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Is Customary Arbitration the Solution to Congestion of Cases in Courts?

It is no longer news that determination of disputes especially commercial disputes before Nigerian courts is not time efficient. The courts are usually congested and cases are subjected to too many adjournments. A litigant cannot reasonably predict the term of a case in court. Presently, the courts are not sitting because judiciary workers are on strike to demand financial autonomy for the judiciary. It is clear that the delay in resolving disputes in court makes the English model court system to be ineffective in meeting the demands for justice in Nigeria in the 21st century.

Customary arbitration was used to reach peaceful resolution of disputes in pre-colonial Nigerian societies. This made it easier for business and social relationships to be maintained in that era. The reason for this is that customary arbitration encouraged amicable settlement of disputes and the need to restore cordiality amongst members of the society. The rights and liabilities of the parties were not interpreted in isolation like in the current English system of litigation. The rights and liabilities of the parties were interpreted in accordance with the general social good of the society.

Interestingly, recently in Umeadi v Chibunze (2020) 10 NWLR (Pt. 1733) 405, the Supreme Court found that where parties who believe in the efficacy of juju, resort to oath-taking to settle a dispute, they are bound by the result and so the common law principles in respect of proof of title to land no longer applies since the proof of ownership of title to land will be based on the rules set out by the traditional arbitration resulting in oath-taking. The Court further stated that where customary arbitration is pleaded and proved, it is binding on the parties and capable of constituting estoppels.

The main difference between customary and modern arbitration is that while the former cannot be enforced as a judgment of court, the later can be enforced as a judgment with leave of court. However, if a customary arbitration award is pleaded and proved before a court of law, the parties cannot resile from it as it will be binding on them and create estoppel.

Customary arbitration is indigenous to Nigerian societies and has been part of our dispute resolution mechanism since time immemorial. It is more effective than the acrimonious and technical English model of litigation. Hence, the Bill before the National Assembly to amend the Arbitration and Conciliation Act should take cognisance of the benefits of customary arbitration and make provisions for it to coexist with domestic and international commercial arbitration.

In order to ensure its efficacy, a customary arbitration award should not be subjected to the principles of English law by the court testing whether the decision of the customary tribunal meets English law standards. This is because the history and composition of the English system of adjudication is different from customary arbitration in Nigeria.

It is settled law that parties are bound by the terms of their agreement. Litigants do not need to go to conventional courts to resolve all their disputes. If parties to a dispute subject themselves to customary arbitration before a religious or traditional leader, clan or village head or other persons they trust, they should naturally be bound by the decision of the person who they choose to resolve their dispute. This will in no small way decongest the courts, promptly resolve disputes and give Nigerians a sense of fulfilment in the justice delivery system in the country.

Indeed, the Supreme Court decision in Umeadi v Chibunze (supra) is a breath of fresh air and a welcome development. It is also a clarion call for Nigeria to go back to its roots and develop its own customary arbitration and indigenous dispute resolution mechanisms, culture and principles which will better serve the demands of Nigerians for a justice system which will serve them promptly and efficiently.

The essence of civil proceedings by Emmanuel Ekpenyong

The essence of civil proceedings is for the judgment creditor to enjoy the fruits of his Judgment. This may be achieved by the judgment creditor executing the Judgment by the attachment and sale of the moveable or immovable property of the judgment debtor, attachment of funds belonging to the judgment debtor in the possession of a third party under the garnishee proceedings or committal of the judgment debtor to prison for refusal to settle the judgment debt under the judgment summons proceedings. However the following are the grounds upon which a Nigerian Court will set aside execution of a Judgment.

(i) If the judgment creditor executed the Judgment against a person other than the judgment debtor.

There are instances where a judgment creditor who is desperate to obtain payment of the judgment debt, attaches the movable property of a third party in the premises of the judgment debtor. Upon the application of the third party with proof that the property belongs to him and not the judgment debtor, the Court would set aside the execution of the Judgment.

(ii) If the person against whom the Judgment was executed, was never a party to the suit.

A judgment creditor cannot legally execute a Judgment against a person who was not a party to the suit upon which he obtained Judgment. This is so even if the person against whom the Judgment was executed is the judgment debtor’s successor-in-title. For instance, if a defendant dies before Judgment is delivered, the judgment creditor ought to bring an application to substitute the defendant’s name with that of his successor-in-title and serve the successor-in-title with all the processes in the suit.

If the judgment creditor fails do so and the Judgment is delivered against the defendant, the judgment creditor cannot sustain an execution against the defendant’s successor in title. This is because the successor-in-title was not a party to the suit. In law, the defendant and his successor-in-title are distinct and different persons.

(iii) Lack of service of the processes on the judgment debtor.

If the judgment creditor failed to effect service of the processes in the suit on the judgment debtor in line with the provisions of the relevant statutes on service of processes, the Court would set aside the execution of the Judgment against the judgment debtor. This is because service of processes on the judgment debtor goes to the root of the suit and affects the jurisdiction of the Court to validly enter Judgment against the judgment debtor. Lack of service is a clear breach of the judgment debtor’s fundamental right to fair hearing and makes the proceedings conducted a nullity and of no legal effect whatsoever.

(iv) Lack of jurisdiction of the Court who delivered the Judgment.

Jurisdiction of Court is a threshold issue. If the Court who delivered the Judgment which the judgment creditor executed against the judgment debtor had no jurisdiction in the first place over the subject matter of the suit or exceeded its statutory jurisdiction, the judgment debtor may apply to set aside the execution of the Judgment.

