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National Bank Of Nigeria Ltd. V. The Are Brothers (Nigeria) Ltd (1977) LLJR-SC

National Bank Of Nigeria Ltd. V. The Are Brothers (Nigeria) Ltd (1977)

LawGlobal-Hub Lead Judgment Report

A. G. IRIKEFE, J.S.C

This appeal is a sequel to an interlocutory ruling delivered by the Federal Revenue Court on 9th July, 1974. There had been pending before that court, a winding-up petition filed by the appellants, a limited liability company engaged in banking business against the respondents, also a limited liability company. The said petition was brought on the ground that the respondents were unable to pay debt owed to the appellants. The relevant paragraphs in the petition allege as follows: –

“(5) There is relationship of banker and customer between your petitioner and the company.

(6.) The company is indebted to your petitioner in the sum of N156,088.62 as at 30th September, 1973 in respect of overdraft and banking facilities granted by the petitioner to the company together with interest accruing on the amount aforesaid.

(7.) On the 11th day of December, 1973 your petitioner served on the company by leaving it at the registered office of the company aforesaid a demand under his hand requiring the company to pay the sum so due, and the company has for three weeks thereafter neglected to pay the sum or to secure or compound for it to the reasonable satisfaction of your petitioner.

(8.) The company is unable to pay its debts. Your petitioner therefore prays as follows: –

(a.) That ARE BROTHERS (NIGERIA) LIMITED may be wound up by the court under the provisions of the Companies Decree 1968;

(b.) Or that such other order may be made in the premises as to the court shall seem just.”

In opposition to the petition, the respondents filed an affidavit the relevant paragraphs of which assert the following:

“(6.) There is relationship of banker and customer between the National Bank of Nigeria Limited (hereinafter called the “petitioner”) and the respondent.

(7.) The respondent is indebted to the petitioner in the sum of N156,088.62 as at 30th September, 1973 but out of this debt the respondent, had since paid N5,000.00 direct to the petitioner and another sum of N8,000.00 through the solicitor to the petitioner.

(8.) That the temporary inability of the respondent to pay this debt was caused partly by the petitioner which had unduly held up the sum of 62,068.19.6d (Sixty-Two Thousand Shillings and Six-Pence) now N124,137.95 (One Hundred and Thirty Four Thousand, One Hundred and Thirty Seven Naira, Ninety Five Kobo) belonging to the respondent.

(9.) That the said amount was intended for a letter of credit to be opened by the petitioner at the instance of the respondent in favour of Delta Financing Corporation of Panama City, R.D. Panama (hereinafter called the “Beneficiaries”) for the purchase of a quantity of cement.

(10.) That despite the plan of the respondent, the beneficiaries insisted that the letter of credit should be opened only by the Bank of America. Copy of the beneficiaries’ letter of 21st February, 1970 paragraph (3) attached marked Exhibit “A” refers.

(11.) That the refusal to accept the petitioner to open the letter of credit was known to the petitioner.

(12.) That despite this knowledge, the petitioner refused to refund the interest paid by the respondent in respect of the letter of credit. A copy of the respondent’s letter paragraph (2) of which was complaining of the loss of this interest is attached marked Exhibits “B” and “C”.

Paragraph 2 of page (2) of the letter refers.

(13.) That the petitioner also held on to the respondent’s 62,068.19.6d now N124,137.95 for several months.

(14.) That as a result of the long delay in refunding the money to the respondent, the purpose for which the letter of credit was to be opened had failed. Thus the business of the respondent was frustrated.

(15.) That this frustration had disorganized the respondent’s business including its ability and mode of operating the banking account with the petitioner.

(18.) On 11th December, 1973 the petitioner served on the respondent a demand note requiring the respondent to pay the sum so due and the respondent through its managing director thereafter signified its intention to liquidate the debt on reasonable terms to be negotiated by both parties.

(19.) To this effect the respondent held 6 meetings with the solicitor of the petitioner.

(20.) That following the negotiation, the respondent was asked to make a cash payment of N10,000 with an undertaking to liquidate the balance of the loan by a monthly instalment of N1,500.

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(21.) As a mark of genuine desire to pay this debt, the respondent on 19th October, 1973 paid into the respondent’s account with the petitioner the sum of N5,000 a photostat copy of the teller is exhibited to this affidavit and marked “D”.

(22.) The respondent has also paid the sum of N8,000 to the petitioner’s solicitor, Chief F. R. A. Williams as per receipt dated 11th April, 1977 a photostat copy of which is exhibited to this affidavit and marked “E”.

(23.) The respondent has also lodged with his solicitors, ‘Lai Joseph & Co. his cheque for another sum of N2,000.

(29.) A photostat copy of a letter from the petitioner’s solicitors as evidence of the negotiation and the refusal of the petitioner to accept the respondent’s offer to liquidate the loan is attached marked exhibit “F”.

