By O.C Ali, Esq.

Introduction

Against the notorious background that one of the cardinal features of law is that it is dynamic and not static, the law on recovery of debt has over the years developed and same extends to its practice and procedure.

This article seeks to provide a quick guide into some intricacies on debt recovery in Nigeria, setting out briefly various categories of debts, background check required of a legal counsel engaged for debt recovery, and in conclusion submit on the disreputable misconception that Law enforcement agencies in Nigeria can be engaged and set in motion by desperate creditor against debtors to recover debts, inter lia.

The law bordering on recovery of debt is principally the law of contract. This is because debts accrue when parties have a pre-existing valid contract whether formal or informal, wherein a party is obliged to pay to the other party a particular amount of money, most at times with interest at a due date or upon the occurrence of an agreed event. Against this background, it is innocuous to conclude that debts derive their existence
from the existence of a valid contract between the debtor and the creditor.

CLASSIFICATION OF DEBTS
In recovery of debts there are 2 (two) principal classifications of debts, and this is in accordance with the way and manner the debt arose. Below I shall quickly discuss these two (2) different types of debts and their possible legal implications.

a. Debt arising from loans.
Firstly, debts arising from loans (not granted by Banks, Corporative societies and Pawn brokers) are governed primarily by the provisions of the Money Lenders law of states. All states in Nigeria have a Money Lender Law or its equivalent. For instance, Lagos has the Money Lender law, CAP 133, law of Lagos State of Nigeria, 1994. The simple jurisprudence behind the fact that a state Money Lenders Law do not cover loans from Banks is because the Constitution of the federal Republic of Nigeria provides that legislations on banks and Banking can only be made by the National Assembly. (See Item 6 in the Exclusive legislative list).

Therefore, all Money Lenders apart from those excluded by the Money Lenders Laws of various states are required to comply with the provisions of the law of the state in which it operates otherwise the law may render recovery of loans granted by them to defaulters unenforceable by action in court.

Be that as it may, most debts arising out of loans are loans which arise from the ordinary cause of business of financial institutions (such as Banks). These loans include secured and in secured loans. The banks are entitled to civil remedies against the customer indebted to the bank (same will be discussed subsequently herein), the bank can also invoke remedy under criminal laws, such as the criminal and penal code, BOFIA, EFCC Act, as the case may be, however note that this is significantly dependent solely on the circumstances of the case,especially where the facts that led to the said indebtedness of a customer is laced with fraud.

b. Debt arising from failure to pay for goods and services

Debts of this nature arising from failure to pay for services often plays out when a party expressly makes request to other party, either in form of service instruction, professional service delivery, supply of goods on credit, among others, but is then denied payment from the Offeror. Once these debts arise, the offended party has no option but to engage in debt recovery procedure against the defaulting party.

WHAT TO DO AT THE COMMENCEMENT OF DEBT RECOVERY
PROCEDURES
My first legal advice to individuals or corporate creditors is that when faced with a debt recovery case endeavour to engage the services of a legal practitioner to lead you through the process. Hence, having being briefed as a legal practitioner to commence debt recovery against a debtor to repay a due debt, it is wise to personally access the debtors ability to repay his debt, his willingness to pay and the nature of security for the loan if any, to help strengthen the approach to be adopted.
Subsequently, a Counsel may follow these steps below:
a. Issue a Letter of Demand: Write a formal demand letter stating the existing valid contract between the parties and state the accounts (due debt) as at the time of writing and make specific demands for payment of the debt, and the possible actions that will follow if the letter is not heeded. NOTE PLEASE: it is not in all cases that a demand letter is necessary, especially where a debtor is hiding or in the case of an artificial person, the debtor dissipating the property of the company before a receiver is appointed.

b. Alternative Dispute Resolution mechanism (ADR) is recommended:
Negotiation as one of the ADR mechanism can be engaged where practicable. In most cases the role of a Legal counsel on the negotiation table is more of a middle man to help bring both parties to a meeting point, which often than not lead to the negotiations of rescheduling of due debts and repayment plan.

c. Litigation: The magistrate courts (District court) and the High court of states and the FCT have original jurisdiction in the recovery of debt cases. Procedurally, the civil procedure rules of the High court of all States in Nigeria contains procedures for obtaining judgments in liquidated money demand cases.

