General & Aviation Services Ltd. V. Captain Paul M. Thahal (2004)
LAWGLOBAL HUB Lead Judgment Report
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 marginalized and excluded the interests of your petitioner in the company and has continued to do so till date.
- 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.
- The said Mr. Sunday Olubadewo has been running the company as his family business with the members 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.
- 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.
- 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.
- 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.
- 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.
- 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 stabilize the operation of the company.
- 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.
- 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.
- 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.
- Mr. Sunday Olubadewo has taken undue advantage of his position as the chairman and Managing Director of The petitioner’s allegation that I run the respondent as ‘family business’ to the exclusion of the petitioner is the company to run the company as his family business and in a manner that has completely marginalized and excluded my interests in the company.
- The said Mr. Sunday Olubadewo being the sole signatory to the bank accounts 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.
- 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.
- The said Mr. Sunday Olubadewo has all along been illegally disposing off (sic) the properties and assets of the company to his own use.
- 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.
- 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 13th 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.”
- I did not change the name of the respondent GEN AIR as 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 SKS9’ is a copy of a letter dated 13th April, 1994 by the FCAA on the use of the name: GEN AIR.
- 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.
- 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.
- I am an engineer by profession and I have been in the aviation business since 1953 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.
- 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 become 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 its business.
- 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:
(c) the provision of security for planes at the airport;
(d) use of the respondent premises;
(e) use of the respondent’s staff, and;
(f) tarmac parking services.
The following are some of the operators the respondent presently has contracts with:
(c) Premier Air Shuttle;
(d) George Eder; and
(e) Dominion Aircraft Company.
- 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 has been on half salary since 1994 because the respondent cannot afford to pay them fully.
- 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;
(d) and costs 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 Ltd. v.Tapp Industries Ltd. (1995) 5 NWLR (Pt. 393) 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:
“When one reads the affidavit evidence before the court one will not have constraint to order the appointment of a provisional liquidator for the respondent/company in order to preserve the assets of the company. The parties are therefore enjoined to assist the court in the exercise of its power to appoint a fit person as provisional liquidator. He will act as receiver pendente lite.
Moreover, I have no difficulty in coming to the conclusion that the applicant through the affidavit evidence satisfied the guiding principles for granting interlocutory injunctions with particular emphasis on preservation of the res which is the assets of the company pending the determination of the suit.”
After making this broad observation upon the basis of the imprecise allegations in the affidavit of the petitioner, the learned trial Judge consequently made orders as follows:
“1. That an order of injunction is hereby granted restraining the Managing Director Mr. Sunday Olubadewo whether by himself, agent, servants or privies from disposing, transferring, operating or in any manner whatsoever dealing with any sum now or hereafter standing to the credit in the company’s bank account.
- That an order of injunction is hereby entered restraining the said Mr. Sunday Olubadewo from further dealing, tampering, transferring or in any manner disposing the assets and properties of the company.
- That an order is hereby entered directing the Managing Director of the company that is Mr. Sunday Olubadewo to surrender all properties, cheque books, vouchers, account books and other banking documents relating to the company’s bank account to the said liquidator.
- That an order is hereby made appointing a fit person as a provisional liquidator with the assistance of the parties.
- That an order is hereby entered for an accelerated hearing of the suit.
- That the petitioner shall give an undertaking in writing as to damages to indemnify the respondent in the event that the court discovers that it ought not to make the order in the first instance.”
It will be observed from Order (4) above that no provisional liqudiator was in fact appointed as required by law.
On appeal to the Court of Appeal, Lagos Division, the appellant raised three issues, two of which I consider relevant were –
(a) Whether the trial court in decreeing ‘that an order is hereby made appointing a fit person as a provisional liquidator with the assistance of the parties’ was a proper exercise of discretion in the circumstances of the case.
(b)Whether on the materials before the court, orders of interlocutory injunction should have been made.