The respondents do not, as could be seen from the foregoing, dispute the appellants’ claim; their complaint, it seems to us, is directed against the unreasonable attitude of the appellants in rejecting their proposals for liquidating the debt.

This rejection is contained, as already adverted to, in a letter dated 30th April, 1974 (Exhibit “F”, being an annexure to the respondent’s affidavit at paragraph 29 thereof).

It reads: –

“The Secretary,

Are Brothers Nigeria Ltd.,

9, Nnamdi Azikiwe Street,

P.O. Box 1954,

Lagos.

Dear Sir,

Suit No. FRC/L/M18/74

In the matter of Are Brothers (Nig.) Limited and in the matter of the Companies Decree, 1968

I thank you for your letter Ref. No. ALB50/RWNB/74 dated 27th April, 1974 in respect of your overdraft account with the National Bank of Nigeria Limited.

  1. During the last visit of the Managing Director – Alhaji Chief K. O. S. Are, to these chambers, I informed him that the National Bank has rejected his offer to liquidate the loan in the manner proposed by him and that accordingly I had instructions to proceed to enforce payment of the loan by legal proceedings and that it may be necessary to proceed with the winding up petition which had already been filed in the Federal Revenue Court.
  2. In pursuance to my instructions from the bank and with reference to the order made by the Federal Revenue Court when the matter came before the Court on the 22nd March, 1973, I have had publish notice for winding up of the company. The said notice was published in the official gazette of Thursday 25th April, 1974 as well as in an issue of the Daily Sketch.
  3. In this circumstances I hope you will take appropriate step to comply with the requirements of the said notice and the such compliance is required to take effect on or before 6th May, 1974 (if you intend to defend the petition).
  4. Please not that the matter comes up before the Federal Revenue Court on Tuesday, 7th May, 1974. It is therefore important for you to arrange to be represented at the proceedings.
  5. Your standard Bank Nigeria Limited cheque No. LA/3 123386 dated 9th April, 1974 for N9,000.00 (Nine thousand – Naira) is hereby returned to you. For security reasons I have cancelled the cheque.

Yours faithfully,

A.L.A.L. Balogun

At the hearing before the lower court on Friday 21st June, 1974 learned counsel appearing on behalf of the appellants moved for a winding-up order. He drew the attention of the court to the fact that the petition had been advertised seven clear days before the hearing both in the Federal Gazette of Thursday 25th April, 1974 and in the Daily Sketch of Monday 13th May, 1974 as required by the rules of court (See Rule 28 if the Companies (Winding-up) Rules, 1949 – S.I. 1949 No. 330). Learned counsel also referred to the affidavit filed by the appellants in verification of the petition and stressed the fact that the two affidavits filed by the respondents in opposition to the petition were filed outside the stipulated period of seven-days in accordance with the rules of court and without the express leave of court so to do. The court was accordingly invited to discountenance the said affidavits.

Opposing the order sought, learned counsel appearing on behalf of the respondents argued that the delay in filing the two affidavits was due to the time taken up in negotiating with the appellants a satisfactory mode of repaying the debt due. This negotiation, counsel argued, broke down on 30th April, 1974 from which date, the time prescribed by the rules should begin to run.

The respondents’ counsel also argued that the petition was being opposed on grounds of law, fact, public interest and equity. He did not, however, elaborate.

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Finally, counsel argued that on the available evidence, it had not been shown that the respondents had neglected to pay their debt. The matter was then adjourned for a ruling.

In its ruling, the court refused to make winding-up order and purporting to act under Section 212 (1) of the Companies Decree, it ordered instead as follows: –

“I order that parties to this petition should meet and examine the offer of the respondents to secure for the debt to the reasonable satisfaction of the petitioners and report back to the court on or before Monday August 5th, 1974. The question of costs will be gone into later.”

This appeal is against the above ruling and the appellants relied on three grounds of appeal, namely: –

“(a.) The learned trial judge erred in law in making the order complained of and in failing to make an order for the winding-up of the respondent/Company.

(b.) The learned trial judge erred in law in relying on the affidavits deposed to by on or behalf of the respondents, when the said affidavits were not filed within the period prescribed under Rule 36 of the Companies Winding-up Rules, 1949 and no leave of Court was sought or granted for an extension of the time so prescribed.

(c.) The learned trial judge erred in law when he held that he had power under section 212 of the Companies Decree 1968 to make the order.”

In arguing the above grounds, learned counsel representing the appellants submitted that the learned trial judge erred, not only in taking cognisance of the two affidavits filed by the respondents in opposition to the petition, but also in his interpretation of section 210 of the Companies Decree, 1968. The type of security envisaged under the provisions of Section 210, it was argued, shall be such as is satisfactory to the creditor and not to the debtor. Finally, it was submitted by counsel that, in as much as there was no dispute over the debt, it was not open to the learned trial judge to have made an interim order as he had purported to do under Section 212 of the Companies Decree, 1968.

