Monday, May 06, 2019 / 10:52PM / By Proshare News & Investigations / Header Image Credit: Japaul Oil Maritime
Japaul Oil & Maritime Services Plc, incorporated in 1994 as a private limited liability company, commenced active business operations in 1997 providing marine offshore construction, marine equipment leasing, and oilfield marine support services.
Having undergone a major and necessary re-structuring exercise, it became the first indigenous upstream service company to raise a sum of N1.3 bn through its initial public offer (IPO) in 2005 and N20 bn through a public offer in 2007.
Over the years, it has managed the tough waters of the marine business in Nigeria with the support of its bankers and patronage from clients. As at 2019, it has had to weather a lot of challenges owing to the economic downturn, especially in the oil industry in the last four years. This led to an approach to its bankers based on a long standing relationship to finance the acquisition of a supply vessel (Diamond) and dredgers (Access) in 2013/14.
The bankers had to restructure the loans due to the realities on the ground; sometimes with multiple and conflicting instructions which compelled the company to review its financial transactions vide a forensic audit which discovered significant excessive charges on the company’s account.
The Battle Against Excessive Charges
Nigerian business landscape is replete with stories of excessive bank charges
as a burden on/to corporate customers. Japaul realized after many stalled
negotiation meetings over the findings, it had no option but to seek redress in
the courts as a corporate responsibility to recoup charges in excess of what
was agreed with the bank(s) in their credit appraisal memos (CAMs) or/and those
statutorily permitted by regulators.
This is instructive, even as the dust is not yet settled over the dispute between GT Bank and local automobile manufacturer, Innoson vehicles Nigeria Limited; over excess bank charges and the enforcement of a court of competent jurisdiction’s order of fifa.
The case of Japaul Oil & Maritime Services Plc, who acknowledges the debt owed its bankers, Access Bank Plc but has a higher counter-claim as evidenced by the forensic report is the latest. The company has been under a MAREVA order obtained by the bank since January 15, 2019 that has all but crippled the ability of the listed entity to function as a viable going concern.
Today, the Federal High Court (FHC) in the Lagos Judicial Division before Justice C. J. Aneke, recently won a court judgment against its banker, Access Bank Plc over wherein it challenged the MAREVA order successfully.
Matters in Contention
claimed in the court papers that it had approached Access Bank to complain
about the exorbitant charges it noticed in its corporate account with the bank
after an internal financial audit. The company requested that the excess
charges be reversed and duly credited back into its account.
The bank declined and insisted that Japaul was in debt to the bank, and therefore, should pay up on its debt first.
While Japaul accepted indebtedness, it, however insisted that to keep the books clean and its records with the bank tidy; Access Bank should show good faith by conducting a reconciliation of the forensic report dated July 23, 2018 and reverse undisputed excess bank charges thereon; and use the amount credited to its account to (partly) offset amounts outstanding in respective of its loan.
The court papers showed no indication of this being done and indeed infers that Access Bank refused to oblige Japual’s request and went ahead to freeze the company’s account in December 2018.
This was further exacerbated when the bank, in response to the suit instituted by Japaul, approached another court in the same judicial division to seek for, and obtain an order to seize (arrest and detain) the assets (equipments) of the firm, freeze the account of the company and that of its Chairman and founder, Mr. Paul Abiodun Jegede on January 15, 2019.
The company subsequently sought redress in the same courts over what it saw as a breach of good faith between itself and its banker.
As a result of the legal confrontation, for four months (approx.) in 2019, Japaul and its Chairman were denied access to either the corporate account of the listed entity or/and that of the Chairman personally (having been a guarantor of the loan); thereby placing the company in dire operating conditions even while the substantive suit was yet undetermined.
Background To An Ordeal
background to the story represents an interesting twist on how unsavory
developments can occur between a bank and its customer when relationships go
sour. Access Bank and Japaul have prior to this had an incident free
relationship from the representations made; and had built a banking relation
for about fourteen (14) years up to the point when things turned south.
Based on documents sighted by Proshare, Japaul had, in a letter addressed to the Deputy Chief Registrar, Admiralty Matters Division, Federal High Court, Lagos, claimed that it had never defaulted on any loan taken from the bank over the period of this relationship. The problem, it posits; started when dredgers financed by the bank on behalf of the company ran into some trouble as the contracts upon which the dredgers were purchased were no longer valid as a result of the delay in the arrival of the equipment. Despite this, Japaul represented that it still continued to pay down on the facility within limited resources.
