Obikoya v Wema Bank Ltd (S.C. 61/1986) [1989] NGSC 16 (19 January 1989)

In The Supreme Court of Nigeria

On Friday, the 20th day of January 1989

S.C. 61/1986


A. Obikoya                             .........          Appellant


Wema Bank Limited              .........                    Respondent

Judgement of the Court

Delivered by

Ebenezer Babasanya Craig. J.S.C

This appeal is an off-shoot of a previous case which came before the Supreme Court sitting as a full Court. That case SC.110/82 - Wema Bank Ltd. V. Bronik Motors Ltd. and A. 0. Obikoya, was later to become the leading authority on the limits of the jurisdiction of the Federal High Court.

The appeal herein arises from an interlocutory application brought after judgment in the principal case referred to above and relates to the proper construction to be placed on a portion of the judgment of this Court as it affects the liability of the appellant who was the 2nd Defendant in the original suit.


The relevant facts as they relate to this appeal are as follows and the par­ties will hereafter be referred to simply as plaintiffs and defendants.


On the 25th of March 1980, the plaintiff, Wema Bank Limited took out C a Writ of Summons against the defendants in the High Court of Lagos for:


1.          Specific performance of an agreement between the parties and evidenced in letters dated 10/W76, 28/1/76 and 2/2/76 whereby the defendants promised to execute legal mortgage of the defen­dant's properties lying and situate at (a) 400 Herbert Macaulay Street, Yaba (Lagos) (b) Adekunle Fajuyi Street, Ibadan (c) D ljebu-Bye Pass, Oke-Ado, Ibadan (d) 21 Barracks Road, Calabar and (e) Mile 3 Aba/Port-Harcourt Road, Aba; in favour of the plaintiffs to secure various overdrafts amounting to over N2,000,000.00 made to the defendants in Lagos between 1976 and 1979.


2.          The sum of N2,135,092.57k (Two Million One Hundred and F Thirty-Five Thousand Ninety-Two Naira and Fifty-Seven kobo) being balance due to the plaintiffs for overdrafts granted by the plaintiffs to the 1st defendants at the plaintiff's Mushin and Ebute-Metta Branches, in the normal course of their business as Bankers to the 1st defendants at their request and for Bank charges incidental expenses upon money due from the defendants to the plaintiffs which money the defendants have refused and or neglected to pay inspite of repeated demands. Plaintiffs also claim interest on the said sum of N2,135,092.57 at the rate of 8% per annum from 1st October, 1979 until judg­ment and 5% per annum thereafter until final liquidation of the whole debt or part thereof.


It would appear that the 2nd Defendant was sued as a guarantor of the 1st Defendant, for in the following paragraphs of the amended Statement of Claim (amongst others), the plaintiff pleaded that:


7.          By letter dated 2/2/76, the plaintiffs approved overdraft facility of N500,000.00 for the use of Bronik Motors unincorporated upon terms stated therein, including legal mortgage of (a) 4(W) Herbert Macaulay Street, Yaba (b) Adekunle Fajuyi Street, Ibadan (c) ljebu-Bye Pass, Oke-Ado, Ibadan (d) 21 Barracks Road, Calabar (e) Mile 2 Aba/Port~Harcourt Road, Aba and (f) 81t acres of land at Ikorodu Road, Lagos.


8.          By an endorsement on the copy of letter dated 2/2/76, referred to in paragraph 7 above, Bronik Motors unincorporated and the 2nd Defendant signified acceptance of all the terms and conditions stipulated therein.


9.          By Deed of Guarantee dated 21/6/76, the 2nd Defendantguaran teed payment to the plaintiffs of all monies and liabilities owing or incurred to the plaintiffs by Bronik Motors unincorporated and the 1st Defendants up to the limit of N500,000.00.


The case proceeded to trial and in his judgment, the learned trial Judge, Onalaja, J. found inter-alia, as follows:


The liability of the 2nd Defendant arises when the principal de­btor has made a default in the payment to the plaintiff, which was demanded by Exhibits 8, 10, 16 and 18.


The liability of the 2nd Defendant cannot be unduly extended beyond the strict provisions of Exhibit 2. The liability of the 2nd Defendant is limited to the loan of half a million Naira chargeable with interest, only that Exhibit 2 is silent as to the rate of interest.


