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In The Supreme Court of Nigeria On Friday , 23rd day of March, 1990 SC 200/1989 Before
Their Lordships
Between
And
Judgment
of the Court Delivered by Abdul
Ganiyu
Olatunji Agbaje
The background material to this appeal is as follows. The plaintiffs, Chief R.A. Okoya, Mrs. K. Okoya and Albion Construction Ltd., sued the defendants, S. Santilli, A. Davanzo and Prince D.A. Ademiluyi in a Federal High Court Lagos Division, claiming against them the following reliefs:- (1) A declaration that the document, copies of which were lodged (2) An injunction restraining the
1st, 2nd and 3rd defendants and/or any
person acting with or on their direction or authority from conducting the
affairs of the Albion Construction Co. Ltd. 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
(3) hereof. (3) A declaration that the
1st and 2nd Plaintiffs are the only lawful
directors of the Albion Construction Co. Ltd. (4) A declaration that the purported appointment of the
1st and
2nd defendants as directors of the Albion Construction Co. Ltd. whether pursuant
to the memorandum and articles of association of the said company or at the
meeting of the Board of Directors of the Company held on 7.2.80 is illegal and
null and void and of no effect. (5)
A
declaration that the claim of the 1st and 2nd defendant to be owners of
40,000 shares each in the Albion Construction Co. Ltd. whether as subscribers to
the memorandum and articles of association or pursuant to resolutions allegedly
passed at a meeting of the Company's Board of Directors held on 5/5/81
is unlawful and not maintainable in law or in fact. (6)
A
declaration that all shares held by the 3rd defendant in the Albion
Construction Co. Ltd. were held by him in trust for the 1st Plaintiff and an
order directing the said defendant to execute a transfer of the said shares to
the 1st Plaintiff. (7) An injunction restraining the 1st and 2nd defendants from holding themselves out as director of the 1st plaintiff company or from giving directions concerning the management and control of the said company unless and until duly appointed as directors of the said company. I am satisfied that the following decision must be made: (1)
The
document described as Memorandum and Articles of Association of Albion
Construction Company Limited dated 16/9/76 and (2)
The nominal share capital of the third plaintiff company is (3)
All the parties to this action are shareholders of the third
plaintiff (4)
The third defendant is hereby directed to execute an instrument (5) 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." By
a notice of appeal dated 22/12/88, the defendants appealed against the whole of
the decision of Odunowo, J., to the Court of Appeal, Lagos Division. For reasons
herein after appearing in this judgment I will reproduce below the grounds of
appeal in the notice of appeal without their particulars. They are as follows: (1)
That the learned trial Judge erred in law and on the evaluation of the facts
before the Court in awarding 51% percent of the adjudged 200,000 Authorised
Share Capital to the 1st and 2nd Plaintiffs and in directing the 3rd Defendant
to execute an instrument of transfer of the said 51 % shares to the 1st
Plaintiff which the learned trial Judge adjudged the 3rd Defendant held in trust
for the 1st Plaintiff. (2) The learned trial Judge erred in law by adjudging that the 1st and 2nd
Plaintiffs are Members of the 3rd Plaintiff Company. (3) The learned trial Judge erred in law in holding that the 3rd Defendant's
shareholding in the 3rd Plaintiff is 9% instead of the 21% which the Defendants
had canvassed in their alternative position. (4) The learned trial Judge erred in his evaluation of the facts and the
application of law to those facts in holding and accepting the contention of the
1st and 2nd Plaintiffs that 'the paid up share capital of the 3rd Plaintiff as
at 31/5/81 stood at 200,00.' (5) That the learned trial Judge erred in law and in the evaluation of the
facts placed before the court by failing to make a finding on the un-contradicted
evidence that the Worker Trust held 10% of the authorised share capital of the
3rd Plaintiff. (6) The learned trial Judge erred in his evaluation of the facts before the
court and in his application of law to those facts in holding that the
presumption of regularity of the disputed Minutes in the minutes Book, Exhibit
HR had not been displaced. (7) The learned trial Judge erred in accepting the authenticity of the
Balance Sheets of the 3rd Plaintiff Company by which the paid up share Capital
were supposedly made by the 1st Plaintiff, as at 31/5/81. (8) That the judgment is against the weight of evidence. There
is a cross-appeal by the plaintiffs. As far as the present appeal is concerned,
I need not say anything more about the plaintiffs' appeal. Pursuant
to an application by the defendants, for leave to appeal against the Judgment of
Odunowo, J., of 15/12/88 and for a stay of Execution of the judgment, parties by
their counsel appeared before Odunowo, J., on 22/12/88. For reasons hereinafter
appearing in this judgment, it is necessary to set down some of the record of
proceedings of that day, which is: Chief F.R.A. Williams: When we came here this morning, we felt that there were two major defects in this application. But we felt we can nevertheless usefully spend this morning in resolving the anxieties of my learned friend ..................... If
you look at the judgment, I submit that there is nothing to stay as such. It
would have been more realistic to ask for an Order that pending the
determination of the appeal, the 1st & 2nd Plaintiffs shall be restrained
from exercising the right attached to the shares which the court has declared to
be owned by them. But your Lordship will have to balance any such application by
a consideration of our own interest, having regard to the principle that a
successful party should not be deprived from enjoying the fruits of judgment.
Bearing those principles in mind and having regard to all the circumstances of
this case, we respectfully submit that there are 2 alternatives open to this
court. These alternatives are to last until the determination of the appeal. In
the alternative, if your Lordship feels you want to hear fuller arguments, then
they should rest until the determination of this motion on Notice or until
further Order: (1) That the 3rd plaintiff company be managed by a Board of receivers comprising: (i) Mr. Santilli who shall be responsible for the functions at present performed by the M.D. (ii) Mr. Davanzo who shall be responsible for the functions at present performed by the director technical. (iii) Prince Ademiluyi who shall be an adviser, without executive responsibilities, to the Board of Receivers. (iv) Three (3) nominees of the 1 St & 2nd Plaintiffs one of whom shall have executive responsibilities for the finances of the company: ............... (2) The second condition is as follows: The business of the 3rd plaintiff
company should be run by a board of receivers and managers comprising six (6)
Persons as in proposal one. The Chairman of the Board shall be an independent
person with experience in business or commercial accounting to be appointed by
the court. Such Chairman not to have an original vote but shall have a casting
vote. Chief Benson: It will be very difficult for
me to accept or refuse the offers. My Lord, I was briefed only yesterday in this
matter and I am yet to have full consultations with my clients. My learned
friend has made a number of remarks about their having a majority as a result of
the judgment. Which judgment is being challenge on appeal. One
is bound to look at the offer, without commitment or prejudice to my clients, on
the face of it. Chief Williams: I will with respect withdraw
my proposals because there is no reasonable response. Chief Benson: ..... He makes his offer and if he withdraws it good luck.
The application was then
adjourned till 2/2/89 for hearing. Giving
his ruling on the application on 1/3/89 the learned trial Judge Odunowo J. held
as follows: First: Just before the motion was moved, Chief Williams, S.A.N., conceded that the order directing the 3rd defendant to execute an instrument of transfer in respect of 51% or 102,000 shares which he holds on trust for the plaintiff could be stayed without prejudice to the operation of all the remaining declarations granted by the court, including the declaration as to the number of shares owned by the 1St and 2nd defendants in the company. Second: Finally, as was pointed out by Eso, J.S.C., . . . a stay of execution is never to be used as a substitute for obtaining the judgment which the trial court has denied a party. . .' (See Okafo V Nnaife (1987) 4 N.W.L.R. (Pt. 64) at page 138). The conclusion I have reached after deep reflection does not persuade me that there is any equitable basis for the present application which must be and is hereby dismissed accordingly, subject to the concession granted by the plaintiffs in respect of declaration (4) above. By
an application dated 2nd March, 1989 the defendants applied to the Court of
Appeal for the following reliefs:-
(1)
An order of this Honourable Court staying further proceedings on the
declarations as contained in the judgment of Hon. Justice T.A. Odunowo of the
Federal High Court, Lagos; (2) An order staying execution of the orders contained in the same judgment
given on the 15th day of December 1988 pending the determination of the appeal
lodged by the Defendants / Appellants / Applicants to this court; (3) And for such further order or other orders as this Honourable Court may deem fit to make in the circumstances. There was an objection by the counsel for the plaintiffs by way of a Notice of Preliminary Objection dated 20/3/89 to this application in the following terms:-
Notice
of Preliminary Objection TAKE
NOTICE that at the hearing of the motion on Notice herein dated the 2nd day of
March 1989, the above-named Plaintiffs intend to raise the following preliminary
objections:- (i) The prayer for 'staying further proceedings on the declarations as
contained in the judgment' is not a relief known to the law. (ii) No such prayer was ever moved in the court below and so it cannot be
moved in this court. (iii) The prayer for 'staying execution of the orders contained in the judgment' is incompetent and untenable as there is nothing left to stay. Dated this 20th day of March 1989. Ruling on the preliminary objection on 27/4/89 the Court of Appeal, co ram Akpata, Babalakin and Kalgo JJ.C.A., as per the lead ruling of Akpata, J.C.A. in which the others concurred held as follows:-
I agree with Chief Williams that the
application for an order staying No
such special circumstances have been shown to exist. The first prayer is therefore incompetent. It is struck out. The objection against the application for an order staying the execution of the orders contained in the judgment of Odunowo, J., delivered on 15th day of December, 1988 fails. It is dismissed.
The
effect of this ruling is that what was left of the defendants' application of
2/3/89 was the second leg of the application namely an order staying execution
of the orders contained in the judgment of Odunowo, J., of the Federal High
Court, Lagos Division of 15/12/88 pending the determination of defendants'
appeal against the judgment. The
application was then heard by the Court of Appeal differently constituted, coram
Ademola, Akpata and Kalgo JJ.C.A. The ruling on it was given on 30/5/89. In his lead ruling which is short, Ademola J.C.A. held as follows:-
At the end of this case in the court below.
Odunowo, J., made the (1)
The document described as Memorandum and Articles of Association of Albion
Construction Company Limited dated 16/9/76 and admitted in evidence in this
action as Exhibit A and to which the first and second plaintiffs were
subscribers in the only true memorandum and Articles of Association of the third
plaintiff company. (2) The nominal share capital of the third plaintiff company is
(3) All the parties to this action are shareholders of the third plaintiff
The
applicants who were defendants in the court below have appealed here. They have
also brought a motion for stay of execution upon the judgment of the court
below. This ruling is in respect of the application for stay of execution. Amidst
the clashes of argument by counsel at the hearing of the application, the
affidavit in support of the Motion and the counter-affidavit in opposition to
the Motion, there is discernable in my opinion a desire on the part of the
warring parties to make the company to which they all belong a going concern
until the appeal is heard. This is an understandable desire in view of an
outstanding contract of over 100 million Naira the Company still has to execute. There
can be no doubt that there are some arguable grounds in the appeal lodged by the
appellants in respect of the apportionment of the share-holding in the company
to the 1st and 2nd Respondents made by the learned trial Bearing
these two factors in mind, it appears that some form of stay of execution of the
judgment must take place. It is therefore very refreshing and commendable to see
some form of proposal in the counter-affidavit of the respondent. During the
course of argument before the Court, Chief Benson showed some accommodation to
the proposal outlined by Chief Rotimi-Williams, learned counsel for the
respondent in this matter. There
would, therefore, be a stay of execution on the following conditions: (1) There would be a Board of Receivers and Managers for this Company pending
the determination of the appeal. (a) The Board would be headed by Chief Folorunsho Oke Chartered Accountant of
Messrs. Copper & Lybrand Ltd., Igbosere Road, Lagos who shall be Chairman. (b) Messrs.
Santilli and Davanzo, 1 St and 2nd appellants to carry on their respective
duties as Managing Director and Technical Director respectively and shall be on
the Board. (c) Prince
D.A. Ademiluyi shall be on the Board. (d) Chief
R. A. Okoya and Mrs. Okoya and Mr. S. O. A. Folami shall be on the
Board. The said Mr. Folami a Chartered Accountant shall be in control of the
finances of the Company pending this appeal. In the alternative, Chief &
Mrs. Okoya should nominate two persons whose names shall be communicated to
Registrar to serve as their nominees on the Board. (2) The order asking the 3rd defendant now appellant, Prince
Ademiluyi to
execute instrument of transfer in respect of 51% or 102,000 shares (a) The order restraining of the 1st, 2nd and 3rd defendant and other person
or persons acting on their behalf or their direction or authority, restraining
them from conducting the affairs of the Company and in particular from operating
the account of the said Company in any bank whatsoever is hereby stayed. (3) The order of interim injunction granted by this Court in respect of a
bank account of the Company is hereby lifted. (4) The Board of Receivers and Managers shall conduct the affairs of the
company during the pendency of the appeal in the best possible (5) The Board of Receivers and Managers shall hold meetings and direct and
run the affairs of the Company in the best possible manner during the pendency
of this appeal. (6) The Chairman, Chief Folorunsho Oke is at liberty to seek the direction of
the Court on any matter regarding the administration of the Company during the
pendency of the appeal in this court. The stay is granted accordingly on these conditions. There shall be no order as to cost. Akpata,
J. C. A., in his ruling said inter alia as follows: A
company and its majority members who have dragged minority members to court
should not be heard to say to the defendants, "Foss v. Harbottle prevents you from appealing because we are
in the majority. Even if you can appeal you cannot stop us from destroying the res
before the appeal is heard.". The courts will not permit that theory.
Sections 220 and 221 of the 1979 Constitution make it clear that an aggrieved
person may appeal with leave of court in others (sic) from decisions of a High
Court. Foss v. Harbottle does not possess the legal elasticity to
have it stretched so as to deprive an aggrieved party the right of appeal
conferred on him by the Constitution.
In
effect, therefore, if an action is well constituted by meeting the requirements
of Foss v. Harbott1e and
it goes to trial, any of the parties aggrieved by the decision of the court may
appeal whether or not they are minority members of the company. They are
competent to apply that the judgment be stayed or suspended so that the res
may not be destroyed. The dictum of Foss
v. Harbott1e terminates with the determination of the action in the
trial court. By
Order 1 Rule 20(8) of the Court of Appeal Rules 198 1, the Court shall have
powers to make orders by way of appointment of a receiver or such other
necessary orders for the protection of property or person pending the
determination of an appeal to it even though no application for such an order
was made in the court below. I agree with my learned brother Ademola, J.C.A., that in the circumstances of this case it is desirable to appoint a body of receiver/manager from both sides for the protection of the company pending the determination of the appeal. Kalgo,
J.C.A., said in his ruling:-
I have before now read in draft form, the ruling just delivered. I agree with it. The most important consideration in this matter, in my view, is that the Company concerned, Albion Construction Limited, should be allowed to run as a going concern while all actions in court are going on. Both learned counsel in this application have conceded that this is very essential and are prepared to accept a compromise which would produce the desired result. In my view, the conditions for the set out (sic) in the ruling just delivered, would in the circumstances be just and fair to both parties pending the determination of the appeal. It
is against this ruling that the plaintiffs have now appealed with leave of the
lower court on 16 grounds of appeal which I need not reproduce since all of them
have been subsumed under one or other of the issues said in the briefs of
arguments in this appeal to arise for determination. According to the brief of arguments for the plaintiffs, the appellants, the issue arising for determination in this appeal are as follows:-
(i)
Whether a defendant
who has filed an appeal against purely declaratory orders made against him is
entitled to apply for 'stay of execution' of those orders pending the hearing
and determination of the appeal; (ii) Whether the Court of Appeal had jurisdiction to make the orders contained
in its decision dated 30.5.89 having regard to the rule in Foss
v.
Harbottle and, in particular the rule that the court ought not to
interfere in matters relating to the internal management of the affairs of a
corporation
(iii)
Whether it was proper for the court below to make the appointment of
receivers and managers-
(a) in the absence of a specific application in that behalf by either party;
(b) without
fixing the amount of security which the persons so appointed ought to give; (c) without inviting the parties to address it on the desirability of marking the appointments, including the suitability of the appointees. According to the brief of arguments for the defendants, it is said that the issues arising for determination in this appeal are as follows:-
(I)
Whether or not items
4 and 5 of the pronouncements of Odunowo,
(2)
If the said items 4 and 5 are orders, could order for Stay of
Execution
be made pending appeal thereupon? (3)
If the said items 4 and 5 could be stayed, has the Court of Appeal
discretion to make such order of stay on condition? (4)
Do the circumstances of this matter fall within principles enunciated
in rule in Foss v. Harbottle (1843) 2 Hare 461? (5)
If item 4 is an order that could be stayed, will such Stay affect the
declaration stated in item 3 or not, particularly the shareholdings of the
plaintiffs i.e. (1)
Chief R. A. Okoya 50% or
100,000 shares (2)
Mrs. K. Okoya 1% or 2,000 Shares? (6)
If item 4 is also an order/injunction, that could be stayed, will such
stay not also affect the declaration stated in item 1 which relates to whether
or not Exhibit A is the proper Memo and Articles of Association? (7) Was the appointment of receivers and managers by the Court of Appeal a reasonable and judicious exercise of its discretion to impose conditions? I
must pause here to comment on some of the issues said by the defendant to arise
for determination in this appeal, that is, issues 1, 2, 3, 5, and 6 above. The
orders in question i.e. orders 4 & 5, for ease of reference are as follows: (4)
The third defendant is hereby directed to execute an instrument of transfer in
respect of 51% or 102,000 shares, which he holds on trust, in favour of the
first plaintiff. (5) The first, second and the 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. As
regards order 4 we have to remind ourselves that the order which is undoubtedly
an executory order capable of enforcement and of being stayed, as I will show
presently in this judgment, has been stayed in the ruling of Odunowo, J., of
1/3/89 on an application to him by the defendants for a stay of execution of his
judgment to which I have earlier on in this judgment referred. So a stay of
execution of that order could no longer be a live issue in the court below in a
fresh application to it by the defendants for a stay of As
regards order 5, a perusal of the grounds of appeal of the defendants against
the judgment of Odunowo, J., which have reproduced earlier on in this judgment
shows that nowhere therein is any complaint made about this order. It is to be
noted that the restrictive order which Odunowo J made is tired to the first
declaratory judgment, namely:- (1)
The document described as Memorandum and Articles of Association of
Albion Construction Company Limited dated 16/9/76 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. It
is equally noteworthy that the defendants in their grounds of appeal no
complained about this order either. If there had been a complaint
To set aside the
judgment and orders of the Federal High Court (a)
A declaration that the 1st and 2nd Plaintiffs are not members of the 3rd
Plaintiff and do not hold 51% of the Shares of the 3rd Plaintiff. (b)
A
declaration that the 3rd Defendant is entitled to and holds 21% the authorised
share capital of the 3rd Plaintiff. (c)
A
declaration that as at 31/5/81 the paid up share capital of the 3rd Plaintiff
was (d)
A declaration that the workers of the 3rd Plaintiff are entitled to hold 10% of
the authorised Share Capital of the 3rd Plaintiff. (e) To adjudge that the disputed Minutes contained in the Minutes Book of the 3rd Plaintiff are irregular and we were never held. It
therefore
appears clear to me that the defendants are satisfied with the the decision of
Odunowo, J., as to the authentic Memorandum and Article of Association of the 3rd
plaintiff/Company. It follows too that they Having made the above comments on the issues said by the defendants, the respondents to this appeal, to arise for determination, I will now go on to consider the issues arising for determination in this appeal as identified by the plaintiffs, the appellants. I will take issue one first, namely:-
(i)
Whether a defendant
who has filed an appeal against purely Counsel for the Plaintiff in the latter's brief of argument, has drawn our attention to the opinions of academic writers in their respective works on declaratory judgments vis-a-vis stay of Execution. The writers and their works he referred to are as follows:-
(1)
C. M. BORCHARD: Declaratory Judgments; (2)
Zamir: The declaratory judgment; (3)
J.W. Young: Declaratory Orders; (4)
Salmond on Jurisprudence; and (5)
Prof. S. A. de Smith Judicial Review of Administrative Act. There
is no doubt at all that there is the following consensus among them as regards
executory judgment, declaratory judgment, and stay of execution of either or
both of them:-
First:
(i) Executory judgment declares
the respective rights of the parties and then proceeds to order the defendant to
act in a particular way, e.g. to pay damages or refrain from interfering with
the plaintiffs' rights, such order being enforceable by execution if disobeyed. Declaratorty
judgments, on the other hand, merely proclaim the existence of a legal
relationship and do not contain any order which may be enforced against the
defendant. Second:
A declaratory judgment may be the ground of subsequent proceedings in which
the right, having been violated, receives enforcement but in the meantime there
is no enforcement nor any claim to it. Counsel
for the plaintiffs then referred in the brief of arguments for the plaintiffs to
judicial decisions in order to show that they are along the same lines I have
just indicated. In this regard he referred:-
(1) to pages 318-319 of Zamir: The Declaratory judgment:-
What is the
position where a defendant disregards a declaration It is highly improbable that any officer of the Government would set the Court at defiance ........ But the remedy in such a case, if it did occur, would be simple enough. Every order such as that which the appellant asks for carries with it liberty to apply. On a proper application on proper notice being given it would be found that the arm of the Court would be long enough to reach the offender, whatever his position might be. If
so, then liberty to apply is nothing more than 'a more precise warning to the
defendant to so conduct himself as not to make the application necessary. (2)
Williams v. Majekodunmi (No.3) (1962)1 All N.L.R. 413 at 430; (3)
Webster v. Southwark London Borough Council (1983) Q.B.D. 698;
and (4) Government of Gongola State v. Tukur (1989) 4 N.W.L.R. (Pt. 117) 592. As
recently as 5/9/89 this court has said, as per the lead judgment of J.S.C., in Government
of Gongola State v. Tukur (supra), in which It
should be noted that many judgments and orders do not require to enforced as the
judgment and order itself is all that the party obtaining requires. See
para. 565 Vol.26 Halsbury Laws of England 4th Edition, page 288. judgment of the
Court of Appeal in question is one such judgment. A
declaratory judgment is complete in itself since the relief is the See Vol.1
Halsbury Laws, 4th Ed., para. 185-187; Akunnia
V. When
therefore a court declares that it has no jurisdiction, besides the preparation of
its incompetence which it has jurisdiction to make, no A stay of execution only prevents the plaintiffs or beneficiary of the judgment or order from putting into operation the machinery of the law-the legal process of warrants of execution and so forth. An order for "stay" pending appeal therefore can only be granted in respect of executory judgment or order. But
the judgment of the Court of Appeal is not an executory order. The Court of Appeal cannot go outside the terms of the motion however misconceived it is. It is bound by the terms or prayers in the motion filed. (Commissioner for Works Benue State V. Devcon Construction Co. Ltd. (1988) 3 N.W.L.R. (Pt. 83) 407 at 420. Since there was nothing to stay the Court of Appeal was in error to have made the order prayed for. In Webster v. Southewark London Borough Council (supra) Forbes, J., said first at page 706:-
Without going
into the authorities-and Mr. Turner-Samuels was
second
at page 708:- .......................The argument that there is no contempt here succeeds only because the form of the order made was a declaratory one. There are two aspects of the form of the order made here which I should mention. The first is that there is a practice of courts to make declaratory orders rather than to grant injunctions or other coercive relief where because the defendant is a responsible authority, it is thought inconceivable that a declaratory order would not result in the plaintiff obtaining his rights. It was against that background that I made the original order here. It is now plain that I was mistaken. The local authority has, in consequence of the manner in which it has treated this order, forfeited all right to be regarded as a responsible authority so far as the courts are concerned, and it remains to be seen whether the courts should, in general, continue to adopt this practice which is now shown to be open to abuse in this fashion.
