IN THE HIGH COURT OF THE FEDERAL CAPITAL TERRITORY HOLDEN AT ABUJA BEFORE: HON. JUSTICE A. I. KUTIGI JUDGE FEDERAL REPUBLIC OF NIGERIA...

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1 IN THE HIGH COURT OF THE FEDERAL CAPITAL TERRITORY HOLDEN AT ABUJA BETWEEN: THIS MONDAY, THE 7 TH DAY OF JANUARY, 2013 BEFORE: HON. JUSTICE A. I. KUTIGI JUDGE SUIT NO: FCT/HC/CR/99/12 MOTION NO: M/357/12 FEDERAL REPUBLIC OF NIGERIA...COMPLAINANT AND 1. ISRAEL AUDU...ACCUSED PERSONS 2. EAZYTRADE CONCEPTS LIMITED RULING By a motion on noticed dated 2 nd October, 2013 and filed on the 3 rd October, 2012 in the court s Registry, the 1 st accused/applicant sought for the following reliefs: 1. An order striking out the name of the 1 st Accused/Applicant from the within charge. 2. Any other order(s) as may be deemed necessary. The grounds on which the objection is predicated are as follows: a) The act of an agent, for a particular purpose, is the act of his principal; b) An agent is not personally liable where there is a disclosed principal; c) A principal and an agent cannot be collectively and/or jointly liable for any act or omission; d) A corporate body is liable for its civil or criminal wrongs. 1

2 In support of the motion is an 18 paragraphs affidavit with two annexures. A written address was also filed in which three issue were raised as arising for determination to wit: 1. Whether Israel Audu (the 1 st accused/applicant) is the same as Eazytrade Concepts Ltd (the 2 nd accused)? 2. Whether an agent is liable for acts done at the instance of a disclosed principal? 3. Whether a corporation cannot stand trial for its criminal infractions? 4. Whether being a managing director of a corporate body is a criminal offence which can attract prosecution? On issue one, it was submitted that Israel Audu is literally and legally different from Eazytrade Concepts Limited. It was submitted further that the effect of Section 37 CAMA is that an incorporated company is a body corporate distinct from its members and/or directors, and that every company in furtherance of its authorized business or objects has all powers of a natural person of full capacity. The case of Salomon V. Salomon (1897) AC 22 was referred. On issue two, it was submitted that the law is clear on location of liability between a principal and an agent, where a principal is disclosed, he takes liability for the acts done by his agent on his behalf. Counsel to the accused in his submission defined who an agent is and referred to the case of Ikemefuna Amadiume V. Agnes Solomon Ibok (2006)6 N.W.L.R (pt.975)158 at 161. Counsel submitted further that from the depositions in the supporting affidavit that the 1 st accused/applicant, at all material times acted for and on behalf of the 2 nd accused (Eazytrade Concept Ltd). He submitted also that an agent incurs no personal liability for acting as a representative or delegate of another person. The case of Samuel Osigwe V. PLPLS Management Consortium Ltd (2009)3 N.W.L.R (pt.1128)378 at 383 was referred to. On issue 3, applicant s counsel submitted that a corporation can validly be prosecuted for its alleged criminal acts arising from activities of its agents. Section of the Criminal Procedure Code was referred to. 2

