ThinkGhana-Vrs- SEC, Ghana: Statement of Case
IN THE SUPERIOR COURT OF JUDICATURE
IN THE HIGH COURT OF JUSTICE
FAST TRACK DIVISION
ACCRA A. D. 2006
SUIT NO. AP22/2006
THE REPUBLIC
VRS
SECURITIES AND EXCHANGE COMMISSION }
C/o SEC Bldg, Ministries, Accra } RESPONDENT
(Applicant will direct service)
Ex parte ThinkGhana }
C/o 28/1 Castle Road, Adabraka, Accra } APPLICANT
STATEMENT OF CASE
The Applicant prays for an order of mandamus to issue against the Respondent, Securities and Exchange Commission pursuant to Order 55 of the High Court (Civil Procedure) Rules, 2004 (C.I. 47) to compel the Respondent to investigate the acquisition by Guinness Ghana Breweries Limited (GGBL) of Ghana Breweries Limited (GBL) to establish whether Ghana’s securities laws have been breached and also for the SEC to be compelled to apply the law and sanction defaulters for the breaches of securities laws and regulations that have been occasioned thereby.
1. The Applicant’s case is as set out herein and in the accompanying Affidavit in Support annexed hereto.
2. The Plaintiff’s cause of action is founded on the following provisions of the law:
a. The Securities Industry Law, 1993 (PNDCL 333)
i. s9 ii. s10 (1) (a, g, h); (2) (a, b); (3-11);
iii. s11-15 iv. s18-20; 22; 27(1); 30(1) (c), (5) (a), (b); v. s123, 124,127(c), 128, 129, 130, 132,134,136
b. The Securities Industry (Amendment) Act, 2000 (Act 590)
Section 9 which incorporates the new Part 1A.
c. Securities and Exchange Commission Regulations, 2003 (L.I. 1728)
i. reg. 50, 51, 54-58, 60, 62
d. Companies Code, 1963 9Act 179)
i. s203; s205; 207(7)
ii. s230(7)
e. GSE Listing Regulations
i. Reg. 52 (1) and (2) ii. Part VIII
3. The Plaintiff’s grounds for an order of mandamus is as deposed to in the affidavit in support of the motion.
4. The facts:
These facts are germane to the matter:
a. In June 2003, GBL completed a capital restructuring programme.
b. In December 2003, Heineken and Diageo, the parents of the Ghanaian entities, announced a deal to acquire Heineken’s stake in GBL triggering a takeover under the GSE Rules.
c. GGBL was obliged to file its first quarter results for its financial year 2004 by October 2003. It was never filed. Till date, it has not been filed. This is a clear breach of Regulation 55 of LI 1728. The penalty is two million cedis for each day the default remains. Nothing has been done by the Respondent till date.
d. GGBL’s half-year results for its 2004 financial year were finally released later but it was also an ingenious breach of the rules. Under LI 1728, it was to be filed latest by January 2004, at a time when the takeover announcement had already been made through the GSE. However, GGBL used the old format for reporting instead of the stipulated format under LI 1728. That implied that a condensed financial statement was produced instead of a separate balance sheet, profit and loss account and cash flow statement as required by law. Please refer exhibit TG15. Again, the Respondent allowed it to pass! It is as yet unclear whether this was an attempt to prevent disclosure of the true financial state of GGBL in the lead up to the takeover. Respectfully, this can only be known if this Honourable Court will make an order of mandamus to issue against the SEC in order to wake the SEC up to its responsibilities under law.
e. No valuation report was submitted to the GSE or the Respondent. We wish to submit that the GSE has no discretion in this regard. The GSE’s own Listing Regulations require it under regulation 52 to demand a copy of the valuation report. Again, it was never demanded by the regulators and never submitted.
f. Between December 17, 2003 when the deal was announced on the Ghana Stock Exchange and July 20, 2004, when the shareholders of GGBL approved the deal and other resolutions pertaining thereto, GGBL’s share prices increased by approximately 136% (that is within seven months of the announcement of its merger with GBL) whilst GBL increased within the same period by approximately 5%. GBL’s share price on the date of the announcement of the deal (December 17, 2003) was ¢1425 and rose to ¢1500 by July 20, 2004. GGBL was trading at ¢5400 on the date of the announcement. By July 20, 2004, it was priced at ¢12750. On any other market, the regulator would investigate to assure itself that all was well. Is Ghana any different? We think not. This is especially so in view of the fact that Diageo caused to be issued to itself to the exclusion of all other shareholders, shares of GGBL which were priced at the prevailing price on the day of the announcement (i.e. ¢5400/17 December, 2003) at a time when the price had already appreciated hugely, thereby making instant capital gains. It is our humble submission that the regulator must investigate to establish where there was no stock market manipulation or insider dealing over the said period leading to these events on the securities market.
g. False reports have been made to the GSE and the Respondent in clear breach of the law. GGBL sent a press release to the GSE in 2005 stating that the merger was achieved in December 2004. Please refer exhibit TG8. This is false and a breach of the Securities Industry Law, 1993. Nothing has been done till date. Regrettably, the Respondent itself has repeated these false and untrue statements in official communication to the Applicant as reflected in exhibit TG2. As shown in exhibit TG12, the Daily Graphic newspaper carried a report of the launch of a corporate entity and logo of GGBG on October 13, 2005. It was all part of the grand deception. GGBG does not exist in law. It has not even been registered with the Registrar-General’s Dept. in contravention of the Registration of Business Names Act, 1962 (Act 151) as evidenced by our search exhibited as TG11.
5. Breaches of the Law:
We wish to set out in detail the following breaches of the law that have occurred and which is the subject matter of the Applicant’s complaint but which the Respondent has refused to investigate and/or apply the legally stipulated sanctions:
a. Financial Reports
When the original offer was made to the GBL Board after GSE’s approval, GGBL was in breach of its disclosure requirements on the GSE. Part VII of the GSE’s own Listing Regulations was breached. Available records indicate that when the original Offer was made to the GBL Board, GGBL was in breach of its disclosure requirements on the GSE. The provisions in Part VII of the GSE’s Listing Regulations bind GGBL as a listed company. However the reporting regimes in the market have been fundamentally altered by the promulgation of the SEC Regulations, 2003 (LI 1728). Regulation 55(1) of LI 1728 is instructive. Under the old GSE reporting regime, listed companies were obliged to disclose half-year results not later than 3 months after the end of the relevant period. Preliminary financial results were to be published not later than 3 months after the end of the relevant financial year. A fully audited annual report was expected to be published not later than 6 months. Under LI 1728, an annual report was to be published not later than 3 months from the end of the relevant financial year (regulation 54 of LI 1728). However, regulation 55 introduced a new quarterly reporting regime such that quarterly financial statements in defined form were to be filed with the regulators and published not later than one month from the end of the relevant quarter.
It is significant to note that LI 1728 does not mention half-year results as was the case in the GSE Listing Regulations. This is because the reporting format was such that the second quarter results would automatically reflect the position at half-year. It should however be noted that in terms of content, it also differs. It is also important to note that where the GSE Listing Regulations conflict with LI 1728, LI 1728 would prevail. The reporting requirements under LI 1728 entail a much more detailed disclosure regime than under the requirements of the GSE Listing Regulations. Regulation 52(1) of the GSE’s Listing Regulations enjoins all listed companies to comply with the Rules on Takeovers and Mergers of the GSE.
GGBL’s financial year ends on June 30. Thus ordinarily, its first quarter results during the relevant period should have been published latest by October 1, 2003. LI 1728 clearly states that after a month’s grace period has expired, a company would be in default and is liable to pay ¢2million for each day the default continues. However even after the transaction had been announced, GGBL’s first quarter results were never disclosed yet the Respondent and the GSE approved a major transaction involving a corporate entity that was essentially in breach of the disclosure rules on the market. Till date, neither the Respondent nor the GSE has published any information to the effect that GGBL was mulcted with the relevant penalties for the said breaches in its continuing obligations by either the GSE or the Respondent. It was only much later that GGBL published its half-year results which went some way to cure the lacunae in information that the market needed in order for informed investment decisions.
