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3PLR/1976/87 (SC)



 (1976) All N.L.R 79

 (1976) 2 S.C. 48







SECURITIES FOR ADVANCES – Guarantee – Action Against Guarantors.

INDOOR MANAGEMENT RULE – Whether person with whom company (e.g. bank) enters into contract is bound to enquire into the internal workings of the company in order to detect the extent of the powers of its officials.

BILLS OF EXCHANGE – (1) Endorsement of bill – Effect thereof – Liability of an endorser – (2) Presentment of bill – In the circumstances, whether presentment is necessary. – (3) Dishonour of bill – Whether in the circumstances, notice of dishonour of bill is necessary.

The appellants instituted this action, claiming from the respondents, the sum of N102,702.73, as indorsers of a Bill of Exchange, dated 1st March, 1972, payable on 30th March 1972; and in the alternative, as guarantors of a contractual undertaking made to the appellants by West African Steel and Wire Company Limited. West African Steel and Wire Company Limited had been indebted to the appellants, and being unable to settle the debt, it was agreed by both parties, that the debt be liquidated, monthly, over a period of time; with the respondents as guarantors. In lieu of a Bankers Guarantee, the appellants accepted twelve Bills of Exchange indorsed by the respondents, each bill maturing monthly. The first bill was successfully negotiated but the second was dishonoured. The appellants (as plaintiffs) commenced this action to recover the amount. The respondents denied liability, stating inter alia that: (1) the director who purported to act for them did not have the authority to do so; (2) no consideration moved from the appellants in respect of the guarantee; and (3) the bill was never properly presented to them and the appellants never gave them any notice of dishonour of the said bill.


(1) The exceptions to the rule in Turquand”s Case which states that where a person is entering into a contract with a company, he need not inquire into the internal workings of the company in order to discover the extent of the powers of the company”s officials, although it is his duty to see that any contract he proposed to enter with the company is within its powers, does not apply in this case.

(2) The liability of an indorser of a Bill of Exchange to the holder and/or his endorsee are clearly spelt out in the Bills of Exchange Act (now Cap. 35, Laws of the Federation of Nigeria, 1990). section 55(2)(a) of the Act provides that by indorsing the bill, the indorser of the Bill agrees that on due presentment, it will be accepted and paid according to its tenor, and that if it is dishonoured, he will compensate the holder or a subsequent indorser who is compelled to pay it; provided that the requisite proceedings on dishonour are duly taken. In regard to an immediate or subsequent indorsee, the indorser is precluded

from denying, at the time of the indorsement, that the instrument was a valid and subsisting one and that he had good title to it. Under section 30(1) of the Bills of Exchange Act, every party whose signature appears on a Bill is, prima facie, deemed to have become a party thereto for value, unlike other forms of simple contract, bills of exchange (and promissory notes) which are presumed to stand on the basis of a valuable consideration; thus the burden is on the party who alleges want of consideration to prove the same.

(3) There was no averment in the respondents” pleadings that the bill was improperly presented by the appellants; thus, they could not raise the issue.

(4) Where the indorser is the person to whom the bill is presented for payment it is not necessary to serve him with a notice of dishonour for non payment; hence, there was no need for the appellants to give the respondents any notice.

Commercial Law – Bills of Exchange – Alternative arrangement for settlement of debt – Bills of Exchange payable indorsed to cover twelve months – No consideration for indorsement – Director not authorized to bind the company.

IDIGBE, J.S.C. (Delivering the Judgment of the Court): This action was star by a writ on 19th January, 1973, in which the appellants (a State Corporation in Hungarian People’s Republic) claim against the respondents (a trading comp incorporated in Nigeria), the sum of N102,702.73 as indorsers of a bill of exchange dated 1st March, 1972, and payable on 30th April, 1972, and in the alternative as guarantors of a contractual undertaking made to the appellants by Messrs. West Africa Steel and Wire Company Ltd. (hereinafter referred to as °WASCO”), a trading company incorporated in Nigeria; this amount (i.e. N102,702.,73) is made up of the principal sum of N97,798 due under the bill, the sum of N4,890.13 being interest thereon and the cost of noting protest on the said bill, being the sum of N14.60. The appellants also claim interest on the total sum claimed (i.e. (N102,702.73) and 10% per annum until judgment is delivered.”

