➥ CASE SUMMARY OF:
Intercontractors Nigeria Ltd. v. National Provident Fund Management Board (1988) – SC
by PipAr Chima
Supreme Court – SC.94/1987
➥ JUDGEMENT DELIVERED ON:
On Friday, the 29th day of April, 1988
➥ AREA(S) OF LAW
➥ NOTABLE DICTA
⦿ IN RECEIVERSHIP COMPANY DOES NOT LOSE ITS LEGAL PERSONALITY
It is important to appreciate the fact that the company neither loses its legal personality nor its title to the goods in the receivership. – Karibi-whyte, JSC. Intercontractors v. National Provident (1988)
⦿ DEBENTURE IS A DEBT OWED BY THE COMPANY
A debenture consists of a debt owed by the Company to another secured by a deed which prescribes the condition of the realization of the debt. A debenture may be created over the fixed or floating assets of the Company. When it is created over the floating assets, the company is entitled to continue to use the assets in the ordinary course of its business, until the conditions prescribed for its realization occurs. When it thus occurs and the debenture holder, usually the creditor, enforces his security by the appointment of a Receiver or Receiver/Manager under his powers in the Debenture deed, the assets formerly available to the Company ceases to be so, and now becomes fixed, and is crystallised, and remains under the general control of “the Receiver/Manager”. – Karibi-whyte, JSC. Intercontractors v. National Provident (1988)
⦿ THE COMPANY CEASES TO HAVE RIGHTS WHEN A RECEIVER IS APPOINTED
The company ceases to have any right to deal with the assets. It’s right thereto is suspended. The Receiver/Manager appointed by the Debenture holder is now regarded as agent of the company for the purposes of dealing with assets in the Receivership. – Karibi-whyte, JSC. Intercontractors v. National Provident (1988)
⦿ COMPANY’S DIRECTORS MAY DEAL WITH ASSET OUTSIDE RECEIVERSHIP
The Receivership in the instant case which does not necessarily result in the liquidation or winding up of the company, the right to deal with the assets in the receivership are revived at the termination of the receivership. In all cases the right of the directors of the Company to deal with the assets of the company not in receivership or other matters not suspended are not affected by the appointment of a Receiver/Manager over the assets of the Company. The directors of the company do not by virtue of a receivership become functus afficio for all purposes of the company. – Karibi-whyte, JSC. Intercontractors v. National Provident (1988)
⦿ ACTIONS BY RECEIVERS ARE EQUITABLE
I wish to add that actions by receiver which is commonly referred to as equitable execution is indeed equitable relief, and this is because of the hindrance in the way of execution at law. – Karibi-whyte, JSC. Intercontractors v. National Provident (1988)
⦿ APPOINTMENT OF A RECEIVER DOES NOT DISSOLVE THE COMPANY
The appointment of a Receiver/Manager does not operate as a bar to the exercise of the right of parties, other than the debenture holders, against the company in receivership; because the appointment of a Receiver/Manager over the assets and business of a company does not ipso facto dissolve the company nor make it lose its legal personality. – Uwais, JSC. Intercontractors v. National Provident (1988)
⦿ A COMPANY UNDER RECEIVERSHIP MUST SUE VIA THE RECEIVER/MANAGER
A company under receivership can be sued. However, if the company is to sue in order to recover or protect the property charged, it can only do so with the sanction of the Receiver/Manager by virtue of the fact that it is the Receiver/Manager that controls its assets and runs its business. – Uwais, JSC. Intercontractors v. National Provident (1988)
⦿ A COMPANY’S LEGAL PERSONALITY DIES AT THE DEATH OF THE COMPANY
A company is a legal person with legal capacity to sue or be sued. That legal personality and capacity continues until the company dies a legal death in the process, and as a result of winding up and dissolution. – Oputa, JSC. Intercontractors v. National Provident (1988)
⦿ WHEN IS A RECEIVER/MANAGER APPOINTED
Where it is necessary for the receiver to carry on the business of the company, the Court usually appoints the Receiver to be both Receiver and Manager. And a Manager is not generally appointed except to carry on the business for the purpose of selling it as a going concern. – Oputa, JSC. Intercontractors v. National Provident (1988)
⦿ A RECEIVER/MANAGER IS AN ALTER EGO OF THE COMPANY
The Receiver/Manager is the alter ego of the Appellant/Company for certain specified purposes and sues in the company’s name and depending on the terms of his appointment and his status (whether he is appointed by the Debenture holden or by the Court) the Receiver may represent both the Debenture holders and/or the Appellant company. – Oputa, JSC. Intercontractors v. National Provident (1988)
Intercontractors Nigeria Ltd.
National Provident Fund Management Board
➥ LEAD JUDGEMENT DELIVERED BY:
G. Karibi-whyte, J.S.C
⦿ FOR THE APPELLANT
⦿ FOR THE RESPONDENT
➥ CASE HISTORY
The issue before this court for determination is whether the Chief Judge of the Federal High Court was right in dismissing Appellant’s application to strike out the writ of summons issued out by the Respondent as Plaintiff, claiming from the Appellant as defendant the arrears of contributions due in respect of National Provident Fund deductions made by it on behalf of its employees. The Court of Appeal affirmed the judgment of the High Court.
The facts of the case are that Plaintiff/Respondent, a statutory body charged with the responsibility for collecting deductions from employers in respect of the National Provident Fund contributions made by their employees issued a writ of summons in the Federal High Court against the Defendant/Appellant claiming the sum of N156,792.44k being deductions made from and due to Respondents on the contributions of its employees which Defendant/Appellant had failed to pay to the Respondents.
After entering appearance Defendant/Appellant brought a motion on notice seeking an order to strike out the writ of summons and particulars of claim on the grounds inter alia, that 1. That the Plaintiffs claim even if successfully litigated was unenforceable. 2. The Defendant/Appellant Company was in Receivership and accordingly could not be sued by an unsecured creditor. 3. That the Federal High Court had no jurisdiction in respect of the subject matter of the claim; being one for recovery of a simple debt; not arising from the operations of the Companies Act 1968, or relating to the revenue of the Federal Government. 4. That the action was frivolous, speculative embarrassing and an abuse of the Courts’ process.
The Trial Court & the Court of Appeal gave judgement against the Appellant. This is a further appeal by the Appellant.
➥ ISSUE(S) & RESOLUTION
I. Whether Plaintiff/Respondent can bring an action against the Defendant/Appellant company in respect of which there has been a receivership over its assets?
RULING: IN RESPONDENT’S FAVOUR.
I.A. The contention of counsel for the Appellants that Plaintiff/Respondent cannot bring action against the Defendant company for any claim whatsoever is predicated on the assumption that on the appointment of a Receiver/Manager, all rights of action by any person against the company whether or not related to the assets in the receivership become frozen against all the assets of the company. This as I have pointed out is not the law and has never been. As I have stated already, only assets included in the charge are affected by the Receivership. The passage in Kerr-On Receivers – relied upon has been too widely stated. In the instant case and on general principle although the directors cannot deal with the assets in the receivership they are not functus officio for all purposes. They are still entitled to exercise their normal functions in other cases not included in the charge. There is nothing in the instant appeal to show that the contributions of Defendants/Appellants’ employees and deductions by the Appellant/Defendant to National Provident Fund, under the National Provident Fund Act 1961, is one of the assets over which there is a receivership thereby rendering it legally impossible by virtue of the receivership, for the company or its directors to deal with. The company still retains its legal personality and can be sued in its own name in respect of actions which properly lie.
➥ MISCELLANEOUS POINTS
➥ REFERENCED (STATUTE)
➥ REFERENCED (CASE)
⦿ RECEIVER/MANAGER IS AN AGENT OF THE COMPANY AND CAN TAKE EFFECTIVE STEPS FOR THE COMPANY
In M. Wheeler and Company Ltd. v. Warren (1928) Ch. 840, the Debenture deed provided for the Receiver/Manager to get in the property charged by the debenture. When there was a default in the terms of the debenture, the debenture holder appointed a receiver. The receiver issued a writ in the name of the company. A preliminary objection was taken by the Defendant seeking to set aside the writ on the ground that the receiver had no power to commence an action in the name of the company. Lord Hornworth M.R. after referring to the words of clause 6, sub-clause 1, similar to clause 1 in this case, and observing that it is not expressly stated that the receiver is to have power to use the company’s name for the purpose of bringing proceedings, stated that it is provided that the receiver “shall be the agent of the company and shall have power….to take possession of and get in the property hereby charged” at p.844 construed this to mean and I entirely agree, “… that as the getting in of the property charged is to be done by the receiver and the property is vested in the company, he must have power to get in the property in the only way possible – namely, by bringing action in the name of the company. The fact that he was made the agent of the company and given power to get in the property charged, is in my opinion sufficient to give him power to take the only effective steps in the name of the company.” – Karibi-whyte, JSC. Intercontractors v. National Provident (1988)
⦿ THE APPOINTMENT OF A RECEIVER IS A MATTER OF DISCRETION
In Viola v. Anglo-American Cold Storage Company (1912) 2 Ch. 305, Swinfen Eady J, gave what is acceptable as the reason why leave of the Court is necessary for a receiver to institute or defend actions whether the appointment of Receiver/Manager is by court or under a debenture-holder’s deed. He said at pp.310-311. “It is however, well settled that in a mortgagee’s action where a receiver and manager has been appointed it is for the court to determine whether proceedings shall be taken at the expense of the mortgaged property. The receiver cannot do this of his own initiative, but would run the risk of his cost being disallowed if he did not obtain the direction of the Court (see Bristowe v. Needham (1847) 2 Ph.190 and Wynn v. Lord Newborough (1790) 3 Bro. C.C. 88, and neither mortgagor nor mortgagee has any absolute right to insist upon an action being brought or to prohibit it being brought by the receiver at the expense of the mortgaged property. The appointment of a receiver is a matter of discretion to be governed by the circumstances of the case; see Lord Truro’s judgment in Owen v. Homan (1851) 3 Mac & G, 378, 412. It is made in the first place for the protection of the estate and for the benefit of all concerned, and in sanctioning the receiver taking proceedings the court has regard to what it considers right and proper in the interest of all parties.” – – Karibi-whyte, JSC. Intercontractors v. National Provident (1988)
➥ REFERENCED (OTHERS)