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"Without Prejudice" - When Does it Apply?

Introduction

Transactions marked “Without Prejudice” usually connote a party’s good faith exchange of correspondence, without any admission of liability, or the abandonment of a claim, or counter claim, or a defence, privilege or other rights arising from such transaction correspondence, regarding an existing dispute.

The essence of the above legal rule is to encourage disputing parties to amicably settle their disputes without resort to an expensive and prolonged litigation process.

Changes in the “Without Prejudice” Rule

Section 25 of the repealed Evidence Act, 1945 (as amended) provided that no admission will be allowed in evidence if it was made either under the express condition that such admission will not be used in a judicial proceeding, or in circumstances where a Court can infer that the parties agreed that such admission obtained during a negotiation, will not be used in a judicial proceeding.

The above protection only applied in disputes between the same parties; third parties could not claim or enjoy the protection. See Nwadike v. Ibekwe (1987) 12 S.C. 12 @ 31.

The Evidence Act 2011 however repealed the provisions of the Evidence Act 1945 (as amended), and as stated above. Section 196 of the Evidence Act 2011 provides that “A statement in any document marked “without prejudice” made in the course of negotiation for a settlement of a dispute out of court, shall not be given in evidence in any civil proceeding in proof of the matters stated in it”. Underling ours for emphasis.

Section 196 above cited therefore implies that documents with admissions in them, marked “Without Prejudice”, will only be protected and inadmissible where (a) there is already a dispute in Court as not all disputes go to Court; (b) there is a good faith negotiation to settle such a dispute which is in Court, out-of-Court.

Section 196 of the 2011 Evidence Act has therefore narrowed the protection or inadmissibility of admissions in correspondence marked “Without Prejudice”, in judicial proceedings, to only disputes that are already in Court.

Another likely situation where a “Without Prejudice” rule will not prevent an admission from been received in a judicial proceeding, even if such proceeding is already in Court, is where it is used as a “fishing expedition”, which will be a bad faith use of this equitable provision.

“Without Prejudice” – Admissibility in other Instances

Like in the repealed Evidence Act provisions, correspondence marked ‘”Without Prejudice”, under the 2011 Evidence Act, though containing admissions, could be admitted in evidence regarding other issues that are not admitted in the subject correspondence. For example, in a land dispute, a correspondence though marked “Without Prejudice”, with an admission of liability in it, could have previous acts of trespass or other infraction that is/are not otherwise admissible in evidence regarding such other matters outside of the admitted facts, been admitted in evidence.

Conclusion

Based on the change in the statutory provision of this subject of “Without Prejudice”, businesses will need to exercise more circumspection or caution in their business communication.

Disclaimer

This is a free educational material, which does not serve as a source of solicitation, advertisement or the offering of legal services or advice of any kind. No Client/Attorney relationship is therefore created. Readers are strongly advised to always seek, from qualified Legal Practitioners, professional legal counselling to their specific factual situation.

Intellectual Property Protected!

This material is protected by International Intellectual Property Laws and Regulations. This material can therefore ONLY be reproduced or re-distributed for non-profit educational purposes under the strict condition that our Authorship is explicitly acknowledged, and our Disclaimer Notice is prominently displayed.

Introduction

One of the longest held business Quote is from Benjamin Franklin who said; “In this world, nothing can be said to be certain except death and taxes”. Also true is the fact that most people will during their lifetime incur some debt(s) which could become problematic and difficult to manage when the Debtor dies.

The above concern is especially so if the Debtor during his lifetime, and his or her Administrators and the beneficiaries of the Debtor’s estate, are not familiar with the basic applicable Laws and Regulations on the subject of Debts after a Debtor’s demise.

General Principles on Debts after Death

Generally, the beneficiaries of the estate of a deceased Debtor are not personally liable or responsible to settle a deceased Debtor’s personal debts. The exception to this general rule include (i) where the beneficiaries co-owed the asset from which the debt arose during the lifetime of the Debtor; or (ii) a beneficiary or all the beneficiaries guaranteed the debt with the deceased Debtor; or (iii) as in some jurisdictions, especially in some States in the United States of America, where any property acquired by a spouse during marriage are considered community property to which both spouses have joint rights and liabilities irrespective of one spouse’s death.

Once a person passes away, the first step that his or her Administrators and beneficiaries must take is to apply for Probate, whether or not the deceased person prepared and executed a Will. Part of the Probate application process is the notification to members of the public, which includes the Debtor’s creditors, usually via newspaper publications and government gazette, of the application for Probate of the deceased Debtor’s Estate.

Probate, Death and Debts

Probate is the legal and formal transfer of a deceased affairs' to his or her nominated Administrators. Administrators hold the deceased estate assets as Trustees for the beneficiaries of such estate.

The first applicable Law on Probate matters is the Administration of Estate Law. Each State in the Federation of Nigeria has its Administration of Estate Law.

The provisions of the Administration of Estate Law do not however apply to the administration or management of the Estate of a deceased person whose affairs were during his lifetime governed or regulated by Customary Law.

Administrators, Beneficiaries and Creditors must also be aware that in the order of priorities, the real and personal properties of a deceased Debtor are assets for the discharge of (I) the deceased funeral and testamentary expenses; (II) the deceased debts and other liabilities with the secured debtors having first charge or priority in this group; (III) the residue of the estate is to be distributed to the beneficiaries as instructed in a signed Will; and where there is no Will, in accordance with the provisions of the Administration of Estate Law.

Any testamentary instructions that seek to vary the above order of priorities in the discharge of a deceased estate liabilities will by the provisions of the Administration of Estate Law, be held to be null and void.

Where however the Administrators of an Estate, in good faith and without notice of the debts, or of the creditors of the deceased, disposes off the assets of the estate for the benefit of the beneficiaries, the beneficiaries will still be liable to the Creditors to the extent of the benefit that each beneficiary received once notice of the debt is brought to the attention of the Administrators and the Beneficiaries.

Administrators are also allowed to invest any surplus funds of the Estate, not immediately required, provided such investment are in accordance with the applicable statute on the investment of Trust assets. In Nigeria, the latter Law is the Trustee Investments Act.

Deceased Debtors and the Bankruptcy Act

Creditors also have a legal right to resort to the reliefs provided for in the Bankruptcy Act when a Debtor becomes deceased.

Bankruptcy arises when a person cannot pay his or her debts out of his or her liquid, unencumbered assets, to a single or multiple Creditors. By the provisions of the Bankruptcy Act, a Creditor of a deceased Debtor whose debt would have been sufficient to support a Bankruptcy Petition had the deceased Debtor been alive, may present a Bankruptcy Petition to Court praying for the administration of the estate of the deceased Debtor under the Bankruptcy Regulations.

Where a Court grants a Bankruptcy Order, the deceased person’s properties shall become vested in an Official Receiver, who shall serve as a Trustee, to collate, sell and distribute the proceeds of the sale of the deceased Debtor’s assets.

The Official Receiver cum Bankruptcy Trustee shall however, before distributing the proceeds of sale, be mindful of any claim by the deceased personal legal representatives regarding proper funeral and testamentary expenses incurred, as such funeral debts shall be given preferential treatment and settlement. See Section 109 (5) of the Bankruptcy Act.

Any surplus remaining in the hands of the Official Receiver cum Trustee, after the payment of all debts, creditors and testamentary costs included, shall be paid over to the Administrators or Legal Personal Representatives, of the deceased Debtor’s estate, or falling such Administrators, to the appropriate Administrator General of the State where the estate resides.

Retirements and Life Insurance Benefits 

Under the Pension Reform Act 2014, retirement and other benefits arising from the mandatory Group Life Insurance schemes are payable to the deceased named beneficiaries.

In some other jurisdiction outside Nigeria, retirement and life insurance benefits are protected from Creditor’s recovery actions where the deceased assured dies.

Conclusion

Very many people, physiologically and understandably, avoid contemplating, discussing and preparing for death and events after death. Death is however an unavoidable departure from this world. Preparing for death by, among other things, writing a Will, is a fantastic wealth creation behavior as the latter exercise enables the maker of the Will to know his or her exact assets and liabilities; among other things.

Debtors should also ensure that they do not leave for their loved ones an unsettled and financially bankrupt estate as only third party Consultants benefit the most from such a state of affairs.

