SAN’s appointment: NBA, LPPC opt for out of court settlement

A new set of Senior Advocates of Nigeria, SANs, may emerge soon, as the Nigerian Bar Association, NBA, yesterday, told a Federal High Court sitting in Abuja that it has decided to discontinue with the suit it filed against the Legal Practitioners Privileges Committee, LPPC.
The NBA said it intends to settle the matter out of court.
NBA had gone to court to challenge the competence of a list of legal practitioners compiled by the LPPC, for the purpose of conferring them with the rank of SAN.
Following the decision of the NBA to opt for an out of court settlement on the matter, presiding Justice Gabriel Kolawole, yesterday, ordered all the parties in the suit to appear before the court on May 31 with their report of settlement.
It would be recalled that the NBA had earlier secured a court injunction stopping the appointment of new SAN’s for the year 2010/ 2011, pending the hearing and determination of the substantive suit it filed against the LPPC, the Chief Justice of Nigeria and the Attorney General of the Federation.
It had prayed the High Court to void the LPPC’s list on the premise that it was constituted in total disregard of the due process of the law, just as it insisted that the planned action ran contrary to the provisions of Section 7 of the Legal Practitioners Act.
NBA specifically urged the trial court to determine among other things, “whether the defendants, particularly the LPPC, complied with the mandatory provision of paragraph 12_(1) of the Guidelines for the appointment of Legal Practitioners to the rank of Senior Advocate of Nigeria made pursuant to Section 7 of the Legal Practitioners Act, in the appointment exercise to the rank of SAN for the year 2010-2011.”
The LPPC, had on March 16, invited 62 legal practitioners for interview with a view to ascertaining their suitability for the conferment of Senior Advocates of Nigeria, SAN, on them.
The action was vehemently resisted by the NBA which maintained that it was not carried along in the entire process.
According to an affidavit deposed to by the NBA National President, Mr. J.B. Daudu, SAN, the aforementioned paragraph 12-(1) of the stipulated Guidelines, provides that the list of selected legal practitioners that scaled the first and second filters for the rank, should be sent to the national secretariat of the Nigerian Bar Association, the candidate’s local branch of the NBA, as well as to all Chief Judges, justices of the Court of Appeal and Supreme Court, who shall be requested to comment confidentially on the integrity, competence and reputation of the selected candidates.
Consequently, NBA urged the trial Judge to determine “whether the present exercise is not incompetent, null and void on account of fundamental breach by the defendants of the statutory guidelines for the appointment of numerous applicants to the rank of Senior Advocate of Nigeria for the year 2010-2011.”
The legal body equally sought a declaration “that the process or procedure for appointment of the rank of Senior Advocate of Nigeria is statutory based on an Act of the National Assembly, i.e. Legal Practitioners Act.”
“That the Legal Practitioners Privileges Committee is enjoined to strictly comply with provisions of its statutory guidelines to wit: Guidelines for the Conferment of the Rank of Senior Advocate of Nigeria.
“That it is illegal that such a mandatory statutory provision has been ignored or sidestepped by the defendants in the purported discharge of their statutory functions. That the confidential reference by judges and the Bar, constitutes the pillar upon which any appointment to the rank of Senior Advocate of Nigeria can be made.
“That the rank of Senior Advocate of Nigeria is an important institution in the legal profession of Nigeria and over the years there have been complaints of lowering of standards, abuse of process and outright corruption of the selection process and this have led to a large section of Bar calling for its total abolition.
“That the majority of the Legal profession think that the process of appointment can be reformed but with the present fundamental infractions such as the foregoing, it is difficult to be optimistic it is apt to suspend further action of the appointment of this year’s applicants to the rank of Senior Advocate of Nigeria on the grounds referred to above by nullification of the process so far.
“That the attention of the Chief Justice of Nigeria the Chairman of the 1st defendant and 2nd defendant in this suit was by a letter dated March 31, 2011 drawn to the afore_described breaches but his response was to proceed to fix the meeting of the 1st defendant for Monday, April 4, 2011 for appointment of new senior advocates.
“That if not restrained the committee will proceed in the face of these breaches. That the Nigerian Bar Association is a veritable stakeholder in the appointment process of the rank of Senior Advocate of Nigeria as it is her members that are the conferees of the award of the rank.
“That monumental injustice will be occasioned to the totality of the rank of Nigerian lawyers if the appointment is allowed to proceed without the input of confidential reference by (a) National secretariat of the Nigerian Bar Association, (b) the candidate’s local branch of the Nigeria Bar Association and (c) all Chief Judges, justices of the Court of Appeal and Supreme Court.
“That in proceeding to confer the rank of applicants this year, a veritable and indeed mandatory filter process has been ignored which may lead to candidates with bad character and others with disciplinary problems to slip through the net and recklessly be conferred with the rank of Senior Advocate of Nigeria. That it is crucial that matters be kept in status_quo until the substantive suit is determined to finality.”
Meantime, it is only the LPPC that has the statutory powers to confer SAN on worthy legal practitioners in the country who satisfy all the requisite conditions for the title, just as it equally has the mandate to discipline any of them found professionally wanting.

The Local Content Act: A breach of Nigeria’s WTO obligations?

Preamble:

his piece is to a large extent, a product of some transactional work and research I was involved in, as an associate at Templars, Lagos and some interaction with a fantastic lady, Liz Whitsitt, the international trade/ investment Law instructor during my LL.M program at the University of Calgary.

Background:

The Nigerian Oil & Gas Industry Content Development Act 2010 (the “Local Content Act”) received presidential assent on Thursday, 22nd April, 2010. Now in operation, the Act seeks to increase indigenous participation in the Nigerian oil and gas industry by prescribing, inter alia, minimum thresholds for the use of local services and materials.

The Local Content Act which derives from the Nigerian Content Policy focuses on the promotion of value addition in Nigeria through the utilization of local raw materials, products, and services in order to stimulate growth of indigenous capacity.

The implementation of this legislation, however, appears to conflict with Nigeria’s “National Treatment Obligations” under the Agreement on Trade Related Investment Measures (“TRIMs”); Article III of the General Agreement on Tariffs and Trade (“GATT”) and the General Agreement on Trade in Services (GATS). This is particularly the case, with respect to preferential treatment extended to Nigerian made goods.

The country is also likely to be in breach in relation to provision to the oil and gas sector, of services in four areas- telecommunications, financial, tourism & travel related services and transportation services inscribed in its schedule, subject to the qualifications stated therein.

Article III of GATT and Annex 1(a) of TRIMs:

The relevant parts of Article III of the GATT provide that the products of the territory of any member of the WTO imported into the territory of any other member shall be accorded treatment no less favourable than that accorded to like products of national origin in respect of all laws, regulations and requirements affecting their internal sale, offering for sale, purchase, transportation, distribution or use.

Additionally, the same Article III provides that quantitative regulations requiring the mixture, processing or use of products in specified amounts or proportions, should not be applied to imported or domestic products so as to afford protection to domestic production.

TRIMs on the other hand, prohibits any regulation requiring the purchase or use by an enterprise of products of domestic origin or from any domestic source.

The National Treatment Principle and the Local Content Act:

This principle requires a host country to extend to foreign investors, treatment that is at least as favourable as the treatment it accords to national investors in like circumstances. National treatment typically relates to the post-entry treatment of foreign investors.

A look at Article III of GATT suggests that to determine the likelihood of Nigeria being in breach of its WTO obligations, two key terms are necessary for analysis. These are the terms “likeness” and “so as to afford protection to domestic production”. In my view, the implementation Section 12 of the Local Content Act which gives priority to goods made in Nigeria, would amount to a breach of Nigeria’s WTO obligations.

The reasons for this are that the foreign made goods are “like” locally made goods and also, this provision affords protection to those goods made in Nigeria. Arguments similar to the foregoing are also plausible under the TRIMs regime.

Do the Exceptions in Article XX GATT and Article 4 TRIMs Avail Nigeria as a Developing Country?

It would appear that these provisions do not avail Nigeria particularly when one looks at the Chapeau of Article XX of GATT and the fact that Article 4 of TRIMs allows only for temporary deviation and only in circumstances related to balance of payments. The exceptions under GATS would also in my view not avail the country.

Conclusion:

Although further research may suggest an arguable leeway, Nigeria appears to be, prima facie, in breach of its obligations under the WTO particularly as regards the National Treatment Principle.

It should, however, be noted that a foreign company carrying on business in Nigeria, which feels strongly about these issues would need to take actions under the auspices of its country of origin.

Where this is done, a Dispute Settlement Body (DSB) may request Nigeria to bring into conformity measures which are inconsistent with its obligations under the WTO. China for example, brought its trade measures into conformity with the DSB’s recommendations and rulings, within 8 months, further to a WTO decision in 2008.

What Sellers and Offtakers want Negotiated in Gas Sale and Purchase Agreements

In the last few weeks, I have had the opportunity of debating with a number of energy law practitioners, terms, sellers and offtakers regard as important and would want their lawyers to negotiate for them in Gas Sale and Purchase Agreements (GSPAs).  I would therefore, this week, like to share some of my findings with the readers of this column.

A GSPA is an agreement for the sale and purchase of gas, typically dry gas and may also be referred to as a Gas Sale Agreement. In Nigeria, the template GSPA for the Nigerian gas to power policy is referred to as a Gas Sale and Aggregation Agreement (GSAA). This Agreement is referred to as a GSAA because it involves a gas aggregator (the Gas Aggregation Company of Nigeria) which supposedly acts as a one stop intermediary point between the suppliers and the diverse demand sectors.

Key Negotiable Terms in the GSPA:

The key negotiable terms in a GSPA vary and the counter-parties have different interests, as far as these contractual terms are concerned. Some of these terms include Shortfall Gas, Make-up Gas, Make Good Gas, Take or Pay, Gas Specification, Force Majeure, Carry Forward Gas, provisions relating to the Delivery Point amongst others. This paper reviews a few of these provisions.

Shortfall Gas:

In very simple terms, shortfall gas is gas supplied by a seller which is lesser than the quantity nominated by the buyer and which the buyer is entitled to nominate pursuant to the terms of the GSPA. In this regard, the buyer would want to negotiate a discounted shortfall gas price when the under-supplied quantity is finally supplied. In the alternative, the buyer may want the seller to be liable to pay for alternative fuel sourced by buyer or pay financial compensation to her.

On the part of the seller, it would want to negotiate very negligible discount if at all, the seller is amenable to a discounted shortfall. Additionally, the seller may also want a cap on the price to be payable where alternative fuel is to sourced by the buyer. At times, the seller might want the price of the alternative fuel indexed to the price of an alternative like low pour fuel oil (“LPFO”).

Gas Specification

The general rule is that the gas must conform to a contract specification. Where this is not the case, the buyer would negotiate a right to reject the gas or take at a discounted price. Where the gas is rejected, it may then be regarded as shortfall gas. On its part, the seller would want a situation where there is a threshold within which, the buyer would still accept the gas and in any case, the seller would like to negotiate a situation where, once the gas is accepted, the full contract price is payable by the buyer.

Force Majeure:

A force majeure also referred to as an FM, is an act typically beyond the control of the parties, which excuses them from any legal responsibility or liability. Depending on the circumstances one party is likely to prefer a broader scope whilst the other may want the scope of FM narrowed down. Other issues such as whether only general strikes would fall within the purview of a force majeure or whether force majeure should include every strike? A typical question in negotiating a force majeure is what happens where there is a strike induced by obviously bad management decision or where a party mischievously induces a strike to excuse itself from liability under the contract.

Take or Pay:

A very important term in most offtake contracts, including GSPAs, is the take or pay (ToP) provision which obliges a buyer to take or pay for, if not taken, a pre-determined quantity of gas. For the seller, this is to ensure a regular source of income, usually for repayment of loans and to meet other obligations so even if a buyer does not take the gas, it pays for it.

Make Up Gas:

This is closely related to the ToP. The situation is such that upon making payment under a ToP without taking the gas, the buyer then becomes entitled to that quantity of gas already paid for, but not taken. This is because that untaken quantity, goes into a make-up bank. If at some point in a future year, it has taken the Take or Pay Amount for that year before the year end, he can then start to take gas free up to the amount of the Make-up outstanding.

Whereas the buyer wants to take the gas free later in the life of the contract, the seller wants a situation where the buyer pays the difference between what was paid earlier and the prevailing gas prices (this only makes sense when there is an increase and not decrease in price).

Conclusion:

This is by no means, an exhaustive piece on those issues that parties to any GSPA by whatever nomenclature. However it raises some of the issues which the discerning negotiator or lawyer should critically consider when negotiating GSPAs for clients. Very importantly, persons negotiating on behalf of a buyer in particular must take into consideration the buyer’s obligations under other downstream agreements, if any and help avoid a mis-match.

Cyber Bullying - 2 Teenagers Criminally Charged for Putting Girl’s Head on Nude Body in Facebook.

Two teenage girls in Florida have been charged with aggravated stalking of a minor younger than 16.

The girls who apparently may have thought it to be an amusing prank didn’t consider the consequences when they allegedly pasted a high school classmate’s head on top a nude photo of an unidentified young woman and posted it on with fake Facebook account under her name.

Naples Daily News reports that the girls, age 15 and 16 respectively, have been charged under a strengthened 2008 state law intended to prevent cyber bullying of teens.

According to a Herald Tribune article published in 2007, the law, known as the Jeffrey Johnston Stand Up for All Students Act, obligates schools to address cyber bullying and give them the power to punish students participating in such conduct at home.

In addition to the nude body shot, the fake Facebook page reportedly contained a photo of male genitalia near the high school student’s mouth.

The liability of an agent of a disclosed principal in a contractual transaction with third parties

Samuel Osigwe v. Privatisation Share Purchase Loan Scheme Management Consortium Limited & Ors (2009) 3 NWLR (Pt. 1128) 378- A Review of the Supreme Court’s decision determining the liability of an agent of a disclosed principal in a contractual transaction with third partiesÂ

