Alhaji M. U. Gombe V. P.w. (Nigeria) Limited & Ors (1995)
LAWGLOBAL HUB Lead Judgment Report
The Petitioner by an amended petition filed in the Federal High Court, Ilorin on the 17th October, 1988 prayed as follows:-
“(i) That P.W. (Nigeria) Limited be wound-up by the Court under the provision of the Companies Act 1968.
(ii) And for such further order(s) as may be just to make in the circumstance.
(iii) Your humble petitioner will at the hearing of the petition rely on the Certificate of Incorporation of the Company. Photostat copy of the letter ref. No. CAD/CR/POL.200/13 and the letters stated in paragraphs above and or any other document or documents in any way connected with the petition.”
While the petition was still pending the petitioner brought an interlocutory application in these terms:-
(1) An order that P.W. of Dublin, its servants or agents or howsoever, be restrained from holding out itself as having proprietary interest either as shareholder or Director or Managing Director in the respondent company and to render accounts for the period Mr. H. V. Flinn or any other person (representative of P.W. Dublin) was Managing Director of the respondent company.
(2) An order of the Honourable Court that an independent manager other than the present ones be appointed to manage and control the affairs of the company and to receive all monies, profits, rents and or interests due or receivable by the respondent company pending the determination of this case.
(3) An order of the court directing the Registrar of Companies to strike out the name of P.W. Dublin from the list of member shareholder of P.W. (Nigeria) Limited.
(4) A declaration that the purported allotment of shares to P.W. Dublin is invalid, null and void and of no effect whatsoever.
(5) An order that P.W. Dublin through its agent Mr. H.V. Flinn make reparation for and refund of all monies, properties movable and immovable made to the said P.W. Dublin in the course of the invalid allotment and exercise of proprietary rights in the respondent company.
AND FOR such further order(s) as the Honourable court may deem fit to make in the circumstance.”
The application was supported by an affidavit and a further affidavit all sworn to by the petitioner. The respondent also filed its own counter-affidavit and further counter-affidavit. In a considered ruling the learned trial Judge Eigbedion J., struck out the name of one Mr. H.V. Flinn whom the petitioner chose to have made a party in the suit without the leave of court and then dismissed the application thus:-
“As I held herein before, the application is a misconceived one, as I find no basis for bringing (the application. Secondly, it is my considered opinion, that the Rule in Foss V. Harbottle (1843) 2 Hg 461 applies to this application. Having so held, the orders sought by the petitioner/applicant must, and are hereby refused.
The application is dismissed in its entirety.”
Dissatisfied with the ruling above, the petitioner appealed to the Court of Appeal, Kaduna Division. Meanwhile while the appeal was still pending and yet to be decided by the Court of Appeal, the petitioner filed a fresh motion on notice dated the 19th day of February, 1990 praying for the following orders:-
“(1) An order that the purported Annual General Meeting of the 1st respondent company held on the 29th January, 1990 inspite of motion of 16/1/90 still pending at Sheraton Hotel, Lagos is null and void and of no effect.
(2) An order setting aside all resolutions taken in pursuance of the said meeting.
(3) An order of the court removing 2nd respondent H. V. Flinn as the Managing Director of the 1st respondent company.
(4) An order of the court that N7.3 million profit declared by the 1st respondent company for the year 1988 be paid into fixed deposit account and to a bank approved by the Honourable court, pending the determination of the petition for winding up and that applicant be made a signatory to the said account or alternatively.
That the profit of N7.3 million declared by the 1st respondent for the year 1988 be paid into the court and Chief Registrar to hold same on trust for the parties pending the determination of the case.
(5) An order of the court that the purported increase of shares capital of the company dated 31/5/88 and 21/5/88 and in the hand of H.V. Flinn (2nd respondent) is null and void and of no effect.
(6) An order that the respondents jointly and severally by themselves, their agents or servants or whosoever be restrained and that an injunction restraining them jointly and severally from calling or holding the Annual General meeting of the 1st respondent company now at any time until the determination of the appeal and the substantive petition now pending before the Honourable Court of Appeal and the Honourable Federal High Court, Ilorin.
(7) An order restraining the respondents jointly arid severally by themselves, their agents or servants or howsoever and that an injunction be granted restraining them from altering, modifying, increasing or in any manner howsoever from interfering with the share capital or membership of the 1st respondent company until the determination of the substantive suit in FHC/2/M/88 and the appeal now pending before the Honourable Court.
And for such further Order(s) as the Honourable Court may deem fit to make in the circumstance.”
