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New Legal Regime on Stamp Duty Charges

Stamp duty is a tax that is levied on single property purchases or documents (including, historically, the majority of legal documents such as cheques, receipts, military commissions, marriage licences and land transactions).

The Finance Act, 2019 amended some provisions of the Companies Income Tax Act, Petroleum Profit Tax Act, Personal Income Tax Act, Value Added Tax Act, Customs and Excise Tariff etc., Capital Gains Tax Act and Stamp Duty Act.

Sections 52 to 56 of the Finance Act, 2019 amended Sections 2, 4, 89 and the Schedule of the Stamp Duty Act, 2004. Section 55 of the Finance Act, 2019 deleted Section 90 of the Stamp Duty Act, 2004.

We shall discuss new trends in stamp duty charges under the Finance Act, 2019.

Modern innovations on stamp duty under the Finance Act, 2019

Section 52 of the Finance Act, 2019 amended Section 2 of the Stamp Duty Act, 2004 to extend the meaning of “stamp” to include “an electronic stamp or electronic acknowledgment” for denoting any duty or fee. Again, the provision extended the meaning of “stamped” to include “instruments and materially tagged with electronic stamp or national stamp on an electronic receipt”. The meaning of “instruments” is extended to “electronic documents”.

Similarly, Section 54 of the Finance Act, 2019 amended Section 89 of the Stamp Duty Act, 2004 to include “electronic inscription whereby any money” is paid within the meaning of “receipt” for the purpose of stamp duty payment. Section 89 is introduced to provide for “digital tag with electronic stamp or any acknowledgement of duty charged on an electronic transaction”.

Section 89 is also introduced to provide that “electronic receipt or electronic transfer for money deposited in any bank” of N10, 000 naira and above paid by the owner of the account shall be charged a one-off duty of N 50 naira.

Who is the competent charging authority?

Under Section 53 of the Finance Act, 2019 which amended Section 4 of the Stamp Duty Act, 2004, the Federal Inland Revenue Service is the competent authority to charge duties on instruments between a company and an individual, group or body of individuals.

The relevant tax authority in a State is the competent authority to charge duties on instruments between persons or individuals within the respective States of the Federation.

The FIRS is empowered to collect stamp duties on all banking transactions though its agents; Banks and other Financial Institutions.

How much is the duty on electronic receipt or electronic transfer?

By the provisions of Section 54 of the Finance Act, 2019, a one-off duty of N 50.00 shall accrue for amounts from N 10, 000 and above. Nevertheless, duty shall not accrue where a person pays or transfers money electronically between his accounts within the same Bank.

What are chargeable transactions?

Instruments such as agreements, contracts, receipts, memorandum of understanding, promissory notes, insurances policies and other transactions listed in the Schedule to the Stamp Duty Act, 2004 are subject to stamp duty.

Exempted transactions under the Finance Act, 2019

a) of the Finance Act, 2019 amended the Schedule of the Stamp Duty Act, 2004 to include exempt receipts as “receipts given by any person in a Regulated Securities Lending Transaction carried out under regulation issued by the Securities and Exchange Commission”.

b) of the Finance Act, 2019 amended the Schedule of the Stamp Duty Act, 2004 and provided that shares, stocks or securities returned or transferred by a lender to its approved agent or a borrower in furtherance of a Regulated Securities Lending Transaction as well as documents relating to regulated securities lending transactions carried out under regulations by the Securities and Exchange Commission are exempted from stamp duty.

Procedure for Obtaining Mobile Money Operator License

A mobile money operator is a mobile money service provider that develops and delivers financial services through mobile phones and mobile telephone networks.

On 3rd August 2021, the recent Central Bank of Nigeria released the Guidelines for the Establishment and Regulation of Payments Service Holding Companies in Nigeria. The Guidelines requires companies that intend to offer both switching and processing and mobile money services to set up a PSHC structure.

The Guidelines defines PSHC as a company whose principal object clause is to be a holding company set up for the purpose of making and managing equity investment in 2 or more companies, being its subsidiaries, which are payment service providers across the following categories:

  1. Mobile Money Operations
  2. Switching and Processing
  3. Payment Solution Services.

(A) Share capital

The minimum issued share capital of a company seeking to apply for an MMO license is N2,000,000,000.00 at 540 naira per dollar.

The PSHC and MMO are in the same category with the switching and processing and payment solution services subsidiary companies in terms of the minimum share capital requirement of N 2, 000,000,000.00 share capital which must be deposited with CBN before the completion of the license application process.

(B) Procedure for Obtaining a Mobile Money Operator License

The licensing requirement as provided in the CBN guideline requires the promoters of the companies to submit a formal application for the grant of a License addressed to the Director, Payments System Management Department of the CBN.

The licensing process shall be in two phases: Approval-in-Principle and Final License stage.

(C) Requirements for Grant of Approval-In-Principle (AIP)

The application shall be accompanied with the following:

  • A non-refundable application fee of N1, 000,000.00 or such other amount that the CBN may specify from time to time; payable to the CBN, through electronic transfer.
  • Evidence of meeting the prescribed minimum paid-up capital subject to the satisfaction of the CBN.

Detailed business plan or feasibility report which shall, at a minimum, include:

  • Objectives of the PSHC and those of the subsidiaries it intends to establish/acquire.
  • Justification for applying for the payments service holding company.
  • Ownership structure in a tabular form indicating the name of proposed investor, profession/business and their percentage shareholdings.
  • Bio-data, resume/curriculum vitae of proposed investors.
  • Indication of sources of funding of the proposed equity contribution for each investor.
  • Where the source of funding the equity contribution is a loan, it shall be a long term facility of, at least, a 7-year tenor, and shall not be obtained from the Nigerian banking system or foreign subsidiaries of Nigerian banks.
  • Corporate Governance Charter of the PSHC stating the roles and responsibilities of the board and its sub-committees, among other things.
  • Criteria for selecting board membership.
  • Bio-data and detailed resumes of directors and board composition.
  • List of identified top/senior management staff, bio-data and detailed resumes stating qualifications, experiences, records of accomplishment, etc.
  • National or Government issued identity documents bio-data and Bank Verification Numbers of proposed Board and management staff of the company.
  • The Tax Identification Number of the company and its Tax Clearance Certificate where applicable.
  • A schedule of services that will be shared in the group.
  • Five-year financial projection on the operations of the PSHC indicating expected growth and profitability, and details of the assumptions that form the basis of the financial projection.
  • Details of Information Technology infrastructure proposed to be deployed.
  • Information on and pictorial representation of the corporate group structure with shareholding percentage by the PSHC in each of the subsidiaries and their principal businesses and registered Head offices.
  • A written and duly executed undertaking by the promoters that the PSHC shall be adequately capitalised for the volume and character of its business at all times, and that the PSHC shall be under the supervisory authority of the CBN, as an Other Financial Institution.
  • For regulated foreign institutional investors, the CBN shall require a no objection letter from the regulatory body in the home country.
  • Shareholders’ agreement providing for disposal/transfer of shares as well as authorisation, amendments, waivers, reimbursement of expenses, etc.
  • Statement of intent to invest in the PSHC to be made by each investor in the PSHC.
  • Technical Services Agreement, where applicable.

Draft copy of the company’s Memorandum and Articles of Association. At a minimum, the MEMART shall contain the following information:

  • Proposed name of the PSHC.
  • Object clause which shall be limited to the permitted activities of its license.
  • Subscribers to the MEMART.
  • Procedure for amendment.
  • Procedure for share transfer or disposal.
  • Appointment of directors.
  • Where the promoters of the PSHC are corporate investors, the CBN shall require them to forward the following additional documents.
  • Certificate of Incorporation.
  • Board resolution supporting the company’s decision to invest in the equity shares of the proposed PSHC.
  • Names, biometrics, BVNs and addresses of owners, directors and their related companies, if any.
  • Audited financial statements and reports of the company, including Tax Clearance Certificate for the immediate past 3 years.
  • Certified True Copies of the company’s CAC forms showing the details of allotment and particulars of directors.
  • Any other document/information that the CBN may require from time to time.
  • If satisfied with the application of the promoter, the CBN may grant an Approval in Principle.

Duration

The AIP stage usually takes a period of between 2-3 months to process.

(D) Requirements to Incorporate an MMO company

Companies in Nigeria are incorporated at the Corporate Affairs Commission. The requirements for incorporating a company are as follows:

  1. 2 unique names of the proposed company to be reserved at the CAC;
  2. Name, address, phone number, email and means of identification of at least 2 Directors, one of which must be a Nigerian or a foreigner with business permit to carrying on business in Nigeria;
  3. Name, address, phone number, email, means of identification of at least one Share holder and in the case of corporate shareholder its incorporation Certificate and Board Resolution to acquire shares in the proposed company;
  4. Objects of the proposed company;
  5. Nigerian address, phone number and email of the proposed company;
  6. Special Articles of Association of the proposed company ;
  7. Name, address, phone number, email, means of identification of Company Secretary;
  8. Approval in Principle from CBN;
  9. Payment of statutory filing fees and stamp duty.

Duration

The incorporation stage will take a period of 7-10 business days.

(E) The Requirements for Granting a Final License

Within six months after obtaining the AIP and incorporation of the company, the promoters of a proposed PSHC shall submit an application to the CBN for the grant of a final license.