Creditors on their part should be proactive in managing and monitoring their Debtors. Curing support in the bad times to a Debtor could enable a quicker recovery of the debt. This is especially as the demise of the Debtor could leave the Creditor out-of-pocket during the Probate exercise; there is no modern day online Probate Registry in Nigeria which enables the Creditors and other interested parties to monitor probate applications. Mischievous Administrators and Beneficiaries could publish the Probate Notice in cheap municipal newspapers that many Creditors do not read thereby jeopardising any actual notice of an unsecured debt to the Creditor.

Disclaimer

This is a free educational material, which does not serve as a source of solicitation, advertisement or the offering of legal services or advice of any kind. No Client/Attorney relationship is therefore created. Readers are strongly advised to always seek, from qualified Legal Practitioners, professional legal counselling to their specific factual situation.

Intellectual Property Protected!

This material is protected by International Intellectual Property Laws and Regulations. This material can therefore ONLY be reproduced or re-distributed for non-profit educational purposes under the strict condition that our Authorship is explicitly acknowledged, and our Disclaimer Notice is prominently displayed.

 

Introduction

Escalation in criminal activities, especially terrorism, kidnapping and armed robbery, has heightened security concerns and vigilance. This is especially as these criminal activities are carried out in contravention of International Criminal and Money Laundering Laws.

Some States have accordingly instructed all Hotels and other Hospitality Establishments carrying on business in their State to henceforth only admit and render services to Guests and other Customers who present valid National or International Identification Cards, or other forms of publicly verifiable identification documents (“ID”). Unbeknown to many of these States and Federal Authorities, the valid ID Pre-admission requirement is already a legal provision under the Money Laundering (Prohibition) Act (as amended) 2012.

Identification of Customers

Financial Institutions and Designated Non-Financial Institutions, of which Hotels and Casinos are in the latter group, are required by Section 3 of the Money Laundering (Prohibition) Amendment Act 2012, to ensure that they Identify all their Customers, using verifiable public identification documents like a Driver’s License, National Identity Card, International Passport, etc, bearing the Customer’s name and address before rendering any service to the Customer.

Financial Institutions and Designated Non-Financial Institutions are further required to preserve and keep the record of their Customer’s Identification data for a period of at least five (5) years after the closure of the Customer’s accounts, or the cessation or severance of relations with any such customer.

Other Mandatory Disclosures

Every Financial and Designated Non-Financial Institution must submit a Written Report to the Economic and Financial Crimes Commission (“EFCC”), of every single funds transfer, lodgment or payment in excess of 5,000,000 (Five Million Naira), in the case of an individual, or 10,000,000 (Ten Million Naira) in the case of a corporate body. Punitive fines for each day of not reporting such transactions to EFCC apply to this serious infraction.

Personal Liability of Directors and Managers

Where the identity of a customer is not independently verified, and the funds transferred is/are above the stipulated limit, the Directors and other key management personnel of the offending Institution who are culpable, or who conspired in promoting the infraction, shall be personally liable to submit to criminal prosecution and conviction if found guilty.

Conclusion

Recent Bomb Expulsions and other criminal activities in Hotels around the world can only place on the owners of these establishments a higher duty of care to ensure that their Hotel premises are secure and safe. Pre-obtaining and retaining customers’ verifiable data must be one, among many other security measures, that must be applied to achieve this Security Protective objective.

Disclaimer

This is a free educational material, which does not serve as a source of solicitation, advertisement or the offering of legal services or advice of any kind. No Client/Attorney relationship is therefore created. Readers are strongly advised to always seek, from qualified Legal Practitioners, professional legal counselling to their specific factual situation.

Intellectual Property Protected!

This material is protected by International Intellectual Property Laws and Regulations. This material can therefore ONLY be reproduced or re-distributed for non-profit educational purposes under the strict condition that our Authorship is explicitly acknowledged, and our Disclaimer Notice is prominently displayed.

 

Introduction

Disputes and disagreements between people are sometime inevitable. For any business concern, having in place well documented Agreements, with an efficient and cost-effective dispute resolution mechanism enshrined, is absolutely essential; particularly as not all disputes can be amicably resolved by the parties themselves.

Litigation or Arbitration?

