Virgin Technologies Limited V. Mrs. Maimuna Shuaibu Mohammed & Anor (2008)
LawGlobal-Hub Lead Judgment Report
MONICA BOLNA’AN DONGBAN-MENSEM J.C.A.
The facts which led to this appeal are that about the 29th day of January, 2004, the Chief Executive Officer (CEO) of the Appellant discovered that the 1st Respondent, who is a director and “co-sole signatory” to the Appellant’s account, had allegedly transferred/carted to her personal account, the sum of N199,660,000.00 (One Hundred and Ninety-Nine Million, Six Hundred and Sixty Thousand Naira only) from the Appellant’s Account. The account in question is with the 2nd Respondent which is a Bank. Attempts at persuading the 1st Respondent to return the money failed and the CEO resorted to adjudication for redress.
On the 03/03/04, an order of interim Injunction was issued restraining the Respondents in the following terms: –
“1. That an order of Interim Injunction is hereby made restraining the Defendants, their servants, agents, and or privies from withdrawing, transferring or in any way dissipating the sum of N199,660,000. 00 currently lodged in the 1st Defendant’s account with the 2nd Defendant pending the Hearing and Determination of the Motion on Notice.
2. That an order of Interim injunction is hereby made restraining the Defendants their servants, agents and or privies from tampering with or in any way dealing with the sum of N199,660,000.00 currently lodged in the 1st Defendant’s account with the 2nd Defendant in any manner whatsoever detrimental to the interest of the Plaintiff in the said funds, pending the hearing and determination of the Motion of Notice.
3. That prayer 5 on the Motion Exparte is a mere suplusage and it is refused.
4. That this matter is adjourned to 22nd day of March, 2004 for Hearing of the Motion on Notice
5. That all the Court Processes should be served on the Defendants.
ISSUED AT LAGOS, Under the Seal of the Court and the Hand of the Presiding Judge this 3rd day of March, 2004.”
This respite was however short lived as the 1st Respondent filed a preliminary objection challenging the locus standi of the CEO to institute the action in the name of the Appellant.
The Appellant filed a similar application which was dismissed. The Preliminary Objection of the 1st Respondent was upheld and the suit was struck out.
This appeal by the Plaintiff before the trial Court, hereafter referred to as Appellant, seeks a reversal of the decision of the trial Court and a restoration of the interim injunction pending the determination of the suit on the merit.
“By the leave of this Court granted on the 24/01/08, the Appellant amended the Notice of Appeal by an additional ground to the original sole ground of appeal.
Two issues were formulated respectively tied to each of the grounds of appeal.
Two issues were formulated by the Appellant and which the 1st Respondent adopted. The 3rd Respondent formulated one issue. These respectively are as follows:-
Appellant’s issues: –
“i. Does the 1st Respondent have any locus to challenge the authority or want of it; to institute the proceedings at the lower Court in the name of the Appellant Company?
ii. Can the Managing Director/CEO of Appellant Company authorize the institution of Court Proceedings in the name of the Appellant Company in the circumstances of this case?”
1st Respondent’s Issues: The 1st Respondent’s arguments were based on the issues formulated by the Appellant.
The main crux of this appeal is as formulated by the 2nd Respondent; which is: – 2nd Respondent’s Issue:
“Whether the lower Court was right in holding that the suit was incompetent for want of the requisite authorization by the company.”
The 1st Respondent filed a notice of preliminary objection and incorporated argument in support thereof in the brief of the 1st Respondent. The Appellant filed a reply brief in response. However, at the Hearing of the appeal, the learned Counsel for the 1st Respondent abandoned the said Preliminary Objection, which is accordingly discountenanced in the consideration of the appeal.
This appeal shall therefore be determined on the issue formulated by the 2nd Respondent which has already been reproduced (supra).
In seeking to fault the decision of the trial Court, the learned Counsel for the Appellant anchored his submissions on the provisions of Sections 229, 63(1) and 65 of the Companies and Allied Matters Act Cap 119 Laws of the Federation of Nigeria of 1990; herein referred to as CAMA.
The learned Counsel for the Appellant submits that the trial Court was wrong to have allowed the 1st Respondent to challenge the right of the Chief Executive Officer of the Appellant Company to institute the action in the name of the Appellant Company. Counsel contends that by Sections 229 and 300 of CAMA (supra), the 1st Respondent is neither competent to challenge a wrong or an irregularity done to the Appellant company nor does she fall within any of the recognized exceptions where a third party may complain for the company.
The learned Counsel maintains that the learned trial Judge was in manifest error when he allowed the 1st Respondent to raise an objection she had no locus to raise. Cited in support of this are the following cases: –
1. LADEJOBI VS ODUTOLA HOLDINGS LTD (2002) 3 NWLR PT.753 P121 @153-156
2. SOTIMINU VS OCEAN STEAMSHIP (1987) 4 NWLR PT66 P.691 @ 705 3. FOSS VS HARBOTTLE (1843) 3 HARE 461
4. IVORY MERCHANT BANK VS MAKHAM CO. LTD (2002) 1 NWLR PT.747 PG.74 @ 85-86
5. EJEKAM VS DEVON IND. LTD (1998) 1 NWLR PT.534 P.417 @ 433.
Upon the provisions of Sections 63(1) and 65 of CAMA, the learned Counsel submits that the law recognizes that the Chief Executive of a company can take certain decisions or institute proceedings in the interest of the company to protect the assets of the company. Section 229 of CAMA cannot be read in isolation, maintains the learned Counsel.
The learned Counsel submits further and in the alternative that even if the CEO had no authority his decision can be ratified by the company.
Contrary to the submissions of the learned Counsel to the 1st and 2nd Respondents, it is the conduct of the 1st Respondent in moving company money to her personal account without “appropriate consent and authority” which “presents a unique … situation”; such of which conduct is anticipated by the protective provisions of section 63 and 65 of the CAMA. (Pg.76 of records).
The learned trial Judge also totally misconstrued the entire suit and fell into serious errors in finding to the effect that: –
“It is crystal clear that what is in issue is whether the name of a company can he used to institute legal proceedings by one director against a fellow director of the same company. In resolving this issue, it is pertinent to look at the provision of Section 299 of CAMA 1990, Section 299 of CAMA Provides as follows: –
“subject to the provisions of this Act, where an irregularity has been committed in the course of the company’s affairs or any wrong has been done of the company, only the company can sue to remedy that wrong and only the company can ratify the irregular conduct.”
The above quoted provision as I understand it means that only a company can sue in it’s name where any wrong is done to it and it is only that company that can ratify any irregular conduct committed in the course of the affairs of the company. Learned Plaintiffs Counsel has relied on Section 63 of CAMA to contend that the Chief Executive of a company can take certain action to protect the assets and business of a company as was done in this case.
However, the Court of Appeal while construing the provision of Section 63(1) and (2) and (3) of CAMA which is essence provides that a company shall act through it’s members in general meeting or it’s board of directors or through officers or agents appointed by, or under authority derived from the members in general meeting or board of directors and that the business of the company shall be managed by the board of directors who shall exercise all the powers of the company, held that these provisions confers general powers on the directors to conduct the business of the company. However, the Court of Appeal went further to held in page 159 Paragraphs A – C that the powers and management or Control of a company in so far as they affect institution of litigation in the company’s name are vested in the general meeting of that company. See also Section 639(5) (b) of CAMA. The question begging for answer now is has the consent of the appropriate organ of the Plaintiff’s company been obtained in this instance to Institute the present proceedings in the name of Virgin Technologies Ltd?”
What is actually within the contemption of the CAMA cited sections viz sections 63 and 65 is the unusual conduct of business by the 1st Respondent who allegedly raked money from the company’s account to her personal account. The power conferred on her as a co-signatory has not been shown to entitle her to move money from the company’s account to her private account. The combined effect of the provisions in Sections 63, 65; 217 and 266 of CAMA 1990 are to enable the principal officers of the company to take steps to arrest and nib in the bud, activities taken by persons, which may be inimical to the company. It appears to me that is what the CEO of the Appellant did. The CEO has a burden responsibility to keep an eye on the possessions of the company. Although he is a co-signatory to the account with the 1st Respondent, as the CEO, he maintains a supervisory role over the officers of the company. His authority to act on behalf of the company is accordingly implied (Refer: SOTIMINU VS OCEAN STEAMSHIP (supra)). Time has not lapsed for the company to ratify the action of the CEO, which action has been condoned since no application was placed before the trial Court by the company to have its name struck off the suit.
Further, the suit of the CEO is not distinguishable with that of Haston’s (supra) as stated by the learned trial Judge. This is not a suit taken out by one director against the other. No, the situation is that the director has moved company funds in suspicious circumstance and the other director, who is also the CEO, has taken steps to stop a seeming illegal act against the company. The facts of this case are very similar to those of Haston’s and the principles are very much applicable to the instant case. Although no signature was forged in the instant case, money is said to have been moved from the company’s account into an unusual location, the personal account of a co-signatory without the authorization of the Appellant. This presents an urgent situation.
In Sotiminu’s case (supra) this Court held that in cases requiring urgency to act, an officer of a company may act to institute proceedings to protect the assets of the company, in which situation, it will be left to the company at any time to ratify the act of such an officer who initiated the proceedings and to adopt the proceedings or rescind it, if it does not desire to continue with the proceedings.
The Supreme Court held in Haston’s case that the authority of the CEO to act is ordinarily presumed until the contrary is established by the party who asserts the contrary. In the circumstance, the contrary has not been established. The company has filed no preliminary objection to the use of its name in the suit. The Respondent has not exhibited any authority from the company authorizing her to represent it.
Indeed, the suit filed by the CEO seeks to protect the company from the seeming excesses of the 1st Respondent.
The process of summoning a general meeting is cumbersome and time consuming. There is no time limit within which a unilateral action of the CEO in protecting the company must be ratified. No objection has been filed by the company and no instructions have been shown to have been issued to the CEO to discontinue the suit.
The situation of the 1st Respondent is different. Sued as an individual, although an official entrusted with the management of the bank account of the company, she has to show her authorization from the company empowering her to move the company funds into her personal account. In the absence of such ex-facie evidence, the 1st Respondent is incompetent to raise the objection, she raises challenging the competence of the suit. It was the 1st Respondent’s Preliminary Objection that should have been dismissed.
The sword of locus standi cannot be employed to becloud a suspected criminal act. The Preliminary Objection of the Appellant could not be a challenge to the exercise of the constitutional right of the 1st Respondent as argued by the learned Counsel for the 1st Respondent. That was giving a “big name to a small fry”. Every party has a right to raise an objection and to counter every point raised against them in an objection. I am of the humble opinion that the learned trial Judge missed the point. The bone of contention in both Preliminary Objections was the provisions of section 299 of CAMA. Having seemingly moved against the company by an alleged conduct, which may be inimical to the company, the Appellant contends that the 1st Respondent is incompetent to raise an issue on behalf of the company; she has lost her objectively. This, to the extent that the 1st Respondent claims to protect the interest of the company. She had been sued by the CEO of the company in the name of the company as an individual not as a principal official of the company. Contrary to the view of the learned trial Judge, the suit is not as between two directors for themselves, but between the company and one of its directors. The 1st Respondent has put her loyally to the company to question by her conduct which gave rise to the main suit. By the alleged conduct, she was incompetent to raise the question of the authorization of the CEO who acted in an emergency to protect the company (Refer: – Sections 63 and 65 CAMA and Sotiminu). The 1st Respondent did not also by her Preliminary Objection before the trial Court exhibit any document from the company challenging the conduct of the CEO in instituting the suit against her person in the name of the company.
In the circumstance, the cases of IVORY MERCHANT BANK VS MAKHAM (supra) and Haston’s do not apply to the advantage of the 1st Respondent. That the 1st Respondent is a signatory to the account does not say she can withdraw money from company account to her own personal account, that is the crux of the matter. The learned trial Judge leaned too much to technicality and was totally blinded to the urgent situation under which the CEO had to move.
Respondent was sued in her personal capacity because she moved company money to her personal account, which is a suspect and an unusual act, Section 299 of CAMA is therefore not available to her. The issue made of the deposition of the CEO in the affidavit that he was; “…duly authorized…to…depose…” is uncalled for. The authority is deemed in the cases of emergency which this suit is. CAMA is not made to render the principal officers of a company helpless and impotent to take steps in emergency situations to protect the interest of the company.
That the 1st Respondent is an authorized operator of the Appellant account makes it even more imperative for the CEO to take the steps he took to protect the alleged ravenous appetite of the 1st Respondent for a huge personal bank account profile. The learned Counsel to the Appellant hit the nail on the head when he said, it would have been irresponsible of the CEO not to file the action and prevent the assets of the company from being dissipated.
The case of Ladejobi Vs Odutola relying in Edward Vs Halliwell (pg.13 of 1st Respondent’s brief) is not applicable and is clearly distinguishable from the instant case. In Edward’s case, it was one member protesting, in the instant case, it is the CEO moving to protect the interest of the company in the general interest of the members of the company against the act of an appointed director (see per Ogundare JSC).
