Wema Bank Plc. & Ors V. Prince (Dr.) B.a. Onafowokan & Ors (2004)

LawGlobal-Hub Lead Judgment Report

JAMES OGENYI OGEBE, J.C.A. 

The three appellants sued the respondents in the Federal High Court, Lagos, seeking a number of declaratory and injunctive reliefs in respect of the receivership of the 2nd appellant company.

The respondents brought a notice of preliminary objection before the High Court, seeking an order of the court to strike out the suit on the ground of incompetence. The trial court upheld the objection and struck out the action for incompetence, especially as the 1st and 3rd appellants instituted the action in the name of the 2nd appellant without the leave of court.

The 1st appellant was dissatisfied with the ruling of the lower court and appealed to this court. The learned Counsel for it filed an amended brief of argument which raised only one issue for determination as follows:

“Whether a person appointed as a receiver of a company pursuant to S.393(3) of the Companies and Allied Matters Act, 1990, must have such appointment confirmed by the court and/or obtain leave of court to institute an action in the name or on behalf of the company.”

The respondents filed a brief of arguments in response to the 1st appellant’s brief and filed one issue for determination as follows:

“Whether the 1st and 3rd appellants who filed a joint statement of claim and who did not plead the material facts in section 393(3) can seek to take advantage of the benefits provided for, in that section to circumvent the need for the leave of court to bring or defend an action in the name of the 2nd plaintiff (company).”

The 2nd and 3rd appellants were also dissatisfied with the ruling of the lower court and appealed to this court against it. The learned Counsel for them filed a brief of argument and identified 4 issues for determination as follows:

“i) Whether the 3rd plaintiff/appellant as receiver of the property of the 2nd plaintiff/appellant must obtain leave of court to institute or defend an action in the name of the 2nd plaintiff/appellant having regard to section 393(3) and clause 5 of Schedule 11 of the Companies and Allied Matters Act, Cap. 59, Laws of the Federation of Nigeria, 1990 (Grounds 1 & 2 of the notice of appeal).

ii) Whether there is any law in Nigeria, which stipulates that the plaintiffs must come to court for the confirmation of the appointment of the 3rd plaintiff/appellant as a receiver (Ground 3 of the notice of appeal).

iii) Whether the learned trial Judge was right in holding that the 2nd plaintiff’s name was improperly used in the suit at the lower court (Ground 4 of the notice of appeal).

iv) Whether the learned trial Judge exercised his discretion judicially and judiciously when he awarded the sum of N10,000.00 as cost against the appellants (Ground 5 of the notice of appeal).”

The respondents filed a brief of argument in response to the and and 3rd appellants’ brief and gave a notice of preliminary objection within the brief and argued that the 2nd appellant and 3rd appellant have no locus to pursue this appeal against the respondents who are the chairman and directors of the 2nd appellant company because only one asset was mortgaged to the 1st appellant and other lender and the 2nd appellant is not under receivership.

I find this objection totally misconceived. The 2nd and 3rd appellants were parties to the suit in the court below and they have the right to appeal to this court against a ruling which did not favour them. What the respondents’ preliminary objection is trying to do is to make this court a court of first instance to determine issues that will require evidence and should be handled by a trial court; this court will not fall into that trap. The preliminary objection is overruled.

The respondents formulated 3 issues for determination as follows:-

“1. Whether the 3rd appellant needed leave of court to bring or defend an action or other legal proceedings in the name and on behalf of the 2nd appellant over whose specifically mortgaged premises he had been appointed a receiver.

2. Whether there is need for a court to confirm the appointment of the 3rd appellant (receiver/manager appointed by a debenture holder.

3. Whether the 3rd appellant can join the 2nd plaintiff as a party to the action.”

They adopted the 4th issue in the brief of the 2nd and 3rd appellants. The only issue in the 1st appellant’s brief is the same issue as the 2nd and 3rd appellants’ 1st issue. The issue formulated by the respondents in respect of the 1st appellant appeal does not arise from any of the grounds of appeal especially as it relates to an issue of pleading which was not raised in any of the grounds of appeal. It is therefore, incompetent and I hereby strike it out.

The main argument of all the appellants in respect of the 1st issue is that by virtue of section 293(3) and Clause 5 of 11th Schedule of the Companies and Allied Matters Act a receiver does not need leave of the court to sue in the name of the company whose property is in receivership. They said that the cases of Intercontractors (Nig.) Ltd. v. UAC (Nig.) Ltd. (1988) 2 NWLR (Pt.76) 303, (1988) 4 SC 207 and Intercontractors (Nig.) Ltd. v. National Provident Fund Management Board (1988) 2 NWLR (Pt.76) 280, (1988) 4 SC 247 relied upon by the trial court to strike out the appellants’ suit were decided under the provisions of the Companies Act, 1968 and were no longer applicable in the present state of the law.

The respondents for their own part submitted that a receiver can only enjoy the powers and duties imposed by section 393 of the Companies and Allied Matters Act, if the deed of appointment shows that the whole or substantially the whole of the company’s properties are under receivershjp and therefore, the receiver can enjoy the privilege conferred under Schedule 11.Anything short of this would make the position expounded by the Supreme Court, in Intercontractors (Nig.) Ltd. v. UAC (Nig.) Ltd. (supra) and Intercontractors (Nig.) Ltd. v. National Provident Fund Management Board (supra) applicable.

The learned Counsel for the respondents said that the controversy as to whether a receiver would require leave of court to sue has been laid to rest by the case of Unibiz (Nig.) Ltd. v. CBCL Ltd. (2003) 6 NWLR (Pt.816) 402 at pages 425-427.

I have read the cases of the Intercontractors (Nig.) Ltd. v. UAC Ltd. and Intercontractors (Nig.) Ltd. v. National Provident Fund Management Board (supra) where the Supreme Court per Karibi Whyte, JSC was of the view it was necessary for a receiver/manager who intends to bring or defend an action in the name of the owner of the goods to seek leave of the court, since he has no legal title to the property in the debenture. These cases were decided under the provisions of the Companies Act, 1968. The Companies Act, 1968, does not have the same provisions as section 393 and Schedule 11 of the Companies and Allied Matters Act, which repealed the previous 1968 Act.

I have also read the case of Unibiz (Nig.) Ltd. v. CBCL Ltd. (2003) 6 NWLR (Pt.816) 402. In that case it was the principal creditor who sued by way of counter-claim for the recovery of its debts and for reliefs to allow the receiver to operate and not the receiver/manager. The Supreme Court considered the provisions of sections 390 and 391 of the Companies and Allied Matters Act, (hereinafter simply called CAMA) as follows at page 427:

“The first observation that must be made is that in the instant case, we are concerned with the provisions of sections 390 and 391 of CAMA. However, a careful reading of the above passage would reveal that the receiver/ manager though recognized as an agent of its company, it was held that it was necessary for that agent to be granted leave by the court to prosecute the action. The reason that made such leave necessary is because it was considered that it must first be determined whether the proposed action would be the best way of disposing the issue. And also limit the costs that would be paid. In the instant case, the question of leave is unnecessary as the principal is itself initiating the action and would be deemed to be in control of the consequences of its own action. Moreover, the action in this case as was made clear in the prayers in the amended originating summons is clearly directed to empowering the receiver to take necessary steps to protect the interest of his principal.”

In that case, the Supreme Court did not consider the powers of a receiver/manager to sue by virtue of Section 393 and Schedule 11 of CAMA. Section 393 subsection 1-3 are relevant and quoted hereunder:

“393(1) A person appointed a receiver of any property of a company shall subject to the rights of prior incumbrancers, take possession of and protect the property, receive the rents and profits and discharge all out-goings in respect thereof and realize the security for the benefit of those on whose behalf he is appointed, but unless appointed manager he shall not have power to carry on any business or undertaking.

2. A person appointed manager of the whole or any part of the undertaking of a company shall manage the same with a view to the beneficial realization of the security of those on whose behalf he is appointed.

3. Without prejudice to subsection (1) or (2) of this section, where a receiver or manager is appointed for the whole or substantially the whole of a company’s property, the powers conferred on him by the debentures by virtue of which he was appointed shall be deemed to include (except in so far as they are inconsistent with any of the provisions of those debentures) the powers specified in the Eleventh Schedule to this Act.”

Reference is made to schedule 11 paragraph 5 which gives the receiver power to bring or defend any action or other legal proceedings in the name and on behalf of the company.

Where the words of a statute are clear it is the duty of the court to give the words their ordinary meaning. See Oviawe v. I.R.P. (Nig.) Ltd. (1997) 3 NWLR (Pt.492) 126. From the provisions above it is clear that where the receiver or manager is appointed for the whole or substantially the whole of the property the powers conferred on him by the debentures by virtue of which he was appointed shall deemed to include the powers specified in Schedule 11 of CAMA to bring or defend any action or other legal proceedings in the name and on behalf of the company.

In my view this power is not limited and does not require confirmation of the receiver’s appointment by the court nor leave of the court to sue. It is quite clear from sections 390 and 391 of CAMA that a receiver or manager of any property or undertaking of a company may be appointed out of court under the power contained in any instrument and may apply to the court for direction in relation to any particular matter arising in connection with the performance of his function. If the trial court had adverted its mind to these provisions of CAMA it would not have hastily struck out the appellants’ claim.

One other point I wish to make is that the preliminary objection in the court below appeared to be premature; for example the question of whether or not, the receiver is appointed for the whole or substantially the whole of the company’s property can only be determined by evidence. A trial court should by and large avoid determining issues which are require tested evidence at a preliminary stage in the proceedings.

For all I have said thus far, I find merit in the 1st appellant’s appeal as regards its sole issue and the 2nd and 3rd appellants’ appeal as regards their 1st issue. Since this issue disposes of the appeal, I do not find it necessary to consider the remaining issues in the brief of 2nd and 3rd appellants. Accordingly, I allow the appeal and set aside the ruling of the trial court including the order of costs. In its place, I dismiss the notice of the preliminary objection filed by the respondents before that court. I remit the case to the Chief Judge of the Federal High Court for the case to be tried de novo by another Judge.

The respondents shall pay costs of N3,000.00 to the 1st appellant and N5,000.00 to the 2nd and 3rd appellants.

Other Citations: (2004)LCN/1551(CA)