Court Orders FG to Pay Babalakin N54bn over Abandoned Federal Secretariat

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Wale Babalakin

Bennett Oghifo
The federal government has been ordered to pay Resort International Limited, a company owned by Dr. Wale Babalakin, a whopping N54 billion as damages in a landmark ruling delivered by an Arbitration Tribunal, THISDAY has gathered.

Ruling in favour of Resort International Ltd, in a formal award letter dated December 3, 2015, the tribunal, chaired by foremost Nigerian architect, Mr. Fred Adeniyi Coker, supported by a leading legal practitioner, Mr. Yusuf Alli (SAN), and a former Attorney General of the Federation, Alhaji Abdullahi Ibrahim (SAN), declared that the federal government had failed in its obligations to Babalakin’s company under the Development Lease Agreement (DLA) entered into by both parties when Resort acquired the old secretariat complex in Ikoyi, Lagos under the sale of federal government’s assets in the state.

Commenting on the landmark ruling, Gbolahan Gbadamosi, a lawyer and publicity secretary of the Nigerian Bar Association (NBA), described the award as, “the beginning of the end of impunity”.

The ruling signposts the climax of a long and acrimonious relationship between Babalakin, the federal government and the Lagos State Government.

Resort International was granted a lease by the federal government to develop the federal secretariat complex in Lagos into a residential property in 2006.

According to documents on the transaction, the DLA, dated October 10, 2006, granted Resort a 99-year lease to redevelop the disused Federal Secretariat complex, Ikoyi, into 480 luxury apartments.

Work had started on the site when the Lagos State Government suddenly stopped the redevelopment of the complex.
Resort claimed at the arbitration that it had suffered damages totalling N88 billion as a result of the breach of a clause of the DLA by the federal government.

It was gathered that no sooner had the company mobilised to site to begin work than the Lagos State Government reportedly mobilised dozens of riot policemen and street urchins, popularly known as “area boys”, and ordered work to stop indefinitely.

The order to stop work on the site, according to a source, was as a result of a series of actions initiated by an uncompromising Lagos government that many said constituted itself into a major impediment to the project.

The tribunal heard that following the Lagos government action, Babalakin was discredited by several banks and organisations as a result of the negative press which attended the failure of the project.

Real estate analysts, who spoke to THISDAY, were of the view that the federal government was hamstrung by the Lagos State government which once showed interest in acquiring the Federal Secretariat complex or had insisted at the time that it should be accorded the right of first refusal since the property is domiciled in the state.

Trouble was already brewing by the time the property was formally handed over to Babalakin’s Resort International in December 2006.

By 2007, speculation was rife about “political intrigues” plaguing the project. The Oba of Lagos, Alhaji Rilwan Akiolu, fired an early salvo, accusing the Olusegun Obasanjo government of selling the complex to so-called powerful interests instead of the state goverrment, a claim denied by Resort International.

The company’s then executive director, Dr. Niyi Odunlami, later responded to the allegation by asserting that “we won the bid through due process”.

At the time, Oba Akiolu said he had assembled a powerful group of traditional rulers and prominent Lagos citizens to lobby Obasanjo’s successor, President Umaru Musa Yar’Adua, with a view to stopping the project.

Many believe the Lagos State Government mounted hurdles on the path of the project by making insurmountable demands, including the requirement that Resort International as leaseholder must obtain a fresh Certificate of Ownership (C of O) from the state government, irrespective of the documents issued by the federal government on the property.

Among other demands, the company was also required to apply for the consent of the Lagos governor on the property leased to them; apply for a change of use, as well as a development permit from the state government.

According to Odunlami, “The state is demanding between 15 and 50 per cent of the cost of properties from buyers as an additional condition before work can commence. If the buyers should get C of Os from the Lagos State government, it means they are compromising the properties, because the properties already have valid title documents.”

It was gathered that despite all entreaties, the state government did not budge and refused to grant the “No-Objection Approval” required under Clause IV of the DLA. Eventually, the federal government’s inability to secure the No-Objection Approval ultimately proved fatal to the project.

To further frustrate and invalidate the transaction, Lagos State officials reportedly vowed not to consider applications for planning permits or other processes related to projects such as the Federal Secretariat, including those for other redevelopment.

The state government’s inflexible stance caused a past president of the Nigerian Institute of Town Planners (NITP), Dr. Olubunmi Ajayi, to accuse it of putting unnecessary hurdles in the way of leaseholders and investors. He further stated that it was wrong to require owners to obtain fresh title documents.

Speaking on the dispute at last year’s Nigerian Economic Summit in Abuja, Babalakin blamed “the failure of the federal government to fulfill its obligations under the DLA by facilitating all requisite approvals, particularly a No-Objection Approval to the change of use of the demised premises from offices to residential apartments from the Lagos State government.

“The project was stalled for this reason despite the huge sums of money invested on the project by Resort and more importantly, despite the huge debt incurred by Resort from commercial banks, investors and subscribers”.

The tribunal heard that the fundamental terms of the DLA were: “The federal government had ‘good title’ to the complex and full power and legal authority to enter into the agreement; and as a pre-condition enunciated in the DLA, would facilitate the procurement of a No-Objection Approval from Lagos State government.”

Resort claimed that the federal government’s failure to fulfill its obligation to assert ownership, to deliver vacant possession and to facilitate the obtaining of a No-Objection Approval from Lagos State government adversely affected the company and put it in a precarious position owing to financial obligations to lenders that it was unable to fulfill.

The company therefore claimed direct expenses, the loss of profit and damages against the federal government to the tune of N88,070,917,933.00. It additionally claimed interest on direct expenditure as well as on the expected profits at the rate of 17.26 per cent.

However, the federal government claimed in its defence that the undertaking to facilitate a No-Objection Approval amounted to no more than an obligation to produce documents in support of Resort’s application to the Lagos State Government.

It also argued that the subsequent promulgation of the Lagos State Model City Development Authority Law was in effect a “frustration” of such contracts.

It explained that the new law effectively sounded the death knell for the Federal Secretarial and other such projects, adding that the law, enacted in 2009, provides that “government institutional offices within a Model City Area shall continue to be used for the public purpose for which the offices were developed and no alteration of use shall be allowed”.

In its deliberations, the tribunal considered the issues arising for determination in the dispute to be: whether the federal government fulfilled its obligations under the DLA; whether the defence of “frustration” was available to federal government as respondent; and whether Resort was entitled to reliefs as set out in its claim lodged in 2014.

The arbitration panel ruled in favour of Babalakin’s company on all three issues presented for determination.

“The claimant proceeded on the strength of these covenants to commence work on the demised premises, only to be stopped by the Lagos State government on the grounds that the land belonged to it and not the respondent,” the tribunal observed.

It also stated that “the inability of the respondent to resolve the dispute between itself and the Lagos State government over the demised premises revealed a defect in title, which is a clear breach of the covenant as to good title”.

  • Omooba

    N54billion as damages is most unreasonable by a tribunal that has no locus standi in our legal system and therefore un-enforceable. It’s sounds comic. All that is required of Wale is to seek for refund from the FGN. Chikenna!!!

    • austin

      Damages would include the cost of purchase, the monies spent on mobilizing to site, cost of funds till date etc. I do not think that there are punitive damages included. However, the big question is: “How would they enforce payment?” Shebi na Buhari dem wan go collect the money from?

    • Toby

      MTN was fined over one trillion naira. This is just 54 billion naira. The government can pay from the MTN’S payment and still have good change left.

    • D’analyst

      Its not that simple, their plans have been totally chattered, do you realise how many years have gone by and the alternative areas they could have invested this huge fund.Imagine the burden of servicing the already borrowed funds since 2006

      • EzekielIwa

        You are spot on

        • Matts

          Logistics, mobilizations, materials, human resources, security etc are parts of any real construction of such magnitude and these alone in monetary terms mean over N100M in high profile areas as Ikoyi, Lagos. Imagine the load of cements, loads of soils, Iron and the other materials that the firm must have bought but left to rot due to so called hostility of the clueless government.
          You need to understand the intricacies of such a DLA project, with a good sense of what the real estate industry entails here in Lagos before you can really make any informed contributions to the piece above.
          Moreover, in fairness to the firm, it deserves to be compensated.

      • Isreal Bethel

        Babalakin has not invested up to N100M on the project talk less of a billion Naira and unfortunate no detail of what the N54Billion cover. The judgement is ridiculous.

    • 9jaRealist

      Where did you get your law “degree”? Oluwole University?! LOL!
      Bro, arbitration is one of the oldest and most widely-recognized ADR mechanisms in our legal system. In this case, it would appear that the LDA obviously provided for dispute resolution by arbitration and if it the customary provision used in most commercial contracts it would provide that the award be “final and binding” on all parties. In other words, the FG has contractually binded itself to be bound by any arbitral award (and obviously by appearing before the arbitration panel, the FG did submit itself to the authority of the panel to resolve this dispute). Accordingly, all that Resort International needs to do now is to file the arbitral award before the law courts which would enter the award as a final and binding JUDGMENT of the court. But then again this present FG has already shown a propensity to disobey court orders that it does not like, so let’s wait and watch.

      • Omooba

        Please my lord SAN, don’t be offended over my ignorance. Iam not learned but only educated.

        • 9jaRealist

          LOL! Bro, education is a continuous life-long process. We all live and learn everyday. Much regards.

  • Nigeria4u

    N54 Billion is too small, our Federal government is not serious, they abuse the too much powers they have for their selfish gains. Many similar court judgements will come up soon because of Federal government foooolishness.

    • ‘ned

      I guess what you read in this article was that the FGN was at fault and sincerely refused implement the agreement? You did not read that it was the LASG that frustrated it?

      People many times read what is in their mind and not the report before them. Is that wisdom or foolishness?

  • okinba launko

    banana judgement from a kangaroo panel. Why should the FG bear the cost of an act by the Lagos state govt. Another legal shenanigan by Babalakin making the law more of an ass. Please go and pay your debt, when you were using connection to acquire all FG properties without even a kobo in your leaky pockets you didn’t know you’d have t pay for them abi. Yeye dey smell, award ko.. reward ni. come and collect it now ole people..

    • 9jaRealist

      The contract was between the FG and Resort. There’s no privity between the LASG and Resort, and therefore no obligation on the LASG’s part. On the other hand, the FG assumed several obligations under the LDA contract and having apparently failed to fulfill those contractual obligations should rightly be held responsible for any consequential damages/losses arising from its failure. If the FG’s contention is that it failed to meet its obligations because of the actions of the LASG, it should in turn sue the LASG.

      • okinba launko

        whilst I agree with you on the fact that one who is not party to a contract cannot be in breach of the contract, it is useful to point out that contract interference is an actionable tort; and if, as is so clearly pointed out by these eminent awarders, it is true that the Lagos state government not only interfered with but actually frustrated the contract, why won’t they advise Babalakin to seek legal redress rather than granting tenuous reliefs that have as much chance of success as the early morning mist under the hot African sunshine. The answer, one can logically assume, is that their interest is beyond the resolution of the dispute, rather they are more interested in judicial advocacy and juristic legislation

        • 9jaRealist

          Point well taken.

          However, are you implying that as legal counsel you would actually rather advise your client to forego the relatively quick and binding arbitration process in a basic breach of contract claim against a contract counterparty and instead pursue an uncertain and relatively speculative tortious claim against a third party that is likely (given the speed of the Nigerian court process) to last for several years?

          Furthermore, if you believe that the enforcement of an award against the FG (pursuant to an arbitrary process that the FG fully submitted to and actively participated in) has about “as much chance of success as the early morning mist under the hot African sunshine”, would you be kind enough to rate the chances of collecting against a state government after years (possibly decades) of litigation?

          • Austin Fash

            I concur with your argument and submission. Because the LASG ought to have been consulted and involved in the negotiations leading to the execution of the lease agreement, they clearly hold the ace in this matter. No doubt the FG is in breach of contract. However, Resort also has to take responsibility because there is contributory negligence. Their lawyers ought to have paid attention to the provisions of the Land Use Act, 1978 and advised their client to seek at least the tacit approval of LASG to the whole deal. Having failed to do that, though Resort is entitled to damages and compensation, that in my opinion, will be greatly effected by the error of their lawyers.

    • morire2015

      Since you dislike the word ‘award’, ‘reward’ is also a good term…lol. It seems to me that the agreement was between the FG and Resort International. So the FG ought to have cautioned the Lagos State Govt because everything still converges on the table of the two people involved in the agreement. Since FG refused to caution the Lagos State Govt, seems to me that the FG has to bear the entire brunt of it all.

      • aladeadekunleoluwaadeshinaola

        Lagos wanted Resort to pay what it legally should collect and they refused to pay, 1004 was also having the same issue but they paid and the State allowed them to carry on but in their own case, they refused. The Title the building had was for Government use but now it is being reverted to private use.

  • DanOD

    Okinba, you have displayed your ignorance of the law, and the provisions of the agreement Babalakin entered into with the Federal Government over the Federal Secretariat because you wanted to be delibrately mischevious and throw abusive words. Why not sit down, look at the agreement and the judgement of the Arbitration Panel and digest their contents before you started showing your crass ignorance? You are simply ridiculing yourself with this kind of primitive and bellyaching reaction.

  • DanOD

    It was a fantastic judgement by a group of learned people. Before the FG entered into an agreement with Resort International limited owned by Babalakin, it ought to have carried the Lagos State Government along to avoid this kind of embarrassing situation. I hope lessons have been learnt here.

  • jude

    The judgement was rightly served to protect the overall interest of real estate investments/ industry and safeguards job creations.

  • Daniel

    The development arising from this long abandoned federal secretariat is, to say the
    least, worrisome. It no doubt portends grave danger to prospective investors.
    Why would FG entered into an agreement and mid-way, turned around to disobey or
    act contrary to the letter of same agreement? This is clearly a
    scourge that must be expunged from our system, if anything meaningful is to be
    achieved.

  • Matts

    In Nigeria, there is a horrible trend of business being at the mercy of government with intelligence quotient and anyone who decided to play the game in a different way would be castigated. If the Government at every level continues to default in their agreement on investment projects in the country to gratify polished but avaricious interest, the result would continue to be the case of a penny wise. And of course, the overall adverse effect would tell on our GDP as a country. My candid appeal goes to our Government to make hay while the sun shines.

  • vic

    THE JUDGE HAS BEEN CLEARLY BRIBED HERE FOR THE JUDGEMENT IN FAVOUR OF THE PLAINTIFF IN ANTICIPATION OF LARGE WINDFALL FROM THE FEDERAL GOVERNMENT BUT THE COMPANY WILL NOT SUCCEED IN ITS MISADVENTURE.

  • Bex Chukwuma Akwsda

    Past President Olusegun Obasanjo should take full responsibility for most of the failure of this transaction, ad the Lagos State Govt, being in controversy with the Federal Govt of Obasanjo on this and other matters, refused to cooperate. Many other projects initiated at the time of Obasanjo as President and involving the same people involved in the Fed Secretariat logjam are also mired in controversy. The Lagos/Ibadan expressway is another.
    These monster projects,& the controversies trailing them need very High Powered Probing. Our Anti Corruption President needs to step in.