Counsel
for the defendants in their brief of argument seizes on the following passages
in Webster's case above namely: .......The first is that there is a practice of courts to make declaratory orders rather than to grant injunction or other coercive relief where, because the defendant is a responsible authority, it is thought inconceivable that a declaratory order would not result in the plaintiff obtaining his right. and
submits: it is my humble submission that such responsible authority could seek a stay so as not to open itself to the castigation of being said to have "forfeited all right to be regarded as a responsible authority" if it does not want to abuse the practice. And
because a declaratory judgment sometimes carries with it, as in the Indian case
in the Privy Council referred to by Zamir in his work The Declaratory Judgment,
the expression liberty to apply, it is the further submission of counsel for the
defendants in the latter's brief of argument that some declaratory judgments
could be stayed that is those where the expression liberty to apply is expressly
stated or can be implied as having been attached to the order. In Williams
v. Majekodunmi (supra) the order carries with it the expression liberty
to apply for an injunction to restrain violation of the declaratory orders
therein. The
above submissions of counsel for the defendants are the mainstay of the
contention for the defendants by their counsel, Chief Benson, S.A.N., that
declaratory judgments can sometimes be stayed having accepted, as I understand
him to have done, that, generally speaking, declaratory judgments cannot be
stayed. So it behoves me to address myself to these submissions. It appears to
me that the starting point in this regard is the consensus not only among
academic centres but in judicial decisions that a declaratory judgment may be
the ground of subsequent proceedings in which the right having been violated
receives enforcement but in the meantime there is no enforcement nor any claim to
it. So, until subsequent proceedings have been taken on a declaratory judgment
following its violation or threatened violation and the right, declared in the
judgment, receives enforcement or is given legal sanction for its violation,
there cannot I now turn to the passage from the judgment of Forbes, J., in Webster v. Southwork London Borough Counci1 (supra) upon which counsel for the defendants/respondents bases his submission that a responsible authority could seek a stay of execution of a declaratory judgment so as not to render itself liable, if it violates a declaratory judgment, to be treated by courts as having forfeited all rights to be regarded as a responsible authority. In the passage in question, Forbes, J., was dealing with the practice which he described there thus:-
The first is that there is a practice of courts to
make declaratory orders In
other words, Forbes, J., was talking there about declaratory order in
contradistinction to coercive orders, and the practice of the courts to grant
the former and not the latter against a responsible authority in the hope that
the declaratory judgment will be obeyed. Because of the abuse of this practice,
as it was in the case before him, he was then expressing doubts about the
desirability of the continuity of the practice. That passage from the judgment
of Forbes, J., is certainly, in my judgment, not an authority for saying an
application for a stay of execution of a declaratory judgment can be made in
order to forestall any consequences of its violation which in any event cannot
include resort to its execution. The
conclusion I reach is that there cannot he a stay of execution of declaratory
judgments. The glosses which counsel for the defendants/ respondents seeks to
put in this general proposition have in my judgment no validity in law. It
follows in my judgment that a defendant who has filed an appeal against a
declaratory judgment or order is not entitled to apply for a stay of execution
of that judgment or order. Such an application in the circumstance will be
misconceived. It
now remains for me to relate this legal conclusion I have just reached to the
situation in the case in hand.
I
have stated earlier in this judgment that the judgment of Odunowo, J.,
appealed from by the defendants is the subject matter of the defendants' application for a
stay of execution in the lower court with which the present appeal is concerned.
For ease of reference I reproduce it again I
am satisfied that the following declarations must be made: (1) The document described as Memorandum and Articles of Association of
Albion Construction Company Limited dated 16/9/76 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) The nominal share capital of the third plaintiff company
is (3)
All the parties to this action are shareholders of the third plaintiff company:
namely (1)
Chief R.A. Okoya - 50% or 100,000 shares; (2)
Mrs. K. Okoya - l% or 2,000 shares; (3)
Mrs. S. Santilli - 20% or 40,000 shares; (4)
Mr. A. Davanzo - 20% or 40,000 shares and (5)
Prince D.A. Ademiluyi - 9% or 18,000 shares. (4)
The third defendant is hereby directed to execute an instrument of in
respect of 51% or 102,000 shares, which he holds on trust, (5)
The first, second and third defendants and/or any other person or sons
acting with or on their direction or authority are hereby In
my judgment orders l-3 in the judgment are evidently declaratory judgment or orders in that they each of
them merely proclaim or declare Because
of what I have just said above I am satisfied on the authorities that an
application for a stay of execution will not lie in respect of any of the three
orders. So in my judgment the defendants' application in the lower court in its
form as one for a stay of execution of these three orders is misconceived. This
however is not the end of the matter having regard to the orders which the lower
court made on this application for a stay of execution which include one
appointing receivers and managers for the 3rd plaintiff Company and another
staying the order restraining the 1St, 2nd and 3rd defendants and other persons
or persons acting on their behalf of their direction or authority from conducting
the affairs of the 3rd plaintiff Company and in particular from operating the
account of the said company in any bank whatsoever. I will deal with this aspect
of the present appeal later on in my judgment. In
the meantime I shall continue to examine the nature of the orders made by
Odunowo, J., in his judgment by now taking a look at orders 4 and 5. They are,
in my judgment, evidently executory judgments orders in that (a) Order 4 makes a certain declaration as regards the respective rights of
the 1st plaintiff and the 3rd defendant and proceeds to order the 3rd defendant
to act in a particular way in respect of that declaration; (b) Order
5 imposes an injunction or injunctions on the 1St, 2nd and 3rd defendants
restraining them from acting in a particular way or rather enjoining them to act
in a particular way as regards the conduct of the affairs of 3rd plaintiff
Company. I
have no doubt that these two Orders I have just spoken about can be a subject
matter of an application for a stay of execution, as it is the case in the
application now before us on appeal. However in my comments above on issue 5
identified in the defendants' brief of arguments I have shown that that part of
Order 4 which directs the 3rd defendants to transfer the shares he holds on
trust for the I St plaintiffs to the latter has been stayed whilst the
declaration as to the trust remains touched. So the order of the lower court
staying execution of the transfer in respect of the shares is in fact otiose. What
I feel I should consider at this stage is issue 5 in the defendants' brief of
arguments which says:-
If Item 4 is an order that could be stayed, will such stay affect the declaration stated in item 3 or not, particularly the shareholdings of the Plaintiffs i.e.
(1) Chief R. A Okoya 50% or 100,000 shares (2) Mrs. K. Okoya 1% or 2,000 shares
I may add that the transfer order has been stayed. But the trust declaration remains and being a declaratory order it by itself alone cannot be with the declaration as to share holdings in Order 3. When this is done the result will be that the 102,000 shares in the 3rd plaintiff/company said in Order 3 to belong to the 1st and 2nd plaintiffs are held by the 3rd defendant in trust for them in the Company . The registered owner of the shares in Register of shares of the Company is the 3rd defendant .The only effect which I can conceive a stay of execution of the transfer order of the shares will have on order 3 is that the rights and obligations of a trustee and cestui que trust will continue to operate in respect of the shares. In this regard Romer, J., said as follows in Kirby v. Wilkins (1929) 2 CH. 444 at 454 a case to which Chief F. R. A. Williams, S.A.N., was good enough to draw our attention:-
It is then said, however, that in any case the defendant ought not to have exercised his voting power in respect of the shares without the direction of the company. I do not think that the contention is sound. Where a shareholder holds shares as a bared trustee for a third person, he is no doubt obliged to exercise his voting power in the way that the cestui que trust desires, but unless and until the cestui que trust has indicated his wish as to the way in which the power should be exercised, there is no reason why the nominee should not exercise the voting vested in him as a trustee. He holds that voting power upon trust, but, unless and until the cestui que trust intervenes, he must exercise it according to his discretion in the best interests of his cestui que trust.
From what I have said earlier on in this judgment on some of the issues identified by the defendants for determination, it is clear that there is no complaint by the defendants in their grounds of appeal about Order 1 and 5 in the judgment of Odunowo, J. And as I have also said earlier the defendants appear to be satisfied with them. So the question of the two orders being disturbed on the determination of the defendants' appeal does not arise. It follows in my judgment that issue 6 in the defendants' brief of arguments which says:-
If item 4 is also an order/injunction, that could be stayed, will such stay not also affect the declaration stated in item 1 which relates to whether or not exhibit A is the proper Memo and Articles of Association. does
not arise for consideration at all. Equally the lower court was, in my judgment,
in error to have made as per the lead judgment of Ademola J. C. A. orders 2(a) and
3 which I have copied earlier on in this judgment and which have to do with
order 5 of Odunowo, J. As I have said earlier, order 5 was not a live issue in
the defendants' appeal in the Court of Appeal. In the circumstances, that
court ought not to have said anything about that order in the defendants'
application to it for a stay of execution pending the determination of their
appeal. I will now proceed to consider issue 2 in the plaintiff's brief of arguments which is as follows:-
(ii)
Whether the Court of Appeal has jurisdiction to make
the orders
The
rule in Foss v. Harbottle
(supra) has been stated thus in Burland
v. Earle (1902) A.C. 83 at 93 cited to us by counsel for the plaintiff,
Chief F. R. A. Williams, S.A.N.: In
that case the Courts allow the shareholders complaining to bring an action in
their own names. This, however, is mere matter of procedure in order to give a
remedy for a wrong which could otherwise escape redress, and it is obvious that
in such an action the plaintiffs cannot have a larger right to relief than the
company itself would have if it were plaintiff, and cannot complain of acts
which are valid if done with the approval of the majority of the shareholders,
or are capable of being confirmed by the majority. The cases in which the
minority can maintain such an action are, therefore, confined to those in which
the acts complained of are a fraudulent character or beyond the powers of the
company. It
is clear that in the case in hand no-body is seeking any relief in the writ of
summons (1) to interfere with the internal management of a company or (2) to
redress a wrong done to the company or (3) to recover moneys or damages alleged
to be due to the company. The disputes in the action are essentially as to the
share-holdings of shareholders in a company and consequential reliefs in respect
thereof. There are also reliefs seeking (I) to have declared the authentic
Memorandum and articles of association and (2) The
decision in the action will certainly decide who as between the 1st 2nd
plaintiffs on the one hand and 1st, 2nd and 3rd defendants on the hand, are the
majority shareholders in the 3rd plaintiff/Company and are thereby entitled to
control the affairs of the Company. But in the meantime as a result of the present
wrangle between the 1st and 2nd plaintiff on the one hand and the three defendants
on the other hand as to which of them have the controlling interest in the Company
the conduct of the affairs of the Company may suffer. It
is
clear law that if owing to disputes among the directors they are
unable act and the affairs of the Company cannot be carried on the court will
interfere by an injunction or by the appointment of a receiver or manager of
undertaking and assets of the Company until the management of the company is
restored to a proper footing. See Featherstone
v. Cooke (1873) The
above
principles will apply in my view in a situation where owing to disputes as to
shareholdings the conduct of the affairs of a Company will suffer or will be in
jeopardy. In
my judgment
the appointment of a receiver or manager of the under-and assets of a Company in
the situations I have just described above it and cannot
offend against the rule of Foss v.
