3PLR – CHIEF NYE JOHN D. GEORGEWILL V. MADAM GRACE EKINE

POLICY, PRACTICE AND PUBLISHING, LAW REPORTS  3PLR

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[BASED ON POLICY, PRACTICE AND PUBLISHING LAW REPORT, 3PLR, PROTOCOLS]

CHIEF NYE JOHN D. GEORGEWILL

V.

MADAM GRACE EKINE

COURT OF APPEAL

(PORT HARCOURT DIVISION)

CA/PH/102/94

FRIDAY, 17TH APRIL, 1998

3PLR/1998/33 (CA)

OTHER CITATIONS

8 NWLR PART PG 455

BEFORE THEIR LORDSHIPS

ALOYSIUS IYORGYER KATSINA-ALU;

SAMSON ODEMWINGIE UWAIFO;

SYLVANUS ADIEWERE NSOFOR.

REPRESENTATION

MAIN ISSUES

COMPANY LAW– Company directors – Nature of relationship between company and director – Whether company director is agent for company.

COMPANY LAW – Legal personality – When company acquires – Effect of legal status.

LEGAL PERSONALITY – Company – When company acquires legal personality.

LOCUS STANDI– Institution of action in respect of company property – Competence of a shareholder to institute.

PRACTICE AND PROCEDURE – Burden of proof in civil cases – On whom lies – Section 136 of the Evidence Act.

Issues:

1. Whether the property in dispute is jointly owned by the parties.
2. Whether the appellant can raise the issue of locus standi for the first time at the Court of Appeal.

Facts:

The plaintiff/respondent and defendant/appellant are husband and wife and were also business partners. They conducted their businesses under trade names of Grace Ekine and Sons; and Sotonye Trading Company. They also registered a limited liability company by name Sotonye Nigeria Limited. The appellant and the respondent were the only subscribers to the Memorandum and Articles of Association each having 50,000 shares of the 100,000 shares of N1.00 each of the company. The appellant and respondent were the two directors and joint signatories to the company account.

In the course of their business and marital relationship, the appellant and the respondent acquired some property in common and others in their individual names. They kept a joint account and also maintained separate accounts in their individual names.

The marital relationship between the appellant and the respondent subsequently went sour and they separated. They also decided to share their common assets including the assets of the company Sotonye Nigeria Ltd.

Whilst compiling the list of property jointly owned by the parties, the appellant excluded the Plot No. 116 Orominike Layout Port Harcourt from the list on the ground that the property was his personal property. The respondent challenged the appellant’s claim and insisted that the property was jointly owned and that she had equal share to the property.

Consequent on the dispute over the property, the respondent filed a suit at the High Court, Port Harcourt Rivers State in which she claimed a declaration that the property was jointly owned by herself and the appellant; an order for payment of one half of rent collected on the property by the appellant; an order of account of all expenditure in respect of the development of the property; and an order of perpetual injunction restraining the appellant from dealing further with or letting out the property without her prior consent.

In the course of the trial of the suit the respondent gave evidence in line with her pleadings that though the lease of the land was obtained from the Rivers State Government in the appellant’s name, the ground rent for the lease, of the land and the building thereon was financed with Funds from Sotontye Nigeria Limited though the parties had their own separate individual savings account.

In his address before the trial court, the counsel for the appellant raised the issue that the suit was not properly brought without the name of Sotonye Nigeria Ltd. Which is a limited liability company which can sue and be sued. In response, the counsel for the respondent said that the company was in voluntary winding up by the two shareholders and that one of the shareholders if aggrieved about the property of the company, could sue in his or her name against the other and that the action was properly constituted.

In its judgment, the trial court found for the respondent on the ground that her evidence was more probable and gave judgment in her favour.

The appellant was dissatisfied with the judgment of the trial court and appealed.

At the Court of Appeal, counsel for the appellant raised the issue of locus standi on the ground that the suit was not properly constituted because Sotonye Nigeria Limited was not a party to the suit at the trial court; which issue counsel for the respondent objected to on the ground that it was not raised at the trial court.

MAIN JUDGEMENT

Held (Unanimously allowing the appeal):

1. A company becomes a body corporate from the date of its incorporation and is capable of exercising all the functions of an incorporated company. It also acquires the capacity to sue and be sued from that date. [Kate Enterprises Ltd. v. Daewoo (1985) 2 NWLR (Pt.5) 116 referred to]
2. An incorporated company is a separate entity from its shareholders. Thus, where as in the instant case, company funds are used as private funds in total disregard of the relevant company law and consequently denying the Federal Government of its revenue from taxation, it is wrong and illegal. [Marina Nominees Ltd. v. Federal Board of Inland Revenue (1986) 2 NWLR (PL20) 48 referred to].
3. In accordance with the organic theory of incorporation, the directors of an incorporated company who are also the only shareholders constitute the heart and soul of the company.
4. A director of a company is a trustee of the company’s money and properties; accordingly, he has a duty to account for all moneys over which he exercises control and he is hound to refund any moneys improperly paid out or to himself. In the instant case, evidence of dealing with the money of Sotonye Nigeria Limited by the respondent as if it is her personal money shows that the respondent did not exercise her powers as a director honestly in the interest of the company.
5. A director or shareholder of a company cannot sue in his name in respect of a company’s property. In the instant case, the respondent lacked the locus standi to prosecute a suit at the High Court in respect of the property in dispute as if she were Sotonye Nigeria Limited.
6. A plaintiff who claims that a property is joint property must prove that the property was purchased in the joint names of the plaintiff and the defendant. In the instant case, for the respondent to succeed in her claim that the property in dispute 1 is jointly owned by the appellant and herself, she ought to show that the property was purchased in the joint names of the appellant and herself; it was not enough to aver or prove that the property in dispute was developed with funds belonging to Sotonye Nigeria Limited.