CORAM

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Okon Efreti Abang JCA

Ishaq Mohammed Sani JCA

Eberechi Suzzette Nyesom-Wike JCA

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PARTIES

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MISSION SECURITIES LIMITED

APPELLANTS 

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1. STEPHEN CHURCHILL KITCHENER

2. SECURITIES & EXCHANGE COMMISSION

RESPONDENTS 

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AREA(S) OF LAW

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COMPANY LAW, CONTRACT LAW, SECURITIES LAW, FIDUCIARY RELATIONSHIP, TRANSFER OF SHARES, EVIDENCE, APPEAL, PRACTICE AND PROCEDURE

 

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SUMMARY OF FACTS

This case revolves around a dispute concerning the transfer of shares. The 1st Respondent (Stephen Churchill Kitchener) was a shareholder and client of the Appellant (Mission Securities Limited). Following a directive by the 2nd Respondent (Securities & Exchange Commission) requiring all market operators to increase their paid-up capital to 1 billion naira by December 31, 2008, the Appellant faced challenges meeting this recapitalization requirement.

The Appellant claimed that the 1st Respondent agreed to transfer his shares to the Appellant as part of a rights issue exercise, evidenced by an undated letter (Exhibit 1) signed by the 1st Respondent. According to the Appellant, this transfer was concluded in 2008, and a share certificate was issued to the 1st Respondent.

The 1st Respondent, however, claimed that he never intended to divest his interest in the shares permanently. He asserted that the Appellant’s Managing Director had requested to temporarily use his shares to meet the recapitalization requirements, with an understanding that the shares would be returned afterward, and that dividends and bonus shares would be remitted to him in the meantime, which the Appellant did until 2014.

When the recapitalization exercise was indefinitely postponed by the 2nd Respondent, the 1st Respondent sent a letter in November 2008 withdrawing his consent for the use of his shares. The 1st Respondent claimed this letter was sent via courier and email, though the Appellant claimed it received the letter only in April 2009, after the transfer had been completed.

 

Upon discovering that the Appellant had converted his shares, the 1st Respondent complained to the 2nd Respondent, which investigated the matter. Dissatisfied with the outcome, the 1st Respondent filed a case at the Investment and Securities Tribunal, which ruled in his favor, ordering the restoration of his shares or the purchase of equivalent shares, along with payment of accrued dividends and damages.

 

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HELD

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1. The appeal was dismissed.

2. The Court held that there was no valid contract between the Appellant and the 1st Respondent for the transfer of the 1st Respondent’s shares.

3. The Court found that Exhibit 1, being an undated letter, could not constitute a valid instrument of transfer as required by Section 151 of CAMA.

4. The Court confirmed that the Appellant breached its fiduciary duty to the 1st Respondent by converting his shares without proper authorization.

5. The Court upheld the decision of the Investment and Securities Tribunal that ordered the restoration of the 1st Respondent’s shares or the purchase of equivalent shares, payment of accrued dividends, and damages.

6. The Appellant was ordered to pay costs of ₦500,000.00 to the 1st Respondent.

 

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ISSUES

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1.Whether or not the trial Tribunal’s decision that Exhibit 1 (the undated letter) and its import is invalid, unenforceable, null and void, and that the transfer of shares is not a conclusive transaction under CAMA can be sustained?

 

2.Whether or not the 1st Respondent proved postage of his letter of withdrawal of consent at the trial to vitiate the share transfer?

 

3.Whether or not the Tribunal was right to have impugned fraud against the Appellant without requisite proof of same?

 

4.Whether, having regard to available evidence and the entire facts and circumstances of the case, the decision of the Tribunal is not against the weight of evidence?

 

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RATIONES DECIDENDI

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VALIDITY OF AGREEMENT – NECESSITY OF DATE OF EXECUTION:

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“I am clearly of the view that for any agreement to be effective, there must be a date of execution or a date when the agreement will become operative. Any agreement that bears no date of execution, or no date when it comes into operation, is invalid and unenforceable. It was held that an agreement for a lease, which does not state when the term is to commence, is invalid, and there is no implication that it is to start on the date of the agreement or within a reasonable time thereafter.” – Per Joseph Olubunmi Kayode Oyewole, JCA

 

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UNDATED DOCUMENTS – PROBATIVE VALUE IN SHARE TRANSFER TRANSACTIONS:

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“Furthermore, the deed of sale agreement tendered by the Appellant lacks a date of transaction. An undated document is worthless. An undated document has been held to be invalid and holds no probative value.” – Per Okon Efreti Abang, JCA

 

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TRANSFER OF SHARES – NECESSITY OF PROPER INSTRUMENT OF TRANSFER:

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“The transfer of a company’s shares shall be by an instrument of transfer. Notwithstanding anything in the articles of a company, it shall not be lawful for the company to register a transfer of shares unless a proper instrument of transfer has been delivered to the company.” – Per Okon Efreti Abang, JCA

 

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CONSENSUS AD IDEM – REQUIREMENT FOR VALID CONTRACT:

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“To constitute a binding contract, there must be an agreement in which the parties are ad idem on the essential terms and conditions thereof. The promise of each party must be supported by consideration. In other words, for an enforceable contract to materialize between the parties, there must coexist a precise offer, unqualified acceptance, legal consideration, and the intent to create a legal relationship.” – Per Okon Efreti Abang, JCA

 

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UNILATERAL IMPOSITION OF CONTRACT TERMS – IMPOSSIBILITY UNDER LAW:

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“A party cannot unilaterally impose a term of a contract on the other. The parties to the agreement must be ad idem on the terms and conditions of the contract before it becomes enforceable.” – Per Okon Efreti Abang, JCA

 

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PRESUMPTION OF RECEIPT – LETTERS SENT BY POST:

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“The duty on the claimant at this stage is to prove that the letter was indeed posted, which duty the claimant discharged through Exhibit 22. There is a presumption that a letter sent by post was received by the addressee. It is not open to the 1st defendant to contend that the presumption is not available to the claimant where it fails to show that the mode of delivery was other than by post.” – Per Okon Efreti Abang, JCA

 

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BREACH OF FIDUCIARY DUTY – CONVERSION OF CLIENT’S SHARES:

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“The claim of the 1st Defendant that it had concluded its recapitalization and, by extension, the transfer of the Claimant’s shares before the receipt of Exhibit 11 dated 28/11/2008, was debunked by Exhibit 33, which the 1st Defendant heavily relied on. This claim did not portray the 1st Defendant in a very good light, as it was less than honest with the Claimant in handling his affairs. The 1st Defendant betrayed the trust and confidence reposed in it by the Claimant by denying him the possessory right over his shares.” – Per Okon Efreti Abang, JCA

 

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BREACH OF TRUST BY FINANCIAL CUSTODIAN – CONSEQUENCES:

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“It will amount to an immiscible breach of trust for the custodian of trust items, such as the Appellant in this case, to covet the same trust properties kept in its possession to the extent of converting them into its own property through dubious and illegal means. I believe, on this ground, the 2nd Respondent ought to have vitiated the entire transaction.” – Per Okon Efreti Abang, JCA

 

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REQUIREMENTS FOR VALID SHARE TRANSFER UNDER CAMA:

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“Even if Exhibit 1 is considered an instrument of transfer, there is nowhere that the Appellant signed accepting the purported transfer of shares. This is because under Section 151(3) of CAMA, the Appellant is enjoined to sign the said instrument for the parties to be bound by it. By any stretch of imagination, Exhibit 1 cannot be an instrument of transfer of the 1st Respondent’s shares to the Appellant under Sections 151(1), (2), and (3) of CAMA.” – Per Okon Efreti Abang, JCA

 

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SIGNIFICANCE OF DATE OF POSTAGE IN WITHDRAWAL OF CONSENT:

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“It is settled law, my Lords, that it is the day of postage of the letter that is relevant and not the date the said document was received.” – Per Okon Efreti Abang, JCA

 

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CONTRADICTORY EVIDENCE – EFFECT ON CREDIBILITY OF CLAIMS:

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“The claim of the 1st Defendant that it had concluded its recapitalization and by extension the transfer of the Claimant’s shares before the receipt of Exhibit 11 dated 28/11/2008 was debunked by Exhibit 33, which the 1st Defendant heavily relied on.” – Per Okon Efreti Abang, JCA

 

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REMEDIES FOR BREACH OF FIDUCIARY DUTY – RECOVERY OF PROPERTY:

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I agree with the 1st Respondent that the remedy available to a party who is a victim of breach of such fiduciary duty is to recover back his money or the property transferred under such circumstances. The Tribunal was right in the consequential order made in the judgment.” – Per Okon Efreti Abang, JCA

 

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JURISDICTION OF INVESTMENT AND SECURITIES TRIBUNAL – EXTENT AND SCOPE:

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“I agree entirely with the 1st Respondent that the Tribunal did not consider any criminal allegation against the Appellant. The decision of the Tribunal was within the confines of the jurisdiction of the trial Tribunal as provided for under Section 284 of the Investment and Security Act. The dispute between the Appellant and the 1st Respondent is a dispute between an Investor and a Securities Exchange or Capital Trade point or clearing and settlement agency.” – Per Okon Efreti Abang, JCA

 

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CASES CITED

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STATUTES REFERRED TO

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1. Companies and Allied Matters Act (CAMA) 1990

2. Investment and Securities Act (ISA) 2007

3. Companies Regulations 2012

4. Evidence Act 2011

 

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