There were affidavits in support of the motion and counter-affidavits in opposition. In a reserved ruling delivered on the 13th day of June, 1990 the Court of Appeal ruled that it had no jurisdiction to hear and determine the motion and dismissed it accordingly.
Not satisfied with the ruling of the Court of Appeal, the petitioner has now appealed to this court. This appeal against the Court of Appeal ruling of 13/6/90 will hereinafter be referred to as “APPEAL Number One”. The appeal against the ruling of the Federal High Court of 26th July, 1989 was later heard by the Court of Appeal on 13/9/90 and judgment delivered on 11th December, 1990. The Court of Appeal in its judgment affirmed the ruling of the trial Federal High Court and dismissed the appeal in its entirety.
Aggrieved by the decision of the Court of Appeal the petitioner has once more appealed to this Court. This appeal against the judgment of the Court of Appeal delivered on 11/12/90 will hereinafter be referred to as “Appeal Number TWO”. The petitioner shall henceforth be called the “appellant” in the two appeals.
The two appeals will now be treated in turn.
APPEAL NUMBER ONE
Lest you forget, this is an appeal against the ruling of the Court of Appeal itself, refusing or dismissing the petitioner’s motion filed before it on the ground of want of jurisdiction. I have already reproduced above the terms of the motion. The appellant filed five grounds of appeal and submitted five issues for determination on pages 3 & 4 of his brief. But it is my view that they can conveniently be reduced into two issues as follows:-
- Whether or not the Court of Appeal has original jurisdiction to hear and determine the application filed before it; and
- Whether or not the order of dismissal by the Court of Appeal was the proper order to be made in the circumstances of the case.
Mr. Kareem learned counsel for the appellant adopted the brief filed on behalf of the appellant at the hearing. He said the facts are not disputed and that the central point in the appeal is the jurisdiction of the Court of Appeal to entertain the motion. He said the reliefs sought by the appellant being temporary or interim orders in nature, pending the determination of the appeal, the Court of Appeal had the necessary jurisdiction to entertain the application. He referred to section 16 of the Court of Appeal Act, 1976 and to Order 1 rule 20(8) of the Court of Appeal Rules 1981. The cases of Akilu v. Fawehinmi (No.2) (1989) 2 NWLR (Pt.102) 122 and Okotie-Eboh v. Okotie-Eboh (1989) 1 S.C. 479; (1989) 4 NWLR (Pt. 113) 113 were cited in support. He said the Court of Appeal has the power to preserve the res and prevent the respondent from carrying out the capital restructuring of the company subject matter of the appeal. He referred to Kigo v. Holman Bros. (1980) 5-7 S.C. 60.
It was also submitted that the Court of Appeal erred in law when having declined jurisdiction, it proceeded to dismiss the application instead of simply striking it out. The court was urged to allow the appeal.
Mr. Nweke learned counsel for the respondents in reply submitted that the jurisdiction of the Court of Appeal is wholly appellate. He referred to Section 219 of the 1979 Constitution. He said section 16 of the Court of Appeal Act has defined the general powers of the Court which include inter alia power to make an interim order or grant an injunction which the court below is authorised to make or grant. Similarly Order 1 rule 20(5) of the Court of Appeal Rules also gives the Court of Appeal wide powers in relation to appeals before it and enables the court to exercise
all the powers of a court of first instance. He said for the Court of Appeal to exercise its jurisdiction under section 16 of the Act or under Order 1rule 20(5) of the Rules, there must first and foremost be an appeal from the court below before the Court of Appeal. He cited in support Mrs. Alero Jadesimi (Nee Okotie-Eboh) v. Adolo Okotie-Eboh (1986) 1 NWLR (Pt.16) 264 at 274 per Karibi-Whyte, J.S.C.
It was submitted that since there was no appeal filed by the appellant at the Court of Appeal when he filed the application which was never decided by the Federal High Court, the Court of Appeal could not have invoked section 16 of the Act or Order I Rule 20(5) of the Rules and that the Court of Appeal rightly declined jurisdiction.
Learned counsel for the respondents however conceded, rightly in my view, that when the Court of Appeal declined jurisdiction the proper order it would have made was that of striking out the application. He said the order of dismissal made by the Court of Appeal was not the correct and proper order to make. Subject to this, counsel urged the court to dismiss the appeal.
On the issue of jurisdiction, the Court of Appeal after considering the cases of Western Steel Works Ltd. v.lron & Steel Workers Union (1986) 3NWLR ((Pt.30) 617; Fawehinmi v. Akilu (1989) 3 NWLR (Pt. 112) 643 at 671 ; Akilu v. Fawehinmi (No.2) (1989) 2 NWLR (Pt.102) 122 at 197 and Mrs. Alero Jadesimi v. Adolo Okotie-Eboh (1986) 1 NWLR (Pt. 16) 264 came to the following conclusion on page 607 of the lead judgment:-
“The prerequisite of the exercise by this Court of its inherent jurisdiction under Section 6(6) of the Constitution, and its other enabling powers of rehearing under Section 16 of the Act, is an appeal duly entered and pending before it, and in respect of which so much of the records of the lower court necessary for hearing and determining the appeal or matter before it has been filed. An application, like the one in hand, in respect of which the lower court was not seised, nor given a decision appealed and for which no record of the court below is placed before this Court, cannot be entertained for lack of jurisdiction under Sections 219 to 225 of the 1979 Constitution, nor under the ancillary provisions of Section 6 of the 1979 Constitution, Section 16 of the Court of Appeal Act 1976, as well as Order 1 rule 20(5) of the Court of Appeal Rules, 1981.
The motion herein has invoked an original jurisdiction which this Court does not have. This application should have been directed to the court below which has powers, under Sections 300 and 304 of Decree No. 1 of 1990………………….. ”
I have considered the submissions of counsel in the case and come to the conclusion that the Court of Appeal was right to have declined jurisdiction. I have also closely examined the orders sought in the application above and irresistibly also come to the conclusion that the orders sought are quite extensive which go beyond the ambit of the interlocutory appeal actually then pending before the Court of Appeal (Appeal No.2 herein). The Court of Appeal was clearly incompetent to entertain those matters not being a court of first instance. I agree with the Court of Appeal that neither section 6(6) of the Constitution nor section 16 of the Court of Appeal Act nor Order 1 rule 20(5) of the Court of Appeal Rules was of any assistance to the appellant in the application.
But the Court of Appeal having declined jurisdiction was clearly in error when it proceeded to dismiss the application instead of striking it out. The appeal therefore succeeds in part only. The order of the court below declining jurisdiction to entertain the application is upheld; while the order dismissing the application is hereby substituted with an order striking out the application.
APPEAL NUMBER TWO
I have earlier reproduced above the interlocutory motion or application filed before the trial Federal High Court in a substantive petition for the winding up of the respondent company by the appellant. The application was heard and the learned trial Judge in his ruling after due consideration of the affidavit evidence and the submissions of counsel dismissed the application. The appellant then appealed to the Court of Appeal, Kaduna. The Court of Appeal in its judgment delivered on the 11th day of December, 1990 dismissed the appeal and affirmed the ruling of the trial Court.
Dissatisfied with the judgment of the Court of Appeal the appellant again appealed to this court.
The parties filed and exchanged briefs which were adopted at the hearing.
The appellant’s brief contained seven issues for determination which the respondents quite properly summarised into three as follows:-
“(i) Whether or not the appellant has locus standi to initiate an action in respect of a wrong done to the company. In other words does the rule in Foss v. Harbottle apply in this case
(ii) Whether or not Mr. H. V. Flinn (representing Public Works Limited of Dublin) should have been joined as a party to this suit.
(iii) Whether or not Public Works Limited of Dublin is an existing company and a shareholder in the first respondent company.”
Needless to state that these same issues were amongst the four issues raised at the Court of Appeal and which were duly considered before they were dismissed.
On issue (i) Mr. Kareem learned counsel for the appellant submitted as follows:1.
- The matters in the application are matters which the majority cannot rectify or remedy.
- The 2nd respondent is the alter ego of the 1st respondent company.
- The 2nd respondent committed and still commits the alleged acts of dishonesty and fraud complained of.
- The 2nd respondent retains the management and control of the 1st respondent.
- The factual situation does not bring the case within the rule in Foss v. Harbottle but rather within its exceptions.
These cases were cited –
Edwards v. Halliwell (1950) 2 AER 1064 at 1066;
Omisade v. Akande (1987) 2 NWLR (Pt.55) 158;
Spoke v. Grosvenor Hotel (1897) QBD 124;
Waller-sterner v. Moir (No.2) (1975) 2 WLR 389.