Historically, most business disputes in the past were resolved by litigation. And most of the time, litigation is an expensive, time consuming dispute resolution mechanism. It is typically hostilely adversarial, with rigid court procedures and rules. Also, during litigation, business secrets and confidences will have to be disclosed to avoid liability or secure a favourable judgement.

Businesses over-time recognised the above-mentioned inimical nature of litigation to smooth enterprise. Arbitration therefore came to assuage the problems associated with litigation.

Essence of Arbitration

Arbitration is a more modern, more cost-effective, more private manner of resolving disagreements. Under the Arbitration process, the parties to a dispute voluntarily pre-agree to submit any dispute that may arise from their transaction to an Independent Arbitration Panel, which Panel may consist of a person or persons, or a body, or some other kind of Tribunal, to hear and deliver a final decision regarding the dispute.

Parties to an Arbitration process are also permitted to pre-agree to the set of rules and procedures that will regulate the Arbitration Proceedings.

Like all contracts, an Arbitration Proceeding and the outcome, which is in the form of an Award or judgement, have a limitation period. So too can the parties to an Arbitration Agreement enter into a new Agreement in the future waiving or amending the Arbitration provision, or its rules, venue, etc.

An Arbitration Award or decision is usually enforced by a Court of Law where any party to it does not willingly comply with the Arbitration Award.

Setting Aside an Arbitration Award

A party to an Arbitration Proceeding, who is dissatisfied with the decision of an Arbitration Panel, has a right to apply to a High Court for the decision or Award of the Arbitration Panel to be set aside.

Some of the common grounds for setting aside an Arbitration Award include that the Arbitration Agreement is not valid under Nigerian Law; the Arbitration Award is against Public Policy in Nigeria; the Award contains decisions on matters which are beyond the scope of the dispute submitted to the Arbitration Panel; the composition of the Arbitration Panel or the Proceedings themselves are not in accordance with the Agreement of the Parties or the Arbitration and Conciliation Act; a Party or Parties to a Arbitration Proceedings was/were not accorded fair hearing; the Arbitrator does not have the Qualifications pre-agreed by the Parties; there are justified doubts of the Arbitrator’s impartiality or independence; the Arbitrator misconducted himself by not complying with the terms of the Arbitration Agreement; the Arbitration Award was improperly procured; etc.

What is Conciliation?

Conciliation is another legal form of resolving disputes in a less adversarial or hostile, and private manner. Under this medium, the parties to a dispute agree to resolve their dispute through a neutral independent person known as the Conciliator. Unlike Litigation and Arbitration, the appointed independent and neutral Conciliator examines the statements of the Parties setting out the nature of the dispute, hears the parties, after which he submits to the Parties the Terms of Settlement for the parties to approve.

If the Parties do not approve the Conciliator’s recommended Terms of Settlement, they will be entitled to refer their dispute to Arbitration, where their Agreement provides for Arbitration; or institute a court action for a Court of Law to resolve the dispute.

Mediation

Mediation is a much more informal method of resolving disputes. Unlike Litigation, Arbitration or Conciliation, a Mediator applies unbinding communication techniques to guide the disputing parties to arrive at a common ground from which an amicable settlement is consummated.

Also, unlike Litigation, Arbitration or Conciliation, a Mediator has no enforcement authority. He instead relies solely on persuading the parties to reach an amicable settlement of their dispute. And where the Mediator cannot amicably settle the dispute, the Parties are entitled to resort to Arbitration or Litigation.

Disclaimer

This is a free educational material, which does not serve as a source of solicitation, advertisement or the offering of legal services or advice of any kind. No Client/Attorney relationship is therefore created. Readers are strongly advised to always seek, from qualified Legal Practitioners, professional legal counselling to their specific factual situation.

Intellectual Property Protected!

This material is protected by International Intellectual Property Laws and Regulations. This material can therefore ONLY be reproduced or re-distributed for non-profit educational purposes under the strict condition that our Authorship is explicitly acknowledged, and our Disclaimer Notice is prominently displayed.

Introduction - Taxation of Educational Institutions
 
It is a commonly held public opinion that Educational Institutions are not liable to pay, suffer or bear any form of tax on their profits or income.
 
