of Section 2(a) of the Public Officers (Protection) Act is to afford protection to public officers in respect of anything done in the execution of or carrying out their duty. The protection comes into play after the expiration of three months from the date of the commission of the act or acts which give raise to the cause of action.
The Appellant is an agency of the Federal Government headed by officers of the agency, who are public officers. The Appellant itself is not such a public officer under the definition of the real term “public officer” as defined in the case of Ibrahim v. J.S.C. (supra); AG Rivers State v. AG Bayelsa State & Anor (2012) LPELR-9336(SC) at pages 18 – 19. Further, the 1st Respondent in the counter-claim raised issues that probe the constitutionality of an existing law. The provisions of the Public Officers Protection Law have no application herein.
The major contention of the Appellant was that the proper parties were not joined to the Counterclaim. In giving the grounds for the counter-claim, the 1st Respondent stated in paragraphs 1, 12 – 17:
“1. The Value Added Tax (VAT) Act was promulgated by the Federal Military Government as Decree No. 102 on the 24th day of August, 1993 and is deemed to be an existing law of the National Assembly under the Constitution of Nigeria 1999 (as amended).
12. I am aware that the Constitution of Nigeria vests, legislative and taxing power in both the Federal Government for the Federation and the State Government for the State.
Legislative and Taxing Powers of Federal Government
13. The Legislative power of the Federal Government is expressly limited by Section 4(2) and (4) of the Constitution of the Federal Republic of Nigeria 1999 (as amended) which provides:
(2). The National Assembly shall have power to make laws for the peace, order and the good government of the Federation or any part thereof with respect to any matter included in the Exclusive Legislative List set out in Part 1 of the Second Schedule to this Constitution.
(4) In addition, and without prejudice to the powers conferred by Subsection (2) of this Section, the National Assembly shall have power to make laws with respect to the following matters, that is to say –
(a) any matter in the Concurrent Legislative List set out in the first column of Part Il of the Second Schedule to this Constitution to the extent prescribed in the second column opposite thereto; and
(b) any other matter with respect to which it is empowered to make laws in accordance with the provisions of this Constitution.
14. I am aware that the original taxing power of the Federal Government of Nigeria is limited to item 59 in the Exclusive Legislative List set out in Part I of the Second Schedule to the Constitution which provides as follows “Taxation of income, profit and capital gains except as otherwise prescribed by this Constitution.
15. I am also aware that the incidental or supplementary legislative power of the Federal Government is restricted to matters in which the National Assembly has power to make law under the Exclusive Legislative List set out in Part I of the Second Schedule to the Constitution and Concurrent Legislative List set out in the first column of Part I of the Second Schedule to the Constitution and not otherwise.
16. I have carefully read the Exclusive and Concurrent Legislative Lists in the Constitution of the Federal Republic of Nigeria and I cannot find imposition of tax on goods and services consumed in hotels, restaurants, event centres or hospitality establishments in States in any of the items in the two (2) lists.
Legislative and Taxing Powers of the State
17. I am aware that Lagos State Government represented in this suit by the Counter-Claimant is vested with legislative power and taxing authority by the express provisions of Section 4 (7) of the Constitution of Federal Republic of Nigeria which provides:
“The House of Assembly of a State shall have power to make laws for the peace, order and good government of the State or any part thereof with respect to the following matters, that is to say –
a. any matter not included in the Exclusive Legislative List set out in Part I of the Second Schedule to this Constitution.
b. any matter included in the Concurrent Legislative List set out in the first column of Part II of the Second Schedule to this Constitution to the extent prescribed in the second column opposite thereto; and
c. any other matter with respect to which it is empowered to make laws in accordance with the provisions of this Constitution.”
On these grounds, and as further stated in the said affidavit in support of the counter-claim, the 1st Respondent sought the following reliefs:
i. A DECLARATION that the provisions of the VAT Act Cap VI Laws of the Federation of Nigeria particularly Sections 1, 2, 4, 5 and 12 which seek to impose tax on customers for goods and services consumed in hotels, restaurants and event centres in Lagos State is inconsistent with the provisions of Sections 4(2), (4)(a) & (b) and Section 4(7) (a) & (b) of the Constitution of the Federal Republic of Nigeria, 1999 (as amended) and therefore unconstitutional and invalid.
ii. A DECLARATION that by virtue of the provisions of Section 4(7) of the Constitution of the Federal Republic of Nigeria, 1999 (as amended), the provisions of the Taxes and Levies (Approved List For Collection) Act Cap T2 Laws of the Federation of Nigeria (as amended by Schedule to the Taxes and Levies (Approved List For Collection) Act (Amended) Order 2015) and the provisions of Hotel Occupancy and Restaurant Consumption Tax Law of Lagos State 2009 the counter-claimant is the only Constitutional and lawful body empowered to assess, impose and collect tax from customers of the 1s Defendant to counter-claim for goods and services consumed in hotels, restaurants and event centres in Lagos State.
iii. AN ORDER OF PERPETUAL INJUNCTION to restrain the 2nd Defendant to counter-claim its staff, agents, and howsoever from implementing or enforcing the provisions of VAT Act on customers of the 1st Defendant to counter-claim for goods and services consumed in hotels, restaurants and event centres in Lagos State (pages 779 – 905 of record).
Now, Tax is defined in the Black’s Law Dictionary, Ninth Edition at page 1594 as a charge, usually, monetary, imposed by the government on persons, entities, transactions or property to yield revenue. Most broadly, the term embraces all government impositions on the person, property, privileges, occupations, and enjoyment of the people, and includes duties, imposts, and excises. Prof. Taofeeq Abdulrazaq in his Treatise: Cases and Materials on Nigerian Taxation, 2016, at page 5, defined tax as:
“…a financial charge or levy imposed upon an individual or legal entity by a State, or a component of the State. A tax is usually a monetary charge on a person’s or entity’s income, property or transaction and is usually collected by a defined authority at the Federal and State level.”
Taxation is the means by which a government or the taxing authority imposes or levies a Tax on its citizens and business entities; Mtn Nigeria Communications Limited v. Benue State Internal Revenue Board Service (BIRS) (2021) LPELR-56259(CA), per Nimpar, JCA. Black’s Law Dictionary, Ninth Edition at page 1598 defines taxation as the imposition or assessment of a tax, the means by which the state obtains the revenue required for its activities.
Taxation is therefore a strong factor in generating revenue for any Country or State. Taxation could be the backbone of the economy of a Country or a State. The formulation of a Country’s tax policies can, for this reason, constitute a highly contentious political issue.
In Nigeria, various taxes imposed by the Federal or State Governments, are founded on different laws, and operated on behalf of the Federal or State Governments by different agencies. The affidavit in support of the counter-claim, particularly the portions reproduced above, reveals that this fact is well known to the 1st Respondent.
The Appellant as 2nd defendant before the lower Court is an agency of the Federal Government created by the Federal Inland Revenue Service (Establishment) Act, 2007, with the object:
“to control and administer the different taxes and laws specified in the First Schedule or other laws made or to be made, from time to time, by the National Assembly or other regulations made thereunder by the Government of the Federation and to account for all taxes collected.”
See Sections 2 and 25 of the Federal Inland Revenue Service (Establishment) Act, 2007 (FIRS Act). One of the taxes which the 2nd defendant is to administer, by the First Schedule of the said Act is the VAT Act, and this includes, by Paragraph 8 of the First Schedule to the FIRS Act, all regulations, proclamation, government notices or rules issued in terms of these legislations. In other words, the Appellant is merely an agent with a discernable and well-known principal, the Federal Government.
Black’s Law Dictionary, Ninth Edition at page 72 defines an agent as, “One who is authorized to act for or in place of another, a representative”. See also Osigwe v. PSPLS Management Consortium Ltd & Ors (2009) LPELR-2807(SC); Cotecna Intl Ltd v. Churchgate Nig Ltd & Anor (2010) LPELR-897(SC). The agent acts as if it is the principal who does the act; Asafa Foods Factory Ltd v. Alraine (Nig) Ltd & Anor (2002) LPELR-570(SC).
It is a settled principle of law that an agent who acts on behalf of a known and disclosed principal, incurs no liability. See Osigwe v. PSPLS Management Consortium Ltd & Ors (supra), Uwah & Anor v. Akpabio & Anor (2014) LPELR-22311(SC), Okafor v. Ezenwa (2002) LPELR-2417(SC), Niger Progress Ltd v. North East Line Corporation (supra), (1989) LPELR-1996(SC); The Federal Government of Nigeria & Ors v. Shobu Nigeria Ltd & Anor (supra). The Appellant herein was the agent of a disclosed principal – the Federal Government. Therefore, the right target for any bullet intended against the Appellant would really be the Federal Government. In this light, reliefs I, II and IV sought in the counter-claim were actually targeted at the Federal Government, and this was revealed in the affidavit in support of the counter-claim.
The question now is: when the Federal Government seeks to enforce a liability, or there is a claim against the Federal Government, who is the right party to sue or be sued? I think the answer to this question is sufficiently answered by extant constitutional provisions. Section 150(1) of the 1999 Constitution, as amended, provides:
There shall be an Attorney-General of the Federation who shall be the Chief Law Officer of the Federation and a Minister of the Government of the Federation.
