DIAB NASR (APPELLANT)
COMPLETE HOME ENTERPRISES (NIG) LTD (RESPONDENT)
(1977) All N.L.R. 93
Division: Supreme Court of Nigeria
Date of Judgment: 6th May, 1977
Case Number: SC.189.75
Before: (Fatayi-Williams, Irikefe, Bello: JJ.S.C.)
The appellant/petitioner, a banker, presented a winding up petition against the respondents/respondent a limited liability company on the ground of its debt under the Companies decree (No.51 of 1968) (now Companies Act 1968).
The respondent in an effort to forestall the petition, instituted proceeding before the same court seeking an injunction restraining the appellants from taking any further steps or proceeding upon the petition.
The actions were subsequently consolidated and later became pending before the Federal Revenue court, which court after the commencement of the instant proceedings became seized of exclusive jurisdiction in matter pertaining to the companies Decree No.51 of 1968. The Federal Revenue Court later heard arguments on the respondent's motion praying that the appellant's petition be removed from the file and ruled there on striking out the petition.
On appeal to the Supreme Court against the striking out order.
(1) Once two cases are consolidated they must be determined as a single matter at one hearing.
(2) The court cannot therefore ignore one case and determine the other.
Chief F.R.A. Williams for Appellant (with Ladi Williams)
G.O.K. Ajayi for Respondents (with E.E.I Urie)
Cases referred to:-
Payne V. British Time Recorder Co. (1921) 2 KB p.16
Statute referred to:-
(1) Companies Decree (No.51) of 1968
(2) Federal Revenue Court Decree No. 13 of 1973
(3) Federal Revenue Court (Amendment) Decree No.38 of 1973.
Irikefe, J.S.C.:-In suit M/126/73, the appellant before the Lagos High Court commenced winding-up proceedings against the respondents on an alleged liability arising under a bill of exchange.
The said proceedings were brought under the Companies Decree (No.51 of 1968) and the petition states as follows:-
"(1) The complete Home Enterprises (Nigeria) Limited (hereinafter called "the company") was on the 21st day of November 1962 incorporated under the Companies Act.
(2) The Registered Office of the Company is at 38, Agege Motor Road, Alakija, Lagos.
(3) The nominal capital of the company is £30,000 (
N60,000.00) divided into 30,000 shares of £1 ( N2) each. The amount of the capital paid up or credited as paid up is £30,000 (N60,000.00).
(4) The objects for which the company was established are to import from overseas and sell various kinds of goods in Nigeria and to carry on other related activities as set forth in its memorandum of association.
(5) The company is indebted to your petitioner in the sum of £46,469.8.4d
(N92,938.83) being the balance of amount due on a bill of exchange drawn by the company on West African Steel and Wire Limited and endorsed to the petitioner who was holder in due course and which bill was dishonoured by non-payment notice whereof has been given to the company.
(6) The said bill of exchange is dated 18th May, 1972 and was drawn by the company as aforesaid and made payable to the company as payee and was duly endorsed by the company in favour of the petitioner.
(7) Your petitioner has made several requests to and demands on the company for payment on its debt, but the company has failed and neglected to pay the same or any part thereof because it is unable to do so.
(8) In the circumstances it is just and equitable that the company should be wound up.
Your petitioner therefore prays as follows:-
"(1) That the complete Home Enterprises (Nigeria) Limited be wound up by the Court under the provisions of the Companies Decree 1968;
(2) Or that such other order be made in the premises as shall be just."
The record shows that this petition was filed on 23rd May, 1973 and that the respondents on being served filed a motion on 28th May, 1973 praying the court to decree as follows:-
"(1) That Diab Nasr the petitioner named in the petition herein which was presented to this Honourable Court on the 23rd day of May, 1973 be restrained from taking any further steps or proceeding upon the said petition whether by advertising the same or otherwise.
(2) That the said petition may be removed from the file and for such further order or orders as this Honourable Court may deem fit to make in the circumstances."
The said motion was supported by a multi-paragraphed affidavit deposed to by one Edmund Chucri Canaan a director of the respondent. In it the deponent stated inter-alia as follows:-
"(1) That I am a director of complete Home Enterprises (Nigeria) Limited hereinafter referred to as "the company," a private limited liability company registered in Nigeria with its registered office at No. 38A, Agege Motor Road, Mushin, Lagos and I have the authority of the company to swear to this affidavit on its behalf.
(2) That my brother John Canaan and I own all the shares in the company.
(3) That I have read the petition filed herein.
(4) That the company is not indebted to the petitioner in the sum of
N92,938,83 as claimed or at all or in any part thereof.
(5) That with reference to paragraphs 5 and 6 of the petition herein, the company avers that it did not at any time draw a Bill of Exchange either on the West African Steel and Wire Company or any other person.
(6) That on or about the 27th of November, 1971 the plaintiff sold and delivered to the West African Steel and Wire Company Limited iron rods and merchandise to the value of £169,408.5.6d (
(7) That in payment therefor the West African Steel and Wire Company Limited herein after called WASCO drew upon itself three inland Bills of Exchange each to the value of £56,469.8.6d-i.e.
N112,938 maturing respectively on 3/2/72,3/4/72 and 18/5/72.
(8) That the two bills which matured on 3/2/72 and 3/4/72 were duly honoured by the West African Steel and Wire Company Limited upon presentation.
(9) That on the 16th April, 1972 the petitioner's son Joseph Nasr came to the company's office and stated that the petitioner was anxious and willing to discount immediately the bill which was due to mature on 18/5/72 upon the payment of the agreed commission.
(10) That the company agreed to discount the said bill and to pay the said commission amounting to
(11) That the said Joseph Nasr thereupon stated that as he would wish to discuss the proposed deal with the West African Steel Company Limited the drawers of the bill, he would wish to have the bill in the meantime for the purpose of the said discussions.
(12) That the company handed the bill to the said Joseph Nasr who took the same away and returned later and stated that he has secured the agreement of West African Steel Company Limited to the deal and had also obtained a further guarantee from the West African Steel Company Limited in respect thereof on behalf of his father, the petitioner.
(13) That Joseph Nasr then requested us to endorse the bill to he petitioner and promised to pay on behalf of the petitioner the value of the bill, less the petitioner agreed commission i.e.
N112,000.00 the following day.
(14) That the company thereupon endorsed the said bill in favour of the petitioner and handed it back to Joseph Nasr for the petitioner.
(15) That on the 19th April, 1972 Joseph Nasr paid the sum of
N32,000.00 to the company at the company's bank and promised to pay to the company the balance of N80,000 on the following day.
(16) That neither Joseph Nasr nor the petitioner has paid the sum of
N80,000 up till date hereof in spite of repeated demands.
(17) That it was on the 8th of May, 1973 when the company received Chief Williams' letter dated 7.5.73 referred to hereinafter that the company were for the first time informed by the petitioner that the bill of exchange was dishonoured on presentation at maturity on the 18th May, 1972.
(18) That the company had not up till that time been given any notice of dishonour of the bill.
(19) That a few days ago the company received a letter from the petitioner's solicitor, Chief F.R.A. Williams setting out the facts about the dishonour of the bill and also stating that after dishonour, the petitioner entered into an arrangement with the West African Steel and Wire Company Limited whereby the WASCO was to satisfy the amount of the bill by paying monthly instalments of
N10,000 and that only a total sum of N20,000.00 had been paid by WASCO to the petitioner under the arrangement.
(20) That the petitioner's solicitor in the said letter made a demand for the payment of
N92,000.00 before the 15th of May, 1973 and threatened, in the case of non-compliance, to present a petition to wind up the company. A photocopy of the petitioner's solicitor's said letter is now produced and shown to me marked ECCI.
(21) That the company is not in any way indebted to the petitioner but it is the petitioner that owes the company
N80,000 as afore-mentioned and the threat to present a winding up petition is a means of forcing us to pay an unjust claim out of fear of the company's credit being damaged by the advertisement of the petition to wind up the company."
It was also common ground in the proceedings that the respondents had, on 15th May, 1973 filed an originating summons under title Suit M/115/73 against the appellants and West African Steel and Wire Company Limited (as defendants) seeking the determination of the following questions asking for the following reliefs namely:-
(1) Whether the 1st defendant is entitled to present a petition for winding up against the plaintiff on account of the sum of
N92,000 being balance of the amount of the Bill of Exchange for £56,469.8.6 owed by the 2nd defendant to the 1st defendant.
(2) An order against the 1st defendant for the payment to the plaintiff of the sum of
N80,000.00 being balance due on the amount of the discounted Bill of Exchange drawn by WASCO and maturing on 18/5/72.
(3) An injunction restraining the 1st defendant from presenting any petition to wind up the plaintiff company.
(4) An order in favour of the plaintiff against the 2nd defendant for the payment of the sum of
N92,938.85 being balance of purchase price of goods sold and delivered to the 2nd defendant by the plaintiff in November, 1971.
(5) Further or other relief."
The respondents appear to have also filed a motion seeking an interim injunction to restrain the appellant from presenting a winding-up petition until the determination of the substantive originating summons in Suit M/115/73. This latter application was apparently not proceeded with as the record shows that on 18th June, 1973 when the parties came before the lower court, Mr Balogun, learned Counsel appearing on behalf of the appellant is recorded as having given an undertaking to that court not to publish the winding-up proceedings in the press until the respondents' application had been disposed of.
The winding-up petition was then adjourned and in the meantime, the appellant filed an application seeking an order that Edmund Chucri Canaan be ordered to attend the court for cross-examination on his affidavit referred to earlier on.
The parties were next before the court on 10th September, 1973 and on that date, there was discussion between their counsel as to the desirability of consolidating Suit M/115/73 (the originating summons) with Suit M/126/73 (The winding up petition).
An adjournment was then granted to enable a formal application for consolidation to be brought.
The motion to consolidate was brought in Suit M/126/73 and it reads:-
"Take notice that this Honourable Court will be moved on Monday the 24th day of September, 1973 at the hour of 9 o'clock in the forenoon or so soon thereafter as counsel can be heard on behalf of the above-named 1st defendant for an order:-
(i) Consolidating the above proceedings with the proceedings in Suit No. M/115/73 (Complete Home Enterprises (Nigeria) Ltd. vs. Diab Nasr & Anor.);
(ii) In the alternative that the two proceedings be heard and determined together before the same court; and
(iii) Such further or other orders as this Honourable Court may deem fit to make."
Both matters were accordingly consolidated on 24th September, 1973 on a consent order and adjourned to 14th December, 1973 for hearing.
But before the adjourned date, jurisdiction in all matters relating to the operation of the Companies Decree, 1968 had been transferred to the newly established Federal Revenue Court, except in those matters that were part-heard before the State High Courts for a prescribed period of six-months only, of the coming into existence of the Federal Revenue Court, which latter event happened on 13th April, 1973. (See Decree No. 13 of 1973 and in particular, Section 8 thereof which deals with Cesser of jurisdiction of the State High Court in respect of matters listed under section 7). See also Decree No. 38 captioned Federal Revenue Court (Amendment) Decree, 1973.
The record next shows evidence of the appearance of the parties before the Federal Revenue Court on 12th November, 1973, 16th November, 1973 and on 22nd November, 1973.
On the latter date, the court granted the application previously filed by the appellant at the Lagos State High Court in M/126/73 before the making of the consolidation order requesting the presence in court of one Edmund Chucri Canaan for the purpose of cross-examination. Canaan appeared duly before the court on 26th November, was cross-examined and the matters were further adjourned to 10th December, 1973.
The record of adjournment reads:-
"Court: Further hearing in this matter, i.e. in respect of the respondent's application against the winding up petition is adjourned till 10/12/73."
On the said date counsel for the parties addressed the court at considerable length on the motion seeking:-
(a) to restrain the appellant from taking further steps or proceeding upon the winding up petition:-whether by advertising the same or otherwise and
(b) that the said petition may be removed from the file.
