Reflections 28 February-24 March

THIS IS REFLECTIONS, our weekly roundup of events in the legal and technology sector, covering various topics and interesting learning points for today’s professionals.

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LATE BANKOLE OLUMIDE ALUKO, SAN  20TH MEMORIAL LECTURE

THEME: ADMINISTRATION OF JUSTICE: THE IDEAL STANDARD, THE NIGERIAN REALITY AND OUR POTENTIAL

The symposium began at about 4pm with introduction of family members and guests present including Olabode Rhodes- Vivour, JSC, Rtd, Amina Augie, JSC, Donald Duke and a host of other dignitaries.

The Chairman of the Management Board of ALUKO and Oyebode, Logo Dosekun said few words of welcome after which the Vice President of Nigeria, Prof Yemi Osinbajo, SAN, was invited to give his keynote address.

Prof Osinbajo in his keynote speech started by eulogizing the late Bankole Aluko, SAN including his family, social and work life. He recounted his personal and professional relationship with him.

On the theme of the symposium, Prof Osinbajo started off by saying that the administration of justice system is the foundation of law, order and commerce, that if it fails, the whole system will collapse. He noted that delays in commercial trials scare a lot of investors hindering the growth of Nigeria’s economy. He said that delays can be addressed by imposing sanctions including adverse, wasted and severe costs for adjournment as adjournment is a waste of public resources.

He furthered that in recent times, Courts have substituted the will of the electorates for Courts verdicts citing the Supreme Court’s case of APC v. Marafa as an example on this point, stating that the whole point of democracy is for the people to choose their leaders and judicial interpretations should take account of this. He said that failure of administration of justice can be philosophical too and judicial decisions must recognize the notions of justice it serves. It must promote substance over form. Technicality over merit will serve no goal where he cited the case of Okafor v. Nweke (2007) which has set precedents of delay and injustice on cases because of the way and manner counsels sign Court processes.

He noted that cliches on jurisdiction has not helped the justice system and technicalities in the way Courts interprete the law should be shunned rather laws should be interpreted with the intention of the legislature in mind and the common good of governance.

On institutional and structural issues, the Vice President noted that the process of appointment of judges should be reevaluated as same is rather seamless in Nigeria as against the United Kingdom that has 17 processes for such appointment part of which the people they want to serve have their input in the appointment. Still on the judiciary, Prof Yemi Osinbajo talked about welfare and remuneration stressing that it should be looked into. He further said that contempt cases should be simplified and that inasmuch as NBA compliments the judge in unethical practices, it still takes a long time to deal with.

Case management function of the judge and judicial precedent/ stare decisis was another area he emphasized stating that conflicting decisions makes predictibility and offering legal opinions difficult. Enforcement of judicial decisions, he said, was also one of the problems of the justice system and the executive arm of government can help in this regard.

He ended on the note of the need of digitization of both the civil and criminal process at all stages of proceedings, drawing justification from the Supreme Court’s endorsement of virtual proceedings being constitutional. He said that there is hope for reform in the justice system of Nigeria.

After the keynote speech of the Vice President, there was a panel session led by Babatunde Fapogbohunlu, SAN with panelists being M.r A B Mahmoud, SAN, Funke Adekoya, SAN, Prof Fabian Ajogwu, SAN, Dr Tunde Ajibade, SAN, Hon Justice HOA Abiru, Justice of the Court of Appeal and Mr. Paul a Queens Counsel based in the UK who joined via zoom.

For Mr. A B Mahmoud, on aspects of culture and character that impacts administration of justice, the learned silk said that more emphasis should rather be on the regulatory framework than the culture of the individuals (lawyers). That the work should be on making the regulatory framework better. He drew reference from how the United Kingdom regulates lawyers and that the LPDC and NBA has a vital role to play on this.

For Mrs. Funke Adekoya, SAN, her emphasis was on culture and character of the bench. She said that the culture of the judiciary is not service oriented, non- interventionist, as judges are afraid of petition hence the less interference in the affairs of lawyers. She said that the promotion culture too in the judicial system is also a challenge as Judges cannot face much critism and that a system where judges come from outside the bench should be encouraged. She said that no justice reform can be without culture and character. That one of the ways to strengthen this is to impose costs on full indemnity basis for legal practitioners that try to slow down the justice.

For Abiru JCA, he opined that beyond culture and character in the judiciary, the most important of them all is individual character. Judges should have an attitude and approach of service. He said his personally was faith based. He reinterated the fact that critism of lawyers most times lead to petition to the NJC.

Mr. Fabian Ajogwu SAN had his own view from the opacity in the system. He said the need to separate adjudicatory functions from administrative functions cannot be overemphasized. He said that existing reforms are not being taken advantage of as reforms are observed more in the breach. Again, like other speakers, he said technology should be embraced and that bodies responsible for ethics like the NJC and LPDC should embrace governance and hold both sides accountable, that is both lawyers and judges.

