The acquisition of Honeywell Flour Mills by Flour Mills of Nigeria, which was announced last week, is being challenged by Ecobank due to heavy indebtedness of the acquired company to the bank.

Flour Mills of Nigeria (FMN) and Honeywell Group Limited (HGL), last Monday announced that they had signed an agreement to which FMN would acquire Honeywell Group’s portfolio company, Honeywell Flour Mills Plc (HFMP). But Ecobank Nigeria Plc has challenged the move by placing a caveat on the deal, Thisday reports.

The two companies, in a joint statement, had said Honeywell Group would dispose of a 71.69 per cent stake in its listed subsidiary to Flour Mills at a total enterprise value of N80bn.

Flour Mills announced in a separate statement that it had entered into an agreement with First Bank of Nigeria Limited to acquire the bank’s 5.06 per cent equity in HFMP. However, the acquisition is subject to all requisite regulatory approvals.

While the two companies were looking forward to sealing the deal, Ecobank Nigeria Limited on Tuesday placed a caveat on any share of HFMP on the grounds that the company is hugely indebted to the bank and that the debt is currently a subject of litigation.

A statement titled: “Purchase of Honeywell Group Limited’s 71.69% stake in Honeywell Flour Mills Limited-“Caveat Emptor”, was issued by the bank’s legal counsel Kunle Ogunba & Associates.

In the statement, Ecobank said that consequent upon a press release circulating in several online publications and as further contained on Honeywell Group Limited’s website: “honeywellgroup.com” wherein notification of the proposed divestment of Honeywell Group Limited’s 71.69% stake in HFMP, it is cautioning the general public and the corporate bodies on the danger inherent in dealing in any shares of the company.

The bank explained that it advanced several loan facilities which included working capital disbursements to HFMP and that due to the failure of the company to liquidate the said loan facilities, it was constrained to commence winding up proceedings against Honeywell Group Limited at the Federal High Court, Lagos in suit no: FHC/L/CP/1571/2015.

The bank said that Honeywell Group Limited, being respondent to the winding up petition, objected to the jurisdiction of the trial court to preside over the said suit, and it was upheld by the trial court.

But it has filed an appeal challenging the decision of the trial court. In the appeal case No: CA/L/1041/2016) at the Court of Appeal, Lagos Division, and upon review of Ecobank’s case, the appellate court found merit in the appeal, and held that the winding up proceedings against Honeywell Group Limited was properly commenced and that the Federal High Court had jurisdiction to hear the said petition.

Ecobank said that while the said decision of the Court of Appeal has been appealed to the Supreme Court, the Court of Appeal’s judgment remains valid and subsisting till date. It added that the effect of the Appeal Court judgment is that there is currently a winding-up action/proceeding pending against the said Honeywell Group Limited.

The bank said the estate or effects of Honeywell Group Limited includes (but is not limited to) its 71.69% stake in HFMP which it now seeks to divest to FMN contrary to the express provisions of the law which prohibits the said sale/transfer or divestment during the course of the winding up proceedings. It added that it is clear that Honeywell Group Limited is legally estopped from sequestering and/or disposing any of its assets pending the final determination of the winding up action commenced against it.

“Furthermore, the HFMP in which the shares are held is also currently indebted to Ecobank by virtue of the Court of Appeal judgment delivered on the 14th day of December, 2020 in appeal number: CA/LAG/CV/975/2019, wherein the Appellate Court held that the company did not repay its debt to our client in line with the agreement of parties. While the said judgment is subject of a further appeal to the Supreme Court.”

The bank thus asked that FMN in its best corporate interest immediately cease and desist from consummating the subject transaction which aims to divest the assets of a company being wound-up (Honeywell Group Limited).

“Please be further informed that the assets of both Honeywell Group Limited and HFMP are the subject of the winding-up action and thus based on the doctrine of “lis-pendens” (in addition to the provisions of CAMA supplied above) you are advised to refrain from dealing with the subject asset which forms part of the subject matter of litigation. ”

The bank said that while it believes that Flour Mills or any other interested person or group will adhere to its wise counsel and comply with its demands as a responsible and publicly listed entity, it stated that it shall not hesitate to deploy all available legal options to prevent this audacious illegality from coming to fruition.

Responding to the development, FMN, in a statement obtained from the Nigerian Exchange Limited signed by its Company Secretary, Joseph Umolu, said the announcement by the group to assume majority shareholder status of Honeywell was made after carrying out necessary due diligence and obtaining appropriate legal guidance.

“Consequently, FMN confirms that this agreement is not in breach of any subsisting order of court in matters relating to any third party. This further assurance has become necessary in view of the publication captioned ‘Ecobank warns against acquisition of Honeywell Flour Mills, alleges company facing winding up proceedings.

“Stakeholders are, therefore, urged to maintain their trust in FMN’s management, whose actions are guided by global best practices, as we work diligently to maintain the group’s sterling reputation as one of Nigeria’s leading and oldest agro-allied companies,” it said.

