Sometimes in 2013, the parties (which were in a mutual banker/customer relationship) commenced discussions on settlement of outstanding liabilities arising from various relationships including underwriting commitments, margin facilities etc. The performance of the agreements led to dispute resolution proceedings one of which was a recovery/winding up proceedings against the appellant at the Federal High Court, Lagos (FHC) where diverse ex parte qua interim (asset freezing) orders of preservation were obtained without notice to the appellant.
Upon being served with the interim orders, the appellant approached the FHC seeking the setting aside of the ex parte/interim (asset freezing) orders earlier granted by the court on various grounds including that same was antithetical to both the guiding statutes and commercial expediency. However, the FHC refused to set aside the said orders, opting rather to slightly vary the orders to allow the respondent withdraw some of its funds to ensure its smooth running as a going concern. Not satisfied with the decision of the FHC, the appellant appealed to the Court of Appeal.
At the Court of Appeal, appellant’s legal team, which was led by our Chief Wole Olanipekun, SAN and other counsel from WOC painstakingly detailed some of the issues raised and argued and emphasised the commercial inexpediency of judicially inhibiting the smooth operations of a going concerns with cumulative assets, turnover etc in excess of US$1billion and a national operational spread. Appellants position was further reinforced by its counsel’s position that by virtue of Order 4 of the Companies Winding Rules 2010, interim (asset freezing) orders could not be granted ex-parte without affording the affected entity a hearing. Furthermore, that the FHC in allowing the appellant to withdraw funds from its accounts, as per the variation of its orders, tacitly acknowledged that the appellant was not insolvent hence justifying the appellant’s position on the needlessness of the winding up proceedings before the FHC. Opposing the appeal, the respondent argued that by the provisions of Section 411 of the Companies and Allied Matters Act (CAMA) and Order 183 of the Companies Winding Rules 2010, the grant of injunctive (asset freezing) orders was permissible ex-parte.
Hear the Court of Appeal in agreeing with WOC on the commercial inappropriateness of the injunctive orders made against a business conglomerate that is still a going concern and servicing a very strategic sector of the economy:
“To my mind, the grant of interim orders 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 immobilise a functional and ongoing corporate organization is an exercise of disretion too extreme and injudicious to be allowed to subsist given the negative socioeconomic impact it will have not only on the appellant but on its employees and society at large”
The Appeal Court of Nigeria, naturally allowed the appeal and discharged all the ex-parte orders.
The stance of the Court of Appeal in this case recognises the peculiarities of the business environment in which corporate organisations operate and the need to protect them and ensure that the judicial process is not used to asphyxiate and strangle business enterprises in view of the domino effect such may have on its employees and the society at large. Whilst the court upheld the time honoured principle of fair hearing and natural justice in adjudication, the decision represents a watershed in dispute resolution proceedings under the Companies and Allied Matters Act, particularly those governed by the Companies Winding up Rules, as to the nature of orders that can be made therein.