Globe Fishing Industries Ltd & Ors V. Chief Folarin Coker (1990)
LawGlobal-Hub Lead Judgment Report
OLATAWURA, J.S.C.
The respondent who was the plaintiff in the court of first instance filed an action against the defendants now the appellants in this court and claimed as follows:
- Declaration that the election of Mr. Joseph Adeola as a director of Globe Fishing Industries Limited is null and void.
- That the chairman Alhaji Sule Katagum, the managing director Mr. Roussinov and the general manager Mr. Dayaldasam be compelled to make available to the plaintiff certified bank statements of account of the Globe Fishing Industries Limited at the United Bank for Africa for the periods 1st July, 1979-30th June, 1980 respectively;
- That the chairman Alhaji Sule Katagum, managing director Mr. Roussinov, and the general manager Mr. Dayaldasam be compelled to convene the annual general meeting of Globe Fishing Industries Limited for the year 1980 to consider
(a) the annual accounts covering the periods 1/7/79- 30/6/80 and 30/6/80 – 31/12/80.
(b) to declare dividends for the year ending 30th June, 1980.”
On the 23rd February, 1981 when the matter came before Anyaegbunam, C. J., pleadings were ordered. Pleadings were filed and amended. It was however on 9th April, 1981 that the respondent herein filed an application seeking the following prayers.
“1. Joinder of the following person as defendant in the above suit:-
Mr. Joseph Adeola
- Amendment of the statement of claim in the suit.
- Interim injunction restraining the 2nd defendant from exercising the functions of a director and chairman of Globe Fishing Industries Co. Ltd. until the determination of this suit.
- Interim injunction restraining Mr. Joseph Adeola from performing and exercising the functions of a director of Globe Fishing Industries Co. Ltd. until the determination of this suit.
- Interim injunction restraining the board of the company from taking any action which will affect the status quo in this suit and for such further order or orders as this Honourable Court may deem fit to make in the circumstances.”
There was an affidavit in support. As a result of the conflicts in the affidavits filed by both sides, the learned trial Chief Judge rightly took evidence, no doubt, to resolve some of the areas of conflict Falobi v. Folabi (1976) 1 N.M.L.R. 169; Uku v. Okumagba (1974) 3 S.C. 35; National Bank of Nigeria Ltd. v. Are Brothers (1977) 6 S.C. 97. The learned Chief Judge on 7th June, 1984 granted only one of the remaining prayers. The first two prayers had earlier been granted by consent. Prayer (d) was granted as follows:-
“I would in the result grant the plaintiff/applicant his prayer that is that Mr. Joseph Adeola be restrained from performing and exercising the functions of a director of 1st defendant/company until the determination of this case.”
The defendants/respondents in the court of first instance were dissatisfied with that ruling and appealed to the Court of Appeal on a number of grounds. On 14th April, 1987 the Court of Appeal in a unanimous decision (Coram, Mohammed, Kutigi and Kolawole, JJ.C.A.) dismissed the appeal hence a further appeal to this court. The grounds filed are as follows:
“(i) The learned Judges of the Court of Appeal erred in law by affirming the order of the Federal High Court, Lagos restraining the 5th defendant/appellant from performing and exercising the functions of a director of the 1st defendant/ appellant company, when
(a) There is uncontradicted evidence that the 5th defendant/appellant was elected a director at the annual general meeting of the 1st defendant/appellant held on 5th December, 1979.
(b) Article 65 of the articles of association of the 1st defendant/appellant company empowers the company in general meeting to fill vacancies in the board of directors, remove and appoint directors by ordinary resolution from time to time.
(c) It is clear that if the plaintiff/respondent had any right to enforce at all, it would be his right to remain as a director and to continue to function as such, which right does not affect the right of the 5th appellant to become and remain a director of the 1st defendant/appellant.
(d) The plaintiff/respondent has no legal right to prevent the 5th appellant from becoming and remaining a director and he did not show that he will suffer irreparable injury if the order restraining the 5th appellant from performing and exercising the functions of a director of the 1st defendant/appellant company is not granted.
(e) The order of interim injunction is not available to the plaintiff/respondent in respect of the complaint for which the injunction was sought bearing in mind particularly that the wrong complained of by the plaintiff could have been remedied and/or resolved by the 1st defendant/appellant in general meeting by virtue of section 175(1) of the Companies Act, 1968.
(f) Any wrong, if any, done to the plaintiff/respondent could be adequately remedied or atoned for in damages.
(g) The order of interim injunction will prevent the 1st defendant/appellant from resolving in general meeting either to nullify or ratify the retirement of the plaintiff/respondent as a director or affirm the appointment of the 5th defendant/appellant as majority of its members may desire.
(ii) The learned Judges of the Court of Appeal misdirected themselves in law and thereby failed to realise that Article 89 of Table A to the Companies Act, 1968 does not preclude the directors of the 1st defendant/appellant from determining those to retire from amongst themselves other than by lot.
PARTICULARS
(a) By the plain and ordinary meaning of the provisions of Article 89 of Table A to the Companies Act, 1968 it is clear that as between persons who become directors on the same day their retirement shall be determined by lot but they can agree to use another method to determine who amongst themselves to retire.
(b) The plaintiff, a legal practitioner agreed with the other directors to retire, offered himself for re-election, but failed to be re-elected.”
“(iii) The learned Judges of the Court of Appeal erred in law when they affirmed the view of the Federal High Court, Lagos that Article 89 of Table A to the Companies Act, 1968 confers a right on the plaintiff qua member and not as a director and that the plaintiff’s complaint is against an injury done to him personally.
(iv) The learned Judges of the Court of Appeal erred in law when they held that it would be premature to consider the principles in Foss v. Harbottle 1843 2 HARE 461, Edwards v. Halliwell (1950) 2 A.E.R.1064 and Macdougall v. Gardiner (1875) 1 Ch.D. 13, wrongly applied the principles governing interlocutory injunction in corporate affairs and thereby came to a wrong conclusion when they held that the plaintiff can sue the 1st defendant/appellant and can seek to restrain the 5th defendant/appellant from acting as a director and thereby failed to appreciate that the act complained of by the plaintiff is a mere irregularity which the majority can regularise at a general meeting.
(v) The ruling of the Court of Appeal is against the weight of evidence.
Briefs were filed and the appellants in their briefs raised four issues:
“l. Whether Article 89 of Table A of the Schedule to the Companies Act, 1968 makes it mandatory for the directors of the 1st defendant/appellant company to determine those to retire amongst themselves by lot.
- The effect of the articles of association of a company incorporated under the Companies Act and the nature and scope of the plaintiff’s rights under Article 89 of Table A of the Schedule to the Companies Act, 1968.
- The principle of majority rule in corporate affairs and whether the wrong complained of by the plaintiff is not just a mere irregularity which could be ratified by the 1st defendant/appellant company in general meeting.
- Whether on a consideration of the facts before the Federal High Court and the principles of majority rule in corporate affairs the relief of injunction is available to the plaintiff so as to entitle the plaintiff to seek an order of interim injunction to restrain the 5th defendant/appellant from performing the functions of a director.”
The issues raised by the respondent are two:
“1. Whether the Court of Appeal was right in limiting the only issue relevant for determination to the issue of injunction simpliciter.
- Whether on the affidavit and oral evidence adduced in support of the application for interim injunction restraining the 5th defendant/appellant from performing the functions of a director in the 1st appellant company the plaintiff/respondent has made out a case for the grant of an interim injunction pending the determination of the substantive case.”
In the determination of any interlocutory application pending the trial of the substantive case, care should be taken not to make pronouncements which may prejudice the trial of the claims filed and still pending before the court. To do otherwise is to prejudge the matter in respect of which evidence is still to be led. It is for this reason that I will prefer the issues raised by the respondent in the respondent’s brief. I will however touch on the relevant issues raised by the appellants.
In the oral submission in amplification of the brief filed on behalf of the appellants, Mr. Vaughan the learned counsel for the appellants after adopting the appellants’ brief submitted that before the application could be granted a prima facie case should be made out. He referred to section S.16 of the Company Act. We did not call on the respondent’s counsel for a reply.
It appears to me that at the stage the application was argued before the learned Chief Judge the simple issue was whether the applicant before him had a right which ought to be protected pending the trial of the substantive case. It will therefore in my preview be premature to rely on and make definite pronouncements on authorities which have the effect of disposing off the claims before the court. These authorities are:
- Hickman v. Kent or Romney Marsh Sheep Breeders Association (1915) 1 CH 881 at 900.
- Pender v. Lushington (1877) 6 CH.D 70.
- Rayfield v. Hands (1960) CH.1.
