United Spinners Nigeria Ltd V Chartered Bank Ltd (2001)

LAWGLOBAL HUB Lead Judgment Report

UWAIS, C.J.N.

This is an interlocutory appeal from the decision of the Court of Appeal, Lagos Division (Musdapher, JCA, Uwaifo, JCA, as he then was, and Pats-Acholonu, JCA).

The facts of the case, which are not in dispute, are briefly as follows. The respondent herein was petitioner in the Federal High Court, Lagos while the appellant herein was the respondent to the petition. The appellant operated an account with the respondent. On 18th March, 1992, the appellant sent a letter to the respondent requesting for allocation of foreign exchange. In the months of March and April, 1992 the sum of US$200,000.00 (United States two hundred thousand dollars) equivalent then to N3,636,000.00 was allocated to the account of the appellant. By a letter dated 26h March, 1992, the appellant requested another bank – Continental Merchant Bank Plc, to send some documents, including “Form M”, to the respondent to enable the respondent dispose of the foreign exchange allocated to the account of the appellant. The Continental Merchant Bank Plc forwarded the necessary documents to the respondent vide a letter dated 30th March, 1992. The respondent effected the transfer of the foreign exchange as instructed by the appellant and debited its account.

Subsequently the respondent made demands upon the appellant to settle its indebtedness to the respondent with respect to the foreign exchange but the appellant failed to do so. By 31st August 1994 the amount owed the respondent by the appellant on the transaction amounted to N10,275,777.17 being the foreign exchange allocated and the accrued interest thereupon. Consequently, the respondent filed a petition on 3rd November, 1994 in the Federal High Court Lagos alleging that the appellant was insolvent and unable to pay its debt, and praying thus-

“1. That United Spinners Nigeria Limited may be wound up by the court under the provisions of section 408 (d) and 409(0.) of the Companies and Allied Matters Act of 1990.

2. Or such other orders as may be made in the premises as shall be just.”

On 6th January, 1995, the appellant filed a notice of preliminary objection on the grounds that the trial court had no jurisdiction to entertain the petition and –

“(b) That the filing and prosecution of the petition is an abuse of the judicial process aimed at harassing and intimidating the respondent into accepting liability for and making good a debt which is doubtful and very much disputed.”

Furthermore, an affidavit sworn to by the Accounts Manager of the appellant, Mr. Elijah Arabambi, was filed in support of the preliminary objection.

