By Michael K. Bielonwu Esq., MCIArb., FIDR.
Abstract:
The final stage of every dispute is the enforcement of the outcome obtained from the dispute resolution body so that any bottleneck to the enforcement of such judgment or resolution leads to a situation where it can be said that the entire process has been a complete waste of every body’s time and in a society where enforcement of a judgment for the generality of the populace is an uphill task will sooner fall into anarchy as the people will not find any need approaching constituted authority for the resolution of their disputes as they will consider it needless.
In this article, we shall restrict ourselves to the enforcement of the court’s judgment using bankruptcy proceedings from the Bankruptcy Act. Although this article considers the proceedings, it is not a detailed guide of the process but simply a peep into one of our laws that most Nigerians have consistently failed to take advantage of.
This article is only to wet your appetite so that when next that judgment debtor constantly refuses to willingly obey the order of the court to pay judgment debt due to you, you may simply instruct your lawyers to commence bankruptcy proceedings against them.
When the proceedings can be initiated:
Under the Bankruptcy Act CAP B2 LFN 2004, instances a bankruptcy proceeding can be initiated are outlined under Section 1 of the Act, which describes what an act of bankruptcy is. Under the extant law, when an act of default has been committed, a proceeding may be commenced before the court to commit the debtor to bankruptcy.
Section 1 of the Bankruptcy Act provides thus:
- A debtor commits an act of bankruptcy in each of the following cases
a) if a creditor-
(i) has obtained a final judgment or final order against him for any amount, and execution thereon not having been stayed, has a bankruptcy notice served on him; and
(ii) does not, within fourteen days after service of the notice, comply with the requirements of the notice or satisfy the court that he has a counter-claim, set-off or cross demand which equals or exceeds the amount of the judgment debt or sum ordered to be paid, and which he could not set up in the action in which the judgment was obtained or the proceedings in which the order was obtained; and for the purposes of this paragraph and of section 4, any person who is for the time being entitled to enforce a final judgment or final order shall be deemed to be a creditor who has obtained a final judgment or final order; or
(b) if execution against him has been levied by seizure of his goods under process in an action, or proceedings in the court, and the goods have either been sold or held by the bailiff for twenty-one days: Provided that, where an inter-pleader summons has been taken out in regard to the goods seized, the time elapsing between the date at which such summons is taken out and the date at which the proceedings on such summons are finally disposed of, settled or abandoned, shall not be taken into account in calculating such period of twenty-one days; or
(c) if he files in the court a declaration of his inability to pay his debts or presents a bankruptcy petition against himself;
(d) if he suspends or gives notice that he is about to suspend payment of his debts to any of his creditors; or
(e) if under a credit agreement the creditor becomes entitled to file a bankruptcy petition; or
(f) if, in Nigeria or elsewhere, he makes a conveyance or assignment of his property to a trustee or trustees for the benefit of his creditors generally; or
(g) if, in Nigeria or elsewhere, he makes a fraudulent conveyance, gift, delivery or transfer of his property or any part thereof, with an intent to defeat or delay the claim of his creditors; or
(h) if, in Nigeria or elsewhere, he makes any conveyance or transfer of his property or any part thereof, or created any charge thereon, which would under this or any other Act be void as a fraudulent preference if he were adjudged bankrupt; or
(i) if, with intent to defeat or delay the claims of his creditors, he departs out of Nigeria, or being out of Nigeria remains out of Nigeria, or departs from his dwelling, or otherwise absents himself, or begins to keep house.
Therefore, under any of these aforementioned circumstances, a bankruptcy proceeding may be commenced against a guilty party, however, this article will narrow on proceedings that began as a result of failure to comply with a court judgment as provided for under Section 1(a) of the Act.
That is, (1) A debtor commits an act of bankruptcy in each of the following cases
- b) if a creditor-
(i) has obtained a final judgment or final order against him for any amount, and execution thereon not having been stayed, has a bankruptcy notice served on him; and
(ii) does not, within fourteen days after service of the notice, comply with the requirements of the notice or satisfy the court that he has a counter-claim, set-off or cross demand which equals or exceeds the amount of the judgment debt or sum ordered to be paid, and which he could not set up in the action in which the judgment was obtained or the proceedings in which the order was obtained; and for the purposes of this paragraph and of section 4, any person who is for the time being entitled to enforce a final judgment or final order shall be deemed to be a creditor who has obtained a final judgment or final order.
Section 656 of the Companies and Allied Matters Act 2020 provides that proceedings against an insolvent company shall also fall under one of the proceedings to be commenced under the Bankruptcy Act. This, therefore, implies that the Act regulates proceedings against both individual and corporate bodies adjudged bankrupt.
How the proceedings can be called in aid of a judgment creditor?
The question anyone reading this article may have in mind is, how a judgment creditor may call in aid the Bankruptcy Act to recover their money, especially where the money is as a result of the judgment of a court?
The relevant section of the Act is section 4. The section provides as follows:
- Subject to the provisions of section 7 of this act, a creditor shall not be entitled to present a bankruptcy petition against a debtor unless-
(a) the debt owing by the debtor to the petitioning creditor, or if two or more creditors join in the petition, the aggregate amount of debts owing to the several petitioning creditors, is not less than N2,000;
(b) the debt is a liquidated sum, payable either immediately or at some certain future time;
(c) the act of bankruptcy on which the petition is grounded has occurred within three months before the presentation of the petition; and
(d) the debtor is ordinarily resident in Nigeria, or within a year before the date of the presentation of the petition, has ordinarily resided or had a dwelling-house or place of business in Nigeria, or has carried on business in Nigeria, personally or by means of an agent or manager, or is or within the said period has been a member of a firm or partnership of persons which has carried on business in Nigeria by means of a partner or partners or an agent or manager.
