OILFIELD SUPPLY CENTRE LTD (APPELLANT)
v.
JOSEPH LLOYD JOHNSON (RESPONDENT)
(1987) All N.L.R. 446
Division: Supreme Court of Nigeria
Date of Judgment: 22nd May, 1987
Case Number: (SC.119/1986)
Before: Eso, Aniagolu, Kazeem, Kawu Oputa JJ.S.C..
The Respondent Joseph Lloyd Johnson, an Australian and the Managing Director of the Oilfield Supply Ltd, a Company incorporated in 1974 under the Companies Act 1968, petitioned for the winding up of the company in the Federal High Court. There were five Shareholders in the Company, Consisting of the Respondent, Chief Stephen Idugboe, Aret Roz, Evan Enwerem and Solomon Asemot. The respondent was in fact the brain behind the founding of the Company, which developed some swamp area into a port complex. Idugboe was the Chairman of the Company.
In November 1976, the Government Compulsorily acquired the port Complex for public purposes and in February 1980 paid compensation of N8,416.850.00 for the acquisition, by which time, the Respondent had left, Nigeria, Solomon Asemota had resigned and the other Shareholders shared the compensation funds. Before the advent of the compensation Chief Idugboe had taken the other members to Court for winding up of the Company. But changed his attitude on payment of compensation subsequently the three Directors shared the money leaving the Respondent. The Respondent on returning to Nigeria instituted a winding up proceedings. Chief Idugboe filed an application, seeking an order for the striking out of the proceeds, on the grounds that the Respondent was not a member of the Company consequently it would be incompetent for him to seek the winding up of the Company.
The Federal High Court held that the Respondent is a Share-holder, member and contributory of the Applicants and as such he is a person competent to bring a petition for the winding up of the Applicants under Section 211 of the Companies Act.
The appellants appealed to the Court of Appeal and the Court of Appeal split in their judgment. The majority held that there is no evidence whatsoever to suggest that the respondent breached section 3(1) of Immigration Act because from the minutes of the meeting held by the Company, the Respondent paid fully for his shares, and it was the duty of the company to apply for quota to cover the Respondent, and failure to obtain the consent makes the formation of the Company a nullity a fortiori and the minority held that the respondent had not established in law that he acquired and has shares which are registered in his name to enable him present a petition for winding up the applicants by the Court.
On further appeal to the Supreme Court
HELD:
1. The Respondent was undoubtedly legally entitled to bring his petition as Shareholder, member and contributory of the Company in view of the overwhelming evidence in favour of the claim of the Respondent, that shares were allotted to him and the shares were paid from Salaries accruing to him.
2. Proviso (a) to Section 211(1) of the Companies Act 1968 must be understood as providing for alternatives. It is not conjunctive. The word "either" is to be read before the Roman (i) not subsequently, still, the meaning is clear enough. Both conditions need not be present together before a contributory can bring a winding up petition. If condition (i) is absent but condition (ii) is present as in this case, a contributory can petition.
3. The purport of Section 8(1) Immigration Act is to protect certain businesses from exploitation by non-Nigerians and make sure that Nigerians are not at any disadvantage section 8 imposes not penalty for failure to apply, apart from deportation. The petitioner has not been deported. It is only when a penalty is imposed that the whole transaction will be void.
4. It is the Appellant who should have applied for a permit for him and failed to, before he helped them found Company that now intends to meet him with illegality perpetrated by the same Company. Certainly Equity will not permit an "action" that is a complaint by the Appellants, based on their own default to arise.
Per Eso JSC.-
5. Here was a stranger in our land used his brains and expertise to establish a port-complex; when the going was rough, Chief Idugboe fell out with the others and took them to Court i.e. things fell apart. Idugboe was no longer at ease. It was the Respondent that Championed the cause of the Company. He stood firm, for he believed in what he created. The Government stepped in, acquired the complex over Eight Million Naira rolled in, and the sight of money brought the combatants together. Meanwhile, the Respondent was in Australia. It was easy for these shareholders to exclude him from the booty. They have benefited from his brain but he was not good enough to participate in the sharing of the wind-fall. It is turpid and it stinks.
Appeal dismissed in its entirety.
Cases Referred to
1. Ebba v. Ogodo (1984)1 SCNLR 372
2. George v Royal Exchange Assurance Corp. (1900) 2 QB 214 at 220
3. Okafor v. Idigo (1984) 6 SC1, 36
4. Sodipo v. Lemminkain (1985) 2 NWLR 547
5. Solanke v Abed & Anor (1962) NNLR 92
Statutes Referred
1. Companies Act, 1968
2. Immigration Act, 1963
Eso JSC. In 1974, the Oilfied Supply Ltd. was incorporated under the Companies Act 1968. Joseph Lloyd Johnson, an Australian who petitioned for the winding up the company in the Federal High Court, it is the respondent to this appeal and he was appointed the Managing Director. He was in fact the brain behind the founding of the company, which developed-some swamp area into a Port Complex. There were five shareholders in all, consisting of the Respondent, Chief Stephen Idugboe, Aref Roz, Evan Enwerem and Solomon Asemota. Though Idugboe wa the Chairman of the Company, its problems started with this Chairman making allegations, some criminal in nature. Against the other shareholder. The Chairman also took some abortive civil actions against the other shareholders. The Chairman also took some abortive civil actions against the Company and the other shareholders.
However, in November 1976 the Government compulsorily acquired the port complex for public purposes. Compensation of N8,416,850.00 was paid for this acquisition but not until February 1980, by which time, the Respondent had left this country for Australia. Solomon Asemota had resigned, and the three other shareholders came to an agreement as to how the compensation funds should be shared.
It is the sharing of this money that brought about the present trouble in the Company, for though, before the advent of the compensation, Chief Idugboe had taken the other members to Court for a winding up of the Company, the payment of the money changed Idugboe's attitude. Things might have fallen apart when there was no money, but things became solidified after the payment of over eight million Naira, and this, the three Directors shared, leaving the present Respondent out of the show.
The Respondent then returned to Nigeria, and he instituted the winding up Proceedings. Chief Idugboe filed an application, seeking an order for the striking out of the proceedings, on the ground that the Respondent, Johnson, was not a member of the Company, in which case it would be incompetent of him to seek the winding up of the Company.
The matter came before Ayinde J., who, in a considered judgment dismissed the application brought against the Respondent. Ayinde J. said-
"It would appear the Applicants, being a Company registered under the Companies Act, 1968 did not only start wrongly at the time of incorporation, by not complying with Immigration Act, the Company was also operated without the slightest regard for the provisions of the Companies Act. This, however, is by the way. I have already found that, by and large, The Respondent is a shareholder, member and contributory of the Applicants and as such he is a person competent to bring a petition for the winding up of the Applicants under Section 211 of the Companies Act."
The appellants appealed to the Court of Appeal coram Omo-Eboh, Belgore and Mustapher, JJ.C.A. The Court of Appeal split in their judgment. The majority judgment was delivered by Belgore J.C.A., as he then was, Mustapher J.C.A. concurred, while Omo-Eboh J.C.A., who presided over the Court dissented. I would like to set herein the views expressed by both the majority and minority. Mustapher J.C.A., who concurred with Belgore J.C.A.'s judgment, also set out in full the facts of the case and highlighted the participation of the Respondent in the Company. He identified the issues before the Court as follows-
"(1) Whether in view of the provisions of Section 8(1) and Section 33 of the Immigration Act 1963, the respondent can validly acquire shares and take employment with the appellant company as from April 1974 when the business permit and the expatriate quota were granted only on 8th of July 1975. Or were the appointment and the allotment of shares void or voidable? And if only voidable did the permission granted by the issuing authority rectify and make valid, the appointment and the issue of the shares?
(2) If the allotment of the shares was valid or was later validated, had the respondent paid for the shares and if he had not paid for the shares, could he under the circumstances of this case qualify as a contributory to bring the petition? Or would he qualify as a Creditor?
(3) Having regards (sic) to Suit No. FRC/W/17M/76 in which the respondent successfully resisted a petition to wind up the company on alleged identical grounds as in the instant petition was the petitioner not estopped from presenting the petition to wind up the company?"
On the first issue the learned Justice of the Court of Appeal held-
"Having regards (sic) to the facts of the case as disclosed by the affidavits and oral evidence, as is especially not disputed that the respondent came to Nigeria under a contract service with UNDAMAC GROUP (Nigeria) LTD. as a base Manager since 1973 to a build a Port Complex, could it be said that the respondent had breached sec. 3(1) of Immigration Act? There is no evidence whatever to suggest that, the respondent had not as at 1973 entered or accepted employment nor that UNDUMAC GROUP (Nigeria) LTD. had not complied with the provisions of the Immigration Act of 1963, considering the circumstances of the case it would appear to me that the appellants merely took over the operations of UNDUMAC GROUP (Nigeria) LTD and absorbed as it were, the already employed initiator of the operations."
As regards the second issue it was the view of the learned Justice of the Court of Appeal that-
"The contention that the respondent had not paid for his shares is another matter and indeed it is an assertion made by the appellants and it is there duty to prove the same, this is having regards to the facts that the appellants hold the register of members which would prima facie show who the members of the company were."
while he held on the third issue that-
"Once a petitioner has a statutory right under the company's Decree to present a petition and it could not be shown to be an abuse of process of the Court he should be allowed to proceed."
Earlier, Belgore J.C.A., who read the lead judgment had set out in detail the facts of the case. He considered the minutes of meetings held by the Company and he was able to show therein that the Respondent paid for his shares from his salary relying for this finding on the resolution of the meetings held by the Company on 16th May 1975 and 8th October 1975 respectively. He also referred to Asemota's evidence that the Respondent's shares were fully paid. Asemota indeed regarded the Respondent as the brain behind the Company.
In regard to the Company's case that there was no quota to accommodate the Respondent, Belogre J.C.A. held-
"In this case there had been a firm and unambiguous application for consent to Federal Commissioner for Internal Affairs which was being querried. Mr Asemota as a lawyer and then co-director pursued the matter on behalf of the Company. The consent was finally granted in 1975 long before compulsory acquisition. The company was still doing business of taking off rather than making money as it was still indebted to many persons. It was the duty of the company to apply for quota to cover the petitioner/respondent and if failure to obtain the consent makes the formation of the company a nullity, a fortiori the act of other directors between April 1974 and sometimes a last quarter of 1975 was nullity. All would be in parti delicto. Certainly, a party to a bargain, who has benefited from it, cannot avoid his responsibility to the other party because he failed to apply for necessary legal consent in respect of the bargain and thus prevent the other party from enjoying the fruit of the bargain.
Now, as I have said earlier, Omo-Eboh J.C.A. dissented from the majority. He identified the main question raised by the parties as follows-
"I have carefully read over and over again the Briefs filed for the applicants and the respondent as well as all the documents filed by both parties in the matter of this petition and it appears that the main question raised thereby is whether or not the respondent has shown satisfactorily that he is a shareholder of the applicants (the Oilfield Supply Centre Ltd.)"
He came to the conclusion that it was-
"...interesting that the respondent claims such a huge amount as his salaries which were used to pay the value of 100,000 or 115,000 shares in the applicants and the same time, he still claims more than thrice that huge amount as "accrued salary unpaid" to him by the same applicants and for "Promotional Goodwill." One, in the circumstances of the above, may just wonder what rate of pay or remuneration per hour or per day did the respondent unilaterally fix in favour of himself and to be paid to him by the applicants-perhaps without their knowledge and/or consent.
He went on-
"Further to the above, all the above claims by the respondent to have acquired a number of shares of the applicants and to be entitled to be paid huge sums of money by the applicants are mere assertions and carry little or no weight in the absence of definite admissions to the same effect by the applicants or of contracts and/or agreements binding upon both parties whereby the applicants are legally obliged to credit the respondent with certain specified number or numbers of shares a already paid up shares. Nor are the applicants legally bound or obliged to pay liquidated or unliquidated sums of money to the respondent for one cause or reason not known to and agreed upon by both parties."
And concluded on the point-
"In a case of this nature, owning shares in a company is not a matter which can be proved by mere assertion or verbal claim alone. Ownership of such shares can only be conclusively proved by necessary documentary evidence to be provided by receipts showing payment effected on the allotted shares; registration of the shares (and their numbers) in the name of the shareholder as entered in the Register of Shareholder of the Company; and/or share certificate issued in the name of the shareholder bearing the shares (and their numbers) as acquired by the said shareholder. In the absence of the proof any and/or all the above by means of documentary evidence then the person concerned cannot be said to have conclusively proved that he has or holds shares (either paid-up in full or partly paid-up) of that company."
