LEGAL PRINCIPLE: COMPANY LAW — Corporate Litigation — Authority to Institute Action — Presumption of Authority and Burden of Proof
PRINCIPLE STATEMENT
The authority of a company to institute an action is presumed until the contrary is proved by the party asserting the contrary; the defendant bears the burden of proving lack of authority.
RATIO DECIDENDI (SOURCE)
Per Ogundare, JSC, in Haston (Nigeria) Limited v. African Continental Bank Plc (2002) NLC-1091998(SC) at pp. 15–16; Paras D–A.
"The action was instituted by the plaintiff in her own name. This obviously is a proper cause. It has been the rule for a long time now since Foss v. Harbottle (supra) was decided that the proper plaintiff in an action for a wrong done to a company is the company itself. The contention of the defendant in the two courts below and in this court is that the company by a resolution of her board of directors, must authorise that an action be taken. But this must be presumed until the contrary is proved by the party that asserts the contrary. The defendant has not led a shred of evidence to support its contention that the action here was not authorised by the plaintiff's board of directors."
EXPLANATION / SCOPE
A company’s authority to sue is presumed. The party challenging authority bears the burden of proving lack of authority. The defendant must adduce evidence to rebut the presumption. The principle protects companies from unnecessary litigation over their capacity to sue. The court will not require proof of authority unless challenged. The rule applies to both plaintiffs and defendants. The company may prove authority by producing board minutes or resolutions. The presumption is rebuttable. The defendant cannot rely on mere speculation. The principle promotes efficiency in corporate litigation. The court will not strike out an action without evidence of lack of authority.