CHIEF R.A. OKOYA AND ORS (APPELLANT)
v.
S. SANTILLI AND ORS (RESPONDENT)
(1990) All N.L.R. 250
Division: Supreme Court of Nigeria
Date of Judgment: 23rd March, 1990
Case Number: (S.C. 200/1989)
Before: Nnamani, Uwais, Karibi-Whyte, Kawu, Abaje JJ.S.C.
The appellants as plaintiffs sued the respondents as defendants in the Federal High Court, claiming the following reliefs.
(1) A declaration that the document, copies of which were lodged with the Registrar of Companies and the Federal Inland Revenue Department, to which the 1st and 2nd Plaintiffs were subscribers, is the only true memorandum and articles of association of the Albion Construction Co. Ltd.
(2) An injunction restraining the 1st, 2nd and 3rd defendants and/or any person acting with or on their direction or authority from conducting the affairs of the Albion Construction Co. Ltd. and in particular from operating the accounts of the said company in any bank whatsoever on the basis of any memorandum and articles of association other than that mentioned in paragraph (3) hereof.
(3) A declaration that the 1st and 2nd plaintiffs are the only lawful directors of the Albion Construction Co. Ltd.
(4) A declaration that the purported appointment of the 1st and 2nd defendants as directors of the Albion Construction Co. Ltd. whether pursuant to the memorandum and articles of association of the said company or at the meeting of the Board of Directors of the Company held on 7/2/80 is illegal and null and void and of no effect.
(5) A declaration that the claim of the 1st and 2nd defendants to be owners of 40,000 shares each in the Albion Construction Co. Ltd. whether as subscribers to the memorandum and articles of association or pursuant to the resolution allegedly passed at a meeting of the Company's Board of Directors held on 5/5/81 is unlawful and not maintainable in law or in fact.
(6) A declaration that all shares held by the 3rd defendant in the Albion Construction Co. Ltd., were held by him in trust for the 1st plaintiff and an order directing the said defendant to execute a transfer of the said shares to the 1st plaintiff.
(7) An injunction restraining the 1st and 2nd defendants from holding themselves out as directors of the 3rd plaintiff company or from giving directions concerning the management and control of the said Company unless and until duly appointed as directors of the said company.
After hearing the parties the trial Judge granted the claims of the appellants and made the following declarations:-
(1) The document described as memorandum and articles of Association of Albion Construction Company Limited dated 10/7/76 and admitted in evidence in this motion as exhibit A and to which the first and second plaintiffs were subscribers is the only true Memorandum and Articles of Association of the 3rd Plaintiff Company.
(2) The nominal share capital of the 3rd plaintiff company is N200,000 divided into 200,000 shares of N1.00 each and not 500,000 as alleged by the defendants.
(3) All the parties to this action are shareholders of the third plaintiff company namely (1) Chief R.A. Okoya 50% or 100,000 Shares; Mrs H. Okoya-1% or 2,000 Shares; Mr S. Santilli 20% or 40,000 shares; (4) Mr A Dovanzo 20% or 40,000 Shares; and (5) Prince D.A. Ademiluyi-9% or 18,000 shares.
(4) The third defendant is hereby directed to execute an instrument of transfer in respect of 31% or 102,000 which he holds on trust in favour of the first plaintiff.
(5) The first, second and third defendants and/or any other person or persons acting with or on their direction or authority are hereby restrained from conducting the affairs of the third plaintiff company and in particular from operating the account of the said company in any bank whatsoever on the basis of any memorandum and articles of association other than that mentioned in paragraph (1) above.
The respondents appealed to the Court of Appeal, pending the determination of that appeal, they applied to the trial Judge for stay of execution of his orders. The trial Judge, after due consideration of the dismissed application except in respect of Order 4 contained in his judgement which he stayed on the concession of the appellant's counsel.
The respondents made a similar application to the Court of Appeal for stay of execution of the orders of the trial Judge, seeking the following reliefs:-
(1) An order of this Honourable Court staying further proceedings on the declaration as contained in the judgement of Hon. Justice T.A. Odunowo of the Federal High Court, Lagos.
