Also, in Temple Koko v. Page Communications Eng. Inc. and Edwards G. French Suit No. LD/936/73, delivered in July 1975, by Dosunmu, J., in the High Court of Lagos State (Unreported), the plaintiff alleged that he had used influence to obtain a contract from the defendants under which they were to supply broadcasting and television equipment to the Rivers State Government. The plaintiff also alleged that under the agreement, his company was to receive ten per cent of the value of the contract from the defendants. It was held that, the contract on which the plaintiff was making his claim was tainted with illegality in that it was to influence public officials from the honest performance of their duties. The contract was contrary to public policy and was therefore void.
6. A contract to defraud the revenue: Any contract deliberately entered into by parties with the intention of depriving the State of revenue it is lawfully entitled to, is contrary to public policy and therefore illegal and void. Thus, in Napier v. National Business Ltd. (1951) 2 All ER 264, N was employed as Secretary and accountant at a salary of £13 a week with £6 a week as expenses. Both parties knew that his expense was less than £1 a week. It was held that, the contract was to evade tax and illegal.
And since it was impossible to sever the part dealing with salary from the dealing with expenses, the whole was unenforceable.
Also in Alexander v. Rayson (1936) 1 KB 169, the plaintiff let a flat to the defendant for £1,200 per annum. In a bid to defraud the revenue and pay a much smaller amount of tax than he would normally be obliged to pay, the plaintiff prepared two documents for the purpose of the rent agreement. The first one disclosed that the rent for the flat and certain services, was only £450. The second one disclosed a fee of
£750 for the same services, plus the use of a refrigerator. The plaintiff intended to tender only the first document to the rating authorities and thus pay tax on only £450, instead of on £1,200. When the defendant failed to pay an installment due under the agreement, the plaintiff sued him to recover the unpaid sum. It was held that the contract was illegal, since the documents were intended to be used for the purpose of defrauding the revenue. The claim was therefore dismissed.
Also, in Miller v. Karlinski (1945) 62 TLR 85, under the terms of a contract of employment, it was agreed that the employee’s salary should include not only the repayment of actual expenses, but also an amount under the same head of expenses, equivalent to the amount of income tax due in respect of his salary. This meant that for that extra amount, no income tax would be computed and the State would thus lose an amount it would normally be entitled to, as income tax. In an action brought by employee to recover 10 weeks arrears of salary, and expenses, the tax evasion device was revealed. It was held that the contract was illegal for being a fraud on the revenue. Therefore, no action lay to recover even the areas of salary, since the contract for the payment of salary was part and parcel of the illegal mode of remuneration of the employee under the contract of employment.
There are some contracts which are prohibited under the express or implied provisions of statutes and declared to be lawful or void in the sense that they are illegal. Statutes rendering contracts illegal can take various forms. These include:
1. The express prohibition of certain types of contracts
2. The regulation of a particular trade, profession, or the dealing in a particular commodity or resource.
3. The protection of a class of persons, the public or the promotion of an object of public policy.
4. The raising of revenue.
1. Express Prohibition of Certain Types of Contracts: Where statute expressly prohibits or bans the making of certain types of contracts, any such contract subsequently made it illegal and void. For example, a contract to import goods like champagne, lace materials, or ready-made clothes into Nigeria would be illegal in view of the various statutes prohibiting the importation of these items. Thus, in Chief A.N Onyiuke III v. G.F. Okeke Suite No. S.C 430/74 delivered on May 5, 1976 unreported), the plaintiff brought a claim of £1,650 being the value of 110tins of palm oil sold and delivered to the defendant in the Republic of Biafra sometime in 1969. It was admitted by both parties that the transaction was in Biafra currency. The defendant argued that the contract was illegal because of the currency in which it was expressed. The Supreme Court held that the contract was illegal, for it had contravened the provisions of Act No. 48 of 1968, which made it an offence to possess or deal in Baifran currency.
Also, in Nwasike v. Onwuameze Suit No. LD/612/70 delivered on November 26, 1970 (unreported) the plaintiff brought a claim of £1,100 against the defendant, being the purchase price of car he had sold to then defendant in Biafran in 1969. The price of the car was £1,250 and the defendant has paid £250. This was a claim for balance of £1,000. The defendant admitted these facts, but alleged that the transaction was entered into within the Biafra during the civil war and that the car was to have been paid for in Biafran currency. He then pleaded that since the Biafran currency had ceased to be legal tender, the contract was frustrated and both parties were discharged from further performance. It was held by Adefarasin, J. that the transaction between the parties was an illegal contract which could therefore not be enforced, because it was based on an illegal currency.
Finally, in Alhaji Rabiu Busari v. Olabisi Willaims (1973) 3 ECSLR 518, the defendant who was the recipient of a hackney carriage (taxi) license issued by the Lagos City Council, hired it to the plaintiff for the operation of the plaintiff’s taxi for
£600. This was in breach of a the City Council’s by-law which prohibited the transfer of carriage licences. When, as a result of a dispute between the parties, the defendant seized the licence from the plaintiff, the later brought an action to recover his £600. It was held that the court would not lend itself in any way to assist a person who has taken part in an illegal transaction; there the action failed.
2. The Regulation of a Particular Trade, or Profession, or the Dealings in a particular community or resource: There are many types of transaction that come under this head. They include enactments regulating the practice of professions like law, medicine, pharmacy, auctioneers, companies, etc. It also covers laws and regulations concerning dealings in land. Hus, by section 21 of the Land Use Act, 1978, Act No. 6 of 1978, it is unlawful for any customary right of occupancy of land to be alienated by assignment, mortgage, transfer of possession or sublease or otherwise, without the consent of the Governor of the State or in some cases, without the consent of the relevant Local Government Council. This same rule also applies to a holder of a statutory right of occupancy, although in this case the consent is limited to the Governor.
3. Protection of a Class, or the Public, or the Promotion of an Object of Public Policy: Where a Statute is enacted specifically for the protection of a class of citizens or the public generally, any contract that is entered into in breach of such a statute would be illegal and void. For example, under the Illiterates Protection Act Cap.
83, Laws of the Federation of Nigeria, 1958, any person who writes or prepares a document at the request of , on behalf of, or in the name of an illiterate person, must read it over and explain the consents to the illiterates person before the latter signs it or makes his mark on it. Also, the writer of the document must write his name and address on the document. Section 4 of the Act provides a fine of £50 or six month imprisonment for a failure to comply with the above stipulations. Thus, in Osefo v.
Uwania (1971) 1 ALR 421, the defendant who owed the plaintiff a small sum of money, bluntly refused to pay, relying on the Illiterate Protection Act. He claimed that he was an illiterate person and that, since the receipt recording the loan transaction did not bear the name and address of the writer (the plaintiff), the defendant was not bound by the contents of the receipt.
The court stated that the object of the Act was to protect an illiterate person from possible fraud, and dismissed the action for the plaintiff’s non-compliance with the statute. Another statute which has been interpreted and applied in the same manner is the Moneylenders Act of the Federation of Nigeria Cap. 124, 1958, and its counterparts in the State. The Act makes provision for a series of conditions which a moneylender must satisfy before he can enforce the repayment of a debt or retain property deposited with him as security. These include a memorandum of contract in wring signed by the parties before the money is lent. The memorandum must contain.
a. The date of the loan was made;
b. The amount of the principal of the loan;
c. The rate of interest per annum, payable of the loan.
The moneylender must issue a receipt for every payment made to him at the time the payment is made. He must also keep a book in which he shall enter in connection with every loan made by him all the information requires for the above memorandum.
The book is also to show all sums received in respect of the loan or the interest thereof with the dates of payment in each case. The maximum rate of interest chargeable is also provided.
Any moneylender who fails to comply with any of the requirements listed above not only loses his right to enforce any claim in respect of the transaction, but is guilty of an offences and liable to a fine of £10 in the first instance and £5 for each day the offence continues. Thus, in the famous case of Kasumu v. Baba-Egbe (1956) AC 539, Baba-Egbe mortgaged a leasehold land to a licensed moneylender as security for a loan. The moneylender kept no books recording the transaction as a required by Section 19 of the Moneylenders Act. The transaction was, therefore held to be unenforceable. Baba-Egbe now instituted an action claiming the redemption of the property and recovery of possession. The question was whether he could be made to repay to the appellant so much of the money lent as still owned with interest.
The West African Court of Appeal and, on appeal, the Judicial Committee of the Privy Council held that the appellant was not entitled to recover, because the mortgage transaction, not having been recorded in a book as required by section 19 of the Act, was unenforceable. The Privy Council therefore ordered the cancellation of the mortgage and the delivery of the cancelled deeds and titled deeds to the administrators of the borrower’s estate. According to the Court:
When the governing statute enacts that no loan which fails to satisfy of these requirement is to be enforceable, it must be taken to mean what it says, that no court law is to recognize the lender as having a right at law to get his money back. That is part of the penalty which the law imposes. There is no room to reform the terms of the law since the statute is not concerned with the vice of the contents but with the vice of the conditions under which it was made. The provisions of section 19 are not purposeless; they seem to assume that no loan that is not contemporaneously recorded can be established with sufficient certainty to be recognized at law.
It the lender fails to comply with the requirements of the statute, he cannot escape the consequences of illegality by bringing an action to recover the bare capital without interest and by claiming that the transaction was not a loan under the Moneylender Act, but a friendly loan, As stated by Onyeama, Ag. C.J. ( as he then was) in Nnadi v Akanni (1962) 2 All NLR 171 at p.174.
In my judgment a moneylender does not escape the net of the Moneylenders Ordinance by calling a loan a friendly loan or by saying it was made without interest… The plaintiff in this case admitted carrying on the business of money lending and has lent money to the defendant on previous occasions. There is nothing in the Moneylenders ordinance excepting from the operation of the Ordinance loans made by moneylenders to their friends or free of interest.
In Akinolu v. Ogbesedanunsi Suit No. AK/21/66 delivered of March 21, 1974 by Coker, J. High Court of Western State (Ondo), the plaintiff claimed N2,400 from the defendant as money had and received for the plaintiff’s sue. He had paid the money to the defendant as loan under the Western Nigeria Moneylenders’ Law, at a rate of
interest of 45 per cent per annum. But on realizing that he did not have a valid licence to practice as a moneylender, he brought this action to recover the loan, without any interest. It was held by Coker, J. that a moneylender could not circumvent the sanction attached to an illegal transaction by framing his claim for recovery of money leant as quasi-contract. Since it was an amount due upon a usurious contract, it was unenforceable under the statute.
Under Section 32(1) of the Pharmacy Act, Cap. 152, Laws of the Federation of Nigeria, 1958, a dispenser, chemist or druggist is prohibited from selling or delivering any poison without the prescription of a doctor. In Agbakoba v. Meka (1962) NRNLR. 1, the respondent a licensed chemist and druggist, supplied the appellant with drugs on credit, some of which were poisons and therefore were governed by Section 32(1) of the Pharmacy Act, above referred to. When the appellant failed to pay, the respondent brought a claim for £96:5s, being the cost of the drugs supplied.
The defendant argued that since the contract was illegal the plaintiff could not maintain the action because the drugs were sold without a doctor’s prescription.
It was held both at the court of first instance and in the Court of Appeal that, if the sale had been without prescription, it would have been an illegal mode of performing a valid contract, and the plaintiff would not have been entitled to recover the price of the drugs. But in this case, there was no evidence whether there was a prescription or not, and that since the onus of proof was on the defendant who made the allegation, he had failed to discharge it, and the presumption that the contract was valid must stand. In other words, the contract between the appellant and the respondent for the supply of poisons was a legal contract. However, it was one which could performed illegally, that is, by supply the drugs without a prescription. The contract was not on its face illegal. Accordingly, the onus lay on the appellant to prove illegality, but he failed to do so.
4. Revenue Raising Statutes: Within this category comes the Registration of Business Name Act 1961, No 17of 1961, which requires all owners of businesses to register them for a fee. One of the aims of the Act was to raise revenue. However, it does not mean that a purchaser of goods from a store whose name has not been registered by its proprietor can refuse to pay the purchase price on the ground that the owner of goods had failed to comply with the statute. The statute does not prohibit the contracts concluded by the proprietors of the business, it merely makes them liable to a penalty of £10 for everyday during which the default continues.
Also, in the same category are the Purchase Tax Laws which were introduced by many states in Nigeria with the principal aim of raising revenue. In most of these states, an extra tax of two and a half per cent to five percent is now payable on all goods and services. In hotels, for example, the new comes tom five per cent of the bill, whereas for the purchase of cars, it comes to two and a half per cent. In cinemas all over the country, the proprietors pay a tax every time a film is shown and the audience itself pays a tax which included in the price of his ticket. Failure of any
establishment to include this tax in a purchase of goods or services will not render the contract illegal or void, rather the seller of the goods or services will pay the prescribed penalty for falling to comply with the provisions of the statute.