The court below answered issue (a) above in the affirmative. It went about it by proceeding to reproduce paragraphs 4, 5, 6, 8, 9 and 10 of the affidavit in support of the motion on notice by the petitioner (now respondent). It then said:
“The above depositions, in their totality touch on alleged maladministration of the company. Faced with these depositions, a court of law has the power under section 422(2) of CAMA quoted above to appoint a provisional liquidator who will be charged with the running of the business of the company between the time of the presentation of the petition and the making of the winding-up order. That the power to so appoint exists in the court is not in doubt. It is the exercise of that power that is being questioned here – whether on the face of the facts before the court, that power was rightly exercised.”
The court below also cited Tapp Industries Ltd. (supra) as regards the purpose of appointing a provisional liquidator. It referred again to the affidavit evidence and said inter alia:
“There is nothing in the two counter-affidavits which by any strained interpretation, can be said to counter any of paragraphs 5, 6, 8, 9 and 10 of the affidavit in support … Having regard to paragraphs 5, 6, 8, 9 and 10 of the affidavit in support of the afore-mentioned application which shows that the business company was been (sic) run in secrecy, that there was mismanagement of assets of the company and impossibility of participation by the petitioner/respondent in the affairs of the company even as to attending meetings with chairman/managing directors, it would be absolutely impossible for the petitioner to prove that there would be assets for distribution upon the winding-up of the company.”
The court below also answered issue (b) in the affirmative and dismissed the appeal.
On further appeal to this court, the appellant has raised three issues for determination. The said issues were adopted by the respondent. I will reproduce them as set down in the respondent’s brief of argument as follows:
“1. Whether the ruling of the trial court which was affirmed by the Court of Appeal is a nullity.
- Whether the learned Justices of the Court of Appeal were right when they held that there was a competent petition before the court upon which the injunctive and preservative orders were premised.
- Whether the learned Justices of the Court of Appeal exercised their discretion judicially and judiciously when they affirmed the manner by which the learned trial Judge exercised his discretion in granting the injunction and the appointment of the provisional liquidator for the appellant company.”
I prefer to deal with issue 3 first. The real question is whether a proper occasion had been disclosed to warrant appointing a provisional liquidator and granting the interlocutory injunctions sought in this case. I think it was completely beside the point to rely on any decided case, as the two courts below did, which merely enunciates the purpose of appointing a provisional liquidator as in Tapp Industries Ltd. (supra); or to state the guiding principles for the grant of an interlocutory injunction, without ascertaining crucial facts justifying the need to appoint such a provisional liquidator or grant such an injunction. A distinction must be made between when, i.e. the proper occasion, to appoint a provisional liquidator and why, i.e. the purpose of appointing one. When will depend on the facts necessitating and justifying placing the affairs of the company in the hands of a provisional liqudiator. As will be seen in r. 21 of the Companies and Winding-up Rules, 1983, which I shall reproduce later in this judgment, this is a procedural requirement. But why is a consequence of having appointed one, which is so that he will preserve the assets of the company and do such other duties as he may be directed by the court pending the outcome of the winding up petition. It does not appear to me with due respect, that the two courts below quite appreciated the nuances of the procedure which are crucial and relevant to the proper resolution of these matters. That is what has made all the difference in this case. It is true that section 422(2) of the CAMA provides thus:
“422(2) At any time after the presentation of a petition and before the making of a winding-up order, the appointment shall be provisional and the court making the appointment may limit and restrict the powers of the liquidator by the order appointing him.”
