- It is trite Law that the Court will not enquire into the adequacy of consideration (AFRICAN PETROLEUM LTD V OWODUNNI (1991) 8 NWLR (PT. 210) 351). In FALOUGHI V FALOUGHI (1995) 3 NWLR (PT. 384) 434 at 451 the Court of Appeal held thus:
“And once the consideration of some value in the eye of the law, even the Court have no jurisdiction to determine whether it is adequate or inadequate.”
- As a result, a party can decide to sell his property for whatever amount he deems fit. The doctrine of freedom of contract ensures that parties are bound by what they agree and are free to determine the terms upon which they shall be bound. A person may innocently decide to sell his property for less than the open market value, particularly if he is in desperate need of money.
- Consider the example below:
In the above example, the X has agreed to purchase the house at a significantly lower price than that which is the open market value of the house. The deed of conveyance reflects the purchase price of the house as $100, yet the house is worth much more than that.
4.4 The question is what are the Legal Implications of the act in the example above?
There are several implications but this paper will limit itself to the implications under the Stamp Duties Act, Land Use Act and the Land Instrument Registration Law of Lagos State. By virtue of section 56 of the Stamp Duties Act, where any property is conveyed to any person in consideration of the payment of money, ad valorem duty is payable on the transaction. Ad valorem whilst not defined in the Act, according to the Oxford Advanced Learner Dictionary means:
“(of a tax) according to the estimated value of the goods being taxed”
- It is derived from a Latin Word meaning ‘according to the value’. By virtue of the above stated provision when assessing the amount of stamp duty payable on the transaction it is possible that the Assessor would be guided by the deed of conveyance and stamp duty may be payable on the sum of $100 instead of $1,000.
- With regard to the Land Instrument Registration Law, no fee is expressly stated in the Law as chargeable on deed of conveyance as section 17 of the Land Instruments Registration Law specifically states:
“(1) Any person desiring that any instrument shall be registered shall deliver the same together with a true copy thereof and the prescribed fee to the registrar at the office.”
- Be that as it may, it is probable that the sum stated as consideration in the deed of conveyance could also affect the amount charged as Registration fee and consequently, again registration fees may be payable on may be payable on the sum of $100 instead of $1,000.
- Finally, with regard to Governor’s consent, section 22 of the Land Use Act states that the Governor’s consent is necessary to a deed of conveyance (AWOJUGBAGBE LIGHT INDUSTRIES V CHINUKWE (1995) 4 NWLR (PT. 390)). The procedure for obtaining governor’s consent in Lagos, an inspection of the property is carried out and this allows the amount to be charged for governor’s consent to be assessed. The calculation is ad valorem, but it would be easier to detect whether the consideration stated in the deed of conveyance should be the amount on which the ad valorem is charged. Thus, in this case, the amount charged as consent fee is likely to reflect the $1,000 value of the property. Therefore, in the above example the low rate of $100 as consideration may cause the lower stamp duties and registration fees to be paid on the transaction.
- Defrauding the government
Unfortunately, it has become a trend for members of the public to include lower amounts in the deed of conveyance than the true amount paid by the Buyer in order to avoid paying high stamp duties and registration fees. This is a crime under both the Stamp Duties Act and the Land Instrument Registration Law of Lagos State. The legal implication of a document not being stamped is that it is inadmissible in evidence (Section 19 of the Stamp Duties Act) save for the exceptions contained in section 22 of the Stamp Duties Act.
- The same applies in the Land Instrument Registration Law, by virtue of section 15 of the Land Instrument Registration Law of Lagos State, no instrument shall be pleaded or given in evidence in any Court as affecting land unless the same shall have been registered. The people who engage in falsification want the benefit of their deeds of conveyance being admitted in evidence in Court but are unwilling to pay the necessary duties. This is an offence is the sight of the law.
