Whether a Company in Liquidation Can Be Attached in a Garnishee Proceedings Segun Agboola

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 INTRODUCTION

This article will consider the hypothetical situation below in tackling the above captioned subject matter;

A judgement creditor applies to the court for a Garnishee Order Nisi against the bank where the Judgment Debtor has accounts in order to satisfy the current accrued judgment debt owed the Judgment Creditor and the Honourable court grants the Garnishee Order Nisi on the 7th of March, 2015, for the bank to show cause, i.e. to disclose the amount in the judgement creditors’ account. The garnishee filed an affidavit to show cause disclosing the amount in its custody which is the sum of N5, 000.000.00K (Five Million Naira) only with the bank. Consequently, the court makes the order absolute on the 19th of April, 2015.

It is worthy to note that the garnishee order was made absolute on the 19th of April, 2015 and in the obeying the court’s orders the bank issued a check of N2,000.000.00K (Two Million Naira) to the judgement creditor, promising to liquidate the remaining balance of N3,000.000.00K (Three million Naira) at a later date.

Fast-forward to 12th February, 2017, the bank had undergone corporate restructuring and merged with another bank thereby bringing into existence another corporate entity. The judgement creditor then wrote to the bank concerning its obligation to pay the remaining sum promised to be paid at a later date. Consequently, the bank issues a cheque of N3, 000.000.00K (Three million Naira) to the Judgement creditor on 2017.

However, the judgement debtor, which is a private company limited by shares wrote to the bank for the immediate reversal of the sum of N3,000.000.00K (Three million Naira) issued to the Judgement creditor and also threatening legal action against the bank, claiming that the Judgement debtor as at the 4th of January, 2016 was and still is in the process of liquidation or winding up.

My aim in this article is to analyze whether the bank can be held liable in the circumstances.

 FRUITS OF LABOUR

A successful party in whose judgement is given, also known as the judgement creditor is entitled to reap the fruits of his labor. The judgement debtor is the party whom judgement was entered against. While the process of giving effect to the judgement is known as enforcement or execution of judgement.

There have been diverse positions on the distinction between execution of judgement and enforcement of judgement; however in NIGERIAN BREWERIES PLC V. DUMUJE, 8 NWLR PART 1515, PAGE 536 @ 551, the court held that the purpose of execution a judgement is to obtain the fruits of the judgement. The goal of enforcing a judgement by garnishee proceedings is to obtain the fruits of the judgement. So, whatever the nomenclature; whether execution of judgement or enforcement of judgement, the aim is the same; reaping the fruits of the judgement. Accordingly, there is no difference between execution a judgement and enforcing a judgement in garnishee proceedings…. P 631, PARAS C-E

 It is worthy to note that in enforcing a judgement pronounced by the court, the law is settled that a declaratory judgement cannot enforced, and litigants ought to avert their minds to same. See OKOYA V. SANTILI 2 NWLR PART 131 PAGE 179 PARAS E-F ; P.228, PARAS, E-G. A judgement creditor or a successful party in a suit is entitled to reap the fruits of his judgement, albeit not declaratory in nature.

 LIQUIDATION PER SE 

Liquidation of a company is a process whereby the affairs of a company are wound up and its assets or properties are administered for the benefit of its creditors and members. By this process, the life of the company is brought to an end. The term, ‘winding-up’, is also used interchangeably with liquidation, see MUSA V. EHIDIAMHEN (1994) 3 NWLR (PT. 334) 544, as it was stated that both terms refer to the process whereby an end is put to the “life” of a company and its property administered for the benefit of its creditors and members.

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There are ways in which a company can come to an end or in this instance be liquidated.

Liquidation or winding up of a company is characterized by the administration of a company’s property for the benefit of its creditors, and members which eventually leads to the dissolution of the company. However, it should be noted that liquidation of a company or a bank is not the dissolution or death of the company or bank as a corporate body incorporated under the Companies and Allied Matters Act. SPRING BANK PLC V. ACB INT’L BANK PLC. 2016, 18 NWLR PART 1544 PAGE 245 @ 247 & 250.

Where a company is said to be in liquidation, it presupposes that the Company is in the process of dissolution. However, a company in liquidation still has its legal personality only that legally, it is sick. C. S. (NIG.) PLC V. MBAKWE (2002) 3 NWLR (PT. 755) 523 AT 527 – 528. That is why Section. 20(3) Companies and Allied Matters Act (herein referred to as CAMA) provides that a company in liquidation should not join in the formation of a company. Even when the order of winding up of the company has been given, that does not mean the company is no longer in existence. It is only when the company has been dissolved, that it ceases to be in existence.

