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IN THE SUPREME COURT OF NIGERIA

ON FRIDAY, THE 22ND DAY OF APRIL 1994

 SC 327/1990

BETWEEN

OKOYA AND 2 OTHERS ..................................... PLAINTIFFS/APPELLANTS/CROSS-RESPONDENTS

AND

SANTILLI AND 2 OTHERS ........................................ DEFENDANTS/RESPONDENTS/CROSS-APPELLANTS

BEFORE: Salihu Modibbo Alfa Belgore; Abubakar Bashir Wali; Uthman Mohammed; Sylvester Umaru Onu; Anthony Ikechukwu Iguh, JJSC

ISSUES

Which of two competing memoranda and articles of association of a company was the real one?

Who were the actual shareholders in the company?

What was the company's share capital?

 

FACTS

Upon the incorporation of the third plaintiff (hereinafter referred to as "the company") as a company in 1976, the first two plaintiffs were the only two subscribers to the company's Memorandum and Articles of Association. Each of them took up a share in the company.

According to the Statement of Claim, the first two defendants, both of whom resided outside of Nigeria, had falsely represented that each of them owned shares in the company. The plaintiffs averred that the requisite permission of the Federal Minister of Finance was not obtained as required by Section 10 of the Exchange Control Act of 1962, for shares to be made available to the defendants. In support of their claim (that they owned shares in the company) the defendants produced their own copy of a Memorandum and Articles of Association. The parties were in dispute over which set of documents was authentic.

The plaintiffs sought a declaration that their copy of the Memorandum and Articles of Association, in which they were reflected as the sole subscribers, was the only true one. They also sought an injunction preventing the defendants from conducting the business of the company or operating its bank account based on the documents in the defendants' possession.

The High Court and Court of Appeal found that the real documents were those of the plaintiffs, and then went on to calculate the division of shares in favour of the defendants. An appeal and cross-appeal by each of the parties were filed at the Supreme Court. The appeal was allowed by a majority.

 

HELD (Majority allowing the appeal)

1.      On the import of a signatory's signing of a document

Any literate person, of full age and capacity and understanding who signs a document is presumed to understand the contents of the document signed. The contents of the document are therefore binding upon him and plea of non est factum will not avail him. Belgore, JSC, at page 404.

 

2.      On the acquisition of shares

The evidence satisfied the court that as of 31 May 1981, the share capital of the company was fully paid for by the first two plaintiffs. There could then be no more shares to allot, and the defendants could only then acquire shares by transfer from the plaintiffs. The trial court was thus incorrect in going on to allot shares amongst the parties. Belgore, JSC, at pages 404-405.

 

3.      On the definition of the relationship between the parties

The fact that the defendants might have sat on the board of the company did not make them shareholders. The partnership agreement between the parties concerned sharing of profits by the defendants only in the running of the company and it could not be elevated to the status of a right to shares in the company. Belgore, JSC, at page 407.

 

4.      On the distinction between the terms "allotment" and "transfer" in company law

The terms "allotment" and "transfer" in company law cannot be used interchangeably. "Allotment" is done when a new company is being incorporated and the money paid for the allotment of shares goes to the company only to form part of its share capital. Once the share capital is paid for by allottees, that is the end of allotment. Transfer is a matter between the shareholder who wants to part with his shares and the purchaser or transferee. The money on transfer goes to the shareholder, and not to the company. Belgore, JSC, at page 409.

 

5.      On the court's approach to an illegality discovered during proceedings

A court, upon discovering an illegality during a trial, must take cognisance of that illegality even if not triable in that court but in another tribunal. Once a transaction is illegal, it is void and all things emanating from that transaction is a nullity. The third defendant's acquisition of shares in the company whilst he was a public officer was an illegality. The shares that could be said to be held by him were held to be 70,000 shares subject to a resulting trust in favour of the first plaintiff. Belgore, JSC, at page 415.

 

6.      On the court's role in assessing a party's claim

It is not the court's duty to investigate what might be the true nature of a claim by a party to a dispute and then proceed to make a declaration or finding which such a party has not specifically sought. In other words, the court may not speculate on or supply evidence or work out the mathematics of arriving at an answer in a case which only evidence tested under cross-examination could supply. Iguh, JSC, at page 419.

 

7.      On the binding nature of pleadings

Parties are bound by the averments set out in their pleadings, and evidence which is contrary to those averments must be disregarded. Iguh, JSC, at page 419.

 

Mohammed and Wali, JJSC dissented

In the dissenting judgment, it was found that the first two plaintiffs had not fully paid for the authorised shares of the company. An entry in the balance sheet reflecting the share capital as fully paid for referred instead to the commitment by the first two defendants to pay for their own allotted shares through a foreign exchange transfer. The dissenting Judge therefore found the defendants to be entitled to the shares claimed.

Chief F. R. A. Williams, SAN, with T. E. Williams, F. R. A. Williams II and Miss A. O. Olomola, for the appellants.

B. O. Benson, SAN, with B. Jagun, for the respondents.

 

The following cases were referred to in this judgment:

Nigeria

Adebambo v Olowosago (1985) 3 NWLR 207

Adeniji & others v Adeniji & others (1972) 1 All NLR (Part 1) 278

ACB Ltd v A-G, Northern Nigeria (1969) NMLR 231

Alhaji Ogunlowo v Prince Ogundare (1993) 7 NWLR (Part 307) 610

Atuyeye v Ashamu (1987) 1 NWLR 267

Bakare v State (1987) 1 NWLR (Part 52) 594

Chikwendu v Mbamali (1980) 3-4 SC 31

Chukwuogor v Obuora (1987) 3 NWLR 454

Commissioner for Works, Benue State & another v Devcon Development Consultants Ltd & another (1988) 3 NWLR (Part 83) 407

Egbase v Ohiareghan (1985) 2 NWLR, 884, 899-900; (1985) 2 NSCC 1219

Eholor v Osayande (1992) 6 NWLR (Part 249) 524

Emegokwue v Okadigbo (1973) 3 ECSLR 267

Ekpenyong & others v Chief Ayi (1973) 3 ECSLR 411

Emegwara v Nwaimo 14 WACA 347

Etowa Enang v Ikor Adu & others (1981) 11-12 SC 25

Ezeudu v Obiagwu (1986) 2 NWLR 208

Falaju v Amosu (1983) NSCC 456, 460, 461

Field Supply Centre Limited v Johnson (1987) 2 NWLR (Part 58) 265; (1987) 5 SC 310

George Ikenye & another v Akpala Ofune & others (1985) 2 NWLR 1

Ibodo v Enarofia 1980 5 SC 42

Igwego v Ezeugo (1992) 6 NWLR (Part 249) 56

Kalu Njokwu & others v Ekwu Ene & others (1973) 5 SC 293

Kola v Coker (1982) 12 SC 252

Lamai v Orbih (1980) 5-7 SC 28

Lokoyi & another v Olojo (1983) 8 SC 1

Mogo Chinwendu v Nwanegbo Mbamali (1980) 3 SC 31

Metalimpex v A G Leventis and Co Ltd (1976) 2 SC 91

National Insurance Corporation of Nigeria v Power and Industrial Engineering Co Ltd (1986) 1 NWLR (Part 14) 1

Nigerian Housing Development Society Ltd & another v Yaya Mumuni (1977) 2 SC 57

Nwankwo v Nwankwo (1992)4 NWLR (Part 238) 693

Ochonma v Oshirim Unosi (1965) NMLR 329

Ogbuagu v Ogbuagu (1981) 2 NCLR 680

Oilfield Supply Centre Ltd v Johnson (1987) 2 NWLR (Part 58) 625

Oniah v Onyia (1989)1 NWLR (Part 99) 514

Onubogu v The State (1974) 9 SC 1

Overseas Construction Ltd v Creek Enterprises Ltd (1985) 3 NWLR (Part 13) 407

Peenok Investment Ltd v Hotel Presidential Ltd (1982) 12 SC 1, 56-57

Seismograph Services (Nigeria) Ltd v Eyuafe (1976) NSCC 547

Steven Omo Ebu eku v Sunmola Amola (1988) 1 NSCC 582

Ukpe Ibodo v Iguase Enarofia (1980) 5-7 SC 42

Uredi v Dada (1988) 1 NWLR 237

Woluchem v Gudi (1981) 5 SC 291

 

Foreign

Anderson Ltd v Daniel (1924) 1 QB 138

Arrale v Constain Civil Engineering Ltd (1976) 1 Lloyd's Report 98

B and B Viennese Fashions v Losane (1952) 1 AER 909

Browne v La Trinidad 37 Ch D 1

Connelius v Philips (1918) AC 185

English Industrial Estates Corp v George Winpey Co Ltd (1973) 1 Lloyd's Report 118

James Miller & Partner Ltd v Whitworth Street Estates (Manchester) Ltd (1970) AC 572

LG Schuler A-G v Wickman Machine Tool Sales Ltd (1974) AC 235

Trollope & Colls Ltd v NW Metropolitan Hospital Board (1973) 1 WLR 601

Vandervell's Trusts (1974) Ch D 269, 322

 

The following statutes were referred to in this judgment

Nigeria

Code of Conduct Bureau and Tribunal Act Cap. 56: S 23(1)

Companies Decree 1968: Ss 48-55; 75-86

Exchange Control Act 1962: S 10

Federal High Court Act: S 9

Nigerian Enterprises Promotion Act

 

The following rules were referred to in this judgment:

Nigeria

High Court Rules of Lagos State: Order 16, rule 17

Majority: Belgore, Onu & Iguh, JJSC

 

Belgore, JSC (Delivered the Leading Judgment):- Despite the rambling seventy-three paragraph Statement of Defence in answer to the Statement of Claim, it is clear the issues between the parties at the trial court through Court of Appeal can be summarised as follows:-

(a)     Which is the real Memorandum and Articles of Association between the two competing ones?

(b)     What is the share capital of the company?

(c)     Who are the shareholders (members) of the company, Albion Construction Company Limited?

The Federal High Court resolved the questions (a) and (b) in favour of the plaintiffs; but the question (c) was not resolved in their favour. The plaintiffs then appealed to the Court of Appeal just as the defendants also did on questions (a) and (b). The Court of Appeal, upholding the decision of Federal High Court on questions (a) and (b) set aside the decision on question (c) and proceeded to make ancillary orders in respect of its decision on this question.

To have a thorough grasp of this matter, it is pertinent to quote portions of the pleadings after summarising what the entire action is all about:-

Albion Construction Limited, the third plaintiff in this case, was incorporated in 1976 under Companies Decree 1968 and was given a Certificate of Incorporation No RC 19475. The subscribers to the Memorandum and Article of Association were the first plaintiff and second plaintiff who are husband and wife, each taking up a share. This Memorandum and Articles of Association of the third defendant company lodged with the Companies Registry could not be found in the file at Abuja and a copy had to be certified as true copy which later became Exhibit 'A' in this case.

Then the Statement of Claim continued as follows:-

"20. The first and second defendants are qualified as "person's resident outside Nigeria" within the meaning of that expression in Section 10 of the Exchange Control Act, 1962. Accordingly, the permission of the Federal Minister of Finance is required whenever the said defendants, in their capacity as persons so qualified want:-

(a)     the third plaintiff company to create any interest in its shares in favour of either of the said defendants; or

(b)     any of the existing shareholders to transfer any of his or her shares to either or both of the said defendants; or

(c)     the third plaintiff company to issue any of its shares to either or both of the said defendants.

21.     At no time was any application made to the Federal Minister of Finance by or on behalf of the first and second defendants for the necessary permission to enable:-

(a)     the third plaintiff company to create any interest in its 200,000 shares of N1 each in favour of either of the said defendants; or

(b)     the first plaintiff to transfer any of his shares or the second plaintiff to transfer her share to either or both of the said defendants; or

(c)     the third plaintiff to issue any of its shares to either or both of the said defendants.

22.     The first and second defendants, without the approval of the Federal Minister of Finance as required by Section 10 of the Exchange Control Act, 1962, have falsely and or unlawfully put forward the claim that each of them own N40,000 worth of shares in the third plaintiff company and procured false documents to bolster up their claim.

Particulars

(i) The said defendants procured the printing of a false Memorandum of Association showing that each of them were subscribers to the said document for 40 000 shares each.

(ii) The said defendants, aided and abetted by the third defendant, procured the making of a false "Extract" of the Minutes of an alleged meeting of the Board of Directors claimed to have been held at the registered office of the third plaintiff company on 5 May 1981 when in fact no such meeting was held.

(iii) The said defendants procured the Secretary of the Company to represent to the Federal Minister of Finance that as at 23 March 1984 Nigerians held N120,000 worth of shares in the third plaintiff company thereby making N80,000 worth of shares available for subscription by non-resident of foreign shareholders.

23.     The plaintiffs will contend at the trial of this action that at all times material to this action the third plaintiff company having issued all its shares to the first and second plaintiffs there are no shares available to be issued to the first and second plaintiffs.

24.     The plaintiffs will contend at the trial of this action that the claim of the first and second defendants to be owners of 40 000 shares each in the third plaintiff company whether as subscribers to the Memorandum and Articles of Association or pursuant to resolutions allegedly passed at an alleged meeting of the said company's Board of Directors held on 5 May 1981 or otherwise howsoever is unlawful and not true in fact or maintainable in law.

25.     The plaintiffs will at the trial of this action rely on the following documents:-

(i) all relevant documents relating to the third plaintiff company registered in the Company's Registry;

(ii) all audited accounts of the third plaintiff as at May 1979 up to date;

(iii) all relevant correspondence between the third plaintiff company and the Federal Ministry of Finance or the Nigerian Enterprises Promotion Board;

(iv) all relevant minutes of meetings of the Board of Directors and of the Annual General Meetings and the extraordinary General Meetings of the third plaintiff company;

(v) Letter dated 24 August, 1976 addressed by Rasaki Okoya Trading & Sons to Messrs Adelusi, Ojo & Co.

 

Whereupon the plaintiffs claim:-

(1)     A declaration that the document described as Memorandum and Articles of Association of Albion Construction Limited dated 16 September, 1976 to which the first and second plaintiffs were subscribers is the only true Memorandum and Articles of Association of the third plaintiff company.

(2)     In the alternative to claim (1), a declaration that the aforesaid document is a true and authentic copy of the only document submitted for registration to the Registrar of Companies by the promoters of the third plaintiff company.

and admitted in evidence in this action as Exhibit 'A' and

(3)     An injunction restraining the first, second and third defendants and/or any other person acting with or on their direction or authority from conducting the affairs of the third plaintiff and in particular from operating the account of the third plaintiff in any bank whatsoever on the basis of any Memorandum and Articles of Association other than that mentioned in paragraph (1) of this hereof.

(4)     In the alternative to (3) an injunction restraining the first, second and third defendants and/or any other person acting with or on their direction or authority from conducting the affairs of the third plaintiff company in any bank whatsoever on the basis of the document purporting to be the Memorandum and Articles of Association of the third plaintiff company and carrying the signatures of the first and second plaintiffs as well as the three defendants as subscribers.

(5)     A declaration that the nominal share capital of the third plaintiff company is N200,000 divided into 200 000 shares of N1 each.

(6)     a declaration that the first and second defendants are not shareholders of the third plaintiff company.

(7)     A declaration that all shares held by the third defendant in the third plaintiff company are held by him in trust for the first plaintiff and an order directing the third defendant to execute an instrument of transfer in respect of the said shares in favour of the first plaintiff."

The defendants on their part first raised objection, albeit lamely, that the first and second plaintiffs had no locus to sue as they were no longer members of the company and at any rate should not have joined the third plaintiff, the company, as plaintiff. These preliminary skirmishes were quickly dealt with by Odunowo J, the trial Judge who overruled the objection. Nothing more is heard of this. But it must be stated that the plaintiffs had earlier pleaded Clause 15 of Articles of third plaintiff that the "subscribers to the Memorandum of Association shall constitute the Original Board of Directors". At its first Annual General Meeting on 7 February 1980, it was resolved that "first and second plaintiffs as well as first and second defendants shall be Directors of the company. The nominal capital of the third plaintiff would be N200,000 and without the knowledge of first and second plaintiffs a purported extraordinary General Meeting was held on 16 January 1987 at which only the defendants were present whereby a resolution was passed to increase the nominal share capital of the company to N500,00 of N1 each. The first and second defendants who were not shareholders were invited to the meeting while the first and second plaintiffs were not invited or intimated of the meeting, the third defendant, assuming he was lawfully a shareholder could not form a quorum for the meeting. Up to 31 May 1980 when the audited account of the company was approved only N2 worth of shares fully paid up by first and second plaintiffs. However by 31 May 1981 the 200 000 shares had been fully paid up by first plaintiff paying N199,998 for the remaining shares through Directors' current account to the share capital of the company. Thus no more shares were available for allotment.

The defendants in their Statement of Defence, particularly in paragraph 19 thereof, inter alia averred:-

". . . first and second defendants upon leaving Cappa and D'Alberto Ltd sought to team up with Nigerian partner to go into construction industry whereupon the first and second plaintiffs approached them with a proposal to set up business in partnership to be organised through Albion construction Ltd."

Albion Construction Ltd was then legally incorporated but was dormant and the first and second plaintiffs were the only shareholders and members. It was because of this that a partnership agreement was entered into between first and second plaintiffs, of the one part, and first and second defendants of the other part. That was on 30 June 1978. This partnership agreement is Exhibit 'SS'. Exhibit 'SS' is an interesting document. It is no more than what it says; an agreement for partnership for the running of third plaintiff and to share profits in a certain proportion. This has nothing to do with the shares in Albion Construction Ltd, it only relates to its running through the expertise of first and second defendants.

Having explained earlier the claim of the plaintiffs, the defendants stand is on the following pedestal in their Statement of Defence in paragraph 72 as follows:-

"72. The defendants jointly and severally in response to the reliefs sought by the first and second plaintiffs in their Statement of Claim shall seek the court to find as follows:-

(i) A declaration that the Memorandum and Articles of Association purported certified on the request of their solicitors by the office of the Registrar of Companies on 28 March 1988 was procured irregularly and in breach of laid down procedures without satisfying the Registrar of Companies as to the authenticity of the document.

(ii) That the defendants are lawful directors and shareholders of Albion Construction Ltd, and that from 1984 when the first and second plaintiffs resigned their membership and directorship of Albion Construction Ltd, they automatically ceased to be members and directors of the company and accordingly have no say in the affairs of the company.

(iii) That the authorised share capital of Albion Construction Ltd is now N500,000.

(iv) That no shares are held in trust for first plaintiff by the third defendant."