3 On issue 4, it was submitted that no person can be punished for any act which at the time it took place, was not defined by law as a crime and that being a director of a company does not translate to a criminal offence, Section 36(12) of the Constitution of the Federal Republic of Nigeria, 1999 (as amended) was cited. Counsel to the applicant further submitted that by virtue of Section 65 CAMA that once a company by a resolution authorises an act, it takes responsibility for the consequences of such act. At the hearing Egbeola Shekemi (Mrs) of counsel relied on the supporting affidavit and the written address and urged the court to strike out the 1 st accused/applicant from the within charge. In opposition, learned counsel for the prosecution, SA Ogwuegbulem was granted leave by court to proffer oral arguments. He submitted that there is no proper affidavit in law to support the extant application. That the affidavit contains legal arguments and conclusions in violation of the provisions of the Evidence Act. The court s attention was drawn to paragraph 15 of the affidavit. It was contended that in the absence of an affidavit, the motion is defective. Learned counsel contended that the issue of a company possessing a distinct legal personality from its members is a general proposition that admits of exceptions. He stated that allegations of crime lifts the veil of corporate personality and opens up the company for judicial enquiry upon good and substantial facts placed before a court as in this case. He referred to the case of Adeyemi V LAN and Baker Nig Ltd (2000)7 N.W.L.R (pt.663)51; Nigerite Ltd V. Dalami (Nig)Ltd (1992)7 N.W.L.R (pt.253)288; Public Finance Sec Ltd V. Jeffia (1998)3 N.W.L.R (pt.543)602. Learned counsel also referred to Section 290 of CAMA which he submits clearly provides an exception to the general principle of separate/distinct legal personality and therefore a director in a company can be proceeded against. Most importantly he submitted that the accused is charged under the Advance Fee Fraud Act and that this Act by the provision of Section 10 clearly allows for a criminal case to be commenced against a director or member of a company. 3

4 He finally urged the court to dismiss the application and hold that the Accused can stand trial notwithstanding that he committed the Act under the company. I have carefully considered the submissions on both sides of the aisle. Notwithstanding the proliferation of issues by the applicant which only serves to detract from the substance of what is to be resolved, the crux of the extant application simply has to do with the extent of personal criminal liability of a director in relation to the separate/distinct juristic personality of the company. Now because of tenor of the arguments/submissions on both sides and in particular the applicant, the point must be immediately made clear that this is only an interlocutory application and therefore the court must be circumspect to avoid prejudging any issue that can only properly be determined at substantive or plenary trial. The culpability or otherwise of the applicant is not in issue here. I will therefore wisely refrain from being unwittingly dragged into matters relating to whether the applicant is liable for the acts allegedly done at the instance of 2 nd accused, a limited liability company as this and other sundry or related issues cannot be devoid of opinion and comments on facts of this case. Similarly whether the applicant is an agent cannot be determined without evidence and it cannot be devoid of comment on facts. In resolving the issue raise, I will limit myself to what is immediately relevant to a proper determination of the application. It is important to give a brief background facts of the case to properly appreciate or locate the crux of this application. The applicant as Managing Director of Eazytrade Concepts Ltd together with Eazytrade Concepts were charged under a 5 count charge of obtaining money by false pretence contrary to Section 1(2) of the Advance Fee Fraud & Other Fraud Related Offences Act 2006 and punishable under Section 1 (3) of the same Act. Let me for the sake of clarity state the counts as follows: 1. That you Israel Audu while acting in the capacity of the Managing Director of EasyTrade Concepts Limited and you Easy Trade Concepts Limited on or about the 16 th day of September 2009 within the jurisdiction of the High Court of the Federal Capital Territory obtained the sum of Two Million Naira(N2,000,000.00_ from one Badru Ismail Abayomi under the false pretence of helping 4

5 him to invest in EasyTrade Concept Limited which you knew was false and thereby committed an offence contrary to Section 1(2) of the Advance Fee Fraud and other Fraud Related Offences Act 2006 and punishable under Section 1(3) of the same Act. 2. That you Israel Audu while acting in the capacity of the Managing Director of Easy Trade Concepts Limited and you Easy Trade Concepts Limited on or about the 21 st day of October 2009 within the jurisdiction of the High Court of the Federal Capital Territory obtained the sum of Three Million Naira (N3,000,000.00) from one Oluyinka Akintunde under the false pretence of helping him to invest in Easy Trade Concept Limited which you knew was false and thereby committed an offence contrary to Section 1(2) of the Advance Fee Fraud and other Fraud Related Offences Act 2006 and punishable under Section 1(3) of the same Act. 3. That you Israel Audu while acting in the capacity of the Managing Director of Easy Trade Concepts Limited and you Easy Trade Concepts Limited on or about the 6 th day of August 2009 within the jurisdiction of the High Court of the Federal Capital Territory obtained the sum of One Million Naira (N1,000,000.00) from one Niyree Andrea Rwang under the false pretence of helping her to invest in Easy Trade Concept Limited which you knew was false and thereby committed an offence contrary to Section 1(2) of the Advance Free Fraud and other Fraud Related Offences Act 2006 and punishable under Section 1(3) of the same Act. 4. That you Israel Audu while acting in the capacity of the Managing Director of Easy Trade Concepts Limited and you Easy Trade Concepts Limited on or about the 2 nd day of November, 2009 within the jurisdiction of the High Court of the Federal Capital Territory obtained the sum of One Million Naira (N1,000,000.00) from one Davour Ishaya Jatau under the false pretence of helping him to invest in Easy Trade Concept Limited which you knew was false and thereby committed an offence contrary to Section 1(2) of the Advance Free Fraud and other Fraud Related Offences Act 2006 and punishable under Section 1(3) of the same Act. 5. That you Israel Audu while acting in the capacity of the Managing Director of Easy Trade Concepts Limited and you Easy Trade 5

6 Concepts Limited on or about the 14 th day of November, 2009 within the jurisdiction of the High Court of the Federal Capital Territory obtained the sum of One Thousand Dollars ($1,000) from one Davour Ishaya Jatau under the false pretence of helping him to invest in Easy Trade Concept Limited which you knew was false and thereby committed an offence contrary to Section 192) of the Advance Free Fraud and other Fraud Related Offences Act 2006 and punishable under Section 1(3) of the same Act. It is clear therefore that the accused persons were clearly charged under a specific legislation, to wit: the Advance Fee Fraud and other Fraud Related Offences Act. It is a legislation with a commencement date of 1 st April, 1995 and it is an Act enacted to create offences pertaining to advance fee fraud and other fraud related offences; to provide for the arrest and trial of persons who commit such offences and for matters connected thereto. It is interesting to note that the extant challenge to the charge accused persons are facing is not located within the purview of this legislation. To the extent therefore that the validity of the charge is not situated within this legislation, I really find it really difficult ascertaining the precise ambit of the extant complaint. The submissions of applicant dealt simply with the provisions of CAMA which is a legislation specifically dealing with the establishment of Corporate Affairs Commission, provides for the incorporation of companies and incidental matters, registration of business name and the incorporation of trustees of certain committees, bodies and associations in complete denial of the applicable legislation under which the accused person were charged. That for me is a serious even if deliberate misdirection. The two legislations are all extant Acts of the parliament and without doubt applicable to take care of specific situations. There is no suggestion here that either is inferior to the other or that one has been repealed. Any meaningful argument on the validity of the extant charge can only be properly located if the two legislations are read and properly understood and applied. I propose to do that shortly. Now the basis of the present inquiry is that the alleged criminal infractions embodied in the charge were acts done at the instance of the 2 nd accused company, a limited liability company and that in the circumstances, he, 1 st accused cannot in any event be liable. Reliance was placed on Sections 37 and 65 of Companies and Allied Matters Act. The respondent on the 6

7 other hand canvassed the point that the recognised principle of separate personality of a company is a general principle which admits of exceptions and cannot be used as a cover to shield criminal activities of any director or officer of such company. That where good and substantial facts are placed before the court alleging a crime, the veil of corporations can be properly lifted. Now it is a recognised principle now of general application that a registered or incorporated company has a separate and distinct identity from its members. See Salomon V. Salomon (1897)AC 26 at 66. The provision of Section 37 Companies and Allied Matters Act is clear to the effect that an incorporated company is a body corporate distinct from its members or directors. By Section 38(1) of CAMA, every company in furtherance of its authorised business or object shall have powers of a natural person by full capacity. Also by virtue of Section 65 of Companies and Allied Matters Act, any act of the members in general meeting, the board of directors or of a Managing Director while carrying on in the usual way the business of the company shall be treated as the act of the company itself and the company shall be criminally and civilly liable therefore to the extent as if it were a natural person. It is to be noted that notwithstanding this distinct personality, a company is in essence a legal abstraction or artificial body which can only properly act through its human agents and officers who are really the directing mind and will of the corporation. See G.M.B.H V. Al-shark (2000)32 WRN at 33-34; Lennard Carring Co V. Asiatic Petroleum Co. Ltd (1915)AC 705 The above general principle on the distinct legal personality of a corporation clearly has admitted exceptions, statutory and judicial. In this case, the applicants have anchored their submissions conveniently on the provisions of Sections 37, 38 and 65 of Companies and Allied Matters Act which I have already alluded too. There is however also a provision of Companies and Allied Matter Act which deals with the personal liability of directors and officers of a company which must necessarily be read together with the other provisions to appreciate the true import of the applicable sections. Section 290(1) Companies and Allied Matters Act provides as follows: where a company: (a) Receives money by way of loan for specific purpose; or (b) Receives money or other property by way of advance payment for the execution of a contract or project; and 7

