Chartered Brains Limited & Anor V. Intercity Bank Plc (2009)
LawGlobal-Hub Lead Judgment Report
JIMI OLUKAYODE BADA, J.C.A.
This is an appeal against the Judgment of the High Court of Niger State in the Minna Judicial Division, delivered on the 11th day of December 2003 in Suit No: NSHC/M/69/2001: INTERCITY BANK PLC VS. (1) CHARTERED BRAINS LTD (2) ABDUL ZUBAIR.
The Respondent as Plaintiff in the Court below had by paragraph 15 of its statement of claim against the Appellants as Defendants claimed as follows:-
“Whereof the Plaintiff claims the sum of N7,460,259.85K being the balance of the loan (unpaid) granted by the Plaintiff to the Defendants with interest at 21% per annum from the date this suit was filed and thereafter 10% interest till the entire sum is fully liquidated.”
At the conclusion of hearing, the learned trial Judge delivered Judgment in favour of the Plaintiff granting the relief sought.
The Defendants/Appellants being dissatisfied with the Judgment of the lower Court now appealed to this Court.
The Learned Counsel for the Appellant formulated four issues for determination as follows:-
“(1) Whether the Respondent’s action at the lower Court was already statute barred at the time the action was commenced.
(2) Whether the 2nd Appellant was privy to the term loan agreement that gave rise to this action and whether he can be sued and held liable under the said term loan agreement.
(3) Whether the Respondent had any reasonable cause of action against the 2nd Appellant.
(4) Whether the lower Court had jurisdiction to hear and determine this matter on merit.”
The Learned Counsel for the Respondent did not formulate any issue for determination but he adopted the issues as formulated by the Learned Counsel for the Appellants.
At the hearing, Learned Counsel for both the Appellants and the Respondent adopted and relied on their respective briefs of argument.
Since the Learned Counsel for the Respondent has adopted the issues for determination formulated by Learned Counsel for the Appellants, therefore this appeal shall be determined upon the said issues for determination.
Issue 1
Whether the Respondent’s action at the lower Court was already statute barred at the time the action was commenced.
The Learned Counsel for the Appellants stated that although the issue of the action being statute barred was not raised in the lower Court but this Court on 10th May 2007 granted leave to the Appellants to raise and argue the issue on Appeal.
He stated further that the cause of action in this suit arose out of a loan agreement (contract) between the 1st Appellant and the Respondent dated the 14th day of February 1995. See pages 37, 38 and 39 of the Record of Appeal.
He contended that the Respondent’s cause of action arose on the 14th day of May 1995 upon the expiration of the loan facility on the 13th day of May 1995. The Respondent according to Learned Counsel for the Appellants had up to 6 years to sue for the recovery of the 1st Appellant’s indebtedness to it under the loan agreement. And the period between 14/5/95 and 11/6/2001 is 6 years 29 days.
He referred to Section 7(1 )(a) of the Limitation Act Cap 522 Laws of the Federation of Nigeria 1990. And submitted that 6 years reckoned from the 14th day of May 1995 when the Respondent’s cause of action arose elapsed on the 13th day of May 2001 but that the Respondent instituted this suit at the lower Court on the 11th day of June 2001 i.e, 6 years and 29 days after the cause of action arose.
He referred to the Respondent’s letter of 25th August 1995 at page 40 of the Record of Appeal which he said confirmed that the loan facility granted to the 1st Appellant expired on the 13th day of May 1995.
He submitted that the Respondent ought to have brought this action on or before the 13th day of May 2001, but that instead he waited until 11th day of June 2001 as shown on the writ of summons on pages 1 to 2 of the Record of Appeal
He submitted that having not brought the action at the lower Court within (6) six years from the date cause of action arose, the action at the lower Court was statute barred by the time the suit was instituted. He referred to the following cases:-
Egbe vs. Adefarasin (1995) 1 NWLR Part 3 Page 549 at 551 Ratio 11; Adeosun vs. Jibesin (2001) 11 NWLR Part 724 Page 290 at 314 Paragraph E – F; N.P.A. vs. Lotus Plastics Ltd (2005) 19 NWLR Part 959 Page 158 at 182 Paragraph A – B and 188 -189 Paragraphs H to E.
Learned Counsel for the Appellants therefore urged that the Judgment of the lower Court be set aside and in its place dismiss the suit.
The Learned Counsel for the Respondent in his submission stated that the fixed term loan granted by the Respondent to the Appellants on 14th February 1995 expired on 13th day of May 1995. However between 1995 and October 1998 the Appellants made payment into their account with a view to offsetting the said loan. And with effect from 31/10/98 the Appellants defaulted in making further payment into their account. He went further that the Respondent commenced action vide writ of summons on 11/6/2001 to recover the unpaid loan balance of N7,460,259.85.
He submitted that between 1995 and October 1998, the Appellants acknowledged their indebtedness to the Respondent by making payment into their account with a view to offsetting the said loan (debt), afortiori, no cause of action could accrue before the date of such acknowledgment through part payment Rather the cause of action would accrue from the date of Appellant’s default which is 31st day of October 1998. He relied on the case of Mosojo vs. Oyetayo (2003) 31 WRN Page 1 at Pages 3 – 4.
In the instant appeal, the Learned Counsel for the Appellants submitted that the cause of action arose out of a loan agreement between the 1st Appellant and the Respondent dated 14th day of February 1995 and the facility formally expired on 13th May 1995. He stated that the Respondent’s cause of action arose on 14th day of May 1995 from which time the Respondent had up to 6 years to sue for the recovery of the loan. What then is the meaning of “cause of action.”
In Adeosun vs. Jibesin (2001) 11 NWLR Part 724 at Page 290:- A cause of action was defined as the entire set of circumstances giving rise to an enforceable action. It is in effect the fact or combination of facts which gives rise to a right to sue and it consists of two elements viz:-
(a) the wrongful act of the Defendant which gives the Plaintiff his cause of complaint and
(b) the consequent damage.
It is every fact that would be necessary for the Plaintiff to prove if traversed, in order to support his right to the Judgment of the Court, See – Akibu vs. Oduntan (2000) 13 NWLR Part 685 Page 466; Savage vs. Uwaechia (1972) 3 S.C. Page 213; Fadare vs. A.G. Oyo State (1982) 4 S.C. Page 1; Kusada vs. Sokoto N.A. (1968)1 All NLR Page 377; Murmansk State Streamship Line vs. Kano Oil Millers Ltd (1974) 12 S.C. Page 1; Mosojo vs. Oyetayo (supra).
In deciding whether there is a reasonable cause of action, the determining factor is the Writ of Summons and Statement of Claim. The Court will need to look at and examine the writ of summons and the averments in the Statement of Claim of the Plaintiff, See. Ajayi vs. Military Administrator, Ondo State (1997) 5 NWLR Part 504 Page 237.
A cause of action arises on the date when a breach or any step taken would warrant a person who is adversely affected by the act of another to seek redress in Court.
In the instant case, the cause of action i.e. the need to sue the Appellants for the recovery of the loan balance could not have accrued until October 1998 when the Appellants started defaulting. See paragraph 15 of the Statement of Claim on page 3 to 4 of the Record of Appeal which states thus:-
“Whereof the Plaintiff claims the sum of N7,460,259.85k being balance of loan (unpaid) granted by the Plaintiff to the Defendants.”
See also PW1’s evidence at page 20, line 26 to 30 of the Record of Appeal wherein PW1 stated thus,-
“The interest rate being charged in the loan kept mounting and by 1998 the balance on the account rose to N5,893,660.48 out of which the company paid the sum of N1,982,250.00 leaving a balance of N3,911,410.48 as at 31st October 1998.”
Also at page 25 lines 18 – 19 of the Record of Appeal, the DW1 testified thus:-
“Since the payment in 1998 we have not made any payment into our account. ”
It is therefore my humble view that the cause of action in this case accrued on 31st October 1998. The Writ of Summons in this case was issued on 11th day of June 2001.
The period between 31st October 1998 and 11th day of June 2001 is just about 2 years and 7 months and 11 days. Therefore it is not up to 6 years 29 days as alleged by Counsel for the Appellants.
Section 7 (1)(a) of Limitation Act Cap 522 Laws of the Federation of Nigeria 1990 provides thus:-
“(7)(1) The following action shall not be brought after the expiration of six years from the date on which the cause of action accrued-
(a) action founded on simple contract.
(b) …..
(c) …..
(d) …..
(e) …..
Under Section 37 of the same Limitation Act.
(1) Where:-
(a) a right of action has accrued to recover a debt; and
(b) the person liable therefor has acknowledged the debt, the right of action shall be deemed to have accrued on and not before the date of the acknowledgement, which in this case is 31st day of October 1998.
A legal right to enforce an action is not a perpetual right but a right generally limited by statute. After the date on which the applicable statute provides that legal proceedings cannot be taken, any person having a right of action can no longer competently institute an action. In other words, a cause of action is statute barred if legal proceedings cannot be commenced in respect of same because the period laid down by the limitation Law or Act has elapsed. See:-
Egbe vs. Adefarasin (1987) 1 NWLR Part 47 Page 1; Obiefuna vs. Okoye (1961) 1 All NLR Page 357; Military Administrator (Ekiti State) & Others vs. Aladeyelu & Others (2007) 40 WRN Page 158 at 183 (Ratios 1 & 2); Okafor & Others vs. A.G. Anambra State (2006) 15 WRN Page 103 at 114.
As I said earlier in this Judgment, the cause of action accrued on the 31st day of October 1998, and the 6 years limitation period will only start to run from that date.
In view of the foregoing, my inevitable conclusion is that the Respondent’s action at the lower Court was not statute barred.
This issue is therefore resolved in favour of the Respondent and against the Appellants.
Issue 2
Whether the 2nd Appellant was privy to the term loan agreement that gave rise to this action and whether he can be sued and held liable under the said term loan agreement.
The Learned Counsel for the Appellants referred to the loan agreement that gave rise to this action dated 14th day of February 1995 which is contained on pages 37, 38 and 39 of the Record of Appeal. The agreement was addressed to the Executive Director of the 1st Appellant and it shows the Appellant as the “Obligor” and the Respondent as “Lender”.
He went further that the only fact connecting the 2nd Appellant with the loan agreement though remotely was that he is a Director of the 1st Appellant.
He submitted that the 2nd Appellant not being a party to the contract is a stranger to it and can neither sue or be sued on the contract even if the contract is made for his benefits. He referred to the case of:-
Makwe vs. Nwukor (2001) 14 NWLR Part 733 Page 356 at 372 Paragraph C.
He also submitted that it was wrong for the Respondent to sue the 2nd Appellant in this action
He urged that the suit be dismissed against the 2nd Respondent.
In his own response the Learned Counsel for the Respondent referred to paragraphs 4, 5, 6 and 9 of the Statement of Claim and paragraph 2, 4, and 6 of the Amended Statement of Defence in order to show clearly that the 2nd Appellant is the 1st Appellant’s Chief Executive. He relied on the case of:-. Bebeji Oil Allied Products Ltd v. Pancosta Ltd (2007) 31 WRN Page 163,
He finally submitted that upon the state of pleadings referred to and the evidence led before the Court that the 2nd Appellant was properly joined as a party to the suit.
There are two things to be determined under this issue:-
(a) Whether the 2nd Appellant was privy to the term loan agreement.
(b) Whether he can be sued and held reliable under the said term loan agreement.
A careful examination of paragraphs 4, 5, 6 and 9 of the Statement of Claim and paragraphs 2, 4 and 6 of the Amended Statement of Defence showed that the 2nd Appellant is the 1st Appellant’s Chief Executive. He applied for the loan, accepted the terms and conditions of the loan and signed the loan agreement.
The 1st Appellant in this case is separate and apart from its members and officers. The locus classicus on this issue is the case of Salomon vs. Salomon & Company Ltd (1897) A.C. Page 22. In the case the House of Lords in reversing the decision of the Court of Appeal, held that a limited liability company is separate and apart from its members and officers. This decision was further magnified in the case of H. L. Bolton Co. VS. T. J. Graham (1956) 3 All E.R. Page 624 at 630 when Denning L. J. said:-
“A company may in many ways be likened to a human body.
They have a brain and a nerve centre which controls what they do. They also have hands which holds the tools and act in accordance with directions from the center. Some of the people in the company are mere servants and agents who are nothing more than hands to the work and cannot be said to represent the mind or will. Others are directors and managers who represent the directing mind and will of the company and control what they do. The state of mind of these managers is the state of mind of the company and it is treated by the law as such. So you will find in cases where the law requires personal fault as a condition of liability in tort, the fault of the managers will be the personal fault of the company.”
See Lennards Carrying Company vs. Asiatic Petroleum (1915} A.C. Page 705.
In Nigeria, the Companies and Allied Matters Act Cap 59 Laws of the Federation of Nigeria 1990 is the law that is responsible for the establishment and management of companies. Section 65 of the law provides thus:-
“Any act of the members in general meeting, the board of directors or of a managing director while carrying on in the usual way the business of the company, shall be treated as the act of the company itself and the company shall be criminally and civil liable therefore to the same extent as if it were a natural person.
Provided that:-
(a) The company shall not incur civil liability to any person if that person had actual knowledge at the time of the transaction in question that the general meeting, board of directors, as the case may be had no power to act in the matter or had acted in an irregular manner or if, having regard to relationship to the company, he ought to have known of the absence of such powers or the irregularity.
(b) If in fact a business is being carried on by the company, the company shall not escape liability for acts undertaken in connection with that business merely because the business in question was not among the business authorized by the company’s memorandum.”
It is therefore clear from the provisions above that a limited liability company or an incorporated company is a different legal entity from its management. It has a separate and distinct life and existence. In other words, the officers and members of an incorporated company are covered by the company’s veil of incorporation and that veil cannot be lifted for the purpose of attacking legal responsibility or liability to its officers who are carrying on the usual business of the company. See the following cases:-
Agbonmagbe Bank vs. G. B. Ollivant (1961) All NLR Page 116; Mailafia vs. Verital Insurance (1986) 4 NWLR Part 38 Page 802; Fawehinmi vs. N.B.A. (No. 2) (1989) 2 NWLR Part 105 at Page 558; Kurubo vs. Zach Mofison (Nig.) Ltd (1992) 5 NWLR Part 239 Page 102; Tuakti vs. NBC (1970) 2 All N.L.R. Page 147; Yusuf vs. J.A. Brothers (1991) 7 NWLR Part 201 Page 39; Ogbodo vs. Quality Finance Ltd (2003) 6 NWLR Part 815 Page 147.
On the other hand a Director or Managing Director of a company shall be held liable or responsible when it is alleged in the statement of claim and it is supported by concrete evidence that the Director or the Managing Director is a surety or a guarantor to the trade debt of the company. In Coop Bank Ltd vs. Obokhare (1996) 8 NWLR Part 468 Page 579 it was held that a Director of an incorporated company cannot be held liable for the loan granted in favour of the company unless he is either a surety or a guarantor of the loan granted to the company.
Section 283 (2) of the Companies and Allied Matters Act Cap 59 Laws of the Federation of Nigeria 1990 provides that a Director is regarded as an agent of the company under Part III of the Act when he is acting within the authority and the powers of the company. As an agent therefore he owes the company a duty of care, However if in the course of winding up of a company, it appears that any business of the company has been carried out in a reckless manner or with intent to defraud creditors of the company the Court on the application of the official receiver or liquidator or any creditor or contributory of the company may, if it thinks proper so to do declare that any persons who were knowingly parties to the carrying on the business in the manner aforesaid, shall be personally responsible without any limitation of liability for all or any of the debts of other liabilities of the company. See Section 506 of the Companies and Allied Matters Act.
In this appeal under consideration, even though the 2nd Appellant is a Director of the 1st Appellant and the transactions culminating in the loan package to the 1st Appellant was arranged and conducted by the 2nd Appellant on behalf of the 1st Appellant, in view of the authorities earlier considered on this issue the 2nd Appellant cannot be said to be privy to the term loan agreement which gave rise to this action, he can only be sued if the Statement of Claim filed by the Respondent alleges that the 2nd Appellant either acted fraudulently or that he guaranteed or stood surety for the trade debt of the 1st Appellant. Furthermore, there must be concrete evidence to support the assertion in the Statement of Claim Since there is no allegation of fraud or that the 2nd Appellant guaranteed or stood surety for the debt of the company, the 2nd Appellant cannot be sued or held liable under the term loan agreement.
In the circumstance this issue is resolved in favour of the Appellants against the Respondent.
Issue 3
Whether the Respondent had any reasonable cause of action against the 2nd Appellant.
Learned Counsel for the Appellant referred to the loan agreement that culminated in this action which is contained on pages 37, 38 and 39 of the Record of Appeal.
He submitted that a person who is not a party to a contract such as the 2nd Appellant in the instant case can neither be sued nor made liable under the contract He referred to the case of:- Makwe vs. Nwukor (supra) at page 372 Paragraph C – D.
He submitted that the 2nd Appellant not being a party to the contract that resulted in this action, the Respondent does not and cannot have a cause of action against the 2nd Appellant under the contract that culminated in this action.
He therefore urged that the Judgment of the lower Court should be set aside and suit against 2nd Appellant dismissed.
The Learned Counsel for the Respondent adopted his submission on issue 2 and submitted that the Respondent had a reasonable cause of action against the 2nd Appellant as shown by issues joined/admitted in the parties pleading and evidence led at the trial Court.
He submitted that in determining whether there is a reasonable cause of action against the 2nd Appellant only the Respondent’s Statement of Claim shall be considered by the Court. He stated further that the Statement of Defence is immaterial at this stage.
He referred to the following cases:-
Taiye Oshoboja vs. Amuda (1992) 7 SCNJ Part II Page 317 at Page 326 Ratio 1;
Bebeji Oil Allied Products Ltd vs. Pancosta Ltd (2007) 31 W.R.N. Page 163 at 191 Ratio 5.
The issue under consideration was partly dealt with under issue 2 above. I shall adopt my reasoning and conclusion in the said issue. In this appeal I have held that the 2nd Appellant was not privy to the term loan agreement that gave rise to this action. It is the law that a person who is a stranger to the consideration of a contract but who stood in such near relationship to the party from whom the consideration proceeds does not because of that become liable to be sued upon the contract and he cannot sue personally in respect of the contract. See – Makwe vs. Nwukor (supra).
According to decided authorities, it is the tradition for human beings to negotiate and execute agreements for on behalf of the company and where such agreement is so executed by a person in authority; the company is liable or deemed to be liable for the act or acts of the company.
In the instant appeal, although the Appellants admitted some paragraphs of the Statement of Claim of the Respondent at the lower Court where it was stated that the loan was applied for by the 2nd Appellant who signed the loan agreement and accepted the terms cum conditions attached
to the loan.
In this case all that the 2nd Appellant did was done on behalf of the 1st Appellant, therefore the 2nd Appellant was not a party to the contract between the 1st Appellant and the Respondent I therefore agree with the submission of Learned Counsel for the Appellant that a person who is not a party to a contract such as the 2nd Appellant can neither be sued nor made liable under the contract See – Makwe v. Nwukor (supra).
In view of the foregoing, it is my view that the 2nd Appellant not being a party to the contract which resulted in this action, the Respondent cannot have a reasonable cause of action against him.
This issue is also resolved in favour of the Appellants and against the Respondent
Issue 4
Whether the lower Court had jurisdiction to hear and determine the matter on merit.
The Learned Counsel for the Appellant repeated his submission on issue 1 herein.
The Learned Counsel for the Respondent also adopted all his submissions on Issue No.1.
In this appeal I have carefully considered the submissions of Learned Counsel for both parties,
This issue of whether the lower Court had jurisdiction to hear and determine this matter on merit was premised on the submission that the cause of action of the Respondent was already statute barred before the suit was instituted at the lower Court.
I have dealt extensively with this issue of whether or not the Respondent’s action at the lower Court was statute barred.
I shall adopt my reasoning and conclusions in the said issue 1. In the circumstance it is my humble view that the Respondent’s suit was not statute barred as at 11/6/2001 when it was commenced at the lower Court.
Therefore the lower Court had jurisdiction to hear and determine this matter on the merit.
This issue is also resolved in favour of the Respondent and against the Appellant.
In the final analysis, this appeal succeeds in part. Consequently the Judgment of the lower Court as far as the 2nd Appellant is concerned is hereby set aside. In its place the suit against the 2nd Appellant is hereby struck out. But as far as the 1st Appellant is concerned the trial Court’s Judgment against it is hereby affirmed and its appeal dismissed.
Other Citations: (2009)LCN/3170(CA)