It would appear that the trial court exercised its discretion to come to the conclusion that a provisional liquidator should be appointed and that interim injunctions should be granted upon the facts contained in the affidavit of the petitioner. Those facts have been set out earlier in this judgment. Also set out are the related facts in the petition. A close examination of the said affidavit evidence reveals that what were deposed to therein are possible conclusions at best. It is, for instance, instructive to draw attention to paragraphs 5, 6, 7 and 8 of the petitioner’s affidavit. Paragraph 5 accused Mr. Olubadewo of running the company as a family business and marginalizing and excluding the interests of the petitioner. Instances of these accusations were not furnished in the said affidavit evidence. The petitioner presumably had facts, which led him to come to these conclusions or frame of mind. What are those facts These facts must be discussed and it will be for the court to draw conclusions from them. But none was disclosed. Again, what is it that Mr. Olubadewo did to lead to his being accused that he has “continued to deplete the financial resources of the company”; or in what way did he frustrate the efforts of the petitioner to become a joint signatory to the accounts of the company Or what are the facts that he has illegally been disposing of the properties and assets of the company to his own use The unsupported allegations are in those paragraphs 6 and 8. As for the accusation in paragraph 7 of the petitioner’s affidavit in support of his motion, this was clearly countered in paragraph 13 of Mr. Olubadewo’s affidavit. Also in paragraph 10, Mr. Olubadewo has shown efforts to get the petitioner to attend meetings of the company. I think it must be said that it was improper for the two courts below to rely on conclusions arrived at in the affidavit of the petitioner and ignore specific facts disclosed by Mr. Olubadewo.
In any affidavit used in court, it is required that it shall contain only a statement of facts and circumstances derived from the personal knowledge of the deponent or from information which he believes to be true. This is provided in sections 86 and 87 of the Evidence Act. The test for knowing facts and circumstances is to examine each of the paragraphs deposed to in the affidavit. If it is such that a witness may be entitled to adduce them in his testimony on oath and are legally admissible as evidence to prove or disprove a fact in issue or dispute, then they qualify as statements of fact or of circumstances. This means that affidavit evidence, like oral evidence, must as a general rule deal with facts and avoid matters of inference or conclusion which fall within the province of the court; or objection, prayer or legal argument which must be left to counsel. If, therefore, affidavit evidence is in the form of conclusion, inference, legal argument, prayer or objection, it raises no fact which needs to be controverted but is simply regarded as extraneous to the determination of factual disputes: see Governor of Lagos State v. Ojukwu (1986) 1 NWLR (Pt. 18) 621; Josien Holdings Ltd. v. Lornamead Ltd. (1995) 1NWLR (Pt. 371) 254 at 265; Nigeria LNG Ltd. v. African Development Insurance Co. Ltd. (1995) 8 NWLR (Pt. 416) 677 at 698-702; Bamaiyi v. The State (2001) 8 NWLR (Pt. 715) 270 at 286-291.
In Dongtoe v. Civil Service Commission, Plateau State (2001) 9 NWLR (Pt. 717) 132 at 161-162, Karibi-Whyte, JSC said:
“Applicant who seeks the exercise of the court discretion has the burden of presenting all the material facts necessary for the exercise of the discretion … The application of the applicant will fail where such materials are absent … It is erroneous to assume that the respondent has any responsibility to supply any omission in the facts supplied by an applicant and on which the court could exercise discretion.
The burden is on the appellant/applicant who is seeking the exercise of the discretion of the court.”
In the same way, Ogundare, JSC said in Menakaya v. Menakaya (2001) 16NWLR (Pt. 738) 203 at 253 that “a court does not exercise its discretion in vacuo but on legal evidence or materials placed before it by the parties. The learned trial Judge dissolved the marriage between the parties without any evidence. On what then had the petitioner satisfied the learned Judge as required by section 15(2) of the Act On what then was the Judge satisfied that the marriage had broken down irretrievably None whatsoever.”
The court below did no more than affirm what the trial court concluded upon the sweeping allegations made by the petitioner. Those allegations were not particularized. They were simply general, inferential and vague. In Re W.R Willcocks & Co. Ltd. (1973) 2 All ER 93, one of two equal shareholders of a company presented a petition to wind-up the company alleging in one of the paragraphs of the petition that there was a deadlock between the two shareholders. There was an application to have the petition struck out for vagueness owing to non-particularization of the allegation.
