CASE TITLE: AURECON AMEI LTD & ANOR v. ZUMA ENERGY (NIG) LTD (2025) LPELR-81425(CA)
JUDGMENT DATE: 22ND APRIL, 2025
JUSTICES: ABBA BELLO MOHAMMED, J.C.A
OKON EFRETI ABANG, J.C.A
DONATUS UWAEZUOKE OKOROWO, J.C.A
DIVISION: ABUJA
PRACTICE AREA: CONSTITUTIONAL LAW
FACTS:
This appeal borders on Company Law.
This appeal is against the ruling of the Federal High Court, coram: Honourable Justice N. E. Maha, delivered on the 7th day of April 2022 in respect of the Appellants’ motion on notice dated 6th July 2020 for advertisement of the winding up petition.
The Respondent engaged the services of the Appellants in 2011 to conduct feasibility studies in respect of its Coal Fired Plant. The Appellants duly conducted the studies and made reports to the Respondent. The Appellants made several demands on the Respondent to pay outstanding monies due to them and in a meeting held in May, 2015, the Respondent maintained that the sum due to the Appellants was US$135,705.00 (One Hundred and Thirty Five Thousand, Seven Hundred and Five Dollars only). The Respondent promised to pay the sum of US$20,000 to the Appellants by end of June, 2015 while the balance would be paid before the end of 2015. But the Respondent failed to pay despite several reminders. In response to the Appellants’ demand made on 30th August, 2018, the Respondent wrote a letter to the Appellants dated 17th October, 2018 wherein it stated that “We will review all outstanding payments and treat them accordingly as we are assiduously working for the project to kick-start again and will surely meet up with our said obligations under the contract.”
When it became clear to the Appellants, after waiting for about 5 years, that the Respondent cannot pay its debt, the Appellants commenced this winding up proceedings against the Respondent before the trial Court, vide petition filed on 6th July, 2020. An affidavit verifying the petition was filed on 7th July, 2020 together with a Motion on Notice seeking leave for advertisement of the petition as required by law. The Respondent opposed the motion with a Counter Affidavit filed on 28th August, 2020. After hearing the Motion, the trial Court delivered its ruling on 7th April, 2022 wherein it refused the application for leave to advertise the petition and struck out the Motion on Notice.
Dissatisfied with the ruling of the trial Court, the Appellants referred the decision to the Court of Appeal.
ISSUE(S) FOR DETERMINATION:
The Court determined the appeal on this sole issue, thus:
Whether the application for leave to advertise the Petition was not properly brought.
COUNSEL SUBMISSIONS:
Learned Counsel for the Appellant pointed out that in refusing the application for leave to advertise the petition, the lower Court had held that from the grounds of the petition, the debt was not acknowledged. Counsel submitted that the lower Court had wrongly assumed that acknowledgement of the debt was a requirement for winding up on the ground of inability to pay debt. Counsel referred to the Companies and Allied Matters Act, 2004 under which the petition was brought, now Section 572 of the Companies and Allied Matters Act, 2020, as well as UNION HOMES SAVINGS AND LOANS PLC v TANUS PROPERTY DEVELOPMENT LTD (2015) LPELR-41000; and BOWES v HOPE LIFE INSURANCE & GUARANTEE CO. (1865) 11 HL Cas. 389.
Learned Counsel also submitted that even if admission or acknowledgement of the debt is a requirement for winding up proceedings, the Respondent had clearly admitted the indebtedness in the Respondent’s reply letter dated 17th October 2018 (at page 94 of the Record) as well as in the emails at pages 243 – 244 of the Record. He posited that the Appellants were therefore entitled to bring the Petition and the application for advertisement of the Petition which was brought by the Appellants ought to have been granted by the lower Court. Counsel argued that the issue of whether or not the debt is disputed cannot be considered before the hearing of the winding up petition. He referred to the case of SUBURBAN BROADBAND v INTELSAT (2016) LPELR-40334 at pages 11 – 12.
The learned Counsel for the Appellant further submitted that the purpose of advertisement of a winding up petition is to give notice to persons interested in the affairs of the company that such a proceeding is pending. He argued that the lower Court was wrong when it held that the application for leave to advertise the petition was brought mala fide. He added that the conclusion by the lower Court that the application was brought mala fide was based on its erroneous finding that the debt was not acknowledged. He referred to ADAMU MOHAMMED GBEDU & ORS v JOSEPH I. ITIE (LIQUIDATOR) & ORS (2020) 1 NWLR (Pt. 1710) 131 – 132; EZENWA v JOSEPH CORNELIUS LIMITED & ORS (1994) 7 NWLR (Pt. 356) 292; OKOYE v INEC & ORS (2009) LPELR – 4727; KHALIFA v ONOFU & ANOR (2016) LPELR-41163 at 20 – 21; UNIFAM INDUSTRIES LTD v OCEANIC BANK INTERNATIONAL (NIG) LTD (2005) 3 NWLR (Pt. 911) 83 at 101; and UNIFAM INDUSTRIES LTD v ECO BANK NIGERIA LTD (2019) 1 NWLR 187.
Learned Counsel pointed out that the Record of the lower Court shows that the issue of whether the application for advertisement was brought mala fide was never raised by the parties, but the lower Court proceeded to input the “fraudulent intention and dishonesty of purpose” on the Appellants’ motion for advertisement without giving the parties the opportunity to be heard on same. On this point, Counsel relied on AKERE & ORS v GOV. OF OYO STATE & ORS (2012) LPELR-7806; ADEGOKE v ADIBI (1992) 5 NWLR (Pt. 242) 410 at 420; ODIASE v AGHO (1972) 1 All NLR (Pt. 1) 170; EJOWHOMU v EDOK–ETER MANDILAS LTD (1986) 5 NWLR (Pt. 185) 267 at 280 and YEKINI A. ABBAS & ORS v MOGAJI & ORS (2001) 11 SC 1 at 14.
Learned Counsel submitted that this Court has the power to grant an order which the lower Court ought to have granted. He referred to Order 23 Rule 19 of the Court of Appeal Rules, 2021 and MAIDOYA & ORS v FUNTUA LOCAL GOVERNMENT & ANOR (2019) LPELR-48019; and SPDC (NIG) LTD v ALLAPUTA (2005) LPELR-11183 at 30. He argued that the application for advertisement of the Petition was duly and properly made before the lower Court pursuant to Rule 19(1) of the Winding Up Rules, 2001. He urged this Court to set aside the ruling of the lower Court of 7th April, 2022 and grant the application which the lower Court wrongly refused and make the order for the advertisement of the petition.
DECISION/HELD:
The appeal was dismissed.
RATIO:
COMPANY LAW- WINDING UP: When will a company be deemed to be unable to pay its debt for the purpose of winding up
“Now, Section 408 of the Companies and Allied Matters Act, 1990 (CAMA 1990), under which the petition was brought [which is now Section 571 of the Companies and Allied Matters Act, 2020 (CAMA 2020)], provides as follows: “A company may be wound up by the Court if – (a) the company has by special resolution resolved that the company be wound up by the Court; (b) default is made in delivering the statutory report to the Commission or in holding the statutory meeting; (c) the number of members is reduced below two; (d) the company is unable to pay its debts; (e) the Court is of opinion that it is just and equitable that the company should be wound up.” (underline mine) In UNION HOMES SAVINGS & LOAN PLC v TANUS PROPERTY DEVELOPMENT LTD (2015) LPELR-41000(CA) at 12, paras. A – D, this Court, per Oseji, JCA (as he then was, later JSC, but now of blessed memory), had espoused the ingredients of paragraph (d) of Section 408 of CAMA 1990, thus: “For the purpose of the instant case, the applicable provision is Section 408(d) which provides that a company may be wound up by Court if “the company is unable to pay its debts. For this to take place, as held in AIR VIA LTD VS ORIENTAL AIRLINES LTD supra, the following ingredients are required:- (a) there must be a debt (b) the debt must be due, and (c) the company to be wound-up is unable to pay the debt. See also BOWES VS HOPE LIFE INSURANCE & GUARANTEE CO. (1865) 11 HL Cas. 389.” Indeed, Section 409 of CAMA 1990 [which is now Section 572 of CAMA 2020], has furthered the provision of Section 408(d) quoted above by listing the circumstances in which a company will be deemed to be unable to pay its debts. It provides thus: “A company shall be deemed to be unable to pay its debt if – (a) a creditor, by assignment or otherwise, to whom the company is indebted in a sum exceeding N2,000, then due, has served on the company, by leaving it at its registered office or head office, a demand under his hand requiring the company to pay the sum due, and the company has for three weeks thereafter neglected to pay the sum or to secure or compound for it to the satisfaction of the creditor; or (b) execution or other process issued on a judgment, Act or order of any Court in favour of a creditor of the company is returned unsatisfied in whole or in part; or (c) the Court, after taking into account any contingent or prospective liability of the company, is satisfied that the company is unable to pay its debts.” (underline mine). As is clearly discernible from subparagraph (a) of Section 409 of CAMA, 1990 quoted above, a company is deemed to be unable to pay its debt once a creditor to whom the company is indebted in the sum exceeding N2,000 has served on the company a written demand notice requiring the company to pay the debt and the company has for three weeks after such demand failed or neglected to pay the debt or to secure or compound it to the satisfaction of the creditor. As for the argument of the Appellant that acknowledgment of the debt is not required in a winding up petition, the trite position is that the existence of a debt which a company is unable to pay, is the very foundation of a petition for winding up of the company. The burden of proof of the existence of such unpaid debt is on the petitioner who must discharge same by either establishing with credible evidence the existence of the debt owed him by the company or by showing that the debt had been acknowledged/admitted by the company. In UNION HOMES SAVINGS & LOANS PLC (supra), this Court specifically addressed this issue when Oseji, JCA (as he then was) held at pages 22 – 23, paras. E – B, thus: “…AIR VIA LTD VS ORIENTAL AIRLINES LTD (supra) where it was held per EJIWUNMI JSC (now of blessed memory) that where a debt is disputed whether by a counter claim or not, the petitioner in a winding-up proceedings has the burden of first establishing the debt owed him before proceeding to take steps to present the petition. See also UNION BANK OF NIGERIA LTD VS TROPIC FOODS LTD. (1992) 3 NWLR (PT 228) 231 AT 250. In HANSA INTERNATIONAL CONSTRUCTION LTD vs MOBIL PRODUCING NIGERIA (1994) 9 NWLR (PT 366) 76 it was held inter alia that, when there is a disputed debt, it will not be right to commence a winding-up proceeding based on it. There ought to be a resort to another forum to have that dispute resolved and to establish a debt in the true sense.” Per MOHAMMED, J.C.A.
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