- Section 9 of the Stamp Duties Act provides as follows:
“All the facts and circumstances affecting the liability of any instrument to duty or the amount of duty with which an instrument is chargeable shall be fully set forth in the instrument; and every persons who, with intent to defraud the Government of the Federation or of any State:
- Executes any instrument in which all the said facts and circumstances are not fully and truly set forth; or
- Being employed or concerned in or about the preparation of any instrument, neglects or omits fully and truly to set forth therein all the said facts and circumstances,
Shall be guilty of an offence and liable on conviction to a fine of forty naira.”
- The use of the word shall in the above section is mandatory. The use of the word ‘shall’ in section 22 (1) of the Law should be given its ordinary meaning and is mandatory. In AGBITI V NIGERIAN NAVY (2011) 4 NWLR (PT. 1236) 175 the Court held as follows:
“The statutory interpretation given to the word “shall” by the courts give the connotation of word of command or exhortation. It denotes obligation and gives no room for discretion”
- From the above, it is clear that when a statute uses the word ‘shall’ it is mandatory in section 9 of the Stamp Duties Act. It is clear from the above that any person who enters any false statement on a deed of conveyance in order to defraud the government would be liable to pay a fine.
- Further, Section 30 of the Land Instruments Registration Law provides as follows:
“any person who shall willfully make or cause to be made for the purpose of being inserted in any register under this Law any false statement touching any of the particulars herein required to be known and registered shall be liable to a fine of one hundred naira or to imprisonment for two years.”
A false statement though not defined in the Law has been defined by the Black’s Law dictionary to be:
“An untrue statement knowingly made with the intent to mislead.”
- As a result of the above, it is clear that when a person makes a false statement touching any of the particulars required to be known by the Land Instrument Registration Law, the said person shall be liable to a fine of One Hundred Naira or imprisonment of two years. The problem is that the Land Instruments Registration Law fails to define a false statement or, what it means for the false statement to be entered into the register. A false statement would arguably include a statement that a house was purchased for less in a deed of conveyance than the actual purchase price that was paid.
- The implication of intentionally changing the amount on the deed of conveyance to a lower amount that was paid goes beyond criminal liability under the enactments. In SAYINNA V AIB (2001) 4 NWLR (PT. 703) 355 the Court held that a party who executes a deed is estopped in a Court of Law from saying that the facts stated in the deed are not truly stated. If the transaction needs to be reversed due to any problems, due to the fact that the deed of conveyance reflects a lower price than the purchase price, the buyer would only be entitled to the price reflected on the deed of conveyance.
- In consideration of the above, it appears the answer to the question whether the consideration stated as paid deed of conveyance must reflect the average value of a property in the open market is it depends. If the price stated as paid as consideration reflects the true price paid by the buyer, there seems to be no legal obligation that the price is changed to affect the average value of the property. However, where the consideration stated as paid has been reduced in order to defraud the government and the consideration clause becomes untrue, criminal liability may arise.
5.0 EVALUATION OF THE CURRENT STATE OF THE LAW
- In consideration of the above, it is necessary to evaluate the current state of the Law. The biggest problem with the penalties imposed by the Acts for defrauding the Government is with enforcement. If both the buyer and the seller have decided to devalue the property on the face of the deed of conveyance, how would the government know that the price stated on the deed of conveyance is not the true price paid by the buyer? Even if the government, suspected that this was the case, how would it prove this fact taking into consideration the doctrine of freedom of contract? As a result, this paper is of the opinion that the Law, as is does not sufficiently prevent people from defrauding the government.
- Further, the mode of enforcement of section 9 of the Stamp Duties Act and section 30 of the Land Instrument Registration Law is not clearly stated in the enactments. The Enactments are applauded for making it a crime to defraud the government but unfortunately the enactments did not go far enough. It would have been better if the enactments had empowered a specific person who would be able to have a special duty of monitoring this type of offence and ensuring that the government is not duped out of paying taxes. The fines payable for the offences are also meager and are in need of urgent upward review.
- In order for a person to be liable under section 9 of the Stamp Duties Act the prosecutor must prove that there was an intent to defraud the government. The Act made no special provision for how such intent may be proved. Section 30 of the Land Instrument Registration Law which made it an offence for a person to cause a false statement to be entered into the register did not expressly provide details of how a false statement can be made. For instance: would a false statement contained within a deed of conveyance amount to a false statement in the register once that deed of conveyance is registered?
