Mode of Application for Leave to Commence a Derivative Action
In the Supreme Court of Nigeria
Holden at Abuja
On Friday, the 21st day of February, 2025
Before Their Lordships
Adamu Jauro
Chioma Egondu Nwosu-Iheme
Moore Aseimo Abraham Adumein
Habeeb Adewale Olumuyiwa Abiru
Abubakar Sadiq Umar
Justices, Supreme Court
SC/CV/971/2022
Between
1. Afribank Nigeria Plc APPELLANTS (suing through and by the 2nd – 6th
Appellants) 2. Igbrude Moses Oke
3. Rasaq Olalekan Mumuni
4. Akinsanya Solomon Sunday
5. Suleiman Dauda Babatunde
6. Igba Sanmi Olatomide
(suing for themselves and in the name
and on behalf of Afribank Nigeria Plc)
And
1. Central Bank of Nigeria RESPONDENTS
2. Governor, Central Bank of Nigeria
3. Corporate Affairs Commission
(Lead Judgement delivered by Honourable Chioma Egondu Nwosu-Iheme, JSC)
Facts
On 13th November 2009, the Appellants filed an Originating Summons at the Federal High Court seeking various declaratory, mandatory, and injunctive reliefs. The 2nd – 6th Appellants simultaneously filed an ex-parte application, for leave to bring the suit in the name and on behalf of the 1st Appellant in a derivative capacity. Subsequently, the trial court heard and granted the Appellants’ ex-parte application for leave to sue in a derivative capacity.
The 1st Respondent filed a Notice of Preliminary Objection challenging the jurisdiction of the trial court, on the grounds that the order granting leave to the Appellants was made without jurisdiction; the conditions precedent for a derivative action were not fulfilled and the suit was not properly commenced. Similarly, the 2nd Respondent filed a Notice of Preliminary Objection challenging the jurisdiction of the trial court to entertain the suit as well as an application seeking to set aside the order of the trial court granting leave to the 2nd – 6th Appellant. The trial Court heard and dismissed the 1st and 2nd Respondent’s Notices of Preliminary objections and the 2nd Respondent’s second application.
Dissatisfied, the 1st and 2nd Respondent, filed separate appeals before the Court of Appeal. The Appellants filed a Respondents’ Notice praying the Court of Appeal to affirm the decision of the trial court, on grounds other than those relied on by the trial court. The Court of Appeal allowed the 1st Respondent’s appeal and struck out the Appellants’ suit on the ground that the trial Court lacked jurisdiction to entertain the matter as the leave sought ought to have been by Originating Summons and not by an ex-parte application. The Court of Appeal also held that the suit was incompetent because leave was not sought and obtained before the filing of the Appellants’ action.
Aggrieved, the Appellants appealed to the Supreme Court.
Issues for Determination
The Supreme Court adopted the issues formulated by the 1st Respondent as follows
1. Whether the Court of Appeal was right in setting aside the Ruling of the trial court, and striking out the Appellants’ suit on the ground that it was not initiated by due process of the law.
2. Whether the decision of the Supreme Court in AGIP (NIG.) LTD v AGIP PETROLI INT’L (2010) ALL FWLR (PT. 520) 1198 on the principle that leave under Section 303 of CAMA 2004 for commencement of an action must be by way of Originating Summons, was made per incuriam.
3. Whether the Court of Appeal had a duty to make pronouncement on the subsistence or bindingness of the holding of the trial court that “no miscarriage of justice was occasioned” in the premises of the commencement of the suit.
4. Whether the Respondents’ Notice filed by the Appellants was competent, and whether the failure of the Court of Appeal to consider same in the circumstances was inappropriate, thereby occasioning a miscarriage of justice?
Arguments
On issue 1, Counsel for the Appellants argued that the fact that leave was obtained via an ex-parte application was at best, a mere irregularity, which ought not to invalidate the leave granted. Counsel also argued that although the Originating Summons was filed on the same day as the ex-parte application, it was clear that no suit could be said to have been commenced until the trial Court granted the order for leave.
Counsel for the 1st Respondent argued conversely that the Originating Summons was improperly filed on the same date as the ex-parte application for leave, contrary to Sections 303 and 635 of CAMA 2004 and Rule 2(1) of the Companies Proceedings Rules 1992 (“CPR”) which require that leave to bring a derivative action must first be obtained by Originating Summons on notice to the company. Counsel argued that the use of an ex- parte application was a fundamental defect and not a mere irregularity, as compliance with the prescribed procedure is a condition precedent to the exercise of jurisdiction.
On issue 2, Counsel for the Appellants urged the Supreme Court to depart from its decision in AGIP (NIG.) LTD v AGIP PETROLI INT’L (2010) ALL FWLR (PT.520) 1198, on the ground that the decision was reached per incuriam.
Counsel for the 1st Respondent argued to the contrary, that the decision in AGIP (NIG.) LTD v AGIP PETROLI INT’L that leave for the commencement of a derivative action can only be validly sought and obtained by Originating Summons was correct in line with the provisions of Section 303 of the CAMA 2004 and Rules 2(1) and 18 of the CPR.
