In The Supreme Court of Nigeria
On Friday, the 23rd day of November 1990
SC 98/1987
Between
Globe Fishing Industries Ltd ...... Appellants
Alhaji Sule Katagum
Mr. D.M. Roussinov
Mr. K. M. Dayaldasam
Mr. Joseph Adeola
And
Chief Folarin Coker ....... Respondent
Judgement of the Court
Delivered by
Olajide Olatawura, J.S.C.
The respondent who was the plaintiff in the court of first instance filed an action against the defendants now the appellants in this court and claimed as follows:
1. Declaration that the election of Mr, Joseph Adeola as a Director of Globe Fishing Industries Limited is null and void.
2. That the Chairman Alhaji Sule Katagum, the Managing Director Mr. Roussinov and the General Manager Mr. Dayaldasam be compelled to make available to the plaintiff Certified Bank Statements of Account of the Globe Fishing Industries Limited at the United Bank for Africa for the periods 1st July, 1979- 3Oth June, 1980 respectively;
3. That the Chairman Alhaji Sule Katagum, Managing Director Mr. Roussinov, and the General Manager Mr. Dayaldasam be cornpelled to convene the Annual General Meeting of Globe Fishing Industries Limited for the year 1980 to consider (a) the annual accounts covering the periods 1/7/79- 30/6/80 and 1/7/80-31/12/80. (b) to declare dividends for the year ending 30th June, 1980.
On the 23rd February, 1981 when the matter came before Anyaegbunam, C.J., pleadings were ordered. Pleadings were filed and amended. It was however on 9th April, 1981 that the respondent herein filed an application seeking the following prayers.
1. Joinder of the following person as defendant in the above Suit:-Mr. Joseph Adeola
2. Amendment of the Statement of Claim in the Suit.
3. Interim injunction restraining the 2nd defendant from exercising the functions of a Director and Chairman of Globe Fishing Industries Co. Ltd. until the determination of this Suit.
4. Interim injunction restraining Mr. Joseph Adeola from performing and exercising the functions of a Director of Globe Fishing Industries Co. Ltd. until the determination of this Suit.
5. Interim injunction restraining the Board of the Comparison taking any action which will affect the Status Quo in this Suit, and for such further order or orders as this Honourable Court may deem lit to make in the circumstances.
There was an affidavit in support. As a result of the conflicts in the affidavits filed by both sides, the learned trial Chief Judge rightly took evidence, no doubt, to resolve some of the areas of conflict Falobi v. Folabi (1976) 1 N.M.L.R.169; Uku v. Okumagba (1974) 3 S.C.35; National Bank of Nigeria Ltd. v. Are Brothers (1977)6 s.C.97. The learned Chief Judge on 7th June, 1984 granted only one of the remaining prayers. The first two prayers had earlier been granted by consent. Prayer (d) was granted as follows:-
I would in the result grant the plaintiff/applicant his prayer that is that Mr. Joseph Adeola be restrained from performing and exercising the functions of a Director of 1st defendant/company until the determination of this case.
The defendants/respondents in the court of first instance were dissatisfied with that ruling and appealed to the Court of Appeal on a number of grounds. On 14th April, 1987 the Court of Appeal in a unanimous decision (Coram, Mohammed, Kutigi and Kolawole, JJ.C.A.) dismissed the appeal hence a further appeal to this court. The grounds filed are as follows:
(i) The learned Judges of the Court of Appeal erred in law by affirming the order of the Federal High Court, Lagos restraining the 5th defendant/appellant from performing and exercising the functions of a Director of the 1st defendant! appellant company.
(a) There is uncontradicted evidence that the 5th defendant/appellant was elected a Director at the Annual General Meeting of the 1st defendant/appellant held on 5th December, 1979.
(b) Article 65 of the Articles of Association of the 1st defendant/appellant company empowers the company in General Meeting to fill vacancies in the Board of Directors, remove and appoint directors by ordinary resolution from time to time.
(c) It is clear that if the plaintiff/respondent had any right to enforce at all, it would be his right to remain as a director and to continue to function as such, which right does not affect the right of the 5th appellant to become and remain a director of the 1st defendant/appellant.
(d) The plaintiff/respondent has no legal right to prevent the 5th appellant from becoming and remaining a director and he did not show that he will suffer irreparable injury if the order restraining the 5th appellant from performing and exercising the functions of a director of the 1st defendant/appellant company is not granted.
(e) The order of interim injunction is not available to the plain-tiff/respondent in respect of the complaint for which the injunction was sought bearing in mind particularly that the wrong complained of by the plaintiff could have been remedied and/or resolved by the 1st defendant/appellant in General Meeting by virtue of Section 175(1) of the Companies Act, 1968.
(f) Any wrong, if any, done to the plaintiff/respondent could be adequately remedied or atoned for in damages.
(g) The order of interim injunction will prevent the 1st defendant/appellant from resolving in General Meeting either to nullify or ratify the retirement of the plaintiff/respondent as a director or affirm the appointment of the 5th defendant/ appellant as majority of its members may desire.
(ii) The learned Judges of the Court of Appeal misdirected them-selves in law and thereby failed to realise that Article 89 of Table A to the Companies Act, 1968 does not preclude the directors of the 1st defendant/appellant from determining those to retire A from amongst themselves other than by lot.
Particulars
(a) By the plain and ordinary meaning of the provisions of Article 89 of Table A to the Companies Act, 1968 it is clear that as between persons who become directors on the same day their retirement shall be determined by lot but they can agree to use another method to determine who amongst themselves to retire.
(b) The plaintiff, a legal practitioner agreed with the other directors to retire, offered himself for re-election, but failed to be re-elected.
(iii) The learned Judges of the Court of Appeal erred in law when they affirmed the view of the Federal High Court, Lagos that Article 89 of Table A to the Companies Act, 1968 confers a right on the plaintiff qua member and not as a director and that the plain-tiff's complaint is against an injury done to him personally.
(iv) The learned Judges of the Court of Appeal erred in law when they held that it would be premature to consider the principles in Foss v. Harbottle 18432 HARE 461, Edwards v. Halliwell (1950) 2 A.E.R.1064 and Macdougall v. Gardiner (1875)1 Ch.D. 13, wrongly applied the principles governing interlocutory injunction in corporate affairs and thereby came to a wrong conclusion when they held that the plaintiff can sue the 1st defendant/appellant and can seek to restrain the 5th defendant/appellant from acting as a director and thereby failed to appreciate that the act complained of by the plaintiff is a mere irregularity which the majority can regularise at a General Meeting.
(v) The Ruling of the Court of Appeal is against the weight of evidence.
Briefs were filed and the appellants in their briefs
1. Whether Article 89 of Table of the Schedule to the Companies Act, 1968 makes it mandatory for the Directors of the at defendant/appellant company to determine those to retire amongst themselves by lot.
2. The effect of the Articles of Association of a Company incorporated under the Companies Act and the nature and scope of the plaintiff's rights under Article 89 of Table A of the Schedule to the Companies Act, 1968.
3. The Principle of Majority Rule in corporate affairs and whether the wrong complained of by the plaintiff is not just a mere irregularity which could be ratified by the 1st defendant/appellant company in general meeting.
4. Whether on a consideration of the facts before the Federal H High Court and the principles of Majority Rule in corporate affairs the relief of injunction is available to the plaintiff so as to entitle the plaintiff to seek an order of interim injunction to restrain the 5th defendant/appellant from perforining the functions of a Director.
The issues raised by the respondent are two:
1. Whether the Court of Appeal was right in limiting the only issue relevant for determination to the issue of injunction simpliciter.
2. Whether on the Affidavit and oral evidence adduced in sup-port of the application for interim injunction restraining the 5th defendant/appellant from performing the functions of a Director in the 1st appellant company the plaintiff/respondent has made out a case for the grant of an interim injunction pending the determination of the substantive case.
In the determination of any interlocutory application pending the trial of the substantive case, care should be taken not to make pronouncements which may prejudice the trial of the claims filed and still pending before the court. To do otherwise is to prejudge the matter in respect of which evidence is still to be Led. It is for this reason that I will prefer the issues raised by the respondent in the respondent's brief. I will however touch on the relevant is-sues raised by the appellants.
In the oral submission in amplification of the brief filed on behalf of the appellants, Mr. Vaughan the learned counsel for the appellants after adopting the appellants' brief submitted that before the application could be granted a prima facie case should be made out. He referred to section s.16 of the Company Act. We did not call on the respondent's counsel for a reply
It appears to me that at the stage the application was argued before the learned Chief Judge the simple issue was whether the applicant before him had a right which ought to be protected pending the trial of the substantive case. It will therefore in my preview be premature to rely on and make definite pronouncements on authorities which have the effect of disposing off the claims before the court. These authorities are:
1. Hickman v. Kent or. Romney Marsh Sheep Breeders Association (1915)1 CH881 at 900.
2. Pender v. Lushington (1877) 6 CR.D 70.
3. Rayfield v. Hands (1960) CH.1.
4. Bdward & Ors. v. Halliwell & Ors. (1950) 2 A.F.R. 1064 and
5. Woodford & Anor. v. Smith & Ors. (1970) WLR 506.
The learned Chief Judge made some observations which ought to be taken into account:
1. That there was no lot cast to determine who should be appointed Directors.
2. That the Secretary. Mrs. Theresa Adesola Odele was not forth-right in her evidence and that she attempted to "draw a red herring on the path of justice"
3. That the members of the Board of Directors were aware that the old Directors were to hold office for three years and yet brought some one new to displace the applicant i.e. the plaintiff.
4. That Chief Folarin Coker the plaintiff protested against the election at the meeting and later followed it up with many letters of protest.
5. That the learned counsel for the defendants conceded that the retirement of the plaintiff was irregular though not fatal.
6. That the plaintiff brought the action with the mind that he is still a Director to be re-elected as was earlier agreed.
7. That the Secretary has no power to retire any Director. That the Secretary did what she had neither the power nor the authority to do and that she was the one who mentioned the names of Directors to retire.
The question now is whether in view of these observations or findings the learned trial Chief Judge was wrong to have made the earlier order reproduced above by me if one takes into account, and this must be done, the claims before the court.
In the lower court, Kutigi, J.C.A., in the lead judgment said:
An applicant must make out at that stage a strong prima facie case on the application in order to justify interference by way of interlocutory injunction and he must show that an injunction is necessary until the hearing to protect him against irreparable injury.
While agreeing with that principle of law, I will say that the decision of this court in Ladunni v. Kukoyi & Ors. (1972) 3 S.C.31135 has stood the test of time and is the locus classicus on an application of this nature.
While dealing with the first issue raised by the appellant, the appellant in his brief said:
The crucial aspect of this case is that, as far as the evidence before the lower court shows the plaintiff/respondent herein called the respondent was retired he and other members of the Board of Directors concerned, he did not protest until he submitted himself for re-election and lost.
Certainly, the act of the Secretary was merely a Ministerial act, and not an order. Non-objection by the plaintiff at the stage when the ministerial act was presented before the Directors is fatal. His retirement and that of those retired with him would F therefore be taken to be by agreement amongst Directors.
It appears to me that the findings or observations I listed above were not taken into consideration by the learned counsel to the appellants. And as I hinted earlier to make a pronouncement about this issue will prejudice the trial that is still pending. I therefore agree with the respondent's counsel in his brief where he submitted that this first issue "cannot be determined at this stage." A pertinent question at the stage of the application was whether the claims are frivolous. Looking at the pleading and without evidence which can be tested by cross-examination and a consideration of the Memorandum and Articles of Association of the Company it will be wrong to say that the action is frivolous. Is there a case made out which so far requires to be tried? I think so.
In my view the learned counsel for the appellants has relied on cases and certain sections of the Companies Decree 1968 on which a final pronouncement must be made at the trial of the substantive suit. What the learned counsel for the appellant tried to impugn i.e. the method of approach of the lower court is without regard to the issues raised by the pleadings. The learned Counsel submitted:
The learned Justices of the Court of Appeal however held the view that it was premature to consider the said cases and in so holding failed to appreciate the importance of the said cases both in terms of their procedural relevance and significance in relation to an irregular act done by a company (Italics is mime)
It is at this singe that any Judge must ensure that the scale of justice is not tilted to one side, for to do so is to give a false impression that the respondent's case is frivolous. It will amount to a hasty, if not a rash conclusion. To bring into focus the cautious approach of the Court of Appeal, I will refer to paragraphs 2 and 6 of the Statement of Defence where the appellants averred as follows:
2. (i) The defendant (sic) avers that in respect of paragraph 4 of the Statement of Claim the plaintiff is estopped and precluded from saying that he did not resign as director of the first defendant/company because after the resignation he offers himself for election again as director at the first defendant/company.
(ii) The plaintiff voluntarily went through the process of election and consequently lost.
(iii) The election for the office of Directors in first defendant/company as pleaded in Paragraph 4 of the Statement of claim is governed by Section 65 of Articles of Association of the company and the defendants will found on this document at the trial of this action.
