Beachland Construction & Development Limited V. Paramo Devt. Ventures Limited & Ors (2013)

LawGlobal-Hub Lead Judgment Report – COURT OF APPEAL

CHINWE EUGENIA IYIZOBA, J.C.A. (Delivering The Leading Judgment)

This is an appeal against the ruling of Abiru J. of the High Court of Lagos State delivered on the 20th day of September 2006 in Suit No.LD/2121/2003 in which it was held that the High Court as opposed to the Federal High Court had jurisdiction to entertain the suit filed by the claimant/Respondent. By its Writ of Summons and Statement of Claim both dated 8/10/2003, the Respondent herein as Claimant filed an action at the High Court of Lagos State against the Appellant and three others – the 1st, 3rd and 4th Defendants/Respondents herein for certain declaratory reliefs, an order of specific performance and injunction.

The Appellant filed a motion challenging the jurisdiction of the Lagos High Court to entertain the Respondent’s claim. In consequence the Respondent on 3/5/04 filed an Amended Statement of Claim seeking, as the main claim, the same reliefs sought in its statement of claim filed on 8/10/12003, and in the alternative, claims for damages against the Appellant and the 1st Defendant/Respondent. The Appellant on 30/5/06 filed a fresh motion dated 26/5/2006, the earlier motion having been struck out praying for:

“1. An order striking out this suit on the grounds that this Honourable Court lacks jurisdiction.

2. Alternatively, an order striking out the suit against the 2nd Defendant/Applicant for non disclosure of a reasonable cause of action and for being frivolous and vexatious.”

The parties filed and adopted their written briefs. On 20/9/06, the learned trial judge delivered a ruling dismissing the motion. The Appellant being dissatisfied with the ruling appealed to this Court on five grounds. The Appellant’s brief dated 24/12/07 was filed on 28/12/07 but deemed properly filed and served on 17/6/09. The Respondent throughout the period filed no brief. By the order of the court granted on 7/6/10, the appeal was set down for hearing on the Appellant’s brief alone. During the hearing of the appeal on 4/11/13, learned counsel for the Appellant, S. Mbadiwe Esq. adopted the Appellant’s brief and urged the court to allow the appeal, set aside the ruling of Abiru J and strike out the suit for want of jurisdiction.

Out of the five grounds of appeal, counsel formulated the following issues for determination:

1. Whether, having regard to the fact that the principal question to be decided in Suit No. LD/2121/2003 is whether the 1st Defendant/Respondent (having contravened its own Board of Directors Resolution No.244 of 5/8/2003) acted ultra vires its powers in granting the Appellant a lease over the 1st Defendant/Respondent’s property at Ikoyi, Lagos, the learned trial judge was right in holding that the High Court of Lagos State has jurisdiction to adjudicate over the Respondent’s suit.
2. Whether considering the fact that the High Court of Lagos State had only a partial jurisdiction over the Claimant/Respondent’s suit, and whereas the Federal High Court has full jurisdiction over the entire suit, the learned trial judge was right when he assumed full jurisdiction over the Claimant/Respondent’s suit.
3. Whether the learned trial judge was right in holding that Respondent’s suit disclosed a reasonable cause of action against the Appellant.

On issue 1, learned counsel submitted relying on Lufthansa German Airlines v. Odiese (2006) 7 NWLR (Pt.978) 34 @ 73 para B that it is beyond dispute that a court must confine itself to the reliefs sought on the writ of summons and statement of claim in order to determine whether or not it has jurisdiction over a suit. After setting out the reliefs claimed and relevant averments in the statement of claim in support, counsel submitted that the question that arises is whether the case, as presented by the Claimant/Respondent at the court below is one which falls within the jurisdiction of the High Court of Lagos State as held by the learned trial judge.

Counsel further argued that the main claims of the Respondent at the court below were, essentially, a declaration to give force and effect to the 1st Defendant’s Board of Directors’ Resolution No.244 dated 5th August 2003, and a further declaration that any act of the 1st Defendant or its officers in contravention of the said resolution is ultra vires the 1st Defendant, invalid, null and void.

Counsel submitted that in the circumstances the crucial question which ought to have agitated the mind of the learned trial judge is – does the High Court of Lagos State have the power to proceed upon an inquiry and make a declaration that an act of the 1st Defendant (an incorporated company), which violated its board of directors resolution, is ultra vires the 1st Defendant? Learned counsel submitted that the answers is “No “, and urged the court to so hold.