Mr. Nweke for the respondents submitted that the learned trial Judge properly applied the rule in Foss v. Harbottle to the case and that the exceptions to the rule do not apply. He referred to the case of Edwards v. Halliwell (supra) and to page 92 of the ruling of the trial court. He said on the face of the amended petition it would be observed that Mr. H. V. Flinn is an employee and Managing Director in the 1st respondent company and that he has no control over the 1st respondent in the con of majority shareholding. He referred to Wallersteiner v. Moir (supra). The Amended Petition he said clearly shows that Nigerians are the majority shareholders and in control of the 1st respondent company. A case of fraud by those in control of the 1st respondent was not made out and the exception to the rule did not apply, It was finally submitted that the appellant failed completely to show on the face of the Amended Petition that he has locus standi and that both the Federal High Court and the Court of Appeal were right when they held that the rule in Foss v. Harbottle applied to the application of the appellant. He cited the case of Thomas v. Olufosoye (1986) 1 NWLR (Pt.18) 669 at 681, para. H (Pt. 18).
On this issue of appellant’s locus standi, the learned trial Judge had this to say on page 91 of the record –
“The petitioner/applicant holds N30.000 shares in the company. He is suing in his name. The sum total of his complaint is that Mr. H.V. Flinn, the Managing Director of the company is defrauding the company by sending the company’s money abroad in different guises. Mr. Flinn is not a shareholder or member of the company, He is an employee of the company and therefore a third party. The principle in the rule of Foss v. Harbottle (1843) 2 Hg. 461. is that prima facie every action must be brought in the name of the company to remedy a wrong done to it for the court has no jurisdiction into the internal management of a company. The rule does not of course prevent a member from suing in respect of an individual wrong.” The learned trial Judge thereafter considered the exceptions to the rule and concluded on page 93 of the judgment thus:-
“As I held herein before the application is a misconceived one. As I find no basis for bringing the application, Secondly, It is my considered opinion that the rule in Foss v. Harbottle (1843) Hg. 461 applies to this application. Having so held, the orders sought by the petitioner/applicant must and are hereby refused. The application is dismissed in its entirety.”
The Court of Appeal agreed with the finding of the trial court that the wrongs complained of by the appellant, if at all, were wrongs done to the company and that only the company could redress them whereupon it dismissed the appeal.
It is significant that there is no appeal against any finding of fact made by the learned trial Judge and on which he relied to come to the conclusion that the rule in Foss v. Harbottle (supra) applied to the application of the appellant in this case. I therefore find no difficulty on the facts in agreeing both with the decisions of the trial court and of the Court of Appeal that the rule in Foss v. Harbottle applied and that therefore the appellant had no locus standi. In Edwards & Anor v. Halliwell & Ors (Supra), Jenkins, L.J. said of the Rule at Pages 1066-1067 as follows:-
“The rule in Foss v. 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 on 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 members of the company or association is in favour of what has been done, then cadit quaestio. No wrong has been done to the company or association and there is nothing in respect of which anyone can sue. If on the other hand, a simple majority of members of the company or association is against what has been done, then there is no valid reason why the company or association itself should not sue. In my judgment, it is implicit in the rule that the matter relied on as constituting the cause of action should be a cause of action properly belonging to the general body of corporators or members of the company or association as opposed to a cause of action which some individual member can assert in his own rights.
The cases falling within the general ambit of the rule are subject to certain exceptions.”
As stated already the lower courts came to a correct decision that the rule applied and I am also satisfied that the factual situation of the case did not bring it within the exceptions to the rule which the learned trial Judge took pains to consider.
Issue (i) is therefore answered in the affirmative. The rule in Foss v. Harbottle (supra) applied and the appellant therefore had no locus standi to bring the application. The term “locus standi” or “standing” which denotes legal capacity to institute proceedings in a court of law or tribunal or the right of a party to appear and be heard on the question before a court or tribunal vide Adesanya v. Shagari (1981) 5 S.C. 112; (1981) 2 NCLR 358 having been resolved against the appellant, it is no longer necessary to consider the remaining two issues. Suffice it to say however, that neither Mr. H. V. Flinn nor the Public Works Limited of Dublin is a party to the winding up petition filed by the appellant. And neither of them has been joined by leave or any order of court anywhere in the record.’
The appeal therefore fails and it is hereby dismissed.
In summary the two appeals are dismissed except that the order of the Court of Appeal dismissing appellant’s application before it, is substituted by an order striking out that application only.
The respondents are awarded costs of one thousand (N1,000.00) Naira only
UWAIS, J.S.C.: I have had the advantage of reading in draft the judgment read by my learned brother Kutigi. J.S.C. I am in complete agreement with him that the two appeals lack merit and that they should accordingly be dismissed.
