U.o.o. Nig. Plc V. Okafor & Ors (2020)
LAWGLOBAL HUB Lead Judgment Report
ADAMU AMINA AUGIE, J.S.C.
The Appellant Company was founded by one late Nze Uche Okafor, who had seven wives, and fifty-five Children. Before his death in January 2007, the late Uche Okafor, had by a letter dated 27/1/2004, tendered his resignation as the Chairman/Managing Director/Chief Executive of the Company, to the Board of Directors, and appointed his son, “Edozie Uche Okafor”, as his nominee for the said positions.
At its General Meeting held on 6/8/2004, it was resolved as follows:
- That Chief Uche Okafor, Chairman/Managing Director/Chief Executive of the Company be and is hereby retired as the Chairman/Managing Director/Chief Executive of the Company, on grounds of old age.
- That in his place, Mr. Edozie Uche Okafor, be and is hereby appointed the Chairman/Managing Director/Chief Executive of the Company.
- That steps should be taken to reflect this position at the Corporate Affair s Commission, Abuja.
Paragraph 80(d) of its Articles of Association dated 4/8/2004 reads:
Mr. Edozie Uche Okafor, having been nominated by Chief Uche Okafor to succeed him as Chairman, Managing Director/Chief Executive (MD/CEO) of the Company is hereby made a life Director of the Company and the Chairman, Managing Director and Chief Executive of the Company for life. The said Edozie Uche Okafor is hereby made the Chairman of the Board of Directors for life. Any contrary provisions to this effect on this Articles of Association is to be interpreted subject to the provision of this Clause.
In February 2005, some of the Directors and Shareholders indicated their desire to disinvest from the Company, and at an Extra Ordinary General Meeting of the Company held on 9/2/2005, a 10-man Asset Valuation Committee was set up to inter alia value its assets/shares. The said Committee worked with some professional companies and came up with a unit price of N1.50 Naira per share that was rejected, and after negotiations, the Parties agreed to N2.65 Naira per share.
At the Annual General Meeting (AGM) of the Company held at Aba on 9/3/2007, the SPECIAL BUSINESS on the AGM’s Agenda was:
To receive and adopt N2.65k as the value of each share of U.O.O. Nigeria Plc., as agreed by the Members of the Revaluation Committee.
But, as the Chairman, Nze Edozie Okafor, was reading his Address, and mentioned the said unit price of N2.65k, there was commotion, and the Meeting became very rowdy. The said Nze Edozie Okafor left the venue of the Meeting when the first Respondent moved a Motion for his removal as Chairman of the Company. He was later informed that the Directors and Shareholders, who stayed behind, voted to remove him as the Chairman and that the first Respondent, who moved the said Motion, was appointed the new Chairman.
On 21/3/2007, Nze Edozie Okafor took out an action against the Respondents at the Federal High Court, Lagos in the name of the Appellant Company. On 13/7/2007, he summoned a Meeting of the Board of Directors to ratify his action, and the Board resolved that:
The action taken by the Chairman to go to Court to challenge the alleged removal of the Chairman was in order and thereby gave its authority to the effect that the matter should be diligently pursued.
The Statement of Claim was later amended. The Appellant Company claimed the following reliefs in the Amended Statement of claim –
a. A Declaration that the purported removal of the Chairman of the Board of Directors, Nze Edozie Uche Okafor, from office at the Annual General Meeting of 9/3/2007 is unlawful, illegal, null and void, the proceedings if any, not having been conducted in compliance with the Articles of Association of the Company and the Companies and Allied Matters Act (CAMA).
b. A Declaration that the offices of the Chairman and other members of (its) Board of Directors prior to the AGM of 9/3/2007 are still subsisting until otherwise determined in accordance with (its) Memorandum and Articles of Association.
c. A Declaration that the purported appointment of 1st Defendant as the Chairman/Managing Director by the Defendants in whatever capacities in pretentious running of the plaintiff’s affairs are illegal, null, void and of no effect whatsoever.
d. A Declaration that all acts done and/or duties performed purportedly by the 1st to 9th Defendants in whatever capacities in pretentious running of the Plaintiff’s affairs are illegal, null, void and of no effect whatsoever.
e. A mandatory Order directing the Defendants jointly and severally to hand over all the Plaintiff’s properties unlawfully removed by them and to account for and refund all monies, remunerations, dividends and other financial or other benefits derived or received by them in their purported pretended and/or illegal operation of the plaintiff Company.
f. An order against the Defendants jointly and severally to render Account of all their dealings in the name of the plaintiff Company from 13th day of March 2006 till Judgment in this Suit.
