CONSOLIDATED BUSINESS SUPPORT SERVICES LTD v. ACCESS BANK OF NIGERIA & ORS
(2012)LCN/5168(CA)
In The Court of Appeal of Nigeria
On Thursday, the 23rd day of February, 2012
CA/L/54/2004
RATIO
THE POSITION OF THE LAW WHERE SHARE CAPITAL MAY BE DIMINISHED OR LOST IN THE CAUSE OF A COMPANY’S TRADING
In TREVOR VS. WITWORTH (1887) 12 Appeal cases 409 at 415 it was held that while share capital may be diminished or lost in the cause of a company’s trading that is a result which no legislation can prevent but persons who deal with, give credit to a limited company, generally rely upon the fact that the company is trading with a certain amount of capital already paid as well as upon the responsibility of its remaining at call, and they are entitled to assume that no part of the capital which had been paid into the coffers of the company has been subsequently paid out except in the legitimate course of its business.” Per Lord Watson. See Lord Herschell searly cases and Materials in company law, 6th edition 1996 P.378 referred to wherein it is stated… This case … Trevor Vs. Whitworth settled the controversy which had existed, at least potentially ever since the passing of the 1856 (Joint Stock Companies) Act. It was only slowly recognized that the issue was not a domestic matter concerned with compliance with the articles or even a question of vires dependent upon the powers set forth in the memorandum, but a matter of legality under the companies Act itself” PER. M. A. DANJUMA, JCA
THE POSITION OF THE LAW ON THE SURRENDER OF SHARES
In BELLERBY VS. ROWLAN & MARWOODS 1902 2 charp. 14, it was held every surrender of shares whether fully paid or not involves a reduction of capital which is unlawful except where sanctioned by a court. Capital cannot be returned by a company to its members save by a reduction of capital by order of court. The reduction in capital holding in this case, without the sanction of a court is invalid. PER. M. A. DANJUMA, JCA
JUSTICES:
HELEN M. OGUNWUMIJU Justice of The Court of Appeal of Nigeria
RITA NOSAKHARE PEMU Justice of The Court of Appeal of Nigeria
MOHAMMED A. DANJUMA Justice of The Court of Appeal of Nigeria
Between
CONSOLIDATED BUSINESS SUPPORT SERVICES LIMITED – Appellant(s)
AND
1. ACCESS BANK OF NIGERIA
2. GSM CENTRE LIMITED
3. MR. CHINEDU NWOLOLO
4. N. V. OPERATION LIMITED – Respondent(s)
M. A. DANJUMA, JCA (Delivering the Leading Judgment): This is an appeal against the decision of the Federal High Court, wherein the Honourable Court dismissed in its entirely the suit of the plaintiff now Appellant, wherein the plaintiff/Appellant by its writ of summons herd claimed as follows:-
“1. A declaration that the 2nd Defendant is liable, to pay to the plaintiff the sum of =N=153 million being value of the plaintiff’s divestment from the 2nd Defendant.
2. A declaration that the Bank Guarantee dated the 15th day of January, 2002 given by the 1st Defendant to secure the payment by the 3rd Defendant of =N=153,000 (one hundred and fifty million Naira) for plaintiff’s interest in the 2nd Defendant is due and payable and the 1st Defendant is liable to honour the said guarantee.
3. The sum of =N=153,000,000 (one hundred and fifty three million Naira) being the amount the 2nd Defendant agreed to pay the plaintiff under a Bond guarantee dated 15th day of January, 2002 in respect of its =N=153,000,000 ordinary shares held in the 2nd Defendant.
4. Interest on the sum of =N=153,000,000 (one hundred and fifty million Naira) at the rate of 21% per annum from the 25th of April, 2002 till the final liquidation of the debt.
5. Costs in this action in the sum of =N=10 million.”
Inspite of its prolixity, I shall adopt the Appellant’s introduction and narration of the facts as both the 2nd and 3rd Respondents have adopted same as indicated in their joint brief of Argument dated 25th September, 2006 and deemed filed and served on 2/07 /07.
INTRODUCTION
1.01 On 4th July 2002, Appellant (Plaintiff in the trial court) sued the Respondents at the Lagos division of the Federal High Court in respect of a Bank Guarantee issued to back up a Disinvestment Agreement between the Appellant and the 2nd Respondent. The Trial Judge ordered accelerated hearing. Evidence was given on behalf of the parties and written submissions ordered and submitted in lieu of oral arguments and on the 8th of May, 2003 the presiding judge, the Honourable Justice R. O. Nwodo delivered judgment and dismissed the Appellant’s case. It is against that dismissal that the Appellant now appeals.
STATEMENT OF FACTS
1.02 The Appellant, Consolidated Business Support Services and 2nd Respondent, GSM Centre Limited were shareholders in the 2nd Respondent Company. At a point, there was a policy disagreement between them in relation to the operations of the 2nd Respondent. Consequently, the Appellant also the majority shareholder, decided to pull out its 51% interest from the 2nd Respondent. A Disinvestment Agreement was drawn up and executed between the Appellant and 2nd Respondent. The relevant parts of the Disinvestments Agreement in relation to this Appeal are reproduced hereunder as follows:
“WHEREAS
The DIVESTOR invested the sum of =N=153 million Naira in the COMPANY, which is a franchise holder with Econet Wireless International for Profit and benefit and upon terms and conditions set out in the Memorandum and Articles of Association of the COMPANY and other working agreements between the DIVESTOR and the COMPANY.
AND WHEREAS
The DIVESTOR no longer finds it conducive and beneficial to retain its investment in the COMPANY and after consultation and negotiation with other shareholders and directors of the COMPANY it has been agreed that the DIVESTOR shall pull out its investment and accrued profit hereon from the COMPANY which has been agreed upon to total the sum of =N=165,000,000 (one hundred and sixty five million Naira only) in the manner hereinafter stated.
NOW THIS INVESTMENT WITNESSES AS FOLLOWS
1. (i) That the COMPANY shall put in place a bank guarantee acceptable to DIVESTOR to secure the payment of the sum of =N=153,000,000 (one hundred and fifty three million Naira) only which must be put in place by the COMPANY before 6.00pm on Monday the 25th of January 2002, draw able and encashable on or before 90 days from the said 25th January 2002 by the DIVESTOR.
(ii) For the avoidance of doubt it is hereby expressly stated that the COMPANY shall forfeit all its assets and properties to the DIVESTOR except the unexpired lease on No.7, Saka Tinubu Street, Victoria Island, Lagos if by the 25th of January 2002, the COMPANY defaults in putting in place the said bank guarantee.
2. That upon the signing of this agreement on or before ninety days from the encashment of the aforesaid bank guarantee the COMPANY shall pay the balance sum of =N12,000,000 (twelve million naira only) to the DIVESTOR.
3. The COMPANY may in its absolute discretion downsize its staff strength such rationalization exercise however not to affect the staff of Finance and Administration department of the COMPANY unless and until the COMPANY has placed the said bank guarantee to secure the repayment of the =N153, 000,000 due to the DIVESTOR and the issue of the post dated cheque of =N 12, 000,000 by Mr. Chinedu Nwokolo, Director of the COMPANY to secure the repayment of same. The said cheque shall be post dated not later than 90days from the encashment of Bank Guarantee.