These Constitutional provisions make it clear that the Attorney-General of the Federation is the Chief Law Officer of the Federation. Similar provisions are found in Section 195 of the 1999 Constitution in respect of the Attorney General of a State; Nigeria Engineering Works Ltd v. Denap Ltd & Anor (2001) LPELR-2002(SC); Sambo v Bello (2017) LPELR-43022(CA).
The implications of Section 150 have been judicially pronounced upon in a number of decisions. As the Chief Law Officer of the Federation, the Federal Attorney-General is the custodian and protector of the Constitution. The constitutional responsibility for bringing and defending actions on behalf of the Federal Government and its agencies is vested in him. See Elelu-Habeeb & Anor v. Ag Federation & Ors (2012) LPELR-15515(SC), AG Rivers State v. AG Akwa Ibom State & Anor (2011) LPELR- 633(SC), AG of Federation v. AG of Imo State & Ors (1982) LPELR-24941(SC).
In Ezomo v. A-G, Bendel State (1986) LPELR-1215(SC) at pages 19 – 20, the Supreme Court, per Aniagolu, JSC, gave a historical explanation:
“Even before the 1979 Constitution, in civil claims, the Attorney-General, under the Petitions of Right Act Cap. 14 Volume 5 laws of the Federation of Nigeria and Lagos 1958, was the one sued where an individual had a claim against the Government and was the one who instituted action on behalf of Government where Government had a claim against an individual (See Sections 2 and 3 of the Petitions of Right Act, Cap. 149 and the amending Law, L.N. 122 of 1964). With the coming into force of the 1979 Constitution, by Section 6 thereof, the Government of the Federation or of a State is liable to be sued, like any other individual, by any person aggrieved by its act without reference to the Petitions of Right Act.
In civil cases in which the Government is sued, the Attorney-General is the defendant, or at least the nominal defendant.”
In AG Kano State v AG Federation (2007) LPELR-618(SC), the Supreme Court gave further clarification to the effect that, while it was not in dispute that the Attorney-General of the Federation can be sued as a defendant in all civil matters in which a claim can properly be made against the Federal Government or any of its authorized agencies, arising from any act or omission complained of, this can only properly happen where the claim or complaint is directly against the State or Federal Government concerned.
The questions submitted for determination under the Counterclaim were:
1. Whether the provisions of the VAT Act Cap VI Law of Federation of Nigeria particularly Sections 1,2, 4, 5, & 12 by which the 2nd Defendant to Counter-Claim imposes tax on customers for goods and services consumed in hotels, restaurants and event centers in Lagos State is inconsistent with the Provision of Section 4(2), (4)(a) & (b) and Section 4(7) (a) & (b) of the Constitution of the Federal Republic of Nigeria 1999 (as amended) and therefore unconstitutional and invalid?
2. Whether by virtue of the provisions of Section 4(7) of the Constitution of the Federal Republic of Nigeria, 1999 (as amended), the provisions of the Taxes and Levies (Approved List for Collection) Act Cap 72 Laws of Federation of Nigeria (as amended by Schedule to the Taxes and Levies (Approved List for collection) Act (Amended) Order 2015 and the provisions of Hotel Occupancy and Restaurant Consumption Law of Lagos state 2009, the counter-claimant is the only constitutional and lawful body empower to assess, impose and collect tax from customers of the 1st Defendant to counter-claim for goods and services consumed in hotels, restaurants and event centres in Lagos State.
The reliefs sought have been reproduced above. The relief seeking to declare that a Statute, passed by the Federal Government under its legislative powers on an item contained in the Exclusive Legislative List, or portions thereof, is unconstitutional, arises from a complaint made directly against the Federal Government. That complaint amounts to an allegation that the Federal Government has acted unconstitutionally in the exercise of its legislative powers. The proper party to respond to this allegation is not the Appellant, who is merely the agent of the Federal Government, but the Federal Government itself through its Attorney General. The Attorney General of the Federation was therefore a necessary party to the counterclaim for the effectual determination of the issues in controversy, for in the absence of the Attorney General of the Federation, the proceedings cannot be said to have been fairly dealt with. To this extent, I agree with Senior Counsel for the Appellant that the Attorney General of the Federation ought to have been made a party to the counter-claim.
To my mind, the next question is whether the failure of the 1st Respondent to join the Attorney General of the Federation to the counter-claim affected the competence of the counter-claim, having regard to the provisions of Order 9 Rule 14(1) of the Federal High Court (Civil Procedure) Rules, 2009, which provided that:
“No proceeding shall be defeated by reason of misjoinder or non-joinder of parties, and a Judge may deal with the matter in controversy so far as regards the rights and interest of the parties actually before him.”
From these provisions, the mere failure to join a necessary party may not on its own defeat an action or render an ensuing judgment a nullity. This would be clearly the case where the nature of the evidence before the Court is such that the case of the parties before it can be determined in the absence of those not joined. In that circumstance, the Court can proceed to determine the matter; Ajayi & Ors v. Jolayemi (2001) LPELR-292(SC). However, where the Court cannot properly determine the issues before it in the absence of the party or parties whose participation in the proceeding is essential for the proper, effectual and complete determination of the issues before it, it will be necessary to insist on the joinder of such necessary parties. See Ayorinde & Ors V. Oni & Anor (2000) LPELR-684(SC), Associated Discount House Ltd v. The Hon. Minister of the FCT & Anor (2013) LPELR-20088(SC).
The Appellant was the disclosed agent of the Federal Government, enforcing the VAT Act, enacted by the Federal Government. The Counterclaim sought reliefs seeking the striking down of portions of the VAT Act for being unconstitutional. The Chief Law Officer of the Federal Government, who is also the Chief Custodian of the Constitution, was definitely a necessary party. This is to ensure that the issues in controversy are effectually and completely settled. In this light, in the absence of the Attorney General of the Federation, who ought to have been joined to the counter-claim, the counter-claim was not properly constituted. This lapse obviously impacted on the jurisdiction of the lower Court to entertain the counter-claim. See Madukolu & Ors v. Nkemdilim (1962) LPELR-24023(SC), Peenok Investments Ltd v. Hotel Presidential Ltd (1982) LPELR-2908(SC).
I agree with the Appellant that the counter-claim was incompetent. The only option is to strike out the Counterclaim.
I therefore resolve issue 1 in favour of the Appellant, and against the 1st Respondent.
Having resolved that the counter-claim was not properly constituted, the consideration of the counter-claim on the merits by the lower Court really had no legal consequence; Madukolu & Ors v. Nkemdilim (supra).
However, I am not mindful of the responsibility of an intermediate Court to pronounce on all the issues placed before it on appeal. See Ogbuji & Anor v. Amadi (2022) LPELR-56591(SC), Okeke v. Uwaechina (2022) LPELR-57291(SC). It is in this regard that I shall proceed to consider the other issues.
Issue 3
In this issue, the Appellant contended that the 1st Respondent’s Counter-Claim was inappropriate, having regard to a prior decision of the Apex Court on the subject matter of the Counter-Claim, being the validity of VAT Act. It was submitted that a plea of res judicata operates against a party and robs the Court of jurisdiction to entertain issues or causes that have been previously determined by the Court. Record estoppel also prevents a party from litigating a cause of action or issue which ought to have been raised and decided in a previous suit, preventing parties from litigating their issues/causes of action in instalments. The decisions in Oshodi v Eyifunmi [2000] 13 NWLR (Pt. 684) 298 at 325; Ogbolosingha v B.S.E.C. (2015) 6 NWLR (Pt.1455) 311 at 333 were cited and relied on. Section 173 of Evidence Act was also relied on.
It was common ground, that the Appellant and the 1st Respondent were parties to the proceedings in Attorney General, Lagos State v. Eko Hotel Limited [2018] 7 NWLR (Pt. 1619) 515 at 545 where the Supreme Court decided on the issue of validity and upheld the application of doctrine of covering of the field to the VAT Act with respect to Sales Tax Law of Lagos State, which also deals with taxes on consumables. It was submitted that Hotel Occupancy Restaurant Consumption Law of Lagos State, like its forerunner, the Sales Tax Law of Lagos State, imposes taxes on consumables in Hotels, Restaurants and Event Centres in Lagos State. The subject matter of the two State Laws, the Sales Tax Law of Lagos State, and Hotel, Occupancy, Restaurant, Consumption Law are the same as they both cover taxes on consumables.
In view of the fact that Appellant and the 1st Respondent were parties in the Eko Hotel case, they were estopped from litigating the same issue on the validity of the VAT Act, which has been decided by the apex Court. The parties, issues and subject matter in the previous Eko Hotel case and in the Counter-Claim were same, therefore, binds parties and the lower Court. In the Eko Hotel case, the legislative competence of the National Assembly with respect to Value Added Tax VAT was upheld. The VAT Act was also upheld as a validly enacted law of the National Assembly. The parties to the proceedings were therefore estopped from raising afresh issues already decided by the apex Court in that case, as there must be an end to litigating an issue or cause of action between same parties. Reliance was placed on lhedioha v. Nwosu (2020) 5 NWLR (Pt. 1717) 29, Triana Ltd. v. U.T.B. PIc (2009) 12 NWLR (Pt. 1155) 313 at 343. On bindingness of a decision in previous suits on all the parties to such proceedings, where the issues decided in such previous suits are the same with a pending or new suit, the following cases were cited and relied on. See Donald v. Saleh (2015) 2 NWLR (Pt. 1444) 529 at 570, Makun v. Federal University of Technology (2011) 6-7 SC (Pt. V) 32 at 85, NDIC V. UBN PLC (2015) LPELR 24316.
Record estoppel covers not only issues specifically raised by the parties in a previous suit, but also encompasses issues which parties ought to have raised but failed to raise in such previous suit; citing Wema Bank v Abiodun (2006) 9 NWLR (PT 984) 1 at 36, 37, Dagaci of Dere v Dagaci of Ebwa (2006) 7 NWLR (PT 979) 382 at 423. In the Eko Hotel case, the 1st Respondent herein specifically raised issue of constitutional validity of VAT Act in its Counter-Claim. The 1st Respondent voluntarily withdrew that leg of the claim, and thereafter failed to file a new suit prior to the final decision in the Eko Hotel case. The Appellant submitted that the 1st Respondent and the lower Court were estopped from raising afresh and entertaining the issue on the constitutionality of VAT Act.
It was further argued that by acting as the Appellant’s VAT collecting Agent between 1993-2018, the 1st Respondent was stopped by conduct from challenging the validity of the VAT Act. The rule on estoppel by conduct being that where a party by words or conduct makes a representation to another person who relies and acts on such representation, the party making the representation will be estopped from resiling from his/her representation. Reliance was placed on Section 169 of Evidence Act, and on Attorney General of Rivers State v. Attorney General of Akwa Ibom State (2011)1 8 NWLR (Pt.1248) (incomplete citation), Ude v Udoji [1990] 5 NWLR (Pt. 151) 488 at 509.
Senior Counsel argued that the 1st Respondent’s counter-claim was abusive of the process of Court, and liable to be dismissed, citing Oluwaniyi v. Adewumi [2008]13NWLR (Pt. 1104) 387 at 418.
Paragraph 6 of the Affidavit in support of the Originating Summons and the attached Exhibit B show that, Eko Hotel Limited is a member of the 2nd Respondent, page 48 of the Record of Appeal. The same Eko Hotel Limited was also a Respondent in the case of Attorney General, Lagos State v. Eko Hotel Limited & Anor (supra) where the apex Court specifically held that Eko Hotel Limited is a taxable person under the VAT Act.
The validity of the same Hotel Occupancy and Restaurant Consumption Tax Law of Lagos State was tried, tested and its ghost laid to rest by the same Federal High Court in the case of Princel v. Attorney General of Lagos State 7 All NTC 213 at 235. The same State Law was tested against the backdrop of the provisions of the VAT Act. In the said case, the Federal High Court declared the Hotel Occupancy and Restaurant Consumption Tax Law of Lagos State unconstitutional and void for its inconsistency with VAT Act. The 1st Respondent has not appealed against the above decision. It was submitted that the learned trial Judge was bound by the above decision. On the bindingness of a decision of a Court of co-ordinate jurisdiction as between such Courts, reliance was placed on Nkwocha v MTN (Nig) Comm Ltd (2008) 11 NWLR (Pt. 1099) 439 at 457, NIMB Ltd v UBN Ltd (2004) 12 NWLR (Pt. 888) 599 at 621.
The effect of abuse of Court process is the outright dismissal of the subsequent suit, citing Arubo v. Aiyeleru [1993] 3 NWLR (Pt 280) 126 at 146; Usman v. Baba [2005] 5 NWLR (Pt. 917) 113 at 132.
The Court was urged to hold that the learned trial Judge ought to have dismissed the 1st Respondent’s counter-claim on the grounds of record estoppel and abuse of Court process.
For the 1st Respondent, in response, it was argued that the decisions in Attorney General of Lagos State v Eko Hotels Limited & Anor (supra) did not pronounce on the constitutionality of VAT Act. Rather, that it was a case of interpleader summons taken out by Eko Hotels Limited against the respondents therein on who was entitled to a sum of money deducted from consumers. The law under consideration in the Eko Hotel’s case was the Sales Tax Law of Lagos State Cap 175 and Schedule (Amendment) of 2000 and not the Hotel Occupancy and Restaurant Consumption Law enacted in 2009. The constitutionality and validity of the Hotel Occupancy and Restaurant Consumption Law of Lagos State was pronounced by the Supreme Court in the case of Attorney General of Federation v Attorney General of Lagos State (2013) LPELR-20974 (SC) where the Federal Government had challenged the constitutionality of 3 Laws:
i) Hotel Licensing Law Cap H6 Laws of Lagos State of Nigeria 20034.
ii) Hotel Licensing (Amendment) Law No.23 Volume 43 Lagos State of Nigeria Official Gazette of 20th July, 2010.
iii) Hotel Occupancy and Restaurant Consumption Law, No.30 Volume 42 Lagos State of Nigeria Official Gazette of 23rd June, 2009.
It was further argued that the case of Princely Court v Attorney General of Lagos State All NTC 213 relied upon by the Appellant was a Federal High Court judgment that was delivered before the Supreme Court decision in Attorney General of Federation v Attorney General of Lagos State (supra) that upheld the constitutionality of the Hotel Occupancy and Restaurant Consumption Law. It was submitted that applying the principle of stare decisis the lower Court was bound to follow the decision of the apex Court in Attorney General’s case and not Eko Hotels case or Princely Court case. On the guideline for application of stare decisis, reference was made to APGA v Oye & Ors (2018) LPELR-45196 (SC).
The Court was urged to hold that the case of Eko Hotels and Princely Court cannot serve as judicial precedent in the instant case as the facts herein are different from the earlier cases.
In the reply brief, the Appellant submitted that the doctrine of stare decisis does not require that the facts of the two cases must be exactly the same for the doctrine to be applicable, citing Adetoun Oladeji Nig. Ltd v. Nigerian Breweries Plc. (2007) 5 NWLR (PT. 1027) 415 at 436. It was further submitted that the facts in the case of Attorney General of Lagos State v Eko Hotel (supra) are similar or closer to the facts in this case than that of Attorney General of the Federation v Attorney General of Lagos State (2014) LPELR-20974 (SC). Whereas, the Laws of Lagos State in contention in the case of Attorney General of the Federation v Attorney General of Lagos State (supra) were held not to be inconsistent with the Nigerian Tourism Development Act, the Statute in consideration in this appeal is the VAT Act, which is what the Supreme Court ruled upon in the case of Attorney General of Lagos State v Eko Hotel (supra). Further, Attorney General of the Federation v Attorney General of Lagos State (supra) was decided in 2014, while the case ofAttorney General of Lagos State v Eko Hotel (supra) was decided in 2017. That the position of the law is that, where there are two judgments of Courts of equal jurisdiction on a particular issue, the decision that is latter in time prevails, citing Osakwe v. Federal College of Education (2010) 3 SCNJ 529 at 546, Alao v. V.C Unilorin (2008) 1 NWLR (PT. 1069) 421 at 450, CBN v. Zakari (2018) LPELR-44751(CA) at 33 – 34.
It was submitted that the 1st Respondent failed to address the issue of res judicata, as argued by the Appellant. The effect of this failure is that the 1st Respondent is deemed to have admitted them, citing Alhaji M. K. Gujba v. First Bank of Nigeria Plc & Anor (2011) LPELR-8971(CA) at 42, Nwankwo v. Yar’adua (2010) 12 NWLR (PT. 1209) 518 at 586.
The Court was urged to uphold the arguments of the Appellant in this regard.
Resolution
I think a convenient place to commence a resolution of this issue is by examining, mainly, two decisions cited and relied on by both the Appellant and 1st Respondent.
The case of AG Lagos State v. Eko Hotels Ltd & Anor (2017) LPELR-43713(SC) originated before the trial Court in the nature of an interpleader proceedings, initiated by the 1st respondent therein to determine the rightful body to remit the money due as tax from its sales to its consumers, that is, whether the then Federal Board of Inland Revenue, the 2nd respondent therein, relying on VAT Decree No. 102 of 1993, or the appellant therein, the Lagos State Board of Internal Revenue, relying on Sales Tax Law Cap.175 Laws of Lagos State, 1995 and Sales Tax Amendment Order 2000. The issue upon which the learned trial Judge predicated his judgment was the single question:
“whether remittance of money collected as tax by plaintiff on its sales to its consumers be paid to Federal Board of Inland Revenue [1st defendant/2nd respondent] or Lagos State Government [2nd defendant/appellant] in view of provisions of Sections 1, 2, 10, 11, 12, 13, 14, 15, and 16 of Value Added Tax Decree No. 102 of 1993 and Sections 1, 2, 3, 4, 5 and 6 of the Sales Tax Law Cap.175 and Sales Tax (Schedule Amendment) Order 2000.”
The issue in dispute therein was not the constitutionality of the Sales Tax Law of Lagos State nor the validity of the VAT Act. There was no issue seeking the invalidation of the VAT Act. The Apex Court, per Kekere-Ekun, JSC, noted that the VAT Act was valid and subsisting, there being no decision of a Court of competent jurisdiction nullifying it.