The decision of the Tax Appeal Tribunal ("TAT" in Ikeja, Lagos in 2014, in the matter of the American International School of Lagos v. Federal Inland Revenue Service is sometime relied upon as the legal basis for the view that Educational Institutions are not liable to pay any Tax on their profits and or income.
 
An examination of the TAT's above decision is necessary to verify the credence of the Public Opinion that Educational Institutions' income and or profits are not liable to bear any tax obligation?
 
The TAT Judgment - The American International School of Lagos v. Federal Inland Revenue Service
 
The contention of the Educational Institution in this case was that it is exempted from paying Companies Income Tax ("CIT"), and Tertiary Education Tax ("TET"), on the grounds that it is an Educational Institution, Incorporated, Limited by Guarantee, engaged solely in educational activities of a public character.
 
The defence of the Respondent Tax Authority in this case was that the fees charged by the Appellant Educational Institution were not affordable by many Nigerians. The Respondent therefore contended that the Appellant Edcuational Institution did not qualify as an Educational Institution of a Public Character under Section 23 (1)(c) of the Companies Income Tax Act (as amended).
 
The final decision of the Tax Appeal Tribunal, in this case, was that as the Appellant is a not-for-profit registered company, Limited by Guarantee, with no evidence that its profits or other income were distributed among the Appellant Educational Institution's Directors or Guarantors, the Appellant is exempted from Companies Income Tax and Tertiary Education Tax obligations. The Tax Appeal Tribunal also held that the Respondent Tax Authority's contention that the School Fees charged by the Appellant Educational Institution is only affordable by a select few, and therefore not of a general public nature or character, was discountenanced as the Tax Authority did not tender any evidence in support of this allegation.
 
The Tax Appeal Tribunal accordingly ordered the Respondent Tax Authority to issue to the Appellant Educational Institution the necessary Tax Clearance Exemption Certificate.
 
TAT Judgment - Ratio Decidendi and Obiter Dictum
 
The legal basis for the Tax Appeal Tribunal decision in the above matter was that because the Appellant Educational Institution was a Not-For-Profit registered Company Limited by Guarantee, whose profits cannot be distributed among the Appellant's Directors or Guarantors, the Appellant Educational Institution is exempted from corporate tax.
 
The decision of the Tax Appeal Tribunal in the above referenced case would have been different if the Appellant Educational Institution was not a Company Limited by Guarantee, with no share capital, whose income, profits or assets are not distributable or transferable among the persons who control the Educational Institution, either directly or indirectly.
 
An Educational Institution that is not Limited by Guarantee or registered as a non-governmental charitable organisation, under Sections 26 and 370 of the Companies and Allied Matters Act respectively will find it very difficult to claim tax exemption under Section 23 (1) of the Companies Income Tax Act (as amended). The TAT Passing Remarks, which is what Lawyers call Obiter Dictum, that it is not strange that Educational Institutions generate their income from educational services that they provide, did not form the legal basis for the TAT bottom-line Ratio Decidendi decision.
 
Conclusion
 
Existing Laws already require all registered legal entities, including tax exempted Limited Liability by Guarantee Companies, and Registered Trustees who are more commonly known as NGOs, to file at the end of each financial year, an Annual Return to which must be annexed a Certified Income Statement containing the particulars of their indebtedness and the landed properties held, mortgages and charges, etc. Unfortunately, the enforcement of these statutory requirements by the Tax and Corporate Affairs Commission authorities remains very poor.
 
Subject to when the existing statutes are amended, some regulatory Guidelines on how the assets, income and the remuneration of the officers who control a tax-exempted entity in Nigeria are administered, is urgently required in order for there to be a fair playing field between the tax-exempted entities and the entities that do not enjoy Tax exemption.
 
Disclaimer
 
This is a free educational materia, which does not serve as a source of solicitation, advertisement or the offering of legal services or advice of any kind. No Client/Attorney relationship is therefore created. Readers are strongly advised to always seek, from qualified Legal Practitioners, professional legal counselling to their specific factual situation.
 
Intellectual Property Protected!
 
This material is protected by International Intellectual Property Laws and Regulations. This material can therefore ONLY be reproduced or re-distributed for non-profit educational purposes under the strict condition that our Authorship is explicitly acknowledged, and our Disclaimer Notice is prominently displayed.