Union Bank Of Nigeria Ltd. V. Sax (Nig.) Ltd. & Ors (1994)

LawGlobal-Hub Lead Judgment Report

ADIO, J.S.C. 

In the Ilorin Judicial Division of the Kwara State High Court, the respondents instituted an action against the appellant. The claim, as stated in paragraph 48 of the Amended Statement of Claim, was as follows:-

“(a) a declaration that their total indebtedness to the 1st defendant as at 1st February 1986 is N304,120.00 and that it is unconscionable for the first defendant to charge interests on the debt from the 1st day of February 1986 to the date of filing this suit and until final determination by reason of the fact that the 1st defendant’s conduct frustrated the business of the plaintiffs; and a further declaration that even if the 1st defendant can claim interest on the overdraft,they can only charge interest at the rate of 11 % per annum from 1982 until the day of judgment and not at any other higher rate;

(b) a declaration that the first defendant is not entitled to exercise power of sale in respect of the properties belonging to 2nd and 3rd plaintiffs respectively which are stated in paragraph 43 of this statement of claim;

(c) an injunction restraining the 1st and 2nd defendants, their agents and/or servants from selling the properties mentioned in paragraph 2 above either by public auction or by any other means whatsoever;

(d) an order of this Honourable court directing the 1st defendant to allow the plaintiffs repay the loan in terms of the proposal annexed to and filed with this writ of summons and mentioned in paragraph 45 of this statement of claim.”

Pleadings were duly filed and exchanged. The evidence led by the respondents was that the 1st respondent was a cosmetics manufacturing firm and the 3rd respondent was the chairman of its board. The appellant granted loans to the 1st respondent and the 2nd and 3rd respondents mortgaged their properties to the appellant as security for the loans. The relevant mortgage deeds were Exhibits 25, 26 and 27. There was a provision in each of the mortgage deeds which empowered the appellant to charge interest on the loans at the rate of 11% and which also empowered the appellant to stipulate the interest subsequently payable from time to time.

There was default in the payment of the loans as a result of which the appellant threatened to sell the properties of the 2nd and 3rd respondents that constituted the security for the loans. In a letter dated 3rd September, 1987, addressed by the appellant to the Managing Director of the 1st respondent it was stated that owing to the circumstances stated in the letter, the interest rate applicable to the payment of the loans was 21% and 2% penalty. The respondents’ submission was that the interest rate of the loan was 11% and it was fixed and could not, in any case, be increased without their consent. Meanwhile, the 1st respondent applied to the appellant for a further loan as working capital.

There were many letters addressed by the 1st respondent to the appellant and many letters that the appellant addressed to the 1st respondent on the matter. Eventually, the appellant did not grant the additional loan. It was the contention of the respondents that a firm agreement between the parties had been reached on the additional loan and that it was the refusal of the appellant to grant the additional loan that made it impossible for the respondents to be in a position to pay the earlier loans for which security was given. For that reason, it was further contended that it would be unconscionable to allow the appellant to charge or recover interest on the said earlier loans. The position of the appellant was that it had power to stipulate interest payable on the earlier loans from time to time as it did in the letter dated 3rd September, 1987, Exhibit “24”. It was not under any obligation, under the provisions of the mortgage deed relating to the earlier loans, to provide the 1st respondent an additional loan for the 1st respondent’s working capital and that, in any case, there was no binding agreement between the appellant and the 1st respondent for an additional loan. What went on, in that connection, was pure and simple negotiation for an additional loan which failed. No firm agreement was reached in relation to that aspect of the matter.

The appellant, in its Statement of Defence, included a counter-claim in which it claimed from the respondents jointly and severally the sum of N448, 150.94 plus interest at 18% per annum on the debt from 18/6/88 until the day of judgment.

The appellant also claimed interest at the court rate of 10% per annum on the judgment debt until the debt was fully settled.

The learned trial Judge gave consideration to the evidence before him and to the submissions made by the learned counsel for each of the parties. He held that the respondents’ total liability as at 1/2/86 was N304, 120.00 and that it was not unconscionable for the appellant to charge interest on the loans granted by the appellant to the respondents. He also held that the agreed rate of interest on the loans aforesaid was 11% and that it could be reviewed only if such review was communicated to and accepted by the respondents. The learned trial Judge was of the view that ordinarily the court would not interfere to prevent the exercise of the power of sale of a mortgagee merely because its exercise was contrary to the wishes of a mortgagor but, because of the circumstance of this case, he would grant, and did grant, an injunction restraining the appellant, its servants, agents and privies from disposing of the mortgaged properties before 31st December, 1990, when the total indebtedness would have been liquidated. With reference to the counter-claim, the learned trial Judge entered judgment for the sum of N304,120.00 due as at 1/2/86 with interest at 11 % per annum.

Dissatisfied with the judgment, the appellant lodged an appeal against it to the Court of Appeal. The respondents also were dissatisfied with a certain aspect of the judgment and they lodged a cross-appeal against it to the Court of Appeal limited to the question whether the conduct of the appellant in failing to grant to the respondents additional overdraft facility did not frustrate the respondents’ business. The Court of Appeal dismissed the appeal and the cross-appeal.

Dissatisfied with the judgment, the appellant has lodged a further appeal to this court and the respondents have also lodged a further cross-appeal to this Court.