BAUCHI STATE GOVERNMENT & ORS v. AREWA CERAMICS LIMITED & ORS
(2019)LCN/13074(CA)
In The Court of Appeal of Nigeria
On Friday, the 12th day of April, 2019
CA/J/347/16
RATIO
CORPORATE LAW: GOVERNMENT-OWNED COMPANIES ARE TOTALLY INDEPENDENT OF THE GOVERNMENT
All too often government-owned companies forget that they are completely independent of government or their parent body. As a result they seek to take advantage of the statute that sets up the parent body. The Courts have resisted this. The subsidiaries are not accorded any special privilege; they are treated as any other company incorporated under CAMA.? (Italics mine)
And after citing the cases of Warri Refinery & Petroleum Co. Ltd v. Onwo (1999) 12 NWLR (PT 630) 312, Okomu Oil Palm Co. Ltd v. Iserhienrhien (2001) 6 NWLR (PT 710) 660 and Daily Times v. Akindiji (1998) 12 NWLR (PT 726) 1 among others to buttress his argument, the learned author went on to further observe, again correctly, thus:
Flowing from its misconception that companies where Government has shares minority, majority or controlling are extension of Government House, even State Houses of Assembly abuse their authority towards them. Company Directors and officials are invited to Government House and House of Assembly for interrogation on company decisions, top government functionaries request employment positions, ask for and obtain goods and services without paying for them, and subject the companies to countless abuses. The decisions below are merely a sample of how the Courts have tried to rein in these abuses.PER BOLOUKUROMO MOSES UGO, J.C.A.
CORPORATE LAW: A COMPANY IS INDEPENDENT FROM ITS PROMOTERS OR SHAREHOLDERS
And coming specifically to the law on this area, it is now well settled that a company duly registered and limited by shares like Arewa Ceramics is a separate and different person from its promoters/shareholders, even if such promoters/shareholders is just one person who holds all its shares and controls it. That much was settled over a century ago in the celebrated case of Salomon v. Salomon (1897) AC 22 and further driven home by the Supreme Court of Nigeria inMarina Nominees v. Federal Board of Inland Revenue (1986) 2 NWLR (PT 20) 48 cited by both Mr. Chinenye and Owoicho for the respondents, even as the said case, I dare say, is actually against the position they have canvassed in this case.PER BOLOUKUROMO MOSES UGO, J.C.A.
JUSTICES
HABEEB ADEWALE OLUMUYIWA ABIRU Justice of The Court of Appeal of Nigeria
TANI YUSUF HASSAN Justice of The Court of Appeal of Nigeria
BOLOUKUROMO MOSES UGO Justice of The Court of Appeal of Nigeria
Between
1. BAUCHI STATE GOVERNMENT
2. MINISTRY OF COMMERCE AND INDUSTRIES, BAUCHI STATE
3. ATTORNEY-GENERAL AND COMMISSIONER FOR JUSTICE, BAUCHI STATE Appellant(s)
AND
1. AREWA CERAMICS LTD
2. ENGR. YAHAYA ISAH
3. CHRISTOPHER IJIMBILI
4. ALH. BABA
(Suing for themselves and on behalf of Staff of Arewa Ceramics Ltd) Respondent(s)
BOLOUKUROMO MOSES UGO, J.C.A.(Delivering the Leading Judgment): This appeal is from the judgment of the National Industrial Court of Nigeria (hereinafter referred to as NICN), Jos Division delivered by R.J. Gwandu J. on 30th June 2015.
The 2nd, 3rd and 4th respondents for themselves and on behalf of 19 employees of 1st respondent, Arewa Ceramics, there filed a complaint (as claims in that Court are called) against Arewa Ceramics Ltd (1st Respondent) and appellants as 1st, 2nd, 3rd and 4th defendants, claiming from them:
1. A declaration that they (complainants) are staff of the defendants and are entitled to all the benefits enjoyed by other staff in the employment of the 2nd and 3rd defendants.
