UNCHECKED AMCON MAREVA INJUNCTIONS

Introduction

The justifiable need for a special legal regime to salvage the banking system from the weight of non-performing loans necessitated the enactment of the Asset Management Corporation (AMCON) Act in 2010 (AMCON Act)[1]. The thinking at the time was that the government needed to create an institution to ‘bailout’ the banks by purchasing the non-performing loans from them but with adequate legal machinery to deal with loan defaulters. In order to achieve this, AMCON was establish and given wide and special powers of loan recovery. The powers include interim possession of property and freezing of account of loan defaulters in ex parte proceedings (AMCON Orders) under sections 49 and 50 of the AMCON Act.

AMCON Orders in its enabling Act have been further captured in the rules made specifically for AMCON cases[2] and have been expanded in the Asset Management Corporation of Nigeria (AMCON) (Amendment) Act, 2019[3]. The rules and the 2019 amendment empower AMCON to apply for these orders even before an action is instituted[4] and takes away the bank customers’ right to privacy and confidentiality[5].

In practice, these orders are often made, not just against the debtor/debtor companies, but also against their directors and even third parties who have no business with the loan in question. The orders are issued in terms which practically renders the debtor and in some cases, third parties, incapable of functioning as a going concern. They are so far reaching that the debtor and other persons affected may not have access to funds to defend themselves.

A common scene today in proceedings before the Federal High Court is third parties trying to wriggle their way out of orders freezing their accounts or granting interim possession of their properties to AMCON. Experience has shown the court’s penchant for granting such ex parte applications and the reluctance to discharge the orders until the matter is determined[6].

This article contends that section 49 and 50 of the AMCON Act as further strengthened in the 2019 amendment do not vest AMCON with an unquestionable carte Blanche and that the way and manner the sections are being applied is incompatible with the Constitution.

The Limit of AMCON Orders under the AMCON Act

Sections 49 and 50 of the AMCON Act give AMCON the power to obtain interim possession of property and freeze accounts. The sections provide:

“49(1) Where the Corporation has reasonable cause to believe that a debtor or debtor company is the bona fide owner of any moveable or immovable property, it may apply to the court by motion ex-parte for an order granting possession of the property to the corporation.”

“50(1) Where the Corporation has reasonable cause to believe that a debtor or debtor company has funds in any account with any eligible financial institution, it may apply to the court by motion ex-parte for an order freezing the debtor or debtor company’s account.”

The above provisions grant AMCON the right to obtain interim possession of property and freeze accounts of debtors. However, in doing so, it must have reasonable cause to believe that the property or funds belongs to the debtor. The only person whose property is liable to attachment under the section is the debtor and not directors (except in cases where the veil of incorporation can be lifted or in order to enforce the personal guarantee by the director) or other third parties.

The phrase ‘reasonable cause’ as used with ‘bona fide owner’ under the sections means that the debtor must be the  real, authentic, genuine or true owner of the property or funds and that AMCON must have an honest and verifiable basis for believing that the property belongs to the debtor. The phrases were deliberately inserted in the Act to avoid conferring an unquestionable discretion on AMCON. The effect of the phrases is that the court has an obligation to scrutinize AMCON’s application to be certain that the properties and funds sought to be attached genuinely and truly belongs to the debtor against whom the debt in issue is sought to be enforced[7].

What AMCON does in practice however is that it files a blanket application to allegedly seize the properties and funds of the debtor. In doing so, it would surreptitiously join the directors to the application and then seek to attach the funds in any account in which the directors are signatory, even where the account belongs to third parties. A list of properties for interim possession is also outlined in the application with or without evidence that the debtor owns the properties. In a case where the writer is part of a team representing the Defendants, AMCON seized a house belonging to the Director's late father. The family was yet to obtain Letters of Administration and there are more than 10 beneficiaries of the Estate. The court refused to set the order aside, thereby effectively locking the family out of their property. This kind of practice is contrary to these provisions.

The duty of the court to scrutinize the ex parte applications to be sure that AMCON has established that the properties or funds sought to be attached is that of the debtor is  consistent with the general duty of the court to ensure that a party who seeks an ex parte order presents a very strong case. Furthermore, it is the law that a Court should not make an order that will affect the interest of a third party to a suit given that it may infringe on their right to fair hearing[8].

There is nothing in sections 49 and 50 of AMCON Act which detracts from the normal guidelines for the grant of ex parte orders. What is deducible from the sections is that the Lawmakers intended to prevent a situation where debtors can dissipate their assets or take them outside jurisdiction. In the absence of any legislative compulsion, the court in interpreting the sections must be guided by general principles for the grant of ex parte orders. In any event, the general principles of law which are predicated on the immortal Constitutional rights of fair hearing cannot be dismissed by reliance on a statute. This takes us to the constitutional issue arising from the application of the sections.

AMCON orders and the constitutional right to fair hearing

The Constitutional Right to fair hearing is the hangar for measuring the limits of ex parte orders. Though section 49 and 50 of the AMCON Act empowers the court to grant interim possession and freezing orders, such powers must be exercised in line with the constitutional right to fair hearing. It is submitted that section 49 and 50 of the AMCON Act and Rules made pursuant thereto cannot authorize a judge to make orders against third parties in breach of the constitutional right to fair hearing. The Supreme Court had since explained that the power to make ex parte orders must be interpreted to accord with the dictates of the constitutional requirements of fair hearing and that the requirement overrides all contrary provisions in any law[9]. Considering that ex parte orders can easily be abused, the courts have also held that they should be granted sparingly and not as a matter of course[10]. Draconian orders such as the ones being obtained by AMCON particularly against 3rd parties should never be made ex parte[11].

The court of Appeal in AMERICA SPECIFICATION AUTOS LIMITED & ANOR v. ASSET MANAGEMENT CORPORATION OF NIGERIA[12] had an opportunity to properly situate AMCON orders within the ambit of the Constitution but failed to do so. Though the sections may not be unconstitutional, the application of the sections which seem to clothe AMCON ex parte orders with the toga of unquestionability offends the constitutional right to fair hearing. It is true that the authorities are to the effect that ex parte orders are not prima facie unconstitutional[13] but when they are made in circumstances which deprives third parties of the right to enjoy their assets pending the determination of an action they are not parties to, they will become incompatible with the constitutional right to fair hearing.

The view of the court that the fact that an application can be made to set the orders aside affords persons affected fair hearing is not justified in practice. The court hardly grants applications seeking to set the orders aside. And why should third parties be put through the rigors of filing applications when a proper gatekeeper's role by the court would save everyone the trouble? The truth is, even when the orders are set aside, the damage would have been done.

AMCON Orders as provided for in the Act are nothing more than codification of mareva injunction. The grant of the orders is therefore subject to normal principles for consideration for such an application. A mareva injunction is granted only in very limited circumstances and does not contemplate the routine manner in which AMCON orders are issued[14]. Because of the right to fair hearing, the burden placed on a party seeking mareva injunction is a heavy one. The mere fact that the application is made ex parte cannot justify the grant of the orders as a matter of course[15].

AMCON orders and the doctrine of lifting the veil of incorporation

The main effect of registration or incorporation is that it confers corporate personality on a company. By the term corporate personality, it is meant a body or company recognized by law as having a legal personality different from its members and officers. The company though not a natural person, is recognized by law as a person with such rights and duties as attributed to it by law.

The 1897 case of Salomon v Salomon is the locus classicus on corporate personality. The case recognized that the corporate form is essentially an abstract legal body, created by law for the purpose of commerce. It consequently did not matter that an individual substantially held all its shares alone or that he performed most of the key roles in the company[16].

Corporate veil is however not absolute and may be lifted in deserving cases[17]. There are many instances where the veil of incorporation can be lifted but the one often invoked by AMCON is section 290 of The Companies and Allied Matters Act (CAMA)[18]. The section provides that where a company receives money by way of loan for specific purpose, or receives money or other property by way of advance payment for the execution of a contract or project, and with the intent to defraud, fails to apply the money or other property for the purpose for which it was received, every director or other officer of the company who is in default shall be personally liable to the party from whom the money or property was received for a refund of the money or property so received and not applied for the purpose for which it was received.

This section does not give AMCON a blanket cheque to move against Directors and other officers of the company. To rely on the section, AMCON must establish fraud in relation to the utilization of the loan in question against the Director. The court should not grant ex parte orders simply on bare allegations in the affidavit in support of the application without a strong prima facie case[19]. Most importantly, this section cannot justify the orders against third parties simply because the Director is signatory to their accounts or may have interest in a joint property unless it can be established that the loan was misappropriated through the accounts or the property was purchased with the loan.

The need to establish fraud, at least prima face, is fundamental. This is because the decision to impute the acts of the company to the Directors, members or other officers must be exercised carefully by the courts and in order to do so, the circumstances which would render such corporate veil to be lifted must be completely and undoubtedly proved by the person who alleges such circumstance. The point was driven home by the court in FDB Financial services ltd v Adesola (2000) 8 NWLR (Pt.668) pages 183-184, parasH-E; where Aderemi J.C.A held thus;

“I wish to say that even if fraud and or illegality are discernible in the conduct of the affairs of the company, this in itself does not disregard the company’s separate personality. But it is not sufficient to say that because the 1st defendant is acting through the 2nd defendant the veil of the 1st defendant can, for that reason be lifted. There must be clear evidence of illegality or fraud for the veil to be lifted”

Conclusion

Contrary to what appears to be the norm in the application for and grant of AMCON Orders, sections 49 and 50 of the AMCON Act do not confer unquestionable carte blanche on AMCON and the court. The court has a duty to ensure that AMCON complies with the limits of the provisions and most importantly, review every application from the prism of the right to fair hearing. It amounts to failure of duty and justice to grant the orders simply because AMCON says so.

