⦿ CASE SUMMARY OF:
African International Bank Ltd. v. Lee & Tee Industries Ltd. & Anor. (2003) – CA
by PipAr Chima
⦿ NOTABLE DICTA
* WHAT IS A CHARGE?
A charge is the appropriation of real or personal property for the discharge of a debt or other obligation, without giving the creditor either a general or special property in, or possession of, the subject of the security. The creditor has a right of realization by judicial process in case of non-payment of the debt. – Augie JSC. Bank v. TEE (2003)
* ONLY A CHARGE CREATED BY A COMPANY REQUIRES REGISTRATION
It has been held that it is only charges to secure money that are registrable, so a charge which, if granted by an individual, would require registration under the Bills of Sale Act, 1882, will not necessarily be registrable if granted by a company. See Stoneleigh Finance Ltd. v. Phillips (1965) 2 QB 537. And only a charge created by a company requires registration not one, which arises by operation of law such as an unpaid vendor’s lien. See London and Cheshire Insurance Co. Ltd. v. Laplagrene Property Co. Ltd. (1971) Ch. 499. – Augie JSC. Bank v. TEE (2003)
The effect of non-compliance with the provisions of section 94 is quite grave. Non-registration at the Companies Registry of charges created by the company, as opposed to existing charges acquired by the company, destroys the validity of the charge. Unless the prescribed particulars are delivered to the Registrar within 30 days of the creation of the charge, it will, so far as any security on the company’s assets is conferred thereby, “be void against the liquidator and any creditor of the company”. But this is “without prejudice to any contract or obligation for repayment of the money thereby secured, and when a charge becomes void under this section the money secured thereby shall immediately become payable”. – Augie JSC. Bank v. TEE (2003)
* ATTRIBUTES OF A LEGAL MORTGAGE
The main attributes of a legal mortgage are:- (a) a covenant to pay the principal debt and interest on a given date; (b) a covenant to pay interest in the event of default in payment of the principal on the day named; (c) the demise or sub-demise of, or the charge by way of legal mortgage on the mortgaged property; (d) the proviso for cesser; and (e) Such variations of the statutory provisions with regard to mortgages, as the arrangement between the parties requires. – Augie JSC. Bank v. TEE (2003)
* DATE FOR PAYMENT IN A MORTGAGE AGREEMENT
Fixing a date for repayment in a mortgage transaction does not generally indicate the parties intention that the actual payment is to be made on the named date, but only that the mortgagee may call for payment on or after that date, if so minded, but not before. See Ogioro v. Igbinovia (supra), and B.O.N Ltd. v.Akintoye (supra), where it was also held that if the mortgage debt is not paid at any time fixed for payment, the mortgagee is entitled to exercise his power of sale, the debt having been deemed to have become due and payable on that day. – Augie JSC. Bank v. TEE (2003)
* MORTGAGEE’S TO GIVE NOTICE BEFORE RESALE
In line with the provisions of section 125(1) of the Property and conveyancing Law, a mortgagee shall not exercise his power of sale unless and until a notice requiring payment of the mortgage money has been served on the mortgagor or one of several mortgagors and default has been made in payment of the mortgaged money or of part thereof for three months after such service. See B.O.N. Ltd. v. Aliyu (1999) 7 NWLR (Pt. 612) 622, where this court held that “the requirement of the law is that notice of intention to sell a mortgage property must be sent to the mortgagor as the words “shall not” are mandatory and not advisory. Consequently, any sale of any mortgage without the requisite notice is invalid ab initio and cannot convey any title to a subsequent purchaser”. – Augie JSC. Bank v. TEE (2003)
* DISPUTE AS TO LOAN AMOUNT CANNOT AFFECT RIGHT OF RESALE
To start with, it is settled law that a mortgagee’s power of sale or foreclosure cannot be affected merely because the amount due under the mortgage agreement is in dispute. See Omidiji v. F.M.B. (2001) 13 NWLR (Pt. 731) 646 and B.O.N. Ltd. v. Akintoye (supra). The law is that a mortgagee will not be restrained nor can his power of foreclosure be affected by the exercise of his power of sale merely because the amount due is in dispute or the mortgagor has commenced a redemption action in court. See Intercity Bank Plc. v. F and F F (Nig.) Ltd. (2001) 17 NWLR (Pt.742) 347. – Augie JSC. Bank v. TEE (2003)
* CONTENT OF DOCUMENT BINDING ON PARTIES
It is an established principle of law, that the contents of a document are binding on the party who being of full capacity appends his signature to it. He cannot thereafter resile from it or choose an alternative course. – Augie JSC. Bank v. TEE (2003)
Generally, where parties to an agreement have set out the terms thereof in a written document, extrinsic evidence is not admissible to add to, vary from, or contradict the terms of the written instrument. – Augie JSC. Bank v. TEE (2003)
African International Bank Ltd.