8 (c) With intent of 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. The above provision is clear and it clearly provides an exception to the question of distinct legal personality of company vis-à-vis the acts of its officers and or directors. There are also clear judicial authorities which supports the proposition that there is nothing sacrosanct about this principle. In the old case of Littlewoods Stores Ltd V. I.B.C (1969)1 W.L.R 1241, the inimitable Lord Denning stated as follows: The doctrine laid down in Salomon s case has to be watched very carefully. It has been supposed to cast a veil over the personality of a limited liability company through which the court cannot see but that is not true. The court can and often do draw aside the veil. They look to see what really lies behind. Coming closer home, the court of Appeal in Public Finance Securities Ltd V Jefia (1998)3 N.W.L.R (pt.543)602 at 614 stated as follows: It is a matter of commonplace occurrence my lord that certain individual have often floated companies which they use to perpetrate fraud and when they are called upon to answer for their actions, they take cover under the guise of separate/distinct juristic personality to avoid in the eye of the law. The courts have therefore developed the doctrine of lifting the corporate veil to see who really is behind the veil. Such individuals are unmasked to bear direct liability as against the sham they call companies. Similarly in Adeyemi V. LAN and Baker Nig Ltd (2000)7 N.W.L.R (pt.663)51, the Court of Appeal instructively stated as follows: The consequence of recognizing of the separate personality of a company is to draw a veil of incorporation over the company and that one is generally not entitled to go behind or lift the veil. Since a 8

9 liability company exists in the eye of the law, it can only operate by means of human beings. However, there is nothing sacrosanct about the veil of incorporation The decision in Salomon V. Salomon must not blind one to the essential facts of dependency and neither must it compel a court to engage in an exercise of finding fact which is contrary to the true intentions or positions voluntarily created by the parties as distinct from an artificial or fictitious one. Thus, if it is discovered that from the material before the court that a company is the creature of a biological person, be he a managing director, and it is a device or sham-mask by the eye of equity, the court must be ready and willing to open the veil of incorporation to see the character behind it, if justice must be seen to be done. It is obvious that cases bordering on allegations of criminality or fraudulent activities does not lend itself to arguments of corporate personality. Where issues of this nature are raised, the veil of corporate personality no longer inures to such corporations, their officers or directors and opens up such corporations for closer scrutiny and judicial oversight upon good and substantial facts placed before a court of competent jurisdiction showing by evidence that the corporation in its operation does not act on its own behalf as an independent trading unit but simply operates for and on behalf of the people by whom it is called into existence. See Nigerite Ltd V. Dalami (Nig) Ltd (1992)7 N.W.L.R (pt.253)288 at 304; Chinwo V. Owhonda (2008)3 N.W.L.R (pt.1074)362 D. In Public Finance Securities V. Jeffia (supra)614 C-E; Rowland JCA stated thus: The court will lift the veil of incorporation of any company to find out who was behind the fraudulent or 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 is involved in reckless or fraudulent trading or activities tainted with fraud, the court can pierce the veil of incorporation. I have at length referred to statutory and judicial authorities to establish the point that courts would necessarily lift the veil of corporation to find out who is behind the fraudulent or improper conduct of a company especially where this is used as a subterfuge to justify any wrongdoing, fraud or crime. This analysis is from a broad and general perspective. Let me now 9

