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  • Fasel Services Ltd. vs. Nigerian Ports Authority
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  • 2004-03-22
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Fasel Services Ltd. vs. Nigerian Ports Authority

FASEL SERVICES LTD. & ANOR.

V

NIGERIAN PORTS AUTHORITY & ANOR.

COURT OF APPEAL

( ABUJA DIVISION )

I. TANKO MUHAMMAD, JCA ( Presided and Read the Lead Judgment )

ZAINAB ADAMU BULKACHUWA, JCA

ALBERT GBADEBO ODUYEMI, JCA

CA/A/79/2000

THURSDAY, 30 TH JANUARY,  2003

CONTRACT - Illegal contract - Contract ex-facie illegal - How treated by court even where illegality is not disclosed in the pleadings

CONTRACT - Illegal contract - Meaning of

CONTRACT - Illegal contract - Mere prohibition of transaction by declaring same void without imposition of penalty for contravention or vice versa - Whether renders the contract illegal

CONTRACT - Illegal contract - Parties who have benefited therefrom Whether can be allowed to raise the defence of illegality

COURT - Attitude of to contract ex-facie illegal even where illegality is not disclosed in the pleadings

INTERPRETATION OF STATUTES - Statutes - How construed

TRUST - Trustees - Duties and discretion of WORDS AND PHRASES - ‘Illegal contract’ - Meaning of

Issue:

Whether the investment of 2nd respondent in the 1st appellant company contravenes the provisions of section 2(1)(d) and section 2(2)(b)  & (c) of the Trustee Investment Act Cap. 449 Laws of the Federation (1990) and therefore rendered the said instrument illegal and unenforceable even where the said illegality was not pleaded.

Facts:

By an originating summons the respondents herein as plaintiffs at the Federal High Court holden at Abuja, sued the appellants as defendants. The background facts of the case reveal that 1st plaintiff is a statutory body set up by the Federal Government of Nigeria, 2nd plaintiff is a body/fund established and funded by the 1st plaintiff as employer for the purpose of providing superannuation benefits for her employees and with power to manage and invest pension funds. 1st defendant is a limited liability company incorporated under the name of Fag Afrikana Services Limited. 2nd defendant was the Chairman of the Board of Directors of the 1st Defendant who had always functioned as Executive Chairman. One of the organisations owned and managed by the 1st defendant is AGURA HOTEL, Abuja. The plaintiffs averred that between October, 1983 and May 1986, the 2nd plaintiff offered to buy and was allocated, 1,330,000 ordinary shares of the 1st defendant company. The 2nd plaintiff duly paid for the shares and was issued with 1st defendant’s share certificates. In 1987, the 1st defendant had liquidity problems which resulted in the appointment of a receiver manager. By a letter dated 7th February, 1989, the 2nd defendant on behalf of the 1st defendant and himself appealed to the 2nd plaintiff to bail the 1st defendant out of her financial problems through further investment in the 1 st defendant company. As a result of that the 2nd plaintiff decided to invest additional N52 million in the 1st defendant company by way of a mortgage debenture and purchase of shares (i.e. N20 million in the purchase of additional ordinary shares and N32 million as loan to 1st defendant by way of mortgage debenture). 1st defendant redeemed the N32 million loan. Shares Certificate in respect of the N20 million Shares were issued to the 2nd plaintiff. Again, in March and August 1995, the 2nd plaintiff acquired additional 7,110,000 and 199,687 ordinary shares of the 1st defendant company.

Thus, as at July, 1995, the 2nd plaintiff’s total share in the 1 st defendant’s company were 28,639,687 units of ordinary shares. The plaintiffs claimed that between 1983 and 1995, the 2nd plaintiff exercised her share holder’s rights in the 1st defendant’s company especially the right to dividends on shares held by the 2nd plaintiff. The 2nd plaintiff received dividends of N1,413,445.00; N1,919,700; N2,559,600.00 and N2,577,571.83, from the 1 st defendant for 1992 - 1995 financial years on the unit of shares held by the 2nd plaintiff in 1st defendant’s company. In 1996, 1997 and 1998 financial years the 1st defendant declared dividends of 13 kobo, 10 kobo and 20 kobo respectively per share. 2nd defendant caused the 1st defendant to pay only N763,558.74 to the 2nd plaintiff as dividends on N1,300.000 units of ordinary shares out of the 28,639,687 units of ordinary shares held by the 2nd plaintiff in 1st defendant’s company. Since 1996, the 2nd defendant has been attempting to unilaterally disregard the 2nd plaintiff’s rights as shareholder in the 1st defendant’s company on the ground that the provisions of the Trustees Investment Act, prohibit the plaintiff from investing in the 1st defendant’s company.

