OWENA BANK PLC V. OLATUNJI (2002)

Background

Owena Bank Plc granted a credit facility to Kayode Olatunji, who traded as Kaylat Enterprises. The facility was secured by Chief M. O. Olatunji, Kayode’s father, who executed a deed of legal mortgage over one of his buildings and also signed a personal guarantee. When Kayode defaulted, the bank obtained judgment against him under the undefended-list procedure. Chief Olatunji was not joined in that action, and the bank did not first serve him with a notice of default or demand for payment under the guarantee.

Despite this, the bank caused the judgment to be executed against Chief Olatunji’s sawmill. Acting through its auctioneer and with the assistance of armed policemen, the bank removed the sawmill machinery, a 75 KVA generating set, tools and cash. The respondent demanded the return of the property, but the equipment was not returned. Some of it was subsequently sold through persons connected with the bank’s execution process.

Chief Olatunji sued at the Ekiti State High Court, seeking declarations that the seizure and detention were unlawful, an order for the return and installation of the equipment, and substantial special and general damages. The trial court entered judgment against the bank and the auctioneer. The bank appealed, while the respondent cross-appealed against aspects of the damages and the trial court’s treatment of an amendment to the pleadings.

Issues

1. Whether the State High Court had jurisdiction, considering the alleged involvement of the Commissioner of Police and the statutory jurisdiction of the Federal High Court.
2. Whether the writ of summons was invalid because leave to issue and serve it outside the jurisdiction was allegedly obtained after issuance.
3. Whether the bank could rely on the personal guarantee to seize the guarantor’s property without demand and a separate court action.
4. Whether the bank was liable in detinue after the equipment had allegedly been sold or transferred to third parties.
5. Whether the evidence justified the awards for replacement value, loss of profit and other special damages.
6. Whether the trial court improperly granted an amendment concerning tax evidence after the respondent had closed his case.

Ratio Decidendi

The Court of Appeal dismissed the bank’s appeal and allowed the respondent’s cross-appeal. It held that jurisdiction depends on the subject matter and the fulfilment of procedural conditions, but that the mere appearance of a Federal Government agency in a writ does not automatically confer exclusive jurisdiction on the Federal High Court. The plaintiff’s statement of claim is examined to determine the cause of action. Since no claim or relief was ultimately made against the Commissioner of Police, and the substantive dispute concerned the bank’s private conduct, the Ekiti State High Court was competent.

The court further held that a defendant who objects to a writ issued or served irregularly must enter an appearance under protest or conditionally and apply promptly to set it aside. The bank entered unconditional appearance, filed pleadings and participated fully in the trial. It therefore waived any objection based on alleged non-compliance with the rules relating to service outside the jurisdiction. The court also applied the presumption of regularity to the official act of the registrar and declined to speculate about the date on which the writ was signed.

On the guarantee, clause 4A of the deed did not authorise self-help. Although the clause treated the guarantor as a principal debtor for purposes of recovery, the bank was still required to make a demand and, upon default, sue in a competent court. Clause 1 expressly referred to payment on demand, while clause 2 contemplated a demand by the bank. The bank could not execute a judgment obtained only against the principal debtor against a guarantor who had not been joined in that proceeding.

In relation to detinue, the respondent proved ownership, an immediate right to possession, the bank’s actual or constructive possession, demand for return and wrongful refusal. The bank could not avoid liability by asserting that the equipment had been transferred to third parties. Because the seizure and sale were unlawful, the bank had no title to pass under the principle nemo dat quod non habet; it remained in constructive adverse possession.

Court Findings

The court distinguished between a true contradiction and a minor discrepancy. Variations in quoted prices for machinery did not necessarily destroy the evidence, especially where the differences were explained by location, date, market fluctuations and the distinction between insurance value and replacement value. Strict proof of special damages means proof that is sufficiently clear and capable of quantification; it does not require mathematical perfection or proof beyond reasonable doubt.

Quotations and price lists prepared by independent traders during the litigation were admissible. The makers were not “persons interested” in the litigation merely because they were commercial dealers who might potentially sell replacement equipment. The evidence of daily profit was also accepted because it was pleaded, supported by testimony and not effectively challenged in cross-examination. However, the court directed that the monthly amount corresponding to days on which the generator was serviced should be deducted from the loss-of-profit award.

The Court of Appeal set aside the separate award for trespass because it resulted in double compensation alongside the awards for the unlawfully removed equipment. It nevertheless affirmed the respondent’s entitlement to appropriate detinue and consequential damages. A court may award less than the amount claimed where that is the amount proved, but it cannot award more than the amount pleaded. Thus, the respondent was entitled to the pleaded cost of installation even though the supporting quotation showed a slightly higher figure.

Finally, the court held that the trial court acted improperly in allowing an amendment introducing personal income-tax evidence long after the respondent had closed his case. The amendment exposed the respondent to a new and prejudicial issue without a fair opportunity to answer it, contrary to the rule of audi alteram partem. The trial court had also acted wrongly in relying on mitigation of damages without the defence having pleaded it or giving the parties an opportunity to address the issue.

Conclusion

The main appeal was dismissed, and the cross-appeal was allowed in part. The judgment of the Ekiti State High Court was varied by removing the award for trespass, correcting the treatment of the installation claim, and adjusting the loss-of-profit award for periods when the generating set was serviced. Each party was ordered to bear its own costs.

Significance

The decision is important for Nigerian banking, secured transactions and civil procedure. It confirms that a guarantee does not authorise a creditor to bypass judicial process or seize a guarantor’s assets merely because the principal debtor has defaulted. It also clarifies the elements of detinue, the relevance of constructive possession, the assessment of replacement-value damages, waiver of procedural objections, the limits of appellate review, and the need to preserve fair hearing when pleadings are amended late in proceedings.