Harbottle (supra). In This, I believe, was what was operating on the mind of Ademola, J.C.A., be said in his lead Ruling:-
Amidst the clashes of argument by
counsel at the hearing of the application, the affidavit in support of the Motion
and the counter-affidavit in opposition to the Motion, there is discernable in my
opinion a desire on the part of the warring parties to make the company to which
they
all belong a going concern until the appeal is heard. This is an I
believe too Chief F.R.A. Williams, S.A.N., had this in mind when he made the
following proposals to the trial court at the hearing of an application for a
stay of execution there:
Chief F.R.A. Williams: But
we felt we can nevertheless usefully spend this morning in resolving the
anxieties of my learned friend. It
would have been more realistic to ask for an Order that pending the
determination of the appeal, the 1st & 2nd Plaintiffs shall be restrained
from exercising the right attached to the shares which the court has declared to
be owned by them. But your Lordship will have to balance any such application by
a consideration of our own interest, having regard to the principle that a
successful party should not be deprived from enjoying the fruits of judgment.
Bearing those principles in mind and having regard to all the circumstances of
this case, we respectfully submit that there are 2 alternatives open to this
court. These alternatives are to last until the determination of the appeal. That
the 3rd plaintiff company be managed by a Board of receivers. (2)
The second condition is as follows: The business of the 3rd plaintiff
company should be run by a board of receivers and managers In
my judgment, I cannot see, as I have just said, any violation of the rule in Foss
v Harbottle by the order of the Court of Appeal appointing receivers
and managers for the 3rd plaintiff company if the orders were rightly made on
the material time before that court. The question now is: was the order rightly
made? This
now takes me to the consideration of issue 3 in the plaintiffs' brief of
arguments which is to the effect whether or not it was proper for the court
below to have made the appointment of receivers and managers for the 3rd
plaintiff/company. It
is the submissions of Counsel for the plaintiff, both in the plaintiffs' brief
of arguments and in his oral address to us that it was wrong of the court below
to have made the order. First he submitted that on an application for a stay of
execution like the one the subject of this appeal, a court cannot grant a relief
in the form of appointment of a receiver and a manager. He referred to the
following propositions in Kigo v.
Holman (1980) 5 S.C. at page 70: the court from which an appeal lies as well as the court to which an appeal lies have a duty to preserve the res for the purpose of ensuring that the appeal, if successful, is not nugatory.
He further submitted that an application to reserve the "res" pending the determination of an appeal may take any one of the following forms:-
(i)
stay of execution (ii)
stay of proceedings (iii)
injunction (iv)
appointment of a receiver or receiver and manager; and (v) payment of damages into court or into a bank in the name of a stake holder. But,
counsel
continued, in an application in one form the court cannot grant a relief in another
form. I
think
that as a general proposition of law counsel for the plaintiffs is correct. In fact
this court said in Government of
Gongola State V. Tukur The
Court of Appeal cannot go outside the terms of the motion however In
that
case, there was an appeal against the decision of a Federal High court to the
Jos
Division of the Court of Appeal that it had jurisdiction to We
must
therefore not forget that the matter, the subject matter of the appeal before us relates
to an action in a Federal High Court. And in Section (11)
The Federal Revenue Court in the exercise of the jurisdiction In
this regard too I refer to the following passage in the judgment of the Privy
Council in Beigh v. Shaw 5
W.A.C.A. 16 at 22: The
Court of Appeal held that this decision could not be supported because no claim
had ever been made against the executor on the basis of wilful default.
Undoubtedly, the original writ was framed only for relief on the basis of a
common administration order, and if the action had been brought in England the
beneficiary would not have been permitted to allege a breach of trust or wilful
default without amending his claim and probably also his writ. But
the procedure in West Africa is more informal. By the rules of the Supreme Court
of the Colony of Gambia (1928) 0.23 r. 1, suits are ordinarily to be heard and
determined in a summary manner without pleadings, and
by 0.16 r. 2, the plaintiff may obtain any such equitable relief as the facts stated and proved entitle him to, though not specifically asked. The
fact therefore that in a case like the present where no pleadings were ordered
the writ makes no mention of wilful default, is not fatal to a decree based on
such a claim. Had there been pleadings they could have been amended in a proper
case if amendment had been applied for. Where, however, there are no pleadings
no amendment is possible, but there is no reason why the plaintiff's case should
not be treated as if it had been formally started on a pleading and formally
amended by a plea of wilful default. Their Lordships agree nevertheless that unless such a claim was
plainly made, submitted to and dealt with at the hearing, it would not be proper to
grant any relief based upon a finding of wilful default. (Italics
mine) By
virtue of Section 16 of the Court of Appeal Act, the lower court has all the
powers of the trial court, i.e., the powers the Federal High Court has in the
matter before it which is now before us on appeal. So,
in my view, the lower court, in order to settle completely and finally the
matters in controversy between the parties to this appeal in the matter before
the lower court and in order to avoid multiplicity of legal In
the application now before us on appeal there is prayer 3 which says: An for such further order or other orders as this Honourable Court may deem fit to make in the circumstances. It
can be said in my judgment that there is a statutory backing for this type of
prayer in the Federal High Court in section 11 of the Federal Revenue Court Decree
to which I have referred to above. There
is statutory jurisdiction in the trial court under Section 13 of the Federal
High Court to grant an injunction or appoint a receiver by an interlocutory order in all cases in which it appears to it to be just and convenient
to do so. I am satisfied that the lower court has the same power in the matter
now on appeal. So,
in
my judgment, because of what I have hitherto been saying, the court has the
power to appoint a receiver and manager in the present
(370)
Meaning of just or convenient. The words 'just or convenient' As
I
have said earlier on in this judgment a manager for the preservation of the
business or property of a company can be appointed pending civil Having satisfied myself that the
lower court had jurisdiction to make the
First: 633. The court in exercise of its statutory power (x) appoints a
receiver in many cases (a) in which the old Court of Chancery would not, as a
matter of practice, have intervened (b). In some cases, as in proceedings to
enforce an equitable charge (c), the appointment is made as a matter of course
as soon as the applicant's right is established. In most cases, however, the
appointment is discretionary, and in cases where the Court of Chancery had
previously no jurisdiction to appoint a receiver the court does not exercise the
statutory power conferred on it (d). Apart from appointments by way of equitable
execution (e) or to enforce a charge (f), the
general ground on which the court appoints a receiver is ultimately in every
case the protection or preservation of property for the benefit of persons who
have an interest in it (g). (Italics mine) Second: Art. 664 Page 411: "Duty of receiver. Before the appointment by the court of a receiver is completed, he must, unless the order otherwise directs, give security duly to account for this receipts and to pay the same as the court or Judge shall direct (i). If time for giving security is fixed by the order the appointment lapses unless the security is completed within that time or an extension of time is obtained; otherwise a new order of appointment must be obtained (k). Third: Art. 670 Page 413: "When security is dispensed with. In certain cases a receiver appointed by the court is not required to provide sureties (r). If all the parties interested in the property are sui juris and themselves nominate the receiver, security may be dispensed with at their request (s); but if the nomination is made by the court on a reference to chambers, security is usually required, even though all parties are sui juris and are willing to dispense with it (t). Let us now see how the lower court exercised this discretionary power. There is no indication in the ruling of Ademola, J.C.A., of 30/5/85 appealed against that the conduct of the business of the 3rd defendant/company would suffer or was in jeopardy as a result of the dispute between the parties to this appeal as to their rights in it. The impression one gets from the ruling is that the learned Justice of Appeal made a consent order as regards the order for the appointment of receivers and managers. Vide the following passages in the judgment:-
During the course of argument before
the Court, Chief Benson now There
would, therefore, be a stay of
execution on the following conditions:- (1)
There would be a Board of Receivers and Managers for this Company pending
the determination of the appeal. (Italics mine) The ruling of Kalgo, J.C.A., bears out the point I have just made
clearly: I have before now read in draft form, the ruling just delivered. I
agree with it. The most important consideration in this matter, in my view, is
that the Company concerned, Albion Construction Limited, should be allowed to
run as a going concern while all actions in court are going on. Both learned
counsel in this application have conceded that this is very essential and are
prepared to accept a compromise which would produce the desired result. In
my view, the conditions for the (sic) set out in the ruling just delivered,
would in the circumstances be just and fair to both parties pending the
determination of the appeal. (Italics mine) If there had been such an agreement between the parties and having
regard to the adversary system in Civil litigation in our Court that consent
order would have been rightly made. In the instant case, Chief Williams, S.A.N., for the plaintiffs has submitted
to us that there was no such agreement in the lower court. Chief Benson, S.A.N.,
for the defendants agreed to this. The truth of the matter is that as I have
shown earlier on in this judgment. Chief Williams. S.A.N., at the hearing of the
application for a stay of execution at the trial court made some proposals for
the appointment of receivers and managers for the 3rd plaintiff/company. But
following the non-acceptance of the proposal by Chief Benson, S.A.N., counsel
for the defendants. Chief Williams, S.A.N., withdrew them in that court. The
proposals were repeated by Chief Williams, S.A.N., in the lower court. So the
proposals were not before the lower court. For the lower court to have grounded
its appointment of receivers and managers for the 3rd plaintiff/company on a non
existent accord between the parties to the appeal before it amounts in my
judgment to the exercise of its statutory power in this regard on wrong
considerations. In effect the lower court has not properly decided that it was
just and convenient to appoint receivers and managers for the 3rd
plaintiff/company. This being so. I am satisfied that I am entitled to interfere
with the appointment. And seeing that the respondent to this appeal. the
defendants have not filed any notice of intention to contend that the decision
of the court below should be affirmed on grounds other than those relied on by
that court. under Order 8 rule 3(2) of the Rules of this court, I have no choice
hut to set aside the order appointing the receivers and mana2crs for the 3rd
plaintiff/company. In the instant case. the lower court has not directed the receivers
appointment by it to give security duly to account for their receipts and to
pay the In the result, the appeal of the plaintiffs/appellants is allowed by me.
The order of the lower court granting a stay of execution in the matter now on
appeal together with the whole of the conditions attached to the stay of
Execution including the appointment of a board of Receivers and Managers for the
3rd defendant/appellant is hereby set aside by me. The order of Odunowo, J., at
the trial court on the stay of execution of the order directing the third
defendant to execute an Instrument of transfer in respect of 51 %
or 102,000 shares which, according to the declaratory judgment. he holds
in trust for the 1st plaintiff is restored without prejudice to any of the
declaratory judgments granted by the court. The plaintiffs/appellants are entitled to their costs in this court and
in the court below which I assess at Judgment delivered by Nnamani. J.S.C.
I have before now had the advantage of reading in draft the
judgment of my learned brother. AGBAJE, J.S.C. My learned brother has meticulously
analysed and fully dealt with all the issues raised before us. I. therefore,
entirely agree with his reasoning and conclusions and will only add a brief
concurring judgment. The proper places to start are the 5 orders made by Odunowo,
J..
in the Federal High Court in giving judgment in favour of the
plaintiffs/appellants in the substantive suit before him between the parties.
The orders were: (1) The document described as Memorandum and Articles of Association of
Albion Construction Company Limited dated 16/9/76 and admitted (2) The nominal share capital of the third plaintiff
company is (3) All the parties to this action are share-holders of the third plaintiff
company namely (1) Chief R.A. Okoya - 50 percent or 100,000 shares; (2) Mrs K.
