COURT ORDERS FIRST BANK OF NIGERIA PLC TO PAY OLISA AGBAKOBA N271.3 MILLION FOR BREACH OF CONTRACT

IKOYI, Lagos, Nigeria – A Federal High Court sitting in Ikoyi, Lagos has ordered First Bank of Nigeria Plc to pay Chief Olisa Agbakoba(SAN), a total sum of 271,368,454.85 million in general damages for mismanaging his share portfolio investment account. Lawyer to the plaintiff, Mr. Babatunde Ogungbamila had filed a claim wherein he alleged that First Bank of Nigeria Plc, sometimes in 2008 introduced margin trading facility to him with instruction that customers were to purchase shares with advanced margin trading facility and that he pledge the shares to the bank for a management fee.

First Bank of Nigeria was to manage the facility by selecting preferred broker and securities. The bank would also prepare all the paperwork needed, provide information about the funds’ holdings and performances and reserved the power to exit should the fund diminish to a threshold that could impair the economic underpinnings of the investment and leave the bank’s exposure uncovered.

He averred that First Bank of Nigeria Plc claimed to possess the requisite knowledge, skills and expertise to seamlessly manage the investment in a win-win situation under terms and conditions that limits exposure of the customers who were to rely on the expertise of the bank to manage the investment.

Babatunde Ogungbamila further posited that based on the strength of assurance, the plaintiff applied for a margin trading facility of N200 million and opened a Joint Special Lien Account with the Central Securities Clearing System (CSCS), whereby First Bank of Nigeria was alleged to be the sole signatory to the lien account.

According to the lawyer, the plaintiff also provided shares worth N60 million as his own contribution in line with the margin trading facility agreement.

The lawyer noted that it was fundamental to the margin loan agreement that if the plaintiff was unable to regularize the account within 5 days following the margin call, the bank has a duty to sell the shares and apply the value of the shares to cover the required margin.

The plaintiff noted that First Bank Nigeria Plc failed to take reasonable care to ensure performance of the contract and observe compliance with all terms and conditions of their agreement in relation to the transaction. He averred that the bank failed to monitor the stock market and advise the plaintiff accordingly as it was obliged by the margin loan agreement; while the value of the shares continued on a steady decline, the plaintiff was utterly left in the dark regarding the value of the share portfolio in spite of repeated demands by the plaintiff for information from the bank.

According to the complainant, First Bank of Nigeria Plc held itself out as possessing the requisite knowledge, skills and expertise to seamlessly manage the investment in a win-win situation while offering the plaintiff the product, consequently the breach of the margin trading facility agreement, fraudulent misrepresentations and mismanagement of the plaintiff’s account by the bank occasioned huge loses to the plaintiff.

The plaintiff noted that the principal sum of N200 million was completely lost and that the plaintiff paid a total sum of N250,434,639.13 in liquidation of the margin loan account excluding interest and other charges.

He averred that the plaintiff’s 30 percent equity contribution valued at N60 million was completely lost and that N40 million out of this would have been saved if the shares were sold at the second trigger point, N768,454,85 cost of cancellation of transfer of the debt to AMCON.

While testifying before the court, Agbakoba tendered 22 exhibits. In his statement of defence, Professor G. Elias (SAN), in behalf of First Bank Nigeria Plc denied the claim, adding that the bank was not in any way liable to the plaintiff either in contract or tort as the plaintiff was aware of the volatility of the operations of the Nigerian Stock Exchange (NSE).

Elias told the court that the bank has never been the plaintiff’s investment manager. Besides, he argued that the bank’s obligations were limited to the administrative facility itself and not the shares and that the said administration involved the bank taking steps to ensure payments of the principal sum and the interest and monitoring movements on the bank’s lien account not share account by debiting and crediting relevant accounts towards repayment of the facility.

Elias argued that First Bank of Nigeria was never a “joint venture” participant in the shares investment business undertaken by the plaintiff with the facility proceeds. He argued that the bank’s role in the facility transaction was that of a lender and not that of a co-investor or asset manager and therefore did not act in breach of contract or breach of any legal duty and consequently, the plaintiff is not entitled to any sum.

He noted that the plaintiff’s claims against First Bank Nigeria Plc are vexations and without merit and should be dismissed with substantial costs. In his judgment, Justice Muslim Hassan held that he is in agreement with the submission of learned counsel for the plaintiff that First Bank of Nigeria failed to honour its contractual obligation as contained in the margin loan agreement and as a result the plaintiff suffered damages.

“The position of the defendant is akin to a situation where a party to a contract in the absence of any agreement to the contrary takes a benefit of a contract and refuses to accept liability as a result of his inaction or negligence, no court in Nigeria would allow that. From the foregoing, I hold that the plaintiff has proved his case against the defendant. I hereby make the following orders.

“An order is made against the bank for the payment of N20 million as general damages against the bank for mismanagement of the plaintiffs share portfolio investment. An order is made against First Bank for the payment of the sum of N200 million principal sum lost by the plaintiff as a result of the bank’s breach.

“An order is made against the bank for the payment of the sum of N40 million to the plaintiff which would have been saved out of the plaintiff equity contributions were the shares sold at the second trigger point.

An order is made against the bank for the payment of the sum N768,454,85 to the plaintiff being the cost of cancellation of transfer of the debt to AMCON. An order is made against the defendant for the payment of the sum of N5.6 million for loss of dividend that accrued from plaintiffs Diamond Bank shares in April 2008.

“Payment of the sum of N5 million as a cost of this action is refused as the plaintiff failed to prove how he arrived at that figure, more so the plaintiff cannot transfer his legal fees to the bank. An order for the payment of interest on the judgment sums awarded against the bank in favour of the plaintiffs from the date of judgement at the rate of 17 percent per annum until judgment sums are paid.”