⦿ CASE SUMMARY OF:
Akinwunmi O. Alade v. ALIC (NIGERIA) Limited & Anor (2010) – SC
by PipAr Chima
⦿ NOTABLE DICTA
* FRAUD LIFTS VEIL OF INCORPORATION
One of the occasions when the veil of incorporation will be lifted is when the Company is liable for fraud as in the instant case. – Galadima JSC. Alade v. Alic (2010)
* AN APPEAL ALLOWED SHOULD NOT BE DISMISSED
The lower court cannot hold simultaneously that the appeal is allowed in part yet proceeded to dismiss the appellant’s claims in its entirety particularly when the part of the appeal allowed has to do with the award of the sum of N70,000.00 share of profit to the appellant. To hold as the lower court did was an obvious error which ought not to be allowed to stand. – Onnoghen JSC. Alade v. Alic (2010)
* COMPANY WILL NOT BE USE AS AN INSTRUMENT OF FRAUD
It must be stated unequivocally that this court, as the last court of the land, will not allow a party to use its company as a cover to dupe, cheat and or defraud an innocent citizen who entered into lawful contract with the company, only to be confronted, with the defence of the company’s legal entity as distinct from its directors. Most companies in this country are owned and managed solely by an individual, while registering the members of his family as the share holders. Such companies are nothing more than one-man-business; hence, the tendency is there to enter into contract in such company name and later turn around to claim that he was not a party to the agreement since the company is a legal entity. – MUNTAKA-COMASSIE JSC. Alade v. Alic (2010)
* PARTNERSHIP BUSINESS DEFINITION
A partnership business is a voluntary association of two or more persons who jointly own or carry on a business with the sole aim of making profit. – Rhodes-Vivour JSC. Alade v. Alic (2010)
* PARTIES BOUND BY CONTRACTUAL TERMS IN ABSENCE OF FRAUD
The well laid down position of the law is that Courts do not rewrite contact for the parties where the terms of the contract are clear. In the absence of fraud, duress and undue influence, misrepresentation, the parties are bound by their contract. It is only parties to a contract that can sue and be sued on it. – Rhodes-Vivour JSC. Alade v. Alic (2010)
Akinwunmi O. Alade
Alic (Nigeria) Limited & Anor.
⦿ LEAD JUDGEMENT DELIVERED BY:
Suleiman Galadima, J.S.C
* FOR THE APPELLANT
– Babatunde Kasunmu Esq.
* FOR THE RESPONDENT
– Omokayode A. Dada Esq.
⦿ CASE HISTORY
A summary of his claim, as can be gleaned from the pleadings, is that he (Appellant) entered into a partnership agreement with the 1st Respondent to trade on produce for the 1987/88 season. The profit accruing from the partnership was to be shared between the Appellant and the 1st Respondent on a 40% and 60% basis, respectively. For this reason, the Appellant procured a loan of N240,000.00 from the international Bank for West Africa (IBWA)for the 1st Respondent for the take off of the partnership. The loan was guaranteed by the Marine and General Insurance Company Limited upon an Indemnity given by the Appellant to the Insurance Company. It is the Appellant’s case that the 2nd Respondents thereafter fraudulently failed to disclose the 1st Respondents prior indebtedness to the International Bank for west Africa and this consequently resulted in a substantial sum of loan procured to be deducted from the 1st Respondent’s account which it once deposited with the bank.
There was further diversion by the Respondents of the sum of N453.584.50 into the 2nd Respondent’s account and non-disclosure of the sum of N165,000.00 from a produce purchaser under the partnership. The Appellant further claimed that the profit, which occurred to the partnership was over N1,000,000,00 (One Million naira only) and that his 40% share of the profit was therefore N436,649,44. Due to the above facts and inability of the Appellant to realize anticipated profit, the Appellant filed an action for damages. On their part’ the Respondents filed their statement of defence and counter claimed for the sum of N25.000.00 being moneys obtained from the 1st Respondent on account at his request and which sums were never retired to the Accounts or refunded to the 1st Respondent.
The Appellant as Plaintiff sued the Respondents as Defendants jointly and/or severally at Oyo State High Court, Ibadan claiming as follows: “The sum of N3,296,528.08 (Three Million, two hundred and Ninety-six thousand five hundred and twenty eight Naira eight kobo) as particularized hereunder being damages suffered as a result of the 1st defendant’s breach about March, 1988 of partnership agreement entered into in Ibadan between the Plaintiff and the 1st defendant on 1st July, 1987, and which breach was masterminded, procured and instigated by the 2nd defendant as agent of the 1st defendant in fraud (sic) of the plaintiff.”
