Enforceability of Contracts by Foreign Companies Not Registered in Nigeria
TFacts he Respondent – Edicomisa International Inc. & Associates, registered under the laws of the United States of America as a corporate entity, was engaged by the Appellant as its “Architects and Engineers-Consultants and Sole-Contractor to do for the Appellant and the Federal Government of Nigeria, the conceptualisation, design, infrastructure and construction of Five Thousand Housing Units at Nbora District in Abuja”. Part of the business was for the commitment of the Respondent to build two factories for the production of Simplex Cepol Wall and Slab Panels, as well as other elements to be used in the construction of the Housing Units for the Appellant. The Respondent bought all the machinery, equipment and vehicles for the building and operation of the said factories which it had built and immediately commenced the production of the Simplex Cepol Panels for the model houses, in furtherance of the agreement. Although the Respondent was paid for the supply of two new factories at the Nbora site, the Appellant terminated the contracts on the ground that the Respondent had installed second hand and fairly used equipment in the factories, while the factories constructed were unserviceable and unfit for purpose. Upon the termination of the contracts, the Respondent filed an action against the Appellant at the High Court of the Federal Capital Territory, Abuja to enforce its rights.
The Appellant raised a preliminary objection to the competence of the suit, on the ground that the Respondent was not registered to carry on business in Nigeria. The trial Court agreed with the Appellant, that though the Respondent has legal capacity to sue and be sued, it has no parallel capacity to carry on business in Nigeria until it is so incorporated. The Respondent’s appeal to the Court of Appeal was found meritorious and the appellate Court found that a foreign company not registered to carry on business in Nigeria, can maintain an action to enforce the rights to the business it carried on in Nigeria. The foregoing finding necessitated the appeal to the Supreme Court by the Appellant.
Issues for Determination Parties to the appeal agreed on the following issues for determination of the appeal:
1. Whether in view of the provisions of Section 54(1), (2) and (3) of the Companies and Allied Matters Act (CAMA), a foreign entity, not registered in Nigeria pursuant to Section 54(1) or given the leave under Section 54(3), can enforce a contract to carry on business in Nigeria in view of Section 54(2) thereof.
2. Whether the provisions of Section 60(b) of CAMA, is applicable in the circumstances of this appeal and inures to the Respondent.
3. Was the Court of Appeal right in the circumstances of this case, to hold that the Respondent was not given the opportunity to establish its legal capacity or status by the trial Court.
Arguments Counsel for the Appellant submitted on the authority of SOLANKE v ABED & ANOR. (1962) 1 ALL NLR 230 at 233, that where a Statute (such as CAMA) declares a contract void and in addition, imposes penalty for making the said contract, then the contract is illegal. By the provisions of Sections 54 and 55 of CAMA, the contract between the Appellant and the Respondent was illegal and void ab-initio. It relied on the authority of OYENEYIN v AKINKUGBE (2010) 4 NWLR (Pt. 1184) 265 at 285, to submit that an illegal act, that is a void act, does not confer any legal right or title whatsoever.
The Respondent contended that, the authorities relied on by the Appellant in support of the assertion that the contract with the Respondent was illegal, void and
unenforceable, were irrelevant. The Respondent submitted that, its relationship with the Appellant does not amount to “carrying on business in Nigeria”.
Court’s Judgement and Rationale Deciding the issues raised for determination together, Their Lordships referred to the provisions of Sections 54(1), (2) and 55 of the CAMA thus:
“54(1) Subject to Sections 56 to 59 of this Act, every foreign company which, before or after the commencement of this Act, was incorporated outside Nigeria, and having the intention of carrying on business in Nigeria shall take all steps necessary In the Supreme Court of Nigeria Holden at Abuja On Friday, the 9th Day of June, 2017
Before Their Lordships
Musa Dattijo Muhammad Kudirat Motonmori Olatokunbo Kekere-Ekun Amiru Sanusi Ejembi Eko Sidi Dauda Bage Citec International Estates Limited Edicomisa International Inc. & Associates ........ Appellant ........Respondent to obtain incorporation as a separate entity in Nigeria for that purpose, but until so incorporated, the foreign company shall not carry on business in Nigeria or exercise any of the powers of a registered company and shall not have a place of business or an address for service of documents or processes in Nigeria for any purpose other than the receipt of notices and other documents, as matters preliminary to incorporation under this Act.
(2) Any act of the company in contravention of subsection (1) of this Section shall be void.
55 If any foreign company fails to comply with the requirements of Section 54 of this Act, in so far as they may apply to the company, the company shall be guilty of an offence and liable on conviction to a fine of not less than N2,500; and every officer or agent of the company who knowingly and willingly authorises or permits the default or failure to comply with those requirements shall, whether or not the company is also convicted of an offence, be liable on conviction to a fine of not less than N250 and where the offence is a continuing one to a further fine of N25 for every day during which the default continues.”
The Respondent in this case, did not dispute the fact that it is a foreign company carrying on business in Nigeria without being duly registered to do so. The legal consequence is as provided in Section 55 of CAMA, replicated above. The conduct of the Respondent was not only criminal by virtue of Section 55 thereof, the transaction entered into with the Appellant, was void in line with the provisions of Section 54(2) of CAMA, as there was no evidence that the Respondent enjoyed the exemption under Section 54(3). The Trial Court and the Court of Appeal, found that the Respondent is a foreign company carrying on business in Nigeria, without complying with the relevant provisions of CAMA, by its failure to be registered or incorporated in Nigeria. Having not appealed this concurrent finding of the Courts below, the Respondent cannot be heard to say that its transaction with the Appellant, does not amount to carrying on business in Nigeria. The burden on the Respondent is not discharged by mere assertion that the findings is wrong. DONATUS OKAFOR v IFEANYI ISIADINSO (2014) LPELR-23013(CA).
Where a foreign company not registered in Nigeria purports to carry on business in Nigeria in contravention of the provisions of Section 54(1) of CAMA, such transaction is void, illegal and criminal. That is the legislative intent of Sections 54(2) and 55 of CAMA. The interpretational responsibility of the courts, is to construe statutory provisions to bring out and promote its purpose. The law is that the Court of justice, should not aid a man who grounds his cause on illegality.
Section 60 of CAMA was enacted to enhance international trade/commerce; hence, it permits the enforcement by a foreign company, a legal right accruing to it from a lawful business or transaction. The Section does not vest in a foreign company, a legal right to enforce an illegal contract. The situation envisaged by the Legislature when enacting Section 60 is where, for instance, a foreign company has had a transaction with a Nigerian or a Nigerian entity, which transaction could be enforced in Nigeria, but which of course may not have been as a result of any business the foreign company is carrying on in Nigeria. RITZ & CO. KG v TECHNO LTD. (1994) 4 NWLR (Pt. 598) 298 at 305.
Where the legal capacity of the Respondent is challenged as in this case, the onus is on the Respondent to prove its legal status and this is done by leading evidence, oral or documentary, to prove its legal capacity that is challenged. On the state of the pleadings, the Respondent having admitted that it is a foreign company carrying on business in Nigeria without evidence of incorporation in Nigeria (by tendering the certificate of incorporation in Nigeria), the Respondent cannot be heard to say that it was not given an opportunity to prove that it was registered in Nigeria, in compliance with the law. MAINAGEE v GWAMMA (2004) 14 NWLR (Pt. 893) 323 at 334, if any evidence given by a party is not controverted by the other party who has the opportunity to do so, and such evidence is not inherently incredible or spurious, the court ought to give credence to such evidence and act on it.
Their Lordships concluded on the principle of law, that illegality of a contract or transaction, whenever it is raised as a defence to a claim founded on the said transaction, impacts on the jurisdiction of the court. Where the contract on which the Plaintiff sues is ex facie illegal, the Courts will decline to enforce it for Courts exercise jurisdiction only to administer the law and not to help a Plaintiff break the law.
Appeal Allowed.
Representation: A.M. Kayode, Esq. with Adiza Shata for the Appellant
F.R. Onoja with I.C. Akwiwu and O.O. Ajisegiri for the Respondent. Reported by Optimum Publishers Limited (Publishers of the Nigerian Monthly Law Reports (NMLR))