Alhaji Sule Haruna Tahir & Anor V. J. Udeagbala Holdings Ltd. (2003)

LawGlobal-Hub Lead Judgment Report

BABA ALKALI BA’ ABA, J.C.A.

This is an appeal against the judgment of Yusuf J. of kano State High Court of Justice sitting at Kana and delivered on 26/3/2001. In the action filed under the undefended list by the respondent who was the plaintiff, the claims were for:

“N2,768,000.00 being sum owing by the defendants in favour of the plaintiff on account of goods sold and delivered by the plaintiff to the defendants at their request in Kana in 1999.”

As the action was filed under the undefended list, the appellants as defendants in accordance with the rules of the lower court, Order 23 of the Kano State High Court (Civil Procedure) Rules, 1988 duly filed their notice of intention to defend the action together with an affidavit in support of that notice. The learned trial Judge after considering the affidavit in support of the action and the affidavit in support of the notice of intention to defend the action, in a considered judgment, delivered on 26/3/2001, came to the conclusion that the appellants’ affidavit of their notice of intention to defend the action did not contain any defence to the action on the merit to justify allowing the appellants to defend the action. Consequently, the learned trial Judge proceeded and entered judgment for the respondent in terms of its claim contained in the writ of summons.

The appeal is therefore against the judgment.

The facts of the case may be briefly stated thus: The plaintiff company based in Kano in 1999 supplied the defendants its customers with 60 metric tones of vegetable oil as a result of which the defendants made some part payment for the said vegetable oil supplied. The defendants in payment of the vegetable oil supplied, issued post dated cheques for the months of March and April, 2000.

However, on presentation, the said cheques were not honoured for payment on their various dates.

The cheques issued by the 1st defendant are marked exhibits A, A1 – A4 while the ones issued by the 2nd defendant are marked exhibits B, B1 – B4. The total outstanding amount is N3,088,000.00 out of which the defendants have since paid the sum of N320,000.00 after the cheques were dishonoured. Inspite of the fact that the defendants have sold all the supplied vegetable oil, yet they have refused to pay the plaintiff hence the institution of the action to recover the outstanding amount, the sum of N2,768,000.00 against the defendants.

The notice of appeal filed by the appellants to challenge the decision of the court below contained at pages 78 – 80 of the record of this appeal containing five grounds of appeal without particulars are as follows:
“1. The learned trial Judge erred in law by holding that the ‘there is no single fact that raises any substantial questions that ought to go trial’.
2. The learned trial Judge erred in law by holding the 1st defendant liable.
3. The lower court erred in law by holding that the 2nd defendant is in a state of bankruptcy.
4. The lower court erred in law when it found the 1st defendant liable under section 279 and 283 of Companies and Allied Matters Act.
Judgment is against the weight of evidence in the affidavit.”

It is from these five grounds of appeal that the appellants distilled four issues for the determination of the appeal in their brief of argument. The issues are:
“1. Whether the learned trial Judge was right when he proceeded to enter judgment against the defendants/appellants under the undefended list procedure in view of the depositions in the defendants/appellants’ affidavit in support of the notice of intention to defend.
2. Whether the learned trial Judge was right when he held the 1st defendant jointly liable with the 2nd defendant in the circumstances where no reasonable cause of action is disclosed against him.
3. Whether the learned trial Judge was right when it found that the 2nd defendant is in a state of bankruptcy?.
4. Whether the learned trial Judge was right when it found the 1st defendant jointly liable with the 2nd defendant on the strength of section 279 and 283 of the Companies Allied Matters (1990).”

In the respondent’s brief of argument the four issues formulated by the appellants were adopted at pages 2 – 3 of the respondent’s brief by the respondent.

Before proceeding to determine the issues, I observed that issues 3 and 4 distilled from grounds of appeal Nos. 3 and 4 respectively neither arose from the judgment nor challenging the ratio decidendi.

A ground or grounds of appeal against a decision must relate to the decision and should be a challenge to the validity of the ratio decidendi of the decision reached by the trial court. See Metal Construction (WA.) Ltd. V. Migliore: in Re Ogundare (1990) 1 NWLR (Pt.126) 299; Egbe v. Alhaji (1990) 1 NWLR (Pt.128) 546.