They then sought the court to dismiss the plaintiffs' case in its entirety. The trial court made some remarkable findings, to wit:-

1.      That the company at formation had only two members, first and second plaintiffs who then subscribed to one share each out of the authorised share capital of N200,000.

2.      That Exhibit 'A1', a purported Memorandum and Articles of Association of the third plaintiff (company) was bogus, meaning it was not genuine and the court was satisfied that the one tendered by the plaintiffs, Exhibit 'A', was the genuine and authentic Memorandum and Articles of Association.

3.      That the share capital of the company remained at N200,000 and has never been increased to N500,000 as claimed by the defendants as of 31 May, 1981.

4.      That the defendants, despite the fact that no more shares were available for allotment still had shares in the company even though first plaintiff had made up the 200 000 shares by payment from his current account of N199,998.

It is not contested that the first and second plaintiffs were the founding members as well as directors of third plaintiff company. They remained so from 1976 and were still so from around February 1980 as it is borne out in paragraph 13 of Statement of Claim and paragraph 15 of Statement of Defence. The third defendant claims that he became a director of the company on 16 October 1981 well after 31 May 1981 when first plaintiff acquired more shares to make the N200,000 nominal capital. The first and second defendants brought in money from foreign country "for the purpose of paying for shares" allegedly allotted to them well after 31 May, 1981 when all the shares in the third plaintiff company had been fully allotted.

The Federal High Court identified, as I said earlier, Exhibit 'A' as true and authentic Memorandum and Articles of Association of third plaintiff company and that Exhibit 'A1', tendered by the defendants is bogus and not genuine; the meaning of this is that Exhibit 'A1' was forged. The same court held that as of 31 May 1981 the share capital of the company stood at N200,000. As for the identity of the shareholders, the trial Judge went into arithmetical exercise of apportioning shares despite earlier holding that all the shares had been taken up by 31 May 1981. This led to the appeal by both parties to the Court of Appeal where resolution of who owned what shares was resolved against the plaintiffs' contention and thus this appeal. The plaintiffs then formulated the following issues for determination in line with the grounds of appeal:-

A.      The shares of first and second plaintiff:-

Whether the first and second defendants ever acquired shares by transfer from the first plaintiff.

B.      Shares of the first and second defendants:-

Whether the court below was correct in failing to consider and uphold the contention of the plaintiffs that by 31 May, 1981, and there were no shares available to be issued to the first and second defendants at the time they claimed to have paid for shares allegedly allotted to them.

C.      The shares of third defendant

Whether the court below ought to have held that:-

(i)      the transfer (and accordingly the underlying contract) whereby in exchange for shares transferred to him by the first plaintiff, the third defendant was obliged and required to participate in the management and running of Albion Construction Limited, was one which was impliedly prohibited by Section 2(b) of the Code of Conduct for Public Officers under the 1979 Constitution and is therefore illegal and void;

(ii)     Whether the shares held by the third defendant were held by him in trust or for his own benefit.

D.      Court of Appeal's Order on Injunction:-

Whether the order of the Court of Appeal setting aside the order for injunction made by the Federal High Court was justified."

Going by the issues raised, I ask, what are the shares held by the first and second plaintiffs? These two persons were the only subscribers to the Memorandum and Articles of Association in 1976, each holding a share, and that was about two years before they met the first and second defendants. The first plaintiff claimed he paid for additional N199,998 worth of shares to make his total shareholding 199,999. This, the first and second defendants denied claiming instead that they held 20 percent each of the share capital of the third plaintiff company; with the third defendant claiming 21 percent for himself and 10 percent for "Workers Trust". The first plaintiff also alleged that out of his shares he transferred 10 percent to L.S. Balogun and 9 percent to L.A. Balogun. But first, it must be made clear that the pleadings of the plaintiffs averred in paragraph 16 that:-

"up to the time when the audited account of the company as at 31 May, 1980 were approved, only N2 worth of shares were fully paid for by first and second plaintiffs who then held one share each."

This was not disputed by the defendants especially in their paragraphs 5 and 38 of Statement of Defence. However, the defendants put a rider into their paragraph 38 (supra) that the two shares were never paid for. This is amazing, when considered in the light of the simple fact that the three of them had not even come near the company in 1976 when the third plaintiff company was incorporated and was dormant up to when first and second defendants came into its life in 1978 vide a partnership agreement, Exhibit '4 SS'. But a look at Exhibit 'H' and 'H2' the third defendant's Balance Sheets for 1978, 1979 and 1980 was each signed by one or the other of the defendants and reflect that the N2 was fully paid. A lot of documents were tendered in this case at trial and it certainly caused some confusion for some witnesses whose memories later got refreshed when under cross-examination they were confronted with relevant documents. An example is Ayinla Okuboye, DW6 who testified in evidence in chief, inter alia, as follows:-

"I am the one who keeps the ledger and books of Albion (third plaintiff). All transactions of the company are recorded in these books. If I see the 1980/1981 (ledger), I can recognise it. This is the ledger being kept by me."

The ledger was tendered and admitted as Exhibit 'U'. The witness then continued:-

"I also keep the cash books. These are the Cash Books from 1978 to May 1981 (the Cash Books were also admitted as Exhibits 'U1' and 'U2').

. . .

The Albion Company has external auditors. From time to time I joined in 1988, the external auditors are Adelusi, Ojo and Co."

He testified further that after preparing all his balances he would submit annually his books to the external auditors. These books include ledgers, cash books and all other books kept my him. Also included among the ledger books are debtors' ledger book, admitted as Exhibit 'V'. Then he continued:-

"I have seen Exhibit 'V'. The earnings for completed work in 1980/81 is N12,815,823.28K. I have seen Exhibit 'H9', it shows the earnings for the same period as N2,015,824. That was not the figure I gave the External Auditors for preparation of Exhibit 'H9'. We have provisions for Directors Account in Exhibit 'U'. It is on page 169 of Exhibit 'U'. As at 31 May, 1981 the account standing to the credit of the Directors Current Account is N195,701.73K, the amount stated in Exhibit 'H9' as Directors Current Account is N2,316,659 exactly; I don't know who gave these figures to the auditors. The amount I gave to the auditors was N195,701.73k."

"I have seen page 168 of Exhibit 'U', the paid up capital. What I have in my books as at 31 May 1981 as paid up capital is N2. The corresponding column in Exhibit 'HH9' shows N200,000 as paid up (capital); I did not give these figures to the auditors I provided the auditors with N2 as paid up. I have seen the column for purchases at page 452 of Exhibit 'U', it shows N3,656,607.47k as the amount for purchases. I have seen Exhibit 'H9', for that period, the figures put by the auditors for purchases is N694,635; that was not the figure I gave the auditors I gave the auditors N3,656,607.47k."

This witness then became more emphatic when he said:-

"Apart from the books of the company, I cannot say the other sources the auditors have in preparing their balance sheet. I provided information to the auditors since 1978. Apart from N2 I did not receive any other money for the payment of share capital. The money could not have been paid without my knowledge. I know Chief R.A. Okoya. He is sitting there . . . I can't say if Chief Okoya loaned any money to the third plaintiff company in 1980/81 financial year. During 1980/81 financial year, I did not receive any money as loan from the first plaintiff. I received all official financial transaction (sic) of the third plaintiff."

In cross-examination, however, this witness, on being taken through the very Exhibits he tendered for defence and those already tendered, became wiser. Exhibit 'W', ledger for 1981/82 was then tendered through him after he identified it. Then he was led through Exhibit 'W' and stated as follows:-

"I have seen page 139 (of Exhibit). It shows the opening entry of N200,000 as from 1 June 1981. It represents paid up capital. The next line is N39,457.44k as at October 1982. The entry for October 1982 does not fit into the entry for 1981/82."

(Against the last sentence above, learned trial Judge made the following observation:-"Note, this question was answered after considerable hesitation and apparent uncertainty.")

This witness, DW6, Mr Okuboye then proceeded under cross-examination as follows:-

"It is correct that as a rule the opening figure for all accounting year (in this case 1 June of a year to 31 May of next year) should rhyme with the closing figure of the previous year. I am sorry, it is not correct that the two should agree, I have some explanation for this answer. If the opening figure is N200,000 during accounting year if there is any transaction the closing figure will be increased. I got the N200,000 from the audited balance sheet. I made the entry of N200,000 in October 1982. The entry for N39,457.44k was not made the same day. I am not aware that the audit for 1982 was not complete; I made it in October 1982. I made the opening entry of N200,000 from the audited account for 1981/1982. Exhibit 'H4' is where I got the figure from."

This Exhibit 'H4', the audited account, is a copy and the original was tendered in cross-examination by DW6 as Exhibit 'X' (i.e. the Audited Account for 1981/82). The entry for audited account for subsequent years including 1985 continued to recur with the figure of N200,000 as paid up capital. This witness finally agreed that the paid up capital by 1980/81 or simply by 31 May 1981 was N200,000.

So the main dispute between the parties has coalesced at Trial Federal High Court, it was not that N2 was not paid as original nominal capital, but what was the position of N199,998 paid by the plaintiff, Chief Okoya. Did he pay?

As for allotment of shares, the plaintiffs brief is succinctly put as follows:-

"It will be possible to argue in "the strictest rules" that in the absence of proof of a Board Meeting or a resolution of the General Meeting to sanction the allotment of shares to the first and second plaintiffs, it must be concluded that there was no proper allotment of shares to them. One would of course be bound to use the same measure in respect of the shares claimed by the defendants."

For the above reasoning, Chief Williams, SAN, for the plaintiff, quoted Lindley LJ in Brown v La Trinidad 37 ChD 1 at 17 to wit:-

"I think it is most important that the court should hold fast to the rule upon which it had always acted, not to interfere for the purpose of forcing companies to conduct their business according to the strictest rules, where the irregularity complained of can be set right at any moment."

It must be pointed out that the trial court outrightly rejected the defendant's contention that Exhibit 'A1', a Memorandum and Articles of Association, was the genuine one, he called it bogus Memorandum and Articles of Association. I find that he meant by this that Exhibit 'A1' was a forgery which the defendants wanted to influence that court with so as to achieve victory. The trial Judge also rejected the forged document purporting to show that share capital of the company had been raised to N500,000 was also not correct, it was certainly a forgery of an alleged Board Meeting of 5 May 1981.

Learned trial Judge finally held that he was convinced by the contention of the plaintiffs, on the balance:-"that the paid up share capital (of the third plaintiff company) as at 31 May, 1981 stood at N200,000."

These were findings the Court of Appeal never disturbed. Then if as of 31 May, 1981 the paid up capital share stood at N200,000 only the plaintiffs could have paid for the allotment by paying an additional sum of N199,998. The reason is not far-fetched because by that day there were no more shares available for allotment and the defendants 1 and 2 could not have by that date acquired any shares by allotment. They brought in their money over one year later. At that time no shares were available for allotment. So the only person who could have paid for the remaining N199,998 for the shares could be no other person than the first plaintiff and this is what all the entry of N200,000 in Exhibit 'U' is for. The evidence of Okuboye, quoted in extenso hereinbefore, is amply corroborated by that of Michael Ojo Adelusi, the principal partner in the Company's external auditor. He identified Exhibit 'U', the Ledger Book, and identified the first entry carried forward from May 31 1981-1 June 1981 as N200,000 as share capital of the third plaintiff company making it fully paid. There was no other entry for 1981 on the capital side; except the following year 1982 where there were no more shares to take up by allotment. By 1 June 1982, the entry in Exhibit 'U' still remained N200,000 as share capital. None of the defendants protested on this entry at the time they were made and they signed as Directors DW9, Chief Adelusi, from the external auditors, thus confirmed the plea in paragraph 17 of Statement of Claim that shares worth N199,998 were paid for from the amount standing to the credit of first plaintiff in the Director's current account of third plaintiff company. All these evidence from DW6 and DW9 could not be assailed as being favourable to the plaintiffs. Such evidence is perfectly admissible and in the absence of any contrary evidence from persons of equal status in relation to the affairs of third plaintiff, it must be accepted as the truth. (Falaju v Amosu (1983) NSCC 456, 460, 461; Adebambo v Olowosogo (1985) 3 NWLR 207, 215); (see also Onubogu v The State (1974) 9 SC 1). Odunowo J, trial Judge, completely believed DW9 was a witness of truth.

Exhibits 'H3-H8', balance sheets show that the N200,000 share capital had been paid up by 31 May, 1981. There is no support for the contention of any of the defendants in these Exhibits tendered and admitted without any objection. Viewed in line Section 141 and Section 142 of Companies Act 1968 (relevant to this case) and Schedule 8 to the same, it is clear, very clear, that the share capital of third plaintiff company, standing at N200,000 as of 31 May, 1981 left no more shares for allotment any more. Exhibit 'H9', remarkably, was signed by second and third defendants and it confirmed the shares were fully taken up by the plaintiffs as of 31 May, 1981. According to DW9, none of the defendants challenged Exhibit 'H9'. Exhibits 'H7' and 'K' are very clear and so is Exhibit 'YY' that says:-

"Albion Construction Limited Directors Report In accordance with Sections 120 and 150 of the Companies Decree 1968, we the Directors of the above named company hereby certify that the attached balance sheet as at 31 May 1981 and the Profit and Loss Account for the same year together with Auditor's Report to be true copies as laid before the company in General Meeting.

We further certify that the Directors did not recommend the payment of any dividend.

(Sgd) A. Davanzo

(Sgd) D. Ademiluyi Directors"

Third defendant, as a lawyer, sui juris, made a statement that no court of law would accept as true when he claimed that he did not know what he signed when he and second defendant signed Exhibit 'YY'. Any person, of full age and capacity and understanding who signs a document, being not illiterate is deemed or presumed to understand what he appended his signature upon. Whatever that document says and undertakes is binding upon him and plea of non est factum will not avail him (Egbase v Ohiareghan (1985) 2 NWLR 884, 899-900).

Exhibit 'HH', minutes of A General Meeting of 15.3.82 where by implication the paid up share capital was ratified. This is supported by Exhibit 'A' in Article 14. It is thus patently clear from the records of the third plaintiff that when Lauro Santilli, first defendant, and Albino Davanzo, second defendant, brought in money into the country in the latter part of 1982, they paid into the company's current account, such money could not be payment for shares as there were no more unalloted shares since 1981, i.e. 31 May 1981. I refer in this instance to DW6 and DW9 who unambiguously identified documents supporting absence of any more shares for allotment after 31 May 1981 especially Exhibits 'U' and 'W'.

I therefore uphold the decision of the courts below that as of 31 May 1981 the paid up capital of the third plaintiff was fully paid for by plaintiffs and there could be no more shares to allot. The only mode of passing shares to the defendants could only be by way of transfer and no more. This is not the claim of first and second defendants; rather than ask for specific performance if there was agreement to transfer shares to them they resorted to subterfuge of cooking up a Memorandum of Association, Exhibit 'A1', and a purported increase in share capital to N500,000 which the courts below rejected in toto.

The trial court, despite all the evidence overwhelmingly in support of the case for plaintiffs, went ahead to allot shares in an arithmetical exercise the parties never claimed or asked the court for, going by their Statement of Defence. The court held there were no shares to allot after 31 May 1981 by virtue of Exhibits 'U' and 'W'. Did the defendants, Davanzo and Ademiluyi, not sign Exhibits 'H3'-'H9' and Exhibit 'YY'? How does the court view the evidence of DW6 and DW9 that were held to be witnesses of truth and the Court of Appeal never faulted? The burden on the plaintiffs should not be higher than balance of probability and going by the concurrent findings of the courts below on the aforementioned Exhibits, one wonders why the same courts turned round and started allotting shares to the defendants. If assuming the defendants claimed that they were promised shares, their remedy, with respect, will be for damages for breach of contract. They are not for this; they opted throughout the case for allotment of shares which were no more there. Unfortunately the defendants resorted to serious misconduct of forging documents - Exhibit 'A1' and alleged minutes of 5 May 1981 - to prove their case. This, if nothing else, is serious enough to show they were not honest to the court. Santilli, first defendant, signed the balance sheets showing all shares having been fully subscribed by 31 May 1981. These documents could in law not be varied by extrinsic evidence in t he absence of ambiguity. First and second defendants were Directors of the third plaintiff, but owned no shares and no voting rights. They were there for their expertise and by virtue of the Partnership Agreement, Exhibit 'SS', trial Judge made a lot of Exhibit 'TT' pleaded by the defendants to persuade the Court that first and second plaintiffs had severed their connection with the third plaintiff, not only as Directors but also as shareholders. (Paragraphs 63 and 64 of Statement of Defence refer). Contrary to Order XXX1 rule 5 Federal High Court Rules and Order 16 rule 17 Lagos High Court Rules (applicable to Federal High Court by virtue of Section 9 of Federal High Court Act), the defendants seemed to shy away from their pleadings, Even in the Court of Appeal they never pretended they relied on Exhibit 'TT' as admission by first and second plaintiffs that they held only 51 percent shares in the third plaintiff company. The court must decide cases on the front presented by the parties, that is to say, through their pleadings. In the face of the clear claim by the plaintiffs and unrebutted by the defendants the courts should not have deviated from their stated objective in their pleadings. The defendants posited all along that there were more shares to allot, a situation the two courts below rejected. In the face of overwhelming evidence that by 31 May 1981no shares were available again for allotment, the first and second defendants bringing in money late in 1982 to pay for "shares allotted" was mere day dream. This brings me to the misinterpretation of the very important words "allotment" and "transfer" in the running and administration of companies with regard to shares.

After making findings of fact in accordance with the law, with the overwhelming evidence before him, and with firm conclusion that as at 31 May 1981the N200,000 share capital of the third plaintiff had been fully subscribed, trial Judge erred in basing his final findings on a document which he termed as "admission" by plaintiffs, that is Exhibit 'TT'. (Seismograph Services (Nigeria) Ltd v Eyuafe) (1976) NSCC 547, 554. The Court of Appeal was not taken in by this finding on Exhibit 'TT'. Trial court merely split the 51 percent mentioned in Exhibit 'TT' between first and second plaintiffs, giving 50 percent (i.e. 100 000 shares) to Chief Okoya. The entire evidence indicates Mrs Okoya had only one share i.e. 0.0005 percent and this is clear on Exhibits 'A' and 'VV'. This led the Court of Appeal into correction exercise.

In the Court of Appeal, Adenekan Ademola, JCA accepted the following is the truth:-

"The defendants cannot, in view of the overwhelming evidence in this case (be heard) to dispute the fact that N200,000 were fully paid for as at 31 May 1981. The first and second plaintiffs had 100 percent ownership of the shares of the company, it was clear that they and they only paid for their shares."