The application shall be accompanied with the following:

  • Non-refundable licensing fee of N5,000,000.00, or such other amount that the CBN may specify from time to time, payable to the Central Bank of Nigeria by electronic transfer.
  • Evidence of promotion or investment of a payment service company.
  • Evidence of payment of capital contribution by each shareholder.
  • Evidence of location of Head Office for the take-off of the PSHC.
  • Schedule of changes, if any, in the Board, Management, IT infrastructure and significant shareholding since the grant of AIP.
  • Evidence of ability to meet technical requirements and modern infrastructural facilities such as office equipment, computers, telecommunications, etc. to perform PSHC operations and meet CBN and other regulatory requirements.
  • Organisational structure, showing functional units, responsibilities, reporting relationships and grade of heads of departments/units.
  • Board and staff training program.

Duration

The Final Licence stage usually takes a period of between 2-3 months to process.

(F) Requirements for Commencement of Operations

Upon obtaining the Final Licence, the PSHC shall inform the CBN of its readiness to commence activities and such information shall be accompanied with one copy of each of the following:

  1. Shareholders’ Register.
  2. Share certificate issued to each investor.
  3. Enterprise Risk Management Framework.
  4. Internal Control Policy.
  5. Minutes of pre-commencement board meeting.
  6. Opening statement of affairs signed by directors and auditors.
  7. Date of Commencement of Activities.

(G) Conclusion

In order to manage financial risks and for efficiency of the business, the CBN expect promoters of a Mobile Money Operator to form at least 3 companies; first, the PSHC which is the holding company; second, a mobile money operator subsidiary and third, the switching and processing subsidiary. Each of the 3 companies shall have a minimum share capital of N 2, 000, 000, 000.

Effect of COVID-19 Pandemic on Dispute Resolution Practices

During this period, we advised various clients on the effect of force majeure caused by the COVID-19 pandemic lockdown on existing commercial obligations. We also advised our foreign clients on the legal framework of business opportunities which the COVID-19 pandemic has sprang up in Nigeria.

Our clients benefit from our experience on ways to renegotiate terms of their contracts which have insulated them from litigation risks and prevent them from running at a loss as a result of the shutdown of their businesses during the lockdown period that inhibited them from carrying on business and fulfilling their obligations under such contracts.

Litigants are now more willing to settle out of court. We have negotiated with counsels of adverse parties who commenced various litigations against our clients and reached amicable settlement with them. The terms of settlement were adopted by the parties and entered as consent judgment.

Ailing businesses are looking for ways to inject fresh capital. This has led to a growth of our debt collection portfolio. International clients retain our services to collect business, hospital and school debts against Nigerians and Nigerian businesses. We have also collaborated with our foreign partners to recover outstanding debts for Nigerians and Nigerian businesses against foreign debtors abroad.

Inevitably, the pandemic has led to many foreign businesses rebuilding by seeking new markets abroad, including the huge Nigerian market. We advised firms – especially in Europe and Asia – on the most suitable business entities to form and the permits and certifications they require in order to carry on business in Nigeria. We have registered more trademarks, patents, designs and franchise within this period.

How do you determine which method of litigation or dispute resolution is most suitable on a case by case basis?

Business disputes are inevitable. Dispute may arise from the interpretation of the provisions of a contract, ascertaining the obligations of the parties, failure to fulfil obligations under the contract, or even breach of the contract itself. In order for the parties to settle their dispute and possibly continue their business relationship, it is important to ascertain when to litigate a matter at conventional courts or employ other disputes resolution mechanisms such as negotiation, mediation and arbitration or a blend of the mechanisms.

In recent times, both legal practitioners and judicial officers have come to appreciate the role which mediation play in the dispute resolution process. For instance, in franchise law, mediation is increasingly becoming popular. Parties agree to settle their franchise disputes by mediation by including mediation provisions in their contracts. Mediation offers both parties the opportunity to resolve their conflict in a non-adversarial way so as to maintain their relationship in future.

As a result of the acrimony and the delay in resolving commercial disputes by litigation, it is better for disputes in sectors such as construction, maritime, telecommunications, manufacturing, oil and gas, finance, where time is of essence to be resolved by arbitration.

What strategies, techniques or conflict management tools can be employed in order to achieve consistent results?

Conflicts can either arise as a result of scarce resources, personal and cultural differences, underperformance, unrealistic expectations, stress, ambiguous work roles, poor communication amongst other human factors.

Conflicts must be timeously managed so as not to impact negatively on an organisation and result in poor results.

