Snapshot: bringing complex commercial claims in Nigeria

Bringing a claim - initial considerations

What key issues should a party consider before bringing a claim?

Before bringing a claim, a party should consider the following:

• the limitation period for commencing the action;
• the appropriate court with jurisdiction to entertain the claim;
• the issuance of pre-action notices where government agencies and departments are involved;
• where companies are involved, the correct names of the companies as registered at the Corporate Affairs Commission;
• whether any alternative dispute resolution (ADR) mechanisms can be used or whether parties have agreed to submit to any ADR mechanism;
• whether all available remedies have been exhausted before embarking on litigation;
• the cost of litigation;
• the possibility, practicalities and potential difficulties of enforcing the judgment; and
• the civil procedure rules of the relevant court.

How is jurisdiction established?

Jurisdiction is established by the Constitution as amplified by judicial decisions of the superior courts of record. Subject matter rules can be found in Chapter VII (7) of the Constitution, which prescribes the jurisdiction of the superior courts of record. The civil procedure rules of various courts determine how and when the court would exercise jurisdiction over parties.

Jurisdictional challenges are available and are usually grounded on the court’s lack of subject matter jurisdiction or jurisdiction over the parties, or both. The principle of abuse of court process is available to stop a defendant from starting an overlapping process in another jurisdiction in Nigeria. With regard to foreign jurisdictions, generally speaking, there is no protection available to stop a defendant from starting an overlapping process in a foreign jurisdiction preferred by it.

Res judicata: is preclusion applicable, and if so how?

Preclusion is available in Nigeria, and it operates to prevent the re-litigation of a matter that has already been settled between the same parties by a competent court. Issue preclusion is also available to prevent the re-litigation of issues that have already been decided between the same parties by a competent court.

In what circumstances will the courts apply foreign laws to determine issues being litigated before them?

The courts will not apply a foreign law to determine issues litigated before them unless the contract between the parties contains a valid choice of law clause in favour of the laws of a foreign jurisdiction. It must be noted, however, that where there is no settled Nigerian law position on an issue or matter, a settled foreign law position regarding the issue or matter may have a persuasive effect on the Nigerian court.

What initial steps should a claimant consider to ensure that any eventual judgment is satisfied? Can a defendant take steps to make themselves ‘judgment proof’?

A claimant is able to take initial steps such as filing an application at the relevant court to restrain a defendant from disposing of its assets or moving them outside the jurisdiction of the relevant court pending the determination of the dispute (known as a Mareva application). The claimant is also able to engage experts to make discreet enquiries about the location and quantum of the assets of the defendant. The claimant must, however, convince the court in its Mareva application that the claimant would likely dissipate its assets or move them outside the jurisdiction of the court. The claimant must also satisfy the requirements laid down by judicial authorities for obtaining an injunction, which are as follows:

• that there is a prima facie case against the defendant and that the same is a serious question that needs to be tried by the court;
• that the balance of convenience lies in the applicant’s favour;
• that the applicant is not guilty of any delays in bring the said application;
• that damages will not be sufficient compensation for the applicant for the remedy sought from the court; and
• that the applicant is willing and able to give an undertaking as to damages.

A defendant is able to make itself judgment proof by hiding its assets or moving the same outside the jurisdiction of the relevant court.

When is it appropriate for a claimant to consider obtaining an order freezing a defendant’s assets? What are the preconditions and other considerations?

Obtaining a freezing order is appropriate where there is a risk that the defendant may dispose of or remove its assets out of the jurisdiction of the court to frustrate any order or judgment that may be made against it. In such a circumstance, a claimant can apply to the court to attach such assets pending the hearing and determination of the suit.

To obtain such a freezing order, the applicant must satisfy the following preconditions:

• it has a cause of action against the defendant, which is justiciable;
• there is a real and imminent risk of the defendant disposing of its assets or removing them from the jurisdiction of the court and thereby rendering nugatory any judgment that the claimant may obtain;
• it has made full disclosure of all material facts relevant to the application;
• it has given full particulars of the assets within the jurisdiction;
• the balance of convenience is on the side of the applicant; and
• it is prepared to give an undertaking as to damages.

