Public Finance Securities Ltd. & Anor V. Sir Chief Harrison Jefia (1998)
LawGlobal-Hub Lead Judgment Report
ROWLAND, J.C.A.
This appeal is from a judgment of Obi, J., sitting at the Warri Division of the Delta State High Court in Suit No. W/216/93 given on 15th April, 1994 wherein in an action brought under the undefended list by the respondent, he adjudged the appellants liable jointly and severally to pay the sum of N3, 593,851.00 (Three Million, five hundred and ninety three thousand, eight hundred and fifty one naira) which sum was to attract 40% interest from 8th August, 1993 till 31st December, 1993, and a further interest of 15% from the last date till 15th April, and a further interest of 10% from 15th April 1994 until payment. The case of the respondent was that he made several deposit placements totalling N3, 593,851.00 with the 1st appellant based on the assurance and warranty of the 2nd appellant, that upon maturity the respondent will be paid.
The respondent filed a writ of summons with an affidavit that the matter be placed on the ‘Undefended List’, when it was manifestly clear that the appellants could not pay the sum placed on fixed deposit.
The appellants entered conditional appearance upon service of the writ on 15th day of November, 1993, and on the same date filed “Notice of Intention” to defend the suit. They thereafter on 7th day of February 1994 filed a Notice of Preliminary objection to the suit.
The Court of trial heard argument on the preliminary objection filed by the appellants and with the consent of plaintiff and defendants counsel, adjourned the matter to 16th day of March, 1994, to resolve by oral evidence, whether the 1st defendant’s office was situate in Warri, Delta State. The respondent called three witnesses to substantiate the fact that the 1st defendant had an office in Warri, within the jurisdiction of the court whilst the appellants called two witnesses. The learned trial Judge in a considered judgment found for the respondent on the 15th day of April, 1994. Dissatisfied with the judgment of the court below the appellants appealed to this court. The Notice of Appeal at pages 49 – 51 of the record of proceedings contains four grounds.
Briefs of argument were filed and exchanged.
From the grounds of appeal the appellants raised three issues for determination. They read as follows:-
“(a) Whether or not the Honourable Judge was right in holding that the Honourable Court was competent and seised of jurisdiction in entertaining the action of the plaintiff as formulated?
(b) Whether or not the learned trial Judge was right in still retaining the cause in the undefended list in the face of defence disclosed and the affidavit of the parties necessitating the Honourable Judge to call evidence to resolve the conflicts in some aspect of the case.
(c) Whether or not the trial Judge was right in holding the 2nd appellant liable jointly on ground or failure to account for money invested by the plaintiff with the 1st appellant and thus invoking the provision of S. 290 of the Company and Allied Matters Act, Laws of the Federation of Nigeria 1990 in the face of the plaintiff’s failure to comply with Order 25, rule 5, of the Bendel State High Court (Civil Procedure) Rules 1988 (as applicable in Delta State and proceeding to hold that the 2nd appellant had no defence to the action?”
On his own part the respondent also raised three issues for determination. They read:-
(i) Whether there was service of the Writ of Summons and other processes on the 2nd appellant.
(ii) Whether the learned trial Judge was right in lifting the veil of incorporation pursuant to Section 290 of the Companies and Allied Matters Decree 1990 and holding the 2nd appellant liable for debt owed by the 1st appellant.
(iii) Whether the learned trial Judge was right in proceeding with the matter under the “Undefended List”.
The respondent at page 3 of his brief set out four preliminary objections relating to jurisdiction vis-‘C3 -vis the grounds of appeal of the appellants.
It was submitted for the respondent that the appellants in their Brief of Argument particularly in pages 3, 4 and 5 is challenging the competence and jurisdiction of the High Court of Justice, Warri to entertain the action by virtue of the facts stated in 3(i), (ii), (iii) and (iv) at page 2 of the respondent’s brief.
It was contended for the respondent that all those issues and arguments do not fall within any of the four grounds of appeal filed by the appellants. It was submitted that the only ground of appeal relating to jurisdiction that is, ground 1 specifically related to non-service of writ and other processes on the 2nd appellant and that it had no bearing whatsoever, whether the Bond Certificate were referable to Lagos or that the contract was to be performed in Lagos.
It was argued that the arguments being postulated in pages 3, 4 and 5 of the appellants’ Brief of argument do not relate to any of the four grounds of appeal filed by the appellants.
