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Where there is no express agreement on the rate of interest payable, established custom can be used


Scale of Justice

In the Supreme Court of Nigeria
Suit No: SC.6/2007
Before Their Lordships

OLASUNKANMI GREG AGBABIAKA (Substituted for Alhaji S. O. Agbabiaka
(Deceased) by Order of Court dated February 25, 2003)                                -Appellant(s)
FIRST BANK OF NIGERIA PLC                             -Respondent(s)      
The respondent was the plaintiff at the trial court, while the appellant was the defendant. On January 29, 1985, on the application of the appellant for term loan/overdraft of N180, 000, the respondent granted him the said term loan/overdraft of N180, 000. The appellant obtained the said term loan/overdraft of N180, 000 for “the processing and development of” his film business. The appellant, despite repeated demands for repayment of the loan plus the accrued interest thereon, failed to repay the loan capital and the interest thereon to the respondent.
On December 6, 1994 the respondent took out, against the appellant a suit on a Writ of Summons specially endorsed with the Statement of Claim. The respondent claimed the following reliefs against the appellant: a. A declaration that Clause 2 of the Memorandum of Deposit of Deed dated January 29, 1985 made between the defendant on one part and the plaintiff is a binding contract upon the defendant.
b. An order compelling the defendant to execute a legal mortgage in respect of his property situate at No. 22, Akinbaiye Street, Isolo in favour of the plaintiff, and to assign the statutory right of occupancy and deposit the certificate thereto to the plaintiff as security for a loan of N180, 000 granted by the plaintiff to the defendant on January 29, 1985 and which has accrued with interest to the sum of N844, 207 as at June 17, 1992.
c. The sum of N844, 207 being the cumulative principal and interest due to the plaintiff as at June 17, 1992 as a result of Banking Facilities (term loan overdraft) granted at the request and instance of the defendant for the sum of N180, 000 of the cumulative sum thereof, which the defendant have refused, failed and neglected to pay despite repeated demands. d. 15 percent interest on overdraft facility at an implied Bank rate from January 29, 1985 to date of judgment. e. 10 percent per annum interest at the court rate from date of judgment until the whole judgment debt together with the interest thereon is fully paid.

The appellant failed to respond to the suit of the respondent within the period stipulated by the rules of the trial court. The respondent was then constrained to file a Motion on Notice under Order 10 Rules 1(a) & (b) and Rule 2, and Order 11 Rules 1 & 2 of the High Court of Lagos (Civil Procedure) Rules, 1972 wherein he prayed for final judgment against the appellant in terms of the claims they sought in the suit. This motion gingered the respondent to file a 14 paragraph affidavit showing cause why he should, as the defendant, be allowed to defend the action. Paragraphs 4, 5, 6 & 10 of the said affidavit, considered by the trial court in its decision the subject of this appeal, being germane to this appeal, are herein below reproduced. That is:    “4. That it is true that I applied for a loan of N180, 000.00 from the Plaintiff but there was no agreement about or payment of any interest whatsoever thereon and the Defendant says that the overdraft loan was interest free.
5. That the purported interest charged on the aforesaid loan/overdraft was/is unilateral on the part of the plaintiff without the knowledge, consent and agreement of the defendant and there was no time I was informed before the loan/overdraft was obtained that interest shall be payable on the same. 6. That contrary to the facts deposed to in paragraph 4 of the affidavit in support dated March 8, 1996, I have no knowledge of any interest accruing and which amounted to N877, 207 or any sum at all as there was no time statement of account or any advice was sent to me by the Plaintiff…10. That I am not liable to pay any interest on the aforesaid loan and overdraft of N180, 000.”
The appellant, as the deponent of the foregoing affidavit, had admitted in paragraph 8 of the affidavit that he did not file any defence to the suit, having been advised by his counsel that he was “not entitled to file any defence to this action as of right”.
The learned trial Judge upon considering the statement of claim and the affidavit supporting the motion for judgment vis-a-vis the appellant’s affidavit held that the appellant as defendant has not established any satisfactory defence. The Court therefore ruled against granting the leave sought to defend the suit.
The Court of Appeal affirmed the findings of fact by the trial court that the loan/overdraft the appellant took from the respondent was not interest free; that the appellant’s affidavit, intended to show cause why he should be given leave to defend, “did not condescend on particulars” and that it did not disclose any defence to the claim of the respondent. The Court of Appeal further found, in agreement with the trial court, that the appellant merely made a sweeping general denial of the averments in the respondent’s supporting affidavit without joining issues with specific averments of the respondent. This appeal to the Supreme Court is inter alia against these concurrent findings of fact by the two courts below.

