Rig Stock – Court Grants Permission for Fraud Claim against Transocean, Ernst & Young, Others
A Federal High Court in Lagos has granted the Chairman of Indigo Drilling, Prof. Fidelis Oditah permission to bring fraud claim against Transocean Limited, Ernst & Young, others.
In a judgment delivered in an application filed by Oditah, seeking the winding up of Transocean Limited, a multinational offshore drilling company, Justice M.S. Hassan held that the proceedings and supporting affidavit to Oditah’s originating summons and exhibits attached showed that there was a prima facie case that required the granting of leave for the commencement derivative action against the defendants.
The judge also agreed that permission applications are not intended to become mini-trials, nor are they supposed to involve any detailed or protracted consideration of the merits of the intended derivation proceedings.
He agreed with the submission of the counsel to the plaintiff that the requirements of Section 303 of the Companies and Allied Matters Act (CAMA) 1990 are satisfied in the present case.
Oditah had recently filed an application before the court for the winding up of Transocean Limited, a multinational offshore drilling company.
In his statement of claim, Oditah, also a Queen’s Counsel (QC) and Senior Advocate of Nigeria (SAN) told the court that in 2014, Transocean presented a prospectus for an equity private placement of US19.6million to investors.
In the petition which has Transocean Limited, Indigo Drilling Limited, Sedco Forex International Inc, Field Offshore Design Engineering Nigeria Limited and Ernest & Young Nigeria as 1st to 5th defendants respectively, the QC said the amount, which contained an initial financial model, anticipated that Indigo Drilling would generate a cumulated cash flow of at least $95million over a 10-year period.
He added that the prospectus also indicated that five contracts existing at the time of the placement which were entered into in 2011, were expected to generate a cash flow in excess of $43million over the first four years, thus significantly outperforming the base case financial model.
The professor of Law contended that the prospectus claimed that investing in Indigo Drilling was an opportunity for Nigerians to be involved in the oil and gas business in Nigeria and to profit from its potential rewards.
He said: “In marketing Indigo Drilling to the plaintiff, Transocean stated: Transocean is a leading international provider of offshore contract drilling for oil and gas wells. As evidence of its long term commitment to Nigeria, Transocean has set up Indigo Drilling Limited to be a Nigerian NCD compliant company established to ultimately operate all drilling contracts for Transocean in Nigeria…”
Oditah said on the basis of these representations, he acquired a 12.5 per cent shareholding for $4,375,000 in August 2014.
The senior advocate disclosed that another Nigerian shareholder, Chime Ibeneche, also in October 2013 acquired a 12.5 per cent shareholding in Indigo Drilling for $5million.
He said as a result of the acquisition of 25 per cent shareholding by Nigerian minority shareholders, Indigo Drilling was able to comply with the Local Content Law and bid competitively for work with the Nigerian regulatory authorities and got extensions of its existing contracts.
The Queen’s Counsel said the remaining 75 per cent shareholding was held indirectly by Transocean initially through its subsidiaries –Sedco Forex and Transocean Support Services Nigeria Limited.
He alleged that from 2015, Transocean parked 26 per cent of its shares in Indigo Drilling in a Nigerian nominee in order to deceive the Nigerian regulators into believing that Indigo Drilling was a Nigerian company under the Local Content law because Nigerians held 51 per cent shareholding.
According to him, while all these were going on, Transocean also controlled Indigo Drilling’s board of director, having appointed two of the three directors – himself, Olamide Abudu and Steve McFadin.
He further alleged that Transocean acted as if it were a sole director of the company and completely bypassed Indigo Drilling’s board of directors, subverted its corporate governance and systematically misappropriated and stole the company’s cash and other assets.
He further revealed that as the chairman of Indigo Drilling’s board of directors, he has no idea in which bank the company’s cash is kept, adding that Transocean and its officers fully control the operation of Indigo Drilling’s bank accounts and the flow of funds in and out of the account without any regards for proper corporate governance.
The senior advocate said no annual budgets were presented to Indigo Drilling’s board of directors for approval, instead Transocean set and altered the budgets to suit its own purposes and not the company’s
He also accused the company of other sundry shady deals.
However, Transocean has asked the court to strike out the suit for lack of jurisdiction.
Transocean Limited, through its counsel in their objection had argued that Oditah acted in bad faith.
They stated that plaintiff did not disclose any prima facie case in his application.
But the judge disagreed, saying: “I am of the humble view that the plaintiff had in the supporting affidavit of his originating summons and exhibits attached shows a prima facie case that requires the court to grant leave to commence derivation action.
“I also agree with him that permssion applications are not intended to become mini-trial, nor are they supposed to involve any detailed or protracted consideration of the merits of the intended derivative proceedings.”
Rig Stock – Court Grants Permission for Fraud Claim against Transocean, Ernst & Young, Others]
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