LUMEN CHRISTI CONSULT

"The court will lift the veil of incorporation of any company to find out who was behind the fraudulent and improper conduct of the company. This will be necessary where the canopy of legal entity is used to defeat public convenience, justify wrong, perpetuate and protect fraud and crime. Also where a company was involved in reckless and fraudulent trading activity tainted with fraud, the court can pears the veil of incorporation." See PUBLIC FINANCE SECURITIES LTD. vs. JEFIA (1998) 3 NWLR, PT. 59.
*MANGA vs. FEDERAL GOVERNMENT OF NIGERIA(2018)LPELR-45341(CA)*

*ISSUE:* LIABILITY OF A COMPANY-Whether an employee of a company can be held liable for the criminal acts of the company; exception thereto

*PRINCIPLE:*
"The Appellant herein has vehemently contended that he being a director cannot be held (vicariously) criminally liable for the acts or omission of the company. Permit me to refer to Section 66 (1 - 3) of the Companies and Allied Matters Act, 2004 which provides that:
1. Except as provided in Section 65 of this Act, the acts of any officer or agent of a company shall not be deemed to be the acts of the company unless-
(a) The company acting through its members in general meeting, board of directors, managing director shall have expressly or impliedly authorized such officer or agent to act in the matter; or
(b) the company, acting as mentioned in paragraph (a) of this subsection, shall have represented the officer or agent as having its authority to act in the matter, in which event the company shall be civilly liable to any person who has entered into the transaction in reliance on such representation unless such person had actual knowledge that the officer or agent had no authority or unless having regard to his position with or relationship to the company, he ought to have known of such absence of authority.
2. The authority of an officer or agent of the company may be conferred prior to any action by him or by subsequent ratification, and knowledge of such action by the officer or agent and acquiescence therein by all the members of the company or by the directors for the time being or by the members in general meeting, board of directors, or managing director; as the case may be.
3. Nothing in this section shall derogate from the vicarious liability of the company for the acts of its servants while acting within the scope of their employment.
See also Section 290 (c) of CAMA on personal liability of directors and officers:
"Where a company-with intent to defraud, fails to apply the money or other property for the purpose for which it was received, every director or other officer of the company who is in default shall be personally liable to the party from whom the money or property was received for a refund of the money or property so received and not applied for the purpose for which it was received; Provided that nothing in this section shall affect the liability of the company itself."
Therefore there is no gain saying that generally vicarious liability is not allowed in law, but there are exceptions even in the doctrine of corporate liability. It is known that a company does not run on its own but on minds of organs of the company who in law is the mind of the company. These are members of the company and organisations of the company, be it private or public. See WAGBATSOMA v. FRN (2015) LPELR-24649 (CA); ALADI v. ALIC NIG. LTD. (2010) 19 NWLR (PT. 1226) 111. In FDB FINANCIAL SERVICES LTD. v. ADESOZA (2002) 8 NWLR (PT. 663) 170 at 173, the Court considering the power of a Court to lift the veil of incorporation held thus:
"The consequences of reorganizing the separate personality of a company is to draw a veil of incorporation over the company. One is therefore generally not entitled to go behind or lift this veil. However, since a statute will not be allowed to be used as an excuse to justify illegalities or fraud, it is a quest to avoid the normal consequences of the statute which may result in grave injustice, that the Court as occasion demands have to look behind the corporate veil."
On whether a company is an artificial person that can only act through its human agent, the apex Court per ANIAGOLU, JSC, in the case of TRENCO (NIG.) LTD. v. AFRICAN REAL ESTATE & INVESTMENT CO. LTD. & ANOR. (1978) LPELR-3264 (SC) held that:
"But a company, although a legal person, is an artificial one which can only act through its human agents and officers. VISCOUNT HALDANE LC in S LENNARD CARRYING CO. v. ASIATIC PETROLEUM CO. LTD. (1915) AC 705 stated: "My Lords, a corporation is an abstraction, it has no mind of its own any more than it has a body of its own; its active and directing will must consequently be sought in the person of somebody who for some purpose may be called an agent, but who is really the directing mind and will of the corporation, the very ego and centre of the personality of the corporation."
Legally the procedure is; it is only after due evaluation of (evidence) acts of the company and that of the directors; (which is not in dispute that the Appellant is) at that point, the lower Court shall determine liability of parties. I again think, its premature at this stage to make an apt decision, in the light of explanations of knowledge of receipt of huge sums where exhibits show Appellant as one of the signatories to the company accounts. I definitely disagree with the heavy submissions of Appellant counsel on this issue; it is part of our laws in Nigeria, that a director or officer of a company can be held vicariously liable for criminal acts of a company. There is no gain saying that Section 286 ACJL does not operate in vacuum. The conditions therein are that:
"...the Court trying the case discharges or acquits any of the Appellants and the presiding Judge or magistrate is of the opinion that the accusation against any of them was false, frivolous or vexatious, the Judge or magistrate may for reasons to be recorded, direct that compensation be paid as the Court shall deem fit to the Appellant or any of them by the person upon whose complaint the accused was charged." (underlining mine)
From the above, the trial Court has not discharged or acquitted the defendant and is not of any opinion that the counts are false, therefore it cannot invoke this provision; it is premature at this stage. The Appellant has in its possession huge sums that has not been returned and are no longer in the Appellant's bank statement of accounts tendered by PW2, 3, 4 nor have the complainants been paid the said returns on investment and have moved out of their known address to avoid been forced to refund. These acts are highly suspicious to the common man and therefore call for explanations there is indeed a prima facie case established against the Appellant herein. It is also important to state at this point that it is premature to review evidence upon this ground to discharge or acquit the Appellant also it does not flow or arise from the Ruling of the Court. See NWANKWO v. EDCSUA (2007) 5 NWLR (PT. 1027) 77; AKIBU v. ODUNTAN (2000) SC (PT. 11) 106. The Appellant further contended that the transaction is contractual. What is in issue and evidence led is to the point that what started as a civil business trampled on the requirement of the law under Sections 58(1) & 59(a) & (b) of BOFIA which the prosecution contends, it is as illegal and such acts have been criminalized. Furthermore the element of fraud on huge monies had received, diverted and has not been refunded
under Section 516, 383(1)& (2) & 390 (9) of the Criminal Code till the date of trial introduced the element of fraud which in its self is a codified offence and falls under other offences under our laws, these are far removed from the realm of civil transaction or gentleman's agreement and now in the region of criminality in form of a scheme which the Appellant has a compulsory task of explaining to the satisfaction of the Court. Therefore until it is explained, neither the lower Court nor this Court can make any definite pronouncement since it is at a no case submission stage.
Likewise this Court is unable to evaluate the case and discharge/acquit the accused based on the evidence adduced so far. It therefore will be overreaching to invoke the provisions of the ACJL, 2011 to make an order of compensation. In AGBO & ORS. v. STATE (2013) LPELR-20388 (SC), FABIYI, JSC, held that:
"It is now basic that in considering a submission of no case to answer, it is not necessary at that stage to determine whether the evidence is sufficient to justify a conviction. The Court only has to be satisfied that there is a prima facie case which requires at least some explanation from the accused person."
As for the issue of arrest and detention of the Appellant's director, the Appellant ought to have taken out a summons under the Fundamental Rights Enforcement Procedure Rules, 2009 to contend this and not raise it in the no case submission or on appeal. A different cause of action applies in this issue having not arisen from the lower Court, this Court being an appellate Court cannot dabble therein. See NGWU & ORS. v. ONUIGBO & ORS. (1999) LPELR-1992 (SC) where ONU, JSC, held at page 12, paras. A - E that:
"...an appeal Court does not inquire into disputes, it inquires into the way in which disputes have been tried and decided..." Per OBASEKI-ADEJUMO, JCA.(Pp.29-36,Paras.C-F).