Section 75 of the Evidence Act says that all facts except the contents of documents, may be proved by oral evidence. Since Exhibit 2 is silent as to the rate of interest, I accept the oral evi­dence and the documentary evidence before me that by mutual agreement, the rate of interest was reduced to 8% from 9%. I hold that the rate of interest chargeable on both the loan guaran­teed by the 2nd Defendant and all transactions in this case is chargeable with 8% interest.


I therefore enter judgment for the plaintiff on the personal liability of the 2nd Defendant as a guarantor of the 1st Defendant to the tune of half a million Naira (N500,000.00) chargeable with interest at the rate of 8% per annum.


After dealing with other aspects of the case, judgment was entered against the defendants in the following terms:


In the final result, judgment is hereby entered for the plaintiff against the defendant for:


(1)        an order of specific performance against the defendants to execute legal mortgage of their properties situate, lying designated, described as (a) 400 Herbert Macaulay Street, Yaba, Lagos and (b) 21 Barracks Road, Calabar in favour of the plaintiffs.


(2)        the total sum of N2,135,092.57 kobo (Two million one hundred and thirty-five thousand and ninety-two Naira fifty-seven kobo) plus interest at the rate of 8%, before this judgment and 4% thereafter this judgment, until final liqui­dation of the judgment debt.


(3)        the sum of N500,000.00 against the 2nd defendant as a guarantor of the 1st defendant with interest at the rate of 8% per annum before judgment and 4% thereafter.


The defendants were dissatisfied with that judgment and appealed to the Federal Court of Appeal (as it then was) on a number of grounds, one of which alleged that:


5.          The learned trial Judge erred in law in giving judgment againsi the 2nd defendant.




(a)        The 2nd defendant did not guarantee the debt of the 1st defen­dant.


(b)       Even if (which is not admitted) there was a valid substitution of Bronik Motors Ltd. for A.O. Obikoya & Sons Ltd. (or Bronik Motors) as debtors of plaintiff Bank, such substitution must op­erate as a discharge of the 2nd defendant as a guarantor.


The arguments on the appeal took four days and in a well considered judg­ment, the lower court dismissed the appeal on all grounds except one.


Ademola, J.C.A., who read the lead judgment, (Nnaemeka-Agu, J.C.A. (as he then was) and Uthman Mohammed, J.C.A., concurring) made an exhaustive review of the full facts of the case and stated at pages 175/176 of the Record:


Let me summarise the issues that have arisen out of this appeal thus:


(a)        Specific Performance


(b)        Illegality of the contract under 5.13(1), S.13(5) of the Banking Act, 1969.


(c)        The question of unjust enrichment if the issue of illegality raised succeeds.


(d)       Assignment of the debt of Bronik Motors to Bronik Motors Limited as it is contended for by the Respondent.


(e)        Novation as what should have been done instead of assign­ment as contended for by the Appellant.


(f)         Pleadings and the causes of action.


(g)        Liability of the 2nd Appellant on the guarantee in Exhibit 2.


Those are matters in my view which I shall dwell upon as having arisen from the argument of counsel; the facts proved in this case and the exhibits tendered.


The learned Judge then proceeded to deal with each of those issues in turn.


In regard to item (g), which forms the subject-matter of this appeal, Ademola, J.C.A., held as follows:


It is convenient at this stage to deal with the liability of the 2nd Appellant on the guarantee given by Exhibit 2 ………………………………


The document Exhibit 2 is the only one that must determine this matter however much the knowledge of the 2nd Appellant may be in respect of Exhibits 4,5, 5A and 5B …………..


Clause 3 of Exhibit 2 would in my opinion take care of the situation of a change from Bronik Motors to Bronik Motors Ltd. effected by Exhibits 4, 5, 5A, 5B and 6. It was up to the 2nd Appellant if he does not wish to continue the guarantee to give notice to the respondent's bank as so stipulated in that clause. Assuming that there was no change in the name style or constitu­tion of Bronik Motors, it is my view that 2nd Appellant would still be liable under Clause 4 of Exh. 2.


I am also of the view that on the proved facts of this case, Clause 18 is also relevant as to the liability of the 2nd Appellant. The conclusion then is that the change that took place in respect of Bronik Motors had not affected the liability of the 2nd Appel­lant. The grounds of appeal as to his non-liability in respect of the account at the Mushin Bank of the respondent fail.


The learned Justice then went on to consider other aspects of the appeal and eventually, he gave judgment in these terms:


Having thus disposed of all the submissions, I have no hesitation in coming to the conclusion that this appeal will have to be dis­missed save in respect of the order for specific performance made by the learned trial Judge.