It was therefore submitted for the respondent that any part of the appellants’ brief of argument not arising from any ground of appeal filed, is incompetent and should be struck out.
The appellants argued at pages 3, 4 and 5 of their brief that the lower court lacked territorial jurisdiction to entertain the action and that the Bonds Certificate evidencing the transactions were referable to Lagos, a place outside the jurisdiction of the court below. It is also the contention of the appellants that the contract between the parties being written and oral was referable to Lagos and not Warri and that the place of contract was Lagos and not Warri.
The ground of appeal that touches the jurisdiction of the lower court is ground 1 and it reads as follows:-
“1. The court lacked jurisdiction to entertain the claim and give judgment against the 2nd defendant/appellant.
Particulars
(a) The 2nd defendant was not served with any of the other processes filed in the matter.”
I have taken a hard look at Ground 1 of the four grounds of appeal and I am satisfied that it does not cover the issues raised at pages 3 to 5 of the appellants’ brief of argument stated above. The issues are also not covered by any other ground or grounds of appeal. It is therefore my view that the arguments contained at pages 3, 4 and 5 of the appellants’ brief of argument are not covered by any ground of appeal and therefore incompetent and should be struck out and it is hereby struck out. See Kafora Oje v. Chief Ganiyu Babalola (1991) 4 NWLR (Pt.185) 267 at 270.
Having dealt with the preliminary objection raised at page 2 paragraph 3.0 of the respondent’s brief I now move on to the consideration of the issues formulated by the parties. It seems to me that the three issues formulated by the respondent are more succinct and have more direct bearing to the facts of this case. I shall therefore treat this appeal in accordance with the issues as formulated by the respondent. In any case, after a closer look at the issues formulated by the parties in their briefs they tend to amount to one and the same thing.
The first issue for determination is whether or not there was service of the writ of summons and other processes on the 2nd appellant.
It was submitted for the appellants that the 2nd appellant was not served with the originating process. It is the contention of the appellants that since the writ of summons was not served on the 2nd appellant and he did not submit to the jurisdiction of the court, the court below had no jurisdiction over him. Reference was made to the case of Nwahueze v. Okaye (1988)4 NWLR (Pt.91) 664 at 667 and Order 12 rule 1 of the Bendel State High Court (Civil Procedure) Rules, 1988 applicable to Delta State. It was contended that the consequence of this case is that the judgment founded on non-service of an originating process is null and void.
For the respondent, it was submitted that it is trite law that the service of the writ of summons and other processes of the court on the 2nd appellant is a cardinal prerequisite enabling the court to have competence and jurisdiction to entertain the suit. Learned Counsel for the respondent in his brief cited the case of Skenconsult v. Ukey (1981) 1 S.C. 6 at page 26. It was submitted that the learned trial Judge made clear findings in his judgment that the 2nd appellant was served with the Writ of Summons in the following terms at page 27 and 33 of the record:-
“Upon being served with the Writ of Summons and the aforementioned affidavit, the defendant through their learned counsel, filed a Notice of Intention to defend, upon the facts set out in the affidavit of Louis Ekwesu, who described himself as the legal officer, in 1st defendant’s company”
“The 2nd defendant, although served with the Writ of Summons in this action, has never appeared one day in court, since the proceedings commenced ….”
It is the contention of the respondent that the 2nd appellant did not challenge this finding of court that he was duly served the Writ of Summons and other processes of court. It is manifest from the record at pages 10-13 that the defendants filed a Notice of Intention to defend the suit through their then Counsel C.O. Nnachor Esq. The Notice was dated 10th day of November, 1993.
This court is bound by the record of proceedings of the trial court. See Section 132(1) of the Evidence Act, Cap. 112 of the Laws of the Federation of Nigeria 1990. It is in accord with common sense and logic that if the defendants/appellants were not served with the Writ or Summons they would not have material on which their Notice of Intention to defend the action would be based. Infact they would not have had notice of the action talkless of filing a notice of intention to defend it.
