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XPRESS PARTNERS LIMITED v. BGL SECURITIES LIMITED (2018)

XPRESS PARTNERS LIMITED v. BGL SECURITIES LIMITED

(2018)LCN/11864(CA)

In The Court of Appeal of Nigeria

On Thursday, the 5th day of July, 2018

CA/L/460M/2012

 

JUSTICES

TIJJANI ABUBAKAR Justice of The Court of Appeal of Nigeria

BIOBELE ABRAHAM GEORGEWILL Justice of The Court of Appeal of Nigeria

ABIMBOLA OSARUGUE OBASEKI-ADEJUMO Justice of The Court of Appeal of Nigeria

Between

XPRESS PARTNERS LIMITED – Appellant(s)

AND

BGL SECURITIES LIMITED – Respondent(s)

RATIO

JURISDICTION OF THE LOWER COURT TO DETERMINE A PETITION FOR WINDING UP OF A COMPANY

The jurisdiction of the Lower Court to hear and determine a petition for winding up of a company is provided for under Sections 407 of the Companies and Allied Matters Act, Cap C20, LFN, 2004 (CAMA). See also Section 251(1) (e) of the Constitution of the Federal Republic of Nigeria, 1999 (as amended) and the decision of this Court in SUBURBAN BROADBAND LTD NIG Vs. INTELSAT GLOBAL SALES AND MARKETING LTD (2016) LPELR-40334 (CA) pg. 8-9, paras. F – F. The jurisdiction of the Court will be activated under the circumstances set out under Section 408 of CAMA; Section 408 (d) provides as follows:

“A company may be wound up by the Court if –

a. …

b. …

c.

d. the company is unable to pay its debt;

e.

Section 409 of the Companies and Allied Matters Act sets out the circumstances where it would be held that a company is unable to pay its debts. Section 409 of the Act provides as follows:

A company shall be deemed to be unable to pay its debt 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 the sum or to secure or compound for it to the reasonable satisfaction of the creditor; or

b. execution or other process issued on a judgment, decree or order of any Court in favour of a creditor of the company is returned unsatisfied in whole or in part; or

c. the Court, after taking into account any contingent or prospective liability of the company is satisfied that the company is unable to pay its debt. PER ABUBAKAR, J.C.A.

TIJJANI ABUBAKAR, J.C.A.(Delivering the Leading Judgment):

This appeal emanated from the Ruling of the Federal High Court sitting in the lkeja Division, delivered by Steven Jonah Adah J. (as he then was) on the 3rd day of May, 2012 in suit No: FHC/IKJ/CP/34/2011 which is contained at pages 190 – 217 of the Records of Appeal wherein the Appellant’s Preliminary Objection to the jurisdiction of the Lower Court was dismissed. The Respondent herein as Petitioner instituted this Suit vide a Petition dated 17th February, 2011 contained at pages 3 – 22 of the Records of Appeal. The Appellant (Respondent at the Lower Court) in reaction to the Petition filed a Notice of Preliminary Objection challenging the jurisdiction of the Lower Court to hear and determine the Petition; the Notice of Preliminary Objection and the Written Address in support of same is contained at pages 37 – 82 of the Records of Appeal. The Respondent filed a Counter-Affidavit to the preliminary Objection and in the end, the Lower Court ruled in favour of the Respondent and dismissed the preliminary objection.

Aggrieved by the decision of the Lower Court, the Appellant filed Notice of Appeal on the 12th day of May, 2012 premised on four (4) grounds of appeal as contained at pages 218 – 220 of the Records of Appeal. The Appellant’s Brief of Argument was filed by Babatunde Irukera on the 3rd day of Jury, 2013. The Respondent’s Brief on the other hand was filed by O. B. Oregbemhe Esq. on the 9th day of September, 2014. The Briefs were deemed as properly filed and served on the 16th day of April, 2018. The Appellant did not file Reply to the Respondent’s Brief. Learned counsel for the Appellant nominated two (2) issues for determination as reproduced below:

1. Does the Lower Court have jurisdiction over the Petitioner’s substantive action is suit No:FHC/IKJ/CP/34/200011? If this question is answered in the negative; was the Lower Court right to have held that the Respondent had sufficiently complied with the mandatory provisions of Section 408 and 409(a) of CAMA? [Distilled from Grounds One and Two].

2. In the unlikely event that this Honorable Court affirms the existence of debt owing to the Respondent; Was the Lower Court right to have held that the Respondent complied with the mandatory provision of Section 409(a) of CAMA as regards the provision of a statutory demand notice issued under the hand of the creditor? [Distilled from Grounds Three and Four].

The Respondent equally distilled two (2) corresponding issues for determination as follows:

1. Whether from the facts and evidence presented before the Federal High Court together with the supporting documents and exhibits, there exists a genuine and evidence of debt owed by the Appellant to the Respondent to support the presentation of the petition. (This issue is distilled from grounds one, two and three of the notice of appeal dated 6th June, 2013).

2. Whether the Respondent did not comply with the statutory requirements of Sections 408 and 409 (a) of CAMA as to the service of demand notice on the Appellant before instituting the petition for winding up of the Appellant. (This issue is distilled from grounds one, two and three of the notice of appeal dated 6th June, 2013).

SUBMISSIONS OF COUNSEL FOR THE APPELLANT

On the first issue, learned counsel for the Appellant argued that the winding-up jurisdiction of a Court is regulated by statute and strict compliance with both the substantive and procedural requirements of the statute is a condition precedent to the exercise of a Court?s jurisdiction. Counsel referred to MADUKOLU vs. NKEMDILIM (1962) 2 SCNLR 341 and submitted that in the instant case, the Lower Court has no jurisdiction to entertain the Appellant’s substantive suit pending before it and that the Ruling herein appealed against was made without jurisdiction and ultimately a nullity. Learned counsel further referred to Sections 408 and 409 of the Companies and Allied Matters Act, Cap C20, LFN, 2004 (CAMA) to contend that for a Petitioner to establish that a company is unable to pay its debt under Section 409 (d), the Petitioner must satisfy the Court on the existence of an undisputed debt; and where the indebtedness of the company is disputed, then such dispute must first be determined in the appropriate forum.

Learned counsel submitted that the existence of a debt is a fundamental requirement for a petition for winding up of a company under the CAMA and that such a debt must either be admitted or undisputed. Counsel referred to MANN Vs. GOLDSTIEN [1968] 2 All ER 797 at773; NEW TRAVELLER’S CHAMBERS LTD Vs. CHEESE AND GREEN [1894] 70 LT 271; AIR VIA LTD vs. ORIENTAL AIRLINES LTD [2004] 9 NWLR (Pt.878) Pg.298 at 329, paras. A – C and pages 40 – 48 of the Records of Appeal to submit that the Appellant herein strongly denied its alleged indebtedness to the Respondent whether in the sum rehashed in the petition or in any sum at all. Learned counsel referred to page 80 of the Records of Appeal to submit that the Appellant requested for and was granted a cash advance in the sum of N200,000,000.00 by the Respondent; the cheque for the sum advanced was issued while the Respondent retained the Appellant’s NEM shares worth about N401,265,650.00 as security for the cash advanced.

Learned counsel further referred to pages 55 and 58 of the Records of Appeal to submit that the Respondent in a letter dated 16th April, 2008 informed the Appellant that it will dispose of the Appellant’s NEM Shares to liquidate the cash advance; and that after a series of correspondences, the parties by a joint memorandum dated 20th May, 2008 agreed that a lien be placed on the Appellant’s NEM shares in favour of the Respondent for a period of 90 days and that in the event of a default in payment by the Appellant, the Respondent was given the right to sell the shares used as security for the loan. Counsel made reference to pages 83 – 89 of the Records of Appeal and submitted that the Respondent failed to dispose of the shares despite having sufficient knowledge of the daily depreciating value of the shares; and that the Respondent who assumed custody of the said shares did not update the Appellant on the current market value of the shares to enable the Appellant make an informed decision on the Shares.

Learned counsel submitted that the Respondent who gave the absence of a mandate from the Appellant to sell the shares as an excuse for not selling the shares when it was valued at N402,071,183.30 (as admitted by the Respondent) turned round and sold the entire Shares when it had depreciated to N41,216,336.06 during the course of the proceedings without formally informing the Appellant thereby leaving an alleged outstanding sum of about N425,818,543.98. Counsel referred to the Respondent’s letter to the Appellant at page 60 of the Records of Appeal dated 10th day of September, 2008 for final demand of payment wherein the Respondent gave notice and undertook to sell the Appellant’s shares portfolio in its possession; learned counsel submitted that by the said letter, the Respondent had clearly released the Appellant from any further liability to the amount claimed. Counsel submitted that the Respondent did not thereafter inform or notify the Appellant of any further outstanding indebtedness after the sale of the shares; and therefore, the Appellant cannot be said to be indebted to the Respondent.