The learned trial Judge merely referred to sections 279 and 283 of the Companies and Allied Matters Act, 1990 in his judgment which he was entitled to do. The provisions of the sections of the Company and Allied Matters Act referred to by the learned trial Judge were not contested by either of the counsel to the parties to warrant a determination on the issue by the learned trial Judge. While the question of the reasonableness of the cause of action was not raised at all by either counsel. I therefore hold that grounds 3 and 4 are incompetent and are struck out. Having struck out grounds 3 and 4 of the appellants’ notice of appeal, it follows that issues Nos. 3 and 4 and the argument canvassed in support of the said issues must also be struck out because in the absence of the said grounds, they have no legs to stand on.

The law is however settled that an appellant cannot be allowed to raise a fresh or new point on appeal without the leave of the Appeal Court having been first sought and obtained to canvass a fresh point.

See Okesuji v. Lawal (1991) 1 NWLR (Pt.170) 661; and Oshatoba & Ors. v. Olujitan & Ors. (2000) 5 NWLR (Pt.655) 159 at 172. In the present case now on appeal, the appellants as defendants did not seek and obtain leave to raise the issues contained in their grounds 3 and 4 which have been struck out.

The appeal will therefore now be determined on the remaining two issues Nos. 1 and 2 formulated by the appellants and adopted by the respondent.

In the appellants’ brief of argument dated 12/4/2002, filed on 19/4/02, Ahmed Raji Esq., learned counsel for the appellants, commenced his argument on issue No.1 by submitting that an action commenced under the undefended list procedure, where the defendant set up grounds of his defence in an affidavit, which prima facie show a triable issue, the proper course for the court is to transfer the suit to the general cause list. He relied on Order 23 rule 3 of the Kano High Court (Civil Procedure) Rules 1988, reproduced at pages 3 of the appellants’ brief.

Learned counsel for the appellants argued that the appellants as defendants filed a notice of intention to defend accompanied by an affidavit, which clearly set out an uncontradicted prima facie defence at pages 55 – 57 of the record of appeal. He relied particularly on paragraphs 10 and 11 of the affidavit in support of the notice of intention to defend. It is further submitted that paragraphs 10 and 11 reproduced at page 3 of the brief which according to the counsel are not denied or contraverted discloses a serious prima facie issue, which ought to go to trial.

He referred the case of N.A.B. Ltd. v. Felly Keme (Nig.) Ltd. (1995) 4 NWLR (Pt.387) 100 at 112 -13 where this court inter alia held that where an action is placed on the undefended list, the court ought to grant leave to defend such action where:
(a) The defendant raises substantial question of fact which ought to be tried;
(b) The alleged facts are of such a nature as to enable the defendant to interrogate the plaintiff or to enable the defendant to cross-examine the plaintiff’s witnesses on the affidavit supporting the action on the undefended list; and
(c) Fraud is alleged in the transaction.

Relying on N.A.B. Ltd. v. Felly keme (Nig.) Ltd (supra), learned counsel contended that the learned trial Judge erred in law when he proceeded to enter judgment against the defendants/appellants in the light of the facts deposed to in their affidavit in support of notice of intention to defend. Reliance is placed on the authority of’ U.B.A. Plc. v. Mode (Nig.) Ltd. (2001) 13 NWLR (Pt.730) 335 where it was held that undefended list procedure does not relieve the plaintiff of proving his case by evidence.

He urged the court to resolve issue No.1 in favour of the appellants.

Chief Ikenna Osuagwu, learned counsel for the respondent in the respondent’s brief filed on 5/6/02, responding to the appellants’ submission on issue No.1, started by referring to Order 23 of the kano State High Court (Civil Procedure) Rules, 1988 and submitted that the trial court refused to allow the appellants to defend because the contents of the affidavit in support of the notice of intention to defend filed by the appellants did not disclose a defence on the merit.

He reproduced paragraphs 10 and 11 of the affidavit in support of the appellants’ notice at page 4 of the respondent’s brief and argued that there were no particulars which if proved would constitute a defence on the merit as required by the rules of court. Learned counsel for the respondent further explained that for example, the appellants claimed that monies were paid to the plaintiff/respondent directly and through the Police but the amounts were not stated or shown.

Reference was also made to paragraph 11 of the appellants’ affidavit where they averred that they are not owing the plaintiff/respondent upon reconciliation of account but the reconciled account was not exhibited to show details of payment to the plaintiff/respondent as a result the appellants failed to satisfy the trial court that there are reasonable grounds for holding that they have a defence on the merit.

Relying on the Supreme Court case of Royal Exchange Assurance Ltd. & Ors. v. Aswani ile Industries Ltd. (1992) 3 NWLR (Pt.227) 1; (1992) 2 SCNJ (Pt.11) 316 at 355, learned counsel for the respondent submitted that it is not necessary to deny every averment in an affidavit and the fact that the respondent did not specifically deny paragraphs 10 and 11 relied upon by the appellants has not in any way affected its case at the trial court. In his final submission on the issue, learned counsel submitted that issue No.1 should fail and urged the court to so hold.

In the instant case, the relevant facts in support of the respondent’s claims against the appellants are contained in paragraphs 3 – 13 of its affidavit in support where it was averred:
“3. That I know the defendants in this suit as our customers.
4. That I remember in 1999 the plaintiff company supplied vegetable oil of 60 (sixty) metric tones to the defendants at their joint several demands in Kano.
5. That the defendants made some part payment as against the said supplied vegetable oil and issued post-dated cheques for the months of March and April, 2000.
6. That the said cheques were not honoured on presentation for payment at their various dates.
7. That I have seen the unpaid cheques issued by defendants, which are ten (10) in number.
8. That the ones issued by the 1st defendant are herein annexed and marked as exhibits A, A1 – A4.
9. That the ones issued by the 2nd defendant are also herein annexed and marked as exhibits B, B1 – B4.
10. That the total sum of the said exhibits as shown in paragraphs 8 & 9 of this affidavit amounted to the sum of N3,088,000.00.
11. That the defendants have since after the non payment of the said exhibits paid the total sum of N320,000.00 leaving now the unpaid sum of N2,768,000.00 as still outstanding sum.
12. That I know as a matter of fact that the defendants have sold all the supplied vegetable oil yet they have refused to pay the plaintiff.
13. That I also know as a matter of fact that the defendants have no defence at all for not paying the plaintiff the said balance of N2,768,000.00.”

The relevant facts in the appellants’ affidavit in support of its notice of intention to defend the suit on the other hand are contained in paragraphs 3 – 12 of that affidavit at pages 56 – 57 of the record as follows:
“3. That I have the authority of the 2nd defendant to depose to this affidavit from facts within my knowledge and information received by me which I verily believe to be true.
4. That the contractual transaction in dispute which led to this suit is between the plaintiff and the 2nd defendant.
5. That the said contractual transaction was the supply of refined kitchen vegetable oil to the tune of N4,388,482.S0 to the 2nd defendant, the invoices for the supply of the said oil is hereby attached and marked as exhibit ‘A – A1’. The invoices were prepared and given out by the plaintiff to the 2nd defendant.
6. That the plaintiff’s exhibit A – A4 were issued in respect of the transaction contained in exhibit ‘A-A1’.
7. That apart from exhibit A – A1, the 2nd defendant had no other business with the plaintiff.
8. That sequel to the issuance of the post dated cheques attached to the Writ of Summons the plaintiff and 2nd defendant had entered into an agreement on the mode of payment now shown to me and marked exhibit ‘B’ is a copy of the agreement.
9. That the amount on all the personal cheques issued by me have been redeemed hence the difference in the claims on writ of summons and the attached invoice issued by the plaintiff.
10. That in the course of the relationships between the parties additional money has been paid to the plaintiff directly and through the Police to whom the plaintiff had also referred in this matter.
11. That the 2nd defendant is actually not indebted to the plaintiff any longer upon reconciliation of the account and especially having regard to all monies already paid to the plaintiff through the various sources.
12. That I am just a director and shareholder of the 2nd defendant company.”

After considering the affidavit of both the respondent and the appellants as well as the submission of counsel to the parties, the learned trial Judge inter alia held:
“Consequently, I agree with the noble submission of Chief Osuagwu learned counsel to the plaintiff that there is nothing in the defendants’ affidavit in support of intention to defend that raises a triable issue. The affidavit therefore does not disclose a defence on the merit warranting the transfer of the claim to general cause list and evidence call in proof therefore in any circumstance I enter judgment for plaintiff under the undefended list in the sum of N2,768,000.00 plus 10% court interest as from today until the judgment sum is fully paid.”

