CHIEF MRS. BERNADETH NWADA OHANENYE & ORS v. OHANENYE AND SONS LIMITED & ANOR (2016)

CHIEF MRS. BERNADETH NWADA OHANENYE & ORS v. OHANENYE AND SONS LIMITED & ANOR

(2016)LCN/8393(CA)

In The Court of Appeal of Nigeria

On Wednesday, the 23rd day of March, 2016

CA/OW/169/2011

JUSTICES

IGNATIUS IGWE AGUBE Justice of The Court of Appeal of Nigeria

PETER OLABISI IGE Justice of The Court of Appeal of Nigeria

FREDERICK OZIAKPONO OHO Justice of The Court of Appeal of Nigeria

Between

CHIEF MRS. BERNADETH NWADA OHANENYE
UCHECHUKWU R. OHANENYE
MADUAWUCHUKWU C. OHANENYE
IKECHUKWU OHANENYE
OBIKE ANTHONY OHANENYE
NKEMJIKA JOHN KENNEDY OHANENYE
CHIKEZIE C. OHANENYE
COBNNEO NIG. LTD Appellant(s)

AND

OHANENYE AND SONS LIMITED
DR. AUGUSTINE NNAMDI OHANENYE Respondent(s)

RATIO

PRACTICE AND PROCEDURE; WHETHER LIVE ISSUES CAN BE SETTLED AT INTERLOCUTORY STAGE

The position of the law is that live issues in a matter should not be pre-empted or settled at the interlocutory stage of hearing an objection. See the cases of MADUBUIKE vs. MADUBUIKE (2001) 9 NWLR (PT. 719) 698 AT 707; PRINCE ABDULRASHEED A. ADETONA & ANOR vs. ZENITH INTL BANK PLC (2011) LPELR- 8237 (SC); OKOTIE-EBOH vs. MANAGER (2004) 11-12 SC. 174. PER. FREDERICK OZIAKPONO OHO, J.C.A.

COURT: INTERPRETATION OF STATUTES; APPROACH OF INTERPRETATION OF STATUTE

In interpreting and applying these Sections of the Law to the facts of the case before Court, it is perhaps appropriate to adopt the purposive approach of interpretation of statutes to not only these Sections, but also to the Companies and Allied Matters Act, Cap. C21 LFN, 2004 (CAMA) in order not to falter in the process of resolving this Appeal. In the English case of PEPPER vs. HART (1993) 1 ALL ER 42, cited with approval in the case of ATTN. LAGOS STATE vs. ATTN. FED. (2003) LPELR 620 (SC) the House of Lords, per LORD BRIDGE OF HARWISH observed at page 50, thus:
The Courts now adopt a purposive approach which seeks to give effect to the true purpose of legislation and are prepared to look at much extraneous materials that bears on the background against which the legislation was enacted. PER. FREDERICK OZIAKPONO OHO, J.C.A.

COMPANY LAW; CORPORATE PERSONALITY; WHAT THE CONCEPT OF CORPORATE PERSONALITY ENTAILS
The concept of corporate personality; that is the one, which at law recognizes a company on incorporation as an artificial person, separate and distinct entity altogether from its members is not without its shortcomings. The law generally does not allow going behind the separate entity accorded the company to hold members liable personally for acts or omissions adjudged those of the company. That is the whole essence of the law. The locus classicus on this point is the old case of SALOMON vs. SALOMON AND COMPANY LTD (1897) AC 22, which has been cited and relied upon in several cases in this country. In certain cases, however, despite the existence of the concept of corporate personality the Courts will be prepared to disregard it and pay regard instead to what really lies behind and the identity of those behind the legal fa?ade for purposes of holding them personally liable for the liabilities or wrongs committed by the company. The purpose for doing this once again, is to forestall the rip-off of unsuspecting creditors or third-parties with impunity by unscrupulous company or business owners. Once again, this demonstrates the creditors and members of the public protection role of the CAMA.
The corporate personality concept, therefore under express statutory provisions and as well as under Common Law does not in all cases shield the person who seeks its use most especially for fraudulent purposes. One of such express statutory provisions is Section 18 of the CAMA, which when read in conjunction with Sections 93, 246 (1) of the Act, deals with the situation when there is a fall in membership below statutory minimum. Under Section 18 of the Companies Act, the minimum number of persons who may form and incorporate a company are pegged at not less than two (2). By virtue of Section 93 of the Act, if membership falls below the statutory minimum, the other member who carries on business of the company during the period for more than six (6) months shall be liable for company debts contracted during the period. Even then, the said Section 93 is not without its own shortcomings but again, that is as far as it can go and no more. Under the Section, the rights of creditors are severally limited and it is only the members who remain after six (6) months that can be sued and not even those whose withdrawal led to the fall below minimum. The Section actually used the expression; ?debts contracted?. GOWER, L. C. B. the learned Author of Modern Company Law, 3rd Edition p. 190 suggests that the members who remain are the ones liable only in respect of liquidated contractual obligations and not in respect of other liabilities incurred. The combination or community reading therefore of Sections 18, 246 (1) and 93 of the Companies and Allied Matters Act, did not say that a violation of these Sections shall necessarily render the company either illegal or non-existent within the contemplation of the law. Issue one is therefore resolved against the Appellants. PER. FREDERICK OZIAKPONO OHO, J.C.A.

COMPANY LAW: INDIVIDUAL RIGHTS AND CORPORATE RIGHT; THE EXERCISE OF INDIVIDUAL RIGHT AND THE EXERCISE OF CORPORATE RIGHT

Individual Rights are described as those that aid in the maintenance of the shareholder in full membership with all the Rights and privileges appertaining to that status. See EDWARDS vs. HALLIWELL (1950) 2 ALL ER 1064. They are created by statute and to enforce his rights in the case of a breach, the shareholder can sue personally and directly in the sense that he does not have to seek and obtain the consent and approval of other members before doing so. See Section 300 (c) of the CAMA. But in the case of his corporate Rights, usually those rights in the company that affects and can only be exercised or enforced by a number of individual shareholders through the passing of appropriate resolution in the General meeting. It is in the exercise of the shareholders corporate Rights that the issue of majority rule and minority rights and the application of democratic principles in company matters come to the fore. Generally, wrongs done to the company are regarded as infringement of the corporate Rights of the shareholders and thus, left for the majority to decide upon in the general meeting whether the wrongs in question should be redressed or not. This position represented the kernel in the rule in FOSS vs. HARBOTTLE (1843) 2 HARE, 461. In reaching its decision in the case, the Court held that an action could not be brought by minority shareholders and two (2) reasons were given for this; First, that it was within the power of the majority to ratify the action and that the Court cannot take away the Companies Right to manage its affairs in accordance with its constitution. Second, that since it was the company that suffered the loss and not the individual shareholder, it was for the company to seek redress if it so wished.
The relevance of the Rule in FOSS vs. HARBOTTLE (supra) in the practice of company matters cannot be over-emphasized, hence its codification in Nigeria together with exceptions in Sections 299 to 300 of the CAMA. PER. FREDERICK OZIAKPONO OHO, J.C.A.