At the end of the trial the learned trial Judge entered judgment in favour of the Appellant and against the Respondents jointly and severally for:- 1. The refund of loan capital of N240,000.00 procured for the 1st defendant and guaranteed by the Plaintiff through Marine and General Insurance Company Limited. 2. The sum of N70,000.00 (Seventy thousand naira) being the Plaintiff’s 40% agreed share of profits on business transacted with Kopek Limited between 1st December, 1987 to 18th February, 1988. 3. 10% compound interest per annum on the N240,000.00 loan obtained from IBWA from 1988 up till today 10th June, 1991 and 5% interest thereafter until the total sum is paid. 4. Claim for damage is dismissed.
The respondents being dissatisfied with this judgment, appealed against same to the Court of Appeal, Ibadan Division on eight grounds. The Court of Appeal in a unanimous decision set aside judgment of the trial Court and dismissed the Appellant’s claims.
The Appellant was not satisfied; he has come on further appeal to this Court on three grounds.
⦿ ISSUE(S) & RESOLUTION
1. Was the Court of Appeal right in dismissing the appellant’s claim against the Respondents? (a) having earlier held, that the Plaintiff’s claim in special damages for loss of profit was particularised and proved and (b) having allowed the respondent’s appeal in part by virtue of (a) above;
RULING: IN APPELLANT’S FAVOUR.
i. The Court below considered and determined this issue in favour of the Appellant. It is worthy to note that the trial court entered judgment in favour of the Appellant for N70,000.00 being his share of the profit. It is to be further noted that the court below in its judgment decided this issue in favour of the Appellant. This court, therefore, having decided this issue in favour of the Appellant, it should have upheld the judgment of the trial court on profit as contained in the 2nd order of that Court thus: ‘The sum of N70,000.00 (Seventy Thousand Naira) being the Plaintiff’s 40% agreed share of Profits on business transacted with KOPEK Limited between 1st December, 1987 to 10th February, 1988.”
In my respectful view, the Court below erred in dismissing the Appellant’s claim against the Respondents, particularly the 1st Respondent, after having held that the Appellant’s claim in special damages for loss of profit was particularized and also having, by virtue of this, allowed the Respondents’ appeal in part.
2. Whether the Respondents, can be held jointly and severally liable for damages occasioned as a result of a breach (fraudulent or otherwise) of the partnership agreement between the Appellant and the 1st Respondent?
RULING: IN APPELLANT’S FAVOUR.
i. A party should not be allowed to benefit from his own wrong. This is encapsulated in the Latin Maxim “nullus commodium capere potest de injuria sua pria.” It is abundantly clear that the 2nd Respondent was responsible for the management of the 1st Respondent Company and on him fell squarely the responsibility of rendering proper accounts of the partnership business on behalf of the said 1st Respondent. It was as a result of this that the trial court rightly looked beneath the facade and lifted the veil of incorporation to discover the thread that ties the 1st Respondent and the 2nd Respondent together as parties in conspiracy to commit fraud and committing that fraud. The 2nd Respondent is therefore jointly and severally liable with the 1st Respondent to make good all sums improperly paid out or accrued due to his failure to exercise the care necessary in the running of the 1st Respondent.
⦿ ENDING NOTE BY LEAD JUSTICE – Per
⦿ REFERENCED (STATUTE)
Section 208 of the Companies and Allied Matter Act (CAMA) Cap. 20 1999 provides as follow: “290 – (i) where a company – (i) receives money by way of loan for a specific purpose or (ii) received money or other property by way of advance payment for the execution of the contract or project. (iii) with intent to defraud, fails to apply the money or other property for the purpose for which it was received, every director or other officer of the company who is in default shall be personally liable to the party from whom the money or property was received for a refund of the money or property so received and not applied for the purpose for which it was received. Provided that nothing in this section shall affect the liability to the company itself.”
⦿ REFERENCED (CASE)
FDB FINANCIAL SERVICES LTD. v. ADESOZA (2002) 8 NWLR (Pt. 668) 170 AT 173, the Court considering the power of a Court to lift the veil of incorporation held thus: “The consequences of recognizing the separate personality of a company is to draw a veil of incorporation over the Company. One is therefore generally not entitled to go behind or lift this veil. However, since a statute will not be allowed to be used as an excuse to justify illegality or fraud it is a quest to avoid the normal consequences of the statute which may result in grave injustice that the Court as occasion demands have to look behind or pierce the corporate veil.”
⦿ REFERENCED (OTHERS)
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