In AG Federation v. AG Lagos State (2013) LPELR-20974(SC), the issues considered by the Supreme Court as formulated by the defendant for the determination of the appeal as follows:
(i) Whether regulation, registration, classification and grading of Hotels, guest houses, motels, restaurants, travel and tour agencies and other hospitality and tourism related establishment are matters in the Exclusive and Concurrent Legislative List and outside the legislative power of Lagos State House of Assembly.
(ii) Whether the following laws of the Lagos State are invalid by reason of their inconsistency with the provision of the Nigerian Tourism Development Act, Cap N.137, LFN:
(a) Hotel Licensing Law, Cap. H6 Laws of Lagos State of Nigeria, 2003;
(b) Hotel Licensing (Amendment) Law No. 23 Volume 43 Lagos State of Nigeria Official Gazette of July 20, 2010 and
(c) Hotel Occupancy and Restaurant Consumption Law No. 30, Volume 42 Lagos State of Nigeria Official Gazette of June 23, 2009.
The Apex Court noted that Nigeria is a Federal Republic with division of legislative power between the Federal Government and component states, and held that, the Federal Government lacked the constitutional vires to make laws outside its legislative competence which are, by implication residue matters for the State Assembly. That the National Assembly cannot, in the exercise of its powers to enact some specific laws, take the liberty, to confer power or authority on the Federal Government or any of its agencies to engage in matters, which ordinarily ought to be the responsibility of a State Government or its agencies. On this basis, the Supreme Court held that the Lagos State Laws in controversy therein, were valid.
Princel v. Attorney General of Lagos State (supra) was a decision of the Federal High Court, which though not made available to this Court, need not be considered here.
Now, in AG Lagos State v. Eko Hotels Ltd & Anor (supra), the validity of the VAT Act was not in issue. The decision in AG Federation v. AG Lagos State (supra), which was an earlier decision, also did not consider the validity of the VAT Act because it was not raised as an issue before it. However, the Supreme Court in AG Lagos State v. Eko Hotels Ltd & Anor (supra), per Kekere-Ekun, JSC, pointed out, page 31 of the E-Report, that:
“At the time the cause of action arose, the VAT Act was deemed to be an Act of the National Assembly. At the risk of repetition, there was no prayer before the trial Court or the lower Court seeking to nullify the Act. Until there is a decision of a Court of competent jurisdiction invalidating it, it remains valid and subsisting.”
(Emphasis mine).
My understanding of this conclusion is that, although the validity of the VAT Act was not raised as an issue before the Supreme Court in that case, the said issue of the validity of the VAT Act could still be raised before a Court of competent jurisdiction in future, and determined by the same. Until this issue is raised and determined, invalidating the Act, the VAT Act remains valid and subsisting.
The word “until” is used as a preposition here, and means “up to the time that: up to such time as” See Merriam-Webster.com Dictionary, Merriam-Webster, https://www.merriam-webster.com/dictionary/until . Accessed 10 Jun. 2022.
The doctrine of stare decisis simply means that an issue so decided and settled by the pronouncement of a competent Court in which it is directly and necessarily raised, is no longer open for consideration and a different ruling by the same Court or by those bound to follow the very ruling. The doctrine is aimed at achieving certainty and discipline in the adjudication process. See State v Yanga (2021) LPELR-53086(SC), AG Lagos State v. Eko Hotels Ltd & Anor (supra), State v. Gbahabo & Ors (2019) LPELR-48117(SC). For the doctrine to apply, the facts of the two cases must be the same or similar. Where there is no relevant likeness between the two, it is idle exercise to consider whether the previous one should be followed or departed from. Adisa v. Oyinwola (2000) LPELR-186(SC).
In the light of the very clear decision of the Supreme Court in AG Lagos State v. Eko Hotels Ltd & Anor (supra), I do not see how the said decision can be adjudged to be stare decisis when an action now challenging the validity of the VAT Act, such as the 1st Respondent has done in the counter-claim, is filed. The counter-claim was not therefore relitigating the issue of validity of the VAT Act. Issue 3 is resolved against the Appellant.
Issue 4
One of the issues placed before the lower Court was the effect of the Supreme Court judgment in the Eko Hotel case on the application of doctrine of covering the field of consumption tax to VAT Act. While the Appellant contended that the Supreme Court had held in the case that VAT Act had covered the entire field on taxes on consumables throughout Nigeria, the 1st Respondent contended otherwise. Learned trial judge in his judgment, held that the doctrine of covering the field was extraneous or irrelevant to the decision of the apex Court in the Eko Hotel case, and agreed with the 1st Respondent Counsel’s submission, that consumption tax on consumables is a residual matter which was within the legislative competence of a State House of Assembly. Learned trial Judge held as follows, page 1045 of the Record of Appeal:
“with matters of consumption tax on individuals or goods and services consumed in hotels restaurants etc absent in either the exclusive or concurrent legislative list, my view is that the issue of VAT Act covering the field on these matters is no longer relevant. That was the position stated in the case of AG of Lagos v. Eko State (sic).”
It was submitted that, contrary to the decision of the lower Court, the Supreme Court did not hold in its judgment that the doctrine of covering the field by the VAT Act, was irrelevant to its decision. Rather, the Supreme Court specifically embraced and upheld VAT Act as having covered the field of consumption tax. It was submitted that the learned trial Judge’s failure to give due consideration to the decision of the Supreme Court occasioned a miscarriage of justice, making the decision of the lower Court liable to be set aside, citing Nwana v. F.C.D.A. [2007] 11 NWLR (Pt. 1044) 59 at 82; Abi v. C.B.N. (2012) 3 NWLR (Pt 1286) 1 at 39.
The Appellant submitted that, by virtue of the principle of stare decisis the Judgment of the Supreme Court in AG Lagos State v Eko Hotels (supra), was binding on the lower Court. The learned trial Judge ought not to have departed from that decision, relying on Ogboru v Ibori (2006) 17 NWLR (Pt. 1009) 542 at 578; Dalhatu v Turaki (2003) 15 NWLR (Pt 843) 310 at 336.
In response, the 1st Respondent recalled that the VAT Act, which was promulgated by the Federal Military Government as Decree No. 102 on 24/8/1993, became an existing law, deemed to have been enacted by the National Assembly by virtue of Section 315 of the Constitution of Federal Republic of Nigeria 1999. The VAT Act, which repealed and replaced Sales Tax Act, imposed a tax, the VAT on supply of all goods and services referred to as taxable goods in the Act. The types of goods and services subject to the tax are defined in Section 46 of the VAT Act.
The 1st Respondent disagreed with the Appellant’s position that the VAT Act covered the field on imposition of tax on goods and services (consumable items) in Nigeria including goods and services consumed in hotels restaurants and events centres in Lagos State. That the doctrine of covering the field would only arise in situation where both the Federal Government and State Government have Concurrent Legislative power on a subject, citing A.G Ogun State & Ors v A.G Federation (1982) NSCC (VOL. 13) 1 at 35, AG Federation v AG Lagos State (2013) 16 NWLR (Pt. 1380) 248.
It was posited that a reading of the items in the Concurrent Legislative Lists in the Constitution of Federal Republic of Nigeria, consumption tax on individuals or goods and services consumed in hotels, restaurants, events centres, cannot be found. That the implication of this is that consumption tax within a State or sales of goods and services within a State. Hotel Occupancy and Restaurant Consumption Law of Lagos State 2009 enacted by Lagos State Government was a residual matter within the Exclusive Legislative Powers of the House of Assembly of the State which the National State Assembly has no power to legislate on, citing A.G. Lagos v. A.G Federation (2003) 6 SC (Pt. 1) 24.
The original taxing power of the Federal Government of Nigeria is limited to Item. 59 in the Exclusive Legislative List set out in Part I of the Second Schedule to this Constitution. While the supplementary taxing power of the Federal Government is restricted to matters in which the National Assembly has power to make law under the Exclusive Legislative List set out in Part I of the Second Schedule to the Constitution and Concurrent Legislative List set out in the first column of Part II of the Second Schedule to this Constitution and not otherwise, citing Section 4 (4) (b) of the Constitution of Nigeria.
The VAT is imposed on goods and services throughout Nigeria, pursuant to the supplementary taxing power of the Federal Government on trade and commerce, which is a matter in Item 62(a) in the Executive Legislative List. It was submitted that the application of similar provision in Item 61(a) in the 1979 Constitution of Nigeria was considered and resolved by the Supreme Court that the Item does not give Federal Government Power to impose tax on intra-state and commerce, relying on AG Ogun State v Aberuagba (1985) NWLR (PT. 3) 395. On this basis, it was submitted that VAT Act has not validly covered the field on consumption tax on customers for goods and services consumed in Hotels, Restaurants and event centres in Lagos State. Further reliance was placed on Attorney General of Lagos State v Eko Hotels Limited & Anor (supra).
In the Reply Brief, the Appellant again relied on the decision in Attorney General of Lagos State v Eko Hotels Limited & Anor (supra).
Resolution
A consumption tax is a tax on the purchase of a good or service. Consumption taxes can take the form of sales taxes, tariffs, excise, and other taxes on consumed goods and services. See Julia Kagan in Investopedia. VAT is a form of consumption tax.