For the respondents, it was argued that the order now being appealed against was the correct exercise of the learned trial judges’ discretion under Section 212 of the Decree; that he had construed Section 210 of the Decree correctly and that in any case, section 17 Federal Revenue Court Decree (Decree No. 13 of 1973) vested the court with jurisdiction to promote reconciliation among parties to suits and to encourage and facilitate amicable settlement thereof.

Is there any merit in these submissions

Rule 36(1) of the Companies (Winding-up) Rules, 1949 (S.1. 1949 No. 330) relied upon by learned counsel for the appellants in support of his plea for the exclusion of the affidavits reads: –

“(1.) Affidavits in opposition to a petition shall be filed within seven days of the date on which the affidavit verifying the petition is filed, and notice of the filing of every affidavit in opposition to such a petition shall be given to the petitioner or his solicitor on the day on which the affidavit is filed.”

The facts here show that the appellant’s affidavit verifying the petition was filed on 20th February, 1974, while the two affidavits in opposition were filed on 25th May, 1974 and 5th June, 1974 respectively; a matter of well over thirty days from the collapse of negotiations as deposed to by the respondents.

The learned trial judge dealt with the non-compliance with the above cited rule in these words: –

“The petitioners also alleged that a demand for the payment of the amount was made to the company on December 11, 1973, requiring it to pay the said sum within three weeks, but they had failed to meet the demand. Hence the conclusion in paragraph 8 of the petition that the respondents were unable to pay their debts. The respondents filed two affidavits in opposition to the petition. Counsel for the petitioners attacked these affidavits in the course of his address and stated that they were not filed within the period of seven days from the date of the affidavit verifying the petition, which is 20th February, 1974, as provided by Rule 36(1) of the Companies (Winding-up) Rules, 1949. To this counsel for the respondents replied and stated that this was due to the time taken up by negotiations to settle the matter out of court. This reply, I find, was borne out by references in the first affidavit to meetings held with a view to settlement. This had not been denied in a counter-affidavit in reply by the petitioners. I am therefore satisfied that the delay in filing the affidavit in opposition to the petition was genuinely due to the protracted negotiations for the purpose of settlement. This had not been denied in a counter-affidavit in reply by the petitioners. I am therefore satisfied that the delay in filing the affidavit in opposition to the petition was genuinely due to the protracted negotiations for the purpose of settlement. I therefore, in the interest of justice, allow the affidavits even though filed out of time.”

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The record in the case in hand shows clearly that before the ruling the subject of this appeal, no attempt was made by the respondents to move the court for extension of time for compliance with the provisions of Rule 36(1) (Supra).

Again, although no such extension was sought, the learned trial judge, nevertheless, purported to act on the conflicting affidavits before him, by granting the respondents an extension, on the argument that, because the appellants had failed to lodge a counter-affidavit to the explanation for the delay given by the respondents, such default by the appellants, rendered their (respondents’) explanation acceptable in the circumstance.

In as much as the reception of the respondents’ affidavits constituted the main basis for the ruling now the subject of this appeal, we think that the learned trial judge was in error in dealing with this matter in the manner he had done.

Thus, although the court has an inherent jurisdiction to extend time in any given case with a view to the avoidance of injustice to the parties, it should not do so suo motu, but upon the application of the party in default. See KEYMER v. REDDY – (1912) 1 K. B. p. 215 and SCHAFER v. BLYTH (1920) 3 K.B. p. 140.

Se also Order 3 Rule 5 of the Rules of the Supreme Court (Annual Practice 1976) which states: –

“5(1) The court may, on such terms as it thinks just, by order extend or abridge the period within which a person is required or authorised by these rules, or by any judgment, order or direction, to do any act in any proceedings.

“5(2) The court may extend any such period as is referred to in paragraph (1) although the application for extension is not made until after the expiration of that period (Emphasis Ours).”

This Court has held in a number of cases that where, as in the case in hand, the court of first instance is called upon to act upon affidavit evidence, and such evidence is in conflict on a point material for the determination in the case, such conflict can only be resolved by the court calling for oral testimony on oath from the parties.

It would not be open to the court as it did here, to accept the last affidavit in point of time as the true position of matters, merely because the other side had failed to lodge a counter-affidavit. See EBOH & ANOR v. OKI & ORS. 1974 1 S.C. p. 179 and UKU & ORS. V. OKUMAGBA & ORS. 1974-3 SC. p. 35.

In the result, the appeal succeeds and it is allowed. The interim order made by Adediran, J. in this matter in the Federal Revenue Court of Nigeria, Lagos on 9th July, 1974 is hereby set aside. We also order that this matter be heard de novo on the merit by the Federal Revenue Court, Lagos. The appellants are allowed costs in this court assessed at N150.


Other Citation: (1977) LCN/1883(SC)

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