Briefly, the following facts constitute the background to this action. WASCO had, prior to March 1971, been importing various goods on a credit-basis from the appellants and as a result was, on 1st April, 1971, indebted to the appellants in the sum of £673,511sterling (the naira equivalent of which was given by the appellants, as “N1,347,022.00”). Unable to pay this debt and being also desirous of continuing its trading activities with the appellants, WASCO proposed to them . . . . . . . . . . . . . for settlement of the debt. The Appellants were requested in a letter of the 18th day of February, 1972, from WASCO (Exhibit A) to agree to a schedule of deferred payments, spread over a period commencing from March, 1972, to February, 1973, of equal monthly instalments of £56,126. Monthly payments of the said sure (i.e. £56,126) were To be made by respondents directly into a special account to be established for that purpose in the United bank for West Africa Ltd., Lagos (U.B.A. Lagos), and it was also added that the respondents would guarantee payments under the proposed monthly instalments; copy of a written undertaking dated 8th February, 1972, guaranteeing monthly payments as proposed (Exhibit Al) addressed to WASCO by the respondents was also attached to the letter, Exhibit A.

It was also proposed in Exhibit A by WASCO “in the interest of continuity of our hitherto pleasant and satisfactory business relationship” that they be allowed to place orders, with the appellants for rolled steel products to the tune of £25,000 per month, ‘which will also be secured by Messrs A.G. Leventis (Nigeria) Ltd.” (the respondents). A letter of confirmation of this second proposal by the respondents (Exhibit D) was also enclosed in Exhibit A. Exhibit D (also dated 8/2/72) signed on behalf of the respondents was addressed to the appellants at their address in Hungary. The appellants, however, did not consider the undertaking in respect of “deferred payments” sufficient and in lieu of a Bankers guarantee which they asked for from WASCO, they informed WASCO that they would be disposed to Accept in addition to respondents’ written undertaking to WASCO (Exhibit Al), Bills of Exchange to cover the deferred monthly instalment payments of £56,126 each. Accordingly, twelve Bills of Exchange each payable to the order of the appellants, accepted by WASCO and indorsed by the respondents were delivered to the Appellants and they were to mature and become payable at the end of each consecutive month (from March, 1972 to February, 1973) beginning from 31st March, .1972. The negotiations relating to the above matter were in the main, carried out by three individuals viz: Mr. Summ – the Managing Director of WASCO – for WASCO, Mr. P. Myrianthousis – a director of A.G. Leventis (Nigeria) Ltd. – for the Respondents and Dr. A Hontvari – the Chief Legal Adviser to the Appellants – for appellants.

On receipt of the twelve Bills of Exchange issued to guarantee the deferred monthly instalment payments proposed in Exhibit A, the appellants’ Chief Legal Adviser, Dr. Hontvari, noted that the bills were indorsed, in each case, by P. Myrianthousis, as Director of the respondents. Testifying in the trial court on behalf appellants, Dr. Hontvari said he came to Nigeria in March, 1972 to crosscheck from the bankers of the respondents and WASCO “as to the genuineness of the signature of Mr. Myrianthousis” and “was satisfied with the genuineness of the signature.” He negotiated the first bill which matured on 31/3/72 and the bill was honoured; and all the remaining bills were left with the U.B.A. Lagos to collect on maturity. When, however, on the due-date in respect of Exhibit E (a bill for £65,190 due to be paid on 30/4/72) the Bank presented the same for payment it was dishonoured. Later it was protested (as per Exhibit F) by a Notary Public. According to Hontvari, the appellants stopped business dealings with WASCO “because the second Bill of Exchange (Exhibit E) was not met.” Consequently, the appellants fled, to court the present claim.

