Legalpedia Citation: (2015-12) Legalpedia 52317 (CA)

In the Court of Appeal

Holden at Lagos

Tue Dec 29, 2015

Suit Number: CA/L/22/2012

CORAM

TIJJANI ABUBAKAR JUSTICE, COURT OF APPEAL

ABIMBOLA O. OBASEKI-ADEJUMO JUSTICE, COURT OF APPEAL

JOSEPH SHAGBAOR IKYEGH JUSTICE, COURT OF APPEAL

TIJJANI ABUBAKAR JUSTICE, COURT OF APPEAL

PARTIES

GATEWAY HOLDINGS LIMITED

APPELLANTS

STERLING ASSET MANAGEMENT & TRUSTEES LIMITED

RESPONDENTS

AREA(S) OF LAW

BANKING LAW, COMPANY LAW, LAW OF CONTACT, ADJECTIVAL LAW, RULES OF STATUTORY INTERPRETATION, CIVIL PROCEDURAL LAW, PRACTICE AND PROCEDURE

SUMMARY OF FACTS

This appeal is against the ruling of the Federal High Court Lagos. The Appellant was offered a short-term loan In the sum of N1.5 billion for a period of 30 days at an interest rate of 18% per annum by the Respondent. The Petitioner/Respondent further claimed that when it demanded for repayment of the credit facility, the Appellant as Respondent refused to pay, and that the Appellant’s loan account statement gave comprehensive details of Appellant’s indebtedness to the tune of N 1,598, 916, 453.03. The Respondent having found that the Appellant was not willing and able to pay the loan commenced winding-up petition against the Appellant at the Federal High Court Lagos. The Appellant as Respondent in the petition for winding-up filed a Notice of Preliminary Objection. In response, the Respondent as Petitioner at the Court below filed a Counter Affidavit.

The Appellant filed additional grounds in support of its preliminary objection, while the Respondent filed a further counter affidavit. The preliminary objection was then ripe for hearing, it was heard and determined, the preliminary objection was eventually dismissed, setting the stage for the winding-up petition to be heard. The Appellant became aggrieved by the decision of the lower Court dismissing the preliminary objection and therefore filed this Appeal.

HELD

Appeal dismissed.

ISSUES

1. Whether the learned trial Judge was right when he held that the Petition was not founded on illegal contract, which is unenforceable?
2. Whether the learned trial judge was right in not striking out the Petition for failure to fulfill the conditions precedent as contended in the Appellant’s Preliminary Objection, to the commencement of winding-up proceedings?
3. Whether the learned trial Judge was right when he held that he had jurisdiction to entertain the Petitioner/Respondent’s Petition presented against the appellant having found that the verifying affidavit did not comply with Rule 18 of the Companies Winding Up Rules 2011?
4. Whether the learned trial Judge ought not to have dismissed the petition on the ground that it did not disclose a reasonable cause of action and/or was brought mala fide being designed to put improper pressure on the Appellant?
5. Whether the learned trial Judge was right when he failed to grant the order restraining the Petitioner/Respondent from taking any further steps upon its petition?

 

RATIONES DECIDENDI

BANKING BUSINESS – WHO CAN CARRY ON BANKING BUSINESS IN NIGERIA

The relevant statute in this regard is the Banks and other Financial Institutions Act (BOFIA). Section 2 of the Act provides that:

(1) No person shall carry on any banking business in Nigeria except if it is a company duly incorporated in Nigeria and holds a valid license issued under this Act.

(2) Any person who transacts banking business without a valid license under this Act is guilty of an offence and liable on conviction to imprisonment for a term not exceeding ten years or to a fine of N 2,000,000, or to both such imprisonment and fine.

It is apparent from the above provisions cited that ONLY a company duly incorporated in Nigeria and is validly licensed can carry on banking business in the country. The provisions in my view bear some flavor of compulsion; they suggest mandatory compliance with the conditions contained therein. PER – TIJJANI ABUBAKAR, JCA.

