By Elvis Evbaruovbokhanre Asia
Case: Elias Igbinakenzua V. First Aluminum Nigeria Plc [1] ( NICN/LA/317/2020)
Appeal: First Aluminium Nigeria Plc V. Elias Igbonakenzua); Court of Appeal , Lagos Division – CA/LAG/CV/561/2021
Trial Judge: Hon. Justice N.C.S. Ogbuanya
Date:
Trial Court Judgment – 14/05/2021
Court of Appeal Judgment – 24/01/2025
Main Issues of Law
- Validity of employment letter, whether board resolution is required
- Employer’s waiver of misconduct.
- Burden of proof in employment cases
Summary of Facts
The Claimant was employed as the Managing Director of the Defendant under a contract of employment dated February 26, 2016. His employment lasted for 25 months, after which he resigned on February 27, 2019. He claimed that despite his service and due resignation, the Defendant company owed him various entitlements, including gross salary of $622,130, monthly allowance of N6,000,000 for 25 months, totaling N150,000,000, Medical insurance worth $20,000 and Monetized value of a Honda CRV vehicle.
The Defendant denied owing the Claimant and argued that his remuneration was to be paid by Aluson S.A., (which had a technical service agreement with the Defendant) for whom he served as a representative Director and nominee on the board. The Defendant also claimed that the employment contract was improperly procured without Board approval and that the Claimant was guilty of various misconduct including absenteeism during which time he established Globus Bank.
In view of the urgency disclosed in the applications filed before the court regarding alleged impending sale of the assets of the Defendant, the court ordered expedited hearing on September 11, 2020, rather than hearing the Claimant’s application for injunction and summary judgment. The Defendant was put on notice and ordered to defend the suit within a limited timeframe. Trial was concluded on September 25, 2020.
Court’s Decision upheld on Appeal
Validity of the Employment Contract – The court held that the Claimant’s employment contract (Exhibit C1) was valid and binding on the Defendant, dismissing the argument that board approval was required.
Employer’s Liability – The court ruled that the Defendant was responsible for paying the Claimant’s remuneration and rejected the argument that Aluson S.A. was liable.
Waiver of Misconduct – The Defendant’s claims of misconduct were dismissed, as no disciplinary measures were taken during the subsistence of the contract, implying a waiver of such misconduct.
Monetary Awards –The court awarded $220,000 as gross salary, based on the contract’s specified upper limit for dollar remuneration. N150,000,000 was granted as a monthly allowance at N6,000,000 per month. $20,000 was awarded for medical insurance. The claims for a Honda CRV, exemplary damages, and pre-judgment interest were dismissed.
Legal Principles Relied Upon
- Validity of employment letter, whether board resolution is required
All that is required of a Claimant is to show evidence of employment relationship. As such, the employment contract does not derive its validity from any Board Resolution approving the remuneration, as long as the said contract of employment has made clear terms relating to remuneration and other conditions of employment. Corporate law would also treat such issue as an in-door management matter under the old English case rule in Royal British Bank v. Turquand (1856)6E&B 327, which would not affect a third-party employee.
- Employer’s waiver of misconduct
It is within an employer’s disciplinary ambit over its erring employee to condone any indiscipline. It is too late in the day for the employer to complain of any of such misconducts, without previously and prior to the suit, initiated any disciplinary measure including invoking termination.
- Burden of proof in employment cases
Once an employee-Claimant establishes the employment relationship and how he earned the accompanying entitlement, the evidential burden of how the said entitlement was paid becomes that of the employer. Thus, upon the Claimant’s discharge of his burden to establish the employment relationship and how the entitlement was earned, the burden shifts to the Defendant (an employer), who has the duty/ evidential burden to establish how the remuneration/entitlement of the Claimant (an employee) was paid, and is at liberty to make relevant averments in defence and tender any evidence in proof thereof.
The Appeal
Upon delivery of the Judgment, the defendant company immediately appealed and challenged the decision of the trial court on a number of grounds, notably that, the lower court’s coerced expeditious hearing, denied them fair hearing and the evidence was not properly evaluated. The Court of Appeal in its unanimous Judgment however disagreed with the Appellant and upheld the Judgment of the trial court, and made good remarks about the manner the trial Judge handled the case with skillful evaluation.
Commentary:
This judgment was delivered in 2021 and upheld by the Court of Appeal on January 24, 2025, in First Aluminium Nigeria Plc v. Elias Igbinakenzua[2]. Notably, the Court of Appeal endorsed the expeditious conduct of trial in the case (within 13 days after service). The appellant had alleged a denial of fair hearing, but the Court of Appeal rejected this claim, holding that both parties had equal opportunities to present their cases. No application for an extension of time was made and refused. The Court of Appeal also upheld the trial court’s decision to proceed to trial despite a pending application for summary judgment, stating that proceeding to trial instead of hearing the summary judgment application does not violate any procedure. Moreover, the appellant had consented to and participated in the trial.
In an ideal system, all employment cases should be similarly expedited. Hon. Justice Ogbuanya must be commended for his efficiency in handling the case, which has now received the approval of the Court of Appeal. Grounded knowledge and interfaced application of corporate law and employment law also underscored the quality of the judgment.
This case highlights several critical aspects of employment law:
- Validity of Employment Contracts without Board Resolutions
The decision clarifies that a board resolution is not required for an employment letter to be valid if the contract is properly executed by the company. The defendant’s argument to the contrary was unfounded, as it would enable companies to evade liability to employees under the guise of board resolutions. However, this ruling must be understood in context. Under Section 88 of the Companies and Allied Matters Act, 2020 (CAMA) and other relevant provisions, only a director may be appointed as a Managing Director by the board via a resolution. While a company’s Articles of Association may provide for a Managing Director’s appointment, CAMA does not seem to permit a non-director to be appointed as a Managing Director without board approval. The court’s decision appears justified, as the issue was not whether the Claimant was properly appointed as Managing Director but rather whether his employment letter which set out the terms required board approval.
- Liability of the Employer for a Director’s Remuneration
The decision reinforces the principle that a company is responsible for paying a director’s remuneration unless a separate arrangement exists between the company and a third party. Even if a director represents a shareholder, the company remains liable for remuneration unless an explicit agreement states otherwise.
- Employer’s Condonation of Misconduct
Employers often cite alleged infractions as a defense against claims from employees. This decision strongly reinforces that such infractions hold no weight unless disciplinary actions were taken at the relevant time. In this case, the Defendant alleged that the Claimant engaged in misconduct, including establishing Globus Bank while serving as Managing Director. The court dismissed these allegations because no disciplinary measures were initiated at the time.
- Burden of Proof in Employment Disputes
Hon. Justice Ogbuanya, as noted by the Court of Appeal, skillfully evaluated the evidence and applied the burden of proof doctrine within employment law. The decision in this regard is a landmark on employment litigation and should be studied by legal practitioners specializing in employment law.
NIC Judgment:
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’
[1] SUIT NO: NICN/LA/317/2020. Available online at https://www.nicnadr.gov.ng/judgement/details.php?id=6097
[2] Appeal No. CA/LAG/561/2021 delivered by Ntong, JCA