Legalpedia Citation: (2023-04) Legalpedia 35474 (CA)

In the Court of Appeal

ABUJA JUDICIAL DIVISION

Fri Apr 28, 2023

Suit Number: CA/A/631/2019

CORAM

PETER OLABISI IGE JCA

UGOCHUKWU ANTHONY OGAKWU JCA

DANLAMI ZAMA SENCHI JCA

PARTIES

HASAL MICROFINANCE BANK LIMITED

APPELLANTS

1. BDA LIMITED
2. DR. (MRS) VIRGY ANOHU

RESPONDENTS

AREA(S) OF LAW

APPEAL, COMPANY LAW, PRACTICE AND PROCEDURE

SUMMARY OF FACTS

The Appellant is the Claimant before the High Court of the Federal Capital Territory, Abuja, in an action on the undefended list. In the said action, the Appellant sought to recover the amount outstanding on the facility it granted to the 1st Respondent and which was personally guaranteed by the 2nd Respondent.

Upon being served the Court processes, the Respondents filed a Notice of Intention to Defend wherein they, inter alia, challenged the competence of the action upon the ground that the Appellant lacked the locus standi to institute the action as there was no resolution of its Board of Directors authorising and mandating that the action be instituted. The Appellant did not file any further processes in reaction to the issue raised in the Notice of Intention to Defend.

The lower Court delivered its ruling and dismissed the action for being incompetent and an abuse of Court process.

The Appellant, peeved by the said decision, appealed against the decision.

HELD

Appeal allowed in part

ISSUES

Ø Whether exhibiting solicitor’s letter of instruction or board resolution is a condition precedent for instituting an action under the undefended list and whether failure to do so constitute a fundamental defect that would render the suit incompetent and liable to be dismissed?

Ø Whether a trial Court in an undefended list proceeding can make a dismissal order before the matter is heard on merit?

RATIONES DECIDENDI

COMPANY – WHETHER RESOLUTION OF THE BOARD IS A REQUIREMENT TO LEGALLY REPRESENT A COMPANY

It has to be made clear that the challenge in this matter is not on whether the Appellant’s counsel was instructed. No. It is rather, whether there was a resolution authorising that the Appellant initiate the action. It is pertinent to state that at all times material to this matter, the applicable law is the Companies and Allied Matters Act, 1990; so, it is to its provisions that we would beam our focus in determining this matter.

In this wise, the stipulations of Sections 63 (3), (5) (b) and 66 (1) (a) of the Companies and Allied Matters Act, 1990 are relevant. They provide:

“63 (3) Except as otherwise provided in the company’s articles, the business of the company shall be managed by the board of directors who may exercise all such powers of the company as are not by this Act or the articles required to be exercised by the members in general meeting.

(5) Notwithstanding the provisions of subsection (3) of this section, the members in general meeting may-

(b) institute legal proceedings in the name and on behalf of the company if the board of directors refuse or neglect to do so;

66 (1) Except as provided in Section 65 of this Act, the acts of any officer or agent of a company shall not be deemed to be acts of the company, unless –

(a) the company, acting through its members in general meeting, board of directors, or managing director, shall have expressly or impliedly authorised such officer or agent to act in the matter.”

​The above provisions are effulgent that the institution of legal proceedings in Court by a company has to be with the authorisation or resolution of the board of directors or the resolution of members in a general meeting.

For reasons of pellucidity, the lower Court in holding that the action is incompetent stated as follows at pages 86-87 of the Records of Appeal:

“I have scrutinized the affidavit of claim and the exhibits attached. Truly I cannot find a Board Resolution attached thereto nor any deposition alluding to that fact. The law on this point is as stated in the case of ACB PLC VS. HASTON (NIG) LTD. (1997) 8 NWLR (pt. 515). The Solicitor who filed this action acted on incompetent instruction. The wider implication of the above case law authorities in my view is that when it comes to a Corporate body, particularly in regard to the protection or concession of its proprietory interest, there must be a Board Resolution instructing the Solicitor to institute an action in Court. It cannot be like any other instruction a Solicitor receives from other client’s client, which may be oral. But in the case of a Limited Liability Company even a mere letter from an officer of the Company even a mere letter from an officer of the Company will not suffice as proper instruction in context, unless and except such letter of instruction is subsequently ratified by the Board either before or in the course of the pendency of the suit.

As stated earlier, nothing is placed before me to justify the institution of this case by Mr. Adebiyi Adetosoye for and on behalf of the HASAL MICROFINANCE LTD. See the cases of TRANSATLANTIC SHIPPING AGENCY LIMITED & ANOR. VS. DAN TRANS. NIGERIA LIMITED (1996) 10 NWLR (pt 478) 360 at 368.

This case is an abuse of Court process and is hereby dismissed.”

The lower Court relied on the decision of this Court in ACB PLC vs. HASTON (NIG) LTD (supra) in arriving at its decision. The principle established in the said case in the lead judgment of Achike, JCA (as he then was) at page 128 [also reported as (1997) LPELR (5218) 1 at 14-15] is as follows:

“Competence of the plaintiff is a fundamental issue as it goes to the question of competence of the Court to entertain the suit. In other words, it goes to the issue of jurisdiction. Where there is a challenge to a party’s right to initiate an action, as was done by the defendant/appellant in the instant case, the burden rests on the defendant [sic]/respondent to establish his competence to initiate the action… It is also firmly established that no person can institute an action in the name of a company unless it is so instituted on the authorisation of the company upon the resolution of the Board of Directors or the resolution of the shareholders… In the absence of aforesaid resolution any action so instituted on behalf of the company is a nullity.”

By all odds, the decision in ACB vs. HASTON (NIG) LTD (supra) was set aside by the apex Court in HASTON (NIG) LTD vs. ACB PLC (2002) LPELR (1359) 1; but the basis of the decision of the apex Court was not that this Court wrongly decided that an action can only be instituted by a company on the authorisation of the Board of Directors or members in general meeting. The basis of the decision was that the challenge to the competence of the said action was that the action was one instituted by the Chairman of the Company (Haston [Nigeria] Limited) in his own name. This is what Ogundare, JSC stated at pages 22-23:

“With profound respect, I cannot subscribe to the views of their Lordships of the Court below on the issue of competence of the action. They appear to have mistaken this action as one instituted by Victor Ndoma Egba in his own name rather than one instituted by the plaintiff in her own name…. the plaintiff had the capacity and competence to institute the action …. Nor has there really been a challenge to her capacity or competence. Rather the challenge was to the capacity or competence of Victor Ndoma Egba who, in any event, did not sue but only testified as a witness for the plaintiff.”

In the light of this, it seems to me that the settled legal position remains that an action can only be validly instituted by a company upon the resolution of the Board of Directors or the shareholders, authorising that the action be initiated. See SUBURBAN BROADBAND NIG LTD vs. INTELSAT GLOBAL SALES AND MARKETING LTD (supra), OCHEKPE vs. TAEN (NIG) LTD (supra) and PLATEAU STATE GOVT vs. CREST HOTEL & GARDEN LTD (2012) LPELR (9794) 1 at 33-34. – Per U. A. Ogakwu, JCA

COMPANY RESOLUTION – EXISTENCE OF COMPANY RESOLUTION IS NOT A MATTER OF INFERENTIAL DEDUCTION

This issue of competence of the action raised by the Respondents is a threshold issue that goes to the jurisdiction of the Court to entertain the action. The Respondent having raised the challenge to the competence of the action, the burden was on the Appellant to establish that the action was instituted on the back of an authorisation or resolution of the board of directors or members in general meeting.

 

It is pertinent to state that the question of the existence of a company resolution is not a matter for inferential deduction. It is a matter that has to be established by production of the resolution which is how the decisions of a company, acting through its human agents, are reached. See MATINO NIGERIA LTD. vs. VIEWPOINT NIGERIA LIMITED (2021) LPELR (56262) 1 at 38-39 and Sections 233, 234 et seq. and 263 of the Companies and Allied Matters, 1990. The allusions to the paragraphs of the affidavit in support of the writ of summons and the Certificate of Pre-Action Counselling and for the Court to deduce therefrom that there may have been authorisation for the action, do not take the place of a clear and specific company resolution which is how a company arrives at its decision.

