➥ CASE SUMMARY OF:
NIB Investment (West Africa) V. Chief A. O. Omisore & Ors. (CA/L/518/2002 · 4 Jul 2005)
by Branham Chima (LL.B.)
➥ SUBJECT MATTER(S)
Foss v. Harbottle;
Minority suing;
Reliefs sought;
➥ CASE FACT/HISTORY
The appeal at hand is against the ruling of the Federal High Court, Lagos Division, delivered by Honourable Justice Dan D. Abutu, on the 29th October, 2002, in suit No. FHC/L/CS/867/2001. The court upheld in the main, the defendant’s/respondent’s objection, dated 30th October, 2001, that the plaintiff/appellant’s had no locus standi to institute the action. The plaintiff was the respondent to that motion, at the lower court and is now the appellant in this court, and its action was instituted by writ of summons and statement of claim, dated 17th October, 2001 respectively, against the defendants/applicants, who are the respondents in this court. The lower court consequent to the objection struck out the appellant’s suit. The appellant is greatly dissatisfied and the reason for filing an appeal against the said decision.
At paragraph 23 of its statement of claim, at pages 8-9 of the record of proceedings, the appellant then sought for various declarations and orders to the effect that the 5th respondent is not a member of the 6th respondent’s company. That the appointment of the 1st to 4th respondents as directors of the 6th respondent was irregular, null and void and of no effect. A further order was also sought to set aside the acts of the 1st to 5th respondents. There was also the appellant’s prayer for the refund by way of restitution to the 6th respondent, a total sum of ₦50,000,000, fifty million naira allegedly wrongly expended by the 1st to 5th respondents.
The Respondents herein by their joint statement of defence dated 30th October, 2001, at pages 1-13 of the supplementary record of appeal, denied the case of the appellant as generally stated or contained in the statement of claim. They however set out prolific caveat relating to points of law in paragraphs 5, 13 and 19 of their statement of defence thereof which inter alia challenged not only the locus standi of the appellant to institute the action, but also the jurisdictional competence of the court to entertain same.
By the respondent’s motion on notice dated 30th October, 2001, same prayed for the disposal of the points of law raised in the statement of defence and for purpose of dismissing or striking out the plaintiffs suit. Both parties filed various affidavits; to wit main, further, counter and further counter as well as replies to same respectively. Both main and supplementary records of proceeding are evidence in support. At pages 81-105 of the main record of proceeding, arguments of counsel were taken on the point of law set down for hearing and at the end of which the lower court by its ruling upheld the objection of the respondents on the issue of locus standi and struck out the appellant’s suit.
Being dissatisfied with the decision of the lower court, the appellant by its notice of appeal dated and filed on 12th November, 2002, appealed on three grounds at pages 119-121 of the record.
➥ ISSUE(S)
I. Whether the appellant has locus standi to institute suit No. FHC/L/CS/867/2001 against the respondents and seek the reliefs stated therein?
➥ RESOLUTION(S) OF ISSUES
[APPEAL DISMISSED]
↪️ ISSUE 1: IN RESPONDENT’S FAVOUR.
[THE APPELLANT HAS NO RIGHT TO SUE; HE HAS STATED NO RIGHT OF HIS WHICH WAS BREACHED
‘Deducing from the exceptions reproduced, it is expected that there must first be an application made by a member, to the court for an order of injunction or declaration to restrain the company. The injunction or declaration are the reliefs which must be sought or asked for, in the absence of which the court could not act in a vacuum. The question as rightly posed by the learned respondents’ Counsel and which is appropriate relates to whether there is a claim for declaration or injunction by the appellant seeking to restrain the 6th defendant/respondent from entering into any transaction which is illegal or ultra vires or to restrain the said 6th respondent from any act or omission affecting the appellant’s individual right as a member? With reference to the briefs of parties, it is obvious that both counsel have called on us to consider the writ of summons, statement of claim and the reliefs sought in the action. The reliefs claimed by the appellant as contained in its statement of claim are reproduced at pages 8-9 of the record of proceedings.’
‘It is as rightly submitted and argued by the respondents’ counsel that the appellant has not stated that the 6th respondent entered into any transaction that is contrary to its objects as provided in its Articles and Memorandum of Association. I am however mindful of the argument by the appellant wherein he raised question of illegality or ultra vires act in reference to section 248 of CAMA and consequent to which reliefs 1 and 2 run foul of the said section of CAMA. It is pertinent to reiterate that the said section 248 supra relates to subsequent appointment of directors which power is clearly exercisable by members at the general or the board of directors in the case of casual vacancy as provided under section 249 of the Act. By the said provisions of sections 248 and 249 of CAMA, therefore, the appointment of directors is the business of the general meeting or the board of the company and not that of an individual member. It follows conclusively that the conception by the appellant at paragraphs 9, 10, 11 and 12 of the statement of claim at page 6 of the record which gives an impression as if it is the duty of the individual member of a company to appoint directors is wrongful. With reference to the appellant’s statement of claim at pages 5-8 of the record, it did not, as rightly submitted by the respondent company in any of the 23 paragraphs aver that the board or general meeting did not approve or appoint the 1st, 2nd, 3rd and 4th respondent, as directors of the 6th respondent. The appellant cannot in the circumstance therefore be heard to have made out a case under section 248 of the Act for purpose of making the appointment of the 1st to 4th respondents as directors illegal or ultra vires of the provision of the said section 248 therewith.’
