Austin O.erebor V. Major & Company (Nig.) Ltd. & Anor (2000)

LawGlobal-Hub Lead Judgment Report

OGUNTADE, J.C.A.

The appellant was the plaintiff before the Federal High Court, Lagos in suit No. FHC/L/CS/118/93 and the respondent the defendant. The appellant filed his writ of summons on 28/4/93.

The defendants after they were served reacted by bringing an application that the suit be terminated on the ground that the lower court has no jurisdiction to entertain it. The grounds for bringing the application were stated thus:

“(a) The plaintiff has no locus standi to maintain this action.

(b) Only the 1st defendant can sue in respect of the reliefs claimed by the plaintiff in this suit.”

The lower court heard the application and in its ruling on 24-3-97 upheld the contention of the respondents. The suit was accordingly struck out. Dissatisfied, the plaintiff has brought this appeal on two grounds of appeal which read.

“(a) The trial court was in error of law for declining jurisdiction to hear this matter on the ground that:

(b) The plaintiff/appellant has no locus standi to maintain the action.

(c) Only the 1st defendant/respondent can sue in respect of the reliefs claimed by the plaintiff in the suit.

Particulars of Error:

Plaintiff/appellant is a shareholder of the 1st defendant/respondent’s company albeit a minority shareholder. Nevertheless he is still a shareholder whose rights and liabilities are protected and guaranteed under the law.

The learned trial Judge erred in law by proceeding to consolidate suits Nos. FHC/L/CS/118/93; FHC/B/100/95 and FHC/UCS/ 683/95 suo motu and without application from either party or hearing address on the point by their counsel.

Particulars of Error:

The three suits were filed at different times claiming different reliefs between different parties. The learned trial Judge consolidated the three cases wrongly in the manner he did on the authority of Onyejekwe v. The Nigeria Police Council (1996) 7 NWLR (Pt. 463) 704 at 707.”

In the appellant’s brief filed, the issues for determination were identified as the following:

“Whether upon a true and proper construction of section 302 of the Company and Allied Matters Act, 1990 (CAMA), the plaintiff/appellant was a share holder Director of the 1st defendant/respondent consequent upon which he had locus standi to bring the matter against the defendants/respondents in consonance with the rule in Foss v. Harbottle.”

The respondents in their brief raised a preliminary objection as to the competence of the second ground of appeal on the ground that the matters raised in the said ground did not arise from the ruling of the lower court being appealed against. I think I should briefly react to the preliminary objection.

Now in the appellant’s brief, only one issue was raised as arising for determination in the appeal. I set out above the said solitary issue. That issue does not raise the question as to the improper consolidation of three matters for hearing by the lower court. Although, a short argument covered by one paragraph appears on pages 8 and 9 of the brief, that would not by itself make the matter covered by the second ground of appeal an issue in this appeal. I think that the correct approach to the matter is to conclude that the appellant, not having formulated any issue from ground B, that ground must be deemed abandoned. See Schmidt v. Umanah (1997) 1 NWLR (Pt. 479) 75; Afribank (Nig) Plc. v. Shanu (1997) 7 NWLR (Pt. 514) 601.

In any case and for the avoidance of doubt, it is necessary to say that the lower court never made any order consolidating three suits. It is apparent upon a perusal of the ruling itself that the question of consolidation never arose and was not discussed in the ruling. However, it is equally apparent from the ruling of the lower court that the parties to the suit were listed thus:

Suit No. FHC/L/CS/118/93

Between:-

Mr. Austin O. Erebor… Plaintiff/Respondent

AND

1. Major & Company (Nig.) Ltd.
2. Nigerian Chemical Services Ltd.
3. Chief Francis Y. Imhagwe… Defendants/Applicants
4. Mr. Michael Okogie
5. Mr. Maxwell Nkanga

The suit No. was correctly stated but it would appear that the parties in another matter were erroneously transposed. The proper applicants/defendants before the lower court in suit No. FHC/L/CS/118/93 were (1) Major & Company (Nig.) Ltd. and (2) Chief Francis Y. Imhagwe who were identified as 1st and 3rd defendants/applicants in the ruling of the lower court. Apart from this wrong heading, nothing else in the ruling appealed against suggests that any suit was consolidated with FHC/L/CS/118/93. This was therefore an innocuous mistake which had not occasioned a miscarriage of justice. The matter must be allowed to rest there since I have before me all the true parties who were also the parties before the lower court. Now to the main issue:- was the lower court in error to have struck out the suit on the ground that the plaintiffs lacked the capacity to bring it? The lower court in its ruling at page 33 of the record of proceedings said:

“Moreover, I am of the view that the allegation of fraud is a part of the corporate rights of the company and not part of the individual rights of members of the company. It is not therefore open to the plaintiff respondent herein to claim it as his even. To do so he must have sued in the name of the company which he did not do in the instant case. See Yalaju-Amaye v. A.R.E.C Ltd..(supra), S.E. limited v. Ponmile (supra) and Tanimola v. S. & Mapping Geodata Ltd. (1995) 6 NWLR (pt. 403) 617.”

In his writ before the lower court, the plaintiff/appellant claimed:

“The plaintiff is a shareholder with share certificate No.8 for 33,000 shares in the 1st defendant company. The 2nd defendant is a shareholder and director of 1st defendant and has sought to defraud and actually defrauded the 1st defendant by infringing the law, (Decree No. 43 of 1989), a situation he refused and or on neglected to bring to the notice of the Directors and shareholders of the 1st defendant.

WHEREOF: Plaintiffs claim against the defendants jointly and severally are for:

(a) A declaration that the 2nd defendant, chief Francis Y. Imhagwe committed fraud on the 1st defendant of which the plaintiff is a minority share holder in November, 1991.

(b) A declaration that 2nd defendant’s neglect and or refused to bring the fraud to the attention of other directors of the 1st defendant is a breach of his fiduciary duties to the 1st defendant.

(c) An injunction restraining the 2nd defendant from further functioning as Managing Director of the 151 defendant.

(d) An order directing the corporate Affairs Commission (CAC) Abuja to investigate the conduct of the managing directors, 2nd defendant, and bring specific proceedings against him.”

It is apparent that the plaintiff/appellant in the claim reproduced above had disclosed more facts than necessary on the Writs of Summons. The plaintiff/appellant had disclosed (1) that he was a minority shareholder owning 33,000 shares in the 1st defendant company (2) that the 2nd defendant was a shareholder and director of the 1st defendant company (3) that the 2nd defendant had committed a fraud on the 1st defendant company (4) that the 2nd defendant had not disclosed the facts of the fraud he committed to the other shareholders of the 1st defendant.

Ordinarily, one would expect all these matters to be disclosed/pleaded on the statement of claim which the plaintiff/appellant had not at that stage filed. It was also apparent that the claims made by the plaintiff/appellant were based on the fraud, which as was alleged, the 2nd defendant committed on the 1st defendant.

The reaction of the defendants/respondents was to bring an application that the suit be dismissed, a request which was granted by the lower court. Appellant now contends that he was entitled to bring the suit since he was a shareholder and that in any case the defendants/respondents could not come under Order 27 of the Federal High Court Rules to ask that his suit be dismissed since no statement of claim had as yet been filed.

Order 27 provides:

“Where a defendant conceives that he has a good legal or equitable defence to the suit, so that even if the allegations of the plaintiff were admitted or established, yet the plaintiff would not be entitled to any decree against the defendant, he may raise this defence by a motion that the suit be dismissed without any answer upon questions of fact being required from him.

2. For the purposes of such application, the defendant shall be taken as admitting the truth of the plaintiff’s allegations, and no evidence respecting matters of fact, and no discussion of questions of fact shall be allowed.
3. The Court, on hearing the application, shall either dismiss the suit or order the defendant to answer the plaintiff’s allegations of fact, and shall make such order as to costs as the court deems just.”

In Amawo v. A. – G., North Central State & 2 Ors (1973) 6 SC 47 at p.51, the Supreme Court commenting on the import of Order 27 above said:

“We think it proper to point out that the whole of Order 28 requires that some sort of pleading should have been filed before it can be invoked.”

Under Order 27, it is not permissible for parties to discuss questions of facts and the defendant shall be taken as admitting the truth of the allegations contained in the statement of claim. The defendants in this case did express not on their motion papers that they had brought the application pursuant to Order 27 above. They however, did not discuss questions of fact on the affidavit in support of the application. In the affidavit in support, it was deposed thus:

“I, Adetokunbo Adefala, Female, Legal Practitioner of 12 Coker road, Ilupeju, Lagos do hereby make oath and say as follows:-

1. That I am a Legal Practitioner in the firm of Ayanlaja, Adesanya & Co; solicitors to the defendants in this action and as such, I am fully seised of the facts of this case.
2. That I have the authority of the defendants to swear to this affidavit.
3. That on the 3rd of May, 1993, the 2nd respondent brought a civil Summons and claim instituted by the plaintiff against the defendants to me in Chambers for necessary action.

