OILFIELD SUPPLY CENTRE LTD. V. JOHNSON

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OILFIELD SUPPLY CENTRE LTD. V. JOHNSON

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725

OILFIELD SUPPLY CENTRE LTD. V. JOHNSON

5

OILFIELD SUPPLY CENTRE LTD

V

10 JOSEPH LLOYD JOHNSON

SUPREME COURT OF NIGERIA:

ESO,



J.S.C.

ANIAGOLU,



J.S.C.

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

KAZEEM,



J.S.C.

KAWU,



J.S.C.

OPUTA,



J.S.C.

22nd May, 1987

APPELLANT

RESPONDENT

SUIT NO. SC 119/1986

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Company Law - Petition to wind up a company - May be brought by a

contributory when either of Iwo conditions in s.211 of Companies Act 1968

is nzet - Proof of being a ,shareholder - Allotment of shares per se

1101

enough

proof - proof of being a shareholder - Can be by oral or documentary

evidence - Section 83, Companies Act, 1968 - Share certificate is prima facie

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evidence not conclusive proof

Equity - Plea of illegality - Equity will not assist party who pleads own illegal

act - Breach of section 8(1) of the Immigration Act 1961 in employing

respondent relied on by Company.

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ISSUES:

1. Whether the two conditions provided for in paragraphs (i) and (ii) of proviso

(a) to section 211(1) of the Companies Act, 1968 must be present before a

contributor to a company can petition for its winding up.

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2. Whether allotment of shares per

se

is proof of being a shareholder of a

registered company.

3.

Whether proof of being a shareholder in a company can only be by

documentary evidence.

4.

On whom rests the onus of proving that a petitioner for winding up a company

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paid for the shares allotted to him.

5.

Whether equity assist a party who pleads his own illegal act as a defence.

FACTS:

In 1974 the appellant company was incorporated under the Companies Act,

1968. The respondent, an Australian was appointed the Managing Director of the

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company. He was infact the brain behind the founding of the company, which de-

veloped some swamp area into a port complex. There were five shareholders in

all consisting of the respondent and four others. Problems started when the Chair-

man, a shareholder began to make allegations, some criminal, against the other

shareholders. He also took some abortive civil action against the company and

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the other shareholders.

However in November 1976 the government compulsorily acquired the Port

Complex for public purposes. Compensation of N8,410,850.00 was paid but not

until February 1980, by which time the respondent had left the country. One other

shareholder had resigned and the other three, including the Chairman came to an

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NIGERIAN SUPREME COURT CASES

[1987] 2 N.S.C.C.

agreement as to how the compensation funds should be shared. This money was

shared leaving the respondent out.

The respondent then returned to Nigeria and instituted winding-up proceedings

in the Federal High Court. The Chairman filed an application on behalf of the comp-

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nay, seeking to strike out the proceedings, on the ground that the respondent was

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not a member of the company and shareholder in which case it would be incom-

petent of him to seek the winding-up of the company. There was evidence that

when the going was good the respondent was recognized by other members not

only as a shareholder but also as Managing Director. He was regarded as a co-

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founder who had used his expertise for the development of the Port complex. It

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was this expertise and his invaluable services to the company that was partly re-

warded by allotment of shares which was to be paid for and was paid for from the

accrued salaries due to the respondent. All this was borne out by several resolu-

tions of the Board of Directors tendered in evidence. The register of members

which was in the appellants possession was not produced.

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The learned trial Judge dismissed the application and held that though the com-

pany had been in breach of the Immigration Act and most of the provisions of the

Companies Act, nevertheless, the respondent was a shareholder, member and

contributory of the applicants and as such he was a competent person to bring a

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petition for the winding-up of the company under section 211 of the Companies

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Act.

The appellant appealed to the Court of Appeal who in a majority judgment dis-

missed the appeal holding that the evidence before the trial Judge viz Minutes of

Meetings held by the company, Resolution passed in those meetings as well as

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the evidence of the shareholder who had resigned, were sufficient proof that the

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respondent was a shareholder in the Company. The dissenting judgment held that

the respondent had not satisfactorily shown that he was a shareholder of the com-

pany. He held that in a case of this nature, owning shares in a company is not a

matter that could be proved by mere assertion or verbal claim alone. He was of

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the view that ownership of such shares can only be conclusively proved by necess-

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ary

documentary evidence

to be provided by receipts showing payment effected

on the alloted shares; registration of the shares (and their members) in the name

of the shareholders as entered in the Register of Shareholders

of the company;

and/or

Share Certificate

issued in the name of the shareholder bearing the shares

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(and their numbers) as acquired by the said shareholder. He held that in the ab-

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sence of all these the person concerned could not be said to have conclusively

proved that he has or holds shares of that company.

On appeal to the Supreme Court the appellant company relied in the main on

the dissenting judgment of the Court of Appeal and argued that though some shares

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were alloted to the respondent there was no evidence to show that he ever paid

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for them and so he could not legally describe himself as a shareholder. He con-

tended further that no share certificate was tendered nor any receipts or Memo-

randum signed and sealed by the company evidencing their acknowledgement of

the payment for shares by the respondent.

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A second issue raised by the appellants was as regards section 211 of the

Corn-

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panies Act, 1968 as to whether a contributory to a company could petition to wind

up the company under the section when (a) the number of members is not reduced

below two; and (b) the shares in respect of which he is a contributory are not shown

to have been registered in his name.

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Finally, it was submitted for the appellants that there was no expatriate quota

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granted the appellant company to have employed the respondent as Managing Di-

rector, and consequently, by virtue of section 8(1) of the Immigration Act (the pro-

vision of which deal with the requirement for the Minister of Internal Affair's consent

to permit a non-citizen participate in a limited liability company) all those contracts