The failure to give notice of meetings to shareholders will amount to a breach of fair hearing

BD LAW DIGEST WITH CLRN & ALP NG & Co.

CITEC INTERNATIONAL ESTATES LTD & ORS v. JOSIAH OLUWOLE FRANCIS & ORS.

SUPREME COURT OF NIGERIA

(RHODES-VIVOUR; KEKERE-EKUN; NWEZE; AUGIE; ABBA-AJI, JJ.SC)

BACKGROUND FACTS

Citec International Estates Ltd. (The 1st Appellant) is a limited liability company with a share capital of 2 million ordinary shares. While Josiah Oluwole Francis, Mrs Josiah Olusola Abiodun; Josiah Michael; Fasubaa Albert Ademola (The 1st – 4th Respondents) owned 95% of the share capital, Bello Saka Oludare (The 2nd Appellant) owned the balance of 5%. The 1st, 2nd, 4th Respondents and the 2nd Appellant were the original directors of the company. By an ordinary resolution passed, the share capital was increased to 10 million. It was the allegation that the company held board meetings whereby the 1st Respondent was removed as chairman and his official residence and vehicle withdrawn and no due process was followed to remove him. In another board meeting, it was alleged that despite the absence of the 1st – 4th Respondents because they were not given notice of meeting and hence there was no quorum, some crucial resolutions were taken. Furthermore, in another meeting, the names of the 1st – 4th Respondents were removed as signatories to the company’s account, their houses were put up for sale, they were suspended, and their salaries were stopped. Thus, the 1st – 4th Respondents were deprived of their rights as shareholders, directors and management staff of the company without notice to them and without the opportunity of being heard. They consequently sued at the Federal High Court, Abuja (trial court), seeking declaratory and injunctive reliefs in order to restore them to their original positions in the company and their rights and entitlements. The suit was challenged by the Appellants after being served, that the trial court did not have the jurisdiction to entertain the suit. The trial court granted the application of the Appellants.

Aggrieved, the 1st – 4th Respondents appealed the decision of the trial court, to the Court of Appeal (lower court), and the trial court’s decision was set aside. Also aggrieved by the decision of the lower court, the Appellants appealed to the Supreme Court. One of the issues raised for determination was: Whether or not the lower court was right when it held that the 1st – 4th respondents possess the locus standi to institute this action.

ARGUMENTS

Learned counsel for the Appellants stated the settled position of the law regarding locus standi – that a claimant would only have locus standi where the reliefs sought would confer some benefit on him. He asserted that the complaints of the 1st – 4th Respondents reflect the wrong done to the 1st appellant by the 2nd – 5th Appellants, and that the wrongs do not reflect a violation of the 1st – 4th Respondents’ personal rights. He stated that the complaints relate to the internal management of the company and that it is not the practice of the court to interfere with the internal management of companies. On this note, counsel stated further that the fair hearing provisions of section 36(1) of the 1999 Constitution, as amended, do not apply to the Board Meetings and Annual General Meetings of the 1st appellant, which is a company limited by shares, and that the provisions are restricted to the proceedings before courts and tribunals established for the determination of the civil rights and obligations of litigants. In submission, counsel stated that there are neither express nor implied provisions in the 1st Appellant’s Memorandum and Articles of Association, which guarantee fair hearing in the allotment/redistribution of shares, removal and appointment of directors or changes in the signatories to the 1st Appellant’s accounts. He posited that even if there were such provisions, they would only qualify as civil rights or a Director’s right, which is outside the scope of section 36 of the 1999 Constitution as amended.

In contention, the 1st – 4th Respondents’ counsel stated that fair hearing at administrative proceedings, such as company meetings, is also guaranteed under the rules of natural justice, and also that the right to fair hearing at company meetings is expressly guaranteed by CAMA as well as the Company’s Articles of Association. Learned counsel submitted that assuming without conceding that the Appellants are correct in stating that section 36 of the 1999 Constitution, as amended, is not applicable to the conduct of company meetings, the provisions of CAMA and the relevant clauses in the Articles of Association relating to notices of meetings, guarantee the 1st – 4th Respondents’ right to fair hearing and the decision of the lower court should not be set aside on this ground.

DECISION OF THE COURT

In resolving this issue, the Supreme Court held that:

There is no doubt that no determination involving the civil rights and obligations can be properly made, until the person whose civil rights and obligations may be directly affected, has been notified of the matter and given the opportunity of answering the case against him. In so far as the company’s Memorandum and Articles of Association make provision for the giving of notice for meetings to shareholders, it follows that those entitled to be given notice of such meetings are entitled to participate in and contribute at such meetings and to be part of whatever resolution might be reached thereat. It is settled law that even the proceedings of a non-judicial or administrative body must be conducted in accordance with the principles of natural justice.

Issue resolved in favour of the Respondents.

A. M. Kayode, Esq., C.I.A. Ofoegbunam, Esq., and A. F. Obiwumma, Esq., for the Appellants
Kehinde Ogunwumiju, SAN., Olumide Adekunle Esq., Saadu Lukman, Esq., and Funmilayo Longe Esq., for the 1st – 4th Respondents
Olayinka Adedeji, Esq., for the 5th Respondent
O. O. Olowolafe, Esq., O. O. Owonla, Esq., for the 6th Respondent

This summary is fully reported at (2024) 4 CLRN in association with ALP NG & Co.

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