UNIVERSAL CO-OPERATIVE COMMODITIES LTD & ORS vs BOB COMMODITIES COMPANY LIMITED & ORS
  • IN THE SUPERIOR COURT OF JUDICATURE
    IN THE HIGH COURT
    KUMASI - A.D 2019
UNIVERSAL CO-OPERATIVE COMMODITIES LTD & OTHERS - (Plaintiff)
BOB COMMODITIES COMPANY LIMITED & OTHERS - (Defendants)

DATE:  30TH APRIL, 2019
SUIT NO:  OCC 05/2017
JUDGES:  DR. RICHMOND OSEI-HWERE, J
LAWYERS:  KWAME ANTWI AFRIYIE FOR THE PLAINTIFF
EDWIN SARFO ANNAN FOR THE 1ST TO 4TH DEFENDANTS
JUDGMENT

 

By a Writ of Summons and Statement of Claim dated the 17th day of August, 2016 the Plaintiffs are seeking the following reliefs against the Defendants herein:

a. A declaration that the 1st defendant has breached the terms and conditions contained in the offer letter the 1st defendant offered (sic) to take over the 1st plaintiff dated 23rd April, 2015 which the 1st plaintiff accepted same.

b. An order of this Honourable Court to nullify or cancel the takeover offer the 1st defendant offered to the 1st plaintiff company dated 23rd April 2015.

c. A declaration that the amount standing in the account of the 1st plaintiff at the 5th defendant bank is not for the defendants but rather for the 1st plaintiff.

d. An injunction order to restrain the defendants especially the 5th defendant from allowing any of the defendants to withdraw any amount from the 1st plaintiff’s account as stated in paragraph 29 of the Statement of Claim at the 5th defendant Bank or in any way transact business with the 1st plaintiff’s account.

e. Cost

f. Any further order (s) as this Court may deem fit.

 

The 1st to 4thDefendantsfiled their statement of defence on the 3rd of October, 2016. Subsequently, the said Defendants upon an application amended their statement of defence and same was filed on the 30th day of April, 2018. In the amended statement of defence, they counter claimed against the Plaintiffs as follows:

1. An order of this honourable court confirming the validity of the takeover agreement between the 1st plaintiff and the 1st defendant.

Or

2. In the alternative an order of this court compelling the plaintiffs to refund to the 1st, 2nd, 3rd& 4th defendants GH¢781,000.00 being the amount the 1st, 2nd, 3rd& 4th defendants have paid out of the total indebtedness of the 1st plaintiff.

3. And a further order compelling the plaintiffs to refund the GH¢200,000.00 the plaintiffs took as consideration for the takeover.

4. Interest on the said amounts from April 2015 until date of final payment.

5. An order of this honourable court compelling the 2nd plaintiff to render accounts of his stewardship of the 1st plaintiff after he was appointed the managing director after the takeover of the 1st plaintiff by the 1st defendant.

 

The Plaintiffs’ Case

From the pleadings, the 2nd& 3rd Plaintiffs claim that, they are the directors and shareholders of the 1st plaintiff company. They further state that, the 1st to 4th defendants in a letter dated 23rd April 2015 decided to acquire the 1st plaintiff for valuable consideration.

The plaintiffs claim they accepted the offer of the 1st to 4th defendants per letter dated 28th April 2018.

The plaintiffs in their statement of claim further state that, the 1st to 4th defendants as part of the takeover of the 1st plaintiff agreed to absorb all the liabilities of the 1st plaintiff. The plaintiffs contend that, the 1st to 4th Defendants breached the terms of the takeover by their inability to absorb the liabilities of the 1st plaintiff and it is a result of the failure of the 1st to 4th Defendants to absorb the liabilities of the 1st plaintiff which has necessitated the present action before this Honourable Court.

 

The 1st to 4th Defendants’ Case

The case of the 1st to 4th Defendants can be summarized as follows:

The 1st to 4th Defendants are the shareholders and directors of the 1st defendant which acquired the 1st Plaintiff.

The 1st to 4th defendants contend further that as part of the takeover of the 1st Plaintiff, the plaintiffs were to furnish the 1st to 4th Defendants with the total indebtedness of the 1st Plaintiff.

The 1st to 4th Defendants state further that, they had on a plethora of occasions requested the plaintiffs to furnish them with the bank statement of the 1st plaintiff for them to amortize any outstanding balances standing in the name of the 1st plaintiff.