Learned counsel referred to DIAMOND BANK LIMITED vs. AVIATION DEVELOPMENT CO. PLC [2004] FHCLR 281; ONOCHIE Vs. ALAN DICK & CO. LTD [2003] 11 NWLR (pt.832) pg.451 at 461 and TATE INDUSTRIES LTD Vs. DEVCOM MERCHANT BANK LTD [2004] 1 NWLR (Pt.901) Pg. 182 to submit that where there is an agreement as regards modality or structure of payment and that modality or structure is yet to be exploited or dishonored, the debt cannot be considered due and a winding-up order cannot lie; and that in the instant case, it is clear that the Appellant denied the purported indebtedness to the Respondent on substantial grounds.

Counsel relied on WEIDE & CO (NIG) LTD vs. WEIDE & CO HAMBURG [1992] 6 NWLR (Pt.249) Pg.627 at 641, paras. B – D and MANN vs. GOLDSTIEN (supra) further submitted that once a debt has been disputed, the case instantly falls outside the purview of the winding-up jurisdiction of the Federal High Court; and that the Lower Court ought not to have dismissed the Appellant’s preliminary objection and then proceed to assume jurisdiction over the Respondent’s winding up petition.

On the second issue, learned counsel for the Appellant relied onINAKOJU VS. ADELEKE [2007] All FWLR (Pt.353) Pg.3 at 18, Para. G and MADUKOLU vs. NKEMDILIM (Supra) to submit that where a law or statute lays down a certain procedure of performing a duty, that procedure, and no other, must be adopted; and that failure to comply with condition precedent to the institution of an action is a fundamental defect which goes to the jurisdiction of a Court to entertain the action.

Counsel contended that in the unlikely event that this Court holds that the Appellant is indeed indebted to the Respondent to warrant the application of Section 408(d) of CAMA; the Respondent would still be disentitled from presenting the petition before the Lower Court on the ground that the statutory demand has not been served on the Appellant in accordance with Section 409(a)(i) of CAMA. Learned counsel submitted that the requirement of the law is that a demand notice must be made under the hand of the creditor and no one else; and that the creditor is to give the debtor a grace period of 21 days after the service of such notice of demand.

Learned counsel referred to OWUNMI vs. MERRIL GUARANTY SAVINGS & LOANS LTD [1994] FHCLR 134 and submitted that the letter of 10th September, 2008 which the Respondent sought to rely on as evidence of a demand notice is grossly non-compliant with the mandatory provision of Section 409(a) of CAMA. Counsel referred to paragraph 3 of the said letter to submit that the Respondent gave the Appellant till 15th day of September, 2008 to liquidate the purported debt which is less than the 21 days required by the Companies and Allied Matters Act. Counsel further referred to a letter dated 22nd November, 2009 at page 63 of the Records of Appeal which the Respondent also relied on as evidence of demand notice; counsel submitted that the said letter does not constitute a valid demand notice under Section 409(a)(i) of CAMA in that the said letter of 22nd November, 2009 was issued by the Respondent’s solicitor and not under the hand of the Respondent as specified by CAMA.

Learned counsel referred to TATE INDUSTRIES LTD vs. DEVCOM MERCHANT BANK LTD (supra) at pg. 221-223 to submit that the Respondent has not complied with the requirement of Section 409(a)(i) of CAMA as regards to a demand under the hand of the creditor. Counsel urged this Court to set aside the Ruling of the Lower Court and to strike out the Respondent’s suit before the Lower Court jurisdiction for lack of the Lower Court.

SUBMISSION OF COUNSEL FOR THE RESPONDENT

Learned counsel for the Respondent while submitting on the first issue referred to Sections 408 and 409 of the CAMA; ADO IBRAHIM & CO. LTD vs. B.B.C. LTD [2007] 15 NWLR (Pt.1058) pg.538 and HANSA INT. CONSTRUCTION LTD VS. MOBIL PRODUCTION NIGERIA [1994] 9 NWLR (Pt.366) pg.76 at 86, paras. C – E to submit that it is apparent from the admitted facts that there is a valid debt to sustain the petition within the provisions of CAMA.

Counsel referred to paragraph 5 (v) & (vi) of the Respondent’s Counter-Affidavit at page 84 of the Records of Appeal; Exhibits YD2 and YD3 at pages 91 and 92 of the Records of Appeal; and paragraph 6(f) (i) & (j) of the Affidavit in support of the Preliminary Objection at page 41 of the Records of Appeal to contend that it is on record that on the 11th day of February, 2008, the Respondent granted N200,000,000.00 cash advance to the Appellant and that the Appellant admitted drawing down on the cash advanced.