(2) If the petitioning creditor is a secured creditor he shall in his petition either state that he is willing to give up his security for the benefit of the creditors in the event of the debtor being adjudged bankrupt, or give an estimate of the value of his security; in the latter case he may be admitted as a petitioning creditor to the extent of the balance of the debt due to him after deducting the value so estimated in the same manner as if he were an unsecured creditor.
(3) Notwithstanding the provisions of any other law or enactment and without prejudice to any other rights of the debtor, a creditor who is entitled to present a bankruptcy petition on or before the end of December, 1992 shall not be disentitled from presenting a petition by virtue only of the provisions of section 4 (1) (c) of this Act if the petition is presented before the expiration of a period of six months.
Subsection 1(a) and (b) of the Act provide that for an individual to be entitled to bring the petition under section7 of the Act, the debt must not be less than two thousand Naira and must also be a liquidated sum, payable either immediately or at some certain future time.
Now since our focus is on judgments of a court, the question is, does the judgment of a court qualify since it was not specifically mentioned under section 4? The answer is an emphatic yes.
In Zenith Bank v. Alobu (2016) LPELR-40306 (CA), page 9-10 paras. E-E, the Court of Appeal, described the nature of a judgment debt, that is, a debt that results from the final judgment of a court as referred to under section 1(a) of the Bankruptcy Act. The Court held thus:
“…a judgment debt becomes payable immediately judgment is delivered subject to the provisions of the Sheriffs and Civil Process Act (or Law of the State). An appeal, where lodged, does not operate as a stay of execution. Until a prayer for stay of execution is made and obtained, the judgment creditor is entitled to enforce the judgment. In this case, this is a money judgment. The Supreme Court held in Chief M.O. Olatunji v. Owena Bank Plc (2008) 8 NWLR Pt. 1090 Pg 668 that unless the Court otherwise orders, a judgment of Court to pay money takes effect from the day it is pronounced or delivered in Court. However, the Court at the time of making any judgment or order, or at any time afterwards, may direct the time within which the payment or other act is to be made or done”
Therefore, seeing that section 4 of the Bankruptcy Act empowers a judgment creditor to commence proceedings for bankruptcy against the judgment debtor, the only pitfall he needs to watch out for is as contained in sections 1(a) and 7 of the Act. That is:
- there is a final monetary judgment against the judgment debtor;
- the judgment has not been stayed;
- that there is no counterclaim, set-off or cross-demand which equals or exceeds the amount of the judgment debt; and
- there is no appeal pending against the judge as at the time of filing the petition
once the potential petitioner can successfully avoid these pitfalls, he can file his petition in compliance with section 7 of the Act.
Which court has jurisdiction?
Section 142 of the Bankruptcy Act defines the court as the Federal High Court in its bankruptcy jurisdiction.
What happens when an individual is committed to bankruptcy?
Under the Bankruptcy Act, the debtor has a duty failing which punishment prescribed under the Act may be meted to him. Section 24 of the Act provides the duty as follows:
- Every debtor against whom a receiving order is made shall, unless prevented by sickness or other sufficient cause, attend the first meeting of his creditors, and shall submit to such examination and give such information as the meeting may require.
- Every aforementioned debtor shall-
(a) give such inventory of his property, such list of his creditor and debtors and of the debts due to and from them respectively;
(b) submit to such examination in respect of his property or his creditors;
(c) attend such other meetings of his creditors;
(d) wait as such times on the Official Receiver, special manager or trustee;
(e) execute such powers of attorney, conveyances, deeds and instruments; and
(f) generally do all such acts and things in relation to his property and the distribution of the proceeds amongst his creditors, as may be reasonably required by the Official Receiver, special manager or trustee or as may be provided by this Act; or be prescribed or be directed by the Court by any special order or orders made in reference to any particular case or made on the occasion of any special application by the Official Receiver, special manager, trustee or any creditor or person interested.
3. Every aforementioned debtor shall, if adjudicated bankrupt, aid to the utmost of his power in the realisation of his property and the distribution of the proceeds among his creditors.
4. If such a debtor willfully fails to perform the duties imposed on him by this section or to deliver up possession of any part of his property, which is divisable amongst his creditors under this Act which is for the time being in his possession or under his control, to the Official Receiver or to the trustee or to any person authorised by the court to take possession of it, he shall, in addition to any other punishment to which he may be subject, be guilty of a contempt of court and may be punished accordingly.
Section 25 of the Act provides for the arrest of the debtor who would be dealt with in accordance with the said section should he try to abscond, sell off his properties, avoiding appearance before the first meeting of his creditors as provided under section 24 of the Act, etc.
Advantages of the proceedings:
A striking advantage of proceeding under the Bankruptcy Act is that the proceeding allows the court to do a critical examination of the debtor, unlike under judgment enforcement under the Sheriff and Civil Process Act where a judgment debtor may hide his properties and refuse to comply with the judgment of the court. Under these proceedings, the debtor may even be arrested where it is discovered that attempts are being made to hide or sell off properties to avoid an order being made against him or altogether absconding from Nigeria.
Further, a debtor can also under section 140(1) be fined or imprisoned when he does not have money to pay as a result of the proceedings.
Conclusion:
In conclusion, the Bankruptcy Act together with the Bankruptcy Rules is really underutilized and can go a long way in providing succour to teaming Nigerians who have lost hope in the judiciary in that they often end up with judgment without justice as a lot of judgment debtors never bother to pay judgment debts.
Disclaimer
The article is for information purposes only and must not be construed as a legal advice of any sort.