Whether Indirect Shareholding Confers Legal Capacity to Sue

In the Supreme Court of Nigeria

Holden at Abuja

On Friday, the 14th day of June, 2024

Before Their Lordships

Helen Moronkeji Ogunwumiju

Ibrahim Mohammed Musa Saulawa

Chioma Egondu Nwosu-Iheme

Haruna Simon Tsammani

Jamilu Yammama Tukur

Justices, Supreme Court 

SC.697/2018

Between

1. INTER OCEAN OIL DEVELOPMENT 

   COMPANY (NIGERIA)

2. INTER OCEAN OIL EXPLORATION 

    COMPANY (NIGERIA)

3. PATRIZO FABBRI 

    (Suing as Administrator of the Estate of

    Dr Vittorio Fabbri)

4. RICCARDO FABBRI

    (Suing as Administrator of the Estate of 

    Dr Vittorio Fabbri)                                       APPELLANTS

                                                  And

1.  DR FESTUS ALANI FADEYI

2. CORPORATE AFFAIRS COMMISSION                                      RESPONDENTS

(Lead Judgement delivered by Honourable Haruna Simon Tsammani, JSC)

Facts

Sometime in 2005, the 1st Respondent applied by way of an Originating Summons to the Federal High Court, Abuja Judicial Division in Suit No. FHC/ABJ/ICS/589/2005, for leave to call, hold and conduct a meeting of the Board of Directors of Pan Ocean Oil Corporation Limited (“Pan Ocean”). The 1st Respondent also sought an order that one director (the 1st Respondent) be deemed as quorum for the purpose of the meeting and that any decision taken at the meeting be binding on Pan Ocean. The court granted the 1st Respondent’s application. At the court-ordered meeting which held on 29th November 2005, the 1st Respondent allotted to himself 5,500 ordinary shares out of the Company’s 7,500 unallotted shares and 1,000 shares each to two other persons. Prior to this allotment, the authorised share capital of Pan Ocean was 10,000 ordinary shares out of which the 1st and 2nd Appellants already held 1,250 shares each. 

After the allotment, the 1st Respondent again approached the Federal High Court for an order validating the business that was transacted at the meeting of 29th November 2005, particularly the allotment of the 7,500 shares. The 1st Respondent represented to the court that the notices of general meeting sent to the existing shareholders (i.e. the 1st and 2nd Appellants) for ratification of the allotment were returned undelivered hence it was impossible to convene the general meeting of Pan Ocean to enable them ratify the allotment. After hearing the application, the Federal High Court made an order validating the allotment as done at the behest of the 1st Respondent. Aggrieved by the action of the 1st Respondent, the Appellants filed an action at the Federal High Court, seeking an order setting aside the order validating the allotment of Pan Ocean’s unallotted shares by the 1st Respondent on the ground that the order was obtained by the 1st Respondent fraudulently. The 3rd and 4th Appellants sued alongside the 1st and 2nd Appellants, as the administrators of the estate of Dr. Vittorio Fabri – the beneficiary of all the shares in a company incorporated in British West Indies called Impex Limited. Impex Limited was the owner of the 1st and 2nd Appellants. 

Upon being served with the Appellants’ originating process, the 1st Respondent filed a Statement of Defence together with a Notice of Preliminary Objection challenging the jurisdiction of the court to entertain the suit and the locus standi of the Appellants to institute the suit. After hearing arguments on the preliminary objection, the trial court delivered its ruling in which it upheld the preliminary objection and dismissed the suit. Dissatisfied, the Appellants appealed to the Court of Appeal. The Court of Appeal in its judgement substituted the order of dismissal made by the trial court with an order of striking out of the suit. Still dissatisfied, the Appellants appealed to the Supreme Court.

Issues for Determination 

The Supreme Court considered the following issues submitted for determination by the Appellants: 

1. Whether the 3rd and 4th Appellants lack the capacity to institute the action.

2. Whether the Court of Appeal was right in striking out the action on the ground that the 1st and 2nd Appellants do not have locus standi.

Arguments

On the 1st issue, counsel for the Appellants argued that the 3rd and 4th Appellants’ power to sue arose from the Letters of Administration issued to them with respect to the estate of their father – Dr Fabbri and their action was informed by the shares in Impex held in trust for their father. Counsel contended that the 3rd and 4th Appellants did not sue to recover or lay claim to the shares in Impex but sued to set aside the order of the Federal High Court validating the 1st Respondent’s allotment of shares in Pan Ocean to himself. Counsel submitted that the Court of Appeal erroneously held that the subject matter of the Appellants’ action is the shares in Impex and that it is only trustees of the said shares held on behalf of Dr Fabbri that have the capacity to sue regarding the same. It was further submitted that although held in trust, the beneficial interest in the shares in question forms part of the estate of Dr Fabbri and the Court of Appeal having found in its judgement that the 3rd and 4th Appellant are beneficiaries of the estate of Dr Fabbri; it goes without saying that the 3rd and 4th Appellants are entitled to sue to protect their interest in the estate including the shares in Pan Ocean held indirectly by Dr Fabbri through Impex through the 1st and 2nd Appellant . 