2. A declaration that non-payment of their (complainants) salaries and leave allowances from 2003 till date infringes on their right and is illegal, null and void.
3. A declaration that they (complainants) are entitled to damages against the defendants for the suffering they have been going through from 2003 till date.
4. An order directing the 1st Respondent (Arewa Ceramics Ltd) and 2nd and 3rd defendants (Bauchi State
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Government and Bauchi State Ministry of Commerce & Industries) to pay to them (complainants) the sum of 17,898,966.24k being their outstanding salaries and leave allowances from January 2003 to August 2012.
5. An order directing the defendants to pay to them (complainants) salaries every month with effect from September 2012, with an option to absorb them into other fields or terminate their appointments and pay their retirement benefits.
6. Damages against the defendants to be assessed by the court.
7. Cost of this suit.
It is necessary to state that second to fourth respondents made it very clear in their action that they were employees of only the first respondent, Arewa Ceramics, and that the said Arewa Ceramics is a Limited Liability company registered under the Companies and Allied Matters Act.
In spite of this, they seem to also hold the belief that appellants also owed them some obligation to pay them their salaries and allowances for working with Arewa Ceramics. They founded this belief on the fact that appellants had at their instance in the past not only intervened on the issue and promised to find solution to their
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plight, they (2nd to 4th respondents) had also sometime reported appellants to the Bauchi State House of Assembly and 2nd appellant was invited to the floor of the House where he promised to pay them their salaries without delay. Furthermore, 3rd appellant had also sometime before their suit approved the appointment of 2nd respondent/complainant, Engr. Yahaya Isah, as Production Manager of Arewa Ceramics and even later elevated him as its General Manager pending the appointment of a substantive General Manager.
Whereas Arewa Ceramics did not respond to the suit, appellants in their 21-paragraph statement of defence denied in totality 2nd to 4th respondents? claims. They averred, particularly in paragraphs 6, 7, 8, 9, 10, 11, 12, 13, 14 15, 16, 17 18, 19 and 20, that 2nd to 4th Respondents were only employed into the services of Arewa Ceramics and not the 3rd defendant; that Arewa Ceramics does not fall within the realm of public service of the State as envisaged by the 1999 Constitution of Nigeria; that the claims of the 2nd to 4th respondents fall within the corporate governance of the Board of Arewa Ceramics and not theirs; that the 2nd to 4th
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respondents had made it their business to ?run from one wrong pillar to wrong post? in pursuit of reliefs from those who had no power, authority or duty to grant them; that there was never any agreement to pay entitlements to the 2nd to 4th respondents as they, appellants, knew fully that it was never an obligation on them; that the Ministry of Commerce and Industries Bauchi State does not report to Bauchi State House of Assembly more so as Arewa Ceramics was not an entity on which the House of Assembly may legislate; that the assurances of the authorities cited by 2nd to 4th respondents was to see in which way they, appellants, could assist in ameliorating the condition of the 2nd to 4th respondents based on the position they put forward; that the contention of the 2nd to 4th respondents does not represent the true state of affairs as the Executive Governor of Bauchi State had been advised that it is not the business of Bauchi State Government or its Ministry of Commerce and Industries to pay salaries and other allowances of Arewa Ceramics Limited, a company not owned by Bauchi State Government; that besides, no money had been appropriated
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for that purpose; that Arewa Ceramics Limited is a corporation with shareholders of which Bauchi State Government is only one; that the shareholding of Bauchi State Government in Arewa Ceramics Ltd is only 16%, representing 55% of the total shares held by Bauchi and Gombe States in Arewa Ceramics Ltd; that the largest shareholding is by one Bored Engineering Ltd, who hold 25% of the shares in Arewa Ceramics Ltd; that the shareholding has not changed; that the concern of Bauchi State Government in the survival of the Arewa Ceramics Ltd had been primarily interim and not a takeover or supervisory/controlling role as it was mindful of its investment and stake in the company and the fact that it was situated in its geographical jurisdiction.
After taking evidence and arguments from parties and their counsel, the trial judge found it difficult to grant the first declaratory relief of the 2nd to 4th Respondent that they who all hold employment letters issued of Arewa Ceramics be also declared staff of not only Arewa Ceramics but also of appellants too. It rather said and ordered thus on that claim:
Having thus come to the end of this journey, I
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shall consider the claims of the claimants thus:
1. A declaration that they (claimants) are staff of the defendants and are entitled to all the benefits enjoyed by other staff in the employment of the 2nd and 3rd defendants.
This prayer is granted in part thus:
It is hereby declared that the claimants are the staff of the 1st Respondent and are entitled to the benefits accruable to them as staff.?
Nevertheless, His Lordship still felt that the evidence before him, particularly the shareholding of appellants in Arewa Ceramics and the interest they had shown in its affairs, warranted applying the company law principle of lifting the veil of incorporation to hold appellants jointly responsible with Arewa Ceramics for its financial obligations to its staff, the 2nd to 4th respondents as sought by them in their other claims. He justified his decision this way:
As it is, the proper control and the engine room of the 1st respondent is the 2nd Respondent who masqueraded as the 3rd Respondent. This is as I have noted earlier corresponds with the company law principle of lifting the veil of incorporation FDB
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Financial Service Ltd v. Adesola (2000) 8 NWLR (PT 668) 170 @ 174). Although this key exposure was not intended here, it is worthy of note that it was the 2nd, 3rd and 4th Respondents themselves that admitted the obvious. They admitted having some/major shares in the 1st respondent. They equally admitted employing the 1st claimant at a certain time and equally uplifting/upgrading him to an Acting General Manager of the 1st respondent. Further, that the 1st claimant was invited severally to dialogue with the Hon. Commissioner, Ministry of Commerce and Industries (the 3rd Respondent) on the activities of the organization. The purport of this is that the Honourable Commissioner (the 3rd Respondent) is the eye of the 2nd Respondent in the 1st Respondent.
In all it is my considered view that that the Respondents (2nd, 3rd and 4th) were all interested in the 1st Respondent and as such the 2nd Respondent have engineered the 3rd Respondent to continue to have an eye on the control and supervision of the 1st Respondent.
Having thus found, I hold that the claimants have proved their case, that they are the employees of
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the 1st Respondent and that the 2nd respondent who has some interests to protect in the 1st respondent elected the 3rd respondent supervisor and controller of the 1st respondent (1st claimant).?
On that basis, it proceeded to grant all other claims of 2nd to 4th respondents and also awarded against appellants jointly with Arewa Ceramics general damages of Ten Million Naira (?10m) as well as costs of ?700,000.00.
Dissatisfied with that judgment, the appellants have brought the instant appeal on three grounds and formulated the following three issues for us to determine:
1. Whether the judgment of the lower Court exempted appellants from paying the respondents? outstanding salaries and leave allowances from January 2003 to August 2012 and placed same on the 1st respondent.
2. Whether the appellants are liable to pay the 2nd, 3rd and 4th respondents any damages.
3. Whether there is any fair hearing in the proceedings of the trial Court.
Whereas Arewa Ceramics Ltd (1st Respondent) adopted these issues, 2nd, 3rd and 4th Respondents framed them a bit differently as follows:
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1. Whether there was sufficient evidence before the lower Court to justify the Court holding the 1st, 2nd and 3rd Defendants (appellants) liable to pay the claimants salaries and allowances.
2. Whether in the circumstances of this case the amount awarded as damages was justified.
3. Whether the issue of service on 1st defendant raised by appellants is competent and if so whether there was proper service on the 1st Respondent.
Arguing their issue 1, appellants referred us to the first relief granted by the trial judge as earlier reproduced and submitted that that order exempted them from any liability. It is the grant of reliefs 4 and 5 by which the lower Court ordered them to jointly pay with the Arewa Ceramics the salaries and allowances of 2nd to 4th respondents, they said, compelled them to file this appeal. The terms employee and worker in the Trade Disputes Act as well as Labour Act, they argued, mean someone who has a contract of employment and since by the trial judge?s own finding in relief No. 1, 2nd to 4th respondents are employees of only Arewa Ceramics, it was wrong and contradictory to order them (appellants) to share in paying 2nd
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to 4th respondents salaries and allowances when they have no contract of employment with them. On that note, they urged us to set aside reliefs 4 and 5 granted by the lower Court ordering them to pay the salaries and allowances of Respondents and resolve this issue in their favour.
Mr. G.N. Chinenye for Arewa Ceramics and Patrick Owoicho for 3rd to 4th respondents all supported the judgment of the lower Court. Both counsel cited the decision of the Supreme Court in Marina Nominees v. Federal Board of Inland Revenue (1986) 2 NWLR (PT 20) 48 to submit that given the role played by appellants in the affairs of Arewa Ceramics as recounted by the learned trial judge in his judgment, coupled with appellants? shareholding in it, His Lordship was right in holding them responsible for its debts.
On issue 2, appellants attacked the award of ?10,000,000.00 damages by the trial judge in favour of 2nd to 4th respondents. They first argued that having regard to His Lordship?s first declaration that 2nd to 4th respondents were only staff of 1st respondent he was wrong to award damages against them for 1st respondent?s inability to pay
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its staff their salaries and allowances. The damages awarded, they also complained, were in any case too high. Besides, they continued, His Lordship did not specify whether the said damages were special or general damages. If they were damages, they argued, 2nd to 4th respondents did not adduce evidence showing how they suffered them, and if they were special damages, 2nd to 4th respondents did not plead and prove them by credible evidence to warrant such huge damages it awarded them. They therefore urged us to intervene.
Messrs. Chinenye for 1st respondent and Owoicho for 2nd to 4th respondents in response argued that the damages awarded by the Court were actually general damages to compensate 2nd to 4th respondents and those they represent for the injury and hardship suffered by them for the period of non-payment of their dues and so were justified especially given their total number.
On Issue 3, appellants submitted that 1st respondent, Arewa Ceramics Limited, was denied fair hearing by reason of non-service of processes on it hence it did not participate in the proceedings at the lower Court and that nullified the proceedings.
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Again, both the 1st respondent as well as 2nd to 4th respondents disputed this assertion. Mr. Owoicho in particular not only further submitted that this issue of non-service was not raised before the lower Court so leave ought to have been sought to argue it, counsel further relied on the Supplementary Records transmitted by 2nd to 4th respondents, which contains proof of service of processes on 1st respondent and even Hearing Notice on it by the bailiff of Court, to buttress his contention. Counsel argued that the acceptable way of disputing proof of service is by filing counter affidavit, which appellants failed to do in this case.
Resolution of issues
This appeal actually pivots on whether the lower Court was correct in holding appellants jointly responsible with Arewa Ceramics for the salaries and allowances of its staff, the 2nd to 4th respondents. On that point, I am not at all convinced that the lower Court was correct. Neither the steps appellants took in relation to Arewa Ceramics nor their shareholding in it warranted the orders the Court made against them and it did not matter that they are the Government. The learned author Professor Emeka Chianu dealt
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with similar acts like these by the various tiers of Government of Nigeria – federal and State – and put the position properly in his book Company Law (Lawlords Publications) when he posited therein at p. 288 that:
All too often government-owned companies forget that they are completely independent of government or their parent body. As a result they seek to take advantage of the statute that sets up the parent body. The Courts have resisted this. The subsidiaries are not accorded any special privilege; they are treated as any other company incorporated under CAMA.? (Italics mine)
And after citing the cases of Warri Refinery & Petroleum Co. Ltd v. Onwo (1999) 12 NWLR (PT 630) 312, Okomu Oil Palm Co. Ltd v. Iserhienrhien (2001) 6 NWLR (PT 710) 660 and Daily Times v. Akindiji (1998) 12 NWLR (PT 726) 1 among others to buttress his argument, the learned author went on to further observe, again correctly, thus:
Flowing from its misconception that companies where Government has shares ? minority, majority or controlling are extension of Government House, even State Houses of Assembly abuse their authority towards
13
them. Company Directors and officials are invited to Government House and House of Assembly for interrogation on company decisions, top government functionaries request employment positions, ask for and obtain goods and services without paying for them, and subject the companies to countless abuses. The decisions below are merely a sample of how the Courts have tried to rein in these abuses.