FREDERICK OZIAKPONO OHO, J.C.A. (Delivering the Leading Judgment): This is an Appeal against the Ruling of Federal High Court sitting at Umuahia, Abia State delivered on the 9th of March, 2011. The Respondents herein, who were Plaintiffs at the trial Court, had sued the Appellants claiming the following the reliefs;
1. A Declaration that the 1st-7th Defendants are not shareholders or Directors of the 1st Plaintiff.
2. A Declaration that the incorporation of the 8th Defendant is fraudulent in so far as the Defendants purport the 2nd Plaintiff to be party to it.
3. A Declaration that the letter dated 14th October, 2008 purportedly under the hand of the 2nd Plaintiff is a crude forgery.
4. A Declaration that the purported transfer of the 1st Plaintiffs’ landed properties known as No. 1 Clifford Road, Aba, Plot 122 Ikenegbu Layout Owerri and Plot 165 Fuel Plantation Layout GRA Aba to the 8th Defendant is fraudulent, illegal and null and void.
5. A Order canceling and/or setting aside the following instruments:-
a. Power

of Attorney dated 2nd December, 2005 and registered as 1/1/773 at the Land Registry at Umuahia.
b. Power of Attorney dated 20th June, 2006 and Registered as 24/24/939 at the lands registry at Owerri.
c. Power of Attorney dated 2nd December, 2005 and registered as No. 26/26/880 at the lands registry at Umuahia.
6. An Order of Court compelling the 1st-8th Defendant to render a comprehensive account of their dealings with the funds, assets and other properties of the 1st Plaintiff since 2004 within 14 days of judgment.
7. An Order of Court compelling the Defendant to pay over to the Plaintiffs the sum of Nine Million, One Hundred and Thirty Eight Thousand, Six Hundred and Fifty Two, Eighty Three Kobo (N9,138,652.83) standing in account number 1071020003851 of the 8th Defendant at Union Bank Plc Factory Road, Aba.
8. An injunction perpetually restraining the Defendants by themselves, their agents, servants or howsoever from further interfering in the affairs of the 1st Plaintiff.

The Appellants as Defendants raised a Preliminary

Objection challenging the competence of the suit on several grounds namely:
1. The suit purports to be a derivative action brought on behalf of the 1st Plaintiff Company by the 2nd Plaintiff.
2. There is no resolution by the directors of the Company, or an authorization pursuant to Section 63(3) of the Companies and Allied Matters Act, Laws of the Federation of Nigeria, approving the institution of the action.
3. The suit is premature as the authority or consent of the directors of the 1st Plaintiff Company was not first sought and obtained.
4. The suit offends Section 299 of the Companies and Allied Matters Act, Laws of the Federation of Nigeria.

In opposition to the grant of the Preliminary Objection, the Respondents filed a Reply to this Preliminary Objection, and a sole issue of law was set down for hearing, videlicet:
Whether the 1st Plaintiff is?in law, a Company within the contemplation of the Companies and Allied Matters Act?

Written addresses were ordered, exchanged and adopted by learned Counsel for the parties on the 13-12-2010 and on the

9-3-2011, the learned trial Judge delivered a Ruling dismissing the Preliminary Objection. Aggrieved by the trial Court’s decision, the Appellants have appealed to this Court vide their Notice of Appeal dated the 22-3-2011 and filed same date. There are three Grounds of Appeal filed, which are reproduced here without their particulars as follows;
GROUNDS OF APPEAL;
1. The learned trial Judge erred in law when he held that the suit brought by the Plaintiffs/Respondents against the Defendants/Appellants is competent when the conditions precedent for instituting such actions were not fulfilled by the Plaintiffs/Respondents before bringing the action.
2. The learned trial Judge erred in law when he held that there is still in existence a Company recognized by law on behalf of whom the action was/or could be brought.
3. The learned trial Judge erred in law when he held thus; “I have read paragraphs 5, 6, 7 and 8 of the statement of claim and paragraphs 9, 10 and 11 of the statement of defense and come to the conclusion that both parties are at agreement that 2nd Plaintiff is the only

director of the Company?.

Learned Appellant?s Counsel raised two issues for the Court?s consideration as follow:
1. Whether the 1st Respondent (Ohanenye and Sons Limited) is still a Company within the contemplation of the Companies and Allied Matters Act, for the purpose of carrying on business and maintaining this suit.
2. Whether this suit is not incompetent by virtue of same being premature and initiated without leave of Court.

?On the part of the Respondent, learned Counsel adopted the issues identified by the Appellant and upon which he addressed Court in response to Appellant?s submissions. Learned Counsel in their briefs of argument addressed Court extensively and cited plethora of authorities. At the hearing of the appeal on the 28-1-2016, the Appellant?s brief of argument dated the 8-1-2013 but filed on the 9-1-2013 was deemed properly filed and served on the 14-5-2013. The brief was settled on behalf of the Appellant by Ama Akalonu Esq.,. The Respondent?s brief dated the 16-7-2013 was filed on the 220-1-2014. This brief was settled on behalf of the

Respondents by Chinyere Umeojiaka (Mrs).

Having taken into consideration the issues raised by learned Counsel in their briefs of arguments, on behalf of the parties together with the authorities cited in support of their positions, it is the view of this Court, it is expedient none the less that this Appeal is resolved on the basis of the issues nominated by the Appellant and which issues, the Respondents saw no difficulties in adopting in this Appeal.

?ARGUMENTS OF APPELLANTS? COUNSEL:

ISSUE ONE;
Whether the 1st Respondent (Ohanenye and Sons Limited) is still a Company within the contemplation of the Companies and Allied Matters Act, for the purpose of carrying on business and maintaining this suit.
It was the contention by learned Appellant?s Counsel that the 1st Respondent (Ohanenye And Sons Limited) is no longer a Company within the contemplation of the Companies and Allied Matters Act, for the purpose of carrying on business and/or maintaining this suit. It was further contended by Counsel that in the determination of questions of locus standi and jurisdiction,

it is only the Writ of Summons and the Statement of Claim that the Court must look at. Against this position, Counsel referred this Court to paragraph 5 of the Statement of Claim of the Respondents, where it was averred as follows:
“5. Subsequently, on or about 1994, a re-composition of the shareholders and directors of the 1st Plaintiff occurred leaving CYRIL ONWUEGBERII OHANENYE as the only shareholder and director holding 54,000 and 6000 shares respectively. Again none of the Defendants owned any share or interest in the 1st Plaintiff. The relevant forms co2 and co7 obtained from the Corporate Affairs Commission shall be founded upon.”?

“It was learned Counsel’s argument that from the foregoing averment at paragraph 5 of the Respondents’ Statement of Claim, it is clear that as at 1994, there were two (2) directors of the 1st Plaintiff, namely CYRIL ONWUEGBERU OHANENYE AND NNAMDI OHANENYE. But that at paragraph 6 of the Statement of Claim, the Respondents once again averred thus:
“6.The Chairman/Managing Director CHIEF CYRIL ONWUEGBERU OHANENYE died on 22nd June, 1998.”

Counsel argued that it was from this averment, it became known that following the death of the Chairman/Managing Director (Chief Cyril Onwugberu Ohanenye) on the said 22nd June, 1998, there was effectively only one Director left in the 1st Respondent. Learned Counsel further argued that this position was confirmed by the Respondents at paragraphs 8 of their Statement of Claim where it was averred as follows:
?8. The 2nd Plaintiff as the sole surviving shareholder did not convene any meeting where any decision to reallocate or redistribute the shares of this Company was taken

The main thrust of Appellant?s Counsel?s argument in this Appeal is that after the death of Chief Cyril Onwugberu Ohanenye in June, 1998, there was only one (1) director left in the 1st Respondent, a situation which is legally untenable, having regard to Sections 18 and 246(1) of the Companies and Allied Matters Act.

?Counsel argued that although in their Statement of Defense, the Appellants as Defendants are saying that they are also co-directors of 1st Respondent, but since, at this stage the Court of Appeal is concerned

with only the averments in the Statement of Claim, the Court and as well as the parties must confine or limit themselves to the facts in the Statement of Claim and the issues arising therefrom. It was therefore submitted by Counsel that by the provisions of Sections 18 and 246 (1) of the Companies and Allied Matters Act, the 1st Respondent cannot do business as a Company or maintain this action. For the avoidance of any doubts, Counsel reproduced Sections 18 and 246(1) of the Companies and Allied Matters Act as follows;
Section 18 of the Companies and Allied Matters Act provides that:-
?18. As from the commencement of this Act, any two or more persons may form and incorporate a Company by complying with the requirements of this Act in respect of registration of a Company.?
(Emphasis is that of Counsel).

Section 246(1) of the Companies and Allied Matters Act provides:-
?Every Company registered on or after the commencement of this Act shall have at least two directors and every Company registered before that date shall before the expiration of six months from the commencement of this Act have at least

two directors.?
(Emphasis is that of counsel).

It was further argued by Counsel that from the averments in paragraphs 5, 6 and 8 of the Statement of Claim, it became obvious that there was only one surviving (sole) director of the 1st Respondent after the death of Chief Cyril Onwugberu Ohanenye and that this is a clear violation of Sections 18 and 246(1) of the Companies and Allied Matters Act. Consequently, Counsel submitted that the 1st Respondent lost every right to be termed a Company in the real sense of the word and indeed, no longer a Company within the contemplation of the Act.

?Having regard to the rules of Interpretation of Statutes, Counsel argued that it need not be stressed that the mandatory or imperative phrase ?shall? was recurrent in Section 246(1) of CAMA. It was in this connection that Counsel urged this Court to give effect to this imperative effect of the word ?shall? and hold that the 1st Respondent, after the 22nd of June, 1998, ceased to be a Company within the contemplation of the law in Nigeria. Learned Counsel said that by Section 246(2) of CAMA, once the number of directors of a company

falls below two, the company shall within one month appoint new directors, and shall not carry on business after the expiration of one month, unless such directors are appointed.

It was disclosed by learned Counsel that the summary of the Respondents Claims/reliefs at the Lower Court purport to question or challenge the acts within the 1st Respondent (as a company) from 1998 to the time of filing this suit, i.e., a period of about twelve years. In reaction to this, learned Counsel submitted that every act of the 1st Respondent Company done after the death of Chief Cyril O. Ohanenye is illegal for want of compliance with Section 246(2) of CAMA regarding the appointment of new directors within a month of Chief Ohanenye’s death and which the 1st Respondent failed to do. It was also argued by Counsel that to grant the reliefs sought by the Respondents in this case would amount to giving judicial stamp of approval to illegality, and Counsel urged this Court not to do so. It was contended by learned Counsel that Respondents’ averment at the afore-quoted paragraph 6 of their Statement of Claim, the Respondents disclosed that Chief Cyril Onwugberu

Ohanenye died on the 22nd of June, 1998 and that what ought to have been done at that stage was for the appointment of a new director or new directors not later than one calendar month from that date. And that having failed to do that, the 1st Respondent (as a Company) ceased to have legal competence.

It was therefore submitted by Counsel that the 1st Respondent (as a Company) is not competent and is not properly constituted for the purpose of maintaining this suit. Counsel said that the proper constitution of parties in a suit is a serious precondition for the institution of a suit and that there ought to be competent parties for a Court to exercise its jurisdiction to determine a suit. Counsel cited the case of MBAKWE vs. R. M. S. AFRICA (2001) FWLR (PT.59) 1343 in support. It was also contended by Counsel that a party to an action, either as a Plaintiff or as a Defendant, must be a person recognized by law or vested by law with the power to sue or be sued. Counsel cited the case of OCCUPIERS/PERSON UNKNOWN vs. IKEDIEGO (2004) ALL FWLR (PT. 188) 1055 in this regard. In concluding on this issue, Counsel submitted, that the Respondent is not vested

with the competence, having breached S.18 and 246(2) of CAMA to institute this action. He urged this Court to resolve the first issue in favour of the Appellants.

ISSUE TWO:
Whether this suit is not incompetent by virtue of same being premature and initiated without leave of Court

In the event that this Court does not resolve the first issue in the favour of the Appellants favour, Counsel made an alternative submission to the effect that the Respondents? suit was premature and incompetent for many reasons, chief of which is the failure to obtain leave of Court to bring the action. Counsel referred this Court to Section 303(1) of the Companies and Allied Matters Act, 2004, which he also took his time to reproduce as follows;
?Subject to the provisions of this section, an applicant may apply for leave to bring an action in the name or on behalf of a Company, or to intervene in action to which the Company is a party, for the purpose of prosecuting, defending or discontinuing the action on behalf of the Company.?

?Learned Counsel also sought to define who an Applicant is in the

con of Section 303 by referring Court to Section 309(b) of CAMA, where the word; ?Applicant? was defined thus; ?an Applicant means a director or an officer or a former director or officer of a Company.? As a result of the foregoing, it was contended by Counsel that the 2nd Respondent who filed this action without leave of Court is therefore an Applicant under Section 309(b) of CAMA. Counsel submitted in this regard that Section 303(1) of CAMA has the interpretation of the Supreme Court in the case of AGIP (NIG.) LTD vs. AGIP PETROL INT?L & ORS (2010) ALL FWLR (PT. 520) 1198 where the apex Court held that it is imperative that a minority shareholder who intends to bring a derivative action in the name of the Company must first and foremost apply for leave of Court by way of Originating Summons on notice to the Company, and such application shall be pursuant to Rule 2(1) and (2) of the Companies Proceedings Rules. According to learned Counsel, the 2nd Respondent, at all times material to this suit is a minority shareholder of 1st Respondent, having regard to paragraph 5 of his statement of claim. It was also contended by

Counsel that compliance with Section 303 of CAMA is a condition precedent, and that noncompliance thereof is not a mere technical rule of procedure, but goes to the root of the matter and that the Court will not treat it as an irregularity but as grave enough to lead to the nullification of the entire proceedings. Counsel cited in support, the case of AGIP (NIG.) LTD vs. AGIP PETROL INT?L (Supra).

Aside from the failure to obtain leave before instituting the suit, Counsel further contended that the suit is also rendered incompetent by virtue of the failure to comply with Section 63(3) of CAMA, i.e., failure to obtain the express authority to sue in the name of the Company. Counsel told Court that the authority to sue in the name of the Company can only be obtained or derived from the directors or from a shareholders? meeting convened for that purpose. Learned Counsel cited the case of ODUTOLA HOLDINGS LTD vs. LADEJOBI (2006) ALL FWLR (PT. 322) 1393, where the Supreme Court held that:-
?S.63 of the Companies and Allied Matter Act allows directors of a Company to authorize that action be taken to protect the business of the

Company.?

As far as learned Counsel is concerned, there is nowhere in the entire paragraphs of the Statement of Claim where the Respondents plead or referred to any authority obtained by the 1st Respondent?s directors to initiate the action, neither did he refer to any resolution of the directors authorizing the action. It was also contended by Counsel, that the only time a member of a Company may institute legal proceedings in the name and on behalf of the Company is provided in Section 63(5) of CAMA, that is to say, if the board of directors refuse and/or neglect to do so. Learned Counsel added that this is not the case in this matter as the Respondent never pleaded that to be the case here.

?Learned Counsel argued assertively that the 2nd Respondent cannot hide under the excuse that he was the only surviving director and that there was no other director on the board of the Company to authorize his actions. To allow this on the part of the Respondent would tantamount to acquiescing to or condoning an illegality, as the law never contemplated a situation whereby only one director of the Company can exist to do business as such.<br< p=””

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Counsel submitted that the only time a sole director can act on behalf of the Company would be for the purpose of appointing another director or other directors in conformity with the provision of Section 246(2) of CAMA, and that that must be done within one month of the number of directors falling below the legal minimum of two (2) directors.

Counsel once again referred to the Statement of Claim, at paragraph 6 thereof, to the averment that the number of directors fell below two on the 22nd June, 1998, i.e., when Chief Cyril O Ohanenye died. He reminded Court of the fact that this suit was commenced on the 12th of April, 2010, nearly twelve (12) years after the number of directors of 1st Respondent fell below two while the 2nd Respondent had a minimum of one month to rectify the fall in number, but failed to do anything to remedy the situation after nearly 12 years of the demise of one of its directors. As far as Counsel is concerned, the 2nd Respondent simply cannot be heard to complain that he was the only survivor, nor can he be allowed to hide under his own illegality as he should be estopped from doing so.

?In this connection, it was

contended by Counsel that a litigant cannot exploit to his own advantage a situation he helped to create. He cited the cases of IBRAHIM vs. OSUNDE & 2 OTHERS (2009) 6 NWLR (PT. 1137) 382; OSAYANDE vs. STATE (1991) 1 LRCN 165 in support. The case of AFRICAN PETROLEUM LTD vs. OWODUNNI (1991) 8 NWLR (PT. 210) 391, where the Supreme Court stated thus:-
?The law will not allow a person to reap any benefit from his own wrongful act. To allow such is manifestly unjust and will portray the law as an instrument of injustice.?

It was finally contended on this issue by learned Counsel that under Section 299 of the Companies and Allied Matters Act, only a Company can sue to remedy any wrong done to it but that in the instant case, there is no Company in existence as contemplated by the Companies and Allied Matter Act. Counsel therefore urged this Court to hold that there are no competent Plaintiffs in this suit and that being so, that the Court lacked the jurisdiction to have entertained the suit and he finally urged this Court to resolve this issue in favour of the Appellants.

?ARGUMENTS OF RESPONDENTS?

COUNSEL:
ISSUE ONE:
Learned Respondents’ Counsel began by clarifying before Court the fact that the instant issue raised by the Appellants as encapsulated in Issue one did not form part of the grounds of objection raised by the Appellants in their motion at the Trial Court. Counsel further said that the issue did not also feature in the address in support of the objection. He referred Court to pages 202-210 of the Record. Counsel said that the issue came up in what was supposed to be the Appellants reply on points of law to the Respondents’ address and he once again referred this Court to page 251 particularly 253-256 of the record. For this reason, Counsel submitted that the issue was not properly before the Court below and that for that reason this Court ought not to have countenanced it. Learned Counsel referred this Court to Order 26 Rule (3) of the Federal High Court (Civil Procedure) Rules, and contended that there is no provision permitting the Appellants to smuggle in a ground of objection which did not form part of their motion or affidavit into the proceedings. According to learned Counsel the

issue was therefore, alien to the application before the Court which graciously considered it and resolved it against the Appellants.

It was contended in a fresh but related argument that in the determination of the issue of jurisdiction including the issue of locus standi to bring an action, it is the claim as endorsed on the writ of summons and the averments in the statement of claim that the Court examines. Counsel cited a number of cases in support of this position, some of which are; AKANNI vs. ODEJIDE (2004) 22 WRN 115 AT 117-118; LADEJOBI vs. OGUNTAYO (2005) 7 WRN 22 AT 29; and DOUGLAS vs. SHELL PET. DEV. CO. LTD (1999) 2 NWLR (PT. 591) 466 in support. Counsel told Court that the Appellants in referring to paragraphs 5 -8 of the Plaintiffs/Respondents’ statement of claim contained at page 5 of the record contended that the 1st Respondent ceased to be a Company within the contemplation of the Companies and Allied Matters Act. In response, Counsel
disagreed with this position and aptly dubbed it incorrect. He however, conceded that at the demise of Chief CYRIL ONWUGBERU OHANENYE in June, 1998, the 2nd Respondent became

the sole director of the 1st Claimant/Respondent. But in his arguments in defense of this position, Counsel submitted that the provisions of statute are not read in isolation. Counsel cited the case of ARAKA vs. EGBUE (2003) CLR 7 (K), in support of this proposition of the law where the Supreme Court had this to say on interpretation of Statutes:
“In considering the provisions of a section of a Statute, the whole Statute must be read in order to determine the meaning and effect of the words being interpreted.”

