Reflections -28 March – 1 April 2022

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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SECURITY DEPOSIT IN TAX LITIGATION IN NIGERIA

TENSION IN BALANCING THE RIGHTS OF TAX AUTHORITY AND TAXPAYERS.

SPEAKER: PROF. ABIOLA SANNI. SAN

The speaker noted that the Constitution of the Federal Republic of Nigeria (CFRN) 1999, liberally endows an aggrieved person the right to appeal against the decision of the any court or tribunal up to the Supreme Court. However, the downside to this is how parties deploy it (appeals) as a tactic to delay or frustrate a legitimate claim or defer honouring a judgement debt.

He noted that a filtering judicial mechanism includes setting parameters for entertaining appeal including an Order for Security for Costs of the Appeal.

The speaker said that his presentation interrogates whether payment of security for cost or 50% of the disputed assessment is a pre-condition for prosecuting a tax appeal in Nigeria and the circumstances that may trigger security for cost in tax appeal.

On Conceptual Clarification & Principles of Security Deposit, the learned silk noted that Security deposit in general-a deposit made to a person (landlord, lessor, hirer etc) to indemnify him in the event of damages to or loss of a property. The deposit is to cover the repair or replacement of the property. In the light of the decision of the Court of Appeal in NNB PLC. V. DECLANG LTD (2001) 1 NWLR (Pt. 695) 542, the concept of security deposit regarding appeals before the Court of Appeal was illustrated. The learned silk noted that the court held as follows: ‘’By virtue of Order 3 rules 10 and 11 of the Court of Appeal Rules, 1981 an appellant shall within such time as the Registrar of the lower court directs deposit with him a sum fixed to cover the estimated expense of making up and forwarding the record of appeal calculated at the full cost of one copy for the appellant and one-seventh cost for each of the seven copies for the use of the court, or where twenty copies are sent, one twentieth. The appellant shall within such time as the Registrar of the lower court directs deposit such sum as shall be determined by such registrar or give security there for by band with one or more sureties to his satisfaction as such Registrar may direct for the due prosecution of the appeal and for the payment of any costs which may be ordered to be paid by the appellant, provided that no deposit or security shall be required. where the deposit would be payable by the Government of the Federal Republic of Nigeria or of a State or by any Government department’’.

He noted that Security for deposit in litigation generally is meant to: –

1. Discourage a plaintiff from pursuing a vexatious or frivolous claim.
2. Ensure that a defendant is not left with an unenforceable judgement after defending a costly court battle.
3. Cover the cost of the court.
4. Be a measure of seriousness to pursue the appeal.

He noted that Security deposit is a powerful tool, especially, where the plaintiff is resident outside of the jurisdiction, while defendants may commonly apply for an order for security deposit, it is not routinely granted as certain parameters must be met.

The learned silk cited the case of NIGERIA DEVELOPMENT CONSTRUCTION AND CO. v. FEDERAL BOARD OF INLAND REVENUE [VOL. 13 ALL NTC Pg. 485]. ‘’The Appellant is not saying that the Respondent would be unable to repay the money if the appeal succeeds. Rather, what it is saying is that repayment to Appellant will not be in time. I agree, as deposed to in the Counter-Affidavit that the Respondent as the revenue collecting agent of the Federal Government of Nigeria is competent and capable of refunding the judgement debt to the Appellant. At this stage, I wish to recall what I said in the case of Dynamit Nobel A.G. V. Federal Board of Inland Revenue FHC/L/A/2002 when I was considering a similar application…’’.

The learned silk also cited SHELL PETROLEUM DEVELOPMENT COMPANY OF NIGERIA LTD & ANOR. v. THE GOVERNOR OF LAGOS STATE & ORS. [VOL. 4 ALL NTC Pg. 491] where the judge held “I am satisfied that the relevant provisions of Law No. 11 of 2001 are comprehensive enough. They protect all parties subject to it and give adequate provisions for representations should the need arise. The provisions supra do not amount to an infringement of Section 36 [2] [a] of the Constitution; neither is the plaintiff denied fair hearing. The provision of Section 15[1], which requires as one of the conditions of appeal that an aggrieved party deposits 50 percent of the amount of the assessed Land Use Charge being disputed, is a condition precedent which in no way inhibits a citizen’s access to the courts; neither is it the intention of the legislature to prohibit judicial review. The provision is very much in order’’.

The silk also cited that in a ruling delivered by Panel 2 of the Lagos Zone of TAT on 24th of August 2021, the Tribunal held as follows: “The understanding of this Tribunal is that, the said section has provided a pre-condition that is required to be fulfilled before the main issues are presented and addressed. The rule is that where the law places a condition precedent to the performance of a given act, such an act cannot be said to have been duly performed without the fulfilment of the stated condition. Failure of a party to comply with the condition in the circumstance is fatal and incurable”.

On whether it is a Good or bad law? The learned silk stated that it is Patently a bad law on the following grounds:

• The order was granted upon an oral application and addresses by counsel, Therefore, there is no evidence – establish the ingredients para 15(7)(a)-(c) either by affidavit or oral evidence.

• The Tribunal did not have the benefit of written addresses to make a well-considered ruling.

• It is not clear which of the circumstances in para 15(7)(a)-(c) was applied.

• The Appellant must have been taken by surprise.