There was further evidence that the 2nd appellant was served with the Writ of Summons and other processes as borne by page 17 of the record in the following terms:-
“Mr. Imadegbelo: ‘There is proof of service on the defendants. A copy of Hearing Notice was also sent to Defence Counsel by Courier services urges court that the matter is allowed to proceed. Court: I am satisfied that the defendants were served with the Hearing Notice. They have deliberately refused to appear either in person or through their counsel. The case may proceed”
It is my view that the learned trial Judge will only be satisfied that the 2nd appellant has been served the Writ of Summons by referring to the case file for the affidavit of service and record of service pursuant to Order 12 rule 28 and Order 12 rule 30 of the High Court Civil Procedure Rules, 1988 (Applicable to Delta State). The affidavit of service and record of service are usually enclosed in the case file, and the learned trial Judge can only be satisfied that the 2nd appellant has been served by reference to the case file. This was the view held in Mohammed v. Mustapha (1993) 5 NWLR (Pt.292) 222 at page 232. Unless one wants to resort to legal technicalities which is unacceptable, it goes without saying that the filing of memorandum of Conditional Appearance to the Writ of Summons and Notice of Intention to Defend both dated the 15th day of November, 1993 by the 2nd appellant’s counsel, is deemed to be on the instructions of the 2nd appellant, unless there is a clear evidence to the contrary. See Yonge v. Toynbee (1910) K.B. 215. It goes without saying also that the 2nd appellant cannot brief his counsel to file Memorandum of Conditional Appearance and Notice to Defend without being served with the plaintiff’s Writ of Summons and the affidavit attached.
“It is straining the rule on proof of service to say that a defendant who filed a defence to a Statement of Claim was not served with the Writ of Summons, because there was no bailiff endorsement on the Writ” per Olatawura J.S.C. in Okesuji v. Lawal (1991) 1 NWLR (Pt.170) page 661 at 678.
From the foregoing I am convinced that the 2nd appellant as well as the 1st appellant was duly served with the Writ of Summons of the case in hand, and therefore, the trial court had the jurisdiction to hear the case.
The second issue for determination is whether or not the learned trial Judge was right in lifting the veil of incorporation pursuant to section 290 of the Companies and Allied Matters Decree 1990, and holding the 2nd appellant liable for the debt owed by the 1st appellant. This is issue No. (C) in the Appellants’ brief.
It was submitted for the 2nd appellant that if adjudged as the agent of the 1st appellant, a fact which is not conceded, it is posited that to be found liable jointly and severally with the 2nd defendant, it must be established that within the purview of the provisions of S. 290 of the Companies and Allied Matters Act 1990, that the first appellant had an intent to defraud or was an agent trading or residing within the jurisdiction of the Honourable Court, in addition to the further requirement that he was in default and that occassioned an inability to return the loan or property within the ambit of the agreement of the parties.
It is the contention of the appellants that the respondents’ case did not disclose the giving of personal undertaking by the 2nd appellant to repay the money invested. It was argued also that the 2nd appellant is not an agent of the 1st appellant.
It was argued that by the tenor and wordings of S. 290 of the Companies and Allied Matters Act, the use of the phrase, “intent to defraud” and “default” carries with it the existence of a guilty intent. And that being so, it must be proved beyond reasonable doubt.
It was submitted that no place has it been shown by affidavit evidence that the 2nd appellant had the required guilty mind in the course of this transaction. Rather, evidence as introduced in the affidavit of the appellants that the down turn in the economy coupled with the political crises in the country occassioned down turn in the business of the 1st appellant, a fact that was not controverted by the respondent which ought to have been taken into consideration by the trial court.
For the respondent, it was submitted from the affidavit evidence filed by the parties in this suit; it was an established fact that the 2nd appellant was the Chairman and Managing Director of the 1st appellant Company, a finance institution.
It was contended that the respondent’s affidavit and evidence was categorical on the point that he made fixed deposit placement with the 1st defendant/appellant Company based on the assurance and warranty of the 2nd appellant. It was submitted that the 2nd appellant further assured and warranted to the respondent that his funds will be well managed and the principal and interest paid to him. It is the contention of the respondent that the 1st and 2nd appellants defaulted in payment of the sum as assured and had no reasonable explanation other than “the 1st defendant in common with other Non Bank and Investment Companies, suffered a decline in business fortunes due mainly to what has been described as political crises and orchestrated blackmail by some fraudulent staffers”. It was submitted that this defence by the appellants is fraudulent, reckless and a sham.
It was reasoned that to further compound the recklessness of the 2nd appellant, though served with the Writ or Summons and other processes of court, he refused to even appear in court to explain the failed investment of the respondent which he personally assured and warranted.