However, a cursory look at the mode of disclosure in respect of the half-year results also gives cause for concern. As outlined earlier, LI 1728 has broadened the depth of information to be provided under the Continuing Obligations of listed companies. Regulation 56 of LI 1728 on contents of quarterly financial statements reads as follows:
(1) The quarterly financial statements shall comprise either a complete set of financial statements or a set of condensed financial statements but the statements shall include at least
a. A balance sheet
b. An income statement for the period on a year to date basis;
c. A statement where relevant showing either
i. Changes in equity
ii. A statement of recognized gains and losses, changes in equity, except those arising from capital transactions with owners and distribution to owners;
iii. selected explanatory notes as specified in this
regulation; or
iv. a condensed cash flow statement.
However as evidenced by exhibit TG15, GGBL used the old format under the GSE Listing Regulations in purported compliance with LI 1728. For a major multinational engaged in a major acquisition of another listed company and having access to seasoned financial and legal expertise, the question that necessarily arises, is whether this done deliberately to prevent the true state of the financial position being disclosed to shareholders? It is difficult for GGBL to argue that it was not aware of the promulgation of LI 1728. Again, it seems both the GSE and the Respondent allowed these breaches of fundamental disclosure obligations to pass. The Respondent despite all its powers under law, and despite its attention being drawn to these clear infractions by the complaint of the Applicant and further communication as expressed in exhibits TG1, TG4 and TG5, has done nothing although it is aware of such blatant disregard for securities laws.
b. Valuation Report
No valuation report was submitted to the GSE and the Respondent and yet both institutions strangely abdicated their legal duty to request for the document and ensure its disclosure to shareholders. This is a clear unambiguous breach of regulation 52 of GSE’s Listing Regulations. Respondent’s statement in exhibit TG2 that the valuation report was submitted by GGBL to the GSE and also to shareholders of GBL is therefore materially false. No valuation report was submitted to the GSE. Although the GSE’s own Listing Regulations obligated it to request a copy of the Valuation Report, for reasons as yet undisclosed due to the Respondent’s refusal to investigate this matter, the GSE broke its own regulations and did not request for the valuation report from GGBL neither was it submitted. Instructively, the Offer Circular, (copies of which are necessarily with the Respondent) did not also disclose that the Respondent or the GSE had granted GGBL an exemption, even though, there would have been no legal basis to exempt such a fundamental document from disclosure. We wish to stress that this information could easily be ascertained from the Offer Circular. We wish to submit that the Valuation Report is not listed among the documents exhibited in the Offer Circular underpinning the takeover. The Applicant shudders to think of the implications if later investigations do indeed show that the GSE was given a copy of the Valuation Report and chose not to make the disclosure. If the regulations require this document to be disclosed, why did the regulators allow non-disclosure and did not state to shareholders it has granted an exemption?
c. False Reports
Takeover?/Merger?
False reports, unfortunately swallowed, hook, line and sinker by the Respondent, have been submitted by GGBL as part of a grand design of deception, to the GSE. This is a clear breach of section 134 of PNDCL 333. By law, any person who with intent to deceive makes or furnishes … any false or misleading statement or report to the SEC, the GSE or officers of the SEC on matters relating to dealings in securities, matters required by the SEC for the proper administration of the law or the enforcement of the rules of the GSE commits and offence. This is punishable by 500 penalty units and/or two years.
GGBL in the notes to its GSE press release no. 077/2005 stated that there had been a merger since December 2004. Please refer exhibit TG8. We are alarmed that the Respondent would commit such a fundamental mistake. The complaint was premised on the fact that there had been a calculated and deliberate campaign of misinformation to the unsuspecting Ghanaian public through the very institutions tasked to prevent and penalize such actions. The deliberate maze created can only be unravelled if a clear distinction is made Guinness Ghana Breweries Group (GGBG), Guinness Ghana Breweries Limited, (GGBL), Guinness Ghana Breweries (GGB), and Ghana Breweries Limited (GBL). We wish to submit that the true state of affairs is that GGBL acquired shares in GBL but has not merged with GBL. This is at variance with corporate communication from GGBL itself, which has oscillated between the fact of non-merger and the basic untruth of merger. This matter could have been ascertained if the Respondent had had due regard to press releases through the GSE and to publications in the media and to the Annual Report submitted to GGBL shareholders for the Annual General Meeting held late last year. All these documents, instructively, are either with the Respondent itself or should be with it by law. We wish to submit that the Respondent has a legal duty under regulation 58(1) of LI 1728 to review such documents to ensure compliance with accounting standards and securities laws. Clearly, this has not been done. The latest is exhibit TG16 which is dated as recently as February 28, 2006.
Again, the Daily Graphic publication of October 13, 2005 (please see exhibit TG12) shows a clear attempt to mislead the public on the true nature of the entity GGBL. When those statements are juxtaposed against the Annual Report of Guinness Ghana Breweries Group (GGBG), a phantom entity established and publicly launched by GGBL officials ostensibly as the holding company of the two companies, the securities regulator should have been concerned. Exhibit TG10 clearly shows that the entity GGBG is being referred to as “Ghana’s most celebrated company”. In actual fact, GGBG does not exist. GGBL has not even bothered to register that entity, a clear breach of the Registration of Business Names Act, 1962 (Act 151). All these matters have been pointed out to the Respondent and yet it refuses to act. We respectfully submit that a securities regulator should necessarily act when such acts are committed on the capital markets in Ghana. It is puzzling to say the least that the Respondent would bend over backwards to protect a corporate entity that is clearly in breach of the law by consistently refusing to act in accordance with its mandate under law. The big question that is to be asked is whether the Respondent is to protect investors or its duty is to protect big business? Is GGBL above the law? The law courts have a unique opportunity to lay down the law pertaining to securities activities in Ghana.
d. GSE Liability
Under section 132 of PNDCL 333, executives of the GSE who fail to take all reasonable steps to ensure compliance with the Law or the accuracy or correctness of any statement submitted by those officials commit an offence and will be liable on conviction to 250 penalty units or to one year imprisonment or both. Applicant has pointed out in its complaint to the Respondent that breaches have occurred. The Respondent has a public duty to act yet it has so far failed to act.
e. Court-approved Price?
We wish to submit that no court of law determined the offer price under the takeover deal. We therefore find it rather unsettling that the Respondent would liberally make in exhibit TG2, factually inaccurate statements to the effect that the High Court determined the offer price. These matters could be cleared if any investigations as prescribed by law had been done to ascertain whether a court of law ever made that determination. The Respondent’s continued assertion of an inaccuracy is a sad testament to its unwillingness to fulfil its legal duty unless ordered so to do by this Honourable Court. The Applicant submits that the Respondent made a rather grave error in stating that “the issue of a fair value does not arise since it was determined by High Court and there was no subsequent appeal”. We respectfully submit that when an apex regulator of the securities industry, with a legal duty, liberally documents untrue statements, which would be an offence under PNDCL 333, as amended, if it were committed by a market operator, the law courts and indeed all investors must be very concerned. The Applicant therefore states categorically that the offer price pursuant to the takeover was not determined by the High Court. The offer price was determined by the offeror, GGBL. The matter brought before the Court by a shareholder of GBL was whether the valuation report had to be disclosed in order to determine the fairness or otherwise of the offer price. As soon as the High Court made a ruling that the valuation report should be submitted, not to the public, but to the Court in order for it to make a determination as to whether it should be disclosed or not, the matter was settled out of court. The substantive issues were therefore never resolved. The Respondent was a party to that suit and is fully aware of all the facts. It is only an investigation that can help determine why the regulator itself will make public statements of an untrue nature.
We wish to submit that Diageo, the parent company of GGBL could only lawfully pay for its new shares after the completion of the EGM of GGBL in July 2004 yet the price it paid for the shares was the prevailing price as at December 17, 2003, when the deal was announced, i.e. ¢5400. This was at a time when the prevailing share price of GGBL was ¢12,270. The Respondent is always invited to the general meetings of listed companies and must have been a witness to this event. Respectfully, no securities regulator in any jurisdiction, perhaps except Ghana, would even wait to receive a formal complaint when it notices a rapid rise in the share price of Guinness between December 17, 2003 and the closure of the deal. Whilst we have consistently stated that we have no evidence of wrongdoing, the facts necessarily warrant an investigation to determine whether any stock market manipulation and/or insider dealing transpired during the period.
Section 123(1) of PNDCL 333 defines stock market manipulation as follows: ‘A person who effects, takes part in, is concerned in or carries out, either directly or indirectly, two or more transactions in securities of a body corporate which are transactions in securities of a body corporate which are transactions that have or are likely to have, the effect of raising, lowering, maintaining or stabilising the price of securities of the body corporate on a stock exchange in Ghana with intent to induce other persons to sell, purchase or subscribe for securities of the body corporate or of a related body corporate commits an offence”.
Section 128 prohibits dealings in securities by insiders. It provides as follows:
(1) A person who is, or has at any time in the 6 months immediately prior to a dealing in the securities of a body corporate been connected with that body corporate shall not deal in securities of that body corporate if by reason of his association he is in possession of information that is not generally available, but if it were, might materially affect the price of those securities.
(2) A person who is or has at anytime in the 6 months immediately prior to a dealing in the securities of a body corporate been connected with that body corporate shall not deal in any securities of any other body corporate if by reason of his being, or having been connected with the first mentioned body corporate he is in possession of information that
(a) is not generally available but, if it were, would be likely to affect materially the price of those securities; and
(b) relates to any transaction (actual or expected) involving both those bodies corporate or involving one of them and the securities of the other.
We wish to submit that a case of stock market manipulation or insider dealing can never be established by the regulator requesting for evidence from a complainant. This is because some trades on the market would necessarily have to be unravelled to establish who was buying or selling the shares leading to the unusual rise or fall in the shares. No individual has legal authority to demand contract notes and transfer receipts and other records of securities dealers. It is only the Respondent who has been clothed with legal authority under section 10 of PNDCL 333 to legally request the relevant documents in its quest to investigate such matters. Indeed, an attempt by the Respondent to fully establish the futility of the “show-me-evidence” posture of the Respondent was proved by the response of the solicitors for GGBL as evidenced by exhibit TG7. The Applicants were duly rebuffed.
We therefore submit that where share prices have risen by 136% within a period of seven months after an announcement of a takeover and the majority shareholder of the acquiring company, engineers a sale to itself, alone, by getting all other shareholders to waive their right to equivalent shares as priced, of shares not at the prevailing price but at 136% discount, the Respondent ought to investigate to establish whether the shares were not manipulated and also whether no one connected with the acquiring company as defined by law, benefited by trading in shares during the said period. These are basic fundamental securities law principles that must be upheld by law in the event that the regulator fails to do its legal duty as in this instance. Further, Applicant draws the attention of this Honourable Court that Guinness Plc, which is a United Kingdom based company with links to GGBL, has been held to have engaged in stock market manipulation and breaches of securities laws in the past. This has already been pointed out in communication to the Respondent. In the late 1980s, the Department of Trade and Industry (DTI) in the United Kingdom also had an opportunity to request “documentary evidence” in the late eighties when reports of possible wrongdoing in the takeover of Distillers Plc by Guinness Plc initially surfaced. After investigations were made, the then Chairman of Guinness Plc, Ernest Saunders, was tried, convicted and jailed with three other directors of the company. We respectfully submit that if the DTI had responded in a like manner of the Respondent, the facts would never have seen the light of day. We therefore respectfully submit that it is absolutely essential that an order of mandamus issues to compel the Respondent to do its legal duty by saving the dignity of the nation and do its duty under law to investigate such clear infractions of the law and to impose the stipulated sanctions for the breaches that have occurred so far.
Further, we draw attention to events on the Tokyo Stock Exchange in the past few months. Livedoor, an internet brokerage firm, is being investigated based on allegations of fraud. The firm has been placed on the Stockwatch List, a step prior to delisting. The directors of the company have been arrested and are being tried for breaches of securities laws. The Respondent is a member of the International Organisation of Securities Commissioners (IOSCO) to which the Japanese regulator also belongs. All members subscribe to the principles of securities regulation as laid down in the IOSCO Principles.
The Respondent has breached and/or condoned the breach of the following securities regulations and laws including but not limited to the following:
i. s9 of Act 590 particularly s8c (3) of the new Part 1A by refusing to investigate the complaint and summarily dismissing it.
ii. Failing to sanction GGBL for non-compliance with regulation 55 and 56 of LI 1728.
iii. Failing to sanction the GSE and GGBL for non-compliance with regulation 52 of GSE’s Listing Regulations.
iv. Failing to investigate complaint of possible stock manipulation and insider dealing.
v. Failing to investigate and sanction GGBL for false reports submitted to the GSE and also disseminated to the general public through the media pursuant to sections 124 and 134 of PNDCL 333.
6. The Law:
a. SEC’s Legal Duty:
The functions of the Respondent have been set out in section 9 of the Securities Industry Law, 1993 (PNDCL 333), among which are the following:
Section 9:
(b): to maintain surveillance over activities in securities to ensure orderly, fair and equitable dealings in securities;
(c): to register license, authorise or regulate, in accordance with this Law or any regulations made under it, stock exchanges, investment advisers, unit trust schemes, mutual funds, securities dealers and their agents and to control and supervise their activities with a view to maintaining proper standards of conduct and acceptable practices in the securities business;
(d): to formulate principles for the guidance of the industry
(f): to protect the integrity of the securities market against any abuses arising from the practice of insider trading;
(h): to review, approve and regulate takeovers, mergers, acquisitions and all forms of business combinations in accordance with any law or code of practice requiring it to do so;
(i): to create the necessary atmosphere for the orderly growth and development of the capital market;
(k): to undertake such other activities as are necessary or expedient for giving full effect to the provisions of this Law; and
(l): to perform other functions specified under this Law.
Section 9 of the Securities Industry (Amendment) Act, 2000 (Act 590) is instructive on what the Respondent ought to do when a complaint has been filed with it. Section 8c of the new Part 1A governs the submission of complaints and the examination of issues. Section 8c states in part as follows:
(1) A complaint, dispute or any violation arising under this Law shall, before any redress is sought in the courts, be submitted to the Commission for hearing and determination in accordance with this Part.
(2) A matter to which sub-section (1) applies shall be submitted in writing to the Director-General of the Commission and where it is not in writing, the Director-General shall cause the matter to be reduced into writing.
(3) The Director-General shall cause the matter to be investigated and shall unless he
(a) considers the matter to be frivolous or vexatious;
(b) can settle the disputed matter or complaint to the satisfaction of parties concerned,
refer the matter together with the findings of the investigations to the Hearings Committee within thirty days from the date of receipt of the written complaint, dispute or violation and shall at the same time inform the complainant or persons concerned of the submission to the Hearings Committee.
Further, subsection (5) of section 8E of the new Part 1A of Act 590 gives the Hearings Committee a period of thirty days from receipt of the complaint it to examine and determine the complaint or matter unless there is a delay occasioned by the complainant, his representative or witness.
We wish to submit that the Director-General of the SEC has a legal duty under section 9 of Act 590, to investigate the complaint in order to make a determination that it is unmeritorious. It is obvious from the statements made by the Respondent in exhibit TG2 that no such investigation was conducted leading to the repetition of the same false information and untrue statements being published through the regulatory institutions, a situation that necessitated the complaint. If an investigation was conducted as warranted by law, the Respondent would have been in a position to know that there had been no merger between GBL and GGL to form GGBL. It would also have established that no valuation report was ever submitted to the GSE or to the Respondent itself. Further, it would have established by its investigations that no court of law in Ghana ever fixed the offer price under the takeover deal that led to the acquisition by GGBL of GBL. By wilfully making these false statements in support of its decision to abdicate its legal responsibilities, it is obvious that no investigation was ever conducted as required by law. The unfortunate false statements made by the Respondent in exhibit TG2 could easily be ascertained as the facts are already in the public domain and relevant documentary proof on the issues are with the Respondent itself.
b. Mandamus
The principle regulating the grant of an order of mandamus is stated in the Annual Practice (1960 ed), Vol 1 at page 1725 and quoted with approval by the High Court in The Republic vrs. The Inspector-General of Police; Ex parte Hansen and Others [1992] 2GLR at page 179: “An order of mandamus is an order requiring an act to be done… and it may be made where an inferior tribunal or body of persons is charged with a public duty to do an act, and has failed upon demand to do it: see R. v. Inland Revenue Commissioners, Re Nathan (1884) 12Q.B.D. 461 C.A. The making of the order is discretionary: see R. v. All Saints, Wigan (Churchwardens) (1876) 1 App. Cas. 611 at p.620, but it is made where there is a legal right to the act and no other specific and equally convenient remedy… but it may be made against officers of the Crown who are obliged by statute to do some ministerial act in favour of the applicant.”
In Republic v Chief Accountant, District Treasury, Kumasi; Ex parte Badu [1971] 2GLR 285 the court held as stated in the head note: “… an order of mandamus lies against public officials in the performance of their public or quasi-public legal duty, to require them to carry out their duty. The order is not meant to review or control what such officials have done or what they do, but to compel them to act…The order will only issue if the duty required to be performed can be legally done. Ex parte Nash 15 Q.B. 92 and R. V. Eastbourne Corporation (1900) 83 LT 338 applied.”
In Halsbury’s Laws of England (3rd ed), Vol 11, pages 106-107, paragraph 199, the law is set out as follows: “A mandamus will not go when it appears that it would be futile in its result. Accordingly, the Court will not, by mandamus, order something which is impossible of performance by reason of the circumstances that the doing of the act would involve a contravention of law …”.
In the Republic v. Chief Lands Officer; Ex parte Allotey and Others [1982-83] GLR 971 an application for an order of mandamus was made by a joint head of family to compel the Chief Lands Officer to register a number of conveyances relating to land belonging to the Onamrokor Adain family, which the Chief Lands Officer had refused or failed to register. The High Court per Cecilia Koranteng-Addow J, had the opportunity to pronounce on the issue of the locus standi of the Applicant. In her Lordship’s view, “so far as applications for granting prerogative writs are concerned, I think it is in the discretion of the court whom it will hear and whether to grant such a remedy or not. The writ of mandamus is a wide remedy and it should avail anyone who shows that he has sufficient interest to be protected and that there is no other remedy”.
The Supreme Court in the Republic v Lands Commission; Ex parte Vanderpuye Orgle Estates, reported in the 1998-99 Supreme Court of Ghana Law Reports, 677, examined the scope of mandamus and considered circumstances where the court would grant mandamus even where alternative remedy of appeal was available to the applicant. The case was an appeal against the unanimous decision of the Court of Appeal affirming the judgment of the High Court, granting an order of mandamus against the Lands Commission.
Bamford-Addo JSC at 691 quoted from page 63, HWR Wade Administrative Law (5th Ed) on the history, use and effect of mandamus: “Lord Mansfield said in sweeping terms in R v Baker (1762) 3 Burr 1265 at 1267…’ it was introduced to prevent disorder from a failure of justice and defect of police. Therefore it ought to be used upon all occasions where the law has established no specific remedy and where injustice and good government there ought to be one … the value of the matter, or the degree of its importance to the public police is not scrupulous weighed. If there be a right and no other specific remedy, this should not be denied.” Her Lordship further quoted Darling J in R V The Revising Barrister for the Borough of Henley [1912] 3 KB 518 that “instead of being astute to discover reasons for not applying this great constitutional remedy for error and misgovernment, we think it is our duty to be vigilant to apply it in every case to which, by any reasonable construction, it can be made applicable.” His Lordship Charles Hayfron-Benjamin JSC further buttressed the importance of mandamus as a tool for ensuring that public officials did their duty. He stated at page 697 that “the respondents were right in approaching the court for a mandamus, for, wherever there is a danger or threat that an interest, whether proprietary or otherwise, will be prejudiced or unlawfully interfered with, mandamus will lie”.
As succinctly stated by Hayfron-Benjamin JSC in the case, “… an order for mandamus may issue against a public officer, a statutory authority or person who has a public duty to perform under the common law to do any act so warranted but who refuses or neglects to do that act or perform that duty. It includes the correction of such acts or duty wrongly performed. The order neither grants victory to the person applying nor is it the result of litigation”.
7. Conclusion
In the Annual Report of GGBG 2004, the Chairman of GGBG states as follows on page 8: “Following completion of the transaction, Guinness Ghana Limited changed its name to Guinness Ghana Breweries Limited”. He states further that “since then, both companies have been working hard to merge the operating businesses of former Guinness Ghana Ltd. and Ghana Breweries Ltd”. According to the said statement, “the businesses have been operating under the name of Guinness Ghana Breweries Group to help the sense of unity that is being built between the two companies. However, I would like to ensure that you are all clear that: Both Guinness Ghana Breweries Limited and Ghana Breweries Ltd. continue to exist as stand alone entities”, end of quote! Please refer exhibit TG10. The MD of GBL is also the MD of GGBL. If there has been a merger, would he hold both positions? Indeed, the fact of non-merger is borne out by the Managing Director of GBL itself in exhibit TG16. We submit that GGBL is just the old entity, GGL, which changed its name into that of the intended merged entity, GGBL and has consistently worked to promote the wrong impression in the minds of all Ghanaians that GGBL is the merged entity. Indeed, under Ghanaian law, the Respondent has a legal duty to as a matter of urgency, immediately correct the false information which evinces a brazen lack of respect for Ghana’s laws and to halt the impunity with which Ghana’s securities laws are being breached, regrettably with the active connivance of the Respondent in total disregard for its duty under law.
When such statements are made in Annual Reports, copies of which are with the Respondent and the Respondent justifies a refusal to investigate a complaint by making statements that are debunked by documents within its own possession, it is imperative that the law courts intervene to ensure that public officials do their duty under law. As stated by Hayfron-Benjamin JSC in the Republic vrs. Lands Commission, ex parte Vanderpuye Orgle Estates, “… an order for mandamus may issue against a public officer, a statutory authority or person who has a public duty to perform under the common law to do any act so warranted but who refuses or neglects to do that act or perform that duty”. The Applicant has shown beyond all reasonable doubt that the Respondent has refused and/or neglected to do its duty.
The relevant law has made a provision of 60 days for resolution of complaints. In securities issues, time is of the essence. The continuing delay in dealing with the matter makes it imperative that an order of mandamus is the only order that would compel the securities regulator to do its duty under law to investigate the matters complained of and also to apply laid down sanctions for the infractions of the securities laws and regulations that have already taken place.
The manner in which the Respondent has abdicated its legal responsibility to regulate the market by refusing to investigate the complaint and ensure that defaulters are appropriately sanctioned leaves much to be desired and is a dangerous precedent that needs to be reversed. The grounds adduced by the Respondent to support its regrettable decision to abdicate its legal responsibility have been shown to be wholly inaccurate. The stated grounds of the Respondent are false in material particular and therefore cannot lawfully found a proper determination not to investigate the complaint. The Respondent is akin to a policeman. Indeed, it is the Police of the securities industry. When a policeman can tell a complainant that he will not investigate a complaint in the face of overwhelming evidence, it is a recipe for chaos. Indeed, the policeman has no such discretion. It has a duty to investigate the matter and cite the complainant for deceit of public officer in the event that it finds that the complaint is wholly unmeritorious. Indeed, that is why mandamus is available “to prevent disorder from a failure of justice and defect of police.”
The applicant has established that the Respondent has a legal duty. It was called upon to perform that duty. It refused. The applicant wrote to the Minister of Finance (please refer Exhibits TG13 and 14). No response has been forthcoming. This is a monumental, indeed, unprecedented breakdown in regulation that may be unique to Ghana. This nation will encounter a lot of mergers and acquisitions in the near future as businesses consolidate on the local market. It is therefore essential to understand the regulatory failures in this particular instance in order to correct any mistakes and better the regulatory framework for such critical economic activities. The matters complained of and warranting the present application can therefore by no stretch of the imagination be termed as frivolous or vexatious. Indeed, after 49 years of independence, the Applicant sincerely believes that it is not only small or medium sized local companies that can fall foul of the law. The law is blind as to personalities. The best signal that the Ghanaian judiciary can send to the investing world is that in Ghana, as in other jurisdictions, the law is applied regardless of the personalities involved. Just as the DTI in the United Kingdom did to Guinness Plc by investigating allegations of impropriety in securities dealings, leading to the trial, indictment and conviction of Mr. Ernest Saunders, then Chairman of Guinness Plc and three other directors for breaches of a similar nature, we wish to humbly submit that in the light of the evidence adduced, “the chips should fall where they may”.
We therefore call on this Honourable Court to order mandamus to issue against the Respondent to compel compliance with its duties under law and to prevent total mayhem on Ghana’s securities markets.
DATED AT ACCRA THIS 23rd DAY OF MARCH, 2006
SOLICITOR FOR APPLICANT
THE REGISTRAR
FAST TRACK HIGH COURT
ACCRA
AND FOR SERVICE ON THE ABOVE-NAMED RESPONDENT
IN THE HIGH COURT OF JUSTICE
FAST TRACK DIVISION
ACCRA A. D. 2006
SUIT NO. AP22/2006
THE REPUBLIC
VRS
SECURITIES AND EXCHANGE COMMISSION }
C/o SEC Bldg, Ministries, Accra } RESPONDENT
(Applicant will direct service)
Ex parte ThinkGhana }
C/o 28/1 Castle Road, Adabraka, Accra } APPLICANT
STATEMENT OF CASE
The Applicant prays for an order of mandamus to issue against the Respondent, Securities and Exchange Commission pursuant to Order 55 of the High Court (Civil Procedure) Rules, 2004 (C.I. 47) to compel the Respondent to investigate the acquisition by Guinness Ghana Breweries Limited (GGBL) of Ghana Breweries Limited (GBL) to establish whether Ghana’s securities laws have been breached and also for the SEC to be compelled to apply the law and sanction defaulters for the breaches of securities laws and regulations that have been occasioned thereby.
1. The Applicant’s case is as set out herein and in the accompanying Affidavit in Support annexed hereto.
2. The Plaintiff’s cause of action is founded on the following provisions of the law:
a. The Securities Industry Law, 1993 (PNDCL 333)
i. s9 ii. s10 (1) (a, g, h); (2) (a, b); (3-11);
iii. s11-15 iv. s18-20; 22; 27(1); 30(1) (c), (5) (a), (b); v. s123, 124,127(c), 128, 129, 130, 132,134,136
b. The Securities Industry (Amendment) Act, 2000 (Act 590)
Section 9 which incorporates the new Part 1A.
c. Securities and Exchange Commission Regulations, 2003 (L.I. 1728)
i. reg. 50, 51, 54-58, 60, 62
d. Companies Code, 1963 9Act 179)
i. s203; s205; 207(7)
ii. s230(7)
e. GSE Listing Regulations
i. Reg. 52 (1) and (2) ii. Part VIII
3. The Plaintiff’s grounds for an order of mandamus is as deposed to in the affidavit in support of the motion.
4. The facts:
These facts are germane to the matter:
a. In June 2003, GBL completed a capital restructuring programme.
b. In December 2003, Heineken and Diageo, the parents of the Ghanaian entities, announced a deal to acquire Heineken’s stake in GBL triggering a takeover under the GSE Rules.
c. GGBL was obliged to file its first quarter results for its financial year 2004 by October 2003. It was never filed. Till date, it has not been filed. This is a clear breach of Regulation 55 of LI 1728. The penalty is two million cedis for each day the default remains. Nothing has been done by the Respondent till date.
d. GGBL’s half-year results for its 2004 financial year were finally released later but it was also an ingenious breach of the rules. Under LI 1728, it was to be filed latest by January 2004, at a time when the takeover announcement had already been made through the GSE. However, GGBL used the old format for reporting instead of the stipulated format under LI 1728. That implied that a condensed financial statement was produced instead of a separate balance sheet, profit and loss account and cash flow statement as required by law. Please refer exhibit TG15. Again, the Respondent allowed it to pass! It is as yet unclear whether this was an attempt to prevent disclosure of the true financial state of GGBL in the lead up to the takeover. Respectfully, this can only be known if this Honourable Court will make an order of mandamus to issue against the SEC in order to wake the SEC up to its responsibilities under law.
e. No valuation report was submitted to the GSE or the Respondent. We wish to submit that the GSE has no discretion in this regard. The GSE’s own Listing Regulations require it under regulation 52 to demand a copy of the valuation report. Again, it was never demanded by the regulators and never submitted.
f. Between December 17, 2003 when the deal was announced on the Ghana Stock Exchange and July 20, 2004, when the shareholders of GGBL approved the deal and other resolutions pertaining thereto, GGBL’s share prices increased by approximately 136% (that is within seven months of the announcement of its merger with GBL) whilst GBL increased within the same period by approximately 5%. GBL’s share price on the date of the announcement of the deal (December 17, 2003) was ¢1425 and rose to ¢1500 by July 20, 2004. GGBL was trading at ¢5400 on the date of the announcement. By July 20, 2004, it was priced at ¢12750. On any other market, the regulator would investigate to assure itself that all was well. Is Ghana any different? We think not. This is especially so in view of the fact that Diageo caused to be issued to itself to the exclusion of all other shareholders, shares of GGBL which were priced at the prevailing price on the day of the announcement (i.e. ¢5400/17 December, 2003) at a time when the price had already appreciated hugely, thereby making instant capital gains. It is our humble submission that the regulator must investigate to establish where there was no stock market manipulation or insider dealing over the said period leading to these events on the securities market.
g. False reports have been made to the GSE and the Respondent in clear breach of the law. GGBL sent a press release to the GSE in 2005 stating that the merger was achieved in December 2004. Please refer exhibit TG8. This is false and a breach of the Securities Industry Law, 1993. Nothing has been done till date. Regrettably, the Respondent itself has repeated these false and untrue statements in official communication to the Applicant as reflected in exhibit TG2. As shown in exhibit TG12, the Daily Graphic newspaper carried a report of the launch of a corporate entity and logo of GGBG on October 13, 2005. It was all part of the grand deception. GGBG does not exist in law. It has not even been registered with the Registrar-General’s Dept. in contravention of the Registration of Business Names Act, 1962 (Act 151) as evidenced by our search exhibited as TG11.
5. Breaches of the Law:
We wish to set out in detail the following breaches of the law that have occurred and which is the subject matter of the Applicant’s complaint but which the Respondent has refused to investigate and/or apply the legally stipulated sanctions:
a. Financial Reports
When the original offer was made to the GBL Board after GSE’s approval, GGBL was in breach of its disclosure requirements on the GSE. Part VII of the GSE’s own Listing Regulations was breached. Available records indicate that when the original Offer was made to the GBL Board, GGBL was in breach of its disclosure requirements on the GSE. The provisions in Part VII of the GSE’s Listing Regulations bind GGBL as a listed company. However the reporting regimes in the market have been fundamentally altered by the promulgation of the SEC Regulations, 2003 (LI 1728). Regulation 55(1) of LI 1728 is instructive. Under the old GSE reporting regime, listed companies were obliged to disclose half-year results not later than 3 months after the end of the relevant period. Preliminary financial results were to be published not later than 3 months after the end of the relevant financial year. A fully audited annual report was expected to be published not later than 6 months. Under LI 1728, an annual report was to be published not later than 3 months from the end of the relevant financial year (regulation 54 of LI 1728). However, regulation 55 introduced a new quarterly reporting regime such that quarterly financial statements in defined form were to be filed with the regulators and published not later than one month from the end of the relevant quarter.
It is significant to note that LI 1728 does not mention half-year results as was the case in the GSE Listing Regulations. This is because the reporting format was such that the second quarter results would automatically reflect the position at half-year. It should however be noted that in terms of content, it also differs. It is also important to note that where the GSE Listing Regulations conflict with LI 1728, LI 1728 would prevail. The reporting requirements under LI 1728 entail a much more detailed disclosure regime than under the requirements of the GSE Listing Regulations. Regulation 52(1) of the GSE’s Listing Regulations enjoins all listed companies to comply with the Rules on Takeovers and Mergers of the GSE.
GGBL’s financial year ends on June 30. Thus ordinarily, its first quarter results during the relevant period should have been published latest by October 1, 2003. LI 1728 clearly states that after a month’s grace period has expired, a company would be in default and is liable to pay ¢2million for each day the default continues. However even after the transaction had been announced, GGBL’s first quarter results were never disclosed yet the Respondent and the GSE approved a major transaction involving a corporate entity that was essentially in breach of the disclosure rules on the market. Till date, neither the Respondent nor the GSE has published any information to the effect that GGBL was mulcted with the relevant penalties for the said breaches in its continuing obligations by either the GSE or the Respondent. It was only much later that GGBL published its half-year results which went some way to cure the lacunae in information that the market needed in order for informed investment decisions.
However, a cursory look at the mode of disclosure in respect of the half-year results also gives cause for concern. As outlined earlier, LI 1728 has broadened the depth of information to be provided under the Continuing Obligations of listed companies. Regulation 56 of LI 1728 on contents of quarterly financial statements reads as follows:
(1) The quarterly financial statements shall comprise either a complete set of financial statements or a set of condensed financial statements but the statements shall include at least
a. A balance sheet
b. An income statement for the period on a year to date basis;
c. A statement where relevant showing either
i. Changes in equity
ii. A statement of recognized gains and losses, changes in equity, except those arising from capital transactions with owners and distribution to owners;
iii. selected explanatory notes as specified in this
regulation; or
iv. a condensed cash flow statement.
However as evidenced by exhibit TG15, GGBL used the old format under the GSE Listing Regulations in purported compliance with LI 1728. For a major multinational engaged in a major acquisition of another listed company and having access to seasoned financial and legal expertise, the question that necessarily arises, is whether this done deliberately to prevent the true state of the financial position being disclosed to shareholders? It is difficult for GGBL to argue that it was not aware of the promulgation of LI 1728. Again, it seems both the GSE and the Respondent allowed these breaches of fundamental disclosure obligations to pass. The Respondent despite all its powers under law, and despite its attention being drawn to these clear infractions by the complaint of the Applicant and further communication as expressed in exhibits TG1, TG4 and TG5, has done nothing although it is aware of such blatant disregard for securities laws.
b. Valuation Report
No valuation report was submitted to the GSE and the Respondent and yet both institutions strangely abdicated their legal duty to request for the document and ensure its disclosure to shareholders. This is a clear unambiguous breach of regulation 52 of GSE’s Listing Regulations. Respondent’s statement in exhibit TG2 that the valuation report was submitted by GGBL to the GSE and also to shareholders of GBL is therefore materially false. No valuation report was submitted to the GSE. Although the GSE’s own Listing Regulations obligated it to request a copy of the Valuation Report, for reasons as yet undisclosed due to the Respondent’s refusal to investigate this matter, the GSE broke its own regulations and did not request for the valuation report from GGBL neither was it submitted. Instructively, the Offer Circular, (copies of which are necessarily with the Respondent) did not also disclose that the Respondent or the GSE had granted GGBL an exemption, even though, there would have been no legal basis to exempt such a fundamental document from disclosure. We wish to stress that this information could easily be ascertained from the Offer Circular. We wish to submit that the Valuation Report is not listed among the documents exhibited in the Offer Circular underpinning the takeover. The Applicant shudders to think of the implications if later investigations do indeed show that the GSE was given a copy of the Valuation Report and chose not to make the disclosure. If the regulations require this document to be disclosed, why did the regulators allow non-disclosure and did not state to shareholders it has granted an exemption?
c. False Reports
Takeover?/Merger?
False reports, unfortunately swallowed, hook, line and sinker by the Respondent, have been submitted by GGBL as part of a grand design of deception, to the GSE. This is a clear breach of section 134 of PNDCL 333. By law, any person who with intent to deceive makes or furnishes … any false or misleading statement or report to the SEC, the GSE or officers of the SEC on matters relating to dealings in securities, matters required by the SEC for the proper administration of the law or the enforcement of the rules of the GSE commits and offence. This is punishable by 500 penalty units and/or two years.
GGBL in the notes to its GSE press release no. 077/2005 stated that there had been a merger since December 2004. Please refer exhibit TG8. We are alarmed that the Respondent would commit such a fundamental mistake. The complaint was premised on the fact that there had been a calculated and deliberate campaign of misinformation to the unsuspecting Ghanaian public through the very institutions tasked to prevent and penalize such actions. The deliberate maze created can only be unravelled if a clear distinction is made Guinness Ghana Breweries Group (GGBG), Guinness Ghana Breweries Limited, (GGBL), Guinness Ghana Breweries (GGB), and Ghana Breweries Limited (GBL). We wish to submit that the true state of affairs is that GGBL acquired shares in GBL but has not merged with GBL. This is at variance with corporate communication from GGBL itself, which has oscillated between the fact of non-merger and the basic untruth of merger. This matter could have been ascertained if the Respondent had had due regard to press releases through the GSE and to publications in the media and to the Annual Report submitted to GGBL shareholders for the Annual General Meeting held late last year. All these documents, instructively, are either with the Respondent itself or should be with it by law. We wish to submit that the Respondent has a legal duty under regulation 58(1) of LI 1728 to review such documents to ensure compliance with accounting standards and securities laws. Clearly, this has not been done. The latest is exhibit TG16 which is dated as recently as February 28, 2006.
Again, the Daily Graphic publication of October 13, 2005 (please see exhibit TG12) shows a clear attempt to mislead the public on the true nature of the entity GGBL. When those statements are juxtaposed against the Annual Report of Guinness Ghana Breweries Group (GGBG), a phantom entity established and publicly launched by GGBL officials ostensibly as the holding company of the two companies, the securities regulator should have been concerned. Exhibit TG10 clearly shows that the entity GGBG is being referred to as “Ghana’s most celebrated company”. In actual fact, GGBG does not exist. GGBL has not even bothered to register that entity, a clear breach of the Registration of Business Names Act, 1962 (Act 151). All these matters have been pointed out to the Respondent and yet it refuses to act. We respectfully submit that a securities regulator should necessarily act when such acts are committed on the capital markets in Ghana. It is puzzling to say the least that the Respondent would bend over backwards to protect a corporate entity that is clearly in breach of the law by consistently refusing to act in accordance with its mandate under law. The big question that is to be asked is whether the Respondent is to protect investors or its duty is to protect big business? Is GGBL above the law? The law courts have a unique opportunity to lay down the law pertaining to securities activities in Ghana.
d. GSE Liability
Under section 132 of PNDCL 333, executives of the GSE who fail to take all reasonable steps to ensure compliance with the Law or the accuracy or correctness of any statement submitted by those officials commit an offence and will be liable on conviction to 250 penalty units or to one year imprisonment or both. Applicant has pointed out in its complaint to the Respondent that breaches have occurred. The Respondent has a public duty to act yet it has so far failed to act.
e. Court-approved Price?
We wish to submit that no court of law determined the offer price under the takeover deal. We therefore find it rather unsettling that the Respondent would liberally make in exhibit TG2, factually inaccurate statements to the effect that the High Court determined the offer price. These matters could be cleared if any investigations as prescribed by law had been done to ascertain whether a court of law ever made that determination. The Respondent’s continued assertion of an inaccuracy is a sad testament to its unwillingness to fulfil its legal duty unless ordered so to do by this Honourable Court. The Applicant submits that the Respondent made a rather grave error in stating that “the issue of a fair value does not arise since it was determined by High Court and there was no subsequent appeal”. We respectfully submit that when an apex regulator of the securities industry, with a legal duty, liberally documents untrue statements, which would be an offence under PNDCL 333, as amended, if it were committed by a market operator, the law courts and indeed all investors must be very concerned. The Applicant therefore states categorically that the offer price pursuant to the takeover was not determined by the High Court. The offer price was determined by the offeror, GGBL. The matter brought before the Court by a shareholder of GBL was whether the valuation report had to be disclosed in order to determine the fairness or otherwise of the offer price. As soon as the High Court made a ruling that the valuation report should be submitted, not to the public, but to the Court in order for it to make a determination as to whether it should be disclosed or not, the matter was settled out of court. The substantive issues were therefore never resolved. The Respondent was a party to that suit and is fully aware of all the facts. It is only an investigation that can help determine why the regulator itself will make public statements of an untrue nature.
We wish to submit that Diageo, the parent company of GGBL could only lawfully pay for its new shares after the completion of the EGM of GGBL in July 2004 yet the price it paid for the shares was the prevailing price as at December 17, 2003, when the deal was announced, i.e. ¢5400. This was at a time when the prevailing share price of GGBL was ¢12,270. The Respondent is always invited to the general meetings of listed companies and must have been a witness to this event. Respectfully, no securities regulator in any jurisdiction, perhaps except Ghana, would even wait to receive a formal complaint when it notices a rapid rise in the share price of Guinness between December 17, 2003 and the closure of the deal. Whilst we have consistently stated that we have no evidence of wrongdoing, the facts necessarily warrant an investigation to determine whether any stock market manipulation and/or insider dealing transpired during the period.
Section 123(1) of PNDCL 333 defines stock market manipulation as follows: ‘A person who effects, takes part in, is concerned in or carries out, either directly or indirectly, two or more transactions in securities of a body corporate which are transactions in securities of a body corporate which are transactions that have or are likely to have, the effect of raising, lowering, maintaining or stabilising the price of securities of the body corporate on a stock exchange in Ghana with intent to induce other persons to sell, purchase or subscribe for securities of the body corporate or of a related body corporate commits an offence”.
Section 128 prohibits dealings in securities by insiders. It provides as follows:
(1) A person who is, or has at any time in the 6 months immediately prior to a dealing in the securities of a body corporate been connected with that body corporate shall not deal in securities of that body corporate if by reason of his association he is in possession of information that is not generally available, but if it were, might materially affect the price of those securities.
(2) A person who is or has at anytime in the 6 months immediately prior to a dealing in the securities of a body corporate been connected with that body corporate shall not deal in any securities of any other body corporate if by reason of his being, or having been connected with the first mentioned body corporate he is in possession of information that
(a) is not generally available but, if it were, would be likely to affect materially the price of those securities; and
(b) relates to any transaction (actual or expected) involving both those bodies corporate or involving one of them and the securities of the other.
We wish to submit that a case of stock market manipulation or insider dealing can never be established by the regulator requesting for evidence from a complainant. This is because some trades on the market would necessarily have to be unravelled to establish who was buying or selling the shares leading to the unusual rise or fall in the shares. No individual has legal authority to demand contract notes and transfer receipts and other records of securities dealers. It is only the Respondent who has been clothed with legal authority under section 10 of PNDCL 333 to legally request the relevant documents in its quest to investigate such matters. Indeed, an attempt by the Respondent to fully establish the futility of the “show-me-evidence” posture of the Respondent was proved by the response of the solicitors for GGBL as evidenced by exhibit TG7. The Applicants were duly rebuffed.
We therefore submit that where share prices have risen by 136% within a period of seven months after an announcement of a takeover and the majority shareholder of the acquiring company, engineers a sale to itself, alone, by getting all other shareholders to waive their right to equivalent shares as priced, of shares not at the prevailing price but at 136% discount, the Respondent ought to investigate to establish whether the shares were not manipulated and also whether no one connected with the acquiring company as defined by law, benefited by trading in shares during the said period. These are basic fundamental securities law principles that must be upheld by law in the event that the regulator fails to do its legal duty as in this instance. Further, Applicant draws the attention of this Honourable Court that Guinness Plc, which is a United Kingdom based company with links to GGBL, has been held to have engaged in stock market manipulation and breaches of securities laws in the past. This has already been pointed out in communication to the Respondent. In the late 1980s, the Department of Trade and Industry (DTI) in the United Kingdom also had an opportunity to request “documentary evidence” in the late eighties when reports of possible wrongdoing in the takeover of Distillers Plc by Guinness Plc initially surfaced. After investigations were made, the then Chairman of Guinness Plc, Ernest Saunders, was tried, convicted and jailed with three other directors of the company. We respectfully submit that if the DTI had responded in a like manner of the Respondent, the facts would never have seen the light of day. We therefore respectfully submit that it is absolutely essential that an order of mandamus issues to compel the Respondent to do its legal duty by saving the dignity of the nation and do its duty under law to investigate such clear infractions of the law and to impose the stipulated sanctions for the breaches that have occurred so far.
Further, we draw attention to events on the Tokyo Stock Exchange in the past few months. Livedoor, an internet brokerage firm, is being investigated based on allegations of fraud. The firm has been placed on the Stockwatch List, a step prior to delisting. The directors of the company have been arrested and are being tried for breaches of securities laws. The Respondent is a member of the International Organisation of Securities Commissioners (IOSCO) to which the Japanese regulator also belongs. All members subscribe to the principles of securities regulation as laid down in the IOSCO Principles.
The Respondent has breached and/or condoned the breach of the following securities regulations and laws including but not limited to the following:
i. s9 of Act 590 particularly s8c (3) of the new Part 1A by refusing to investigate the complaint and summarily dismissing it.
ii. Failing to sanction GGBL for non-compliance with regulation 55 and 56 of LI 1728.
iii. Failing to sanction the GSE and GGBL for non-compliance with regulation 52 of GSE’s Listing Regulations.
iv. Failing to investigate complaint of possible stock manipulation and insider dealing.
v. Failing to investigate and sanction GGBL for false reports submitted to the GSE and also disseminated to the general public through the media pursuant to sections 124 and 134 of PNDCL 333.
6. The Law:
a. SEC’s Legal Duty:
The functions of the Respondent have been set out in section 9 of the Securities Industry Law, 1993 (PNDCL 333), among which are the following:
Section 9:
(b): to maintain surveillance over activities in securities to ensure orderly, fair and equitable dealings in securities;
(c): to register license, authorise or regulate, in accordance with this Law or any regulations made under it, stock exchanges, investment advisers, unit trust schemes, mutual funds, securities dealers and their agents and to control and supervise their activities with a view to maintaining proper standards of conduct and acceptable practices in the securities business;
(d): to formulate principles for the guidance of the industry
(f): to protect the integrity of the securities market against any abuses arising from the practice of insider trading;
(h): to review, approve and regulate takeovers, mergers, acquisitions and all forms of business combinations in accordance with any law or code of practice requiring it to do so;
(i): to create the necessary atmosphere for the orderly growth and development of the capital market;
(k): to undertake such other activities as are necessary or expedient for giving full effect to the provisions of this Law; and
(l): to perform other functions specified under this Law.
Section 9 of the Securities Industry (Amendment) Act, 2000 (Act 590) is instructive on what the Respondent ought to do when a complaint has been filed with it. Section 8c of the new Part 1A governs the submission of complaints and the examination of issues. Section 8c states in part as follows:
(1) A complaint, dispute or any violation arising under this Law shall, before any redress is sought in the courts, be submitted to the Commission for hearing and determination in accordance with this Part.
(2) A matter to which sub-section (1) applies shall be submitted in writing to the Director-General of the Commission and where it is not in writing, the Director-General shall cause the matter to be reduced into writing.
(3) The Director-General shall cause the matter to be investigated and shall unless he
(a) considers the matter to be frivolous or vexatious;
(b) can settle the disputed matter or complaint to the satisfaction of parties concerned,
refer the matter together with the findings of the investigations to the Hearings Committee within thirty days from the date of receipt of the written complaint, dispute or violation and shall at the same time inform the complainant or persons concerned of the submission to the Hearings Committee.
Further, subsection (5) of section 8E of the new Part 1A of Act 590 gives the Hearings Committee a period of thirty days from receipt of the complaint it to examine and determine the complaint or matter unless there is a delay occasioned by the complainant, his representative or witness.
We wish to submit that the Director-General of the SEC has a legal duty under section 9 of Act 590, to investigate the complaint in order to make a determination that it is unmeritorious. It is obvious from the statements made by the Respondent in exhibit TG2 that no such investigation was conducted leading to the repetition of the same false information and untrue statements being published through the regulatory institutions, a situation that necessitated the complaint. If an investigation was conducted as warranted by law, the Respondent would have been in a position to know that there had been no merger between GBL and GGL to form GGBL. It would also have established that no valuation report was ever submitted to the GSE or to the Respondent itself. Further, it would have established by its investigations that no court of law in Ghana ever fixed the offer price under the takeover deal that led to the acquisition by GGBL of GBL. By wilfully making these false statements in support of its decision to abdicate its legal responsibilities, it is obvious that no investigation was ever conducted as required by law. The unfortunate false statements made by the Respondent in exhibit TG2 could easily be ascertained as the facts are already in the public domain and relevant documentary proof on the issues are with the Respondent itself.
b. Mandamus
The principle regulating the grant of an order of mandamus is stated in the Annual Practice (1960 ed), Vol 1 at page 1725 and quoted with approval by the High Court in The Republic vrs. The Inspector-General of Police; Ex parte Hansen and Others [1992] 2GLR at page 179: “An order of mandamus is an order requiring an act to be done… and it may be made where an inferior tribunal or body of persons is charged with a public duty to do an act, and has failed upon demand to do it: see R. v. Inland Revenue Commissioners, Re Nathan (1884) 12Q.B.D. 461 C.A. The making of the order is discretionary: see R. v. All Saints, Wigan (Churchwardens) (1876) 1 App. Cas. 611 at p.620, but it is made where there is a legal right to the act and no other specific and equally convenient remedy… but it may be made against officers of the Crown who are obliged by statute to do some ministerial act in favour of the applicant.”