The Apex Court determined the appeal on the issues joined by the parties.

Relying on Sections 134(1) and 135 of the Evidence Act, 1990 LFN (now Sections 131(1) and 132 of the Evidence Act, 2011. The Supreme Court per EKO, J.S.C. held that: ‘’Whoever desires any court to give him judgment, as to any legal right or liability dependent on the existence of facts which he asserts, has the onus of proving that those facts exist’’
The court stated that the appellant admittedly averred in paragraph 8 of his affidavit that he filed no defence to the claims of the respondent having been advised by his counsel that he was not “entitled to file any defence to this action as of right”. Therefore the fact of his taking the term loan/overdraft of N180, 000 from the respondent is indubitable. A fact he admitted. That in his affidavit he did not disclose how much he had repaid the respondent out of his indebtedness. The court held that the appellant, as submitted by the respondent’s counsel, admitted taking the loan facility but complained that the loan was interest free without adducing any iota of evidence to back up the assertion in order to displace the normal banking custom. That the two courts below found so as a fact and the concurrent finding of fact is not perverse.
On the submission by the appellant’s counsel that the trial court, in giving judgment to the respondent, gave judgment for interest at compound rate and not a reasonable rate, and that this “was clearly illegal”. The court observed that this argument cannot be accommodated under the issue, distilled from grounds 1 and 2 of the amended Notice of Appeal, which complain that there were no facts establishing the conditions for the grant of summary judgment under the relevant rules of trial court and that respondent’s Form 917 exhibited to the statement of claim did not show any agreement to pay any interest on the principal loan sum. The court stated that the said Form 917, Exhibit A8, gave notice to the appellant, as the borrower, that “all usual bank charges and commission and interest would be charged on the loan” contrary to his averment that he had no knowledge that the loan would attract any interest thereon and that he was not liable to pay any interest on the loan. He was held to have executed Form 917, Exhibit A8. The concurrent findings of fact on this, by the two Courts below, were therefore held not to be perverse.
The Supreme Court held that the respondent having by the processes filed, including the statement of claim, prima facie disclosed a triable issue against the appellant; it does not avail the appellant to aver, as he did, that he was, as of right, not entitled to defend the action. The holding of the trial court, affirmed by the Court of Appeal, that the onus was on the appellant to properly set out the facts on which he relies for his defence in order to satisfy the court that he ought to be given leave to defend the action was therefore found faultless by the Supreme Court. The Supreme Court held that evidence discloses a prima facie case when it is such that, if uncontradicted and if believed, it is not only sufficient to support the case of the plaintiff against the defendant; it also entitles the court to proceed to judgment in favour of the plaintiff. That the totality of the facts in the statement of claim and the other processes, unless sufficiently contradicted by the appellant, entitle the respondent to the judgment it got against the appellant.

The Apex Court held further that the relevant Rules of the trial Court under which it entered judgment, the subject of this appeal, in favour of the appellant required the respondent, as the defendant, to show cause why judgment should not be summarily entered for the respondent against him, the plaintiff having in the processes filed, disclosed prima facie case entitling it to judgment. In the words of Justice EKO: ‘’Showing cause in a summary judgment procedure means the production of satisfactory explanation or excuse by defendant in connection with the action or suit of the plaintiff.’’

The Court relied on the Supreme Court decision in MACAULAY v. NAL MERCHANT BANK LTD (1990) 4 NWLR (pt. 147) 688; (1990) 1 NSCC 433, (1990) LPELR-1801 (SC), where it was held that in a summary judgment procedure whereby the defendant is required, upon an affidavit, to show cause why judgment should not be entered against him; the defence he is obligated to disclose is a real defence on the merits and not a sham defence intended only to dribble and frustrate the court and the plaintiff and thereby delay the disposal of the action.
The Supreme Court per GALUMJE, J.S.C. in his concurring contribution, held on the position of the law where there is no express agreement as to the rate of interest payable held that: ‘’Where there is no express agreement as to the rate of interest payable, the bank is entitled to charge interest rate on the basis that there is an established custom to that effect.’’
In a unanimous decision, the Supreme Court found the appeal lacking in merit and consequently dismissed same. The concurrent decisions of the lower courts were further affirmed.
WITH HIM, P. E TAGBO, ESQ. AND G. SOFOWORA, ESQ.                 -For Appellant
EMONI WILLIAMS, ESQ. -For Respondents.
 Compiled by LawPavilion


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