The management of any organisation should employ the following good conflict resolution techniques:

  • Proper communication: Every organisation should encourage proper communication across different cadres of its set-up. There should be increased dialogue among groups and sharing of information. This will help the group know more about each other, eliminate suspicion and encourage teamwork.
  • Prompt resolution of conflicts: Management must endeavour to immediately address conflicts because postponing conflict resolution would escalate the issue and affect performance. However, the issues resulting in the conflict should not be addressed too quickly without careful consideration as management’s decisions will directly affect the demeanour and performance of staff.
  • Emphasis organisational goals: Management should emphasise organisation goals and objectives which should prevent conflicts. If larger goals are emphasised, employees are more likely to see the big picture and work together to achieve corporate goals.
  • Impartiality: Management must be impartial and be seen to be impartial. Situations should be accessed from all sides for the purpose of arriving at a fair and reasonable solution.

What measures can a company enact to help minimise the cost, damage and disruption of litigation to their business?

The main aim of any business is for profits and not to engage in endless litigations. This is because litigation is time consuming, distracting, expensive and sometimes may be costlier than the amount in dispute. Time spent preparing staff as witnesses takes away business time. The company pays its counsel from its scarce resources to represent the company in court. Disputes can also dampen staff morale and ruin the company’s business reputation.

This is why a company should observe the following measures to avoid and minimise the risk and cost of litigation:

  • Retain the services of a company secretary: In the 21st century, a company secretary is no longer a mere clerical officer but an important member of the board who advises the company on modern due diligence matters, corporate and governance issues and ensures that the company’s practices are in line with extant legislations and international best practices. This will reduce the company’s exposure to litigation.
  • Proper documentation: A company should engage the services of a solicitor to ensure that all its agreements with other companies, its staff, suppliers, business partners, etc., are properly documented and franked. Variations to the original agreement should be properly documented, approved and executed. Having an agreement which clearly sets out rights, obligations and dispute resolution clause of partnership or business relationship when it breaks down can minimise the cost of resolving disputes.
  • Proper communication: In order to avoid conflicts which may result in litigation, a company should ensure its clients, customers or associates are well informed about their activities and send timely updates. This could be by informing them about increase in cost, budgets and scheduling. Respecting its customers and keeping them well informed can go a long way to make a company avoid litigation.
  • Effective customer care service: A company should maintain an effective customer care service which will pacify and attempt to resolve disputes between the company and its customers or business partners. If actions are taken promptly to deal with conflicts as they arise, a company would be able to prevent such conflicts from developing into a major problem. It is not advisable to ignore a problem or complaint hoping that it will go away by itself.
  • Study profile of potential partners: A company should do proper study and search on their potential clients, customers, employees and suppliers. The company should ensure that they know the individuals or companies which they want to do business with. Some individuals and organisations have a tendency to attract trouble. Businesses should avoid companies or individuals with such profiles.
  • Being objective: Persons in management positions should think and act objectively for both the short and long time gain of the company. They should, put themselves in the shoes of others and identify the motivation for litigation against the company and negotiate towards an amicable settlement. They should be able to determine if it is simply animosity or the other party has a genuine reason for commencing litigation against the company.

How has COVID-19 impacted the litigation & dispute resolution landscape?

Courts across the globe have rapidly adapted to COVID-19 protocols. The have found new ways to hear cases before them. As restrictions are relaxed in Nigeria, litigants are now faced with a significantly altered dispute resolution landscape. In order to decongest the courts and maintain social distancing, access to courtrooms in most States of the Federation is restricted to one counsel per litigant. The counsels must maintain social distancing in their sitting arrangement.

Many courts now conduct fully virtual hearings, in which the Judge and some parties are present in the courtroom while others attend virtually. The courts provide parties, the public and the media with login details for virtual hearings. This is a drastic change from the requirement that parties and counsels must be physically present at court proceedings.

Electronic processes have been widely adopted and used as a means of filing and serving processes of court. Before now only the National Industrial Act and its rules make provision for this technology. However, the High Courts of some states started test running electronic filing system in their jurisdiction, but the COVID-19 restriction has sped up the process. Electronic filing and service is now an integral part of the justice delivery system in many jurisdictions in Nigeria.

There has been an increased awareness in settling commercial disputes amicably. Financial pressure caused by the pandemic has made many litigants to be more willing to settle disputes to avoid long and expensive court proceedings. Settlements are currently being achieved through virtual meetings, mediation and informal discussions between counsels and the litigants.

Nevertheless, in spite of the increased use of technology in court proceedings, in many jurisdictions, courts are yet to embrace this innovation. This has increased the backlog of cases in those jurisdictions and made litigants to believe more in ADR mechanisms, especially, mediation and arbitration to promptly resolve their disputes.

What new challenges have emerged as a result of COVID-19 and what steps should companies take to remediate these risks?

