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CITEC Intl Estates Ltd & Ors v. Francis & Ors (2021) – SC

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➥ CASE SUMMARY OF:
CITEC Intl Estates Ltd & Ors v. Francis & Ors (2021) – SC

by PipAr Chima

➥ COURT:
Supreme Court – SC.720/2017

➥ JUDGEMENT DELIVERED ON:
Friday, January 15, 2021

➥ AREA(S) OF LAW
Locus standi;
Fair hearing;
Company decisions.

➥ NOTABLE DICTA
⦿ ISSUE DERIVED FROM BOTH COMPETENT & INCOMPETENT GROUND
It is also settled law that an issue for determination can only be distilled from a competent ground or competent grounds of appeal. As observed earlier, in a situation where an issue for determination is derived from both competent and incompetent grounds, the issue is liable to be struck out for incompetence. – Kekere-Ekun JSC.

⦿ OBITER DICTUM DISTINGUISHED FROM RATIO DECIDENDI
An obiter dictum is an expression of opinion made by a Judge in passing in the course of delivering judgment, but which does not decide the live issues in the matter. The ratio decidendi on the other hand, is the principle of law upon which a particular case is decided. It has the binding force of precedent. All lower Courts are bound by the ratio decidendi of the decision of a higher Court. The ratio decidendi has also been defined as “the reason for deciding.” – Kekere-Ekun JSC.

⦿ COURT HAS NO JURISDICTION WHERE LOCUS STANDI IS LACKING
Locus standi connotes the legal capacity to institute an action in a Court of law. It is a threshold issue that affects the jurisdiction of the Court to look into the complaint. Where the claimant lacks the legal capacity to institute the action, the Court, in turn will lack the capacity to adjudicate. In order to have locus standi, the claimant must have sufficient interest in the suit. For instance, it must be evident that the claimant would suffer some injury or hardship or would gain some personal benefit from the litigation. – Kekere-Ekun JSC.

⦿ STATEMENT OF CLAIM HAS TO BE SCRUTINIZED TO DETERMINE LOCUS STANDI
It cannot be disputed that the question whether or not a plaintiff has a locus standi in a suit is determinable from a totality of all the averments in his statement of claim. In dealing with the locus standi of a plaintiff, it is his statement of claim alone that has to be carefully scrutinized with a view to ascertaining whether or not it has disclosed his interest and how such interest has arisen in the subject-matter of the action. Where the averments in a plaintiffs statement of claim disclose the rights or interests of the plaintiff which have been or are in danger or being violated, invaded or adversely affected by the act of the defendant complained of, such a plaintiff would be deemed to have shown sufficient interest to give him the locus standi to litigate over the subject-matter in issue. – Abba Aji JSC.

Also read:  Bashiru A. O. Rosenje v. Madam Salamotu Bakare (1973)

➥ PARTIES
1. CITEC International Estates Ltd
2. Bello Saka Oludare
3. Akin Fayinminu
4. Nurudeen Jinadu
5. Goke Odunlami

v.

1. Josiah Oluwole Francis
2. Mrs. Josiah Olusola Abiodun
3. Josiah Michael
4. Fasubaa Albert Ademola
5. Mrs. Bello Aderonke
6. Corporate Affairs Commission

➥ LEAD JUDGEMENT DELIVERED BY:
Kudirat Motonmori Olatokunbo Kekere-ekun, J.S.C.

➥ APPEARANCES
⦿ FOR THE APPELLANT
A.M. Kayode Esq.

⦿ FOR THE RESPONDENT
Kehinde Ogunwumiju, SAN.

➥ CASE HISTORY
The 1st appellant, CITEC International Estates Ltd. was duly incorporated on 16th February, 2001 as a limited liability company under the provisions of the Companies and Allied Matters Act (CAMA), with a share capital of 2 million ordinary shares. The 1st – 4th respondents owned 95% of the share capital while the 2nd Appellant, Bello Saka Oludare, owned the balance of 5%. The 1st, 2nd and 4th Respondents as well as the 2nd Appellant were the original directors of the company. By an ordinary resolution passed on 1st April 2002, the share capital of the company was increased to 10 million.

It was alleged that the company held board meetings on the 9th and 10th of March 2006 whereby the 1st respondent was removed as chairman and his official residence and vehicle withdrawn. It was contended that due process was not followed in his removal. Another board meeting took place on 4th April 2006. It was alleged that notwithstanding the fact that the 1st – 4th respondents were not given notice of the meeting and the members present were unable to form a quorum, the several decisions were reached.

