ZENITH BANK PLC V. CHIEF ARTHUR JOHN, ELDER FRANK ULE & CHIEF SILAS OFORJI (2010)

Background

The respondents had obtained judgment against Shell Petroleum Development Company of Nigeria Ltd (SPDC) in the Federal High Court, Umuahia, in Suit No. FHC/UM/CS/03/2000. On 17 November 2005, the Federal High Court awarded the claimants N1,849,187,568.00. SPDC appealed and obtained a conditional stay of execution. Following subsequent variations of the stay order, the Court of Appeal directed SPDC to provide a bank guarantee covering the judgment sum and accrued interest. Zenith Bank Plc issued the guarantee in favour of the respondents.

The guarantee provided, among other things, that Zenith Bank would pay the respondents upon receipt of a written demand accompanied by a duly certified judgment of the Court of Appeal stating that the amount was due and payable by SPDC, if SPDC’s appeal failed. The appeal was heard and dismissed. Although SPDC reportedly appealed further to the Supreme Court, it did not obtain a stay of execution pending that further appeal.

The respondents therefore presented cheques and demanded payment from Zenith Bank under the guarantee. Zenith refused to honour the cheques. The respondents commenced proceedings under the undefended-list procedure in the Rivers State High Court, Port Harcourt, claiming N1,622,390,490.46 plus interest. On 12 August 2010, the High Court ordered Zenith Bank to pay the claimed sum with interest at 10 per cent per annum until satisfaction. Zenith appealed and applied to the Court of Appeal for a stay of execution and related injunctive orders.

During the pendency of the dispute, the respondents commenced garnishee proceedings against funds belonging to Zenith Bank held by the Central Bank of Nigeria. An order nisi was made and subsequently made absolute. Zenith argued that the garnishee proceedings and the enforcement of the judgment should be restrained while its appeal and stay application were pending.

Issues

1. Whether Zenith Bank had shown good and substantial reasons for the grant of a stay of execution pending appeal.
2. Whether the garnishee proceedings could properly continue or be completed while an application for stay of execution was pending.
3. Whether Zenith had approached the court with clean hands, having denied liability to the respondents while seeking reimbursement from First Bank under a counter-guarantee.
4. Whether the applicant’s affidavit evidence sufficiently established that the respondents commenced garnishee proceedings after becoming aware of the stay application.

Ratio Decidendi

The Court of Appeal dismissed the application. It reaffirmed that a stay of execution is discretionary and that an applicant seeking this equitable remedy must approach the court with clean hands. A party cannot simultaneously approbate and reprobate on the same issue. Zenith’s letter to First Bank invoked its entitlement under a counter-guarantee and asserted that the relevant conditions for payment had been satisfied, notwithstanding disputes between SPDC and the beneficiaries. The court regarded this conduct as inconsistent with Zenith’s refusal to honour its primary guarantee to the respondents.

The court held that facts contained in affidavit evidence which are not controverted are deemed admitted. It also applied section 137 of the Evidence Act: the party who asserts a fact bears the burden of proving it. Where affidavit evidence is materially conflicting, the conflict should ordinarily be resolved by calling oral evidence. Zenith failed to call evidence to resolve the conflict concerning when the respondents became aware of the stay application, and that failure was fatal to its contention.

On garnishee proceedings, the court stated that where a motion for stay predates the making of a garnishee order absolute, the motion for stay should ordinarily be heard and determined first. Courts must balance the judgment debtor’s constitutional right of appeal against the judgment creditor’s right to enjoy the fruits of judgment. Neither party should be placed in a position of helplessness, and execution should not be allowed to make restoration to the status quo impossible. However, in the present case, the order absolute had already been made before the application was filed, and the applicant had not established grounds for disturbing the completed process.

Court Findings

The lead ruling found that Zenith’s application was improperly motivated and lacked merit. The bank was not the judgment debtor in the original SPDC litigation, yet it was attempting to prevent the respondents from enforcing the independent obligation created by its own guarantee. Its assertion that payment should be withheld because SPDC had appealed to the Supreme Court was not supported by the wording of the guarantee and was inconsistent with its demand upon First Bank under the counter-guarantee.

The court further considered that the relief seeking to restrain the Central Bank of Nigeria was defective because the Central Bank was not a party to the application. That relief was withdrawn and struck out. The garnishee order absolute had also already been made, meaning that the court could not grant an ineffective order purporting to stop an act that had been completed. The suggestion that the appeal raised a substantial jurisdictional issue did not, without more, justify a stay.

Conclusion

The Court of Appeal unanimously dismissed Zenith Bank’s application for stay of execution and injunctive relief. Costs of N50,000.00 were awarded to the respondents. The decision left the judgment of the Rivers State High Court enforceable and confirmed that Zenith’s obligation under the bank guarantee could not be postponed on the basis of an unperfected further appeal by SPDC.

Significance

The ruling is significant in Nigerian civil procedure and banking law. It emphasizes the reliability of court-ordered bank guarantees and the need for banks to honour clear contractual undertakings once their stipulated conditions have been fulfilled. It also illustrates the equitable character of a stay of execution: the remedy is not available as of right, particularly to an applicant whose conduct appears inconsistent, misleading or designed to delay enforcement. The decision provides important guidance on the relationship between stay applications and garnishee proceedings, requiring courts to prevent enforcement steps from frustrating a genuine pending appeal while equally protecting successful litigants from indefinite delay.