Now produced, shown to me and marked Exhibit “AA1″ is a copy of the plaintiff’s claim against the defendants in this action.

4. That on the 3rd of May, 1994, the 2nd respondent also brought a motion on notice and accompanying affidavit and exhibits to me in Chambers for necessary action. Now produced, shown to me and marked Exhibit AA2 is a copy of the said motion, affidavit and exhibit.
5. That I swear to this affidavit in good faith.”

The plaintiff deposed to a counter-affidavit which reads:

“I, Austin Osametor Erebor, Male, Nigerian, Christian, living at No. 12A Tinubu Road, Palmgrove Estate, Ilupeju, Lagos do hereby make oath and state as follows:

1. That I have been served with a copy of the defendant’s motion on notice filed 17-6-93 challenging this court’s jurisdiction and locus standi in this matter.
2. That I am an executive director in charge of Production in Nigerian chemical Services Limited, the manufacturing division of the 1st defendant. A copy of the relevant form in which my name appears as director therein is attached herewith, marked Exhibit ‘A’. Plaintiff shall also rely on his letter of termination Exhibit ‘H’ in the applicant’s affidavit.
3. That I am a shareholder of the 1st defendants my shareholder’s certificate is attached herewith marked Exhibit ‘B’,
4. That I depose to this affidavit bona fide.”

It was never in dispute before the lower court that the plaintiff/appellant was a shareholder and director in the 1st defendant company. The defendants never raised issue as to plaintiff’s capacity to sue based on the fact that he did not own shares in the 1st defendant company. It was the plaintiff/appellant who stressed that aspect in his counter-affidavit. The defendants contention was that plaintiff’s ownership of shares did not confer on him the standing to bring the suit which was based on the wrongs done or fraud perpetrated as alleged on 1st defendant company. In other words, the defendants’ contended that as the plaintiff did not have the locus standi to bring the suit, the lower court has no jurisdiction in the matter.

It is settled law that once it is shown that a plaintiff has no locus standi to bring a suit, the court would have no jurisdiction to adjudicate. See Thomas v. Olufosoye (1986) 1 NWLR (pt.18) 669 at 670 and Pepple v. Green (1990) 4 NWLR (Pt.142) 108 at 117. It follows therefore that, the objection raised by the defendants was jurisdictional in nature and that it was open to the lower court to consider it and rule thereupon even if the plaintiff had not at that stage filed a statement of claim. This is because the issue of jurisdiction has always been regarded as a threshold matter which can be raised at any stage of the proceedings as soon as the cause of the impairment of the court’s jurisdiction surfaces. See Ajayi v. Military Administrator; Ondo State (1997) 5 NWLR (Pt. 504) 237 SC.

As earlier observed, plaintiff’s claim was based on the premise that the 2nd defendant committed a fraud on the 1st defendant company. Did the plaintiff/appellant have the locus standi to bring a suit to redress an injury allegedly done to the 1st defendant company? I think not. At page 29 of the ruling appealed against, the lower court said:

“Again, it is clear law that in order to redress a wrong done to the company or to recover moneys or damages alleged to be done to the company, the action should prima facie be brought by the company itself for it is the majority to decide whether they wish to complain or not:- see Buland v. Earle (1902) A.C., page 83 in particular at page 93 thereof, EN Limited v. Ponmile (1996) 2NWLR (pt. 435) at 145 at 422 and Omisade v. Akande (1987) 2NWLR (Pt. 55) page 158 ratio 4 (to mention a few).”

I entirely agree with the lower court in its views above. I think the law on the point is now well settled. When an injury is done to a company, it is generally the position that only the company itself can bring an action for vindication or a claim for the injury done to it. This is because the majority of the shareholders of the company may elect not to press the claim for damages or vindication. The position at common law now has statutory backing. Section 299 of the Companies and Allied Matters Act. Cap. 59 Laws of the Federation 1990 provides:

“299. Subject to the provisions of this Act, where an irregularity has been committed in the course of a company’s affairs or any wrong has been done to the company, only the company can sue to remedy that wrong and only the company can ratify the irregular conduct.”