4. That upon placement of the bank guarantee by the COMPANY all management, oversight and control functions including power to sign cheques provided by the DIVESTOR in the COMPANY shall terminate whilst all forms of ownership right of the DIVESTOR shall be relinquished upon the encashment of the said bank guarantee by the DIVESTOR.
5. That the COMPANY may as it deems fit open more franchise and business retail outlets in Onitsha, Aba, Kaduna, Kano, Broad Street Lagos, Bode Thomas Street Surulere Lagos and Abuja.
6. (a) That the COMPANY may in its own discretion close a number of its business and retail outlets in the manner tabulated hereunder.
a. 3 out of the 5 in Abuja
b. 3 out of 4 in Port Harcourt
c. 2 out of 4 in Onitsha
d. 2 out of 4 in Onitsha
e. 2 out of 4 in Aba
f. The outlet at No.54B Adeniran Ogunsanya Street Surulere shall be closed while another one shall be opened at 49 Bode Thomas Street Surulere Lagos to replace it.
(b) That the proceeds from the recovered unexpired leases shall be paid into the COMPANY’S account at Platinum Bank Limited.
7. That the cost of renovation of the CS Econet franchise retail outlets shall be =N4, 900,000 (four million nine hundred thousand naira only) subject to availability of funds.
8. That the DIVESTOR shall take over possession on No. 20 Saka Tinubu Street Victoria Island immediately upon its receipt of the Company’s Bank guarantee for =N154,000,000 (one hundred and fifty three million naira only).
2.02 The agreement was to be executed in stages as stipulated in clause (4) of the agreement pursuant to which the Appellant ceased all management oversight and control functions in the 2nd Respondent. The Respondents in turn when called upon by the Appellant to perform their own obligations under the Disinvestments Agreement reneged citing non-performance of the Appellant, not under the Disinvestments Agreement, but non-performance of the Appellant under the bank guarantee. Aggrieved, Appellant sued claiming that the 2nd Respondent is liable to pay it the -N- 153m and that the bank guarantee was due and payable by the 1st Respondent.
THE CONTROVERSY
2.03 The 1st Respondent relying on the alleged terms of the bank guarantee contended in its statement of defence that its obligation to pay the Appellant was conditional on Appellant fully relinquishing its shares in the 2nd Respondent and that Appellant had not relinquished the said shares. 1st Respondent also contended that its obligation to pay under arises only upon failure, neglect or refusal by the 2nd Respondent to pay the principal sum of =N=153 million to the Appellant. 2nd – 4th Respondents also contended in their statement of defence that the terms of the bank guarantee required that the Appellant must fully transfer its shares to the 2nd Respondent before payment. 2nd – 4th Respondents contended in the alternative that the agreement between the Appellant and the 2nd Respondent amounted to capital reduction and is ultra vires the Articles of Association of the 2nd Respondent and Section 160 Companies and Allied Matters Act (CAMA).
The Respondents contended further in the alternative that the agreement required the 2nd Respondent to purchase or acquire about 65.6% of its own shares and that this was prohibited by section 162 CAMA.
2.04 The Learned Trial Judge agreed with the Respondents and in his ruling dismissed the Appellant’s action.
Dissatisfied with the Judgment, which is contained at pages 218 — 263 of the records of Appeal, the Appellant filed his Notice of Appeal containing a one ground of Appeal. It is dated 27th day of May, 2003 and is contained at the attached and unpaginated document to the record of appeal; and provides as follows:
“The lower court erred in law when it held that the bank guarantee cannot be sustained by the divestment agreement, since the divestment agreement is unenforceable in law and hereby came to a wrong decision.”
The said noticed of appeal was, however, filed on 10/5/11 following the grant of leave by motion for amendment in that respect on the 9th of May, 2011.
The amended Notice of Appeal is contained at pages of the records and provides as follows:-
“…”
The 2nd Respondent also cross appealed. In furtherance of its appeal, the Appellant herein, filed its brief of argument on 22/4/04 and within time reckoning the date of transmission of the records; Appellant also filed a Notice of preliminary objection to the cross appeal of the 2nd Respondent vide its Notice of preliminary objection filed 24/8/07.
An address – vide a brief of argument was also filed in support of the said objection on the same date. The 1st Respondent on its part, filed a brief of argument on the 29/10/06 and out of time but was by leave of court granted on 2/7/07 deemed properly filed within time on 2/7/07.
The 2nd and 3rd Respondents pursuant to an application to that effect made on 25/9/06, their brief of argument of the said 25/9/06 was granted on the 2nd July, 2007 and the brief was deemed properly filed within time. A cross appeal was also filed pursuant to leave granted on 14/7/04 pursuant to a motion filed 12/5/04. The Notice of cross appeal filed on 15/7/04 was; accompanied by a brief of argument as contained in part 2 of the brief of argument deemed filed on 2/7 /07 pursuant to the motion of 25/9/06.
A reply to the preliminary objection is dated 23/4/11. An address was filed on 12/3/09 in respect of the P. O. to cross appeal and objection to the cross appeal.
The respective set of parties by their counsel argued the appeal by adopting their briefs of argument and urging that the appeal be determined in their favour as the case may be.
Having summarized the factual status of the case leading to these appeals and having noted the processes that were filed before this court it is now desirable to proceed into the consideration of the respective argument of the parties as adumbrated in their respective briefs of argument and the real elucidation thereof. Starting with the appeal it is clear that the Appellant, by his brief of argument raised a lone issue for the determination of the main appeal to wit:
1. What was the nature of the disinvestment agreement and whether by its terms the Bank Guarantee was due and payable?
The said lone issue threw up a number of sub issues that made the Appellant’s brief quite prolific spanning 22 pages. This I think makes the address beyond being a brief of argument which should be succinct and brief indeed one laden with prolixity and verbosity all bordering on an academic excursion.
This is not allowed in our Appellate courts. The 1st Respondent adopted the lone issue as formulated by the Appellant’
The 2nd and 3rd Respondents on their part formulated a lone issue, to wit:-
“Whether the disinvestment Agreement is enforceable to the extent of
compelling the 2nd Respondent/cross-Appellant to pay back to the Appellant the value of its shares in the 2nd Respondent/cross appellant company and following that to the extent of compelling the 1st Respondent to pay the appellant on the Bank guarantee. Arguing its lone issue, the Appellant’s learned counsel at page 8 of its brief of argument submitted that a scrutiny of Exhibit “B” will show that the word “Shares” was never used, nor were the expressions “Reduction” or “Transfer” used. That no purported transfer of shares; to any transferee was made. That it did not also state that by the disinvestment agreement, the shares of the 2nd Respondent were being reduced from a particular number to another number. That the disinvestment agreement was not an instrument of transfer or reduction of shares real or implied. That a proper evaluation of exhibit “B” would have disclosed that it was not the intention of the parties; there to constitute it as an instrument for the disposal of shares. That Exhibit “C”, the guarantee agreement was not based on an instrument of transfer or relinquishment of shares, rather that it was to secure the Appellant for relinquishing his interest in the management and control of the 2nd Defendant/Respondent. That, this transcended transaction in shares. That Exhibit “B” was not in the form of the precedent forms provided by sasegbon on company law for transmission nor sale of shares and so should be held not to be so. That Exhibit “B” was not illegal as it was still executory and:-
Alternatively, it was submitted that even if Exhibit “B” was interpreted to constitute an acquisition of its own shares by the 2nd Respondent, Appellant submits that it did so under cover of section 160(2) (a) and (d) of the CAMA which provides that a company may acquire its own shares for the purpose of: 160(2) (a) settling or compromising a debt or claim asserted by or against the company.
