Ecobank moved to “kill” Honeywell Flour Mills by irregular procedure but the Supreme Court waded in.

Ecobank (Nig.) Ltd v. Honeywell Flour Mills Plc [2019] 2 NWLR (Pt. 1655) 55 at 84, para. B. per Okoro, JSC:

“May I state it without equivocation that application for orders of injunction affecting the rights and obligations of parties cannot be moved ex-parte in winding up proceedings. Parties must be put on notice.”

The brief facts of the case are that the Appellant (Ecobank) and the Respondent (Honeywell) had reached an amicable settlement whereby it was agreed that the Respondent shall pay to the Appellant the sum of N3.5 Billion in full and final settlement of the indebtedness of about N5.5 Billion owed by the Respondent and its sister companies under the Honeywell Group.

Due to subsequent disagreements that ensued regarding the repayment, the Respondent filed an action against the Appellant at the Federal High Court. While the suit was pending, the Appellant filed a fresh suit, being a petition for the winding up of the Respondent followed with applications for interim/interlocutory reliefs seeking to preserve the assets and funds of the Respondent pending the appointment of a provisional liquidator and the hearing of the petition before the court. The Court (Tsoho J.) declined to grant the applications, directing that the Respondent be put on notice. The Appellant consequently discontinued the action. Later, the Appellant filed a fresh petition for winding up accompanied by similar ex parte application against the Respondent. This time around, the Court (Yinusa J.) granted the application. The Respondent’s subsequent application to set aside the ex parte orders made were disallowed. Instead, the Court varied the orders made by allowing the Respondent limited access to the funds in the company’s account. Aggrieved, the Respondent appealed to the Court of Appeal which allowed the appeal, setting aside the orders made and directed that the matter be transferred to another Judge. The Appellant appealed to the Supreme Court which dismissed the appeal. The Supreme Court held that it was improper to grant the ex parte application without hearing the Respondent. Okoro, JSC quoted the Court of Appeal thus:

“The reason is not far-fetched. The Court below made it so clear and I shall reproduce it here – “To my mind, the grant of interim order of injunction by the Lower Court particularly orders No (1) and No (3) (whether varied or not) without any notice to the Appellant thereby affording it the opportunity to be heard on a matter that seeks to paralyze and immobilize a functional and ongoing corporate organization, is an exercise of discretion too extreme and injudicious to be allowed to subsist given the negative socioeconomic impact it will have not only on the Appellant but also on its employees and society at large, such a scenario no doubt demands that application on notice must be the only plausible option to enable the Appellant react and present its own side of the story before the Court will decide which way the pendulum of discretion will swing.””

In giving his own opinion, his Lordship, Okor, JSC, was even more emphatic:

“May I add that even if there was no Rule 4 of the Winding Up Rules* prohibiting the grant of ex – parte orders against parties without being put on notice, a Court to which such order is sought ought to be discrete and reserved in granting such far reaching orders. The economic and social implication which such an order will have is enormous. Apart from the sudden collapse of the business, many families depending on the company for their livelihood may dislocate. Courts are not agents of destruction and as such we must resist at all times any attempt to be used for destruction or vendetta. The Court must hear both parties before making up its mind to grant such orders. It must not be done ex – parte particularly where injunctive reliefs are sought.”

Clearly, to wind up a company means to dissolve (“kill”) a company and bring its corporate existence to an end. It is therefore improper to apply for the grant of orders capable of having adverse effect on the company sought to be wound up without serving the company with a copy of the application to enable it respond to same. More so, it is improper for the court to grant such an application without hearing from the other side. This is the import of the Supreme Court’s position.

Interestingly, it was the Appellant’s argument that ex parte applications can be granted in winding up proceedings, relying on the case of Provisional Liquidator Tapp Industry Ltd v. Tapp Industry Ltd. [1995] 5 NWLR (Pt. 393) 9. Okoro, JSC had no difficulty distinguishing the cases and clarifying the position when he reasoned:

“The Appellant herein, relying on the case of Provisional Liquidator Tapp Industry Ltd v. Tapp Industry Ltd (supra) had argued that ex – parte orders can be granted in winding up proceedings. This sweeping submission is dangerous. In that case, this Court made it very clear that although ex – parte applications may be allowed in winding up proceedings, it stressed that where an order is being sought against any person, in which case, such a person will have to be put on notice of the motion… I need to point out here that the ex – parte application in Tapp’s case (supra) was for extension of time within which to complete the assignment by the Provisional Liquidator and another motion to take possession of certain properties belonging to the respondent. This Court held that those applications did not raise any contentious issues that would affect the civil, rights and obligations of the parties to the winding up proceedings.”

 

*Rule 4 of the Winding Up Rules

“Every application in Court other than a petition shall be made by motion, notice of which shall be served on every person against whom an order is sought not less than five clear days before the day named in the notice for hearing the motion.”



Stephen Azubuike
Author: Stephen Azubuike
Stephen is a Legal Practitioner, Consultant, Mediator and Social Entrepreneur. He has successfully argued cases from the High Courts of various jurisdictions to the Appellate Courts. Desirous of implementing new legal solutions, he founded Stephen Legal, a firm in the business of providing innovative legal insights and easy solution in this information age. Stephen also serves as a volunteer at Prof. Pat. Utomi’s Centre for Values in Leadership in Lagos, given his passion for capacity building and leadership development.
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