Modern commercial law practice owes its lifeblood, in part, to the concept of Agency; a concept which has been rightly described as lying “at the very heart of the subject (commercial law) and without it modern commerce would not exist.” Â
The traditional Common Law of Agency is founded on the maxim qui facit per alium facit per se meaning ‘he who acts through another acts himself’. The full amplitude of the principal/agent relationship arises where one party, the principal, authorises another party, the agent, to act on his behalf and the agent consents to so act. From this authority directly conferred on the agent stems the agent’s power. This may either be actual or apparent authority where the principal has by its conduct given the indication that the agent has authority for such matters.
The recent case of Osigwe v. Privatisation Share Purchase Loan Scheme Management Consortium Ltd & Ors is a re-statement of the general principle that an agent acting on behalf of a disclosed principal incurs no personal liability in respect of transactions entered into with third parties which falls within the scope of his authority. This is the law in Nigeria as well as other Common Law jurisdictions of the world.
Facts
The Appellant instituted a class action for himself and on behalf of persons who had registered to purchase shares in public companies under the Privatization Share Purchase Loan Scheme (PSPLS) against the Respondent for themselves and as representatives of all financial intermediaries engaged in the PSPLS Scheme. The claim was instituted before the Investment and Securities Tribunal.
The allegation of the Appellant at the Tribunal was that he and the parties represented suffered damage as a result of a breach committed by the Respondent in respect of certain provisions of the Investment and Securities Act (ISA) and the rules and regulations issued by the Securities and Exchange Commission (SEC) pursuant to the ISA 1999 [specifically by not filing the appropriate statements with SEC. The Appellant sought for the suspension of the share acquisition scheme or an order directing the Respondent to comply with the provisions of the ISA and the rules and regulations made under it.
Upon a notice of preliminary objection filed by the Respondents challenging the competence of the action against them, the Tribunal in its ruling, held that the Respondents were not necessary parties because they were agents of a disclosed principal and did not fall within the exceptions to the general rule. The Tribunal accordingly struck out the Respondents’ names.
The Appellant, being dissatisfied with the decision of the Tribunal, appealed to the Court of Appeal which dismissed the appeal. The appellant consequently appealed to the Supreme Court.
Issues before the Supreme Court and judgment
The main issue for determination by the Supreme Court is whether the lower court was right in upholding the decision of the Tribunal which struck out the Respondents from the proceedings on the ground that as agents of a disclosed principal, they were not necessary parties to the proceedings.
The submission of the learned counsel for the Appellant was that the Common Law principle that limits the liability of an agent of a disclosed principal does not apply in a case where the Respondents are accused of breaches of statutory duties and requirements and thus the statutory provision envisaged the responsibility of the respondents regardless of their agency status. On their parts, the Respondents’ counsel submitted that as agents of a disclosed principal, the Respondents are not necessary parties in the suit.
Upon consideration of these submissions the Supreme Court unanimously dismissed the appeal. Musdapher, JSC in his lead judgment succinctly captures the legal position as follows:
  “Again, it is clear from the appellant’s pleading that each of the respondents herein are merely agents of the BPE solely appointed for the registration of would be purchasers of the shares of the public companies to be privatized. The respondents also by the pleading of the appellant, are unmistakably agents of a revealed principal and as agents, they cannot be liable under all the circumstance of this case. See Okafor v. Ezenwa (supra) ... An agent acting on behalf of a known and disclosed principal incurs no personal liability.…”
The above decision is not any way in isolation. The Supreme Court had reached the same conclusion in the case of James v. Mid-Motors (Nig.) Co. Ltd. (1978) 11 N.S.C.C. 536 at 548 where the court per Aniagolu, JSC made a brilliant exposition of the law on the point while His Lordship made reference to the judgment of the House of Lords in Houlsworth v. City of Glasgow Bank (1874-1900) ALL ELR. Page 333 which had being the locus classicus on this Common Law position.
Comments
The reciprocal rights and liabilities of Principal and Agent reflect commercial needs and legal realities. In any sizable business, it is not possible for one person to travel everywhere to negotiate all the transactions necessary to maintain or grow the business. These problems are increased if the business is a corporation, because it is then a fictitious legal person and, as such, it can only act through human agents. Hence, independent people are contracted by businesses to buy and sell goods and services on behalf of those businesses. When agreements are made, the Principal is liable under the contract(s) made by the Agent. So long as the Agent has done what he or she was instructed to do, the result is the same as if the Principal had done it directly.
If the Agent has actual or apparent authority, the Agent will not have liability on any transactions agreed within the scope of that authority so long as the Principal was disclosed, i.e. the fact of the agency was revealed and the identity of the Principal revealed. But where the agency is undisclosed or partially disclosed, both the Agent and the Principal are bound. Where the Principal is not bound because the Agent had no actual or apparent authority, the purported Agent is liable to the Third Party for breach of the implied warranty of authority.

What amounts to an infringement of a registered Trademark by a registered Design?

