High Court unfreezes Britania’s accounts, assets

The High Court has unfrozen bank accounts and assets of collapsed Britania Foods Limited. This followed protests by Diamond Trust Bank (DTB) that a freeze order had paralysed operations and hampered efforts by an administrator appointed by the lender to get the firm back on its feet.

Justice Wilfrida Okwany yesterday ordered Britania’s administrator Peter Obondo Kahi to deposit Sh14 million into a joint bank account in the name of lawyers for the biscuit maker and Uzuri Foods, a creditor that filed insolvency proceedings over the debt, as an alternative to the freeze orders.

The judge on August 17 froze Britania’s assets after Uzuri Foods filed an application claiming the biscuit maker was withdrawing funds from bank accounts as part of a ploy to avoid repaying a Sh17 million debt.

Uzuri Foods says Britania has failed to pay for supplies worth Sh14 million and that the sum has attracted more than Sh3 million interest since 2019.

Justice Okwany’s release of Britania’s bank accounts came two days before the deadline for creditors to file their claims with Mr Kahi. 

The administrator last month gave creditors until September 3, 2021 to submit their proof of debt.

Yesterday, lawyers representing DTB protested over the asset freeze order, arguing it paralysed operations and efforts by an administrator hired by the lender to get Britania out of financial doldrums.

Loan agreement

DTB appointed Mr Kahi as Britania’s administrator on the same day Justice Okwany issued orders freezing the biscuit maker’s assets.

The judge said at the time the freeze orders were issued, there were concerns that Britania could empty its bank accounts before paying the debt owed to Uzuri Foods.

“Having heard the rival submissions by counsel for the parties, the court deems it necessary to vary the orders issued on August 17, 2021 as follows: the court directs that the company (Britania) shall deposit Sh14 million in a joint interest-earning account in the name of counsel within 45 days,” the judge ordered.

DTB’s lawyer George Oraro argued that Uzuri Foods is an unsecured creditor, hence its interests cannot be placed ahead of the lender’s. 

Mr Oraro argued that DTB is a secured creditor whose loan agreement with Britania provided for appointment of an administrator in the event of default.

Britania owed DTB more than Sh1 billion as at yesterday’s court proceedings.

Mr Oraro held that Uzuri Foods acted in bad faith by seeking to freeze Britania’s assets rather than seeking court orders for indemnity from the administrator for the Sh17 million supplier debt.

But Uzuri Foods lawyer Brian Onyango said his client had asked for indemnity as an alternative to freezing Britania’s assets.

Insolvency suit

Mr Oraro argued that the freeze order had ruined negotiations on the debts owed by Britania.

“The order has financial consequences on my client (DTB). Mr Onyango should have applied for indemnity from the administrator. There were people negotiating interest on the loan and they have now exited because of the orders issued by the court on August 17, 2021. If there is an invalid appointment of an administrator, you can apply to the court so that the person who appointed the administrator can indemnify them,” Mr Oraro said.

DTB has also filed an insolvency suit against Britania, where it seeks authority to have Mr Kahi manage the biscuit maker’s affairs and possibly get it back to normal operations.

The 34-year-old biscuit maker has fallen on tough times, as it has been unable to collect debts that would have restored normal operations.

In response to the Uzuri Foods insolvency petition, Britania argues that its troubles are directly linked to Sh50 million debts owed to the firm by collapsed retailers Nakumatt and Tuskys, coupled with the economic effects of the Covid-19 pandemic.

Following partial economic shutdowns by the government, Britania was unable to reach some of its biggest clients, mainly schools and hotels.

Britania says it has sought capital injection from various investors who could help it pay debts and resume operations.

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