He further held:-

"The contention of the defendants that the share capital of the company is otherwise than N200,000 and have not been fully paid for, fails."

With the foregoing specific findings of fact, corresponding with the stand of the plaintiffs throughout the case, the Court of Appeal should have no option except to hold that there were no more shares in the company to allot after 31 May 1981, except by transfer from first and second plaintiffs. But this was not the case of the defendants who stubbornly stood by their claim for allotment. There was no evidence of allotment to the first and second defendants before 31 May 1981, a0ll that one can find in favour of these two Italians is that they had a partnership agreement, Exhibit '4SS' with first plaintiff, dated 30 June 1978 and this agreement talks only of sharing profits in running the third plaintiff company. (I shall allude to this more later in this judgment).

That cannot in law be allotment; at best it gave them right to sit on the company's Board without shares and without voting rights. The concurrent findings of the Federal High Court and Court of Appeal were to the effect that all shares of the company had been taken up by 31 May 1981with defendants No 1 and 2 not having any to take up and their paragraph 23 in the Statement of Defence that they were "allotted" shares could not be correct. Ademola, JCA was clear about this when he, inter alia, held as follows:-

"Agreeing with Chief Williams' submission that if by 31 May 1981 the 200 000 shares had been fully paid for mostly by first plaintiff through Director's Account of the company and this is the finding of the learned trial Judge in the earlier part of his judgment, it follows, and the argument is very compelling that anybody besides the first and second plaintiffs who wants to acquire shares in the third plaintiff company after the 31 May 1981 must do so by transfer from the first plaintiff or his wife if they are prepared to transfer their shares.

Acquisition of shares in this company cannot therefore be by way of allotment. It follows therefore that acquisition of shares by first, second and third defendants must be by way of transfer or sale."

It seems that the Court of Appeal, after the findings of trial court on the situation of the share capital and their own confirmation of the same, got carried away by Exhibit 'KK' which led Ademola JCA to hold.

"Exhibit 'KK' shows the entry on the date when first and second defendants paid by cheque for the shares ascribed to them. The third defendant cannot complain that it is false. Both sides in this case have relied on it and it (has) not been disowned. It is therefore a record from which some information about the dealings of the company could be gathered.

As for the first objection that it was not pleaded as the foundation of the first and second defendants' case, this to my mind is not a serious objection to it being used as it supports the case of first and second defendants being made of since it is a record of third plaintiff. The Exhibits relating to the application for the first and second defendants to bring in money into the country for the purposes of shares and the approval by the Ministry (of Finance) and Central Bank were admitted during trial without objection. They support the evidence of the first and second defendants as to the fulfilment of their obligations under the Partnership Agreement, Exhibit '4 SS' with the first and second plaintiffs."

The observation above, more than anything else was the raison d'etre for the Court of Appeal to embark on arithmetical exercise of apportioning shares to the defendants, believing the admission of KK operated as estoppel against the plaintiffs. The defendants sitting as Directors of the company, Court of Appeal held, was also against the plaintiffs' stand. But it is clear in evidence that trial Court never so held that the defendants sitting on the Board of the company made them shareholders. There is always a world of difference between fact and fiction it is Exhibit '4SS', Partnership Agreement, that gave the first and second defendants opportunity to be on the Board of the company. This Exhibit concerns sharing of profits by these defendants only in the running of third plaintiff and it cannot be elevated to status of a right to shares in the company.

This was the error of the Court of Appeal. The findings of Court of Appeal is Certainly contrary to pleadings and evidence before the trial court. Far from establishing that they purchased shares in the company the first and second defendants' case was that they acquired shares by allotment; there were no shares again to allot after 31 May 1981and their own key witnesses, DW6 and DW9 confirmed this. It is in contradiction of the law to say that the first and second defendants acquired their shares by allotment and it is a complete departure from the battle line set up in the pleadings to allow defendants that they purchased their shares from first plaintiff. This new posture is completely untenable judging by the pleadings; it amounts to departure and resulting in non-issue.

Court of Appeal having held that the contention of the defendants that the share capital of the company is otherwise than N200,00 must fail, it then stands to reason legally that from 31 May 1981there were no more shares to allot to anybody and whoever from that day wants to acquire shares must convince the first plaintiff and second plaintiff to part with their shares by way of transfer. There is thus no basis for the finding of Court of Appeal that first and second defendants acquired shares by allotment after 31 May 1981once their subterfuge of forging Exhibit 'A1' and preparing a bogus resolution increasing share capital to N500,000 failed in the two courts below.

The case of the first and second defendants cannot be on all fours with that in Oilfield Supply Centre Ltd v Joseph Lloyd Johnson (1987) 2 NWLR (Part 58) 625, 626. The decision that this case established, inter alia, that to prove a person is a shareholder in a company, it is not mandatory that documentary evidence such as receipt or share certificate must be tendered, even though desirable, oral evidence which is satisfactory to the court from the dealings of the parties may be enough. In the Oilfield case (supra) there were not only shares to take up on allotment, there was already an increase in share capital and the respondent right from formation of the company was the motivator and paid for his allotted shares by way of his salary that he ploughed into the company. In the case now at hand there were no more shares to allot to the defendants 1 and 2.

Companies are governed by their own special laws and practice. It is for this reason that in the custom of running companies, certain terms have emerged over the centuries that they have acquired certain and definite meanings and thus become words of art of technical words. Company legislation and practices have grown over the centuries that hardly any nation is an island in their operations any more. Many of the terms being employed have developed specific meanings that when agreements are entered into, the meanings have clear and specific interpretation. When these terms then surface in statutes, they must be assigned the meanings given to them. To do otherwise will create mischief that can throw several companies into disarray. In such a case uncertainty will create fear in entering into agreements. The words "allotment" and "transfer" in respect of shares of a company cannot have any other meaning except the ones ascribed to them in companies practice and legislation; they can never mean the same thing or be used interchangeably. "Allotment" is done when a new company is being incorporated and the money paid for the allotment of shares goes to the company only to form part of its share capital. Once the share capital is paid for by allottees that is the end of allotment. Any person desirous of participating in such a company will not therefore ask for allotment but for sale and transfer to him by a shareholder. Companies Decree (Act) 1968 has provisions for allotment in Sections 48 to 55. The exception is when share capital is increased.

As for transfer, this is a matter between the shareholder who wants to part with his shares and the purchaser or transferee. The money on transfer goes to the shareholder, not to the company, the company will only ratify by adjusting its books to reflect the new shareholding. The transfer of shares is in the provisions of Companies Act (supra) at Sections 75-86.

Thus there cannot in law be a recognition of interchangeable use of "allotment" and "transfer" in company's dealings, the words have acquired definite meanings that it is too late to ascribe to them any other meaning. Apart from allotting shares to participants in formation of a company, more shares may be available when share capital is increased and allotment may also be made. Apart from this there can be no allotment of shares when all the share capital of a company has been taken up. Since there were no more to allot after 31 May 1981, there cannot be any allotment in late 1982 when the first and second defendants brought money to Nigeria for shares; their case is not a question of transfer, it was all along that of allotment. Allotment having been fought and lost by them, the lower courts erred in trying to save a situation that forged documents - Exhibit 'A1' and purported minutes of 5 May 1981 -never achieved.

In paragraph 23 of Statement of Defence the first and second defendants claimed 40 000 shares each. But in the face of concurrent findings of the two lower courts that all shares had been taken up by first and second plaintiffs by 31 May 1981 and they were unable to prove acquiring the shares they (the first and second defendants) claim before that date, that ought to be the end of their case. Having failed to prove in accordance with their pleading their case ought to end there. But the Court of Appeal, despite its findings, then adverted to Exhibit 'KK'.

Exhibit 'KK', as far as the Court of Appeal is concerned, manifests circumstantial evidence to show that first and second defendants brought money into the country to pay for shares in the third plaintiff company and nothing more. The question always is: who are the members of the third plaintiff company?

Since Exhibit 'A' is the only authentic Memorandum and Articles of Association of the third plaintiff, as found and held by the trial court and affirmed by the Court of Appeal, how do these two defendants come in? The only answer seems to be the confusion caused by Exhibit 'SS', the Partnership Agreement whereby the two defendants would use their special knowledge and expertise to run the third plaintiff company which had been dormant since its incorporation in consideration for share in its profits. It is remarkable that the partnership agreement was only between the first and second plaintiffs on one side and first and second defendants on the other side. Thus the third plaintiff incorporated in 1976 had no contact with the two defendants before 1978, when Exhibit 'SS' was made. Exhibit 'SS' amply provided in its terms in paragraphs 1-13 how they would operate. Salaries, accommodation, share of profits, share of losses, annual preparation of balance sheets, accounts, operation of bank accounts, transport, each partner to be just and faithful, restriction in engaging in a similar business to compete with the object of the partnership, determination of the partnership etc. Part of the clauses will be useful in this case to be set out.

Clause 3

"The profits of the Partners shall belong as to 50 percent to the First Partner (first and second plaintiffs), and 40 percent as to the Second Partner (first and second defendants) and 10 percent as Bonus to the Technical Staff and they shall bear losses in the same proportion."

 

Clause 7

"That each of the Second Partner shall be entitled to a salary of N24,000 per annum and which is entitled to draw out of the Partnership Account at the end of each month commencing from 1 June 1978 - this making the sum of N8,000 payable to the Second Partner severally and jointly annually and the Second Partner shall jointly be entitled to a salary of N6,000 per annum and which is entitled to be drawn out of the Partnership Account at the end of each month commencing from 1 June 1981 . . . etc."

To me I cannot find any other agreement that let in the two defendants into the third plaintiff company except Exhibit 'SS'. The Exhibit 'SS' was an "open sesame" for the two to sit on the Board of third plaintiff as Directors but without shares or voting rights. Now Exhibit 'KK' mentions that the two defendants paid in N40,000 each on 5 May 1981. This has never been their case. At any rate that date of entry is remarkable, it was the date a resolution was alleged to have been passed to increase the share capital of the third plaintiff to N500,000, rejected by the trial Court and by the Court of Appeal. Secondly, Exhibit 'HH' containing the Minutes of the third plaintiff Board Meeting, never alluded to shareholding of any of these two defendants. It is instructive to see the Minute Book page by page:-

"(1)    Page 1 - meeting of 13 April 1979 where certificate of incorporation was produced. The defendants never attended, only first and second plaintiffs and Mr Oriogun of Mabs & Co Ltd.

(2)     Page 2 - Meeting of 7 February 1980. Present - first and second plaintiffs and first and second defendants. Among resolutions was the appointment of first and second defendants as directors along with first and second plaintiffs. There was nothing about shareholding.

(3)     Page 3 - Directors' Report with no recommendation for Dividends.

(4)     Page 4 - as at page 3.

(5)     Page 5 - 15 May 1980. To introduce two prospective Directors - one showed up, the other was absent.

(6)     Page 6 - 1 July 1980. Present were first and second plaintiffs and first and second defendants. Business -Directors' shareholding produced, opened and made accessible to those attending. All Directors confirmed.

(7)     Page 7 - Directors' Report on Balance Sheet as of 31 May 1979.

(8)     Page 8 - Attendance as in page 6. Shareholding produced.

(9)     Page 9 - As in page 6 for 31 May 1980.

(10) Page 10 - Attendance as in page 6. Business - Appointment of Bankers. Date 6.5.81. Nothing about shareholding.

(11) Page 11 - Date 16 October 1981. Second plaintiff absent but present were first plaintiff, first, second and for the first time third defendant. Appears disagreement on account of the company and breach in trust between first plaintiff and first defendant. It was suggested that the third defendant be appointed Director/Deputy Chairman with first plaintiff offering 9 percent of his own shares to third defendant. Offers accepted. (third defendant still a public officer)".

It could be observed that Exhibit 'KK' has not been supported in any material detail by Exhibit 'HH'; secondly the money brought into the country to pay for his alleged shares did not come, according to all evidence, both by the Central Bank and Ministry of Finance, before November 1982. Having found clearly that the entire nominal capital share of third plaintiff had been fully subscribed by 31 May 1981and finding that no resolution was passed on 5 May 1981 to increase the share capital to N500,000, with the attempt to claim Exhibit 'A1' was the authentic Memorandum and Articles of Association of third plaintiff, no circumstantial evidence will support Exhibit 'KK' as reflecting the true state of affairs as regards the shareholding. The pleas of the two defendants concerned was that they brought in money to pay for their allotment late in 1982. They cannot arrogate and subrogate at the same time.

Had the first and second defendants claimed they were entitled to transfer perhaps their case might have some weight. There was no alternative plea of transfer by these two defendants and Court of Appeal was totally wrong to have virtually so held. But the only agreement that I find linking them unambiguously with the third plaintiff company is the Partnership, Exhibit 'SS'. I have taken the trouble to enumerate the events leading the defendants 1 and 2 to the third plaintiff so that clearly one can see that the terms in clauses 3 and 7 concerning payment of salaries and the sharing of profits in Exhibit 'SS' were used as licence to claim ownership of shares. Clause 3 (supra) is what now becomes the claim of first and second defendants as right to share by allotment. The entry in 'KK', even though not adequately considered in the trial court, it is obvious both trial court and Court of Appeal made specific findings of fact:-

1.      That on 31 May 1981all the N200,000 shares being nominal capital of third plaintiff had been taken up and no more shares were available for allotment.

2.      That after 31 May 1981, whoever wanted to have interest in acquiring any shares in third plaintiff can only do so by way of transfer and not by allotment.

3.      That there was no allotment of shares on 5 May 1981 as claimed by the defendants 1 and 2 as reflected in Exhibit 'HH', Minutes of the company and that the claim of first and second defendants was that they brought money from outside the country to pay for their allotment. Nothing was paid for on 5 May 1981 and the Exhibit 'HH' does not reflect any shares being allotted before 31 May 1981. If first and second defendants brought in money, it was late in 1982 and the Central Bank and Ministry of Finance letters on this were dated in 1984.

It is therefore not right, after all the above findings of fact, and the fact that Exhibit 'A1' relied upon by first and second defendants as Memorandum and Articles of Association of third plaintiff was rejected by the two Courts as bogus, perhaps euphemism for forgery, to have deftly proceeded to hold again that these two defendants acquired shares. Exhibit 'LL' is a fabricated evidence and it is an extract of a minute of the Board of Director's Meeting purportedly held on 5 May 1981. Third defendant signed it an purports to show 40 000 shares allotted to first and second defendants. Its falsity was finally admitted in amended Statement of Defence, paragraph 50(b) thereof. Exhibit 'HH', Minutes Book never in fact reflect any meeting on that day. There is nothing in the pleading of the first and second defendants of any "transfer", none was proved either.

No increase in share capital from N200,000 to N500,000 and the two lower courts so held. It must however be recognised that by Nigerian Enterprises Promotion Act, and also by exchange Control Regulation aliens must seek consent of Ministry of Finance and Internal Affairs Ministry to participate in business venture in Nigeria. The permission of Ministries aforementioned and bringing in money from abroad through Central Bank cannot be prima facie evidence of allotment of shares. Shares are allotted if available. The aliens can thus only be allotted shares if the shares are available; and if not available by increasing share capital to accommodate them in the new shares. The other option is by transfer of shares by those who want to dispose of them. Of course aliens in such a situation can go to court, if they have firm agreement to the effect, for the company to increase share capital to accommodate them or to ask the court to compel some shareholders to transfer shares to them if they over subscribed their initial agreement on allotment. None of the above was the battle field in this case.

I find the two lower courts were in error to have held as they did to 'allot' shares that were legally no more available. I allow this appeal and hold that all the shares of third plaintiff, as on 31 May 1981belonged to the first and second plaintiffs. I further order that the authentic Memorandum and Articles of Association of third plaintiff is Exhibit 'A' as held by the two lower courts. I order injunction against first and second defendants from any interference with the affairs of third plaintiff and particularly from operating the account of third plaintiff in any bank whatsoever on the basis of Exhibit 'A1' or any other document whatsoever.

I also re-emphasise that the share capital of third plaintiff remains at N200,000 divided into 200 000 shares of N1 each and that first and second defendants are not shareholders of the third plaintiff company.

 

Third defendant

The plaintiffs' case against this defendant, Prince Ademiluyi, is that first plaintiff transferred to him 70 000 (35 percent of the company's) shares to which this defendant paid no consideration and on this basis first plaintiff contends that "there was a resulting trust in respect of the transfer for first plaintiff". This is reflected in paragraphs 18 and 19 of Statement of Claim. The Defence reacted by contending that as at the time of the transfer, the first plaintiff had no shares in the company as he had not paid even for his shares. The third defendant claimed his consideration for transfer to him was in consideration for him to leave the services of the National Electric Power Authority as Chief Legal Officer and this first plaintiff is estopped from denying third defendant the shares. The interesting portion of Statement of Defence is paragraph 69 which says:-

"69 . . .the shares currently held by the third defendant in Albion Construction Limited are so held on the basis of allotment made to him and paid for after the exit of the first and second plaintiffs from the company and not as a result of a transfer made by the first plaintiff."

Thus the third defendant denies a transfer and insist he had outright allotment. But learned trial Judge had held there was a transfer and may be supported in some way by the evidence of third defendant, to wit:-

"In respect of the (transfer) of 9 percent I have already told the court how it came about. Then in 1984 when Chief Okoya was leaving the company he transferred an additional 26 percent shares but in a letter to me he expressed the view that 14 percent of the 26 percent should be held on trust for his son, Ademola Okoya. He told me that the 12 percent was a gift to me in recognition of my activities in the company. So by the time he left in 1984 I was holding a total of 35 percent equity shares of Albion Construction Co Ltd - 21 percent for myself and 14 percent on trust for his son."

There must be certainty in any transfer and the consideration must be shown. The uncertainty between 20 percent and 25 percent shares in the company purportedly given to third defendant can never be removed by subsequent conduct of first plaintiff. Such evidence as available at the trial and argued in the Court of Appeal cannot be relied upon as constituting a contract. Chief Williams relied on sound English cases - James Miller & Partner Ltd v Whitworth Street Estates (Manchester) Ltd (1970) AC 572, 603, 606, 611 and 614; English Industrial Estates Corp v George Winpey Co Ltd (1973) 1 Lloyd's Report 118; Trollope & Colls Ltd v NW Metropolitan Hospital Board (1973) 1 WLR 601, 611; L. G. Schuler A. G. v Wickman Machine Tool Sales Ltd (1974) AC 235, at 252, 260, 261, 265-270 and 272; Arrale v Constain Civil Engineering Ltd (1976) 1 Lloyd's Report 98. The point was taken in the Court of Appeal though not argued before the trial court but being a point of law it was properly taken. Court of Appeal never made any pronouncement on this point even though Supreme Court in Peenok Investment Ltd v Hotel Presidential Ltd (1982) 12 SC 1, 56-57 cited with approval the statement of Denning M. R. in Vandervell's Trusts (1974) Ch D 269, 322 as follows:-

"It does appear that Mr Mills put the case before us differently from the way it was put before the Judge: but this did not entail any difference in the facts, only difference in legal consequences. So it was quite open to him."

The third defendant was on one hand claiming allotment in his pleadings and on the other transfer for consideration for giving up his job with NEPA to devote full time to third plaintiff's affairs. The evidence of this witness (third defendant) ought not to have been believed. He claimed he had, since 1981, been assisting the third plaintiff to procure contracts with NNPC, NPF and IGL projects, and also many other projects. He was also responsible for procuring facilities from banks for the third plaintiff on the premise that for all his efforts he would always receive as commission 1 percent of value of any contract procured by him for the company. As Chief Legal Officer of NEPA, he was a public officer. As such he was not supposed to engage in any other business - see code of Conduct Act Section 2(b). To so engage in such business is an offence under Section 20(1)(supra) and thus punishable. He participated in running third defendant company and signed Minutes of the company while still an officer of NEPA -See Exhibit 'HH'; several annual accounts and balance sheets of the company. He left NEPA in 1983 but his active participation in third plaintiff's affairs started in 1981. The reasons for the transfer, if there was any, of shares to him was to actively participate in the management and running of the third plaintiff. This is clear in Exhibit 'HH' I alluded to earlier. Thus the entire transaction in shares of third plaintiff to him was tainted ab initio with illegality. The third defendant as a lawyer ought to know this. The trial Judge held that illegality ought to have been pleaded. With respect, this is not right. Pleadings, I must restate, shall contain and contain only statement of facts upon which a party relies for his case, and not the law nor the evidence by which those pleaded facts are to be proved. Odunowo J at trial Federal High Court held public servants are constantly appointed into Boards of Banks and Statutory Corporations on behalf of Ministry of Finance Incorporated. This is true because that is permissible in law governing those statutory corporations and government owned Banks. Albion Construction Ltd is a private company and has nothing linking its administration with NEPA that third defendant served as Chief Law Officer. Araka CJ was certainly wrong in Ogbuagu v Ogbuagu (1981) 2 NCLR 680, 684 that in a matter of this nature where the jurisdiction to try an illegality is vested in another tribunal. Where a Court of law, in the course of trial of a matter finds an illegality punishable under the law, even if not triable in that court but in another tribunal, without prejudice to its referring the matter to that Tribunal, must take cognisance of the illegality. Once a transaction is illegal, it is void and all things emanating from that transaction is a nullity. The third defendant's later leaving NEPA will not legalise what was patently illegal transaction he entered into while he was a public officer. The shares that could be said to be held by the third defendant will be 70 000 shares subject to a resulting trust in favour of the first plaintiff.

I therefore make the following orders in respect of the main appeal:-1. First plaintiff owns 199,998 shares in the company.

2.      First and second defendants have no shares whatsoever in the company, they were only in the company by virtue of Exhibit 'SS'.

3.      The third defendant owns 35 percent (70 000) shares subject to a resulting trust in favour of the first plaintiff.

4.      The third defendant should execute an instrument of transfer in favour of first plaintiff, transferring to that plaintiff the 35 percent shares held as mentioned in (3) above in his (third defendant) name.

5.      The decision that third defendant holds shares other than as trustee of first plaintiff is hereby set aside.

6.      The decision of Court of Appeal on injunction restraining the defendants from managing or operating the accounts of the company is set aside and the injunction of the trial court is restored.

I award N1,000 as costs of this appeal in this Court against each defendant.

As for cross-appeal, the reasons advanced in the main appeal are ample enough to cover it. The entire N200,000 share capital of third plaintiff were taken up and owned by first and second plaintiffs as of 31 May 1981. The cross appeal is therefore without merit and it is hereby dismissed. No order as to costs will be made for failure of cross appeal.

 

Iguh, JSC:- I have had the privilege of reading in draft the lead judgment of my learned brother, Belgore, JSC, just delivered.

I entirely agree with the reasoning and conclusion therein. I wish however to add a few words of my own on the all important issue of the share capital of the third plaintiff company together with whether or not the first and second defendants are share holders in the company.

In this connection, the trial court after an exhaustive consideration of the evidence found that:-"the paid up share capital of the company still stands as at today at N200,000."

Earlier on in his judgment, the learned trial Judge, Odunowo, J had held as follows:-

"I am convinced that on balance, the contention of the plaintiffs are right in the sense that the share capital as at 31 May 1981 stood at N200,000."

(My emphasis.)

The above findings were not disturbed by the Court of Appeal in the face of abundant evidence in support thereof. Indeed, the Court of Appeal, in accepting those findings of Odunowo, J per the lead judgment of Ademola, JCA observed as follows:-

"The contention of the defendants that the share capital of the company is otherwise than N200,000 and have not been fully paid for, fails."

A little later in the said judgment, the Court of Appeal continued as follows:-

"The defendants cannot, in view of the overwhelming evidence in this case (be heard) to dispute the fact that N200,000 were fully paid for as at 31 May 1981. The first and second plaintiffs had a 100 percent ownership of the shares of the company. As both of them were at that time the only members of the company, it was clear that they and they only paid for the shares". (My emphasis.)

It is therefore crystal clear, and this is of vital importance in the determination of this appeal, that there are concurrent findings of facts by both the trial court and the Court of Appeal to the effect that as at the 31 May, 1981 the entire 200 000 shares of the third plaintiff company had been fully allotted and paid for. Indeed the Court of Appeal further found, and quite rightly in my view, that the said shares were fully paid for by the first and second plaintiffs and that there could not have been any acquisition of shares in the third plaintiff company by the defendants by way of allotment after the said 31 May, 1981. In this regard, the court below commented thus:-

"Agreeing with Chief Williams' submission that if by 31 May 1981 the 200 000 shares had been fully paid for mostly by the first plaintiff through the Director's (of) credit account of the company, and this is the finding of the learned trial Judge in the earlier part of the judgment, it follows, and the argument is very compelling, that anybody besides the first and second plaintiffs who wants to acquire shares in the third plaintiff company after the 31 May, 1981 must do so by transfer from the first plaintiff or his wife if they are prepared to transfer their share. Acquisition of shares in this company cannot therefore be by way of allotment."

I have laboured to no small extent to ascertain whether the aforesaid concurrent findings ought to be disturbed by this Court. However, in the face of overwhelming evidence in support thereof; in the absence of any apparent and substantial error on the face of the record of proceedings upon which they were based; the said findings not being perverse and there being no miscarriage of justice or special circumstances to justify their reversal; this Court has no option but to uphold them as fully established. See Chiwendu v Mbamali (1980) 3-4 SC 31 at 75; Lamai v Orbih (1980) 5-7 SC 28; Ibodo v Enarofia (1980) 5 SC 42; Woluchem v Gudi (1981) 5 SC 291 at 326; Kola v Coker (1982) 12 SC 252; Lokoyi v Olojo (1983) 2 SC NLR 127 at 131; Igwego v Ezeugo (1992) 6 NWLR (Part 249) 56; National Insurance Corporation of Nigeria v Power and Industrial Engineering Co Ltd (1986) 1 NWLR (Part 14) 1 at 36; Eholor v Osayande (1992) 6 NWLR (Part 249) 524 at 548 etc.

It is not disputed that the first and second defendants were directors of the third plaintiff company from around February 1980. It is also not open to question that the sum of money imported into the country by the first and second defendants as their alleged subscription to the capital of the company was only transferred sometime between June and the end of 1982. The said money was therefore transferred well over one year after the 31 May, 1981 on which date all the shares in the company had been fully taken up and paid for by the first and second plaintiffs. It seems to me plain in the circumstances that the above concurrent findings of facts, which, as I have observed, I have no reason whatsoever to interfere with, completely ruled out the first and second defendants' claims to any shares in the company by way of allotment. This is because the first and second defendants' alleged subscription to the capital of the company was only imported into the country after the 31 May, 1981 as aforesaid. And as at the said 31 May, 1981 up to the present moment, it is clear from the established facts of this case thatnot one single share of the company remained available for allotment to any one. In my view, the aforesaid concurrent findings are more than sufficient for any court to arrive at the inevitable and inescapable conclusion that the first and second defendants on the balance of probability acquired no shares by way of allotment from the third plaintiff company. Equally, they are more than enough to sustain the dismissal of the claims of the first and second defendants in respect of their alleged ownership of shares in the third plaintiff company by way of allotment.

With great respect to the learned Justices of the Court of Appeal, I find it extremely difficult to appreciate how in the face of the foregoing findings, they were able to plunge into the arena of speculation and proceeded to hold that the first and second defendants must have acquired the shares they claimed by way of transfer or sale. The said court, per Ademola, JCA, concluded as follows:-

"Acquisition of shares in this company cannot therefore be by way of allotment. It follows therefore that acquisition of shares by the first, second and third defendants must be by way of transfer or sale . . .(My emphasis.)

With profound respect, it must be pointed out that this resolution of the issue under consideration by the court below is totally unsupported by the evidence before the court and contrary to the contentions of the parties both in their pleadings and in their viva voce evidence before the trial court. The first and second defendants neither pleaded nor based their claim on transfer or sale of the shares they claimed. On the contrary, they specifically pleaded in their Statement of Defence and based their entire claim to shares in the third plaintiff company by way of allotment. I entertain no doubt, with all due respect to the court below, that their finding to the effect that the first and second defendants are shareholders in the third plaintiff company by way of transfer or sale is a gross misconception and a serious error in law. This is so for several reasons.

In the first place, it is not the duty of a court to endeavour by examination of the evidence to deduce what ought to be or might be the true nature of a claim by a party to a dispute and then proceed to make a declaration or finding which such a party has not specifically sought and may not in fact desire. It would be certainly improper for the court so to do unless, of course, it were prepared to order an amendment of the pleadings in which case it would be necessary to give the other party an opportunity of what would be an entirely different case. See Emegwara v Nwaimo 14 WACA 347 at 348. Put differently, it is not and has never been the function of a court of law by its own ingenuity or exercise to imagine, speculate on or to supply evidence or work out the mathematics of arriving at an answer in a case which only evidence tested under cross-examination could supply. See George Ikenye & another v Akpala Ofune & others (1985) 2 NWLR 1.

In the second place, it is a basic principle of law that parties are bound by their pleadings and that evidence which is at variance with the averments in the pleadings goes to no issue and should be discountenanced or disregarded by the court. See Emegokwue v Okadigbo (1973) 3 ECSLR 267; Ekpenyong & others v Chief Ayi (1973) 3 ECSLR 411; Kalu Njokwu & others v Ekwu Ene & others (1973) 5 SC 293 etc.

Thirdly, it is a fundamental principle in the determination of disputes between parties that judgment must be confined to the issues raised by the parties in their pleadings and not otherwise. It is therefore not competent for the court suo motu to make or formulate a case for either or both of the parties and then proceed to give judgment on the case so formulated contrary to the case of the parties before it. See Commissioner for Works Benue State & another v Devcon Development Consultants Ltd & another (1988) 3 NWLR (Part 83) 407; Ochonma v Oshirim Unosi (1965) NMLR 329; Nigerian Housing Development Society Ltd & another v Yaya Mumuni (1977) 2 SC 57; Adeniji & others v Adeniji & others (1972) 1 All NLR (Part 1) 278 and ACB Ltd v Attorney-General, Northern Nigeria (1969) NMLR 231. To act otherwise might well result in the denial to one or the other of the parties of his right to fair hearing. See Metalimpex v A-G. Leventis and Co Ltd (1976) 2 SC 91; Alhaji Ogunlowo v Prince Ogundare (1993) 7 NWLR (Part 307) 610 at 624 and Oniah v Onyia (1989) 1 NWLR (Part 99) 514.

As I have already stressed, the first and second defendants at no time pleaded or relied on their acquisition of shares in the third plaintiff company by way of transfer or sale. There was in fact no iota of evidence from the first and second defendants on the issue of their alleged acquisition of shares in the third plaintiff company by way of transfer or sale. In the circumstance, it seems to me clear that the court below by wading into an issue neither pleaded nor relied upon by the defendants obviously slipped and consequently fell into a serious error of law which resulted in its erroneous allocation of non existent shares to the first and second defendants. It appears to me that the first and second defendants having failed to prove the case of allotment which they pleaded, that should have been the end of their claim in respect of title to any shares in the company. It is my view that in the face of the evidence before the court, both the trial court and the court below should have had no option than to dismiss the first and second defendants' claims as misconceived and lacking in merit. This is without prejudice to whatever claims the first and second defendants may have against the plaintiffs in connection with whatever amount they imported into the country in respect of the affairs of the third plaintiff company.

It is for the above and the more elaborate reasons set out in the lead judgment of my learned brother, Belgore, JSC, that I too would allow this appeal. The cross-appeal is without merit and it is hereby dismissed. I endorse all the consequential orders in the lead judgment in their entirety including those as to costs.

 

Onu, JSC:- When this appeal came up for hearing on 24 January, 1994, it underwent the following preliminaries. Firstly, upon Chief Williams, learned Senior Advocate for the plaintiffs/appellants/respondents leading his team of learned Counsel getting up to submit that they filed a brief dated 8 May, 1992 and that they wished to adopt same, learned Senior Advocate, Chief Benson for the defendants/respondents/cross-appellants, quickly got up to observe that after receiving the appellants' brief, they for their part, filed a respondents' brief dated 20 August 1992. That thereafter, they applied to cross-appeal and that that application having been granted, they proceeded to file a brief in cross-appeal dated 26 August 1992. Learned Counsel then pointed out how that morning he drew Chief Williams' attention to the fact that he had up till then not received from him (Chief Williams) a respondents' brief in response to his (Chief Benson's) cross-appellants' brief. The reply he received from Chief Williams was succinctly that he did not deem a respondents' brief to his (Chief Benson's) cross-appeal necessary.

We heard it all from the horse's mouth when Chief Williams rose to say that they felt no need to file a respondents' brief in response to the cross-appeal, adding that their original brief on the main appeal (i.e. that filed on 8 May, (1992 covered everything he needed to say.

Having previewed the preliminaries, I must pause here to set out in brief the facts of the case from inception as suit no. FHC/L/39/88 in the Federal High Court sitting in Lagos (per Odunowo, J) to Suit no CA/L/44/89 in the Court of Appeal held in Lagos, which has culminated in the decision of the court below dated 5 April, 1990 now on appeal to this Court.

The first and second plaintiffs suing for themselves and in a representative capacity for the other alleged shareholders, Messrs L.A. Balogun and L.S. Balogun, claimed against the three defendants 100 percent total ownership (of the shares) of the third plaintiff company. Pleadings were ordered, filed and exchanged.

The first and second plaintiffs sought in the amended Statement of Claim and in the Oral Further amended Statement of Claim thus:-

1.      A declaration that the document described as Memorandum and Articles of Association of Albion Construction Limited dated 16 September 1976 and admitted as Exhibited 'A' and to which the first and second plaintiffs were subscribers is the only true Memorandum and Articles of Association of the third plaintiff.

2.      In the alternative to claim (1), a declaration that the aforementioned document is a true and authentic copy of the only document submitted for registration to the Registrar of Companies by the promoters of the third plaintiff company.

3.      An injunction restraining the first, second and third defendants and/or any other persons acting with or on their direction or authority from conducting the affairs of the third plaintiff and in particular from operating the account of the third plaintiff in any bank whatsoever on the basis of any Memorandum and Articles of Association other than that mentioned in claim (1).

4.      In the alternative to (3) an injunction restraining the first, second and third defendants and/or any other person acting with or on their direction or authority from conducting the affairs of the third plaintiff company in any Bank whatsoever on the basis of the document purporting to be the Memorandum and Articles of Association of the third plaintiff company and carrying the signature of the first and second plaintiffs as well as the three defendants as subscribers.

5.      A declaration that the nominal share capital of the third plaintiff company is N200,000 divided into 200 000 shares of N1 each.

6.      A declaration that the first and second defendants are not shareholders of the third plaintiff company.

7.      A declaration that all shares held by him in trust for the first plaintiff and an order directing the third defendant to execute an instrument of transfer in favour of the first plaintiff.

 

The defendants jointly and severally denied the plaintiffs' claims and pleaded in their paragraph 72 of the amended Statement of Defence thus:-

1.      A declaration that the Memorandum and Articles of Association purportedly certified on the request or on behalf of first and second plaintiffs through their Solicitors by the Office of the Registrar of Companies on 28 March, 1988 was procured irregularly and in breach of the laid down procedure without satisfying the Registrar of Companies as to the authenticity of the document.

2.      That the defendants are lawful directors and shareholders of Albion Construction Limited and that from 1984 when the first and second plaintiffs resigned their membership and directorship of Albion Construction Limited they automatically ceased to be members and directors of the company and accordingly have no say in the affairs of the company.

3.      That the authorised share capital of Albion Construction Limited is now N500,000.

4.      That no shares are held in trust for the first plaintiff by the third defendant.

5.      That the names of the defendants are in the Register of Shareholders and Registrar (sic) of Directors of Albion Construction Limited.

6.      That the names of the first and second plaintiffs cannot and should not be in the Register of Members of Register of Directors of Albion Construction Limited.

After evidence was adduced on all sides and Counsel had addressed the trial court, the latter in a reserved judgment (See pages 499-559 of Vol. II of the Record) while rejecting the 100 percent ownership of the third plaintiff's shares as claimed by the first and second plaintiffs, held, inter alia:-

1.      That the Memorandum and Articles of Association put forward by the first and second plaintiffs - Exhibit 'A' is the only true Memorandum and Articles of the third plaintiff company.

2.      That the nominal share capital of the third plaintiff company is N200,000 and not N500,000.

3.      That all the parties to the Suit are share-holders of the third plaintiff company in the following proportions:-

first plaintiff                    -50 percent

second plaintiff              -1 percent

first defendant              -20 percent

second defendant        -20 percent

third defendant            -9 percent

4.      That the third defendant should execute an instrument of transfer in respect of 51 percent or 102 000 shares held by him on trust in favour of first plaintiff.

5.      That the defendants are restrained from conducting the affairs of the third plaintiff company and in particular from operating the account of the said company in any bank whatsoever on the basis of any Memorandum and Articles of Association other than that mentioned in paragraph (a) above.

Being dissatisfied with this decision the plaintiffs/appellants/respondents (hereinafter referred to simply as appellants) appealed to the Court of Appeal, Lagos, which in a considered judgment, set aside the decision of the trial court (much to appellants' disapproval) as being contrary to their contentions when it held, inter alia, thus:-

1.      "It is hereby declared that the share holding of the respective members of the company are as follows:-

-first plaintiff                      19.995%              N39,999

-second plaintiff                  .0005%              N1

-first defendant                     20%                 N40,000

-second defendant                20%                N40,000

-third defendant                      21%               N42,000

-L. S. Balogun                        10%               N20,000

-L. A. Balogun                         9%                N19,000                   

                                                                    N200,000

2.      The shareholding of 19.9995 percent in favour of the first plaintiffs inclusive of the 14 percent held in trust for him by the third defendant.

3.      It is hereby ordered that the third defendant should execute an instrument of transfer of the 14 percent shares accordingly.

4.      The order restraining the defendants from conducting the affairs of the third plaintiff company and, operating the account of the said company in any bank whatsoever is hereby set aside. They are however, not to conduct the affairs of the company or operate its account on the basis of the Memorandum and Articles of Association Exhibit 'A1' raising the share capital of N500,000.

5.      It is hereby declared that the nominal share capital of the third plaintiff company as at the time of this action was instituted remained at N200,000 divided into 200 000 shares of N1 each and not N500,000 as alleged by the defendants."

It is against this judgment that the appellants have further appealed to this Court. The defendants/respondents (hereinafter referred to as respondents) later cross-appealed as hereinbefore mentioned. Both parties filed briefs of arguments by their Senior Counsel in accordance with the rules of this Court as elucidated earlier on in this judgment.

The questions submitted on behalf of the appellants for determination as far as the shares of the third appellant are concerned are:-

A.      The shares of first and second appellants:-

Whether the first and second defendants ever acquired shares by transfer from the first plaintiff.

B.      Shares of the first and second respondents:-

Whether the court below was correct in failing to consider and uphold the contention of the plaintiffs that the third plaintiff company had issued all its shares to the first and second plaintiffs by 31 May 1981and there were no shares available to be issued to the first and second defendants at the time they claimed to have paid for shares allegedly allotted to them.

C.      The shares of third respondent:-

Whether the court below ought to have held that:-

(i)      The transfer (and accordingly the underlying contract) whereby in exchange for shares transferred to him by the first plaintiff, the third defendant was obliged and required to participate in the management and running of Albion Construction Limited, was one which was impliedly prohibited by Section 2(b) of the Code of Conduct for Public Officers under the 1979 Constitution and is therefore illegal and void;

(ii)     Whether the shares held by the third defendant were held by him in trust or for his own benefit.

D.      Court of Appeal's Order on injunction:-

Whether the order of the Court of Appeal setting aside the order for injunction made by the Federal High Court was justified.

The respondents for their part also formulated four issues for our determination, to wit:-

(a)     Are the first and second defendants shareholders of the third plaintiff company, and if so, how did they acquire their shares and or have they any interest in 40 percent of the shareholding of the third plaintiff.

(b)     Whether the third defendant is a share-holder of the third plaintiff company and if so how many of the shares held by him are for his own benefit and how many are held by him in trust for the first plaintiff.

(c)     Whether the order of the court of appeal setting aside the order for injunction made by the Federal High Court was justified.

(d)     How many of the shares held by the third defendant beneficially (if some are so found) were acquired in contravention of Section 2(b) of the Code of Conduct for Public Officers under the 1979 Constitution.

At the hearing of this appeal on 24 January, 1994 learned Senior Counsel on either side adopted their briefs and elaborated thereon in extenso. Chief Williams in expatiation of his brief submitted that in relation to their appeal they had set out three questions at page 1 of their brief i.e. (A) the identity of the Memorandum and Articles of Association; (B) the share capital and (C) the share holding. While question (A) was decided in their favour, he pointed out, question (B) was decided substantially in their favour too, adding that the only question he wished to highlight was question (C). As a foundation for the judgment of the Court of Appeal in respect of shareholding, learned Counsel referred us to page 673, last sentence to page 674, lines 1 to 3 in Vol. IV of the Records. The respondents' contention at page 676 lines 8-10 of the Record that the share capital of third appellant was otherwise than N200,000 and had not been fully paid for would fail, argued learned Counsel. This point, he said, would seem to have been accepted by Ademola, JCA in his judgment at page 684, last paragraph to page 685, lines 1 and 2. Since it was therefore not first and second respondent's case that they acquired membership of third appellant by transfer of shares, he argued, one could not possibly reach that conclusion on how the first and second respondents came to acquire their shares. Learned Senior Advocate adverted our attention to page 25, paragraph 5.3 and page 26 of his brief. After referring to the counterclaim at pages 345 and 346 in paragraph 72 of the first to third appellants' amended Statement of Defence, particularly paragraph 6 thereof, learned Counsel submitted that first and second respondents did not claim before the trial court acquisition of their shares by transfer - there being a world of difference between buying shares by way of transfer in which case the buyer pays money to the one from whom he buys and buying of shares by paying to the company directly. In relation to third respondents shares learned Counsel referred us to pages 28 and 30 of his brief and submitted that he adopted all arguments he proffered therein. Learned Senior Advocate in this regard further referred us to page 35 at paragraph 6.6 on the effect of Code of Conduct, adding that Ademola, JCA agreed that there was indeed a breach of the Code of Conduct vide Section 2(b) of the Code of Conduct for Public Officers by third appellant as illustrated at pages 42-44 of appellants" brief. Learned Counsel however urged us to seize this opportunity to overrule the case of Ogbuagu v Ogbuagu (1981) 2 NCLR 680 at 684 which, he argued was wrongly decided.

On the order of injunction learned Senior Advocate referred us to page 48 of the appellants' brief and maintained that there were two Articles and Memoranda of Association (Exhibits 'A' and 'A1') which were before the trial court, the latter (Exhibit 'A1') which it ruled as a bogus document. In view of that conclusion which was perfect decision, argued learned Counsel, there was no need for the court below labouring under a misapprehension, to have attempted to interfere with the order for injunction the trial court made.

Making further expatiation on the question of Code of Conduct, learned Counsel said that he wanted to correct his learned friend's impression that unless corruption was proved there could be no finding against a person. He adverted our attention to pages 35 and 36 of his brief read together with page 423 (Vol. II of the Records).

On partnership agreement (Exhibits 'SS') we were referred to page 654 in Vol. II of the Records depicting that Exhibit 'SS' was signed on 6 July 1978 where in parties were not talking of the ownership of the any company but rather a business for the sharing of profits.

We were thereafter referred to page 499 (the judgment of the trial court) which learned Counsel submitted, had nothing to do with Exhibit 'SS' - document neither pleaded nor in the evidence adduced and in the briefs, adding that nobody is talking about breach of the document but rather on profit-sharing which was never an issue before the trial court. What was in issue, learned Counsel asserted, was that of sharing-holding, adding that if any money was paid by first and second respondents, this was done after third appellant had issued all its shares, as fully paid. Learned Senior Counsel further contended that the question of application to Ministry of Finance, etc. for first and second respondents to participate in third appellant company would not since there should have been a permit for them (first and second respondents) to bring into Nigeria the money to buy the shares in third appellant company. And if the first and second appellant disappointed them, they could have sued for specific performance. Our attention was finally drawn to paragraph 50 of the respondent's amended Statement of Defence at page 341 (Vol. 1) of the Records where after first and second respondents had averred that they both held 40 percent of the combined share holding of third appellant pleaded that they had "lawfully 40 percent of the authorised share capital of Albion Construction Limited which is now N500,000 ."

The learned Senior Advocate in conclusion referred us to the counter-claim by the respondents at pages 501 at the bottom of page 502.

Chief Benson, learned SAN, on behalf of the respondents after adopting his brief dated 20 August 1992, submitted firstly in respect of the order of injunction that his contention relating thereto is to be found at paragraphs 3.1 and 3.2 on pages 25 and 26 of their brief.

Secondly, and in relation to the two Memoranda, learned Counsel submitted that while one was held to be bogus, the other (the first one) was held to be genuine. That while the trial Federal High Court made an order respecting Exhibit 'A1' rejecting it in evidence, the court below also made its own specific order thereto, adding that the specific order made by the court below was correct. We were referred to pages 16, 17 and 18, particularly paragraphs 2, 7.2 at page 18 of the respondents' brief in relation to the transfer of shares in third appellant company and from first appellant to third respondent, adding that nobody would be allowed to benefit from illegality.

Thirdly, and in regard to Code of Conduct, learned Senior Advocate adverted our attention to page 19 of his brief for the view that whoever felt the third respondent had breached the Code of Conduct ought to report him to the Code of Conduct Bureau which ultimately makes a finding of fact that he among other things corruptly acquired shares. However, since there was no evidence apart from that emanating from the third respondent himself, this Court should not disturb the decision of the court below. Learned Senior Advocate while conceding that being a director while still a public servant is an illegality, he would not admit that to acquire shares only from a company is an illegality. Hence, the 9 percent acquisition of the share capital of third appellant company by third respondent while in office would not result in an illegality.

Fourthly, regarding the shareholding of the first and second appellants in the third appellant (Albion Construction company) the company itself, learned senior Advocate asserted, took off in 1976 with a share each of N1 that in 1978 first and second appellants invited the first and second respondents who are aliens. Being aliens, both first and second respondent, it stated, could not directly partake in the shareholding of third appellant company. Hence, they entered into a partnership agreement (Exhibit 'SS'), the latter in which the mode of shareholding was depicted as 50 percent to first and second appellants, 40 percent to first and second respondents and the remaining 10 percent to members of staff.

The first and second respondents being aliens, they applied to Government to enable them participate in third appellant company. Steps were therefore taken to get them the permission vide pages 6, 7 and 8 of the respondents' brief. It was then shown that they (first and second respondents) paid in foreign exchange and the money went into third appellant's account. Learned SAN then explained that the problem that arose was that as at 31 May 1981 when the first and second respondents signed a balance sheet of third appellant company showing a transfer of a sum of N199,998 from director's account to make up for the N200,000 shareholding the shares were fully paid. The appellants' assertion that they owned the 200 000 shares as found by trial court and the court below, especially with regard to the latter, maintained Counsel can be seen at page 9, paragraph 1.3.1 to page 10 of the respondents' brief. These findings, he submitted, are concurrent findings of facts. Ademola, JCA, learned Counsel then pointed out, did find that because of the finding in Exhibit 'HH', the first and second respondents had lost their rights under the partnership agreement (Exhibit 'SS'). He therefore submitted that as at 1978, the first and second respondents had an equitable right to enforce their rights under Exhibit 'SS' adding that first and second respondents being part and parcel of that agreement, had no right to resile from the partnership agreement. Pages 4, 5 & 6 of the cross-appellant's brief. Our attention was thereon drawn to Ademola JCA's finding, a view with which Akpata, JCA (as he then was) did not share vide page 5 of the cross-appellants' brief dated 26 August 1992. Where there is an equitable right that could be confirmed, argued learned Senior Advocate, it would not be overthrown. He relied for support on the contents of pages 12, 13 and 14 respectively of the cross-appellants' brief and finally urged us to dismiss the main appeal and uphold the cross-appeal.

I will now consider the issues as formulated by the appellants (respondents' issues being similar) in their order of sequence as follows:-

 

Issues A & B

As pointed out elsewhere in this judgment, the court below by its decision set out above had set aside the decision of the trial Federal High Court on question C and proceeded to resolve same in a manner contrary to the contentions of the appellants. As can be seen, the court below in effect, made orders purely ancillary to their decision on question C; hence the appeal and cross-appeal herein. In so far therefore as questions A and B are taken as having been substantially disposed of, I shall, where applicable for the purposes of this appeal regard them as concurrent findings of fact of both the Federal High Court and the Court of Appeal, with which this Court will be loath to interfere in as much as there are no special circumstances to warrant us to do so; the decisions not having been shown to be either erroneous or perverse. This Court has by a long line of decided cases established this principle to need any further re-echoing. Such decisions to mention but a few are:-

1.      Ukpe Ibodo v Iguase Enarofia (1980) 5-7 SC 42 at 55

2.      Lokoyi & another v Olojo (1983) 8 SC 1

3.      Uredi v Dada (1988) 1 NWLR 237 at 254

4.      Mogo Chinwendu v Nwanegbo Mbamali (1980) 3 SC 31

5.      Etowa Enang v Ikor Adu & others (1981) 11-12 SC 25 at 30-40

6.      Chukwuogor v Obuora (1987) 3 NWLR 454 at 457

7.      Ezeudu v Obiagwu (1986) 2 NWLR 208 at 215 and

8.      Atuyeye v Ashamu (1987) 1 NWLR 267.

I think it pertinent to refer to a few examples if only to elucidate the point. At page 673, line 7 on to page 674 lines 1-3 in Vol. IV of the Records, the Court of Appeal (per Ademola, JCA) had this to say:-

"The plaintiffs submitted that Exhibits 11 and 12, the company's balance sheet for 1978/79 and 1980 which was signed by one or other of the defendants belied the contention of the defendants that the N2 shares were not paid for. Also Exhibit 'U' supports the payment of N2. The plaintiffs contend that the only issue is whether the shares of 199, 998 in addition to the one share each were paid for.

The plaintiffs relied on the evidence of Chief Adelusi who confirmed paragraph 17 of the Statement of Claim that the additional 199, 998 worth of shares were paid for by transferring the sum from the amount standing to the credit of the first plaintiff as a Director to the third plaintiff share capital account as reflected in the audited account. Chief Adelusi was a witness for the plaintiffs as well as for the defence. plaintiffs can use his evidence to support their case. See the case of Faloju v Amosu 1983 NSCC page 454 at page 461; Adebambo v Olowosago (1985) 3 NWLR page 207 at 215. Chief Adelusi being a defence witness, the defence must take the consequences of his evidence.

The plaintiffs submitted that the balance sheet, particularly Exhibit 'H9' which was signed by the second and third defendant is conclusive on the issue as to the full payment of the shares of the company, and the Director' Report, Exhibit 'YY' given in accordance with Sections 120 and 150 of the Companies Act puts the matter beyond dispute. The defendants cannot, in my view of the overwhelming evidence in this case be heard to dispute the fact that N200,000 were fully paid for as at 31 May 1981. First and second plaintiffs had a 100 percent ownership of the shares of the company both of them were at that time the only members of the company, it was clear that they and they only paid for their shares."

Thus, even though Ademola, JCA who wrote the lead judgment later stated, erroneously though in my view, that the words transfer and allotment were interchangeable - these being words of art that have received judicial interpretation and recognition for all times and can in no way be used interchangeably - had dealt a mortal blow to the respondents' case when the learned Justice further held at page 676, lines 8-11 of the Record thus:-

"The contention of the defendants that the share capital of the company is otherwise than N200,000, and have not been fully paid for, fails."

Hence, in my view, no one can at that point in time (31 May 1981) acquire shares in third appellant company. This is because, since first and second respondents' case is that they acquired membership of third appellant by transfer of shares one cannot possibly reach that conclusion as to how they came to acquire their shares. Transfer of shares if any, could only have emanated from first or second appellant. And if it was acquisition of shares by way of allotment, such acquisition of shares by first, second and third respondents must perforce be from third appellant. See Section 75 of the Companies Act, 1968. Be that as it may, PW5, Adelusi had testified both as plaintiff's witness and as a defence witness uncontroverted to the effect that the N200,000 capital shareholding of third appellant had been fully subscribed by 31 May 1981 and this amounted to the respondents' own funeral since they cannot be heard to argue otherwise than their own witness has bluntly and factually put it. In law, a party guarantees the reliability of the witness procured by him. See Onubogu v The State (1974) 9 SC 1 at page 20, See also Cross on Evidence at page 270.

In saying, all I have said above, I am not unmindful of Exhibit 'GG' dated 11 November 1981 in which it is claimed that the first appellant acknowledged that the second respondent (Davanzo) held 20 percent shares (yet to be settled) and upheld by the two courts below. However, there is a discordant note emanating from Exhibit 'RR8' in which third respondent was writing to PW5 on 6 October 1984 in his own handwriting - over three years after the share capital of third appellant had been fully paid up at 200 000 shares when he said inter alia therein that:-

"You will find enclosed a letter from Chief Okoya instructing that an additional 12 percent shares be transferred to me. My total shareholding will now be 21 percent. . .

Kindly prepare the necessary Transfer form/papers before our arrival. . ." (My emphasis.).

While Exhibit 'RR8' (supra) talks of 21 percent as second respondent's shareholding, Exhibit 'P' is a letter from the Administrative Manager of third appellant company to the Permanent Secretary, Federal Ministry of Finance asking for approval status for both first and second respondents and the necessary foreign money from their country (Italy) "to pay for their 40 percent contribution" i.e. "the transfer of N100,000 being 40 percent of the N200,000 of the company".

Apart from the contradiction on these documents there is no evidence that after 31 May 1981 when the 200 000 shares of the third appellant were said to have been fully paid up as endorsed by the two courts below, there is no assertion or suggestion that any other person or persons apart from first and second appellants contributed cash or services to the share capital of third appellant. Moreover, there is no book of third appellant bearing any transfer or allotment of third appellant's shares to any member(s) placed before us. Be it noted too that with the rejection of Exhibit 'A1' any purported expansion in the capital shareholding of third appellant as would suit the respondents other than that contained in Exhibit 'A' had been effectively blocked. A fortiori, Exhibit 'A' being the uncontroverted Memorandum and Articles of Association of third appellant company to which first and second appellants subscribed, is the only true Memorandum and Articles of Association of the third appellant. This is irrespective of the fact that first appellant by his own self admission resigned as a member of the company only later to return thereto. That the first appellant did not testify at the trial or that he resigned from the third appellant for sometime, in my view, would not detract from my conviction that the respondents did not and could not establish their case by incontrovertible evidence at the trial. In the first place, none of the respondents could be heard to say that all the shares were not allotted as at 31 May 1981. If any of them had said so, he would be contradicting what he had declared and signed in Exhibits 'H3' and 'H9' each in which the share capital of third appellant company is depicted as 200 000 ordinary shares of N1. Furthermore, it must be borne in mind that Exhibit 'H9' was signed by second and third respondents who equally signed Exhibit 'YY'. First respondent also signed some of the Balance sheets (Exhibits 'H1' and 'H5') showing that all the shares had been fully subscribed. Hence, any oral evidence to the contrary by any of the respondents is simply unworthy of credit vide Onubogu v The State (1974) 9 SC 1. Nor is the fact that they acted as directors of third appellant (a thing the Companies Act allows) makes them members of the third plaintiff as shareholders.

In the light of the above, the imperative question to ask is did the first and second respondents actually acquire the shares of third appellant? In other words, can first and second respondents be said to be members of the third appellant? If so, how did they acquire their shares - by transfer or allotment? My answer to the first question in the light of all I have said hereinbefore, is in the negative by reason of the fact that by 31 May 1981 the share capital of the third appellant was 200 000 shares at N1 by way of a 100 percent share holding vested in the first and second appellants. In answer to the second question it is pertinent first to dispel the notion created by the court below that the words Allotment and Transfer could be used interchangeably. I had been given, sold or apportioned directly by and from the company (on the resolution of a Board of Directors) to the allottees for whatever consideration agreed upon. For instance, where the consideration is cash, the amount is paid to the company and subsequently forms part of the company's share capital. It could be by way of services rendered in the form of expertise whereby the salary earned by the person who rendered the services are converted into shares as in Oil Field Supply Centre Limited v Johnson (1987) 2 NWLR (Part 58) 265; (1987) 5 SC 310. In the instant case, one cannot talk of allotment of shares in as much as the two courts below found the paid up share capital of the third appellant company was and remained at 200 000 shares of N1 from 31 May 1981. There is no evidence that despite the Central Bank authorisation for first and second respondents to bring money into the country, such sums are accounted for in any of the books of the company eg in the minutes of the company's General Meeting as exemplified in Exhibit 'HH'. Indeed, where the consideration for the allotment is other than cash e.g. by way of services (supra) the law is clear that this be indicated separately in the Return of Allotment together with an agreement to that effect and stating the consideration therefore between the company and the allottee. Such a situation arises where there are "unallotted shares" yet to be apportioned or where the share capital of a company is to be simultaneously increased to meet the fresh allotment. In the instant case, the nearest event to the latter situation was where the respondents attempted to increase through manipulation the paid up share capital of the third appellant but the appellants resisted and the trial court and the court below ruled in their favour. The same antics on the part of the respondents in relation to their attempt to tender Exhibit 'A1' was stoutly and successfully resisted. In none of the documents tendered is it depicted where the money brought in by the respondents from Italy went. Hence if they are not members of third appellant company they cannot be its directors.

If such money as was brought into Nigeria constituted transfers, the law is that shares in a company are in the nature of personal estate and are transferable in the manner provided by the articles. See Section 75 of the Companies Act 1968 and Orojo on Nigerian Law and Practice, page 209. With a transfer, the only way in which the company is concerned is to give effect to a private arrangement between the transferor (existing member) and the transferee (who may be an existing member or a new member altogether). Usually the transaction is concluded between the parties before it is brought to the knowledge of the company and for whatever the consideration that may have passed, does not concern the company. The transferee's name eventually replaces that of the transferor on the records.

It is worthy of note that throughout the trial in the trial court no evidence was led to show that first and second appellants executed any transfers as a result of any sale of shares to or in favour of first and second respondents nor did these gentlemen claim to have acquired shares by transfer from first and second appellants. The contention of first and second respondents had been that they acquired 40 percent or more shares by allotment for which they brought in money into Nigeria. However, by the time their money arrived in the country in June 1982 or thereabout the stage for allotment of the share capital of third appellant had passed. Of course, in relation to third respondent, he was doing what he did with third appellant company in contravention of Section 2(b) the Code of Conduct for Public Officers and his actions were null and void. His conduct is however punishable at the instance of the Code of Conduct Tribunal vide Ogbuagu v Ogbuagu (1981) 2 NCLR 680 at 684 and Nwankwo v Nwankwo (1992) 4 NWLR (Part 238) 693. With regards to Chief Williams' invitation to us to overrule Ogbuagu's case I need only say here that attractive though the invitation, I think that it is not opportune nor is it the appropriate forum to do so. A full panel of this Court may have to consider this matter when in future it is canvassed before it. In respect of the injunction granted by the court below, I do not share Chief Benson, learned Senior Advocate for the respondents' view that there is no difference between that granted by the trial court and that which the court below ordered. By the court below in considering its grant delving into a consideration of Exhibit 'A1' which had been ruled as inadmissible by the trial court as being bogus and which it itself accepted as correctly excluded, it was thereby granting an order of injunction couched under a new guise. Such an order cannot be allowed to stand in the face of overwhelming circumstances to the contrary.

In the result, the entire appeal succeeds and it is allowed by me. The cross-appeal fails and it is accordingly dismissed. I will make the same consequential orders viz Orders 1-6 contained in the judgment of my learned brother Belgore, JSC, accompanying which is the draft of his judgment which I have been privileged to read before now and with which I am in complete agreement. I equally make the same Order as to costs.

Dissenting Judgment: Mohammed and Wali, JJSC

 

Mohammed, JSC:- I have the opportunity of reading through the majority judgment just read by my learned brother, Belgore JSC and with greatest respect I have come at a different conclusion in this appeal.

The two parties in this appeal and the cross-appeal are in dispute over the affairs, including ownership of shares, in a limited liability company, incorporated under the name of Albion Construction Limited. The matters in dispute relate to the promotion and incorporation of the company, its share capital, who the shareholders are and the number of shares each shareholder owns. The case is complex and, with ninety two Exhibits, its decision has been based almost entirely on documentary evidence. I will therefore follow the method adopted by the Court of Appeal and refer to the parties as plaintiffs and defendants for ease of reference, in this judgment.

The first and second plaintiffs filed their action for themselves, and for other shareholders, Messrs L.A. Balogun and L.S. Balogun and claimed against the three defendants 100 percent total ownership of the shares of the third plaintiff company. It is a well contested case with Counsel on both sides throwing in one document after another in an endeavour to prove their clients' respective claims.

At the conclusion of the trial and, after Odunowo, J of the Federal High Court had delivered a well considered judgment, both parties appealed to the Court of Appeal. At the Court of Appeal, Chief B.O. Benson, SAN, took over the case of the defendants from Mr Ugerah Abalu. Both senior Counsel wrote detailed briefs and made illuminating oral submissions in support of them. There again, both parties were dissatisfied with the unanimous decision of the Court of Appeal. Hence the registration of this appeal and the cross-appeal. This is not the first time the dispute between the parties over the matters of the third plaintiff had reached this Court. An application for stay of execution of the judgment of Odunowo, J, pending the determination of the appeal filed by the defendants in the Court of Appeal ended up in this Court. In that decision this Court set aside the order of the Court of Appeal in which it granted a stay of execution of the judgment of Odunowo, J and restored the order of the learned trial Judge directing the third defendant to execute an instrument of transfer in respect of 51 percent or 102 000 shares which, according to the declaratory judgment, the third defendant holds in trust for the first plaintiff. The decision was made without prejudice to any of the declaratory judgments granted by Odunowo, J in his judgment.

The plaintiffs claim against the first, second and third defendants is as follows:-

"1.     A declaration that the document described as Memorandum and Articles of Association of Albion Construction Limited dated 16 September 1976 and admitted as Exhibit 'A' and to which the first and second plaintiffs were subscribers is the only true Memorandum and Articles of Association of the third plaintiff company.

2.      In the alternative to claim (1), a declaration that the afore-mentioned document is a true and authentic copy of the only document submitted for registration to the Registrar of Companies by the promoters of the third plaintiff company.

3.      An injunction restraining the first, second and third defendants and/or any other persons acting with or on their direction or authority from conducting the affairs of the third plaintiff and in particular from operating the account of the third plaintiff in any bank whatsoever on the basis of any Memorandum and Articles of Association other than that mentioned in Claim (1).

4.      In the alternative to (3) an injunction restraining the first, second and third defendants and/or any other persons acting with or on their direction or authority from conducting the affairs of the third plaintiff company in any bank whatsoever on the basis of the document purporting to be the Memorandum and Articles of Association of the third plaintiff company and carrying the signature of the first and second plaintiffs as well as the three defendants as subscribers.

5.      A declaration that the nominal share capital of the third plaintiff company is N200,000 divided into 200 000 shares of N1 each.

6.      A declaration that the first and second defendants are not shareholders of the third plaintiff company.

7.      A declaration that all shares held by the third defendant in the third plaintiff company are held by him in trust for the first plaintiff and an order directing the third defendant to execute an instrument of transfer in favour of the first plaintiff."

The defendants jointly and severally opposed the claim and urged the trial Federal High Court to find and declare in their favour what they canvassed in paragraph 72 of the amended Statement of Defence, to wit:

"1.     A declaration that the Memorandum and Articles of association purportedly certified on the request of on behalf of first and second plaintiffs through their solicitors by the office of the Registrar of Companies on the 28 March 1988 was procured irregularly and in breach of laid down procedure without satisfying the Registrar of Companies as to the authenticity of the document.

2.      That the defendants are lawful directors and shareholders of Albion Construction Limited and that from 1984 when the first and second plaintiffs resigned their membership and directorship of Albion Construction Limited they automatically ceased to be members and directors of the company and accordingly have no say in the affairs of the company.

3.      That the authorised share capital of Albion Construction Limited is now N500,000 .

4.      That no shares are held in trust for the first plaintiff by the third defendant.

5.      That the names of the defendants are in the Register of shareholders and Registrar of Directors of Albion Construction Limited.

6.      That the names of first and second plaintiffs cannot and should not be in the Register of members or Register of Directors of Albion Construction Limited."

The facts of this case, in a nutshell, are in the following narrative: Albion Construction Limited, the third plaintiff company, was incorporated in October, 1976. The first and second plaintiffs were subscribers to the Memorandum and Articles of Association of the company and in that capacity each of them subscribed for one share in the third plaintiff. On 30 June 1978, the first and second plaintiffs entered into a partnership agreement with the first and second defendants by which they agreed to engage in the business of construction and development under the name of Albion Construction Limited. The partners agreed to share the profits on 50 percent for the first and second plaintiffs, 40 percent for the first and second defendants and 10 percent for the technical staff.

On the 15 November 1980, the Administrative Manager of the third plaintiff wrote the following letter to the Permanent Secretary, Ministry of Finance, Lagos:-

"The Permanent,

Federal Ministry of Finance,

Lagos.

Dear Sir,

Application for Approved Status for Messrs Santilli and Davanzo Albino

We wish to inform you that the above named gentlemen were given business permit by the Ministry of Internal Affairs as foreign participants on the above named establishment.

In order to enable them bring the necessary foreign money from their country to pay their 40 percent contribution we should be grateful if you would kindly grant the transfer of N1,000 being 40 percent of the N200,000 shares of the company.

We shall be grateful for an early reply.

Yours faithfully,

Administrative Manager (Sgd.)"

The approval to transfer the money was granted and the first and second defendants brought in, through the Central Bank, foreign exchange equivalent to N78,601.70. This has been confirmed in a letter dated 14th February, 1984 from the Secretary of the third plaintiff to the Permanent Secretary, Ministry of Finance, Exchange Control Department. It has also been confirmed in Exhibit 'T' and 'Z'. In his evidence, as PW.5, Michael Ojo Adelusi, a chartered accountant, told the trial court that he was involved in the incorporation of the third plaintiff. He said that when Mr Babatola prepared the Memorandum and Articles of Association of the company he was the one who registered it. At that time only Chief Okoya and his wife were the subscribers. Mr Adelusi audits the account of the company and prepares its Balance Sheets. He said that in 1981, he was directed by Chief Okoya to transfer N199,998 from his Current Account to third plaintiff's paid up Capital Account. This the witness said was a recognised method of payment for shares. Mr Adelusi however neither gave the exact date of the transfer nor did he show in the Balance Sheet where such transfer was made.

However, at the Annual General Meeting of the company held on 15 March, 1982, where the third defendant presided as Chairman, and all the remaining parties were present, and the audited accounts of the company for the year ending 31 of May, 1981 together with the Directors Report were received and unanimously adopted. In the Balance Sheet, Exhibit 'H9', it has been recorded that 200 000 ordinary shares of the company had been fully paid.

In another document, Exhibit 'KK', which is the share register of the company, it has been recorded that both the first and second defendants have, on 5 May, 1981, each paid by cheque for 40 000 shares. It has not been made clear whether the shares were paid for through a transfer or allotment.

The third defendant was invited by the first plaintiff, who was his friend, to join the company. He said in evidence that he was promised between 20 percent to 25 percent of the shares of the company in consideration of what he would lose if he left the position of Chief Legal Officer of NEPA. in fulfilment of that oral agreement at a meeting of the Board of Directors of the company, held on 16 October 1981, the first plaintiff who was the chairman, suggested that the third defendant be appointed a Director and Deputy Chairman of the company. The first plaintiff, in addition offered 9 percent of his shareholding to the third defendant. The third defendant accepted both offers. He was thereafter formerly introduced to all the Board members.

In 1984 relationship between the first plaintiff and the first and second defendants turned sour. On 13 July 1984, the first and second plaintiffs wrote a letter which a legal officer, Ogunsanya & Ogunsanya, passed on to the Secretary of the company disclosing that they have resigned from both directorship and membership of the company. The letter is important to this decision and I reproduce it below:-

"1. Alhaji Rasaki Okoya

2. Mrs Kuburat Okoya 3/5 Ikoyi Crescent, Ikoyi, Lagos

13th July 1984

The Company Secretary,

Albion Construction Limited,

Iganmu, Lagos

Dear Sir,

Resignation of Membership of the Board of Directors and the Company

We have within the last few weeks drawn the attention of the management of Albion Construction Limited to a number of irregularities in the manner in which they have been running the affairs of the Company. The information was conveyed to them during verbal discussions and in letters written by our Solicitors on the subject.

It is clear that the Management had given no response to the warnings.

It is not our wish to do anything which might in any way prejudice the existence or the future operations of the Company which we have done so much to build.

We therefore have no alternative than to sever our connections with the Company by resigning our director-ship of the Company and our membership thereof. Our resignations take effect from today. Please convey to us your acceptance thereof.

We propose to transfer our shares to our nominees whose names will be given to you in due course. Please delete our names from the register of members of the Company forthwith.

We wish the Company every success in its business. Thank you for the co-operation which you gave us throughout the period of our association with the Company.

Yours Faithfully,

1. Alhaji Rasaki Okoya (Sgd.)

2. Mrs Kuburat Okoya (Sgd.)"

The defendants however gave a different version of the account of the event leading to the resignation of Chief Okoya and his wife from the company. The defendants said that the first plaintiff and his wife resigned from the company because he feared that the Military Regime which toppled the civilian government of Alhaji Shehu Shagari would investigate the affairs of Albion Construction Limited.

There are various documents tendered before the learned trial Judge showing the stand of the parties in respect of share holding in the company. I shall analyse some relevant documents later in this judgment. The case of the plaintiffs is anchored on the assertion that the first and second defendants owned no shares in the company and that all the shares being held by the third defendant were held in trust for the first plaintiff.

The learned trial Judge Odunowo, J must have burnt the mid night oil to produce what, in my view, is a very well considered judgment. At the end of his judgment he made the following declarations:-

"(1)    That the document described as Memorandum and Articles of Association of Albion Construction Company Limited dated 16 September 1976 and admitted in evidence in this action as Exhibit 'A' and to which the first and second plaintiffs were subscribers is the only true Memorandum and Articles of Association of the third plaintiff Company.

(2)     That the nominal share capital of the third plaintiff company is N200 000 divided into 200 000 shares of N1 each, and not 500 000 as alleged by the defendants.

(3)     That all the parties to this action are shareholders of the third plaintiff company namely (1) Chief R.A. Okoya - 50 percent or 100 000 shares (2) Mrs K. Okoya - 1 percent or 2 000 shares. (3) Mr S. Santilli - 20 percent or 40 000 shares. (4) Mr A. Davanzo - 20 percent or 40 000 shares, and (5) Prince D.A. Ademiluyi - 9 percent or 18 000 shares.

(4)     That the third defendant is hereby directed to execute an instrument of transfer in respect of 51 percent or 102 000 shares, which he holds on trust in favour of the first plaintiff.

(5)     That the first, second and third defendants and or any other person or persons acting with or on their direction or authority are hereby restrained from conducting the affairs of the third plaintiff company and in particular from operating the account of the said company in any bank whatsoever on the basis of any Memorandum and Articles of Association other than that mentioned in paragraph (1) above.

(6)     That each side shall bear its own costs.

(7)     That an extra-ordinary general meeting of the third plaintiff company shall be held on Wednesday the 21 December 1988 at 4pm at Albion premises 52/53 Onitiri Close, Surulere."

Dissatisfied with the above decision both parties appealed to the Court of Appeal. As I mentioned earlier, Chief B.O. Benson, SAN, took over the case of the defendants from Mr Abalu and the battle scene moved to the Court of Appeal with motions and counter motions over the decision of the trial Federal High Court. At the Court of Appeal, the reliefs sought by the defendants in their appeal are to set aside the orders of the Federal High Court relating to the shareholding of the first and second plaintiffs and the third defendant in the company and substitute it with the following:-

"(a) A declaration that the first and second plaintiffs are not members of the third plaintiff and do not hold 51 percent of the shares of the third plaintiff.

(b)     A declaration that the third defendant is entitled to hold 21 percent of the authorised share capital of the third plaintiff.

(c)     A declaration that as at 31 May 1981 the paid up share capital of the third plaintiff was N2.

(d)     A declaration that the workers of the third plaintiff are entitled to and hold 10 percent of the authorised share capital of the third plaintiff.

(e)     To adjudge that the disputed Minutes contained in the Minutes Book of the third plaintiff are irregular and were never held."

The plaintiffs were similarly dissatisfied with the decision of the Federal High Court and the relief sought at the Court of Appeal, they urged for their appeal to be allowed and the decision of Odunowo, J be substituted with the following decision or orders:-

"(i) a decision that in this case it is unnecessary to plead the illegalities on which the plaintiffs rely;

(ii) a decision that by reason of the provisions of the enactments on which the plaintiffs rely neither the first nor the second defendants own any shares in the company and the shares held by the third defendant are held by him in trust for the first plaintiff;

(iii) a decision that as at 31 May 1981 the first plaintiff owned all the shares but one in the company;

(iv) a decision that the first and second defendants do not own any shares in the company.

The Court of Appeal with quorum: Ademola, Akpata and Babalakin JJCA (as they then were) considered the illuminating briefs filed by the learned Senior Counsel on both sides and the oral argument in support of those briefs. In its judgment, delivered on 5 April, 1990, the Court of Appeal held as follows:-

"It is hereby declared that the shareholding of the respective members of the company are as follows:-

-first plaintiff                      19.995%              N39,999

-second plaintiff                  .0005%              N1

-first defendant                     20%                 N40,000

-second defendant                20%                N40,000

-third defendant                      21%               N42,000

-L. S. Balogun                        10%               N20,000

-L. A. Balogun                         9%                N19,000                   

                                                                    N200,000

2.      The shareholding 19,9995 percent in favour of the first plaintiff is inclusive of the 14 percent held in trust for him by the third defendant.