Plowman, J. made the following observation at pages 95-96:
‘The principal point of counsel for Mr. Dutch was that the vague and generalized allegations in para. 7 of the petition, which are in no way particularized, are embarrassing. In the first place, it is part of the petitioner’s case on the petition that differences have arisen between her and Mr. Dutch in relation to the mode of conducting the company’s business. I say it is part of her case for two reasons. First of all, because if it were not part of her case there would be no point in alleging it, and secondly, because as a matter of the construction of para. 8 of the petition, which says ‘in the circumstances it is just and equitable that the company should be wound up’, the allegation is part of ‘the circumstances’ referred to. Similarly, it is part of the petitioner’s case that the petitioner and Mr. Dutch have found it impossible to settle their differences and to agree on the future course of the company’s business. Similarly, too, it is part of the petitioner’s case that it has become impossible to ‘conduct the business of the company. But these allegations, which, as I say, are part of the petitioner’s case, are wholly unparticularized. Mr. Dutch is not informed of the precise nature of the case which he has to meet and he has no means of knowing what evidence he ought to file in order to meet it. For example, if he knew the precise nature of the allegations made against him, he might want to confess and avoid rather than deny the allegations. He might, for all I know, want to say that the differences to which the petitioner refers, or the fact that it is impossible to settle them, were due entirely to the petitioner’s intransigence and that in those circumstances it would be neither just nor equitable to make a winding-up order. It may well be that if the affidavit had condescended to particulars of the allegations in para. 7 of the petition, the deficiencies in that paragraph would have been made good. But before this motion was launched Mr. Dutch’s solicitors were informed by the petitioner’s solicitors that it was not proposed to file any further evidence. In those circumstances, in my judgment, Mr. Dutch is entitled to have this petition struck out.”
Let me here refer to another case where the allegation was again that there was deadlock between the only two shareholders of a company. It is Re Davis Investments Ltd. (1961) 3 All ER 926. It was a case also decided by Plowman, J. which went on appeal to the Court of Appeal. There, the court dismissed the appeal, Danckwerts, L. J observing at page 928 as follows:
“This is not a case of a petition by a creditor for a winding-up order because of the inability of the company to pay its debts, where, once the debt is shown to be genuine debt, a winding-up order is made as a matter of course. It must depend on the provision in the Act giving power to wind-up a company where it is just and equitable, that the company should be wound up. That is not so simple and uncomplicated a matter as an ordinary creditor’s winding-up petition. We have been referred to cases of winding-up where the persons interested in the company could not agree, and these have some analogy to the case of partners. These are an application of the provision that a company may be wound-up where that is just and equitable, but really are an extension of the ordinary practice of the court. The present case is one which is unusual rather than purely formal and the petitioner must make out his case. It is not necessary for the person opposing the winding-up to do anything, as it seems to me, unless the petitioner does make out his case. Therefore, it may well be necessary that the petitioner should supplement the ordinary statutory affidavit by an affidavit putting in evidence and proving the facts which justify and require an order by the court, and in some cases that may obviously, as has been pointed out in the books, involve exhibiting documents on which the matter depends.”
In the present case, the petitioner who was anxious to have a provisional liquidator appointed and interim injunctions ordered removing the chairman/managing director, Mr. Olubadewo, from office, and a mandatory injunction for him to surrender all books etc of the company, ought to have particularized his allegations by condescending to the facts of the allegations. Without doing that, the respondent (now appellant) had no obligation in law to respond to allegations of which he had no clear idea of the facts: see Dangtoe (supra) at pages 161-162 per Karibi-Whyte, JSC.
