ISSUES

Whether there was any basis on which the Supreme Court could base its findings having regard to the finding of the lower courts that J.A Obanor was not insane when he negotiated with the respondent and signed the mortgage covering the advance by the respondent of N250,000 (Exhibit "B")?

Whether the appellant was, in any event, bound by the mortgage (Exhibit 'B')?

If J.A. Obanor had ceased to be a director of the appellant company at the time of the execution of the mortgage, what effect would that have had on the appellant's liability to the respondent?

Did the respondent advance J.A. Obanor the sum of N250,000 and execute a fresh mortgage deed in the knowledge that he (Obanor) was either: (a) mentally incapacitated; and/or (b) no longer a director of the appellant?

Whether the respondent was bound to have pleaded facts and circumstances for the invocation of equitable principle in its favour?

Whether the respondent was bound to have pleaded and proved that the appellant had obtained benefit from the advance of N250,000?

FACTS

The respondent advanced J.A. Obanor the sum of N250,000 on 26 July 1974, covered by a fresh mortgage deed (Exhibit 'B') executed by the said J.A. Obanor on behalf of the plaintiff in May 1977 to cover the advance. Exhibit 'B' constituted an agreement between the appellant (J.A. Obanor and Company (Nig) Limited) and the respondent (Co-operative Bank Limited). It was common cause that the advance would go to the account of the respondent, as the signatory to the agreement, and not to Mr J.A. Obanor as a person.

The appellant claimed not to be bound by Exhibit 'B' by reason of the fact that, firstly, J.A. Obanor was insane when he executed the agreement and secondly had ceased to be a director of the appellant. The appellant claimed further that the respondent was informed of these facts and nevertheless proceeded to advance the sum of N250,000 and execute a fresh mortgage deed.

The trial court found in favour of the respondent and the Court of Appeal upheld that decision. The respondent appealed again to the Supreme Court.

The appeal was dismissed.

HELD

(Per Mohammed, JSC - Ogwuegbu; Uwais, Ogundare and Kutigi, JJSC concurring)

1.      Ground of fact or law

Labelling a ground as one of law does not make it one. The ground may be examined to consider whether in fact it is a ground of law or of fact or of mixed law and fact.

2.      Powers of appeal courts with regard to findings of fact in lower court

The Supreme Court will not interfere with concurrent findings of fact of two courts below unless a miscarriage of justice or a perverse decision or improper exercise of judicial discretion has been established in the lower courts' judgment. Since the two lower courts rejected the contention of the appellant that J.A. Obanor was insane when he negotiated with the respondent and signed Exhibit 'B' the Appeal Court could not disturb such concurrent findings.

3.      Dealing with companies

Even if the respondent had the knowledge (which has not been proved) that J.A. Obanor had been removed as a director, under the rule enunciated in the case of Royal British Bank v Turquand [1843-1860] AER Rep 435 at 437 to 438, the appellant would still be liable for the amount advanced to the company. This is on the basis that, "while persons dealing with a company are assumed to have read the public documents of the Company and to have ascertained that the proposed transaction is not inconsistent therewith, they are not required to do more; they need not inquire into the regularity of the internal proceedings".

4.      When equity can be invoked

The characteristic common to all equitable remedies and which distinguishes them from common law remedies is their discretionary nature. The Nigerian courts can have resort to equitable principles and establish a remedy where strict adherence to common law rules would cause injustice and hardship to parties.

5.      Equity correctly applied

The Court of Appeal was correct in applying the principles of equity after being satisfied that the appellant company had received and benefited from the N250,000 loan advanced by the respondents to the appellant. The ratio of Trenco (Nigeria) Limited v African Real Estate and Investment Co Ltd & another (1978) 4 SC 9, (referring to the case of Montaignac v Shitta (1890) 15 App Cases 357) applied.

For the appellant: Mr T Esekody

For the respondent: Mr A O Eghobamien

The following cases were referred to in the judgment:

Nigeria

Alade v Alemuloke (1988) 1 NWLR 207

Enang v Adu (1981) 11-12 SC 25

Ntiaro v Akpan (1914-22) 3 NLR 9

Okechukwu Adimora v Nnanyelugo Ajufo & 2 others (1988) I NSCC 1005

Trenco (Nig.) Ltd v African Real Estate and Investment Co Ltd & another (1978) 4 SC 9

Foreign

Liggett (Liverpool) v Barclays Bank (1927) AER Rep 451

Montaignac v Shitta (1890) 15 App Cases 357

Royal British Bank v Turguand (1843-1860) AER Rep 435

Mohammed, JSC (Delivered the Leading Judgment):- In this appeal, the appellant, J.A. Obanor and Co Limited, as plaintiff at the Benin City High Court, filed an action claiming several declarations and an injunction against the respondent. In response, the respondent as the defendant before the trial High Court denied all the claims and filed a counter-claim against the appellant. The plaintiff's claim as per its amended Statement of Claim is as follows:-

"a)     A declaration that the said Mr J.A. Obanor ceased to be a Director of the plaintiff's company as from 14 July, 1976, and as such is incompetent to create any obligation for and on behalf of the plaintiff's company with the defendant or any other company.

b)      A declaration that the plaintiff company limited in liability as a corporate body is not competent to enter into and could not enter into any contract transaction beyond its normal share capital with the defendant company.

c)      A declaration that the signatory, Mr J.A. Obanor, to the purported unstamped mortgage registered at the office of Lands Registry, Benin City, as No 14 page 14 in Volume 425 between the plaintiff and the defendant was at the time of the purported agreement, incompetent to contract on behalf of the plaintiff company.

d)      A declaration that the mortgage, purportedly made on 26 July 1974, executed by the said J.A. Obanor on behalf of the plaintiff in May, 1977 and upstamped to cover N250,000 (Two hundred and fifty thousand Naira) and delivered for registration on 23 May, 1977 and registered as No 14 at page 14 in Volume 425 at the Office of the Land Registry, Benin City is false, null, void and of no effect whatsoever and is not binding on the plaintiff.

e)      An order setting aside the said mortgage.

f)       A declaration of the court that the parcel of land situate and lying at No 6 Dawson Road, Benin City on which resides the building of Continental Palace Hotel is the bona fide property of Messrs J.A. Obanor and Company Limited.

g)      An order of injunction to restrain the defendant, its servants, agents or privies from carrying out or proceeding with the advertised sale of the building of the Continental Palace Hotel, property of J.A. Obanor and Company Limited."

The respondent, in a counter-claim, filed together with the statement of defence, prayed for an order of the trial High Court for the sale of the lands and buildings specified as per the particulars, set forth hereto, and all of which (properties) covered by legal mortgage dated 19 August, 1969 and registered at No 10 at page 10 in Volume 69; by legal mortgage dated 20 May, 1977 and registered as No 9 at page 9 in Volume 425, and by legal mortgage dated 26 July, 1974 and registered as No 34 at page 34 in volume 228 and No 14 at page 14 in Volume 425 upstamped to cover N250,000, in order to harmonise excesses in the authorised overdraft. The appellant has failed to redeem the loans secured and the mortgaged properties are as follows:-

"A      (i)      Land and building situate and lying at No 20 Dawson Street (sometime known as No 6 Samuel Ogbemudia Street or Dawson Street). Benin City containing an area of 1377.78 square yards and

(ii)     Land and building situated and lying at Uwa Street, Benin City containing an area of 3088.90 square yards, both of which were covered by legal mortgage dated 26 July 1974 and registered as No 34 at page 34 in volume 228 at the Lands Registry, formerly kept at Ibadan but now in Benin City to secure an overdraft/loan of N40,000.

B       (i)      Land and buildings situated and lying at ward 7/E New Benin, Benin City.

(ii)     Land and buildings situated and lying at Uwa Street, 1 East Circular, Ward 18/H, Benin City.

(iii)    Land and building situated at Uwa Street containing an area of 3058.90 square yards surrounded by a border coloured pink on the plan attached to a conveyance registered as No 52 at page 52 in volume 23 at the Lands Registry, Benin City."

Pleadings were ordered and delivered. At the close of the hearing, the learned trial Judge, in a considered judgment, dismissed the claims of the appellant and gave judgment to the respondent in respect of the counter-claim. Being dissatisfied with the decision of the High Court, the appellant went on appeal before the Court of Appeal. There again the appellant was not successful. The appeal was dismissed. Aggrieved by the said decision, the company, with the leave of this Court, filed this appeal and supported it with ten grounds of appeal. Four issues were formulated from those grounds for the determination of this appeal. The four issues are as follows:-

"(1)    Whether the Court of Appeal was right in affirming the judgment of the learned trial Judge, having regard to the state of the pleadings, the evidence led before the learned trial Judge and issues raised in the appeal?

(2)     Whether on the state of the pleadings, the evidence on the printed record and, the issues raised in the appeal, the Court of Appeal was right in holding that the appellant obtained benefit from the advance of N250,000 (two hundred and fifty thousand naira) made by the respondent to J.A. Obanor?

(3)     And if the answer to Issues 2 is in the affirmative, was the Court of Appeal, in any event, right after holding that the respondent was not entitled to recover the sum advanced to J.A. Obanor, in invoking and applying the equitable doctrine enunciated in their Lordship's judgment in the circumstance of this case, when the issue was not placed before their Lordships?

(4)     If the answers to Issue 2 and 3 are however, in the affirmative, is the justice of the case met by ordering the sale of the appellant's properties?"

In respondent's Brief of Argument, Counsel for the respondent formulated only three issues for the determination of this appeal and these are:-

"1.     Whether the Supreme Court can interfere with the two concurrent findings of facts by the trial court and the Court of Appeal.

2.      Whether appellant did not benefit from the loan of N250,000 from respondent's bank.

3.      Having regard to the totality of the evidence and the finding of facts, was the Court of Appeal right in dismissing appellant's appeal?"

Before I go through the submissions of the appellant, I find it pertinent to refer to a general submission made by Mr Eghobamien, learned Counsel for the respondent, in respect of grounds 1 to 9 which Counsel says, although couched as grounds of law, are in fact grounds of fact or mixed law and fact. It is trite that labelling a ground as of law does not make it one (sic). The ground may be examined to consider whether in fact it is a ground of law or of fact or of mixed law and fact. Mr Eghobamien is not applying for those grounds to be struck out because as a matter of fact some of them were filed following an application which was granted by this Court. What the learned Counsel is urging is that since the grounds complained of facts or mixed law and facts and the two lower courts have made concurrent findings of fact on those grounds, they ought to be dismissed because the appellant has failed to show that the findings of the two lower courts were perverse. I have looked at those grounds and I agree that only ground one is a ground of law. The rest are all grounds of fact or mixed law and fact. However, I will go through the submissions of the learned Counsel for the appellant in respect of the four issues raised against all the grounds filed in support of this appeal and during the course of this judgment, I shall consider the above submission whenever I deal with the concurrent findings of fact made by the two lower courts on any of the issues raised for the determination of this appeal.

The core of the argument of the learned Counsel for the appellant, Mr Esekody, in respect of issue one, is that the appellant is not bound by Exhibit 'B' which was executed by Mr J.A. Obanor after he had ceased to be a director of the appellant company by reason of (a) his mental illness and or (b) his removal as a director from the appellant company. Counsel argued that the respondent was informed of these facts and despite this knowledge of his incapacity to act on behalf of the appellant company, the respondent proceeded to advance him the sum of N250,000, executed a fresh mortgage deed and purportedly upstamped same as Exhibit 'B'. Mr Esekody further argued that the appellant pleaded that it obtained no benefit from the advance.

It is pertinent to observe that the mental condition of Mr J.A. Obanor is relevant to the decision in respect of issue one. There are already two concurrent findings of fact on Mr Obanor's mental condition. The learned trial Judge accepted the evidence of PW2 who was a Chief Consultant Psychiatrist at Uselu Clinic, Benin City. Mr J.A. Obanor was alleged to be a patient of PW2 and in his evidence the psychiatrist said:-

"I first examined him in 1974 but was examined in May, 1967. He was admitted on 5 January, 1974 and discharged 18 January 1974 and treated him with (ECT) (sic). He was admitted on 26 October 1967 and discharged18 December 1967. It was the trouble he had in 1967 that re-occurred in 1974. When he was discharged in January 1974 he did not come back until 1976 when he was ill but not as severe as it was in 1974. He was treated and discharged in May 1977. He was not admitted then. Since 1977 May, Joshua Obanor has not showed up at the Uselu Hospital. I saw him again on 21 April 1986 and at this time he was mentally stable. I will not take credit for his present condition after ten years of not seeing him. I would have recommended Joshua Obanor was free to go back to his duties when I discharged him in January 1974 and we normally give them a period of two months or six months. I would have thought that when he was discharged, he could have gone back to his trading job. At the time he was brought in by one Gabriel Obanor."

The learned trial Judge referred to this evidence and pointed out that he accepted the view of the psychiatrist that Mr J.A. Obanor could have gone back to his normal duties when he was discharged in January 1974. The learned trial Judge said that he agreed with the psychiatrist's opinion because the loan of N40,000 ,which has brought about the present controversy, was entered into between the plaintiff and the defendant on 26 July, 1974 and that J.A. Obanor signed on behalf of the plaintiff company.

The Court of Appeal, per Ejiwunmi, JCA, agreed with the learned trial Judge on this issue. The learned Justice said that, in his view, the findings of the learned trial Judge on the mental condition of Mr J.A. Obanor is unassailable upon the evidence before the court and continued:-

"As I find no reason to disagree with the conclusion of the learned trial Judge with regard to the mental state of Mr J.A. Obanor, at all times material to this case, I also uphold his conclusion thereon."

It is plain from the pleadings and evidence adduced that the case of the appellant hinged on the acceptance of the submission that J.A. Obanor was mentally unsound when he negotiated and signed Exhibit 'B'. However since the two lower courts have both rejected the contention of the appellant, that J.A. Obanor was insane when he negotiated with the respondent and signed Exhibit 'B', can I disturb such concurrent findings? I do not want to repeat what is the established practice, that this Court will not interfere with concurrent findings of fact of two courts below unless a miscarriage of justice or a perverse decision or improper exercise of judicial discretion has been established in the lower courts' judgment: Okechukwu Adimora v Nnanyelugo Ajufo & 2 others (1988) I NS CC 1005; Enang v Adu (1981) 11-12 SC 25 at 42 and Alade v Alemuloke (1988) 1 NWLR 207 at 212. An appellate court can also interfere with findings of fact by the lower court when there has been some violation of some principles of law or procedure: Ntiaro v Akpan (1914-22) 3NLR 9 at page 10.

Now, was there anything categorically established by the appellant's Counsel in respect of this issue showing any of the decisions of the two lower courts, in this appeal, falling within the exception to the general rule which would invite the interference of this Court? The answer is definitely in the negative. The appeal, in respect of this issue, has therefore failed.

The question raised in issue 2 is whether on the state of the pleadings, the evidence on the printed record and the issues raised in appeal, the Court of Appeal was right in holding that the appellant obtained benefit from the advance of N250,000 signed by Mr J.A. Obanor? It is instructive to explain that Exhibit 'B' was an agreement between J.A. Obanor and Company (Nigeria) Limited and co-operative Bank Limited. Any payment made through this agreement would obviously go to the account of J.A. Obanor and Company Nigeria Limited who were the signatories to the agreement and not to Mr J.A. Obanor as a person.

The two lower courts, on this issue, referred to a communication between the appellant and the respondent over the indebtedness of the company in the two accounts it operated in the respondent's bank. The letters were admitted in evidence as Exhibit 'R' and 'R1'. Exhibit 'R1' is the reply written by the appellant to Exhibit 'R' and it was written on 27 July 1983. It is pertinent to point out that the respondent clearly explained the position of the appellant's indebtedness in Exhibit 'R' in the following manner:-

"Mr J.A. Obanor, Managing Director,

Continental Palace Hotel Limited, No 6, Dawson Road,

Benin City.