Section 2 of the VAT Act provides that VAT shall be charged and payable on the supply of all goods and services other than those goods and services listed in the First Schedule to this Act. Section 3 refers to the First Schedule for the list of certain goods and services that are exempt from payment of VAT. The Interpretation Section in Section 46 provides finer definition of taxable goods and services. Such services include motel and restaurant business, which are defined:
“motel” means premises on which accommodation, flats, service apartments, beach cottages, holiday cottages, game lodges are provided but excludes the following, that is –
(a) premises run by a charitable or religious organisation registered under the relevant law for charitable or religious purposes;
(b) premises operated by a medical institution approved by the Minister for the time being responsible for health for the use of the staff of that institution;
(c) premises whose supply is under a lease or licence of not less than one month, unless by prior arrangement, the occupier may without penalty, terminate that lease or licence on less than one month’s notice;
“restaurant” means any establishment carrying out the business of restaurant services, and includes cafeterias, fast-food outlets, snacks bars, food stuffs at exhibitions or sports arenas and similar establishments but excludes –
(a) an establishment operated for charitable or religious purposes;
(b) an establishment run by an educational or training institution approved by the Minister for the use of the staff and students of those institutions; and
(c) an establishment run by a medical institution approved by the Minister for the time being responsible for health for the use of the staff and students of the institution;
“restaurant service” means the supply of foods or beverages prepared for immediate consumption, whether or not such consumption is on the premises of the restaurant and including outside catering
“supply of services” means any service provided for a consideration;”
The law is trite that where the words used in a statute are clear and unambiguous, the Courts are enjoined to interpret the words in their ordinary and natural meanings, without any embellishments. A Court is required to give a liberal or broad and purposeful interpretation to a statute; Kassim v. Adesemowo & Ors (2021) LPELR-55333(SC); Aguma v APC (2021) LPELR-55927(SC); NURTW & Anor v RTEAN & Ors (2012) LPELR-7840(SC), (2012) 10 NWLR (pt. 1307) 170; Elabanjo & Anor vs Dawodu (2006) LPELR-1106(SC).
The clear and unambiguous wordings of the Act, goods and services consumed in hotels, restaurants, event centres and similar establishments, were not exempted. That is to say, VAT is payable on all such goods and services.
The Hotel Occupancy and Restaurant Consumption Law of Lagos State, as well as the Hotel Occupancy and Restaurant Consumption (Fiscalisation) Regulations, 2017, made thereunder, also fall under the category of consumption tax. The validity of this Law had been decided in AG Federation v. AG Lagos State (supra), where the Supreme Court, per Galadima, JSC, held, page 64 of the E-Report:
“Having regard to the fact that regulation, registration, classification and grading of hotels, motels, etc are not items in the Exclusive and Concurrent Legislative Lists, they are clearly residual matters for the State. Therefore the 3 laws in question enacted by the Lagos State Government is intra vires the power of the State Government.”
And further, that, pages 65 – 66 of the E-Report:
“By virtue of Sub-section 7 of Section 4 of the Constitution (supra) powers of a State House of Assembly to make laws for the peace order and good government of its state is not in doubt. The Lagos State House of Assembly considered these factors in the passing of the 3 laws (supra) to regulate, grade and classify its hotel and other hospitality establishments. These items are not in the Exclusive and Concurrent List; they are within the competence and ambit of the Lagos State House of Assembly to legislate upon.”
The Hotel Occupancy and Restaurant Consumption Law of Lagos State was then declared to be valid and not unconstitutional.
The question now is whether the VAT Act, which also prescribes a consumption tax, can be viewed as covering the field in that area such that it would prevail over any similar enactment by Lagos State?
What is the doctrine of covering the field? Relevant authorities are to the effect that the doctrine is applicable to where concurrent legislative powers are validly exercised on the same subject matter. In Attorney General, Ogun State v. Attorney General, Federation (CON) (1982) LPELR-11(SC) at pages 93 – 94, Eso JSC, opined:
“The last point I would like to comment upon in this case is the doctrine of covering the field…I take the view that when one considers this doctrine, the phrase “covering the field” means precisely what it says. Where a matter legislated upon is in the concurrent list and the Federal Government has enacted a legislation in respect thereof, where the legislation enacted by the State is inconsistent with the legislation of the Federal Government it is indeed void and of no effect for inconsistency. Where however, the legislation enacted by the state is the same as the one enacted by the Federal Government, where the two legislations are in pari materia I respectfully take the view that the State Legislation is in abeyance and becomes inoperative for the period the Federal Legislation is in force. I will not say it is void. If for any reason the Federal legislation is repealed, it is my humble view that the State legislation, which is in abeyance, is revived and becomes operative until there is another Federal legislation that covers the field.”
In AG Lagos State v. Eko Hotels Ltd & Anor (supra), Kekere-Ekun, JSC, at pages 25 – 28 of the E-Report, relied on the decisions in Attorney General, Ogun State v. Attorney General, Federation (supra); AG Abia State v AG Federation (2002) 6 NWLR (Pt.763) 264 at 435 INEC v Musa (2003) 3 NWLR (Pt.806) 72 at 204 – 205; (2003) LPELR-1515 (SC) at 108 and further explained the doctrine thus:
“In my humble view, a State Law which is not necessarily inconsistent with either the Institution or an Act of the National Assembly but merely covers the legislative field of the National Assembly is not harmful as it is merely a surplusage. In line with the decision of Eso, JSC, in A.-G, Ogun State (supra), such a law of a State House of Assembly is in abeyance and inoperative and could be revived and becomes operative if for any reason the Federal legislation is repealed.”
See also AG Federation v. AG Lagos State (supra), at pages 66 – 67; Attorney-General of Abia State & Ors v. Attorney-General of the Federation (2002) LPELR-611(SC).
I think it is worthy of note that the issue arising in the later case of AG Lagos State v. Eko Hotels Ltd & Anor (supra), was also in respect of a consumption tax, in that case, the Sales Tax Law Cap.175 Laws of Lagos State 1995 and Sales Tax Amendment Order 2000. The Supreme Court, per Kekere-Ekun, JSC, at pages 32 – 33 of the E-Report, held:
“As rightly observed by the two lower Courts, the goods and services covered by both legislations are the same. It follows that the VAT Act has effectively covered the field in that regard. Section 7 (1) of the Act provides that the tax shall be administered by the 2nd respondent. In the circumstances, I am in complete agreement with the Court below, which affirmed the finding of the trial Court, that the VAT Act having covered the field on the issue of sales tax, its provisions prevail over the provisions of the Sales Tax Law of Lagos State. Thus, even if the Lagos State House of Assembly has the requisite legislative competence to enact the Sales Tax Law, which is not an issue before us, once an existing Federal law or an Act of the National Assembly has covered the field, the Act of the National Assembly or such existing Federal law must prevail.”
(Emphasis mine).
The Supreme Court in this decision recognized the fact that the Sales Tax Law was validly passed within the Legislative competence of the House of Assembly of Lagos State, which was also the case with the Hotel Occupancy and Restaurant Consumption Law of Lagos State. However, taxable goods and services under these consumption taxes are also provided for by the VAT Act, see Sections 2, 3, 46 and the First Schedule to the Act. The VAT Act having covered the field on other consumption taxes, its provisions prevail over similar State Laws. Thus, even though the Lagos State House of Assembly has the requisite legislative competence to enact a consumption Law, once an existing Federal law or an Act of the National Assembly has covered the field, the Act of the National Assembly or such existing Federal law must prevail. By the decision in AG Lagos State v. Eko Hotels Ltd & Anor (supra), the VAT Act is an existing Federal law or an Act of the National Assembly, which will prevail over the Hotel Occupancy and Restaurant Consumption Law of Lagos State.
It is not in issue that a lower Court is bound by the decisions of the appellate Court on the issue that has been raised and determined by that higher Court. On the doctrine of stare decisis, the Supreme Court, per M. D. Muhammad, JSC in Ogwe v IGP (2015) LPELR-24322(SC) at page 17 said:
“By the doctrine, judges are enjoined to stand by their decisions and the decisions of their predecessors. The doctrine does not allow for the exercise of discretion in an issue the Court previously decided when that same issue subsequently surfaces before the Court for determination. It is this age old rule of practice that gives law its certainty and equilibrium in the society.”
In the light of the doctrine of stare decisis, I agree that the lower Court was bound by the decision in AG Lagos State v. Eko Hotels Ltd & Anor (supra), on the issue that the VAT Act, being an existing Federal law or an Act of the National Assembly, will prevail over any similar State Law, including the Hotel Occupancy and Restaurant Consumption Law of Lagos State. Issue 4 is resolved in favour of the Appellant.
ISSUES 5, 6 AND 7
In arguing these issues, the Appellant complained that the learned trial Judge side-lined the issue of the constitutionality of Section 1(2) of Taxes and Levies (Approved List for Collection) Act, which issue the Court had raised suo motu. The Appellant also canvassed the issue of the alleged repeal of some provisions of VAT Act, and the validity of the amendment of the schedule to the Taxes and Levies (Approved List for Collection) Act, vide ministerial order of 2015.
The learned trial Judge suo motu raised the issue of constitutionality of Section 1(2) of the Taxes and Levies (Approved List for Collection) Act which empowers the Minister of Finance to amend the schedule to the said Act. Learned Trial Judge declined to decide on the constitutional issue raised by him, due to the submission of the 1st Respondent’s Counsel, that the Court should avoid being seen as taken sides with a party by raising of issues not placed before it by parties. Senior Counsel for the Appellant submitted that a Court is entitled to raise a relevant issue suo motu and, invite the parties to address it on issues so raised; citing N.B.C. Plc v. Suleiman (2019) 18 NWLR (PT. 1703) 80; Okafor v. Ilukwe (2013) 10 NWLR (PT. 1363) 465.
