STANBIC IBTC BANK PLC V. L.G.C. LTD. (2025) 13 NWLR (PT. 2002) 361
ON APPLICATION OF MAXIM “IN PARI DELICTO”
Where parties are equal in the wrong, the court will not give one legal redress against the other.
The full implication of a plea for an equitable remedy of in pari delicto is that it must be manifest by proven conduct that both parties must have mutually profited, attributed to themselves/third party and/or contributed to the depletion of the subject funds or vital constituents meant for the full performance of the contract.
The legal maxim “in pari delicto” is a principle rooted in equity, which holds that a plaintiff who has participated in wrong doing may not recover damages resulting from the wrongdoing. The application of the phrase is majorly significant in contract law and tort law.
It is often applied in cases where both parties are equally at fault for a particular illegal or unethical act. It is a critical tool in promoting justice and equity by preventing individuals from profiting from their own wrong.
In the instant case, the appellant knowingly and wilfully performed the contract in an illegal manner and was only liable to bear the consequence of that breach and performance in bad-faith because it depended on the appellant alone to present exhibit “A” to the Security and Exchange Commission for final regulatory approval and not on the 1st – 4th respondents.
The Court of Appeal was right to have found that there was no averment of facts suggesting the issue of in pari delicto.
[Eperokun v. UNILAG (1986) 4 NWLR (Pt. 54) 162; Jegede v. I.N.E.C. (2021) 14 NWLR (Pt. 1797) 409; Nwaolisah v. Nwabufoh (2011) 14 NWLR (Pt. 1268) 600; Adomba v. Odiase (1990) 1 NWLR (Pt. 125) 165 referred to.]
(Pp. 401-402, paras. H-G)
AFRIBANK (NIG.) PLC V. C.B.N. (2025) 13 NWLR (PT. 2002) 255
ON FUNCTION AND EFFECT OF DERIVATIVE ACTION UNDER SECTION 303(1) OF THE COMPANIES AND ALLIED MATTERS ACT
The effect of section 303(1) is to deprive the Directors of the company the power as the duly authorized organ of the company to authorize the bringing of action in the name of the company. The action is that brought by the minority shareholder in the name of the company.
(P. 291, paras. D-E)
AFRIBANK (NIG.) PLC V. C.B.N. (2025) 13 NWLR (PT. 2002) 255
ON NATURE OF APPLICATION FOR LEAVE TO COMMENCE DERIVATIVE ACTION AND NEED TO ENSURE FAIR HEARING IN DETERMINATION THEREOF
An application for leave to commence a derivative action is not a mere formality. It is a process that requires the court to make an active determination with stated benchmark for reaching such determination. In making such a determination regarding the interest of the Directors, fair hearing demands that such Directors should be put on notice. An order which has the effect of stripping the Directors of their statutory right must be one in respect of which they should be given the right to be heard before it is made as their civil rights and obligations would be affected. Consequently, it is right to give them fair hearing as enshrined in section 36(1) of the 1999 Constitution.
(Pp. 290, paras. F-H; 291, paras. E-G)
AFRIBANK (NIG.) PLC V. C.B.N. (2025) 13 NWLR (PT. 2002) 255
ON WHAT AMOUNTS TO DERIVATIVE ACTION AND WHEN CAN BE INITIATED
When a wrong is done to a company, it is only the company as represented by the Board of Directors of the company that can take steps to address the wrong either by way of filing an action in court or in any other way. However, there is an exception to this general rule which permits an individual shareholder or shareholders of the company to initiate an action on behalf and/or in the name of the company. Such an action is known as a derivative action. This is codified in section 303 of the Companies and Allied Matters Act 1990, now section 346 of the Companies and Allied Matters Act, 2020, which requires that a shareholder or shareholders of the company should obtain leave to commence a derivative action.
(P. 301, paras. A-D)
AFRIBANK (NIG.) PLC V. C.B.N. (2025) 13 NWLR (PT. 2002) 255
ON RIGHT TO INSTITUTE ACTION ON BEHALF OF COMPANY OR TO INTERVENE IN ACTION IN WHICH COMPANY IS PARTY, AND PURPORT OF
By virtue of section 303 of the Companies and Allied Matters Act, Laws of the Federation of Nigeria, 2004 (as amended), subject to the provision of subsection of the section, an applicant may apply to the court for leave to bring an action in the name or on behalf of a company, or to intervene in an action to which the company is a party, for the purpose of prosecuting, defending or discontinuing the action on behalf of the company.
(Pp. 289–290, paras. H-A; 296, paras. A-C)
AFRIBANK (NIG.) PLC V. C.B.N. (2025) 13 NWLR (PT. 2002) 255
ON PURPOSE OF DERIVATIVE ACTION
The purpose of a derivative action is for an applicant to bring an action in the name of or on behalf of the company or to intervene in an action to which the company is a party.