The Respondents, who were the Defendants at the trial Court, also amended their Statement of Defence and Counter Claim, and they counter-claimed for the following in their Amended Counter-Claim:
- A Declaration that the Defendants, as shareholders of U.O.O Nigeria Plc, have the legal right to dis invest in the Company and take away whatever belongs to them by way of cash, shares, dividends, benefits, profits and other entitlements.
- An order of Court compelling the plaintiff to allow the Defendants to dis invest in the Company and take away whatever they are entitled to by way of cash, shares, dividends, profits, benefits and all entitlements that accrued to them as investors/ shareholders in the Company.
- An Order of Court compelling the Plaintiff to settle and pay to (them) the total cash value of their investments/share holdings, dividends, profits and other entitlements which accrued to them jointly and severally as investors/shareholders in the Company.
- An Order of Court constituting or directing the Plaintiff to constitute a 10-man committee made up of nominees of both Parties to work out modalities for the disinvestment/settlement of the Defendants within 14 days from the date of Judgment.
- An Order of Injunction restraining the Plaintiff and any person(s) claiming to be its agents or representatives, particularly Edozie Okafor and Abalonye Okafor, from selling, mortgaging and in any other way howsoever disposing of the Company’s assets for any other purpose whatsoever until (they) are fully settled.
- An Order of Court directing that all title documents of landed properties belonging to the Plaintiff be deposited with and custody thereof retained by the Deputy Chief Registrar of this Court until the Defendants are fully settled.
At the trial itself, the Appellant called seven witnesses, including Edozie Okafor as PW1, while the Respondents called one witness; and thereafter learned Counsel adopted their Written Addresses.
It was argued for the Respondents that the action cannot be maintained in the name of the Company because evidence led at the trial shows that this is a personal action on the part of PW1.
In his Judgment delivered on 27/3/2013, the learned trial Judge, Okeke, J., disagreed with the Respondents “that PW1 ought to be the one suing” and held as follows on the issue of who should sue:
Since (PW1) is the alter ego of the Plaintiff, he actually has no locus standi to sue the Plaintiff for his purported removal as Chairman of the Plaintiff’s Board since the said removal did not affect his position as the MD/CEO of the Plaintiff; rather it is the Board of the Plaintiff that has the right to sue in the name of the Plaintiff, as it has done in this instance.
However, after considering the main case, he concluded as follows:
I therefore hold that PW1, Nze Edozie Okafor, was validly removed as the Chairman of the Plaintiff Company and Mr. Amaribe (sic) Okafor, validly elected the new Chairman – PW1 having been validly removed as Chairman of the Plaintiff Company, lacked the locus to preside over a Meeting of the Board of Directors on the Plaintiff Company to authorize the commencement of this Suit in the name of the Company. All the reliefs claimed by the Plaintiff fail and are accordingly dismissed.
He thereafter held as follows on the Respondents’ Counter-Claim:
Both the Plaintiff and the Defendants agree that the Defendants are Shareholders in U.O.O. Nigeria Plc. The Parties are in agreement that the Defendants and other Shareholders are entitled to disinvest in the Plaintiff Company. The dispute is the value of the unit share of the Plaintiff. In the interest of justice, it is ordered as follows –
- That Mr. Amaribe Okafor, as the Chairman – in collaboration with the management constitutes a 12-man Committee to work out modalities for the disinvestment/settlement of the Defendants and other shareholders on the true and current value of the Company.
- That the Plaintiff Company, its former Chairman, the Directors and Officers are restrained from selling, further mortgaging and in any other way howsoever from disposing of the Company’ s assets for any other purpose until the full settlement of the Defendants and other Shareholders, who wish to disinvest.
Dissatisfied with the Trial Court’s decision, the Appellant appealed to the Court of Appeal. The Court of Appeal delivered its Judgment on 18/5/2016, wherein it held as follows on the issue of competency:
It is trite law that where a Company suffers any injuries done to it, actions in respect of such injuries can be brought only in the name of the Company. There is no injury suffered by the Appellant Company. However, there is an allegation of injury suffered by a person named Nze Uche Okafor (sic), whose name in not a synonym or substitution for or an alias also known as U.O.O. Nigeria Plc., by any stretch of imagination. Section 63(3) of CAMA provides that the critical elements in the exercise of the powers of the Company “…are to protect the “business of the Company “as explicitly set out in the object clauses in the Memorandum of Association”. In the evidence on the Record, there is nothing that shows that it is the corporate object of the U.O.O. Nigeria plc., to manage the style of life of Nze Okafor as a business of the Company within the framework of Section 63(3) or Section 279(3) of CAMA 2004. What is involved in this Appeal is not directly about assets of the Appellant Company but the self-serving interest of Nze Edozie Okafor… So far as the enterprise in this action is not one authorized by the Memorandum of the Company, the people who authorized it are binding the Company to a liability, which the Company cannot escape; and by the syntax of logic, the only liability that can be incurred by the Appellant Company is if Nze Okafor were to sue for breach of contract created in his favour by the Memorandum and Afticles of Association; it is only in this context can emerge any capacity or competence for the Appellant Company to incur any liability in its own name in respect of any injuries suffered by Nze Okafor transliterated by trans positioning into the competence and capacity of the Appellant Company to have suffered any injuries for which it is now seeking remedy or redress… Within the conceptual framework of “alter ego” and “liability”, therefore, it is patently unconscionable for Nze Edozie Okafor to arrogate to himself through the use of the Company on 13/7/2007 the capacity and the competence as Chairman/MD/CEO to institute the action in the name of the Appellant Company after the AGM of 9/3/2007. It is an unmitigated pre-supposition founded on misguided and false presumption that Nze Edozie Uche Okafor can by this Appeal be re-instated through the back-door of corporate governance Section 263(4) of CAMA provides that the Board of Directors of a Company elects, who is to be the Chairman. This election is, however, in practice pursuant to the decision of the Members at the AGM that “constituted the Board” for the purposes of running the authorized business of the Company in accordance with the Memorandum of Association and in respect of which Management, Members as Shareholders of the Company are liable to the extent of their shareholding and it is to this extent and within this context that the MD/CEO of any Company is its alter ego or directing mind. In the context of this Appeal, therefore, which on the face of it is a struggle for power between two organs of the Appellant Company, that is the AGM and the Board of Directors, it is dysfunctional for any Meeting of the Board of the Directors after the AGM of 9/3/2007 of the Appellant Company to be chaired by Nze Edozie Uche Okafor on the 13/7/2007. The entire testimony of Nze Edozie Uche Okafor as PW1, was as a Witness not for the Appellant Company but for himself.
At the end of the day, the Court of Appeal held that “on both the evidence of the facts disclosed and the Law, the Appeal lacks merit”; it dismissed the Appeal and affirmed the decision of the trial Court.
Further aggrieved, the Appellant filed two Notices of Appeal in this Court. It withdrew the first one, and its Brief of Argument is based on the Notice of Appeal filed on 27/6/2016, which contains six Grounds of Appeal, and it formulated five Issues for Determination:
1) WHETHER the Court below was right when it held that the “majority shareholders” did not breach Article 80 of the Articles of Association of the Appellant or any provisions of CAMA in the purported removal of the Appellant’s Chairman?
2) WHETHER the Court below was right when it held that the offices of the Chairman, Chief Executive Officer and Managing Director of the Appellant are “intertwined and inseparable in the organogram of the Appellant Company”?
3) WHETHER the Court below was right when it held that the reliefs granted to the Respondents were not in excess of the reliefs claimed by the Respondent in their Counter Claim at the trial Court?
4) WHETHER the Court below was right when it held that the institution of this Suit at the trial Court was not authorized by the proper organ of the Appellant?
5) WHETHER the Court below was right when after finding as a fact at pages 1 – 2 of the Judgment (pages 1068 – 1069 of the Record) of the bedlam that afflicted the ALGM resulting in the presiding Chairman of the Appellant being chased away from the Meeting, still went ahead and endorsed the election of the 1st Respondent as the Chairman of the Appellant?
The Respondents adopted the Issues formulated by the Appellant in their Brief of Argument, “with slight modifications”, as follows:
- WHETHER the facts of the Appellant’s case as narrated by the Court of Appeal in its Judgment at pages 1068 to 1069 of the Record of Appeal, Vol. 111, constitute findings of fact, to vitiate the Lower Court’s affirmation of the trial Court’s Judgment with respect to the election of the 1st Respondent as Chairman of the Appellant.