It is clear to me that in resolving issue No.1 in this appeal what I have to consider is whether the appellants’ affidavit in support of the notice of intention to defend has disclosed a good defence to warrant the action being transferred to the general cause list where pleadings will be ordered and evidence be given by the parties in support of their respective case. Whenever application is made to a court for the issuance of a writ of summons in respect of claim to recover a debt or a liquidated money demand and such an application is supported by an affidavit setting forth the ground upon which the claim is based and stating that in the plaintiff/applicant’s view that there is no defence thereto, the court shall if satisfied that there are good grounds for believing that there is no defence thereto, enter the suit for hearing in what shall be called the “Undefended List” and marked the writ accordingly and enter thereon on a date for hearing subject to the circumstance of the particular case. If the party served with the writ of summons and affidavit delivers to the Registrar that he intends to defend the suit, together with an affidavit disclosing a defence on the merit, the court may give him leave to defend upon such terms as the court may think just. However, for an action to be transferred to the general cause list from the undefended list, there must be a defence on the merit.

It must not be a halfhearted defence. See Franchal (Nig.) Ltd. v. Nigerian Arab Bank (1995) 8 NWLR (Pt.412) 176 at 188.

It is a settled principle of law for an action filed under the ‘undefended list’ to be referred to the general cause list, the defendant must present a defence to the action on the merit. It is not enough for the defendant merely to deny the claim or aver that some payment he made were not taken into account. He must set out the details and particulars of the defence. See Adegoke Motors Ltd. v. Adesanya (1989) 3 NWLR (Pt.109) 250; Nishizawa Ltd. v. Jethwani (1984) 12 SC 234; UTC v. Pamotei (1989) 2 NWLR (Pt.103) 244; and John Holt & Co. (Liverpool) Ltd. v Fajemirokun (1961) 1 All NLR 492.

It is the law that if the learned trial Judge finds that the appellants have no defence to the respondent’s suit which has been placed under the undefended list under Order 23 rule 1 of the Kano State High Court (Civil Procedure) Rules 1988, he has no option other than to enter judgment for the respondent for the sum of money that it claimed.

Having carefully examined the affidavits filed in support by the respective parties in this case, as well as the exhibits, it is clear to me that the appellants’ affidavit did not disclose a defence to warrant transferring the case to the general cause list. In fact, the appellants have admitted the transaction but claimed in their paragraphs 10 and 11 of their affidavit in support of their notice of intention to defend to have paid the respondent directly or through the Police. Appellants also denied owing the respondent from the reconciliation of their account. I agree with the learned counsel for the respondent that paragraphs 10 and 11 heavily relied upon by the appellants did not disclose a defence because they are in effect mere denial having failed to furnish the details and necessary particulars.
It is significant to note that the affidavit in support of the notice of intention to defend was deposed to by Alhaji Sule Haruna of No.825/826, Galadima Road, Sabon Gari, Kano, The Managing Director of the 2nd defendant/appellant who is also the 1st defendant/appellant.

The case of N.A.B. Ltd v. Felly keme (Nig.) Ltd (supra) relied upon by the learned counsel for appellants is unfortunately not helpful to the case of the appellants as the case of the appellants has not satisfied any of the three conditions enumerated in the said judgment to warrant the appellants’ case being transferred to the general cause list. I therefore resolved issue No.1 against the appellants in favour of respondent in that the learned trial Judge was right in proceeding to enter judgment against the appellants under the undefended list procedure.

Learned counsel for the appellants on issue No.2 submitted that it is elementary principle of law that upon incorporation a company acquires a distinct legal personality of its own separate and distinct from that of its constituent members, citing Salomon v. Salomon & Co. Ltd (1987) A.C. 22 in support of his submission. It is pointed out that the 2nd defendant, Al-Sul Tahir Oil Co. Ltd, is an incorporated company and therefore separate and distinct from its members. Reference was made to the Supreme Court case of Kano State Oil and Allied Products Ltd. v. Kofa Trading Co. Ltd. (1996) 3 NWLR (Pt.436)244 where the principle in Salomon v. Salomon was applied by the Supreme Court of Nigeria.

He contended that the trial court therefore erred in law when it proceeded to hold the 1st defendant/appellant, a shareholder and director of the 2nd defendant/appellant jointly liable with the 2nd defendant in respect of a contract entered into only by the 2nd defendant/appellant.

It is further submitted that the 1st defendant/appellant ought not to have been joined in the suit as no reasonable cause of action is disclosed against him as the subject matter of the transaction was strictly between the plaintiff/respondent and 2nd defendant/appellant.

Learned counsel cited several authorities in support of issue No.2 and urged the court to resolve issue No.2 in favour of the appellants.

