General & Aviation Services Ltd Vs Captain Paul M. Thahal (2004)

LAWGLOBAL HUB Lead Judgment Report

UWAIFO, JSC

This is a company matter in which a petition has been brought by a party who claims to be a shareholder and contributory, praying the court to wind-up the company, namely, the appellant. The ground for seeking a winding-up, as I understand it, is stated in the petition to be “oppression”. The following paragraphs of the petition seem to be the mainstay of the alleged oppression upon which it is claimed that it would be just and equitable to wind up the company: “10. Since 1988, the said Mr. Sunday Olubadewo has been running the Company in a manner that has completely marginalised and excluded the interests of your Petitioner in the Company and has continued to do so till date. 11. The said Mr. Sunday Olubadewo has abused his position as Chairman and Managing Director and has managed and administered the Company as if it were his own private property. 12. The said Mr. Sunday Olubadewo has been running the Company as his family business with the member of his family, particularly Captain E. Olubadewo and Mrs. G.B. Olubadewo, who have been illegally occupying top positions in the Company to the exclusion of our Petitioner. 13. The said Mr. Sunday Olubadewo has been dealing adversely with the Company and has purportedly changed the Company’s name from General & Aviation Services Limited to GEN. AIR, while still operating from the premises of the Company with the staff and assets of the Company. 14. Your Petitioner has been deliberately excluded from the affairs of the Company by the said Mr. Sunday Olubadewo who has refused to give account of the operations of the Company since 1988 in spite of repeated requests. 15. The said Mr. Sunday Olubadewo being the sole signatory to the bank accounts of the Company since 1985, has been depleting the financial resources of the Company without accounting for the same. 16. In view of the Petitioner’s insistence that proper account should be rendered as to the operation of the Company, the said Mr. Sunday Olubadewo has now embarked upon a course designed to strip the Company of all its valuable assets and leave only a mere shell. 17. The said Mr. Sunday Olubadewo abused his position as the Chairman and Managing Director of the Company by using his said position to frustrate every attempt made by the Petitioner to reorganise and stabilise the operation of the Company. 18. In addition to the facts stated herein, the said Mr. Sunday Olubadewo has begun to perpetrate certain machinations in pursuit of his own manifest aim of excluding the Petitioner from participating in the running of the Company and reaping from the fruits thereof. 19. As a result of the wrongful acts and adverse conducts complained of herein, the underlying trust which was the basis of the joint venture which was at the onset (sic) commenced by your Petitioner and the said Mr. Sunday Olubadewo has been destroyed in the climate of continuous deceit, dishonesty, hostility and greed. 20. In these circumstances, your Petitioner contends that the affairs of the Company are being conducted in a manner oppressive to him and that it would be just and equitable to wind up the Company.”

Pursuant to the petition, the petitioner filed a motion on notice seeking from the court the appointment of a provisional liquidator and the following orders, “pending the hearing and determination of the petition filed herein: (1) that the official Receiver or some other fit and proper person be appointed as Provisional Liquidator (or alternatively as Receiver/Manager) of the above-named Company; (2) that the Managing Director of the Company, Mr. Sunday Olubadewo, should surrender all properties, cheque books, vouchers, account books and other banking documents relating to the Company’s Bank Accounts to the Liquidator or Receiver/Manager; (3) granting an interim injunction to restrain the said Mr. Sunday Olubadewo, whether by himself, agents, servants, privies or howsoever otherwise from disposing, transferring, charging, operating, dissipitating, disbursing or in any way howsoever dealing with any and all sums now or hereafter standing to (the) credit in the Company’s Bank Accounts; (4) granting an interim injunction restraining the said Mr. Sunday Olubadewo from further dealing, tampering, transferring, charging, disposing or in any way dissipitating the assets and properties of the Company.”

The depositions in the affidavit in support of the motion are almost in the same tone as the allegations made in the petition which I have reproduced above. The said depositions read as follows: “4. The business and assets of the Company will be in jeopardy and the Petitioner’s interest will be adversely affected unless this Honourable Court appoints a Provisional Liquidator or Receiver/Manager to protect the business and assets of the Company pending the hearing and determination of the Petition. 5. Mr. Sunday Olubadewo has taken undue advantage of his position as the Chairman and Managing Director of the Company to run the Company as his family business and in a manner that has completely marginalised and excluded my interests in the company. 6. The said Mr. Sunday Olubadewo being the sole signatory to the bank accounts of the Company has continued to deplete the financial resources of the Company without accounting for the same and has used his position as Chairman to frustrate my efforts to become a joint signatory to the said accounts. 7. The said Mr. Sunday Olubadewo has purportedly changed the Company’s name from General & Aviation Services Limited to GEN AIR, while still operating from the premises of the company with the staff and assets of the Company and has embarked upon a course designed to strip the Company of all its valuable assets and leave only a mere shell. 8. The said Mr. Sunday Olubadewo has all along been illegally disposing off (sic) the properties and assets of the Company to his own use. 9. I verily believe that the actions taken by the said Mr. Sunday Olubadewo are intended to pre-empt any proceedings which the Petitioner may be advised to take by making it difficult for the Petitioner or the Court to obtain information relevant to these proceedings and also rendering nugatory anything which the Petitioner may obtain by pursuing his remedy in this Honourable Court. 10. I fear that unless the orders in support of which I swear to in this Affidavit are made, the said Mr. Sunday Olubadewo may seize the books of account and other relevant documents or cart away goods of the Company the moment this Petition is served on him.”

The Chairman/Managing Director of the company, Sunday Kayode Solomon Olubadewo, swore an affidavit denying the allegations made in support of the motion. He made efforts to offer some explanations, where desirable, as to how the company was being managed.