Lee & Tee Industries Ltd. & Anor.
Court of Appeal
⦿ LEAD JUDGEMENT DELIVERED BY:
Amina Adamu Augie, J.C.A.
* FOR THE APPELLANT
– Mr. T. J. O. Okpoko, SAN
* FOR THE RESPONDENT
– Chief B. B. E. Idigbe
⦿ CASE HISTORY
A case on mortgaged property as regards the right to sell.
⦿ ISSUE(S) & RESOLUTION
(1) WAS THE LEARNED TRIAL Judge right in holding that, the original mortgage or charge in respect of the loan of N2.9 Million Naira granted by the bank to the respondent, did not continue in respect of the balance of N430,182.77?
RULING: IN FAVOUR OF THE APPELLANT.
i. By this definition, the question on the other side of the coin is, if the sum still outstanding is a fresh transaction or loan, what is to continue in sub-clause (a)? It is crystal-clear from a careful reading of clause 3 and its sub-clause (a) that it is the Legal Mortgage of the properties of 2nd defendant registered as 37/37/267 of the Lands Registry in the office at Benin City that was to be continued and upstamped. The learned trial Judge referred to the evidence of DW1 to buttress his finding, however what DW1 actually said is; “The balance was converted into a loan by the defendant to the 1st plaintiff. There was security by way of Deed of Legal Mortgage of a property in respect of the initial loan of N2.9 Million. — There is security by way of Deed of Legal Mortgage in respect of the second converted loan of N430,182.77k. The security was up-stamped by the defendant”.
ii. The evidence of DW1 does not in any way counter clause 3 of exhibit B. Clause 3 of exhibit B clearly states that the balance of the judgment debt “shall be granted to the 1st defendant by way of loan upon the following securities being provided”. It is evident from the said clause that the balance sum was converted to a loan but on the condition that the defendants provide the securities specified in sub-clause (a) and (b). Sub-clause (a) specified that the Legal Mortgage of the properties of the 2nd defendant registered as 37/37/267 of the Lands Registry in the office at Benin City, is to be continued and upstamped.
(2) WAS THE LEARNED TRIAL Judge right in holding that, the mortgage dated 29/10/87 and registered as No. 11/11/747 and re-registered as No. 23/23/739 of the Lands Registry is null and void in the circumstances of the case?
RULING: IN FAVOUR OF THE APPELLANT.
i. The import of section 94(1) of the Companies Act, is that the particulars of any charge created by a company must be delivered to or received by Registrar of Companies within thirty days after its creation, or else any security on the company’s property or undertaking shall be void against the liquidator and any creditor of the company. In essence, the focal point in section 94(1) of the Companies Act, 1968, is the company. It is a charge created by a company that must be registered. If the charge is not registered, it is the security on the company’s property or the security on the company’s undertaking that shall be void. And the said security is void only against the liquidator and any creditor of the company.
ii. It is an accepted fact in this case that, the property mortgaged is the property of the 2nd respondent, who is an individual, not a company. It is submitted for the respondents that since the property was used to secure the debt of the company, it is deemed to be company property. This line of argument lacks merit. The case of Salomon v. Salomon (1897) AC 22 established the elementary principle that a limited liability company has an entity separate from its proprietor. The law is that once incorporation takes place, the company becomes a separate legal entity from those who incorporated it, and there is no personal liability for any debt incurred by the Company.
iii. But that is not the correct pronouncement to make in the peculiar circumstances of this case. If the learned trial Judge had addressed his mind to the pertinent issues and evidence before the court, it would have been obvious to him that the provisions of section 94 of the Companies Act, 1968, did not come into play at all. The original mortgage was a continuing security for the balance sum that was converted to a loan, and the only thing needed was simply to upstamp it.
iv. It goes without saying that the provisions of section 94(1) of the Companies Act, 1968 do not apply in this case. But I will say it. Section 94 of the Companies Act, 1968, has no application in this case. The learned trial Judge was therefore in error in holding that non-compliance with section 94(1) of the Companies Act, 1968, rendered the charge null and void.
v. Since the security had already been stamped and registered, it is not necessary to further register the upstamped amount. It suffices if the stamp duties are paid on the upstamped amount.
3) WAS THE LEARNED TRIAL Judge right that the bank as mortgagee is not entitled to exercise its right of sale over the mortgaged property?
RULING: IN FAVOUR OF THE APPELLANT.
i. In the instant case on appeal, the fact that the respondents are disputing the exact amount owed is not sufficient to restrain the appellant from exercising his power of sale under the Deed of Legal Mortgage. The learned trial Judge was clearly in error in arriving at that conclusion.
ii. A mortgagee will only be restrained from exercising his power of sale, if the mortgagor pays the amount claimed in court. In other words, in order to stop the mortgagee’s power of sale of a mortgaged property, the amount owed must be paid in full.
iii. The power of sale inherent in a mortgage is given to the mortgagee for his own benefit, to enable him the better to realise his debt. The learned trial Judge was clearly in error in granting the order of injunction. This issue is also resolved in favour of the appellant.
(4) WAS THE LEARNED TRIAL Judge right, in ordering the bank to return to the respondent the title deed of the mortgaged property, when the mortgage debt has not been discharged?
RULING: IN FAVOUR OF THE APPELLANT.
i. The answer is quite simple. The appellant is entitled to keep the registered title Deeds as long as the mortgage had not been discharged. The learned trial Judge was wrong to order a return of the title Deeds to the respondent.
⦿ ENDING NOTE BY LEAD JUSTICE – Per
⦿ REFERENCED (STATUTE)
* CHARGE BY COMPANY TO BE REGISTERED
Section 94(1) of the Companies Act, 1968 provides as follows “Subject to the provisions of this part of this Decree, every charge created after the fixed date by a company, being a charge to which this section applies, shall so far as any security on the company’s property or undertaking is conferred thereby be void against the liquidator and any creditor of the company, unless the prescribed particulars of the charge together with the instrument, if any, by which the charge is created or evidenced, have been or are delivered to or received by the Registrar for registration in the manner required by this decree or by any enactment hereby repealed within thirty days after the date of its creation, but without prejudice to any contract or obligation for repayment of the money thereby secured, and when a charge becomes void under this section the money secured thereby shall immediately become payable”.
* MORTGAGEE’s POWER OF RESALE
Sections 123 and 125 of the Property and Conveyancing Law, reads –
123.(1) A mortgagee, where the mortgage money is made by deed, shall, by virtue of this Law, have the following powers, to the like extent as if they had been in terms conferred by the mortgage deed, but not further (namely) (i) A power, when the mortgage money has become due, to sell, or to concur with any other person in selling, the mortgaged property, or any part thereof, either subject to prior charges or not, and either together or in lots, by public auction or by private contract, subject to such conditions respecting title, or evidence of title or other matter, as the mortgagee thinks fit, with power to vary any contract for sale, and to buy in at an auction, or to rescind any contract for sale, and to resell, without being answerable for any loss occasioned thereby”.
125. A mortgagee shall not exercise the power of sale conferred by this law unless and until – (i) Notice requiring payment of the mortgage money has been served on the mortgagor or one or more mortgagors and default has been made in payment of the mortgage money, or of part thereof, for three months after such service, or (ii) Some interest under the mortgage is in arrears and unpaid for two months after becoming due”, or (iii) There has been breach of some provision contained in the mortgage deed or in this Law, … and on the part of the mortgagor, or of some person concurring in making the mortgage, to be observed or performed, other than and besides a covenant for payment of the mortgage money or interest thereon”.
⦿ REFERENCED (CASE)
* CONTINUING MORTGAGE NEEDS NO REGISTRATION
B.O.N Ltd. v. Akintoye (1999) 12 NWLR (Pt. 631) 392: “Where an original mortgage is a continuing security for raising a second mortgage, what is needed is to upstamp it. There is no need to obtain a fresh consent of the Governor for the second mortgage. In the instant case, where the wordings of the mortgage deeds relating to the security are clear and unambiguous and where the original deed was a continuing security, there was no need to obtain a fresh consent of the Governor for the second mortgage”.
* MORTGAGEE’S RIGHT OF PROPERTY SALE
Intercity Bank Plc. v. F and F F (Nig.) Ltd. (2001) 17 NWLR (Pt.742) 347, wherein Omage, J.C.A. stated as follows on page 365 “In my respectful opinion, the complaint of the mortgagor notwithstanding, about the actual sum owing on the mortgage, the court will not interfere or restrain the mortgagee from exercising his right of sale of the mortgaged property. To intervene is to seek to vary the terms of the mortgage agreement and the court will not rewrite the mortgage agreement for the parties. The right of sale of the mortgagee is the only certain shield of recovery of the mortgagee’s investment … and he should be allowed to sell, ceteris paribus (all things being equal)”.
⦿ REFERENCED (OTHERS)
⦿ SIMILAR JUDGEMENTS
B.O.N Ltd. v. Akintoye (1999) 12 NWLR (Pt. 631) 392