Vertner W. Tandy Tandy V. The Harmony House Furniture Co. Ltd (1964)
Vertner W. Tandy Tandy (In The Matter Of The Companies Act (Cap 37)) V. The Harmony House Furniture Co. Ltd (1964)
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PER BRETT JSC
This is an appeal against the judgment of the High Court of Western Nigeria dismissing a petition for the winding-up of the respondent company on the ground that it is unable to pay its debts and that it is just and equitable that the company should be wound up.
The history of the matter is as follows. On the 17th of July, 1960, there was a meeting of the promoters of the company attended by the two petitioners, Messrs Tandy and Freeman, and by three others. The petitioners said that they were in possession of £10,000, being the proceeds of a two-year loan which had been made to them in Ghana for a purpose which had failed, and they offered to lend this money to the company on the same terms of repayment and at 7½ per cent interest.
This offer was accepted but as the company was not incorporated until the 8th of August, 1960, the agreement reached at that meeting did not constitute a contract binding on the company. The petitioners, however, held the money available for the use of the company from the 17th of July, 1960, and at some time after the incorporation of the company they paid the money to the company. On the 2nd of September, 1961, there was a meeting of the Board of Directors, when this loan was discussed, and it was agreed that the loan should be deemed to have commenced on the 17th of July, 1960, and that interest at 7½ per cent should be paid from that date. It was further agreed that a written memorandum of this should be prepared and signed by the chairman of the company and by Mr V. Tandy, as Secretary of the company; but it does not appear that this was ever done.
On the 31st of January, 1962, Mr Tandy wrote to the company saying that it would be convenient for him and Mr Freeman if the loan could be paid off before July, 1962, as he had received information from Ghana which made it urgent that the loan they had received in Ghana should be paid off as soon as possible. The chairman replied on the 14th of February, 1962, suggesting that Mr Tandy should find some one or more persons who would pay £10,000 in cash to the company so as to make it possible for the company to repay the loan.
This virtually amounts to an admission that the company was unable to repay the loan out of its current assets, and such an admission is confirmed by the Balance Sheet of the company at the 31st March, 1962, in which current liabilities, exclusive of the loan from Mr Tandy, consist of a bank overdraft, sundry creditors and the director’s current account to a total of £29,000 odd, and current assets, consisting of stock as certified by the Manager, sundry debtors and £23 cash in hand, amount to a total of £31,000 odd.
On the 21st of July, 1962, Mr Tandy wrote again demanding the repayment to him of everything which the company owed him, including the loan of £10,000 plus interest. The chairman replied on the 23rd August, 1962, repeating what he had said in his previous letter and saying, “It had all along been understood that the £10,000 loan you both made to the company at an agreed interest rate of 71/2 per cent was to be repayable from operations and/or increased capital contributions by members.”
On the 9th of October, 1962, the petitioners made a formal demand for the payment of £10,000 within 21 days and warned the company that if it did not pay this amount they would instruct their solicitors to file a winding-up petition. The petition was filed on the 7th of November, 1962.
The first response of the company to the filing of the petition was to claim that over £6,000 of the loan of £10,000 had been repaid, but this was not true. The trial judge dismissed the petition because he held that the company was not bound by the agreement of the 17th July, 1960, but it has been conceded on behalf of the company in this Court that the company is liable in quasi-contract to refund the loan, and it is not necessary to decide whether, as the appellant submits, a fresh contract was made on the 2nd September, 1961. Both parties agree that the petitioners owe a certain sum of money to the company for furniture supplied to them, but there is a dispute as to whether the amount of this counterclaim is £500 odd or £1,100, and the parties are not in agreement as to whether the company is under any liability to pay interest on the loan.
In these circumstances, what this Court has to decide is whether it has been shown that the company is unable to pay its debts within the meaning of sections 135(e) and 136 of the Companies Act, and Chief Williams, on behalf of the appellant, referred us to the decision of Plowman, J., in In re Tweeds Garages Ltd. [1962] 1 Ch. 406. This decision is, of course, not binding on any court in Nigeria but in the absence of Nigerian decisions on the relevant sections of the Nigerian Companies Act, the reasoning of any decision on the equivalent provisions of the United Kingdom Act must command particular attention.
Plowman, J., referred to the decision in In re Brighton Club and Norfolk Hotel Company Ltd. (1865) 35 Beav. 204, where a petition was based on a failure to pay a debt after a statutory demand, and the petition was refused on the ground that there was a bona fide dispute as to the amount due, but he pointed out that in that case the Master of the Rolls said: ‘Far from being insolvent, this company is carrying on a thriving business, which I am asked to stop, merely because there is a quarrel between the company and their contractor as to what is due, to him.”
He also referred to In re London and Paris Banking Corporation (1874) L.R. 19 Eq. 444, where Sir George Jessel, M.R. said, “I should be bound by authority (even if I entertained a different opinion, which I do not) to hold that if the debt is bona fide contested, and there is no evidence other than non-compliance with the statutory notice, to show that the company is insolvent and the company denies this insolvency (as this company does) I ought to dismiss the petition.” He regarded those cases as distinguishable because in the case before him he was satisfied that the company was insolvent and he dealt with the meaning of insolvency in this context as follows:-
“Insolvency in the relevant sense is explained in Buckley on the Companies Acts, 13th ed. (1957), p. 460, in this way: `The particular indications of insolvency mentioned in paragraphs (a), (b) and (c)’-I interpolate the words `of section 223-’are all instances of commercial insolvency, that is of the company being unable to meet current demands upon it.
In such a case it is useless to say that if its assets are realised there will be ample to pay 20 shillings in the pound: this is not the test. A company may be at the same time insolvent and wealthy. It may have wealth locked up in investments not presently realisable; but although this be so, yet if it have not assets available to meet its current liabilities it is commercially insolvent and may be wound up.”’
Towards the end of his judgment he said-
”Moreover, it seems to me that it would, in many cases, be quite unjust to refuse a winding-up order to a petitioner who is admittedly owed monies which have not been paid merely because there is a dispute as to the precise amount owing.” And later, “in the present case, being, as I have said, satisfied that the company is insolvent, I think that it would be wrong to put these petitioners to the trouble and expense of quantifying the precise amount which is owing to them in other proceedings and, in all the circumstances of this case, I propose to make the usual compulsory order.”
In our view, this is a proper case for the Court to follow the reasoning of Plowman, J., in Tweeds Garages Ltd. It seems clear from the admissions made by the chairman of the company in his letters of the 14th of February and the 23rd of August, 1962, as well as from the Balance Sheet of the 31st of March, 1962, that the company is commercially insolvent, as explained above, and that at the lowest reckoning a very substantial sum of money is owing to the petitioners. The company had ample warning that the petitioners wished this sum to be repaid as soon as possible, and has, in effect, told th
Other Citation: (1964) LCN/1188(SC)