(d) Satisfying the claim of a dissenting share holder. It is contended that the Appellant was a dissenting shareholder. Counsel relies on Exhibit “B” and particularly where it is provided therein that “the Divestor no longer finds it conducive and beneficial to retain its investment in the company and after consultation and negotiation with other shareholders; and Directors of the company it has been agreed that the Divestor shall pull out its investment and accrued profits … page 8 of the records-lines 18-21).
In a nutshell, the totality of the submissions of the learned Appellants counsel are to the effect that the appeal should be allowed for the reasons that:-
1. Exhibit “B” is not an instrument of transfer or transmission in the share capital of the 2nd Respondent and is therefore not a violation of the articles of Association of the 2nd Respondent and not a violation of any provision of CAMA, also.
Secondly that Exhibit “B” was not a complete act of transaction in shares and it was not an instrument to that, effect within the meaning of section 151 CAMA; that at worst it was an agreement that anticipates subsequent transaction in shares, and this is not illegal.
Thirdly, that even if Exhibit “B” related in part to shares, there were still severable parts of the agreement that ought be saved as valid.
Fourthly, that Exhibit “B” was susceptible to two meanings and the interpretation that saved it and was in consonance with the intent of the Parties ought be ascribed to it’
Fifthly, that even if Exhibit “B” was voidable, it was so against 2nd Respondent who had derived benefits there under and should not be allowed to resile there from.
Finally, learned counsel argued that the Bank Guarantee Exhibit “A” was due and payable as the Appellant had fulfilled its obligations under the Bank Guarantee and Exhibit “B”. He then urged this court to hold that Exhibit “B” is a valid and subsisting agreement and that the bank guarantee is due and payable and is enforceable against the Respondents.
Learned counsel made references to principles of equity and public policy and submitted strenuously that the 2nd Respondent has taken the benefit of the relinquishment or management and control of the 2nd Defendant/Respondent company by the Appellant and wherefore the Appellant having given a power of Attorney and Exhibit “J” and a letter Exhibit “C” to effectively act for it in the disinvestment agreement, should have the benefit of the agreement by having it enforced, as such. The 1st Respondent on his part, as earlier indicated in this judgment filed his briefs of argument, which he adopted at the trial.
This Respondent who was the 1st Defendant at the trial has argued vide his 1st Respondent’s briefs of argument thus:- That the Appellant as a Plaintiff at the trial court has made alternative prayers in his reliefs sought and this court was therefore bound to consider the reliefs in the alternative forms as they were sought at the trial court.
Learned counsel had submitted that the Appellant had sought relief No.1 as an alternative prayer to reliefs 2-5. That the grant or refusal of relief No.1 which related to the disinvestment Agreement dated 21st day of December, 2001 and appearing at pages 8-10 of the record of this appeal. That the terms and conditions of the Bank Guarantee contract between the Appellant and the 1st Respondent were distinct from the dis vestment contract and the relief claimed in both contracts, were separable and individually enforceable and per each claims as made.
The case of the Attorney General and commissioner for Justice Anambra state & ors. vs. Robert C. Okafor (1992) 2 NWLR (Part 224) 396 at 431 par. B. Per Olatawura, JSC, was cited and relied upon in arguing that this court is invited to considering the claims or reliefs in the same form as they were claimed at the trial court, in that case Olatawura JSC, held thus:-
“A careful reading of section 16 of the Court of Appeal Act which deals with general powers of the court shows that it is only limited to the claims or reliefs before the court of Appeal, otherwise the court will then the (sic) tempted to grant a relief not claimed section 16 of the Court of Appeal offers no sanctuary for a writ which discloses no cause of action.”
” … It is for this reason that a plaintiff filing a writ must show positively and not by implication the reliefs.”
The cases of Gombe Vs. PW (Nigeria) Limited & Ors. (1995) 6 NWLR (Pt402) at 424 per Iguh, JSC, and Basit & Anor Vs. Fajebe & Anor. (2001)11 NWLR (Pt.725) 593 at 608 in submitting that an appeal entails a hearing and therefore it is the reliefs as claimed at the trial court that will be looked at. Upon the aforesaid analogy, it was submitted that upon the reliefs claimed, the trial Judge had proceeded to make findings against the Appellant in favour of the 1st Respondent on two Prongs or fronts to wit:-
(i) That the Bank guarantee could not be due and payable because the disinvestment agreement was void abinitio and
(ii) That the Bank Guarantee not be said to be due and payable. Secondly that no relinquishment and demand had been made to the 2nd Defendant who had failed thereafter; all the four claims failed, thereby. The 1st Respondent’s counsel contended that the Appellant has not appealed against the findings of the trial court as made in arriving at the decision appealed against.
counsel, further submitted that the relief claimed before this court on appeal to wit “An order allowing the Appeal and setting; aside the judgment of Honourable Justice R. O. Nwodo of the Federal High court Lagos Division delivered on the 9th of May,2003” is ambiguous and does not frontally meet the separate reliefs against the Respective Respondents at the trial. In a nutshell, it is submitted that the failure of the Appellant to appeal this finding of the lower court would in law prevent it from being heard to question that finding of the lower court in this appeal.
Ogunbiyi Vs. Ishola (1996) 6 NWLR (Pt 452) 12 at 23 per Onu JSC referred to. In Ogunbiyi Vs. Ishola supra, it was stated thus:-
“Be it noted that where a party has not appealed against a finding of the trial court or the court of appeal he cannot be heard to question that finding on appeal. See Ijale Vs. Leventis & Co. Ltd (1959) SC NLR 255; (1959) 4 FSC 108, the essence of an appeal being to have an opportunity to have one’s suit re-examined before higher or independent panel with a view to convincing such a panel in its favour,”
It was further submitted that the appeal should be dismissed, on the ground that even if the issue formulated is answered in favour of the Appellant the reliefs 2-5 as endorsed on the writ of summons and statement of claim at the lower court cannot be granted as the reasons /findings in dismissing the reliefs have not been appealed against.
The vessel “Leona II & Anor. Vs. First Fuels Ltd. & Anor (2002) 18 NWLR (Pt 799) 439 at 478.
In the case supra, it was stated by the Supreme Court thus:
“In the result, even if the two last issues have been resolved in favour of the defendants that would have made no difference to the conclusion to be arrived at in the appeal. In the case of Ifeanyichukraru (Osonde) Co. Ltd. V. Soleh Boneh (Nig) Ltd (2000) SCN 18 this court reasserted the view that the success of a party on an issue raised by him does not necessarily lead to succeeds in the appeal. That would have been the position here even if the two issues have been resolved in favour of the defendants.”
The 1st Respondents learned counsel, proceeded to argue that the argument of the Appellant at page 18 of his brief of argument wherein he stated as follows: – “the final question Appellant humbly submits in respect of the issue is, if the Disinvestment agreement is not void, whether, the Bank guarantee is therefore not due and payable” is not such a question that should be answered by this court as it does not arise from the ground of Appeal as couched for consideration by the Appellant.
That the lower court did hold the bank guarantee not due and payable for reasons other than voidability or unenforceability of the disinvestment agreement. That those findings of facts have not been challenged by the Appellant, it was the alternative submission of the learned counsel, that, if this
court found the need to inquire into this question posed and frowned upon as aforesaid it should find that the guarantee agreement was an independent contact and enforceable only on its own terms between the Appellant and the 1st Respondent and without any bearing whatsoever with the Disinvestment agreement executed between the Appellant and the 2nd Respondent. That the contract must be interpreted strictissimi juris ie strictly, such that to make the guarantee liable to the terms contained in the guarantee relating to the obligations of the guarantor to pay over the guaranteed sum to the creditor must, be strictly complied with. Referring to the case of Umegu vs. Oko (2001) 17 NWLR (pt 741) 142 at 155 – 156 (CA); citing Royal Exchange Assurance (Nig) Ltd. Vs. Aswani Textiles Industries Ltd (1992) 3 NWLR (Part 227) 1 at 13 per Ekpe, JCA, learned counsel posited that the common features of a contract of guarantee may be stated as follows:-
1. That there must be three parties involved in the contract ie (a) a creditor, (b) a principal debtor (c) a promissory who undertakes to discharge the principal debtor’s liability, should the later fail to discharge it himself.
2. There must be an agreement between the parties.
3. The agreement must be in writing and if not under seal, there must be valuable consideration.
4. The contract or agreement must not be illegal as illegality generally renders any contract null and void abinitio and the party seeking to endorse it will have no remedy in a court of law.”
It was submitted that a calm study of the guarantee contract reveals that upon the presentation of the bank guarantee which the 1st Respondent bank had agreed to provide, the Appellant would relinquish its total shareholding in the 2nd Defendant/2nd Respondent company and secondly, that the indemnity will only arise or accrue upon the demand and refusal of the 2nd Respondent to pay. All these must be within the stipulated and the agreed period of time. That there was no proof that the Appellant had relinquished his share holding (page 133 – t37 of the record referred). That there was also no evidence of prior failure by the 2nd Respondent to pay the total sum claimed. Counsel drew the analogy and submitted that the contract of guarantee was contingent upon the relinquishment of share holding by the Appellant in the 2nd Respondent company; that the payment was the purchase price for those shares to be first relinquished, and wondered why payment per the terms of the guarantee was expected without the Appellant having first relinquished the shares.
Finally this court has been urged to dismiss; the appeal for want of merit.
The 2nd and 3rd Respondents on their part filed a joint brief of argument in opposition of the appeal and incorporated the 2nd Respondent/cross-Appellant’s brief of argument in support of the cross Appeal.
The main Respondent’s brief is contained at pages 1 – 17 of the said joint 2nd – 3rd Respondents brief while the 2nd Respondent/Cross Respondent’s brief is at pages 17 – 21.
Learned counsel having prefaced his submissions with the observation that the trial court did not make any comment or finding as regards submission that no obligation could have attached under the bank guarantee even if it were held to be valid because it expired before the default which it sought to guarantee against could arise.
I should say however, before proceeding that the learned trial judge did comment on that aspect of the submission and in tandem with the observations made.
2nd and 3rd Respondents formulated 1 issue for determination to wit:-
“Whether the Divestment Agreement is enforceable to the extent of compelling the 2nd Respondent/Cross Appellant to pay back to the Appellant the value of its shares in the 2nd Respondent/Cross Appellant company and following that to the extent of compelling the 1st Respondent to pay the Appellant on the bank guarantee. In arguing this issue learned counsel for the 2nd and 3rd Respondents considered this issue from perspective of 3 sub-issues to wits.
1. The nature of the divestment agreement in relation to the sort of transactions prohibited, under sections 105- 107 and 160 – 162 of the companies and Allied Matters Act (CAMA).
(b) Whether the 2nd Respondent/cross Appellant could be said to have obtained any real benefits under the contract.
(c) whether the divestment agreement was void or merely voidable.
(d)Whether the Bank guarantee is enfonceable against the 1st Respondent.
On the sub issue No.(a), it is submitted that on the principle of exturpi causa non oritur actio, the Appellant could neither sue nor maintain an action on a contract that was forbidden by law; That it was the substance of the agreement and not the form that was to be inquired into; that, a perusal of the Disinvestment contract showed that, it was intended that the 2nd Respondent buys back its own share on the consideration was in violation of section 105 – 107 of CAMA. To enforce such an agreement was inequitable. Alao v. ACB Ltd (1998) 3 NWLR (pt 542) (Supreme Court) wherein it was held thus:-
“A contract is illegal if the consideration on the, promise involves doing something illegal or contrary to public policy or if the intention of the parties in making the contract is thereby to promise something which is illegal or contrary to public policy. An illegal contract is a void contract and it cannot be the foundation of any right. In other words, where the object of either the promise or the consideration it to promote the committal of an illegal act, the contract itself is illegal and cannot be enforced. See Kutigi, JSC at pages 355 – 356. Learned counsel argued that the comparison or analogy sought to be made with transaction in land does not hold as land transactions could be covered by agreement and also the subsequent transaction of conveyance, sale or mortgage and therefore it is possible to have an enforceable agreement or contract to sell covered by prohibition or not and then the complete transaction standing alone; that transaction in shares as done in the subject of this appeal by the agreement was a complete act that was prohibited by the CAMA ab-initio.
That the agreement was intended to reduce the share capital of the 2nd Respondent by paying off the Appellant to the tune of 51% of the company’s share holding. That this could not be done without a resolution of the company authorizing same as it is a reduction in share capital. That would amount to
overreaching creditors of the company who are protected by law. It was submitted that the articles of Association of the company must be shown to authorize share capital (b) a special resolution authorizing must have been passed. (c) The share capital or shares to be paid off must be in the excess of company’s wants.
(d) The special resolution must be confirmed by the court. See section 106 and 107 of CAMA, 2004.
That there was no proof special resolution authorizing same rather there was the evidence by the Auditor’s report at page 42 – 44 of the record (as employed by the Appellant) showing indebtedness of the company and the value of the shares sought to be paid off was not in excess of the company’s want.
(e) There was no application to the court nor any confirmation order to any share reduction scheme.
Further that section 160 – 162 CAMA prohibiting the purchase of its shares, allows for an exception only
(a) Where the shares are purchased out of profits of the company which would otherwise be available for dividends or the proceeds of a fresh issue of shares made for the purpose of the purchase.
(b) …
(c) No purchase shall be made in breach of section 162 of the Decree.
That section 162 prohibits any agreement that may result in a company acquiring by itself or any subsidiary, a share interest beyond 15% of the shareholding. That is to say such other persons or subsidiary shall not relinquish or have remaining less than 85% of the shares. That the use of capital is purchasing shares is prohibited. That is, the use of creditor’s funds to pay or give value to shares is prohibited. That a company cannot have more than 15% of the shares as it could manipulate its worth or the shares.
That the divestment agreement qualifies for a form of agreement for transfer or dealing in shares under section 151(4) CAMA and that it was a payment from the shares as contemplated by section 161(a) of the CAMA, 2004.
