Intercontractors Nigeria Ltd. V. National Provident Fund Management Board (1988)

LawGlobal-Hub Lead Judgment Report

G. KARIBI-WHYTE, J.S.C.

The issue before this court for determination is whether the Chief Judge of the Federal High Court was right in dismissing Appellant’s application to strike out the writ of summons issued out by the Respondent as Plaintiff, claiming from the Appellant as defendant the arrears of contributions due in respect of National Provident Fund deductions made by it on behalf of its employees. The Court of Appeal affirmed the judgment of the High Court.

The core of the argument of Counsel for the Appellant/Defendant consistently in his appeal against the judgment of the High Court and now the Court of Appeal, is that no writ can validly issue against Appellant/Defendant Company being in Receivership for claims in respect of its assets in receivership. Since even a successful litigation by the Plaintiff/Respondent cannot enforce the judgment. it is unnecessary and abuse of the litigation. It was therefore submitted that the claim be struck out. It is necessary to observe that this is the second of the two appeals which came before us on the 8th February, 1988.

The Appellants were represented by the same Counsel who appeared to have assumed that the same arguments applied to the two cases. Generally, in each case the same company was in Receivership. In the earlier case, SC.93/1987 judgment had been obtained and enrolled against Appellants and writ of execution of Fifa applied for before the Receiver was appointed.

In the instant case the writ of summons filed on 7/4/86 had been issued and Appellant had been served with the hearing notice. A Receivership had been appointed over the assets of the Appellant company on the 27th June, 1985 about ten months prior to the issue of the writ of summons. The debenture, a floating charge of the assets of the Appellant Company was involved in the Receivership. Thus the writ of summons was issued after the Receiver/Manager was appointed over the assets of the Appellant Company.

The facts of the case are that Plaintiff/Respondent, a statutory body charged with the responsibility for collecting deductions from employers in respect of the National Provident Fund contributions made by their employees issued a writ of summons in the Federal High Court against the Defendant/Appellant claiming the sum of N156,792.44k being deductions made from and due to Respondents on the contributions of its employees which Defendant/Appellant had failed to pay to the Respondents. After entering appearance Defendant/Appellant brought a motion on notice seeking an order to strike out the writ of summons and particulars of claim on the grounds inter alia, that

1. That the Plaintiffs claim even if successfully litigated was unenforceable.
2. The Defendant/Appellant Company was in Receivership and accordingly could not be sued by an unsecured creditor.
3. That the Federal High Court had no jurisdiction in respect of the subject matter of the claim; being one for recovery of a simple debt; not arising from the operations of the Companies Act 1968, or relating to the revenue of the Federal Government.
4. That the action was frivolous, speculative embarrassing and an abuse of the Courts’ process.

The affidavit in support of the motion summarily stated averred that the assets of the Defendant/Appellant Company were by means of a floating security charged to Savannah Bank Ltd, and that having defaulted in the terms of the Debenture the assets have crystallised and the Savannah Bank Ltd have appointed one Joseph Olutoyin Munis as the Receiver/Manager of the Defendant/Appellant Company over the assets of the Company.

It was also averred that the Receiver/Manager is now the Agent of the Defendant/Appellant Company with respect to the assets charged. The averments in paragraphs 6-12 of the affidavit are very important to the appeal before us and arc reproduced verbatim.

AFFIDAVIT IN SUPPORT

5. “That the Defendant/Applicant has since defaulted under, and failed to comply with the said debenture, by virtue of which the said Bank has appointed a receiver/manager over the assets charged, accordingly the floating charge has crystallised.
6. That by a Deed of Appointment dated 26/6/85, one Joseph Olutoyin Munis was appointed the Receiver/Manager over the Defendant/Applicant herein by the said Bank. A copy of the said Deed is attached hereto and marked Exhibit F.
7. That whereas while the Defendant/Applicant went into receivership on 20 June, 1985, the claim of the Plaintiff/Respondent is for debt owed well outside one year of the occurrence of the receivership.
8. That as Receiver/Manager of the Defendant/Applicant the said Joseph Olutoyin Munis is now agent of the Defendant/Applicant with respect to the assets charged to the said Bank by virtue to the Debenture.
9. That the Defendant/Applicant is being managed by the Receiver/Manager with a view to putting it on a ground commercial footing. Indeed several contracts are being carried on by the Defendant/ Applicant and a lot of recoveries are being made.
10. That the assets of the Defendant/Applicant are in excess of its liabilities present, contingent and prospective.
11. That the Receiver/Manager, and Mr. Abiodun Ajayi Accountant with the Defendant/Applicant gave me the information set out in paragraphs 2-10 above, and I verily believe them.

It is pertinent to observe that the motion is not seeking leave of the court to enable Mr. J. O. Munis, the Receiver/Manager to bring the application in the name of the Defendant/Appellant Company, the averment in the affidavit that he is the Agent having been regarded by Defendant/Appellant as sufficient. The crux of the application of Defendant/Appellant is that no action can be successfully brought against a company in Receivership.

After hearing arguments of counsel M. B. Belgore C.J. of the Federal High Court held that he had jurisdiction to hear the suit because the provisions of section 36(1) of the National Provident Fund Act makes contributions to the fund recoverable by action as a debt owing to the Federal Government, at any time within six years from the date when the contribution became due. The learned Chief Judge relied on Ansaldo Nigeria Limited v. NPF Management Board CA/L/207/85.

On the claim itself the learned judge referred to the affidavit of the Defendant/Appellant where liability has been admitted. He also observed that the Defendant/Appellant was not under liquidation, voluntary or compulsory and that the issue of claiming under the assets of the Defendant/Appellant Company had not arisen. After construing the provisions of section 92(1) and 297 of the Companies Act 1968, he held at p.21 of the record of proceedings, that

“The position of debts generally whether secured or unsecured, is not the same when a debenture receiver is appointed as when a liquidator or a receiver in liquidation is appointed. In the former case there is no laid down method of proving the debt as there is in a winding up case. Winding up procedure is laid down in the law and is widely publicised so that all and sundries can be aware of it.

There is provision for other creditors to put in notice so that their claim can be considered by a liquidator. All these procedures are not available to a creditor of a debenture debt why then should the creditor be denied the legal means of making his claim Such a denial cannot be in consonance with law or equity.”