In a case like this, the appointment of a provisional liquidator is not automatic simply because a petition has been filed. That is not the intendment of section 422(2) of CAMA. In-the old case of Re Railway Finance Co. Ltd. (1866) 35 Beav. 473; (1866) 55 ER 979, a petition had been presented by a creditor to wind-up the company but before it had been heard, the petitioner obtained ex parte an order for the appointment of a provisional liquidator. An application was made to discharge the order. In a two-sentence judgment, Lord Romilly, M. R. at page 980 said:
“I never appoint a provisional liquidator until it appears that the company must be wound-up. I must discharge the order.”
In another case, Re London, Hamburg and Continental Exchange Bank – Emmersons case – (1866) L.R. 2 Eq. 236-237, again Lord Romilly, M. R. observed:
“It is perhaps convenient that I should state what my practice is with reference to the appointment of provisional liquidators. Where there is no opposition to the winding-up, I appoint a provisional liquidator as a matter of course, on the presentation of the petition. But where there is an opposition to it, I never do, because I might paralyze all the affairs of the company, and afterwards refuse to make the winding-up order at all.”
It has been held that if the court refuses to make a winding-up order on the hearing of the petition, it ought to discharge any provisional liquidator whom it has already appointed, and restore all parties to the position they would have occupied if he had never been appointed at all: see Re Dry Docks Corporation of London (1888) 39 Ch. D 306. It must be recognized that in practice, where the atmosphere is such that a provisional liquidator does not feel bound to act in the best interest of the company, the consequences may be irredeemable. I think in order to avoid making a decision that is likely to paralyze the affairs of a company by the appointment of a provisional liquidator, or to create uncertainty or panic as regards the viability of the company, the court should act with circumspection and on clear facts that a winding-up petition is likely to succeed or at any rate, contains momentous factual allegations. Such facts ought to be evidence when reliance is placed on affidavit disclosure in support of the appointment of a provisional liquidator.
It cannot be over-emphasized that it is upon known, or at times undisputed facts, or facts as found, and in all cases fully disclosed facts, that a Judge seeking to do what is just and equitable may exercise his discretion. No discretion can be regarded as judicially and judiciously exercised upon no factual disclosure or upon partial disclosure, or upon misrepresented or suppressed facts: see Carron Iran Co. v. Maclaren (1855) 5 HLC as. 416; Wimbledon Local Board v. Croydon Rural Sanitary Authority (1886) 32 Ch. D. 421. It is a rule of equity that where the exercise of discretion plays a part, it is expected that the court will act in conformity with the ordinary principles upon which judicial discretion is exercised otherwise an appellate court will interfere with the discretion: see R. v. Stafford Justices (1940) 2 K.B. 33 at 43; Okere v. Nlem (1992) 4 NWLR (Pt. 234) 132 at 149; Oyeyemi v. Irewole Local Government (1993) 1 NWLR (Pt. 270) 462 at 477. There is always the need for a court exercising a discretion to give reasons in justification of the exercise: see Solanke v. Ajibola (1968) 1 All NLR 46 at 54. There can hardly be any justifiable reasons for exercising a discretion upon imprecise facts. It is the nature and strength of facts made available to the court that provide the tonic for the proper exercise of discretion. Admittedly, the exercise of discretion upon known facts involves the balancing of a number of relevant considerations upon which opinions of individual Judges may differ as to their relative weight in a particular case: see Birkett v. James (1978) AC 297 at 317D. But that will not necessarily affect the justness of the exercise of the discretion, so long as the facts are available and reasonably appreciated. I answer issue 3 in the negative.