He did not accept the story of the Respondent that he acquired N115,000.00 shares in the Company and that his salaries which he never drawn throughout the period he worked for the applicants were utilised as payment for the shares. He did accept that the Respondent was a force in the company. He said-
"To avoid my being misunderstood, I have to say that there is no doubt that the respondent and Chief S. Idugboe promoted the formation of the applicants and that the respondent utilised his expertise to build up the port complex and develop the business of the applicants at the material time. These notwithstanding and sentiments and moral consideration apart, the respondent in my opinion has so far not establish in law that he acquired and has shares in the applicants which are registered in his name to enable him present a petition for winding up the applicants by the court."
I must say that the dissenting judgment was rather long and well researched and this necessitated my dealing so exhaustively with it especially as the appellants have based their appeal in the main on this judgment.
The Appellants have appealed to this Court on some five grounds of appeal. I do not intend to set these grounds out in this judgment, as I will deal with their briefs in the Court.
Chief B.E.E. Idugboe learned Counsel for the appellant set out the issues arising on the appeal as-
"PART II
1. ISSUES ARISING IN THE APPEAL
(I) Was it conclusively established in this case that the Petitioner/Respondent is a shareholder, a member and/or a contributor of the appellant?
(II) Can a contributory present a petition to wind up a company under section 211 of the companies at when:
(a) The number of members is not reduced below two;
(b) The shares in respect of which he is a contributor are not shown to have been registered in his name?
(III) (a) On whom rests the onus of proving that the Petitioner/Respondent paid for the shares allotted to him?
(b) If the onus is on the Applicant/Appellant did it shift on the Petitioner/Respondent or not after the applicant has established by means of Exhibit A (minutes of 27/3/76), Exhibit K (auditors report showing that he did not pay for the shares) and evidence of the auditor to the effect that the Petitioner/Respondent made withdrawals over and above his salaries for the period?
(IV) Were the justices of the Court of Appeal right in equating secs. 8(1) and 33 Immigration Act 1963 with section 11 Lands and native Rights Act?
(V) Were the justices of the Court of Appeal justified in failing to hold that the petition was an abuse of the process of court since it was presented with a view to achieving a collateral advantage by bringing pressure to bear on the company to pay him N1,172,530.04 which he was claiming in suit No. FHC/24/80?"
He regarded the main issue arising however as "whether or not it has been proved conclusively that the Petitioner/Respondent paid for the shares allotted to him."
Chief Idugboe argued in his Brief that the Respondent's case was a mere assertion without proof. He made the following points-
(1) that the Respondent never paid for the shares as he himself had admitted that the shares were to be paid for with salaries earned by him.
(2) that when the Respondent issued foreign cheques towards payment of shares the cheques were dishonoured.
(3) that no share certificates were tendered nor did the Respondent show that shares were registered in his name.
(4) that Respondent neither produced receipts nor a memorandum signed or sealed by the Appellants to prove that he paid for his shares.
(5) that Respondent showed no contract of service.
(6) that the Court of Appeal did not consider the evidence of Anthony Aneno and that of Mr Enwaem nor was the evidence given by these witnesses evaluated.
In his oral submissions to this Court on this issue, Chief Idugboe in answer to a question put to him by the Court admitted that the Respondent had equitable interest. To quote his words, he said-
"I now say that the Respondent had equitable interest up to N50,000.00 but he was not a shareholder."
But this was after he had first conceded to the Court that in view of the passage shown by the court, the Respondent had shares up to N50,000.00. Indeed, Chief Idugboe was confronted with the Minutes of the Meeting of the Directors held on 2nd July 1974 wherein it was recorded.