Finally, learned counsel sought to distinguish the cases of Savannah Bank Vs. Ajilo and Awo Jugbagbe on Mortages as being decided on equitable principles contrary to this instant case of outright statutory prohibition of the transaction sought to be enforced by the Appellant.
Ultimately, the 2nd/3rd Respondents urged that the appeal be disallowed and the Judgment affirmed for the reasons posed also. It was pointedly submitted that the transaction evidenced by the Disinvestment agreement is expressly prohibited by law CAMA, 2004. That the said agreement is void and gave rise to no legally enforceable rights and duties. It is not enforceable in law.
That it is trite that a transaction will be illegal as being in violation of a statute if:
(a) The transaction is to do something which the statute forbids
(b) The transaction itself which the statute forbids.
(c) The transaction, although lawful in itself, is intended to be performed in a manner which the statute forbids.
Counsel concluded in these words, thus:-
“The share transaction in the disinvestment agreement meets all the embodiment and criteria of statutory illegality for being in contravention of the provisions of section 105 – 107 and 160 – 162 of CAMA.
Appellant’s learned counsel proceeded to argue to the effect that section 163 of the companies and Allied Matters bars the specific enforcement against the company of any contract by the company in breach of section 160.
That transactions that may be protected are only such as are for the purchase of shares of company by itself for the purpose of
(a) Settling or compromising a debt or claim asserted by or against the company ; or
(b) ….
(c) …
(d) Satisfying the claim of a dissenting shareholder. Learned counsel submitted that in the absence of a claim been asserted by the Appellant against the 2nd Defendant/Respondent, separate and in dependent of its demand for a return of its investment in the shares of the company, the agreement cannot be enforced as it will amount to relinquishing shares wrongfully or illegally.
Furthermore, that for section 160(2) (d) of CAMA, to be applicable, there must also exist an independent prior and distinct claim by a dissenting share holder and distinct from the compromise sought of the company to acquire the dissenting share holders’ shares, that merely losing hope of even obtaining profit upon its investment could not ground a return or withdrawal of investment in the manner done. That to allow that will destroy the basis of share holding. That such a person dissatisfied may dispose of the shares in accordance to law.
That the Appellant was a majority share holder and not a dissenting share holder. That it is the majority that cover the company as clearly enunciated in the case of Foss Vs. Harbottle (1843) 2 Hare 461, (1843) 67 ER 189. That the Appellant could not have been dissenting against itself. That section 160(d) of CAMA, 2004 was only applicable to minority share holders in lawful, circumstances. That the transaction constituted or contemplated by the Disinvestment agreement is foreign to section 160 of CAMA and section 163 therefore renders it unenforceable against the company that the transaction was illegal and in breach of public policy the absence of penal sanctions notwithstanding. That it was beyond mere irregularities or vires of the company to so act.
In TREVOR VS. WITWORTH (1887) 12 Appeal cases 409 at 415 it was held that while share capital may be diminished or lost in the cause of a company’s trading that is a result which no legislation can prevent but persons who deal with, give credit to a limited company, generally rely upon the fact that the company is trading with a certain amount of capital already paid as well as upon the responsibility of its remaining at call, and they are entitled to assume that no part of the capital which had been paid into the coffers of the company has been subsequently paid out except in the legitimate course of its business.” Per Lord Watson.
See Lord Herschell searly cases and Materials in company law, 6th edition 1996 P.378 referred to wherein it is stated… This case … Trevor Vs. Whitworth settled the controversy which had existed, at least potentially ever since the passing of the 1856 (Joint Stock Companies) Act. It was only slowly recognized that the issue was not a domestic matter concerned with compliance with the articles or even a question of vires dependent upon the powers set forth in the memorandum, but a matter of legality under the companies Act itself”
That the Disinvestment agreement breaches several safe-guards built into the companies and Allied Matters Act to avoid willful and reckless depletion of the share capital of a company without the authorization of the court and to the detriment of creditors and persons unwarily dealing with the company: it seeks to compel the company to reduce its share capital by purchasing its shares without the authority of the court; to pay for such shares not out of its profits (it had none, was in fact making losses); and in consequence to acquire (and thus effectively return capital on or cancel out) 51% of its shares all contrary to the provisions of CAMA.
Learned counsel for the 2nd – 3rd Respondent urged further that it would be fraudulent to enforce such an agreement as it was obvious that the company was indebted to the tune of over =N=300,000,000 as testified to by the Appellant and Audit. Report of Expert. (See pages 42- 44 of the record) that the logical meaning is that the share capital of the company had been depleted or lost through trade debts to the tune of =N=300,000,000 and therefore the =N=153,000,000 being claimed by the Appellant as the value of the invested capital or shares in the 2nd Respondent company was possibly already lost. That the company was therefore being sought to pay for what was lost or had no value. That there being no capital to return to Appellant, 2nd Respondent was been sought to use crerditors funds to give value to the Appellant’s negative shares.
That from Exhibit “O” Audit Report, the company had been operating at a loss and on debt right from inception. That there was capital loss and the Disinvestment agreement was therefore a clever way of the Appellant recouping their capital losses at the expense of the creditors of the company. That the prevention of this sort of fraud lies at the heart of the provisions of the law restricting a company from acquiring its own shares.
That public policy can make a transaction illegal in the circumstance. Alao Vs. ACB Ltd (1998) 3 NWLR (Pt542) 339, 355 SC wherein it was held” A contract is illegal if the consideration or the promise involves doing something illegal or contrary to public policy or if the intention of the parties in making the contract is thereby to promote something which is illegal or contrary to public policy.”
In Onwuchekwe Vs. NDIC (2002) 5 NWLR (Pt 760) 371, Ayoola JSC said at paragraph G, Page 391 thus:-
“It is to be observed that public policy is at the root of the defence of illegality. A decision to allow the defence or permit recovery sometimes cannot be divorced from public policy considerations …”
That Appellant is the principal share holder or majority shareholder and principally responsible for the debts of the 2nd Respondent to the extent of its share holding in the company. That most people who have dealt with or extended credit to the 2nd Respondent probably did that on the strength of Appellant’s shareholding in the company ie that such shareholding will be available to satisfy any debts owed upon the event of the company been wound up. That the fact that the Appellant was bound to the company in the majority of its share structure was most probably a consideration for the creditors of the company agreeing to extend credit to it. It was submitted that withdrawing such investment when such debts remained outstanding is therefore a fraud on the creditors. That to accede to that would destroy the very reason for permitting individuals to limit their liabilities within an incorporated company.
That on the authority of Trevor Vs. Whitworth’s case, the learned trial Judge was right in holding that the divestment agreement, in so far as it provided for the acquisition by the 2nd Respondent company of its; own shares held by the Appellant without compliance with the conditions set out in CAMA was bad on its face for illegality arising from breach of mandatory statutory provisions and/or public policy.
On the Bank guarantee, learned counsel submitted that since it was predicated upon the void or illegal Disinvestment agreement it was ipso facto void and unenforceable. It is further contended that the guarantor is entitled to rely on the defence that may be available to the principal debtor, in this case the 2nd Respondent.
