Fasel Services Limited & Anor. V. Nigerian Ports Authority & Anor (2009)

LAWGLOBAL HUB Lead Judgment Report

MOHAMMED, J.S.C

Fasel Services Limited, the 1st Appellant in this appeal is a Limited Liability Company which was incorporated on 22nd August, 1978 with the then registered name of Fag Africana Services Limited. The 2nd Appellant Chief M. O. Kanu is the Chairman and Chief Executive of the Board of Directors of the 1st Appellant. Between 1983 and 1986, the 2nd Respondent which is a body or fund established and funded by the 1st Respondent, a body created by the Federal Government of Nigeria by statute, bought and was duly allotted with 1,330,000 Ordinary Shares of the 1st Appellant Company. When between 1987 and 1989, the 1st Appellant found itself in financial stress resulting in the appointment of a receiver manager by one of its creditors; it approached the 2nd Respondent to further invest in the Company by the purchase of additional shares and provision of loan through acquisition of Debentures secured by Deed of Mortgage. This request resulted in further investment by the 2nd Respondent in the 1st Appellant Company to the tune of N52,000,000.00. Of this amount, the sum of N20,000,000.00 was invested in the purchase of additional Ordinary Shares while the sum of N32,000,000.00was invested in form of a loan secured by a Mortgage of Debentures of the 1st Appellant.

It was common ground on the undisputed facts of this case between the parties that the sum of N32,000,000.00 further invested by the 2nd Respondent by way of Debenture Mortgage had since been redeemed by the 1st Appellant. However in 1995, the 2nd Respondent again acquired additional Ordinary Shares of the 1st Appellant, bringing its total number of shares in the Company to 28,639,687. Although the 2nd Respondent as shareholder of the 1st Appellant had received dividends in the sum of N1,413,445.00, N1,919,700.00, N2,559,600.00 and N2,557,571.83 for the financial years of 1992, 1993, 1994 and 1995 respectively, and despite the declaration of 13 kobo, 10 kobo and 20 kobo respectively as dividends per share of the Company for the financial years of 1996, 1997 and 1998, only the sum of N763,558.74 representing dividends payment on only 1,300,000 units of shares out of the number of shares of 28,639,687 held by the 2nd Respondent, was actually paid to the 2nd Respondent. The refusal of the 1st Appellant to pay the correct amount of dividends due to the 2nd Respondent having regard to the number of shares held by it in the 1st Appellant which apparently regarded the entire investment of the 2nd Respondent in it as illegal being in violation of the Trustee Investments Act, gave rise to the dispute between the parties resulting in the Respondents’ action as Plaintiffs by Originating Summons against the Appellants as Defendants setting down the following questions and consequent reliefs for determination by the trial Federal High Court:

“1. Whether in the light of the 27,309,687 shares certificates issued by the 1st Defendant Company to the 2nd Plaintiff the Defendants especially the 2nd Defendant’s Company can deny the Plaintiff the rights as shareholder of the said 27,309,687 Units of Ordinary Shares..

2. Whether the provisions of the Trustees Investments Act CAP 449 Laws of the Federation 1990

Edition renders the said 27,309,687 Units of Ordinary Shares held by the 2nd Plaintiff in the 1st Defendant Company illegal.

3. Whether the provisions of the Trustees Investments Act, CAP 449 Laws of the Federation 1990 Edition wholly and exclusively regulate Plaintiffs Investment Powers.
4. Whether the Defendants who are neither contributors nor beneficiaries of the 2nd Plaintiff’s fund, have the locus standi, to challenge the Plaintiff’s investment of 27,309,687 Units of Ordinary Shares in the 1st Defendant Company. If the answers to 1, 2, 3 or 4 above are/is in the negative, the Plaintiffs claim:

(A.) A declaration that the 2nd Plaintiff as the lawful Shareholder of the 27,309,687 Million Units of Ordinary Shares of the 1st Defendant Company is entitled to exercise all the Shareholders rights in respect of the 27,309,687 Million Units of shares especially the right to receive dividends thereof from the 1st Defendant.

(B.) An order directing/compelling the Defendants especially the 2nd Defendant to do pay forthwith, dividends to the 2nd Plaintiff on the said 27,309,687 Million Units of Ordinary Shares for 1996, 1997 and 1998 financial years.”

This Originating Summons of the Plaintiffs now Respondents filed on l5th June, 1999 at the trial Federal High Court Abuja, came before Auta J., who in a considered judgment delivered on 31st January, 2000 found in favour of the Plaintiffs/Respondents. Part of this judgment at pages 137 – 138 of the record reads –

“In conclusion the best the Defendants can do now that they are bouyout is to buyout the Plaintiff and pay them the correct market price of their shares, and also pay them their due, dividend. In view of the observation made by me above I find that the 1st Defendant and 2nd Defendant, cannot deny the Plaintiff their rights as shareholders of the said 27,309,687, Units of Ordinary Shares. The provisions of Trustees Investments Act CAP 449 LFN do not render the said 27,309,687 Units of Ordinary Shares by the 2nd Plaintiff in the 1st Defendant Company illegal. The Defendants are therefore ordered to pay forthwith, dividends to the 2nd Plaintiff on the said 27,309,687 Units of Ordinary Shares for 1996, 1997 and 1998 years, till date. The application of the Plaintiff accordingly succeeds.”

The Appellants were not happy with this decision of trial Court against them and therefore decided to appeal to the Court of Appeal where the Appellants in their Appellants’ brief of argument, raised only one issue for the determination of their appeal. That issue states –

“Whether the investment of the 2nd Respondent in the 1st Appellant’s Company contravenes the provisions of Section 2(1)(d) and Section 2(2)(b.) & (c.) of the Trustees Investments Act CAP 449 LFN 1990 and therefore rendered the said investment illegal and unenforceable even where the said illegality was not pleaded.”

In a unanimous decision of the Court of Appeal Abuja Division with Muhammad JCA (as he then was) delivering the lead judgment on 30th January, 2003, the Appellants’ appeal was dismissed and the judgment of the trial Court which found the provisions of the Trustee Investments Act CAP 449 Laws of the Federation 1990, do not render the investment of the 2nd Respondent in the 1st Appellant Company illegal or unenforceable, was accordingly affirmed.

The Appellants still dissatisfied with the decision of the Court of Appeal dismissing their appeal, have now further appealed to this Court. In their Appellants’ brief of argument, the following three issues for the determination of their appeal were formulated –

“1. Whether on the strength of the available evidence, the lower Court was right, in not setting aside the judgment of the trial Court, or in not itself declining jurisdiction (Related to Ground D). 2. Whether based on the evidence of both parties the Plaintiff/Respondent is not precluded from seeking the aid of the Court, considering that reliefs sought in the Originating Summons are to perpetuate the enforcement of a void/illegal contract, in which both parties are guilty or in contravention of a prohibitive statute (Related to Grounds A, B, & C).