‘It is trite law and elementary, that parties are bound by their pleadings. The plaintiff will also succeed in the relief or remedy he seeks and no more. The case of Shell P.D.C of Nigeria Ltd. v. Nwawka (2003) 6 NWLR (Pt. 815) 184 at 209 is relevant and in support. There is no averment by the appellant which showed that it was deprived from nominating its three directors to the board of the 6th respondent; there is also no averment to show that the annual general meeting or the board of directors did not appoint the 1st to 4th respondents as directors of the 6th respondent. It follows therefore that the arguments by the appellant on the appointment of 1st to 4th respondents being contrary to section 248 of the Act cannot, as rightly submitted by the respondent, stand. Same is discountenanced and consequent to which the appellant cannot have the benefit of that exception as claimed. Further still and by the provision of section 300(c) of CAMA also reproduced (supra), it relates to an invasion of personal right. In other words, it is open to a member who may wish to institute an action to redress a wrong done to him as an individual member of the company. He may in the circumstance apply to the court for declaration or an order of injunction restraining the company from any act or omission affecting the applicant’s individual rights as a member. The provision of Section 41(1) of the Companies and Allied Matters Act 1990 has defined the individual personal rights under the memorandum and articles of the company when registered. On the authority of Obikoya v. Ezenwa (1973) 8 NSCC, 504 for instance, it was held that the Memorandum and Articles of Association constitute a contract not merely between the shareholders and the company but between each individual shareholder and every other. A member is free and at liberty to seek redress for any infringement of his rights. In the instant appeal at hand, the appellant had not pleaded on its statement of claim of its individual right that the respondent breached or invaded. The emphasis here is on the phrase “individual right”, which must be pleaded and with same having been conferred on it by the Articles and Memorandum of the 6th respondent, and being the subject matter of the breach thereof.’
‘If fraud was perpetrated in the expenditure of the N50 Million, the particulars of the fraud have not been supplied in the statement of claim to enable the appellant have a standing to institute the action. The learned trial Judge Abutu J. was right to state that when an irregularity has been committed in the course of the company’s affairs or any wrong has been done to the company, only the company can sue to remedy the wrong or ratify the irregular conduct.’]
.
.
.
✓ DECISION:
‘On the totality of the appeal before us, the appellant in the entire circumstance has not made out any claim for injunction or declaration seeking to restrain the 6th respondent from entering into any alleged illegal or ultra vires transaction. Hence the provisions of section 300 (a), (c) or (d) of CAMA cannot avail the appellant as sought. In my humble deduction therefore, the principle of the rule in Foss v. Harbottle, which is codified under the provision of section 299 of the Companies and Allied Matters Act is applicable to this case as rightly arrived at by the learned trial Judge. In other words, the decision by the lower court stands firm per its findings and consequent to which I hold that there is no merit in this appeal which same should and therefore fails while the ruling of the Federal High Court, Lagos Division per Hon. Justice Dan. D. Abutu delivered on 29th October, 2002, in Suit No. FHC/L/CS/867/2001 is hereby affirmed. With costs following events, same is hereby assessed at ₦10,000 to the respondent.’
➥ FURTHER DICTA:
⦿ THE LOCUS CLASSICUS CASE OF FOSS V. HARBOTTLE
The locus classicus common law rule in Foss v. Harbottle (supra) is well founded with its articulated conceptual application restating that to redress a wrong done to a company or to the property of a company or to enforce the right of a company, the proper plaintiff is the company itself and the court will not entertain an action brought on behalf of the company by a shareholder. The said rule has widely been followed by Nigerian courts in a number of cases and thus culminating in the codification of same in our legal system by the provision of Section 299 of the Companies and Allied Matters Act. A number of Nigerian cases which applied the common law rule include Sparks Electronics Nig. Ltd. v. Ponmile (1986) 2 NWLR (Pt. 23) 516; Mbene v. Ofili (1968) NCLR 293; A.R.E.C. Ltd. v. Amaye (1986) 2 NWLR (Pt. 31) 653; Omisade v. Akande (1987) 2 NWLR (Pt. 55) 158. — C.B. Ogunbiyi JCA.
⦿ PARTIES WHO MAKE A CONTRACT MAKE LAW WHICH BINDS THEM
It is pertinent to restate that when parties make a contract it is within their own prerogative to make their own law to which they are subject. Same also creates the rights and obligations which bind them. The general law in the circumstance only gives recognition and force. In other words, and relating to the issue at hand, it is the Articles and Memorandum of Association and CAMA that creates right and obligation which bind the members of the company. The Constitutional provision vide section 6(6) of 1999 therefore only gives recognition thereto as the general law. — C.B. Ogunbiyi JCA.
➥ LEAD JUDGEMENT DELIVERED BY:
Clara Bata Ogunbiyi, JCA.
➥ APPEARANCES
⦿ FOR THE APPELLANT(S)
Chris Otuma, Esq.
⦿ FOR THE RESPONDENT(S)
Odebowale, Esq.
➥ MISCELLANEOUS POINTS
➥ REFERENCED (LEGISLATION)
➥ REFERENCED (CASE)
➥ REFERENCED (OTHERS)