It is again the case of the 1st to 4th Defendants that, the 1st Plaintiff furnished them with only the Bank Statement of Ideal Finance which had a discrepancy of GH¢300,007.82 presented to them during the takeover.

It is also the case of the 1st to 4th Defendants that, the plaintiffs failed or ignored to produce the other bank statements of the 1st plaintiff for the perusal of the 1st – 4th defendants.

The 1st to 4th defendants again contend that, they paid the liabilities of the 1st plaintiff which was submitted to them without any issues and which was genuine in their estimation.

The 1st to 4th defendants in their amended statement of defence say that, they have spent a total of GH¢781,000 excluding the GH¢200,000 the plaintiffs received as consideration for the takeover of the 1st plaintiff.

 

Issues set down for trial

As required under Order 58 rule 4 of the High Court (Civil Procedure) Rules, 2004, CI 47, there was an attempt at settlement but the parties were unable to reach an agreement. The following issues were therefore set down for trial:

1. Whether or not the 1st – 4th Defendants have breached the terms of the takeover of the 1st plaintiff.

2. Whether or not the 2nd& 3rd Plaintiffs have the capacity to institute the instant action.

3. Whether or not the takeover of the 1st Plaintiff was contingent upon the payment of the liabilities of the 1st Plaintiff.

4. Whether or not if there was a breach, the 1st Plaintiff reverts to its original position with its original directors and shareholders.

5. Whether or not Plaintiffs have fraudulently used 1st plaintiff to secure any loan from any financial institution.

6. Whether or not the plaintiffs are entitled to their claim.

In the light of the fact that the 1st to 4th Defendants amended their statement of defence and introduced a counter claim in the pleadings, there is an additional issue for consideration i.e. whether or not the 1st to 4th Defendants are entitled to their counter claim.

 

The Burden of Proof in Civil Suits Generally

As in all civil suits, the legal burden of proof is placed on the party who asserts the existence of a fact in issue or any relevant fact. Depending on the admissions made, the party on whom the burden of proof lies is enjoined by the provisions of sections 10, 11(4), 12 and 14 of the Evidence Act, 1975 (NRCD 323) to lead cogent evidence such that on the totality of the evidence on record, the court will find that party's version in relation to the rival accounts to be more probable than its non-existence.

 

This basic principle of proof in civil suits, is expounded in Zambrama v Segbedzie (1991) 2 GLR 221 and the same has been applied in numerous cases including Takoradi Floor Mills v Samir Faris (2005/06) SCGLR 882; Continental Plastics Ltd v IMC Industries (2009) SCGLR 298 at pages 306 to 307; Abbey v Antwi (2010) SCGLR 17 at 19 (holding 2); and Ackah v. Pergah Transport Limited and Others [2010] SCGLR 728

 

In Ackah v. Pergah Transport Limited and Others (supra), Adinyira, JSC succinctly summed up the law, at page 736:

“It is a basic principle of law on evidence that a party who bears the burden of proof is to produce the required evidence of the facts in issue that has the quality of credibility short of which his claim may fail…It is trite law that matters that are capable of proof must be proved by producing sufficient evidence so that, on all the evidence, a reasonable mind could conclude that the existence of a fact is more reasonable than its non-existence. This is the requirement of the law on evidence under section 10 (1) and (2) and 11 (1) and (4) of the Evidence Act, 1975 (NRCD 323).”

 

There is, indeed, a clear distinction between the legal burden of proof and evidential burden of proof. Whilst the legal burden of proof is mostly borne by the plaintiff or whoever makes an assertion, evidential burden exists to produce evidence in support of an assertion or exists in the form of tactical onus to contradict or weaken the evidence that has been led by an adversary.

Thus, at the trial the Plaintiffs bore the burden of producing evidence and the burden of persuasion on the issues set down for trial. The 1stto 4thDefendantsbore the legal burden of proof on their counterclaim and were also at liberty to introduce evidence to contradict the assertions of the Plaintiffs.

 

Proof of Crimes in Civil Suits

 In a civil action, an allegation that a crime has been committed must be proved beyond reasonable doubt. This rule is encapsulated under section 13 (1) of NRCD 323 which provides:

 

Section 13—Proof of Crime.

(1) In any civil or criminal action the burden of persuasion as to the commission by a party of a crime which is directly in issue requires proof beyond a reasonable doubt.

In Fenuku v John-Teye [2001-2002] SCGLR 985, it was held (in holding 5) that:

“The law regarding proof of forgery or any allegation of a criminal act in a civil trial was governed by section 13(1) of Evidence Decree, 1975 (NRCD 323), which provided that the burden of persuasion required proof beyond reasonable doubt.”

