IN THE SUPERIOR COURT OF JUDICATURE
IN THE HIGH COURT OF JUSTICE COMMERCIAL DIVISION
HELD IN ACCRA ON MONDAY THE 23RD DAY OF JUNE 2014
BEFORE HIS LORDSHIP JUSTICE GEORGE K. KOOMSON

 

                                                                                      SUIT NO: BFS/144/14

 


HFC BANK GHANA LIMITED                                               PLAINTIFF / RESPONDENT

Vrs

1.    REPUBLIC BANK LIMITED                                            1STDEFENDANT/APPLICANT

2.    SECURITIES AND EXCHANGE COMMISSION            2ND DEFENDANT

 

RULING

In this application, the 1st defendant/applicant (herein referred to as 1st defendant) seeks an order of this court setting aside the writ of summons, striking out the statement of claim and dismissing the suit and the application for interlocutory injunction. The 1st defendant has brought the said application on four main grounds, namely,

1.   The Securities Industry Law, 1993 (PNDCL 333) provides explicitly in section 8C that the matters complained of by the plaintiff in this suit shall first be submitted to the Securities and Exchange Commission (SEC) before redress is sought in the courts. Plaintiff is in clear violation of this statutory precondition for bringing these matters to court.

2.   Plaintiff is asking this civil court to determine that offences, notably “inside trading”, have been committed by the 1st defendant and seeks the imposition of the appropriate penalties and sanctions on the 1st defendant, in disregard of section 139(1) of the Securities Industry Law which sets out processes for adjudication in respect of allegations of offences having been committed and/or resolution of such matter whether by the SEC composing sanctions and penalties or the Attorney-General initiating proceedings or both otherwise.

3.   In the application for an order of interlocutory injunction conclusive documentary evidence is provided by a representative of the plaintiff that shows that the Board of Directors of the plaintiff has not authorised this action and the Court’s jurisdiction has therefore, not been properly invoked on behalf of the plaintiff bank.

4.   The proceedings instituted by the plaintiff and the application for order of interlocutory injunction is vexatious and an abuse of the court process.

 

Let me briefly set out the material facts giving rise to the dispute before me. The plaintiff is a public limited liability company incorporated and operating in Ghana and is licensed by the Bank of Ghana to engage in the business of banking in Ghana. It is also listed on the Ghana Stock Exchange. The 1st defendant is a company incorporated and licensed by the Central Bank of Trinidad and Tobago to engage in the business of banking.

The 2nd defendant is a body corporate set up under the Securities Industry Act, 1993 (PNDCL 333) to regulate the securities industry in Ghana. The 1st defendant holds shares in the plaintiff company. The total shares held by the 1stdefendant as at 6th November 2012 constituted 8.79% of the plaintiff’s shares. Subsequently the 1st defendant acquired the entire shareholding of Aureos Africa Fund LLC in the plaintiff which increased the ordinary shares of 1st defendant to 32.02% as Aureos was, at the time 1st defendant acquired its shares, holding 23.23% of the ordinary shares in the plaintiff. The acquisition of the shares held by Aureos has triggered the mandatory takeover of the plaintiff Bank by the 1st defendant. It is the mandatory Takeover of the plaintiff Bank by the 1st defendant that has given rise to the present action.

The issues which require my adjudication are:

1.   Whether or not the writ of summons had been filed in violation of a statutory Precondition and thereby depriving the court of jurisdiction.

2.   Whether or not the plaintiff has been authorized by its Board to bring the present action.

3.   Whether or not the 1st defendant has the requisite capacity to pray for an order to strike out the suit (i.e. the writ of summons, the statement of claim and the application for interlocutory injunction).

