Chief Peter Amadi Nwankwo & Anor V. Ecumenical Development Co-operative Society (Edcs) U.A (2007)

LAWGLOBAL HUB Lead Judgment Report

M. MUKHTAR, J.S.C

The respondent who was the plaintiff in the High Court of Enugu State applied for issuance of a writ of summons under the undefended list, and the particulars of its claims against the defendants jointly and severally were as follows:-

“(a) The sum of $500,000.00 (Five hundred thousand US Dollars) being the principal sum of the loan due from the first and second/defendants to the plaintiff under a personal guarantee executed by the defendants to secure a loan granted by the plaintiff to Amike Ezzangbo Community Farms Limited under a loan granted by the plaintiff to Amike Ezzangbo Community Farms Limited under a loan agreement dated 18th January, 1990 payment of which sum the first and second defendants have failed, refused and/or neglected to pay despite repeated demands.

(b) Interest on the principal sum of $500,000.00 (Five Hundred Thousand US Dollars) at the agreed rate of 9% (nine percent) per annum from January 22, 1991 till date of judgment.

(c) Interest thereafter at the rate of 6% (six percent) per annum from the date of judgment until the entire judgment sum is finally liquidated.”

A twenty-five paragraphed affidavit in support of the application was sworn to by one Eze-Ozims Made for, and quite a number of documents were exhibited thereto. The pertinent paragraphs of the affidavit are:-

“3. That under and by virtue of a Loan Agreement dated 18th January, 1990 executed between the plaintiff! applicant and the Amike Ezzangbo Community Farms Limited (hereinafter referred to as “the company”), the plaintiff agrees to make available to the company a loan in the sum of $500,000.00 (Five Hundred Thousand US Dollars) for the purpose of financing the purchase of equipment, vehicle and working capital requirements for the development of the company’s agricultural project at Amike Ezzangbo, Ishielu, Enugu State. The loan agreement dated 18th January, 1990 is herewith attached and marked exhibit A.

10. That consequent upon the above, the plaintiff on the 22nd January, 1991 disbursed the loan to the Company through its Domiciliary Account No. 192/05 with First Bank of Nigeria Plc, Isolo Branch, Mushin, Lagos State, Nigeria through their Head Office No. 29/30 King Street, London EC2 V8 8EH
11. That the Company since utilized the said loan for the purchase of capital equipment and its working capital requirement in accordance with the terms and tenor of the Loan Agreement.
12. That rather than pay the installment due on the principal sum as agreed by the plaintiff and the company, the company on the 12th of October, 1992 and 1st November,1993 apply to the plaintiff for a Maintenance and Stabilization Fund Loan and Authority to borrow more fund from other sources which application was never granted by the plaintiff. The Company’s letters of October, 1992 and 1st November, 1993 are attached herewith and marked exhibit D1 & D2 respectively.
13. That on the failure of the Company to discharge its obligation under the Loan Agreement and Legal Mortgage regarding the repayment of the outstanding principal sum and interest in compliance with the terms and tenor of the Loan Agreement, the firm of Bentley Edu & Co. on the instruction of the plaintiff on 19th April, 1995 caused a letter of demand to be written to the company demanding a remittance of the outstanding principal sum and interest on the loan facility. The plaintiffs said former solicitor’s letter of 19th April, 1996 is herewith attached and marked exhibit E.
14. That rather than discharge the several installments of the principal sum and accrued interest that have fallen due, the company vide its letter of 12th May, 1995 applied to the plaintiff for a rescheduling of the loan and for further funding. The company’s letter of 12th May, 1995 is herewith attached and marked exhibit F.
15. That on the default of the company to repay the loan and the accrued interest, the plaintiff solicitors, Messrs George Ikoli & Okagbue by letters dated 29th July, 1996 demanded from the first and second defendants an immediate redemption of their obligation under the executed guarantee by paying the principal sum and the accrued interest on the loan granted to the company, payment of which sum they guaranteed. The plaintiff’s Solicitors Letters of 29th July, 1996 are herewith attached and marked exhibits 1(a) & 1(b).” The defendants filed a notice of intention to defend the suit under Order 24 rule 9(2) of the High Court (Civil Procedure) Rules of Anambra State (applicable to Enugu State), disclosing their grounds of defence in the supporting affidavit. The plaintiff filed a counter affidavit against the defendants’ notice of intention to defend.