Replying on issue No.2, learned counsel for the respondent stated that the defendants/appellants are both legal persons that can sue and be sued and the reasons for taking out a writ of summons under the undefended list procedure is contained in paragraphs 1-13 of the plaintiff/respondent’s affidavit contained at page 54 of the record. Learned counsel pointed out that throughout the proceedings before the lower court the defendants/appellants, 1st defendant/appellant inclusive did not deny issuing exhibits A, A1 – A4 and B, B1 – B4. He said that the exhibits are cheques that were all dishonoured upon presentation for payment and it is for that reason that the respondent as plaintiff sued the appellants as defendants to recover the amount in respect of the dishonoured cheques.

Learned counsel urged the court to resolve issue No.2 in favour of the respondent.

At pages 18 – 19 of the record, dealing with the liability of the 1st defendant/appellant, the learned trial Judge held as follows:
“There is no doubt that all the goods supplied to the 2nd defendant by the plaintiff were delivered to the 1st defendant who was responsible for running the business of the 2nd defendant. Since this is the case, he was required to observe utmost good faith towards the 2nd defendant in any transaction with it or on its behalf.

This is again what the 1st defendant has failed to do and which appeared to have landed the 2nd defendant
… He must therefore be held liable for what he had caused to the 2nd defendant. He cannot therefore opt out of the liability because the same Article 279(8) provides:
‘The provision whether contained in the Articles or Resolution of a company or in any contract shall relieve any Director from the duty to act in accordance with this section or relieve him from any liability incurred as a result of any breach of duties conferred upon him under this section.’

As I have pointed out above, Article 283 of the Companies and Allied Matters Decree makes the 1st defendant the trustee of the 2nd defendant’s monies and properties and it makes him accountable for the monies and the properties. Similarly, Article 279 (1) also makes the 1st defendant to stand in fiduciary relationship towards the 2nd defendant and was expected to observe good faith towards the company in any transaction with it or on its behalf. The 1st defendant had failed to do all these and as I had said he had landed the 2nd defendant in a state of bankruptcy. He is therefore liable …”

I must confess that I had difficulty in making up my mind as to whether issue No.2 formulated by the appellants arose before the trial court but since it is better to err on the side of caution coupled with the fact that this is not the last court of the land, I have decided to deal with the issue having regard to the finding of the learned trial Judge on the issue. But it appears to me particularly from the submission of the learned counsel for respondent that the issue of the liability of the 1st defendant was not raised at the trial court. Be that as it may, I will proceed to determine the issue.

Let me start by first saying that ground of appeal is defined as any wrong decision, resolution, interference or step taken by the court below, which in the contention of an appellant is wrong. From the definition, it is trite that, a ground must relate to a decision or judgment appealed against and should challenge the validity of the ratio in the judgment. See Dr. Ogo Ella & Ors. v. Ella Agbo & Anor. (1999) 8 NWLR (Pt.613) 139. Any ground of appeal therefore that is not based on an issue that was canvassed should either be ignored or struck out. As the issue of the liability of the 1st appellant/defendant was not raised before the trial court, ground of appeal No. 2 is incompetent so also issue No.2 formulated from the said ground.

I therefore strike out ground of appeal No.2 as well as issue No.2.

Assuming I am wrong in holding that ground No, 2 of the notice of appeal is incompetent, I believe I am not, I hold from the submission of both counsel and the judgment of the trial court, the learned trial Judge is right in my view in holding the 1st defendant/appellant jointly liable. In fact, the 1st defendant/appellant in paragraph 9 of the affidavit in support of the notice of intention to defend, admitted his involvement in the transaction.

I am also of the view that what this court is to decide is whether the decision or the judgment of the trial court is right not whether its reasons for judgment were. See the cases of R.A. Ukejianya v. J.I. Uchendu (1950) 13 WACA 45 at 46; Abel Nkado & 2 ors v. Ozulike Obiano & Anor. (1997) 5 NWLR (Pt.503) 31, 56; Allied Bank of Nigeria Ltd. v. Jonas Akubeze (1997) 6 NWLR (Pt.509) 374,404. I therefore resolved issue No.2 in favour of the respondent.

In the result, I hold that this appeal is devoid of merit and is hereby dismissed. I therefore affirmed the judgment of the learned trial Judge, Yusuf J., delivered on 26/3/2001 with costs assessed at N5,000.00 in favour of the respondent against the appellants.

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Other Citations: (2003)LCN/1407(CA)