Thus, the evidence led in proof of criminal allegation in a civil trial must be such that the court should be able to convict on that crime if it were trying it in criminal proceedings. The ultimate condition to the application of this rule is that the allegation of crime should be a fact in issue.

 

Tackling the Issues

 I shall now proceed to resolve the issues which were set down for trial. In the analysis, the court shall also consider the written addressesof counsel for the parties.

I shall first assess issues 1, 3 and 4 together since they all border on the terms of the takeover agreement. I shall then tackle issue 2 which borders on the capacity of the 2nd and 3rd Plaintiffs to institute the action. Issue 5 shall then be tackled. It shall be concluded whether the Plaintiffs are entitled to their claim and whether the 1st to 4th Defendants are entitled to their counterclaim.

 

The Takeover Agreement

 Section 25 of the Evidence Act, 1975 (NRCD 323) provides:

“Except as otherwise provided by law, including a rule of equity, the facts recited in a written document are conclusively presumed to be true as between the parties to the instrument, or their successors in interest.”

In Akim Akroso Stool and Others v Akim Manso Stool and Others [1989-90] 1GLR 100 at page 106, the

 

Court of Appeal held that:

“what the word in a document mean can only be derived from the document itself. The intention of the parties must be gathered from the written instruments. The function of the court is to ascertain what the parties meant by the words which they have used. The court is to declare the meaning of what is within the instrument and not what was intended to have been written so as to give effect to the intention.”

 

Exhibit 2 is the offer letter for the purchase of the 1st Plaintiff company. It reads:

“The Managing Director

Universal Co-operative Commodities Co. Ltd.

Kumasi.

Dear Sir,

OFFER TO ACQUIRE YOUR COMPANY

 

We write to officially declare our intention to acquire your company. This is due to the fact that, we have carefully analysed your assets and liabilities (as per appendix 1) and think full takeover is the best option for us.

We are taking over all the assets and liabilities of your company upon successful transfer of 100% shares of UCCCL to Bob Commodities Limited.

We therefore agree unconditionally to absolve all shareholders, directors, agents, staff, etc of all liabilities incurred and sitting in the books of UCCCL immediately 100% shares of UCCCL are transferred to Bob Commodities Limited.

We appreciate if the process could be completed within the shortest possible time to enable us work within few weeks left on the Cocobod calendar to avoid the withdrawal of your Internal Marketing of Cocoa Licence by Cocobod.

We are counting on your usual co-operation.

Yours sincerely,

Sgd.

Emmanuel Adansi Bonah

(Managing Director)

Cc: The Board Chairman, Universal Coop. Commodities Ltd.”

 

Upon receipt of the above letter, the 1st Plaintiff company accepted the offer made by the 1st Defendant company when its Board Chairman authored Exhibit 3 and communicated same to the Managing Director and Board Members of the 1st Defendant company. The acceptance letter states as follows:

“The Managing Director

BOB Commodities Limited

P.O. Box NT 344

Kumasi

Sir,

RE-OFFER TO ACQUIRE YOUR COMPANY

 

We wish to appreciate your interest in our company per your letter BCL/UCCCL/01/15 dated 23/04/15 and also to acknowledge (sic).

We feel contented of the following proposals stated in your letter under reference:

1. Your intention to make outright purchase of our company.

2. Your intention to take over the Total Liabilities and Total Assets of our company.

3. Your intention to unconditionally absolve the Directors, Shareholders, Management and Staff of the company from all liabilities.

4. And your intention to provide an amount of GH200,000.00 as ‘handshake/drinks’ money to buy out the Directors and Shareholders of the company.

Meanwhile, at an emergency consultative meeting of the Board and Shareholders of the company in Kumasi on Monday 27/04/15, the proposals stated above were accepted.

The Board at the said meeting has directed the Managing Director of the company, Mr. Kwaku Oppong, to prepare the minds of the management and staff on the new deal of the company in relation to their severance awards without delay.

It is hoped that both parties would establish a good working relationship soon to expedite action on the proposals in order to speed up the process of transfer of ownership of the company to BOB Commodities Ltd. to seal up the deal.

Thank you.

Yours faithfully,

Sgd.