RE: J.A. Obanor - C/A. 26

2 Continental Place Hotel - F/C 158

We draw your attention to your above mentioned accounts which have for sometime now been badly operated. It is prudent at this juncture to itemise your total indebtedness, which is as follows:-

(a) F/C     158 N35,909.80       Debit

(b) C/A      26 N328,189.91     Debit

N364,099.71     Debit

In view of the poor position of the accounts and the apparent stand still of your business, we are forced to call in the total facility by demanding immediate settlement of the outstandings on the two accounts within 30 days from now. Kindly pay up within the ultimatum given, as failure shall lead us to actions likely to embarrass you.

Please treat this letter with all the seriousness it deserves

You are advised to co-operate.

Yours faithfully,

For: Co-operative Bank Limited.

(SGD)

JO Olaleye

Branch Manager."

The two lower courts referred to this document in their respective judgments. The Court of Appeal pointed out that the tenor of the letter showed that the appellant company and its subsidiary were indebted to the total sum of N364 099.71 to the respondent's bank. In the reply written by the appellant company in Exhibit 'R1', it admitted receiving Exhibit 'R' and appealed for more facilities from the respondent for the running of the business of the appellant company. It is clear that the wording of Exhibit 'R1' is indicative of the fact that the appellant was aware of the loan of N250,000 and that the amount had been used in the running of the business of the appellant company.

For the above reasons, even if the respondent had the knowledge (which has not been proved) that Mr J.A. Obanor had been removed as a director, under the rule enunciated in the case of Royal British Bank v Turguand (1843-1860) AER Rep 435 at 437 to 438, the appellant would still be liable for the amount advanced to the company. The learned trial Judge applied the rule in Royal British Bank v Turguand (supra). The rule is reproduced as follows:-

"According to this rule, while persons dealing with a company are assumed to have read the public documents of the company and to have ascertained that the proposed transaction is not inconsistent therewith, they are not required to do more; they need not inquire into the regularity of the internal proceedings - what Lord Hatherley called "the indoor management."

I do not see how the appellant can run away from the liability of a loan advanced to the company, paid into the company's account and used by the company to run its business. The argument made in respect of issue 2 is also not helpful to the appellant.

Issue 3 was formulated against the Court of Appeal's resort to equitable doctrine. The appellant raised the issue from ground ten and argued that the respondent did not plead facts and circumstances making the invocation of equitable principle in their favour. Counsel argued that for the principle to apply, it must be pleaded and proved that the appellant obtained benefit from the advance, and that by discharging appellant's liability the respondent should be placed in the position of appellant's creditor. I have already agreed with lower courts' finding that Mr J.A. Obanor validly entered into a loan agreement with the respondent in which N250,000 was advanced to J.A. Obanor and Company Limited. I have also accepted in this judgment that appellant company had benefited from the advance.

It is elementary to write about the relationship of equity and common law. It is plain, however, to say that the characteristic common to all equitable remedies and which distinguishes them from common law remedies is their discretionary nature. Courts in this country can have resort to equitable principles and establish a remedy where strict adherence to common law rules would cause injustice and hardship to parties. The Court of Appeal applied the principles of equity after being satisfied that appellant company had received and benefited from the N250,000 loan advanced by the respondent's bank to the company following the agreement the respondent signed with Mr J.A. Obanor. The learned Justice of the Court of Appeal, Ejiwunmi, JCA, who wrote the leading judgment supported his decision by reference to a very relevant English case, to wit, Liggett (Liverpool) v Barclays Bank (1927) AER Rep 451 at 456. Ejiwunmi, JCA, summarised the facts of that decision in the following manner:-

"In that case the facts revolved round the payment by the respondent bank of certain cheques which were signed by someone who described herself as a director of the plaintiff company. It was found in that case that the respondent bank had notice that the person who signed the cheques had not been properly appointed as a director of the plaintiff company. In deciding whether the respondent bank was entitled to succeed in its claim, in spite of the fact that the respondent bank was found negligent by the payment of the sums of money represented on the various cheques presented to the respondent bank, Wright J, at pages 457-458 said:-