Learned counsel further referred to Exhibits YD6 and YD7; paragraph 5(xii) & (xiii) of the Respondent’s Counter-Affidavit; pages 85 – 96 of the Records of Appeal; and the Appellant’s letters dated 21st April, 2008 and 14th May, 2008 to submit that the indebtedness of the Appellant was not only shown to exist, but that the Appellant unequivocally admitted and acknowledged owing the Respondent. Counsel submitted that the Appellant having admitted the drawing down and utilizing the sum of N200,000,000.00 from the Respondent ought to show evidence of liquidation of the said sum instead of a frivolous denial of the existence of the debt. Learned counsel referred toJADESIMI VS. OKOTIE-EBOH; IN RE.LESSEY [1989] 4 NWLR (Pt.113) Pg.113; ANYADUBA vs. N.R.T. CO. LTD [1990] 1 NWLR (pt.127) Pg.397 at 407, Para. F to submit that the Appellant cannot admit the debt in one breath and in another breath deny the existence of the debt; and that such denial is a ploy to mislead the Court and deprive the Respondent of the right to recover its debt.

Learned counsel further referred to OKOLI vs. MORECAB FINANCE [2007] 14 NWLR (Pt.1053) pg. 97 at 71, paras. D – E to submit that the Appellant having admitted collecting the said sum from the Respondent vide its letters dated 21st April, 2008 – Exhibit YD6; 14th May, 2008 – Exhibit YD7 and the letter dated 7th January, 2009.

Exhibit YD11 must show evidence of liquidation of the sum before it can bona fide dispute the existence of the debt. Counsel submitted that the tenor of the short term loan had become due and payable but still unpaid by the Appellant. Learned counsel contended that assuming, without conceding, that the indebtedness of the Appellant is in dispute, the Court will not strike out a Petition in-limine simply because the Respondent to the Petition merely denied/disputed the debt.

Counsel referred to UNIFAM INDUSTRIES LIMITED vs. OCEANIC BANK INTERNATIONAL (NIG) PLC. [2005] 3 NWLR (pt.911) pg.83 at 101 to submit that the mere fact that there is a dispute as to the precise amount owed does not defeat a petition for winding-up.

Learned counsel submitted that in the instant case, it is obvious that the Appellant is not genuinely and bona fide disputing the existence of the debt which clearly exists and is yet to be liquidated; which is the reason for the conclusion of the Lower Court at pages 216 – 217 of the Records of Appeal. Learned counsel further submitted that the Appellant’s contention that the Respondent had a lien on the Appellant’s shares and ought to have sold the said shares to liquidate the debt is frivolous and misconceived. Counsel referred to SUMMIT FIN. CO. LTD. vs. IRON BABA & SONS LTD [2003] 17 NWLR (pt.848) pg.89 to submit that for shares placed on lien to be disposed of, there must be an undated letter signed by the Borrower authorizing the Lender to sell the stocks in the event of default at the expiration of the loan due date; and when the Borrower in issuing the mandate to sell the shares upon default pegs the minimum price at which the shares are to be sold, the Lender cannot sell at a price below that benchmark.

Learned counsel referred to the Appellant’s letter dated 7th February, 2008 – Exhibit YD1 at page 90 of the Records of Appeal which mandated the Respondent to sell 40 Million of its NEM shares at a minimum price of N6.00 per Share to submit that the Respondent could not sell the shares at a lower price than N6.00 per share as contained in the mandate. Counsel contended that in the construction of documents, the material words are to be given their natural and grammatical meanings and that in the absence of any instruction to the contrary, the Respondent could not have sold below the N6.00 per share it had been mandated by the Appellant to sell each share.

Learned counsel further referred to the letter dated 10th September, 2008 – Exhibit YD8 to submit that after the receipt of the said letter, the Appellant still recognized and acknowledged its indebtedness to the Respondent by virtue of the Appellant’s letter dated 7th January, 2011 – Exhibit YD11 wherein the Appellant proposed to liquidate the interest at a closer date to the term anniversary of the facility. Counsel argued that if the Appellant genuinely thought that it has been released from further liability, it would not have written Exhibit YD11; Learned counsel therefore urged this Court to hold that the Lower Court was right to have held that the Respondent successfully established that the Appellant is indebted to the Respondent and that it had the requisite jurisdiction to entertain and determine the Respondent’s winding up petition.

In dealing with the second issue, learned counsel for the Respondent urged this Court to disregard the Appellant’s submission in its issue two. Counsel contended that a company may be wound up by the Court if the company fails to pay its debt three weeks after the service of a formal demand notice by the creditor. Counsel further contended that the essence of a demand notice is to demand for the payment of the debt due and to inform the Debtor of the consequences of failure to pay within the statutory period. Learned counsel referred to AIR VIA LTD VS. ORIENTAL AIRLINES LTD [2004] 419 NWLR (Pt.878) Pg.298 to submit that a formal demand for the payment of debt due and payable is sufficient once the contents of the demand notice are clear and contains salient points to make the Debtor realize what it is all about.

Learned counsel referred to the letter dated 10th September, 2008 – Exhibit YD8 by which the Respondent made a formal and unequivocal demand for the payment of the debt of N227,264,743.20 being the outstanding debt due and payable as at the 10th day of September, 2008 which includes the cash advanced and the interest thereon; counsel submitted that the action for winding-up of the Appellant was instituted by the Respondent 17th day of February, 2011 which is well over the statutory period of 21 days stipulated in CAMA. Learned counsel referred to Section 409 (a) of CAMA to submit that the right of the Respondent to petition for winding-up of the Appellant had become activated and exercisable when after three weeks from the service of Exhibit YD8, the Appellant failed and/or refused to pay the debt owed.

Learned counsel referred to UNIFAM INDUSTRIES LIMITED VS. OCEANIC BANK INTERNATIONAL (NIG) (SUPRA) AT PAGE 99, PARA B – D and submitted that the Appellant misinterpreted the provisions of Section 409 (a) of CAMA; and that the provision cannot be interpreted to mean that to be valid, a statutory demand notice must in express terms say that the Debtor is given three weeks within which to pay the debt. Counsel further submitted that the Respondent is only barred by the provisions of Section 409 (a) of CAMA from presenting a petition for winding-up before the Lower Court before the expiration of the three weeks from the date of service of the demand notice; and that in this instant case, the Respondent actually waited for two years after the demand notice had been served on the Appellant before commencing the winding-up petition at the Lower Court.

Learned counsel for the Respondent argued that the case of OWUNMI vs. MERRIL GUARANTY SAVINGS & LOANS LTD (supra) cited by the Appellant has no bearing to the fact of this case because the winding-up proceedings because the case was instituted within 21 days period required by law. Counsel further referred to the letter dated 22nd November, 2008 which the Appellant argued was an invalid demand notice; learned counsel submitted that the said letter is not a demand notice but a reminder on the Appellant from the Respondent’s solicitor that the Appellant had neglected to pay its debts and that the Respondent intends to commence legal action against the Appellant. Counsel urged this Court to hold that the Exhibit YD8 is a valid demand notice and in complete compliance with the provisions of Section 409 (a) of CAMA and that the Lower Court had jurisdiction to entertain and adjudicate over the winding-up Petition instituted by the Respondent.

RESOLUTION

I have thoroughly perused the Ruling of the Lower Court which led to this appeal and the submissions of the counsel for both parties in this appeal. The contention of the Appellant is that the Lower Court lacked jurisdiction on the ground that the requirements of Sections 409 of the Companies and Allied Matters Act, Cap C20, LFN, 2004 (CAMA) were not met before the Respondent filed a petition for winding up of the Appellant and further on the ground that the Appellant disputed the debt. From the two issues and submissions of counsel before this Court, I am of the opinion that the two questions that need to be determined are: whether there was prima facie evidence that the Appellant was indebted to the Respondent; and whether the requirements under Sections 409 of CAMA were met before the Respondent filed the Petition for the winding-up of the Appellant. If these questions are answered in the affirmative, then, the Lower Court would have been right in assuming jurisdiction.

On the first issue, which is, “whether there was prima facie evidence that the Appellant was indebted to the Respondent”; There are certain facts before this Court which are clear and undisputable, to wit: the Respondent filed a Petition for winding Up of the Appellant vide a Petition dated 17th February, 2011 before the Lower Court on the ground that the Appellant is indebted to it and is unable to pay the debt the Appellant challenged the jurisdiction of the Lower Court on the ground that it was not indebted to the Respondent and that, even if it was indebted, no valid notice of demand had been served on it by the Respondent; the Lower Court dismissed the preliminary objection and held that it is vested with jurisdiction to hear the petition.

The jurisdiction of the Lower Court to hear and determine a petition for winding up of a company is provided for under Sections 407 of the Companies and Allied Matters Act, Cap C20, LFN, 2004 (CAMA). See also Section 251(1) (e) of the Constitution of the Federal Republic of Nigeria, 1999 (as amended) and the decision of this Court in SUBURBAN BROADBAND LTD NIG Vs. INTELSAT GLOBAL SALES AND MARKETING LTD (2016) LPELR-40334 (CA) pg. 8-9, paras. F – F. The jurisdiction of the Court will be activated under the circumstances set out under Section 408 of CAMA; Section 408 (d) provides as follows:

“A company may be wound up by the Court if –

a. …

b. …

c.

d. the company is unable to pay its debt;

e.