Business NewsLitigationsTop NewsTrending Post
It Is Illegal To Deduct N50 As Stamp Duty Charges On Customers Bank Account, Court Rules Against CBN, Zenith Bank
By Unini Chioma -December 12, 2020
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The Federal High Court sitting in Asaba presided over by Hon. Justice (Dr.) Nnamdi O. Dimgba in a case between Mr. Rupert Irikefe and CBN, Zenith Bank & Attorney General of the Federation has ruled that it is illegal to deduct #50 as stamp duty on teller deposits or electronic transfers of monies from #1,000 above.

This is contained in a Judgement of the Court delivered on Thursday, 9th day of December, 2020.

By an amended originating summons filed on 15th day of October, 2020, the Plaintiff sought for 8 declarations against the Defendants.


He urged the Court to declare that “the conduct of the 1st Defendant (CBN) in continuing to impose, direct the imposition, deduction or remittance to it by the 2nd defendant and or receiving the sum of #50 Naira as stamp duty on electronic transactions or transfer of monies from #1,000 (One Thousand Naira) upwards from Plaintiff’s current account no. 1014242877 despite the subsistence and or its awareness of the Judgements in Appeal No. CA/L/437A/2014 and Suit No. FHC/L/CS/126/ 2016 is arbitrary, unlawful, illegal, dismissive and contemptuous of the lawful orders of superior courts of competent jurisdiction, condemnable, null and void and of no effect”.

In addition, the Plaintiff claimed the sum of #50 million as general damages and #50 million as exemplary damages.

Meanwhile, the Defendants all greeted the suit with preliminary objections which were all dismissed by the Court as unmeritorious.

However, on the substance of the suit, the Court reformulated a sole issue for determination as follows:

“Whether from the totality of the materials presented before the Court, the Plaintiff is entitled to any or all of the reliefs sought”.

