Wednesday, March 27, 2013

$91.7 m judgement debt can collapse NIB

March 22, 2013 (Page 22)

THE National Investment Bank (NIB) has stated that the $91.7 million judgement debt awarded against it by the Commercial Court has the potential of collapsing the bank.
The bank, which has appealed against the court’s order, has revealed that the amount is far in excess of the entire net worth of the bank.
In its motion for stay of execution filed on March 12, 2013 at the Commercial Court Division of the Fast Track High Court, the NIB said the debt “is far in excess of the entire net worth of the first defendant/applicant bank, the payment of which, if at all feasible, would lead to the total collapse of its business, with far-reaching consequences for individual depositors, corporate customers and the entire banking system of the country”.
The bank is, therefore, praying the Commercial Court to stay execution of its order pending the outcome of an appeal it has filed on the grounds that the bank will suffer irreparable damage if the court’s order, dated February 21, 2013, is not stayed and the appeal succeeds in the long run.
According to the bank, its appeal had a “high likelihood of success” because the trial judge, Alhaji Justice Amadu Tanko, failed to consider the bank’s evidence which led to the fact that the bank was not liable to any entity.
Hearing of the motion for stay of execution has been fixed for May 8, 2013.

Motion on notice for stay of execution
An affidavit in support of the motion for stay of execution deposed by the Head of Legal of the NIB, Mr Michael Amarfu-Dey, said the court’s finding that the bank failed to cross-examine a witness with respect to the disbursement of $24 million from the promissory notes was not supported by the evidence on record.
It said apart from the fact that the NIB’s appeal stood a high chance of success, the Dominion Corporate Trustees, “just like its predecessor, Standard Bank Offshore Trust Company Limited, as per the endorsement on its Writ and Statement of Claim, is an offshore company registered and operating in Jersey, Channel Islands, a jurisdiction renowned for its secret legal arrangements to shield companies from taxes and the attachment of their assets”.
For that reason, the bank held that its business and tangibles were located within the jurisdiction of the court and in the event of success upon appeal, the NIB success would be rendered nugatory as it would virtually find it impossible to recover the sum now ordered to be paid in the judgement.
“That this Honourable Court has no means available to it to determine the net worth of the plaintiff/respondent for purposes of making a decision as to whether and the extent to appeal which it could repay the sum so ordered in the judgement in the event of the appeal succeeding,” the affidavit in support stated.
 The plaintiff/respondent in this instance is Dominion Corporate Trustees Limited.
In confirmation of the uncertainty surrounding Dominion Corporate Trustees Limited, the bank held that the status or nature the plaintiff in the case changed at the inception of the case from “Standard Bank Offshore Trust Company Limited, which in itself was suing for and on behalf of certain investors in promissory notes such as Sphynx Capital Market PCC Investors and Tricon Trade Management Limited, to Dominion Corporate Trustees Limited”.
“That there is evidence on record which irresistibly leads to the conclusion that the substitution was motivated substantially by the desire to hide the fact that an amount of US$24 million, representing a little over  50 per cent of the US$45,412,790, being the proceeds of the sale of the promissory notes, was paid to Standard Bank Jersey Limited for the benefit of a company known as Sphynx Ltd, USA, on August 24, 2007,” the affidavit said.
It further held that the $24 million which was paid into an account numbered 000153885 with HSBC Bank USA and the beneficiary, Sphynx Ltd, USA, operated an account numbered 58081144 with the aforesaid Standard Bank Jersey Limited.
The affidavit stated that Standard Bank Jersey, the recipient of the $24 million on behalf of Sphynx Ltd USA, was related to Standard Bank Offshore Trust Company Jersey Limited, the entity that first instituted the present action.

Sphynx Ltd “Missing in Action” and bankrupt
It said all attempts on the part of the bank to locate Sphynx Ltd, USA had proved futile, adding, “The only evidence from the Internet and other searches showing that a company going by that name had gone into bankruptcy and proceedings to that effect were brought and determined in 2006 before the United States Bankruptcy Court for the Southern District of New York. This case is reported in 351 B R 103 (Bank. S D N Y September 6, 2006).”
“That in the aforesaid proceedings before the United States Bankruptcy Court for the Southern District of New York, it is stated that Sphynx Limited, USA was a Cayman Island company, registered offshore with its centre of non-main interest being the United States of America,” the affidavit said.
It said the striking coincidence was that one of the companies on whose behalf the suit had been brought was a company registered and operating offshore Mauritius, known as “Sphynx Capital Markets PCC, a special purpose vehicle established and owned by Iroko Securities, the transaction advisors to the deal that resulted in the current action by the Plaintiff/ Respondent”.
The bank, accordingly, prayed the court to, in the interest of justice and fairness, “take due cognisance of the linkage between the payment to Sphynx Limited USA of over 50 per cent of the proceeds of the sale of the promissory notes and the current claim by the plaintiff, partly on behalf of Sphynx Capital Markets PCC, a company owned by the transaction advisors who were the main architects of this deal”.
It said given the “complicated  and secretive nature of the entities involved in this deal, and emerging evidence of self-dealing”, the bank would be placed in a  significantly difficult situation were it to pay the sum ordered and subsequently reclaim the same upon success in its appeal.
According to the NIB, it was easier for Dominion Corporate Trustees Limited to recover its debt should the appeal fail, since the bank was a reputable bank that had its centre of main interest here in Ghana, with tangible assets within the jurisdiction of the court and which Dominion Corporate Trustees Limited could attach in execution of its judgement.
The bank said “in all the circumstances of this case the balance of hardship tilts heavily against the bank” in the event that it was compelled to pay the said judgement pending the determination of its appeal, “which has a high likelihood of success”.

Notice of Appeal
In a notice of appeal dated March 1, 2013, the bank held that the trial judge erred in law when he excluded from evidence which clearly demonstrated that Iroko Securities Limited, the plaintiff’s arrangers of the discounting of the impugned promissory notes, knew that Mr Gyimah lacked the requisite authority to bind the NIB in a $60 million transaction and that exclusion of evidence had resulted in a substantial miscarriage of justice.
It said the trial judge erred in law when he held that the presumption of regularity contained in Section 142 of the Companies Act, 1963 (Act 179) had not been rebutted by evidence of previous dealings with the NIB (the issuer of the promissory notes) and Iroko Securities Limited (the arranger of the promissory notes), which evidence of previous dealings clearly indicated that they knew or ought reasonably to have known that Mr Gyimah did not have the requisite authority to bind the NIB in a transaction worth $60 million.
According to the appellant, the trial judge erred in law when he failed to realise that the presumption of regularity contained in Section 142 of the Companies Act, 1963 (Act 179) did not apply to banking transactions that contravened the single obligor limit as contained in Section 42 of the Banking Act 2004 (Act 673).
Arguing further, the bank held that the trial judge erred in law when he held in the face of contrary evidence that the plaintiff was an innocent third party and was, therefore, immune from the use of contrary evidence to rebut the presumption of regularity in the performance of the duties of Mr Gyimah as Managing Director of the NIB.
It went on further to submit that the trial judge erred in law when he held that the NIB had failed to produce evidence of fraud or other material illegality and, therefore, the holders in due course of the said promissory notes were entitled to the presumption of validity of such notes under the Bills of Exchange Act, 1960 (Act 55).
According to the bank, the trial judge erred in law when he held that when an allegation of fraud had been made in a civil suit, the burden of proof was beyond reasonable doubt “as opposed to proof on a preponderance of probabilities”.
According to the bank, it was wrong for the trial judge to dismiss the NIB’s counter claim, adding that “the judgement is against the weight of evidence”.
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