Requirements on Institution of Action by a Company

CASE TITLE: HASAL MICROFINANCE BANK LTD v. BDA LTD & ANOR (2023) LPELR-60313(CA)

JUDGMENT DATE: 28TH APRIL, 2023

PRACTICE AREA: COMPANY LAW

LEAD JUDGMENT: UGOCHUKWU ANTHONY OGAKWU, J.C.A.

SUMMARY OF JUDGMENT:

INTRODUCTION:

This appeal borders on institution of action by a company.

FACTS:

This is an appeal against the decision of the High Court of the Federal Capital Territory, Abuja.

The Appellant, was the Claimant before the High Court, in an action on the undefended list in SUIT NO. FCT/HC/CV/1437/2018: HASAL MICROFINANCE BANK LIMITED vs. BDA LIMITED & ANOR. In the said action, the Appellant sought to recover the amount outstanding on the facility it granted to the 1st Respondent and which was personally guaranteed by the 2nd Respondent.

Upon being served the Court processes, the Respondents filed a Notice of Intention to Defend wherein they challenged the competence of the action upon the ground that the Appellant lacked the locus standi to institute the action as there was no resolution of its Board of Directors authorising and mandating that the action be instituted, amongst others. The Appellant did not file any further processes in reaction to the issue raised in the Notice of Intention to Defend.

The trial Court after hearing the parties on the processes filed, delivered its ruling and dismissed the action for being incompetent and an abuse of Court process.

The Appellant, peeved by the said decision, filed this appeal.

ISSUES:

The appeal was determined on the following issues:

1. Whether by law the resolution of the board of directors of a company or the members in general meeting is a pre-requisite to an action being filed in Court.

2. Whether a trial Court in an undefended list proceeding can make a dismissal order before the matter is heard on merit?

DECISION/HELD:

The appeal succeeded in part. The decision of the trial Court that the appellant’s suit was incompetent was affirmed but the order dismissing same was set aside for an order striking out the suit.

RATIOS:

• ACTION – COMPETENCE OF AN ACTION/A SUIT: Importance of competence of action to jurisdiction of Court; burden of proving same
• ACTION – LOCUS STANDI: Whether the question of whether an action was commenced with the authorization of the Board of Directors or Shareholders of a company touches on the locus standi to maintain the action; effect of absence of same
• COMPANY LAW – INSTITUTING AN ACTION IN THE NAME OF A COMPANY: How to establish the existence of a company resolution to institute legal proceedings
• JUDGMENT AND ORDER – ORDER OF COURT: Proper order the court would make where the plaintiff lacks locus standi to institute an action