The defence of the respondents was, in the main, a denial of the authority of Mr. Myrianthousis to bind them in this particular transaction. According to the respondents, Myrianthousis had no authority or approval of respondents either to sign the undertaking in Exhibits A1 and D or to indorse the Bills of Exchange of which Exhibit E is one. It was even alleged – although not the slightest evidence was adduced in support of it – that Mr. Summ, Mr. Byrianthousis and one Mr. Louvaris at all times material to the transactions referred to above had conspired to defraud the respondents. The respondents did not call evidence at the trial and we therefore, think it is desirable, at this stage, to set out some of the salient paragraphs of the statement of defence, and these are:

(6) In further answer to paragraphs 3, 5, 6, 7, 8, 9 and 12 of the amended Statement of claim, the defendants (i.e. respondents) aver that the transactions referred to in the Said paragraphs result from a conspiracy between the plaintiffs (i.e. appellants), one Mr. H. Summ, one Mr. C.P. Louvaris, and others connected with West African Steel and Wire (Co.) Ltd., on the one hand and one Mr. P. Myrianthousis (a former Director of the defendants) on the other, for the purpose of defrauding the defendants.


(a) ……………………………………………………… ……………………………… … (b) The said Myrianthousis colludewith Messrs. H. Summ and C.P. Louvaris to help West African Steel & Wire (Co.) Ltd. and other companies in the Group (I.E. WASCO/WAMAC Group) in their financial difficulties.

(c) In furtherance of the said conspiracy and with the knowledge of the plaintiffs it was arranged that the said Myrianthousis was to give an undertaking in the name of the defendants, and without any consideration to pay the sum of £56,126 monthly for a period of twelve months into an account to be opened at the United Bank for Africa Limited, in the name of the plaintiff when, to the knowledge of the plaintiffs, the defendant; had no indebtedness whatsoever to the plaintiffs.

(d) In spite of the foregoing, the plaintiffs further requested, and obtained from Messrs. H. Summ and C.P. Louvaris and from the said Mr. myrianthousis, signed Bills of Exchange in favour of the Plaintiff purporting to be signed by the said Mr. Myrianthousis as a director of the defendants.

(7) ……………………………………………:…………………………………………

(8) The defendants further aver that by the conduct of the plaintiffs, and particularly of their Chief Legal Adviser, one Dr. Hontvari, and by the inquiries made on behalf of the plaintiffs by other persons the plaintiffs knew that the said Mr. Ph. Myrianthousis was not authorised to enter into the said transactions or to sign the said Bills of Exchange at all or alone.

(9) The defendants will contend at the trial of this suit that any loss occasioned to the plaintiffs by the circumstances referred to ………….. is due to the fraudulent and illegal acts of the plaintiffs, or in the alternative is due to their negligence.

(10) The defendant further aver that the transactions referred to ….. were without consideration ……

As can readily be observed from the foregoing paragraphs of the statement of defence, the respondents set up a three-pronged defence alleging (1) fraud and illegality; (2) want of authority on the part of Myrianthousis and, finally, (3) want of Consideration for the alleged transaction between them and the appellants. No iota of evidence was proffered by the respondents in support of their allegation of fraud and/or illegality and we need hardly dwell on that aspect of the defence. In order that the full significance of the defence of “want of authority on the part of Myrianthousis” may be appreciated it is, in our view, necessary to set out the important aspects of Exhibits A, A1 and D. Parts of Exhibit A – a letter from H. Summ, Managing Director of WASCO, to the Director-General of Metalimpext – read:

“We regret very much the further delay which has occurred in settling the overdue balance against a number of Bills from your company which have fallen due for payment in the course of the year 1971.

In spite of all efforts on our part the External loan has not been released and consequently alternative arrangement had to be made in this country to procure the necessary finance.

On account of the very tight credit squeeze prevailing in Nigeria since last year there is no chance to raise the money ……and we have no choice but to ask very kindly for your consent to a schedule of deferred payments as set out in the attached summary. It is proposed that payments are made to a special account to be established for this purpose with the United bank for Africa Ltd., Lagos direct by Messrs. A.G. Leventis & Co. (Nigeria) Ltd. A written undertaking has been obtained from this company and a copy is enclosed herewith for your information …………………………………………….. Moreover, in the interest of continuity of an hitherto pleasant and satisfactory business relationship we are ready to place orders for rolled steel products with your company to the tune of £25,000 per month which will also be secured by Messrs. A.G. Leventis & Co. (Nigeria) Ltd. A letter of confirmation is enclosed in this connection……” (Italics supplied)

As already stated, Exhibit A is dated 18th February, 1972, and parts of Exhibit A1 (dated 8th February, 1972) signed by Ph. Myrianthousis – Director, for A.G. Leventis & Co. (Nigeria) Ltd.” and addressed to WASCO, read:

Referring to our various discussions concerning your request for payments to be made direct to an account in Nigeria in favour of your overseas suppliers we wish to give our undetaking herewith for the following:

Our company will pay with effect from March, 1972, the Amount of £56,126.00 monthly, for a period of twelve (12) months to an account of Messrs. Metalimpex, Budapest, Hungary, United Bank for Africa Ltd., Lagos.

Iinterest if approved and at a rate to be fixed by the Central Bank, will be added on Reducing balances.

Yours faithfully,


Exhibit D, however, was addressed directly to Metalimpex in Budapest, Hungary, and was signed, for and on behalf of “A.G. Leventis & Co. (Nigeria) Ltd.” by Ph. Myrianthousis – Director” and parts of it read:

“We wish to give our undertaking herewith to purchase from your company, on behalf of West African Steel and Wire Co. Ltd./West Africa Metal and Ltd/WAMAC products Ltd., and their associated companies, rolled steel products, particularly wire rods, steel strip ….. to the tune of £25,000 per month. If the business is negotiated direct between the WASCO/WAMAC Group and your company, we are ready to confirm the business transaction ……..

As stated earlier on, the appellants in spite of these “undertakings” (Exhibits A1 and D) requested and obtained as additional or “confirmatory’ guarantee from WASCO twelve Bills of Exchange each for £56,126 payable to the order of the appellant’s accepted by WASCO and indorsed by the respondents. One of these bills (Exhibit E) when presented to the respondents at the due date, 30th April, 1972, was not paid by them (i.e. the respondents) mainly on the ground, according to the respondents, that Ph. Myrianthousis had in fact no authority to draw the same and/or to bind the respondents. It has also been contended before us by the respondents:

(1) that they cannot be liable to the appellants because no consideration moved from the appellants to the respondents in respect of the transaction leading to the indorsement by the respondents of the said Bills of Exchange;

(2) in any event, the bill in question (i.e. in the case in hand) Exhibit E was never properly presented to them and the appellants never gave to them (the respondents) any “notice of dishonour” of the said bill’ accordingly, the appellants cannot, in the circumstances, maintain the present action; and

(3) finally, the appellants ought not to succeed on a plea of estoppel by conduct, which they raised in the lower court relying on the fact of payment to them of the amount due on the first bill which was due on 3113/72 and negotiated in Lagos (as earlier on stated by Dr. Hontvari.

We think we ought to deal with the plea by the respondents of want of authority on the part of Ph. Myrianthousis and also on the question of consideration. since if we are satisfied that, in the circumstances of this case, the appellants can rely on the said signature (i.e. of Myrianthousis) and are not precluded from recovering on the bill (Exhibit E) on the ground of want of consideration then, unless the plea of lack of due presentment of the bill and notice of dishonour can avail the respondents, the claim must succeed. The appellants have also pleaded that the Respondents are now estopped from denying the authority of Myrianthousis in signing Exhibit E since the first Bill of Exchange (due to mature at the end of March 1972) signed on behalf of the respondents by Myrianthousis was negotiated and duly honoured by the respondents. On the issue of estoppel we do not consider the appellants to be on firm ground; the Bill of Exchange in question is not in evidence although both parties admit that it was made for the sum of £56,126 signed on behalf of the respondents by Ph. Myrianthousis. There is no evidence that it was presented directly to the respondents for payment; Exhibit K a cheque for £56,125 (instead of £56,126) duly signed for and on behalf of the respondenta by Myrianthousis and one other member of the respondents’ company issued WASCO (not Metalimpex) was used by WASCO in settling the amount due on the first Bill of Exchange on 4th April, 1972. Exhibit K itself is dated 6th March 1972, a date much earlier in time to the “due-date” of the first Bill of Exchange, and there is no Evidence that it was drawn by the respondents specifically for the purpose of settling the amount due on the said Bill (i.e. the first Bill of Exchange). It is therefore, our view that in the circumstances the plea of estoppel in pais raised by the appellants cannot avail them. On the issue of presentment and notice of dishonour learned counsel for the respondents – Chief Obafemi Awolowo – contended that the Bill Exchange in question (Exhibit E) was not duly “presented” to the respondents nor were the respondents given notice of dishonour as prescribed by the Bills of Exchange Act Cap. 21 of the 1958 edition of the Laws of the Federation Vol. 1. He therefore permitted that the Claim was incompetent. The Bill (Exhibit E) which matured on 30th April, 1972, when presented on 20th May, 1972, was, as he submitted, overdue for presentment (and he referred to Section 45(2)(a) and (b) of Cap. 21 aforesaid). He pointed out that no evidence was proffered to bring the lack of XXXX presentment of the said Bill within the ambit of sub-section (2) of section 46 XXXX Bills of Exchange Act aforesaid.” Chief Awolowo then submitted that, in the XXXXXXXX

by non-acceptance of the Bill could properly arise under Section 47 of Cap. 21 aforesaid since the same was never duly presented. Finally, he submitted that the appellants’ claim is incompetent since they failed to give to the respondents “notice of dishonour’ by non-payment of exhibit E as required by Section 48 of Cap. 21. There is, in our view, no merit in the contention of learned counsel for the respondents on the issue of “due-presentment” and “lack of notice of dishonour’. It is a settled rule of practice that parties to a case are bound by their own pleadings and cannot be allowed to set up in court a case which is at variance with their pleadings.

Paragraph 10 of the amended statement of claim reads:

(10) ……..The second bill was due for payment on the 30th April 1972 and when it was presented to defendants on 20th May, 1972 the defendants refused to make the said payment on the grounds that the acceptance of the bill was not authorised.” (italics supplied)

and paragraph (4) of the amended statement of Defence reads:

“With reference to the amended statement of claim, the defendants say that the said bill of exchange was brought to them for payment on or about the 20th of May, but this was refused on the ground stated in the said paragraph 10.” (Again italics supplied)

There is no doubt that the presentment for payment of a Bill of Exchange and the giving of notice of dishonour for non-payment to the party liable to be charged are, generally, conditions precedent to the bringing of any action on the bill by the holder of the same. However, it is generally unnecessary for a plaintiff to plead in his statement of claim the fulfilment of all conditions precedent, and this is because the due performance or happening of all conditions precedent is usually implied in every pleading;

It will be for the defendant if he thinks any condition precedent has not been performed or fulfilled, to take this objection in his defence by specifically pleading what that condition was and the fact that it has not been performed or fulfilled” (see Bullen & Leake and Jacob’s Precedents of Pleadings, 12th Edition, p. 334). “In practice, however, the pleader frequently waits to see whether the non-performance is set up in the defence: if it is, the fulfilment or the excuse for non-performance is pleaded in the Reply” – (Sullen & Leake & Jacob’s – ibid);

and in the old case, the defendant was required to set up in his pleading his special defence that a promissory note was “overdue.” (See Cripps v. Davis (1843) 12M & W. 159; 152 E.R. 1152; see also Lawrence, J. in Gates v. W.A. & R. Jacobs (1920) 2 Ch. 567 – an action for recovery of possession). Undoubtedly the above principles of pleadings enshrined in the cases earlier cited are preserved by the Rules of Supreme Court, England. They are also preserved by the High Court of Lagos State Civil Procedure Rules (H.C.R. Lagos State) which came into force on and were in operation when this case went to trial in the lower court and we refer particularly to Order 16 Rules 10 and 11 of the said High Court Rules (i.e., H.C.R. Lagos.State).

XXXXX the case in hand, it was clear from the state of the pleadings that the principal XXXXX in the case – when the matter went to were –

XXXXX the alleged want of authority on the part of Myrianthousis to indorse the bill;

(2) the alleged want of consideration for issue of the same.