It was submitted that the learned trial Judge in his judgment at page 33 of the record about the 2nd appellant’s conduct, to wit:
“The 2nd appellant, although served with the Writ of Summons in this action, he never appeared in court one day.
He did not consider it desirable to come to court to explain the inconsistency in his dinner speech aforesaid”
It was contended that the averment by the respondent that the 2nd appellant warranted that his funds will be diligently managed and that he will be paid the fixed deposit placement was not traversed or denied. According to the respondent this warranty denotes a binding promise for which the 2nd appellant could be held liable. Reference was made to Stroud’s Judicial Dictionary, Fourth Edition Vol. S – Z at page 2979 of the definition of “Warranty”. It was further contended that the respondent’s affidavit evidence is clear on the point that the 2nd appellant negotiated the entire transaction with him, signed all the bonds assured and warranted payment upon maturity. It was submitted that the 2nd appellant is liable for his role unless there was clear evidence in rebuttal of the alleged role. It was argued that this is a proper case to lift the veil of incorporation pursuant to the provisions of section 290 of the Companies and Allied Matters Decree, 1990.
I must say that it is trite law that the court will lift the veil of incorporation of any company to find out who was behind the fraudulent and improper conduct. This would be necessary where the canopy of legal entity is used to defeat public convenience, justify wrong, perpetuate and protect fraud and crime.
In the case of Littlewoods Stores Ltd. v. I.B.C. (1969) 1 W.L.R 1241. Lord Denning M.R. had this to say:-
“The doctrine laid down in Salmson’s case has to be watched very carefully. It has been supposed to cast a veil over the personality of a limited liability company through which the court cannot see. But that is not true. The court can, and often does, draw aside the veil. They can and often do pull down the mask. They took to see what really lies behind. The legislature has shown the way in group Accounts and the Rest. And the court would follow suit”.
The courts have in other situations where Company was involved in reckless or fraudulent trading oractivities tainted with fraud pierced the veil of incorporation. See Jones v. Lipman (1962) 1 WLR 482: Gilford Motors Co. Ltd. v. Home (1933) Ch 935; Re Surgis press Ltd. (1933) Ch. 935.It appears to me to be unacceptable that the 2nd appellant after inducing the respondent through his assurance and warranty to place funds with the 1st appellant Company of which he is the Chairman and Managing Director, provide no defence for failure to repay the funds other than “general decline in business due mainly to political crises and orchestrated blackmail by some fraudulent staffers “… The Supreme Court of Nigeria has held situations of this nature to amount to constructive fraud, in Trenco (Nig) Ltd. v. African Real Estates and Investment Ent. Co. Ltd. (1978) 4S.C. 9 at page 28. See also Nocton v. Lord Ashburton (1914) A.C. 932; Eboni Finance and Securities Ltd. v. Wole-Ojo Technical Services Ltd. & Ors. (1996) 7 NWLR (Pt.461) page 464 at page 478.
From the foregoing, I agree with the learned trial Judge in his judgment that the 2nd appellant should disgorge the respondent’s funds since he gave no valid reason for the failed investment placement or accounted for the money during trial, despite the fact that he had opportunity to do so.
It seems to me that by virtue of Section 290 of the Companies and Allied Matters Decree 1990, where as in this case, a Company receives money by way of loan for a specific purpose and with the intent to defraud fails to apply the money for the purpose for which it was received, every Director or Officer of the Company shall be personally liable to the person from whom the money was received. It is patently clear that Section 290 of the Companies and Allied Matters Act 1990 is wide enough to cover the situation herein where as borne by the record the 2nd appellant, as the Chairman and Managing Director of the 1st appellant Company had recklessly refused to attend court to explain or defend the failed investments of the respondent, but instead Fabricated a sham defence “that the 1st defendant in common with other Banks and Investment Companies, suffered a decline in business fortunes due to political crises and orchestrated blackmail by some fraudulent staffers.
The learned trial Judge at page 39 lines 2 to 11 of the record said:-
“The money invested by the plaintiff represents a loan to the 1st defendant for the sole purpose of yielding interest. The Company is not willing to pay and says that it is in some distress and has resorted to all sorts of subterfuge in order to avoid payment of the sum appearing on the Bond Certificates. I have already shown that this is only but a sham and fraudulent defence that is put forward. The question is what did they do with the money? It is fraud in my view to establish a Financial Institution that collects money from the general public by way of investments and turn round to disappoint their legitimate expectation under the guise of having a general decline in business.”