Alliance International Limited v Saam Kolo International Enterprises Limited (2010) 13 NWLR (Pt. 1211) C.A 270;

A decision of the Court of Appeal considering what amounts to the infringement of a registered Trademark by a registered Design

There can no longer be any doubt that we live in an information age where, at least in developed countries, product sales by personal contact has been overtaken by online and mail order purchasing. Despite this, by whichever means one conducts the advertisement and sale of goods, the sanctity of a company’s trademarks cannot be over-emphasised as this is often the means by which a consumer identifies and makes the decision

on which goods and services to purchase.

As an aid to clarity, the Trademarks Act Cap T 13 Laws of the Federation of Nigeria 2004 defines a trademark as a mark used or proposed to be used in relation to goods, for the purpose of indicating a connection in the course of trade between the goods, and some person having the right either as proprietor or as registered user, to use the mark.

Trademarks as intellectual property assets are often valued by auditors and found to be worth more than many of the physical assets of the company combined. Put differently, consumer brand loyalty associated with diverse goods and services is built over a period of time, often spanning decades. The manufacturers of these products therefore, can hardly afford the luxury of exposing same to exploitation and infringement by not availing them of the full protection afforded by the Trademarks Act; which has this to say about the effects of non-registration of a Trademark:

“No person shall be entitled to institute any proceeding to prevent or to recover damages for, the infringement of an unregistered trademark…”

The Trademarks Act goes further in its Section 5 to outline the rights bestowed on the proprietor of a registered Trademark, to include the exclusive right to the use of that trademark in relation to the goods in respect of which it is registered. The position of the law is substantially the same in the case of a registered design. According to the Patents and Designs Act Cap P2 Laws of the Federation of Nigeria 2004, a design is any combination of lines or colours or both, and any thee dimensional form, whether or not associated with colours, if it is intended by the creator to be used as a model or pattern to be multiplied by industrial process and it is not intended solely to obtain a technical result.

However, while it may often seem to be quite clear what amounts to an infringement of a Trademark – that is, the unauthorised use of such a mark or a mark so nearly resembling as to be likely to deceive or cause confusion in the course of trade – the situation assumes a different dimension when a registered design seems to infringe upon a registered trademark. On the face of it, a certificate of trademark registration is not superior to a certificate of design. However in the case under reference, the Court of Appeal sitting in Lagos had the opportunity to draw a fine distinction between a Trademark and a Design and the posture of the law where one seems to infringe upon the other.

Synopsis of the case;

The respondent as plaintiff at the Federal High Court brought an action against the 1st defendant seeking N 5,000,000 (Five Million Naira) as damages as well as an injunction against the appellant and his agents and officers by whichever name so called, for infringement of two of its registered trademarks. The goods covered by the trademarks in question were shoe protectors described as “step” and “guard”, which the appellant registered in Nigeria on behalf of a foreign principal, in 1990. The appellant also claimed to have a certificate of registered design in respect of heel protectors and sole protectors called “step”. The respondent had previously instituted a suit at the Federal High Court seeking the nullification of the certificate of design issued to the appellant in respect of the aforementioned products. Judgment in that suit was entered in favour of the respondent.

The trial court in the instant suit, found in favour of the respondent, making an order of perpetual injunction restraining the appellants and its agents from infringing the respondent’s registered trademarks. The trial court also made a monetary award in excess of the N 5,000,000 (Five Million Naira) claimed by the respondent as damages.

Dissatisfied, the appellant went on appeal.

Issues for Determination and Judgment

Amongst the issues that arose for determination before the learned Justices of the Court of Appeal, that which is most pertinent for the purpose of this discourse is:

Whether the trial court was right in holding that the appellant admitted infringing the trademarks of the respondent.

Learned counsel to the appellant contended that the appellant could not be said to have infringed the respondent’s trademark in so far as it was exercising its rights and privileges conferred on it by virtue of its registered design. Counsel therefore submitted that the trial court’s findings that the appellant had admitted infringing the respondent’s trademark were perverse. On the other hand, learned senior counsel for the respondent Mr. Gani Adetola-Kaseem, SAN posited that the arguments raised in the appellant’s statement of defence at the trial court, did not amount to a denial of the plaintiff’s allegation of infringement of its trademark, but a mere justification on account of the defendant’s registered design.

The court invited further address from both parties as to the import of a certificate of design vis a vis a certificate of trademark. Learned counsel to the appellant citing Section 12 of the Patents and Designs Act sought to persuade the court of the superiority of a certificate of design over a certificate of trademark. Learned senior counsel to the respondent however posited that while a trademark exists to preserve the integrity of the product, a certificate of design only applied to protect the creativity in the design and was therefore not an answer to a charge of infringing trademark. Accordingly, learned senior counsel urged the court to hold that whilst the appellant was entitled to the protection afforded by a certificate of design, it had not answered the claim of infringement of trademark and therefore urged that the appeal be dismissed.

In delivering its judgment, the learned Justices of the Court of Appeal considered the concept and definition of a trademark as contradistinguished from a design. In doing so, the learned Justices found that neither certificate is superior to the other but that they are issued for different purposes and serve different functions. The submissions of learned senior counsel for the respondent in that regard were therefore upheld. Their Lordships further found that the appellant’s contention that the use of the respondent’s trademark was covered by its certificate of design was without merit and accordingly failed, even though the appeal was allowed in part and the damages awarded to the respondent at the trial court reviewed downward in line with its claim.

Conclusion

There now seems no end to the myriad effects of the interplay of our laws on commercial activities as highlighted by the case under reference. It is the considered view of this writer that the draftsmen charged with drafting both the Trademarks Act and the Patents and Designs Act, were perhaps oblivious to the possibility of the scenario painted by the instant case. Had they considered that an action might be instituted for infringement of a registered trademark by a registered design, they might perhaps have included in their drafting, remedial steps to be taken in such an instance.

Going forward, and with the benefit of hindsight wisdom in the face of modern day practicalities of commercial existence, it would not be unwise to employ a holistic or harmonised approach to the entire branch of law known as Intellectual Property Law (indeed, in some jurisdictions, there is a growing body of opinion that favours this aggregated approach). For who is to know when our courts may find that they have again crossed paths?

Khaled Barakat Chami v. United Bank for Africa plc [2010] 6 NWLR (pt 1191) 474

The Supreme Court’s decision establishing whether a guarantor can be sued without the joinder of the principal debtor when the liability of the guarantor crystallizes –

Introduction

At the risk of stating that which may seem trite, it nonetheless remains indubitable that in every part of the world, financing is the catalyst that drives all commercial activities. However, in more recent times, limited access to finance globally has created major constraints in business. Key projects and transactions are inadequately funded due to the lack of sufficient security for the much needed loans. Typically, where a potential borrower is unable to meet the criteria of the lending institution by providing satisfactory collateral, the said borrower may introduce a guarantor to its creditor. The guarantor usually undertakes to pay for the facility in the event the borrower defaults and may also pledge valuable collateral to cover the facility.

The case under review is based on a banker-customer relationship gone awry and which resulted in the creditor seeking to enforce the contract of guarantee after the principal debtor failed to liquidate its debt. Certain interesting procedural and substantive legal issues were raised and dealt with by the Supreme Court in this suit and in addition, it has further expounded the concept of guaranteeship in depth. Facts of the case Rasha Enterprises Limited; the principal debtor, was granted overdraft facilities by the respondent. As condition thereof, the respondent requested a guarantor for the credit facilities. The principal debtor introduced the appellant to the respondent for this purpose. The appellant was also a customer of the respondent bank. In furtherance of this arrangement, the appellant executed a guarantee agreement in favour of the respondent on the strength of which the principal debtor was permitted by the respondent to overdraw its account.

The respondent subsequently claimed that the principal debtor, became indebted to it in the sum of N171,452,649.52k (One Hundred and Seventy One Million, Four Hundred and Fifty Two Thousand, Six Hundred and Forty Nine Naira, Fifty Two Kobo) as a result of the credit facilities aforementioned and it failed to settle its indebtedness despite repeated demands. The respondent’s solicitor wrote the appellant asking him to satisfy the aforesaid indebtedness in fulfillment of his pledge under the guarantee agreement. The appellant refused to honour the terms of the guarantee and the respondent consequently instituted an action in court to recover the money. At the trial court, the appellant contended that he never acted as guarantor in the overdraft arrangement between the respondent and the principal debtor. He further argued that the principal debtor was not a duly incorporated company and that the credit facility was not secured. The appellant did not however testify in proof of his averments in the trial court. The respondent on its part tendered the guarantee form or agreement which the appellant had signed. The trial court held that the respondent failed to prove its case and further that the debt could not be proved against the appellant without joining the principal debtor as a party to the suit.

The respondent being dissatisfied with the judgment, appealed to the Court of Appeal, which allowed the appeal and granted judgment in its favour in the sum claimed at the trial court. Aggrieved, the appellant appealed to the Supreme Court. ISSUES FOR DETERMINATION AND JUDGMENT The main issue for determination before the Supreme Court was: Whether the Court of Appeal was right in its finding that the principal debtor was not a necessary party to the suit. Learned counsel for the appellant argued vigorously that the principal debtor was a necessary party to the proceedings to make same competent and the failure to join the principal debtor in the proceedings at the trial court was a fatal omission which made it impossible in law for the court to determine the alleged indebtedness of the principal debtor to the respondent, which determination was a condition precedent to any liability under a guarantee. In his reaction, learned counsel for the respondent submitted that the respondent had led evidence to prove the indebtedness of the principal debtor and that there was also evidence that the principal debtor failed, refused or neglected to pay the debt as secured by the appellant.

Relying on the case of Olujitan v. Oshatoba (1992) 5 NWLR (Pt. 241) 326 at 329, he further contended that the issue of non-joinder of the principal debtor was never raised by the appellant either as a preliminary point or in his statement of defence, concluding therefore that it was not incumbent to join the principal debtor in an action to join against the appellant in respect of the guarantee agreement. In a well considered judgment, the Supreme Court dismissed the appeal. The Learned Justices noted that the issue of joining the principal debtor in an action to enforce the guarantee did not arise from the pleadings of the parties, evidence, and addresses of counsel before the trial court. The matter was thus raised suo motu without calling on learned counsel to address on it, before basing its decision thereon. On whether or not the guarantee had crystallized the court held thus per ONNOGHEN JSC: “…it is settled law that where a person personally guarantees the liability of a third party by entering into a contract of guarantee or suretyship, a distinct and separate contract from the principal debtor is thereby created between the guarantor and the creditor. The contract of guarantee so created can be enforced against the guarantor directly or independently without the necessity of joining the principal debtor in the proceedings to enforce same.” Comments From the above exposition, it is clear that a guarantor is technically a debtor.

This is so because where the principal debtor refuses to pay, the guarantor will be called upon to repay the loan so guaranteed as was the case in the suit under reference. It is therefore trite that a contract of guarantee is an abstract promise to perform and is a separable obligation independent of the underlying transaction. A guarantor will therefore not be at liberty to escape the obligations he freely contracted to honour. This promise acts as a soft landing for creditors to secure the performance obligation in the event of the principal debtor’s default. With the ongoing banking sector reforms and the immense efforts of banks to recover debts from unwilling debtors, the sound reasoning and logical conclusions of the learned Justices of the Supreme Court in the instant case is a welcome indication that our courts are alive to intricacies of secured credit transactions. However, it is perhaps unavoidable sometimes that their efforts are thwarted due to tactical application of legal techniques by counsel at the courts. For the avoidance of doubt though, the case under review has re-affirmed the settled legal principles on the subject under reference.