The silk noted that the Respondent claimed that 50% of the disputed sum was due while the Appellant (rightly) argued that it was the equivalent of the amount of tax paid in the preceding year, Parties eventually reached an amicable settlement.

On the the TAT Rule Framework, he noted that the Minister of Finance, on 10th June 2021, Issued the TAT Rules 2021 which supplanted TAT Rules, 2010.

TAT 2021 contained pockets of innovations including electronic filing, electronic service, virtual proceedings, summary appeal procedure, power to consider issues not raised by the parties and the controversial Order 3 Rule 6 TAT Rules 2021 provides:

For an Appeal against the Service or relevant tax authority under Rules 1 and 2 of this Order, the aggrieved person, shall:

a. pay 50% of disputed amount into designated account by the Tribunal before hearing as security for prosecuting the appeal; b. file the Notice of Appeal as in Form TAT 1A, along with a deposition as in Form TAT 18.

The learned silk noted that the decision in Investment Holding Limited v FIRS is well considered and indeed a good law. The decision which was perhaps, the first, to test the validity of the Order III Rule 6 and para 15(7)(c) took the wind out of the sail of the former and rendered it impotent. He noted that it is doubtful if the provisions can be revised except through a proper statutory amendment and not an “amendment” by the back door. He also noted that the Federal High Court on 8th May 2020 in The Registered Trustees of Hotel Owners and Managers Association of Lagos (RTHMAL) V. Attorney General of the Federation & Minister of Finance nullified the Taxes and Levies (Approved List for Collection) Act (Amendment) Order, 2015 on the basis that it was ultra vires the Minister of Finance.

He noted that Order III Rule 6 which requires 50% of the disputed assessment as a pre-condition for prosecuting a tax appeal in Nigeria is arguably no longer part of corpus of the tax law in Nigeria, having been declared ultra vires, null and void.

He said that TAT has been able neutralise the toxic effect of Order Ill Rule 6 without going as far as leveraging section 36 CFRN 1999.

The speaker also noted that payment of security for cost under Para 15(7) is not automatic as the tax authority had contemplated. For the Tribunal to grant the order, the tax authority must prove the existence of at least one of the three conditions listed in para 15(7)(c).

The application must be by motion with supporting affidavit together with written address. Where the provision is successfully invoked, the Appellant will be liable to pay the lesser of (i) the amount of tax paid in the previous year or (ii) 50% of the disputed assessment plus 10 percent of the deposit.

In Conclusion, the learned silk was of the opinion that, the tax authority is seeking ways and means of making payment of 50 percent of the disputed assessment a pre-condition for the hearing of an Such a policy might become law once a proper statutory framework is put in appeal.

He also noted that the tax authority should be mindful that such a law will negatively impact access to justice and ease of doing business in Nigeria.

The learned silk said that Stakeholders in taxation should be watchful and positively engage the tax authority, National Assembly and the Presidency to prevent such an outcome and that the tax authority should seek to leverage and optimise the provisions of Paragraph 15(7)(c) in appropriate cases.

The speaker also said the Minister of Finance should strengthen her legal/tax advisory unit to avoid repeated embarrassment of her actions being declared ultra vires.

TOPIC: IMPACTS OF BUSINESS AND HUMAN RIGHTS ON INTERNATIONAL LAW CONFERENCE

TIME: 9.30 AM

DATE: 29TH MARCH, 2022

The responsibility to respect human rights is a global standard of expected conduct for all business enterprises wherever they operate.

The conference focused on the impacts of business and human rights on public international law. The core principles of public international law, such as the sovereignty of states and international legal personality, and impacts in the application of public international law in different situations, including the attribution to states of corporate activity, its use in domestic law and what is a breach of international law in diverse contexts. The impacts of business and human rights on specific areas of international law, such as international human rights law, international investment law, etc. The rapid development of business and human rights has also raised issues about what is public international law, to whom it applies and how it is enforced.

Business and Human Rights as a field encompasses many areas of law, from domestic criminal, tort, contract and corporate law to private international law and comparative law, as well as other disciplines, such as business management, business ethics, sociology and economics. In addition, it is relevant in many fields of public international law, including international human rights law, international investment law, international humanitarian law, international criminal law, international environmental law, international organizations law and the law of the sea.

Every state has an obligation to respect and protect human rights.

The United Nations guiding principles on Business and Human Rights are:

a) States’ existing obligations to respect, protect and fulfil human rights and fundamental freedoms;

(b) The role of business enterprises as specialized organs of society performing specialized functions, required to comply with all applicable laws and to respect human rights;

(c) The need for rights and obligations to be matched to appropriate and effective remedies when breached.

These principles are applicable to all business enterprises, organizations and states regardless of their structure.

There is also the need to pay attention to the risk of sexual and gender-based violence, which is especially prevalent during times of conflict. It is important for States to address issues early before situations on the ground deteriorate.

States should maintain adequate domestic policy space to meet their human rights obligations when pursuing business-related policy objectives with other States or business enterprises, for instance through investment treaties or contracts.

Every business enterprise has the corporate responsibility to respect Human Rights. Addressing adverse human rights impacts requires taking adequate measures for their prevention and mitigation. The initial step in conducting human rights due diligence is to identify and assess the nature of the actual and potential adverse human rights impacts with which a business enterprise may be involved. In this process, business enterprises should pay special attention to any particular human rights impacts on individuals from groups or populations that may be at heightened risk of vulnerability.