3PLR – JETHWANI V. NIGERIA WIRE IND. PLC

POLICY, PRACTICE AND PUBLISHING, LAW REPORTS  3PLR

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JETHWANI

V.

NIGERIA WIRE IND. PLC
COURT OF APPEAL

(LAGOS DIVISION)

CA/L/398/97

THURSDAY, 15TH APRIL, 1999

3PLR/1999/61  (CA)

OTHER CITATIONS

5 NWLR PART 602 PAGE 326

BEFORE THEIR LORDSHIPS:

IGNATIUS CHUKWUDI PIUS-ACHOLONU, JCA

PIUS OLAYIWOLA ADEREMI, JCA

AMIRU SANUSI, JCA

BETWEEN

1. STRICHAND JETHWANI

EUROPEAN TRADE & FINANCE. CORPORATION PLC.

AND

NIGERIA WIRE INDUSTRIES PLC.

MAIN ISSUES

COMMERCIAL LAW– Shares – Transfer of shares – Transfer of shares to an allotee outside Nigeria – When valid – Sections 7 and 1 0(1), Exchange Control Act considered. When deemed effected Section 152(2), Companies and Allied Matters Act.

PRACTICE AND PROCEDURE – COURT – Illegality – Whether court will aid.

PRACTICE AND PROCEDURE – Cause of action – Applicable law thereto – How determined – Guiding principles.

Issue:

Whether the transfer or sale of the Mitsui shares to the 2nd appellant is valid and enforceable having, regard to the provisions of the Exchange Control Act, 1962.

Facts.

Mitsui and Company Limited is a shareholder in the respondent company. In 1991, Mitsui and Company Limited sold and assigned to the 2nd appellant (a foreign company) its share of 1,500,000 ordinary shares by a deed of assignment. On 20th December, 1991, it wrote to the respondent notifying it of the said assignment. The 2nd appellant then appointed Centre Point Investments Limited, a member of the Nigerian Stock Exchange, as a broker to endeavour to perfect the transfer of the shares. Centre Point Investments Limited applied for permission from the Nigerian Stock Exchange Commission, and permission was granted.

The 2nd appellant, on the strength of the permission, paid the sum of U$$ 275000 for the shares to Mitsui and Company Limited. Centre Point Investments Limited thereafter lodged with the respondent’s registrar, UBA Registrars Plc. all necessary documents to enable it effectuate the transfer. These efforts notwithstanding, the respondent refused to accept the said transfer and when the appellants insisted, the respondent sued the appellants at the High Court.

The respondent sued for a declaration that the 1,500,000 shares held by Mitsui and Company Limited have been forfeited or surrendered to the respondent; that the purported sale or transfer of the shares to the 2nd appellant is illegal and void; that the appellants are not shareholders in the respondent company. The respondent also sought for an injunction restraining the appellants from acting or purporting to act or continuing to act in pursuance of tae said sale or transfer and an injunction restraining the appellants from acting or holding themselves out as shareholders or members of the respondent company or from otherwise intermeddling in the company’s business or the management of its affairs; and an injunction restraining Mitsui and Company Limited from purporting to act or hold itself out as a shareholder or member of the respondent company.

The appellants denied the respondent’s claims and counter-claimed for a declaration that the 2nd appellant is a shareholder and member of the respondent company holding 1,500,000 ordinary shares of 50 kobo each; a declaration that the transfer 6f 1,500,000 ordinary shares of 50 kobo each by Mitsui and Company Limited to the 2nd appellant is valid and effective; an order compelling the respondent to register the 2nd appellant as the proprietor and owner of the 1,500,000 shares in the respondent company; an order allowing the 2nd appellant to enjoy its rights, entitlements and privileges in the respondent without hindrance from the respondent; and an order that the proceedings of the Board of Directors of the respondent wherein it was purportedly resolved that the transfer of the 1,500,000 ordinary shares by Mitsui and Company Limited to the 2nd appellant was rejected by the board is ultra vires, unlawful and void and that the respondent cannot refuse or reject the transfer of the said shares to the 2nd appellant.

At the conclusion of the trial, the trial court, in a reserved judgment, granted the respondent’s claims in part. It held that the transfer of Mitsui and Company Limited’s shares to the 2nd appellant is valid and effective but subject to obtaining the subsequent consent of the Federal Minister of Finance. The court refused to compel the respondent to register the 2nd appellant as its shareholder.

The appellants were aggrieved by the judgment and they appealed to the Court of Appeal. The respondent, also dissatisfied with certain portions of the trial court’s judgment, cross-appealed.

Held (Unanimously dismissing the appeal and allowing the cross-appeal):

1. The substantive law existing at the time a cause of action arises governs the determination of the action and the rights and obligations of the parties must he determined in accordance with the substantive law when the cause of action arises. A change of law after the cause of action has arisen will not affect accrued rights or obligations unless the change is made retrospective. In the instant case, as of the time the securities were transferred and even lodgement by Centre Point to the United Bank for Africa, the registrar of the respondent, which is a time frame between 1991 to 1993, the Exchange Control Act was very much extant and in operation. The cause of action arose as at the time the transfer was effected and the notice thereof brought to the knowledge of the respondent and it declined to accommodate it. All this time, the Exchange Control Act was in force. Therefore, to effectuate a valid transfer, the consent or approval of the minister must be sought and obtained. [Rossek v. African Continental Bank Ltd. (1993) 8 NWLR (Pt.312) 382 referred to]

2. By virtue of section 152(2) of the Companies and Allied Matters Act, 1990, until the name of the transferee of shares is entered in the register of members in respect of the transferred shares, the transferor shall so far as it concerns the company be deemed to remain the holder of the shares. In other words, there is no transfer of shares until the name of the transferee is entered in the register of members in respect of the transferred shares.

3. By virtue of sections 7 and 10(1) of the Exchange Control Act, 1962, the consent or permission or approval of the Minister is essential for the valid transfer of security when the business transaction involves or effects someone resident outside Nigeria.

4. A court will not lend its aid to the perpetrators of any illegality and will not therefore permit the enforcement of a contract founded on illegality save in certain exceptional circumstances. [Thirwell v. Oyewunmi (1990) 4 NWLR (Pt.144) 384 referred to]

Per- PIUS-ACHOLONU, J.C.A. “In their appellants’ reply brief the appellants contended relying on the provision of section 152(2) of the Companies and Allied Matters Act which states that:

‘Until the name of the transferee is entered in the register of members in respect of the transferred shares the transferor shall so far as it concerns the company be deemed to remain the holder of the shares’ shall be construed to mean that a transfer or sale remains a proposed one until the name of the transferee is entered in the register of members. This seems to me over- simplification of a complex problem. The truth of the matter is that there has not been any transfer at all. The whole transaction smacks as an underhand effect and surreptitious move to thwart the intent of the laws and ridicule the authority of the various approving authorities.

1. The appellants failed to obtain the permission or consent or approval of the Minister of Finance.

2. After the lapse of the time given to them to effectuate a transfer they failed to reapply for further approval.

3. Exhibits A & B showed that the sale of the shares was made before the approval of prices.

In my view the appellants behaved indecently throughout the transaction. 1 will however praise the counsel for the appellants in trying to make sense out of obviously hard situation.