The above quoted passage from the judgment of the trial court cannot be faulted as it is supported by both the affidavit and oral evidence contained in the record of proceedings. I agree with him. I also agree with him that this is a proper case to invoke the provisions of section 290 of the Companies and Allied Matters Decree 1990 to protect the respondent and hold the 2nd appellant liable jointly and severally with the 1st appellant for debt owed the respondent.
The last issue for consideration is issue (iii) in the respondent’s brief which is issue No. (6) in the appellants’ brief. It is whether or not the learned trial Judge was right in proceeding with the matter under the “undefended list”. It is the contention of the appellants that the defence raised in the affidavit setting out the grounds of the defence of the appellants disclosed substantial materials in favour of the appellants and or the 2nd appellant to warrant the appellants to be permitted to be allowed to contest the respondent’s claim.
The above is the sum total of the argument advanced by the appellants that the matter should be remitted to the court below for rehearing on the general cause list.
For the respondent, it was submitted that the appellants had no bona fide or defence on the merit to warrant the matter being transferred to the general cause list. It was contended that a bonafide and meritorious defence is the prerequisite for transfer of a matter from the undefended list to the general cause list.
I have read carefully the affidavit of the appellants at pages 10, 11, 12 and 13 of the record and I am satisfied that the appellants had no defence on the merits to enable the court below transfer the matter from the “Undefended List” to the general cause list. The appellants as borne by the record only slovenly stated past investments which have been repaid and closed in paragraphs 6 and 7 of the appellants’ affidavit setting out the grounds of defence and in page 11 of the record evasively stated in paragraphs 9 and 10 of their affidavit as follows:-
“(9) The details of the other payments will be supplied at the trial.
(10) That the plaintiff is aware that the 1st defendant has only recently suffered in common with other Non-Bank Finance and Investment Companies a general decline in business due mainly to political crises and orchestrated blackmail by fraudulent staffers.”
Surely the above averments are not germane and serious enough to warrant the court below to transfer this matter from the ‘Undefended List’ to the general cause list.
Order 23 rule 3(1) of the Bendel State High Court (Civil Procedure) Rules, 1988 (Applicable to Delta State) enables the court to transfer a matter from the “Undefended List” to the general cause list but there must be a defence on the merit.
As to what amounts to a defence on the merit. See Agueze v. Pan African Bank Ltd. (1992) 4 NWLR (Pt.233) 76 at 88 – 89; Bell Thomas Hotels Ltd. v. Sebi Furniture Ltd. (1989) 5 NWLR (Pt.123) 523 at 529; Adegoke Motors Ltd. v. Adesanya & Anor. (1989) 3 NWLR (Pt.109) 250; Nishizawa Ltd. v. Jethawani (1984) 12 S.C. 234: U.T.C. Nigerian Ltd. v. Pamotei (1989) 2 NWLR (Pt.103) 244; John Holt & Co. Liverpool Ltd. v. Fajemirokun (1961) All NLR 492.
In Franchas (Nig.) Ltd. V. NAB. Ltd. (1995) 8 NWLR (Pt.412) 176 at page 188; Akintan, J.C.A. said:-
“On the nature of the defence which must be put across by the appellants, the requirements of the law are that before their application for transfer of action from the Undefended List could succeed, they were expected to present a defence to the action on the merit. It was therefore not enough merely for them to deny the claim or aver that some payments they made were not taken into account, without setting out the details and particulars of such payments”It must be noted that the counsel for the appellants in his briefs raised dust of legal technicalities to hoodwink this court In the case of the State v. Gwonto & 4 Ors. (1983) 1 SCNLR 142; (1983) S.C. 62 at 76, the Supreme Court said:-
“Justice can only be done if the substance of the matter is examined. Reliance on technicalities leads to in justice.”
In the case in hand, the learned counsel for the appellants would want us to use legal technicalities to defeat the justice that this case demands. We shall certainly not allow that to happen.
In the light of the foregoing, this appeal must fail and I accordingly dismiss it. The judgment of the lower court is affirmed. The respondent is entitled to costs assessed at N2.000.00.
Other Citations: (1998)LCN/0359(CA)