In the originating summons, the plaintiffs raised the following questions for determination by the lower court.

“1. Whether in the light of the 27,309,687 share certificate(s) issued by the 1st defendant’s company to the 2nd plaintiff the defendants, especially the 2nd defendant as chairman of 1st defendant’s company can deny the plaintiff the rights as share holder of the said 27,309,687 units of ordinary shares.

2.              Whether the provisions of the Trustees Investment Act Cap.

449  Laws of the Federation 1990 Edition renders the said 27 ,309,687 units of ordinary shares held by the 2nd plaintiff in the 1st defendant company illegal.

3.              Whether the provisions of the Trustees Investment Act, Cap 449  Laws of the Federation 1990 Edition wholly and exclusively regulate Plaintiffs’ Investment Powers.

4.              Whether the defendants who are neither contributors nor beneficiaries of the 2nd plaintiff’s fund have locus standi to challenge the plaintiffs’ Investment of 27,309,687 units of ordinary shares in the 1st defendant company. If the answer(s) to 1, 2, 3, or 4 above are/is in the negative, the plaintiffs claim:

(A)         A declaration that the 2nd plaintiff as the lawful shareholder of the 27,309,687 million units of ordinary shares of the 1st defendant company is entitled to exercise all the shareholder’s rights in respect of the 27 ,309,687 million units of share especially the right to receive dividends thereof from the 1st defendant.

(B)          An order directing/compelling the defendants especially the 2nd defendant to pay forth dividends to the 2nd plaintiff on the said 27,309,687 million units of ordinary shares for 1996, 1997 and 1998 financial years.”

Upon being served with the originating summons, the appellants/ defendant filed a motion on notice praying the lower court to dismiss the originating summons. The appellants’ motion on notice was heard and it was dismissed by the lower court. The originating summons was argued later and the learned trial Judge granted same and entered judgment in favour of the plaintiffs/respondents.

Being dissatisfied, the appellants have appealed to the Court of Appeal, the Court of Appeal considered the provisions of section 2(1)&(2) Trustees Investment Act Cap 449 Laws of Federation 1990 which provides as follows: 2(1) This Act shall apply to

(a)           all securities hereafter created or issued by or on behalf of the Government of the Federation.

(b)           securities hereafter created or issued by or on behalf of the Government of a State which are declared by the President by notice in the Federal Gazette to be securities to which this Act applies;

(c)           securities which are declared by the President by notice in the Federal Gazette to be securities to which this Act applies, being securities created or issued by companies or corporations incorporated directly by an Act enacted by the National Assembly or by a Law enacted by the House of Assembly of a State or by an Act or Law having effect as if it were so specified in the schedule hereto or which may be added to such schedule by the President by notification in the Federal Gazette;

(d)           debentures and fully paid up shares of any company incorporated by and registered under the Companies and Allied Matters Act (other than a private company within the meaning of that Act).

On the powers exercisable, subsection 2 thereof provides:

“2.     The power conferred by the foregoing subsection shall not be exercisable unless, at the time when it is proposed to exercise it:

(a)           the nominal value of the fully paid up shares issued by the company in question is not less than one million naira; and

(b)           the price of the debentures or shares of the class in question is quoted on the Lagos Stock Exchange, and

(c)           in the case of an investment in shares of a company, dividends have been paid during each of the three calendar years immediately preceeding the current year on all the shares of the company issued where the dividends paid during each of those years in respect of each share ranking for dividend throughout that year was not less than five percent of the nominal value of the share.

3(1)          Without prejudice to the enabling provisions of any other law, a trustee may under the powers of this Act invest in any of the securities specified or referred to in section 2 of this Act.

4(1) A trustee shall not be liable for breach of trust by reason only of his continuing to hold an investment which has at any time ceased to be an investment authorised by the provisions of this Act.”