BERINI BEIRUT-RIYAD (NIGERIA) LIMITED (APPLICANTS)
1. JABR BROTHERS INDUSTRIAL CO (NIGERIA) LIMITED
2. MOHAMMED RAFIC-IBRAHIM JABR
3. MOHAMMED RASHEED IBRAHIM JABR (RESPONDENTS)
(1964) All N.L.R. 548
Division: High Court, Lagos
Date of Judgment: 16th November, 1964
Case Number: LD/501/63
Before: Taylor, C.J.
The applicants obtained a judgment, against the respondents jointly and severally, for the sum of £32,039. 4. 3d and £429 costs; the parties agreed to an undertaking by the respondents to liquidate the judgment debt and costs by instalments of not less than £5,500 together with accrued interest every 6 months as from the first day of January 1965, on or before which date the first instalment of £5,500 and interest becomes payable; notwithstanding the agreement, the applicants brought an application under section 19(1) of the High Court of Lagos Act for an order that a receiver and manager be appointed to manage the business of the first respondents in view of the magnitude of the respondents' indebtedness to the applicants and other creditors. The respondents opposed the application contending that (I) an order to appoint a Receiver or Manager cannot be made in the absence of an order for winding up the Company (2) that insofar as the substantive Suit has proceeded to judgment, no interlocutory proceedings can be brought under it. The question is whether it is "just or convenient" to appoint a receiver and manager to manage the business of the first respondent in the circumstances.
(1) The court has power to appoint a receiver whenever the security of a debt is in jeopardy and when it is considered just and convenient to do so; in the present case, it would be in the interests of the respondents that the applicant Bank with such a large financial interest in the first respondent Company should have its nominee appointed as a receiver to see to it that the company is run in a way that will guarantee the payment of their debt and that will also be satisfactory to the other creditors.
(2) Where the judgment in the substantive Suit is not yet satisfied, the judgment creditor has certain future rights the performance or breach of which can be enforced or restrained by interlocutory proceedings, and if those rights constitute some form of security for the judgment debt, the creditor is entitled to come by way of motion to protect his security if he is able to show that the security is in jeopardy.
Cases referred to:-
McMahon v North West Ironworks Co (1891) 2 Ch. 148
Salt v. Cooper (1880) 16 Ch.D. 544
Ponnamma v. Arumogam 1905 A.C. 383
Acts referred to:-
High Court of Lagos Act. Cap. 80, sections 14(2) and 19(1)
Companies Act, Cap. 37, sections 162 and 163
Judicature Act, 1925 sections 45(1) and (2).
Rules of the High Court, Order XXXIV, rule I
Rules of the Supreme Court Order 50, rule 16.
Chief Williams, for the Applicants.
Abudu, for the Respondents.
Taylor, C.J. of Lagos:- This is an application brought by the applicant bank under section 19(1) of the High Court of Lagos Act for an order that one Emile Minaise agent-in-charge of the Apapa Branch of the Applicant Bank, or some other fit and proper person be appointed as receiver of the profits of the 1st respondents, and proper person be appointed as receiver of the profits of the respondents, and further that the said receiver be authorised to manage the business of the 1st respondents for a period not exceeding four years.
In the substantive Suit between the parties which was settled on the 18th May, 1964, Judgment was entered inter alia for the present applicants for the sum of £32,039. 4. 3d and £425 costs against the defendants jointly and severally. It is one of the terms of settlement that:-
"The defendants undertake to pay the Judgment debt and costs by instalments of not less than £5,500 together with accrued interest every six months as from the first day of January 1965 on or before which date the first instalment of £5,500 and of accrued interest will be paid."
In paragraphs 4 and 5 of the affidavit in support of the motion the applicants aver, and it was conceded at the hearing, that the 2nd and 3rd respondents had mortgaged all their shares in the Company to the applicant bank, and further that the 1st respondent was, apart from the Judgment debt above referred to, owing the applicant Bank the sum of £2,000.
The affidavit goes on to say that there are other creditors of the 1st respondent, and that the 2nd and 3rd respondents have not sufficient funds to satisfy the Judgment debt; that unless a receiver was appointed creditors may fall upon the 1st defendant Company which as a result may be wound up.
The respondents admit their indebtedness to other creditors to the tune of £26,500. 9. 3d, and have filed a balance sheet to which I shall later make reference. At this stage I propose to deal with two preliminary points raised by Mr Abudu for the respondents that:-
1. An order appointing a Receiver or Manager cannot be made in the absence of an order winding up the Company.
2. That insofar as Suit LD/501/63 has proceeded to Judgment, no interlocutory proceedings can be brought under it.
On the first point Mr Abudu referred me to sections 162 and 163 of the Companies Act and to Vol. 18 of the 3rd Edition of Halsbury's Laws of England at 560 in support of his point. There is no need for me to set out the first section for the opening words made it clear that it is inapplicable to the facts of this case. It says that:
"Where the official receiver becomes the liquidator of a Company"
As for section 163 it states that:-
"Where an application is made to the court to appoint a receiver on behalf of the debenture holders or other creditors of a Company which is being wound up by the court, the official receiver may be so appointed."
That section deals with the case of a company being wound up by the court which is not the case here. Chief Williams in answer to this urged that his application was brought not under the Companies Act but under section 19(1) of the High Court of Lagos Act which provides that:-
"The High Court may grant a mandamus (as defined in Subsection 5) or an injunction or appoint a receiver by an interlocutory order in all cases in which it appears to the court to be just or convenient so to do."
And section 14(2) provides that:-
"Any such order may be made either unconditionally or on such terms and conditions as the court thinks just."
These provisions, as Chief Williams pointed out, are identical with section 45(1) and (2) of the Judicature Act, 1925. In the note to Order 50, rule 16 of the Rules of the Supreme Court at 1209 1963 Annual practice it is said that:
"There is no limit to the power of the court under this section (i.e. 45 of the Judicature Act) to appoint a receiver on motion, except that it is only to be excercised when it appears "just or convenient."
The relevant consideration is whether it is "just or convenient" in the circumstances of this case that a receiver and manager be appointed to manage the 1st respondent's business. It is relevant to note for the purposes of guidance that even under the Company Law of England, as the learned author of Palmer's Company Law 20 Edition says at 416:-
"The power of the court to appoint a receiver is not confined to cases in which the principal or interest on the debenture or debenture stock is in arrear. A receiver may be appointed whenever the security is in jeopardy. Thus when a Company has become insolvent and closed its works, a receiver was appointed. So, where a winding up of the Company takes place or is imminent, or where a Company is disposing of its undertaking in violation of the terms of the security; or where there are judgments against the company; or where a company is in a state of suspended animation."
In the case of McMahon v. North West Iron Works Co 1891 2 Ch. 148 at 150 Kekewich J. said that: "As a matter of principle a mortgagor has a right to the protection of his security if it is in jeopardy."
In that case it should be noted that there had been no actual default in payment of interest, and the principal was not yet due and payable. The point for consideration is whether 'the security is-in jeopardy and to my mind this is a matter that must weigh heavily in my mind in deciding whether it is just or convenient to appoint a receiver under section 19(1) of the High Court of Lagos Act. There is therefore no substance in the first point raised by Counsel that unless there are winding up proceedings before the court, a receiver cannot be appointed.
It will be convenient for me to dispose of the second objection of Counsel before I proceed to the consideration of whether it is just or convenient in these proceedings to appoint such a receiver. Order XXXIV, rule 1 of the Rules of the High Court provides that:-
"Interlocutory applications may be made by motion at any stage of a cause or matter."
Mr Abudu's point as I understand it is that once a cause or matter has proceeded to final Judgment no interlocutory application can be made in that cause or matter. In the Third Edition of Halsbury's Laws of England Vol. 32 at 393, section 630 the learned author says that:-
"A receiver cannot be appointed in a foreclosure action after order for foreclosure absolute, for this brings the proceedings to an end as far as the court is concerned, but it is otherwise in the case of actions for money demands, where the process of the court may still be invoked to enforce what is on the face of it a final Judgment.
Further, in the case of Salt v Cooper (1880) 16 Ch.D. 544 at 551 Jossel MR said that:-
"A cause is still pending even though there has been final judgment given, and the court has very large powers in dealing with a judgment until it is fully satisfied. It may stay proceedings in the judgment, either wholly or partially, and the cause is still pending therefore, for the purpose, as it appears to me, and must be considered as pending, although there may have been final judgment given in the action, provided that judgment has not been satisfied.
This case was cited with approval in Ponnamma v. Arumogam 1905 AC. 383 at 390 where Lord Davey delivering the Judgment of the court said that:-
"The case of Salt v. Cooper (1) seems merely to have decided that a cause in which judgment has been given, provided that the judgment has not been satisfied, is still pending within the meaning of the rule relating to execution of Judgment, which seems a little obvious."
The Judgment in the substantive Suit is obviously not satisfied, in fact the first payment of the judgment debt is in January 1965 and payments of £5,500 are to be made every 6 months until the whole debt and interest are paid off. Finally paragraphs 3, 4 and 5 of the Judgment show that though the judgment is final, the judgment creditor has certain future rights the performance or breach of which can be enforced or restrained by interlocutory proceedings, and if those rights constitute some form of security for the judgment debt I see no objection to his coming by way of motion to protect his security if he is able to show that it is in jeopardy. This objection is therefore without any substance.
Now to the substance of the application. Is it just or convenient to appoint a receiver? Is the security guaranteed by the judgment in the substantive Suit in jeopardy?
In the account filed the current liabilities is said to be £60,337. 14. 10d. made up of £33,837. 5. 7d. said to be Bank overdraft owing to the plaintiff Company and £26,500. 9. 3d. owing to other creditors' five of whom are referred to in paragraph 3 of the further affidavit. The amount owed to each is not stated. There is a substantial increase in these figures as compared with those of 1963 which show the former as £30,597 and the latter as £11,291.
Mr Abudu drew my attention to the items "fixed" and "current" assets in the balance sheet where the first is shown as £48,050. 12. 3d. as against the 1963 figure of £48,525. and the latter as £45,749. 11. 5d. as against the previous year's figure of £52,966. The depreciation speaks for itself. Looking further into the current assets both the "stock" which is shown as £34,643. 15. 0d. and "Cash in Hand" shown as £937.4. 1d. are figures not verified by the auditor or accountants but said to be "as certified by the Managing Director." In 1963 the balance sheet showed that the 1st respondent Company had nothing in the Bank as against an increase of £60 in the 1964 balance sheet.
That the company is in a precarious position is self evident. The deponent, on behalf of the respondents, swore in paragraph 6 of the affidavit that at the beginning of 1964 sales dropped by as much as 65%, but goes on to say that things are improving.
The possibility of any of the other creditors, or all of them, falling on the 1st respondent in respect of the respective debts to them cannot be ruled out, and if that did happen and the 1st respondent is unable to pay the debt or debts, a winding-up petition may be the outcome. It is in my view just that a receiver should be appointed. I would go so far as to say that it would be in the interests of the respondents that the applicant Bank with such a large interest (financial) in the 1st respondent Company should have its nominee appointed as a receiver to see to it that the company is run in a way that will guarantee the payment of their debt and that will also be satisfactory to the other creditors.
I do not, however, propose to make this appointment immediately, but to make the order conditional upon a further review of the position of the 1st respondent Company on Monday, the 8th February, 1965 after the first instalment of £5,500 to the applicant would have become due and payable. The respondents are ordered to appear on the 8th February, 1965, and to present an account showing the position of the Company. The account is to be served on the applicant Bank not later than January the 18th, 1965, who may if they so wish file an answer or a falsification or surcharge to same. Costs of this application will be discussed on that day. The application is therefore adjourned till 8th February, 1965.