09/10/2017
POWER OF A LENDER TO CHARGE AN INTEREST RATE HIGHER
THAN THE INITIAL INTEREST RATE
AMSEL LTD & ANOR v. UBN PLC
PRACTICE AREA: BANKING LAW
INTRODUCTION
Obtaining a loan facility for one purpose or the other is not an uncommon phenomenon and it is usually evidenced by a loan agreement. This loan agreement, containing the terms upon which the loan facility is granted, is usually presented by the banks for signing by the borrower. One of the essential clauses in the loan agreement is the one relating to interests rate. Some loan agreements make interests rate chargeable susceptible to changes in the trend or fluctuations in the financial market. Such was the loan agreement in the case at hand.
The Court of Appeal, per OHO, J.C.A. considered the import of such an interest rate clause in the case at hand and held that “The settled position of the law is that where there is a provision that interests is not fixed and that it is subject to variations or fluctuations, as in the instant case, the lender has the power to charge an interest rate higher than the initial interest rate as long as what is charged is the prevalent interest rate in the financial market.”
The Court went further to state instance(s) where, despite the interest rate clause being made susceptible, the lender will not be allowed to charge an interest rate higher than the initial interest rate. The Court held that “The exception, however, is where the borrower can establish that the interest rate imposed is unreasonable or in excess of what obtains in the financial market at the relevant time.”
On whether the Court can set aside the imposition of an interest rate higher than the initial interest rate or compel the lender to charge a particular interest rate, the Court, per OHO, J.C.A said “In addition, a Court of law cannot set aside the imposition of an interest rate which is reasonable and in tandem with what obtains at the financial market at the relevant time as this is usually set by CBN policy.”
FACTS OF THE CASE
This appeal is an offshoot of the Judgment of the High Court of Lagos State delivered on the 27th day of March, 2014 wherein the Court gave judgment in favour of the Respondent who was Defendant at the Trial Court.
The case, as can be gleaned from this appeal, borders on a loan facility granted the Claimants (now Appellants) by the defendant (now Respondent). The Claimants, at the Trial Court, prayed for declaration that the Defendant's refusal to remove the credit risk management report in order to enable Oceanic Bank Plc to refinance the Claimants’ indebtedness to the Defendant was unlawful and in bad faith and was intended to clog the Claimants’ equity of redemption; that the Defendant has no right in law to continue to clog the Claimant's equity of redemption by continuing to frustrate the Claimant's effort to get other Banks to refinance the Claimants' indebtedness to the Defendant; that it is inequitable for the Defendant to frustrate Claimants' efforts to get Oceanic Bank Plc to refinance the loan and then trial Court instead allowed all the reliefs sought by the Respondent in proceed to foreclose the Claimant's right to redeem mortgaged property; an Order of the Hon. Court directing the Defendant to remove the negative surveillance report placed against the name of the 1st Claimant and on its account in order to allow Oceanic Bank International Plc or any other Bank to re-finance the Claimant's financial Obligations to the Defendant; an Order of injunction restraining the Defendant from unlawfully selling and or otherwise disposing of any of the Securities by which the mortgage was secured or in any manner whatsoever encumber the Claimant's equity of redemption.
In another twist, the Respondent as Defendant counter-claimed against the Claimants for the sum of 101,842,628.56 being the debt owed to it by the Defendant to the Counter-Claim by virtue of a loan facility granted by the Counter-Claimant to the 1st Defendant and guaranteed by the 2nd Defendant to the Counter-Claim which they failed to repay despite several demands by the Counter-Claimant as well as interest on the said sum; a declaration that the Counter-Claimant's right of sale of the 2nd Defendant to the Counter-Claim's property used to secure the facility granted to the 1st Defendant to the Counter-Claim has arisen and exercisable; a declaration that the Defendants to the Counter-Claim have created an enforceable equitable mortgage in favour of the Counter-Claimant in respect of the 2nd Defendant to the Counter-Claim's undeveloped property at Ikotun by virtue of the deposit/ex*****on of Memorandum of deposit of the original title deed of the said property at Ikotun as security for the facility granted to the 1st Defendant to the Counter-Claim by the Counter-Claimant.
In a well considered judgment delivered by the Trial Court, all the Reliefs claimed by the Defendant/Counter-Claimant were granted against the Claimant. Being aggrieved by the Judgment of the Trial Court, Appellants have brought this Appeal.
