Bank to pay N4.5b for breach of contract

A Federal High Court, Lagos has ordered Stanbic IBTC Bank Plc to pay a former Group Managing Director of Afribank Nigeria Plc, Patrick Olayele Akinkuotu and his company, Longterm Global Capital Limited, the sum of N4.5 billion for breach of contract.

The trial judge, John Tsoho, also ordered Stanbic IBTC and the second defendant in the case, Starcomms Plc, to pay interest of 10 percent on the sum per annum until the date of final liquidation.
The court also declared that the 100 million units of Starcomms’ shares sold to the plaintiffs through private placement in 2008 were improper, invalid, null and void.

Akinkuotu and his company had dragged the bank and Starcomms before the court in 2012, alleging that the Stanbic IBTC deliberately misled them into buying shares of the second defendant by misrepresenting facts and issuing false documents.

Other plaintiffs in the suit are Mrs. Oluyinka Akinkuotu and Lakeside Mews Limited.
According to the suit, which was filed by the plaintiffs’ counsel, Chief Felix Fagbohungbe (SAN), in April 2008, the bank, through one of its officers, Akintayo Mabeweji, proposed to sell shares of Starcomms to the plaintiffs by way of private placement.

He said: “The bank gave the plaintiffs an Investment Letter dated April 24, 2008 bearing the names of Stanbic IBTC and another company, Chapel Hill Advisory Partners Limited, as Joint Issuing Houses and that the Investment Letter and the Form of Commitment were represented by the bank as the only placement documents which target or prospective investors were expected to rely on before they made their unfettered independent investment decisions in respect of the placement.

“Based on these, each of the plaintiffs was committed to purchase 25, 000, 000 units of Starcomms shares and promptly complied with the instructions of the bank.

“On July 24, 2012 the plaintiffs received two separate investigation letter from the Securities and Exchange Commission (SEC) which raised several issues in respect of the private placement, and upon enquiries, the plaintiffs discovered that the authentic and final document prepared and submitted to the SEC by the defendants was a Private Placement Memorandum dated May 5, 2005 and not the one given to them.”

The plaintiffs averred that they were actually induced and misled by the representation which were deliberately made by Stanbic IBTC Bank Plc which made them to apply and pay for Starcomms shares.

In its defence, the bank challenged the jurisdiction of the court to entertain the suit and that it should be dismissed because it was frivolous and vexatious.

The bank argued that it did not conceal any material information in order to induce the plaintiffs to offer to participate in the private placement. The bank also stated that the plaintiffs never asked for the Private Placement Memorandum or any information relating to the business management and financial position of the second defendant.

Justice Tsoho, however, agreed with the plaintiffs that the defendants deliberately concealed useful information which may have assisted the plaintiffs to reach a more informed decision. He therefore declared that the plaintiffs were legally entitled to rescind the four Forms of Commitment for 100 million units of Starcomms’ shares which were subsequently manipulated by Stanbic IBTC Bank and were improperly and unlawfully treated as three valid applications for subscriptions and purchases under the private placement exercise.