[1] The Act was amended in 2015. See https://www.amcon.com.ng/downloads/AMCON_(Amendment)_Act_2015.pdf

[2] See order 4 and 12 of the Asset Management Corporation of Nigeria (AMCON) Proceedings Rules, 2018 (AMCON Rules)

[3] The Act was signed into law by President Buhari on August 7, 2019.

[4] Order 12 Rules 2. This is similar to Order 14 of the Asset Management Corporation of Nigeria (Special Debt Recovery Practice Direction) 2013.

[5] The 2019 amendment now empowers AMCON to place any bank account or any other account comparable to a bank account of a debtor of an eligible financial institution under surveillance; obtain access to any computer system component, electronic or mechanical device of any debtor with a view to establishing the location of funds belonging to the debtor; and obtain information in respect of any private account together with all bank financial and commercial records of any debtor of any eligible financial institution.

[6] See AMERICA SPECIFICATION AUTOS LIMITED & ANOR v. ASSET MANAGEMENT CORPORATION OF NIGERIA (2017) LPELR-44016(CA).

[7] The phrase ‘reasonable cause’ in the sections is similar to reasonable and probable cause for believing someone has committed an offence.  The term entails AMCON should have in its possession, a set of facts which to an ordinary man would lead to the conclusion that the property and funds belongs to the debtor. See In EROMOSELE v. WERMER & ORS (2014) LPELR-22183(CA), pp. 61-62.

[8] See OBIOR VS NNAMUA (2014) LPELR (23041).

[9] Kotoye v. Central Bank of Nigeria (1989) 1 NWLR (Pt. 98) 419, 448

[10] See also Okechukwu v. Okechukwu(1989) 3 NWLR (pt 108) 234; Fenner v Walson (1893) Ch 656andT& E (Nig.) Ltd v. Integrity Concepts Ltd. (2012 )NWLR (Pt 1283) 1-200; Asogwa v. Chukwu (2003) 4 NWLR (pt 811) 540; Okafor v. Onedinbe(2003) 9 NWLR (pt. 825) at 415

[11] See Group Danone v. Voltic (Nigeria) Limited(2008) All FWLR (Pt.417) 51, 80 paras C-D

[12] (supra). See also JOSCO AG. GLOBAL RESOURCES LIMITED & ANOR v. ASSET MANAGEMENT CORPORATION OF NIGERIA (2018) LPELR-45637(CA); VAN VILET TRUCKS (NIG) LTD v. AMCON & ANOR (2018) LPELR-46789(CA)

[13] See 7-UP Bottling Go. Ltd. v. Abiola and Sons Ltd. (1995) 3 NWLR (pt.383) 257, 277

[14] See Durojaiye v. Continental Feeders (Nig) Ltd.(2001 ) 10 NWLR (pt. 772) 657 at 664-665 paras H-B

[15] COMPACT in MANIFOLD & ENERGY SERVICES LTD v. WEST AFRICA SUPPLY VESSELS SERVICES LTD (2017) LPELR-43537(CA) the Court of Appeal held that the Applicant for the order has the burden to establish by relevant and cogent facts in the supporting affidavit all of the following, to wit: a. He has an action against the Defendant within jurisdiction. b. He has a good arguable case. c. The Defendant has assets within jurisdiction and must give the particulars of such assets. d. There is a real and imminent danger that the Defendant will remove the assets from jurisdiction and thereby render nugatory any judgment which the Plaintiff may obtain. e. He must give a full and frank disclosure of all material facts relevant to the application. f. He must show that the balance of convenience is on his side. g. He must be prepared to give an undertaking as damages.

[16] See Habib (Nig). Bank ltd v Ochete (2001)3 NWLR (Pt. 699) pages134-135 paras. H-D

[17] See NEW NIGERIAN NEWSPAPERS LTD. V. AGBOMABINI (2013) LPELR-20741(CA); AKEEM v. FRN

(2018) LPELR-43892(CA); ADEWUMI v. ADEBEST TELECOMMUNICATIONS NIGERIA LIMITED

(2011) LPELR-9087(CA); ROWAYE v. FRN & ORS (2018) LPELR-45650(CA); JUBRIL v. FRN (2018) LPELR-43993(CA)

[18] Cap C20 LFN 2004

[19] It is arguable whether the court should be able to grant the orders on the basis of section 290 of CAMA. This is because fraud is a criminal allegation that ought to be proved beyond reasonable doubt. such a burden cannot be discharged in an ex parte proceedings. The court often resort to the practice under sections 26, 28 and 34 of the Economic and Financial Crimes Commission (EFCC) Act, 2004, Sections 12 and 16 of the Terrorism (Prevention) Act, 2011 etc. However, these provisions are different from section 49 and 50 of the AMCON Act.