LAW DIGEST WITH CLRN & ALP NG & Co.
INTER OCEAN OIL DEVELOPMENT COMPANY (NIGERIA) & 3ORS. v. DR. FESTUS ALANI FADEYI & ANOR.
SUPREME COURT OF NIGERIA
(OGUNWUMIJU; SAULAWA; NWOSU-IHEME; TSAMMANI; TUKUR, JJ.SC)
FACTS
Inter Ocean Oil Development Company and Inter Ocean Oil Exploration Company (1st and 2nd Appellants) are registered corporate shareholders in Pan Ocean Oil Corporation Limited. The 3rd and 4th Appellants, P.A. Trizo Fabbri and Riccardo Fabbri, are the administrators of the estate of their late father, Dr. Vittorio Fabbri, who owned shares in a company called Impex. These shares were held in trust by Weatstone Investment Limited and Owl Investment Limited, with Impex holding shares in the 1st and 2nd Appellants.
In 2005, Dr. Festus Alani Fadeyi (the 1st Respondent) filed an Originating Summons with the Federal High Court, seeking permission to call, hold, and conduct a meeting of the Board of Directors of Pan Ocean Oil Corporation Limited. The 1st Respondent also requested that the court allow one director to form a quorum for the meeting and make any decisions taken at the meeting binding on the corporation. The court granted these requests on November 24, 2005, and the meeting took place on November 29, 2005, during which the 1st Respondent allotted himself 5,500 ordinary shares and 1,000 shares each to two others. At the time, Pan Ocean Oil Corporation Limited had 7,500 unallotted shares out of a total of 10,000, with the 1st and 2nd Respondents already holding 1,250 shares each.
Subsequently, the 1st Respondent returned to the Federal High Court, seeking an order validating the business transacted at the November 29, 2005 meeting, particularly the share allotment. In making this request, he represented to the court that notices of the general meeting had been sent to the 1st and 2nd Appellants but were returned undelivered. He further claimed that it was impossible to hold a general meeting to allow the existing shareholders to ratify the share allotment. The court, relying on these representations, granted the order validating the 1st Respondent’s allotment of the 7,500 shares. Aggrieved by these events, the 1st and 2nd Appellants in their capacity as shareholders of Pan Ocean Oil Corporation Limited, instituted an action against the Respondents at the Federal High Court, Lagos. The 3rd and 4th Appellants also sued as administrators of the estate of Dr. Vittorio Fabbri who was the sole shareholder of the 1st and 2nd Appellants. Their primary complaint was that the 1st Respondent had conducted the affairs of Pan Ocean Oil Corporation Limited in an illegal and wrongful manner. The Appellants sought an order setting aside the validation of the 7,500-share allotment made at the meeting of November 29, 2005. They also sought an order directing the 2nd Respondent, the Corporate Affairs Commission, to remove from its records all filings made by or on behalf of the 1st Respondent pursuant to the court order of February 8, 2006.
The 1st Respondent, upon being served, filed a statement of defence alongside a notice of preliminary objection where they contended that the 3rd and 4th Appellants lacked the legal standing (locus standi) to institute the action because they were strangers to the 1st and 2nd Appellants. After considering the objection, the trial court ruled in favour of the 1st Respondent, holding that since the 3rd and 4th Appellants were not members of Pan Ocean Oil Corporation Limited, they lacked the requisite locus standi to bring the suit. Consequently, the court dismissed the Appellants’ case in its entirety.
Dissatisfied with the trial court’s ruling, the Appellants appealed to the Court of Appeal, which partially allowed the appeal, setting aside the dismissal and replacing it with an order to strike out the case.
Further dissatisfied with the judgment of the Court of Appeal, the Appellants appealed to the Supreme Court. One of the issues raised for determination was: Whether the 3rd and 4th Appellants as beneficiaries of the estate of the deceased have the locus standi to institute the action.
ARGUMENTS
The Learned Counsel for the Appellants contended that the 3rd and 4th Appellants, being the children of the late Dr. Vittorio Fabbri and the Administrators of his estate, had the legal capacity to initiate the action in order to protect their interest in their father’s estate. Counsel emphasized that the 3rd and 4th Appellants were not suing on behalf of the 1st and 2nd Appellants but in their capacity as Administrators of Dr. Fabbri’s estate. Counsel further argued that the suit was specifically filed to challenge the Federal High Court’s order validating the 1st Respondent’s unilateral allotment of Pan Ocean shares to himself and others, and that the action was not an attempt to recover shares in Impex or to assert ownership over them.
Again, Counsel submitted that as beneficial owners of shares in Impex, the 3rd and 4th Appellants were directly prejudiced by the 1st Respondent’s actions, which altered the shareholding structure of Pan Ocean, and as beneficiaries of Dr Fabbri’s estate, the 3rd and 4th Appellants had a right to protect their interests, including trust property, as equity would not allow a wrong to go without a remedy. The Court was urged to determine this issue in the Appellants’ favour.
In response, the Learned Counsel for the 1st Respondent argued that a beneficiary under a trust cannot, by their own actions, usurp the rights of the trustees and cannot sue on behalf of the trust unless specifically authorized by the trust deed. The Counsel emphasised that the 3rd and 4th Appellants never claimed to be shareholders or directors of the 1st and 2nd Appellants. Instead, they acknowledged that they were merely administrators of the estate of Dr. Fabbri, whose shares in Impex are held in trust by Weatstone Investment Limited and Owl Investment Limited. According to Counsel, the trustees are the legal owners of the shares and the only entities with the capacity to initiate an action related to those shares.
Furthermore, the Counsel referred to the provisions of the Companies and Allied Matters Act (CAMA), which clearly outlines the rights of individuals in the position of the 3rd and 4th Appellants. They are entitled only to the same dividends and advantages that would have been conferred on Dr. Fabbri, but they are not entitled to exercise any rights related to membership, such as voting or participating in decisions, until they are formally registered as members. Counsel concluded by asserting that, being strangers to the 1st and 2nd Appellants, the 3rd and 4th Appellants lacked the necessary legal capacity to institute the current action.
DECISION OF THE COURT
In resolving the issue, the Supreme Court held that:
The provisions of the law are clear on the capacity to institute an action concerning a company’s affairs. The Court affirmed the principle that only a company, acting through its directors or shareholders, has the legal standing to sue in order to remedy any wrong done to it or to ratify any irregularities in its affairs.
The Supreme Court found that while the 3rd and 4th Appellants, as beneficiaries of Dr. Fabbri’s estate, had the right to protect their interests in the estate, this right did not extend to shares in Pan Ocean Oil Corporation Limited unless they were registered members of the 1st and 2nd Appellants. The Court noted that the 3rd and 4th Appellants had not been registered as members or directors of these companies, and as such, they were considered strangers to the 1st and 2nd Appellants.and lacked the locus standi to sue.
Issue resolved in favour of the Respondent
Oyinkansola Badejo-Okusanya, Esq., with Mrs. Ibukun Fasoro, Halima Shuaibu; Esq and Emmanuel Bulus, Esq., for the Appellant
Peter Olomona, Esq., with Ademola Abimbola; Esq., for the Respondents
This summary is fully reported at (2024) 10 CLRN in association with ALP NG & Co.
See www.clrndirect.com ; www.alp.company