Stephen Akwasi Dapaah

(Board Chairman)

Ccs: ALL BOARD MEMBERS”

 

Indeed, Exhibits 2 and 3 speak for themselves. Clearly, an offer for the purchase of shareswas made to the 1st Plaintiff by the 1st Defendant and the former accepted the offer together with the conditions attached. Consequently, the shareholders of the 1st Plaintiff transferred their shares to the 1st Defendant company. This is evidenced by the Deed of Transfer documents which were tendered as

Exhibit 6 series. By exhibit 6 series, the 100% shares of the 1st Plaintiff company were successfully transferred to the 1st Defendant company. These transactions were also backed by valuable consideration of Two Hundred Thousand Ghana Cedis (GHC 200,000.00), as evidenced by the payment voucher issued by the 1st Defendant to the advantage of shareholders of the 1st Plaintiff (Exhibit P) and a cheque with face value of GHC 200,000.00 issued to the shareholders (Exhibit Q).This is compatible with a takeover deal undertaken through share acquisition where the underlying agreement is made between the buyer and the company shareholders. The legal effect of the instant transaction is that, the takeover agreement was signed, sealed and delivered. Thus, the interests of the original shareholders of the 1st Plaintiff company in the company have extinguished and the 1st Defendant company has taken the place of the 1st Plaintiff company through the share transfer.

 

It is trite learning that if you acquire a business through a share purchase, that is, buying all or substantially all of the company's shares from its shareholders, your company as it were "steps into the shoes" of the other company, and business continues as usual. The buyer takes on all of the seller's debts and obligations, whether they are known or unknown at the time of the sale. Ross et al. (2007) describes an acquisition as the complete absorption of one firm by another, the acquiring firm retains its name and its identity and it acquires all the assets and liabilities of the acquired firm. Acquisition of all assets and liabilities of acquired firms is consistent with merger and acquisition transactions.

 

In Ghana Ports and Harbours Authority v Issoufou [1993-94] 1GLR 24, the erstwhile Ghana Ports Authority (GPA) and Ghana Cargo Handling Co Ltd (GCHC) were jointly and severally sued for the value of 1,412 bags of rice belonging to the plaintiff which were lost whilst in custody of the defendants. In June 1986 whilst the suit was pending, the Ghana Ports and Harbours Authority Law, 1986 (PNDCL 160) was enacted merging GPA, GCHC and Takoradi Lighterage Co into one body corporate to be known as Ghana Ports and Harbours Authority (GPHA). The Supreme Court held that even though section 6 of the Ghana Ports and Harbours Authority Law, 1986 (PNDCL 160) expressly transferred the assets of the erstwhile Ghana Cargo Handling Co. Ltd to the Ghana Ports and Harbours Authorities (GPHA), and the Law was silent on the transfer of the company’s liabilities, it could not be said that the express enactment did shut the door to further implication because it was possible that it never struck the draftsman that liability needed specific mention of any kind. Accordingly, the court held that by virtue of the merger the liability of the Ghana Ports Authority and Ghana Cargo Handling Co. Ltd are transferrable to the Ghana Ports and Harbours Authorities.

 

The legal effect of the Ghana Ports and Harbours Authority v Issoufou case (supra) is that once you absorb an entity you take over both the assets and liabilities of the entity. It does not really matter whether or not there is an instrument compelling one to do so or whether the liabilities are known or unknown at the time of a merger or acquisition.

Takeover of companies, however, precedes the payments of liabilities that are acquired by the buyer. Once the shares are transferred and considerations are provided, the takeover becomes valid. The debts of the seller may take some time for the buyer to liquidate. Thus, in the instant case the takeover of the 1st Plaintiff company was not contingent on payment of liabilities of the 1st Plaintiff. As observed early on, the takeover was completed when the shares were transferred and valuable consideration paid. Per Part VIII of Exhibit 7 (the Registrar-General’s Form 3) the shares were formally allotted to the 1st Defendant company to give effect to the deeds of transfer and it also confirmed the takeover.

 

Payment of liabilities and execution of other obligations associated with the acquisition of a company are post takeover commitments that confront the buyer (1st Defendant herein). Creditorsof the seller (1st Plaintiff herein)are, for instance, at liberty to take action against the buyer if it fails to liquidate the inherited debt. Thus, in answer to issue one: failure on the part of the 1stDefendant to liquidate all the debt of the 1st Plaintiff does not constitute a breach of the takeover agreement. It is open to the creditors to institute action against the buyer to vindicate their rights. It has nothing to do with the former shareholders of the 1stPlaintiffs.

