In the matter of FARMART PRODUCE AND SHIPPING LINE LTD. and in the matter of THE COMPANIES ACT CHAPTER 37 in re. FARMART PRODUCE AND SHIPPING LINE LTD. (APPELLANT)
ESTABLISHMENT DE COMMERCE GENERAL (PETITIONER/RESPONDENT)
(1971) All N.L.R. 250
Division: Federal Supreme Court
Date of Judgment: 15th July, 1971
Case Number: SUIT NO. S.C. 210/1969.
Before: Coker, Madarikan, Sowemimo, JJ.S.C.
Appeal from the High Court (Lagos).
(1) In winding-up proceedings the petition itself must disclose facts upon which the court rely in coming to the conclusion that it is just and equitable to wind up the company. In this case, the Petition in its present form, did not disclose sufficient cause to justify the granting of the prayer sought since it did not appear from the allegations therein that the substratum of the Company had gone or that there had been a complete deadlock.
(2) A deadlock which could induce the court to exercise its jurisdiction under the "just and equitable" clause must be a complete deadlock. Such deadlock did not exist here upon the grounds disclosed in the Petition.
(3) The allegations in the petition in this case were not properly verified. Rule 30 of the Companies (Winding-up) Rules, 1949, provides, inter alia, that every petition shall be verified by an affidavit referring thereto. In this case, the affidavit which purported to verify the petition made no reference to the petition, but instead, made reference to certain paragraphs of an affidavit. Since the petition had not complied with the provisions of rule 30 of the Companies (Winding-up) Rules, 1949, it ought to have been struck out.
Appeal allowed: Order of High Court set aside: Petition struck out.
Case referred to:
In re. L'Industrie Verriere Ltd., (1914) W.N. 222.
Act referred to:
Companies Act, (Cap. 37) Section 135.
Rules and Order referred to:
Companies (Winding-up) Rules, (1949) rule 226(1).
APPEAL from the High Court (Lagos).
SUIT NO. S.C. 210/1969.
Sofola for the Appellant.
Kotoye for the Petitioner/Respondent.
Adio (State Counsel) for the Registrar of Companies.
Madarikan, J.S.C. (delivering the judgment of the court):-On the 2nd August, 1968, Messrs Establishment de Commerce General (hereinafter referred to as the petitioner) filed a petition in the Lagos High Court (Suit No. M/122/68) which read:
"The humble petition of Your Lordship's petitioner, Messrs Establishment de Commerce General, a financing company, registered in Switzerland and having its registered office at No. 9490 Vaduz, Herrengasse 247, Fursterntum Liechtenstein, through its solicitor, N.A.B. Kotoye of 20, Reclamation Road, Lagos aforesaid, showeth:-
1. That the Farmart Produce & Shipping Line Limited (hereinafter called "the company") was incorporated on the 14th July, 1967 under the provisions of the Companies Act, Cap. 37 Laws of the Federation of Nigeria and Lagos (1958) as a private company limited by shares.
2. That the registered office of the company is situated at 23/25 Martins Street, Lagos.
3. That the nominal capital of the company is £3,000 divided into 3,000 shares of £1 each.
4. That the objects for which the company was established are among others, as follows:-
(a) To construct, hire, purchase and work steamships and other vessels of any class, and to establish and maintain lines or regular services of steamships or other vessels.
(b) To carry on the business of transport and haulage contractors.
(c) To buy, sell, import, prepare for market, and otherwise deal in all goods, produce, articles, chattels, commodities and things capable of being advantageously dealt with in connection with the above-mentioned business.
5. That the amount of paid-up capital so far as can be ascertained is £1,250 representing 1,250 £1 shares allotted to the petitioner.
6. That the petitioner is a shareholder of the company and owns 1,250 £1 shares which have been fully paid.
7. That there are only three shareholders of the company namely Olusegun Ayoade Aderogba (hereinafter referred to as Mr Aderogba) who owns 1,550 £1 shares, Alhaji Buraimoh Ashiru who owns 200 £1 shares and the petitioner.
8. That the said Olusegun Ayoade Aderogba was by the Articles of Association of the company appointed the managing director of the company.
9. That the petitioner has financed the business of the company to the extent of £36,000 between November, 1967 and March, 1968.
10. That following exchanged correspondence and negotiations between the petitioner and Mr Aderogba, Mr Kayode Fashina of Mile 10-, Ikorodu Road, Ikeja, company director, was appointed a director of the company representing the interest of the petitioner.
11 That when it became known that the said Mr Aderogba was mis-managing the affairs of the company by failing to honour overseas contracts with customer, the said Mr Aderogba was asked by the solicitor of Mr Fashina in a letter dated 7th June, 1968 to render an account of the business of the company.
12 That the said Mr Aderogba has refused to render such an account and has also refused to summon any meetings of the company.
13 That a formal request made on 13/7/68 by the solicitor of the petitioner to the said Mr Aderogba as managing director to summon a general meeting of the company to deliberate over the following agenda was ignored by the said Mr Aderogba:
(a) Up to date report of affairs by managing director.
(b) Appointment of an auditor for the company.
(c) Directions for the compilation and presentation of the audited accounts of the company to the next general meeting.
(d) Re-organisation of the company so as to put it on a sound basis.
14 That the said Mr Aderogba as managing director kept all the affairs of the company to himself alone and runs the business of the company as if he alone owns the company.
15 That the company so far as it is known has no secretary who can be asked to summon a meeting.
16 That a car No. LO. 194 belonging to the company but used by the said Mr Aderogba and his family for their private affairs was seized by a hire-purchase company and redeemed by the said Mr Fashina and is now kept in Mr Fashina's custody.
17 That the said car LO. 194 is the only visible asset of the company known to the petitioner.
18 That the only share capital and operating capital possessed by the company were provided by the petitioner and since the petitioner ceased to finance the company, it has, to the best of the petitioner's knowledge ceased to conduct any business.
19 That by a resolution passed by the board of directors on the 13th November, 1967, Messrs Aderogba and Fashina were appointed authorised signatories to operate the bank account of the company.
20 That there is a state of deadlock and friction in the management of the company which makes it impossible for the business of the company to be carried on to the extent that Mr Aderogba through his solicitor Bola Adesunmbo Ajibola Esq., in a letter dated 13th July, 1968 asserted that Mr Fashina was never a director of the company and that he Mr Aderogba, would have nothing to do with him, Mr Fashina, either on behalf of himself or any other person."
The petition was concluded with the following prayers: "Your petitioners therefore humbly pray as follows:-
1 That Farmart Produce and Shipping Line Limited may be wound up by the court under the provisions of the Companies Act, Cap. 37, Laws of the Federation of Nigeria and Lagos, and
2 That such other order or orders may be made in the premises as to the court shall seem just."
The petition was verified by an affidavit sworn to by one Kayode Fashina who described himself as a representative of the petitioner on the board of directors of the Farmart Produce and Shipping Line Limited (hereinafter referred to as the Nigerian company).
A motion was filed in the High Court on the 27th August, 1968 by the Nigerian company seeking an order for stay of the winding-up proceedings and also an order restraining the petitioner from publishing notices of its intention to apply for the winding-up order in the gazette or newspapers.
That motion was subsequently withdrawn on the 16th September, 1968, and struck out with costs. Prior to this, and indeed on the 3rd September, 1968, the petitioner had been granted a month's extension of time within which to advertise its petition in the Federal Government Gazette and the Nigerian Morning Post.
When the petition eventually came up for hearing on the 8th November, 1968, learned Counsel for the Nigerian company raised some preliminary objections. After hearing arguments of the parties' Counsel, the learned trial Judge gave his considered ruling on the 24th March, 1969, and ordered as follows: "The objections raised by Counsel ... are overruled and the petition will proceed."
Whereupon, the Nigerian company sought and obtained leave to appeal to this Court against that ruling.
Before us on appeal, learned Counsel for the appellants, Mr Sofola, sought to argue that the petitioner/company was not competent to present this petition as, in this submission, the petitioner/company does not come within the meaning of the term "contributory" as defined in section 131 of the Companies Act. After considerable argument, he conceded that the petitioner/company was a contributory and then proceeded to attack the petition by submitting that it lacked certain essential particulars, and ought to have been struck out for that reason.
Section 135 of the Companies Act, Chapter 37, which was in force at the time the petition was presented, was divided into 6 sub-paragraphs numbered (a) to (f) setting out the grounds on which a company may be wound up by the court. Of these sub-paragraphs, it is beyond dispute that the petition was brought under sub-paragraph (f) which provides in effect that a company may be wound up by the court if the court is of the opinion that it is just and equitable that the company should be wound up. We think that Mr Sofola was right in his contention that the petition itself must disclose facts upon which the court could rely in coming to the conclusion that it is just and equitable to wind up the company. In the instant case, we are satisfied that the petition, in its present form, does not disclose sufficient cause to justify the granting of the prayer sought since it does not appear to us from the allegations therein that the substratum of the company has gone or that there has been a complete deadlock. A deadlock which can induce the court to exercise its jurisdiction under the "just and equitable" clause must be a complete deadlock. In our view, such deadlock does not exist here upon the grounds disclosed in the petition. Indeed, learned Counsel for the petitioner, Mr Kotoye, was candid enough to concede that this was so, but he argued further that the defect was not fatal because about a week after the learned trial Judge had given his ruling on the petition, the petitioner filed in the High Court a document entitled "Amendment to petition presented on 2nd August, 1968" wherein the proposed amendments to the petition were set out. Mr Kotoye then submitted that if the proposed amendments had been granted, the defect in the petition would have been regularised.
We cannot agree that it is proper for us in deciding this appeal to consider the contents of an application for amendments to the petition since the application was neither considered nor granted by the learned trial Judge. The amendments sought in the application read as follows:
"Amendment to Petition Presented on 2nd August, 1968
1 Delete paragraph 6 and substitute the following:-
6 (a) That the petitioner is a registered shareholder of the company and owns 1,250 £1 ordinary shares which have been fully paid for.
(b) That the petitioner is the original allottee of the said 1,250 shares and became the owner of the said 1,250 £1 ordinary shares as from 13th November, 1967 the date on which payment was made and accepted by the company.
(c) That since the 15th November, 1967 when the petitioner became the owner of 1,250 £1 ordinary shares by purchase it has never surrendered nor parted with them.
2 Delete paragraph 9 and substitute the following:-
9 That the petitioner has financed the business of the company to the extent of £35,000 between November, 1967 and March, 1968 and that this amount does not include £1,250 spent in the purchase of shares of the company.
3 Delete paragraph 14 and substitute the following:-
14 (a) That the said Mr Aderogba as managing director kept all the affairs of the company to himself alone and runs the business of the company as if he alone owns the company.
(b) That the said Mr Aderogba only spent a part of the money advanced him to purchase produce and spent the remaining part for his personal affairs and without authorisation of the company.
4. Delete paragraph 17 and substitute the following:-
17 (a) That from the proceeds of overseas shipment of goods made by the company, the company expects a net profit of over £5,000.
(b) That from profits referred to in paragraph 17(a) above and the proceeds of sale of the company's property e.g. car LO. 194 there will be a surplus of assets available for distribution amongst the shareholders.
(c) that in view of paragraphs 9, 11, 12-14 of the petition, the affairs of the company require investigation in respect of how the managing director spent the £34,250 which came into his hands from the petitioner.
(d) That such an investigation as in paragraph 17(c) above will result in further surplus of assets to the company."
In view of the order which we propose to make on this appeal, we shall refrain from expressing any views on whether if the amendments sought had been granted, the petition would have disclosed sufficient facts.
We have also been referred to rule 226(1) of the Companies (Winding-up) Rules, 1949, which provides as follows:-
"226 (1) No proceedings under the Act or the 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 opinion that substantial injustice has been caused by the defect or irregularity and that the injustice cannot be remedied by any order of the court."
It was urged upon us that the defects complained of here were formal, and learned Counsel for the petitioner contended that as no substantial injustice had been occasioned by the defects, they could not invalidate the proceedings.
The power conferred upon the court under rule 226 appears to be wide. Great care must however be taken to ensure that it is not exercised lightly but with due caution. Thus, in In re L'Industrie Verriere Limited (1914) W.N. 222, where in a petition to wind-up a company, it was discovered that in the advertisement of the winding-up petition, the company's name was misspell "L'Industre Verriere Limited", Astbury J. observed as follows:-
"The rule on which the court had long acted was that an error in the name of the company in the advertisement rendered the advertisement absolutely void.
It was important that this rule should be strongly enforced. But where the mistake consisted of a very trifling error in spelling by which no one could possibly be misled, and there was no other company of any similar name on the register, His Lordship thought he had and ought to exercise his discretion of waiving the formal defect ... In the circumstances the petition might be amended and the order stand without any further advertisement."
But where, as in this case, the nature of the defects goes to the root of the petition in that it failed to disclose sufficient cause for granting the petition, we find it difficult to agree that such defects could be cured by rule 226.
We now wish to advert to another point of considerable importance in this case. It is that the allegations in the petition were not properly verified by an affidavit. Rule 30 of the Companies (Winding-up) Rules, 1949, provides, inter alia, that every petition shall be verified by an affidavit referring thereto. In the instant case, the affidavit which purported to verify the petition was sworn to on the 2nd August, 1968, by one Kayode Fashina. It contains 5 paragraphs none of which referred to the allegations in the petition. Curiously enough, instead of making reference to the petition, the deponent, in paragraphs 4 and 5 of the affidavit, made references to paragraphs 1-21 of an affidavit. This might have been an error, but we must go by the wording of the affidavit and since the petition had not complied with the provisions of rule 30, it ought to have been struck out.
In the event, it is not necessary for us to consider the other points raised on this appeal. The appeal must succeed and is hereby allowed. The order contained in the ruling of the High Court given on the 24th March, 1969, in Suit No. M/22/1968 is hereby set aside and we order that the petition be struck out. The appellants (i.e. the Farmart Produce and Shipping Line Ltd.) are entitled to the costs of this appeal from the petitioner/company which we assess and fix at 71 guineas.
Appeal allowed: Order of High Court set aside: Petition Struck out.