It was submitted that having raised the issue suo motu, the learned trial Judge was wrong when he declined a decision on the issue of constitutionality of Section 1(2) of the said Act.
An appeal is by way of re-hearing, the Court was invited to consider the issue of constitutionality of Section 1(2) of the Taxes and Levies (approved List for Collection) Act and decide on the issue which learned trial Judge neglected to decide on. On the rehearing powers of the Court, the decision in Utuama v INEC (2017) LPELR-42653(CA) was cited and relied on.
It was posited that Section 1(2) of the said Act, which empowers the Hon. Minister of Finance to amend the schedule to the Act, by adding to or deleting from the list in the schedule runs contrary to the principle of separation of powers embraced by the 1999 Constitution.
Under Section 4, 5, 6 of the Constitution, Legislative, Executive and Judicial powers are vested in the National Assembly, the President and Judiciary respectively. Consequently, only the National Assembly is empowered to enact and amend Federal Laws by virtue of Section 4 of the Constitution. The only role of the Executive through the President is to either assent or withhold assent to bills passed by National Assembly. It was therefore not part of the functions of the Minister who is a member at the Executive arm of Government to amend an Act of the National Assembly; citingGadi v. Male (2010) 7 NWLR (Pt. 1193) 225 at 280; Gov. Ekiti State v. Olayemi [2014] 4 NWLR (Pt. 1501)1 at 39.
The Appellant conceded that the Taxes and Levies (Approved List for Collection) Act of 1993 was enacted into law vide a decree during military regime, a period when there was no clear-cut division of legislative and executive powers. While Section 1(2) of the said Act may have been valid under military regime, it was an invalid under the 1999 Constitution (as altered). That Act is an existing law by virtue of Section 315(4) (b) of the 1999 Constitution. It must therefore be read and interpreted harmoniously with the Constitution. Therefore Section 1(2) of the Taxes and Levies (Approved List for Collection) Act which empowers the Minister of Finance to amend/alter schedule to the said Act, which is very much an integral part of the Act is null and void and of no effect because of its evident conflict with Section 4 of the 1999 Constitution.
The learned trial Judge had reasoned that the ministerial order of 2015 not only validly amended the List in Part 2 of the Schedule to the Act thereby vesting powers to collect consumption taxes on consumables in Hotels, Restaurants and Event Centres in each State Government, the said order tacitly repealed the VAT Act.
The Appellant argued that Sections 4, 5 and 6 of the 1999 Constitution embrace separation of powers, the power to make and amend laws being the exclusive preserve of the legislative arm of government. That the Taxes and Levies (Approved List for Collection) Act is an existing Law of the National Assembly under and by virtue of Section 315 (4) (b) of the 1999 Constitution (As Amended). Under Section 315 (2) of the Constitution only the President who is the appropriate authority that is empowered to modify in text of an existing law which he considers necessary or expedient in order to bring the Law in conformity with the provisions of the Constitution. That even at that, the modification which the President is empowered to make is restricted to the text and not the substance of an existing law. Neither the President nor the Minister of Finance is constitutionally entitled to perform the legislative function of amending an existing Law/Act of the National Assembly. For this reason, that Section 1(2) of the Taxes and Levies (Approved List of Collection) Act which empowers/enables the Minister of Finance to amend the schedule to the Taxes and Levies (Approved List of Collection) Act is ultra vires the constitutional powers of the Minister who is not a member of the legislative arm of Government. That the said provision is null and void on account of its inconsistency with the Constitution by virtue of Section 4 read along with Section 1 (3) of the said Constitution.
The Court was urged to hold that the amendment of the Schedule to the Taxes and Levies (Approved List of Collection) Act by the Minister of Finance through a Ministerial Order of 2015 cannot override or amend the provisions of the Taxes and levies (Approved List for Collection) Act and Value added Tax Act. The said ministerial order, as well as Section 1(2) of the enabling Act, are inconsistent with the provisions of the Constitution and therefore null and void by virtue of Section 1 (3) of the said Constitution. On the supremacy of the Constitution and invalidity of any law that is inconsistent with the Constitution, the following cases were cited and relied on: EFCC v. Agbele (2018) LPELR 44677; INEC v. Musa (2003) LPELR 24927; Kayili v Yilbuk (2015) LPELR 24323 SC.
It was further argued that, from the angle of the principle of no taxation without representation, the vesting of power in the Minister (a non-legislator) to amend tax statute under Section 1(2) of the Taxes and Levies (Approved List for Collection) Act was unacceptable. The principle is that people’s elected representatives (Legislators) must be audible, visible and have a say in the enactment or amendment of a tax legislation. Therefore, a tax legislation enacted or amended without involving the legislative arm is invalid. That it follows that the Minister of Finance, who is not a member of the National Assembly lacks the constitutional powers to amend an existing Act of the National Assembly.
The Court was invited to note that under Item 4, Schedule 1 of the Taxes and Levies (Approved List of Collection) Act, Value Added Tax (VAT) is still retained as a tax within the tax collecting powers of Government of the Federation. That the decision of the learned trial Judge that the Taxes and Levies Approved List of Collection Order, 2015 has tacitly repealed VAT Tax Act was faulty and absurd. Submitting that a rule of interpretation of statutes is that they should not be construed in a way that results in absurdities, reliance was placed on Udoh v. Orthopaedic Hospitals Management Board (1993) LPELR 3308 (SC); Adewumi v. AG. Ekiti State (2002) LPELR-3160(SC).
Senior Counsel posited that a Schedule to an Act is an integral part of the Act, with the same rule applying to the body and to the schedule of an Act, citing N.E.P.A. v. Ango (2001) 15 NWLR (PT. 737) 627; Ikem v Aisowieren (2010) 1 NWLR (PT. 1174) 147. That the schedule to the said Act can only be amended in the same manner of amending an Act of the National Assembly. The Ministerial Order of 2015 was therefore incapable of amending and has not amended, the Taxes and Levies (Approved List for Collection) Act. For the same reason that order is incapable of expressly, impliedly or tacitly amending the VAT Act.
The 1st Respondent, in response submitted that that law frowns on a party approbating and reprobating at the same time, citing Westcom Technology & Energy Services Ltd v Transclear S. A. (2018) LPELR- 44794 (CA). At the lower Court, the Appellant had argued that the “Minister of Finance possesses the legal power to amend the Schedule” pursuant to Section 1(2) of the Taxes and Levies (Approved List for Collection) Act and the Schedule (Amendment) Order of 2015 added Items 12 – 25 to Part II of the Schedule to the Principal Act, referring to page 997 of Vol. II of the Record of Appeal. Listed as Item 13 on the Amended Schedule is Hotel Occupancy and Restaurant Consumption Tax. The Appellant having argued before the lower Court in favour of the position that the Minister has the power to amend the Schedule, has now turned around to argue before this Court that the Minister lacks the constitutional power to amend the Schedule, because the Schedule is part of the Act. That this was approbating and reprobating which must be condemned by this Court as it did not lie in the mouth of the Appellant to say that the Minister lacked the power to amend the Schedule.
The 1st Respondent further argued, assuming without conceding that the Court was inclined to consider the issue, that the power to amend the order as contained in the Schedule was not unconstitutional, relying on Chisco International Ltd v Prime Marketing Associates Ltd & Ors (2015) LPELR-24506 (CA). It was submitted that the power exercised by the Minister of Finance to publish in the official gazette Schedule of the Taxes and Levies (Approved List for Collection) (Amendment) Order, 2015, which was pursuant to power donated under Section 1(2) of Taxes and Levies (Approved List for Collection) Act, 2009 was not a usurpation of legislative power of the National Assembly. That the Appellant cannot be heard to complain at this Court, on appeal, after conceding to the same in the lower Court.
It was further submitted that the lower Court was right when the learned trial Judge declined to pronounce on the issue raised suo motu, which was not part of the case formulated by the parties. The case of Dada & Ors v Bankole & Ors (2008) LPELR-907 (SC) was further relied on to submit that the lower Court has acted within the confines of the authorities decided by appellate Courts as the issue of Section 1(2) of the Taxes and Levies (Approved List for Collection) Act was not part of the issues formulated before the Court. The 2nd Respondent’s case before the lower Court was not a challenge to the Hotel Occupancy and Restaurant Consumption Law but the Fiscalization Regulation, 2017, which was meant to ensure that appropriate deductions from consumers in hotel, restaurants and event centres were appropriately captured.
In the reply brief, the Appellant submitted that issues bordering on the constitutionality of a statute may be raised suo motu by the lower Court, as long as each of the parties is given the opportunity to be heard, citing Akosile v Oando (2020) LPELR-50808 at 13. That the principle stated in the case of Shekse v Plankshak (2008) 15 NWLR (PT. 1109) 105, relied on by the 1st Respondent, will only come to play when the Court raises an issue suo motu and decides same without the parties’ input in circumstances outside of the above-mentioned exceptions. That the case of Chisco International Ltd v. Prime Marketing Associates Ltd & Ors (2015) LPELR-24506 (CA) was inapplicable to the issue under discourse.
The Appellant conceded that the legislature may donate its powers to the appropriate authority or organs of government to modify existing laws, but that such powers cannot be exercised in a manner that will be inconsistent with the Constitution. It is only to be exercised where the appropriate authority considers it necessary and expedient to bring the law in conformity with the provisions of the Constitution.
The question for the Court’s determination is whether or not the relevant provisions of the VAT Act are unconstitutional. Once this is answered in the affirmative, the Schedule Amendment Order of 2015 cannot stand. It was submitted that the question ought to be answered in the affirmative. Since 2015, when the Schedule Amendment Order was promulgated, up till date, there is no law or judicial pronouncement, invalidating the VAT Act for being unconstitutional.
The Court was finally urged to discountenance the submissions of the 1st Respondent, and allow the appeal.
Resolution
The learned trial Judge raised two issues suo motu:
1. Whether this Court is competent to make a pronouncement on the issue of constitutionality or otherwise of the VAT Act.
2. Whether the provisions of Section 1(2) of the Taxes and Levies Act are constitutional.
Learned Counsel for the parties addressed the lower Court on both issues. The learned trial Judge however held, pages 1040 – 1041 of the Record of Appeal:
“Let me begin with the second issue raised suo motu by the Court. The learned Senior Advocate to the 1st Defendant has argued firstly that the Section 1(2) of the Taxes and Levies (Approved List of Collection) is an existing legislation which is binding and that it is not an issue before the Court.
Indeed, the issue was not raised by either of the parties. But I think it’s trite that a Court is entitled to raise an issue suo motu which it considers germane to the case for the sake of just determination of the matter. However, from some of the pronouncements of the appellate Courts which I have read, it appears in raising an issue the Court should do so within the confines of the issues raised by parties except vital issues such as jurisdiction. The fear is to avoid making the Court appear to be making a case for one of the parties. See for example the case of SHEKSE V. PLANKSHAK (2008) 15 NWLR (PT.1109) 105 S.C. where it was stated in the following terms:
“It is not competent for a Court sou motu to make a case for either or both of the parties and then proceed to give judgment on the case so formulated contrary to the case of the parties before it.”
It is on the premise that I have to agree with the Learned Senior Advocate to the 1st Defendant that since the issue of validity of the said Act is not before the Court, it should not be the business of the Court to delve further.”
With respect, the learned trial Judge completely misconstrued the law in this regard.
Fundamentally, a Court is bound by and confined to the issues raised by the parties. Where however the Court raises an issue suo motu, which it considers material for the proper determination of the case, it must give the parties, particularly the party likely to be adversely affected by the issue, the opportunity to be heard. See Effiom & Ors v. CROSIEC & Anor (2010) LPELR-1027(SC). Where an issue is raised suo motu by the Court and the parties are not given an opportunity to be heard thereon before the Court renders a decision thereon, and the appellate Court finds that this failure has led to substantial miscarriage of justice, the decision shall be overturned; Anya v Anya & Ors (2020) LPELR-49386(SC); Agbanelo v. UBN Ltd (2000) LPELR-234(SC).
In Jime & Anor v. INEC & Ors (2019) LPELR-48399(CA), per Otisi, JCA, at pages 12-13, this Court expressed the opinion that:
“I believe it is well settled that a Court ought not to suo motu raise an issue without giving the parties an opportunity to be heard thereon, particularly the party that may be adversely affected as a result of the point so raised, before it takes a decision. The reason for this was given in Stirling Civil Engineering (Nig) Ltd v. Yahaya (2005) LPELR-3118(SC) per Tobi, JSC,
In our adversarial system of adjudication, Courts should be reluctant or loath to raise issues suo motu. This is because the litigation is not theirs but that of the parties. If a Court raises an issue suo motu it has removed itself from its exalted position to flirt with the parties and in the course get itself soiled in the litigation.
This does not mean that a Court of law is totally inhibited from raising issues suo motu. It can and in relevant circumstances. For instance, a Court of law can raise issue suo motu, if it is in the interest of justice to do so. Where the issue raised will determine the fortunes of the case one way or the other, a Court of law is entitled to raise it. There could be a situation where the case cannot be determined one way or the other without resolving the issue. In such a situation, a Court is competent to raise it to enable it determine the case.
Though Court has the jurisdiction to raise an issue suo motu, it has not the jurisdiction to resolve the issue suo motu. The Court must give an opportunity to the parties to react to the issue by way of address. On no account should a Court of law raise an issue suo motu and resolve it suo motu. That is unjust and a party aggrieved has the right to complain in the way the appellant has complained in this Court. The case law is in great proliferation. Let us take a few cases.
In Chief Oje v. Chief Babalola (1991) 4 NWLR (Pt. 185) 267, this Court held that on no account should a Court raise a point suo motu, no matter how clear it may appear to be, and proceed to resolve it one way or the other without hearing the parties.”
Concurring judicial pronouncements on this issue are legion. I will only mention a few: Sani v. Kogi State House of Assembly & Ors (2019) LPELR-46404(SC); Akeredolu v. Abraham & Ors (2018) LPELR-44067(SC); Araka v. Ejeagwu (2000) LPELR-533(SC).
The demands of fair hearing are not met when a Court of law raises a point suo motu, no matter how clear it may appear to be, and proceeds to resolve it one way or the other without hearing the parties, particularly the party that may be adversely affected as a result of the point so raised. Once the Court embarks on such a course, it will be in breach of the parties’ right to fair hearing. Araka v. Ejeagwu (supra). And the decision reached thereby is liable to be set aside.”
In Shekse v Plankshak (supra), also reported in (2008) LPELR-3042(SC), the appellant therein had complained that the issue of boundary dispute was raised suo motu by the Court. The Supreme Court however agreed with the position of the respondent therein that, the appellant himself raised the issue of boundary dispute and cannot complain that the trial Court raised it on its own. This authority is therefore not applicable herein.
The learned trial Judge, by raising an issue suo motu, has made the said issue one to be considered and resolved by the lower Court. In this regard, whether it was not an issue raised by the parties becomes irrelevant. Having raised the issue suo motu, the issue translates into an issue for determination in the matter. The only caveat is that the parties should be given an opportunity to be heard on the said issue before the Court rules on it. If I may emphasize, it may not have been an issue within the contemplation of the parties, but once the Court has raised the issue suo motu, as it has the jurisdiction to so raise, the parties must be heard thereon. The Court has no jurisdiction to resolve the same issue suo motu; Okonkwo v. Cooperative & Commerce Bank (Nig) Plc & Ors (2003) LPELR-2484(SC) at pages 51 – 52. That is the caveat.
In this case, the parties were given the opportunity and did address the lower Court on the issue raised suo motu by the learned trial Judge. The learned trial Judge was therefore in error to have declined to resolve the issue he raised suo motu.
In such event, the appellate Court could either return the matter to the lower Court for a decision thereon, or could, if the circumstances permit, go ahead to resolve the issue itself. The said issue herein, if I may restate, was:
Whether the provisions of Section 1(2) of the Taxes and Levies Act are constitutional
This issue is closely tied to the counter-claim of the 1st Respondent, which sought the determination of the following questions:
1. Whether the provisions of the VAT Act Cap VI Law of Federation of Nigeria particularly Sections 1, 2, 4, 5, & 12 by which the 2nd Defendant to Counter-Claim imposes tax on customers for goods and services consumed in hotels, restaurants and event centers in Lagos State is inconsistent with the Provision of Section 4(2), (4)(a) & (b) and Section 4(7) (a) & (b) of the Constitution of the Federal Republic of Nigeria 1999 (as amended) and therefore unconstitutional and invalid?
2. Whether by virtue of the provisions of Section 4(7) of the Constitution of the Federal Republic of Nigeria, 1999 (as amended), the provisions of the Taxes and Levies (Approved List for Collection) Act Cap 72 Laws of Federation of Nigeria (as amended by Schedule to the Taxes and Levies (Approved List for collection) Act (Amended) Order 2015 and the provisions of Hotel Occupancy and Restaurant Consumption Law of Lagos State 2009, the counter-claimant is the only constitutional and lawful body empowered to assess, impose and collect tax from customers of the 1st Defendant to counter-claim for goods and services consumed in hotels, restaurants and event centres in Lagos State.
Indeed, the learned trial Judge held, page 1047 of the Record of Appeal:
“…I am in agreement with the learned Senior Advocate to the 1st Defendant that the subsequent taxes and levies (Approved Listed Collection) Act has tacitly repealed the affected provisions of the Vat act (sic).”
The learned trial Judge further held, page 1050 of the Record of Appeal:
“With my decision in the Originating Summons, I think the counterclaim should succeed.
Accordingly, I hereby answer all the questions in the positive and in favour of the counter claimant. I also hereby grant all the reliefs sought in the counter-claim.”