(2) An order staying execution of the orders contained in the same judgement given on the 15th day of December, 1988 pending the determination of the appeal lodged by the Defendants/Appellants/Applicants to this Court.
(3) And for such further order or orders as this Honourable Court may deem fit to make in the circumstances.
Counsel for the plaintiffs/appellants objected to this application by way of Notice of Preliminary Objection on the grounds that
"(1) the prayer for 'staying further proceedings on the declaration as contained in the judgement' is not a relief known to law.
(2) No such prayer was ever moved in the court below and so it cannot be moved in this Court.
(3) The prayer for staying execution of the orders contained in the judgement is incompetent and untenable as there is nothing left to stay."
Ruling on the preliminary objection, the Court of Appeal dismissed the first leg of the defendants/respondents application and allowed the second leg. The court inter alia appointed a Board of receivers and managers to conduct the affairs of the company pending the determination of the appeal.
The plaintiffs/appellants appealed to the Supreme Court against this latter ruling, raising the following issues:
(1) Whether a defendant who has filed an appeal against purely declaratory orders made against him as entitled to apply for a stay of execution of those orders pending the hearing and determination of the appeal.
(2) Whether the Court of Appeal had jurisdiction to make the orders contained in its decision having regard to the rule in Foss v. Harbottle and in particular the rule that the court ought not to interfere in matters relating to the internal management of the affairs of a corporation or association save at the instance of the corporation itself or at the instance of a majority of its members.
(3) Whether it was proper for the Court of Appeal to make the appointment of receivers and managers:
(a) In the absence of a specific application in that regard by either party.
(b) Without fixing the amount of security which the persons so appointed ought to give,
(c) Without inviting the parties to address it on the desirability of making the appointments, including the suitability of the appointees.
HELD:
(1) Executory judgements declare the rights of parties in a case and further proceeds to order the defendant to act in a particular way, e.g. to pay damages or refrain from interfering with the plaintiffs rights, such order being enforceable by execution if disobeyed.
(2) Declaratory judgements merely proclaim the existence of a legal relationship and do not contain any order which may be enforced against the defendant.
(3) A declaratory judgement may be the ground of subsequent proceedings in which the right so declared in the prior proceedings having been violated, receives enforcement but in the meantime there is no enforcement or claim to it.
(4) Until subsequent proceedings have been taken on a declaratory judgement following its violation or threatened violation and the right declared in the judgement receives enforcement or is given legal sanction for its violation, there cannot be a stay of execution of the declaratory judgement because prior to the subsequent proceedings it merely proclaims the existence of a legal relationship and does not contain any order which may be enforced against the defendant.
(5) The expression "with liberty to apply" (for a stay of execution of a declaratory judgement or for an injunction to restrain violation of the declaratory orders therein) when a declaratory judgement carries it or when it is implied in the judgement is no more than a clear warning to a defendant against whom a declaratory order is made that the order is a ground of a subsequent proceeding in which the right declared by the judgement if violated will receive enforcement; the expression cannot convert a declaratory judgement into an executory judgement capable of enforcement and a proper subject of a stay of execution.
(6) Orders 1-3 in the judgement of the trial Judge are evidently declaratory judgements or orders in that each of them merely proclaim legal situations or primary rights ante litem vis-a-vis the first and second plaintiffs on the one hand and the defendants on the other hand with respect to the third plaintiff. None of these three orders contains any order which may be enforced against any of the defendants and therefore a stay of execution will not lie in respect of any of them.
(7) That aspect of Order 4 in the judgement of the trial Judge which directs the third respondent to execute an instrument of transfer in respect of 51% or 102,000 shares in favour of the first appellant is executory in nature and has already been stayed by concession of the appellants counsel.
(8) That aspect of Order 4 in the judgement of the trial Judge which proclaims that the 3rd respondent hold the 102,000 shares in trust for the 1st plaintiff is declaratory in nature and therefore cannot be stayed.
(9) The disputes in this case are essentially as to the shareholdings of shareholders in the company and consequential reliefs thereof.
(10) Since neither of the parties is seeking any relief (a) to interfere with the internal management of the company (b) to redress a wrong done to the company or (c) to recover moneys or damages alleged to be due to the company, the rule in Foss v. Harbottle cannot apply.