Are there requirements for pre-action conduct and what are the consequences of non-compliance?

In most states, the claimant is required to complete a pre-action protocol form before commencing a matter in court. In Lagos, for instance, a claimant is required to attach evidence of its prior unsuccessful attempts to settle a dispute before filing a claim. Should the claimant fail to comply with the pre-action protocol, the claim may not be accepted for filing.

Where government agencies or departments are involved, the statutes creating such agencies often provide for a pre-action letter to be served on the agency or department prior to the filing of a claim. Failure to comply with the provisions of such statutes will render the action incurably defective.

What other forms of interim relief can be sought?

There is a wide variety of interim relief available to parties in a dispute. These reliefs are often granted by way of an injunction restraining a party from carrying out certain actions or directing a party to perform certain actions. Such reliefs include but are not limited to the following:

• interim injunctions;
• interlocutory injunctions;
• Mareva injunctions;
• orders to account for profits;
• orders to disclose;
• orders for production of documents; and
• Anton Pillar orders.

Does the court require or expect parties to engage in ADR at the pre-action stage or later in the case? What are the consequences of failing to engage in ADR at these stages?

Parties are encouraged to resolve their dispute by utilising ADR mechanisms. The court is able to refer parties to ADR centres created by the courts (eg, the Lagos State Multi Door Court House).

Usually, the court refers parties to ADR at the commencement of proceedings and before trial. If parties are referred to ADR and are unable to resolve their dispute amicably, they will be referred back to court for trial.

At the pre-action stage, the consequence of failing to engage in ADR is that the suit might not be accepted for filing at the court’s registry. During the course of proceedings before the court, the consequence of failing to comply with an order of court to engage in ADR might be the initiation of contempt proceedings against such a party. The courts are, however, always mindful that parties cannot be compelled to settle amicably.

Are there different considerations for claims against natural persons as opposed to corporations?

In respect of claims against corporations, there are certain considerations a claimant must pay attention to, such as:

• the precise name of the corporation must be stated as registered at the Corporate Affairs Commission, which is the Nigerian companies registry;
• originating processes must be served on the company through a director, secretary or other principal officer of the company or by leaving the same at the registered office of the company;
• where a corporation is created by statute, relevant requirements contained in the statute must be considered;
• for natural persons, processes (particularly originating processes) must be served on the person personally. The court is, however, able to order substituted service where there are compelling facts to show that personal service is impossible; and
• the correct name of the natural person must be the name used; otherwise, the suit may be deemed incompetent.

Are any of the considerations different for class actions, multiparty or group litigations?

There are no different considerations for class actions, multi-party and group litigations.

What restrictions are there on third parties funding the costs of the litigation or agreeing to pay adverse costs?

There is no legal restictions to third party funding arrangements in Nigeria.

Can lawyers act on a contingency fee basis? What options are available? What issues should be considered before entering into an arrangement of this nature?

Lawyers are able to act on a contingency fee basis. The Rules of Professional Conduct in Nigeria provide that a lawyer may enter into a contract with his or her client for a contingency fee in respect of a civil matter undertaken or to be undertaken for that client, whether contentious or non-contentious, provided that:

• the contract is reasonable in all the circumstances of the case, including the risks involved and uncertainties of compensation; and
• the contract is not vitiated by fraud, mistake or undue influence, or contrary to public policy, and, if the employment involves litigation, it is reasonably obvious that there is a bona fide cause of action.

Lawyers are prohibited from entering into contingency fee arrangements in criminal cases, and from acquiring a direct or indirect interest in the subject matter of a litigation that her or his firm is conducting. Lawyers are also under an obligation to advise clients on the effect of a contingency fee arrangement before entering into such an arrangement.

Law stated date

Give the date on which the information above is accurate.

12 August 2020.