Having found that the counter-claim was wrongly constituted, which impacted on the jurisdiction of the lower Court to entertain the counter-claim, it is my considered view that further proceeding to resolve this issue may not be proper. This is because, a necessary party, the Attorney General of the Federation, was not a party herein to enable his participation at the hearing. Secondly, if the lower Court lacked jurisdiction to entertain the counter-claim, and this issue raised suo motu by the lower Court is so closely tied thereto, neither would this Court have the jurisdiction to entertain the issue on the merit. All appeals are by way of re-hearing; Order 7 Rule 2 Court of Appeal Rules, 2021. Therefore, if the trial Court lacked jurisdiction to hear the matter, neither can the appellate Court exercise such jurisdiction; Section 15 Court of Appeal Act, 2004. See Ehuwa v Ondo State Electoral Commission (2006) LPELR-1056(SC) at page 19, also cited by the Appellant. See also Obi v INEC (2007) LPELR-9263(CA), Fastech Nigeria Limited v Zamfara State Government & Ors (2019) LPELR-48135(CA), Akarat v. Yabracks (2021) LPELR-53567(CA). I therefore decline to proceed further to resolve this issue as I see no benefit in so doing.
In view of the finding that the counter-claim was not properly constituted, impacting on the jurisdiction of the lower Court to entertain the same, the destiny of this appeal is that it succeeds and is hereby allowed. The decision of the lower Court delivered on 3/10/2019 is hereby set side. The counter-claim of the 1st Respondent filed on 30/5/2018 is struck out.
MUHAMMAD IBRAHIM SIRAJO, J.C.A.: I had the privilege of going through the draft copy of the judgment prepared by my learned brother, ONYEKACHI AJA OTISI, JCA, just delivered. I fully concur with the elaborate reasons and conclusions stated therein.
Before the lower Court, the 2nd Respondent, a registered Association of tax payers, took out an originating summons for the determination of three questions bordering on the applicability and operation of the Lagos State Hotel Occupancy and Restaurant Consumption (Fiscalisation) Regulations, 2017 vis-a-vis the provisions of the VAT Act relating to the proper agency empowered to collect taxes on consumption of goods and services in Hotels, Restaurants and Event Centres in Lagos State. The suit was filed against the 1st Respondent and the Appellant as 1st and 2nd Defendants respectively. In opposing the action, the 1st Respondent filed a counter-affidavit and a counter-claim seeking declaratory reliefs bordering on the constitutionality of the VAT Act, a legislation that was made in 1993 under a Military regime and therefore an existing law deemed to have been passed by the National Assembly by virtue of the provisions of Section 315 of the Constitution of the Federal Republic of Nigeria, 1999 (as altered). The Defendants to the counter-claim are the 2nd Respondent and the Appellant. In its judgment, the lower Court dismissed the claim of the 2nd Respondent and granted the counter-claim of the 1st Respondent by restraining the Appellant from enforcing the provisions of the VAT Act against the 2nd Respondent by barring the Appellant from collecting consumption taxes on goods and services consumed in Hotels, Restaurants and Event Centres owned by the 2nd Respondent in Lagos State. This appeal is against that decision.
In making a far-reaching decision on the constitutionality of the VAT Act with respect to collection of consumption tax, the lower Court was not mindful of the parties before it and the need to ensure the presence of all necessary parties before deciding on the question of validity or otherwise of the VAT Act, a Federal enactment. Constitutionally speaking, the Attorney General of the Federation is the Chief Law Officer of the Federal Government and the Custodian of the Constitution and all Acts of Parliament.
It is not in dispute that the determination of the constitutionality of any Act of the National Assembly, the Value Added Tax Act inclusive, will affect the interests and indeed rights of the Federal Government positively or negatively. It is therefore incumbent on any party that wants to challenge the constitutionality of any Act of Parliament, such as the VAT Act, to ensure that the Federal Government, through the Attorney General of the Federation, as a necessary party in such an action, is joined as a Defendant in order for the action to be effectually determined. A necessary party is a party who is interested and whose interest will be affected by the outcome of the litigation and who therefore ought to be made a party for the effectual determination of the question(s) in controversy. There is a plethora of authorities defining who is a necessary party and explaining the rationale for joining certain class of persons to causes and matters as necessary parties. In the case of Sifax Nigeria Ltd & Ors vs. Migfo Nig. Ltd & Anor (2018) LPELR-49735 (SC) @ 80-81, Augie, JSC, defined a necessary party as:
“…someone, whose presence is essential for the effectual and complete determination of the issues before the Court. It is a party, in the absence of whom, the claim cannot be effectually and completely determined”. Talking about necessary party, the Supreme Court, in the recent case of Jegede & Anor vs. INEC & ors (2021) LPELR-55481 (SC), per Okoro, JSC stated at pages 62-63 of the Report:
“It is trite that a necessary party to a proceeding is a party whose presence is essential for the Court. It is the party in the absence of whom the claim cannot be effectually and completely determined. See lge & Ors vs. Farinde & Ors (1994) 7 NWLR (Pt. 354) 42, Azubuike v PDP & ors (2014) LPELR – 22258 (SC). In Green v. Green (2001) FWLR (Pt. 76) 795 at 814, this Court held that a necessary party is one who is not only interested in the subject matter of the proceedings but whom in his absence the proceedings cannot be fairly and judiciously decided. In other words, the question to be settled in the action between the existing parties must be a question which cannot be properly settled unless the necessary party to the particular claim is joined in the action.”
See also Panalpina World Transport (Nig.) Ltd vs. Olandeen International & Ors (2010) LPELR-2902 (SC), Poroye & Ors vs. Makarfi & Ors (2017) LPELR-42738 (SC), Central Bank of Nigeria vs. Interstella Communications Ltd & Ors (2017) LPELR-43940 (SC), Buhari & Anor vs. Yusuf & Anor (2003) LPELR-812 SC). The fundamental reason which makes it necessary to make a person a party to an action is to make him bound by the result of the action. That is the litmus test for the determination of who is a necessary party to a suit. See Gassol vs. Tutare & Ors (2013) LPELR-20232 (SC). The fact that any decision on the constitutionality and applicability of the VAT Act in any part of the Country will ultimately affect the Federal Government tax regime, makes the Attorney General of the Federation, not only a necessary party but an indispensable party before such a decision can be handed down. The non-joinder of the Attorney General of the Federation as a party to the 1st Respondent’s counter-claim before the lower Court renders the counter-claim incompetent and the determination of same ineffectual.
It is for the above reason and the more elaborate legal expositions leading to the conclusion reached in the leading judgment that I too allow the appeal, set aside the judgment of the lower Court and strike out the 1st Respondent’s counter-claim.
ADEBUKUNOLA ADEOTI IBIRONKE BANJOKO, J.C.A.: Before now, I had carefully read in advance the judgment just delivered my learned brother, ONYEKACHI AJA OTISI, JCA. I agree with the reasoning and conclusion reached thereof.
Although by Order 9 Rule 14 (1) & (3) of the Federal High Court (Civil Procedure) Rules 2009. Non-Joinder of a necessary party in a suit is a mere irregularity that does not affect the Competence or Jurisdiction of the Court to adjudicate on the matter before the Trial Court. it must however, have regard to the rights and interests of the parties actually before it. Failure to include a necessary party in a Suit is fatal to the case of a plaintiff and robs the Court of Jurisdiction. See EZIONWU VS. EGBO (2006) 5 NWLR PART 973 316 AT 328-329.
In the instant case, there is no way the question posed by the 1st Respondent in its counter-claim for determination would effectually and completely be answered in the absence of the Chief Law Officer the Federal Government, the ultimate target of the outcome of the decision in the Counter-claim. Also, without Federal Government as a party, the reliefs sought would not have any effect as the Federal Government cannot be bound by an order of a Court in a matter it was not a Party. See OLAWOYE VS JIMOH (2013) 13 NWLR (PART 1371) 362, NDP VS INEC (2013) 6 NWLR (PART 1350) 392.
The end result of what I have said above is that although the trial Court had the Jurisdiction to hear the suit as constituted. the judgment generated thereby which had massive impact on the Federal Government cannot be allowed to stand. Counter-claim must not take a different dimension from the Claimant’s case. Where a counter-claimant has made out a counter-claim affecting another party different from the claimant in the suit, the counter-claimant must be endeavour to join that affected person. Therefore. where the outcome of counter-claim will affect a party one way or the other. It will be foolhardy not to join such a party in the Suit. In fact, it would amount to an exercise in futility as the party will not be bound by the outcome of the case. Reliance is placed on OKWU & ANOR VS UMEH & ORS (2016) LPELR-26042(SC), BELLO VS INEC & ORS (2010) LPELR-767(SC).
Therefore, having not joined the Chief Law Officer of the Federal Government in hearing the counter-claim which was actually targeted against the Federal Government, the counter-claim was not properly constituted and therefore goes to the Jurisdiction of the lower Court.
I hereby equally allow this appeal.
The decision of the lower Court delivered on 3/10/2019 is hereby set aside. The counter-claim of the 1st Respondent filed on 30/5/2018 is hereby struck out.
Appearances:
Yusuf Ali, SAN, and Prof. Taiwo Osipitan, SAN, with him A.M. Salman, Esq., A.O. Abdul, Esq., and Tola Akinduro, Esq. For Appellant(s)
Adebayo Haroun, Esq., Deputy Director, Ministry of Justice, Lagos State for the 1st Respondent.
Ms. A.D. Taiwo-Nsirim, holding the brief of O. Badejo Okunsanya, Esq., appeared for the 2nd Respondent. For Respondent(s)