On account of this argument, Counsel referred this Court to pages 287-288 of the Record where the trial Judge treated the issues as follows:
“I agree entirely with the submission of the learned counsel. Every registered company in Nigeria must have at least 2 directors and that this statutory minimum must be maintained throughout the life of the company.
Where the company so operate with less than 2 directors (as in this case the law does not make the company illegal but clearly provided for under Section 246 of the Companies and Allied Matters Act (CAMA) what should be done and the

liability of the existing director.

For the avoidance of any doubts and clearly in the interest of clarity learned Counsel took the pains to reproduce Section 246 provides as follows:
1. Every company registered on or after the commencement of this Act shall have at least two directors and every company registered before that date shall before the expiration of six months from the commencement of this Act have at least two directors.
2. Any company whose number of directors falls below two shall within one month of its so falling appoint new directors and shall not carry on business after the expiration of one month, unless such new directors are appointed.
3. A director or member of a company who knows that a company carries on business after the number of directors has fallen below two for more than 60 days shall be liable for all liabilities and debts incurred by the company during that period when the company so carried on business.

Arising from this position, Counsel contended that although the provisions of the Companies and Allied Matters Act (CAMA), requires that

every Company shall have at least two directors, failure to do so does not make the Company illegal. According to Counsel, the only consequence for failure to so comply is as it is stated under Section 246 of the Companies and Allied Matters Act and to which effect is that the surviving director and the members of the company that were aware that the number of directors had fallen below two, shall be liable for all liabilities and debts incurred by the Company during that period. It was further argued that the law does not state that such a Company becomes an illegal one as erroneously canvassed by the Appellants.
Counsel further referred Court to the case of ARAKA vs. EGBUE (Supra) on the role expected of the Court in the interpretation of statutes and what the Supreme Court had to say on the issue as follows;
“The duty of the Court is to interpret the words contained in the statute and not go outside the words in search of an interpretation which is convenient to the Court or to the parties or one of the parties. Even where the provisions of a statute are hard in the sense that they will do some inconvenience to the

parties, the Court is bound to interpret the provisions once they are clear and unambiguous. It is not the duty of the Court to remove the chaff from the grain in the process of interpretation of a statute to arrive at favourable terms for the parties outside the contemplation of the lawmaker. That will be tantamount to traveling outside the statute on a voyage of discovery. This Court of law cannot embark upon such a journey.”

Against this backdrop, Counsel contended that the Appellants were out to mislead the Court by referring to Sections 18 and 246(1) of the Companies and Allied Matters Act without reference to Section 246(3) which makes the surviving director and the members liable for all the liabilities incurred by the Company when a Company operates with less than two directors and not necessarily making the Company illegal.

Apart from this, Counsel contended that from the nature of the case of the Respondents on the pleadings, it will be difficult to see how the question of illegality could arise when the gravamen of the claim was that the Defendants/Appellants who were neither shareholders nor directors had illegally taken over

the management and operation of the 1st Claimant to the detriment of the 2nd Claimant by means of forged documents. Counsel referred Court to paragraphs 4, 5, 6, 7, 8, 9, 10, 11, 12, 13 and 14 of the Statement of Claim at pages 5-11 of the printed Record. Counsel said that it was when the Appellants were challenged that they turned volte-face to allege that the same 1st Respondent which they have hijacked, pillaged and plundered is an illegal entity.

It was the contention of learned Counsel that by so doing, the Appellants are only seeking to take benefit of their own wrongdoings and which the law cannot permit. Counsel cited the case of SOLANKE vs. ABEL (1962) ALL NLR PT. 1 P. 230 AT P.234, where the point was stressed in these words:
“For these reasons I am of the opinion that it was not open to the Defendant in the circumstances of this case to rely upon his own wrongful act so as to allege as against the Plaintiffs that the agreement of tenancy was null and void unenforceable under Section 11 of the Land and Native Right Act. The agreement was not illegal”

Counsel also cited the following cases in this regard

GREEN vs. GREEN (2001) 45 WRN P.90 and TERIBA vs. ADEYEMO (2010) 13 NWLR (PT. 1211) P. 242. According to learned Counsel, the action of the Appellants in seeking to use the provisions of a statute in foreclosing an enquiry into their patently illegal, fraudulent and highly condemnable activities should not be accepted by Court. As far as Counsel is concerned, the 1st Claimant/Respondent is still a legal entity and also has the legal competence to institute this action and that the Federal High Court also has jurisdiction to entertain the action. Counsel urged this Court to resolve this issue in favour of the Respondents.

ISSUE TWO:
Under this issue, Counsel submitted that Section 303(1) of Companies and Allied Matters Act is not a mandatory provision of law. He reproduced the Section for the avoidance of doubt as follows;
“Subject to the provisions of this section, an applicant may apply for leave to bring an action in the name or on behalf of a Company or to intervene in an action to which the Company is a party, for the purpose of prosecuting, defending or discontinuing the action on behalf of the

Company.?

It was argued by Counsel that in the rules and principles governing interpretation of Statutes, the use of the word ?may? in statutory provisions invokes a persuasive obligation and not a mandatory obligation. Counsel cited the cases of BUCKNOR-MACLEAN vs. INLAKS LTD (1980) 8-11 SC. P1 and UDE vs. NWARA (1993) 2 NWLR (Pt. 278) P.638 AT P.661 where the Supreme Court said:
?I believe that it is now that invariable practice of the Court to interpret, may as mandatory whenever it is used to impose a duty upon a public functionary, the benefit of which enures to a private citizen.?

Counsel however sought to distinguish the facts of this instant case which he said is not one of such cases. According to Counsel, the Appellants misled themselves into believing that the instant case is hinged on the assumption that the present action is a derivative action. Counsel disagreed that the action at the Lower Court was a derivative action. He referred Court to the learned Author, O. J. Orojo, in his book COMPANY LAW AND PRACTICE IN NIGERIA; VOLUME 1 COMMENTARY, p. 245, where the Author gave the

basis of a derivation action as follows:
?The action is in reality an action by the Company for the wrong done to it but since it will not sue as Plaintiff provisions are made for a minority to sue on its behalf and not on behalf of the shareholders. Although the action is framed as a representative one on behalf of the aggrieved minority and other shareholders, it is in fact, an action which should be properly brought by the Company if it has not refused to do so and the action, is therefore derived from the right of the Company to sue; hence it is described as derivative action.

?Against this backdrop, Counsel argued that the instant action has nothing to do with a derivation action. Here, he said that the Company sued and on the basis of the facts disclosed in the statement of claim and that the Appellants were neither shareholder nor directors, while the 2nd Appellant was the sole surviving shareholder. Counsel continued and said that the action herein was not brought in a representative capacity by aggrieved minorities against any majority. And that the Appellants, not being directors or shareholders were not in a position

to take any action as it would have been absurd for the Respondents to ask the Defendants/Appellants to take action against themselves for hijacking and pillaging the Company.

Learned Counsel contended that the facts of the case of AGIP (NIG.) LTD. vs. AGIP PETROL INT?L (Supra) relied upon by the Appellants as their trump card in this matter was an action by minority Nigerian Shareholders against the foreign minority shareholders who sold all their shares in the Nigerian Company to a third party without recourse to the Nigerian Minority Shareholders who thereupon brought action in the name of the Company. Counsel quickly added that that was clearly a derivative action distinct from the case under consideration, which involves wrongs done not only to the Company but to the 2nd Claimant by the Appellants who were neither shareholders nor directors of the 1st Respondent. According to Counsel, the 2nd Respondent was admittedly the only existing shareholder and director and that he authorized the action and that he was not just a shareholder but constituted the management of the Company which was the 1st Claimant. Counsel cited the case of OMISADE vs.

AKANDE (1987) 2 NWLR (PT. 158) AT PP. 168-169, where the Supreme Court stated thus:
“In order to redress a wrong done to the Company or to recover money or damages alleged to be done to the Company, the action must prima-facie be brought by the Company itself. There is however an exception to the second rule that, where the persons against whom the relief is sought hold and control the majority of the shares in the Company and will not permit an action to be brought in the name of the Company. In that case the Courts allow the shareholders complaining to bring an action in their own name.”

Against the Appellants’ contention that the 2nd Plaintiff/Respondent did not obtain the consent of the directors or the shareholders of the 1st Plaintiff to sue in the name of the Company contrary to Section 63(3) of Companies and Allied Matters Act (CAMA), Counsel adopted the Respondents’ arguments in the preceding paragraphs and referred Court to pages 285-286 of the printed records where he said the trial Judge captured the essence of the whole case of the Plaintiffs/Respondents as follows;

The question here is from whom is the 2nd Plaintiff going to apply to seek for authority to bring an action on behalf of the 1st Plaintiff? Is this case not at variance with the authorities cited and relied upon by the Defendant/Applicant? Can the 2nd Plaintiff now wait and see the assets of the 1st Plaintiff being dissipated to the detriment of the 1st Plaintiff.

Still on the need of the 2nd Plaintiff/Respondent to take steps to protect the assets of the Company as sole surviving director, Counsel emphasized his role and responsibilities under Section 279(3) and Section 282 (1) of the CAMA and the findings of the trial Court made in this connection at page 286 of the printed records as follows;
One of the duties of a director (2nd Plaintiff in this case) provided for under Section 279(3) of the Companies and Allied Matters Act (CAMA) is that; a director shall act in all times in what he believes to be in the best interest of the Company as a whole so as to preserve its assets, further purpose for which it was formed, and in such manner as a faithfully, diligent, careful and ordinarily

skillful director would act in the circumstances.”

See also Section 282(1),(2) of the CAMA.
On the question of who a proper Plaintiff is in an action for wrong done to a Company, learned Counsel cited the case of HASTON (NIG.) LTD vs. A.C.B. PLC (2002) 12 NWLR (PT. 782) 623 AT 627. Learned Counsel once again told Court that this case was a timely intervention to stop the Appellants in their tracks, they not being directors or shareholders of the Respondents, hijacked its assets and were plundering its resources making it imperative for the suit to be filed so that the Court could determine the legality of what they were doing.

Counsel contended that in an action instituted by a director of a Company, the basic presumption in law is that such director has the authority and consent of the Company to initiate the action until the contrary is proved by the person challenging such authority, and not just by mere assertion but through evidence in the cause of trial. He cited in this regard, the case of SOTUMINU vs. OCEAN STEAMSHIP (NIG.) LTD (1981) 4 NWLR (PT. 66) A 691 AT 692-693 in support. According to Counsel, the burden of proof of

lack of authority of a Company Director to act as such or maintain an action on behalf of the Company is on the person who challenges the authority. Counsel cited the case of EJEKAM VS. DEVON IND. LTD (1998) 1 NWLR (PT. 534) 417 AT 421, in support.

Counsel finally urges the Court to dismiss the Appeal and affirm the decision of the trial Court.

RESOLUTION OF APPEAL;
The resolution of the issues involved in this appeal, requires some measure of carefulness on the part of this Court, this being an interlocutory appeal the resolution of which has nothing to do with the main issues which has arisen before the trial Lower Court for determination. The position of the law is that live issues in a matter should not be pre-empted or settled at the interlocutory stage of hearing an objection. See the cases of MADUBUIKE vs. MADUBUIKE (2001) 9 NWLR (PT. 719) 698 AT 707; PRINCE ABDULRASHEED A. ADETONA & ANOR vs. ZENITH INTL BANK PLC (2011) LPELR- 8237 (SC); OKOTIE-EBOH vs. MANAGER (2004) 11-12 SC. 174. It will be recalled that this matter is only an appeal which has arisen from the Preliminary Objection raised by the

Appellants as Defendants at the Lower Court and which was overruled by that Court and resulting in their Appeal to this Court.

The brief facts of this case, going by the averments in the parties pleadings is that the 2nd Respondent as Plaintiff along with three (3) others sometime in 1970 were subscribers to the memorandum and articles of association of the 1st Respondent, OHANENYE & SONS LTD. In 1994 or thereabout, the Shareholders and Directors of the said 1st Respondent were recomposed leaving one Cyril Onwugberu Ohanenye now deceased and the 2nd Respondent as the only Shareholders and Directors of the 1st Respondent. In 1998 Chief Cyril Onwugberu Ohanenye, who also doubled as Chairman/Managing Director of the 1st Respondent, died, leaving on the 2nd Respondent as only Shareholder and Director of the 1st Respondent. According to the 2nd Respondent without his knowledge and consent, the Defendants who are Appellants in this case began to dabble into the affairs of the 1st Respondent. First, they rented out the 1st Respondent’s property at No. 91 Asa Road, Aba.

Next they were alleged to have made false forms Co2 and Co7 of the

1st Respondent and appointed and entrenched themselves as members and/or Shareholders and Directors of the 1st Respondent and also did sundry other things which the trial Court, if at all will have to contend with, if this Appeal does not succeed. But on the part of the Appellants as Defendants before the Lower Court, the story had changed a great deal. They acknowledged however, the fact that the 1st and 7th Appellants were never initial subscribers to the memorandum and articles of association of the 1st Respondent, but that in 1999 they had acquired the status of subscribers and/or Directors of the company and that it is not true that this was done without the consent of the 2nd Respondent. According to the Appellants, the 1st Respondent?s incorporation was conceived out of the sufferings and investments of its former Chairman/Managing Director ? the now deceased Chief Cyril Onwugburu Ohanenye and his wife, Chief Mrs. Bernadette Ohanenye ? the 1st Appellant herein. And that all the parties involved in this dispute are members of one nuclear family, more specifically, the 2nd Respondent and the 2nd ? 7th Appellants are siblings and

uterine brothers while the 1st Appellant being their mother and the Late Chief Cyril Onwugberu was Ohanenye their father.

The most important thing here however, is the averment of the Appellants at paragraph 12(a) of their statement of Defence wherein they averred that the 2nd Respondent had knowledge of, and gave his consent to the renting of the 1st Respondent’s property in Aba; and also the averment at paragraph 12 (b) where it is averred that the 2nd Respondent is not the only surviving administrator or Shareholder in the family. There are other very weighty averments in the statement of Defence of the Appellants. Whether these were expressly denied by the 2nd Respondent or not, is not the business of this Court at this stage of proceedings.

What the Appellants had canvassed in their issue one (1) and which the Respondents adopted without modification is whether the 1st Respondent is still a limited liability company within the contemplation of the Companies and Allied Matters Act for purpose of carrying on business and maintaining this suit. The Appellants had predicated their issue on the fact that membership of the company

had fallen below the minimum prescribed by law which should be not below two (2) at all times. The Appellants relied on Sections 18 and 246(1) of the Companies and Allied Matters Act (CAMA) Cap. C21 LFN, 2004. They argued that the 2nd Respondent, having operated the company since membership fell to one in clear violation of Sections 18 and 246 of the CAMA, the 1st Respondent ceased to be a company in the real sense of the word and within the Contemplation of the Act.

It may be necessary at this stage and for the avoidance of doubt to reproduce Sections 18 and 246 (1) of the CAMA as follows:
SECTION 18:
“As from the commencement of this Act, any two or more persons may form and incorporate a company by complying with the requirements of the Act in respect of Registration of Company.”

SECTION 241:
(1) Every company registered on or after the commencement of this Act shall have at least two directors and every company registered before that date shall before expiration of six months from the commencement of this Act have at least two

directors.?

In interpreting and applying these Sections of the Law to the facts of the case before Court, it is perhaps appropriate to adopt the purposive approach of interpretation of statutes to not only these Sections, but also to the Companies and Allied Matters Act, Cap. C21 LFN, 2004 (CAMA) in order not to falter in the process of resolving this Appeal. In the English case of PEPPER vs. HART (1993) 1 ALL ER 42, cited with approval in the case of ATTN. LAGOS STATE vs. ATTN. FED. (2003) LPELR ? 620 (SC) the House of Lords, per LORD BRIDGE OF HARWISH observed at page 50, thus:
?The Courts now adopt a purposive approach which seeks to give effect to the true purpose of legislation and are prepared to look at much extraneous materials that bears on the background against which the legislation was enacted.?

?A basic purpose or objective for the enactment of the Companies and Allied Matters Act, Cap C21, LFN 2004 is no more than the protection of investors, creditors and the general members of the public whenever they decide to invest or acquire some interest in the shares or securities of

Companies quoted or unquoted as the case may be. It is for precisely this reason that there is several blue sky laws designed not only to keep the investors protected but also other unsuspecting members of the public from any sharp and unconscionable practices in the capital and securities market. In the same token, every single provision in the CAMA, beginning from its preliminary enactments to the last have been deliberately crafted and included in the legislation not merely for the fun of it, but clearly with the broad based objective of offering one form of protection or the other to the investor and creditor alike, with Sections 18 and 246 (1) of the Act not left out. I shall go ahead and demonstrate this shortly.

?The concept of corporate personality; that is the one, which at law recognizes a company on incorporation as an artificial person, separate and distinct entity altogether from its members is not without its shortcomings. The law generally does not allow going behind the separate entity accorded the company to hold members liable personally for acts or omissions adjudged those of the company. That is the whole essence of the law. The locus

classicus on this point is the old case of SALOMON vs. SALOMON AND COMPANY LTD (1897) AC 22, which has been cited and relied upon in several cases in this country. In certain cases, however, despite the existence of the concept of corporate personality the Courts will be prepared to disregard it and pay regard instead to what really lies behind and the identity of those behind the legal fa?ade for purposes of holding them personally liable for the liabilities or wrongs committed by the company. The purpose for doing this once again, is to forestall the rip-off of unsuspecting creditors or third-parties with impunity by unscrupulous company or business owners. Once again, this demonstrates the creditors and members of the public protection role of the CAMA.
The corporate personality concept, therefore under express statutory provisions and as well as under Common Law does not in all cases shield the person who seeks its use most especially for fraudulent purposes. One of such express statutory provisions is Section 18 of the CAMA, which when read in conjunction with Sections 93, 246 (1) of the Act, deals with the situation when there is a fall in

membership below statutory minimum. Under Section 18 of the Companies Act, the minimum number of persons who may form and incorporate a company are pegged at not less than two (2). By virtue of Section 93 of the Act, if membership falls below the statutory minimum, the other member who carries on business of the company during the period for more than six (6) months shall be liable for company debts contracted during the period. Even then, the said Section 93 is not without its own shortcomings but again, that is as far as it can go and no more. Under the Section, the rights of creditors are severally limited and it is only the members who remain after six (6) months that can be sued and not even those whose withdrawal led to the fall below minimum. The Section actually used the expression; ?debts contracted?. GOWER, L. C. B. the learned Author of Modern Company Law, 3rd Edition p. 190 suggests that the members who remain are the ones liable only in respect of liquidated contractual obligations and not in respect of other liabilities incurred. The combination or community reading therefore of Sections 18, 246 (1) and 93 of the Companies and Allied

Matters Act, did not say that a violation of these Sections shall necessarily render the company either illegal or non-existent within the contemplation of the law. Issue one is therefore resolved against the Appellants.

In respect of the second issue, dealing with the question of the competence or otherwise of this suit by virtue of same being considered incompetent having not been initiated with leave of Court, Learned Appellants Counsel argued that the suit was prematurely brought, the necessary leave of Court, having not been sought and obtained under Section 303 (1) of the CAMA. According to learned Counsel, this being a Derivative Suit it is imperative that a minority shareholder who intends to institute one, in the name of the company must first and foremost apply for leave of Court by originating summons on Notice to the company and that such application shall be brought pursuant to Rule 2 (1) and (2) of the Companies Proceedings Rules.

In their reaction, the 2nd Respondent contended that this action has nothing to do with a derivative action. Counsel said that the company sued on the basis of the fact disclosed in the Statement of Claim and

that the Appellants were neither shareholders nor Directors of the company while the 2nd Appellant was the sole surviving shareholder. He further argued that it would be absurd for Respondent to ask the Defendant/Appellants to take action against themselves for hijacking and pillaging of the company. It may be important for the umpteenth time, to clarify once again, that the substantive issue at this stage must as much as possible be avoided. But that in doing so, the position depicted as the current standing of both sides to the dispute is their tenacious claims to not only being members and shareholders to the 1st Respondent, but also its Directors. Whatever becomes of the accuracy of these positions, presently does not concern this Court at this stage of the matter. The situation that is therefore presented to Court is that the dispute is between a set of majorities on the one hand, represented by the Appellants and a minority on the other hand, represented by the 2nd Respondent, while the 1st Respondent remains the company whose ?soul? in a manner of speaking, the parties are battling for.

?The whole essence of the tussle between

majorities and minorities in the affairs of companies is all about, the enforcement of shareholders? Rights; both their individual and as well as their corporate Rights in the company. Individual Rights are described as those that aid in the maintenance of the shareholder in full membership with all the Rights and privileges appertaining to that status. See EDWARDS vs. HALLIWELL (1950) 2 ALL ER 1064. They are created by statute and to enforce his rights in the case of a breach, the shareholder can sue personally and directly in the sense that he does not have to seek and obtain the consent and approval of other members before doing so. See Section 300 (c) of the CAMA. But in the case of his corporate Rights, usually those rights in the company that affects and can only be exercised or enforced by a number of individual shareholders through the passing of appropriate resolution in the General meeting.
?It is in the exercise of the shareholders corporate Rights that the issue of majority rule and minority rights and the application of democratic principles in company matters come to the fore. Generally, wrongs done to the company are regarded as

infringement of the corporate Rights of the shareholders and thus, left for the majority to decide upon in the general meeting whether the wrongs in question should be redressed or not. This position represented the kernel in the rule in FOSS vs. HARBOTTLE (1843) 2 HARE, 461. In reaching its decision in the case, the Court held that an action could not be brought by minority shareholders and two (2) reasons were given for this; First, that it was within the power of the majority to ratify the action and that the Court cannot take away the Companies Right to manage its affairs in accordance with its constitution. Second, that since it was the company that suffered the loss and not the individual shareholder, it was for the company to seek redress if it so wished.
The relevance of the Rule in FOSS vs. HARBOTTLE (supra) in the practice of company matters cannot be over-emphasized, hence its codification in Nigeria together with exceptions in Sections 299 to 300 of the CAMA.

Learned Appellant’s Counsel had insisted that this action is a derivative action instituted by the 2nd Respondent on behalf of the 1st Respondent and that necessary conditions

precedent were not met. Clearly, if this Court is to accept this as the true position of things, which I am afraid it is, where this suit is to be accepted as a derivative suit, then this action is surely bound to suffer under the hammer of a struck down. But this Court is also fully aware that a derivation action only provides an alternative route in the enforcement of the corporate Rights of a company, while the exceptions to the rule in FOSS vs. HARBOTTLE (Supra) particularly under Section 300 (a) to (f) of the CAMA provides an alternative route. For the avoidance of doubt, Section 300 (a) to (f) are reproduced as follows;
“Without prejudice to the rights of members under Section 303 to 308 and Sections 310 to 312 of this Act or any other provisions of this Act, the Court on the application of any member, may be injunction or declaration restrain the company from the following:
(a) Entering into any translation which is illegal or ultra vires,
(b) Purporting to do by ordinary resolution any act which by its constitution or the Act requires to be done by special resolution;

(c) Any act or omission affecting the applicant?s individual rights as member
(d) Committing fraud on either the company or the minority shareholder where the directors fail to take appropriate action to redress the wrong done;
(e) Where a company meeting cannot be called in true to be of practical use in redressing a wrong done to the company or to minority shareholders; and
(f) Where the directors are likely to derive a profit or benefit, or have profited or benefited from their negligence or from their breach of duty”

Arising from the foregoing therefore, there is nothing absolutely to suggest that the 2nd Respondent’s claims before the Lower Court cannot be protected from being struck down by the exceptions to the rule in FOSS vs. HARBOTTLE (supra) provided in Section 300 (a) to (f). See the case of ELUFIOYE & ORS vs. HALILU & ORS (1993) LPELR -1120 (SC), where the Supreme Court, per KARIBI-WHYTE, JSC had this to say:
“The rule in FOSS vs. HARBOTTLE applies only where the majority can cure the irregularity of

illegality complained of by passing of ordinary resolution. It does not apply where the act is absolutely illegal and incapable of being confirmed by such majority. In such a case, the Court will interfere at the instance of the minority. The Court will also interfere where the act complained of is ultra-vires the company.?
See also the case of EDOKPOLO & CO. LTD vs. SEM-EDO WIRE IND. LTD & ORS (1984) LPELR ? 1017 (SC); In the case of GOMBE vs. P. W. (NIG.) LTD (1995) LPELR- 1330 SC, the Supreme Court, per UWAIS, JSC had this say:
“Therefore, the proper party to complain about the fraud is the company itself. The rule in the case of FOSS vs. 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 vs. HARBOTTLE which do

enable a minority shareholder to sue where there is a fraud on the majority shareholders.”

In the instant case, what the 2nd Respondent has done is to bring this action in order to redress what he perceives to be fraudulent in the affairs of the 1st Respondent and I do not think he does not have the right to do so. In the final analysis, this Appeal fails and it is accordingly dismissed. Matter is sent back to the Federal High Court, Umuahia for continuation of the hearing of the substantive matter. There shall be no Orders as to costs.

IGNATIUS IGWE AGUBE, J.C.A.: I had the advantage of reading in advance the just delivered judgement by my learned brother, F. O. Oho, JCA.

I completely agree with his reasoning and conclusion that this Appeal fails and it is accordingly dismissed. The case is sent back to the Federal High Court, Umuahia for continuation of hearing of the substantive matter.

PETER OLABISI IGE, J.C.A.: I agree with the conclusion reached in the judgment just delivered by my Learned Brother OHO, JCA.

Appearances

Ama Akalonu, Esq.For Appellant

AND

Chinyere Umeojiaka (Mrs)For Respondent