The Plaintiff argued that by the decisions of Courts on the subject, it is unlawful and disrespectful of the Defendants to continue to impose the charges on his account, adding that Judgement of a Court is binding and subsisting until same is set aside.

He further argued that CBN does not have the competence to impose a tax as the power to so do resides in the Federal Inland Revenue Service (FIRS) by the dint of Section 87 of the Stamp Duties Act and relevant provisions of the FIRS ACT, 2007.

Conversely, CBN argued that it is protected from any liability whatsoever by virtue of Sections 52(1) and 53(1) of the CBN Act and BOFIA respectively which imbue the CBN with immunity from any act done or undone in good faith.

In addition, the 2nd Defendant (Zenith Bank) argued that it cannot be liable because it was merely acting on the instruction of a disclosed principal.

On the part of the AGF, he argued that the Plaintiff had not been able to place sufficient materials before the Court to warrant a grant of the reliefs.

THE DECISION OF THE COURT

Having carefully listened to the pith and substance of the case advanced by the parties, firstly, the Court noted that the argument of the CBN is misconstrued and cannot stand.

“To enjoy the protection of the referenced provision, firstly, the action done or omitted to be done should be in good faith; and secondly, the actions done or undone in good faith should be one done or undone in the process of the ex*****on of any powers conferred upon the apex bank by the legislation”, the Court held, adding that can it be said that the purported deductions made from the Plaintiff’s account “in the face of subsisting decisions of Courts prohibiting same, one done in good faith? I do not believe so. The reason is not far fetched.”

The Court further said that CBN participated in “Suit No FHC/L/CS/126/2016 between Retail Supermarkets Nigeria Limited v. Citi Bank Limited and Central Bank of Nigeria…challenging…its circular with reference – CBN/GEN/DMB/02/006” where CBN instructed Banks to be deducting the said #50 as stamp duty, adding that the Court “held that it was unlawful for the apex bank and the commercial banks to continue to make those deductions”.

The Court, therefore, made the below notable pronouncements:

“The question, is having been aware of the above clear decisions of competent courts (of this Court and Court of Appeal), why then did the 1st Defendant and the 2nd Defendant continue to treat those decisions as if they were not existing, and to continue to implement the provisions of the circular which had already been nullified as being inconsistent with the law, namely the Stamp Duties Act?

“I have never ceased to wonder the practice that is so very much exacerbated in current climes, where agencies of the government treat decisions of courts of law with disdain, and carry on as if this decisions were not in existence. In my view, and I have raised this alarm anytime an opportunity presents itself, (and I do so for posterity,) obedience to the rule of law of which respect for the authority and decisions of law is an integral part, is at the foundation and the heart of the stability of our society. Everybody has a stake in ensuring that the rule of law prevails, and that the authority of courts of law is held as sacred. The reason is because ultimately, everybody turns to the court for protection, for in the moral authority of the courts lie salvation for all. This includes for the weak, in the immediacy, and for the strong, potentially. Human and executive powers are all transient. Stripped by the ephemerality that attends human affairs of his raw or executive power, the strong today inevitably turns out to be the weak tomorrow. And the question is where will the strong, now weakened, turn to for protection tomorrow, if he or she in the hours of strength of today, facilitate or participate in the destruction of the courts, to which all ultimately turn to as an alcove of salvation in the moment of vulnerability? This is a question that I will continue to pose, and for which all stakeholders must and should ruminate in their minds.”

Furthermore, the Court ruled that by the dint of Section 287 of the 1999 Constitution, the Defendants are bound by the decisions of the Court and are under obligation to enforce same.

The Court further stressed:

“Coming down to earth, my empathetic view is that by continuing with the deductions of stamp duty charges from the bank account of the Plaintiff and having same remitted to it, inspite of clear and binding decisions of Court prohibiting same, the 1st Defendant (CBN) has not acted in good faith; it actually acted in bad bad faith. By its every action, the 1st Defendant cannot take lawful shelter under Sections 52(1) and 53(1) of the CBN Act and BOFIA”.

Besides, the Court dispelled the contention of Zenith Bank that it was acting for a disclosed principal, ruling that “the exception to the general rule of liability in agency is that, where an agent is a wrongdoer, he cannot enjoy any protection from liability simply by pleading that it is an agent of a disclosed principal.”

The Court added that Zenith Bank “became a wrongdoer when they willfully disobeyed the judgement of Courts. They should therefore suffer the consequence. The truth is that when it comes to obedience to the law, everybody is on his own and should exercise independent judgment.”

In the whole, the Court adjudged the Plaintiff’s suit to be meritorious and awarded the sum of # 2 million damages adding that “it is granted to set an example that it is reprehensible conduct to willfully disobey decisions of competent courts of law”.


Also, the Court awarded the cost of #500,000 in favour of the Plaintiff against the CBN and Zenith Bank.

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