A Federal High Court in Lagos has ruled that the sale and disposal of assets belonging to a firm Kay Nath Nigeria Limited by Union Bank Plc was illegal, null, and void.
The court ordered the bank to refund the sum of N143,297,700 to the company.
Justice Daniel Osiagor delivered the judgment in Suit No: FHC/L/CS/459/2004, filed by Kay Nath Nigeria Limited against Union Bank.
The court found that Union Bank acted beyond its authority when it took control of the company’s assets and stocks.
Kay Nath Nigeria Limited, represented by its lawyer Mr Adenrele Adegborioye, had sought a declaration from the court that Union Bank’s removal, sale, and disposal of the company’s assets at its head office and factory at 13/15 Osolo Way, off Murtala Mohammed International Airport Road, Ajao Estate, Lagos, was unlawful.
Adegborioye argued, “The defendant had no right to sell or alienate the assets of my client. The Chief Promoter of the company was completely shut out of the business, despite being included in the Joint Venture Agreement. This exclusion is a violation of the agreement.”
The plaintiff also asked for the court’s declaration that it and its officers were entitled to unrestricted access to the company’s premises.
“It is our right to manage and operate the business. Union Bank had no authority to disrupt our operations or take over the company’s administration,” Adegborioye said.
In response, Union Bank, through its amended defence and counterclaim, stated that as a mortgagee, it had the right to execute its power of sale under the Investment Mortgage Agreement, dated 16th November 1992.
The bank argued that the agreement allowed it to take control of the plaintiff’s properties, including fixed plants, machinery, and other assets, to recover an outstanding debt of N131,811,183.70.
However, in his judgment, Justice Osiagor rejected the bank’s claim, stating, “The Joint Venture Agreement was still valid as of March 11, 2004, and Union Bank had appointed two of the company’s directors, one of whom was the Chairman of the Board.
“The company was responsible for liquidating its debt, and Union Bank had the responsibility of overseeing this process through its appointees. Therefore, the defendant is denied the power of sale as requested.”
The court further held that Union Bank’s unilateral control over the company’s management was a breach of the agreement.
“The exclusion of the plaintiff’s appointee from the management of the company is a violation of the Joint Venture Agreement. The defendant cannot take matters into its own hands and strip the company of its assets,” Justice Osiagor ruled.
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’’.