3.      It is hereby ordered that the third defendant should execute an instrument of transfer of the 14 percent shares accordingly.

4.      The order restraining the defendants from conduction the affairs of the third plaintiff company and operating the account of the said company in any bank whatsoever is hereby set aside. They are however not to conduct the affairs of the company or operate its account on the basis of the Memorandum and Articles of the Association Exhibit 'A1' raising the share capital to N500,000 .

5.      It is hereby declared that the nominal share capital of the third plaintiff company as at the time this action was instituted remained at N200,000 divided into 200 000 shares of N1 each and not N500,000 as alleged by the defendants.

Both parties, being dissatisfied with the decision of the Court of Appeal came to the Supreme Court. The plaintiffs enumerated parts of the decision of the Court of Appeal which they appealed against in the following order:-

"(i) The decision concerning the amount or proportion of shares held in the third plaintiff company by the first and second plaintiffs and the first, second and third defendants.

(ii) The decision relating to the legality of the shareholding of the first, second and third defendants.

(iii) The decision setting aside the order for injunction made by the High Court.

(iv) The decision that the first and second defendants are shareholders in the third plaintiff company and that the third defendant holds shares otherwise than as a trustee."

Chief Williams, SAN, in the plaintiff's Brief, which he prepared, submitted that the disputes between the parties to the action boil down to a number of questions concerning the affairs of the third plaintiff company - the Albion Construction Limited. The particular matters to which the questions relate are:-

(a)     the identity of the Memorandum and Articles of Association;

(b)     the share capital of the company; and

(c)     who are the shareholders of the company and how many shares does each of them own.

Considering the grounds of appeal filed in support of the plaintiffs' appeal and the issues formulated by Chief Williams, SAN, for the determination of the appeal, it is only the question on injunction granted by the High Court, but set aside by the Court of Appeal, which does not fall within the question raised in (c) above. I have gone through the issues each learned Counsel formulated for the determination of this appeal and, apart from the semantic content of the formulation, the issues raised therein are the same. I shall adopt the formulation of Chief Williams, SAN, in dealing with the relevant issues for the determination of this appeal. Therefore the issues for the determination of this appeal are as follows:-

"A.     The Shares of first and second plaintiff:-

Whether the first and second defendants ever acquired shares by transfer from the first plaintiff.

B.      Shares of the first and second defendants:-

Whether the court below was correct in failing to consider and uphold the contention of the plaintiffs that the third plaintiff company had issued all its shares to the first and second plaintiffs by 31.5.81, and there were no shares available to be issued to the first and second defendants at the time they claimed to have paid for shares allegedly allotted to them.

C.      The Shares of third defendant:-

Whether the Court below ought to have held that:-

(i)      The transfer (and accordingly the underlying contract) whereby in exchange for shares transferred to him by the first plaintiff, the third defendant was obliged and required to participate in the management and running of Albion Construction Limited, was one which was impliedly prohibited by Section 2(b) of the Code of Conduct for Public Officers under the 1979 Constitution and is therefore illegal and void;

(ii)     whether the shares held by the third defendant were held by him in trust or for his own benefit.

D.      Court of Appeal's Order on Injunction:-

Whether the order of the Court of Appeal setting aside the order for injunction made by the Federal High Court was justified."

Chief Williams, SAN, opened up his submission with the issue raised on the shares of the first and second plaintiff. It is the case of the plaintiffs that all the 200 000 shares of the third plaintiff company, had been fully paid up by the first and second plaintiffs. It is not in dispute that the first and second plaintiffs were the subscribers to the Memorandum and Articles of Association and in that capacity each of them subscribed for one share in the third plaintiff company. At the High Court what was in dispute over the single shares for each of the first and second plaintiffs is the claim of the defendants that the plaintiffs had not paid for those shares. Chief Williams, SAN, submitted that, in the face of overwhelming evidence at the trial, the High Court had no difficulty in arriving at any other conclusion than that the N2 shares were paid for. There is really no need to further plug the issue of payment for the two shares which were subscribed by the first and second plaintiffs when they subscribed to the Memorandum and Articles of Association of the third plaintiff company. It is clear that the defendants have abandoned their argument that the two shares were never paid for by the first and second plaintiffs. This can be seen in one of the reliefs the defendants requested from the Court of Appeal when they filed their grounds of appeal. They asked the Court of Appeal to set aside the judgment and orders of the Federal High Court relating to the shareholding of the first and second plaintiffs and the third defendants in the third plaintiff company and substitute it with the following:-

"(c) A declaration that as at 31 May 1981 the paid up share capital of the third plaintiff was N2."

The main issue which is highly contested is whether the first appellant had validly acquired and paid for 199,998 shares in addition to the one share which he subscribed when the company was floated. In paragraph 17 of the Statement of Claim it is averred that:-

"As at 31 May 1981the first plaintiff had paid for N199,998 worth of additional shares . . . "

If it is established that by 31 May 1981 the first plaintiff and his wife had fully paid for the 200 000 shares in the third plaintiff company, the learned trial Judge would be correct to say that whoever wants to acquire any share thereafter could only do so by transfer from the first plaintiff or his wife. But the big question is, was there any proof that the first plaintiff had fully paid for 199,998 remaining shares of the company? The only evidence was from the testimony of PW5 where he said that on the direction of the first plaintiff he transferred N199,998 from Director's Current Account to the third plaintiff's share Capital Account. The witness referred to Exhibits 'H3' and 'H9' which were the audited Balance Sheets prepared by PW5.

It is instructive to observe that there is no entry in the Balance Sheet (Exhibits 'H3' and 'H9') showing how and when the amount N199,998 was transferred from the Director's Current Account to the share Capital Account. It only shows that by 31 May 1981 the 200 000 shares of the company were fully paid up. The missing gap in the evidence was provided by the oral testimony of Chief Adelusi (PW5). There is no document however to support the evidence of PW5 that 199,998 shares had been allotted informally to the first plaintiff and it had not been mentioned in any report of the Board of Directors meeting.

Chief Williams, SAN, submitted that it might well be possible to argue on the basis of the strictest rules that in the absence of proof of a Board Meeting or a resolution at the General Meeting sanctioning the allotment of shares to the first and second plaintiffs, it must be concluded that there was no proper allotment of shares to them. The learned Senior Counsel added that one could use the same measure in respect of the shares claimed by the defendants. He then referred to the dictum of Lindley LJ in Browne v La Trinidad 37 Ch. D 1 at 17 where he said:-

"I think it is most important that the court should hold fast to the rule upon which it had always acted, not to interfere for the purpose of forcing companies to conduct their business according to the strictest rules, where the irregularity complained of can be set right at any moment."

It is crystal clear that Chief Williams cannot use the same measure in respect of the payment of shares of the first and second defendants. In the case of the first plaintiff there is no document to support the evidence of PW5 that he transferred 199,998 from Directors Account to the Share Capital Account. Whereas in the case of first and second defendants many documents have been admitted in evidence showing that they have transferred foreign exchange to the share capital of the company.

Chief Williams submitted however that the learned trial Judge found in his judgment that on balance, the contention of the plaintiffs were right in the sense that the paid up share capital as at 31 May 1981 stood at N200,000 . On this argument Chief Benson, SAN, pointed out that although the learned trial Judge found on the basis of Exhibits 'H3' and 'H9' that the paid-up capital of the third plaintiff was N200,000 the learned trial Judge never found that all the shares were paid for by the first plaintiff and his wife.

Looking at the other documents admitted in this case, over the shareholding of the parties in the third plaintiff company, Chief Williams has uphill task to convince anyone that the first plaintiff and his wife had paid in full all the 200 000 shares in the third plaintiff company. In Exhibit 'KK', the shareholders Register of the company, first plaintiff and his wife were shown to have only 120 000 by 5 May 1981. Since it is the case of the plaintiffs that the first and second defendants owned no shares in the company and that the plaintiffs did not transfer any shares to the Italians, it would mean that the 100 percent shares of the third plaintiff company were all allotted and fully paid for by the first appellant and his wife.

If that is so what of the 40 000 shares which first and second defendants each paid in by cheques as is recorded in the Register of Shareholders of the company, Exhibit 'KK'. Those payments have been recorded to have been made on 5 May 1981. It is quite correct as Chief Williams submitted that Santilli and Davanzo made payments to the company in or around the latter part of 1982. Now for the sake of argument if both the learned trial Judge and the Court of Appeal had found that by 31 May 1981 all the 200 000 shares had been paid up which money had been used by the first and second defendants to pay for their shares? There is no doubt that missing links on both sides and seeming admissions makes this appeal complex and difficult. It is plain that some documents may not be true.

What is obvious however, is the overwhelming evidence that the first and second defendants were allotted 40,000 shares each and that they had paid for those shares through the foreign exchange transfer which had been established to have been paid into the account of the third plaintiff company (see Exhibit 'S'). It has been decided by this Court in the case of Oilfield Supply Centre Ltd v Johnson (1987) 2 NWLR (Part 58) 625 that the question whether or not a person is a shareholder of a company is in the main a question of fact. If the first plaintiff and his wife have paid in full the 200 000 shares of the third plaintiff company he could not have spoken in the following documents showing that first and second defendants are shareholders in the company or that he only controls majority shareholding.

In Exhibit 'CC', Chief Okoya wrote to Messrs Adelusi Ojo & Co as follows:-"Dear Mr Adelusi,

By the date I resigned my appointment with Albion Construction Company, there was credit standing in my favour and my wife respectively. Can you please give me the details of all the credit.

By the time of Santilly and Davanson, I had (sic) been given 40 percent (forty percent) share, can we have the value of the company's asset as at that time and equipment etc. In one word, what is the true value of the company's asset. Certainly there is credit in our favour, including the amount owed by the Ministry of Works to which we are entitled.

Thank you very much,

Yours sincerely,

Chief R. A. Okoya. (Sgd.)"

In Exhibit 'JJ1', first and second plaintiffs wrote to the company Secretary notifying that they have both resigned from directorship and membership of the company and in addition said that they propose to transfer their shares to their nominees. This is indicative of the fact that there were other shareholders left in the company. Exhibit 'GG' is a letter written on 20 November 1981 and in it the first plaintiff complained to the Secretary of the company about the failure of the Board of Directors to meet in the following words "Reference to your letter dated 19 November 1981 kindly realise that Mr Davanzo's absence should not prevent this meeting being held. For your enlightenment, he has 20 percent shares (yet to be settled) . . ."

In Exhibit 'GG6', Mr Adeyiga O Ajayi, solicitors for the first and second plaintiffs wrote to the company's Secretary requesting among other things the following:-

"Our clients are also anxious to know the position of the shares in the company, particularly those shareholders who have fully paid for their shares and how these shares were paid for." (My emphasis.)

This letter clearly shows that there are minority shareholders in the company and that one can safely assume that the first plaintiff was the majority shareholder which he referred to in his letter. In Exhibit 'TT' the first plaintiff and his wife entered into an agreement with the third plaintiff company and referred to himself and his wife being holders of 51 percent of the equity shares of the company. It is pertinent to ask, who are the shareholders of the remaining 49 percent. It is in evidence that the first plaintiff had transferred 9 percent of his shareholding to the third defendant when he invited the third defendant to join the company. It is evidently clear that all these facts are admissions against interest. The case of the plaintiffs is that the first and second defendants owned no shares in the company. But the documents, some of which were written by the first plaintiff himself show to the contrary of that assertion.

The only evidence upon which the first plaintiff hinged his claim on is that he and his wife had paid in full 100 percent shares of the third plaintiff is through the Balance Sheet Exhibit 'H9' and Directors Report Exhibit 'YY' both of which had been signed by second and third defendants. In Exhibit 'YY' the second and third defendants certified that the Balance Sheet as at 31 May 1981 and the Profit and Loss Account for the same year, together with Auditors Report were true copies as laid before the company at the General Meeting.

In their evidence the first and second defendants told the trial High Court that when they challenged the entry showing that 200 000 shares had been paid up they were told that the entry was made for tax purposes only. Chief Williams, SAN, referred to the evidence of the third defendant where Prince Ademiluyi said that he signed the balance sheets before the auditors explained it to him and that he did not know how to read a balance sheet. The learned Senior Counsel referred to the case of Egbase v Ohiareghen (1985) 2 NSCC 1219 at 1231 in which Eso, JSC quoted Lord Denning MR where he declared that:-

"Whenever a man of full age and understanding who can read and write signs a legal document which is put before him for signature by which I mean a document which, it is apparent on the face of it, is intended to have legal consequences -then, if he does not take the trouble to read it, but signs it as it is, relying on the word of another as to its character or contents or effect, he cannot be heard to say that it is not his document. By his conduct in signing it he has represented to all those whose hands it may come, that it is his document; and once they act upon it as being his document, he cannot go back on it, and say it was a nullity from the beginning."

Be that as it may, the first plaintiff must still prove that he was the one who paid 199,998 shares to complete the 200 000 shares alleged to have been fully paid up. It was only the evidence of Chief Adelusi (PW5) which supported that assertion. Curiously enough such a transaction could not be traced in any of company's boo and it is mandatory to report such a principal activity in the Directors Report and attach it to the Balance Sheet. It seems very clear that the evidence available from other documents tilt more against such assertion than in favour of it.

I agree with Mr Benson SAN, that it stands to reason that had it been the plaintiffs that paid for the whole shares of the company in 1981, the money subsequently brought in by the first and second defendants would have been paid to the first plaintiff and not to the company. In Exhibit 'P' (application for approval status) the company, as far back as 15 November 1980, applied to the Permanent Secretary, Ministry of Finance for permission to be granted the first and second defendants to transfer foreign money in order that they might pay their 40 percent contribution of the 200 000 shares granted to them. In Exhibit 'S' on 23 March 1984, the Company Secretary wrote to the Permanent Secretary, Federal Ministry of Finance, Exchange Control Department showing non-resident investment in the third plaintiff company explaining the following position in the company:-

"The present position of the capital of the company, Albion Construction Limited is:

Paid-up Capital            N200,000

Nigerians                      N120,000

Foreigners                    

Mr Santillit (20 percent) N39,144.26

Mr Davanzo (20 percent) N39,467                     N80,000

The small differences rose as a result of small fluctuations in foreign exchange rates. . ."

With such overwhelming evidence could anyone deny that the first and second defendants have each 20 percent shareholding in the third plaintiff company? It is abundantly clear that in many documents tendered in this appeal which includes Exhibits 'CC', 'GG', 'P', 'S', 'KK', 'TT' both the first and third plaintiffs recognised the first and second defendants as shareholders in the company. In all those documents the plaintiffs have made admissions against their interests. It is trite that once a fact is admitted it requires no further proof. It must be taken as established. See Steven Omo Ebu eku v Sunmola Amola (1988) 1 NSCC 582.

Chief Benson, SAN, concluded his submission on this issue that the concurrent findings of both the Federal High Court and the Court of Appeal are that the first and second defendants are shareholders and each owned 20 percent of the 200 000 shares of the company. To confirm the submission of Chief Benson, I will reproduce excerpts from the findings of the two lower courts. Odunowo, J, the trial Federal High Court Judge in his evidence at page 554 of the record found as follows:-

"The conclusion I have reached on preponderance of evidence placed before me is that the first plaintiff and his wife both have 51 percent shares of the company's equity. Which is perhaps another way of saying that all the shares in the company were not fully allotted to the first plaintiff as alleged . . . my finding is that each of the two gentlemen has 20 percent of the company's equity. This result is justified in view of the evidence of DW2, DW3, DW5, DW7 and the evidence of the defendants coupled with Exhibit 'P' and 'P1'."

At the Court of Appeal, Ademola, JCA, who wrote the lead judgment referred to the Exhibits relating to the application for the first and second defendants to bring in money into the country for the purposes of the shares and the approval of the Ministry and Central Bank and said that the Exhibits were admitted during trial without objection and that:-

"They support the evidence of the first and second defendants as to the fulfilment of their obligations under the partnership agreement, Exhibit 'SS' with the first and second plaintiffs. The fact of their bringing in money into the country was established beyond doubt. The payment of such monies to the company for the acquisition of shares was also established and I think all these pieces of evidence which were believed by the learned Judge led to one conclusion that they are shareholders in the company to the extent for the shares ascribed to them in the books of the company. It is important to bear in mind that there is no opposing evidence to theirs. . .

In my view, it does not lie in the mouth of the third plaintiff to describe them as employees now because the money brought in to buy shares are in the company's hands and the books of the company, Exhibits 'KK' (Register of Members) show them as shareholders.

The first plaintiff cannot, having sat with them as a director of the company now say they are not shareholders. For at various meetings of the Board of Directors, the register of shareholders and various other books of the company which must . . . placed before them in compliance with the provisions of the Company Act."

Akpata, JCA (as he then was) in his contribution on this issue also found as follows:-

"Contrary to the stance of the plaintiffs on this issue, there is the partnership agreement Exhibit 'SS' dated 11 June 1978 which vested 50 percent of the business in the first and second plaintiffs, 40 percent in the first and second defendants . . . There is also the letter dated 20 November 1981, Exhibit 'GG' . . . He cannot be seen to approbate and reprobate. Incidentally the first plaintiff conveniently avoided the witness box. There is also Exhibit 'TT' an agreement between the first and second plaintiffs on the one hand and the third plaintiff company on the other hand dated 25 July 1988 . . . wherein both of them claimed to hold 51 percent of the equity shares of the company. This agreement to my mind further falsifies the case of the plaintiffs that the first and second plaintiffs owned the entire 200 000 shares. That is not all. As far back as 15 November 1980, the company of which the first plaintiff was the chairman wrote the letter Exhibit 'P' disclosing:- (1) That the first and second defendants had been given business permit . . . (2) Applying for approved status for the first and second defendants; and (3) requesting that permission be granted to enable the said defendants transfer foreign money . . . There is also the letter, Exhibit 'S' dated 23 March 1923 written by the Secretary of the company to the Permanent Secretary Ministry of Finance showing in unmistakable terms that (1) the amounts in question for 20 percent shares held by each of the first and second defendants had been paid to the (Company)."