The pandemic has tested the resilience of most businesses and challenged their financial, operational and commercial framework. In order to survive the rough tides, companies should be ready to adapt to the current strains and market conditions caused by the pandemic. As the situation evolves, companies should expect to see a shift in focus and a reprioritisation of operational and conduct risks as they come to terms with the harsh reality of managing their dispersed workforces.

In order to grapple with these challenges, companies must be ready to engage in the following:

Conduct readiness assessments: A readiness assessment is a good place to start when companies don’t know what their business continuity programme should be. Industry and role readiness templates as well as pandemic-specific templates allow a company to evaluate their business continuity programme against a best practice standard and identify where gaps may exist. These readiness libraries break down standards and best practices into actionable pieces so that companies can track progress and adherence.

Have a risk management plan: Companies should complete a risk assessment on their core business processes to identify and prioritise any new risks or gaps in their existing controls for new scenarios like pandemics, recession, and geopolitical conditions risks.

Conduct business impact analysis: Not all risks within processes or functions within a company should be treated the same way. A business impact analysis allows companies to identify which parts of the business are most critical to its operations.

Have a management policy: As the pandemic lingers and new information arises, policies will need to be revisited, updated and communicated. For example, reviewing and revising a work-from-home policy will be effective only if dissemination of that revised policy is made with governance tracking for adoption across the company.

Ascertain staff redundancy benefits: As the pandemic lingers and revenue dwindles, some companies may have to terminate the employment of redundant staff. It is therefore important for the company to ascertain the severance package for its redundant staff so that it does not expose itself to the risk of litigation and other labour related issues.

Have there been any recent regulatory changes or interesting developments?

One of the key provisions is the recently passed Bank and Other Financial Institution Act, which makes bank staff personally liable for contraventions of the terms of a banking license. This will improve compliance and reduce recklessness by forcing bank management to be more vigilant. The new regulation hopes to avoid events like the toxic asset crisis of 2009, which many people believed that Nigerian banks contributed towards.

These changes have far-reaching implications in the areas of monitoring, and enforcement of safer lending practices. For example, the BOFIA 2020 Act provides that loans in excess of three million naira without collateral will require the Central Bank of Nigeria approval. Many small and medium businesses that rely heavily on revenue-based financing will now face an extra hurdle which will further slow allocation of credit in Nigeria’s economy. The increased powers given to the CBN potentially mean that the regulatory bank could become more obstructive in coming weeks.

The BOFIA 2020 Act even gives the CBN authority over the opening or shutting down of bank branches. The law gives immunity to the CBN which limits the redress banks can seek if they feel they have a case concerning any action taken by the regulator. On one hand, the new legislation will certainly make the sector more robust, due to the higher penalties for recklessness. However, the range of things requiring CBN approval may stifle growth, and make banks slower to respond to changes in the banking industry and Nigerian economy.

The BOFIA 2020 Act provides opportunities for Fintech investors to support meaningful innovation in financial services that improves the lives of people. Generally, certain aspects of the Act will be advantageous to local FinTech’s, partly because a slight barrier was incorporated to ensure foreign FinTech’s localise their operations, giving a degree of protection to home-grown players, and also because the CBN’s powers have been broadened, to the extent of having to sanction even some of the most rudimentary moves by banks.

Furthermore, the Companies and Allied Matters Act, 2020 introduces some new provisions for the purpose of entrenching the ease of doing business in Nigeria and to ensure that the practice of business entities meets international standards and modern corporate governance principles. The new provisions will indeed improve the management and productivity of Nigerian businesses in the coming years.

Are you noticing any trends in industry-specific litigation?

As a result of the numerous problems in resolving international commercial disputes through litigation in domestic courts, in the last few years, international arbitration has grown to become the preferred dispute resolution mechanism for disputes arising from international contracts and investments agreements. In particular, international arbitration has been used to resolve an increasing number of technology and IP disputes. In order to keep up with the explosion of technology investments overseas, companies have spent considerable time drafting arbitration clauses to protect the confidentiality and proprietary nature of the technology and IP they share with foreign partners, manufacturers, and distributors.

Financial market pressures are forcing companies to rely more heavily on ADR mechanisms in an attempt to limit litigation exposure while expanding business interests globally. Companies have become more sophisticated in utilising international arbitration, particularly in emerging markets. This additional corporate sophistication has provided a suitable ground for accelerated competition among various arbitration institutions.

This has led to the development of a variety of driving trends in international arbitration, including new expectations of parties to arbitrations and new competition-driven features offered by international arbitration institutions. Companies choose international arbitration over pursuing judgment in domestic courts for a variety of reasons such as the elimination of perceived bias by domestic courts.

However, a primary and perhaps underappreciated advantage is the flexibility offered by international arbitration. Parties can choose the applicable law, the seat of arbitration, the arbitration institution, the arbitrators, the jurisdictional scope, and the general procedure and conduct of the arbitration, all of which can provide efficiency advantages over domestic courts as well as important legal and tactical advantages customized to the subject matter of the dispute.

A majority of parties who have been involved in international arbitration in the past, however, believe that any negative impact of choosing a particular governing law can be limited by carefully drafting either the original contract or a subsequent agreement to enter into arbitrations with this in mind, businesses can draft an arbitration clause that allows for negotiation of the choice of law provision in order to gain contractual advantages elsewhere in a particular agreement. This flexibility, therefore, increases stability and predictability when resolving disputes internationally.

Have there been any noteworthy case studies or examples of new case law precedent in the past year?

Enforcement of money judgment in Nigeria is regulated by the provisions of the Sheriffs and Civil Process Act, CAP S LFN 2004 and the Judgments Enforcement Rules, a subsidiary legislation to the SCPA. The SCPA sets out, amongst other things, the various methods by which successful litigants may enforce money judgments. These are by writ of fieri facias, garnishee proceedings, a charging order, a writ of sequestration or an order of committal on judgment debtor summons. However, writ of FIFA and garnishee proceedings are the most commonly used method.

One major obstacle often faced by judgment creditors seeking to enforce judgments against governments and their agencies is the requirement under the SCPA that a judgment creditor must obtain consent of the Attorney General of the Federation or Attorney General of a State as the case may be, before such judgments can be enforced by garnishee proceedings.

Interestingly, in CBN v Interstella Communications Ltd All FWLR 442, the court provided some clarification on the requirement for the consent of the Attorney General. The court stated that the rationale behind this decision is that seeking the Attorney General’s consent is to avoid any embarrassment to the government that may arise from making attachment orders against public funds in the custody of a public officer which has been appropriated for a purpose without notice to the government.

This means a judgment creditor does not require the consent of the Attorney General to attach and secure private funds in the hand of a public officer. It is the owner of the funds that determines whether the holder of the funds is a public officer and not the status of the person who is in custody of the funds.

Looking beyond COVID-19, how is the current litigation & dispute resolution landscape comprised in your jurisdiction?

The year 2020 was undoubtedly a challenging year for many businesses and individuals. The pandemic made parties to a dispute more interested in employing ADR mechanisms to resolve their disputes.

Mediation involves the appointment of a neutral middleman to facilitate a discussion between the parties and their legal representatives. It offers parties the chance to put their respective positions privately to each other in a confidential and conciliatory manner away from the public, so that the mediator can try to settle the dispute. Often, the mediator has a more specialist background befitting of the technical dispute than a Judge at conventional courts.

Parties are bound by the Civil Procedure Rules to consider taking part in ADR as a way of resolving a dispute and this obligation continues even after court proceedings have begun. This is why mediation is offered at the Multi-door Court House attached to some courts in Nigeria. The social distance protocol occasioned by the pandemic has led both litigation and ADR mechanism practitioners to consider virtual proceedings as a veritable platform to conduct hearings to meet the end of justice.

Virtual mediation will become the mainstay of resolving disputes even when things return to normal. This is because virtual mediations have led to improved efficiencies and prevents parties from needing to travel long hours to attend proceedings. This reduces stress and anxiety for participants. Whilst there was a general reluctance to engage in anything “virtual” in the pre-COVID era, there will be a marked change in how dispute resolution is dealt with in a post-COVID world.

How do judicial shortages pose a threat to the court system?

Lack of or inadequate infrastructures such as deteriorating and ill-equipped physical facilities in some courts severely undermine fair and speedy administration of justice in Nigeria. Justice can hardly be speedy when Judges lack adequate facilities to enable them to function effectively and efficiently. In most cases, the court facilities are overcrowded, badly equipped, and under-funded.

Some litigants do not understand English, the language of the court in Nigeria. Most courts have few interpreters to interpret court proceedings to the litigants. In some cases the interpreters are poorly trained. Court libraries are inadequate. There are few functional computers, photocopiers, or other modern equipment. Judges may even have to supply their own paper and pen to record proceedings in longhand. If litigants need a transcript of proceedings, they would have to pay for the transcript themselves. This encourages corruption which impugns the justice system in many ways.

Also, records of court proceedings and judgments are not stored in satisfactory conditions. This makes them susceptible to damage or intentional destruction by unscrupulous court staff. Absence of modern facilities provides an enabling environment for corrupt and unethical court staff to tamper with evidence and even court records.

Parties are limited in the kinds of technological and visual aids available throughout litigation. The courtrooms are not equipped to handle audio, slide and other visual presentations that assist fact-finding in understanding a case in order to reach a just decision. Where a litigant is unable to present technical evidence because of inadequate infrastructure, he is significantly disadvantaged and left to suffer his fate.

