Personal Liability of a Director Who Acted on Behalf of the Company
In the Supreme Court of Nigeria
Holden at Abuja
On Friday, the 21st Day of May 2021
Before Their Lordships
Amina Adamu Augie
Uwani Musa Abba Aji
Mohammed Lawal Garba
Samuel Chukwudumebi Oseji
Justices, Supreme Court
SouthBeach Company Limited
Mr. Efetobor Jubilee Osowa. Appellants
Dr. Charles Oladeinde Williams Respondent
(Lead judgement delivered by Honourable Mohammed Lawal Garba, JSC)
Based on a sub-lease agreement between the Respondent (as the Sub-lessor) and the Appellants (as sub-lessee), the Respondent sued the Appellants at the High Court of Lagos State, for trespass and claimed damages. At the end of the trial, the court granted the Respondent’s claims against the Appellants. Aggrieved by the decision of the trial court, the Appellants appealed to the Court of Appeal, Lagos Division, which court allowed the appeal in part. Further dissatisfied with the decision of the Court of Appeal, the Appellants appealed to the Supreme Court.
At the apex court, the Appellant had filed its Brief of Argument; in response thereto, the Respondent filed a Notice of Preliminary Objection together with its Respondent’s Brief of Argument, praying for an Order dismissing the appeal for want of jurisdiction.
Issues for determination
The court took arguments on the Preliminary Objection along with the substantive appeal and the following issues were considered by the court:
- Whether the Second Appellant was rightly adjudged as a necessary party by the lower courts without whom the suit could not have been successfully determined.
- Whether the valuation report that was pleaded by the Respondent in his Reply to the Defendants’ Statement of Defence was properly pleaded and considered by the trial court.
On the Preliminary Objection, counsel for the Respondent argued that all the grounds in the Notice of Appeal complained about the exercise of discretion by the lower court and concurrent findings of the two lower courts. He posited that the grounds are of mixed law and facts which require prior leave of court to be competent – THOR LTD v F.C.M.B. LTD (2020) 4 NWLR (Pt. 757) 427. Responding to the submission, counsel for the Appellants referred to Section 233(2) of the Constitution (as amended). Counsel also referred to ANUKAM v ANUKAM (2006) LEPLR-500(SC) on the distinction between a ground of law alone and ground of mixed law and facts. He argued that the Appellants are not challenging the concurrent findings of the two courts below, but the application of principle of law on pleadings and award of damages on settled facts of the case. Counsel argued further that the grounds of appeal are of law alone and so do not require leave of court for the appeal.
In his submission on Issue One of the substantive appeal, Counsel for the Appellant relied on the authority of GREEN v GREEN (1987) 3 NWLR (Pt. 61) 460, in support of his position that the Respondent’s Statement of Claim and evidence placed before the trial court did not show that the Second Appellant had any personal interest or acted at any time in a personal capacity or is likely to be personally affected by the result of the action. Counsel stated further that there was no privity of contract between the Respondent and the Second Appellant, who is an employee of the First Appellant, and acted at all times, in his official capacity as the managing Director (MD) and agent of the First Appellant. Relying on the principle of law as enunciated in SALOMON v SALOMON (1987) AC 22, counsel argued that an incorporated company is independent, and a legal personality is distinct and separate from the people who incorporated it. Counsel maintained that an employee acting in an official capacity in his employment as an agent of the employer, incurs no liability, as expressed in Latin; “qulfacir peralum facit a sam facere unidepur.’’
Responding to the submissions above, Counsel for the Respondent contended that the arguments on the issue are to the effect that the Appellants seek to challenge the concurrent findings of the lower courts that the 2nd Appellant is a necessary party in the action. By his position, the findings of the courts below can only be interfered with where they are shown to be perverse, resulted from violation of some principle of law and procedure or occasioned a miscarriage of justice, which requirements the Appellants failed to meet. Relying on BUHARI v YUSUF (2003) 13 NWLR (Pt. 841) 446, learned counsel stated that at the trial, the Second Appellant had explained under cross examination that he played an integral part in the negotiation of the contract in question, from the beginning to the end, and even signed/executed it. Under the provision of Order 13, Rule 6(1) of the High Court of Lagos State (Civil Procedure) Rules, 2012, it was not a requirement for a Claimant to have a specific claim against all the Defendants in the suit and that once a prima facie case is made against the Defendant, he would be adjudged a necessary party.
