LEGAL PRINCIPLE: COMPANY LAW — Winding-Up — Inability to Pay Debts — Counter-Claim as Basis for Disputing Debt in Winding-Up Proceedings
PRINCIPLE STATEMENT
Where a company has a serious counter-claim arising from the same contract, the claims must first be established in a normal case before a winding-up petition can be embarked upon.
RATIO DECIDENDI (SOURCE)
Per Onu, JSC, in Air Via Ltd. v. Oriental Airlines Ltd. (2004) NLC-132000(SC) at pp. 7–8; Paras E–A.
"The appellant has put up a plausible defence to the action in that he has a serious counter-claim and because it believes that the respondent/petitioner was liable to it on the same contract. It has neglected to pay what was claimed against it. In this kind of claim and counter-claim arising from breach of contract, the claims must first be established in a normal case before a petition of winding-up can be embarked upon."
EXPLANATION / SCOPE
A counter-claim on the same contract disputes the debt. The principle applies to company law. The disputed debt must be resolved in ordinary proceedings. The rule prevents winding-up on questionable debts. The court will dismiss the petition. The principle is well-established.