Also, inadequate facilities, especially erratic power supply, contribute to delays as court proceedings are often interrupted or adjourned due to power outages. All these erode public confidence in the court system. This is why the Chief Judge of the 36 states and the Chief Justice of the Federation have taken various steps and made practice directions to address these anomalies in Nigeria’s judicial system.

Why Construction Liens Should Be Adopted

Construction liens are legal claims for money expended or unpaid compensation filed by a contractor or other professional on a building or design. This is done by filing a public notice on a property stating that the owner of the property owes the contractor a stated sum of money.

It can also be filed by a subcontractor or materials supplier for any work done on a building.

The purpose of a construction lien is to serve as an encumbrance on the property upon which a lien is filed. It also gives notice to a bonafide purchaser for value that there is an unpaid sum outstanding to the contractor, subcontractor, materials supplier or other professional. It may prevent interested purchasers from purchasing the property until the unpaid sum is liquidated.

Benefits of a Construction Lien

When a Construction lien has been effectively filed, it acts as an encumbrance on the property and any third party who goes ahead to buy the property obtains title subject to the lien. It prevents the sale or refinance of the property because a prudent purchaser or mortgagor will not want to obtain a property that has a lien on it. The lien helps contractors, sub-contractors, material suppliers and other professional to quickly resolve payment problems.

Constructive lien also gives the holder of the lien an equitable interest in the property because failure of the property owner to clear the outstanding debt can grant the lien holder the right to foreclose the property after a period of time.

Furthermore, when the lien is placed, it hastens the property owner’s decision to clear the unpaid sums. It is an additional remedy granted to contractors in addition to the right to sue for a breach of contract. Nevertheless liens are not absolute; a property owner who is disputing the sum claimed can challenge the lien in Court.

Other Jurisdictions

Construction lien in its modern form originated in the United States of America after it was introduced by Thomas Jefferson to encourage the construction of Washington. Today, it is applicable in all states in United States and a lot of developed countries like England, France and Canada. However, Countries in Latin America and UAE specifically prohibit the lien except where the parties voluntarily adopt it as binding on them.

Current Situation

Construction liens are strictly regulated by statutes. Unless there is a law stipulating its procedure it can generally not be applied. In Nigeria, construction liens are generally not applicable due to the absence of a statute enacting it. Given the benefits of the concept of construction liens, one wonders why Nigeria, a country growing at a tremendous rate, where real estate is on the rise has not adopted this concept which seeks to protect the contractor while encouraging economic development.

Furthermore, the Nigerian judicial system is slow and before unpaid contractors can recover their money, a lot of productive time may have been wasted. There is also the issue of the depreciating value of our naira which stalls economic growth and development.

Another consideration is the number of people involved in the construction business who actually need protection and prompt payments; these include bricklayers, architects, quantity surveyors, materials suppliers, engineers etc.

Escaping the Current Situation

There are instances where contractors can take advantage of construction liens. An example is where a right of a contractor to a construction lien is expressly stated in the construction contract. This is advisable because it guarantees the contractor payment for his labour and expenditure.

Another instance is approaching the Court to place a lien or encumbrance on the property. This will usually be done by filing a suit for breach of contract claiming for the unpaid fees. The contractor can ask for an interlocutory or perpetual order of the court, placing a lien on the property to prevent the property owner from disposing it or mortgaging it until the unpaid sums or Judgment sums are liquidated.

Since the Court has discretion on whether or not to grant the remedy of placing a lien on the property, it is advisable that contractors should insist on a construction lien clause being part of the construction contract. This is because it is settled Nigerian law that parties are bound by their agreement.

The Way forward

Construction lien is a creation of statute and to effectively utilise it in Nigeria, our legislators need to promulgate a law recognising and enforcing it or amend our existing real property and construction laws in Nigeria to accommodate it.

The benefits of construction liens are numerous and a developing Country like Nigeria needs to use the concept to its benefits. This will curb the excesses of recalcitrant property owners who wish to take advantage of the loopholes in the Nigerian legal system to deliberately refuse to pay sums owed by them to professionals who constructed the property.

Practical Completion and Defect Liability Period

Though the date of practical completion is of great importance to a building project, it does not have a unanimous definition. Generally, the date of practical completion is not merely the date in which the Client takes over possession of the building. In fact, practical completion may be achieved without the Client taking over physical possession of the building.

Technically and legally, practical completion is the date when the responsibility of insurance, security and maintenance of the building passes from the Contractor to the Client; the Client pays the contract retention sum to the Contractor and the defect liability period begins to run.

A Construction Agreement may provide for practical completion of a building or it may be inferred from the conduct of the parties or deemed upon the happening of an event. The defect liability period is a period for the Contractor to rectify the latent defects it discovers in the building or brought to his attention by the architect or Client’s agent on the building project.

