Debt recovery is a process of recovering something or money owed to a person, bank, or company, from an individual or corporate body etc .

In Nigeria, many businesses have shut down, individuals have gone bankrupt, while companies have been wound up as a result of the failures of some debtors to pay up their debts. Hence, individuals and companies have been left frustrated and disillusional by their debtors while many debtors are living large at the expense of their creditors.

First off, creditors are to ascertain whether or not the debtors have the money or means to pay. Legal action becomes futile if the debtors do not have the means (personal or real property) to pay the amount of the judgment awarded. It is pointless if the creditors in the long run lose the court fees and probably other costs too. It may, of course, be difficult in practice to establish whether the debtors do or do not have the means to pay. It is expedient to make the necessary findings so as to avoid waste of time and resources on the debt recovery.

In addition, there are a few debtors who will try as much as practicable to evade payments. They can rely on technicalities to delay or obstruct the debt recovery process. Debtors may adopt both legal and illegal ground(s) to evade responsibilities. Of course, only a minority of debtors would consider using such tactics. Therefore, creditors should be optimistic and resolute about recovering their debts. In the case of John Holt & Co LTD v. Henry Fajemirokun (1961) ANLR (Reprint) 513, the defendant maintained that the plaintiffs have failed to “render a correct and faithful account”. Justice Lambo, J. quoted Lord Blackburn as follows:

“If you swear that there was fraud, that will not do. It is difficult to define it but you must give such an extent of definite facts pointing to the fraud as to satisfy the Judge that those are facts which make it reasonable that you should be allowed to raise that defence.”

Lambo, J. submitted thus: “It follows, therefore, that I should not be expected to act upon such general and vague allegations, that the plaintiffs have failed to render “a correct and faithful account” of their dealings with the defendant without in any way showing in what respects the accounts had been incorrect and dishonest. The defendant, in paragraph 4 of his affidavit, disputes owing the amount claimed. It is my view that that is not enough. I must be satisfied that there is reasonable ground for saying so.” Indeed, Lord Blackburn in the case of Wallingford v. Mutual Society, (cited supra), stated at page 704 as follows:

“It is not enough to swear, ‘I say I owe the man nothing.’ Doubtless, if it was true, that you owed the man nothing as you swear, that would be a good defence. But that is not enough. You must satisfy the Judge that there is reasonable ground for saying so.”

The defendant has said in paragraph 11 of the affidavit that he has “a good defence to this action,” but has not set out what the defence is, even though leave was granted to the defendant to file an affidavit disclosing a defence “on the merits.” The word “good” does not, in my view, save that statement on oath from being a regrettable one.

“So, looking at the affidavit, it is manifest that in none of the paragraphs did the defendant satisfy the burden that was cast upon him to file an affidavit disclosing a defence to this action on the merits”.

Furthermore, creditors should weigh their chances of winning against losing. Going by statistics, creditors have a very high chance of winning, especially if winning means obtaining judgment. On the other hand, if winning is getting paid, then your chances are less, but still quite good. The debtors either pay, admit the debt and ask for time to pay, or do nothing at all. Much more thought is necessary if you face the prospect of a real dispute and a seriously defended claim. Both sides will start to incur costs and it could get very expensive. It is important to note that none of this is intended to discourage you from pursuing your claim and seeking redress. It is to open your eyes to things you may not have contemplated before now.

Also, creditors are usually nervous of the costs that they will incur and of their prospects of recovering them from the debtors. You are very right to consider them, especially where the cases are complicated with an uncertain outcome or if the debtors are likely to try and evade payments, even after judgments have been awarded. The onus is on you to be tactful in any step(s) you are to take in recovering the debts.

Furthermore, creditors should be very sure of the terms that govern the contracts which resulted into the present debt (if any) because, the period of credit would be what is stipulated by the contracts or agreements. You would obviously have to show that the terms of the contracts or agreements have been accepted.

Most importantly, get a good lawyer who has vast knowledge  in debt and asset recovery, then you can be assured of sound and productive advice before and during the debt recovery process.

Whatever means you want to adopt, act decisively, your debtors are likely to be owing other people, too. Therefore, your legal actions may as well put you in competition with these other people and early decisive actions may give you the advantage(s). Also, remember to send an explicitly worded final demand/warning letter before commencing legal proceedings.


In an instance where your debtor is an individual, the lawyer will begin the process by issuing a formal letter of demand to the debtor, giving him an ultimatum of a certain number of days and a threat of further legal action. This letter of demand must contain how much is owed, how the debt was incurred, the date before which it must be paid and the warning of a legal action if the money is not paid within a given period. Debtors should note that a letter of demand from a creditor is usually the beginning of a potential legal dispute and must be cautious when replying this letter so as not to have such reply ruin any chances he might have in court. If your debtor is a company, you may decide to commence a winding up proceedings against such company, leveraging on the provisions of Companies and Allied Matters Act on Winding Up of Companies.

Section 408 (d) of the Companies and Allied Matters Act provides that a creditor may commence winding up proceedings against a company if it is unable to pay its debts.

Section 409 of the Companies and Allied Matters Act provides that a company shall be deemed to be unable to pay its debts if it is indebted to a creditor in a sum exceeding N2, 000 and same remain unpaid after 3 weeks of service of a statutory letter of demand delivered at the registered place of business of the company.

Procedure for Recovery of Debt from an Insolvent Company and Fraudulent Directors

The Company and its Directors will be served with a letter of demand demanding full payment of the debt within 7 days of receipt of the letter failing which an action will be commenced against the Company and its Directors to recover the debt, including damages for breach of contract and winding up proceedings against the company for inability to pay its debts.

If the debtor does not pay the debt within 7 days as provided in the letter of demand, a summary judgment proceeding is commenced against the debtor and its Company to recover the debt and an application for security or attachment of the moveable and immoveable property of the debtor pending the determination of the proceeding is brought before the Court.

A statutory letter of demand for winding up of the Company for inability to pay its debts may also be served on the Company and upon expiration of the statutory period of 3 weeks, a winding up proceedings is commenced against the Company to liquidate and sell its assets.

Provision of the Federal High Court Rules on Recovery of a Liquidated Sum

Order 12 of the Federal High Court Rules provides that a claimant may apply summarily to Court for issuance of a writ of summons to recover a liquidated sum and the application will be accompanied with an affidavit stating the grounds upon which the claim is based and that the defendant has no defence on the merit to the claim. The Court would enter the claim in the “undefended list” if it is satisfied that the defendant has no defence to the claim.

Order 30 of the Federal High Court Rules provides that where the claimant feels that the defendant have the intention to obstruct or delay the execution of any order that may be passed against him by disposing or removing his property from the jurisdiction of the Court, the claimant may apply to the Court at the time of instituting the suit to make the defendant to deposit sufficient security to fulfil the order or for his movable or immovable property within jurisdiction to be attached until the order of Court is delivered.

In conclusion, whichever way you slice it, negotiation/arbitration should have been exhausted before embarking on litigation. Where a dispute is very technical or specialised, both sides may prefer to trust the judgment of an appropriate arbitrator, and also where the contracts contain clauses which specify that disputes will be settled by arbitration. The parties may at any time try to negotiate a settlement and they may do this in any manner that they choose. Litigation should be the last resort except where the relationship between the parties has broken down or there is no hope/expectation of continuous business transactions.

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