The decision of Justice CMA Olatoregun of the Federal High Court sitting in Lagos, on the ownership tussle between the founding directors of Eko Hospital and a major shareholder of the company, Geoff Ohen Ltd, has been challenged at the Court of Appeal.
Geoff Ohen Ltd appealed the trial judge’s decision on the ground that she erred in law and in facts.The founding directors of Ekocorp Plc, owners of Eko Hospital, had instituted the suit against Geoff Ohen Ltd, praying the court amongst others to declare that they are entitled to convert 75% of the debt the company (Ekocorp Plc) is owing them into equity in accordance with the decisions of the board of directors’ meeting.
The Petitioners – Dr. Sunday Folorunso Kuku, Dr. Augustine Amaechi Obiora and Senator M.N.I Ajegbo (for and on behalf of the estate of late Dr. Alexander Chukwuma Eneli) also prayed the court to declare that the action of Dr. Geoffrey Ohen and his company, Geoff Ohen Ltd (1st and 2nd Respondents in the suit), in using their purported majority shareholdings to block Eko Hospital’s Annual General Meeting wherein a more specific resolution would have been passed to authorise the debt-equity swap of the 75% indebtedness of the Eko Hospital to them, is oppressive, unfairly prejudicial and unfairly discriminatory to their interest.
The Petitioners also prayed the court to order that an Annual General Meeting be held within three months of the court order where specific resolution authorising the 75% of the company’s indebtedness will be passed to be converted into equity.
Also, the petitioners prayed the court to declare that the 1st and 2nd Respondents cannot acquire more than 30% of the shares of Ekocorp Plc without a takeover bid being made to the board of directors of the company, adding that the court should restrain the Respondents from exercising any right whatsoever over any shares above the 63 million shares, which according to them were acquired prior to the special placing.
Responding to the Petitioners, the Respondents had prayed the court to declare amongst others that the alleged debt owed to the petitioners by the company are in fact secret profits made by them in the course of their duties as directors of Eko Hospital.
The Respondents also prayed the court to declare that the only reason why the hospital is in any financial difficulty was as a result of the profligacy, mismanagement and incompetence of the petitioners, who in their admission are responsible for the running and management of the hospital.
Dr. Geoffrey Ohen and his company Geoff Ohen Ltd also asked the court to declare that the petitioners having admitted to be responsible for the management and running of the hospital cannot possibly be victims of any oppressive, unfairly prejudicial and unfairly discriminatory acts of the majority shareholders who up till the date of filing the suit are not responsible for the management of the hospital.
The Respondents prayed the court to order the Petitioners to return part of the secret profit amounting to 25% of the whole which they have already taken as cash in the sum of N29,642,305.75, which interest rate at prime bank rate from August 2007 till date judgment is given.
They prayed the court to order that an Annual General Meeting be held within three months to consider the removal of the directors, which include the Petitioners, from the Board of Directors having abused their office.
The Respondents had during hearing explained to the court that Ekocorp Plc was not indebted to its founding directors, adding that the prospectus upon which they based their invitation to invest never disclosed such liability.
Dr. Geoffrey Ohen said he was not perturbed by the 75% debt-equity swap because any decision of the board of directors would still require ratification by the company in a general meeting for it to have business efficacy.
He had told the court that the huge financial liabilities referred to was a direct result of the alleged mismanagement of the two surviving directors (Messrs Kuku and Obiora) who were directly and solely responsible for running and management of Ekocorp Plc.
According to him, it was in order to satisfy a preconceived but hidden agenda that the two surviving founding directors allegedly concocted a strategy to further emasculate the company financially under the guise of an alleged debt-equity swap.
Ohen explained that when Ekocorp Plc, which operates the hospital known as Eko Hospital and clinic, ran into some difficult times financially, to help solve the financial challenge, the company sold 110 million shares to him under a scheme known as Special Placement. He added that the 110 million shares were sold to him for a total consideration of N440 million.
“The total issued shares of Ekocorp Plc were 498 million. If the 110 million shares sold to Geoff Ohen Ltd as the Special Placement is removed from the total share, there would be 388 million shares left. Of the remaining 388 million shares, Geoff Ohen Ltd has over 155 million shares representing 39.8% while the founders have 55 million shares each, which represent 15%. Dr. Geoffrey Ohen has over 100 thousand shares which when added to over 155 million shares of Geoffrey Ohen Ltd amounts to about 40% of the company before the 2007 Special Placement”, he stated.
He told the court that the claim of ignorance of these shareholdings cannot stand as Dividend Warrant representing about 30% of the company shares was issued to Geoff Ohen Ltd for the year ended December 31, 2006 long before the 110 million shares placement in 2008.