Basically, there are three modes of winding up a company, namely

  1. Winding up by the court
  2. Voluntary winding up by members or creditors
  3. Winding up subject to the supervision of the court – 401(1)(a)-(c) CAMA

Furthermore, The CAMA has proceeded to further provide for the protection of a company in liquidation. See Sections S. 497 and 500, 414, 417, etc. of CAMA,

Section 497 provides that:

“Where a company is being wound up subject to the supervision of the court, any attachment, sequestration, or execution put on force against the estate or effects of the company after the commencement of the winding up shall be void”. 

Section 500(1) states that:

“Where a creditor issues execution against any goods or land of a company, or attaches any debt due to the company is subsequently wound up, the creditor shall not be entitled to retain the benefit of the execution or attachment against the liquidator in the winding up of the company, unless he has completed the execution or attachment before the commencement of the winding up”. 

Section 414 provides that:

“Where a company is being wound up by the court, any attachment, sequestration, distress or execution put in force against the estate or effects of the company after the commencement of the winding up shall be void”. 

Section 417 states that:

“If a winding up order is made or a provisional liquidator is appointed, no action or proceeding shall be proceeded with or commenced against the company except by the leave of the court given on such terms as the court may impose”.

  GARNISHEE PROCEEDINGS UNDER THE NIGERIAN LEGAL SYSTEM

A garnishee proceedings procedure is as follows:

  1. The first stage involves the judgement creditor commencing the proceedings by way of ex parte application which shall be supported by an affidavit deposed to either by the judgement creditor or his legal practitioner stating that judgement has been obtained and that the judgement is still unsatisfied. The affidavit is also expected to state the extent of the amount so unsatisfied and that a third party who is within the state is indebted to the judgement debtor.
  1. Where the court is satisfied that the judgement creditor is entitled to attached the debt, the court makes a garnishee order nisi directing the garnishee to appear in court on a specified date to show why an order should not be made against him for payment to the judgement creditor, the amount of the debt owed to the judgement debtor.
  1. The service of the order nisi on the garnishee binds the debt in the hands of the garnishee such that any payment of the debt to the judgement debtor or its alienation, without leave of court, shall be null and void.
  1. The garnishee may, within 8 days (depending on the rules of court has provided for in each state) of the service of the order nisi on him, pay into the court the amount alleged to be due from him to the judgment debtor or if that amount is more than sufficient to satisfy the judgement debt and the costs, a sum to satisfy the debt and costs.
  1. Where a garnishee disputes its liability to pay the debt, he does not have to make any payment into the court, but to appear in court on a return date and dispute his liability. This he does by filing an affidavit to show cause as to why the order nisi should not be made absolute.
  1. Where the garnishee does not within the time prescribed, pay into the court the amount dues from him and does not dispute the debt or where he does not appear as ordered, the court, on proof of service, may make the garnishee order absolute.
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See the cases of C.B.N V. S.C.S.B.V. 2015 11 NWLR PART1469, PAGE 1 @ 7,8,9. IN RE: DIAMOND BANK LTD 2002 17 NWLR PT 795 120 ONJEKWU V K.S.M.C.I 2003 10 NWLR PT 827 40

SEE ALSO, SECTIONS 83, 85, 94 OF THE SHERIFFS AND CIVIL PROCESSES ACT, AND ORDER VIII RULE 5 (1) OF THE JUDGEMENT ENFORCEMENT RULES