4.   Whether or not the application lacks merit.

The contention of the 1st defendant on the first issue, i.e. whether or not the plaintiff violated a statutory pre-condition and thereby deprived the court of jurisdiction is the Security Industry Act, 1993 (PNDCL 333) provides that where there is a complaint, dispute or any violation arising under the law shall be submitted to the Securities Exchange Commission for redress before any is sought in the courts. Counsel for the 1st defendant contended further that the plaintiff failed to submit whatever complaint they have to the Securities Exchange Commission and are therefore in violation of the said statutory pre-condition. Counsel therefore submitted that where a statute has provided a way in which certain things are required to be done, this honourable court cannot countenance a process which is contrary to the terms of the Statute. In support of this submission, counsel referredto the following cases:

Boyefio vs NTHC Properties Ltd [1997-98] 1 GLR 768, Guddah, Fynn & 38 ors vs Goldfields (Ghana) Ltd [2206] 8 MLRG 13; Samuel Barkell Ackah vs Express Services Ltd & ors; Gaisie, Zwennes, Hughes & Co. vrs Loders Crocklaan BV [2012] 1 SCGLR 363.

The 2nd defendant’s contention on this issue falls in line with the contention of the 1st defendant. Counsel for the 2nd defendant after referring the court to the provision in PNDC Law 333 55 8A, 8B, 8C, 8D, 8E, 8F and 8G further referred the court to the Boyefio case.

The plaintiff on the other hand, raised a preliminary legal objection to the present application before addressing the issue of violation of a statutory pre-condition. As a matter of convenience I shall state the contention of plaintiff relating to the issue before coming to the preliminary objection. The contention of the plaintiff is that the court should not throw out the case of plaintiff because it has substantial reasons why it did not put it case before the Securities and Exchange Commission as provided by the statute. The plaintiff further contended that the 2nd defendant who, under the statue, is to determine all complaints and disputes had acted in way that has given the plaintiff the cause to worry, as the 2nd defendant allegedly, investigated aspects of the matter without reference to the plaintiff and the 1st defendant.

The plaintiff therefore contends that the conduct of the 2nd defendant in the so-called investigation clearly shows that the 2nd defendant had no intention to exercise its regulatory powers to investigate the alleged breaches of securities regulations without the intervention of the High Court. Again the plaintiff explains that the 2nd defendant is a party to their action and could not therefore appear before it.

In sum, the plaintiff contends that it has no confidence in the 2nd defendant being impartial should the plaintiff put their case before it; and the 2nd defendant cannot be a judge in its own case.

Coming back to the preliminary legal objection, counsel for the plaintiff referred to Order 11 rule 7 of C.I 47; Order 11 rule 8 (a) of C.I 47; Order 9 rule 7 of C.I 47; Order 9 rule 8 of C.I 47; Order  11 rule 18 of C.I 47.

It is the contention of counsel of the plaintiff that Order 11 rule 7 of C.I 47 provides, in part, that the material facts on which a party relies on in his defence, must be contained in the pleadings; and a party cannot set up what constitutes the material bases for his defence in any other process, but in his pleadings particularly where that ground defence is an alleged failure to comply with a condition precedent, the rules provide that that may only be raised by way of pleadings. It is therefore the case of the plaintiff that the effect of Order 11 rule 7 (4) of C.I 47 is that until the 1st defendant has pleaded the allegednon-performance with the allegedstatutory precondition, its performance by the plaintiff is presumed. That presumption can only be rebutted by the 1st defendant’s pleadings. In the absence of that pleading, the 1st defendant cannot be heard to complain about its non-performance.

It is the further contention of the plaintiff that non-appearance to a writ is primarily a default, and a party in default cannot obtain anything from the court, except otherwise, as they do in Order 9 rule 8 of C.I 47. Counsel concedes that Order 9 rule 8 constitutes the only circumstances that a party can take any proceedings before the court when it has not entered any form of appearance.

Order 9 rule 8 of C.I 47 provides as follows;

“A defendant may at any time before filing appearance, or, if the defendant has filed a condition appearance, with fourteen days after filing appearance, apply to the court for an order to

a.    Set aside the writ or service of the writ

b.    Declare that the writ or notice of it has not been served on the defendant or;

c.    Discharge any order that gives leave to serve the notice on the defendant outside the country”

The effect of the wording in Order 9 rule 8 of C.I 47 was that a party, i.e., a defendant, might apply to the court to set aside the writ before even filing an appearance. Again, the defendant might file a conditional appearance and within 14 days move the court to set aside the writ or the service of the writ.