Practically, the date of practical completion of the building is the date in which the works are reasonably ready for its intended use even though there may be outstanding snags or defects. In essence, practical completion is achieved where construction is completed and there are no patent defects in the construction of the building.

It is easier to ascertain the date of practical completion where the Construction Agreement clearly spells out same. Most Construction Agreements usually provide for the architect or the Client’s agent on the project to issue a Certificate confirming practical completion of the works under the Agreement. But what happens where there is no Agreement defining the date or medium to signal practical completion or the architect or Client’s agent on the project refuses to issue a Certificate of practical completion of the construction works in the building even though same has been achieved?

In such an instance, practical completion would be deemed from the intention of the parties which can be inferred from their conducts. For instance, if the Contractor informs the architect or Client’s agent on the project that he has completed the construction works and the architect or Client’s agents submits a list of latent defects on the project to the Contractor, practical completion is deemed to have taken place and the defect liability period shall begin from that date.

Upon completion of the rectification works submitted to the Contractor by the architect or Client’s agent, the defects liability period shall come to an end and the Contractor will ordinarily not be liable to carry out further maintenance works on the building.

However, where there are patent defects on the project, it is the responsibility of the Contractor to rectify the patent defects on the building before practical completion will be deemed and the defect liability period begins. For instance if Mr Tanko Ahmed employ Main Construction Limited to construct a 4 storey building and upon completion of construction, the parties discover that the walls are cracked or the ceilings are licking, Main Construction Limited would have to effectively rectify the cracked walls and licking ceilings before practical completion will be deemed and the defect liability period would begin.

Again where there is no Agreement on the duration of the defect liability period, it may be deemed from the conducts of the parties. For instance, if upon practical completion, the Client informs the Contractor that he will take over possession of the project after the rainy season. The rainy season constitutes the defect liability period. The end of the rainy season signifies the expiration of the defect liability period and the Contractor will no longer be liable to carry out maintenance works on the building.

This is because the Contractor cannot maintain the building project indefinitely. Even the law does not expect that. In such a circumstance, after the rainy season, the Contractor should advise the Client to immediately take possession of the building because practical completion of the building has been achieved and the defect liability period has ended. The Contractor is legally entitled to withdraw from the building and send the keys of the building to the architect or Client’s agent.

Benefits upon Discharge On Grounds of Redundancy

An employee benefits package is a collection of non-wage compensation that supplements an employee’s salary. It is up to an employer to decide what they offer in a benefits package and it can vary between individual employees based on some of the needs of their job.

Like in other Countries, the COVID-19 pandemic has affected the survival of many businesses across all the sectors in Nigeria.

In other to grapple with the rough tides and remain in business, owners of businesses have deliberately cut down the cost of running their business by reducing overhead costs, declaring some post redundant and reducing their workers by discharging them on grounds of redundancy.

This has created problems for both workers and employers. Whilst workers will lose their means of livelihood, it opens up employers to industrial actions by the discharged workers. It is therefore in the best interest of the employers and workers for employers to discharge workers on grounds of redundancy in line with the provisions of the labour law.

Section 20 of the Labour Act provides that in the event of redundancy, the employer shall inform the trade union or workers’ representative concerned of the reasons and extent of the anticipated redundancy. The employer shall adopt the principle of “last in, first out” in the discharge of the workers affected, subject to all factors of relative merit, including skill, ability and reliability.

This means workers who have been in employment longer will be considered for discharge before the latest workers to come into the employment. The employer shall use his best endeavours to negotiate redundancy payments to the discharged workers who are not covered under any regulation.

However, it is settled law that where the employment of workers is wrongfully terminated i.e. terminated against the provisions of the labour law or their contract of employment, the remedy available to the workers is for their benefits which would have accrued to them had their employment been legally terminated, to be paid to them.

Apart from employment with statutory flavour, it has been settled by Nigerian courts that the law or Court cannot foist a willing employee on an unwilling employer and vice versa.

Hence, an employer has a duty to furnish the workers with a notice stating the reasons for their discharge on the grounds of redundancy and comply with the “last in, first out” principle in the labour law in discharging the workers. Nevertheless, the employer has the right to consider other factors like the relative merit, skill, ability and reliability of the workers in reaching a decision on which of the workers to be discharged on grounds of redundancy.

The employer has a duty to rely on international best practices to reach a redundancy payment to the discharged workers who are not covered by any existing regulation.

Regrettably, where a worker was wrongfully discharged on ground of redundancy, the worker is only entitled to his redundancy benefits as stated in the relevant Employment Contract, Collective Agreement or regulation. The worker does not have a right to reinstatement, loss earnings, emotional or psychological pain.

This is because the Court cannot force or foist a willing worker on an unwilling employer.