Therefore the judgment of the Lagos High Court presided over by Onalaja, J. is hereby confirmed in part; the order for specific performance on properties at 400 Herbert Macaulay Street, Yaba, Lagos and 21 Barracks Road, Calabar is hereby set aside as null and void. The appeals of the Appellants on other grounds are accordingly dismissed.


As previously stated, Nnaemeka~Agu, J.C.A. (as he then was) and Moham­med, J.C.A. concurred in that judgment and in the decision to dismiss the appeal, particularly in regard to the liability of the 2nd Defendant.


The two defendants were not satisfied with that judgment and they appealed to the Supreme Court. The appeal took a new turn in this Court, be­cause in addition to the 12 original grounds of appeal filed, the appellants in a further ground of appeal called upon the Supreme Court:


1           To hold that the State High Court had no jurisdiction to adjudicate on the claim before it as the subject-matter of the suit - bank­ing - was a matter on the exclusive Legislative list, and that under the 1979 Constitution, it was a matter which was cognisable be­fore the Federal High Court only and


2.          To overrule its previous decision of 9 years standing on the point as contained in the case of Jammal Steel Structures Ltd. V. A.C.B. Ltd. (1973)1 All N.L.R. Part 11 208.


In consequence of the 2nd prayer above, a full Court was empanelled to take the appeal. In a unanimous decision, the Court held that the State High Court did have jurisdiction and declined the invitation to overrule the deci­sion in Jammal's case supra. The judgment of this Court is reported as Bronik Motors Limited and anor. V Wema Bank Ltd. (1983) 6 5 C. 158.


It is necessary to mention here that because of the importance of the case, a good portion of the judgment of all the seven Justices who sat on the appeal was devoted to the constitutional points raised in the appeal. How­ever, Nnamani, J.S.C., who read the lead judgment, after dealing exhaus­tively with the Constitutional issues went on to touch on other aspects of the appeal. In particular, His Lordship considered the limit of the liability of the 2nd Defendant (Appellant herein) and held as follows:


As regards the other matters in this appeal, Ademola, J. C.A. in his lead judgment had set them down at page 176. I had earlier on in this judgment indicated the matters I propose to deal with and set down appellant's ground of appeal relating to those matters. I would only wish to deal with the guarantee, admitted in the pro­ceedings as exhibit 2, given by the 2nd appellant to the respon­dent. The Court of Appeal affirmed the decision of the learned trial Justice on that point. As regards the liability of the 2nd Appellant, Chief Williams had submitted that even if he was liable, the liability cannot exceed N500,000. In fact the order of the learned trial Justice was for judgment against the defendant for:……………………………………………………………………..


(3)        the sum of N500,000 against the 2nd Defendant as a guarantor of the 1st defendant with interest at the rate of 8% per annum be­fore judgment and 4% thereafter.


I agree that the terms of the order should be varied such that the judgment is against the 2nd defendant (i.e. 2nd appellant herein) for N500,000,00 at the rates of interest mentioned above.


As for the merits of the appellants' case on the guarantee, the argument on Exhibit 2 had been that the guarantee given by the 2nd appellant was on behalf of Bronik Motors (a division of A. Obikoya and Sons Limited) and not on behalf of Broniks Motors Limited (1st Appellant) which had not been incorporated at the time the guarantee was given.


I agree with the Court of Appeal that paragraph 3 of exhibit 2 which reads as follows:­~


(3)        The guarantee shall be continuing security binding on the Guarantor or on each of the Guarantors and his/their executors administrators and legal representatives until the expiry three calendar months after the receipt by the Bank of notice in writing to discontinue same from Guarantor to any of the guarantors or from his/their executors administrators or legal representatives and notwithstanding any change in the name style or constitution of the Principal


certainly disposed of that contention. Paragraph 4 of the guarantee was also in these terms:


(4)        If the Principal be a Committee or other unincorporated body which has no legal existence or which is under no legal liability to discharge obligations undertaken or purported to be undertaken by it or on its behalf this guarantee shall be valid and binding G upon the Guarantor or Guarantors notwithstanding that fact and as though the Guarantor was the principal debtor or if there be more than one Guarantor as though the Guarantors were joint and several principal debtors.


The terms of paragraphs 5, 13 and 18 of exhibit 2 also leave me in no doubt as to the liability of the guarantor to the limit agreed by the parties in exhibit 2.


For all the foregoing reasons this appeal must fail and it does fail. It is accordingly dismissed. I affirm the judgment of the Fed­eral Court of Appeal dated 6th July. 1982.1 also award N300 costs against the appellant and in favour of the respondents. (italics ours)


It is this portion of the judgment that has given rise to the present appeal. The 2nd Defendant contends that his liability on the amount due to the plaintiff is limited to the sum of N500,000 as stated by Nnamani, J.S.C. and that once he pays that amount, he is completely absolved from further liability on the guarantee.


The plaintiff on the other hand, claims that the mere payment of the sum guaranteed does not wholly discharge the 2nd Defendant. He asserts that under Clause 11 of the guarantee (Exhibit 2), the liability of the 2nd De­fendant is continuous until the debt of over N2 million is paid by the 1st De­fendant.


That knotty point as to the real extent of the liability of the 2nd Defen­dant is now the subject of an appeal before the lower court and, in my view, it would not be right to express any opinion on it in this appeal so as not to prejudge the issues which might be canvassed before the lower Court.


Because of this, it will be necessary to determine at this stage, the exact limits of the scope of the appeal in this court. In this respect, I bear in mind that this appeal arose Out of a Motion filed before the Court of Appeal for:


(a)        extension of time within which to appeal


(b)        leave to appeal, and


(c)        stay of execution pending the appeal.


The lower Court refused those prayers and gave as its reasons the fact that the proposed grounds of appeal were not prima facie substantial grounds. In other words, the lower Court was of the opinion that the proposed grounds did not contain any arguable points. See Ukpe Ibodo & ors. V. Enarofia (1980) 5-7 S.C. 42 at p.53; University of Lagos V. Olaniyan (1985) 1 NWLR (Pt.1) l56 at 166.


In those circumstances, this appeal will be limited to a consideration of the reasons given for dismissing the Motion, and to ascertaining whether the Court of Appeal was right for holding that the proposed grounds were not substantial. In my view, it would be premature at this stage, to make a deci­sion on the actual merits of the proposed grounds of appeal. I shall now give a short resume of the relevant facts which gave rise to this appeal.


Whilst the principal case (S.C. 110/182) was pending in the Supreme Court, and following an application made by the defendants, this Court on 15/11182 granted a stay of the execution of the trial Court's judgment, on the following conditions (amongst others):


(a)        That the defendants should pay the sum of N50,000.00 within 7 days of the order


(b)       That the defendants should thereafter, pay N50,000.00 every month until the appeal is disposed of, - the first of such monthly payments to be made at the end of December, 1982


(c)        That in default of any of the conditions stipulated by the court, the stay thereby granted would automatically abate and be dis­charged. (italics ours).


It will be seen from the 2nd condition above, that the stay was granted pending the determination of the appeal. The appeal was in fact disposed of on the 10th of June 1983, and the 2nd Defendant claimed that by that time, he had personally paid the sum of N350,000.00 to the plaintiffs.


On the 14th day of June, 1983(i.e. 4 days after the Supreme Court judg­ment), the plaintiffs made the following offer to the Defendants:


14th June, 1983


Chief F.R.A. Williams, S.A.N.

Palm Grove House,

I Shagamu Avenue,

Ikorodu Road, Iupeju

Lagos State.


Dear Sir,


RE: SUIT NO. SC.110/82

Bronik Motors Ltd. & anor. vs. Wema Bank Ltd.


Following the judgment of the Supreme Court delivered in favour of our client on the lOth June, 1983 it would appear that the order for stay of execution, subject to the payment of N50,000.00 monthly until the appeal was disposed of, automatically terminated with effect from 10/6/83.


2.          We would be obliged if your clients would confirm within 7 DAYS their willingness to continue the instalmental payment of N50,000.00 monthly until the entire judgment-debt of N2,441,122.36k (Two million, four hundred and forty-one thousand, one hundred and twenty-two naira thirty-six kobo) as at 30/9182 plus 4% interest from 3019/82 is fully liquidated.


3.          Unless this confirmation is received as requested, we have instruction to revive execution of the Writ of Fifa suspended since l981 and to proceed with public auction of landed properties of the judgment-debtors. We would not wish to embarrass your clients further in this matter if only they would now co-operate with us to settle the debt.


Yours faithfully,


Ladosu Ladapo & Co



The defendants were quick to accept that offer by letter dated 2016/83 which states:   



20th June 1983


Ladosu Ladapo & Co.

52/54 Murtala Muhammed Way,





Dear Sir,


RE: SUIT NO. SC.110/82

Bronik Motors Ltd. & anor. vs. Wema Bank Ltd.