(11) As a general rule, a court cannot grant a relief in the form of appointment of a receiver and manager on an application for a stay of execution.
(12) Under section II of the Federal Revenue Court Decree 13 of 1973 the Federal High Court has power to grant all such remedies whatsoever as any of the parties in an action appears to be entitled to.
(13) Since By virtue of section 10 of the Court of Appeal Act 1976 the Court of Appeal has all the powers of a trial Court, that is the powers of the Federal High Court has in the matter before it, the Court of Appeal had the power to suo motu appoint a receiver and a manager for the company.
(14) Despite the fact that the Court of Appeal has jurisdiction to appoint a receiver and a manager for the company, the power (which is discretionary) was not properly exercised since the ruling of that court did not indicate that the conduct of the business of the company would suffer or was in jeopardy as a result of the dispute between the parties which is a general ground on which the court appoints a receiver.
(15) Since counsel for both parties stated that there was no consensus between them that the Court of Appeal should appoint a receiver and manager for the company, a basis on which the said court purported to appoint same, the said appointment by the Court of Appeal was of no effect.
(16) Despite the fact that the rule which states that before the appointment by the court of a receiver is completed, he must unless the court otherwise directs give security duly to account for his receipts and to pay the same as the court shall direct was not complied with by the court of Appeal, if the appointment of the receiver by that court had been regular, by virtue of section 22 of the Supreme Court Act 1961 the Supreme court could have remedied this lapse by ordering the receiver and manager to give the necessary security before beginning to act as such.
Appeal allowed.
Cases referred to:
A.C.B. Ltd v. A.G. Northern Nigeria (1969) 1 N.M.L.R. 231.
Bank of Baroda v. Merchantile Bank Ltd. (1987) 3 N.W.L.R. (Pt. 60) 233.
Beigh v. Shaw 5 W.A.C.A. 16.
Burland v. Earle (1902) A.C. 83.
Comm. for Works, Benue State v. Devcon Const. Co. Ltd. (1988) 3 N.W.L.R. (part 83) 403.
Fawehinmi v. Akilu (No. 2) (1988) 2 N.W.L.R. (Pt. 102) 12.
Featherstone v. Cooke (1873) L.R. 16 Ex 298.
Foss v. Harbattle (1843) 2 Hare 461.
Govt of Gongola State v. Tukur (1989) 4 N.W.L.R. (Pt. 117) 592.
Kilgo v. Halman (1980) 5 S.C. 70.
Kirby v. Wilkins (1929) 2 Ch. 444.
Kudoro v. Alaka (1936) F.S.C. 82.
Nwabueze v. Nwosu (1988) 4 N.W.L.R. (Pt. 88) 237.
Sheperd v. Oxenford 855 K. & J. 491.
Solanke v. Ajibola (1969) N.M.L.R. 253.
Standfield v. Gebbon (1925) W.N. 11.
Trade Auxillary Co. v. Vicker L.R. 76 E.X. 303.
Vaswani Trading Co. Ltd. v. Savalakh (1972) All N.L.R. (Pt. 2) 483.
Webster v. Southwarh London Borough Council (1983) Q.B.D. 698.
Williams v. Majekodunmi (No. 3) (1962) 1 All N.L.R. 413.
Statutes referred to:
Constitution of the Federal Republic of Nigeria 1979.
Court of Appeal Act No. 43 of 1976.
Federal Revenue Court Act No. 13 of 1973.
Supreme Court Act, 1961.
Court of Appeal Rules, 1981.
Supreme Court procedure 1988 Vol. 1.
Rules of the Supreme Court 1985.
S.C. 200/1989
Chief B.O. Benson, S.A.N. for the Respondents. (with A. Sagbesan S.A.N. and O.P. Eseile)
Chief F.R.A. Williams, S.A.N. for the Appellants. (with O. Durojaiye)
Agbaje, J.S.C.:-The background material to this appeal is as follows. The plaintiffs, Chief R.A. Okoya, Mrs K. Okoya and Albion Construction Ltd., sued the defendants, S. Santilli, A. Davanzo and Prince D.A. Ademiluyi in a Federal High Court Lagos Division, claiming against them the following reliefs:-
"(1) A declaration that the document, copies of which were lodged with the Registrar of Companies and the Federal Inland Revenue Department, to which the 1st and 2nd Plaintiffs were subscribers, is the only true memorandum and articles of association of the Albion Construction Co. Ltd.
(2) An injunction restraining the 1st, 2nd and 3rd defendants and/or any person acting with or on their direction or authority from conducting the affairs of the Albion Construction Co. Ltd. and in particular from operating the account of the said company in any Bank whatsoever on the basis of any memorandum and articles of association other than that mentioned in paragraph (3) hereof.
(3) A declaration that the 1st and 2nd Plaintiffs are the only lawful directors of the Albion Construction Co. Ltd.
(4) A declaration that the purported appointment of the 1st and 2nd defendants as directors of the Albion Construction Co. Ltd. whether pursuant to the memorandum and articles of association of the said company or at the meeting of the Board of Directors of the Company held on 7.2.80 is illegal and null and void and of no effect.
(5) A declaration that the claim of the 1st and 2nd defendant to be owners of 40,000 shares each in the Albion Construction Co. Ltd. whether as subscribers to the memorandum and articles of association or pursuant to resolutions allegedly passed at a meeting of the Company's Board of Directors held on 5/5/81 is unlawful and not maintainable in law or in fact.
(6) A declaration that all shares held by the 3rd defendant in the Albion Construction Co. Ltd. were held by him in trust for the 1st Plaintiff and an order directing the said defendant to execute a transfer of the said shares to the 1st Plaintiff.
(7) An injunction restraining the 1st and 2nd defendants from holding themselves out as director of the 1st plaintiff company or from giving directions concerning the management and control of the said company unless and until duly appointed as directors of the said company."
After hearing the parties and their witnesses the learned trial Judge, Odunowo, J., gave his judgment in the case on 15th December, 1988 where he held as follows:-
"I am satisfied that the following decision must be made:
(1) The document described as Memorandum and Articles of Association of Albion Construction Company Limited dated 16/9/76 and admitted in evidence in this action as Exhibit A and to which the first and second plaintiffs were subscribers is the only true Memorandum and Articles of Association of the third plaintiff company.
(2) The nominal share capital of the third plaintiff company is N200,000.00 divided into 200,000 shares of N1.00 each, and not 5000,000 as alleged by the defendants.
(3) All the parties to this action are shareholders of the third plaintiff company: namely (1) Chief R.A. Okoya-50% or 100,000 shares; (2) Mrs K. Okoya-1% or 2,000 shares; (3) Mr S. Santilli-20% or 40,000 shares; (4) Mr A. Davanzo-20% or 40,000 shares; and (5) Prince D.A. Ademiluyi-9% or 18,000 shares.
(4) The third defendant is hereby directed to execute an instrument of transfer in respect of 51% or 102,000 shares, which he holds on trust, in favour of the first plaintiff.
(5) The first, second and third defendants and/or any other person or persons acting with or on their direction or authority are hereby restrained from conducting the affairs of the third plaintiff company and in particular from operating the account of the said company in any bank whatsoever on the basis of any Memorandum and Articles of Association other than that mentioned in paragraph (1) above."
By a notice of appeal dated 22/12/88, the defendants appealed against the whole of the decision of Odunowo, J., to the Court of Appeal, Lagos Division. For reasons herein after appearing in this judgment I will reproduce below the grounds of appeal in the notice of appeal without their particulars. They are as follows:-
"(1) That the learned trial Judge erred in law and on the evaluation of the facts before the Court in awarding 51% percent of the adjudged N200,000 Authorised Share Capital to the 1st and 2nd Plaintiffs and in directing the 3rd Defendant to execute an instrument of transfer of the said 51% shares to the 1st Plaintiff which the learned trial Judge adjudged the 3rd Defendant held in trust for the 1st Plaintiff.
(2) The learned trial Judge erred in law by adjudging that the 1st and 2nd Plaintiffs are Members of the 3rd Plaintiff Company.
(3) The learned trial Judge erred in law in holding that the 3rd Defendant's shareholding in the 3rd Plaintiff is 9% instead of the 21% which the Defendants had canvassed in their alternative position.
(4) The learned trial Judge erred in his evaluation of the facts and the application of law to those facts in holding and accepting the contention of the 1st and 2nd Plaintiffs 'that paid up share capital of the 3rd Plaintiff as at 31/5/81 stood at 200,00.'
(5) That the learned trial Judge erred in law and in the evaluation of the facts placed before the court by failing to make a finding on the uncontradicted evidence that the Worker Trust held 10% of the authorised share capital of the 3rd Plaintiff.
(6) The learned trial Judge erred in his evaluation of the facts before the court and in his application of law to those facts in holding that the presumption of regularity of the disputed Minutes in the minutes Book, Exhibit HH had not been displaced.
(7) The learned trial Judge erred in accepting the authenticity of the Balance Sheets of the 3rd Plaintiff Company by which the paid up share Capital were supposedly made by the 1st Plaintiff, as at 31/5/81.
(8) That the judgment is against the weight of evidence."
There is a cross-appeal by the plaintiffs. As far as the present appeal is concerned, I need not say anything more about the plaintiffs' appeal.
Pursuant to an application by the defendants, for leave to appeal against the Judgment of Odunowo, J., of 15/12/88 and for a stay of Execution of the judgment, parties by their counsel appeared before Odunowo, J., on 22/12/88. For reasons hereinafter appearing in this judgment, it is necessary to set down some of the record of proceedings of that day, which is:-
"Chief F.R.A. Williams: When we came here this morning, we felt that there were two major defects in this application. But we felt we can nevertheless usefully spend this morning in resolving the anxieties of my learned friend. . . .
If you look at the judgment, I submit that there is nothing to stay as such. It would have been more realistic to ask for an Order that pending the determination of the appeal, the 1st & 2nd Plaintiffs shall be restrained from exercising the right attached to the shares which the court has declared to be owned by them. But your Lordship will have to balance any such application by a consideration of our own interest, having regard to the principle that a successful party should not be deprived from enjoying the fruits of judgment. Bearing those principles in mind and having regard to all the circumstances of this case, we respectfully submit that there are 2 alternatives open to this Court. These alternatives are to last until the determination of the appeal. In the alternative, if your Lordship feels you want to hear fuller arguments, then they should rest until the determination of this motion on Notice or until further Order:
(1) That the 3rd plaintiff company be managed by a Board of receivers comprising: (i) Mr Santilli who shall be responsible for the functions at present performed by the M.D. (ii) Mr Davanzo who shall be responsible for the functions at present performed by the director technical. (iii) Prince Ademiluyi who shall be an adviser, without executive responsibilities, to the Board of Receivers. (iv) Three (3) nominees of the 1st & 2nd Plaintiffs one of whom shall have executive responsibilities for the finances of the company: . . .
(2) The second condition is as follows: The business of the 3rd plaintiff company should be run by a board of receivers and managers comprising six (6) Persons as in proposal one. The Chairman of the Board shall be an independent person with experience in business or commercial accounting to be appointed by the court. Such Chairman not to have an original vote but shall have a casting vote.
These suggestions, I assume (sic) the court from the bar, are my own suggestions and they have been made in a genuine effort to see that the subject matter of litigation is preserved without injustice to either side. We have won the case substantially in the sense that we have a majority vote . . .
CHIEF BENSON: It will be very difficult for me to accept or refuse the offers. My Lord, I was briefed only yesterday in this matter and I am yet to have full consultations with my clients. My learned friend has made a number of remarks about their having a majority as a result of the judgment. Which judgment is being challenge on appeal. . . .
One is bound to look at the offer, without commitment or prejudice to my clients, on the face of it. . . .
CHIEF WILLIAMS: I will with respect withdraw my proposals because there is no reasonable response. . . .
Chief Benson: . . .
He makes his offer and if he withdraws it good luck."
The application was then adjourned till 2/2/89 for hearing.
Giving his ruling on the application on 1/3/89 the learned trial Judge Odunowo J. held as follows:
First: "Just before the motion was moved, Chief Williams, S.A.N., conceded that the order directing the 3rd defendant to execute an instrument of transfer in respect of