10 come to the specifics of the charge and in particular the extant enactment on which the charge is predicted. As stated earlier, the applicant chose to ignore this important Act in its submission on the issue. The five count charge as started earlier is based on obtaining property by false pretence. I will refer to the relevant provisions only. Before doing so, let me refer to the provision of Section 36(12) of the 1999 Constitution which provides in express terms that a person shall not be guilty of a criminal offence unless that offence and the penalty therefore is prescribed in a written law; and in this subsection, a written law refers to an Act of the National Assembly or a law of a state, any subsidiary legislation or instrument under the provisions of a law. The offences the accused persons are facing is precisely defined with prescribed penalties in a written enactment or an Act of the National Assembly. See Section 286(3) of the 1999 Constitution; Aoko V. Fagbemi (1963)1 AII NLR 400. Now Section 1 of the Advance Fee Fraud Act provides as follows: (Obtaining property by false pretences etc:) 1 Notwithstanding anything contained in any other enactment or law, any person who by any false pretence, and with intend to defraud; (a) Obtains from any other person, on Nigeria or any other country, for himself or any other person; (b) Induces any other person, an Nigeria or in any other country to deliver to any person; or (c) Obtains any property, whether or not the property is obtained or its delivery is induced through the medium of a contract induced by false pretence, is guilty of an offence under this Act. Section 10 on offences by corporate bodies provides thus: (1) Where an offence under this Act which has been committed by a body corporate is proved to have been committed on the instigation or with the connivance of or attributable to any neglect on the part of a director, manager, secretary or other similar 10

11 officer of the body corporate, or any person purporting to act in any such capacity, he, as well as the body corporate where practicable shall be deemed guilty of that offence and liable to be proceeded against and punished accordingly Section 20 on interpretation defined false pretence to mean a representation, whether deliberate or reckless, made by word, in writing or by conduct, of a matter of fact or law, either past or present which representation is false in fact or law and which is person making it knows to be false or does not believe to be true. The above provisions appear to me clear and unambiguous. Section 1 commences with the word notwithstanding which in law means inspite of. When this term appears in any legislation or statute, it is meant to exclude any impinging or impeding effect of any other statute or legislation so that the said section may fulfill itself. See Emesin V. Nwachukwu (1999)6 N.W.L.R (pt.605)154 at 167; NDIC V. Okem Enterprises Ltd (2004)10 N.W.L.R (pt.880)107 at 182; KLM Airlines V. Kumzhi (2004)8 N.W.L.R (pt.875)231 at 258. Here we have not been referred to any law or enactment which impinges on the operation of this enactment and even if there is, this section clearly excludes its application. It logically follows therefore that the provision of Section 10 of the Act provides clear and positive answers to the issues raised by the extant application. It clearly allows for criminal proceedings to be proceeded against a body corporate but where the offence is committed by a body corporate and proved to have been committed at the instigation or with the connivance of or attributable to any neglect on the part of the director, manager, secretary or other similar officer of the body corporate, such officer or anybody purporting to act in that capacity shall be liable as well as the body corporate and both can be proceeded against and punished accordingly. See Chief (Dr) O. Fajemirokun V. Commercial Bank Nig. Ltd & Anor (2009)5 N.W.L.R (pt.1135)588. The substance of the charge from the proof of evidence is essentially that the 1 st accused as Managing Director of 2 nd accused allegedly made false and or reckless representation which led the nominal complainants to make failed investments in 2 nd accused person. I am in no doubt that Section 10 broadly covers the substance or sting of these allegations. Whether these allegations are proved can only be determined at plenary trial. The bottom 11

12 line really is that the substance of the questions raised by applicant is that an officer and the corporate body can properly be proceeded against within the purview of the enabling provision of the Advance Fee Fraud Act. The charges against both accused remain valid, as nothing has been shown or established before me to impugned the validity of same. The issue or question of liability and threshold of proof of the constituent elements of the offences is however a different matter altogether and is properly a matter for substantive trial. In the final analysis, the application clearly lacks merit and it is accordingly dismissed. Appearances: Hon. Justice A.I. Kutigi 1. S.A Ogwuegbulem, Esq., for the Complainant/Respondent. 2. Egbeola Oluwashekemi (Mrs) for the Accused/Applicant. 12