For example, in the affidavit sworn on 10 February, 1997, he said in paragraphs 10, 13, 14, 16, 17, 18, 19, 20 and 25 as follows:

“10. The petitioner’s allegation that I run the respondent as ‘family business’ to the exclusion of the petitioner is untrue. On the contrary Extra-ordinary General Meetings (‘EGM’) have been convened at my instance for the purpose of appointing the petitioner a director of the respondent so that he may participate in its running. However due to the failure of the petitioner to attend the said meetings the appointment has not been made. Now produced and shown to me and marked as:

a) ‘Exhibit SKS/4’ is a copy of a letter by Mrs. P.M. Thahal, the wife of the petitioner indicating that an EGM should hold on 21st August 1996; b) ‘Exhibit SKS/5’ is a copy of a notice by the respondent dated 13 August 1996 to the petitioner convening an EGM for 21st August 1996, the date suggested by the petitioner’s wife in Exhibit SKS/4; c) ‘Exhibit SKS/6’ is a copy of a letter dated 20th August 1996 by the petitioner to the respondent indicating that he shall not be able to attend the EGM and suggesting that it be postponed to 15th October 1996; d) ‘Exhibit SKS/7’ is a copy of another notice of EGM to be held on 15th October 1996, the date suggested by the petitioner in Exhibit SKS/6, and; e) ‘Exhibit SKS/8’ is a copy of a letter dated 15th November 1996 by the respondent to the petitioner indicating that the EGM of 15th October 1996 could not hold because of the absence of the petitioner and suggesting a number of dates for the petitioner to indicate one that is convenient to him for holding the EGM.” 13. I did not change the name of the respondent to GEN AIR s alleged by the petitioner. GEN Air is a name that was approved and allocated to the respondent by the Federal Civil Aviation Authority (‘FCAA’). Now produced and shown to me and marked as ‘Exhibit SKS/9’ is a copy of a letter dated 13th April 1994 by the FCAA on the use of the name: GEN AIR. 14. Neither the respondent nor myself have any intention of excluding the petitioner from its affairs nor does it intend to deny him any rights due to him as a shareholder. All that the respondent is interested in is in continuing its operations without disruption. The respondent cannot achieve this if it is being run by a court official,

the provisional liquidator. 16. On a daily basis, in my capacity as the respondent’s Managing Director, I have to deal with and balance the conflicting interests of my staff, the interests of other aviation operators and those of the regulatory authorities. These interests can only be properly managed by a person who understands the aviation business and one who the authorities and the industry know and respect. 17. I am an engineer by profession and I have been in the aviation business since 1853 and I have been the Managing Director of the respondent since 1973. It is largely because of my training as an engineer and all my years of experience in aviation that I have been able to direct the affairs of the respondent. 18. The business of the respondent as an aviation services operator is a highly sensitive and visible one. The moment the general public and other aviation operators became aware that a provisional liquidator is running the respondent’s business, the confidence that people have in the respondent will vanish and this may lead to the irreparable collapse of it’s business. 19. The respondent at the moment is facing some operational and financial difficulties because since 1993 none of its planes have been flying. The respondent is however able to remain in business by the provision of certain ground handling services to other ‘aviation operators. These services include: a) the provision of security for planes at the airport; b) use of the respondent premises; c) use of the respondent’s staff, and; d) tarmac parking services. The following are some of the operators the respondent presently has contracts with: a) Premier Air Shuttle; b) George Eder and; c) Dominion Aircraft Company. 20. These contracts are neither big nor lucrative but they are sufficient to run the respondent’s business and to pay its staff. As a matter of fact, the staff have been on half salary since 1994 because the respondent cannot afford to pay them fully. 25. In addition to all the foregoing facts herein a disruption to the operations of the respondent’s business could lead not only to loss of the little income it is earning but also: a) the revocation of its operating licence by the aviation authorities, which will cost an enormous amount of money and time to get back; b) loss of dedicated and loyal staff which if they have to be replaced will be a higher wages by reason of paragraph 20 above; c) expose the respondent to potential legal suits by business associates here in Nigeria and overseas, and; d) cost of replacing equipment and other operating assets which nowadays are prohibitive and one that the respondent cannot afford.”

The learned trial judge (Bioshogun, J.) in his ruling on the motion on notice stated that the issues were (1) whether he could invoke the provisions of section 422(2) of the Companies and Allied Matters Act 1990 (the CAMA) relating to the appointment of a provisional liquidator and (2) whether in the exercise of his discretion he could grant the interim injunctions asked for. He then set out some of the guiding principles upon which an application for an interlocutory injunction may be considered. It is not particularly clear how he applied those principles to this case but he did acknowledge that counsel for both parties addressed him and cited a plethora of authorities. He drew attention to one of those authorities, Re Union Accident Insurance Company (1972) 1 All ER 1105, and extracted from the holdings therein the following:

“1. It was the duty of the provisional liquidator to protect the company’s assets.

The power to appoint a provisional liquidator conferred on the court by section 238 of 1948 Act was not limited to the cases where such special circumstances existed.”

The learned trial judge then added that there was a similar provision in the CAMA, section 422 (2). With all due respect to the learned judge, nothing that he considered thus far tended to assist him to determine whether it was just and equitable, or whether there were good reasons, for him to order the appointment of a provisional liquidator and make injunctive and preservation orders.

However, the learned trial judge proceeded to consider the appointment of a provisional liquidator, placing reliance on the case of the Provisional Liquidator Tapp V. Tapp Industries (1995) 5 NWLR (pt. 363) 9. He drew attention particularly to where it says that a provisional liquidator is generally appointed where the assets of the company are in jeopardy and that his primary object is to prevent the directors of the company from dissipating such assets of the company. It was after this that the learned trial judge said: