EFFECT OF A STATUTE-BARRED CLAIM

The above principle was reaffirmed by the Supreme Court in the very recent case of KEYSTONE BANK LTD. V. EBUH (2026) 13 NWLR (Pt. 2058) 433, where it considered whether a claim for the refund of money paid for shares that were not allotted could be brought more than nine years after the cause of action arose.

To proceed, a statute-barred claim has been judicially defined by the Supreme Court in the aforementioned case as:

“… a claim that is barred by a statute of limitations; a claim that cannot be brought because the time allowed by law for bringing it has expired…”

The above case shall be the framework of this journey on the effect of a statute-barred claim. A simple and brief narration of the facts of this case goes thus:

Dr. Vincent O. Ebuh applied for and paid for 30,000,000 shares during a public offer. However, only 4,335,000 shares were allotted to him, leaving 25,665,000 shares unallotted. He subsequently sought a refund of ₦436,305,000, representing the money allegedly paid for the unallotted shares.

The cause of action arose on 19th April, 2008, but Dr. Ebuh commenced an action before the Investment and Securities Tribunal in November 2017, more than nine years later. The Tribunal decided in his favour. Dissatisfied, Keystone Bank Limited challenged the decision, arguing, among other things, that the claim was statute-barred. The matter eventually reached the Supreme Court.

The central issue was whether the claim was governed by a six-year limitation period applicable to simple contracts or a twelve-year period applicable to certain actions founded on instruments under seal.

The learned counsel of Keystone Bank argued that the claim was founded on a simple contract and was therefore subject to the six-year limitation period under section 8(1) of the Limitation Law of Lagos State. He submitted that since the action was commenced more than nine years after the cause of action arose therefore it was statute-barred.

On the other hand, Dr. Ebuh maintained that the transaction attracted a longer limitation period because of the applicable provisions of the Companies and Allied Matters Act, 1990, relating to shares and instruments under seal.

In determining the appeal, the Supreme Court held that the claim was essentially for the recovery of money paid for shares that were never allotted. It explained that an application for shares constitutes an offer, while allotment signifies acceptance and creates the contractual relationship. Since the disputed shares were not allotted, the claim was not one founded on a contract under seal.

The Apex Court further reinforced that section 385 of the Companies and Allied Matters Act, 1990, which relates to the recovery of declared dividends, could not be extended to cover a claim for the refund of money paid for unallotted shares. Consequently, the claim was governed by the six-year limitation period applicable to simple contracts under section 8(1) of the Limitation Law of Lagos State.

The Court, therefore, held that the action was statute-barred because it was commenced more than nine years after the cause of action arose. It reaffirmed the principle that once an action becomes statute-barred, the claimant's right to enforce the claim through judicial proceedings is extinguished, and the court lacks jurisdiction to entertain it.

Verbatim, the Supreme Court held thus:

“When a claim is statute-barred, the legal right to enforce the claim through court action is extinguished due to the lapse of the prescribed limitation period. When a claim is statute-barred, it extinguishes the right of action and renders the action “dead” or “sterile”. Once a case is statute-barred, the action is barren and sterile, requiring the court to dismiss it. In this case, the 1st cross-respondent’s claim is statute-barred, meaning that the claim is dead and there is no live issue in it to be determined by any competent court of law… In the light of the foregoing, the proper order the Court of Appeal should have made is an order dismissing the claim.”

Furthermore, as seen above, the Apex Court emphasised that, in the circumstances of the case, dismissal rather than striking out was the appropriate order. Hence, the cross appeal was allowed, and the claim was dismissed as statute-barred and for want of jurisdiction.

In conclusion, the case of Keystone Bank Ltd. v. Ebuh emphasises the importance of commencing actions within the time prescribed by law. It also demonstrates that the applicable limitation period depends on the true nature of the claim, rather than merely the general subject matter of the transaction. Legal practitioners must, therefore, identify the cause of action, determine when it arose, and ascertain the applicable limitation period before commencing proceedings. A claim may have merit on its facts but still fail where the law no longer permits it to be enforced.

About the Author:

Rabiatu Abubakar Barde is a member of the Research and Litigation Directorate, Solace Chambers, Bayero University, Kano. She can be reached via 09046759722.