BANKING BUSINESS – MEANING OF BANKING BUSINESS

For the purpose of the Act, ‘banking business’ is defined under the Act, by Section 66 to mean:

“the business of receiving deposits on current account, savings account or other similar account, paying or collecting cheques, drawn by or paid in by customers; provision of finance or such other business as the Governor may, by order published in the Federal Gazette, designate as banking business;….”

PER – TIJJANI ABUBAKAR, JCA

TRANSACTION – WHETHER OR NOT A PARTY CAN PLEAD ILLEGALITY AFTER BENEFITING FROM A TRANSACTION

It is also settled that a party cannot as in the instant appeal benefit from a transaction and turn round to plead illegality. PER – TIJJANI ABUBAKAR, JCA.

ADJECTIVAL LAW, PRACTICE AND PROCEDURE COURT – A COURT OF LAW IS A COURT OF JUSTICE

A Court of Law is a Court of Justice, where it is shown that there is obvious breach, parties must be afforded forum to ventilate their grievance. Upholding the objection by the Appellant will amount to shutting the doors of the Courthouse against the Petitioner Respondent, thereby aiding evasion of seeming obligation to honor terms of an agreement, this must certainly not be made the business of a Court of justice, no far from it. PER – TIJJANI ABUBAKAR, JCA.

ILLEGALITY – CONSTITUENT OF ILLEGALITY

In my view illegality must be obvious, apparent, unequivocal and perceivable from the circumstances surrounding the agreement. I am unable to either openly or remotely perceive any seeming design to perpetrate illegality by the parties. I am tempted to also reason along the line of thought of the learned Jurist Pats-Acholonu (JSC) in BCC LTD V. BATALHA (2006) 9 NWLR (PT. 986) 595, where his lordship in apparent expression of disgust said:

“The presumption or rather the necessary inference deducible therefrom is that, the Appellant never really intended or contemplated to pay the respondent the amount as agreed in the contract of service. A defense to an action which is ignoble on its face and tainted orbesmirched with an oddity that is inherently dubious, dishonest and reprehensible and does violence to a principle of equity and good conscience it ought not in my view win the support of this court. This court should not lend itself to a defense for breach of contract which is embarrassing to any conscientious being and is an affront to civilized behavior and decency”.

PER – TIJJANI ABUBAKAR, JCA.

COMPANY – WHEN CAN A COMPANY BE SAID TO BE INDEBTED AND LIABLE TO BE WOUND UP

That section provides as follows:

“A Company shall be deemed to be unable to pay its debts if-A creditor, by assignment or otherwise, to whom the company is indebted in a sum exceeding N2,000 then due has served on the company, by leaving it at its registered office or head office, a demand under his hand requiring the company to pay the sum so due, and the company has for three weeks thereafter neglected to pay up the sum or to secure or compound for it to the reasonable satisfaction of the creditor:…. “(Underline mine)

It is obvious from the above provision of section 409(a) that what is reckoned therein is not that the letter of demand must give three weeks’ notice. Far from it! A literal construction of the clear and unambiguous provision of the Act shows that, the extent of notice in the letter of demand is immaterial; what is mandatory therefrom is that such debtor company must have neglected to pay up the sum being owed or compound for it to the reasonable satisfaction of the creditor for three weeks from the delivery of the letter of demand. Consequently, a combined reading of section 408(b) and 409(a) of CAMA will lead to the conclusion that a company can only be said to be unable to pay its debt and liable to be wound up if it is indebted in a sum exceeding N 2,000 and such debt has become due and the debtor company had neglected for three weeks after the demand for payment was made to pay for such debt as provided under the Act. Therefore, I must say that the contention of the Appellant’s counsel that the Respondent’s did not comply with the above-referenced provision of CAMA is misconceived and contrary to the clear provision of the Act. Any interpretation to the contrary will lead to manifest absurdity. PER – TIJJANI ABUBAKAR, JCA.