  RESOLUTION

  1. From the following, the Bank cannot be said to be liable because as stated above, a garnishee proceeding is sui generis in nature, whereby the judgement debtor is not heard since it’s brought by an ex parte application, calling on the bank to provide the account details of the Judgement debtor. The sections reproduced above in CAMA provided protection from the creditor and not the garnishee. The Proper party to the suit will be Judgement creditor, and if the debtor comes against the bank, the bank is well within its right to file a preliminary objection for lack of jurisdiction, as the bank cannot be a party in the suit. See the following cases on parties to a suit. MOBIL PRODUCING UNLTD V LASEPPA (2002) 18 NWLR (PT.798) PG. 1 @ 38 PEENOK INVESTMENT LTD V HOTEL PRESIDENTIAL LTD (1982) 12 SC PG1, GREEN V GREEN (1987) 3 NWLR (PT. 61) PG. 480 FEBSON FITNESS CENTRE V CAPPAH. LTD (2015) 6 NWLR (PT.1455) PG. 263 @ 281, paras. D-G, UNION BEVERAGES LTD V PEPSI COLA INT. LTD (1994) 3 NWLR (PT.330) PG. 1 @ 70 OJO V OGBE (2007) 9 NWLR (PT.1040) PG.542 @ 558-559 
  1. It is noteworthy that an order absolute was granted against the judgement debtor’s account in respect of a garnishee proceeding, and in compliance with the Court’s Order, the bank duly debited the sum of N3,000.000.00K (Three million Naira) from the judgement debtor’s account. The law is trite that an Order of court must be obeyed regardless of the attitude of a litigant toward the validity thereof. An Order of a competent court of law no matter its nature is absolute and binding on all and sundry without question until it is legally and legitimately set aside by a competent court of appellate jurisdiction. The fact of its being final or interim does not therefore affect its application and effectiveness. It remains valid and enforceable and must be obeyed. See ABEKE V. ODUNSI 2013 13 NWLR PART 1370 SC 1 @ 12. KUBOR V. DICKSON 2013 4 NWLR PART 1345 PAGE 534 @547.
  1. Submit that after the Honourable court made the Garnishee order Nisi, absolute on the 19th of April, 2015 the instant garnishee proceedings was effectively determined and concluded. Therefore, the Garnishee Order Absolute made on the 19th of April, 2015, is a final order which cannot be set aside by this same court considering that the motion ex-parte instituting the garnishee proceedings is not an interlocutory application whose orders (like other interlocutory motions) can be set aside or discharged by the court issuing it. Equally, a garnishee proceeding is a sui generis proceedings that once the court has made the order Nisi Absolute, the case is terminated. It is a substantive relief originating that garnishee action whose resultant order is final. This court is therefore functus officio and as such the garnishee order absolute can only be set aside (if at all) on appeal.
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Further submit that the test for determining if a decision is interlocutory or final is as enunciated in the case of ALOR v. NGENE [2007] 17 NWLR (Pt. 1062)163 @ 175 paras D-H where it was held summarily that if the decision in issue finally disposes of the claims before the court, then it is a final decision and the court becomes functus officio. See also the case of OMONUWA V. OSHODI & ANOR (1985)2 SC 1, where the Supreme Court held that: 

“……a decision between the parties can only be regarded as final when the                  determination of the court disposes of the rights of the parties, (and not merely an issue) in the case.”

In this case, the motion ex-parte filed by the Petitioner/Judgment Creditor, in instituting that Garnishee proceedings called for the court’s determination of the rights of Petitioner/Judgment Creditor to recover the accrued judgment debt from the Respondent/Judgment Debtor/Applicant and the obligation of the Garnishees to pay the debt to the Judgment Debtor. The result being the determination of same by this Honourable court, and the Order of 19th April, 2015, thereby rendering this honourable court functus officio in the circumstance. The remedy (if any) that the Respondent/Judgment Debtor/Applicant may attempt to exercise is to approach the Court of Appeal if aggrieved by same. Hence, by law, a Judgment Debtor is a total stranger to the garnishee proceedings, NITEL PLC V I.C.I.C (DIRECTORY PUBLISHERS) LTD. (2009) 16 NWLR, especially after the garnishee order absolute has been made. He therefore, cannot be heard on it except in a proper appeal. PT. 389-390, H-A. See also of RE: DIAMOND BANK LTD (2002) 17 NWLR (PT. 795) @ 134-135 where ADEREMI  J.C.A held that:

 “Where a garnishee order nisi has been made absolute, the only way by which the garnishee can express dissatisfaction with the order of the court is to appeal against it.”

However, this position has been overruled in the case of NIGERIAN BREWERIES PLC V. DUMUJE, 8 NWLR PART 1515, PAGE 536 @ 553, as the court held that a judgement debtor is a part of a garnishee proceedings.

Consequently, the justice of the Garnishee proceedings was met by the Garnishee Order Absolute made in the case on the 19th of April, 2015. We therefore submit that the Honourable court will be sitting on appeal against its final decision if it entertains the instant application brought by the Respondent/Judgment Debtor/Applicant. See the case of UNION BANK OF NIGERIA V. BONEY MARCUS (2005) 13 NWLR PT 943 @ 654. 

Segun Samuel Agboola LL.B, ChMC   practices at Prime Solicitors, in Ibadan

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