ADAMU MOHAMMED GBEDU & ORS v. JOSEPH I. ITIE & 3 ORS.
FEDERAL HIGH COURT
(ILORIN DIVISION)
(NNAMANI, J.)
FACTS
The Plaintiffs, comprising representatives of the Food, Beverage and Tobacco Senior Staff Association (FOBTOB) and the National Union of Food, Beverage and Tobacco Employees (NUFBTE), together representing a total of 2,169 members, were employees of the Nigerian Sugar Company (the 2nd Defendant). The Bureau of Public Enterprises (3rd Respondent) filed a winding-up petition against the 2nd Defendant, which was already in liquidation, at the Federal High Court, Ilorin Judicial Division. On 18th March 2005, the Court made an order compulsorily winding up the 2nd Defendant. Following this, the Court appointed a liquidator, Joseph I. Itie (1st Defendant) to oversee the affairs of the 2nd Defendant and manage its assets and liabilities during the winding-up process.
On 6th April 2006, the Plaintiffs were disengaged from service, and the liquidator subsequently paid them what was deemed to be their entitlements. Dissatisfied with both the termination and the amounts paid, the Plaintiffs wrote several petitions to the 1st Defendant and to the 3rd Defendant seeking redress. These petitions, however, were ignored, leaving the Plaintiffs with no alternative but to pursue legal action. Consequently, the Plaintiffs filed an action by way of a writ of summons at the Federal High Court, challenging the lawfulness of their termination and disputing the amounts paid to them as entitlements. They claimed a total of N1,349,756,250 as the alleged shortfall in salaries and entitlements for the period June 2002 to March 2005. Additionally, they claimed N582,114,139.22 for outstanding salaries from April 2005 to April 2006, N160,875,548.80 for annual leave grants for the same period, N3,830,117,883.40 as terminal benefits upon termination, and N169,193,702.30 as wrongful deductions allegedly made by the Defendants from sums owed to them.
Aggrieved by the acts of the liquidator, the Plaintiffs approached the court. One of the issues raised for determination in the suit was: whether the appointment of a liquidator automatically terminates the contract of employment of a company’s workers, and whether the acceptance of part payment by the plaintiffs constitutes a bar to claiming any balance allegedly due.
ARGUMENTS
Learned counsel for the Plaintiffs argued that the appointment of a liquidator does not in itself affect the employment of a company’s staff and that there is no law in Nigeria which provides otherwise. He maintains that the Plaintiffs remained validly employed even after the appointment of the liquidator and that the idea of automatic dismissal upon liquidation, as suggested by foreign or academic authorities, has no binding effect on Nigerian courts. Counsel submits that the evidence before the court, especially from the Plaintiffs’ witnesses, clearly shows that the Plaintiffs continued with their normal duties after the liquidator assumed office and that they were still performing their regular functions as employees of the 2nd Defendant.
He further contends that the communication said to have terminated their employment was not properly addressed and was never brought to the attention of the workers. In his view, since there was no clear or express termination of their employment, their appointments continued to subsist in law. He explains that a valid termination must be properly communicated and must comply with the terms of employment, and that in the absence of such notice, the Plaintiffs remained employees of the company. Counsel also maintained that from the facts and evidence presented before the court, the Plaintiffs were fully engaged in their normal work between March 2005 and April 2006. They continued to carry out their duties and were never informed of any cessation of employment during that period. He submits that the alleged termination of their employment, especially one made to take effect retrospectively, is not known to law, is illegal and cannot stand. On that basis, he insists that the Plaintiffs are entitled to be paid their full salaries and allowances for the period in question.
In response, learned counsel for the Defendants contends that the law is settled that once a company is wound up by an order of court, its employees are automatically dismissed by operation of law. He states that the appointment of a liquidator and or receiver and manager by the court equally results in the termination of the company’s staff in the same way that a compulsory winding up order does. Counsel submits that the Plaintiffs’ claim that they remained in employment from April 2005 to April 2006 cannot be sustained, since the company had already been wound up and ceased to exist as a functioning entity as of April 2005. He further asserts that the Plaintiffs were not performing their normal duties during that time and were not receiving their usual wages, as only a few workers were retained on a casual or ad hoc basis to protect the 2nd Defendant’s assets before the final handover. He therefore urges the court to dismiss the Plaintiffs’ action with substantial costs, describing it as unmaintainable in law.
DECISION OF THE COURT
In resolving this issue, the Federal High Court held that:
Where a company is wound up by an order of court, the servants or staff of the company are, by operation of the law, dismissed without the need for any further notice. The Court held that where the business of a company is wholly at an end and the company passes a resolution to wind up voluntarily, such a resolution would operate as a notice of dismissal to its employees, for there is nothing further to which the servants could look forward. The winding-up order has the effect of discharging all the company’s employees and dismissing its directors, putting an end to the directors’ power of management as they can no longer exercise any control over the company’s affairs or make calls.
Furthermore, the Court held that it does not matter that the servants or staff of the company claim to have received notice of the winding-up order or the appointment of a liquidator belatedly. The effect is automatic and mandatory as it is presumed that every creditor or person interested has notice of the winding-up proceedings, having regard to the wide publicity normally given to such petitions by way of court-ordered advertisement. In the instant case, the Plaintiffs are not entitled to salaries once they have notice of the impending liquidation or resolution to wind up the company. However, where the winding-up is undertaken purely for amalgamation or reconstruction, it will not operate as a discharge or dismissal of the staff, since the business is expected to continue under a new structure or entity.
Issue resolved against the Plaintiffs.
Mallam Yusuf O. Ali, SAN, K. K. Eleja; B. Ajanaku; I. O. Atofarati; A. S. Ishola; T. Omidiji; U. M. Ohabuike (Miss) and A. G. Undie) for the Appellants.
Tokunbo T.Agoro, O. O. Oshodi (Mrs); O.A.Adeniyi; F. M. Oladiji (Miss) and I. F. Yusuf) for the 1st -3rd Respondents
A.A. Foelong for the 4th Respondent
This summary is fully reported at (2008) 1 CLRN in association with ALP NG & Co.
See www.clrndirect.com ; www.alp.company.
