The Lagos Division of the Court of Appeal has dismissed an appeal filed by Bank PHB Plc (now Keystone Bank Limited) to challenge the sale of licence and assets by the Central Bank of Nigeria (CBN).
Bank PHB had in 2012 commenced the suit at the Federal High Court in Lagos due to the revocation of its licence by the CBN and the eventual sale of its assets.
CBN, Keystone Bank and Attorney General of the Federation (AGF) and Minister of Justice were the 1st to 3rd respondents in the suit.
It claimed that the revocation of its banking licence by the CBN and the eventual sale of its assets through Nigerian Deposit Insurance Commission (NDIC) and Asset Management Corporation of Nigeria (AMCON) to Keystone Bank was done maliciously, in bad faith and in contravention of the provisions of the law.
It sought orders to overturn the decision of the CBN revoking its licence and transfer of its assets through the NDIC and AMCON.
In response, the CBN filed preliminary objections challenging the jurisdiction of the court to entertain the matter primarily on the grounds that the bank lacked the requisite locus standi to institute the action.
Upon argument of the applications, the trial judge, Justice Charles Achibong, upheld the CBN’s objection and dismissed the Bank PHB’s claim.
The judge ruled that the bank failed to demonstrate over acts of bad faith on the part of CBN which was a condition precedent necessary for invoking the jurisdiction of the court to entertain the matter.
He stated that such actions of the CBN were carried out in lawful exercise of its duties.
Dissatisfied with the lower court’s ruling, Bank PHB appealed to the Court of Appeal. The CBN also filed a cross-appeal.
The appellant formulated issues as follows: Whether the trial court was not bound to follow the decision in Savannah Bank of Nigeria v. CBN and consequently conduct a full trial.
Counsel for appellant argued that the trial court was wrong to have decided the matter without conducting a trial, as that was the only way it could have properly evaluated the evidence of the parties and determined whether the actions of the 1st respondent was devoid of good faith.
The appellant submitted that the trial court ought to have adopted the procedure in Savannah Bank of Nigeria v. CBN wherein a similar issue was only determined upon full trial. Counsel for the 3rd respondent, Counsel to the AGF, Professor Fabian Ajogwu SAN, in arguing the Cross in his argument, clearly distinguished both cases and drew the court’s attention to the fact that in the case of Savanah Bank, no preliminary objection on jurisdiction of the court was raised thus enabling the court to proceed with trial.
He contended that this was however not the position in the instant case.
The second issued was whether the trial court was right in holding that it could not possibly find the decision of the 1st respondent as being tainted with malice and bad faith.
Counsel for the appellant further argued that the appellant’s statement of claim clearly made a case for bad faith on the action of the 1st respondent as the appellant was not among the 10 banks listed by the 1st respondent Audit Report of August 14, 2009 as a bank under financial stress.
It added that the decision of the 1st respondent to sack the appellant’s Board of Directors and sell its assets through NDIC and AMCON was an evidence of bad faith.
The 1st and 3rd respondents contended that the action of the 1st respondent was done lawfully in exercise of its duties pursuant to Section 53 of the Banks and Other Financial Institution Act (BOFIA) which mandates the 1st respondent to take necessary steps to protect depositors, promoters and shareholders.
Another issued raised was whether the trial court was right when it failed to consider that there was no authority from any of the organs of the company to commence the suit.
The cross-appellant submitted that a company can only exercise its right to sue upon the resolution of its Board of Directors or Shareholders.
Counsel for the 3rd respondent argued that this omission rendered the action incompetent and robbed the court of jurisdiction to entertain the suit as the action was not instituted by a proper party.
In affirming the judgment of the lower court, Justice Jamilu Tukur while delivering the lead judgment of the Court of Appeal, held that Bank PHB could not rightly contend that its right to fair-hearing was breached at the lower court because the condition precedent of establishing bad faith on the part of CBN had not been fulfilled.
The court in affirming the submissions of the learned senior advocate, held that the proper party to institute a suit when a wrong has been committed against the company was the company itself.
The court held thus: “it is only the company acting through its Board of Directors or majority of its members at a general meeting that can sue except in exceptional circumstances, such as where the rule in Foss v. Harbottle would apply or certain instances in CAMA where the act of a single member can bind the company”.
The court reasoned that Bank PHB’s failure to show evidence of its legal authority for the action pointed irrevocably to the fact that no such authority existed and robbed the company of the legal right to institute the suit.
Having determined the issues raised in favour of the respondents, the court dismissed the appeal in its entirety for lacking in merit.
It also upheld the cross-appeal and held that failure of the cross-respondent to furnish the court with the condition precedent necessary to commence an action by the company, points irrevocably to the fact that no such authority exists and robs the cross-respondent of locus to institute the matter.