ISSUES FOR DETERMINATION
The issues for determination in this appeal as formulated by the Appellant and adopted by the Court are:
1. Whether the Appellants suffered miscarriage of justice by reason of the fact that the Judgment of the lower Court was delivered outside the ninety days after conclusion of evidence and final address allowed by the 1999 Constitution of the Federal Republic of Nigeria (As Amended) and if so, whether the judgment of the lower Court is a nullity or ought to be set aside. (Ground one).
2. Whether contrary to the holding of the lower Court, there was sufficient evidence before the lower Court to show that the Respondent frustrated the efforts of the Appellants at refinancing the 1st Appellant's indebtedness to the Respondent and if so, whether it amounts to a clog on the Appellants' equity of redemption. (Ground Two)
3. Whether the trial Judge was right in holding that the Respondent could not be compelled to create a second lien on the mortgage "if it felt" that the valuation of the property was too low to bear two debts when in fact there was no valuation Report at all before the lower Court to inform that decision. (Ground Three)
4. Whether the finding of fact by the learned trial Judge that the Respondent was charging the 1st Appellant interest at the commercial rate of 25% per annum as against the rate of interest mutually agreed to by the parties, supports the holding of the trial Court that the high rate of interest was not responsible for the frustration of 1st Appellant's business and does not constitute a clog on the Appellants' equity of redemption. (Ground Four)
5. Whether there are exceptions to the holding of the learned trial Judge that Appellant's failure to file a defence to the Respondents Counter Claim amounted to lack of defence to the Counter Claim on the part of the Appellants and if so whether the Appellants' case come within the exceptions. (Ground Five)
HELD
The Court upheld the decision of the Trial Court as all the issues were resolved in favour of the Respondent. The Court held that the Appeal is moribund as it lacks merit. Same was accordingly dismissed with cost of ₦100,000.00 awarded against the Appellant.
RATIO DECIDENDI
ACTION - COUNTER-CLAIM: Effect of failure of a plaintiff to file a reply/defence to a counter-claim
"On the question of whether there are exceptions to the holding of the learned trial Judge that Appellant's failure to file a defence to the Respondent's Counter Claim amounted to lack of defence to the said Counter Claim, the settled position of the law is that a Counter-Claim, once set up by a Defendant is a separate suit on its own, though joined to the main suit for the purpose of convenience and quick determination by the Court. What the Plaintiff in the main suit becomes is the Defendant to the Counter-Claim. It is therefore important for this reason to file a Defence to the Counter-Claim except where the Plaintiff (now Defendant) decides to admit the Counter-Claim in its entirety. There are legions of decided cases on this subject.
The Appellant's failure to therefore file a defence to the facts contained in the Counter-Claim and to make any depositions to traverse the facts contained therein, could create a very unpleasant situation to the Plaintiff when once evidence is led in proof of the Counter claim as same will be deemed accepted and proved and the Counter-Claim established. See the cases of; ALHAJI HAIDO & ANOR vs. ALHAJI USMAN (2004) ALL FWLR (PT. 291) 1763 AT 1781; IGE vs. FARINDE (1995) 7 NWLR (PT. 354) 42." Per OHO, J.C.A. (Pp. 65-66, Paras. B-B)
ACTION - TRAVERSE: Whether a general traverse is enough in claims for liquidated money demand
"On the other hand, the counter claim of the Respondent was never specifically accepted or denied. It is worthy of note that a general traverse has no place in pleadings. It cannot controvert material and important averments in pleadings particularly where the claim is one in debt or liquidated demand."Per MUKHTAR, J.C.A. (P. 67, Paras. B-C)
ACTION - PLEADINGS: Aim/object/purpose of pleadings
"The whole object of pleadings is to narrow the parties to definite issues, and thereby to reduce expense and delay, especially as regards the amount of testimony required on either side at the hearing."Per MUKHTAR, J.C.A. (P. 67, Paras. D-E)
BANKING LAW - CENTRAL BANK: Purport of Section 42(1) (a-c) of the Central Bank Act
"In respect of the second issue dealing with the allegations of the Appellant that the Respondent frustrated its efforts at refinancing the 1st Appellant's indebtedness to the Respondent and that this amounted to a clog on the Appellant's equity of redemption, the straight answer on this issue, is that the Respondent was under a duty to comply with the CBN regulations in placing a Negative Electronic Financial Analysis and Surveillance Report on the Account of 1st Appellant. The essence of this is to use the Electronic Financial Analysis and Credit Risk management system to curtail the activities of chronic debtors in order to put other Banks on notice so that they would be able to decide whether or not they want to deal with such Debtors in any future transactions. See the provision of Section 42(1) (a-c) of the Central Bank Act Cap C4 Laws of the Federal Republic of Nigeria, 2004.