We are, therefore, of the view that in the circumstances it was not now open to the respondents to raise the issue of (1) lack of “due presentment” and (2) lack of “notice of dishonour” for non-payment. However, on the question of lack of “notice of dishonour” for non-payment the respondents by their pleadings have admitted that the Bill of Exchange (Exhibit E) which was dishonoured by them was presented to them on 20th of May, 1972 and it is the law that where the indorser (in the instant case, the respondents) is the person to whom the bill is presented for payment, It is not necessary to serve him (the indorser) with a notice of dishonour for non-payment (see section 50(2)(d)(ii) Bills of Exchange Act, Cap. 21; also Halsbury’s Laws of England 4th Edition, Vol. 4 Paragraph 429 p.190).

We will now deal with the issue of consideration. Lack of consideration was raised in regard to two aspects of the claim in this suit, vie – (a) in relation to the guarantee; and (b) in relation to the indorsement of the Bill of Exchange. Since we consider that this appeal can be disposed of on the aspect of the claim relating to the indorsement of the Bill of Exchange, we consider it unnecessary to deal with that aspect of the claim relating to the liability of the respondent’s (if any) arising under the guarantee hereinbefore mentioned. The liability of an indorser of a Bill of Exchange to the holder and/or his indorsee are clearly set out in the Bills of Exchange Act, Cap. 21 aforesaid. In the first place by indorsing the same, the indorser of the bill undertakes that on due presentment it will be “accepted and paid according to its tenor, and that if it be dishonoured he will compensate the holder or a subsequent indorser who is compelled to pay it provided that the requisite proceedings on dishonour are duly taken” (see Section 55(2)(a) of the Bills of Ex change Act Cap. 21 aforesaid); and in regard to his immediate or subsequent in dorsee the indorser is estopped or precluded from denying that at the time of hi indorsement the instrument (i.e the bill) was a valid and subsisting one and that h had a good title to it. (see Section 55(2)(c), Cap. 21 aforesaid). And again, ever party whose signature appears on a bill is prima. facie deemed to have becom a party thereto for value. (See section 30(1) of the Bills of Exchange Act, Cap. 2 aforesaid. Hence, unlike other forms of simple contract, Bills of Exchange (ar promissory notes) are presumed to stand on the basis of a valuable consideratio on the basis of this presumption therefore the burden is on the party who alleg want of Consideration (and in the instant case, this will be the respondents) to pro the same. The respondents gave no evidence in the court below. The evidence on record, however – that of the appellants – establishes that the subsisting debt of WASCO was the consideration for the bill (Exhibit E); and the case of Balfour v. Sea Fire Life Assurance Co. (1857) 3 C. B. (N.S.) 300 is authority for the view and proposition that a subsisting debt from a third person is good consideration for a Bill of Exchange, at feast if the instrument is (as in the case in hand) payable at a future date (because it amounts to an implied agreement – as it clearly does in the case in hand – to give time to the original debtor, and this indulgence to the original debtor is, indeed, consideration to the maker or indorser of the bill): This disposes of the argument so strenuously urged upon us by learned counsel for the respondent – Chief Obafemi Awolowo – that (1) there was no express request from the respondents for the appellants to forbear to sue WASCO; and (2) there was no evidence of such forbearance in fact, and, therefore, consideration for the making of or indorsement of, exhibit E did not move from the appellants qua promisee). What more evidence of forbearance can any-one require? It is clear that the appellants have had to “be patient’, (i.e. forbear) with WASCO and refrain from XXXX ward recovery of the debt between March, 1972, when exhibit E was XXXX XXXXXXXXXXXXX claim was filed. As stated by Crowder, “the contract between the plaintiffs and the defendants was merely the giving of a bill by the latter in discharge of a debt due, from third parties ……. the consideration being the forbearance of the plaintiffs during the currency of the bill.” (see 140 E.R. at 758)

There was, therefore, in our view, sufficient consideration de facto for the endorsement of exhibit E by the respondents against whom the principles of liability of, and estoppel against, the indorser of a bill (as provided by subsections (a) and (c) of Section 55(2) of the Bills of Exchange Act, Cap. 21 aforesaid) must operate.