 For instance, The Summary Judgment proceedings, which is a proceeding when the claimant puts out reasonable grounds to believe that the defendant has no defence to the action. This procedure help save time as it obviate the need for time consuming hearing of evidence. (See Order 13 Lagos State High Court Civil Procedure Rules 2019; Order 11, F.C.T High Court Civil Procedure Rules 2018). See the cases of NISHIZAWA V. JETHWEMI (1984) 1 SC 234, SANUSU BROTHERS v. COTTA CERSA (2020) 11 NWLR (PT. 679) P. 566. In all these cases the Apex court emphasized the point that once summary proceedings are properly filed and no real defence is disclosed by the Defendant, the Court should proceed to enter judgment. The procedure for applying for this summary judgment varies from state to state in accordance with the variations of the rules of court from the High courts to the Magistrate courts.

The Undefended list procedure, the core essence of the undefended list procedure is also to obtain judgment in cases in which the Defendant is unable to show a triable issue. However, there appears to be gradual phasing out of the undefended list procedure through the enactment of New High Court Civil Procedure Rules across the states, as some States have this procedure deleted from their rules, for instance, Order 60 of the 2004 Civil Procedure Rules in Lagos no longer exist in the 2019 Rules of the Court, and same applies to some other states in Nigeria. Be that as it may, this procedure for recovery of debts can be engaged in states where the Civil Procedure rules of the court provides for same, for instance the FCT High Court Civil procedure rules provides for it under Order 35 of the rule..

 Judgment based on admissions, admissions have been provided for by Section 20 of the Evidence Act 2011 as “a statement, oral or documentary, which suggests any inference as to any facts in issue or relevant fact”. The statement must of necessity have been made by the person against his interest or that of his principal. See Section 21 Evidence Act, 2011.

In most debt recovery transactions, especially were corporate bodies are involved, several letters are written at the commencement of the recovery efforts by the parties. At this stage the debtor is very likely to make salient admissions of material facts. When this happens, an application for judgment based on admissions may be made by the Claimant at the Case management Conference or Pre-trial conference stage or other stage of the proceedings. See Order 21 rule 4 of the Lagos State High court civil procedure Rules 2019; see ALI v. NDIC (2014) Judy electronic Law Report 55470 (CA).

Finally, it is important that the misconception that the Police, the EFCC and other law enforcement agencies are debt recovery agents must be readdressed. The Supreme Court has in plethora of cases established that the Law enforcement agencies are not debt recovery agents to be used to intimidate Debtors on behalf of Creditors.

The Supreme Court held in the recent KURE V. C.O.P (2020) NWLR pt.1729 p. 296 at 326 para B-G on the primary duty of the Police thus: “The primary duty of the Police by section 4 of the Police Act is the prevention of crime, investigation and detection of crime and the prosecution of
offenders.” See IBIYEYE V. GOLD (2012) All FWLR (pt. 659) 1074.The duties of the police do not extend to enforcement of contracts and collection of debts arising from purely civil transactions. Furthermore, unlike the duties of the Police stated in Section 4 of the Police Act, the
entire Part IV of the Police Act wholly states the powers of the Police and same is unambiguous to give room for assumption that other powers are vested in the Police outside their constitutional powers.Against this background, the misconception of the Police and other Law enforcement agencies as debt recovery agents which is slowly becoming a norm must be quickly aborted.

Note that, owing of debt arising from the ordinary course of social/business interactions is not a crime recognized by any law in Nigeria. The Supreme Court has in plethora of cases including the ones earlier cited in this respect condemned the use of the instruments of the State especially Law enforcement agents to recover debts for individuals, as if debt recovery forms part of the functions of the law enforcement agents.Our courts remain the only valid institution vested with the jurisdiction to hear and determine claims on monetary matters, arising from civil
contracts and transactions between parties.

O.C ALI, is a Lawyer, with interest in Dispute Resolution & Corporate Legal
Advisory. (Partner, MCALI LEGAL CONSULT, LP).
mcalilegal@gmail.com
He tweets: @CharlesMcali

CAVEAT: The Information provided in this article should not be taken as providing
legal advice on the subject. Kindly send an email, to mcalilegal@gmail.com if you
need further legal advice on the issues raised therein.