Chief B.O. Benson, SAN, referred to the recent decision of this Court in Oilfield Supply Centre Ltd v Johnson (supra) where it was held that to establish that a person is a shareholder of a company oral evidence which is satisfactory to the court may be sufficient to establish the right of a person as a shareholder of a company. In my judgment here I will agree that if the trial court believed that the evidence of PW5 was sufficient to establish that the first and second plaintiffs had fully paid for the shares of the third plaintiff that would be a finding of fact. But the trial court did not believe him and the Court of Appeal concurred in disbelieving that the first and second plaintiffs were the only shareholders of the third plaintiff.

Learned Senior Counsel for the defendants cited the cases of Overseas Construction Ltd v Creek Enterprises Ltd (1985) 3 NWLR (Part 13) 407 at 403 and Bakare v State (1987) 1 NWLR (Part 52) at 594. In both cases this Court held that as a general rule this Court will not normally disturb or up set concurrent findings of fact in the two lower courts unless there is some miscarriage of justice or violation of some principle of law or procedure.

With the above findings it is abundantly clear that the first and second plaintiffs did not fully pay for the 200 000 authorised shares of the third plaintiff company as alleged in the plaintiffs Statement of Claim. By inference the reasonable thing to accept is that by that date the entry in the balance sheet (Exhibit 'H9') which shows that the authorised share capital of 200 000 had been fully paid could only be in anticipation of the commitment of the first and second defendants to pay for their allotted shares through a foreign exchange transfer which had been applied for as far back as 15 November 1980.

Before I go away from the issue of paid up share capital, I think it is pertinent at this stage to consider the issue appealed against by the defendants against the judgment of Ademola, JCA, in the cross-appeal. In his judgment Ademola, JCA, said:-

"Agreeing with Chief Williams' submission that if by 31 May 1981 the 200 000 shares had been fully paid for mostly by the first plaintiff through the director of credit account of the company and this is the finding of the learned trial Judge in the earlier part of the judgment, it follows and the argument is very compelling that anybody besides the first and second plaintiffs who wants to acquire shares in the third plaintiff company after 31 May, 1981 must do so by transfer from the first plaintiff or his wife if they are prepared to transfer their shares. Acquisition of shares in this company cannot therefore be by way of allotment of shares by first, second and third defendant must be by way of transfer or sale."

I have decided above, in this judgment that the overwhelming evidence is that the first and second plaintiffs did not fully pay the 200 000 authorised shares of the third plaintiff company. With such a finding it goes without saying so that the learned Justice of the Court of Appeal was in error to say that he agreed with Chief Williams that by 31 May 1981 anybody, besides the first and second plaintiffs, who wants to acquire shares in the third plaintiff company must do so by transfer from the first plaintiff or his wife if they are prepared to transfer their shares. There is no evidence from either oral testimony or the 92 documentary Exhibits that the first and second plaintiff had transferred any shares to the first or the second defendants. In fact it is not the plaintiffs' case that the 80 000 shares allotted to the first and second defendants had been acquired through a transfer from the first and second plaintiffs. Chief Williams, SAN, did not even support such a finding of the Court of Appeal that the first and second defendants acquired their shares through transfer. He said so in the following submission in the plaintiffs' brief:-

"So, it cannot be right for the Court of Appeal to conclude that they (the said defendants) obtained any shares by way of transfer from the first plaintiff. The Supreme Court is respectfully invited to hold that the two defendants acquired their shares by transfer from the first plaintiff is (with profound respect) untenable."

I therefore agree that the cross-appeal has merit and it succeeds. It is accordingly allowed.

The Third defendant's Shares

The plaintiffs' case is that the first plaintiff transferred 70 000, 35 percent of his shares to the third defendant. The questions which arise for determination on the pleadings at the trial of the action which Chief Williams formulated in respect of the shares of the third defendant were as follows:-

(i) Whether the shares which were registered in the name of the third defendant in the plaintiff company were transferred to him by the first plaintiff (as the plaintiffs contend) or were allotted to him (as the defendants contend in the alternative).

(ii) If the answer to question (i) reveals that the shares were transferred to the third defendant by the first plaintiff, whether there was any consideration for the transfer (as the defendants have alleged) or it was a voluntary transfer made without any consideration (as the first plaintiff has alleged).

(iii) Was there a resulting trust in favour of the first plaintiff in respect of any of the shares held in the name of the third defendant."

It has been resolved by the trial High Court that the shares were transferred and not allotted to the third defendant. There are a number of documents which are Exhibits in this case dealing with the transfer of the first plaintiff's shares to a number of beneficiaries including the third defendant. I dealt with the transfer of 9 percent of the first plaintiff's shares earlier in this judgment. The learned trial Judge rejected the contention of the defence that the shares were allotted to the third defendant and on the transfer of 9 percent of the first plaintiff's shareholding to the third defendant he said:-

"the uncontradicted evidence of all the three defendants that the first plaintiff voluntarily transferred 9 percent of his shareholding to the third defendant. Secondly, the fact that this was done is clearly borne out by the minute of the first board meeting attended by the third defendant (see page 11 of Exhibit 'HH') at which "the Chairman also offered 9 percent of his shareholding to Prince Ademola Ademiluyi."

Thus by this decision the court is of the opinion that the third defendant was a beneficial owner of that percentage. The Court of Appeal upheld the decision of the learned trial Judge and added that the third defendant was in fact entitled to hold beneficially 21 percent and not 9 percent of the equity shareholding of the company. I have gone through all the documents upon which the two lower courts based their decisions and it is quite clear that the intention of the first plaintiff to transfer his shares to the third defendant are explicit in those documentary Exhibits. I will reproduce some of them for the clarity of what I say. In Exhibit 'RR7', dated 5 October 1984, the first plaintiff wrote to the Secretary of the company announcing a grant of 12 percent of his shares to the third defendant in the following words:-

"5 October 1984

The Secretary,

Mabs & Company Limited,

286, Murtala Mohammed Way,

Yaba.

Dear Sir,

We have concluded with Prince Ademola Ademiluyi and we hereby confirm a share of 12 percent to them respectively leaving us a balance of 20 percent in which we will soon confirm to you the beneficiaries.

Please kindly send us the necessary forms from the Ministry for our signature.

Please inform the Managing Director and other Directors accordingly.

Thanks for your usual cooperation.

Yours faithfully,

Chief R. A. Okoya

cc: Chairman,

Albion Construction Ltd

cc: Managing Director

Albion Construction Ltd"

In Exhibit 'RR' 11 the Secretary of the third plaintiff company wrote, on 19th October 1984, to the first plaintiff acknowledging receipt of Exhibit 'RR 7'. The Secretary in that letter said:-

"With reference to your letters dated 4th and 5 October 1984, we forward herewith Transfer forms for Prince D.A. Ademiluyi and Alhaji L.S. Balogun. As indicated on the forms, we are transferring additional 24 000 shares representing 12 percent to Prince Ademiluyi. This brings the total holding by him to 21 percent."

See also Exhibits 'RR 8', 'RR 9' and 'ZZ'.

In the absence of any instruction in the articles of association of a company or by agreement with the company outside the articles a shareholder can transfer his shares to any beneficiary legally competent to take the shares. A share in a company is a chose in action. It consists of the interest in the second, and also made up of various rights conferred by the contract contained in the articles of association.

The first plaintiff, from the documents reproduced above, in the absence of any evidence to the contrary, voluntarily transferred his shares to a number of his nominees and beneficiaries, including the third defendant. Cozens - Hardy MR, in the case of Re Bede Shipping Company Limited (1917) 1 Ch. 123 held:

". . . What is the position of a shareholder in a company such as this? He has a property in his shares, a property which he is at liberty to dispose of, subject only to any express restriction which may be found in the articles of association of the company . . . subject to that right, the shareholder is at liberty to transfer a share as much as he is at liberty to sell a chair or table or any other property."

In the case in hand, there is no evidence showing that the first plaintiff was induced through fraud or deception to transfer his shares to the third defendant.

Chief Okoya did not disclose any reason or condition for the transfer of 21 percent of his shares to the third defendant and it is not the business of the court to start fishing for reason for such a voluntary transfer of shares.

In his evidence before the trial court, third defendant testified thus:-

"I am a shareholder of the company. In respect of the 9 percent I have already told the court how it came about. Then in 1984, when Chief Okoya was leaving the company, he transferred an additional 26 percent shares but in a letter to me he expressed the view that 14 percent of the 26 percent should be held by me on trust for his son, Ademola Okoya. He told me that the 12 percent was a gift to me in recognition of my activities in the company. So by the time he left in 1984, I was holding a total of 35 percent equity shares of Albion Construction Limited, 21 percent for myself and 1 percent (sic) on trust for his son."

The only person who would deny what is testified above is the first plaintiff, but he avoided the witness box. Therefore there is no evidence from the plaintiffs contradicting the above testimony of the third defendant. There were documents as I reproduced above and Exhibit 'ZZ' in which the first plaintiff demanded the return only of 14 percent which the third defendant held in trust for his son. The trial court believed that 9 percent of the first plaintiff's shares had been voluntarily transferred to the third defendant. On appeal the Court of Appeal affirmed the decision of the High Court in respect of 9 percent, and added that 12 percent also had been transferred voluntarily by the first plaintiff to the third defendant, thus making his total shareholding 21 percent.

In his judgment, Ademola, JCA, observed that the way and manner the third defendant acquired 9 percent of the shares of the company was, in his opinion, a clear breach of the provisions of Section 2(b) of the Code of Conduct for Public Officers. The learned Justice however, quite rightly, saw nothing wrong in the acquisition of the third defendant of 12 percent shares which were given to him by the first appellant after he had left NEPA. What looked like a U-turn, the learned Justice said on true construction of Section 20(1) of the Code of Conduct Bureau, the Organ to make a finding that one is in breach of its provisions and impose punishment is the Code of Conduct Tribunal established under the Constitution and not the regular courts. He referred to the case of Ogbuagu v Ogbuagu (1981) 2 NCLR page 680 at 684. Section 20(1) of the Code of Conduct Bureau provides:-

"Where the Code of Conduct Tribunal finds a public officer guilty of contravention of any of the provisions of this Code, it shall impose upon that officer any of the punishments specified under sub-paragraph (2) of this paragraph and such other punishment as may be prescribed by the National Assembly."

Chief Williams submitted that since, in exchange of shares transferred or to be transferred by the first plaintiff, the third defendant was obliged to and did participate in the management and running of the third plaintiff company which impliedly was prohibited by the Code of Conduct, the contract to transfer the shares was void. He referred to a number of English authorities to buttress his submission - see Connelius v Philips (1918) AC 185 at 204-205; B and B Viennese Fashions v Losane (1952) 1 All ER 909 at 913. In Anderson Limited v Daniel (1924) 1 QB 138 Atkin LJ held:-

"The question of illegality in a contract generally arises in connection with its formation, but it may also arise, as it does here, in connection with its performance. In the former case, where the parties have agreed to something which is prohibited by Act of Parliament, it is indisputable that the contract is unenforceable by either party. And I think that it is equally unenforceable by the offending party where the illegality arises from the fact that the mode of performance adopted by the party performing it is in violating of some statute, even though the contract as agreed upon between the parties was capable of being performed in a perfectly legal manner."

In reply, Chief B.O. Benson, SAN, referred to the decision of the Court of Appeal and submitted that only the Code of Conduct Tribunal has the jurisdiction to try a contravention of the Code of Conduct for Public Officers. He agreed that one of the functions of the Bureau under Section 15(1)(b) is:-

"to receive complaints about non-compliance with or breach of this Code and where it considers it necessary to do so, to refer such complaints, of such breach or non-compliance of the Code of Conduct Tribunal."

The penalty provision is in Section 23(1) of the Code of Conduct Bureau and Tribunal Act Cap. 56. It has been provided therein that a public officer if found guilty by the Tribunal contravening any of the provisions of the Code, it shall impose upon that officer any of the punishments specified under subsection 2. The subsection reads:-

(2)     The punishment which the tribunal may impose shall include any of the following:-

(a)     vacation of office or any elective or nominated office, as the case may be;

(b)     disqualification from holding any public office (whether elective or not) for a period not exceeding ten years; and

(c)     seizure and forfeiture to the State of any property acquired on abuse of corruption of office.

Learned Senior Counsel for the defendants submitted that the proper thing for any person who felt that the third defendant had breached the Code of Conduct Bureau which bureau may, if it considers it necessary to do so, refer his case to the Code of Conduct Tribunal. This is more so in view of the fact that what the third defendant is alleged to have done against the Code of Conduct might be morally wrong but not illegal. The learned Senior Advocate referred to the cases of Ogbuagwu v Ogbuagwu (supra) and Nwankwo v Nwankwo (1992) 4 NWLR (Part 238) 693 and argued that any complaint not having been lodged against the third defendant with the Code of Conduct Bureau, the third defendant cannot be said to be in breach of the code.

Before I consider whether or not the transfer of 9 percent shares is in breach of the Code of Conduct and therefore illegal I would like to say that I see nothing wrong in the third defendant receiving a transfer of 12 percent of the shares which the first plaintiff voluntarily made to him after he had left NEPA.

I have been referred to the decision of Araka, CJ in the case of Ogbuagu v Ogbuagu (supra) in which the learned Chief Judge held (1) that the court is not a proper forum under the Constitution for a complaint that a person has breached a Code of Conduct under the Constitution. (2) Under the Constitution any allegation that a public officer has committed a breach or has not complied with the provisions of the Code of Conduct should be made to the Code of Conduct Bureau established by the Constitution. (3) Judges are sworn to uphold the Constitution of the Federal Republic of Nigeria but the Constitution cannot be upheld by the Judges usurping the powers and functions of Constitutional body set up by the very Constitution.

I entirely endorse this decision of Araka, CJ and will apply it fully in this judgment. It is a fundamental right under the Constitution that:-

"33     (1)     In the determination of his civil rights and obligations, including any question or determination by or against any government or authority, a person shall be entitled to a fair hearing within a reasonable time by a Court or other tribunal established by law and constituted in such manner as to secure its independence and impartiality."

The issue involved here is said to amount to a breach of the Code of Conduct under the Constitution. It is pertinent to ask, who determines whether a breach has occurred or not? Under Section 12 of the Code of Conduct for Public Officers it is provided that any allegation that a public officer has committed a breach of or has not complied with the provisions of the Code shall be made to the Code of Conduct Bureau. The Bureau would impose a punishment if it finds a public officer guilty of contravention of any of the provisions of the Code. It is quite clear therefore that until the Code of Conduct Tribunal finds a public officer guilty of contravention of the Code of Conduct for public officers no public officer shall be deprived of his rights, property or freedom and the tribunal cannot decide his case without hearing him.

It should be borne in mind that taking unilateral decisions, without following the proper procedure laid down by the Constitution would result in depriving a citizen of his status or property. It is not for any person other than the Code to declare that a particular act amounts to an infringement of the Code of Conduct. Such declaration could only be made by the Body empowered to do so by the Constitution.

In the case in hand, although it is safe to allege that an illegality might have been committed by the third defendant when he accepted 9 percent shares in the company, in order to take part in the company's management, while still serving NEPA, in my opinion, it is only the Code of Conduct Tribunal which would declare the conduct illegal and a contravention of its provisions. The learned Justice of the Court of Appeal, Ademola, JCA, is therefore right to hold that only the Code of Conduct Tribunal and not the regular courts could declare the action of the third defendant a breach of the provisions of the Code of Conduct for Public Officers. Thus making the agreement to transfer 9 percent shares to Prince Ademiluyi illegal and void. Having reached the above conclusion, it is my opinion that the issue of resulting trust in favour of the first plaintiff or his nominees in respect of 21 percent of the shares which the first plaintiff voluntarily transferred to the third defendant, does not arise.

The issue of injunction is a simple one. The alternative claim which the plaintiffs sought for a declaration at the High Court is - "an injunction restraining the first, second and third defendants and/or any other persons acting with or on their direction or authority from conducting the affairs of the third plaintiff company in any bank whatsoever on the basis of the document purporting to be the Memorandum and Articles of Association of the third plaintiff company and carrying the signature of the first and second plaintiffs as well as the three dependants as subscribers". It is an error, in my view, for learned Justice of the Court of Appeal to refer to Exhibit 'A1'", the Memorandum and Articles of Association which the learned trial Judge, quite correctly, declared bogus. The learned Justice of the Court of Appeal shared the views of the learned trial Judge in respect of Exhibit 'A1'.

I do not agree with Chief B.O. Benson, SAN, that there is little difference between the order of injunction made by the trial High Court and the one made by the Court of Appeal. There is indeed a world of difference between the two. I therefore agree with Chief Williams SAN, that the appeal in respect of the order of injunction should be allowed and it is allowed. I restore the order of injunction made by the Federal High Court. For clarity I reproduce that order hereunder:-

"The first, second and third defendants and/or other person or persons acting with or on their direction or authority are hereby restrained from conducting the affairs of the third plaintiff company and in particular from operating the account of the said company in any bank whatsoever on the basis of any Memorandum and Articles of Association other than that mentioned in paragraph (1) above."

What was mentioned in paragraph (1) above is Memorandum and Articles of Association of Albion Construction Company Limited dated 16 September 1976, and admitted in evidence during the trial as Exhibit 'A'. It is the Memorandum and Articles of Association which the first and second plaintiffs were subscribers when the company was incorporated.

In consequence of all what I considered above, this appeal fails in respect of the issues concerning the shareholdings of the first, second and third defendants. The cross-appeal in respect of the issue that the 80 000 shares of the first and second defendants were acquired through transfer succeeds. The appeal of the plaintiffs against the order of injunction made by the Court of Appeal also succeeds. I accordingly dismiss the appeal concerning the shareholdings of first, second and third defendants in the third plaintiff company and I allow both the cross-appeal and the appeal of the plaintiffs against the order of injunction made by Ademola, JCA.

In summary, the share standing of the equity shareholding of respective members of the third plaintiff company are as follows:-

(1) first plaintiff                             19.9995%           equivalent of              N239,999

(2) second plaintiff                        .0005%              equivalent of              N240,001

(3) first defendant                           20%                          "                      " N240,000

(4) second defendant                     20%                          "                      " N242,000

(5) third defendant                          21%                          "                      " N220,000

(6) L.S. Balogun                             10%                          "                       " N219,000

(7) L.A. Balogun                              9%                           "                         N200,000

In view of the fact that the success and failure in this appeal are shared between the parties each should bear own costs.

 

Wali, JSC:- I am privileged to have read in advance, the judgment of my learned brother, Uthman Mohammed, JSC and I entirely agree with the reasoning and the conclusions contained therein. I adopt the same as mine. I also subscribe to the consequential orders made in the said judgment, that of costs inclusive.

Appeal allowed.

Cross appeal dismissed.