We are now left with the principal question in this appeal and it is whether the respondents are right in their contention that they are not liable in this action on the signature of Mr. Ph. Myrianthousis which they claim to be unauthorised? Now, where a contract is entered into on behalf of a company the question which arises is whether such a contract is binding on the company and can be enforced by or against it. The answer depends inter alia on whether the contract is (1) ultra vices the company or (2) intra vires the company but ultra vires its directors. If the contract is ultra vires the company neither the company nor the opposite party to it can generally sue on it. If, however, the contract is intra vires the company but ultra vires its directors the opposite party to it can, in certain circumstances sue the company. The Memorandum and Articles of a company are registered with the Registrar of Companies and may be inspected by any member of the public; consequently any member of the public who deals with a company is deemed to have notice of its Memorandum and Articles and therefore the powers and limitations of its directors. If a member of the public, therefore, deals with the company in matters inconsistent with the powers given in the Memorandum and Articles and the consequences are unpleasant he must abide by such consequences. However, a person may hold a company liable on any contract between them although ultra vires the directors of the company if:

(a) the company has held out the director as having the necessary authority; or (b) the circumstances fall within the well-known Rule in Royal British Bank v. Turquand (1856) 6 E. & B. 327 which put shortly is this: a person dealing with a company is assumed to be aware of the powers of the company which are set out in its public documents (i.e. the memorandum and Article of Association) filed with the Registrar since he has access to these documents, and although it is his duty to see that any contracts he proposes to enter with the company are within its powers he is not bound to do more. He need not Inquire into the internal working of the company; and he is entitled to assume that everything is being done properly or constitutionally.

There are, of course, limitations to the above rule and it does not apply in the following cases:

(a) cases of forgery or “non-genuine” transactions;

(b) the person seeking to rely on the rule is himself aware, or has knowledge, of irregularities, or

(c) where the transaction is of such an unusual nature that a person dealing with the officers of a company might reasonably be expected to make inquiries to assure himself that those with whom he is dealing are acting regularly and within the authority of the company; or

(d) where the person seeking to rely on it was not aware of the contents of the Memorandum and Articles of Association of the company.

We think it is desirable to refer to one or two sections of the respondents’ Memorandum and Articles of Association which were received in evidence at the trial, as Exhibit L.

(1) Clause K of the Memorandum of Association (Exhibit L) empowers the respondents – “to draw, make, accept, endorse negotiate, discount and execute promissory notes, Bills of Exchange and other negotiable instruments.”

(2) Clause H of Exhibit L empowers the respondents –

“to receive money on deposit or loan upon such terms as the company may approve, and to guarantee the obligations and contracts of customers and others.”

(3) Article 78 of the Articles of Association (Exhibit L) reads –

“The business of the company shall be managed by the directors who may pay all such expenses of and ………… may exercise all such powers of the company and do on behalf of the company all such acts as may be exercised and done by the company ………………..” (4) Article 95 of Exhibit L reads –

‘The directors may delegate any of their powers to Committees consisting of such member or members of their body as they think fit …………” (5) Article 76 of Exhibit L reads –

“The directors may from time to time appoint any one or more of their body to be Managing Director of Managing Directors, for such period and upon such terms as they may think fit and may vest in such Managing Director or Managing Directors such of their powers hereby vested in the directors generally as they may think fit and such powers may be made exercisable for such period or periods……..”

And, finally:

(6) Article 2 Of Exhibit L – the interpretation clause provides that –

words importing the singular number only shall include the plural number and vice versa.” (Italics supplied)

We are satisfied that, from the above provisions, the respondents are empowered by their Constitution, to endorse Bills of Exchange and that in doing so they may act by their directors who are themselves empowered by the said Constitution to appoint, for this purpose, from among their body a Managing Director (Article 75 refers) or a Committee consisting of one member or more of their body (Article 95 refers). In other words, the respondents’ Constitution, without doubt, anticipates that one or more of their directors or a Managing Director may exercise the powers set down in Clause H of Exhibit L (which include the endorsement of a Bill of Exchange).