Also, in a statement signed by its Company Secretary, Yewande Giwa, HFMP defended the acquisition saying: “It is pertinent to set the record straight that there is no winding up petition currently pending or live against HFMP in any court in Nigeria. There is also no pending court order restraining trading in the shares of HFMP or inhibiting HFMP or its owners from dealing in its assets.

“The issue as to whether HFMP is indebted to Ecobank is still before the courts and the final decision remains the exclusive preserve of the courts. It is also important to state that the Court of Appeal judgement being referred to in the reports did not declare HFMP to be indebted to Ecobank.”

Honeywell currently has a debt balance of N78.5 billion while Flour Mills is also debt-laden with about N142.8 billion scattered across Nigerian banks.

While HFMP assures investors, regulators and stakeholders that in all of its engagements with FMN, it received independent legal advice, the future of the deal is likely going to be determined by the Court, and all parties are going to wait on the court’s decision.

Good People, it’s graduation week – and Tekedia Institute Mini-MBA edition 6 will conclude this week. It has been a great academic excursion on the mechanics of market systems. Over the last 12 weeks, more than 60 faculty members have led those excursions across different topics and domains.

For this week, we will begin live sessions on Tuesday with “Winning in Markets” to be followed by “The Call to Business Execution”. On Saturday, we will have the finale with “It’s Graduation Day”. Zoom links in the Board.

Registration for the 7th edition (Feb 7 – May 7, 2022) has since started – register here for the early benefits 

• Tue, Nov 30 | 7pm – 8pm WAT | Winning in Markets – Ndubuisi Ekekwe
• Thur, Dec 2 | 7pm – 8pm WAT  | The Call to Business Execution – Ndubuisi Ekekwe
• Sat, Dec 4| 7pm – 8pm WAT | It’s Graduation Day  –  Ndubuisi Ekekwe

I know you own a landed property or you desire to own one some day and I also know that you might have heard from estate developers, surveyors, land sellers or even lawyers that Certificate of Occupancy (CofO) of the land you acquire grants you a root of title as an evidence that you are the legal owner of the land or proves that you are the owner of the land. 

Well, I’m not a bearer of bad news but the bad news is that the Certificate of Occupancy doesn’t prove ownership as it is not enough to grant you a good root of title and it’s not ultimate prove that you are the legal owner of the land. It only raises a presumption of ownership in your favor which can be rebuttable. So take it from me that the certificate of occupancy of the property you own or you intend to own doesn’t really prove or show you are the owner of the property.

This rule was established by the Supreme Court while upholding the decision of the Appeal Court in the case of Joshua OGUNLEYE v. Babatayo ONI (S.C. 193/1987)[1990] NGSC 63. The court in it’s dictum stated  and I quote; “however, a general statement that may be made about the certificate of occupancy is that it raises a presumption in favour of the holder; albeit a rebuttable presumption that the holder has a right of occupancy”- per Belgore Jsc.

In the above case, Mr Joshua Ogunleye bought a land from a community who was proven does not have the ownership of the and therefore cannot sell the land as the land belongs to Babatayo Oni’s father.

Mr. Ogunleye  after the purchase of the land acquired a certificate of occupancy on the land from the state government and started developing the land.

Mr. Oni the rightful owner of the land got to know that his land has been sold by the community without his consent went to the land and demolished the structures already erected on the land by Ogunleye. Ogunleye took Oni to court for trespassing on his land.

At the high court, the court held that by the reason of Joshua Ogunleye acquiring the certificate of Occupancy on the land he’s the bonafide and legal owner of the land. Damages was awarded to him against Mr. Oni for Trespass.

Mr. Oni  went on appeal, the court of appeal reversed the decision of the high court and established that although Ogunleye acquired a certificate of occupancy on the land in question which raises the presumption that he is the legal owner of the land but you cannot acquire a property from the wrong means and get a certificate of occupancy to cover it up. When you acquire a property from the wrong owner, even if you get a certificate of occupancy on that property it won’t prove you are the rightful owner.

The matter went on to the Supreme Court were the court upheld the judgement of the court of appeal and reemphasizing that certificate of occupancy alone is not an evidence of ownership or a good root of title, you must show that you acquired the property from the rightful owner before the certificate of occupancy comes into play.

His Lordship Nnaemeka Agu Jsc in his dictum stated; “This appeal by the plaintiff brings into focus what is required to prove by a plaintiff who relies upon a grant for his proof of title to land. Incidentally, it exposes the weakness of a certificate of occupancy which has been granted where the grantee has no title to the land”.

By this judgement, the Certificate of Occupancy granted to a purchaser of land does not confer any title on him if the seller of the land have no title to the land or not the rightful owner of the land in question as it is he rule that you cannot give what you don’t have (Nemo dare potest quod non habet).

My best advice (out of goodwill) to you is to always consult a lawyer before you get into any transaction, it will save you a lot. 

JOSHUA OGUNLEYE V BABATAYO ONI (S.C. 193/1987)[1990] NGSC 63 (27 APRIL 1990).