But in her judgment on the suit delivered on May 7, 2018, Justice Olatoregun granted some of the payers of the petitioners, to the effect that the petitioners are entitled to convert 75% of the debt the company (Ekocorp Plc) is owing them into equity in accordance with the several decisions of the board of directors meeting.
On the conversion of debt owed by Ekocorps to the Petitioners to equity, Justice Olatoregun held that from the evidence it is clear that Ekocorp Plc was indebted to them and that Dr. Geofferey Ohen did not protest at the Board meeting where it was agreed that 75% of the debt be converted to equity while 25% of the debt be paid to them in cash as seen from the adopted minutes of meeting.
The judge while rejecting prayers 1 to 3, 5 and 6 of the 1st and 2nd Respondents, granted prayers 1 to 3 and 5 of the Petitioners and ordered that an Annual General Meeting wherein the Debt Equity swap and the Special Placement will be approved, having set aside the Special Placement of 110 million shares on the ground that it was acquired in breach of the provisions of the law.
Justice Olatoregun, having found the Petitioners culpable and indicting them of assisting with the illegality of producing an Exhibit, which was found to be false, said they cannot benefit from their illegality and ordered the Petitioners to refund the 25% of the sums collected for the purported sale of 110 million shares in the sum of N29,642,305.75.
Aggrieved by the judgment of the lower court, Geoff Ohen Ltd has asked the Court of Appeal to reverse the order of Justice Olatoregun, setting aside its Private Placement 110 million shares.
The Shareholder also prayed the Appellate Court to set aside the lower court’s decision granting the order that some of its acts are oppressive, unfairly prejudicial and unfairly discriminatory to their interest.
In the alternative, the Appellant asked the court to order Eko Corps Plc and its funding directors to refund its N440 million paid for the 110 million shares since August 2007 with interest up to the time of the judgment now appealed against, if they no longer want it to be a co-investor.
In the Notice of Appeal filed on its behalf by the law firm of Agbamuche & Agbamuche on six grounds, the Appellant stated that Justice Olatoregun erred in law when she held that there was no legal requirement on the 2nd and 3rd defendants (Dr. Geofferey Ohen and Eko Corps Plc) to get evidence in support of the pleadings.
The Appellant argued that it is a trite law that pleadings without evidence to support the pleadings of Petitioners is either abandoned or goes to no issue. It added that failure to give any evidence whether documentary or oral of any type meant that none of the facts pleaded in the joint petition especially where challenged by the answer and cross petition could have been relied upon by the learned trial judge in the determination of the facts and law so far as the 2nd and 3rd petitioners were concerned.
Geoff Ohen Ltd also stated that Justice Olatoregun erred in law when she held that the 110 million allotted to it cannot in a legal sense be its property, contending that it was invited by Eko Corps Plc to invest in the shares as core investors.
It argued that the parties executed a share purchase agreement wherein Eko Corps Plc offered for sale by way of a Special Placement a share for an agreed sum. It stated that it was not in dispute that Eko Corps Plc received the sum of N440 million as the sale price for the 110 million shares.
According to the Appellant, it was not its duty to seek the approval of the company in general meeting for the allotment of 110 million shares because it is the responsibility of the board of directors who already conveyed the information to it (Appellant) that the board of directors had approved the allotment of the shares to it.
The Appellant added that having given valuable consideration for the shares, the only factor remaining was the approval of SEC which was granted and there could therefore be no doubt that the property in the shares has passed the Appellant.
Furthermore, the appellant faulted Justice Olatoregun’s decision setting aside the SEC approval of the Special Placement 110 million shares, arguing that the authority and power of SEC to regulate the activities of publicly quoted companies is a creation of statute.
Geoff Ohen Ltd contended that there was nothing before the learned trial judge whether in the pleadings or the evidence tendered in court to show that the approval of SEC was wrongful exercise in favour of the Private Placement Scheme.
The Appellant said the trial judge also erred in law when she declared the acquisition by the Appellant illegal ab initio because of the absence of a takeover bid in line with Section 131 of the Securities and Investment Act.
The Appellant argued that the 110 million Special Placement shares was approved by SEC and that Section 131(1) of the Securities and Investment Act enjoined a person who had not less than 30% of the issued shares in the company to make a takeover offer to holders or any class of equity shares.
Geoff Ohen Ltd argued that the shares allotted to it by way of Private Placement was not owned by any person in which case it was not possible to make a takeover offer to any existing shareholder of the 110 million as provided by Section 131 B of the Securities and Investment Act.
It contended that there was nothing in Securities and Investment Act, which provides that in the event of failure to make a takeover bid of shares already bought and paid for, particularly shares bought on the floor of the Stock Exchange can be described as illegally acquired.
The appellant therefore prayed the court grant all its reliefs.