Legal problems of credit and security 2nd Edition 1988, sweet and Maxwell page 188 by prof. R. M. Goode referred to. That all the arguments against the Disinvestment agreement were applicable to the guarantee. That the guarantee had in fact expired even before the alleged default complained of and more so, that there was in fact no consensus ad-idem in respect of the guarantee as relating to the conditions and terms. That there was no agreement at all. In conclusion this court has been urged to dismiss the appeal.
On the Cross Appeal: The 2nd Respondent Cross Appealed pursuant to an order for extension of time within which the Cross Appellant may appeal. The motion was filed 12/5/2004 and granted on 14/7/04. The notice of cross Appeal was filed on 15/2/04 but deemed filed on 24/4/06. The 1st Respondent took a preliminary objection to the filling of the said cross appeal.
First, I shall reproduce the grounds of the said Cross Appeal. It states thus:-
“3. GROUNDS OF APPEAL
“The learned trial Judge misdirected herself when she found as follows:-
“It is morally wrong for the defendant after reaping the benefits of being a sole signatory or running the 2nd defendant solely turn around to say that the agreement that gave him those benefits is illegal or void” lines 11- 13 at page 262 of the records).
PARTICULARS OF MISDIRECTION
(1) The primary victim/objector to the divestment agreement was not the other defendants in the suit but the 2nd defendant/cross-Appellant and the company could not have been runnin6; itself.
(2) Withdrawing human capital from the management of the 2nd defendant/cross appellant at time it was in financial distress cannot by any stretch of imagination be described as a benefit or advantage or good done to the company.
(3)The finding goes against the grain of the conclusion of the court on the disinvestment agreement and for which it refused the claims of the plaintiff was to injure the company and its creditors.
B. The learned trial judge erred in law when she failed to consider whether there was indeed any valid guarantee capable of sustaining a claim beyond the midnight of 25th April, 2002.
PARTICULARS OFMISDIRCTION
1. The Bank Guarantee ex-facie could only attach after the midnight of 25th April, 2002 and yet its life span expired simultaneously.
a(sic) for 2 there was no tangible benefit to the 2nd defendant following the purported acts of the plaintiff Appellant.
4 (sic) RELIEFS SOUGHT FROM THE COURT OF APPEAL
An order setting aside the findings of the lower court. To this Cross Appeal, the 1st Respondent filed Notice of preliminary appeal pursuant to Order 3 Rule 15(1) of the Court of Appeal Rules 2007. The grounds of the objection are as follows:-
1.01 “GROUNDS OF OBJECTION
(a) The 1st ground of the grounds of appeal in the cross appeal is obiter dictum of the trial court and was not part of the decision of the court that an appeal can lie to this Honourable Court.
(b) Ground two of the grounds in the Notice of cross Appeal is on the validity of the Bank guarantee, which issue was resolved by the trial court in favour of the cross appellant.
I shall, in this appeal, proceed first to consider the main appeal before proceeding to the cross appeal.
This appeal appears to be a straight forward and clear cut one without any complications as to the facts leading to both the main appeal and cross appeal are agreed to by parties. The learned trial Federal high Court after taking the oral and documentary evidence that were tendered, examined those evidence in the face of the laws governing the operations and dealings relating to the share capital of an incorporated company, and in my view arrived at the correct decision when he refused all the claims of the plaintiff/appellant and on account of the reasons it ably and rightly proffered. I shall set out to evaluate the evidence led in proof of the claim and the contention of the parties thereto before proceeding to the cross appeal.
The parties were ad idem that the plaintiff who is now Appellant held 153,000,000 ordinary shares valued =N=153 million in the 2nd Defendant company, representing 51% share holding of the company. Plaintiff/Appellant exercised as the majority shareholder and largest investor, all management over sight and control functions in the 2nd Defendant.
The plaintiff by its Amended statement of claim copiously pleaded this fact of its majority share holding and control of the 2nd defendant company. See paragraphs 1 and 2 of the said statement of claim. It was pleaded thus:-
“1. The plaintiff was at all material times a majority shareholder in the 2nd Defendant company. The 1st Defendant is a Bank and in relation to the plaintiff and the 2nd Defendant guaranteed the divestment of the plaintiff from the 2nd Defendant. The 2nd Defendant is a franchise holder of Econet Wireless. International. The 3rd Defendant is the managing Director of the 2nd Defendant.
THE TRANSACTION
2. The plaintiff held 153,000,000 ordinary shares valued =N=153, million in the 2nd Defendant, representing 51% shareholding of the company. Plaintiff says that as majority shareholder and largest investor, it exercised all management over sight and control functions in the 2nd Defendant.”
From the evidence led by the plaintiff’s PW, at the trial- one Christopher Ezeofulukwa, a legal officer in the Plaintiff/Appellant’s company, Exhibit “A” a contract of guarantee executed by the 1st Defendant/Respondent in favour of the Appellant was made to give effect to the obligation of the parties under the terms of Exhibit ‘B’ which is the divestment agreement under which the Appellant was to give up its majority shareholding, management and control and over sight of the 2nd Defendant/Respondent company within a stated period. PW1 testified at the trial that change of signatories and the withdrawal of the Appellant’s General manager from the running of the company had marked the end of a phase in the disinvestment agreement Exhibit “B”. That the 2nd stage of the disinvestment agreement was the realization or satisfaction by payment over to the 1st Appellant of the said sum of money guaranteed. PW1 in his evidence had testified that despite repeated demand it was not paid. Further correspondences appertaining demands for payment were futilely made through Exhibits G, H and a power of Attorney was also issued by the plaintiff to the 2nd Defendant Company in respect of its shares, therein the company. The power of Attorney is Exhibit “J”.
It is the evidence of PW1 that Exhibit “J” was issued following the insistence of the 1st Defendant that they needed evidence of the relinquishment of the entire interest of the plaintiff in the 2nd Defendant company. See page 12 of the record of proceedings.
In Cross examination, the PW1 admitted that, the title and the shares were still with the plaintiff even when the payment pursuant to the Exhibit “A” was being insisted upon. The further portions of the testimony of the PW1 only re-enforce the contention of the Appellant that they were entitled to the reliefs – sought.
In Defence, DW1, of the legal Department of the 1st Defendant identified Exhibit “B” which was prepared and issued by the Bank (1st Defendant). DW1 had also identified Exhibits “F, K and J” DW1 testified that there was a letter from the 2nd Defendant to the L” Defendant that the payment upon of the guarantee Exhibit “A” should not be done as it will be upon 1st Defendant’s peril since the total relinquishment of shares and interest in the 2nd Defendant had not been done by the Plaintiff/Appellant pursuant to Exhibit “B”. Exhibit “G” and “H” were identified as letters to the plaintiff in ie in “itself” that respect, DW1 admitted and stated that no payment was made in honour of the Exhibit A, because the Bank payment was predicated on the event of total relinquishment of interest holding by the plaintiff on the 2nd Defendant and after the 2nd Defendant would have failed to make payment of the guaranteed sum. That none of these situations had occurred to make it obligatory for the 1st Defendant Bank to pay.
