Edokpolo & Company Limited V. Sem-edo Wire Ind. Ltd & Ors. (1984)

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NNAMANI, J.S.C.

The appellant, the plaintiff in the substantive suit filed in the Federal High Court Warri, is a limited liability company incorporated under the Companies Decree 1968 and carrying on business principally in Benin City. Sometime in 1975, the appellant and a German based company SEM Nigerian Holding G.H.B.H. and Company Hamburg agreed to set up a wire industry in NIGERIA On the 27th October 1975 to be precise, they entered into an agreement for purposes of incorporating a Nigerian company to carry out the industrial project. This agreement which was prepared by the 2nd respondent herein, a legal practitioner, is a crucial element in this case. I shall therefore avert later in this judgment to some of its provisions. Suffice it for present purposes to say that under the agreement the appellant was to subscribe 40% of the share capital of the proposed company while the foreign partner was to subscribe 60%. This was in accord with the Nigerian Enterprises Promotion Decree 1972 then in force, the activity of the proposed company having fallen within Schedule 2 thereof. The provisions of the agreement principally evinced a desire on the part of both parties (i.e. the appellant and the foreign partner) that only two of them should be shareholders of the proposed company. The provisions of this agreement by the partners were incorporated in the memorandum of association of the proposed company. Pursuant to the agreement of October, 1975, the Sam-Edo Wire Industries Limited, 1st respondent herein, was incorporated on 5th December, 1975. It is pertinent at this stage to mention that one of the provisions of the October 1975 agreement apportioned the appointment of the directors of the proposed company between the two partners. It was the appellant who was to nominate the chairman of the board of directors of the proposed company. Although the process by which the chairman of Sam-Edo Wire Industries Limited was appointed is one of the matters on which the parties have joined issue, it is pertinent to mention that on incorporation, the 3rd respondent was appointed chairman of the board of directors.

On the 27th February 1976 the two partners, i.e. the appellant and the foreign partner entered into another agreement principally for the purpose of increasing the share capital of Sam-Edo Wire Industries Limited from N1,000 000 to N1,500,000. Following this agreement the company duly passed a special resolution increasing its share capital from N1,000,000 to N1,500,000. The share capital has remained at that level.

Subsequently, the company alloted 2% and 3% of the shares in Sam- Edo Wire Industries Limited to 2nd and 3rd respondents. This allotment was taken out of the 40% of the shares which appellant was to subscribe. The appellant protested in vain to the managing director of the 1st respondent company (a nominee of the foreign partner SEM Nigerian Holding Company Hamburg). It then instituted the suit in the Federal High Court earlier referred to. In that suit it claimed the following reliefs:

“(1) A declaration that the plaintiff is entitled to 40% of the shares in Sam-Edo Wire Industries Limited, incorporated in Nigeria in 1975.

(2) A declaration that the share certificate issued to the 2nd defendant as evidence of his shareholding in Sam-Edo Wire Industries is null and void in that the transaction was without the knowledge and/or consent of the plaintiff who is the sole Nigerian partner and owner of 40% of the shares in Sam-Edo Wire Industries Ltd.

(3) A declaration that the share certificate issued to the 3rd defendant as evidence of his share holding as Nigerian partner in Sam-Edo Wire Industries Limited is null and void in that the transaction was without the knowledge and/or consent of the plaintiff who is the sole Nigerian partner and owner of 40% of the shares in Sam-Edo Wire Industries Ltd.

(4) An order for specific performance on the 1st defendant company to perform the obligations in the decisions of the board of directors of the company at the board meeting of 30th June, 1978.

(5) Any further order or orders which this Honourable Court would consider just and equitable in the circumstances of the case.”

Pleadings were ordered, filed and exchanged. After the appellant had filed a statement of claim and an amended statement of claim to which the respondents’ (defendants to the suit) replied with a joint and detailed statement of defence, the respondents in July 1980 brought an application before the said High Court praying that the appellant’s action be dismissed. The application was brought under the inherent jurisdiction of the court and/or Order 27 rule 1 of the Federal Revenue Court (Civil Procedure) Rules L.N.34 of 1976. The latter rule states –

“1. Where a defendant conceives that he has a good legal or equitable defence to the suit so that even if the allegations of the plaintiff were admitted or established, yet the plaintiff would not be entitled to any decree against the defendant, he may raise this defence by a motion that the suit be dismissed without any answer upon questions of fact being required from him”.

Ayinde, J. listened to extensive and detailed argument by counsel to both parties and after separately considering the application under the two arms of the jurisdiction of the court invoked refused it. The respondents dissatisfied with this ruling appealed to the Federal Court of Appeal (now the Court of Appeal). That court by a majority judgment (Ete and Okagbue JJCA., Agbaje, J.CA dissenting), allowed the respondents’ appeal and dismissed the appellant’s claims in the High Court. The appellant has now appealed to this Court.

For a full appreciation of the reasoning of the Court of Appeal, and indeed the main issue before this Court, I think I ought to set down some provisions of the agreement of 27th October, 1975 as well as portions of the parties’ pleadings. The relevant provisions of the October 1975 agreement were:-

“Whereas: