A Federal High Court in Lagos has declared the sale and alienation of assets, as well stocks of a limited liability company, Kay Nath Nigeria Limited by Union Bank Plc illegal, null and void.
Delivering judgement in Suit No: FHC/L/CS/459/2004, filed by Kay Nath Nigeria Limited against Union Bank, Justice Daniel Osiagor ordered the Bank to refund the sum of N143,297,700 back to the company.
The Plaintiff by its amended Statement of Claim dated the 27th of April, 2023 filed by their lawyer, Mr. Adenrele Adegborioye of BA Law LLP prayed for a declaration that the removal, disposition, sale and alienation of the assets and stock of the Plaintiff Company from its Head Office and factory premises at 13/15 Osolo Way, off Muritala Mohammed International Airport Road, Ajao Estate, Lagos and any other place by the Defendant and its agents, representatives and or assigns is illegal, null and void.
Adegborioye had argued that the Chief promoter, though included in the Joint Venture Agreement (JVA) to get involved in the management of the company, was shut out of the company even after series of letters were written to the company.
Consequently, he prayed the court for a declaration that the plaintiff and its officers and owners are entitled to free and unhindered access to and use of the Plaintiff’s Head Office and factory at 13/15 Osolo Way, off Muritala Mohammed International Airport Road, Ajao Estate, Lagos.
The plaintiff also prayed the court for ”A declaration that the complete takeover of the administration and control of the management of the Plaintiff company to the exclusion of any other person and the subsequent disruption of the Plaintiff’s business by the Defendant and its agents, representatives or assigns is ultra vires the Memorandum and Articles of Association of the Plaintiff company, not in conformity with the Companies and Allied Matters Act or any other enactment, illegal, null and void and of no effect whatsoever.
‘’A declaration that the Plaintiff and its officers and owners are entitled to free and unhindered access to and use of the Plaintiff’s Head Office and factory at 13/15 Osolo Way, off Muritala Mohammed International Airport Road, Ajao Estate, Lagos.
However, Union Bank by its amended statement of defence and counterclaim dated the 27th June, 2023 urged the court to hold that as a Mortgagee it is entitled to execute its power of sale in respect of the plaintiff’s properties (fixed plants, machineries, fixtures, fittings, movable and immovable both present and in the future) particularly the Plaintiff’s property lying and being at Ago Okota-Isolo by virtue of the Investment Mortgage Agreement between the plaintiff and the defendant dated 16 November, 1992 and duly registered at the Corporate Affairs Commission.
In the alternative, the bank prayed the court to direct the defendant to Counterclaim to pay the sum of N131,811,183.70 being the outstanding balance in the defendant to Claim’s account as at 11th March, 2004 in respect of the facilities granted by the Counter-Claimant to the defendant.
In his judgement, Justice Osiagor held “I have gone through the processes filed and exhibits tendered and deduced that the JVA exhibit 17 was still subsisting as at the 11th March, 2004.
‘’It is pertinent to state here that parties are bound by the terms of a contract It was expressly stated as one of the terms in the JVA that the company shall liquidate the debt owed the bank (the defendant herein).
“This agreement embodies the entire understanding of the parties in respect of the matters contained or referred to in it inclusive of all the annexures to this agreement and there are no promises, terms, conditions or obligations, oral or written, express or implied other than those contained in this agreement.
‘’Hence, the company, represented by the Directors two of which were appointed by the bank of which one was the Chairman board of directors, and the Technical Company were and are responsible for the repayment and liquidation of the debt due the Defendant herein. For the 7 years they exclusively managed the company.
‘’By reason of the aforementioned, the Defendant is refused the power of sale as prayed in its reliefs 1, 2 as it should have satisfied the debt through its appointees and the terms contained in the JVA. Sequel to the foregoing, relief 3 of its counter claim is refused. On the whole, issue one is resolved against the Defendant’’.
On whether the Plaintiff is entitled to the reliefs sought, the court held that ‘’The sole management of the company without the involvement of the Plaintiff’s appointee is ultra vires and in breach of the agreements between the parties in Exhibit 17 i.e. the JVA. I so hold.
‘’The Defendant did not specifically controvert the paragraph 34 of the 3rd Amended Statement of claim stating that the Defendant carted away all the goods, equipment and assets in the Plaintiff’s company. Why strip the company bare?
‘’The courts frown at self-help. No reasonable society will encourage resort to self-help for whatever reason. Given the above analysis, I hereby resolve issue 2 in favour of the Plaintiff. Relief 1 is granted only to the extent that it is contrary to the Joint Venture Agreement. Relief 2 is also granted. Relief 3 granted.
‘’Relief 4 granted as depicted by Exhibit 14 only to the extent that it is granted without the Perkins 600 KVA Generator added.
‘’Thus, the valuation price of N246,829,500 (Exhibit 19) minus the 600 KVA Generator of N8,000,000 = N238,829,500. N238,829,500 minus a further 40% depreciation for wear and tear of N95,531,800 = N143,297,700. The Plaintiff is therefore entitled to the #143,297,700. Interest is refused’’.