In my view the provision in Order 9 rule 8 is not exhaustive of the situation that might require a defendant to apply to the court to have a writ set aside. Where for example a defendant sought an order to the court to set aside a writ on the grounds that the Court lacked jurisdiction to entertain the action, the defendant might at any time file an application to that effect irrespective of the fact that he had not entered appearance or entered an appearance.

A defendant could therefore elect to enter appearance either unconditionally or conditionally or not at all before raising the objection to the jurisdiction. In the Supreme Court case of Kwaframoah III and others vrs Sakrakyie II [1996-97] SCGLR 199 at 208 the Supreme Court had this to say about setting aside suits by reason of lack of jurisdiction;

“If a tribunal adjudicates on a dispute over which it has no jurisdiction, its decision thereon is a nullity and the party affected by it is entitled ex debito justitiae to have it set aside. The appellants herein were entitled to raise the question of jurisdiction at any stage of the litigation, even at the Supreme Court level…”

It is clear that when it comes to an issue bordering on jurisdiction a party might have entered an unconditional appearance, but can raise the question of jurisdiction at any stage of the proceedings.

In the instant case before me, the 1st defendant’s application is in three (3) parts. The first relate to the setting aside of the writ. It has been provided by the 1st defendant on the motion paper that Order 9 rule 8 of C.I 47 would be resorted to. In my view the first part of the application has been brought under Order 9 rule 8 of C.I 47 in that the 1st defendant is praying this Court to set aside the writ of summons on the ground that plaintiff has violated a statutory precondition. For the plaintiff to say that the first 1st defendant should take the objections in its pleadings or defence and have them heard would be to prejudice the objection of the 1st defendant as the objection complained of non-compliance with statutory precondition which may in proper circumstance deprive the court the jurisdiction to determine the case.

It is therefore my considered view that the 1st defendant need not enter appearance by any form before raising the objection relating to the writ of summons having been filed in breach of a statutory pre-condition.

I now turn to my discussion of the first issue. I have given my thoughtful consideration to rival contentions of the parties and the provisions in Section 8 of the Securities Industry Act 1993 (PNDCL 333) especially Section 8 (c) thereof. It is useful however to reproduce the relevant extract from the Securities Industry Act 1993 (PNDCL 333) as Amended by the Security Industry (Amendment) Act 2000 (Act 590) which provided at Section 8 (c) as follows;

“8C (I) A Complaint, dispute or violation arising under this Act shall, before a redress is sought in the Courts, be submitted to the Board for hearing and determination in accordance with this part”

It has been submitted by both council for the 1stdefendant and 2nd defendant that where a statute has provided a way in which certain things are required to be done, this honourable court cannot countenance a process which is contrary to the terms of the statute.

It has also been submitted by the plaintiff’s counsel that there is an exception to this rule especially where a party can show that there are substantial reasons for side stepping the internal tribunal.

In the case before me, there is no dispute that by Section 8C (i) of PNDCL 333 as amended by Act 590 of 2000, a complaint or dispute arising under the said law should first be submitted to the Commission for hearing before a party can go to the court.

The question which I have to determine here is that, the plaintiff having failed to seek redress at the Commission before seeking redress at the High Court, should the writ of summons be set aside. Before I address myself to the above question, it is necessary for me to bear in mind the principles governing the setting aside of a writ of summons on grounds of non-compliance with statutory pre-conditions. In this Boyefio case reported in 1996/97 SCGLR the Supreme Court at holding (5) it was held that “the law was clear that where an enactment had prescribed a special procedure by which something was to be done, it was the procedure alone that was to be followed…..”

The court then continued that;

“where a person has ignored the internal tribunal by resorting to the court in respect of any such internal dispute, the court would invariably order him to go back to the internal tribunal, if that person had no substantial reason for ignoring the internal tribunal” (emphasis mine)

Echoing the view that non-compliance with statutory conditions invalidate a writ of summons, the Supreme Court in the case of Gaisie, Zwennes, Hughes & Co vrs Loders Crocklaan BV [2012] SCGLR 363 at 368 stated;

“In our opinion, not having satisfied the mandatory requirement of Legal Profession Act 1960 (Act 32) s.30 regarding the service on the client of a bill of fees before suing out the action herein, the action was improperly constituted…The non-compliance with the mandatory statutory requirement contained in Section 30 of Act 32 rendered the action in the form in which it was taken before the High Court one that was not sanctioned by law;.... the non-compliance in this case being a failure to comply with a mandatory statutory requirement invalidated the writ of summons on which proceedings in the matter herein were based….”

I must say that reading the various decisions cited to me by counsel for the parties, I am in considered agreement with the school of thought which lays down the principle that where a person ignores the internal tribunal and comes to court in respect of any such internal dispute, the court would invariably order him to go back to the internal tribunal if that person had no substantial reason for side-stepping the internal tribunal.

Why then did the plaintiff issue out the writ of summons without first seeking redress before the Commission? The plaintiff has contended that the 2nd defendant who is mandated by law to determine complaints and disputes arising under the Act conducted itself in a manner that makes it difficult for it to be impartial. 2nd defendant is said to have conducted an investigation in the matter without reference to the main actors i.e. the plaintiff and 1st defendant but rather with the Stanbic Bank Brokerage and the Ghana Stock Exchange. In fact the plaintiff described the said investigation as a sham and whitewash intended to give the appearance of oversight and scrutiny.

It appears to me that, before the plaintiff embarked on this action a lot of things had been done by the 2nd defendant which in the view of the plaintiff raises question of bias and unfairness on the part of the 2nd defendant. It is noted that institutions and bodies mandated by law to determine disputes between parties are enjoined to be fair and impartial. Where therefore, a party has a genuine reason to believe that the independence of the arbiter or tribunal has been compromised; it would be a travesty of justice to subject such a party to appear before the arbiter or tribunal. Paragraph 19 of the affidavit in opposition filed by the 2nd defendant sums up the fears of the plaintiff. It is deposed therein as follows;

“19 the market operators were subsequently called to a meeting and cautioned…. The commission did not therefore fail to investigate as wildly alleged by the plaintiff. The 2nd defendant did not find insider dealing in the matter”

Again in the endorsement in the writ of summons, the plaintiff is seeking a declaration that the 2nd defendant breached its statutory duty under section 9 of PNDC L 333 and a further order directed at the 2nd defendant to impose sanctions on the 1st defendant including the nullification of the 1st defendant’s purchase of ordinary shares held by Union Bank of Nigeria.

I find it preposterous for the 1st defendant to ask this court to throw out the claim of the plaintiff for the matter to be gone into by the 2nd defendant when the 2nd defendant is a party in the dispute.

In my view granting the application on this ground shall defeat the ends of justice. Having made up its mind that there was no insider dealing in the transaction, I can understand the fears of the plaintiff that the likelihood of getting a fair trial before the 2nd defendant Commission is slim if not impossible.

I must say that I am satisfied with the explanation or reasons given by the plaintiff for not seeking redress before the 2nd defendant and applying the principle as stated by their Lordships in Boyefio vs NTHC [1996/97] SCGL, I hold the view that in would be a travesty of justice to throw the plaintiff out and direct it to appear before the 2nd defendant in the given circumstances. It is my considered opinion that the writ of summons though filed without compliance with Section 8 (c) (1) of the Securities Industries Act, 1993 (PNDCL 333) is properly laid before the court.

Having ruled on the first issue in favour of the plaintiff, the question then is, is the 1st defendant clothed with the capacity to ask the court to strike out the statement of claim and the application for Interim Injunction?

          Order 11 rule 18 (1) of C.I 47 provides the following;

“18 (1) the court may at any stage of the proceedings order any pleadings or anything in any pleading to be struck out on the grounds that:

(a) It discloses no reasonable cause of action or defence; or

(b) It is scandalous, frivolous or vexatious; or

(c) It may prejudice, embarrass or delay the fair trail of the action; or

(d)It is otherwise an abuse of the process of the court, and may order the action to be stayed or dismissed or judgement to be entered accordingly.”

The 1st defendant has contended that the plaintiff is asking the court to make determination that a crime has been committed and that penalties and sanctions ought to be imposed as a sequence. In the view of counsel for the 1st defendant the relief (i) which plaintiff is seeking has been done in disregard to Section 139 (1) of the Securities Industry Law.