On the related allegation that by placing the Negative Electronic Financial Analysis and Surveillance Report on the Account of 1st Appellant, and that the Respondent thereby clogged the Appellant's Equity of Redemption, I fail to see how this could be possible when all the Respondent had done is complying with a statutory obligation imposed on it by Law. In agreement with the submissions of learned Respondent's Counsel, I also fail to see how the Negative Electronic Financial Analysis and Surveillance Report placed on the Account of 1st Appellant has prevented the Appellant's intended redemption party i.e. Oceanic Bank Plc from bailing out the Appellant. Perhaps, the findings of the Court below on the issue, which I have no cause whatsoever to disagree with is instructive in this regard when the Court said at page 300 of the printed records as follows;
"The above Section shows that the Defendant (Respondent) had a duty to cooperate with the CBN in its provision of financial services and also to further the policies of the CBN which in the opinion of apex bank were in the National interest. It is therefore my view that the Claimants could not in wanting to pay ask the Defendant not to issue to a report that the Defendant had a statutory obligation with the CBN to issue and in any case as stated by the Defendant which the Claimant did not deny), Oceanic Bank was in a position to decide whether or not it wanted to deal with the Claimants as the report did not prohibit lending. All the report did was to put Oceanic Bank on notice of the indebtedness. The Claimants equity of redemption is simply the right they have left after the mortgage was entered into demand for the title documents upon payment of the mortgage debt and in doing its statutory duty the Defendant cannot be regarded as having blocked or impeded the equity of redemption." Per OHO, J.C.A. (Pp. 56-58, Paras. A-C).
BANKING LAW - INTEREST ON CREDIT FACILITIES: General rule as to payment of interest on a debt or loan and its exception
"On the question of the finding of the Court below that the Respondent was charging interest at commercial rate of 25% per annum as against the rate mutually agreed between the parties; whether this was supportive of the holding of the Court below that the high rate of interest was not responsible for the frustration of the 1st Appellant's business dealings, the position here is that the letter of grant of the loan facilities also made the interests rate chargeable susceptible to changes following the trend of fluctuations in the financial market. It was this provision within the letter of grant that made it possible for the Respondent to charge a 25% interest rate on the facilities. I am in agreement that this cannot be held to amount to a clog in the 1st Appellant's equity of redemption. A copy of this letter is pasted at page 19 of the Records of Appeal. The settled position of the law is that where there is a provision that interests is not fixed and that it is subject to variations or fluctuations, as in the instant case, the lender has the power to charge an interest rate higher than the initial interest rate as long as what is charged is the prevalent interest rate in the financial market. See the case of ALHAJI ABUBAKAR SADIK DANTAMA vs. UNITY BANK PLC (2015) LPELR- 24448 CA where this Court per AWOTOYE, JCA had this to say on the subject;
"...In my respectful view claims for interest by Banks on loans are almost always complicated as interests rates are not fixed because they are subject to change"...
The exception, however, is where the borrower can establish that the interest rate imposed is unreasonable or in excess of what obtains in the financial market at the relevant time. In addition, a Court of law cannot set aside the imposition of an interest rate which is reasonable and in tandem with what obtains at the financial market at the relevant time as this is usually set by CBN policy. Apart from this where as in the instant case where the parties have a written understanding as to how the interests chargeable is to be organized, the Court below will be charged with seeking to re-write the agreement between the parties, outside the one which they had agreed upon at the time of the commencement of the relationship. The position of the law remains that parties and the Court are bound by the express terms of the agreement to which they have freely entered. See the cases of EVBUOMWAN & ORS vs. JONATHAN ELEMA & ORS (1994) LPELR - 1177 (SC); SAMUEL ISHENO vs. JULIUS BERGER NIG. PLC (2008) LPELR - 1544 (SC); ARJAY LTD vs. A. M. S. LTD (2003) LPELR- 555 (SC)."Per OHO, J.C.A. (Pp. 62-65, Paras. F-A)
MORTGAGE - EQUITY OF REDEMPTION: What a mortgagor who intends to exercise his equity of redemption must do
"On the question of the Appellant's equity of redemption, the position of the law is that the equity of redemption of the mortgagor cannot be activated, until the mortgagor makes full repayment of the Loan advanced to it by the mortgagee and therefore, the mortgagor who has not made any actual repayment cannot complain that there is a clog in his equity of redemption when he has not made any actual repayments. See the case of THE FED. ADMIN-GEN & ORS vs. CARDOSO & ORS (1973) LPELR 3171 (SC) where the Supreme Court per ELIAS, CJN had this to say on the subject;
"It is settled law that a mortgagor has two types of rights, one legal and the other equitable: there is his legal right to redeem his property on payment of capital and interest to the mortgagee on the contractual date..."
See also the cases YARO vs. AREWA CONSTRUCTION LTD & 2 ORS (2007) 6 S.C (PT. II) 149 AT 182."Per OHO, J.C.A. (P. 59, Paras. A-E)
WORDS AND PHRASES - "MISCARRIAGE OF JUSTICE": Meaning of "miscarriage of justice"
"The expression; "miscarriage of Justice", is defined in Black's Law Dictionary, 5th Edition as; "Decision or outcome of legal proceeding that is prejudicial or inconsistent with substantial rights of a party."Per OHO, J.C.A. (P. 55, Paras. B-C)
OTHER NOTABLE CASES FROM THE COURTS
AKINLADE & ORS v. OSENI (2017) LPELR-42981(CA)
APPEAL - INTERFERENCE WITH FINDING(S) OF FACT(S): What must be shown to succeed in an appeal against findings of facts
"On the question of the Appellants' contention that the learned trial Court introduced the doctrine of part-performance in dismissing the Counter claim of the Appellants' as Defendants, and that this occasioned a miscarriage of justice, the settled position of the law is that an Appeal Court will not disturb the finding of a trial Court supported by evidence and that the onus of showing that the trial Court's decision was perverse in its judgment or that there was a miscarriage of Justice, is on the party so impeaching it. See the cases of WOLUCHEM vs. GUDI (1981) 5 SC 291 AT 326; BOARD OF CUSTOMS AND EXCISE vs. BARAU (1982) 10 SC 48 AT 137 -138."Per OHO, J.C.A. (Pp. 46-47, Paras. E-B)
EVIDENCE - PROOF OF TITLE TO LAND: Ways of proving title/ownership of land
"The well established five (5) methods by which ownership of land may be established were laid down by the Supreme Court in the case of IDUNDUN vs. OKUMAGBA (1976) 9-10 SC 227. These five methods are;
1. By traditional evidence,
2. By production of documents of title which are duly authenticated,
3. By acts of selling, leasing, renting out all or part of the land, or farming on it or on a portion of it,
4. By acts of long possession and enjoyment of the land; and
5. By proof of possession of connected or adjacent land in circumstances rendering it probable that the
owner of such connected or adjacent land would in addition be the owner of the land in dispute.
It was held in the case of ABEL NKADO & ORS vs. OZULIKE OBIANO & ANOR (1997) 5 SCNJ 33 that the onus on the Plaintiff is discharged if he establishes any one of the five methods.
From the evidence led by the parties to this case at the lower Court, it is clear that both sides relied on the second method, which is the production of title documents in seeking to establish their competing claims to ownership of the parcel of land in dispute. The Supreme Court in IDUNDUN vs. OKUMAGBA (Supra) per FATAI WILLIAMS, JSC (as he then was) had this to say on the subject;
"Secondly, ownership of land may be proved by production of documents of title which must of course be duly authenticated in the sense that their due ex*****on must be proved, unless they are produced from proper custody in circumstances giving rise to the presumption in favour of due ex*****on in the case of documents twenty years old or more at the date of the contract (see Section 129 of the Evidence Act and JOHNSON vs. LAWANSON (1971) 1 ALL NLR 56.)."Per OHO, J.C.A. (Pp. 34-36, Paras. F-C)
EVIDENCE - BURDEN OF PROOF/ONUS OF PROOF: Whether a plaintiff can rely on the weakness of the defendant's case to prove his own case in action for declaration of title
"It is also settled that in a claim for declaration of title to land, the Plaintiff has the duty of proving his case upon his own evidence and cannot rely on the weakness of the Defendant's case. See the cases of D**E vs. OKOLOEDO (1999) 10 NWLR (PT. 623) 359 AT 364; MOGAJI vs. CADBURY (NIG.) LTD (1985) 2 NWLR (PT. 7) 282."Per OHO, J.C.A. (P. 36, Paras. C-E)
EVIDENCE - BURDEN OF PROOF/ONUS OF PROOF: Whether a plaintiff can rely on the weakness of the case of the defendant to prove his own case in action for declaration of title
"The position of the law usually in a claim for a declaration of title to land a Plaintiff must succeed on the strength of his case and not on the weakness of the defence. See KODILINYE vs. ODU 2 WACA 366 AT 337.
That however, does not mean that a Plaintiff is not entitled to take advantage of any evidence adduced by the defence (or the opponent) in which he intends to establish his title and supports the case of the Plaintiff. See AKINOLA vs. OLUWO & ORS (1962) 1 ALL NLR 224 at 225."Per OHO, J.C.A. (P. 43, Paras. B-D)
SILHOUETTE-TRAVELS & TOURS LTD v. LEADERS & CO. LTD PUBLISHERS OF THIS DAY NEWSPAPER (2017) LPELR-42982(CA)
ISSUE(S) FOR DETERMINATION: Effect of an issue for determination not arising or relating to any ground of appeal
"In respect of the first issue raised, the position of the law is that where an issue is formulated and which cannot be related to any Grounds of Appeal filed, the Court will strike it out and all the arguments presented in its support will be discountenanced. See the cases of ONIAH vs. ONYIA (1989) 1 NWLR (PT. 99) 514; UGO vs. OBIEKWE (1989) 1 NWLR (PT. 99) 566; OFONDU vs. NIWEIGHA (1993) 2 NWLR (PT. 275) 253." Per OHO, J.C.A. (Pp. 18-19, Paras. F-B)
ISSUE(S) FOR DETERMINATION: Whether issues for the determination of an appeal must arise from the grounds of appeal
"... The issue two (2) identified therefore having been found not to attack the decision appealed against has duly and assuredly attracted for the issue two (2) of Appeal the Court's hammer of a struck down which happens to be the appropriate thing to do in the circumstance. See the cases of ADA vs. ADA (2001) 5 NWLR (PT. 705) 1 AT 2; AMAD**E vs. GOV. OF IMO STATE (1993) 2 NWLR (PT. 275) 302 AT 315; ADELEKAN vs. ECU-LINE NV (2006) LPELR-113 (SC), where the Supreme Court per ONNOGHEN, JSC (as he then was, now CJN) had this to say on the subject; "It is settled law that whereas Grounds of Appeal must relate to and challenge the validity of the decision appealed against, the issues for determination in the Appeal must arise from the said Grounds of Appeal. For issues formulated to result in setting aside the judgment appealed against, they must be based on Grounds of Appeal that attack the ratio decidendi in the judgment." Per OHO, J.C.A. (Pp. 20-21, Paras. F-D)
PRACTICE AND PROCEDURE - ABUSE OF COURT/JUDICIAL PROCESS(ES): Meaning and nature of the concept of "abuse of Court/judicial process"
"Abuse of process can also mean abuse of legal procedure or improper use of the legal process. An abuse of process always involves some bias, malice, some deliberateness and some desire to misuse or pervert the course of justice. See AFRICAN REINSURANCE CORPORATION v. JDP CONSTRUCTION NIG. LTD (2003) 13 NWLR (PT.838) 609 AT 635 paragraphs F-G; USMAN vs. BABA (2005) 5 NWLR (PT. 917) 113 AT 131 paragraphs E-G."Per OHO, J.C.A. (Pp. 22-23, Paras. E-A)
PRACTICE AND PROCEDURE - ABUSE OF COURT/JUDICIAL PROCESS(ES): What amounts to or constitutes an abuse of Court process
"There is said to be an abuse of the process of the Court when a party improperly uses the issue of judicial process to the irritation and annoyance of his opponent, such as instituting a multiplicity of actions on the same subject matter against the same opponent on the same issue." Per SHUAIBU, J.C.A. (P. 28, Paras. B-C)
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