Where a court lacks the jurisdiction to entertain a case, the proper order to be made by the court is that of striking out the case and not dismissing it. This has since been stated by this court in a number of cases including Oloriode v. Oyebi (1984) 1 SCNLR 390; Okoye v. Nigerian Construction and Furniture Co. Ltd. (1991) 6 NWLR (Pt.199) 501; Akinbinu v. Oseni (1992) 1 NWLR (Pt.215) 97; Ohiaeri v. Akabeze (1992) 2 NWLR (Pt.221) I; Road Transport Employers Association of Nigeria v. National Union of Road Transport Workers ( 1992) 2 NWLR (Pt.224) 381; and Adesokan v. Adetunji (1994) 5 NWLR (Pt.346) 540.
Although in the second appeal the appellant felt aggrieved by what he complained about, to wit, that Mr. H.V. Flinn, the Managing Director of the respondent was defrauding the respondent, the trial court found that the appellant was a minority shareholder in the company. Therefore, the proper party to complain about the fraud is the company itself. The rule in the case of Foss v. Harbottle (1843) 2 Hare 461, which precludes a minority shareholder or shareholders from suing where there is irregularity in the internal management of a company that is capable of being confirmed by a simple majority of the shareholders, clearly applies to this case. For that reason the Federal High Court could not interfere at the suit of the appellant as a minority of the shareholders. Admittedly, there are exceptions to the rule in Foss v. Harbottle which do enable a minority shareholder to sue where there is a fraud on the majority shareholders – see Cook v. Deeds (1916) 1 A.C. 554; Omisade v. Akande (1987) 2 NWLR (Pt.55) 158 and Yalaju-Amaye v. AR.E.C. Ltd. (1990)4 NWLR (Pt.145)422. However, the exceptions do not apply to the present case. In Yalaju-Amaye’ sease (supra) Karibi-Whyte, J.S.C. observed as follows at page 451 E-H thereof:-
“Appellant in claim 6 sought for an order for injunction restraining the 2nd to 6th defendants/respondents and their agents and servants from operating the accounts of the 1st defendant/respondent company in the 7th and 8th defendants/respondents bank without prior consent or approval by the plaintiff/appellant. I think this is the most ambitious of all the claims in the writ of summons. In arguing this head of claim counsel to the appellant must have taken into consideration the fact that he is only holder of 16.6% of the shares of the 1st defendant company. The 2nd – 6th defendants hold 86.3% of the shares. Thus at any time, the management of the affairs of the company is vested in the majority of its shareholders.
The question of the operation of the accounts of the 1st defendant/respondent company is a matter to be determined by the Board of Directors or the Managing Director, in who is vested the management of the company. See Art. 80 Table A.
It seems to me well settled that a minority shareholder, which plaintiff/appellant is in the instant case, has no legal right to interfere with the management of the company, except where fraud has been alleged against the majority.”
In my opinion, the Court of Appeal was right in the decision it reached in its ruling on the interlocutory application by the appellant and the appeal before it from the judgment of the Federal High Court. It is for these reasons and those contained in the judgment read by my learned brother, Kutigi, J.S.C. that I too hereby dismiss the appeals with N1,000.00 costs to the respondents. The order of dismissal wrongly entered by the Court of Appeal is set aside and in its place I substitute an order of striking out the appellant’s application thereat.
OGWUEGBU, J.S.C.: I agree with the judgment of my learned brother, Kutigi, J.S.C. dismissing both appeals. I also dismiss them. The court below wrongly dismissed the application of the appellant after declining jurisdiction to entertain the same. Since it had no jurisdiction to determine the application, the proper order which it should have made is that of striking out. See Oloriode & Ors. v. Oyebi & Ors. (1984) NSCC 286 at 292; (1984) 1SCNLR 390; Onwunalu v. Osedeme (1971) 1 All NLR 14 and Adesokan & Ors. v. Adetunji & Ors. (1994) 5 NWLR (Pt.346) 540. I hereby substitute the order dismissing the application with that of striking out.
I also agree with the finding of the learned trial Judge which was affirmed by the court below that the wrongs complained of by the appellant were done to the company and that the proper plaintiff in such a case is the company itself. It is clear law that in order to redress a wrong done to a company or to recover money or damages alleged to be due to a company, the action should be brought by the company itself except where the majority are endeavouring directly or indirectly to appropriate to themselves money, property or advantages which belong to the company or in which the other share-holders are entitled to participate. See Foss v. Harbottle 67 E.R. 189; Mozley v. Alston 41 E.R. 833 and Elufioye & Ors. v. Hallilu & Ors. ( 1993) 6 NWLR (Pt.301) 570.
For the above reasons and the fuller reasons contained in the lead judgment. I also dismiss the appeal and abide by the consequential orders made therein including the order as to costs.