The company equally disclosed that it had to sell-off other assets in order to liquidate commitments on the loan. Assets sold, according to the maritime operator, included two (2) landed properties in choice locations in Port Harcourt and according to Japaul’s representations in the court documents; Access bank’s disposal/sale of Japaul’s land worth N1.6bn for N700m towards the liquidation of the debt.
By June 2018, Japaul claimed that the bank sent documents that were not reflective of the accurate status of the loan account which aroused their curiosity and led to a request to the bank to provide an opportunity for the company and the bank to reconcile the account.
Japaul represents that before executing any further documents, and having raised concerns about the fidelity of the claims against the firm, it sought the reconciliation of the loan account to the satisfaction of both parties.
This opportunity for reconciliation was frustrated by the bank, according to Japaul who became concerned as to why such overtures for means-tested account reconciliation were ignored.
Enter The Forensic Audit
validate its internal accounting findings, the board of Japaul approved for a
forensic audit to be commissioned and engaged the services of the reputable
firm of Messrs Forensic Consulting whose report was received in July
2018. The report according to the marine service company showed that Japaul had
been the subject of alleged excessive bank charges to the sum of N18.7bn
and $94m through a review of its transaction history with the bank.
The company represents that on receiving the report from the forensic consultants, a copy of the audit report was sent to the bank and a request was made for a joint review of the account status, which was ignored. It was on this basis that the company decided to seek legal redress.
Involving The EFCC And Matters Evolving
sooner than receiving the forensic report, Access Bank caused for a report to
be made to the Chairman to the Economic and Financial Crimes Commission (EFCC)
on the charge that the company had sold the dredgers financed by the bank
and that the proceeds of the sale had been diverted.
The Chairman of the company was invited in October 2018 for questioning and detained while the EFCC carried out an investigation into the matter and subsequently recommended that both parties reconcile the customer’s loan book.
This action by the EFFC occurred while the case challenging the outstanding loan claim had been filled in the court of competent jurisdiction.
A Day In Court
to come to an amicable settlement of the matter, Japaul filed three cases in
court to seek a refund of the alleged excess bank charges that were indicated
by its forensic report on its account with the bank. The cases were:
The three cases were filed in 2018 with proceedings in progress. The State High Court advised that both parties go for mediation and that Access Bank bring its own report on the account status of the customer. This process, for reasons unknown, has not been consummated since mid-January 2019.
Perharps unsatisfied with the non-progress of the process for an amicable resolution of the matter, the bank approached Honourable Justice C. J. Aneke of the Federal High Court in Lagos wherein the bank asked for; and received an ex parte Mareva Injunction seizing the assets of Japaul and its Chairman.
The Mareva Judgment:
suit No: FHC/L/CS/29/19 the Honourable Justice Aneke granted the following
1. An Order for the immediate Arrest and detention ofvthe Vessels MV JAPAUL A TUGBOAT AND MV DOMINON (MV PINA) TUGBOAT, THE VESSELS JD-1 DREDGER and JD 11 DREDGER the 1st, 2nd, 3rd and 4th Defendants (the mortgaged properties) anywhere they may be found within the Niegrian territorial waters within the jurisdiction of this Honourable Court pending the hearing and determination of the substantive suit;
2. AN ORDER OF MANDATORY PRESERVATIVE INJUNCTION is made restraining the 3rd Defendant, JAPAUL MINES & PRODUCTS LIMITED, JAPAUL OIL & MARITIME SERVICES PLC AND PAUL ABIODUN JEGEDE, OWNERS OF JAPAUL A TUGBOAT AND MV DOMINION (MV PINA) TUGBOAT, THE VESSELS JD-1 DREDGER AND JD-11 DREDGER the 1st,2nd, 3rd, and 4th Defendants (the mortgaged properties) from registering any change or charges or mortgages to the ownership of the 1st and 2nd Defendants pending the hearing and determination of the substantive suit;
3. AN ORDER OF MAREVA INJUNCTION is made restraining the 3rd Defendant; JAPAUL MINES & PRODUCTS LIMITED, JAPAUL OIL & SERVICES PLC and PAUL ABIODUN JEGEDE, OWNERS OF JAPAUL A TUGBOAT AND MV DOMINION (MV PINA) TUGBOAT, THE VESSELS JD-1 DREDGER AND JD-11 DREDGER the 1st, 2nd 3rd and 4the Defendants herein, their agents, officers, assigns from operating the account maintained with the banks listed in schedule hereto including issuance of cheques, bank drafts, cash withdrawals or anything howsoever that would cause any sum of money to be removed from the said account pending the hearing and determination of the substantive suit;
The Effect Of The Order
the court order had a severe impact on Japaul’s ability to conduct normal
The Mareva order made it impossible for the company to operate its accounts and sustain its activities as a going concern; the consequence of which threatened the jobs of hundreds of workers employed by the company.
