Tuesday, June 14, 2016 04:05 PM / NSE
NATURE OF THE TRANSACTION:
3 member companies of the Honeywell Group – Honeywell Flour Mills Plc, Anchorage Lesiures Limited and Siloam Global Services Limited – obtained facilities from Oceanic Bank for commercial purposes between 2006 - 2008. Oceanic Bank was later acquired by Ecobank in 2011.
Following protracted negotiations, an agreement was reached between Honeywell and Ecobank that the sum of N3.5 billion would be paid in full and final settlement of the total liability of all 3 companies.
The portion of the total outstanding in question in the name of Honeywell Flour Mills Plc stood at N2 22, 991, 248. 33 as at May 2015 as the company maintained only a running overdraft account with the bank.
CLAIMS OF BOTH PARTIES:
Honeywell: Both parties agreed in July 2013 that Honeywell would pay the sum of N3.5 billion in full and final settlement of the indebtedness of the 3 companies stated above. This agreement was reached between representatives of both entities at the most senior Management level (including Ecobank’s Managing Director and Company Secretary), and was re -confirmed by the Bank in meetings and correspondence with Honeywell.
Honeywell completed the payment of the agreed sum in January 2014, and thereafter requested for a letter of discharge from the Bank and an update of the performance status of its accounts on the CBN CRMS Portal.
In its letter dated 7th February, 2014 Ecobank confirmed receipt of the payment and indicated that the portal would be updated accordingly Surprisingly, Ecobank also stated in the same letter after receipt of agreed payments that Honeywell’s request for a waiver/concessionary payment was going through an internal approval process and as such the letter of discharge could not be issued. For the records, at no time during the negotiation/discussion process was the settlement conditional upon any other internal approval process.
Honeywell continued to engage the Bank with respect to the letter of discharge and the update of its accounts on the CBN CRMS Portal as we were certain that we had fulfilled our obligations as agreed. About eleven months after Honeywell completed the payment of the agreed settlement figure of N3.5 billion and despite the fact that several letters had been written which were never responded to, Ecobank reneged on the agreement and claimed that the N3.5 billion was only a partial payment.
Ecobank for its part claimed that the agreement reached by both parties was an “in – principle understanding” and that the N3.5 billion paid by Honeywell was only a partial payment. It also asserted that the Chairman of the Honeywell Group was a related party to the bank at the time the debt repayment was negotiated, and as such it would not grant a discharge letter to Honeywell.
All these claims were made about a year after Honeywell had completed the payment and to our mind, were afterthoughts.
As it had become obvious that a dispute had arisen, to resolve the issue of whether there was indeed a debt owed or not, Honeywell wrote a petition to the subcommittee on Ethics and Professionalism of the Bankers’ ommittee which heard submissions from both parties. On the 26th of June 2015, the subcommittee issued a ruling in favour of Honeywell directing Ecobank to honour the agreement. The subcommittee’s findings are as follows:
·“It was not in dispute that Management of Ecobank consummated an agreement with the Chairman of Honeywell Group on the 22nd of July 2013 to accept the sum of N3.5 billion in full and final settlement of the total outstanding sum of N5.5 billion being the Group’s indebtedness to the bank;
·The sum of N500 million was paid on 23rd July 2013 and payment of the balance of N3 billion was completed on January 10th, 2014;
·As at the time the transactions were consummated with Oceanic Bank (legacy bank), the Chairman of Honeywell Group, Dr. Oba Otudeko CFR was not a member of the Board of Directors of Oceanic Bank;
·As at the time Ecobank acquired Oceanic Bank and by implication the Honeywell Group loan facility, and commencement of discussions with Ecobank, Oba Otudeko had left the Board of Ecobank Transnational Incorporated (ETI) as a Director;
·Based on legal opinion and clarification sought from the Banking Supervision Department of the Central Bank of Nigeria, the Chairman of Honeywell Group was not a ‘related party’ to the transaction, as he was not a member of the Board of Directors of Oceanic Bank at the time the transactions were consummated.”
In conclusion, the subcommittee ruled that:
“The agreement between Honeywell and Ecobank to pay the sum of N3.5 billion as full and final payment of Honeywell’s indebtedness is valid and should be complied with....”
Following the CBN directive issued on the 22nd of April, 2015 that all Banks should publish lists of delinquent debtors with non-performing accounts in at least three national daily newspapers, Honeywell wrote several letters to Ecobank reminding the bank that as the matter was before the Bankers’ Committee, Ecobank had no right to include the names of the affected companies in its list of delinquent debtors. Ecobank however indicated that it would publish the names of the Honeywell companies, and remained obstinate in its stance on the grounds that it had to comply with the CBN directive. Honeywell thereafter, through its Counsel, Messrs. Wole Olanipekun & Co, wrote to Ecobank on the 28th of July 2015 and advised the bank to desist from making any libelous communication or describing the affected companies as debtors in any newspaper advert 3 or any other means. Ecobank failed to respond to this letter. In view of the impending deadline for publication of names of delinquent debtors, Honeywell’s lawyers again wrote to Ecobank on the 3rd of August 2015 demanding within 24 hours, a confirmation that the bank would not publish the names of the affected companies. Ecobank again failed to respond to this letter.
In order to prevent further reputational damage and financial losses to the Group, it became imperative for Honeywell to protect its interest by ensuring that the status quo was preserved until a resolution of the matter was reached. Honeywell therefore filed a suit before the Federal High Court in August 2015, and the Court directed parties to maintain the status quo pending further orders. In flagrant breach of this directive, Ecobank filed multiple suits before several judges of the Federal High Court, essentially ‘shopping’ for an ex parte order restraining the Honeywell companies and their Chairman from:
· operating their accounts in all banks and financial institutions;
· directing and compelling all banks and financial institutions in which the companies have accounts to furnish details of the said accounts to Ecobank within 7 days;
·and granting leave to Ecobank to publish the order in the official gazette and in the Guardian and Thisday newspapers.
Several judges declined to grant the order, instead directing that the companies should be put on notice. Unfortunately the ex parte order was finally granted by one of the judges of the Federal High Court. Honeywell thereafter filed an application successfully challenging the grant of the exparte order, and an order varying the terms of this ex parte order was granted on the 4th of December 2015. Honeywell has filed a Notice of Appeal at the Court of Appeal, Lagos to set aside the ex parte order in its entirety.
Contempt proceedings have also been initiated against the bank for violating the order of the Court that parties should maintain the status quo. This comes up for ruling on the 15th of January 2016.
Honeywell is also exploring all other options for the speedy resolution of the matter.In the interim, the affected companies continue to operate their respective business