(P. 297, para. A)
AFRIBANK (NIG.) PLC V. C.B.N. (2025) 13 NWLR (PT. 2002) 255
ON CONDITIONS PRECEDENT TO FILING DERIVATIVE ACTION ON BEHALF OF COMPANY
Leave of court is a condition precedent to the commencement of a derivative action. By virtue of section 303 of the Companies and Allied Matters Act 2004 (as amended), no action may be brought and no intervention may be made on behalf of a company in an action under subsection of the section unless the court is satisfied that:
(a) the wrongdoers are the directors who are in control and will not take any necessary action;
(b) the applicant has given reasonable notice to the directors of the company of his intention to apply to court under subsection of the section if the directors of the company do not bring, prosecute or defend or discontinue the action;
(c) the applicant is acting in good faith; and
(d) it appears to be in the best interest of the company that the action be brought, prosecuted, defended or discontinued.
(Pp. 290, paras. A-D; 301, paras. D-F)
AFRIBANK (NIG.) PLC v. N.D.I.C. (2025) 12 NWLR (Pt. 2000) 453
ON MEANING OF ACTION
Action is defined as an ordinary proceeding in a court of justice by which one party prosecutes another for the enforcement or protection of a right, the redress or prevention of a wrong.
A civil suit stating a legal cause of action and seeking only a legal remedy. Consequently, the term action, as employed in section 303 of the Companies and Allied Matters Act, 2004, contemplates the prosecution of a party for the enforcement of a specific right or remedy. It does not operate as a carte blanche to prosecute a multitude of claims on behalf of the company indiscriminately.
(Pp. 476-477, paras. H-A)
AFRIBANK (NIG.) PLC v. N.D.I.C. (2025) 12 NWLR (Pt. 2000) 453
ON NEED FOR LEAVE TO BRING ACTION ON BEHALF OF A COMPANY
By virtue of section 303(1) of CAMA 2004, subject to subsection 2 of the section, an applicant may apply to the court for leave to bring an action in the name and on behalf of a company, or to intervene in an action to which the company is a party for the purpose of prosecuting, defending, or discontinuing the action on behalf of the company.
In the instant case, the appellants’ case was irredeemably incompetent by reason of failure to fulfil a condition precedent — that is, seeking and obtaining leave to commence a derivative action.
(Pp. 476, paras. F-G; 478, para. H)
AFRIBANK (NIG.) PLC v. N.D.I.C. (2025) 12 NWLR (Pt. 2000) 453
ON PURPOSE OF REQUIRING LEAVE TO INSTITUTE AN ACTION
A critical purpose of requiring leave is to ensure that only reasonable and viable causes of action are permitted to proceed before the courts. If one instance of leave were to serve as an unrestricted license to initiate any and all subsequent claims, even the most frivolous and unfounded actions could exploit the earlier leave, thereby overwhelming the judicial system. Such an outcome is untenable and inconsistent with the principles of judicial economy and prudence.
Per NWOSU-IHEME, J.S.C. at page 477, paras. C-E:
“Regarding the appellants’ contention that they acquired a vested right through Suit No. FHC/L/CS/1286/2009, I must unequivocally reject this proposition. My preceding explanations regarding the limitations of the leave obtained in that suit suffice to negate any argument for the acquisition of vested rights. Even if the appellants did possess a vested right, it would pertain solely to the specific subject matter of Suit No. FHC/L/CS/1286/2009, which remains distinct and separate from the issues in the present suit.”
AFRIBANK (NIG.) PLC v. N.D.I.C. (2025) 12 NWLR (Pt. 2000) 453
ON MEANING OF DERIVATIVE ACTION
A derivative action is a legal procedure by which a shareholder or a member of a company institutes an action on behalf of the company against the directors or officers of the company for a wrong done to the company.
The shareholder or member of the company stands in the place of the company and the benefit goes to the company and not the individual directly.
[Agip (Nig.) Ltd v. Agip Petroli Int’l (2010) 5 NWLR (Pt. 1187) 348; Esiso v. Esiso (2024) LPELR-62465 referred to.]
(Pp. 479-480, paras. H-A)
AFRIBANK (NIG.) PLC v. N.D.I.C. (2025) 12 NWLR (Pt. 2000) 453
ON APPLICATION OF VESTED RIGHT
Vested rights apply to a defined subject. Also, both parties and cause of action must be the same.
In the instant case, the Supreme Court, while rejecting the contention of the appellants that they had vested right to institute the action, however opined that if at all the appellants had such right as they contended, it would pertain solely to the specific subject matter of Suit No. FHC/L/CS/1286/2009, which remained distinct and separate from the issues in the present suit.
[Ndayako v. Dantoro (2004) 13 NWLR (Pt. 889) 187, referred to.]
(P. 477, paras. D-E)
Per ABIRU, J.S.C. at page 482, paras. B-E:
“Without engaging with the allusion to ‘vested right’ to maintain an action made by the counsel to the appellants, it is commonsensical that whatever vested right claimed can and will only be in respect of the claims in the earlier action, Suit No. FHC/L/CS/1286/2009, and not in the present action.
The causes of action and the parties in the earlier action and in the present action are completely different and not similar in any material particular.
The earlier action challenged the right of the Central Bank of Nigeria to interfere in the operations and governance of the first appellant, while the present action questions the revocation of the operating banking license of the first appellant and the consequent takeover of its operations and management by the first and second respondents, preparatory to its liquidation.
The first and second respondents were not parties to the earlier action and the Central Bank of Nigeria is not a party to this present action. The contention of the counsel to the appellants on the transferring of the leave obtained in the earlier action to this present action is thus completely baseless. The two lower courts were correct in their findings that the present action is incompetent.”