No statute should be applied to defeat the protection of the institution for which it was made to govern. To interpret section 229 of CAMA to render impotent, its principal officer to take preliminary steps to protect the company would be to expose the company to the “viles”, the insatiable appetite of some greedy members of the company who have the propensity to convert company property to private use, The 1st Respondent has not deposed to one reason why she diverted company’s money into her private coffers, She has not exhibited the authority conferred on her to prevent the use of the Appellant’s name in a suit taken out against her. Ex- facie, the ease of the Appellant is protective of the company while that of the Respondent is not
The learned trial Judge obviously erred in reasoning as follows:-
“The Plaintiff’s counsel has argued that by the decision in HASTON’s case supra, a Chie/Executive can act to protect the assets of a company, but I wish to observe that the/acts at HASTON’s case are not similar to the present case, in Haston’s case, the signature of the chairman of the company (who is the sole signatory to the company’s account) was forged and money was withdrawn from the company’s account fraudulently, the Supreme Court held that the Chairman who is the sole signatory and whose signature was forged can institute action to protect the assets of the company, however, in the present case, by “Exhibit ATLIVb” attached to the affidavit in support of the Plaintiffs originating summons, the 1st Defendant was shown to be one of the duly authorized signatory to the account of the Plaintiffs company with the 2nd Defendant. Infact, the exhibit clearly states that the 1st Defendant alone can withdraw money from the company’s account.”
The point is not whether the 1st Respondent could withdraw the money but whether she could carte/rake the company’s money to her personal account all alone when there is a co-signatory. The difference between this case and that of Haston is the fact of forgery of the signature of the chairman; in this case, fraud is indicated by the fact that the money was moved by an authorized signatory into an alleged unauthorized location. Ex – facie, it appears an unethical fraudulent act, and being the CEO, (a co-signatory) he is in a position to know.
Which is the lesser evil, want of authorization to protect the company, or the dissipation of the company’s possession by one of its trusted directors, and without the authority of the company? In the absence of a direct complaint from the company, it would be technical adjudication to throw out the case unheard and dully determined.
I think the former is the lesser evil because the company can always ratify or resile from the prosecution of the suit without loosing anything. Put another way, by the provisions of Sections 63 and 65 of CAMA, the suit taken out by the CEO is not void abinitio, since the company can either ratify or rescind same. Section 299 of CAMA does not make the consent of the company a condition precedent for the institution of the suit in its name. The suit is therefore competent and does not suffer from any of the disabilities highlighted in Nkemdilim (supra). What the CEO has done is adopt an irregular procedure in an emergency. In the case of Mr. Duke Vs Akpabuyo LG, (2005) 19 NWLR Pt.959 P130 @ 143 the Supreme Court held that: –
…”The term” irregularity”, when used in relation to procedures, denotes something not being fundamentally tainting or besmirching a proceeding as to render it invalid or a nullity. That is, it denotes something curable. (P143, paragraphs B – C).
Ex-facie, it is an emergency situation requiring an emergency response, a quick response which the CEO has taken. An efficient CEO on red alert in the general interest of the company should not be put down by technicalities. The era of technicality is past, long interred in the annals of history. Pro-activity and functionality is now the order of the day in adjudication. The law infact develops better when interpreted in terms of utility rather than the hard/dry lifeless letter of technicality. The law is meant to work for the benefit of society not to its detriment.
In the case of Duke vs Akpabuya (supra) the Apex Court counseled that: –
“When a party to a suit is seen to be indulging in a method that is antithetical to due administration of justice, the Court should distance itself from the party”. (P.144 paragraph D).
For whatever purpose, with whatever authority the 1st Respondent moved funds from the company’s account to her personal account, Ex – facie, it is “strange,” and should be placed under check.
A full hearing of the case by the trial Court could reveal the purpose and vindicate the 1st Respondent or save the company from a colossal lost.
This Appeal has merit and is hereby allowed. The decision of trial Court is set aside. The Interim order is restored.
The Hon. Chief Judge of the Federal High Court shall re-assign the case to another Judge to hear and determine the matter on the merit.
A cost assessed at N30,000.00 is awarded to the Appellant and against the Respondent. It is hereby so ordered.
Other Citations: (2008)LCN/2876(CA)