On issue 3, Counsel for the Appellants argued that the lower court erred when it failed to determine the issue raised by the Appellants, on the subsistence and bindingness of the holding of the trial court that “no miscarriage of justice was occasioned” in the premises of the commencement of the suit. Counsel urged the court to determine the issue as it goes to the fundamental right of the Appellants to fair hearing.
Counsel for the 1st Respondent argued conversely that the lower court was not under any duty to specifically address the point after it had held that there was a fundamental issue of lack of jurisdiction which finding conclusively determined the suit before the trial court.
On issue 4, Counsel for the Appellant argued that the lower ought to have considered and determined the Respondents’ Notice, as an intermediate appellate court which is duty bound to consider all issues that are properly raised before it, regardless of whether or not its decision on a point will be adequate to dispose of the appeal one way or the other. Counsel contended that this is because if the decision on that point is reversed on a further appeal, its decision on the other points may then be considered by the higher court for a final determination of the appeal.
Counsel for the 1st Respondent pointed out that it had filed a Notice of Preliminary Objection on the Respondents’ Notice being wholly incompetent because it was improperly asking the Court to affirm findings which the lower court never made, and the issues raised therein were never raised at the trial court nor was there any finding on them.
On the totality of the issues raised, Counsel for the 2nd Respondent argued that commencement of an action by due process is a jurisdictional matter and that failure to seek leave by originating summons before filing the substantive action was fatal. Counsel argued that because the decision to allow a derivative action affects the rights of the company, the application must be on notice to afford fair hearing. Counsel also submitted that Rule 18 of the CPR, which excuses minor procedural irregularities, was inapplicable since the defect here was a total non-compliance with a mandatory procedure.
Counsel for the 3rd Respondent similarly argued that the Appellants’ failure to comply with the mandatory provisions of Section 303 of CAMA and Rule 2(1) of the CPR, rendered the Originating Summons and the entire proceedings a nullity. Counsel further argued that questions of locus standi or miscarriage of justice were immaterial since the lack of jurisdiction rendered all claims comatose.
Court’s Judgement and Rationale
In resolving the first issue, the Supreme Court held that once a condition precedent for the commencement of an action is not fulfilled, such action has not undergone due process and as such the jurisdiction of the court cannot be properly activated as the court has been robbed of the requisite vires to entertain the matter. The Apex Court relied on its earlier decision in NWORA v NWABUEZE & ORS (2013) LPELR-20587 (SC) PAGE 21, PARA D-F. The Court held that from the joint reading of Section 303 of CAMA 2004 and Rule 2(1) of the CPR made pursuant to Section 635 of the CAMA 2004, the application for leave to commence a derivative action is not a mere formality, but a process that requires the court to make an active determination with stated benchmark for reaching such determination; and in making such a determination regarding the interest of the directors, fair hearing demands that such directors should be put on notice. The Supreme Court affirmed the finding of the Court of Appeal that by the cited provisions, the appropriate/legally acceptable mode of seeking for leave in a derivative action is by originating summons on notice, and in this regard, a motion ex-parte does not meet the requirement of the leave procedure for commencing a derivative action.
The Supreme Court held further that, where leave of court is required for filing an action/process and a party ignores seeking and obtaining the requisite leave before filing the same, the action/process is rendered incompetent. The Apex Court found that that the Appellants’ filing of the Originating Summons and application for leave on the same day, amounted to filing the action before obtaining leave.
On the second issue, the Supreme Court relying on its decision in OSHOBOJA v AMUDA & ORS (2009) LPELR – 2803 (SC) held that, for the court to be able to depart from a previous decision, at least one of the following conditions must exist: (i) the previous decision is inconsistent with the provisions of the constitution; (ii) the previous decision was given per incuriam; (iii) the previous decision is proved to perpetuate injustice and hardship if followed. The Apex Court held that the Appellants failed the show the existence of any of these conditions in relation to the decision in AGIP (NIG.) LTD v AGIP PETROLI INT’L (SUPRA), therefore, the decision was not made per incuriam to require the Supreme Court to depart from it.
On the third issue, the Supreme Court held that cases conducted without jurisdiction, no matter how well handled, are a waste of time, as the entire proceeding amounts to a nullity. The Court held that, having held that the trial court lacked jurisdiction to hear the suit, the lower court also stripped itself of any power of considering any further issues on the matter.
On the fourth issue, the Supreme Court held that the grounds relied upon in the Respondent’s notice must be apparent on the record, having regards to the facts of the case, the law applicable thereto, and the judgement on appeal. The Court held that the grounds relied upon by the Appellants’ in the Respondents’ Notice were not canvassed at the trial court, neither did they form part of the judgement appealed against. The Apex Court found that the failure of the Court of Appeal to consider the Respondents’ Notice was thus, not inappropriate, because apart from the fact that it was incompetent, the decision on the trial Court’s lack of jurisdiction precluded the Court of Appeal from considering the Respondent’s Notice.
Appeal Dismissed.
Representation
I. O. Aniakor and another for the Appellants.
Chima Okereke for the 1st Respondent.
Ogunmuyiwa Balogun and others for the 2nd Respondent.
C. I. Okoye and others for the 3rd Respondent
Reported by Optimum Publishers Limited, Publishers of the Nigerian Monthly Law Reports (NMLR)(An affiliate of Babalakin & Co.)
