Principles Guiding The Limit Of Interest Payable On Refund Of Payment For Unallotted Shares

In the Supreme Court of Nigeria Holden at Abuja On Friday, the 11th day of June, 2021

Before Their Lordships
Amina Adamu Augie
Uwani Musa Abba Aji
Mohammed Lawal Garba
Samuel Chukwudumebi Oseji
Emmanuel Akomaye Agim
Justices, Supreme Court
SC.90/2012

Between

Unijoy Paper Products Ltd Appellant
And

1. Nigerian Deposit Insurance Corporation
2. Alpha Merchant Bank (In Liquidation) Respondents

(Lead Judgement delivered by Honourable Mohammed Lawal Garba, JSC)

Facts

The 1st Respondent is a regulatory authority that secures deposits made by the public in commercial Banks in Nigeria, and is also the liquidator of the 2nd Respondent. The 2nd Respondent was a Public quoted bank with head office in Lagos, who offered its shares for sale through the Security and Exchange Commission (SEC).

On the 15th October 1992, the Appellant made payment for the sum of N5,395,781.60 to the 2nd Respondent, for the purchase of shares for some persons namely: Jimi Lawal (N2,395,781.60), Janet O. Lawal (N1,000,000.00), Francis Nwachukwu (N1,000,000.00) and Richard Ikiebe (N1,000,000.00). However, no shares were allotted to these persons because the SEC refused to register the shares, as payment was made after the offer had closed.

The 2nd Respondent, shortly after its public offer became distressed, and was consequently liquidated by the 1st Respondent. As the shares sought were never allotted to the said persons, the Appellant’s solicitors made several demands for refund. However, the Respondents failed and refused to refund the amount paid to the 2nd Respondent. The Appellant, thereafter, approached the Investment and Securities Tribunal for recovery of the said sum, with interest at the rate of twenty-one percent (21%)from the date of deposit till judgement is delivered and thereafter, till payment of the judgement sum is effected. The Tribunal delivered its decision in October 2009, wherein it directed the refund of the money paid by the Appellant, the sum of N5,395,781.60 with interest at the Minimum Policy Rate (MPR) plus two per cent per annum (2% p/a), from the date of the deposit (16th December 1992) to the date of liquidation of the 2nd Respondent on the 8th September 1994, only.

The Appellant, being dissatisfied with the decision of the Tribunal, appealed to the Court of Appeal on the limitation of the interest awarded. The Court of Appeal, suo motu, raised the issue of whether the Appellant was entitled to any interest at all, and held that the Respondents were not obligated to pay any penalty whatsoever by way of interest, as no right had inured to the Appellant. Consequently, the lower court affirmed the decision of the Tribunal, but set aside the Tribunal’s decision in the award of interest. Further dissatisfied, with the decision of the Court of Appeal, the Appellant appealed to the Supreme Court.

Issue for Determination

Four issues were formulated from the three Grounds of Appeal, submitted for determination of the court. However, the Supreme Court considered the sole issue below, in its determination of the appeal:
Whether the Court of Appeal was wrong in law, to hold that the Appellant was not entitled to any interest on the sum paid for the shares of the 2nd Respondent.

Arguments

On the issue, counsel for the Appellant contended that the Tribunal was right in law to have held that the Appellant was entitled to interest, albeit wrong to have limited the said award of interest to the date the 2nd Respondent was liquidated. In other words, counsel submitted that it was entitled to interest on the deposit made for the purchase of the shares, from the date of the deposit to the date of refund of same/judgement was delivered. It relied on the combined effect of Sections 10(2), 13(1), 14(1) and 21(1) of the Nigerian Deposit Insurance Corporation (NDIC) Act, 2006; Order 77 of the Investment Tribunal Rules, 2003; Sections 91(1) and 96(1) of the Investment and Securities Act (ISA); Rule 64 of the Securities and Exchange Commission, Rules; amongst others. The Appellant contended further that the Court of Appeal was wrong in law to have suo motu held that the Appellant was not entitled to any interest on the sum paid for the shares of the 2nd Respondent, as there was no Cross-Appeal by the Respondents on the award of interest made by the Tribunal neither was the issue raised by the parties in the appeal. It relied on BAKARE v NRC (2007) 12 MJSC 1, in support of its contention and urged the court to hold that the Appellant is in fact entitled to interest on the sum paid for the shares of the 2nd Respondent from the date of deposit to the date the money is refunded.