On issue 2, learned counsel submitted that no doubt, in the absence of the main claims, the learned trial judge would have the jurisdiction to adjudicate over the alternative claims contained in paragraphs 28 (e) and (f) of the amended Statement of Claim. Counsel contended that a court can only consider an alternative claim where the main claim fails. He referred to the case of Ibekendu v. Ike (1993) 7 SCNJ 50 and submitted that in any suit jurisdiction over the main claim is a sine qua non for assumption of jurisdiction over an alternative claim; and in this case the mere fact that the High Court of Lagos State could entertain the alternative claims of the Respondent did not vest it with jurisdiction over the suit. Learned counsel cited the case of DALFAM NIGERIA LTD V OKAKU INTERNATIONAL LIMITED & ANOR (2001) 15 N.W.L.R. PART 735 P. 203 AT PAGE 240 paras. C.-D where the court of appeal held:

“Where a court lacks jurisdiction to entertain part of the claims before it, the fact that it can entertain other parts as in the instant case will not be sufficient.”

On issue 3, whether the Claimant/Respondent’s suit disclosed a reasonable cause of action against the 2nd Defendant/Appellant, learned counsel submitted that assuming without conceding, that this Court has jurisdiction to entertain this suit and that the 1st Defendant/Respondent Wemabod acted ultra vires its powers in granting a lease of its property to the 2nd Defendant/Appellant, that the Claimant/Respondent, not being a member or secured creditor of the 1st Defendant/Respondent, is a mere busy body and cannot challenge the acts of the 1st Defendant/Respondent as being ultra vires. Counsel contended that the right of a litigant to challenge an ultra vires act of a company is derived from statute; in this case, section 39 of the Companies and Allied Matters Act, 1990. However, Section 39 (4) of that Act limits the category of persons who can apply to the court for relief on the grounds that an act of a company is ultra vires to (a) any member of the company and (b) the holders of any debentures secured by floating charge on the company’s properties or a trustee of such debenture holder. It was argued that even if the 1st Defendant/Respondent and its officers acted ultra vires their powers in granting a lease of 1st Defendant’s property to the 2nd Defendant, the Claimant has no right to challenge the 1st Defendant for such action. Learned counsel submitted that the 1st Defendant/ Respondent’s resolution No.244 of 5/8/2003 created no enforceable contract in favour of the Claimant and that consequently, the Claimant had no right to enforce 1st Defendant’s Board of Directors’ Resolution of 5/8/2003, which was passed pursuant to the Memorandum and Articles of Association of the 1st Defendant. Counsel submitted that rules and regulations contained in the Memorandum and Articles of Association of a company do not apply to outsiders. The Law is that the Memorandum and Articles when registered shall have the effect of a contract between the company and its officers and between the company and its shareholders and between the officers and shareholders inter se. Section 41 of the Companies and Allied Matters Act, 1990. Counsel argued that the Claimant is neither a member nor an officer of the 1st Defendant and is therefore a stranger to any contract arising from the Memorandum and Articles of the 1st Defendant and the resolutions passed pursuant thereto. The law is that only parties to a contract can enforce same. A person who is not a party to a contract cannot enforce it even if it was made for his benefit and purport to give him the right to sue upon it. K.S.O. & Allied Products Limited v Kofa Trading Company Limited (1996) 3 NWLR (pt 436) p.244 at 263 paragraph B-C.

Therefore, even if the resolution of 5/8/03 was a contract made between the 1st Defendant and its directors for the benefit of the Claimant, the Claimant was not a party to that contract and cannot bring an action to enforce it. Learned counsel submitted that these arguments were put before the learned trial Judge of the lower court but his lordship failed to resolve the issue of the locus standi of the Claimant/Respondent but instead held that the case of the claimant/Respondent disclosed a reasonable cause of action. Learned counsel submitted that once the issue of the locus standi of the Claimant/Respondent was raised the learned trial judge was obliged to consider it first before any other issue because the issue of locus standi touches on the competence of the action and the jurisdiction of the court. He cited Ogunyombo v. Ookoya (2002) 16 NWLR (Pt.793) p.224 at P.247 para B-C. Counsel urged the court to resolve the issue of the Claimant/Respondent’s locus standi under the powers conferred by section 15 of the Court of Appeal Act CAP C 36 Laws of the Federation of Nigeria 2004, and to hold that the Claimant/Respondent lacked the locus standi to seek the reliefs set out in paragraphs 28 (a) to (d) of the Amended Statement of Claim.

Starting with issue 1, it is necessary to set out the provisions of the Constitution on the jurisdiction of these courts. The Constitution of the Federal Republic of Nigeria, 1999 CAP C23 Laws of the Federation of Nigeria 2004 which established the state High courts provides in section 251 as follows: