Merill Guaranty Savings & Loans Limited & Anor V. Worldgate Building Society Limited (2012)

LAWGLOBAL HUB Lead Judgment Report

M. MUKHTAR, J.S.C.

In an action instituted in the High Court, Lagos State, the respondent who was then the plaintiff claimed against the appellants jointly and severally the following reliefs:-

“(i) The sum of N553,013.69 being the principal sum and interest outstanding on the amount placed in the 1st Defendant’s high yield certificate as at 31st December, 1993, which sum the Defendant has refused and/or neglected to pay despite repeated demands.

(ii) Interest on the said sum of N553,013.69 at the rate of 21% per annum from 1st January, 1994, until the whole amount is totally liquidated.”

Briefly, the plaintiff’s case is that it is a limited liability company, while the 1st defendant is a finance company and the 2nd defendant is its Managing Director, who executed a personal guarantee in favour of the plaintiff on its investment of N500,000 on the defendants’ merit high yield certificate at an interest rate of 8.5% per month for 90 days to fall due on 24th August 1993, and the defendant issued a post-dated Guarantee Trust Bank cheque to be presented on 24th August 1993. The defendant however failed to redeem the plaintiff’s investment despite several entreaties, hence it instituted this action against the defendants. After filing the plaintiff’s statement of claim, the defendant filed a notice of preliminary objection, the ground of which reads the following:-

“The Lagos State Court lacks jurisdiction to entertain this suit by virtue of the provision of Section 230(1)(d) of the Constitution of the Federal Republic of Nigeria 1979 as amended by Section 1 (3) of the Constitution of the Federal Republic of Nigeria 1979 as amended by Section 1 (3) of the Constitution (Suspension and Modification) Decree No. 107 of 1993.”

In an affidavit in support of the preliminary objection, the deponent, Olufunmilola Osisanya deposed to the following facts:-

“3. That the Plaintiffs instituted this action at the Lagos High Court on 8th May 1995 claiming the total sum of N553,013.69 (five hundred and fifty three thousand and thirteen Naira sixty nine kobo) arising from a short term loan granted by the Plaintiff to the 1st Defendant.

4. That the cause of action in this suit arose as a result of the conduct of the business of the 1st Defendant as a financial institution.
5. That there is no banker-customer relationship between the plaintiff and the 1st Defendant.
6. That I verily believe that the Honourable court lacks jurisdiction to entertain this suit by virtue of the provisions of the constitution (suspension and Modification) Decree No. 107 of 1993.
7. That it is in the interest of justice that this suit be dismissed.”

The learned trial judge in his ruling upheld the objection and struck out the plaintiff’s action. Dissatisfied, the plaintiff appealed to the court of Appeal, Lagos Division where Ogebe JCA (as he then was) in the lead judgment of the court allowed the appeal thus:-

“Consequently, I allow this appeal and set aside the ruling of the trial court. In its place I dismiss the respondent’s preliminary objection before the court”.

Aggrieved by the decision, the defendants appealed to this court on four grounds of appeal. In pursuance to the rules of this court the learned counsel for the parties exchanged briefs of argument, which were adopted at the hearing of the appeal. In its brief of argument, the appellant raised the following lone issue for determination of the appeal:-

“Whether the Lagos High Court had jurisdiction to determine Civil Causes and matters arising from financial institutions (such as between the Appellants and Respondent) not being a dispute between an individual customer and his bank, taking cognizance of the provisions of Section 230(1)(d) of the Constitution of the Federal Republic of Nigeria 1979 as amended by section 1(3) of the Constitution (suspension and Modification) Decree no.107 of 1993.”In its brief of argument, the respondent also formulated one issue for determination which is, whether the High Court of Lagos State has jurisdiction to entertain the plaintiff’s case a formulated in the Statement of claim.

In arguing its sole issue, learned counsel for the appellants referred to paragraphs 1 and 2 of the plaintiffs statement of claim which he argued show that the respondent and 1st appellant are finance and investment companies whose activities fall within the category of ‘other financial institutions’ regulated by part 1 i.e Sections 56 – 59 of the Banks and Other Financial Institutions Decree No. 25 of 1991. The finding of the Court of Appeal which I will reproduce hereunder was attacked. It reads as follows:

“I must begin the resolution of the sole issue of this appeal by saying that there is nothing on the face of the claim to show that the parties are financial institutions. To determine whether or not they are financial institutions of incorporation and registration as financial institutions would require evidence showing their documents of incorporation and registration as financial institutions. There was nothing before the trial court to establish this ……..”