A REVIEW OF THE EVOLVING NIGERIAN PRINCIPAL — AGENCY RULES, IN
THE CONTEXT OF TWO LANDMARK CASES:
UKPANAH V. AYAYA (2011) 1 NWLR [PART 1227] 61 AND Samuel
Osigwe vs. Privatization Share Purchase Loan Scheme Management Consortium Ltd
& Ors (2009) 3 NWLR (Pt. 1128) 378
1.
INTRODUCTION
This
work simply tries to argue that an agent can still be liable third parties even
when the principal is disclosed. Under the modern practical American commercial
law, another rule of liability for an agent is “Warranty of Authority”
rule: Occasionally an agent attempts to act for a principal when he
possesses no power to bind the latter. In such instances he may or may not be
aware of the limitation of his power; he may honestly think his authority
extends to the act complained of, or he may be, well aware that he was never
appointed an agent. In either event he becomes liable to third parties for the
damages resulting from his failure to bind the principal. The result from the
breach of an implied warranty is that every agent that impliedly warrants to
third parties that he possesses if power to affect their legal rights remains
liable even if the principal is disclosed.
2.
NIGERIAN LAW OF AGENCY
Generally,
theagent seldom incurs any liability to the third party upon contracts entered
into for a known principal. In such cases he negatives any personal
responsibility by a proper execution of the contract. Only if the agent
carelessly executes a written agreement may he find himself bound by the
contract. To use an illustration suggested previously, the agent who signs a
negotiable instrument for his principal, but fails to indicate clearly the
principal's existence and his relation to the instrument, is personally liable.
In
recent times, two major landmark cases have considered the liability of an
agent where his principal is disclosed under Nigerian commercial law.
a. Samuel
Osigwe vs. Privatization Share Purchase Loan Scheme Management Consortium Ltd
& Ors (2009) 3
NWLR (Pt. 1128) 378
The
first is Samuel Osigwe vs. Privatization Share Purchase Loan Scheme
Management Consortium Ltd & Ors (2009) 3 NWLR (Pt. 1128) 378
In
the Osigwe case, Osigwe had filed a class action before the
Investment and Securities Tribunal (“the IST”) claiming damages from the fact
that the Privatization Share Purchase Loan Scheme Management Consortium Ltd
(“the Consortium”) did not file appropriate statements with the Securities and
Exchange Commission (“SEC”) and that, as a result, the Consortium’s share
acquisition scheme did not proceed as was promised with the investors,
including Osigwe suffering damages.
The
Consortium filed a Notice of Preliminary Objection to the suit, claiming that
the Consortium was an agent of a disclosed principal, i.e., that the Consortium
represented the Nigerian Bureau of Public
Enterprises (BPE). In other words, the sole proper defendant—the BPE, was not a
party to the suit, making the suit incompetent. The IST sustained the
objection, and Osigwe appealed all the way to the Supreme Court which
considered a plethora of common law decisions of the non-liability, and
reiterated that the agent of a disclosed principal can not be liable in so far
as the principal was disclosed. According to Nigerian Supreme Court Judge, Musdapher,
JSC who gave the lead judgment:
“Again,
it is clear from the appellant’s pleading that each of the respondents herein
are merely agents of the BPE solely appointed for the registration of would be
purchasers of the shares of the public companies to be privatized. The
respondents also by the pleading of the appellant, are unmistakably agents of a
revealed principal and as agents, they cannot be liable under all the
circumstance of this case. See Okafor V. Ezenwa (supra) ... An
agent acting on behalf of a known and disclosed principal incurs no personal
liability. See Niger Progress case (supra)”.
b. UKPANAH
V. AYAYA, (2011) 1 NWLR [PART 1227] 61
Next
came the Nigerian Court of Appeal Decision in UKPANAH V. AYAYA
(2011) 1 NWLR [PART 1227] 61. In Ukpanah, the facts are
straightforward, Ukpanah took a long lease on a piece of land from Ndidem Edim
Imona, the Ntoe of Big Qua who was a prominent traditional ruler in Calabar, in
Cross River State. After lease agreement
was executed, Ukpanah took possession. 30 years later, the Big Qua Community
attempted to terminate the lease. 2 years later, i.e., in 2005, acting
furtherance to the lease termination, the Big Qua Community engaged Mr. Ayaya,
a licensed surveyor, to carry out a survey of the land. Ayaya was later paid
off for his services by the Big Qua community.
For
some reasons unknown, Ukpanah proceeded against Ayaya for damages for trespass,
when it is clear that Ayaya never claimed to be an owner of the land. The suit
was also dismissed as lacking merit because Ayaya was an agent of a disclosed
principal.
3. QUARE:
CAN AGENT BE LIABLE—EVEN WHEN HIS PRINCIPAL IS DISCLOSED?
In
Scotland, in the case of Halifax v DLA Piper [2009] CSOH 74, where
although the main focus of that case was the potential liability of
an agent acting on behalf of a non-existent principal, Lord Hodge left
open the possibility of a further action between the same parties on the
grounds of breach of warranty of authority. The Halifax case later
settled.
The
first case to clearly establish the warranty of authority rule was Frank
Houlgate Investment Company Limited v Biggart Baillie LLP [2009] CSOH 165.
This was a case concerning the conduct of a fraudster who obtained sums from
the pursuer for investment in a company known as Securimax. An initial
£100,000 was advanced, and a further £500,000 was to be advanced subject to the
grant of a standard security over the fraudster's "ancestral
estate" which was, according to the fraudster, Balbuthie Farm in
Fife. The standard security was executed and registered.
Eventually, the pursuer discovered that all was not well on reading an article
in an evening newspaper which included a picture of the fraudster and a
report of his conviction for fraud. On telephoning the ancestral home,
the pursuer discovered that the fraudster was not the registered owner of that
property. Additionally, it transpired that the fraudster had forged the
pursuer's signature on a discharge of the standard security and arranged for registration
of the discharge in the Land Register. In arguing for the alternative
ground of breach of warranty of authority, Lord Drummond Young quoted the
definition of this rule appearing in Bowstead & Reynolds on Agency
(16th edn, 1996, cited with approval in Penn v Bristol & West Building
Society, [1997] 1 WLR 1360):
"Where a person, by word or conduct,
represents that he has authority to act on behalf of another, and a third party
is induced by such representation to act in a manner in which he would not have
acted if that representation had not been made, the first-mentioned person is
deemed to warrant that the representation is true, and is liable for any loss
caused to such third party by a breach of that implied warranty, even if he
acted in good faith, under a mistaken belief that he had such authority."
In
Frank Houlgate Investment Company Limited v Biggart Baillie LLP, the
pursuers had based their argument on the fact that the solicitor had
represented that he had authority to act on behalf of the registered owner of
the land in question, over which the standard security was
granted. Lord Drummond Young swiftly rejected this argument [para
27]:
"What is significant in the
formulation of the principle, however, is that the supposed agent, A,
represents that he has authority to act for B in a particular transaction, with
the result that the third party, C, is induced to act on that
representation. Thus the representation relates to the person for whom the supposed
agent purports to act. It does not relate to the capacity in which
that person, the supposed principal, will enter into the transaction, or as to
the property that person holds, or as to that person's title to any
property."
Applying
these principles of law to the facts of Frank Houlgate Investment Company
Limited v Biggart Baillie LLP case, the solicitor had not breached his
warranty of authority - he had been authorised by a particular client
to act on his behalf. Whether or not that client had good title to the
land was irrelevant in the context of the assessment of a possible case of
breach of warranty of authority, and the pursuers therefore failed to
establish a relevant case in this respect.
The rule of breach of warranty of authority was
recognized in Singh & Anor v Sardar Investments & Ors [2002]
EWCA Civ 1706. There, A negotiated the sale to T of property owned by P,
claiming to be authorized to act on P's behalf. P denied that A was authorised
and T now claimed against A for breach of warranty of authority. The Court of
Appeal held that although A was in breach of warranty of authority.
In the United States, under Pennsylvania law for instance,
this implied warranty of authority constitutes a basis for personal liability
on a contract. See Kribbs v. Jackson, 387 Pa. 611, 623-24 (1957). In Kribbs,
the Supreme Court of Pennsylvania adopted § 329 of the Restatement (Second) of
Agency, which states in pertinent part:
“A person who purports to make a contract, conveyance or
representation on behalf of another who has full capacity but whom he has no
power to bind, thereby becomes subject to liability to the other party thereto
upon an implied warranty of authority, unless he has manifested that he does
not make such warranty or the other party knows that the agent is not so
authorized.” Id.; Kribbs, 387
Pa. at 623-24.
Clearly, The American Restatement (Second) of Agency, § 329,
grounds personal liability on the implied condition that an agent has the
authority to enter into the contract on behalf of a principal, not on any
express promise to guarantee the debt.
4. When
Agent Bound On Sealed Instruments By The Form Of His Execution
Finally,
it is a long established rule that only those who are named or described in and
sign a sealed instrument are bound thereon. If the agent signs his own name
only, though he describe himself as agent, he will be bound and the principal
will not be bound. By the law of sealed instruments, only those can be sued
thereon who are parties thereto? An agent may, by careless execution of a
sealed instrument, bind himself when he intended only to bind his principal.
5.
Conclusion
The evolving commercial law rules may, in certain circumstances,
as we have seen above, mandate that the agent be liable even when the principal
is disclosed. We look forward to when the appropriate case will arrive before
the Nigerian Supreme Court for a clear definition of rules of agency liability
under Nigerian commercial law