The ruling at the end of the submission striking out the winding-up petition is the subject of this appeal.
The appellant relied on three grounds of appeal, namely:
(a) The learned trial Judge erred in law in holding that the debt due from the company under the bill of Exchange is a disputed debt when there is absolutely no defence or no genuine defence to the petitioner's claim as holder of the said bill of exchange.
(b) The learned trial Judge erred in law in failing to consider whether Suit M/115/73 was instituted as a genuine action to determine a genuine dispute or whether it was no more than a ruse or a subterfuge to base an application for defeating the remedy of the petitioner to wind up the company.
(c) The learned trial Judge erred in law in allowing the application of the company when it is plain on the evidence before him that the company has no valid defence to the debt claimed by the petitioner under the bill of exchange.
The above grounds were argued together and the following points were made on behalf of the appellant:-
(a) In respect of winding-up proceedings brought under Section 209 of the Companies Decree, 1968 (as the present proceedings are) it is open to a company sued to establish that the debt relied upon by the petitioner is bonafide disputed.
(b) If there is a dispute, the company is entitled to insist that the dispute be resolved before it can be called upon to pay.
(c) A person making a claim to a disputed Debt will not be allowed to present a petition, because the court will not try a substantial dispute about liability in a winding-up petition.
(d) Although a court will not determine a substantial and bona-fide dispute on a petition, it will nevertheless determine the bona-fide and substantiality of the dispute.
(e) If the dispute is merely a ruse to defeat the creditor's right or is trivial in nature, the court will nevertheless entertain the petition.
(f) The onus is on the company to establish the bona-fide nature of the dispute or its substantiality, and this cannot be done on the mere assertion of the company or its directors.
(g) A dispute as to the quantum of a debt is no answer to a winding-up petition brought on the ground that the company is unable to pay its debt.
(h) The fact that the company sought to be wound up also has a claim against the petitioner does not destroy the petitioner's status as a creditor unless the company's claim is bona-fide and is equal to or exceeds the claim of the petitioner.
(i) Viewed on the entire evidence before the court, there was no material on which a genuine dispute could be based.
For the respondents, it was submitted that inasmuch as the originating summons was filed before the winding-up petition and as both matters were subsequently consolidate, the court would appear to be under a duty to deal with them together. It was further argued that a careful scrutiny of the record shows that no attempt was made on either side to de-consolidate the matters.
It was therefore submitted that, the learned judge who dealt with this matter, being fully seised of all the facts in the form of affidavit and oral evidence was entitled to strike out the petition without going into the merit of the case.
We pause here to observe that the application to consolidate the two actions was brought by the appellant. The main purpose of consolidation, it has been said, is to save costs and time, and therefore it will not usually be ordered unless there is "some common question of law or fact bearing sufficient importance in proportion to the rest" of the subject-matter of the actions "to render it desirable that the whole should be disposed of at the same time." See PAYNE v BRITISH TIME RECORDER CO. (1921) 2 K.B.p.16.
In these proceedings, there is no evidence that the order to consolidate was ever discharged. It is equally plain that the learned judge in the court below as could be seen from the commencement of his ruling in this matter was erroneously of the impression that the winding-up petition was the only matter before him.
We therefore hold that the order striking out the petition was premature and that there should have been a determination on the merit in the consolidated causes after issues shall have been properly joined. In our view, once two cases are consolidate, they must be determined as a consolidated matter. The court cannot ignore one and determine the other. The learned trial Judge, was, therefore, in error in striking out the winding-up petition as he did and ignoring the originating summons in Suit M/115/73.
In the result, the appeal is allowed. The order striking out the petition, including the order as to costs, is set aside, and in substitution therefor we order that the matters as consolidated be determined on the merit by the lower court after joinder of issue.
The appellant is allowed costs in the court below assessed at
N100 and N164 in this Court,
(Sgd.) A. Fatayi-Williams
Justice, Supreme Court.
Justice, Supreme Court
(Sgd.) M. Bello
Justice, Supreme Court