In Republic v Chief Accountant, District Treasury, Kumasi; Ex parte Badu [1971] 2GLR 285 the court held as stated in the head note: “… an order of mandamus lies against public officials in the performance of their public or quasi-public legal duty, to require them to carry out their duty. The order is not meant to review or control what such officials have done or what they do, but to compel them to act…The order will only issue if the duty required to be performed can be legally done. Ex parte Nash 15 Q.B. 92 and R. V. Eastbourne Corporation (1900) 83 LT 338 applied.”
In Halsbury’s Laws of England (3rd ed), Vol 11, pages 106-107, paragraph 199, the law is set out as follows: “A mandamus will not go when it appears that it would be futile in its result. Accordingly, the Court will not, by mandamus, order something which is impossible of performance by reason of the circumstances that the doing of the act would involve a contravention of law …”.
In the Republic v. Chief Lands Officer; Ex parte Allotey and Others [1982-83] GLR 971 an application for an order of mandamus was made by a joint head of family to compel the Chief Lands Officer to register a number of conveyances relating to land belonging to the Onamrokor Adain family, which the Chief Lands Officer had refused or failed to register. The High Court per Cecilia Koranteng-Addow J, had the opportunity to pronounce on the issue of the locus standi of the Applicant. In her Lordship’s view, “so far as applications for granting prerogative writs are concerned, I think it is in the discretion of the court whom it will hear and whether to grant such a remedy or not. The writ of mandamus is a wide remedy and it should avail anyone who shows that he has sufficient interest to be protected and that there is no other remedy”.
The Supreme Court in the Republic v Lands Commission; Ex parte Vanderpuye Orgle Estates, reported in the 1998-99 Supreme Court of Ghana Law Reports, 677, examined the scope of mandamus and considered circumstances where the court would grant mandamus even where alternative remedy of appeal was available to the applicant. The case was an appeal against the unanimous decision of the Court of Appeal affirming the judgment of the High Court, granting an order of mandamus against the Lands Commission.
Bamford-Addo JSC at 691 quoted from page 63, HWR Wade Administrative Law (5th Ed) on the history, use and effect of mandamus: “Lord Mansfield said in sweeping terms in R v Baker (1762) 3 Burr 1265 at 1267…’ it was introduced to prevent disorder from a failure of justice and defect of police. Therefore it ought to be used upon all occasions where the law has established no specific remedy and where injustice and good government there ought to be one … the value of the matter, or the degree of its importance to the public police is not scrupulous weighed. If there be a right and no other specific remedy, this should not be denied.” Her Lordship further quoted Darling J in R V The Revising Barrister for the Borough of Henley [1912] 3 KB 518 that “instead of being astute to discover reasons for not applying this great constitutional remedy for error and misgovernment, we think it is our duty to be vigilant to apply it in every case to which, by any reasonable construction, it can be made applicable.” His Lordship Charles Hayfron-Benjamin JSC further buttressed the importance of mandamus as a tool for ensuring that public officials did their duty. He stated at page 697 that “the respondents were right in approaching the court for a mandamus, for, wherever there is a danger or threat that an interest, whether proprietary or otherwise, will be prejudiced or unlawfully interfered with, mandamus will lie”.
As succinctly stated by Hayfron-Benjamin JSC in the case, “… an order for mandamus may issue against a public officer, a statutory authority or person who has a public duty to perform under the common law to do any act so warranted but who refuses or neglects to do that act or perform that duty. It includes the correction of such acts or duty wrongly performed. The order neither grants victory to the person applying nor is it the result of litigation”.
7. Conclusion
In the Annual Report of GGBG 2004, the Chairman of GGBG states as follows on page 8: “Following completion of the transaction, Guinness Ghana Limited changed its name to Guinness Ghana Breweries Limited”. He states further that “since then, both companies have been working hard to merge the operating businesses of former Guinness Ghana Ltd. and Ghana Breweries Ltd”. According to the said statement, “the businesses have been operating under the name of Guinness Ghana Breweries Group to help the sense of unity that is being built between the two companies. However, I would like to ensure that you are all clear that: Both Guinness Ghana Breweries Limited and Ghana Breweries Ltd. continue to exist as stand alone entities”, end of quote! Please refer exhibit TG10. The MD of GBL is also the MD of GGBL. If there has been a merger, would he hold both positions? Indeed, the fact of non-merger is borne out by the Managing Director of GBL itself in exhibit TG16. We submit that GGBL is just the old entity, GGL, which changed its name into that of the intended merged entity, GGBL and has consistently worked to promote the wrong impression in the minds of all Ghanaians that GGBL is the merged entity. Indeed, under Ghanaian law, the Respondent has a legal duty to as a matter of urgency, immediately correct the false information which evinces a brazen lack of respect for Ghana’s laws and to halt the impunity with which Ghana’s securities laws are being breached, regrettably with the active connivance of the Respondent in total disregard for its duty under law.
When such statements are made in Annual Reports, copies of which are with the Respondent and the Respondent justifies a refusal to investigate a complaint by making statements that are debunked by documents within its own possession, it is imperative that the law courts intervene to ensure that public officials do their duty under law. As stated by Hayfron-Benjamin JSC in the Republic vrs. Lands Commission, ex parte Vanderpuye Orgle Estates, “… an order for mandamus may issue against a public officer, a statutory authority or person who has a public duty to perform under the common law to do any act so warranted but who refuses or neglects to do that act or perform that duty”. The Applicant has shown beyond all reasonable doubt that the Respondent has refused and/or neglected to do its duty.
The relevant law has made a provision of 60 days for resolution of complaints. In securities issues, time is of the essence. The continuing delay in dealing with the matter makes it imperative that an order of mandamus is the only order that would compel the securities regulator to do its duty under law to investigate the matters complained of and also to apply laid down sanctions for the infractions of the securities laws and regulations that have already taken place.
The manner in which the Respondent has abdicated its legal responsibility to regulate the market by refusing to investigate the complaint and ensure that defaulters are appropriately sanctioned leaves much to be desired and is a dangerous precedent that needs to be reversed. The grounds adduced by the Respondent to support its regrettable decision to abdicate its legal responsibility have been shown to be wholly inaccurate. The stated grounds of the Respondent are false in material particular and therefore cannot lawfully found a proper determination not to investigate the complaint. The Respondent is akin to a policeman. Indeed, it is the Police of the securities industry. When a policeman can tell a complainant that he will not investigate a complaint in the face of overwhelming evidence, it is a recipe for chaos. Indeed, the policeman has no such discretion. It has a duty to investigate the matter and cite the complainant for deceit of public officer in the event that it finds that the complaint is wholly unmeritorious. Indeed, that is why mandamus is available “to prevent disorder from a failure of justice and defect of police.”
The applicant has established that the Respondent has a legal duty. It was called upon to perform that duty. It refused. The applicant wrote to the Minister of Finance (please refer Exhibits TG13 and 14). No response has been forthcoming. This is a monumental, indeed, unprecedented breakdown in regulation that may be unique to Ghana. This nation will encounter a lot of mergers and acquisitions in the near future as businesses consolidate on the local market. It is therefore essential to understand the regulatory failures in this particular instance in order to correct any mistakes and better the regulatory framework for such critical economic activities. The matters complained of and warranting the present application can therefore by no stretch of the imagination be termed as frivolous or vexatious. Indeed, after 49 years of independence, the Applicant sincerely believes that it is not only small or medium sized local companies that can fall foul of the law. The law is blind as to personalities. The best signal that the Ghanaian judiciary can send to the investing world is that in Ghana, as in other jurisdictions, the law is applied regardless of the personalities involved. Just as the DTI in the United Kingdom did to Guinness Plc by investigating allegations of impropriety in securities dealings, leading to the trial, indictment and conviction of Mr. Ernest Saunders, then Chairman of Guinness Plc and three other directors for breaches of a similar nature, we wish to humbly submit that in the light of the evidence adduced, “the chips should fall where they may”.
We therefore call on this Honourable Court to order mandamus to issue against the Respondent to compel compliance with its duties under law and to prevent total mayhem on Ghana’s securities markets.
DATED AT ACCRA THIS 23rd DAY OF MARCH, 2006
SOLICITOR FOR APPLICANT
THE REGISTRAR
FAST TRACK HIGH COURT
ACCRA
AND FOR SERVICE ON THE ABOVE-NAMED RESPONDENT
posted by JOEDEE at 5:48 AM
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