Section 409 of the Companies and Allied Matters Act sets out the circumstances where it would be held that a company is unable to pay its debts. Section 409 of the Act provides as follows:

A company shall be deemed to be unable to pay its debt 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,

20

and the company has for three weeks thereafter neglected to pay the sum or to secure or compound for it to the reasonable satisfaction of the creditor; or

b. execution or other process issued on a judgment, decree or order of any Court in favour of a creditor of the company is returned unsatisfied in whole or in part; or

c. the Court, after taking into account any contingent or prospective liability of the company is satisfied that the company is unable to pay its debt.

In the instant case, the facts and submissions of both parties establish without any doubt that the Respondent advanced the sum of N200,000,000.00 to the Appellant on 11th day of February, 2008 (see, pages 9, 10, 50 and 51 of the Records of Appeal). The said sum was advanced pursuant to the negotiations between the parties which were expressed in the letter dated 7th February, 2008; in the said letter contained at page 49 of the Records of Appeal, the Appellant requested for the advance payment and mandated the Respondent to sell its 40 million units of NEM Shares at a minimum price of St6.00 per share. After advancing the sum to the Appellant on the 11th day of February, 2008; the Respondent wrote a letter dated 14th March, 2008 which is contained at pages 11 and 52 -53 of the Records of Appeal; this letter in addition to an unequivocal demand that Appellant should “…immediately liquidate the cash advance plus charges to date, through the sale of shares…”; the Respondent further gave the Appellant other options which include “Apply for a conversion to facility” under its Asset Backed Module.

The Respondent wrote another letter dated 16th April, 2008 contained at pages 1’2 and 55 of the Records of Appeal reminding the Appellant of its previous letter of 14th March, 2008 and further, in my opinion, threatened to sell the Appellant’s shares. In Apparent response to the Respondent’s letter of 16th April, 2008; the Appellant wrote the letter dated 21st April, 2008 contained at pages 13 and 55 wherein the Appellant asked the Respondent to convert the advanced N200,000,000.00 to a Short term loan. Further to this development, the Appellant further wrote a letter dated 14th May, 2008 contained at page 14 of the records restating that the advanced N200,000,000.00 be converted to a short term loan of 6 (six) months. The Respondent converted the said sum and the charges thereon to a short term loan as requested by the Appellant vide the letter dated 20th May, 2008; incidentally, on the same day, the parties entered into an agreement (Joint Memorandum) authorizing the Central Securities Clearing Systems Limited to place a lien on the Appellant’s NEM Shares in favour of the Respondent. See pages 15 and 57-59 of the Records of Appeal.

What followed, as can been garnered from the records, particularly at pages 17 and 60 of the Records of Appeal is that on the 10th day of September, 2008, the Respondent wrote another letter of demand to the Appellant requesting for the sum of N200,000,000.00 and the interest of over N27 million naira that had accrued thereon; and in its usual language, threatened to proceed to sell the Appellant’s shares. Again, on the 11th day of December, 2008 the Respondent wrote a letter contained at page 61 of the Records of Appeal, wherein the Respondent stated its intention to “embark on partial sale of the stocks purchased with the facility with a view of liquidating the outstanding interest portion on the facility.”

The Respondent further stated in the said letter that it was taking these steps towards “liquidating only the interest portion on the facility, at least for now…” The Appellant responded to the Respondent’s letter of 11th December, 2008 vide the letter dated 7th January, 2009 contained at pages 18 and 62 of the Records of Appeal wherein the Appellant requested for/suggested that the liquidation of the interest be done at a further date closer to the term/anniversary of the facility which it believed is to end by April, 2009.

No record of other correspondences between the parties until 22nd November, 2010 when the Respondent’s Solicitor by a letter contained at pages 22 and 63 of the Records of Appeal referred to the several demands that had been made by the Respondent and the Appellant’s refusal to pay the sum due and stated that legal proceedings will be commenced against the Appellant if the sum and interest due is not paid within 21 days. From a very careful analysis of the facts of all that transpired between the Respondent and the Appellant from 7th February, 2008 up to 22nd November, 2010; it is not in doubt from the various correspondences that the Appellant received/accepted the sum of N200,000,000.00 advanced to it by the Respondent thereby making the Appellant indebted to the Respondent. In my view, there is nothing on record to show that the said sum of N200,000,000.00 had been paid back to the Respondent.

With regards to the issue of lien placed on the Respondent’s shares, it is evident that the shares were never sold by the Respondent; and the term of the Joint Memorandum did not confer outright ownership of the said shares on the Respondent, it only conferred on the Respondent the right to sell if the Appellant failed to pay the advanced sum and the interest that had accrued thereon as agreed by the parties after stipulated period of 90 days, upon a condition that the Appellant (Borrower) shall issue an undated letter of authorization to the Respondent (Lender) to sell the stocks; apparently, from the records before this Court, no such authorization was given to the Respondent by the Appellant pursuant to the Joint Memorandum; what this therefore means is that the N200,000,000.00 and the accrued interest were still pending and unpaid.

Again, the Appellant’s response to the Respondent’s letter of 11th December 2008 vide its letter dated 7th January, 2009 contained at pages 18 and 62 of the Records of Appeal wherein the Appellant requested for/suggested that the liquidation of the interest be done at a further date closer to the term/anniversary of the facility which it believed is to end by April, 2009 clearly suggests nothing but an admission of the debt by the Appellant.

The Respondent’s letter dated 11th December, 2008 which the Appellant replied to clearly stated inter alia that the Respondent’s intention was to “embark on partial sale of the stocks purchased with the facility with a view of liquidating the outstanding interest portion on the facility.” and that it was taking these steps towards “liquidating only the interest portion on the facility, of least for now…”

From the totality of records and correspondences between the parties as shown by the evidence before this Court, I am of the opinion that the Lower Court was right in its findings at pages 216 – 217 of the Records when it held that:

It is evidently clear that the Respondent took money converted to Loan which is still outstanding. It follows therefore that evidence of debt is certain.

Furthermore, evidence abound that this loan plus the interest has grown from the initial N200m. There are several demand notices which has not been met and the Petitioner issued final notice giving the Respondent the time of 21 days to pay the debt.

The first issue, whether there was prima facie evidence that the Appellant was indebted to the Respondent is hereby resolved in the affirmative, having regards to the facts set out herein.

Having established the indebtedness of the Appellant, the next issue is whether the requirements under Sections 409 of CAMA were met before the Respondent filed the Petition for the Winding-Up of the Appellant. What must be established in proffering an answer to this question is whether or not there was a valid demand pursuant to the provisions of Section 409 of Companies and Allied Matters Act. The Appellant argued that there is no valid notice of demand from the Respondent. At the risk of repeating myself, the provisions of Section 409(a) of CAMA states that: “A Company shall be deemed to be unable to pay its debt 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 the sum or to secure or compound for it to the reasonable satisfaction of the creditor; or”.

From the very clear and unambiguous provisions of Section 409(a) of CAMA, the primary requirements for a notice of demand are that:

1. The debt exceeds N2,000.00 and has become due;

2. The notice requires the indebted company to pay the sum due;

3. The notice is under the hand of the creditor; and

4. The notice is served on the company, by leaving it at its registered office or head office;

If after the issuance of a Notice of Demand in the manner stipulated by the Act, the Appellant for three weeks (or more) neglects to pay the sum, the company shall be deemed to be unable to pay its debt. In the instant case, the debt in question exceeds N2,000.00; and from the Respondent’s letter dated 14th March, 2008 which is contained at pages 11 and 52 -53 of the Records of Appeal; the Respondent clearly demanded/required the Appellant to “…immediately liquidate the cash advance plus charges to date…”

This letter was under the hand of the Respondent and duly served on the Appellant; and the Appellant did not pay the debt three weeks after this particular letter of demand, which cannot be invalidated. Further to the letter dated 14th March, 2008 as already shown in this judgment, several other letters of demand followed wherein the Respondent demanded/required the Appellant to pay its debt; one of such is the letter dated 10th September, 2008.

The Petition in the instant case was filed by the Respondent on the 17th day of February, 2011 which clearly exceeds three weeks after the initial notice of demand and the other demands; therefore, there is no ground for the Appellant’s contention that there is no valid demand. The Appellant is contending that the letter of 10th September, 2008 which the Respondent sought to rely on as evidence of a letter of demand is not in compliance with the mandatory provisions of Section 409(a) of the Act because paragraph 3 of the said letter, in which the Respondent gave the Appellant till 15th day of September, 2008 to liquidate the purported debt is less than the 21 days required by the Companies and Allied Matters Act.

I am of the view that contrary to the misconceived submissions of learned Counsel for the Appellant, what is paramount is that the letter demands for payment of the debt, and after such demand, if the Appellant neglects to pay the debt after a period of three weeks (21 days), then the Appellant is deemed to be unable to pay its debt and consequently, the Respondent is entitled to file a Petition for winding up of the Appellant. There is nothing in the provision of Act providing that the 21 days be stated on the face of the Notice of Demand.

UWAIS JSC (Later CJN) in AIR VIA LTD VS. ORIENTAL AIRLINES LTD [2004] 9 NWLR (pt.878) pg.298; (2004) LPELR-272 (SC) pg. 32 – 33, Paras. E -A held as follows:

“Section 408 of the Companies and Allied Matters Act, Cap. 59 of the Laws of the Federation of Nigeria, 1990 provides inter alia that a company may be wound-up by Court if “the company is unable to pay its debt.”

For this to take place the following essential ingredients are required:-

(a) There must be a debt,

(b) The debt must be due, and

(c) The company to be wound-up is unable to pay the debt…..

It follows from the foregoing that it is possible for a respondent to a petition for winding-up to dispute the petition by bona fide challenging the debt or its been due or on the ground that it is capable of paying its debt…”

In the instant case, the Appellant is not challenging the petition on the ground that it is capable of paying the debt, and the purported dispute of the debt is unsustainable in the face of the admissions of indebtedness by the Appellant especially in their last letter to the Respondent on the 7th January, 2009 contained at pages 18 and 62 of the Records of Appeal wherein the Appellant requested for the liquidation of the interest be done at a further date closer to the term/anniversary of the facility which it believed was to end by April, 2009 without mentioning or disputing the principal sum. See the decision of this Court in DURUMUGO vs. ZENITH BANK PLC (2016) LPELR -40487 pg.14 – 21, para. E – A.

This instant appeal is an interlocutory appeal challenging the Ruling of the Lower Court on the Appellant’s Preliminary Objection that the Lower Court had no jurisdiction to entertain the Respondent’s Petition because condition precedent under Section 409 of CAMA had not been fulfilled.

In the circumstances therefore, since it is apparent there is prima facie evidence before the Court that the Appellant is indebted to the Respondent; that the debt had become due; that the Respondent demanded for the debt to be paid; and that three weeks (21 days) had elapsed after the debt had been demanded, the contention by the Appellant that the Lower Court lacked jurisdiction is completely baseless and without merit.

This appeal therefore lacks merit and deserves to be and it is so dismissed by me. The Ruling of the Lower Court delivered on the 3rd day of May, 2012 by Steven Jonah Adah J. in suit No: FHC/IKJ/CP/34/2011 is affirmed.

N500,000.00 cost is awarded to the Respondent against the Appellant.

BIOBELE ABRAHAM GEORGEWILL, J.C.A.: I had the privilege of reading in draft the lead judgment of my learned brother TIJJANI ABUBAKAR, JCA, just delivered with which I agree and adopt as mine. I have nothing more to add.

ABIMBOLA OSARUGUE OBASEKI-ADEJUMO, J.C.A.: I have had the privilege of reading before now, the judgment just delivered by my learned brother, TTJJANI ABUBAKAR, JCA. I agree with the detailed reasoning and the conclusion thereat.

Having gone through the records before this Court, I have no hesitation in holding that the Appellant is indeed indebted to the Respondent and same has become due with interest accrued. The facts and submissions of both parties established the fact that the Respondent advanced the sum of N200,000,000 to the Appellant and that several letters of demand were written for the liquidation of the debt and the interest. In one of the Appellant?s response to the Respondent’s letter of 11th December, 2008, the Appellant requested that the liquidation of the interest be done at a date closer to the anniversary of the facility and he did not mention or dispute the indebtedness.

There is nothing on record to show that the debt had been liquidated. The Respondent therefore rightly invoked the jurisdiction of the Lower Court under Sections 408 and 409 of the CAMA. The debt had become due, demand notice which even exceeds the statutory three weeks’ notice was given and it was given under the name of the creditor. See the case ofAIR VIA LTD v. ORIENTAL AIRLINES [2004] 9 NWLR (PT.878) 298.

It is apparent that the Lower Court rightly exercised jurisdiction as the condition precedent to the invoking of the Court’s jurisdiction in the winding up of a company was rightly complied with by the Respondent and the contention of the Appellant against same is erroneous.

Consequently, the appeal fails and is accordingly dismissed and the Ruling of the Lower Court delivered 3rd May, 2012 coram ADAH, J., in suit No: FHC/IKJ/CP/34/2011 is hereby affirmed. I abide by the order as to costs.

 

Appearances:

Adegoke Adedoyin with him, Ayodeji Jolaosho and H. A. ShobambiFor Appellant(s)

M.O. Daudu with him, Adebayo Ofabamide and Bisola ScottFor Respondent(s)