OKEKE V. SECURITIES AND EXCHANGE COMMISSION (2013)

Background

This appeal arose from proceedings concerning alleged misstatements in the published annual accounts of Cadbury Nigeria Plc. Christopher Okeke was appointed a non-executive director of the company in June 2003. Following concerns raised by the Securities and Exchange Commission (SEC) after reviewing Cadbury’s annual reports, the company’s chairman commissioned PricewaterhouseCoopers to conduct an independent investigation. After receiving that report, the SEC established an in-house investigative team and an Administrative Proceedings Committee (APC) to investigate the alleged accounting irregularities, reportedly involving approximately N13 billion.

Cadbury Nigeria Plc, its auditors and several directors challenged the competence of the APC to conduct the investigation. Despite that challenge, the APC proceeded with hearings and delivered its findings to the SEC on 8 April 2008. It found several persons culpable, disqualified certain individuals from operating in the Nigerian capital market or holding directorships in public companies for five years, and referred the directors to the Economic and Financial Crimes Commission for further investigation and prosecution.

Okeke commenced judicial review proceedings at the Federal High Court, Lagos, seeking declarations, certiorari and injunctive reliefs. He argued that the allegations concerned the operation and management of a company under the Companies and Allied Matters Act (CAMA), matters within the exclusive jurisdiction of the Federal High Court under section 251(1)(e) of the 1999 Constitution. He also alleged that the APC had breached his constitutional right to fair hearing and had wrongly treated him as an executive director. The Federal High Court dismissed his claim, holding that there had been no breach of natural justice. Okeke appealed.

Issues

1. Whether the APC had jurisdiction to adjudicate allegations concerning misstatements in Cadbury Nigeria Plc’s annual accounts, having regard to section 251(1)(e) of the Constitution.
2. Whether the APC’s treatment of Okeke as an executive director constituted an error warranting the quashing of its decision.
3. Whether the APC’s findings were supported by the evidence and applicable legal principles.
4. Whether Okeke’s right to fair hearing had been breached.
5. Whether the allegations and sanctions had a criminal character which the APC lacked competence to determine.
6. Whether the Federal High Court was entitled to deliver one judgment in the three consolidated applications.

Ratio Decidendi

The Court of Appeal allowed the appeal. It held that jurisdiction is fundamental and must be determined before the merits. Jurisdiction cannot be inferred by implication or obscurity; the statute conferring it must use clear and positive language. Any decision made without jurisdiction is null and liable to be set aside.

The court examined sections 13 and 310 of the Investment and Securities Act 2007, which empower the SEC to regulate the capital market and establish committees to perform specified functions. However, those provisions could not override the Constitution. By section 1(3) of the Constitution, the Constitution is supreme, and any inconsistent enactment is void to the extent of the inconsistency.

The allegations concerned the preparation, accuracy and publication of company accounts, the responsibilities of directors, and the management and assets of Cadbury Nigeria Plc. Those matters fell within the expression “arising from the operation” of CAMA in section 251(1)(e) of the Constitution. The APC was not a court vested with criminal jurisdiction and could not adjudicate allegations having a serious criminal flavour or make findings determining the legal rights and liabilities of the appellant in that regard. The SEC’s regulatory powers and the jurisdiction of the Investments and Securities Tribunal did not displace the constitutional jurisdiction of the Federal High Court.

Court Findings

The court further found a breach of fair hearing. The identities and status of the APC members were not disclosed in the relevant processes, and the record did not demonstrate that Okeke was given a sufficient opportunity to present his case. The appellate court considered it significant that the facts contained in Okeke’s affidavit and supporting exhibits were not effectively challenged by counter-affidavit. The Federal High Court’s conclusion that there was no breach was therefore speculative and unsupported by the record.

Because the APC lacked jurisdiction and the proceedings also violated fair hearing, the Court of Appeal held that it was unnecessary and improper to determine the remaining issues on the merits. Once a successful jurisdictional or fair-hearing objection is established, an appellate court should not proceed to decide other substantive questions.

Conclusion

The judgment of the Federal High Court delivered on 26 September 2008 in suit FHC/L/CS/483/2008 was set aside. The appeal was allowed, with no order as to costs. The decision of the APC against Okeke could not stand because the committee lacked jurisdiction and failed to accord him fair hearing.

Significance

The decision confirms the supremacy of the Constitution over regulatory legislation and places constitutional limits on the investigative and disciplinary powers of administrative agencies. It establishes that the SEC may regulate the capital market, but it cannot constitute an administrative panel to exercise judicial or criminal jurisdiction over disputes fundamentally arising from company administration and accounting obligations under CAMA. The case also reinforces the principle that fair hearing requires a genuinely independent and identifiable decision-making body, adequate notice, and a meaningful opportunity to answer the allegations.