Now, dealing with the subject of “signature on Bills of Exchange” the learned Authors of Halsbury’s Laws of England, 4th Edition Vol. 7 in paragraph 743 at page 444 observe:

“Where In the case of an individual a bill or note is required to be signed. It is sufficient, in the case of a company if it is signed on behalf of the company parry by any person acting on its authority ….. A Bill of Exchange . . . . is deemed to have been ……indorsed ………..on behalf of the company by any person acting under its authority. It is not necessary that a formal resolution XXXXXXXXXXX directors be passed that bills should be accepted, and where a director without authority accepts bills on behalf of a company whose articles give power to delegate the duty of accepting bills to one director, the company is liable to a holder in due course even though the delegation has not in fact taken place.” (Italics supplied)

In the case of Dey v. Pullinger Engineering Co. (1920) All E.R. Rep. 591 which is cited in support of the statement quoted above by the learned Authors of Halsbury Laws of England Vol.4 aforesaid, Sankey, J. cited with approval the statement of Lindley, L.J. in Biggerstaff v. Rowatt’s Wharf Ltd. (1896) 2 Ch. 3 at 102:

“Here the articles enabled the directors to give to the managing Director all the powers of the directors except as to drawing, accepting or indorsing bills of exchange and promissory notes. The persons dealings with him must look at the articles, and see that the Managing Director might have power to do what he purports to do, and that is enough for a person dealing with him bona fide. It is settled by a long string of authorities that, where directors give a security which according to the articles they might have power to give, the person taking it is entitled to assume that they had the power’. (See (1920) All E.R. Rep. at 596)

We are satisfied that, in the case in hand, the Articles enabled the Directors or the Managing Director, or a Committee of one or more of their body to exercise on its behalf all the powers of the company (and these, by virtue of Article 78 and Clauses H and K of Exhibit L include the power to indorse a Bill of Exchange and to guarantee the obligation of another – in this case, WASCO). It is sufficient for the appellants to look at Exhibit L and come to the conclusion that Ph. Myrianthousis – a member of the body of Directors of the respondents’ company might have the power to endorse Exhibit E. In this context, the significance of the failure of the respondents to adduce this vital evidence of want of authority on the part of Myrianthousis should not be overlooked. We think it should be mentioned, in passing, that while the company “note-paper” of WASCO on which exhibit A was written (and directed to the appellants) lists its directors, and show Mr. H. Summ as the Managing Director, none of the note-paper on which the letters from the Respondents to the appellants were written (Exhibits D, G and J refer) indicate that t respondents had a “Managing Director”; on the contrary, each of the exhibits bras signed by Myrianthousis qua director and his name is listed at the foot of each is one of the six directors of the respondents. We are unable to accept the rather belated argument of the respondents that Dr. Hontvari of the appelants’ company came to Nigeria in March, 1972, because he was “suspicious of the validity and authority of Myrianthousis to indorse the bill”; his explanation that he did so out of a desire “to be more cautious” and to confirm his impression that Myrianthousis was authorised to indorse all the twelve Bills of Exchange was justified by the facts given in evidence. We are unable, in the circumstances, to accept the contention of learned counsel for the Appellants that the third exception [exception (c) supra] to the Rule in Turquand’s case (supra) can be invoked against the appellants.

Accordignly, we are satisfied that the plea of want of authority on the part of Myrianthousis to indorse the Bill, exhibit E, must fail and the argument in support of it cannot therefore succeed particularly in view of the lack of evidence to support the said plea. As we stated earlier on, this appeal can be disposed of on the issue of the respondents’ liability as indorsers of the Bill, Exhibit E, and we, therefore find it unnecessary to consider the second arm of the claim (i.e. respondents’ liability under the guarantee).

This appeal, therefore, succeeds and the judgment of the learned Judge of the High Court of Lagos in Suit LD/66/73 dated the loth December, 1975, together with the order awarding Costs of N1,000 to the respondents must be, and are, hereby set aside and in substitution therefore it is hereby ordered that judgment be entered in favour of appellants (plaintiffs in the court below) for the sum of N117,156.73 together with interest thereon at 10% from the 19th January, 1973, until 10th December, 1973. The appellants are entitled to costs of this appeal assessed at. N380, whereof of N130 represents their out-of-pocket expenses and in the court below assessed at N150. Costs of N1,000 awarded by the Court below to the respondents, if already paid, must be refunded to the Appellants.

Appeal allowed.


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