Breach of warranty: UK court orders Ardova to pay $19.2m to Zenon

Zenon Petroleum and Gas Limited has won a suit instituted by Ignite Investment Limited in the London court of international arbitration (LCIA) over the share purchase agreement (SPA) reached on the sale of Forte Oil Plc (now Ardova Plc). 

A share purchase agreement (SPA) is the main contract used in a private sale of shares. 

AbdulWasiu Sowami, chief executive officer (CEO) of Prudent Energy and Services Limited (the parent company of Ardova Plc), through his investment portfolio, Ignite Investments and Commodities Limited, acquired a 74.02 percent stake in Forte Oil Plc in 2019.

In the judgment delivered on October 7, 2022, the tribunal ruled in favour of Zenon in three out of the four claims. 

It also ordered Ignite to make the SPA agreed payments less the amount awarded for one of the claims.

As such, Zenon Petroleum was awarded $19.2 million by the LCIA in the dispute.

With the award in favour of Zenon, it is expected that all due payments would be made by Ignite in compliance with the award.

In June 2019, Zenon Petroleum had completed the sale of a 74.02 percent shares of Forte Oil Plc to Ignite Investments. 

Thereafter, Ignite served a dispute notice through a letter dated June 17, 2020, wherein the company had alleged claims for a breach of warranty relating to the SPA executed on December 20, 2018.

The dispute notice had alleged that Zenon breached certain warranties under the SPA and as such, Ignite made the relevant claims against Zenon.

Breach of warranty is the violation of an express or implied contract of warranty, and thus it is a breach of contract.

In line with the SPA, the parties agreed to meet with the intention to find a solution to the alleged claims by Ignite.

However, following failure to resolve the dispute, Ignite filed a claim at the LCIA on December 18, 2020, of which Zenon filed a counterclaim.

Thereafter, a tribunal was then appointed by LCIA consisting of three arbitrators namely: Messrs Alain Choo Choy QC (presiding arbitrator), Oba Nsugbe QC, and Segun Osuntokun.

The tribunal held the hearing on the matter from December 6th to 9th, 2021, wherein all parties presented their case and cross-examined individual witnesses from both parties.

Therefore, On October 7, 2022, the tribunal delivered its judgement in the case in favour of Zenon. 

TheCable had reported that Zenon Petroleum asked a federal high court in Lagos to wind up Prudent Energy and Services Limited over the latter’s inability to pay over $6 million debt.

Zenon Petroleum, in a suit at the federal high court, Lagos, with No. FHC/L/CP/1450/2022, said the debt was alleged to have arisen from the sale conducted in 2018 where Zenon Petroleum and Gas Limited and its affiliates sold 74.02 percent of the issued share capital of Forte Oil Plc to Sowami and Ignite Investment and Commodities Limited.

According to the court filing, the company had alleged that the security for the deferred consideration for the sale of the shares, Prudent Energy and Services Limited and Sowami had provided a guarantee in favour of Zenon Petroleum and Gas Limited and its affiliates for the prompt payment of the deferred consideration as at when due.

It also alleged that $6 million being part of the deferred consideration became due on June 18, 2022, and the company refused to fulfil the obligation despite several demand letters.

However, Zenon Petroleum and Gas Limited said it did not publish details of winding-up petitions instituted against Prudent Energy.