- WHETHER the Lower Court was right when it affirmed the Judgment of the trial Court, holding that Mr. Edozie Okafor was validly removed as Chairman of the Appellant, that the offices of the Chairman, Chief Executive Officer and Managing Director of the Appellant are intertwined/inseparable in the organogram of the Company.
- WHETHER the Lower Court was right when it held that Mr. Edozie Uche Okafor, having been removed from office by the Shareholders of the Appellant as its Chairman at the last Annual General Meeting (AGM), had no authority to summon and preside over as the same Chairman, the Meeting that authorized the institution of the action at the trial Court
- WHETHER the Lower Court was right when it held that the reliefs granted by the trial Court in favour of the Respondents were not in excess of the reliefs sought in the Counter Claim.
The Issues formulated by both Parties raise same questions but it is clear that the issue of whether this action filed in the name of the Appellant Company is competent or not, must take center stage.
The Appellant has however, argued that the Trial Court did not make any finding on the said issue; that the Respondents did not file a Cross Appeal or Respondent’s Notice to raise the issue, so they are estopped from raising the issue; and that Nze Edozie Okafor had locus to chair the said meeting of the Board of Directors wherein the decision to institute this action at the Trial Court, had been taken.
The Respondents contend that Nze Edozie Okafor lacked locus to preside over the Meeting of 13/7/2007; that the incompetence of a suit intrinsically raises the issue of jurisdiction, therefore, the Court can raise it suo motu based on facts and evidence before it; and that “whether (they had) raised it at the trial or not, whether there was a Cross Appeal or Respondent’s Notice, is of no moment and the absence of that does not preclude the Court from raising it.”
Furthermore, that Parties cannot by consent or acquiescence confer jurisdiction on the Court where there is a feature in the case, which affects the jurisdiction of the Court; and that jurisdiction and competence of Parties are issues of law, therefore, the Court below did not require a Cross Appeal or Respondent’s Notice to rule on it.
The Respondents are right; the question of proper Parties is a very important issue, which would affect the jurisdiction of the Court, since it goes to the foundation of the Suit in limine. In effect, where the proper Parties are not before the Court then the Court lacks jurisdiction to entertain or hear the Suit – See Cotecna Int. Ltd. V. Churchgate (Nig.) Ltd. & Anor (2010) 18 NWLR (pt. 1225) 346 SC.
See also Utih V. Onoyivwe (1991) 1 NWLR (pt. 166) 166 SC, wherein this Court per Karibi-Whyte, JSC, explained as follows –
It is a well settled principle for the administration of justice in our judicial system that a matter cannot be heard on its merits unless there is a cause of action, and the Plaintiff has the right to bring the action… The Court in which the action has been brought can only validly exercise jurisdiction to hear and determine the matter in such circumstances.
So, before an action can succeed, the Parties must be shown to be the proper Parties to whom rights and obligations arising from the cause of action can attach – see Ehidimhen V. Musa (2000) 8 NWLR (Pt. 669) 540 SC, Peenok Ltd. V. Hotel Presidential (1983) NCLR 122.
It is also well settled that to determine whether a plaintiff is a proper Party or not, all that the Court is required to do is to examine his claim(s), which gives him the right to initiate the action for the alleged wrongful act – see Bello V. INEC (2010) 8 NWLR (pt. 1196) 342.
A cause of action consists of the Defendant’s wrongful act that gives the Plaintiff his cause of complaint – see Adesokan V. Adegorolu (1997) 3 NWLR (Pt. 493) 261, Agbanelo V. UBN (2000) 4 SC (Pt. 1) 2333, Oduntan V. Akibu (2000) 7 SC (pt. II) 106, A.G. Fed. V. ANPP (2003) 12 SCNJ 67. The factual situation on which the plaintiff relied to support his claim must be recognized by law as giving rise to a substantive right capable of enforcement or being claimed against the Defendant – see Cookey V. Fombo (2005) 15 NWLR (pt. 947) 182.
In this case, Nze Edozie Okafor was removed as the Chairman of the Appellant’s Board of Directors at the AGM held on 9/3/2007. The issue at this point is not whether he was validly removed as the Chairman by the Respondents, but whether he was right to institute the action at the trial Court in the name of the Appellant Company. He did not hide the fact that he had filed the action at the trial Court.