Mr. Tunde Ajibade SAN on his own part focused on structural challenges beyond culture. He said there was insufficient appreciation of the role and quality of legal practitioners even for entrants into the profession. He also emphasized welfare and funding for the judiciary and the technicality on jurisdictional issues that causes delays that are needless and proferred a solution that for cases wrongly  begun in Courts of coordinate jurisdiction, the matter should be transferred to the proper Court by the coordinate Court rather than litigation over proper Court to litigation spanning many years without going into the substance of the matter.

Finally, Mr. Paul from the UK shared a little about how the justice system works in the UK from committee, costs, public hearing and so on.

The panel session ended on this note

It was an educative and insightful session which highlighted the challenges of our justice system and with hopes that it can and will be better. The deployment of technology in this regard is very pivotal to accelerating justice.

A REPORT ON THE WEBINAR HOSTED BY ESQ TRAINNINGS LIMITED HELD ON THE 22^ND DAY OF FEBRUARY, 2022.

TOPIC; TAXATION OF FINANCIAL PRODUCTS & TRANSACTIONS 2022

SPEAKERS; OYEYEMI OKE FCA, PARTNER, A02 LAW

FOLAJIMI OLAMIDE AKINLA, SENIOR MANAGER, PWC

KELECHI UGBEVA, FOUNDING PARTNER, BLACKWOOD & STONE

ATTENDEE FROM LAW PAVILION; ONIFADE ADETOLA (A.O)

The webinar commenced around 1:05 pm.

Amina Aviomoh spoke extensively on the topic: TAX IMPLICATION OF FINANCIAL PRODUCTS AND TRANSACTIONS.

She explained that Financial Products include;

1. Short Term Investments: Money Market Funds, Treasury Bills, High Yield Savings Accounts.
2. Long Term Investments: Stocks/ Shares, Equities, Dividend, Long Term Loans, Real Estate Investments.

She also spoke about the Financial Technology (FINTECH) Industry that has opened the Nigerian market to products such as Digital Banking, Investment and Financial Management, Crowdfunding, Electronic Payment, Digital Credit, Block Chain and Digital Currencies. The CBN has also recently released the e-Naira, a Nigerian digital currency for transactions.

She highlighted the tax implications on various financial products to include; Withholding Tax, Stamp Duties and Capital Gains Tax.

Abisola Christopher spoke on TAX PLANNING FOR MULTINATIONAL CORPORATIONS IN THE WORLD TODAY.

She revealed that before carrying out business in any jurisdiction, it is very important to find out the tax obligations of the intending jurisdiction.

She explained further that a multinational company is one that operates in its own Country as well as other Countries of the world but has its main office in its own Country.

She defined and highlighted the differences between about Tax Avoidance and Tax Evasion.

Ms. Abisola also spoke extensively on tax obligation for multinationals in Nigeria which include;

1. Companies Income Tax Returns
2. Value Added Tax

She emphasized the passing of the Income Tax Transfer Pricing Regulations which is aimed at ensuring multinational transactions are conducted as if parties are not really there.

The speaker concluded the session with a brief question and answer segment where further clarifications were made to all the above discussed points.

The webinar ended around 3pm.

TOPIC: COMPANY LAW DEVELOPMENTS.

DATE: 10^TH MARCH, 2022

The webinar started at about 2:01pm with the host introducing himself as John McKenzie. He stated that the webinar was organized by the Royal Faculty of Procurators in Glasgow. He then went on to introduce the speaker as Dr. Jonny Hardman. He stated that Jonny Hardman is a Lecturer in International Commercial Law, University of Edinburgh. The host then invited Dr. Jonny Hardman to commence his discussion.

Dr. Jonny Hardman started by introducing the topic of the webinar which is titled Company law Developments.

He pointed that there are two developments in company law which he named as follows:

1. Reflective Loss; and

2. Challenges to holding a Scottish share pledge.

He then started with the first development which is the Reflective loss. He explained that the reflective loss is a company law term for resulting loss suffered by shareholders when a company suffers a wrong. That this can manifest by reduction in the value of shares or reduction in the dividend income caused by this wrong. He stated the fact that the concept of reflective loss evolved firstly from company law that has long held that the company is the correct party to sue for a wrong done to it and in support of which he cited the case of Foss v Harbottle (1843) 2 Hare 461. That thus, the shareholders have no action.

Secondly, the concept evolved from the rules that govern double recovery. He explained this as the fact that a wrongdoer can only be liable to pay once, and that public policy says that it should come into company coffers first. He pointed the fact that this came from private law which says that shareholders have action but prevented from recovering. He termed this as ‘prohibition’

Jonny further referred to several foreign authorities to further buttress the history of the concept of reflective loss one of which is the case of Johnson v Gore Wood & Co (No. 1) [2002] 2 AC 1, [2001] All ER 481. He explained that in the said case, Johnson owned “virtually” all shares in a company.The company’s solicitors were negligent and so the company settled. Hence, Johnson sued in personal capacity (includingfor payments into his personal pension fund that the company would have made.The speaker stated that in Court, one of the judges known as Lord Bingham stated the following principles;

• Where company loses from breach to company, onlycompany can sue.

• Where company suffers loss but has no breach,shareholder can sue even though loss is drop in sharevalue

• Where company suffers, and shareholder suffersindependent loss from breach of a separate duty owedto it, each can sue.

Lord Bingham then held that in the instance of the said case, Johnson could not sue, as caught by theprohibition.

Jonny further explained that in the case, another Lord known as Millet equally aligned his thought with that of Lord Binghamand further stated that:

“If the shareholder is allowed to recover in respectof such loss, then either there will be doublerecovery at the expense of the defendant or theshareholder will recover at the expense of thecompany and its creditors and other shareholders.Neither course can be permitted … Justice to thedefendant requires the exclusion of one claim orthe other; protection of the interests of thecompany’s creditors requires that it is the companywhich is allowed to recover to the exclusion of the shareholder. “

The speaker in response to the findings of the Lords,recommended certain options. He explained one as the strong company law approach. That the prohibition applied to all those interacting with a company. Thus, the prohibition would catch employees, creditors, and tort victims of companies. As such being a creditor, employee, or tort victim of a company is inherently different from being a creditor, employee, or tort victim of a sole trader.

He stated another as the semi-strong company law approach. Here, he explained that the prohibition applied to all claims held by shareholders. That if a third-party creditor held a debt, their recovery of it would not be affected by the prohibition, but if they sold that claim to a shareholder, then it would be. He pointed that this approach arises conceptually from company law, but holds that there is something inherent in being a shareholder of a company which can compromise all claims you have in respect of that company.

The speaker then moved on to briefly discuss the second development in company law which he stated as challenges to holding a Scottish share pledge.

He started off by stating that Scots law does not allow for a proper right in security over shares. He was of the opinion that there is a need for a functional security (i.e., title transfer).

He stated that the lex situs of shares is jurisdiction of incorporation. Here, he cited the case of Macmillan Inc v BishopsgateInvestment Trust plc (No 3) [1996] 1 WLR 387.

He also stated the fact that to take fixed security (as opposed tofloating) over shares in Scottish company, there is a needto transfer the shares to the creditor. Again, he cited the case ofEnvirocoLtd v Farstad Supply A/S [2011] UKSC 16.

He stated that by virtue of the provisions of Section 1162 of the Companies Act, 2006 which states as follows:

An undertaking is a parent undertaking in relation to anotherundertaking, a subsidiary undertaking, if—

(a)it holds a majority of the voting rights in the undertaking, or

(b)it is a member of the undertaking and has the right toappoint or remove a majority of its board of directors, or

(c)it has the right to exercise a dominant influence over theundertaking—

(i)by virtue of provisions contained in the undertaking’s articles, or

(ii)by virtue of a control contract, or

(d)it is a member of the undertaking and controls alone,pursuant to an agreement with other shareholders or members,a majority of the voting rights in the undertaking.I.e., if have no “rights” in respect of the shares, have no risk of fallingwithin this section and moving across: merely holding shares notenough and likewise Section 7 para 8 Companies Act, 2006:

“Rights attached to shares held by way of security shall betreated as held by the person providing the security—

(a)where apart from the right to exercise them for the purposeof preserving the value of the security, or of realizing it, therights are exercisable only in accordance with his instructions,and

(b)where the shares are held in connection with the granting ofloans as part of normal business activities and apart from theright to exercise them for the purpose of preserving the value ofthe security, or of realizing it, the rights are exercisable only inhis interests.”a Scottish share pledge did not affect grouparrangements.

Jonny was of the opinion that the challenges of holding a Scottish Share Pledge can also trigger National Security Regime.

In conclusion, he stated the fact that this is not treated as an oversight as in the House of Lords, one Lord Bruce of Bennachie proposedan amendment to carve out Scottish share pledges which is drafted by the speaker himself,Dr. Jonny Hardman and which is also supported by Baroness McIntosh of Pickering.

The host, John McKenzie thanked the speaker Jonny Hardman for the thorough exploration of the history of Company Law developments. The attendees were also appreciated for attending.

The webinar came to an end at about 2:50pm.

In all, the webinar was quite insightful as a better understanding on the background history of the company law principle that a company is the correct party to sue for a wrong done to it. The rule in Foss v Harbottle (1843) 2 Hare 461. This principle is also incorporated in Nigeria, the provision ofSection 341 of the Companies and Allied Matters Act, 2020. I align myself with the finding of Lord Millet in the case of Johnson v Gore Wood & Co (No. 1) [2002] 2 AC 1, [2001] All ER 481, that it will not be justiciable for there to be double recovery at the expense of a defendant. That is both the company by itself and the shareholders recovering claims separately from the Defendant when the wrong was actually committed to the company. Bringing home to Nigeria and relying on some of the recommendations proposed by the speaker, I think the applicability of this company law principle should depend on the facts and circumstances of each case. In as much as a Defendant should not be made to suffer double recovery claims, I think the rights of shareholders should also be put into consideration unless it might discourage individuals from owing shares in companies.