- Edward & Ors. v. Halliwell & Ors. (1950) 2 A.E.R.1064 and
- Woodford & Anor. v. Smith & Ors. (1970) WLR 506.
The learned Chief Judge made some observations which ought to be taken into account:
- That there was no lot cast to determine who should be appointed directors.
- That the secretary. Mrs. Theresa Adesola Odele was not forthright in her evidence and that she attempted to “draw a red herring on the path of justice”.
- That the members of the board of directors were aware that the old directors were to hold office for three years and yet brought someone new to displace the applicant i.e. the plaintiff.
- That Chief Folarin Coker the plaintiff protested against the election at the meeting and later followed it up with many letters of protest.
- That the learned counsel for the defendants conceded that the retirement of the plaintiff was irregular though not fatal.
- That the plaintiff brought the action with the mind that he is still a director to be re-elected as was earlier agreed.
- That the secretary has no power to retire any director. That the secretary did what she had neither the power nor the authority to do and that she was the one who mentioned the names of directors to retire.
The question now is whether in view of these observations or findings the learned trial Chief Judge was wrong to have made the earlier order reproduced above by me if one takes into account, and this must be done, the claims before the court.
In the lower court, Kutigi, J.C.A., in the lead judgment said:
“An applicant must make out at that stage a strong prima facie case on the application in order to justify interference by way of interlocutory injunction and he must show that an injunction is necessary until the hearing to protect him against irreparable injury.”
While agreeing with that principle of law, I will say that the decision of this court in Ladunni v. Kukoyi & Ors. (1972) 3 S.C.31/35 has stood the test of time and is the locus classicus on an application of this nature.
While dealing with the first issue raised by the appellant, the appellant in his brief said:
“The crucial aspect of this case is that, as far as the evidence before the lower court shows the plaintiff/respondent herein called the respondent was retired he and other members of the board of directors concerned, he did not protest until he submitted himself for re-election and lost.
Certainly, the act of the secretary was merely a ministerial act, and not an order. Non-objection by the plaintiff at the stage when the ministerial act was presented before the directors is fatal. His retirement and that of those retired with him would therefore be taken to be by agreement amongst directors.”
It appears to me that the findings or observations I listed above were not taken into consideration by the learned counsel to the appellants. And as I hinted earlier to make a pronouncement about this issue will prejudice the trial that is still pending. I therefore agree with the respondent’s counsel in his brief where he submitted that this first issue “cannot be determined at this stage.” A pertinent question at the stage of the application was -whether the claims are frivolous. Looking at the pleading and without evidence which can be tested by cross-examination and a consideration of the memorandum and articles of association of the company it will be wrong to say that the action is frivolous. Is there a case made out which so far requires to be tried I think so.
In my view the learned counsel for the appellants has relied on cases and certain sections of the Companies Decree 1968 on which a final pronouncement must be made at the trial of the substantive suit. What the learned counsel for the appellant tried to impugn i.e. the method of approach of the lower court is without to the issues raised by the pleadings. The learned Counsel submitted:
“The learned Justices of the Court of Appeal however held the view that it was premature to consider the said cases and in so holding failed to appreciate the importance of the said cases both in terms of their procedural relevance and significance in relation to an irregular act done by a company”
(Italics is mine)
It is at this stage that any Judge must ensure that the scale of justice is not tilted to one side, for to do so is to give a false impression that the respondent’s case is frivolous. It will amount to a hasty, if not a rash conclusion. To bring into focus the cautious approach of the Court of Appeal, I will refer to paragraphs 2 and 6 of the statement of defence where the appellants averred as follows:
“2(i) The defendant (sic) avers that in respect of paragraph 4 of the statement of claim the plaintiff is estopped and precluded from saying that he did not resign as director of the first defendant/company because after the resignation he offers himself for election again as director at the first defendant/company.
(ii) The plaintiff voluntarily went through the process of election and consequently lost.
(iii) The election for the office of directors in first defendant/company as pleaded in paragraph 4 of the statement of claim is governed by section 65 of articles of association of the company and the defendants will found on this document at the trial of this action.
- The defendants aver that even if, the plaintiff is entitled to remain in office for three years, that which is denied, the plaintiff by offering himself for election before the expiration of three years since he held office (he) the plaintiff has waived the right to remain in office for three years.”
