Personal property law in Nigeria

Mike A.A. Ozekhome

Description

This book addresses core issues of personal property law in Nigeria from a comparative perspective. It offers a detailed account of the laws governing personal property and the different lightweight reforms undertaken mainly through case law before the enactment of the Secured Transactions in Movable Assets Act in 2017. The book draws insights from the United States UCC article 9, being unarguably the first law that introduced the concept of modern secured transactions law, and was influential to many common and civilian law systems in reforming their personal property laws. Given that personal property law is fairly new in Nigeria, and also in Africa in general, the main aim of the book is to provide judges and academic researchers with a rich collection of tested solutions from jurisdictions that have experimented with modern secured transactions law for several decades. The primary and secondary works that were referenced in the book have tracked the different epochal shifts in legal thinking and their significances. This may assist scholars and judges in Nigeria to come up with bespoke interpretations of the Act and solutions to underlying problems on credit and security, that will satisfy the local conditions as opposed to copying the unaltered solutions from the United States and other advanced systems.

Sujets

• Economie
• développement
• Politics
• Relations internationales
• Développement
• Géopolitique

Informations

• Publié par: PULP (Pretoria University Law Press)
• Date de parution: 01 janvier 2020
• Nombre de lectures: 0
• EAN13: 9781920538972
• Langue: English
• Poids de l'ouvrage: 4 Mo

Extrait

Personal property law in Nigeria

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Mike A.A. Ozekhome

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Personal property law in Nigeria

Published by: Pretoria University Law Press (PULP) The Pretoria University Law Press (PULP) is a publisher at the Faculty of Law, University of Pretoria, South Africa. PULP endeavours to publish and make available innovative, high-quality scholarly texts on law in Africa. PULP also publishes a series of collections of legal documents related to public law in Africa, as well as text books from African countries other than South Africa. This book was peer reviewed prior to publication.

For more information on PULP, see www.pulp.up.ac.za

Printed and bound by: Pinetown Printers, South Africa

To order, contact: PULP Faculty of Law University of Pretoria South Africa 0002 Tel: [phone] Fax: [phone] [e-mail] www.pulp.up.ac.za

Cover design: Marguerite Hartzenberg, Active Space Designs

Layout: Marguerite Hartzenberg, Active Space Designs

ISBN: 978-1-920538-97-2

© 2019

2019

TABLE OF CONTENTS

Foreword Acknowledgments List of abbreviations 1 Introduction 2 Synopsis of the chapters 3 A note on terminology

CHAPTER ONE SECURED FINANCING BEFORE THE ST ACT

1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 1.9 1.10 1.11 1.12 1.13 1.14 1.15 1.16 1.17 1.18 1.19 1.20 1.21 1.22 1.23 1.24

Introduction The heightened importance of credit Applicable laws on credit in the erstwhile regime The problems posed by compartmentalisation of secured credit laws Chattel mortgage: The Bill of Sale Act of 1882 Chattel pledge The Pawnbroker’s Act of 1917 Lien Warehouse financing Factoring Trust receipts Retention of title transactions Receivables financing: The death of the rule inDearle v Hall Quasi securities Flaw asset and set-off Letters of credit Comfort letters Letters of guarantee and indemnity The co-existence of floating charge with floating lien: What problems might arise from the conflation? Why it made sense to break ties with the English genealogy in the law reform The points of divergence between the English and US models Why the English Law was not the right inspirational source for Nigeria The concept of legal origins: Does legal transplantation work? Can law be transplanted?

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1.25 1.26 1.27 1.28 1.29

Law reform is more than a copy and paste Does culture play any crucial role in transplantation? The increasing need to infuse economics into legal studies The new ST Act: A harbinger of economic success or failure? Concluding remarks: The urgent need to amend section 2(3) of the ST Act

CHAPTER TWO THE CREATION OF SECURITY INTERESTS

2.1 Introduction 2.2 Objectives of the ST Act 2.3 Scope of the ST Act 2.4 Financial versus operating leases 2.5 Set-off 2.6 Exclusion of land 2.7 Exclusion of ships and aircrafts 2.8 Characterisation of interests as either equitable or legal 2.9 The underlying implications of a banker’s supreme  right of set-off 2.10 Creation of security interests 2.11 Debtor’s rights in the collateral 2.12 Is a security interest created to the extent of a debtor’s  right in the collateral? 2.13 Receivable financing: The rule inDearle v Hall 2.14 The invalidation of non-assignment clauses 2.15 Contents of a security agreement 2.16 Description of collateral in security agreement 2.17 Concluding remarks

CHAPTER THREE PERFECTION OF SECURITY INTERESTS

3.1 3.2 3.3 3.4 3.5 3.6

Introduction Some policy issues surrounding perfection The nexus and distinction between creation and third-party effectiveness Who are ‘third parties’? The nexus between third-party effectiveness and priority A quick glance at the methods of perfection under the ST Act

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3.7 ‘Control’ as a method of perfection 3.8 Registration in the CBN collateral registry 3.9 Registration of a financing statement differs from the  creation of a security agreement 3.10 Registration is only a superstructure in relation to  third-party effectiveness 3.11 The indispensability of collateral registry in a modern  secured transactions system 3.12 The CBN collateral registry and other specialised registries 3.13 ‘Possession’ as a perfection method 3.14 The ST Act does not distinguish between actual  and constructive possession 3.15 Possession by a third party 3.16 Possession in the context of enforcement 3.17 Registration in a specialised registry 3.18 Registration of financing statements 3.19 Contents of a financing statement 3.20 Perfection of purchase money security interest 3.21 Automatic perfection of a security interest in proceeds 3.22 Perfection in the context of fixtures 3.22.1 Fixtures affixed onto an immovable asset 3.22.2 Fixtures affixed onto a movable asset 3.23 Automatic perfection of a security interest in a mass or  product 3.24 Continuity and lapse of perfection 3.25 Errors in a financing statement 3.26 Amendment of a registered financing statement 3.27 Concluding remarks

CHAPTER FOUR PRIORITY OF SECURITY INTERESTS

4.1 4.2 4.3 4.4 4.5 4.6 4.7 4.8 4.9

Introduction Priority of security interests Same priority for original collateral, proceeds and advances Transfer of obligations does not affect priority Voluntary subordination priority Priority of purchase money security interest and its proceeds Priority of security interests in processed or co-mingled goods Priority with respect to receipt of funds and cash Priority of lien holders

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4.10 4.11 4.12 4.13

Priority of holders of negotiable instruments and title documents Rights of a buyer or lessee of goods Rights and priority of assignees Priority of a judgment creditor

CHAPTER FIVE ENFORCEMENT OF SECURITY INTERESTS

5.1 5.2 5.3 5.4 5.5 5.6 5.7 5.8 5.9

Introduction Scope of enforcement Repossession of collateral Sale of repossessed collateral Discharge of subordinate security interests Statement of account of disposition Distribution of proceeds of sale The right of redemption and reinstatement of security agreement Conclusion

BIBLIOGRAPHY Books; chapters in books Journal articles; papers; seminars

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FOREWORD

Nigerian law for so long developed only one aspect of its property law, namely, real property law, and the law on personal property was left in shambles and unreformed. As a result, most secured lenders refused to accept personal (movable) assets as collateral for loans. One of the reasons was a lack of a collateral registry where security interests on personal property collateral ought to have been registered to inform the public about existing encumbrances. Thus, due to this exploitable gap it was possible for debtors in a non-possessory lending context to create the ostensible impression before potential lenders that they owned the property free from any encumbrance, thereby obtaining several credits with a collateral that was insufficient to cover the debts. Similarly, third party buyers were tricked into purchasing collateral that was encumbered because, prior to purchase, such buyers had no collateral registry to verify ownership and encumbrances.

Before 2017 the closest Nigeria came to having a legal framework on personal property was the Bill of Sale Act 1882, which is a statute of general application that provided for chattel mortgage. However, chattel mortgage did not see the light of day in Nigeria as there was no bill of sale register, which is a prerequisite of chattel mortgage. In place of chattel mortgage, retained title financing devices, such as conditional sale, hire purchase and financial leases, thrived. Yet, given the lack of a collateral registry where such transactions ought to have been registered, it was possible for the conditional buyer in possession to resell to an unsuspecting third party, and the latter’s claim of being abona fidefor value without purchaser notice at the expense of the conditional seller almost always succeeded.