COMPANY – CONDITION PRECEDENT BEFORE A CREDITOR CAN MAKE A STATUTORY DEMAND ON A COMPANY WHO IS INDEBTED

I have earlier reproduced the provision of section 409(a) of CAMA and I need not do that here again, but it is instructive to note that in order to activate that provision as to hold that a company is unable to pay its debt, section 409(a) makes it mandatory that the debt at stake must be due. For the purpose of emphasis, the initial part of the provision states that:

“A creditor, by assignment or otherwise, to whom the company is indebted in a sum exceeding N2,000 then due has served on the company, by leaving it at its registered office or head office, a demand under his hand requiring the company to pay the sum so due…. “(Underline mine)

It is apparent from the underlined portion of the above provision that it is a condition precedent that the debt owed by a company must become due before the statutory demand can be made. Therefore, where it is found that the letter of demand by a creditor to a debtor company was delivered before the debt become due, the court will readily hold that the condition precedent under section 409(a) has not been complied with. PER – TIJJANI ABUBAKAR, JCA.

NON-COMPLIANCE TO RULES – THE QUALIFYING CONDITION TO NON-COMPLIANCE TO THE RULES

Is the petition then rendered a nullity on this ground? I will answer in the negative. In support of this stance, I refer to Rule 182 (1) of the Companies Winding-Up Rules which provides as follows:

(1) “No proceedings under the Act or these Rules shall be invalidated by any formal defect or by any irregularity, unless the Court before which an objection is made to the proceeding, is of the opinion that injustice has been caused by the defect or irregularity and that the injustice cannot be remedied by any order of that Court.” (Underline mine)

It is evident that the qualifying condition as to the non-compliance with the provision of the Rules is that such non-compliance must have caused injustice. The question to be asked then is whether the filing of the verifying affidavit on the same day the petition was filed caused any injustice to the Appellant? Does it prejudice the interests of the Appellant Company, so as to cause an injury that cannot be remedied? These questions must also be answered in the negative. The Appellant has not been able to establish that any injury has been occasioned by the non-compliance by the Respondent, and while it falls short of the Rules, it is to be treated as an irregularity which is not fatal to proceedings. PER – TIJJANI ABUBAKAR, JCA

BANKING BUSINESS – WHO CAN CARRY ON BANKING BUSINESS IN NIGERIA

The relevant statute in this regard is the Banks and other Financial Institutions Act (BOFIA). Section 2 of the Act provides that:

(1) No person shall carry on any banking business in Nigeria except if it is a company duly incorporated in Nigeria and holds a valid license issued under this Act.

(2) Any person who transacts banking business without a valid license under this Act is guilty of an offence and liable on conviction to imprisonment for a term not exceeding ten years or to a fine of N 2,000,000, or to both such imprisonment and fine.

It is apparent from the above provisions cited that ONLY a company duly incorporated in Nigeria and is validly licensed can carry on banking business in the country. The provisions in my view bear some flavor of compulsion; they suggest mandatory compliance with the conditions contained therein. PER – TIJJANI ABUBAKAR, JCA

BANKING BUSINESS – MEANING OF BANKING BUSINESS

For the purpose of the Act, ‘banking business’ is defined under the Act, by Section 66 to mean:

“the business of receiving deposits on current account, savings account or other similar account, paying or collecting cheques, drawn by or paid in by customers; provision of finance or such other business as the Governor may, by order published in the Federal Gazette, designate as banking business;….”

PER – TIJJANI ABUBAKAR, JCA

TRANSACTION – WHETHER OR NOT A PARTY CAN PLEAD ILLEGALITY AFTER BENEFITING FROM A TRANSACTION

It is also settled that a party cannot as in the instant appeal benefit from a transaction and turn round to plead illegality. PER – TIJJANI ABUBAKAR, JCA

CASES CITED

STATUTES REFERRED TO

1.Companies Winding Up Rules, 2011

2.Company and Allied Matters Act, Cap C20 Laws of the Federation of Nigeria 2004

3.Banks and Other Financial Institutions Act (BOFIA)

4.Evidence Act, 2011

5.Interpretation Act

 

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