United Spinners Nigeria Ltd V Chartered Bank Ltd (2001)
LAWGLOBAL HUB Lead Judgment Report
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.
- 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-
- 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.
- 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.
- 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.
- 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.
- In subsequent meetings and telephone discussions we stated categorically that we accept no liability for the principal sum given their negligence in the matter.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.”
The motion came up for hearing before the Court of Appeal on 5th June, 1996. Counsel for the parties addressed the court. At the end of the addresses the motion was instantly dismissed.
The appellant then decided to appeal to this court from the ruling of the Court of Appeal. Briefs of argument were filed and exchanged by the parties. The following issues have been formulated by the appellant for our determination:-
“(i) Did the Court of Appeal in peremptorily dismissing the application, exercise its discretion judiciously and judicially
(ii) Was the Court of Appeal’s dismissal of the appellant’s application without considering the appellant’s brief and adverting to the principles of law of stay of proceedings relevant to the application
(iii) Is the Court of Appeal right to hold that the appellant’s claim is puerile and this cannot in their view constitute a genuine dispute as to indebtedness”
For its part the respondent formulated two issues for determination. They are-
“(1) Whilst (sic whether) on the evidence and materials placed before the Court of Appeal, there was sufficient justification for the court to refuse the grant for a stay of proceedings.
(2) Did the Court of Appeal in fact decide the substantive appeal by its pronouncement when it refused to stay proceedings. “In arguing issue no(1) in the appellant’s brief, it is contended that unless the Court of Appeal acted on a wrong principle or disregarded a principle or acted under a mistake of law or under a misapprehension of the facts or took irrelevant matters into account or on the ground that injustice would arise, the Supreme Court would not interfere with the Court of Appeal’s exercise of discretion. The cases of Awani v.Erejuwa (1976) 11 SC 307; University of Lagos v.Aigoro (1985) 1 NWLR (Pt.1) 143 at pp. 148-9 and Efetiotoroje v. Okpalefe II (1991) 5 NWLR (Pt.193) 517 at p. 537 were cited in support. Again it is contended that each party to a case has a right to have his case determined upon its merits and courts should do everything to favour fair trial of the questions before them. The cases of Collins v. Vestry of Paddington (1880) 5QBD 368 at p. 381 and Ojikutu v. Odeh 14 WACA 640 were relied upon. It was then argued that the Court of Appeal did not carry out its judicial function in its ruling despite the fact that the grounds of appeal, the appellant’s motion for stay of further proceedings and the brief of argument in support of the motion were before the court. As a result the court failed to advert its mind to the principles of law applicable to application for stay of further proceedings as laid down in Akilu v.Gani Fawehinmi, (1989) 2 NWLR (Pt.102) 122 at pp. 167-169. Nor did it take into consideration the preservation of the res, and the great hardship that the winding up of the appellant would cause. That the court also failed to consider the grounds of appeal particularly the one that contended that there was a substantially disputed debt and the contention that the Federal High Court lacked jurisdiction. It is submitted that if these facts had been taken into consideration by the Court of Appeal, it would not have dismissed the motion but would have granted the stay of further proceedings. It is further submitted that for the foregoing reasons, this court should interfere with the ruling of the court below, which was a wrong exercise of discretion, and therefore grant the application by the appellant.
With regard to issue no.(ii) the foregoing argument on issue no (i) is adopted by the appellant and in addition, it is submitted that the terse ruling given by the Court of Appeal is a violation of the appellant’s right to fair hearing to wit that it failed or neglected to consider the vital issues in the appellant’s brief of argument.
On issue no (iii) the appellant refers to the leading ruling delivered by Uwaifo, JCA, and contends that the Court of Appeal had prejudged the substantive suit when it stated-
“It then says it would pay only principal sum and not the interest. This to me is a puerile claim. This cannot in my view constitute a genuine dispute as to indebtedness.”
It is submitted that the dictum is perverse and cannot stand having regard to the evidence which is available to the appellant against the respondent’s claim.
The respondent, for its part, argues in its brief of argument that the Court of Appeal Rules, 1981 have not made provision for the filing of a brief of argument in support of a motion for stay of proceedings nor did the court direct the appellant to file a brief of argument. The appellant acted on his own in filing the brief and so could not complain if the Court of Appeal disregarded the brief. In any case, it is said, the court did not mention in its ruling that it did not refer to the brief, in which case the appellant cannot argue that that court disregarded the brief. It is again canvassed that the fact that the Court of Appeal did not expressly refer to the brief in its ruling does not mean that it did not read it. It is then contended that in its deciding to dismiss the application peremptorily, it cannot be argued that the Court of Appeal did not advert to the brief of augment or that the argument by the appellant was not considered.
It is submitted that both counsel for the appellant and the respondent addressed the court before it gave the ruling which was based on all the material facts and documents before the court. Therefore, this cannot be regarded as a denial by the court below of the right of fair hearing. It is contended that the principles on which a stay of proceedings can be granted are laid down in the case of Okafor v. Nnaife (1987) 4 NWLR (Pt.64) 129 at P.136 and it is submitted, on the authority of Nnonye v. Anyichie (1989) 2 NWLR (Pt. 101) 110 a p. 115 G – H and Jadesimi v. Okotie-Eboh & On (1986) 1 NWLR (Pt. 16) 264 at p. 278, that the Court of Appeal was entitled to consider the factual situation of the case by observing that the appellant could not maintain a stance that there was genuine dispute as to its indebtedness to the respondent.
Now, I think it is pertinent to reproduce the ruling of Uwaifo, JCA which is short. It reads:-
“The application before the court is for a stay of further proceedings of the petition before the lower court, i.e. the Federal High Court, on the ground that (that) court has no jurisdiction. The issue of jurisdiction has been raised because the applicant says that there was a dispute as to the indebtedness of the applicant to the petitioner/respondent. This dispute, if (sic it) is said is in regard to the interest on the facilities of $200,000 made available to the applicant. The said amount was not debited to the account of the applicant in time but when thus (sic the) error was discovered, the account was brought up to date by the petitioner. But the applicant now argues that since that debit was not done in time, it was misled. It then says it would pay only the principal sum and not the interest. This to one is a puerile claim. This cannot in my view, constitute a genuine dispute as to indebtedness. This application has no merit and it is hereby dismissed with N1,000.00 costs to the petitioner/ respondent. “The nature of the application made before the Court of Appeal was simply to stay the proceedings in the petition brought by the respondent (herein) to wind up the appellant, pending determination of the appeal to the Court of Appeal. Now, the court below has the inherent power to stay proceedings pending appeal in order that the res may be preserved. The power, which is indeed discretionary, must be exercised judicially and also judiciously – See Shodeinde v. The Trustees of Ahmadiyya Movement-in-Islam (1980) 1-2 SC 163 and Kigo (Nig.) Ltd v. Holman Bros (Nig.) Ltd. (1980) 5-7 SC 60. Res means a thing or things, or an object or objects. The question is: what is the res in the present case to be preserved The petition is for the appellant to be wound up. The appellant is, therefore, the res to be preserved pending the determination of the interlocutory appeal before the court below. If the proceedings were not stayed while the interlocutory appeal by the appellant is pending in the Court of Appeal, the possibility and indeed the danger that the winding up proceedings could continue in the Federal High Court and even be concluded is real and present. Should this happen and the appeal before the Court of Appeal succeeds, the damage in winding up the appellant could have taken place. The existence of the company would not therefore have been preserved in the circumstance. The real issue to have been considered by the Court of Appeal was not whether the appellant was indebted to the respondent but rather what could have happened if the proceedings for winding up went on in the Federal High Court and was concluded earlier than the appeal before it got determined. I am afraid the court below did not advert its mind to this very important element in the motion as can be seen from the full of its leading ruling quoted above. In Akilu v. Fawehinmi (No.2) (1989) 2 NWLR (Pt.102) 122 at p. 188, I stated as follows:-
“Some of the considerations which the courts bring to bear on any application for stay of proceedings pending appeal are that the burden is on the applicant for stay of proceedings to show that if the appeal should succeed, the success would not be in vain. Also that in the peculiar circumstances of the case a refusal of stay of proceedings would not be unjust and unequitable..
See Jadesimi v. Okotie-Eboh (1986) 1 NWLR (Pt.16)264; Obeya Memorial Specialist Hospital & Anor. v. A-G of the Federation & Anor., (1987) 3 NWLR (Pt.60) 325 and Okafor v. Nnaife (1987) 4 NWLR (Pt.64) 129.”
It follows, therefore, that the Court of Appeal did not exercise its discretion properly. In order words, the exercise of the discretion was neither judicial nor judicious. In my opinion it ought to have granted the application.
Next the appellant complained that the Court of Appeal prejudged the case in the trial court when it held thus:-
” …But the applicant now argues that since that debit was not done in time, it was misled. It then says it would pay only the principal sum and not the interest. This to one (sic me) is a puerile claim. This cannot in my view, constitute a genuine dispute as to indebtedness…. (Italics mine) There is no doubt, and it is unfortunate, that this finding by the court is prejudicial to the appellant’s case before the trial court. The Court of Appeal should not have adverted to the merit of the appellant’s case in the lower court. If the court had limited its consideration to the principles laid down, in a long line of decisions for the grant of stay of proceedings, it would not have been necessary for it to prejudge the merit of the case before the trial court. This propensity for appeal court to determine the merit of a case, which is not before it for a decision, had been deprecated by this court on many occasions. It is, therefore, necessary for appeal courts to restrain themselves, in dealing with the merit of the dispute in the substantive case, which is not necessary for the determination of any interlocutory appeal brought before them.
For the foregoing reasons, I hold that the decision of the Court of Appeal not to exercise its discretion to grant the application for stay of further proceeding in the winding up petition brought by the respondent in the Federal High Court is erroneous. This is a proper case in which this court can interfere with the decision of the court below.
Accordingly, the appeal succeeds and it is hereby allowed. The decision of the Court of Appeal is set-aside and in its place I grant the application. The proceedings for the winding up petition in the Federal High Court are hereby stayed pending the determination of the interlocutory appeal before the court below. A panel of the Court of Appeal different from the one mentioned at the beginning of this judgment shall hear the pending interlocutory appeal. Costs assessed at N10,000.00 are hereby awarded in favour of the appellant (herein) against the respondent (herein).