The foregoing difficulty caused secured lenders to always request either real property collateral or rich guarantors who were regularly asked to deposit signed post-dated cheques as collateral, in case of the primary debtor’s default. This debilitated the growth of small and medium-scale enterprises (SMEs) in Nigeria because the bulk of the assets of the SMEs did not reside in real property but in personal property, such as inventories, accounts receivables, intellectual property, farm products, equipment, and so forth, all of which could have been used to secure credit and support the growth and development of SMEs. Without the need for a supporting evidence, it is common knowledge that a thriving SME sector invariably would create more jobs and alleviate poverty in the country. This can only

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become possible once the asset base for collateral has been expanded, just as the Secured Transactions Act in Movable Assets (ST Act) has now done.

Fortunately, in 2017 the Nigerian National Assembly passed the ST Act. The law is a mirror image of aticle 9 of the Uniform Commercial Code, the law that governs secured transactions in the United States. In summary, the law recognises the use of personal property as collateral, and creates a framework that governs the creation, perfection, priority and enforcement of security interests created on a debtor’s collateral under a security agreement. Given that the ST Act has largely unsettled the former regime of secured transactions law through its unitary and functional approach, a book that explains the law and its intricacies and thus provides a guide to certain obscure provisions in the ST Act indeed is of vital importance. The necessity of such a book is also hinged on the potential commercial disputes that would soon be predicated on the ST Act, which would require judges to make accurate pronouncements.

This book titledPersonal property security law in Nigeriacarefully explains the new law, occasionally drawing insights from other jurisdictions, and carefully analysing the topics in a flowery language that makes the complex subjects easy to read without necessarily losing the essential points of the overarching discourse. I highly recommend the book to all those interested in personal property law in Nigeria and Africa.

Professor CU Ilegbune, SAN, OFR

Lagos, 2018

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ACKNOWLEDGMENTS

In truth, there are many persons to thank, and I hereby express my gratitude to them for seeing me through this book; to all those who provided support, read, wrote, offered comments, and assisted in the editing, proofreading and design – I thank you.

Above all I want to thank my wife, Josephine Ozekhome, my children and the rest of my family, who supported and encouraged me in spite of the numerous times I could not afford to join them for dinner, but had to stay late in my office to finish up a topic or chapter of the book.

Last but certainly not least, I would kindly beg for forgiveness from all those who assisted me in one way or another in the course of writing this book, but whose names I have failed to mention for lack of writing space.

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LIST OF ABBREVIATIONS

ACA American Consumers Association ADR Alternative to dispute resolution AfrLR(Comm) African Commercial Law Report ALI American Law Institute All NLR All Nigerian Law Reports Article 9 Revised 1999 Article 9 of the United States  Uniform Commercial Code BC Bankruptcy Code (United States) BGB German Civil Code BIA Bankruptcy and Insolvency Act (Canada) BOFIA Banks and Other Financial Institutions Act CA Court of Appeal CAC Corporate Affairs Commission CAMA Companies and Allied Matters Act CAP Chapter CEAL Centre for the Economic Analysis of Law Cir Circuit CISG United Nations Convention on Contracts for the  International Sale of Goods (1980 Vienna Convention) CJN Chief Justice of Nigeria CSCS Central Securities and Clearing System DIP Debtor-in-possession EBRD European Bank for Reconstruction and Development ECOWAS Economic Community of West African States ERNLREastern Region of Nigeria Law Reports HC High Court HCJ High Court of Justice

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JCA JSC LFN NAFTA NCCSL NLR NSCC NWLR OHADA OPPSA PMSI PPSA SC SCN SCNJ SMEs ST Act UCC UN UNCITRAL UNIDROIT

USC UTRA WACA WRNLR

Justice of the Court of Appeal Justice of the Supreme Court Laws of Federation of Nigeria

North American Free Trade Agreement National Conference of Commissioners for the Uniform State Laws Nigerian Law Reports

Nigerian Supreme Court Cases Nigerian Weekly Law Report Organisation for the Harmonisation of Business Laws in Africa Ontario Personal Property Security Act Purchase Money Security Interest Personal Property Security Act Supreme Court

Supreme Court of Nigeria Supreme Court of Nigerian Judgment Small and Medium-Scale Enterprises/Entrepreneurs Secured Transactions Act in Movable Assets Uniform Commercial Code United Nations United Nations Commission on International Trade Law

International Institute for the Unification of Private Law United States Code Uniform Trust Receipt Act West African Court of Appeal Western Region of Nigeria Law Reports

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