Okoya - l 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 DA.
Ademiluyi 9 percent or 18,000 shares. (4) 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) 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. The defendants/respondents herein appealed to the Court of Appeal
against the said judgment of Odunowo, J. Pending
the determination of that appeal, they applied to Odunowo, J.,
for Stay of Execution of his orders. The learned trial Judge after due
consideration of the application dismissed it except for the following order
contained in that part of the ruling where he said: Just before the motion was moved, Chief Williams, S.A.N., conceded
The defendants/respondents made a similar application to the Court of
Appeal for Stay of Execution of the orders made by Odunowo,
J. The Court of Appeal in effect granted it. In his lead ruling Adernola,
J.C.A.,
made the following observations and orders:
Amidst the clashes of argument by counsel at the hearing of the (1) There would be a Board of Receivers and Managers for this Company pending
the determination of the appeal. (a) The Board would be headed by Chief Folorunsho
Oke, Chartered Accountant
of Messrs Cooper and Lybrand Ltd., Igbosere Road, Lagos who shall be Chairman.
(b)
Messrs
Santilli and Davanzo, 1st and 2nd appellants to carry on their respective duties
as Managing Director and Technical Director respectively and shall be on the
Board. (c) Prince D.A. Ademuluyi shall be on the Board. (d)
Chief
R.A. Okoya and Mrs. Okoya and Mr. S.O.A. Folami shall be on the Board. The said
Mr. Folami a Chartered Accountant shall be in control of the finances of the
Company pending the appeal. In the alternative, Chief and Mrs. Okoya should
nominate two persons whose names shall be communicated to the Registrar to serve
as their nominees on the Board. (2) The order asking the 3rd defendant now appellant, Prince Ademuluyi to
execute instrument of transfer in respect of 5 1 percent or 102,000 shares which
he holds in trust in favour of the 1st plaintiff now respondent is now stayed. (a) The order restraining the
1st, 2nd and 3rd defendants and other person
or persons acting on their behalf or direction or authority, restraining them
from conducting the affairs of the Company and in particular from operating the
account of the said Company in any bank whatsoever is hereby stayed. (3) The order of interim injunction granted by this Court in respect of a
bank account of the Company is hereby lifted.
(4) The Board of Receivers and
Managers shall conduct the affairs of the
Company during the pendency of the appeal in the best possible manner having
regard to the fact that their broad mandate is to make the Company a going
concern until the determination of this appeal. (5)
The Board of Receivers and Managers shall hold meetings and direct and
run the affairs of the Company in the best possible manner during the pendency
of this appeal. (6)
The Chairman. Chief Folorunsho Oke is at liberty to seek the direction of
the Court on any matter regarding the administration of the Company during the
pendency of the appeal in this Court. The stay is granted accordingly on these
conditions. There shall be no order as to costs. The
appellants appealed against this decision to this Court. In his brief of argument. Chief Williams. S.A.N.. for the
appellants identified the following
issues for determination.
(i)
Whether a defendant who has filed an appeal against purely declaratory orders
made against him is entitled to apply for stay
of execution of those orders
pending the hearing and determination of the appeal. (ii)
Whether the Court of Appeal had jurisdiction to make the orders contained in its
decision dated 30.5.89 having reward to the rule in Foss v. Harbottle and in particular the rule that the court
ought not to interfere in matters relating to the internal management of the
affairs of a corporation or association save at the instance of the corporation
itself or at the instance of a majority of its members. (iii)
Whether it was proper for the Court below to make the order for the
appointment of receivers and managers (a)
In the absence of specific application in that behalf by either party: (b)
Without fixing the amount of security which the persons so appointed ought to
give: (c)
without inviting the parties to address it on the desirability of
making the appointments including the suitability of the appointees. In
view of the comprehensive nature of the lead judgment. as I mentioned earlier.
I intend to comment on only issues (i ) and (iii). It
would appear that the first issue was raised by appellants following that
portion of the ruling of Akpata J.C.A.. on appellants preliminary objection
in which the learned Justice said However, with the utmost respect to the learned Senior Advocate, I hold the view that the case under reference has not advanced his earlier submission that the 'stay of execution' of a 'declaratory order' is a 'conceptual impossibility.' Nonetheless, 'stay of execution', as I have earlier stated, is applied loosely as a pervading legal term embracing any order which defers, suspends or stops the effect of a decision or order of court until the determination of the appeal lodged against it. It seems to me that all the academic writers and the decisions to which
we were referred are agreed that there can be no execution of a declaratory
order. That position has recently been taken by the decision of this Court in Government
of Gongola State v. Turkur (1989) 4
N.W.L.R. (Pt. 117) 592. This is because as this Court there said, a declaratory order merely
declares a legal situation or rights or relationship. It is complete in itself,
the declaration being the relief. It does not order anyone to do anything.
Having arrived at this position, it follows that there can be no stay of
execution of such an order for there is really nothing to stay. In oral argument, Chief Benson, S.A.N., urged this court to look at the
5 orders made by Odunowo, J., to
determine which are declaratory and which are executory. After carrying out that
exercise, I am satisfied that the first 3 orders were declaratory orders and
cannot be the subject of any stay of execution. Chief Benson conceded as much
both in his brief and in court. I am equally satisfied that Orders 4 and 5 were
executory and execution could arise in relation to them. It is, however,
necessary to look once more at those 2 orders which I had set down earlier in
this judgment. The 4th order had already been stayed by Odunowo, J. In
his ruling to which I referred earlier and a further stay on it by the Court of
Appeal was totally unnecessary. This directly affects Order 2 in the orders made
in the lead ruling of Ademola, J.C.A. As for Order 5, Chief Williams both in his brief and oral
argument had submitted that the respondents did not appeal against it to the
Court of Appeal. He therefore contended that the Court of Appeal cannot make an
order on it as part of stay of execution. This relates to Order 2(a) of the
orders made by Ademola, J.C.A. I have myself perused the grounds of appeal filed by the
respondents in the Court of Appeal against the judgment of Odunowo,
J. Indeed,
there is no complaint against the 5th order made by Odunowo,
J. The
Court of Appeal could not therefore make an order of stay of execution in
respect of a matter on which there is no appeal pending before it. It follows
from all this that I too would disallow Order 2(a) of the orders made by Adernola,
J.C.A.
Turning now to the question of the appointment of Receives, Chief
Williams had in his brief of argument submitted that an application for the
preservation of a res takes various forms including:
(i) Stay of execution (ii) stay of proceedings (iii) injunction (iv) appointment of a receiver or receiver and manager and
(v) payment of damages into Court or into a bank in stake holder. He submitted that the appointment of receivers in the circumstances of
the case amounted to a direct interference in matters of the internal
management of the Company. He also complained that no security was taken from
the appointees as is usually the practice (Halsbury's Law of England, 4th
Edition, Vol.39, paragraphs 858, 859 and 864). Referring to the respondent's
application before the Court of Appeal in which they prayed for: An order staying execution of the orders contained in the same judgment given on the 15th day of December, 1988 pending the determination of the appeal lodged by the Defendants/Appellants/Applicants to this Court. He contended that the Court of Appeal could not appoint a Board of
Receivers when neither of the two parties before it prayed for it. In his reply, Chief Benson, S.A.N., contended that the stay of execution
granted by the Court of Appeal was in response to the second prayer in the
respondent's application which I have set down above. He said that the
appointment of a Board of Receivers/Managers not only took into consideration
the competing rights of the parties ( Nwabueze
v. Nwosu (1988) 4 N.W.L.R. (Pt. 88) 257, 266) but was also meant to
preserve the res and rights. He said that the Court of Appeal in dealing with
stay of execution has a discretion as to what terms such prayer can be granted.
Such discretion when exercised is not set aside except under certain
circumstances. He referred to Supreme Court Practice, 1988. Vol. 1, page 894,
Order 59 R. 13(2) page 859. It seems unarguable that the Court of Appeal has power to make an order
for the appointment of Receiver/Manager under certain circumstances. Order 1,
Rule 20(8) of the Court of Appeal Rules, 1981 provides as follows: The Court shall have power to make orders by way of injunction or the appointment of a receiver or manager and such other necessary orders for the protection of property or person pending the determination of an appeal to it even though no application for such an order was made in the court below.
It is also necessary to remember that under Section 18 of the Court of
Appeal Act No.43 of 1976, the Court of Appeal has power to ''order a stay of
execution either unconditionally or upon the performance of such conditions as
may be imposed in accordance with rules of court." The wording of Order 1
Rule 20(8) set down above suggests to me that it could be on application by
either of the parties but I cannot say that the Court cannot make it, after
hearing the parties, where it thinks that the justice of the case demands it. It
would seem to me right that the Court of Appeal when seised with an application
for stay of execution can certainly consider whether the appointment of
Receiver/Manager would be a fair and just relief in the circumstances of the
particular case. Because of this view, I cannot accede to the urging of Chief
Williams that the order for appointment or Receiver/Manager ought not to have
been made as neither party applied for it. He had quoted the views of this Court
in Tukur's case that
The Court of Appeal cannot go outside the terms of the motion however misconceived it is. It is bound by the terms of the prayers in the motion filed.
In my view therefore, the relief sought being one for stay of execution
of the orders made by Odunowo, J..
I see nothing wrong in the Court of Appeal considering and making order for
appointment of receivers as one of the conditions of the stay so granted. The
only question that arises, however, is whether the appointment in this case has
complied with the practice in this matter. As this is an equitable relief
intended to preserve the res and also hold the balance between the parties
pending the determination of the appeal, it is in accord with the dictates of
justice that the parties be heard before the appointment -on such matters as the
suitability of the persons to be appointed, security payment by such appointees,
etc. There is nothing to indicate there was any such hearing before the
appointments in this case. Ademola, J.C.A., predicated the appointments on his
view that Chief Benson now showed
some accommodation to the proposal outlined by Chief Williams, learned counsel
for the respondent in this matter. The
proposals to which the learned Justice made reference were in fact not made to
the Court of Appeal but to the High Court. My learned brother. Agbaje.
J.S.C.,
has set down the particular proceeding in his lead judgment and I do not need to
repeat it. It is only necessary to say that on that occasion. Chief Williams who
made the proposals withdrew them. In his brief of argument, Chief Benson. S.A.N., said, The idea of Board of Receivers/Managers was that of Chief Williams. S.A.N..
counsel to the Plaintiffs. If he withdrew his offer which he With due respect, I do not think that this is a fair attitude. Even if
Chief Williams muted the original ideas, he was entitled (just as the other side
was) to be heard before the Court made those ideas into order. This is more so
when looking at the order made by the Court of Appeal, and comparing them to
Chief William's proposals, one can see some substantial differences. For
instance, while Chief Williams proposed a Chairman with no original but a
casting vote, the Court merely appointed Chief Oke Chairman without any
qualification whatsoever and without even taking the views of the parties as to
his suitability into account. Secondly, while Chief Williams proposed that Chief
D.A. Ademuluyi be an adviser with no seat on the "Board, the Court of
Appeal" made him a member of the Board. It seems to me that the compromise between the parties on which the
Court of Appeal based the appointments was non existent. While the Court of
Appeal may well have felt that in the circumstances of the case a Board of
Receivers was necessary to preserve the res in the interest of the Company, I am
not satisfied that the appointment of such a Board was fair and just to all the
parties. In the result, for these reasons and the more detailed reasons in the
lead judgment, I too would allow the appeal, and set aside all the orders contained
in the Ruling of the Court of Appeal, Lagos Judicial Division made on 30th May,
1989. I abide by all the other orders in the lead judgment including the order
for costs.
Judgement delivered by Uwais. J.S.C.
I have had the advantage of reading in draft the judgment
read by my learned brother, Agbaje, J.S.C. I entirely agree with his reasoning
and conclusions. There is no doubt that unlike an executory judgment, a stay of
execution cannot be granted against a declaratory judgment. As there was no
mutual consent to the appointment of receivers and managers to manage the
affairs of the company in which the parties hold shares, the Court of Appeal was
in error when it made the order on its own appointing a Board of Receivers and
Managers for the company pending the determination of the appeal before it. Accordingly, I too will allow the appeal. I abide by all the orders contained
in the judgment of my learned brother, Agbaje, J.S.C. Judgement delivered by Karibi-Whyte. J.S.C.
I
have read the judgment of my learned brother Agbaje, J.S.C. in this appeal, and
I agree entirely with his reasoning and conclusion that this appeal be allowed,
the judgment and orders of the court The
facts of this case have been stated in detail in the judgment of my learned
brother Agbaje, J.S.C.
I
will not repeat them. I will concern myself in this judgment with the two issues
argued before us by Counsel to the appellants. Plaintiffs
had issued a writ of summons as amended claiming against the 1st, 2nd and 3rd
defendants the following reliefs: (1) A declaration that the document described as Memorandum and (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 3rd plaintiff
Company. (3) An injunction restraining the 1st. 2nd and 3rd defendants
and/or any
other person acting with or on their direction or authority from conducting the
affairs of the 3rd plaintiff and 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 1st. 2nd arid 3rd
defendants and/or any other person acting with or on their direction or
authority from conducting the affairs of the 3rd plaintiff company in any bank
whatsoever on the basis of the document purporting to be the Memorandum and
Articles of Association of the 3rd plaintiff Company and carrying the signatures
of the 1st and 2nd plaintiff as well as the three defendants as subscribers. (5)
A
declaration that the nominal share capital of the 3rd plaintiff company is (6)
A declaration that the 1st and 2nd defendants are not shareholders of the 3rd
plaintiff company. (7)
A
declaration that all shares held by the 3rd defendant in the 3rd plaintiff
company are held by him in trust for the 1st plaintiff and an order directing
the 3rd defendant to execute an instrument of transfer in respect of the said
shares in favour of the 1st plaintiff.
After hearing the parties and their witnesses, and counsel, the trial Judge Odunowo, J., in his judgment granted the claims of the plaintiffs and made the following declarations-
(1) The document described as Memorandum and
Articles of Association of Albion Construction Company Limited dated 16/9/76
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) The nominal share capital of the third plaintiff company is
(3) All the parties to this action are shareholders of the third plaintiff
company: namely (1) Chief R.A. Okoya - 50% or 100,000 shares; (2) Mrs. K.
Okoya -1
% or 2,000 shares; (3) Mrs. S. Santilli - 20%
or 40,000 shares; (4) Mr. A. Davanzo - 20% or 40,000 shares; and (5) Prince D.A.
Ademiluyi - 9% or 18,000 shares. (4) The third defendant is hereby directed to execute an instrument of
transfer in respect of 51% or 102,000 shares, which he holds on trust, in favour
of the first plaintiff. (5) The first, second and the 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 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. Defendants in dissatisfaction by a notice dated 22/12/88 gave notice of appeal to the Court of Appeal, relying on the grounds of error excluding particulars set down below:-
(1) That the learned trial Judge erred in law
and on the evaluation of (2) The learned trial Judge erred in law by adjudging that the
1St
and
2nd plaintiffs are Members of the 3rd plaintiff company.
(3) The learned trial Judge erred in law in holding that the 3rd defendant's
shareholding in the 3rd plaintiff is 9% instead of the 21% which the defendants
had canvassed in their alternative position. (4) The learned trial Judge erred in his evaluation of the facts and the
application of law to those facts in holding and accepting the contention of the
1st and 2nd plaintiffs that the paid up share capital of the 3rd plaintiff as at
31/5/81 stood at 200,000'. (5) That the learned trial Judge erred in law and in the evaluation of the
facts placed before the court by failing to make a finding on the uncontradicted
evidence that the Worker Trust held 10% of the authorised share capital of the
3rd plaintiff. (6) The learned trial Judge erred in his evaluation of the facts before the
court and in his application of law to those facts in holding that the
presumption of regularity of the disputed Minutes in the Minutes Book, Exhibit
HH had not been displaced. (7) The learned trial Judge erred in accepting the authenticity of the
Balanced Sheets of the 3rd plaintiff company by which the paid up share Capital
were supposedly made by the 1st plaintiff, as at 31/5/81. (8) That the judgment is against the weight of evidence. Plaintiffs cross-appealed. The cross-appeal of the plaintiffs will not
feature in this judgment as it is not relevant to the issues discussed. On the
22/12/88 defendants argued a motion for leave to appeal against the judgment and
for a stay of execution before Odunowo, J. The stay of execution was granted on
1/3/89.
Pursuant to their appeal, defendants brought another application dated
2nd March, 1989 praying for a stay of further proceedings and to stay execution
of the Orders contained in the judgment of Odunowo, J., dated December 15, 1988
pending the determination of their appeal. Defendants also asked for "such
further order or orders" as the Honourable Court may deem fit to make in
the circumstances. Counsel to the plaintiffs/respondents filed a notice of preliminary
objection dated 20/3/89 to the hearing of the application on the grounds that (i) The prayer for staying
further proceedings on the declarations as contained in the judgment" is
not a relief known to the law. (ii) No such prayer was ever moved in the court below so it cannot be moved in
this court. (iii) The prayer for staying
execution of the orders contained in the judgment" is incompetent and
untenable as there is nothing left to stay.
In a lengthy ruling delivered on 27th April, 1989 the Court of Appeal
per Akpata, J.C.A., struck out the prayer seeking a stay of further proceedings
on the ground that no application had been made in the court below and that no
special circumstances had been shown why it should be granted. The
objection against an application for stay of execution of the Orders of Odunowo,
J., failed, the objection to the application was held incompetent and was
dismissed. Defendant's application for stay of execution was heard and a
differently constituted panel gave their ruling on the 30th May, 1989. In actual
fact having struck out the prayer for stay of proceedings in the ruling on the
preliminary objection, defendants/appellants/applicants had only to argue their
prayer for stay of execution. This came before Ademola, Akpata and Kalgo, JJ.C.A. Ademola, J.C.A., pointed out in a short ruling that it was "in
respect of the application for stay of execution." It seems to me
that the Court of Appeal in coming to its decision took into consideration,
first the assumption that both parties had expressed desire to carry on with the
ordinary business of the 3rd plaintiff company which had an outstanding contract
worth over 100 million naira to execute. Secondly, that there is some
considerable merit in the grounds of appeal challenging the decision relating to
the apportionment of the shareholding between the 1st and 2nd respondents, and
thirdly, that some measure of damage would result from the implementation of
some of the terms of judgment. Finally, the court would seem to have been
persuaded by what it described as "very refreshing and commendable to see
some form of proposal in the counter-affidavit of the respondent." It was
also observed that "During the course of argument before the court, chief
Benson now showed some accommodation to the proposal outlined by Chief Rotimi-Williams
learned counsel for the respondent in this matter." The Court of Appeal
then went on to grant the application for stay of execution and made the
following Orders (1) There would be a Board of Receivers and Managers for this company pending
the determination of the appeal. (a) The
Board would be headed by Chief Folorunsho Oke, Chartered Accountant of Messrs.
Cooper & Lybrand Ltd. Igbosere Road, Lagos who shall be Chairman. (b)
Messrs.
Santilli and Davanzo, 1st and 2nd appellants to carry on their respective duties
as Managing Director and Technical Director respectively and shall be on the
Board. (c) Prince
D.A. Ademiluyi shall be on the Board. (d) Chief R.A. Okoya, and Mrs. Okoya and Mr. S.O.A. Folami a Chartered
Accountant shall be in control of the finances of the company pending this appeal. In the alternative Chief &. Mrs. Okoya should
nominate two persons whose names shall be communicated to the Registrar to serve
as their nominees on the Board. (2) The order asking the 3rd defendant now appellant, Prince
Ademiluyi to
execute instrument of transfer in respect of 52% or 102,000 shares which he
holds in trust in favour of the 1st plaintiff now respondent is now stayed. (a) The order restraining the 1st, 2nd and 3rd defendants and other person or
persons acting on their behalf or their direction or authority, restraining them
from conducting the affairs of the company and in particular from operating the
account of the said company in any bank whatsoever is hereby stayed. (3) The order of interim injunction granted by this court in respect of a
bank account of the company is hereby lifted.
(4) The Board of Receivers and Managers shall conduct the affairs of the
company during the pendency of the appeal in the best possible manner having
regard to the fact that their broad mandate is to make the company a going
concern until the determination of this appeal. (5) The Board of Receivers and Managers shall hold meetings and direct and
run the affairs of the company in the best possible manner during the pendency
of this appeal. (6) The Chairman, Chief Folorunsho Oke is at liberty to seek the direction of
the court on any matter regarding the administration of the company during the
pendency of the appeal in this court. The stay is granted accordingly on these conditions. The plaintiffs have appealed against this ruling and filed sixteen
grounds of appeal. It is necessary to reproduce only those grounds or appeal
relied upon in argument before us because appellants in an application to this
court sought leave to abandon all the other grounds of appeal and to rely only
on grounds (iii), (v) and (viii). The reason for so doing was stated in the
schedule subjoined to the motion dated 31st October, 1989 where leave was sought
stating as follows- (1) The question referred to by the appellants in their Brief as
"the major question for determination in this appeal" has been
considered and determined by a Full Bench of the Supreme Court in Government
of Gongola State V. Alhaji Umaru Abba Tukur (1989) 4 N.W.L.R. (Pt. 117)
592 in a manner favourable to the contention of the appellants in this appeal.
(2) In the light of that decision the appellants now consider that it is
unnecessary for them to press any of the other grounds of appeal except the one
relating to the Order for injunction dealt with in Part 8 of the Brief and the
Order for stay of transfer of shares held by Prince Ademiluyi dealt with in Part
7 of the appellants' Brief. (3) In the premises only grounds (iii), (v) and (Viii) of the Grounds of Appeal attached to the Motion on Notice filed herein and dated 29.9.89 will be argued. The relevant grounds of appeal are reproduced below:-
(iii) The court
below erred in law in making the appointment of (v) The court below erred in law in failing to observe that the expression
"preservation of the res" pending an appeal cannot include the
suspension of the rights of the shareholders who control the majority votes at
the meeting of a company. (viii) The court below was wrong to have decided to make the order for the appointment of receivers and managers without inviting the parties to argue on the desirability or otherwise of making such an order. The three grounds of appeal reproduced above are covered by the three
questions for determination formulated by counsel to the appellants in this
appeal, which was described as the
major questions for determination. The questions are (i) Whether a defendant who has filed an appeal against purely declaratory
orders made against him is entitled to apply for "stay of execution"
of those orders pending the hearing and determination of the appeal." (ii) Whether the Court of Appeal had jurisdiction to make the orders contained
in its decision dated 30.5.89 having
regard to the rule in Foss v.
Haribottle and, in particular the rule that the court ought not to
interfere in matters relating to the internal management of the affairs of a
corporation or association save at the instance of a majority of its members. (iii) Whether it was proper for the court below to make the appointment
of receivers and managers: (a) in the
absence of a specific application in that behalf by either party; (b) without
fixing the amount of security which the persons so appointed ought to give Chief Williams has in his brief of argument and orally before us
submitted that a negative answer to the first question will resolve this appeal
in his favour and no other question will arise. It is only when his contention
is rejected and the answer to question I is in the affirmative will
consideration of the other two questions (ii) and (iii) arise. I agree entirely.
Questions 1 contains the real issue involved in challenging the judgment of the
Federal High Court dated 15/12/88. I shall begin my consideration of the questions for determination from
question (iii) which in my view has given me the least anxiety. I have already
pointed out that paramount in the consideration of the Court of Appeal in
granting the stay of execution and imposing a condition by the appointment of
receivers and managers, is the fact of an alleged compromise by counsel for the
parties and in the counter-affidavit filed. Chief Williams has submitted and
Chief Benson agreed that there was no such compromise. There is no doubt that a
compromise solution was suggested by Chief Williams for the plaintiffs during
the hearing of the application for stay of execution in the Federal High Court.
The application was to enable the company carry on its normal business pending
the determination of the appeal. It seems to me that lack of support by Chief
Benson for the defendants/respondents, for the proposed compromise solution
resulted in Chief Williams withdrawing the compromise offer suggested. Thus
there was not before the Court of Appeal, the alleged compromise on which the
condition for granting the stay of execution was founded. It is quite clear that the court below gave the conditions for the stay
of execution that is the appointment of the receivers and managers for the 3rd
plaintiff company on a non-existent accord between the parties. This undoubtedly
amounts to an exercise of statutory discretionary power on wrong considerations. See
Solanke V. Ajibola (1969)1
N.M.L.R. 253. There was no consideration on the record whether it was just and convenient
to appoint receivers and managers for the 3rd plaintiff/company. This court is
entitled to interfere with the exercise by the court below of its discretion to
appoint receivers and managers for the 3rd plaintiff/company, or indeed to grant
the stay of execution on that condition.- See Bank of Baroda v. Mercantile Bank Ltd. (1987)
3 N.W.L.R. (Pt 60) 233. Respondents to this appeal have not, pursuant to Order 8 r.3(3) RSC
1985, sought to contend that the decision of the court below should be affirmed
on grounds other than those relied upon by the court below. The decision It is pertinent to point out that the trial court is vested with
statutory powers to appoint a receiver. Section 13(1) of the Federal High Court
Act provides The Federal High Court may grant an injunction or appoint a receiver by an interlocutory order in all cases in which it apears to the court to be just or convenient so to do. There was no suggestion from the ruling that the court below exercised
its discretion on evidence before it that the conduct of the business of the 3rd
plaintiff/company would suffer or was in jeopardy unless the injunction was
granted upon those conditions. There was no application before the court below
for the appointment of receivers and managers. It was therefore not proper in
the circumstance to make the appointment. It is well settled that the appointment of a receiver is only complete
on the giving of security to account for his receipts and to pay same to the
court unless the court otherwise directs - See Halsbury's - Laws of
England 3rd Ed. Vol.32 Art. 664, p. 411. However, the requirement of
security may be dispensed with where all the parties interested in the property
are sui juris and themselves nominate the receiver. The requirement
of security will seem to be mandatory even where all the parties are sui
juris
and are willing to dispense with security, if the nomination is made by
the court. See Article 670, Haisbury's
Laws of England, 3rd Ed. p.413. In the instant case it seems to me the
requirement of a security on the part of the receivers and managers is
mandatory, the appointment having been made by the court and the parties
interested in the property being sul
juris. In the absence of the security, which is a precondition for the
appointment, no valid appointment of receiver or manager was made.
Finally on the third question, as I have already pointed out the issue
of appointment of the receivers and managers as a condition of the grant of stay
of execution was done by the court suo
motu in the absence of the agreement of the parties. There is nothing to
show that the suitability of those appointed was considered by the parties or
that counsel were invited to address it on their suitability. Because of these
lapses I will answer the third question in the negative, and will set aside the
appointments made as invalid. I shall now turn to the first question formulated by appellants which
concerns the granting of an order for stay of execution against declaratory
(1) Whether or
not items 4 and 5 of the pronouncements of Odunowo,
(2) If the said items 4 and 5 are Orders, could order for stay of execution
be made pending appeal thereupon? (3) If the said items 4 and 5 could be stayed, has the Court of Appeal
discretion to make such order of stay on Condition?" (4) ............... (5) If item 4 is an order that could be stayed, will such stay affect the
declaration stated in item 3 or not, particularly the shareholdings of the
plaintiffs i.e. (1) Chief R.A. Okoya 50% or 100,000 shares (2) Mrs. K. Okoya 1% or 2,000 shares
(6) If item 4 is also an order/injunction, that could be stayed, will such
stay not also affect the declaration stated in item 1, which relates to whether
or not Exhibit A is the proper Memo and Articles of Association? The first three questions relate to the first issue in appellant's
brief. I have already reproduced the orders 4 and 5, in the judgment of Odunowo,
J. Order No.4 which is a direction to the third defendant to execute an
instrument of transfer in respect of 51% or 102,000 shares, which he held in
trust in favour of the 1st and 2nd plaintiffs had been stayed on an application
to him by defendants in the ruling of Odunowo, J., dated March 1, 1989.
Consequently a stay of execution in respect of that Order cannot be an issue in
an application before the court, pending an appeal against the Order. Similarly
an appeal to this court against the decision of the Court of Appeal on the
defendants' fresh application in that court for a stay of execution. With respect to Order No.5, which has also been reproduced earlier in this judgment, none of the grounds of appeal filed against the judgment of Odunowo; J., relates to it. But the Order seems tied to Order No.1 which has also been reproduced. Order No.1 to which it is tied is a declaratory order and is as follows:-
(1) The document described as Memorandum and Articles of
Association of Albion Construction Company Limited dated 16/9/76 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. It seems to me pertinent to observe that the reliefs sought by the defendants in their appeal against the
judgment of Odunowo, J., in the court below did not include a challenge of the
authenticity of the Memorandum and Articles of Association of the 3rd plaintiff
company. I reproduce them below and they are as follows-"To set aside the
judgment and orders of the Federal High Court relating to the shareholding of the 1st and 2nd plaintiffs and the 3rd
defendant in the 3rd plaintiff and to substitute it with the following:- (a) A declaration that the 1 St and 2nd plaintiffs are not members of the 3rd
plaintiff and do not hold 51 % of the shares of the 3rd plaintiff. (b) A
declaration that the 3rd defendant is entitled to and hold 21% of the authorised
share capital of the 3rd plaintiff. (c) A
declaration that as at 31/5/81 the
paid up share capital of the 3rd plaintiff was ~2 (sic). (d) A declaration that the workers of the 3rd plaintiff are entitled to and
hold 10% of the auth orised share capital of the 3rd plaintiff. (e) To
adjudge that the disputed Minutes contained in the Minutes Book of the 3rd
plaintiff are irregular and were never held." Since defendants are not aggrieved with Orders No.1 and 5, it is
legitimate to assume that they are satisfied with them. It follows that
defendants are not complaining against the Order restraining them from
conducting the affairs of the 3rd plaintiff company and in particular operating
its bank accounts otherwise than in accordance with the authentic memorandum and
articles of association-Exhibit A. The crucial question to answer in order to resolve the issue is-What is
a Declaratory Order? all judgment. It seems to me on the arguments addressed to
us that this is the question to be answered in respect of issue No.4 as
formulated by Counsel to the appellants. It is also the gravamen of the
formulation of issues to be determined by counsel to the respondents. Both in his brief of argument and in his oral expatiation of same Chief
Williams learned Senior Counsel for the appellants cited and relied on the
opinions of several academic writers and decided cases in support of the view
that there is consensus that a stay of execution cannot be had in respect of
Declaratory judgments and Orders. He distinguished, and Chief Benson, learned
senior Counsel for the respondents agreed, between executory and declaratory
judgments. Executory judgments and Orders are those which On the other hand a declaratory judgment merely proclaims the existence
of a right or a legal relationship and contain no provision for the enforcement
against the defendant. A declaratory order or judgment can be and usually is the
ground of subsequent proceedings in respect of the enforcement of the
violation of the right so declared. C.M. Borchard: The Declaratory Judgments Zamir: The Declaratory Chief Willams referred also to several judicial decisions which support
his contention that declaratory orders or judgments are not coercive orders and
are not enforceable by execution. He cited inter alia, Williams v. Majekodunmi (1962) 1 All N.L.R. 413 at
430, Webster V. Southwark London
Borough Council (1983) Q.B.D. 698. Learned Senior Counsel then submitted
that a stay of proceedings or execution in respect of declaratory judgments or
orders is a conceptual impossibility. The effect of a declaration is not to
create rights but merely to indicate what the rights so proclaimed have always
been.
Relying on Government of
Gongola State V. Tukur (1989)4 N.W.L.R. (Pt. 117) 592, Chief Williams
submitted that the issue has been settled finally and beyond controversy by that
case in appellant's favour. Learned Senior Counsel cited and relied on dicta by
Obaseki, J.S.C. in the lead judgment at p. 603 and Oputa, and Nnaemeka-Agu,
JJ.S.C. at pp. 605 and 607-9 respectively. Whilst accepting the general principle that declaratory judgments cannot
be stayed, Chief Benson for the respondents relying on dicta in Webster
V.
Southwark London Borough Council (supra)
and Williams V. Majekodunmi (supra)
submitted that some declaratory judgments could be stayed where "liberty to
apply" could be implied. He submitted that following this argument an order
for stay of execution could properly be made in respect of declaratory judgments
with "liberty to apply". I think the problem posed by the issue is whether the Order No.1 is a
declaratory order. If it is whether it is capable of being stayed as contended
by Chief Benson for the respondents. Or it is incapable of being stayed being
conceptually impossible as contended by Chief Williams for the appellants.
Counsel are ad idem that the purpose of a stay of execution is to preserve the res subject matter of the action. The various remedies have one objective, - the preservation of the res. These are :-
(i) stay of execution (ii) stay of proceedings (iii) injunction (iv) appointment of a receiver or receiver and manager (v)
payment of damages into court or into Bank in the name of a stake holder. Chief Williams has submitted and I agree with him that it is wrong to
assume as the Court of Appeal had done that an application for a stay of
execution on one of the remedies could be satisfied by the grant of any of the
others enumerated. In short the expression should be regarded as interchangeable.
This view is clear from the declaration of Akpata, J.C.A., in the lead judgment
that "the term "stay of execution" is a general legal term
embracing any order suspending the decision of the court until the appeal is
heard." In his view section 18 of the Court of Appeal Act which empowers
the court to order a stay of execution on such conditions as may be imposed in
accordance with the rules of court covers "all prayers" meant to preserve the subject matter of
the litigation pending the determination of the appeal. For this proposition the
learned justice of the Court of Appeal cited and relied on Nimanteks
Associates Limited and Anor. V. Marco Construction company Ltd. & Ors. (1987)
2 N.W.L.R. (Pt. 56) 267, Erinford Properties & Anor. V. Cheshire County Council (1974)
Ch. D. 261 at p. 268, Re Overseas
Aviation Engineering (G.B.) Ltd. (1963)
Ch. 24, 39-40 and Akilu V. Fawehinmi
(No.2) (1989) 2 N.W.L.R. (Pt. 102)122. I have found it difficult to understand the judgments relied upon by
Akpata, J.C.A., for the proposition he is propounding. I agree that in Vaswani
Trading Co. Ltd. V. Savalakh & Co. (1972) All N.L.R. (Pt. 2) p. 483,
487, this court declared that" All rules governing stay of actions or proceedings, stay of executions of judgments or orders and the like are but corollaries of this general principle and seek to establish no other criteria than that the court, and in particular the Court of Appeal, should at all times be master of the situation and that at no stage of the entire proceedings is one litigant allowed at the expense of the other to assume that role. This dictum does not suggest that the different remedies of the court to
remain in control of the proceedings. In Nimanteks Associates v.
Marco Construction (supra) also cited and relied upon by Akpata, J.C.A.,
there is nothing to suggest that the reliefs are interchangeable. An examination
of the report of the case discloses that there were five specific reliefs
sought. Three of these reliefs were for injunction, The decision of Megarry, J., in
Erinford Properties Ltd. V. Cheshire County Council (supra) seems to me
authority for the proposition that where a Judge dismisses an interlocutory
motion for an injunction he has jurisdiction to grant the unsuccessful
applicant an injunction pending an appeal against the dismissal. The fact that
the interlocutory application for injunction was dismissed did not deprive him
of the jurisdiction to grant the injunction pending appeal against his decision.
The only consideration in this application was for an injunction. No other
remedy was in issue or was considered. The dictum relied upon by Akpata, J.C.A.
was referring to applications for injunctions and none other. It seems to me
clear from the dictum of Megarry, J., quoted that he was
saying that there was no difference in effect between the injunction he
granted which is not a stay of execution, but achieves the same result as a stay
of execution which succeeds. In each case the successful party is
prevented from reaping the fruits of his success until the Court of Appeal has
been able to decide the appeal. Akilu V. Fawehinmi (No.2) supra
is self-explanatory that the effect of a successful application in respect of
each of the remedies is the same namely, the suspension of the action and
preservation of the res. It is clearly not the same thing to say
that the effect of a successful application is the same, as to say that the
reliefs are interchangeable. It is an elementary but fundamental principle of our adversary system
that an applicant is bound by the prayers in his motion. See A.C.B.
Ltd. v. A.G. Northern Nigeria (1969) N.M.L.R. 231. I agree with the
submission of Chief Williams, and I know no authority to the contrary that an
application for injunction can end with a grant for a stay of proceedings, or
stay of execution which was not asked for. I do not regard this as a mere
technicality.
The case of a party is considered and granted on the relief he has asked for.
This is because his opponent is entitled ii know the case being presented and
which he has to meet. The Court of Appeal was in error in holding that the different remedies
which have the effect of preserving the res
pending an appeal are interchangeable. None of the decided cases cited
and relied upon supports the proposition and I know of no authority or principle
in support. I shall now examine the order and apply to it the accepted tests to
determine whether it is declaratory or executory. The first Order reproduced
hereunder for ease of reference is as follows:- (1) The document described here as Memorandum and Articles of Association of Albion Construction Company Limited dated 16/9/76 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. Chief Williams has referred us to several academic writers and judicial
decisions in support of his contention that the consensus is that a declaratory
judgment or order is one which declares and proclaims an existing right without
at the same time creating a new one. It is a final judgment or Order which does
not require any coercive order for its effectiveness. Its effectiveness lies
in the validity of the declaration. This court has declared in its recent
judgment of Government of Gongola State
V. Tukur (supra) where Obaseki, J.S.C., in his concurring judgment said, It should be noted that many judgments and orders do not require
to be enforced as the judgment and order itself is all that the party obtaining
it requires:- See para. 565 Vol.26 Halsbury's Laws of England 4th Edition page
288. The judgment of the Court of Appeal in question is one such judgment. A
declaratory judgment is complete in itself since the relief is the declaration.
See Vol.1 Halsbury's Laws, 4th Ed., para. 185 187; Akunnia v. Attorney-General of Anambra State (1977) 5 S.C. 161 at It is important to state that the appeal against the judgment of the
Court of Appeal in Government of
Gongola State v. Tukur (supra) is that the court declared that it had no
jurisdiction. Apart from the declaration of incompetence which it surely had
jurisdiction to make it could not go further. The court was thus stating an
accepted legal situation. Similarly in the instant appeal, the Order of the
court was the declaration as to the authenticity of the Memorandum and Articles
of Association of the 3rd plaintiff company. This is the final determination of
the declaration sought and requires no further action on the part of the person
in whose favour the declaration is made. This is why a refusal to abide by the terms of the declaration made is
not regarded as a contempt of court. This was lucidly stated in Webster
V. Southwark London Borough Council (supra) by Forbes, J., when he said, I readily accept the proposition that where a court makes only a declaratory order it is not contempt for the party affected by the Order to refuse to abide by it. If he does so refuse no doubt the other party can go back to the court and seek an injunction to enforce the order, but mere refusal of one party to an action to abide by a declaratory order is not, as I understand it, contempt of court. Chief Benson for the respondents has in his brief relied on an
expression of opinion in Webster's case why courts give declaratory orders
rather than injunctions, namely "because the defendant is a responsible
authority, it is thought inconceivable that a declaratory order would not result
in the plaintiff not obtaining his right." at p.708 to submit that a
responsible authority could seek a stay of execution so as not to open itself to
the castigation of being accused of having "forfeited all right to be
regarded as a responsible authority" if it does not want to abuse the
practice. Learned senior counsel to the respondents also relied on the expression
"liberty to apply" usually added to Declaratory judgments and Orders
to contend that there is an implication in such cases that such Declaratory
Orders could be stayed. These submissions are the main plank on which counsel to
the respondents relied for his contention that there are Declaratory Orders or
judgments which could be stayed. I am not persuaded by any of them. It is not a matter of dispute before us that generally, Declaratory judgments
and orders cannot be stayed. It is also a matter of general consensus among
academic writers and in judicial decisions that a declaratory judgment which
is an embodiment of the recognition of particular rights may be the basis for
subsequent proceedings to enforce such rights, where such right is threatened or
is being violated. It seems to me correct to postulate that a Declaratory
judgment or Order is a recognition of a dormant right. Hence a declaratory
order or judgment remains a dormant right until subsequent proceedings have been
taken to protect the threat to or violation of the rights so declared in the
judgment or Order. Until this is done there cannot be on the authorities as they
stand, a stay of execution of the declaratory judgment or Order. The expression "with liberty to apply" viz-a-viz the person in
whose favour a declaratory judgment or Order is made is merely a hint to him
that the Order is a ground on which subsequent proceedings to enforce the rights
declared by the judgment if violated will receive enforcement. The judgement
remains declaratory, and is not converted to an executory judgment by the
enforcement. In my opinion, there cannot be a stay of execution of a declaratory
order or judgment. The contentions of Chief Benson for the Respondents has not
shown that it is a conceptual possibility. A defendant who has filed an appeal
against a declaratory judgment or order is not entitled to apply for a stay of
execution of that judgment or Order. This is because a declaratory judgment or
Orders has no coercive effect and threatens no one.
I have already stated that defendants/respondents appealed against the
judgment of Odunowo, J., in the Federal High Court. I have also reproduced the
declarations and orders made by the learned Judge. It is clear that the first
three declarations 1, 2, 3 which relate to the authenticity of the Memorandum
and Articles of Association, the nominal share capital of the 3rd plaintiff
company, and the respective shares held by the Shareholders and the 3rd
plaintiff company, are evidently declaratory of the issues as contained therein. None of these contain any order which may be enforceable against any of
the defendants. None of them will pronounce any sanction against any of these
defendants in the event of defiance of the orders. Consequently stay of
execution will not be an acceptable remedy in respect of any of them.
Accordingly, the defendants application in the court below based on the rule is
misconceived. Declarations 1-3 are clearly declaratory orders in respect of
which a stay of execution cannot be made. We now have still outstanding orders 4 and 5 to consider. I have already
reproduced the orders in this judgment. On a careful perusal of the nature of
the orders it is obvious that (i) Order IV makes a certain declaration as
regards the rights of the 1st plaintiff and the 3rd defendant and proceeds to
direct third defendant to act in a particular way in respect of the Declaration. (ii) Order V imposes an injunction on the 1st, 2nd and 3rd defendants
restraining them from acting in a particular way or to act in a particular way
as regards the conduct of the affairs of the 3rd plaintiff company. An executory judgment or Order has coercive force and declares the
respective rights of the parties and proceeds to order the Defendant to act in a
particular way, namely, to pay damages, or refrain from interfering with
plaintiff's rights, and such order being enforceable by execution if disobeyed.
An executory judgment is a final and investitive Order or judgment. I have already stated in this judgment that part of Order 4 which
directs the 3rd defendant to transfer the shares he holds in trust for the 1st
plaintiff to the latter has already been stayed. The Declaration of trust,
however, stands and remains. Consequently the order of the Court below staying
the execution of the transfer of the shares was unnecessary in the face of a
valid order in respect of the same issue. In the Defendant's/Respondent's brief of argument, learned Counsel
raised the issue, "if item 4 is an order that could be stayed, will such
affect the declaration stated in item 3 or not, particularly the shareholdings
of the plaintiffs, i.e. 1. Chief R.A. Okoya 50% or 100,000 shares. 2. Mrs. K. Okoya 1% or 2,000 shares. Although the trust declaration remains a declaratory order, and cannot
be stayed, it must, to be meaningful, be read together with the declaration as
to the shareholdings in Order 3. So read, the 102,000 shares therein and in the
3rd plaintiff company will be held in trust for the 1st and 2nd plaintiffs by
the 3rd defendant. The 3rd defendant remains the registered owner of the shares
in the Register of the Company - see s.29 Companies Decree. He will however be
bound to vote on the direction of the cestui
que trust - See Romer, J., in Kirby
V. Wilkins (1929) 2 CH.444. Issue 6 in the Respondents' brief of argument asks the question, If item 4 is also an order/injunction that could be stayed, will such stay not also affect the declaration stated in item 1 which related to whether or not Exhibit A is the proper Memo and Articles of Association. I have already held in this judgment that the Respondents in the court
below, on appeal, did not complain in their grounds of appeal about the two
orders Nos. I and 5 in the judgment of the Federal High Court. Hence the
question of their being considered in the Court of Appeal did not arise. Similarly
issue 6 in the defendant's brief of argument does not arise. It is for the above reasons that I hold that the Court below per Ademola,
J.C.A., basing Orders 2(a) and 3, on Order No.5 of the judgment of the Federal
High Court was wrong. Order No.5 having already been stayed was not open for
consideration. The Court of Appeal ought not to have considered it in the
defendant's application for stay of execution pending determination of their
appeal. I think the appeal before us in this case can adequately be disposed of
on the two issues I have considered above. I adopt the opinion expressed by my
learned brother Agbaje, J.S.C., in respect of the second question which is
founded on the application of the rule in Foss v. Harbottle. For the reasons I have given in this judgment I will allow the appeal of
the Appellants. The order of the Court below granting a stay of execution in the
matter now on appeal, together with the conditions attached are hereby set
aside. The Order of Odunowo, J., of the Federal High Court on the stay of
execution of the Order directing the 3rd defendant to execute an instrument of
transfer in respect of 51% of 102,000 shares which according to the judgment he
holds in trust for the 1St plaintiff is restored without prejudice to any of the
declaratory judgments granted by the Court.
Plaintiffs/Appellants are entitled to the costs of this appeal in the
sum of
Judgment delivered by Kawu. J.S.C.
I have had the opportunity of reading in draft the lead
judgment of my brother, Agbaje, J.S.C., which has just been delivered. I agree with
his conclusions that the appeal ought to be allowed. I will accordingly allow the appeal for the reasons given in the lead
judgment. I also agree with all the consequential orders made in the lead
judgment including the orders as to costs. Counsel
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