"Fresh Allotment of Shares:
1. Chief Stephen Idugboe 125,000 Ord. Shares
2. Mr A. Roz 125,000 Ord. Shares
3. Evan Enweren 100,000 Ord. Shares
4. Mr S. Asemota 75,000 Ord. Shares
5. Mr J.L. Johnson 50,000 Ord. Shares
6. Chief C.F. Bekederomo 25,000 Ord. Shares
Total Shares allotted 500,000 of N1 each
It was unanimously Resolved to cancel all the previous allotment of shars and the position of the Share holding in the Company should be as follows-
It was also Resolved that the previous Share Certificates issued in respect of the previous allotments be and are hereby cancelled.
It was agreed that Certificates should be according to the above allotment.
Share Certificates But Shares not fully paid will be debted to the individual Current Account of the Members concerned."
Learned counsel contended however that that Resolution must be shown to have been carried out. All that had been shown was that the shares were allotted to him.
Mr Scott-Emuakpor, learned Counsel for the Respondent, in his own brief, contended that it was proved that the Respondent was a shareholder. Chief Idugboe himself, learned Counsel pointed out, admitted this much in his verifying affidavit. As at 5th April, 1974, when the share certificates, formerly issued were cancelled, the Respondent in accordance with the Resolution of the Company had a vested right to a share certificate for N50,000 ordinary shares of one Naira each. Mr Scott-Emuakpor further submitted that the Respondent had capitalised his technical know how and services as the brain behind the Company.
In regard to membership register, learned Counsel contended that every company is presumed to have a membership register. When it came to oral submissions, Mr Scott-Emuakpor simply relied upon his Brief. I think he was in a good position to do this as learned Counsel had presented this Court with a very comprehensive and well an noted Brief, the type that should be recommended to other counsel.
This being the main issue in the case, I intend to deal with it at this stage. I have earlier said that the issue rests mainly on facts, for it is a matter of fact whether the Respondent had shown or not that he was a shareholder of the Appellant Company.
To the motion filed by the Appellant on 19th March, 1981, seeking an order to strike out the petition of the Respondent, which motion led to the Ruling now on appeal before this Court, was attached an Exhibit showing an earlier petition by Chief Idugboe against the Company. Chief Stephen Idugboe, the principal dramatis persona of the Appellant Company, had said in that petition-
"(3) The nominal capital of the company is N1,000.000 divided into 1,000,000 shares of N1 each. The amount of capital paid up or credited as paid up is N504,500 made up as follows-
"(i) Chief Stephen Idugboe N202,500.00
(ii) Mr Evans Enwerem 150,000.00
(iii) Mr Aref Rox 118,000.00
(iv) Mr S.A. Asemota 34,000.00
(v) Mr J.L. Johnson NIL
TOTAL N504,500.00"
This indicates that though the Respondent was allocated shares, he had not paid anything towards his shareholding for in the same affidavit, Chief Idugboe referred to the five people listed above as Directors. He said
"The five shareholders mentioned in paragraph 3 above are also the directors of the company. The petitioner is the Chairman of the board of Directors while J.L. Johnson is the Managing Director."
Thus Chief Idugboe, on oath acknowledged the Respondent as the Managing Director of the Company.
The application by the Appellant was also supported by another Exhibit "A1", and this Exhibit, brought as evidence by the Appellant, was the counter-affidavit sworn to by the present Respondent in the case brought by Chief Idugboe against the Company. The Respondent (Johnson) had said (and this was evidence now relied upon by the appellants in their present application to strike our Mr Johnson's Petition)-
"Contrary to paragraph 3 of the affidavit the nominal share capital of the Company is now N1,5000,000 of N1 each the increase by N1/2 million was made at an extra-ordinary general meeting held on the 9th August 1976 at the Company's Office in Ogunu, at which the Petitioner, and Messrs J.L. Johnson, Evans Enwerem and Aref Roz were present. The amount of capital paid up or credited as paid up is N1,040,000.00 made up as follows-
1. Chief Stephen Idugboe N202,500.00
2. Mr Evans Enwerem 300,000.00
3. Mr Aref Roz 375,000.00
4. Mr S.A. Asemota 112,500.00
5. Mr J.L. Johnson 50,000.00
Mr J.L. Johnson originally paid up N100,000 of this amount, N50,000 was paid from his accrued salary and the other N50,000 was paid by two cheques of N25,000 each drawn on his foreign accounts in the U.S.A. and Australia. Both cheques were returned. That of U.