To pronounce on the relevance of the authorities cited in the appellants’ brief and some of which I had referred to at the stage of the appeal in the lower court and this court will tantamount to deciding the real issues raised by the claims, the need for a real hearing would have been defeated and the whole exercise will breach the rule of fair hearing. The purpose of pleadings would have been defeated in that each party by the pleading has given enough indication of the case to be determined at the trial. For example it is difficult to make a pronouncement without evidence that paragraph 13 of the amended statement of claim which says:
“13. The plaintiff fraudulently tricked out of the board of the company and had since then not been allowed to serve on the board of the company and perform his duties as board member. The plaintiff will rely on the minutes of the annual general meeting held on the 5th of December, 1979.” is false or has not been proved.
If the articles of association limits the appointment of number of director to ten and the respondent is contending that he is still a director notwithstanding the appointment of the 5th defendant/appellant, then there is in my view a real issue to be tried and this is a proper case in which an interlocutory injunction should be granted.
Obeya Memorial Specialist Hospital v. Attorney-General of the Federation (1987) 3 N.W.L.R. (Pt.60) 325. I will agree with the opinion of the learned author expressed on page 588 of Pennington’s Company Law, 4th Edition where the author said:
“The dividing line between personal and corporate rights is very hard to draw, and perhaps the most that can be said is that the court will incline to treat a provision in the memorandum or articles as conferring a personal right on a member only if he has interest in its observance distinct from the general interest which every member has in the company adhering to the terms of its constitution.”
It is for these reasons that I summarily dismissed the appeal on 10th September, 1990 with costs assessed at N500.00 in favour of the respondent.
In the course ofthe submissions before the learned Chief Judge, the defendants counsel relied on many cases, certain sections of the Companies Decree 1968. The conclusions by the learned Chief Judge concerning the issue of injunction touched on the substantive issues to be decided at the trial. Having made a definite pronouncements about their relevance, it will be a proper order that the substantive case be heard by another Judge. However, I take judicial notice of his retirement, hence the order has been overtaken by the event of his retirement.
I now come to delay in the administration of justice as a result of the appeal lodged against the interlocutory decision. If learned counsel had taken into account the claims before the court, the best course was to have asked for accelerated hearing of the case. The case was filed in February, 1981 and the ruling on the interlocutory application was delivered on 7th June, 1984 in respect of the motion filed on 7th April, 1981.
Pleadings were ordered on 23rd February, 1981. In the course of hearing the application the learned Chief Judge frowned on various applications for adjournments. By now, if the case had proceeded to trial immediately after the ruling, the case would have been concluded.
When a ground of appeal on a ruling which is adverse to a party can be taken on appeal with the substantive case, an appeal against an interlocutory ruling is not advisable. Such appeal leads to unnecessary expenses. It also delays the trial of the main action.
I will point out that when this appeal was heard and dismissed on 10th September, 1990, my learned brother, Nnamani, J.S.C., now of blessed memory presided. We unanimously agreed that the appeal be dismissed. His death has deprived us his reasons which, as usual, would have been clear, lucid and articulate.
NNAMANI, J.S.C. (Deceased)
Editorial Note:
The Honourable Justice Augustine Nnamani presided over this appeal and summarily dismissed the appeal on 10th September, 1990. He also participated at the conference for the reasons for the judgment and agreed with the reasoning of Olatawura, J.S.C.
He died on Saturday, 22nd September, 1990 before the reasons were delivered on Friday, 23rd November, 1990.
KARIBI-WHYTE, J.S.C.: This appeal was on the 10th September, 1990 summarily dismissed by me after reading the records of appeal, the briefs of counsel and hearing arguments on the expatiation of their briefs. I indicated on that day I will today give my reasons for so doing. I have read the judgment of my learned brother, Olatawura, J.S.C. I agree with his reasoning therein.
The point at issue In this court is the very narrow one of whether the learned trial Chief Judge was right in granting an interlocutory injunction to the plaintiff in respect of the reliefs sought in his claim before the court. The contention of the appellants in the two courts below which have been consistently rejected and now before us was that the injury subject matter of complaint by plaintiff is not injury done to the plaintiff qua member of the 1st defendant company, but as a director thereof. Further, the injury complained of is one which can be corrected by the company in general meeting, accordingly plaintiff not having a personal legal right thereto, is not entitled to the injunction sought. Concisely stated, the contention is that the plaintiff has no right of action which he can enforce against the defendants.
