Liberia: How Eco Fuel Fraud Caught Up With Them
MONROVIA – When Eco Fuel FZE entered into a joint venture agreement with SRIMEX Oil and Gas Company, the agreement was that both companies will own a parent company to be registered in the United Arab Emirates, Srimex Eco Fuel on a 50-50 shareholder basis.
Pursuant to that understanding, Srimex was first responsible to make available the land for the construction of the fuel storage terminal, the registration of three subsidiaries, the acquiring of importation license, among others.
SRIMEX acquired a 2.03 acre of land from the National Port Authority as the first step to the registration of the parent company in Dhabi.
On March 3, 2015, Eco Fuel incorporated and registered a company in the UAE known as Srimex Eco Fuel. Contrary to the agreement, the company was incorporated and registered under the laws of the UAE as a single shareholder company and Mr. Hasbulleh Akabary, who is also a business partner of Mr. Simon Rees (the respondent of Eco Fuel Trading) was named and designated on the shareholder’s certificate as the sole registered shareholder of record of the shares of Srimex Eco Fuel FZE.
Following the registration of the Srimex Eco Fuel in the UAE, the certificate of incorporation was forwarded to Mr. Musa Bility’s Srimex to enable him incorporate and register the three subsidiaries as agreed upon in the joint venture agreement.
In April 2016, the records presented to the Civil Law Court showed that Srimex Oil and Gas Company complied with the joint venture agreement and the understanding of the parties when Srimex duly assigned its leasehold rights to the 2.03 acres of land which it had previously leased from the National Port Authority to Srimex Eco Fuel FZE Inc. under the provisions of the Substitution and Novation Agreement, subject to cancellation proceeding.
Srimex still in honor of the agreement, applied to the Liberia Petroleum Refinery Company (LPRC) for the assignment of importation license, but the LPRC requested Srimex to provide evidence of its interest in the Srimex Eco Fuel FZE as a precondition and a matter of policy before the said license can be transferred.
In November 2018 Srimex filed a petition for declaratory judgement against Eco Fuel Trading, the National Port Authority and the LPRC before the Civil Law Court. Srimex requested the court to make certain declarations of law in respect of its ownership of the 2.03 acres parcel of land which it had previously leased from the NPA.
Again, in November 2019, Srimex again filed a petition for the cancellation of the April 2016 substitution and novation agreement against Eco Fuel Trading.
According to Srimex, its request for the cancellation of the novation was based on Eco Fuel’s fraudulent misrepresentation that Srimex was a 50 percent shareholder in Srimex Eco Fuel FZE, the company which Eco Fuel Trading had established in the UAE in March 2015.
The National Port Authority, which was also a correspondent to the complaint filed by Srimex, conceded the legal soundness of Srimex’s petition and prayed the court to cancel the substitution and novation agreement.
Eco Fuel filed its returns denying that the assignment of Srimex’s leasehold rights in April 2016 to the provisions of the substitution and novation agreement was not based on Eco Fuel fraudulent misrepresentation, and that Srimex has its 50 percent share of the joint venture and should proceed to Dhabi to sign for its 50 percent share of the holding company.
In an amended petition in July 2020, Srimex stated that it only became aware on Thursday, October 31, 2019 of the incorporation of, and shareholding in Srimex Eco Fuel FZE in UAE when its Counsel was served with a Motion to Intervene by Respondent Eagle Holding Limited, in which the Certificate of Incorporation and Share Certificate of Srimex Eco Fuel FZE were attached as exhibits.
Co-Respondent Eagle Holding filed its turns and denied the averments contained in Srimex’s petition and contended, among other things, that the assignment Srimex leasehold rights to Eco Fuel FZE Inc. pursuant to the substitution and novation agreement was not based on fraudulent representation or fraud. Srimex also performed other obligations agreed upon in the joint venture agreement, but failed to transfer its importation license to the joint venture company or its subsidiary, authorizing it to import petroleum products for storage into the terminal.
Following the trial, the court sought to determine the whether or not Srimex established fraud or misrepresentation during trial for which the petition for cancellation of the substitution and novation can be granted.
According to the court, both parties agreed and confirmed during the trial that they agreed to incorporate and register a joint venture company called Srimex Eco Fuel, wherein Srimex Oil and Gas Company and Eco Fuel Trading could have 50-50 shares of the joint venture. Co-Respondent Eco Fuel had its obligation to incorporate and register the joint venture in Dubai, wholly owned by the parties in the case on a 50-50 basis.
Both parties, according to the court, intended to incorporate and register a joint venture in Dubai for the sole purpose of constructing a modern terminal at the Freeport of Monrovia to import petroleum products into the storage for sale or distribution within the Liberian market, or beyond borders.
The court further observed that it was agreed by the parties that Srimex had 50 percent share of the joint venture, and was required to incorporate and register three local subsidiaries, wholly owned by the joint venture which Srimex did.
According to the court, Srimex relied on representation made by the Eco Fuel of his 50 percent share in the joint venture, and signed substitution and novation agreement where upon Srimex Eco Fuel Inc. one of the subsidiary companies of joint venture took exclusive possession of the leasehold right of Srimex that it had previously leased from the Freeport of Monrovia in 2012. This led to the construction of the modern storage terminal at the port which construction cost a 50-50 share equally by the two parties.
The record before the court showed that the certificate of share of the joint venture is only in the name of Mr. Hasibullah Akbary, who incorporated and registered the joint venture as Eco Fuel FZE, Free Zone Establishment, which is either owned by one person or an entity. It does not provide for multi-shareholders.
The court opined that Mr. Akbary should have incorporated and registered the joint venture as Eco Fuel FZC which provides for multi-stakeholders in Dubai.
According to the court, the sequence of events of performance was firstly established and register a joint venture company, wholly owned by the partners on a 50-50 basis before the incorporation and registration of the three Liberian subsidiary companies, wholly owned by the joint venture.
The court stated that the certificate of share indicating 100 percent ownership of Mr. Akabery shows that Srimex does not have any equitable interest in the joint venture, despite Srimex incorporated and registered the subsidiary companies of the joint venture and transferred its leasehold rights of 2012 to the Srimex Eco Fuel Inc. in 2016.
The court opined that Srimex’s execution of the substitution and novation agreement in April 2016 assigning its leasehold right to Srimex Eco Fuel FZE Inc., was based solely on its good faith reliance on the representation made it by Eco Fuel, that Srimex Eco Fuel FZE had previously been incorporated and registered in the UAE as the parent and holding company of Srimex Eco Fuel FZE, Inc. and the other two local subsidiary Liberian companies made Srimex as 50 shareholder in Srimex Eco Fuel FZE, the parent company.
The court further opined that Srimex established fraud or misrepresentation of fact during trial under the facts and circumstances in the case.
Court therefor decreed the Substitution and Novation Agreement executed by the parties in April 2016 cancelled ab initio as though it was never executed.
The court: “The Leasehold right of the subject premises is hereby reverted to the Petitioner, and the Clerk of Court is hereby ordered to issue a Writ of Possession to be placed in the hand of the Sheriff to have co-respondent Eco “Fuel FZE and its subsidiaries evicted, ousted and ejected from the leased property and place the Petitioner in possession thereof.
“The parties in this litigation are hereby ordered to nominate a auditor who will be appointed by this Court to ascertain the cost of the construction of the terminal and the cost of the Petitioner’s expenses in respect of the construction of the terminals, deduct from the cost of the expenses the amount realized by the Respondents in the operation of the terminal and thereafter determine the amount to be paid to the respondents by the Petitioner as equity demands in the premises.”