Whether The Issue Of Jurisdiction Can Be Raised Fresh On Appeal

Facts

In 1997, the ABC Merchant Bank Ltd entered into an agreement with the Respondent (NERFUND), as one of the participating banks in the disbursement of the National Economic Reconstruction fund loans. In this capacity, ABC Merchant Bank Ltd granted a loan in the sum of N35 million to the 1st Appellant. Shortly afterwards, the Bank went into liquidation, as its operating licence was revoked by the Central Bank of Nigeria (CBN). The Nigerian Deposit Insurance Corporation (NDIC) was appointed as its official Liquidators. During this period, the loan granted the 1st Appellant was due but unpaid. In the process of the liquidation, the NDIC entered into an agreement with the Bank, wherein its rights and liabilities in the transaction with the 1st Appellant, were assigned and transferred to the Respondent (which provided the funds). Further to this, the Respondent proceeded to enter into fresh loan agreements with the 1st Appellant, and dealt directly with it. The 2nd and 3rd Appellants, were the Guarantors of the loan.

In 2003, the loan sum of N47 million was further granted to the 1st Appellant, bringing the principal sum granted by the Respondent to N82 million. The agreed interest payable on the loan, was 19% per annum. The 1st Appellant, however, defaulted in meeting the repayment schedule, despite several demands for repayment by the Respondent. Given the foregoing, the Respondent instituted an action against the Appellants at the Federal High Court, Abuja, under the Undefended List Procedure. The Respondent sought an order of court for the sum of N115,025,503.79, being the principal and interest on the credit facilities as at 31st March, 2008; 21% pre-judgement interest on the sum from April, 2005; and 15% post-judgement interest till the date of final liquidation.

Despite being served with the processes, the Appellants neither appeared in court, nor filed processes in the suit. The trial court entered judgement against the Appellants in the sum claimed as principal and interest on the credit facility, with 10% post-judgement interest. The Appellants, who felt aggrieved by the decision of the trial court, appealed to the Court of Appeal. Owing to non-appearance/representation of the Appellants at the trial court, all the issues raised in the Notice of Appeal were fresh issues, including the challenge to the jurisdiction of the trial court to determine the suit. The issues were raised, without seeking leave of court. In its Brief of Argument, the Respondent raised a Preliminary Objection, contending that all the grounds in the Notice of Appeal were incompetent. The Court of Appeal upheld the Preliminary Objection of the Respondent, and struck out the appeal. Nonetheless, conscious of the fact that it is not the final court, the Court of Appeal went ahead to consider the appeal on the merit, and dismissed same. Dissatisfied with the decision, the Appellants appealed to the Supreme Court.

Issues for Determination

1. Whether the Court of Appeal was right in upholding the Preliminary Objection of the Respondent, to the effect that the Appellants required leave to raise the issue of jurisdiction or competence of the trial court to entertain the Respondent’s claim in the Court of Appeal.

2. Whether the Court of Appeal was right in holding that the Federal High Court had jurisdiction to entertain the Respondent’s claim or action, which was founded on contract and/or breach of contract.

Arguments

Submitting on the first issue, counsel for the Appellants argued that the fundamental nature of the issue of jurisdiction exempts it from restrictions which may affect other legal points on appeal if not raised at the lower court, or at the appropriate time. He posited that the issue of competence of the court can be raised at any stage of the proceedings, even for the first time on appeal at the Supreme Court, without seeking leave. By its nature, the issue can even be raised by the court suo motu – OLORIEGBE v OMOTOSHO (1993) 1 SCNJ 30. Counsel stressed that the failure to raise the issue, does not vest a court with the competence it lacks – WESTERN STEEL WORKS LTD. & ANOR. v IRON STEEL WORKERS UNION OF NIGERIA (1986) SC 35. Reacting to the issue, counsel for the Respondent argued that without seeking and obtaining leave of court, the Appellants were precluded from raising the issue of jurisdiction. He relied on GLOBAL TRANS. OCEANICO S.A. v FREE ENT. (NIG) LTD (2001) 5 NWLR (Pt. 706).

On the second issue, counsel submitted for the Appellant that, jurisdiction of the Federal High Court is prescribed by Section 251(1)(a) – (s) of the Constitution of the Federal High Court, 1999 (as amended), and any matter not contained in the Section is outside its jurisdiction. Further, jurisdiction of court is determined by the Plaintiff’s claim, as endorsed in the Writ of Summons or Statement of Claim. The claim of the Respondent before the trial court, was for breach or repayment of a loan contract. Counsel submitted that a proper interpretation of Section 251 referenced above, would reveal that same does not confer the Federal High Court with jurisdiction to entertain matters founded on contract and/or its breach – ONUORAH v. KADUNA REFINERY & PETROCHEMICAL CO. LTD (2005) 21 NSCQR 130. He urged the court to allow the appeal and invoke its powers under Section 22 of the Supreme Court Act, to transfer the suit to the High Court of Anambra State for its determination.

Responding to the submissions above, counsel for the Respondent contended that the Respondent is an agency of the Federal Government, and that the finding of fact made in this regard stands, having not been appealed against. Counsel argued that in so far as the claim before the court pertains to the administration and management of a Federal Government agency, by virtue of Section 251(1)(p) of the 1999 Constitution (as amended), the Federal High Court has exclusive jurisdiction to entertain the claim. He relied on the decision in NEPA v EDEGBERO (2002) 18 NWLR (Pt. 798) 79. Reacting to the submission that the trial court does not have jurisdiction in matters founded on contract, irrespective of the parties to the transaction, counsel countered the submission, stating that the Respondent was established solely by the Federal Government for the purpose of granting loans, which is the basis of this action. Further, the Respondent having assumed the rights and liabilities in respect of the loan transaction, the Respondent had stepped into the shoes of the participating banks. Counsel argued that if the banks could recover outstanding capital from the Appellants at the Federal High Court, then the Respondent should not be precluded from so doing. He argued that a Banker-customer relationship had arisen between the parties, and both the Federal High Court and the State High Court have jurisdiction in the matter, though the Respondent is neither a bank nor a financial institution – NDIC v OKEM ENTERPRISES LTD (2004) 10 NWLR (Pt. 880) 107. In response to the issue of the transaction being a simple contract, counsel submitted that a contract which touches on the very essence of the statutory duties of the Respondent, cannot be described as a simple contract. He referred to the sealed Deed of Legal Mortgage in the transaction, in support of his position that a simple contract cannot be under seal.

Court’s Judgement and Rationale

Deciding the first issue, the Apex Court reiterated the fundamental nature of the issue of jurisdiction, stressing that it behoves on every court, the Supreme Court inclusive, to carefully examine the issues in the Statement of Claim, to determine whether the issues sought to be ventilated before the court are within its jurisdictional competence. On the question whether the Appellants in this instance, required leave of court to raise and argue the issue of jurisdiction, their Lordships held that although the rules require a party raising a fresh issue on appeal to do so by leave of court; nonetheless, the issue of jurisdiction is radical and at the foundation of adjudication, and if a court acts without jurisdiction, the entire process is a nullity. A court cannot, under any disguise, decline to deal with an issue of jurisdiction raised for the first time on appeal without leave – CGG (NIG) LTD v AMINU (2015) LPELR-24463(SC). Also, by virtue of Section 233(2)(a) of the 1999 Constitution (as amended), no leave of court is required to raise an issue of jurisdiction. It follows that the lower court was in error, when it held that the Appellants required leave to raise the issue of jurisdiction as a fresh issue.

In its determination of the second issue, the Apex Court scrutinised the verifying affidavit filed by the Respondent and the reliefs sought before the trial court, in concluding that the Respondent’s suit was for recovery of a loan contract entered into by the parties. The Respondent argued strenuously that by Section 1(2) of the NERFUND Act, the Respondent was established solely for the purpose of granting loans to deserving small scale and medium scale industrial enterprises, and that the action for recovery of loans granted falls within the management and control of the agency, and therefore, within the exclusive jurisdiction of the Federal High Court. Counsel had also argued that the suit can be classified as one arising from banker/customer relationship, and that the Deed of Legal Mortgage executed by parties in respect of the transaction, takes it away from the purview of a simple contract. Their Lordships, however, held that Deed of Legal Mortgage is not the document to be considered, in determining whether the action is one founded on simple contract.

The court held that an action predicated on recovery of loan is one for the enforcement of simple contract … and it is the High Court that has jurisdiction to entertain actions predicated on breach of contract; not the Federal High Court. The fact that granting of loans which forms part of the basis of this action is the sole reason why the Respondent was set up by the Federal Government, cannot give the contract a colouration other than that of a simple contract. The character of the transaction did not change, simply because the current creditor is an agency of the Federal Government. Notwithstanding the presence of a Federal Government agency as a party to a suit, the subject-matter of the dispute is also relevant in determining whether the Federal High Court has jurisdiction – A-G LAGOS STATE v EKO HOTELS LTD & ANOR. (2017) 12 SC (Pt. 1) 107.

The court concluded that the trial court lacked the jurisdiction to entertain the suit, and that the decision reached by the court was a nullity; same was thereby, set aside, including the appeal arising therefrom. The court then, invoked its powers under Section 22 of the Supreme Court Act, to order a transfer of the suit from the Federal High Court to the High Court of Anambra State for proper adjudication.

Appeal Succeeds.

Representation
Emeka Mozie, Esq. with Abdulkarim Usman, Esq. for the Appellants.

K.O. Ekwem, Esq. with Michael Ezie, Esq. for the Respondent.

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