The learned trial Chief Judge rejecting these contentions held on the 7th June, 1984 that the plaintiffs complaint is against an injury done to him personally, and therefore was a personal legal right which can be protected by injunction. Accordingly the prayer that Mr. Joseph Adeola, 5th defendant, now appellant, be restrained from performing and exercising the functions of a director of 1st defendant company until the determination of the substantive action, could be made, and therefore was granted. The defendants appealed against the ruling to the Court of Appeal.
Of the three grounds of appeal filed, the first two were complaints against the construction of Article 89 Table A of the Articles of Association to the Companies Act, 1968, and the third was a complaint against a wrong application of the rule in Foss v. Harbottle. Although learned counsel to the appellant, in the court below formulated four issues for determination and learned counsel to the respondent three issues, I think the Court of Appeal was right to reduce all the issues to one; namely whether or not the court below was right in granting an order of interlocutory injunction against the 5th appellant (Mr. Joseph Adeola) pending the determination of the substantive suit.
After due hearing of argument on the briefs filed by counsel of both parties, the Court of Appeal affirmed the ruling of the learned Chief Judge. The court held that the respondent had clearly made out a case for an interlocutory injunction and that the learned trial Chief Judge was right in granting the injunction sought. The Court of Appeal pointed out and quite correctly too, that “It is not necessary that the court should at this stage find a case which would entitle the respondent to relief at all events; it is quite sufficient for it to find a case which shows that there is a substantial question to be investigated and that the status quo should be preserved until the question can finally be disposed of ”
This judgment is the subject matter of appeal to this court. There are five grounds of appeal which in substance are indistinguishable from the grounds of appeal filed in the court below. I will refrain therefore from setting them out. I will accordingly set out the issues for determination as formulated by counsel to the parties as follows-
Counsel to the appellant.
“2.01. Whether Article 89 of Table A of the Schedule to the Companies Act, 1968 makes it mandatory for the directors of the 1st defendant/appellant company to determine those to retire amongst themselves by lot.
2.02 The effect of the Articles of Association of a Company incorporated under the Companies Act and the nature and scope of the plaintiff’s rights under Article 89 of Table A of the Schedule to the Companies Act, 1968.
2.03. The principle of majority rule in corporate affairs and whether the wrong complained of by the plaintiff is not just a mere irregularity which could be ratified by the 1st defendant/appellant company in general meeting.
2.04. Whether on a consideration of the facts before the Federal High Court and the principles of majority rule in corporate affairs the relief of injunction is available to the plaintiff so as to entitle the plaintiff to seek an order of interim injunction to restrain the 5th defendant/appellant from performing the functions of a director.”
Here again this court is faced with the formulation of issues which are not in the least relevant to the determination of the appeal before it. This court has on numerous occasions advised counsel to formulate the issues for determination within the parameters of the grounds of appeal filed and the judgment appealed against. It seems to me obvious that the first issue which relates to the construction of Article 89 of Table A, of the Companies Act, 1968, and the third issue which relate to the application of the rule in Foss v. Harbottle, respectively are issues the determination of which are hardly relevant to the application before the court. There is clearly no doubt that the facts before this court at this stage raise the question whether the principle of majority rule is applicable to the facts of the case and is a substantial issue to be tried.
Learned counsel has formulated the issues to be determined as if they were alternate grounds of appeal. Indeed the erroneous assumption is that the determination of the application for interlocutory injunction predicates the determination of the substantive relief. This is clearly not the well settled accepted principles of law. The purpose of the application is to keep the parties in status quo in which they were before the judgment or act complained of see Preston v. Luck (1884) 27 Ch.D.497, Kufeji v. Kogbe (1961) All N.L.R. 113. I prefer the formulation of the issues by learned counsel to the respondent which has confined the questions for determination to the application subject matter of the ruling, and the decision of the Court of Appeal appealed against. The formulation is as follows –
“2.01. Whether the Court of Appeal was right in limiting the only issue relevant for determination to the issue of injunction simpliciter.
2.02 Whether on the affidavit and oral evidence adduced in support of the application for interim injunction restraining the 5th defendant/appellant from performing the functions of a director in the 1st appellant company the plaintiff/respondent has made out a case for the grant of an interim injunction pending the determination of the substantive case.”