In the Minutes of the Board Meeting of 13/7/2007, which is at pages 236-241 of the Record, it was stated under post AGM that –
The Chairman informed the Board of the fall-out of the AGM held at Aba on 9/3/2007. He said that the Members at the General Meeting rejected the share price of N1.50k reached by the professionals… He said he had to declare the Meeting closed because the Meeting became uncontrollable. He further informed the Board that he learnt that after he left, some Members purportedly elected a new Chairman and Secretary and that he had challenged the action at the Federal High Court, Lagos. The case was still pending… The Chairman said that because of the urgency of the matter, he consulted a Lawyer to challenge the alleged removal and hereby sought the Board to ratify his action. The Board resolved that the action taken by the Chairman to go to Court to challenge the alleged removal of the chairman was in order and thereby gave its authority to the effect that the matter should be diligently pursued.
The contention in this Appeal is that the said Nze Edozie Okafor was denied fair hearing in his purported removal as the Chairman by the Respondents. It was submitted that Nze Edozie Okafor was not at the said Meeting when the Motion for his removal was moved, therefore, he was not given the opportunity to defend himself; and that the consequence thereof is that the proceedings are null and void, citing Dingyadi V. INEC (No. 1) (2010) 18 NWLR (pt. 1224) 1 SC.
It was also argued that it was the Company’s Memorandum and Articles of Association that was violated by the Respondents, and it is the Company that is wronged, therefore, it has locus standi to challenge such act by instituting an action to remedy the wrong.
The Respondents argued that the decision taken at the AGM is a decision of the Company, and an individual member cannot use its name to sue the Shareholders for taking the said decision; and that any such action is misconceived and unsustainable in law.
They also contend that initiating a personal action against the Company was the only remedy open to Nze Edozie Okafor, and if his argument that he was not given fair hearing is anything to go by, then he is the proper plaintiff ”and not the Appellant, who allegedly denied him the fair hearing through the shareholders”; and that –
The complaint in the Appellant’s Brief – is that Edozie Okafor was not given fair hearing by the Shareholders before his removal and not that the Company – was not given fair hearing. This further supports the submission that the action was wrongly initiated in the name of the Appellant Company.
Once again, I agree with the Respondents. The question in this case boils down to whether the Appellant Company itself was denied fair hearing when the said Edozie Okafor was removed as its Chairman? The Court of Appeal made two potent findings that provide answers to this question – “there is no injury suffered by the Company”; and – “what is involved in this Appeal is not directly about assets of the Company but the self-serving interest of the said Nze Edozie Okofor.”
What could be clearer? As the Respondents rightly submitted, the first relief sought in the Amended Statement of Claim filed at the Trial Court shows clearly that the person actually aggrieved by what they did is Nze Edozie Okafor and not the Appellant Company.
The said Nze Edozie Okafor, who replaced the founder of the Appellant Company, was removed as the Chairman of the Company, by the Respondents, who are Shareholders of the same Company.
The Appellant Company is therefore the umbrella that covers both the Chairman/MD/CEO of the Company and the Shareholders. How can the quarrel between the Parties under the said umbrella, constitute an injury to the Appellant Company, and in what way did the removal of Nze Edozie Okafor as Chairman by the Respondents, amount to denial of fair hearing to the Appellant Company itself?
These are questions looking for answers that cannot be found because there is nothing to connect the Appellant Company to the wrongful act complained of by Nze Edozie Okafor, which led to the Suit filed at the trial Court, in the name of the Appellant Company.
As I said, a matter cannot be heard on its merits unless there is a cause of action, and the Plaintiff has the right to bring the action -Utih V. Onoyivwe (supra). In this case, the Appellant Company has no cause of complaint; it did not suffer any injury when the said Edozie Okafor was removed as its Chairman by its Shareholders; and the action was wrongly instituted in its name at the trial Court. So, without a cause of action, it is not a proper Party before the Court.
It goes without saying that without the proper Party before it, the Trial Court had no jurisdiction to entertain the action taken out by Nze Edozie Okafor in the name of the Appellant Company and the Court of Appeal was right to hold as follows in its Judgment –
At the time the action in this Appeal was taken out in the Lower Court, it was not authorized by the proper organ of the Appellant Company to do so, and in effect, therefore, it vitiates the competence of the action and the jurisdiction of the Lower Court and the Court of Appeal to adjudicate.
The end result of the foregoing is that this Appeal totally lacks merit and it is hereby dismissed. There will be no order as to costs.
SC.713/2016