Breach of the takeover agreement can only be said to have occurred if a party fails to perform a condition precedent to the takeover. For instance, if shareholders of the seller fail to transfer their shares to the buyer or if the buyer fails to provide valuable consideration in payment of the shares. It is under such conditions that the seller can revert back to his position. In the instant case, however, since there is no breach of the takeover agreement, the 1st Plaintiff cannot revert back to its original position – the purchased shares cannot revert back to the original shareholders of the 1st Plaintiff company. In view of this, the so called termination letter that was served on the 1st Defendant on the instruction of the Plaintiffs is of no consequence. The said letter (Exhibit V) was authored by lawyers for the Plaintiffs and it sought to terminate the takeover agreement for the reason that the 1st Defendant had failed to take over all the liabilities of the 1st Plaintiff.

 

Capacity of 2nd and 3rd Plaintiffs to institute this action

The 1st to 4th Defendants are alleging that the 2nd and 3rd Plaintiffs lack the capacity to institute the instant action. This was articulated by learned counsel for the 1st to 4th Defendants in his written submission as follows:

“My Lord, it is a worn out principle of law that, the managing director of a company acts through and under authorization derived from the board of directors or members acting in a general meeting.

My Lord, it is also borne out of the evidence that, the 1st- 4th defendants acquired the 1st plaintiff thus making them the board of directors of the 1st plaintiff company.

My Lord, from the authorities outlined above, it is obvious that, the 2nd and 3rdPlaintiffs were not shareholders and directors of the 1st plaintiff at the time they mounted this action.

My Lord, it is again clear that, the 2nd and 3rd plaintiffs did not present any board resolution from the board of directors of 1st plaintiff company authorizing them to institute this action on behalf of the 1st plaintiff.

My Lord, the failure of the 2nd and 3rd plaintiffs to produce in evidence any board resolution by the board of directors of the 1st plaintiff or a resolution of the members in a general meeting is ample evidence that, they did not have the capacity to institute and maintain the present suit since their acts cannot be said to be acts of the company thereby rendering the acts of the 2nd & 3rd plaintiffs’ ultra vires (sic) therefore cannot bind the company.”

 

I agree with learned counsel that so far as they (2nd and 3rd Plaintiffs) had ceased to be members of the 1st Plaintiff company at the time the instant action was instituted they had no capacity to sue as members of the company. However,it seems to me that the 2nd and 3rd Plaintiffs are also tracing their capacity to institute this action as guarantors of loans procured by the 1st Plaintiffs. Paragraphs 18 and 19 of the Plaintiffs’ witness statement sums up the assertion as follows:

18. When the defendant agreed to settle all the debts of the 1st Plaintiff immediately the takeover deal is settled, the plaintiffs informed all the creditors of the 1st Plaintiff to settle the 1st Plaintiff debt within a short time to avoid any legal action against them.

19. However the 1st Defendant failed to settle the debt as promised or agreed and the 2nd and 3rd Plaintiffs had to find an alternative means to settle part of the Plaintiff debt to avoid legal action against them which could also lead to the sale of their properties used as collateral securities for loans for the 1st Plaintiff.

 

Banks and financial institutions advance credit facilities to individuals and corporations for the running of businesses based on the security provided by either the borrower or a third party. The rational far backing loan agreements with securities is for the creditors to reduce the risk of losing the sum advanced and also to ensure that the money is received even if the borrower’s business collapses. These securities are also referred to as guarantees and they play a very important role in the banking industry with regards to lending.

In Campbell v McIsaac (1873) 9 N.S.B 287(CA), the court defined guarantee as a contractual obligation undertaken by one person (known as the principal or principal debtor) and another person enters into a contract to fulfill some obligation such that if the principal does not do so, the surety will do it for the principal.

 

A contract of guarantee is a collateral contract to answer for the default of another person. Thus, when a guarantor signs a guarantee he tells the bank or financial institution that when the debtor defaults he will pay the sum involved.

In the instant case, the 2nd and 3rd defendants are claiming that they risk losing their properties as guarantors since the 1st Defendant has failed or refused to liquidate all the debt of the 1st Plaintiff. I subscribe to the argument that the desire to protect their property has clothed them with the capacity to institute this action and I hold that prima facie they have the capacity to institute this action as guarantors of the said loan agreement.

 

Did the 2nd Defendant act fraudulently?

The 1st to 4th defendants are also alleging that the plaintiffs particularly the 2nd plaintiff acted fraudulently when he procured loan a facility for the 1st Plaintiff.

It is apparent from the record that subsequent to the takeover, the 2nd defendant was appointed as a Director of the 1st Plaintiff company. This is evidenced by Exhibit 7. He was assigned the role of a managing director of 1st Plaintiff and this placed him in a position to manage the day-to-day activities of the company.