In response, Counsel for the 1st Respondent argued that a beneficiary under a trust does not have the capacity to sue on behalf of the trust except where authorised under the trust deed. Counsel argued that the only persons with the legal capacity to sue in respect of the shares held in trust for Dr Fabbri in Impex are Weatstone Investment Limited and Oil Investment Ltd being the trustees and recognised legal owners of the said shares. Counsel submitted further that Section 155(5) of the Companies and Allied Matters Act is very clear on the rights of persons in the shoes of the 3rd and 4th Appellants as only being limited to dividends and other advantages conferred on Dr Fabbri as beneficiary but not to extend to the exercise of any right conferred by membership until they are registered as members. 

On the 2nd issue, Counsel for the Appellants argued that given that there was no question before the Court of Appeal as to the competence of the 1st and 2nd Appellants to institute the action, there was no basis for the lower court to have raised the same suo motu and struck out the suit, particularly as the 1st and 2nd Appellants had rightly sued in their capacity as shareholders of Pan Ocean.

In response, Counsel for the 1st Respondent submitted that the Court of Appeal did not at any time determine whether the 1st and 2nd Appellants have locus standi to institute the action but had rightly struck out the suit in view of the 3rd and 4th Appellants’ incompetence. 

Court’s Judgement and Rationale

In its determination of the 1st issue, the Apex Court held that where it is alleged that the affairs of the company have been conducted in an illegal or wrongful manner, it is the company itself through its directors or shareholders that have the legal capacity to institute an action to either remedy or ratify the wrong. The Court referred to the provisions of Section 299 of CAMA 1990 (the subsisting law at the time the action was instituted). The Supreme Court held that by the said provision and the extant provisions of CAMA 2020, it is only Pan Ocean through its directors and/or shareholders that can sue to remedy or ratify the wrong done to it, and though the 3rd and 4th Appellants as beneficiaries of the estate of Dr Fabbri who died intestate could sue to protect their interest in the said estate, when it comes to shares purported to be held by or in trust for Dr Fabbri in either the 1st and 2nd Appellants or Pan Ocean Corporation, they had to show that they are registered members of the 1st and 2nd Appellants. The Apex Court found that not having done that, they are strangers to the 1st and 2nd Appellants, and therefore, have no locus standi to sue in respect of the shares held by the 1st and 2nd Appellants in Pan Ocean. It is thus, only the shareholders of Pan Ocean (the 1st and 2nd Appellants) or its directors, that have the locus standi to sue in the circumstance. 

The Court held further that the 1st and 2nd Appellants as well as Impex have separate corporate personalities, hence, the proprietary rights attached to the 1st and 2nd Appellants’ shareholding in Pan Ocean belong exclusively to the 1st and 2nd Appellants, and Impex has no capacity to sue in respect of shareholding in Pan Ocean being the property of the 1st and 2nd Appellants, neither does Dr Fabbri or the beneficiaries/administrators of his estate have such capacity. The Court found that the issue of succession to the estate of Dr Fabbri is limited to the shares held on his behalf in Impex, and the shares held by the 1st and 2nd Appellants in Pan Ocean cannot be subject of Dr Fabbri’s testate or intestate succession as these companies are deemed by law to be self-succeeding. 

Resolving the 2nd issue, the Supreme Court referred to the provision of Order 9 Rule 14 of the Federal High Court (Civil Procedure) Rules, 2009 and its decision in BELLO v INEC (2010) 8 NWLR (PT. 1196) 342, that no proceedings shall be defeated by reason of misjoinder or non-joinder of parties, and the court may in every cause or matter, deal with the matter in controversy so far as regards the rights and interests of the parties actually before it. The Apex Court held that being shareholders and registered members of Pan Ocean, the 1st and 2nd Appellants have the requisite locus standi under Section 310 and 311 of CAMA 2004, to initiate an action complaining that the affairs of Pan Ocean are being or have been conducted in a manner that is oppressive or unfairly prejudicial to them. Their Lordships held that while the 3rd and 4th Appellants lack locus standi, the 1st and 2nd Appellants are competent to present the suit in their personal capacity; and the proper order the Court of Appeal should have made, having found that the 3rd and 4th Respondents lacked the locus standi to institute the action, is an order striking out the names of the 3rd and 4th Appellants as Plaintiffs in the suit, and not an order striking out the suit in its entirety.  

Appeal Allowed in Part. Suit remitted to the trial court to be heard before another Judge other than J. T. Tsoho (CJ) with the 1st and 2nd Appellants as Plaintiffs.

Representation

Oyinkansola Badejo-Okusanya with Mrs Ibukun Fasuro, Halima Shuaibu and Emmanuel Bulus for the Appellants.

Peter Olomona with Ademola Abimbola for the 1st Respondent.

2nd Respondent unrepresented.  

Reported by Optimum Publishers Limited, Publishers of the Nigerian Monthly Law Report (NMLR)(An affiliate of Babalakin & Co.)