By Elvis Evbaruovbokhanre Asia
Case: Dr. Pius Apere v. Linkage Assurance Plc[1]
Date: 19/7/2024-
Judge: Justice (Prof.) E. A. Oji
Main issues of law
- Termination of appointment of a Managing Director
- The implication of international best practices on the dichotomy between termination and dismissal in Nigeria
Summary of facts
The Claimant was appointed as Managing Director/CEO of the Defendant by the Defendant. Following allegations of misconduct and investigation, his employment was terminated. The Claimant claimed that the termination was not due to misconduct, because he was paid salaries after suspension and the termination letter did not state that it was due to misconduct. The Claimant also claimed that the termination was not in accordance with the Companies and Allied Maters Act (CAMA). The Defendant’s defence was that there was no need for compliance with the CAMA as the Claimant was not a director and was only removed as managing director for misconduct. The Defendant counter-claimed for the book value of the two (2) status cars that were in the Claimant’s possession.
Court’s Decision
The court held that the claimant did not prove that he was a director, entitled to enjoy the procedure for removal of directors under the Companies and Allied Matters Act. The court held further that the facts show that the Claimant’s termination as managing director was as a result of the allegations of misconduct in respect of which proper procedure was followed, even though not expressly stated in the letter of termination. The court dismissed the Claimant’s claims and granted the counter claim ordering him to pay the sum of N55,312,500 (Fifty-Five Million, Three Hundred and Twelve Thousand, Five Hundred Naira Only) being the total Net Book Value of the two official vehicles in his possession.
Legal principles relied on
Termination of the appointment of a Managing Director
- A claimant who wishes to challenge his removal as Director under the Companies and Allied Matters Act must prove that he was a Director to be subject to the removal procedure of a Director stipulated in the Act.
- While it is possible for a Director to also be a Managing Director, it is also possible for a Managing Director not to be a Director.
- A Managing Director’s appointment can be terminated based on the contract for the appointment and there is no provision in CAMA to be followed for the termination.
- An employer has the inherent power to commute summary dismissal to termination.
The implication of international best practices on the dichotomy between termination and dismissal in Nigeria
- By virtue of the ILO’s Convention 158 i.e. the Termination of Employment Convention 1982 No. 158 (C.158) and its accompanying Recommendation No. 166 (R.166) and section 254C (1)(f) of the Constitution which empowers the NICN to apply international best practices, there is no legal justification to continue to maintain the termination/dismissal distinction as we presently do in Nigeria.
Commentary
The decision of the court may be justified on the premise that the issue presented by the Claimant was his removal as Managing Director and not as a director. However, the conclusion of the court that a person may be a Managing Director without being a director appears inconsistent with the CAMA and the decisions of the appellate courts and in fact, corporate governance practices. While the appointment of a Managing Director may be terminated based on the agreement for the appointment, section 88 of CAMA 2020 which is similar to section 64 of 1990 CAMA and other relevant provisions suggests that only a director can be appointed as a Managing Director. In LONGE v. FBN PLC (2006)[2] the Court of Appeal while interpreting the provisions of the repealed Article 106 in the First Schedule in Table A of the repealed Companies Decree, 1968 which is similar to the provisions of section 88 and 289(5) of 2020 CAMA and 64 and 263 (5) of 1990 CAMA held that a person to be appointed a managing director must himself be a sitting director as he ought to come from amongst the directors. Though the main part of the judgment was upturned on appeal In LONGE v. FBN (SC)[3], the Supreme Court nevertheless confirmed that a director is simply a person appointed to manage the business of the company and queried how a Managing Director can be said not to be a director. In AZODO v. KAY-KAY CONSTRUCTION LTD[4](2014) LPELR-24150(CA) and NWANKWO v. KAY-KAY CONSTRUCTION LTD (2014) LPELR-24336(CA), the Court of Appeal held that what determines whether a person is a director is not form CO7 and that a Managing Director is a Director whether or not his directorship is recognized by the Corporate Affairs Commission (CAC) once held out as such by the company. Therefore, contrary to the decision of the Court, the fact that the Claimant did not produce CAC document showing he was appointed a director does not mean that he was not a director in the eyes of the law.
There is also the rather casual manner in which the Court invoked IBP to invalidate the substance of the difference between termination and dismissal under our law. Apart from the fact that this issue did not arise from the facts and arguments placed before the court, the application of unratified IBP should not be handled the way it was treated in this case. It is important for the Court to allow a proper interrogation of the application of unratified IBP before placing reliance on them. This is because; the tenor of the relevant constitutional provision for IBP does not give the NICN the power to apply unratified IBP as if they were law. The constitution vests the Court with jurisdiction and gives it power to deal with it when it arises in a case brought before it.
Elvis E. Asia is the Managing Partner of Law Future Partners and a PartneratBols Attorneys, Nigeria. He has an LLB, Ambrose Alli University; and LLM from the University of Lagos. He is a member of the Chartered Institute of Arbitrators, United Kingdom, Institute of Chartered Secretaries and Administrators of Nigeria and the Chartered Institute of Taxation of Nigeria. Elvis is the author of the book ‘Oil and Gas Insurance and Nigeria’s Local Content Policy’.
Footnotes
[1] SUIT NO: NICN/LA/92/2021. Full judgment is available at https://nicnadr.gov.ng/judgement/judgement.php?id=9091
[2]LPELR-7682(CA) Per Isa Ayo Salami, JCA (Pp 10 – 23 Paras C – A)
[3] PLC (2010) LPELR-1793(SC)
[4](2014) LPELR-24150(CA)