2.1 As a result, this paper recommends that these enactments should be amended.
- Independent Valuation
It should be clearly stated in the enactment that what would determine the amount to be paid as Stamp Duty or Registration fees is not dependent on the amount stated in the deed of conveyance but upon the assessment of an independent Government appointed valuer. The Applicant seeking to pay the fees would pay for the valuation at a fixed rate and this valuation would be used to determine all statutory fees payable on the transaction.
- Fast Track Procedure for punishing offenders
Legislators need to create a fast track procedure which would create special fast track procedures for dealing with people who have been caught defrauding the government over stamp duties, registration fees and governors consent fees. The procedure as set out should:
- Create special courts, or set some Tax Court apart for this specific purpose.
- Create a land transaction fraud investigation unit which will investigate any potentially fraudulent transaction.
- Ensure the time for hearing and determination of such suits are short and adjournments are not permitted for longer than 2 days unless special circumstances are shown.
- Increase in fines
The fines charged under the enactments should be steep in order to discourage this kind of fraud. There are several aims of punishment and, the fines in this instance should be aimed at deterring members of the public from committing the offence rather than punishing offenders.
2.2 This paper is aware that in some instances rate cards are being used to determine fees payable on deeds of conveyance and so on. However, the use of rate cards should be discouraged. Two properties may be in the same proximity but may not be worth the same amount of money. For instance: A parcel of land located in Lekki Phase I, Lagos State facing the Lekki – Epe Expressway would be worth more than a parcel of land on the adjacent street which cannot be viewed from the expressway, parcels of land which also have a waterfront are also valued more than another parcel of land, close to that street having no water front.
2.3 Apart from location, there are several factors that affect the value of property so this paper would not suggest that rate cards are used. However, it is this writers opinion that the above recommendations, if enacted into statute would reduce fraud on the government in fees payable on deeds of conveyance.
In conclusion, it has been resolved that there is no binding obligation on a party to reflect the average market value of a property on his deed of conveyance. However, if parties convey the property for more than what is contained in the deed of conveyance with an intention to defraud the government, that would be considered an offence. In order to discourage committal of that offence the recommendations in this paper should be implemented.
ABOUT THE AUTHOR
Morenike Okebu graduated top of her class from the University of Sheffield. She spent several years in tutelage at the law firm of a leading Senior Advocate of Nigeria. She is now a partner in GM George Taylor & Co. a full-service law firm with its head office located in Lagos State, Nigeria.
LIST OF CASES TO BE CONSIDERED:
- AWOJUGBAGBE LIGHT INDUSTRIES V CHINUKWE (1995) 4 NWLR (PT. 390) – S.C.
- AGBITI V NIGERIAN NAVY (2011) 4 NWLR (PT. 1236) 175
- OBORO V R.S.H. AND P.D.A. (1997) 9 NWLR (PT. 521) 425 – C.A.
- SAYINNA V AIB (2001) 4 NWLR (PT. 703) 355 – C.A.
- THOMAS V THOMAS (1842) 2 QB 851
- AFRICAN PETROLEUM LIMITED V OWODUNNI (1991) 8 NWLR (PT. 210) 301 – S.C.
- FALOUGHI V FALOGHI (1995) 3 NWLR (PT. 384) 434 – C.A.
- VINCENT V PREMO ENT. LTD (1969) 2 QB 609
LIST OF STATUTES
- EVIDENCE ACT 2011
- STAMP DUTIES ACT
- LAND INSTRUMENTS REGISTRATION LAW OF LAGOS STATE
- REGISTRATION OF TITLES LAW OF LAGOS STATE
LIST OF BOOKS
- BLACK’S LAW DICTIONARY
- NIGERIAN CONTRACT LAW BY ITSE SAGAY
- LAND LAW BY I.O. SMITH
- CHESHIRE FIFOOT AND FURMSTROM’S LAW OF CONTRACT (15th edition).
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