Background
The present appeal arises from the Federal High Court in Lagos and the Court of Appeal’s decisions striking out a derivative action filed by Afribank Nigeria Plc and its members against the Nigerian Deposit Insurance Corporation (NDIC), Asset Management Corporation of Nigeria (AMCON) and Skye Bank Plc. The appellants had previously obtained leave in suit No. FHC/L/CS/1286/2009 to bring a derivative action against the Central Bank of Nigeria (CBN). After the CBN revoked Afribank’s banking license and transferred its management to NDIC and AMCON, the appellants initiated a fresh originating summons (suit No. FHC/L/CS/1307/2011) without seeking new leave. The trial court struck out the suit for lack of competence and the Court of Appeal affirmed. Dissatisfied, the appellants appealed to the Supreme Court.
Facts
1. In 2009, Afribank Nigeria Plc and fifty others secured leave under section 303(1) of the Companies and Allied Matters Act (CAMA) 1990 to sue the CBN for alleged unlawful interference.
2. During the pendency of that derivative action, the CBN revoked Afribank’s license and assigned its assets and operations to NDIC and AMCON.
3. The appellants filed originating summons No. FHC/L/CS/1307/2011 seeking to invalidate the takeover and restrain further actions, alleging they were ultra vires without CBN authorization.
4. NDIC and AMCON objected for want of leave under CAMA and raised jurisdictional issues in preliminary proceedings. The trial court dismissed the appellants’ motion to amend and struck out the suit.
5. On appeal, the Court of Appeal held that the leave granted in the earlier suit was confined to that litigation and could not be applied to the new proceedings, dismissing the appeal.
6. The appellants then appealed on the sole ground that the prior leave created vested rights enabling them to maintain the present suit without fresh leave.
Issues
- Whether leave granted in a prior derivative action under section 303(1) of CAMA can be implicitly transferred to a new suit involving different parties and subject matter.
- Whether the appellants had acquired a vested right to maintain the second suit by virtue of the earlier leave.
- Whether courts may address substantive questions at the interlocutory stage by extending leave beyond its express terms.
Ratio Decidendi
The Supreme Court held that:
- Section 303(1) CAMA requires an applicant to seek judicial leave for each distinct action to be brought on a company’s behalf; leave is not a transferable entitlement.
- The term “action” in section 303(1) denotes a specific proceeding in which a right is enforced or a wrong is redressed, limited to the parties and reliefs defined at the time leave is granted.
- Interlocutory or preliminary objections must not preempt substantive determinations; courts cannot extend leave by implication without adjudicating the merits at trial.
Court Findings
The Court emphasized that the earlier suit directly challenged CBN’s conduct, whereas the present action targets NDIC, AMCON and Skye Bank—distinct parties with different issues. It rejected the notion of “leave by implication” and held that no authority permits leave granted in one proceeding to serve as leave in another. The Court reiterated that interlocutory proceedings must not preempt the merits, citing its decision in Agwu & Ors v. Julius Berger Plc.
On vested rights, the Court clarified that any rights vested by the earlier leave relate solely to that suit’s subject matter and do not extend to new actions. It also ruled that derivative suits require leave as a condition precedent to competence and that failure to comply renders the suit null and void.
Conclusion
By a unanimous decision delivered by Chioma Egondu Nwosu-Iheme, JSC, the Supreme Court dismissed the appeal. The Court affirmed that fresh leave must be obtained for each derivative action and that the appellants’ failure to do so rendered the originating summons incompetent. Each party bears its own costs.
Significance
This landmark ruling clarifies the scope and limits of leave for derivative actions under CAMA. It confirms that leave is action-specific, non-transferable, and a substantive condition precedent. The decision reinforces judicial economy by preventing the proliferation of unfounded derivative claims and underscores the separation between interlocutory rulings and substantive adjudication.