Law Reporting

Court of Appeal Dictum on Whether a Default Judgment can be Granted where there is a Breach of Statutory Provision


Justice


In Unity Bank v. Onuminya[2019] LPELR-47507[CA], it was held that:


“The critical question for consideration under this issue is whether the money agreed to be paid to the Respondent is one that comes within the purview of Section 271 of CAMA. The parties have rightly
submitted that where the words of a statute are clear and unambiguous they should be given their plain and ordinary meaning: COCA-COLA (NIG.) LTD. vs. AKINSANYA (2017) 17 NWLR (PT. 1593) 74 at 121;
BUHARI vs. OBASANJO (supra) and OLOFU vs. ITODO (supra). Now, Section 271 of CAMA enacts: “It shall not be lawful for a Company to make to any director of the Company, any payment by way of compensation for loss of office, or as a consideration for or in connection with his retirement from office, unless particulars with respect to the proposal and the amount, have been disclosed to the members of the Company and the proposal is approved by the Company.”

The words of the above provision are clear and unambiguous. So they should be given their plain, ordinary and natural grammatical meaning as rightly submitted by the parties. By the said provision, no compensation or other consideration shall be paid to a director of a company upon his ceasing to be a director unless the particulars of the payment and the amount have been disclosed to the members of the company and approved by the members.

The Respondent was an Executive Director of the bank; so as a Director the provision is applicable to him. In AGRO ALLIED DEVELOPMENT ENT. LTD. vs. MV NORTHERN REEFER (2002) 12 NWLR (PT. 1155) 255 a member of a company is defined as follows:

1) The subscribers of the memorandum of the company.

2) Every other person who agrees in writing to become a member of a company and whose name is entered in its register of members.

3) A shareholder. From the facts averred to by the Respondent the payment to be made to him was negotiated with, agreed and approved by the Chairman of the bank.

There is nothing in the pleadings remotely showing that the particulars of the proposed payment and the amount was disclosed to and approved by the members of the company. Now, the Respondent has argued that the agreed payment was neither a compensation nor consideration payable to him consequent upon his ceasing to be a director. Could this be correct? We turn to the pleadings.

The averments in paragraphs 9-21 of the Statement of Claim which I have previously reproduced in this judgment make it abundantly clear that the amount agreed with the Chairman of the bank to be paid to the Respondent was consequent upon his ceasing to be a director. In paragraphs 9, 10, 18 and 20 it is averred: “9. The Plaintiff
(Respondent), prior to his resignation in early 2003 held a pre-disengagement meeting with the Chairman as the Chief Executive Officer and alter-ego of the Centre Point Bank and both parties agreed on the conditions for plaintiff’s (respondent’s) disengagement.” “10. During the Plaintiff’s (Respondent’s) pre-disengagement meetings with the Chairman of the Bank, the Chairman expressed the bank’s deepest appreciation to the Plaintiff (Respondent) and he informed him of the monetary payments to be given to him (the Plaintiff) (Respondent) in consideration of his services of reviving the Bank.” “18. It was only after the Plaintiff (Respondent) and the Centre-Point Bank had settled all his disengagement packages that the Chairman now allowed him to send in his resignation letter.” “20 The Centre-Point Bank Plc accepted the Plaintiff’s (Respondent’s) resignation, vide their letter dated 20th February, 2003 and directed him that the Accounts department would pay his terminal benefits.” It seems to me effulgent from the above averments that the amount to be paid to the Respondent was as a compensation, consequent upon his ceasing to be a director of the bank by resignation. I have alluded to the fact that even though the Statement of Claim supersedes the Writ of Summons, the reliefs claimed on the Writ of Summons is incorporated in the Statement of Claim by express reference. The claim as endorsed on the Writ of Summons lays to rest any doubt as to whether the agreed amount to be paid to the Respondent was consequent upon his ceasing to be a director of the bank. The relief endorsed on the Writ of Summons at page 4 of the Records and which is incorporated in paragraph 34 (ii) of the Statement of Claim at page 10 of the Records is as follows: “The plaintiff’s claim is for the sum of N57.7 million being the amount agreed to be paid to the plaintiff for his meritorious service of turning the bank into profitability and also as part of the severance allowance by the then Centre-Point Bank Plc, which is one of the banks that merged to form the defendant bank.” (Underlining supplied)

The word “severance” is used in the claim. One may ask, severance from what? The answer would be severance as a director of the bank. Without a doubt, the amount agreed to be paid to the Respondent falls squarely within the purview and ambit of Section 271 of CAMA and it is not lawful to make the said payment without the approval of the members of the company. The lower Court was therefore in error when it entered default judgment for the Respondent for the said amount contrary to the stipulations of Section 271 of CAMA.” Per OGAKWU, JCA.(Pp.36-41,P
aras.F-C).”

Leave a Reply

Your email address will not be published. Required fields are marked *