It is further contended by the 1st defendant that is only the Attorney General that has power under the Act and to a limited extent the 2nd defendant who can invoke the jurisdiction of the court. It is further the case of the 1st defendant that the plaintiff’s claim are based on alleged breaches of the provisions in the Securities Exchange Commission’s code on the Takeover and Mergers which in the view of the 1st defendant founds no cause of action.

The plaintiff on the other hand contends that Order 11 rule 18 of C.I 47 does not permit the 1st defendant to apply to the court to seek an order striking out the plaintiff’s pleadings when 1st defendant has not entered any kind of appearance.

The question that needs to be answered is, can a party plead the Commission of a crime in a civil case and does a party who has not entered appearance apply to the court to strike out pleadings for any reason.

Answering the question whether a party can plead the Commission of a crime, it is useful to refer to the provisions of Section 13 and 15 of the Evidence Act, 1975 (NRCD 323). The section 13(1) provides:

“In a 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”

Then the Section 15 (a) also states:

“Unless it is shifted, (a) a party claiming that a person has committed a crime or wrong doing has the burden of persuasion on that issue;”

In the instant case, the plaintiff has pleaded “insider trading” having been committed and therefore want the court to make a declaration to that effect. In my view the pleadings on insider trading falls in line with Section 13(1) and 15 (a) of the Evidence Act, as the burden to persuade the court that “insider trading” has occurred rest with the plaintiff. The plaintiff can lead evidence on “insider trading” only if the said material facts are pleaded. In my considered opinion where a party pleads the commission of a crime in a civil action it does not in itself constitute a criminal prosecution. It is trite knowledge that a criminal prosecution begins with the preference of a charge or charges and the arraignment of the person charged before a court which has criminal jurisdiction.

There is no dispute that the Attorney-General and to a limited extent the SEC have the mandate under the Securities Industry Act to conduct criminal prosecutions for breaches under the said Act, this does not however operate as a bar for a party to plead in a civil action that a breach of the Act has occurred.

I will therefore dismiss the ground two (2) of the 1st defendants application. I agree entirely with the plaintiff on his submission that before a party can pray the court to strike out any pleadings the party must have entered some form of appearance. A party who has not entered an appearance however can only ask for the striking out of a writ of summons for the stated reasons but not the pleadings.

This brings me to the ground (3) relating to the non-authorization of the plaintiff by the Board of Directors. The plaintiff by its supplementary affidavit filed on the 17/6/14 sworn to by the Managing Director of the plaintiff Mr. Asare Akuffo addresses all the concerns raised by the 1st defendant. By paragraphs 4,5,6,7, and 8 of the supplementary affidavit in opposition filed by the plaintiff, it has been demonstrated that the Board of the plaintiff authorized the commencement of an action. See also annexure ‘AA1’ annexed to the supplementary affidavit in opposition.

I am satisfied from the affidavit evidence provided by the plaintiff in the instant case that the Board of Directors authorized the commencement of the suit. The ground three (3) also fails.

On the ground four (4) it is my considered opinion that the present action is not vexatious and an abuse of the court process. As a matter of fact serious questions of law have been raised which requires resolution by the court.

On the whole of the affidavit evidence before me I am of the considered opinion that the 1st defendant’s three part application lacks merit. Same is accordingly dismissed.

Cost of GHC 1,000.00 is awarded in favour of plaintiff against 1st defendant.

[SGD]

JUSTICE GEORGE K. KOOMSON
JUSTICE OF THE HIGH COURT
(COMMERCIAL DIVISION)

 

COUNCIL:

Fui Tsikata ESQ. FOR 1st DEFENDANT/APPLICANT

NARNIA OWUSU ANKOMA FOR PLAINTIFF/RESPONDENT

NII OMON BADDOO ESQ. FOR 2nd DEFENDANT/RESPONDENT

 

Cases referred to:

Boyefio vs NTHC Properties Ltd [1997-98] 1 GLR 768, Guddah, Fynn & 38 ors vs Goldfields (Ghana) Ltd [2206] 8 MLRG 13; Samuel Barkell Ackah vs Express Services Ltd & ors; Gaisie, Zwennes, Hughes & Co. vrs Loders Crocklaan BV [2012] 1 SCGLR 363. KWAFRAMOAH III Vs SAKRAKYEI II [1996-97] SCGLR 199