In Omisade v. Akande (1987) 2 NWLR (Pt. 55) 158 at 170 the Supreme Court per Bello C.J.N. adopted the observation of Lord Denning M.R. in Wallersteiner v. Moir (No.2) (1975) 2 WLR 389 at 395 where he said:

“It is a fundamental principle of our law that a company is a legal person, with its own corporate identity, separate and distinct from the directors or shareholders, and with its own property rights and interests to which alone it is entitled. If it is defrauded by a wrongdoer, the company itself is the one person to sue for the damage. Such is the rule in Foss v. Harbottle (1843) 2 Hare 461. The rule is easy enough to apply when the company is defrauded by outsiders. The company itself is the only person who can sue. Likewise, when it is defrauded by insiders of a minor kind, once again the company is the only person who can sue. But suppose it is defrauded by insiders who control its affairs by directors who hold a majority of the shares who then can sue for damages? Those directors are themselves the wrongdoers. If a board meeting is held, they will not authorise the proceedings to be taken by the company against themselves. If a general meeting is called, they will vote down any suggestion that the company should sue themselves. Yet the company is the one who is damned. It is the one who should sue them. In one way or another some means must be found for the company to sue. Otherwise the law would fail in its purpose. Injustice would be done without redress.”

In appellant’s brief, it was argued that the appellant’s suit before the lower court falls within the exceptions to the prohibition granted under section 299 of CAMA. I have read the provisions of sections 300 and 302 of CAMA and I am unable to say that the provisions of these sections afford any protection to the plaintiff/appellant from the provisions of section 299.

As to whether the lower court should have allowed the parties to file pleadings first, my view is that the nature of the defect that affected the plaintiff/appellant’s suit was fundamental and it would be a mere waste of time to allow parties to file pleadings in a situation where it was patent that the suit was brought in flagrant breach of section 299 of CAMA.

The court has an inherent jurisdiction to terminate proceedings before it at any stage where it is apparent that such proceedings are incompetent, manifestly vexatious or scandalous or both. In J. O. Amawo v. A.G., & Ors (supra), the Supreme Court recognised such situations when it said:

“We easily concede the possibility of instituting application of this type at any stage of the proceedings where the particular ill complained of is manifest or apparent on the record. Every court has the inherent jurisdiction to stop an abuse of its process and indeed to prevent the institution or continuation before it of any proceedings which are manifestly vexatious or scandalous or both. These characteristics stultify the action from its inceptions and we scarcely require further extrinsic facts to demonstrate their destructive effects.”

Similarly, in Enwezor v. Onyejekwe (1964) 1 ALL NLR 14 at 19, the Supreme Court said:

“…but it seems to us that where it is obvious to the court from the circumstances of the case, or from the material before it, that no further proceedings would help the case, but merely cause unnecessary delay, there is inherent jurisdiction in the court to refuse an order for pleadings and strike out the claim on submissions made to it.”

And in Heyting v. Dupont (1963) 1 WLR 1192 at page 1195, Plowman J. said:

“Now it is clear that a court is not only entitled but bound to put an end to proceedings if at any stage and by any means it becomes manifest that they are incompetent. It can do so on its own initiative, even though the parties have consented to the irregularity because as willes J. said in City of London Corporation v. Cox (1866) LR2 HL 239, 283 HL in the course of giving the answers of the Judges to this House, ‘mere acquiescence does not give “jurisdiction”. Similarly, 50 years or so earlier, Lord Esher In re Aylmer, Ex parte Bishchoffsheim (1888) 20 QBD 258, 4 TLR 174, CA in the Court of Appeal referred to what he described as the well-known rule that the consent of parties cannot give the court a jurisdiction which it does not possess.”

In the light of the applicable principle of common law and specifically section 299 of CAMA, it would have amounted to a waste of time waiting for the plaintiff/appellant to file pleadings when the plaintiff/appellant had itself voluntarily disclosed on his writ of Summons that the foundation of his claim was a wrong or injury done to 1st defendant/respondent, a company in which he had minority shares. Only the company itself could have validly sued.

This appeal accordingly fails. It is dismissed with N5,000:00 costs to the respondent.

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Other Citations: (2000)LCN/0681(CA)