In reaction Counsel for the Respondent contended that, as the Appellant was not a depositor of an account in the 2nd Respondent or any insured institution for that matter as contemplated under the NDIC Act, the provisions of the NDIC Act cannot apply to the Appellant’s case as constituted. He argued further that Order 77 of the Investment Tribunal Rules, 2003 cannot prevail over the provisions of the NDIC Act, and that the Appellant was not entitled to interest whatsoever as rightly held by the lower court. It relied on the case of EKWUNIFE v WAYNE (1989) 5 NWLR (Pt. 122) 445. Flowing from the above, it urged the court to hold that the Appellant is only entitled to the refund of the sum paid without interest.

Court’s Judgement and Rationale

Before deciding the sole issue, the court noted that the only issue submitted for adjudication by the court below, was whether the award of interest was limited to the period from date of deposit for the allotment of shares to the date the 2nd Respondent was liquidated, instead of the date the Tribunal delivered its decision. There was no other complaint brought before the Tribunal, especially as to whether the Appellant was entitled to any interest at all or as of right, since payment had been made after the offer had closed. The said issue was not submitted to the lower court for determination in the appeal, by any of the parties. The fresh issue was raised suo motu by the lower court without affording parties an opportunity to be heard on the said issue, even the Appellant who would be prejudicially affected by the decision setting aside the interest awarded in its favour – OSHODI v EYIFUNMI (2000) 7 SC (Pt. II) 145; (2000) 13 NWLR (Pt. 684) 298. In light of this, the court held that the decision of the lower court on same, could not be allowed to stand for breach of the right to fair hearing, which occasioned a miscarriage of justice to the Appellant.

In its determination of the issue, the court noted that the Tribunal awarded the interest on the money paid for the shares based on the provisions of Sections 5(a) (e) of the, 25, and 27 of the NDIC Act; Section 91 of the Investment and Securities Act, 2007; Rule 64 of the Securities and Exchange Commission Rules and Regulation; as well the Tribunal’s previous decision in GBADEBO SMITH v FIRST BANK OF NIGERIA (Suit No. IST/OA/06/08), to the effect that the Appellant is entitled to interest on the money paid for the shares.

Section 96(1) – (3) of the Investment and Securities Act provides for the return of surplus monies paid by subscribers, period within which such monies are to be returned and interests payable thereon. … However, the money paid by the Appellant in this instance was for the shares of the 2nd Respondent, which company was liquidated, and ceased to exist before the refund of the Appellant’s deposit for non-allotment. The deposit was paid for shares, and not deposit made in the accounts maintained by the Appellant with the 2nd Respondent, for which it was insured by the 1st Respondent in furtherance of the provisions of Section 2 of the NDIC Act. The payment of interest on the deposit for shares by unsuccessful applicants in respect of the 2nd Respondent ended with its liquidation as a corporate entity, and the responsibility taken over by the 1st Respondent was to generally administer the assets and deposit liabilities of the 2nd Respondent in respect of depositors or account holders, and not share holders or owners of the bank.

The court noted the definition of the word “deposit” as contained in Section 59 of the NDIC Act, as monies lodged by depositors with any insured institution for safe keeping or for the purpose of earning interest, premium or dividend, whether or not payable and demand, upon, a given period of time, or upon a fixed date, or at a time or in circumstances agreed to by or on behalf of the depositor making the lodgement and the insured institution receiving it, except as otherwise extended under this Act. Applying the definition above, the court held that the provisions of the NDIC Act are not applicable or relevant in the determination of interest on deposits made for the purchase of shares of the 2nd Respondent, since the Appellant’s claim was not in respect of a deposit with the 2nd Respondent as defined in Section 59 thereof.

Referring to its earlier decision in EKWUNIFE v WAYNE (W/A) LTD (1989) 5 NWLR (Pt. 122) 422 at 445, the Apex Court reiterated that interest may be claimed as a right where it is contemplated by the agreement between the parties, or under a mercantile custom, or under a principle of equity such as breach of fiduciary relationship. Where interest is being claimed as a matter of right, the proper practice is to claim entitlement to it on the writ and plead facts which show such an entitlement in the statement of claim. The decision of the trial Tribunal in this instance, appears to be based on statutory provisions, mercantile custom and claim of right by the Appellant. Thus, the lower court does not have the vires to meddle into it, or to act as it did. Hence, the Supreme Court allowed the appeal in part, and set aside the decision of the lower court which upturned the award of interest by the trial Tribunal. The award of interest as made by the Tribunal was accordingly, affirmed. The appeal, however, failed in respect of the period of time limited by the Tribunal.

Appeal Allowed in Part.

Representation
Pablo Amaran Esq. for the Appellant.
T.O.S. Fadahunsi Esq. for the Respondents.

Reported by Optimum Publishers Limited,Publishers of the Nigerian Monthly Law Reports (NMLR)(An affiliate of Babalakin & Co.)