6. The defendants aver that even if, the plaintiff is entitled to remain in office for three years, that which is denied, the plaintiff by offering himself for election before the expiration of three years since he held office (he) the plaintiff has waived the right to remain in office for three years.
To pronounce on the relevance of the authorities cited in the appellants' brief and some of which I had referred to at the stage of the appeal in the lower court and this court will tantamount to deciding the real issues raised by the claims. the need for a real hearing would have been defeated and the whole exercise will breach the rule of fair hearing. The purpose of pleadings would have been defeated in that each party by the pleading has given a enough indication of the case to be determined at the trial. For example it is difficult to make a pronouncement without evidence that paragraph 13 of amended Statement of Claim which says:
13. The plaintiff fraudulently tricked out of the Board of the company and had since then not been allowed to serve on the Board of the company and perform his duties as Board Member. The plaintiff will rely on the Minutes of the Annual General Meeting held on the 5th of December, 1979.
is false or has not been proved.
If the Articles of Association limits the appointment of number of Director to ten and the respondent is contending that he is still a Director notwithstanding the appointment of the 5th defendant/appellant, then there is in my view a real issue to be tried and this is a proper case in which an interlocutory injunction should be granted.
Obeya Memorial Specialist Hospital v. Attorney-General of the Federation (1987) 3 N.W.L.R. (Pt.60) 325.
I will agree with the opinion of the learned Author expressed on page 588 of Pennington's Company Law, 4th Edition where the author said:
The dividing line between personal and corporate rights Is very hard to draw, and perhaps the most that can be said is that the court will incline to treat a provision in the Memorandum or Articles as conferring a personal right on a member only if he has interest in its observance distinct from the general interest which every member has in the company adhering to the terms of its Constitution.
It is for these reasons that I summarily dismissed the appeal on 10th September 1990 with costs assessed at N500.00 in favour of the respondent.
In the course of the submissions before the learned Chief Judge, the defendants counsel relied on many cases, certain sections of the Companies Decree 1968. The conclusions by the learned Chief Judge concerning the issue of injunction touched on the substantive issues to be decided at the trial. Having made a definite pronouncements about their relevance, it will be a proper order that the substantive case be heard by another Judge. However, I take judicial notice of his retirement, hence the order has been overtaken by the event of his retirement.
I now come to delay in the administration of justice as a result of the appeal lodged against the interlocutory decision. If learned counsel had taken into account the claims before the court, the best course was to have asked for accelerated hearing of the case. The case was filed in February, 1981 and the ruling on the interlocutory application was delivered on 7th June 1984 in respect of the motion filed on 7th April, 1981.
Pleadings were ordered on 23rd February, 1981. In the course of hearing the application the learned Chief Judge frowned on various applications for adjournments. By now, if the case had proceeded to trial immediately after the ruling, the case would have been concluded.
When a ground of appeal on a ruling which is adverse to a party can be taken on appeal with the substantive case, an appeal against an interlocutory ruling is not advisable. Such appeal leads to unnecessary expenses. It also delays the trial of the main action.
I will point out that when this appeal was heard and dismissed on 10th September, 1990, my learned brother, Nnamani, J.S.C., now of blessed memory presided. We unanimously agreed that the appeal be dismissed. His death has deprived us his reasons which, as usual, would have been clear, lucid and articulate.
Judgment delivered by
Karibi-Whyte, J.S.C.
This appeal was on the 10th September, 1990 summarily dismissed by me after reading the records of appeal, the briefs of counsel and hearing arguments on the expatiation of their briefs. I indicated on that day I will today give my reasons for so doing. I have read the judgment of my learned brother, Olatawura, J.S.C. I agree with his reasoning therein.
The point at issue in this court is the very narrow one of whether the learned trial Chief Judge was right in granting an interlocutory injunction to the plaintiff in respect of the reliefs sought in his claim before the court. The contention of the appellants in the two courts below which have been consistently rejected and now before us was that the injury subject-matter of complaint by plaintiff is not injury done to the plaintiff qua member of the 1st defendant company, but as a Director thereof. Further, the injury complained of is one which can be corrected by the company in General Meeting, accordingly plaintiff not having a personal legal right thereto, is not entitled to the injunction sought. Concisely stated, the contention is that the plaintiff has no right of action which he can enforce against the defendants.