The salient depositions in the affidavit in support of the notice of intention to defend the suit are as follows:-

“2. That the loan agreement was not executed on 18th January, 1990.

3. That a copy of the letter showing that the loan agreement was not executed even in 1991 is herein shown as exhibit EC01.
4. That by a letter dated 10th August, 1990 addressed to S. A. Edu Esq. Counsel for the plaintiff – a copy of which is shown herein as exhibit EC02 the Amike Ezzangbo Community farms withdrew from the project since the loan was not released.
5. That by letter dated 6th July, 1990 a copy of which is herein shown as exhibit EC03 counsel for the plaintiff refused to give approval for the loan.
6. That there are other documents which the defendants will use at the trial to show that there was no contract between the plaintiff and the defendants.
7. That the defendants/respondents have good defence against the claim.
8. That even if there was a valid contract the defendants will raise issue of expiration of time within which the plaintiff may take out this suit”.

On the other hand, the salient depositions in the counter-affidavit are as follows:-

“7. That I deny paragraph 2 of the affidavit in support and state that the loan agreement was indeed executed on 18th January, 1990. That attached and marked exhibit EDCS 1 is the loan agreement showing that it was duly executed by the parties.

8. That contrary to the averments in paragraph 3 of the affidavit in SUPPORT, the letter dated 22/1/92 is a letter from the plaintiff to its former solicitors thanking them for sending the loan agreement and legal mortgage which have been executed by both parties.
9. That contrary to the impression sought to be created by paragraph 4 of the affidavit in support, the Amike Ezzangbo Community Farms Limited did not by its solicitors letter of dated August, 1990 withdraw from the project but merely complained about the delay in advising the plaintiff to release the loan to the Amike Ezzangbo Community Farms Limited when all necessary securities have been put in place.
10. That I deny paragraph 5 of the affidavit in support and state that exhibit EC03 referred to in the said paragraph 5 and attached to the affidavit is a letter dated 6th July, Amike Ezzangbo Community farms limited complaining about the inefficiency of the securities put in place by the company to facilitate the disbursement of the loan by the plaintiff to the company.
11. That indeed regardless of the plaintiff’s former solicitors position in exhibit ECO3 attached to the affidavit in support of the defendants notice of intention to defend the suit, plaintiff actually disbursed the loan to Amike Ezzangbo Community Farms Limited.
12. That Amike Ezzangbo Community Farms Limited had by letter dated 12th May, 1995 admitted that it borrowed from the plaintiff, a total sum of US S500,000.00 and that it had regrettably defaulted in paying the installments of principal sum due and accrued interest. Attached and marked exhibit EDC83 is Amike Ezzangbo community farms limited letter dated 12th may, 1995.
13. That I deny paragraph 6 of the affidavit in support and aver that three was indeed a contract between the plaintiff and the defendants as evidenced by the guarantee duly executed by the defendants in favour of the plaintiff to secure the loan agreement entered into between the plaintiff and Amike Ezzangbo Community Farms Limited.
14. That in answer to paragraph 7 of the affidavit on support I say that the defendant have no defence against the claim as they actually guaranteed the payment of the loan of US $ 500,00.00 given by the plaintiff and Amike Ezzangbo Community Farms with interest and which the company have defaulted in paying in spite of repeated demands by the plaintiff.
15. That the first defendant executed the personal guarantee which was incorporated in the said loan agreement (page 16- 21) Exhibits EDCS 1 hereof on 19th October, 1989, while the second defendant executed same on 16th October, 1996.

18 That the defendants ate directors of the said Amike Ezzangbo Community Farms Limited, the borrower and the loan agreement was signed by the first defendant in his capacity as director of the borrower.

19. That contrary to the impression sought to be created in paragraph 8 of the affidavit in support of the notice of intention to defend, the action was instituted well within the time allowed by law”.

The learned trial Judge after a careful consideration of the processes and documents before him refused the defendants’ application to transfer the suit to the general cause list, describing their defence as a sham. Unhappy about the decision, the defendants appealed to the Court of Appeal. The Court of Appeal dismissed the appeal, and the defendants again appealed to this court. Learned counsel for the parties exchanged briefs of argument. The appellants formulated issues for determination which were adopted at the heating of the appeal. The issues for determination in the appellants’ brief of argument are as follows:-

“1. Whether the Court of Appeal applied moral persuasion instead of legal rules in determining the appeal before it