By Stephen Kwabena Effah
December 22, 2011
The legal action brought against the STX Korean partners to disengage them from taking part in the execution of the STX housing project was yesterday dismissed by the Accra Commercial Court on technical and procedural grounds.
The court described the action as “incompetent in law” and a waste of the court’s time, and accordingly awarded a cost of GH¢3,000 against the Ghanaian partner, B.K. Asamoah who initiated the action.
The parties had on November 15, informed the court that they had agreed to negotiate to resolve the shareholding impasse which had resulted in the legal tussle to pave the way for commencement of the project.
However, the court which was expected to hear and adopt the terms of the settlement was informed yesterday that the proposed negotiations between Mr. Asamoah and his Korean partners, STX Korea, had broken down.
Sources close to the Korean partners told the Times after court proceedings that they did not agree with the terms which were drafted and sent to them in Korea to assent.
The court presided over by Justice (Mrs.) Gertrude Torkornoo therefore compelled the Ghanaian partner to move his application which sought a declaration that by the Korean partners’ failure to comply with the country’s investment statute, they cannot be shareholders in STX Ghana to operate in Ghana.
Moving the application, counsel for the Ghanaian counterparts, Carl Adongo, argued that STX Korea ought not to be allowed to operate in Ghana because they have failed to satisfy the requirements under the Ghana Investment Promotion Council Act.
According to him, STX Korea failed to pay its equity contribution in STX Ghana as required under the law, pointing out that the about 10,000-dollar wired to STX Ghana through the Bank of Ghana was a loan granted the Ghanaian partner.
He showed the court e-mail communication in which the Koreans demanded full repayment of the amount.
“Indeed, it is a loan…it cant be said to be an investment,” he said, and added that even if the amount was indeed their equity contribution, they could not turn round to demand repayment with interest.
He said by their action, the Korean partners have breached the investment statute which cannot be compromised and asked the court to declare them non shareholders in STX Ghana.
However, counsel for the Koreans, Mr. Osarfo Buabeng opposed the application on procedural grounds.
According to him, the Ghanaian partner did not follow the right procedure in instituting the legal action against his client saying that since the applicant is challenging the investment in STX Ghana, he cannot initiate the action under Section 21(7) of the Companies Act.
He contended that the applicant ought to have caused the action to be initiated with a writ instead of the originating motion and therefore asked the court to dismiss it.
Upholding the submission by Mr. Buabeng, Justice Torkornoo chastised Mr. Adongo for using unpalatable words in his pleadings, and not taking a cue from the court’s advice on the technical aspect when his attention was indirectly drawn to it.
The action which was commenced on September 27 is against STX Engineering & Construction, STX Construction Co. Ltd and eight other Koreans appointed by the latter to represent them on the former as directors.
The Ghanaian partner claimed that the Korean counterparts breached their obligations under the Joint Venture Agreement by woefully failing to provide all the technical, engineering and construction expertise required for the project, aside its failure to arrange for finances.
In the motion, the applicant contended that the Korean partners on May 6, 2011 wrote a letter to terminate the Joint Venture Agreement of November 15, 2009 and the heads of agreement between the two partners which it duly accepted.
It said having accepted STX Construction Company Limited’s “unilateral decision” terminating the agreements, it has since ceased to be a partner of the STX Engineering and Construction Ghana Limited, which is to execute construction of 200,000 houses.
By the action of STX Construction, the applicant argued that it has “no right of representation on STX E&C Ghana Limited’s board”.
It claimed that the Korean partners’ breach completely prejudiced the success of the project in that it contravened its statutory obligation to make the appropriate investment by way of direct equity contribution as a partner to the project in terms of its obligation as a foreign investor.
The applicant therefore sought among other reliefs, a declaration that by terminating the Joint Venture Agreement and Heads of Agreement, the respondents have renounced their membership of STX E&C
It is further sought an order of injunction restraining STX Construction Co. Ltd as well as its seven directors from holding itself out and or purporting to act or discharge functions as shareholders of STX E&C.
Opposing the claims, the Korean partners indicated that STX Construction Limited still remains a member of the STX E&C an that all its appointees to the board of STX E&C have acted legally and lawfully at all material times.They said, STX Construction Co. Ltd has paid fully for its 15,000 shares in STX E&C and remitted to Ghana a total of 1,009,964 dollars of which 15,819.21 dollars has been converted to cedis and credited to STX E&C account as its equity contribution.
Again, the respondents claim that STX Construction Co. Ltd has not executed any transfer of its shares, neither have the shares been affected by any law or statute,.
Besides they contended that the Joint Venture Agreement between STX E&C and STX Construction Co. Ltd was merely transitional and was to operate for only six months.