It is trite learning that a company upon incorporation becomes a separate and distinct entity from its shareholders, directors and officers, and the Courts will seldom attach personal liability to such shareholders, directors and officers whose acts are the acts of the company except in very limited circumstances.

 

Sections 139 and 140 of Act 179 also espouse this fundamental principle of corporate personality and the role of handlers of a company. In Bousiako Co., Ltd. V. Ghana Cocoa Marketing Board; Kwabo-Osekyere Construction Works Ltd. V. Ghana Cocoa Marketing Board (Consolidated) [1982-83] GLR 824, the Court explained the legal effect of these provisions. Osei-Hwere, J (as he then was) held at page 842:

‘‘Sections 139(a) and 140 of the Companies Code, 1963 (Act 179) regulate the above proposition. By section 139 it is provided, among others, that any act of the board of directors or managing director, for instance, while carrying on in the usual way the business of the company should be treated as the act of the company itself; and accordingly the company shall be civilly liable therefore to the same extent as if it were a natural person …

Section 140 also provides for situations when the acts of any officer or agent of a company shall be deemed to be acts of the company. These are, for instance, when the company, acting through its board of directors, or managing director, shall have expressly or indirectly authorised such officer or agent to act in the matter or shall have represented the officer or agent as having its authority to act in the matter. In any of these events the company shall be civilly liable therefore to the same extent as if it were a natural person.’’

 

A managing director of a company is a directing mind of the company. It is his responsibility to act to advance the cause of the company. Operations such as loan procurement ordinarily fall within the core mandate of a managing director. This mandate may be controlled through the internal mechanisms of the company such as board approvals. Therefore, in the absence of any express directive prohibiting the 2nd Plaintiff from securing a loan for the 1st Plaintiff company in his capacity as the Managing Director, it will be going too far to suggest that procuring the loan on behalf of the 1st Plaintiff amounts to a fraudulent act. The act of the 2nd Plaintiff in procuring the loan was the act of the 1st Plaintiff. Consequently, the said loan transaction entered with the 5th Defendant bank binds the 1st Plaintiff company. It would have been a different conclusion if the 2nd defendant had gone ahead to enter into a loan transaction after the passage of the Board resolution forbidding him from doing so. It is my considered opinion that so long as there is no evidence of any limitation on his authority to enter into the said loan agreement, his act remains legitimate. The result is that the fraud allegation against the 2nd defendant has not been proven.

 

Are the Plaintiffs entitled to their claim?

 From the foregoing, it goes without saying that the Plaintiffs have not been able to establish their claim against the Defendants on a balance of probabilities. It has been established from the evidence that there is a binding takeover agreement and the same has not been breached by the 1st Defendant. The 1st Defendant is, however, obliged to fulfill his obligation under the takeover arrangement by liquidating all the debt of the 1st Plaintiff company. From the record, the 1st Defendant has paid GHC 781,000.00 out of the total liability of GHC 2,294,643.39,as captured in Exhibit S, the schedule of liabilities as at 10th April, 2015 (prior to the takeover). Consequently, I order the 1st Defendant to pay all the outstanding debt of the 1st Plaintiff company. The 1st Defendant is also bound to takeover any unknown liability of the 1st Plaintiff which existed prior to the takeover. Beside the bare assertion, the 1st to 4th Defendants failed to establish that the Plaintiffs concealed information relating to their liabilities. The assertion was denied by the plaintiffs and it is evident per Exhibit S that the 1st Plaintiff furnished the 1st Defendant with a list of its liabilities and it was up to the 1st Defendant to do its due diligence by auditing the books of the 1st Plaintiff prior to the decision to takeover. From the 1st Defendant’s own showing it conducted due diligence as it stated in Exhibit 2 that:

“We write to officially declare our intention to acquire your company. This is due to the fact that, we have carefully analysed your assets and liabilities (as per appendix 1) and think full takeover is the best option for us”.

 

I therefore order the 1st Defendant to pay any other existing liability prior to the takeover.

In the event of the 1st Defendant’s failure to liquidate a debt which has been guaranteed by the 2nd and 3rd Plaintiffs, the law gives the sureties (2nd and 3rd Plaintiffs) a right of action against the 1st Defendant for the recovery of any amount paid by them in their role as guarantors. See Campbell v Rotering 42 Minn. 115.

In the circumstances, the 1st to 4th Defendants are entitled to relief 1 of their counterclaim.

There will be no order as to costs.