Appellants and the learned trial judge suffered the same misconception which our Courts have consistently frowned at and it ought to have been easy for the learned trial judge, if he was well directed, to do the right thing and dismiss 2nd to 4th respondents? claims against appellants without further ado. It is unfortunate that he failed to do that and in the event occasioned a serious miscarriage of justice by purportedly lifting Arewa Ceramics corporate veil to hold appellants responsible for its obligations to its workers.
The veil of incorporation is not lifted just for the asking like that of the bride at the Altar on her wedding day, which itself also has at least one rule: the bridal veil can only be lifted
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before the officiating priest and the congregation. In the instant case, even if the conditions for lifting the veil of incorporation of Arewa Ceramics Limited were in existence, one would have seen behind the veil not just one bride in Bauchi State Government but several brides, including but not limited to Gombe State Government created from Bauchi State which the pleadings and evidence reveal is also a shareholder of Arewa Ceramics. That alone would have made it unconscionable to make only Bauchi State Government bear sole responsibility for what it owns along with several others.
And coming specifically to the law on this area, it is now well settled that a company duly registered and limited by shares like Arewa Ceramics is a separate and different person from its promoters/shareholders, even if such promoters/shareholders is just one person who holds all its shares and controls it. That much was settled over a century ago in the celebrated case of Salomon v. Salomon (1897) AC 22 and further driven home by the Supreme Court of Nigeria inMarina Nominees v. Federal Board of Inland Revenue (1986) 2 NWLR (PT 20) 48 cited by both Mr. Chinenye and Owoicho for the respondents,
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even as the said case, I dare say, is actually against the position they have canvassed in this case. The facts of Marina Nominees v. Federal Board of Inland Revenue supra as stated by Kazeem J.S.C. in his lead judgment were as follows: A firm of accountants named Peat Marwick Carselton Elliot & Co. (hereinafter called Peat Marwick) was acting as Secretaries to a number of limited liability companies; and according to the provisions of the Companies Act 1968, whenever there is a change of Secretary of a limited Liability Company, the Company concerned is obliged to file Returns with the Registrar of companies of such change. Peat Marwick while acting as Secretaries to their clients was making use of members of their staff as such Secretaries. But whenever those employees left the services of Peat Marwick, it became necessary to file Returns with the Registrar of Companies to satisfy the requirements of the Companies Act. In order therefore to take advantage of perpetual succession and to prevent frequent filing of Returns of Change of Secretaries, Peat Marwick formed the appellant company (Marina Nominees) in March 1964, among other things, to
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act as Secretaries to limited liability companies on their behalf. The subscribers of Marina Nominees were two senior partners of Peat Marwick; but there was nothing in the Memorandum and Articles of Association of the Marina Nominees to show any connection with Peat Marwick. Mr. Ogunde, a partner of Peat Marwick who testified for the appellant, Marina Nominees, said the Secretariat work was done by Peat Marwick in the name of Marina Nominees and that all bills for services rendered by Marina Nominees were raised in favour of Peat Marwick and Peat Marwick retained all the income and accounted for them in their books. He maintained that since Marina Nominees did not really run the services, it had no right to the income. Consequently Marina Nominees neither filed any income tax returns nor paid any corporate tax since its inception. The issue before the Supreme Court, and the argument of Marina Nominees as presented by its counsel Chief Rotimi Williams, was whether it was in the circumstances bound to pay its own company income tax given that it was in its opinion a mere alias and agent of Peat Marwick which virtually ran and did everything
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on its behalf including using its own staff to do its work. The Supreme Court had no difficulty dismissing that argument, with Kazeem, J.S.C. in lead judgment responding this way at p.58-59:
It is not disputed that the appellant company was duly incorporated and registered under the Companies Act, 1968. Hence by virtue of that incorporation, the appellant company became a separate legal entity as a body corporate. See Section 15(2) of the Companies Act. The recognition of this legal fiction which first caused the Courts some problems was laid down in the case of Salomon v. Salomon & Co. Ltd (1897) A.C. 22.
And after quoting copiously from Salomon v. Salomon & Co. Ltd as well as the later decision of Lee v. Lees Air Farming Ltd (1961) A.C. 12, His lordship continued thus:…a company could be held liable to pay compensation for the acts of its assistant who was the controlling shareholder and governing director of a company formed by him. Thus it is clear from these cases that a company must be regarded as separate entity from any one of its shareholders, no matter how many shares he may hold, and the company cannot be an agent of its subscribers…
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What in my view is relevant here is the fact that the appellant Company was neither incorporated as a sham or a stratagem nor as an instrument of fraud, but as a limited company charged with duties inter alia of acting as Secretaries to clients of Peat Marwick.
It has been shown that the appellant is a separate legal entity even though it may be fully owned by Peat Marwick. It was not incorporated as a sham, front, or stratagem; or as an instrument of fraud but as a legal person to perform the services as Secretaries to several clients of Peat Marwick.
Oputa, J.S.C., in his contribution at p. 64 quipped pungently thus on whether the fact that Peat Marwick provided staff for Marina Nominees (as it is also here) made any difference:
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It cannot be in dispute that the appellant company is bound by the relevant Companies Act of Nigeria but especially the Companies Act of 1979 Section 8 which provides for the taxation of any company registered in Nigeria. Whether or not the staff of Appellant company are provided by Peat Marwick is quite irrelevant as that does not remove the corporate seal from the appellant.
This position of the law was recently revisited and reconfirmed by the Supreme Court of the United Kingdom in its landmark decision in the celebrated case of Prest v. Petrodel Resources Ltd (2013) UKSC 34, (2013) 2 A.C 415 – a case incidentally involving a United Kingdom based Nigerian businessman, Mr. Micheal Prest, and his British wife Mrs. Yasmin Prest. One of the main issues on appeal there was whether the veil of incorporation of six offshore companies solely owned by Mr. Micheal Prest could be pierced as divorce settlement for his wife Yasmin. Lord Sumption (recently retired) pronouncing lead judgment of the Court stated the true position of the law on the subject thus:
But when we speak of piercing the corporate veil, we
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are not (and should not be) speaking of any of these situations but only of those cases which are true exceptions to the rule in Salomon v Salomon & Co Ltd (1897) A.C. 22, i.e. where a person who owns and controls a company is said in certain circumstances to be identified with it in law by virtue of that ownership and control.
?Most advanced legal systems recognise corporate legal personality while acknowledging some limits to its logical implications. In civil law jurisdictions, the concept of abuse of rights, to which the International Court of Justice was referring in In re Barcelona Traction Light and Power Co. Ltd (1970) ICJ 3, when it derived from municipal law a limited principle permitting the piercing of the corporate veil in cases of misuse, fraud, malfeasance or evasion of legal obligations.
These considerations reflect the broader principle that the corporate veil may be pierced only to prevent the abuse of corporate legal personality. It may be an
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abuse of the separate legal personality of a company to use it to evade the law or to frustrate its enforcement. It is not an abuse to cause a legal liability to be incurred by the company in the first place. It is not an abuse to rely upon the fact (if it is a fact) that the liability is not the controller?s, because it is the company?s. On the contrary, that is what incorporation is all about.? (Italics mine)
It was thus held that even though all the said offshore companies were solely owned by Mr. Prest, the principle of piercing the veil could not be applied to them because they were not formed as a sham or to commit fraud on his wife the petitioner but rather formed long before even the issues in dispute.
Like Marina Nominees v. Federal Board of Inland Revenue (supra) and Prest v. Petrodel Resources Ltd (supra), it has not been suggested by the respondents let alone shown by them that Arewa Ceramics which was formed and registered long before the issue of delay in payment of the salaries and allowances of 2nd to 4th Respondents was formed as a sham, stratagem or instrument of fraud. The trial judge was therefore clearly
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wrong to rely on appellants mere alleged control of it to hold them liable for its financial obligations to 2nd to 4th respondents. Accordingly, I unhesitatingly resolve issue 1, as well as issue 2, consequentially, in favour of appellants.?
Having so held, issue 3 of appellants of whether 1st respondent was denied fair hearing ? which issue should not even be the concern of appellants – become academic.
In summary, the appeal succeeds and is allowed and all the orders the lower Court made against appellants, including damages and costs, are hereby set aside and it is ordered that the case of the claimants/2nd to 4th respondents in the trial National Industrial Court of Nigeria as it relates to the appellants be and is hereby dismissed.
Parties shall bear their costs.
HABEEB ADEWALE OLUMUYIWA ABIRU, J.C.A.: I have had the privilege of reading before now the lead judgment delivered by my learned brother, Boloukuromo Moses Ugo, JCA. His Lordship has ably considered and resolved the issues in contention in the appeal. I agree with the reasoning and the conclusion reached therein.
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The second to the fourth Respondents, and the other people they represent, were staff of the first Respondent. The first Respondent is a limited liability company and the first Appellant is one of the shareholders of the first Respondent. The second to the fourth Respondents, and the other people they represent, were not paid their salaries and other employment benefits by the first Respondent and they commenced an action in the lower Court against the first Respondent and the Appellants for the outstanding salaries, leave allowances and other benefits as well for damages. The lower Court found that the second to the fourth Respondents, and the other people they represent, were indeed staff of the first Respondent, and not of the Appellant but it ordered the payment of the unpaid employment benefits against the first Respondent and the Appellants and it also ordered damages against them, relying on the principle of lifting the veil.
?The fact of the first Respondent being a duly registered limited liability company automatically brings into play, in the circumstances of his case, the concept of corporate personality which has become firmly established since the
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decision of the English House of Lords in the celebrated case of Salomon Vs Salomon and Company Ltd (1897) AC 22. It means that once a company is incorporated under the relevant laws, it becomes a separate person from the individuals who are its members. The company has capacity to enjoy legal rights and is subjected to legal duties which do not coincide with that of its members. Such company is said to have legal personality and is always referred to as an “artificial person” and it can sue and be sued in its own name. It may own property in its own fight and its assets, liabilities, rights and obligations are distinct from that of its members ? Kano State Oil and Allied Products Ltd Vs Kofa Trading Company Ltd (1996) 3 N WLR (Pt 436) 244, Zest News vs Waziri (2004) 8 NWLR (Pt 875) 267, Aso Motel Kaduna Ltd vs Deyemo (2006) 7 N WLR (Pt 978) 87, New Resources International Ltd Vs Oranusi (2011) 2 N WLR (Pt 1230) 102. This point was explained by Aderemi, JCA (as he then was), in Companhia Brasileira De Infrastrututira Vs Cobec (Nig) Ltd (2004) 13 NWLR (Pt 890) 376 at 394 -395 thus:
“The single most important consequence of incorporation of company
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is the separate legal personality which the company acquires. From the date of incorporation mentioned in the certificate of incorporation, the subscribers of the memorandum, together with such other persons as may from time to time become members of the company shall be a body corporate by the name contained in memorandum capable forthwith of exercising all the functions of an incorporated company; that is the purport of Section 37 of CAMA. It is by the provision of this section that a separate legal entity of the body corporate is created. Each company so registered or incorporated under CAMA is quite distinct and separate from each other; the locus classicus is the well-known case of Salomon Vs Salomon and Company Ltd (1897) AC 22. Upon incorporation, a company is regarded as a separate and distinct entity from any one of its shareholders, no matter how many shares he may hold…”
The liability for the payment of the employment beneflts of the second to the fourth Respondents, and the other people they represent, was thus the primary responsibility of the first Respondent and had nothing to do with the Appellants. The Courts do not make a habit of going
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behind the facade of corporate personality of a company to hold the shareholders or directors liable for the acts of the company except in very rare instances such as where the company has been used as an instrument for illegality or fraud – Adeyemi vs Lan & Baker (Nig) Ltd (2000) 7 NWLR (Pt 663) 33, FDB Financial Services Ltd vs Adesola (2000) 8 NWLR (Pt 688) 170, Mezu vs Cooperative & Commerce Bank (Nig) Plc (2013) 3 NWLR (Pt 1340) 188. This was explained by Adekeye, JCA (as he then was) in Vilbeko (Nig) Ltd Vs Nigerian Deposit Insurance Corporation (2006) 12 N WLR (Pt 994) 280 at 295 F-H thus:
“An incorporated limited liability company is always regarded as a separate and distinct entity from its shareholders and directors. The consequence of recognizing the separate personality of a company is to draw the veil of incorporation over the company. No one is entitled to go behind the veil. This corporate shell shall however be cracked in the interest of justice. Particularly where the company is used as a mask or sham by the director to avoid recognition in the eyes of equity, the Court must be ready and willing to open the veil of incorporation
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to see the characters behind the company in the interest of justice. Since a statute will not be allowed to be used as an excuse to justify illegality or fraud, and once there is clear evidence of fraud or illegality, the veil will be lifted.”
It was not the case of the second to the fourth Respondents, and the other people they represent, that the first Respondent was being, or had been, used by the Appellants to perpetuate illegality or fraud against them in the payment of their employment benefits. There was thus no basis for the lower Court to have lifted the veil to hold the Appellants liable for obligations of the first Respondent to the second to the fourth Respondents, and the other people they represent.
It is for these reasons and the better exposition of the law in the lead judgment that I agree that there is merit in the appeal. I too allow the appeal and set aside the judgment of the National Industrial Court sitting in Jos and delivered by Honorable Justice R. H. Gwandu on the 30th of June, 2015 as far as it relates to the Appellants. I abide the order on costs in the lead judgment.
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TANI YUSUF HASSAN, J.C.A.: I had the privilege of reading in draft the lead judgment of my learned brother, BOLOUKUROMO MOSES UGO JCA, which I am in agreement both with the reasoning and conclusion that the appeal has merit. It succeeds and it is allowed by me. I abide by the orders made.
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Appearances:
A.S. Umar, Esq. (Chief State Counsel, Ministry of Justice, Bauchi State) with him, M.K. Toro and I.K. YahayaFor Appellant(s)
C.I. Nwobu, Esq. for 1st Respondent.
P. Owoicho, Esq. for 2nd, 3rd and 4th RespondentsFor Respondent(s)
Appearances
A.S. Umar, Esq. (Chief State Counsel, Ministry of Justice, Bauchi State) with him, M.K. Toro and I.K. YahayaFor Appellant
AND
C.I. Nwobu, Esq. for 1st Respondent.
P. Owoicho, Esq. for 2nd, 3rd and 4th RespondentsFor Respondent