On the answer given to issue 3 that the two courts below did not exercise their discretion judicially and judiciously to order the appointment of a provisional liquidator, this appeal ought to succeed. I may add here that, apart from the lack of facts, the decision “that an order is hereby made appointing a fit person as provisional liquidator with the assistance of the parties” is most irregular and does not conform to section 422(3)(a) which provides that if a provisional liquidator is to be appointed before the making of a winding-up order, the official receiver or any other fit person may be so appointed. The court may either make the official receiver a provisional liquidator or be satisfied of a particular fit person to be so made by it at the time the order is made. There is a deliberate procedure to be followed and this is provided in rule 21 of the Companies Winding-up Rules, 1983 (Cap. 59) Laws of the Federation of Nigeria, 1990 which reads thus:
“21(1) After the advertisement of a petition for the winding up of a company by the court, upon the application of a creditor, or of a contributory, or of the company, and upon proof by affidavit of sufficient ground for the appointment of a provisional liquidator, the court, if it thinks fit and upon such terms as in the opinion of the court shall be just and necessary, may make the appointment.
(2) The order appointing the provisional liquidator shall bear the number of the petition, and shall state the nature and a short description of the property of which the provisional liquidator has performed any other duty prescribed by these rules.
(3) The provisional liquidator shall pay the official receiver such sum, if any, as the court directs.
(4) The order of appointment of a provisional liquidator shall be in Form 11 in the Appendix with such variations as circumstances may require.
It can be seen that the appointment must take into consideration (a) proof by affidavit of sufficient ground for the appointment of a provisional liquidator:
sub-rule (1); (b) the previous experience of the provisional liquidator, the particulars of the nature and description of the property with which he had dealt being stated: sub-rule (2). As already indicated proof by affidavit must depend on facts and circumstances. The so-called appointment couched thus, “that an order is hereby made appointing a fit person as a provisional liquidator with the assistance of the parties,” by the trial court and affirmed by the Court of Appeal is completely erroneous and cannot be allowed to stand. The injunctive and preservation orders were also made upon no facts and are accordingly wrong in law. Issue 2 does not depend on the question whether those orders were made upon a competent petition. I consider this issue irrelevant and strike it out.
Issue 1 is a misconception. The submission of the learned Senior Advocate on this issue as contained in the appellant’s brief of argument is that because the basis for the exercise of the discretion of the learned trial Judge was not clear, the judgment was a nullity. It was therefore, further submitted that the Court of Appeal could not have rightly affirmed such a decision. Reliance was placed on the observation of Coker, JSC in Ojogbue v. Nnubia (1972) 7 NSCC H 478 at 482 as follows:
“We cannot see the basis on which the plaintiffs’ case was dismissed nor, what is worse, the grounds on which the learned trial Judge had proceeded to ‘enter judgment for the defendants.’ A judgment of the court must demonstrate in full a dispassionate consideration of the issues properly raised and heard and must reflect the results of such an exercise.”
This authority does not in any way support the learned Senior Advocate’s submission on issue 1. I cannot accept that failure on the part of a trial court to come to a considered judgment or to exercise discretion properly will make the decision a nullity. A judgment may be declared a nullity due to some fundamental vice such as lack of statutory jurisdiction to hear the case, or failure to fulfil a necessary condition precedent: see Madukolu v. Nkemdilim (1962) 2 SCNLR 341, (1962) 1All NLR 587. A distinction must be drawn between an order or a judgment which a court is not competent to make and a judgment which, even though erroneous in law and in fact, is within the court’s competence: see Timitimi v. Amabebe (1953) 14 WACA 374 at 377; Awoyegbe v. Ogbeide (1988) 1 NWLR (Pt. 73) 695 at 715. The ruling of the trial court in the present case was not a nullity. It was based on perverse findings and was wrongly decided. That made the decision of the court below which affirmed it perverse and also erroneous. The result of my resolution of issue 1 does not affect the merit of this appeal.
In the circumstances, I find merit in this appeal and allow it. I set aside the decisions of the two courts below together with the order for costs. I hereby dismiss the motion on notice dated 22 January, 1997 seeking the appointment of a provisional liquidator together with other prayers, and order that the parties return to the status quo ante. It is further ordered that the winding-up petition should be assigned to a Judge other than Bioshogun, J. I award the appellant N1,000.00 as costs in the trial court, N4,000.00 as costs in the court below and N10,000.00 as costs in this court.