With respect to the Second Issue, counsel for the Appellant contended that the pith of the arguments on the issues are that the valuation report alluded to in the Respondent’s Statement of Claim was filed by the Respondent when the Appellants had no right of response under the rules of pleadings and evidence, having been filed in the Respondent’s Amended Reply to the Appellant’s Amended Statement of Defence. Counsel also argued that the Valuation Report has no nexus with the amount claimed as costs of rebuilding the structures destroyed and that the Respondent did not claim the sum awarded by the lower court as costs of reinstating the damaged property and there was no evidence to support the award. Relying on OLUBODUN v LAWAL (2008) 17 NWLR (Pt. 115) 1, among others, counsel argued that a Reply cannot be used to raise a new cause of action or issue not contained in the Statement of Claim. Reacting to the submission, Counsel to the Respondent argued that the fulcrum of the submissions is that by the Rules of Pleadings and the provisions of Orders 3 Rule 2(1) and 15 Rule (1) the Rules of the trial court, the Reply filed by the Respondent formed part of the pleadings of the parties in the case and the valuation report in question was properly pleaded to make it admissible as evidence in the trial. Counsel relied on AMAECHI v INEC (NO.3) (2007) 18 NWLR (Pt. 725) 592 on the content of pleadings and on the principle that parties are bound by their pleadings. The court was urged to hold that the valuation report admitted as exhibit A in evidence was pleaded and properly admitted by the lower court.
Court’s Judgement and Rationale
In its determination of the Preliminary Objection, the Supreme Court, relying on MAIHORO v GARBA (1999) 7 SCNJ 270, explained that an appeal which the grounds do not fall or are not within the situations enumerated in the provisions of Section 233(2), is an appeal which by the operation of Section 233(3) mandatorily requires prior leave of court, as a condition precedent, for it to be validly brought or filed and for it to be competent to vest the requisite jurisdiction on the court to adjudicate over it. The Supreme Court analysed the three grounds contained in the Notice of Appeal and held that the questions raised in grounds one and two are of law alone and do not require prior leave of court to be brought or filed. On ground three which is an omnibus ground, the court held that it involves questions of facts which requires prior leave of court, and the Preliminary Objection was upheld on that ground alone.
Regarding the substantive appeal, the court held on the first issue that simply put, a necessary party to a suit is one who is only interested in the subject matter of the proceedings, but in whose absence the suit could not be fairly, completely, and effectually adjudicated upon and all material issues finally settled therein by the court. In law, the main or primary reason for making a person a party to a legal proceeding is so that he should at the end, be bound by the result, orders, decisions, or judgement of the court in the action. In this case, there is no disputing the fact that the Second Appellant is the Managing Director and Chief Executive Officer of the First Appellant; he directs and runs its affairs and business; it is its alter ego, directing mind and will under the law. Ordinarily, the First Appellant as an incorporated or registered company is a separate or distinct legal entity and personality with the requisite legal capacity to sue and be sued in legal actions from the Second Appellant. Relying on NNSC v ALHAJI HAWA JODA SABANA CO. LTD (1988) 2 NWLR (Pt. 74) 23, the court held that a contract entered into by the Director or Managing Director of a company in the name of the company and acting in his official capacity for the company, incurs no personal liability under the contract, unless, of course, there is evidence that he undertook personal liability in making the contract. It is clear that although the Second Appellant may be interested in the subject matter of the action against the First Appellant due to his position as the directing mind and will, all the material issues or questions involved in the action can be effectually, completely and finally decided by the trial court, fairly, in his absence. He cannot therefore rightly be described as or held to be a necessary party to the action.
On the second issue, the apex court held that only facts and not the evidence by which such facts are to be proved, need to be pleaded, deposed or averted in pleadings. Referring to Order 15 Rule 2 of the Rules of the trial court, Their Lordships held that the Respondent did not only plead the material facts which show the existence of Exhibit ‘A’, but specifically stated that he was going to rely on same. In addition, in its Reply to the Amended Statement of Defence, the Respondent specifically pleaded the said Exhibit ‘A’ as one of the documents to be relied on in proof of the claim made. In the circumstances, it is gross misconception by learned counsel for the Appellants to say and insist that pleading, production and admission of Exhibit ‘A’ was setting up, raising or making a completely new or fresh claim by the Respondent outside the claim. The court also held that, a party may make claims in his pleading, which the law imposes a burden on him to prove by credible and sufficient evidence if judgement was to be entered for him by the court – Section 131, 132 and 133(1) of the Evidence Act, 2011. The court has power and authority to enter judgement in favour of a party in respect of the claims whether in whole or in part, which are satisfactorily proved by such evidence as required by law – BALOGUN v UBA LTD (1992) 6 NWLR (Pt. 247) 336.
In the present appeal, since the Respondent had claimed the sum of N200,000,000.00 (Two hundred million naira) as costs of restoration and reinstatement of the property in question in his Statement of Claim, but was only able to satisfactorily prove and establish, through Exhibit ‘A’, that the actual costs as assessed by the experts engaged by him to do so, the lower court was on “terra firma” to have awarded him the lesser amount which was proved by the evidence placed before the trial court.
Appeal allowed in part.
- Edu with E. Okewu for the Appellants.
- Ibironke for the Respondent.
Reported by Optimum Publishers Limited
Publishers of the Nigerian Monthly Law Report (NMLR)
(An affiliate of Babalakin & Co.)