Power Of The Securities And Exchange Commission

CASE TITLE:                         FORTE OIL PLC v. FIDELITY FINANCE CO. LTD & ORS (2021) LPELR 55877 (CA)

JUDGMENT DATE:           7TH OCTOBER, 2021

JUSTICES:                            PETER OLABISI IGE, JCA

                                           DANLAMI ZAMA SENCHI, JCA

                                           KENNETH IKECHUKWU AMADI, JCA

COURT DIVISION:            ABUJA

PRACTICE AREA:              Company Law- Securities and Exchange Commission

FACTS

The 1st – 3^rd Respondents (Fidelity Finance Company Limited, Mr. Osa Osunde, Mr. Nosa Osunde) owned units of shares of the former African Petroleum (AP) PLC now Forte Oil PLC. Out of which they pledged 27,114,506 to secure a loan facility from Afribank Ltd which bank’s assets and liabilities were later taken over by AMCON.

The Appellant issued a Hybrid Public offer of shares in 2008 in which about N10 Billion Naira units worth of shares were allocated to the 1st – 3rd Respondents. Consequently, the 5th Respondent (Securities and Exchange Commission), in a letter, divested the 1st and 2nd Respondents of their holdings in AP PLC.

They were no longer existing shareholders, and ceased to be on the Board of the Company. Also, the 1st Respondent was ordered to refund the dividend collected plus accrued interest to AP PLC in respect of the shares allotted to it based on the 2008 offer. The 1st – 3rd Respondents took out a suit before the Federal High Court, Benin, against the Appellant and 5th Respondent, which case was struck out.

They appealed to the Court of Appeal. However, while the appeal was pending, the 1st – 3rd Respondents entered into negotiation, brokered by the 5th Respondent, upon which it was agreed that the 1st – 3rd Respondents shall pay the sum of N1,238,085,074.32 (One billion, two hundred and thirty eight million, eighty five thousand seventy four Naira, thirty two Kobo) in favor of Forte Oil and a penalty fee in the sum of (Five Million, Four Hundred and Seventy five Thousand Naira) in favor of 5th Respondent, whereupon 5,599,087 units of shares of Forte Oils held by the 1st – 3rd Respondents were divested at an agreed price in favor of the Appellant.

Thereafter, the 5th Respondent wrote a letter confirming that the 1st – 3rd Respondents have fully complied with the 5th Respondent’s directives and are thereby discharged of all liabilities therefrom. Upon recovery of the 27,114,506 units of Forte Oil shares used as security with Afribank Plc (in liquidation) from AMCON, the 1st – 3rd Respondents sought to recover the accrued dividends and bonus shares from the Appellant.

The Appellant refused on the ground that the said 27,114,506 units of AP shares were included in the 5th Respondent’s directive as it relates to divestment of shares held by them.

 On the other hand, the 1st – 3rd Respondents claimed that the said directives contained in Exhibit CW2 did not affect the said 27,114,506 units of AP shares, which shares were acquired from a secondary market prior to the Hybrid public offer of 2008. Also, that having been discharged from all liabilities by the 5th Respondent, they were entitled to the accrued dividends and bonus shares on those shares as claimed.

The 1st to 3rd Respondents therefore commenced an action at the Investment and Securities Tribunal, claiming sundry reliefs. Judgment was partly entered for the claimants/1st-3rd Respondents.

Dissatisfied, the Appellant appealed to the Court of Appeal.

ISSUES:

Among other issues, the following issues were considered for determination in the appeal:

1. Whether the Tribunal properly interpreted the true purport and intendment of the contents of Exhibits CW2 when it construed the sanctions conveyed in Exhibit CW2 as only affecting shares allotted to the 1st – 3rd Respondents from the Appellant’s 2008 public offer.

2. Whether having regard to the totality of the evidence adduced at trial, the Tribunal was right when it held that the out of Court settlement between the Appellant, 1st -3rd Respondents and the 5th Respondent compromised the 1st – 3rd Respondents original cause of action.

3. Whether having regard to the totality of the evidence adduced at trial, the Tribunal was right in holding that Exhibit CW11 which was issued by the 5th Respondent discharged the 1st – 3rd Respondents from further complying with the sanctions embodied in Exhibit CW2.

COUNSEL SUBMISSION

Learned Counsel for the Appellant submitted that when a Court is called upon to interpret a document, it is bound to invoke the recognized canons of interpretation with a view of ascertaining the intention of the maker of the document sought to be interpreted.

That in interpreting Exhibit CW2 which formed the crux of the dispute between the parties as issued by the 5th Respondent in its capacity as the capital market regulator, the document must be construed as at the time of its execution.

That the first sanction called for a divestment of the holdings of the 1st and 2nd Respondents in the Appellant Company as at the 7th December, 2010 and did not limit the scope of divestment and further directed the transfer of all such holdings to the existing shareholders of the Appellant.

That the second sanction required the 1st and 2nd Respondents to return the dividends and interest they wrongfully and or fraudulently collected as a result of their infraction of the rules pertaining to the Appellant’s 2008 public offer.

Counsel further submitted that the letter from the 5th Respondent did not discharge the 1st and 2nd Respondents from compliance with the sanction but only confirmed that the 1st – 3rd Respondents had complied with the 5th Respondent’s directive without the 5th Respondent knowing that 1st – 3rd Respondents had concealed the existence of 27,114,506 Units of AP PLC (now Forte Oil PLC) Shares which were pledged to a third party bank and which were a part of the holdings of the 1st to 2nd Respondents affected by the sanction  issued.

On the other hand, Learned Counsel to the 1st – 3rd Respondents argued that a reading of the contents of the 25th April, 2016 letter will show that the words used therein were clear and unambiguous, made without any qualifications, and remained unconditional and not subject to any present or future occurrence.

That where the words used in a document are clear and unambiguous, the literal rule of interpretation remains solely applicable in the construction of the same.

Counsel submitted that the 1st – 3rd Respondents were lawfully entitled to all and any accrued dividends, bonuses, benefits and/or corporate actions over and concerning the given number of shares in Forte Oil including but not limited to the 27,114,506, units of Forte Oil’s shares held in their respective names at all material times.

DECISION/HELD

In the final analysis, the Court of Appeal dismissed the appeal.

RATIOS

1. COMPANY LAW- SECURITIES AND EXCHANGE COMMISSION: Powers of SEC to impose penalties and determine when the penalties so imposed have been complied with; effect of exercise of such power-

“The power given to the 5th Respondent by the Investment and Securities Act 2007 to impose penalties on the flip side, includes the power to determine when the penalties so imposed have been fulfilled and or complied with. By Exhibit CW2 the 5th Respondent imposed penalties on the 1st – 3rd Respondents and by Exhibit CW11, the said 5th Respondent stated that the 1st – 3rd Respondents have fully complied with their directives and therefore discharged of any further liabilities under the penalty, both CW2 and CW11 were in writing and documentary in form, the Court has no further business in calling oral evidence to interpret them, the decision of the 5th Respondent in this case as contained in Exhibit CW2 and CW11 is final and cannot be questioned or altered by the Appellant.” Per AMADI, JCA

• COMPANY LAW- SECURITIES AND EXCHANGE COMMISSION: Whether SEC must obtain order of Court before freezing/declaring forfeiture of assets of persons whose assets were derived from the violation of the Investments and Securities Act/any securities law/regulation-

“I have to state it clearly, that the 5th Respondent (Securities and Exchange Commission) in virtue of Section 13(ii) the Investment and Securities Act 2007, has powers to levy fees and penalties and administrative costs of proceedings or other charges. However, it is required to “seek judicial order” to freeze the assets of any person whose assets were derived from the violation of the Act or any securities law or regulation under Section 13 (u) of the Investment and Securities Act 2007. The implication of the foregoing is that the 5th Respondent cannot without an order of Court declare forfeiture of the shares held by person in any company without a judicial order, to do so will certainly offend the right to proprietary interest in those shares as guaranteed in Section 44(1) of the Constitution of the Federal Republic of Nigeria as amended.” Per AMADI, JCA.

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