April 18 2006
On January 5 2006 the Court of Appeal upheld a judgment of the Lagos Federal High Court, which found that the relationship between the director of a bank and the bank is that of servant and master, thereby justifying the dismissal of a bank's managing director following his alleged misconduct in granting a loan facility.
The managing director of a bank was sacked on June 13 2002 after granting a loan of $111.7 million to Investors International (London) Limited for the purchase of Nigerian Telecommunications Company Plc (NITEL), the national fixed-line and mobile telecommunications company. Investors International (London) Limited forfeited the loan to the Bureau for Public Enterprises after failing to meet the balance of payment for the acquisition of NITEL as scheduled.
Following his termination, the managing director sued the bank before the Federal High Court, claiming that the bank's board meeting which had approved his termination was illegal and void. He claimed that he had not been invited to the meeting, in violation of the provisions of the Company and Allied Matters Act. Therefore, he sought the annulment of the termination, as well as a reinstatement order. The trial court held that the relationship between the appellant and the bank was that of servant and master, and that the bank had the power to hire and fire any of its employees. Further, it held that the reason adduced by the bank for the termination (ie, misconduct in granting the loan) was sufficient.
Before the Court of Appeal, the appellant contended that the trial court should not have tried the allegations of misconduct against him. He also sought a declaration that, as director of the bank, the relationship between him and the bank was not that of employer and employee, as held by the lower court. Further, he requested that the board of directors' meeting to which he was not invited be declared invalid and unlawful.
The appellate court affirmed the decision of the trial court and dismissed the appeal. It stated that the trial court was correct in holding that the bank, as an employer, has the right to hire and fire. It further held that, when the managing director of a bank is suspended (as was the case of the appellant at the time of his termination), he or she is no longer in a position to perform the duties of his or her office and can neither attend nor take part in a meeting of the board of directors.
The court held that the appeal "lacked merit and was simply an unwholesome waste of the time of the court". The appeal was consequently dismissed.
The decision highlights the important issue of the rights of a company director with regard to the company. The issue is whether, although the company exists as a separate legal entity, its powers may be overshadowed by the rights of one of its directors. One may consider that the director - who is a fee earner of the company - qualifies as an employee of the company and may be fired by his or her employer as deemed appropriate.
An employee of a company is, by virtue of his or her status of employee, subject to disciplinary measures (eg, suspension); these measures have the effect of putting the terms of his or her contract on hold, including all rights and privileges which may be attached to his or her position in the company.
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