I refer to your letter dated 14th June, 1983 and do hereby confess the willingness of my clients to continue the instalmental payment on the terms and in the manner stated in your letter.


Yours faithfully,


F.R.A. Williams, Esq. S.A.N.


But a few days later, the plaintiffs withdrew their original offer and made a new offer to the defendants in these terms:


15th July 1983


F.R.A. Williams Esq., S.A.N.,

Chief Rotimi Williams Chambers,

Palm Grove House,

1 Shagamu Road,



Dear Sir,


RE: SUIT NO. SC.110/82

Bronik Motors Lid. & anor. V. Wema Bank LImited


Further to our letter of 14/6/83 and your reply of 20/6/83, we regret to say that your client's proposal to pay the judgment debt of N2,441,122.34k as at 30/9/82, plus 4% interest from 30/9/82 by N50,000.00 monthly instalment was rejected by the Board of Directors of the Bank at their meeting of 14/7/83.


2.          In view of the contravention by our clients of S.13(1) of the Banking Act, 1969 and the penalty being paid to the Central Bank under S.13(5) (which contravention formed the basis of ground 11 of your grounds of appeal at the Supreme Court), the Board of Directors of the Bank have directed that your clients be advised to pay a lump sum of N400,000.00 (four hundred thousand naira) and thereafter to pay monthly instalment of N50,000.00. In the alternative, your clients should be advised to pay monthly instalment of N100,000.00.


3.          The Board of Directors of the Bank note that it will take over 4 (four) years to liquidate the judgment-debt on the basis of your clients proposal; whereas the loan overdraft was granted on a short term basis.


4.          In the light of the above, we shall be pleased if you would confirm which of the alternatives your clients would prefer. In the meantime we shall suspend further action until we hear from you.


Yours faithfully,


Ladosu Ladapo & Co



In his reply to the above, Chief Williams took care to set out what he considered to be the legal position of the two defendants. This is what he said:


24th September 1983


Wema Bank Limited,

52154 Murtala Muhammed Way,



RE: SUIT NO. S. C.I10/82 

Bronik Motors Ltd. & anor. V Wema Bank Limited


We write on behalf of Mr. A.O. Obikoya who was the second defendant in the above matter. As you are aware, one of the results of the appeal to the Supreme Court was to limit the liability of that defendant to the sum of N500,000.00 with interest "at the rate of 8% per annum before judgment and 4% thereafter."


You may have observed (as the fact is) that all payments made pursuant to the order of the Supreme Court up to date were made personally by Mr. Obikoya from his personal resources and not by the 1st defendant. At the same time the 1st defendant are taking urgent steps to see that they play their part fully in the repayment programme.


It is observed that by making the aforementioned payments, our client has fully repaid the sum of N500,000.00. In the circumstances Mr. Obikoya has asked us to make it plain to you that the further payment of N50,000.00  herewith enclosed and paid from his personal resources should be treated as payment on account of his liability for interest.


You will no doubt agree that in computing Mr. Obikoya's liability for interest you have to work on the amount of interest attributable to his total liability only. Mr. Obikoya has computed this amount in the sum of N82,499.59 If you agree with this figure then he will let you have his proposal for repayment. Thereafter we intend, on behalf of Bronik Motors to take up and settle with you the repayment of the outstanding balance.


We look forward to having your confirmation that the sum due from Mr. Obikoya is N82,499.59 We shall also be grateful for your statement of the balance due from Bronik Motors for our consideration.


Thanking you in advance for your co-operation.


Yours faithfully,


F.R.A. Williams.



cc:        Ladosu Ladapo, Esq.,

Ladosu Ladapo & Co.,

52/54 Murtala Muhammed Way,



There was no response to the above letter and so Chief Williams sent another. It reads as follows:-


20th October 1983.


Wema Bank Limited,

52/54 Murtala Muhammed Way,

Ebute-Metta, Lagos.


Dear Sir,


Bronik Motors Ltd. & an or. V. Wema Bank Ltd.


We refer to our letter dated 24th September 1993 addressed to you on behalf of Mr. A.O Obikoya in respect of the above matter. You have, up to date failed to accord to us the courtesy of an acknowledgment or reply to that letter.


2.          In the circumstances we have advised our client to make his own calculations of the sum due and payable by him with interest attributable to the amount of N500,000.00 guaranteed. This has worked out in the sum of N32,499.59 and cheque for this amount is enclosed herewith.


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