See page 146 of the record of proceedings at the trial. DW1, identified the said Exhibit “B” as to the terms, and was not cross examined further on it. DW2 – testified to the effect that Exhibit “A” had changed the character and effect of Exhibit “B”; that since there was no relinquishment, no payment was made. That it was not a promise to transfer shares. That the power of Attorney Exhibit “J” was received on 26/4/02 a day after the expiry of the guarantee agreement (being 25/4/02). That the company was operating at a loss during the said transactions as no profit was being made and the money in possession was been used for acquisition of premises and acquisition of machinery.
That there was no court order made before Exhibit “B” was made and further that the 2nd Defendant’s did not call their creditors before making the said Exhibit “B”. That 2nd Defendant did not also go to court to sanction Exhibit “B”, Exhibit “N” – The Articles and Memorandum of Association of =N-100 million cash deposit (as backing) and property at Lekki was provided to ensure that 1st Respondent post a issued Exhibit “A” in favour of Appellant at the instance of 2nd Respondent.
In the face of the evidence as clearly brought out aforesaid, and the exhibits tendered, it is my view that the lone issue of the Appellant that asks the question:-
“What is the nature of the disinvestment agreement and whether by its terms the Bank guarantee was due and payable” which encapsulates the Respondents issues in all material relevant can be answered in the aforesaid manner appearing and to the ultimate determination of the merit of this appeal.
1. Was there a contract between the plaintiff and the 2nd Defendant?
2. What are the terms of the contract and consideration?
3. Is the contract if any valid and enforceable?
It is obvious that there are two contracts, namely between the Appellant herein and the 2nd Defendant, expressed in Exhibit “B” and between the 2nd Defendant and the 1st Defendant and in favour of the Appellant who may only sue under it under the principle of Novation in contract. There is no doubt that an offer had been made and accepted by the parties herein with .the intention of entering into a binding agreement. To the extent that the consideration is the relinquishment of its shares in the 2nd Defendant Company, in accordance to law, the agreement could be valid and enforceable. In this appeal, the Exhibit “B” shows that the consideration for the payment of the =N=153,000,000 is the shedding off by the Appellant of the value of the shares held by the Appellant in the said company. It is trite that although a company is made up of share holders who have property and title in their shares, the totality of the shareholding constitutes the share capital and property of the juristic and corporate entity called the company. Dealings in the shareholder’s shares shall therefore only be in accordance with the Articles, Memorandum of Association and the statutory provisions regulating dealings in shares, such as the companies and Allied Matters Act.
See section 105 of CAMA, 1990 Laws of the Federation of Nigeria, 2004.The Exhibit “B” is for the payment to the Plaintiff/Appellant from the share capital of the 2nd Defendant the monetary value of the share capital stated therein. This, represents an agreement to reduce share capital of the 2nd Defendant by 153,000,000 as after the value thereof would have been paid off or refunded so to speak, those shares become valueless, or cease to exist:! It is a case of buy back agreement by a shareholder contrary to the law.
Section 106 of CAMA, 1990 prohibits such an exercise of buy back or sale or transfer. The said section provides as follows:-
“Subject to confirmation by the court a company having share capital may if authorized by its articles, by special resolution reduce its share capital in any ways”
The Articles of Association of the 2nd Defendant ie Exhibit “P” at paragraph 34 authorizes reduction pursuant to section 106 in the following manner:-
“Subject to confirmation by the court in the manner prescribed by the Act the company may by special resolution and not otherwise reduce its share capital in the manner permitted by law” The nature of the divestment agreement is therefore such that intends to cause a reduction in the share capital of the 2nd Respondent. The Articles of Association Exhibit “P” at the trial requires a special resolution of the company in a general meeting to be approved by the court for such dealings in share capital as sought.
The 2nd Respondent was right when it contended that the dealings intended in Exhibit “B” amounted to a reduction in share capital which was not sanctioned by a court nor by a prior special resolution of the company in a general meeting.
Each case of surrender of shares or relinquishment of shares involves a reduction in share capital, see TREVOR vs WHITWORTH (1887) 12 APP cases 409 at 438. That the 153,000,000 shares sought to be bought back by the Appellant and its equivalent value relinquished by the 2nd Respondent should be under stood as losing an amount of capital already paid for by the company. It cannot be paid out except in the cause of legitimate business.
What business or legitimate business has been shown between the Appellant herein and the 2nd Defendant towards the making of profits or the advancement of the objects of the 2nd Appellant? There was none disclosed before the trial court. I find no such business in the record.
In BELLERBY VS. ROWLAN & MARWOODS 1902 2 charp. 14, it was held every surrender of shares whether fully paid or not involves a reduction of capital which is unlawful except where sanctioned by a court. Capital cannot be returned by a company to its members save by a reduction of capital by order of court. The reduction in capital holding in this case, without the sanction of a court is invalid.
Further more, the terms of Exhibit “B” are that the Appellant would have divested his total interests. The said interest being in the character of shareholding can only be divested by the execution of documents of transfer of shares in accordance with section 151 of the CAMA, 1990, no such transfer having been done there was no transfer and no disinvestment thereof. Parties, being bound by the provisions and terms of there agreement were ad idem on this fact.
To argue to the contrary is merely an attempt to resile from a  sacrosanct term of an agreement.
Worst still, Exhibit “B” constituted an illegality as the 2nd Defendant was been sought to purchase its shares, not out of profits, nor before first giving shareholders the right or 1st option of purchase after notice to investors.
Even if purchase of its shares could be made and even if it was from proceeds from profits (which have been shown to be non existent, the contract Exhibit “B” that sought the purchase in effect of the Defendant’s share capital beyond the 15% of total holding was prohibited under section 161CAMA, 1990, as Exhibit “O” – the form CO2 showed that the issued share capital of the 2nd Defendant was 300,000,000 shares. The 153,000,000 sought to be bought over is over 50% of the share capital of the company.
The agreement being prohibited is void and illegal. It cannot be enforced. Indeed a court of law should declare it so.
See SODIPO LEMMINKAINE (1936) 1 NWIR (Part 15) 220 at 238. RAILWAY LINES LTD. VS. REIN MAS LAND SEA (1993) 7 NWLR (Part 308) page 692 at 711, EKWUNIFE VS. WAYNE (1989) 5 NWLR (Part 122) page 422 at 450.
The principle is that there shall be no cause of action in a dead action. It is expressed in the Latin maxim – “Ex – turpi causa oritur non actio.”I agree with the argument of the 2nd Defendant/Respondent when he stated in address at the lower court that the plaintiff still remained the majority shareholder in the 2nd Defendant company and was entitled to all possible reliefs relating to accountability from persons in fiduciary positions in the 2nd Defendant company whether or not the said plaintiff continue to maintain signing and over sight control functions. (See page 153 of the record). The contract Exhibit “B” is illegal, void, against public policy and unenforceable and I so hold. The complaint against same was in order.
Issue No.1 relating to its character or nature is answered in the terms that Exhibit “B” is illegal, void and against public policy and therefore unenforceable in law. The 2nd Defendant/Respondent being a corporate or juristic personam can only act through its officers and agents. And in accordance with its Articles and Memorandurn of Association and the companies and Allied Matters Act. Any act carried out on its behalf in violation will be ultravires the company. In the same token the company cannot be stopped from any defence of illegality in the circumstance.