At another board meeting held on 6th October 2006, the names of the 1st – 4th respondents were removed as signatories to the company’s accounts.

The houses allocated to the 1st and 4th respondents were put up for sale. The 1st – 4th respondents were suspended and their salaries stopped. It was alleged that the 1st – 4th respondents, have by all the actions complained of, been deprived of their rights as shareholders, directors and management staff of the company without notice to them and without being given the opportunity of being heard.

Also read:  MTN Nigeria Communication Limited v. Corporate Communication Investment Limited (2019) - SC

As a result, they instituted an action before the Federal High Court, Abuja seeking the declaratory and injunctive reliefs reproduced below, aimed at restoring them to their original positions within the company and restoring their rights and entitlements.

This appeal is against the judgment of the Court of Appeal, Abuja Division delivered on 7th July 2017, wherein the Court allowed the appeal filed by the present 1st – 4th respondents and set aside the decision of the trial Federal High Court, Abuja Division.

➥ ISSUE(S) & RESOLUTION
[APPEAL: DISMISSED, WITH N2,000,000 IN RESPONDENT’S FAVOUR]

I. Whether or not the lower Court was right when it held that the 1st – 4th respondents possess the locus standi to institute this action?

RULING: IN RESPONDENT’S FAVOUR.
I.A. I agree with learned senior counsel for the 1st – 4th respondents that the rule in Foss Vs Harbottle (supra) is inapplicable in the present circumstances. The complaints are not complaints of wrongs done to the company. Their grievance is that they have been denied their rights to notice of meetings where decisions affecting their individual rights were taken. They also contend that the allotment of 8 million unallotted ordinary shares of the 1st Appellant by the 2nd Appellant to members and non-members of the 1st Appellant without regard to their right of first refusal is ultra vires, illegal, unlawful and accordingly null and void. Another complaint is in relation to the intended sale of their official quarters, their suspension and the stoppage of their salaries.
.
.
II. Whether or not the Court below was right when it held that it was not necessary for the 1st – 4th respondents to seek and obtain leave of Court to institute the action, as same was not a derivative action?

RULING: IN RESPONDENT’S FAVOUR.
II.A. In the course of resolving Issue 1, I held that the suit of the 1st – 4th respondents does not seek to redress any wrong done to the 1st Appellant but to protect and enforce their individual rights. The suit cannot, by any stretch of the imagination, be considered to be a derivative action. It follows therefore that they did not require prior leave for their suit to be properly instituted. I also held that the said suit was properly commenced by Writ of Summons and Statement of Claim and was therefore competent.

Also read:  Warri Refining & Petrochemical Co. Ltd. v. GECMEP Nigeria Limited (2020)

➥ MISCELLANEOUS POINTS

➥ REFERENCED (STATUTE)
Section 41 CAMA;
Section 300(C), 303, CAMA;

➥ REFERENCED (CASE)
⦿ WHO MAY SUE FOR INJURIES DONE TO THE COMPANY
Jenkins, L.J. in Edwards Vs Halliwell (1950) 2 ALL ER 1084 @ 1066, where His Lordship held inter alia: “The rule in Foss Vs Harbottle, as I understand it, comes to no more than this. First, the proper plaintiff in an action in respect of a wrong alleged to be done to a company or association of persons is prima facie the company or the association of persons itself. Secondly, where the alleged wrong is a transaction which might be made binding on the company or association and or all its members by a simple majority of the members, no individual member of the company is allowed to maintain an action in respect of that matter for the simple reason that if a mere majority of the company or association is in favour of what has been done, then cadit quaestio. Thus, the company or association is the proper plaintiff in all actions in respect of injuries done to it. No individual will be allowed to bring actions in respect of acts done to the company which could be ratified by a simple majority of its members. Hence the rule does not apply where the act complained of was ultra vires the company, or illegal or constituted a fraud on the minority and the wrongdoers are in the majority and in control of the company.”

⦿ COMPANY LAW – WHAT IS A DERIVATIVE ACTION
Unipetrol (Nig.) Plc Vs. Agip (Nig) Plc (2002) 14 NWLR (Pt. 787) 312 @ G – N, the Court of Appeal per Aderemi, JCA (as he then was), in interpreting the above provisions, held, inter alia, “It has now become accepted as settled in law that a derivative action is an action brought by a shareholder in the name of himself and all other shareholders to enforce the company’s rights. The company must be joined as a defendant to the action so that it becomes a patty to the action and judgment can be given in its favour so that it will be bound by the Court’s judgment.”

➥ REFERENCED (OTHERS)

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