By Tamuno Boboye
The recent decision of the Supreme Court in Appeal No. SC/CV/374/2023 – 11 Plc v. Milan Industries Limited signposts a doctrinal refinement of two critical issues that have hitherto presented practitioners with doubts and uncertainties.
While the judgment highlights several key legal positions, ranging from jurisdiction and competence of the court to salient lines of discourse in company law, this article considers two central legal points which signal a redefinition of the law in relation to:
(1) the jurisdiction of the courts over the sale of eligible bank assets by the Assets Management Corporation of Nigeria (AMCON); and
(2) the limited effect of stamp duty on secured credit transactions.
Brief Summary of the Appeal
Milan Industries Limited (“Milan”) had obtained credit facilities from Skye Bank Plc (a predecessor company to Polaris Bank Limited).
In obtaining the loan, Milan pledged its property at Plots 244 and 255 Kofo Abayomi Street, Victoria Island, Lagos (housing the Lagos Continental Hotel) as continuing security for the facility through a Deed of Legal Mortgage.
The deed was duly perfected with the Land Registry and the Corporate Affairs Commission (CAC) in line with the Companies and Allied Matters Act (CAMA).
However, in relation to the payment of stamp duties, Skye Bank made a statutory payment on an assessed sum of N2 billion.
Milan subsequently defaulted in liquidating the loan, which, by then, had accrued interest far in excess of N15 billion.
The facility became a non-performing loan and was consequently classified as an eligible bank asset pursuant to the AMCON Act.
It was accordingly purchased by AMCON as a collateralised and secured loan, following which the property used as security was sold to 11 Plc.
Dissatisfied with the sale, Milan instituted an action at the Federal High Court against Polaris Bank, AMCON, and 11 Plc, seeking, among other reliefs, an order setting aside the sale by AMCON.
Milan’s case was that although its credit liability had risen beyond N15 billion, it had discharged the debt obligation of N2 billion, being the amount for which the instrument was assessed and stamped.
To that extent, Milan contended that the creditor could no longer resort to the security, which it considered discharged upon payment of the N2 billion.
Milan relied substantially on section 202 of CAMA, 1990, now reenacted as section 227 of CAMA, 2020.
Although the trial court dismissed Milan’s suit, the Court of Appeal agreed with Milan and held that: “The maximum amount secured was N2 billion and the 1st Respondent cannot use the property charged to liquidate any amount in excess of the maximum amount secured and when the maximum amount secured is paid the security is discharged.”
Aggrieved by the finding of the Court of Appeal, 11 Plc, through its lead counsel, Chief Wole Olanipekun, CFR, SAN, filed a Notice of Appeal containing 27 grounds of appeal.
In the appellant’s brief of argument settled by Chief Olanipekun, 11 Plc challenged the decision of the Court of Appeal on diverse grounds, two of which touched on:
the jurisdiction of the court to interfere with a sale by AMCON; and
The proper interpretation of sections 197, 199, and 202 of CAMA, 1990.
Jurisdiction of the Court Over AMCON Sale
In addressing this issue, Olanipekun contended on behalf of 11 Plc that by the combined provisions of sections 33A and 34 of the AMCON Act, the court lacked jurisdiction to entertain any action challenging the acquisition of an eligible bank asset by AMCON under the Act.
He further submitted that the decision of the Court of Appeal, which made the application of the provision conditional upon the existence of a valid acquisition, amounted to an infusion of elements not contained in section 33A of the AMCON Act. Relying on the decision of the Supreme Court in Abegunde v. Ondo State House of Assembly (2015) 8 NWLR (Pt. 1461) 314 at 371–372, he argued that the Court of Appeal had a duty to give the unambiguous statutory provisions their ordinary meaning.
In response, lead counsel for Milan, Mr Ahmed Raji, SAN, argued that section 33A of the AMCON Act was wholly inapplicable to the case. He further submitted, inter alia, that the referenced provisions of the AMCON Act constituted ouster clauses and could not be sustained in the face of the judicial powers vested in the courts under section 6 of the Constitution of the Federal Republic of Nigeria, 1999 (as amended).
In concurring with the appellants, the Supreme Court, per Nwosu-Iheme, JSC, observed that section 34(6) of the AMCON Act was indeed an ouster clause and held that: “While a person’s access to the courts to have his civil rights adjudicated upon may be restricted or ousted by a statute or Act, it must be construed rather strictly. Ouster of jurisdiction needs express words.”
Pronouncing on the implication of section 34(6) of the AMCON Act, the apex court further held: “As submitted by the Appellants, and I agree, if the reliefs are not grantable by virtue of section 34(6) of the AMCON [Amendment] Act, then the Court had no jurisdiction to grant the same or even entertain the suit.
The powers of the Court to that extent were ousted by the Act. Clearly, the prohibition enacted in that section is a mandatory provision employing the word ‘shall’.
The Act went on to prescribe the only remedy available to a successful litigant in such an action. Again, as cited by the Appellants, it is the duty of a Court to enforce mandatory provisions of an enactment.”
In his concurring opinion, Abiru, JSC, identified the effect of the combined provisions of sections 33A, 34(1)(a), 34(2), 34(3), and 34(6) of the AMCON Act as being: “to extinguish the right of action of anyone to challenge and seek the setting aside of the purchase of an eligible bank asset by [AMCON].”
His Lordship further noted that: “The provision limits the right of action of anyone that has a grievance against the purchase of an eligible bank asset by [AMCON] to a claim in monetary compensation only and the provisions were given retrospective effect and made applicable to all eligible bank assets including but not restricted to assets acquired by [AMCON] before May 2015.”
