J.S. Olugbusi v. J.O. Tunolase (1973)

LawGlobal-Hub Lead Judgment Report

O. ELIAS, C.J.N. 

This is an appeal against the order made by Adefarasin, J:, in the High Court of Lagos state ordering that the name of the first plaintiff be struck out of the Suit.

Several grounds of appeal were filed and, by leave of the Court, argued together. The pith and substance of the appeal, as argued by Mr. Balogun, learned counsel for the appellant, is that the learned trial judge is wrong in law to have made the order, the subject-matter of the appeal, without looking at the Articles of Association and the Memorandum of Association of the Company in control of the organization around which the action revolves.

The plaintiff claimed that the appellant had not the authority of the Company to bring the suit and in the supporting affidavit he claimed that the organization had in fact passed a resolution disowning the appellant as the rightful person to sue on its behalf. Learned counsel argued that the powers of the Company are governed by its Articles of Association and the Memorandum of Association and that the fact that the appellant did not file a counter-affidavit to the plaintiffs affidavit does not prevent the appellant from challenging the order made by the judge, provided that the appellant can establish its wrongfulness otherwise.

Learned counsel finally argued that the learned trial judge should have demanded to see the Articles and Memorandum of Assocication in order to determine for himself who has the power to institute or defend an action or who in fact has the control of the Company.

Mr. Lardner, learned counsel for the respondents, submitted that this court as a Court of Appeal should not interfere with the findings of the learned trial judge unless these were found to be unreasonable. He further submitted that the resolutions referred to in the affidavit were produced by the respondents at the trial in order to show that the action was not rightly brought by the appellant.

We think that there is merit in Mr. Balogun’s contention that the learned trial judge acted prematurely and that he should have asked to see the Articles and Memorandum of Association in order to determine what powers are granted to whom before deciding whether or not to strike out the appellant’s name. The resolutions are by themselves insufficient to support what the learned trial judge did do, since they can only have been passed in pursuance of powers granted in that behalf by virtue of the Articles and Memorandum of Association. In John Shaw & Sons (Salford) Ltd v. Shaw (1935) 2 K.B. 113, in which the point was raised as to who had the right to bring actions on behalf of a company, it was held that under the company’s articles the power to give instructions for the bringing of the actions was vested not in the directors generally but in the permanent directors, whose decision could not be overriden by the mere resolution of the shareholders, and therefore that the bringing of the actions was duly authorized.

Roche, L.J., observed as follows:

“As to the preliminary question whether the plaintiff company was properly before the Court, that is to say, whether the action was instituted and carried on with its authority, I have arrived at the same result as Greer, L.J., but for different reasons, which I propose briefly to state.

I agree with both the Lords Justices as to the result of the decided cases and particularly of the Daimler case and of the Russian Commercial Bank case. The principles to be derived from them are that such an objection to a right to sue as is here taken should be taken not at the trial but by an interlocutory motion or summons; that if such procedure is not adopted the Court need not, and ordinarily should not entertain such an objection at the trial as if it were a defence. If it were otherwise, then for reasons pointed out by Marrington, J., in Richmond v. Branson, the position of the Court would be well nigh intolerable. Nevertheless, as appears from the decision in the Daimler case, if want of capacity or authority to sue plainly appears at any stage the Court may then strike out the action.”

We think that, instead of deciding in limine that the appellant was not competent to bring the action, the learned trial judge should have heard argument on either side which might have enabled him to determine whether or not there was want of capacity on the part of the appellant. The evidence that would have enabled him to determine the question was scant, and he was no doubt in error when he made the order at the stage he did.

The appeal is, therefore, allowed and costs assessed at N94 are awarded to the appellant.

SC.359/1971