The affidavit stated in part as follows-

2. I have studied the petition to wind up served on us and observed that several statements contained therein are incorrect in material particulars and omit to mention several material facts relevant to the issue.
3. The petitioner, on our instructions remitted the total sum of $200,000.00 to some of our suppliers in Germany on or about March 25,1992 and April 10, 1992 and were supposed to, as is the usual banking practice, debit our account with them immediately to the tune of the Naira equivalent.
4. The petitioner instead debited another of their customers and did not discover this until on or about May 19, 1993 when they wrote us to say that they had accordingly debited our account with the principal sum of N3,636,000.00 plus the accrued interest. Attached herewith and marked Exhibit EA1 is a photocopy of the said letter.
5. The petitioner followed up with their letter dated June 14, 1993 by which they informed us that the principal sum plus accrued interest came to the sum of N5,449,355.42 and asking us to pay them the said sum. Attached herewith and marked Exhibit EA2 is photocopy of the said letter.
6. In subsequent meetings and telephone discussions we stated categorically that we accept no liability for the principal sum given their negligence in the matter.
7. The petitioner’s present deputy managing director, Mr. Akinsola Akinfemiwa, then wrote a letter dated June 18, 1993 pleading with our managing director, Mr. Ravi Charnrai to intervene and help them out of the problem which them had created. Attached herewith and marked Exhibit EA3 is a photocopy of the said letter.
8. It is pertinent that, together with our sister companies we maintain accounts with well over twenty commercial volume of business ventures and activities with the result that keeping a tab on all our accounts is a major full time task in itself without the negligence of any of our bankers.
9. Further to paragraph 8 above, we wrote a letter dated May, 18, 1992 to the petitioner asking them to avail us with our bank statement on a weekly basis given the critical need for us to closely and constantly monitor our bank balances and plan accordingly. Attached herewith and marked Exhibit EA4 is a photocopy of the said letter.
10. Meanwhile, we continued to insist that we would not pay any sum more than the principal sum which the petitioner refused to accept and purported to continue to calculate interest and by their letter dated January 17, 1994 had calculated the sum of N8,020,537.17 as our total outstanding indebtedness, threatening to wind us up if we fail to pay the said sum within 21 days. Attached herewith and marked Exhibit EA5 is a photocopy of the said letter.
11. When we ignored what we considered their unnecessary and baseless threat as contained in Exhibit EA5, the petitioner unilaterally purported to grant us some concession on their equally unilateral interest computation vide their letter dated February 8,1994 wherein they asked us to pay them the sum of N6,828,593.69 in full and final settlement of the sum of N9,105,408.50 Attached herewith and marked Exhibit EA6 is a photocopy of the said letter.
12. Meanwhile, the petitioner had earlier by their letter dated January 4, 1994 advised us that they had issued a commercial paper on our account in the sum of N8 million “to normalize the unauthorized overdraft in the account” notwithstanding that there was no mandate from us for such thing to be done. Attached herewith and marked Exhibit EA7 is a copy of the said letter.
13. After the petitioner made what they called “Final Demand Notice of Amount Outstanding” dated March 28, 1994 there ensued a rather long drawn our negotiations between us punctuated by the political crisis of June September 1994 at the end of which we offered to pay the sum of N5 million in full and final settlement which the petitioner refused to accept by its letters dated October 4, 1994 wherein they also stated that they would accept the sum of N8.16 million instead. Attached herewith and marked Exhibits EA7A and 8 respectively are photocopies of the said letters.
14. The petitioner’s present counsel by a letter dated October 20, 1994 wrote us enclosing a draft copy of the petition, threatening to file it within seven days if we fail to pay the petitioner the sum claimed in the petition. Attached herewith and marked Exhibit EA9 is a photocopy of the said letter and accompanying petition.
15. We then got our solicitors to write the petitioner the letter dated October 27,1994, a photocopy of which is attached herewith and marked EA10.
16. In the circumstances of this case, I am convinced that this petition is intended to stampede us into paying the petitioner monies which Frank Hoenyosi, our solicitor, tells me and I verily believe that they are not in any way entitled to especially given their negligence in not representing to us the correct state of our account with them.
17. We have in the meantime paid the sum of N3.636 million to the petitioner which I verily believe is the whole extent of our indebtedness to the petitioner. Attached herewith and marked Exhibit EA11 and 12 are photocopies of the cheque and covering letter sent to the petitioner’s counsel by our own counsel.’

Further affidavit and counter-affidavit were respectively filed by the appellant and the respondent. Thereafter the appellant filed a notice of preliminary objection.

After hearing counsel for the parties on the preliminary objection the trial court (Abdu-Kafarati, J.) delivered its ruling on 24th November, 1995. In concluding the ruling the learned Judge held

“From the facts and circumstances of this case as can be discerned from the affidavit evidence and the exhibits attached thereto, it is my opinion that the petition to wind up the respondent company is properly before the court and is not an abuse of this court’s processes (sic) and so I hold. I also hold the view that this court has jurisdiction to entertain the petition. This application therefore lacks merit and is hereby dismissed.”

Dissatisfied with the ruling the appellant (herein) appealed to the court below. Whilst the appeal was pending thereat the appellant brought a motion on notice on 13th March, 1996 praying the Court of Appeal for –

“an order staying all further proceedings in the substantive suit pending the hearing and determination of the respondent’s appeal to the Court of Appeal against the ruling of the Federal High Court, Lagos Division (Coram Abdu-Kafarati, J.) delivered on 24th November, 1995; and for such further order(s) as (the Court of Appeal) may deem fit to make in the circumstances.”