This decision of the Supreme Court lays to rest the protracted debate over the constitutionality and effect of the referenced provisions of the AMCON Act, especially in light of conflicting decisions of the Court of Appeal.
In the unreported decision of the Court of Appeal in Appeal No. CA/L/1266/2019 – AMCON v. Shittu, delivered on 15 December 2020, the Court of Appeal had earlier held that since section 34(6) of the AMCON Act sought to curtail the discretion of the court and the right of citizens to seek redress, it was inconsistent with the Constitution and consequently null and void. See also Jumbo v. AMCON & Ors (2020) LCN/14278 (CA).
The recent position of the Supreme Court, however, now underscores the principle that while courts will jealously guard their jurisdiction and naturally lean against ouster clauses, where a statute is clearly worded to oust jurisdiction, the court will be constrained to give effect to the legislative prescription.
Stamping and Up-Stamping
One of the principal reliefs sought by Milan at the trial court was: “A declaration that the security of the Plaintiff under the Deed of Legal Mortgage is void in relation to any amount in excess of the N2 billion secured and up-stamped.”
Although this argument was rejected by the trial court, the Court of Appeal found in its favour, holding that: “The law regulating enforcement of charges does not permit the 1st Respondent to recover any sum of money in excess of the amount secured and where the amount secured has been repaid the security is discharged and the excess amount is treated as an unsecured debt to be recovered through a debt action.”
At the Supreme Court, the appeal turned on the proper interpretation of sections 197, 199, and 202 of CAMA, 1990 (now sections 222, 224, and 227 respectively of CAMA, 2020).
Chief Olanipekun, on behalf of 11 Plc, relied, on the one hand, on the equitable rights arising from the parties’ contractual obligations as evidenced by the Deed of Legal Mortgage. On the other hand, he emphasised that a proper interpretation of the relevant provisions of CAMA would lead to a result contrary to that reached by the Court of Appeal.
His position was that by virtue of section 199 of CAMA, the duty to register the charge and pay the appropriate stamp duty lay with Milan, and that having failed to appropriately up-stamp the instrument to the full extent of its liability, Milan could not rely on its own default to escape liability.
Olanipekun further argued that even if the bank had paid the stamp duty on behalf of Milan, the latter remained liable to reimburse the bank for the registration.
Therefore, the obligation remained with Milan at all material times. He also relied on judicial authorities, including Omobare v. New Nigerian Bank Ltd (1986) 1 N.S.C.C 32 at 36 and Adedeji v. National Bank of Nigeria (1989) 1 NWLR (Pt. 96) 212 at 226, for the proposition that a court of equity would not allow a party to enjoy the benefits of credit facilities and simultaneously disclaim liability by raising issues that would have rendered the transaction void or irregular.
The Supreme Court was also invited to consider foreign jurisprudence on similar statutory provisions. Of particular note was the decision of the Chancery Division of the English High Court in Independent Automatic Sales Ltd v. Knowles and Foster [1962] 3 All ER 27 at 30–31, which involved an interpretation of section 95 of the Companies Act 1948, a provision in pari materia with section 197 of CAMA, 1990.
In that case, the court held that it did not lie in the mouth of the company to contend that charges were void for lack of registration, as such a position could only properly be taken by the company’s liquidator or creditors.
Arguing per contra on behalf of Milan, Mr. Ahmed Raji, SAN, maintained that the Court of Appeal’s interpretation of section 202 of CAMA was correct and unassailable.
According to Raji, it is CAMA, and not the Deed of Legal Mortgage, that regulates the creation, registration, and enforcement of charges. He further contended that section 202 of CAMA creates a condition subsequent which ties enforceability to the amount of stamp duty paid and voids the continuing security to the extent that it charges the mortgaged property beyond the sum assessed and paid as stamp duty.
In the lead judgment, Honourable Justice E.N. Nwosu-Iheme, JSC, observed: “It appears to me that the 1st Respondent is approbating and reprobating in the same breath. While it acknowledges that it is indebted to the 2nd Respondent to the tune of N13 billion, it at the same time argues that the property which it used to secure the debt cannot be used to liquidate the same.
The 1st Respondent wants to eat its cake and still have it. This is instructive, because the requirements of compliance with the registration of the charge under sections 197 and 202 of CAMA, 1990 rest on the Respondent.”
In his concurring judgment, Honourable Justice H.A. Abiru, JSC, emphasised that the essence of statutory interpretation is to discover the intention of the lawmaker as conveyed by the words of the statute, and that in doing so, the court must assume that the legislature did not intend to create injustice or absurdity.
Agreeing with the appellant, his Lordship held that: “It is obvious that the essence and purpose of registering charges created on the assets of a company under the Companies and Allied Matters Act was not for the protection of the debtor company creating the charges, but to protect the liquidator and creditors of the company.”
Conclusion
Beyond the issues in dispute between the parties, it is instructive that the Supreme Court has, by its decision in 11 Plc v. Milan Industries Limited, streamlined the class of persons with locus standi to invoke the provisions of sections 222, 224, and 227 of CAMA, 2020, in relation to the adequacy or otherwise of the payment of stamp duty.
While the decision reaffirms the settled principle that a party cannot take the benefit of a contract and subsequently turn around to challenge the validity of that same contract, it also clarifies the legal obligation for the registration of a charge over company property.
Not only has the judgment activated the practical essence of section 224 of CAMA, 2020, the apex court has also, with judicial finality, clarified the implications of default and the extent of liability under the provision.
In practical terms, the decision is likely to shape future litigation involving AMCON asset acquisitions, mortgage enforcement, corporate charges, stamp duty compliance, and secured credit transactions in Nigeria.
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