(v) Execution of a Judgment outside the stipulated statutory period.

Order IV Rules 8 (1) and (2) of the Judgment Enforcement Rules provides that a Judgment shall be executed against the property of a judgment debtor within 6 (six) years and against the person of the judgment debtor within 2 (two) years from the date in which the Judgment was delivered, failing which the judgment creditor must file an exparte application for leave of Court to execute the Judgment outside the stipulated statutory period.

If a judgment creditor, without leave of court, execute a Judgment outside the stipulated statutory period, the judgment debtor may apply to the Court to set aside the execution of the Judgment.

Protecting borrowers under a loan and collateral agreement in Nigeria

In order to execute large projects or for businesses to expand, there is usually a need to apply for loan facility from Banks (“the Bank”). Though, Banks are likely to grant loan to Borrowers if they have the requisite collateral, most times Borrowers end up in trouble with the Banks either because they cannot pay back the repayment instalments as at when due; or the interest rate on the loan facility is too high; or they breached an important covenant of the Loan and Collateral Agreement (“the Agreement”) or they simply did not understand the risks and obligations under the Agreement. Therefore, Borrowers must take the following provisions in the Agreement seriously.

The Collateral Provision;

The Borrower must ensure that it has the collateral stated in the Agreement and the evaluation of the collateral must be as envisaged in the Agreement. If the collateral is to be provided by a third party, the Borrower must ensure that the third party provides the specified collateral timeously. The Borrower must ensure the third party binds himself to provide additional collateral upon the Bank’s request.

If the collateral provision provides that the Bank may demand for additional collateral upon some conditions or the happening of an event, the Borrower must ensure that such conditions or event are clearly spelt out in the Agreement.

The Interest Rate Provision;

The current Central Bank of Nigeria’s lending rate is 14 percent while that of commercial Banks is 18 percent. The Borrower must ascertain whether it will be able to pay the interest rate on the loan sum. If the Bank reserves the right to review the interest rate to a higher margin, the Borrower must know the circumstances in which the Bank will increase the interest rate.

The Borrower must take into account all provision on additional interest rates such as interest rate on sums drawn more than the loan sum or unpaid instalments to the Bank upon expiration of the loan period before it makes a decision on whether to take the loan or not.

Repayment Provision;

There are different repayment schedule towards liquidation of the loan sum. Some of which include; equal payments, equal instalments, fixed equal instalment, bullet repayment and instalment free period. The Borrower must ascertain whether the repayment schedule proposed by the Bank is convenient to it and its line of business.

Commencement Date Provision;

The Borrower must ensure that the date of disbursement of the loan sum is in line with the purpose for which it requires the loan. This will prevent it from incurring interest payment for the period it did not do business with the loan sum.

Conditions of Loan Provision;

In some Agreements, the Bank may withhold, recall or even cancel the loan facility if the Borrower fails to use the loan for the purpose it was granted; diverts repayment instalments to other ventures; breaches obligations under the Agreement; fails to repay the agreed instalments for a period of time; makes material misrepresentation regarding facts which induced the Bank to grant the loan or the value of the collateral depreciates.

Again, the Bank may have the right to convert loan facility to overdraft, advances, commercial papers and other market instruments or vary the terms of the loan to reflect the prevailing conditions in the financial markets or monetary regulations. Disbursement of the loan sum may be subject to the availability of funds and ability of the Bank to accommodate the loan sum.

In such a circumstance, the Borrower must ensure that it uses the loan for the purpose it was granted, avoid misrepresentation of facts on its eligibility to be granted the loan and repay the instalments as at when due. The Borrower must determine whether it agrees with the right of the Bank to convert the loan to other financial instruments or the conditions in which the Bank may withhold, recall or cancel the facility.

The Borrower’s business is premised on the Bank disbursing the entire loan sum in accordance with the Agreement. Hence, the Borrower must be certain that the Bank will disburse the entire loan sum. This will prevent the Borrower from being frustrated and stranded.

Events of Default Provision;

Some Agreements provides that if the Borrower is unable to pay its debts; admits in writing to its inability to discharge its financial obligations; or makes legal authorization to the Bank to postpone repayment of the instalments, all the monies outstanding to the Bank as principal sum and interest will become immediately due and payable.

This may also extends to circumstances where the Bank perceives that there is an extra ordinary situation which will make it impossible for the Borrower to discharge its obligations under the Agreement; inability of the Borrower to execute a distress levied on its property within 7 days; a call by the Central Bank of Nigeria for the Bank to recall the loan; material adverse change in financial condition of the Borrower and the unenforceability of the Agreement under Nigerian law.

The Borrower must consider whether it can cope with the wide premise in which the Bank may recall disbursed sums or make them immediately due and payable.

Covenants Provisions;

The Agreement may provide for the Borrower to fund its account with the Bank with a monthly turnover of a specific amount to pay interest, commission and other charges. The Borrower must ensure that it can provide such monthly amount in order to prevent itself from being overwhelmed by unpaid instalments and interests.

Insurance Provision;

The Borrower may be obligated to pay the premium and maintain a comprehensive insurance as the Bank may approve in the joint name of both the Bank and the Borrower and the Bank’s interest will be first protected in the insurance policy in case of the occurrence of the insured risk.

The Borrower must determine whether its business interest will be protected if it maintains a comprehensive insurance in its name and that of the Bank and ensure the Bank’s interest is first protected in the insurance policy.

From the foregoing, it is important for Borrowers to understand and evaluate the risks in the Agreement before signing the dotted lines to bind themselves. A stich in time saves nine.