The learned trial Chief Judge rejecting these contentions held on the 7th June, 1984 that the plaintiff's complaint is against an injury done to him personally, and therefore was a personal legal right which can be protected by injunction. Accordingly the prayer that Mr. Joseph Adeola, 5th defendant, now appellant, be restrained from performing and exercising the functions of a Director of 1st defendant company until the determination of the substantive action, could be made, and therefore was granted. The defendants appealed against the ruling to the Court of Appeal.
Of the three grounds of appeal filed, the first two were complaints against the construction of Article 89 Table A of the Articles of Association to the Companies Act, 1968, and the third was a complaint against a wrong application of the rule in Foss v. Harbottle. Although learned counsel to the appellant, in the court below formulated four issues for determination and learned counsel to the respondent three issues, I think the Court of Appeal was right to reduce all the issues to one; namely, whether or not the court below was right in granting an order of interlocutory injunction against the 5th appellant (Mr. Joseph Adeola) pending the determination of the substantial suit.
After due hearing of argument on the briefs filed by counsel of both parties, the Court of Appeal affirmed the ruling of the learned Chief Judge. The court held that the respondent had clearly made out a case for an interlocutory injunction and that the learned trial Chief Judge was right in granting the injunction sought. The Court of Appeal pointed out and quite correctly too, that "it is not necessary that the court should at this stage find a case which would entitle the respondent to relief at all events; it is quite sufficient for ft to find a case which shows that there is a substantial question to be investigated and that (he status quo should be preserved until the question can finally be disposed of"
This judgment is the subject matter of appeal to this court. There are five grounds of appeal which in substance are indistinguishable from the grounds of appeal filed in the court below. I will refrain therefore from setting them out. I will accordingly set out the issues for determination as formulated by counsel to the parties as follows
Counsel to the appellant.
2.01. Whether Article 89 of Table A of the Schedule to the Companies Act, 1968 makes it mandatory for the Directors of the 1st defendant/appellant company to determine those to retire amongst themselves by lot.
2.02. The effect of the Articles of Association of a Company incorporated under the Companies Act and the nature and scope of the plaintiff's rights under Article 89 of Table A of the Schedule to the Companies Act, 1968.
2.03. The Principle of Majority Rule in corporate affairs and whether the wrong complained of by the plaintiff is not just a mere irregularity which could be ratified by the 1st defendant/appellant company in general meeting.
2.04. Whether on a consideration of the facts before the Federal High Court and the principles of Majority Rule in corporate affairs the relief of injunction is available to the plaintiff so as to entitle the plaintiff to seek an order of interim injunction to restrain the 5th defendant/appellant from performing the functions of a Director.
Here again this court is faced with the formulation of issues which are not in the least relevant to the determination of the appeal before it. This court has on numerous occasions advised counsel to formulate the issues for determination within the parameters of the grounds of appeal filed and the judgment appealed against. It seems to me obvious that the first issue which relates to the construction of Article 89 of Table A, of the Companies Act, 1968, and the third issue which relate to the application of the rule in Foss v. Harbottle, respectively are issues the determination of which are hardly relevant to the application before the court. There is clearly no doubt that the facts before this court at this stage raise the question whether the principle of G majority rule is applicable to the facts of the case and is a substantial issue to be tried.
Learned counsel has formulated the issues to be determined as if they were alternate grounds of appeal. Indeed the erroneous assumption is that the determination of the application for interlocutory injunction predicates the determination of the substantive relief. This is clearly not the well settled H accepted principles of law. The purpose of the application is to keep the parties in status quo in which they were before the judgment or act complained of see Preston v. Luck (1884) 27 Ch.D.497, Kufeji V. Kogbe (1961) All N.L.R. 113.1 prefer the formulation of the issues by learned Counsel to the respondent which has confined the questions for determination to the application subject matter of the ruling, and the decision of the Court of Appeal appealed against. The formulation is as follows
2.01. Whether the Court of Appeal was right in limiting the only issue relevant for determination to the issue of injunction simpliciter.
2.02. Whether on the affidavit and oral evidence adduced in support of the application for interim injunction restraining the 5th defendant/appellant from performing the functions of a Director in the 1st appellant company the plaintiff/respondent has made out a case for the grant of an interim injunction pending the determination of the substantive case.
It is important for the purposes of this appeal to bear in mind that the subject C matter of the application is for an interlocutory injunction pending the determination of the substantive case. Nevertheless, the application is based on the facts leading to the substantive case and therefore the court is obliged to hear aspects of the substantive case which will enable it to make the order for interlocutory injunction. It i