HFC Bank takeover saga: Court dismisses Republic Bank’s plea

An Accra High Court, Commercial Division, on June 23, 2014, has dismissed an application by Republic Bank of Trinidad & Tobago, to strike out the action filed by HFC Bank against the hostile takeover attempt of HFC Bank by Republic Bank.

The court, presided over by Justice George K. Koomson, dismissed Republic Bank’s application, holding that the action was properly brought before the court by HFC Bank and should therefore be heard.

Background

The HFC Bank, on 23rd May 2014, sued the Republic Bank and the Securities and Exchange Commission (SEC) for what it alleged were breaches of the SEC Code on Takeovers & Mergers in Republic Bank’s attempt to do a mandatory takeover of HFC Bank by purchasing of HFC shares held by the Union Bank of Nigeria.

HFC Bank also applied for an interim injunction against Republic Bank and the SEC.

Republic Bank countered this by filing an application to strike out the court action altogether, arguing that: 1) HFC Bank should have submitted a complaint to the SEC to investigate the alleged wrongdoing by Republic Bank before filing the action in court; 2) the action was not authorised by the Board of Directors of HFC; 3) the fact that HFC Bank accuses Republic Bank of engaging in "insider trading", which is a criminal offence, means that the action can only be prosecuted by the Attorney-General as a criminal case and not as a civil case, and 4) the action is vexatious and an abuse of the court’s process. The SEC supported Republic Bank's application.

However, the court dismissed the application on all the four grounds. On the first ground, the Court held that HFC Bank was justified in not first submitting a complaint to the SEC, because the SEC’s actions in the transaction raise questions of bias and impartiality. HFC Bank therefore had legitimate fears that it had a very slim, if not impossible chance of getting a fair hearing before the SEC.

The court stated that it would be preposterous for it to throw out HFC Bank’s action, and that it would amount to a travesty of justice. On the second ground, the court held that HFC Bank was not wrong to allege in a civil suit, that Republic Bank had committed "insider trading".

On the third ground, the court held that the Minutes of the Meeting of HFC Board on 28thApril 2014 and a letter of the same day, written by HFC Bank's Managing Director to the Bank's lawyers, Bentsi-Enchill, Letsa & Ankomah, confirmed that the action was authorised. On the last ground, the court stated that the court action initiated by HFC Bank raises serious issues that have to be determined by the Court and therefore the action is neither vexatious nor an abuse of the court process.

The court awarded costs of GH¢1,000.00 against Republic Bank and in favour of HFC Bank.

HFC Bank is represented in this matter by Bentsi-Enchill, Letsa & Ankomah, and the Republic Bank is represented by Reindorf Chambers.