It is important for the purposes of this appeal to bear in mind, that the subject matter of the application is for an interlocutory injunction pending the determination of the substantive case. Nevertheless, the application is based on the facts learning to the substantive case and therefore the court is obliged to hear aspects of the substantive case which will enable it to make the order for interlocutory injunction. It is however not required to come to a decision which ought to be made in respect of the substantive action. See Obeya Memorial Hospital v. A-G. of the Federation (1987) 3 N.W.L.R (Pt.60) 325. It is therefore of crucial relevance to the determination of this appeal to state the fact which have resulted in the substantive action before the court, and on part of which the application for interlocutory injunction is based.
The facts relied upon by the respondent for this application are largely undisputed. It is admitted that plaintiff now respondent to this appeal is a shareholder, howbeit, minority of the 1st defendant company. The 2nd defendant is a shareholder of the 1st defendant company and at the relevant time, chairman of the 1st defendant company. The 3rd defendant is the managing director of the 1st defendant company. The 4th defendant is the general manager of the 1st defendant company. The 5th defendant who is a shareholder of the 1st defendant company, subsequently joined as a defendant by order of the court.
Plaintiff/respondent was elected a director of the 1st defendant company, with nine other shareholders on a three year term on the 3rd June, 1978. At the end of this period he was entitled to submit himself for re-election.
Articles 88 & 89 of the Articles of Association provide for the retirement of those directors who have been longest in office since their last election. The determination to retire among those who had become directors the same day shall be by lot. As on the date of the annual general meeting on the 5th December, 1979, plaintiff/respondent had served only for about eighteen months, when it was agreed that one-third of the directors of the 1st defendant were to be re-elected. As at this date 5th defendant was a shareholder and not a director. However, when the directors offered themselves for re election, the 5th defendant Joseph Adeola, who was not a director, also submitted his name for appointment as a director, and was included among the directors who were to be re-elected. The secretary of the 1st defendant company included the name of the plaintiff amongst the three directors to be retired. Thus there were now four directors for the three vacancies available on the board of directors of the 1st defendant company for the re-election of three directors. It is pertinent to observe that the exercise was not for the appointment of directors. The evidence before the court was that plaintiff/respondent and others protested, but the 2nd defendant/appellant ignored their protest. The three directors entitled to seek re-election and the shareholder seeking to be appointed a director contested the three available vacancies on the board of directors meant for directors seeking re-election. The two existing directors whose terms had not expired, like the plaintiff/respondent and the 5th defendant seeking appointment as director for the first time were re elected. The plaintiff/respondent was not re-elected.
Plaintiff/respondent, therefore brought the substantive action claiming as follows-
“The plaintiff’s claim against the defendants jointly and severally are the following:-
- Declaration that the election of Mr. Joseph Adeola as a director of Globe Fishing Industries Limited is null and void.
- That the chairman Alhaji Sule Katagum, the managing director, Mr. Roussinov and the general manager. Mr. Dayaldasam be compelled to make available to the plaintiff certified bank statement of account of Globe fishing Industries Limited at the United Bank for Africa for the periods 1st July, 1979-30th June, 1980 and 1st July, 1980-31st December, 1980, respectively;
- That the chairman Alhaji Sule Katagum, managing director, Mr. Roussinov and the general manager, Mr. Dayaldasam be compelled to convene the annual general meeting of Globe Fishing Industries Limited for the year 1980 to consider
(a) the annual accounts covering the periods 1/7/79-30/6/80 and 1/7/80-31/12/80.
(b) to declare dividends 30th June, 1980.
Immediately on the filing of the action plaintiff applied by motion dated 7th April, 1981 praying the court as follows-
“(3) Interim injunction restraining the 2nd defendant from exercising the functions of a director and chairman of Globe Fishing Industries Co. Ltd. until the determination of this suit.
(4) Interim injunction restraining Mr. Joseph Adeola from performing and exercising the functions of a director of Globe Fishing Industries Co. Ltd. until the determination of this suit.
(5) Interim injunction restraining the board of the company from taking any action which will affect the status quo in this suit.”
I am compelled to make this observation because of the error often committed by both counsel and the court in applications of this nature. The application here is seeking an injunction pending the determination of the substantive suit, such an injunction can only be interlocutory and not interim. An interim injunction is one that can be discharged during the pendency of the substantive action. See Kotoye v. C.B.N. (1989) 1 N.W.L.R. (Pt.98) 419 at 4656. It seems obvious from the wording of the application, and the supporting affidavit that applicant was seeking an interlocutory injunction, the court so understood and so made the order sought. This had to be so because applicant was seeking an injunction pending the determination of the substantive suit see Beese v. Woodhouse (1970) 1 W.L.R. 586. It seems to me that only the 4th of the issues on a careful analysis of the issues for determination formulated by learned counsel to the appellant falls within the scope of the facts of the case and the judgment of the Court of Appeal appealed against. As I have already stated in this judgment, the issues as formulated by learned counsel to the respondent which I have adopted more properly cover the grounds of appeal filed.
I consider it however convenient to consider the two issues together because they cannot, in the light of the facts of this case, be meaningfully separated and dealt with independently. At the risk of obvious tedious repetition of the facts I think it is pertinent to point out the salient facts on which the application is predicated. They are as follows:
Applicant, 2nd and 5th defendants are shareholders of the 1st defendant company. Applicant was immediately before the institution of the action, a director of the 1st defendant company. The 2nd defendant is chairman of the company. Applicant was in accordance with the articles 89 of articles of the association of the 1st defendant company entitled at the expiration of his first three year term to present himself for re-election and be re-elected. 5th defendant was not before these incidents a director of the 1st defendant company and was not entitled to offer himself for re-election. He was a shareholder of the company. The 2nd defendant as chairman of the 1st defendant company where the 5th defendant who was at the time a shareholder was nominated and elected a director, along with appellant and two other directors. The re-election of the applicant was rejected. 5th defendant was the only shareholder among the four who were re-elected. The other three directors are both shareholders and directors. The agenda of the meeting of the 5th December, 1979 was for the re-election of directors.
I have observed in this judgment that only the 4th issue for determination in this appeal formulated by learned counsel to the appellant is relevant to the appeal before us. The other three issues relate to matters concerning the determination of the substantive action which is clearly not relevant to this application subject matter of this appeal. I will therefore only consider the submissions on this issue.
I have adopted this approach because counsel to the appellants’ fourth issue for determination could be brought within the scope of the two issues for determination formulated by learned counsel to the respondent which I have adopted for the purpose of this appeal.
Interim and interlocutory injunctions are useful equitable remedies which the courts resort to on the application of a party to a litigation in keeping matters in status quo between litigating parties. It is a remedy granted pending the determination of the substantive action. Hence the court granting an interim or interlocutory injunction does not and should not go to into the merits of the substantive action. The applicant seeking the grant of the injunction is only required to satisfy the court that it necessary in the interest of justice and the balance of convenience to maintain the status quo between parties.
It is curious to observe that learned counsel to the appellant in his brief of argument on this issue confined his argument to challenging the dictum of the learned trial Judge in his ruling at page 176 which was accepted by the Court of Appeal. He went on to criticise the findings of the learned trial Judge who he said regarded the act of the secretary of the company as irregular, and that plaintiff believed that he was still a director of the 1st defendant company waiting to be re-elected.
Without admitting but conceding for the purposes of the argument that the above legal rights may only be protected by means of injunction restraining the appellants from disturbing respondent in the performances of his duties as director, it was submitted that the right was not wide enough in scope to entitle respondent to obtain an injunction restraining 5th appellant from performing the duties of a director of 1st appellant company.
Learned counsel relied on Ladunni v. Kukoyi (1972) 1 ALL N.L.R. (Pt.1) 133 and has submitted that in granting interlocutory injunctions the court takes into consideration not only the existence of a legal right, of the plaintiff but whether the plaintiff would suffer irreparable injury which cannot be adequately remedied by the payment of damages.
Applying the principles to the facts of this case, learned counsel submitted that the 5th appellants was elected a director of the 1st appellant company by the board of directors under powers in the articles of association of the company. Learned counsel submitted that 5th appellant had no hand in the retirement of the respondent as director, not being a member of the board of directors which retired the respondent.
Learned counsel contended that the election of the 5th appellant had nothing to do with the right which respondent seeks to enforce, namely, the irregularity of his retirement and the contention that he is still a member of the board of directors of 1st appellant company. It was finally submitted that the appointment of directors was not ultra vires the 1st defendant company and that there was no evidence that 5th appellant was disqualified by the articles of association of the company from being a director.
It seems to me that learned counsel to the appellants has completely misconceived the issue involved in the application of the respondent seeking an interlocutory injunction restraining both the 2nd appellant from acting as chairman of board of directors of 1st defendant company and the 5th appellant from acting as director of the company. Plaintiff is not at this stage seeking a determination that 2nd appellant was not the chairman of 1st appellant company or that 5th appellant was not validly elected. This is what is to be tried subsequently. He is asking that they should be restrained from acting as chairman and director respectively.