​Let me iterate that the issue of competence of an action and jurisdiction of the Court to entertain the same are threshold in nature and once an issue of jurisdiction is raised it has to be resolved first before anything else. See A-G RIVERS vs. A-G AKWA IBOM (2011) LPELR (633) 1 at 123, OKWUOSA vs. GOMWALK (2017) LPELR (41736) 1 at 9 and OKOYE vs. NIGERIA CONSTRUCTION AND FURNITURE CO. (1991) 7 SCNJ (PT 2) 365 at 388. It is only upon the resolution of the question of jurisdictional competence that the Court can proceed, where it holds that it has jurisdiction, to exercise the jurisdiction to hear the matter under the undefended list and make any of the orders provided for under Order 35 of the Rules of the lower Court. The Court cannot make any of the said orders without having first upheld that the action is competent and that it has the jurisdiction to entertain the same. SeeAPP vs. OBASEKI (2021) LPELR (58374) 1 at 37, ELUGBE vs. OMOKHAFE (2004) 18 NWLR (PT 905) 319 and ADEKOYE vs. NIGERIAN SECURITY PRINTING AND MINTING CO LTD (2009) LPELR (106) 1 at 10. – Per U. A. Ogakwu, JCA

LOCUS STANDI – LOCUS STANDI FOCUSES ON THE PARTY AND NOT THE ISSUE

The question of whether an action was commenced with the authorisation of the Board of Directors or Shareholders of the company touches on the locus standi to maintain the action. The fundamental aspect of locus standi is that it focuses on the party seeking to get his complaint before the Court and not on the issue he wishes to have adjudicated. So, in the circumstances of this matter, there cannot be any consideration of the merits of the matter as required under Order 35 of the Rules of the lower Court, until the locus standi is resolved. This is more so because the authorisation to initiate an action is a precursor to an application for a writ of summons being made; so, it has to be had and obtained before any writ of summons is applied for and the accompanying documents including the Certificate of Pre-Action Counselling filed.

Where the Plaintiff does not have the locus standi, in this instance, for want of establishing the authorisation to commence the action, the trial Court will be robbed of jurisdiction to entertain the action: ADESANYA vs. PRESIDENT OF NIGERIA (1981) 5 SC 112 or (1981) 2 NCLR 358, ODIMEGWA vs. IBEZIM (2019) 9 NWLR (PT 1677) 244 at 256-257 and 260 and AFRICAN PRUDENTIAL REGISTRARS PLC vs. MACAULAY (2020) LPELR (49593) 1 at 15. The Appellant did not produce any resolution authorising that the action be instituted. In the absence of such resolution, the lower Court rightly held that the action was incompetent and that it did not have the jurisdiction to entertain the same. This is so because a trial Court cannot properly assume jurisdiction to entertain a matter where the plaintiff does not have the locus standi. See ODIMEGWA vs. IBEZIM (supra) at 260, DADA vs. OGUNSANYA (1992) LPELR (908) 1 at 24-25, EMEZI vs. OSUAGWU (2005) LPELR (1130) 1 at 16-17, OPOBIYI vs. MUNIRU (2011) LPELR (8232) 1 at 17-18 and ECOBANK vs. ANCHORAGE LEISURES LTD (2020) LPELR (52128) 1 at 44. – Per U. A. Ogakwu, JCA

 

LOCUS STANDI – WHEN A COURT HOLDS THAT A PLAINTIFF HAS NO LOCUS STANDI

In RTEAN vs. NURTW (1992) 2 NWLR (PT 224) 381 at 391, Babalakin, JSC held:

“When a Court holds that a plaintiff has no locus standi in respect of a claim the consequential order to be made is striking out of such claim and not a dismissal of the claim. The rationale is that holding that a plaintiff has no locus standi goes to the jurisdiction of the Court before which such an action is brought. When the question that a plaintiff has no locus standi to institute an action arises all that is being said in effect is that the Court before which such an action is brought cannot entertain the adjudication of such an action. The Court cannot dismiss a claim the merit of which it is not competent to enquire into.”

See also ADESOKAN vs. ADETUNJI (1994) LPELR (152) 1 at 35, OPTIMUM CONSTRUCTION & PROPERTY DEVELOPMENT LIMITED vs. AKE SHAREHOLDINGS LTD (2021) LPELR (56229) 1 at 16-17 and TINUBU vs. KHALIL & DIBBO TRANSPORT LTD (2000) LPELR (3249) 1 at 10. The lower Court was therefore wrong when it ordered a dismissal of the action. – Per U. A. Ogakwu, JCA

 

CASES CITED

STATUTES REFERRED TO

1. High Court of the Federal Capital Territory, Abuja (Civil Procedure) Rules, 2018
2. Companies and Allied Matters, 1990

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