On the sub-issue relating the Guarantee Agreement, it is trite that the said agreement being one made pursuant to an illegal and void contract is itself void and unenforceable. On the whole, it is obvious from the evidence on the record at the trial court that – (1)the shares in issue were still vested on the Plaintiff
2. Exhibit “J” was not a proper instrument of transfer and worst still it conferred power only after the effective day and expiry of the guarantee (Exhibit “A”.
The Exhibit “J” was only an offer which had not been accepted see the evidence of DW1, DW2 and Exhibit “E”; paragraphs 1.8 – 23 of Exhibit “P” (i.e Articles of Association of 2nd Defendant) where not complied with.
The complaint that Exhibit “B” is valid and subsisting has no merit; so also is the claim that the Bank guarantee is due, payable and enforceable is fallacious.
Accordingly, the lower court was not in error when it held that the Bank guarantee cannot be sustained by the divestment agreement once the divestment agreement is unenforceable in law.
The lone ground of appeal as contained in the Notice of Appeal filed on 10/5/11 has no basis. The appeal is therefore dismissed and the Judgment of (as she the then was) sitting at the Federal High Court Lagos is affirmed.
THE CROSS APPEAL.
The Notice of Cross Appeal filed 15/7/04 but deemed properly filed on 24/4/06 appeals against the Judgment in the substantive appeal just considered aforesaid on the ground of misdirection to wit:-
“3. GROUNDS OF APPEAL
The learned trial Judge misdirected herself when she found as follows:-
“It is merely wrong for the Defendant after reaping the benefits of being a sole signatory or running the 2nd Defendant solely to turn round to say that the agreement that gave him those benefits is illegal and void. (Lines 11 – 13 of page 262 of the records.
PARTICU LARS OF M ISDI RECTION
(1) The primary victim/objector to the Divestment Agreement was not the other Defendants in the suit, but the 2nd Defendant/Cross Appellant and the company could not have been running itself.
(2) Withdrawing human capital from the Management of the 2nd Defendant/Cross Appellant at a time it was in financial distress cannot by any stretch of imagination be described as a benefit or advantage or good done to the company.
The finding goes against the grain of the conclusion of the court on the Divestment Agreement and for which it refused the claims of the plaintiffs which was that its purpose was to injure the company and its creditors.
B. The learned Trial Judge erred in law when she failed to consider whether there was indeed any guarantee capable of sustaining a claim beyond the 25th April, 2002.
PARTICULARS OF MISDIRECTION
“(1) The Bank Guarantee ex-facie could only attach after the mid-night of 25th April, 2002 and yet its life span expired simultaneously.
4. There was no tangible benefit to the 2nd Defendant following the purported acts of the Plaintiff/Appellant.”
Objection was taken to the Notice of Cross Appeal on the duo grounds that the 1st ground of Appeal relates to an obiter dictum of the trial court and not to the decision or part of the decision and therefore that it was not appealable.
The second ground of the objection is that Ground 2 of the Grounds of Appeal relates to the validity of the Bank guarantee which issue had been resolved in favour of the Cross-Appellant.
The Cross Appellant had sought to have those portions of the Judgment impugned set aside.
Learned counsel for the 1st Respondent had argued that no appeal had been made in respect of that finding of fact.
He referred to decided authorities including the case of BANK OF THE NORTH LTD VS. ALHAJI MURI (1998) 2 NWLR (Pt s36) 153 at 172 par 5 B – C and argued that a finding in which there has been no appeal cannot be disturbed on appeal.
I have carefully considered the submissions for and against the Cross Appeal and taken into consideration the Notice of preliminary objection first. I think that the objection has a solid base.
A clear and calm reading of the Judgment of R. O. NWODO; J (as she then was) clearly shows that the Judgment was based on the unenforceability of the divestment agreement on ground of illegality and conflict with the CAMA, public policy and Articles of Association of the 2nd Respondent. The superfluity in expressing the moral view appertaining enjoyment of benefit did not constitute the decision or reason for the decision. It was a passing remark or opinion, so to speak.
The law is that a ground of Appeal shall be based on the reasons for the decision appealed against and arise from the decision itself.
On the second ground for the objection, I agree that the issue of the Bank guarantee ie Exhibit “A” had been resolved and in favour of the 1st Respondent.
The learned trial judge had comprehensively considered all the arguments relating to the invalidity of the said guarantee Exhibit “A” in the light of its been affected by a failed consideration ie a purported transfer of title in shares that never took place; the expiration of the guarantee date and effectual date; the illegality of the consideration etc. Having held that the Exhibit “A” did not create an enforceable contract it suffices, as it would have been a sheer indulgence in academic exercise to have embarked on the consideration of the fact that the said Exhibit had, after all expired after 12, noon of 20th April 2002. Courts are not academic institutions. The failure to consider (which is not conceded) that surplus sage of a reason has not in fact occasioned any Miscarriage of Justice as the decision in any case would still have remained the same. See DALORI VS. SADIKU (1988) 12 NWLR (Pt 576) 112 at 121 – 122, STATE VS. AJIE (2000) NWLR (Pt.678) 434 at 447.
On the premises of the aforesaid reasons, the Cross Appeal is not only incompetent but is tainted with lack of merit, even on the substance. The guarantee having been invalidated, on other grounds does not make it resurrectable for the purpose of a re-invalidation on some other alternative ground as sought by the Cross Appellant. The grounds of Appeal on the 2 grounds of the Cross Appeal are therefore nothing other than a sheer abuse of court process.
The objection to me has merit. I accordingly strike out the said Notice of Cross Appeal and dismiss the said cross appeal accordingly. Main appeal is dismissed. Cross Appeal dismissed.
I award a cost of =N=50,000 against the Appellant in the main appeal and =N=30,000 against the Cross-Appellants in the Cross Appeal, in favour of the Respondent in each of the appeals respectively.
Note: This appeal ought have been determined on or before the 2nd day of February, 2012, but has been unavoidably delayed because I was involved in the hearing of Election Appeal cases in both Lagos and Ibadan, which necessitated the compelling need to keep on-hold, albeit temporarily, all other matters and more so that the day penultimate to the expiry date and the expiry date itself were both declared public holidays.
HELEN MORONKEJI OGUNWUMIJU, J.C.A.: CONTRIBUTION
I have had a preview of the judgment just delivered by my brother M. A. Danjuma JCA and I agree with the reasoning and conclusion.
The main appeal is devoid of merit and same is hereby dismissed. The Cross-Appeal is incompetent and same is hereby dismissed.
I abide by all consequential orders
RITA NOSAKHARE PEMU, J.C.A.: I have had a preview of the Judgment just delivered by my brother M.A. Danjuma J.C.A. and I agree with the reasoning and conclusion.
The main appeal is devoid of merit and same is hereby dismissed. The Cross-Appeal is incompetent and same is hereby dismissed.
I subscribe to the consequential order made that costs of N50,000.00 in the main appeal be in favour of the Respondent and against the Appellant and N30,000.00 costs against the Cross-Appellant in the cross appeal.
Appearances
QUAKERS N. J. (SAN) WITH I. A. OKHUELEIGBE (MISS) For Appellant
AND
A.A. ADEGBONMIRE WITH F. C. ANEJE FOR 1ST RESPONDENT.
BC IGWILO WITH C. OSAJI (MISS) FOR 2ND RESPONDENT. For Respondent