The conclusion from the undisputed facts relied upon by the respondent is that 5th appellant not being a director was not qualified for re-election to the position of a director. Furthermore, the agreed three year term of appointment of the respondent as director had not expired. According to whether the respondent was due for retirement on the basis of rotation is an issue to be determined after due trial. It follows therefore that the question whether 5th appellant had been validly appointed as a director and whether respondent could be validly dropped from re-election are issues which must necessarily be determined in the substantive action. It is only sufficient for the purposes of the grant of the interlocutory injunction to raise the issues, so that the parties will remain in status quo till the determination of the action. This is what this court was saying in Ladunni v. Kukoyi (supra) when it declared;
“The principle seems to be clear and in short an interim injunction would be granted to a party who shows that he has a prima facie case on a claim of right or in other words that prima facie, the case he has made out is one which the opposing party would be called upon to answer and that it is just and convenient to the court to intervene and that unless the court so intervene at that stage, the other party’s action or conduct would irreparably alter the status quo or render ineffective any subsequent decree of the court,”
Quite concisely expressed the principle is that the court should be satisfied that there is a serious question to be tried at the hearing and that on the facts before it there is the probability that the plaintiff is entitled to the relief sought see Egbe v. Onogun (1972) 1 All N.L.R.95; Kufeji v. Kogbe (1961) 1 All N.L.R.113.
I think the Court of Appeal was right to hold that the only relevant issue for determination in the appeal before it was whether or not the learned Chief Judge was right in granting an order of interlocutory injunction against the 5th defendant/appellant pending the determination of the substantive suit.
Learned counsel to the respondent has submitted in his brief of argument, and I agree with him that the law is settled that in determining applications for interim or interlocutory injunctions pending the determination of the substantive action, the Judge is not concerned with the establishment of the violation of the rights in dispute. The consideration of the court at this stage is for a determination whether on the facts the applicant has disclosed any rights in respect of the subject matter of the substantive action, and that the evidence disclosed was sufficient to keep the parties in the position in which they were before the violation of the rights complained of. This court has stated the applicable principles clearly in its recent judgment in Obeya Memorial Hospital v. Attorney-General for the Federation (1987) 3 N.W.L.R. at p.338 where Obaseki, J.S.C., restated principles in as follows-
“When an application for an interlocutory injunction to restrain a defendant from doing acts alleged to be a violation of the plaintiff’s legal right is made upon contested facts, the decision whether or not to grant an interlocutory injunction has to be taken at a time when ex hypothesis, the existence of the right or the violation of it or both is uncertain and will remain uncertain until final judgment is given in the action.”
Learned counsel to the respondent has pointed out that respondent has shown that he has a personal legal right as a member, shareholder and director of the 1st appellant company. It was also submitted that the personal right of the respondent as a director was violated by his unlawful removal from the board of directors of the 1st appellant company contrary to the provisions of the articles of association of the 1st appellant company.
On the other hand learned counsel to the appellant is contending that respondent was validly removed in compliance with the articles of association of the 1st appellant company. He also submitted that the 5th appellant was validly elected a director of the 1st appellant company notwithstanding the irregularity. It is also contended that the election of 5th appellant not being ultra vires and is within the competence of the 1st appellant is a matter which the 1st appellant can ratify in general meeting. Accordingly, it is submitted, the violation, if at all, conferred no personal legal right on the respondent to justify the grant of injunction.
Thus, the question whether in the light of facts respondent has a legal right which ought to be recognised and protected, or that the 5th appellant was validly elected as director of the 1st appellant together with directors who were being re-elected are undoubtedly substantial issues to be tried in the determination of the reliefs claimed by the respondent.
The Court of Appeal was right to hold that in the interlocutory application before the learned trial Judge, and at that stage of the proceedings he was precluded from determining the issues raised before him which are intended for the determination of the reliefs claimed. I agree with the view which is consistent with the well settled principles applied in our courts that respondent having raised substantial question to be tried has made out a prima facie case to enable the grant of injunction for the preservation of the status quo between the parties pending determination of the substantive action.
The grant of the injunction is to protect the legal right of the respondent pending the determination of the substantive action see Oniah v. Onyia (1989) 1 N.W.L.R. (Pt.99) 514
The above are my reasons for dismissing this appeal.
SC.98/1987