While this was at play, the listed company represented that it met its minimal requirements as a listed entity; yet the market was not availed of this information; especially as it relates to market being properly apprised of the situation and the potential contingent liabilities appropriately priced into market valuations. This is a matter we intend to interrogate in subsequent reviews on the development as it relates to the issue of market disclosure and corporate transparency.
Far more pertinent must be the discovery that the company followed through on the complaint procedure put in place by financial regulators on matters of this type, as a means of market friendly resolution of banking excess charges with material consequence on profitability (including shareholder value). The firm represents that when such a formal complaint was made; the regulators adviced them to “stay on the queue” as several cases of this nature was pending.
This alleged response from a market regulator requires some deep reflections as it undermines the integrity of timely problem resolution mechanisms put in place to build confidence in the market and promote a veritable ‘ease of doing business’ climate.
Takeaway from the Judgment
seems to be an important lesson Nigerian Banks must learn from their approach
to debt resolution with corporate clients, customer conflict engagement and the
use of the courts, as seen in the last two high profile cases to date.
Recall that in Guaranty Trust Bank Plc v. Innoson Nig. Ltd.  16 NWLR (Pt. 1591) 181 at 203, paras. D-F, per Eko, JSC (A Garnishee Lacks The Power To Fight The Cause Of A Judgement Debtor) the Supreme Court reiterated what is otherwise trite principle of law regarding garnishee proceedings and left everyone wondering why the Appellant decided to fight what the apex Court rightly described as a mischievous proxy war against a Judgment that does not concern it, when it said that:
“It is not for a garnishee to fight the cause of a judgment debtor who either accepts the judgment against him and does nothing about it, or who may be indolent to fight his cause. No power in law inheres in the garnishee to make himself a busybody and proceed like Don Quixote, the Knight Errant, to fight the cause of the judgment debtor who is his customer. A judgment debtor whose money or property is seized or attached through garnishee proceedings in excess of the judgment sum has several options in law to deploy to forestall such unwarranted seizure or attachment. It is not for the garnishee to embark on any of such options, which he lacks the locus standi to embark on. The cause of action accruable to the garnishee in a garnishee proceeding is quite a limited one. It does not include his usurping the cause of action of the Judgment Debtor.”
Akin to the above judgment in another important legal principle shared in the judgment order in Access Bank Plc v. Japaul & 8 Others  Suit No: FHC/L/CS/29/19 of May 6, 2019 by the Honourbale J. C. Aneke, wherein the judge concluded and noted as follows:
“The Defendants/Applicants have therefore demonstrated to the satisfaction of this Honourable court how the instant suit constitutes an abuse of judicial or court process. For instance it has been shown that there is a multiplicity of actions on the same subject matter against the same opponents on the same and /or similar issues and that the instant suit constitutes the use of judicial process to the irritation and annoyance of the Defendants/ Applicants to truncate the efficient and effective administration of justice. All these have been demonstrated to the case therein. I hold therefore that this suit constitutes abuse of Court or judicial process thus robbing this Honourable Court of the requisite jurisdiction to hear and determine same. In the result, the interim Orders of this Honourable Court made on the 15th day of January, 2019 are hereby set aside and the suit accordingly struck out for want of jurisdiction to hear and determine same.”
While the judgment above offers relief for the defendant in this case, they like many other firms remain at the mercy of the awesome powers wielded by financially empowered lenders.
While the defendant can enjoy the temporary respite this judgment offers and the restoration of faith it presents; the real deal lies in the convergence of two independent but mutually reinforcing actions:
A more informed analysis and detailed technical report on the financial status of Japaul Oil & Maritime Services Plc and the potential impact the outcome of the current litigation could have on its books will be a useful contribution to the market; and we will endeavor to issue such.
The pro forma review below indicates a potential adjustment should the claim materialize, subject to any other fiscal and operational adjustments. The company so far has maintained a steady loss position over the past five years.
Table 1: Japaul Oil & Services Financials 2015-2018
Visit Japaul Oil Plc IR Page in Proshare MARKETS
Graph – One Year Share Price Movement
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