First Bank in N266 million Judgement Saga …Appeal Court Fixes October 12 for Hearing

An appeal court sitting in Lagos south west Nigeria has fixed 12th of October,2021for the hearing of an appeal filed by First bank of Nigeria against a judgement delivered by a Federal high court in Lagos ordering the bank to pay a human rights lawyer Olisa Agbakoba a customer of the bank the sum of N266,368,454.85,as general damages for mismanaging the lawyer's share portfolio investment account. First bank is also waiting for a date to be fixed for hearing of its appeal against another Federal high court judgement of N13millon obtained by one of its customers Abolade Bode,who reside in Nigeria, but alleged that a fraud was perpetrated on his account as his account was debited for shopping in London and flight ticket bought in far away Budapest in Hungary In the case of Olisa Agbakoba SAN as filed before a Federal high court in Lagos, the senior lawyer in his claim stated that as a result of bankers/customer relationship between him and the bank; sometime in 2008, the bank introduced its margin trading facility to him, which he accepted.

He said First Bank explained to him that the bank’s customers were to purchase shares with the advanced margin trading facility and pledge the shares to the bank.

The bank, for a management fee, was to professionally manage the advanced facility by selecting the broker and securities for the facility

He said the bank would also prepare all the paper work 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 left the bank’s exposure uncovered.

Consequently, the bank requested and encouraged him as a customer to take the margin loan contract.

On the strength of assurance, the plaintiffs applied for a margin trading facility of N200 million with the plaintiff and the bank opening a joint special reserve lien account with the Central Securities Clearing System (CSCS), whereby First Bank Limited was the sole signatory to the lien

According to Agbakoba, the bank claimed to possess the requisite knowledge, skills and expertise to seamlessly manage the investment in a win-win situation under terms and conditions that limited the exposure of the customers who were to rely on the expertise of the bank to manage the investment

The plaintiff said he also provided shares worth N60 million as his own contribution in line with the margin trading facility agreement.

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 the duty to sell the shares and apply the value of the shares appreciate to cover the required margin.

However, Agbakoba averred that the bank did not take reasonable care to ensure the performance of the contract and observe compliance with all terms and conditions of their agreement in relation to the transaction as 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 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.

In a particular of the fraudulent inducement, First Bank 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 principal sum of N200 million was completely lost, the plaintiff paid a total sum of N250,434,639.13 in liquidation of the margin loan account excluding interest and other charges.

It was disclosed that the plaintiff’s 30 percent equity contribution valued at N60 million was completely lost and 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. However in its statement of defence First Bank, while denying almost the claims of Mr Agbakoba SAN, contended that it is 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) and the speculative nature of the price of the stocks traded thereon and voluntarily assumed the business risks involved therein by applying for the loan from the bank and applying for the loan proceeds to buy shares, thereon the bank has never been the plaintiff’s investment manager.

The bank’s obligations were limited to the administrative of the facility itself, not the shares. 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.

The bank was never a “joint venture” participant in the shares investment business undertaken by the plaintiff with the facility proceeds.

The bank’s role in the facility transaction was that of a lender and not that of a co-investor or asset manager.

Consequently, the bank denied that it acted in breach of contract or breach of any legal duty, therefore the plaintiff is not entitled to any sum as the plaintiff’s claims against the bank are vexations and without merit and should be dismissed with substantial costs.

In his judgment, Justice Muslim Hassan held that, “I am in agreement with the submission of learned counsel for the plaintiff that the bank 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.

“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 . However,inanother judgement delivered by a Federal high court Judge,Hadzat Shagari, that indicted First bank,the bank is also seeking the order of the appellate court to overturn the said judgement.

The customer, named Abolade Bode resides in Nigeria, but alleged that a fraud was perpetrated as his account was debited for shopping in London and flight tickets bought in far away Budapest in Hungary while in Nigeria.

After a titanic legal battle that started sometime in 2013,the presiding Judge Shagari in her judgement declared the claim of the plaintiff succeeds and awarded N13million against First bank Plc in favour of the plaintiff.

Abolade, who is seeking redress against the bank, joined MasterCard West Africa Limited as co –defendant in the litigation.

In a statement of claim filed before the court, on his behalf by a Lagos-based lawyer, Barrister Ganiyu Bello, the customer averred that he maintains a current account with First Bank of Nigeria which he has been operating since 2006 directly by cheques and with the MasterCard procured from the bank after due payment which he uses electronically through Automated Teller Machines (ATMs).

With the card bearing the MasterCard Trade Mark and produced by MasterCard West Africa Limited, it’s advertised to be internationally acceptable and acknowledged and therefore projected to have high technological protection, hence the plaintiff’s confidence in using the MasterCard.

However, Mr Abolade alleged that on 17th August, 2012, he discovered that his account with First Bank was fraudulently debited with sum of N750,509.77 arising from unknown and unauthorized transactions. He promptly complained via voice call and as well by e-mail, with his complaint acknowledged.

Thereafter, he physically visited the head office of the bank at Marina, Lagos State on several occasions and he was told that the matter was under investigation.

In its letter dated 5th September, 2012, First Bank denied liability, forcing to write the Central Bank of Nigeria on the issue. In its response on September 27, 2012, the CBN directed First bank to review his complaint and respond within 72hours

While awaiting First Bank’s response, the plaintiff made a formal complaint to MasterCard West Africa on September 10, 2012, with MasterCard advising him to apply for the payment of provisional credit to his account within 60days in its response.

In accordance with the advice, he requested for provisional credit to be placed on his account to the bank on September 11, 2012 but the bank did not respond to the request.

Pursuant to CBN’s directives, First Bank made available details of the unauthorized transactions on his account, a copy of which was sent to him as follows: (a) Online transaction receipt for 3 internet purchases of auto parts made by Mr Manuel Caser of 22 Greengate street London and third from Digital and (b) Two Air Tickets purchased on Wizz Air in Budapest showing Passengers’ names Gamote Iordam and Alina Claudia Duma respectively

Despite Abolade making it clear he does not know any of these persons, neither did he authorize the transactions, the bank neglected to demand from the merchants Turner Shop and Wizz Air or their banks the sum of N750,509.77 arising from the unlawful transactions on his account within 60days of occurrence as per the charge process and as advised by MasterCard.

He also declared that there was never a time the details of his MasterCard, which is always in his possession, disclosed to anyone, and in the circumstances of this matter, First bank is liable for the online fraud committed on his account because it arose from card skimming and/or counterfeiting.

He contended further that the online fraud committed on his account was not due to his negligence but by means of other compromises of the defendants’ security because the information required for online transactions are open and accessible only to the staff of First bank who handed over the MasterCard to him at the inception as well as the staff of MasterCard who had the custody of the card before issuance.

He stated further that the loss of his N750,509.77 from his account has put him under serious financial strains and stress so much so that he could not carry out important projects already lined up for execution. Mr Abolade added that his account, which has been debit frozen since August 2012 to avoid further complications, has constrained him access to his funds in the account and therefore cannot transact any other businesses in the cashless environment of Lagos state.

The bank, in spite of several demands, failed to reimburse him and in consequence, he is claiming from the defendants jointly and severally for the reimbursement of N750,509.77 and N10million damages respectively plus interest at the rate of 21% per annum with effect from August 17, 2012 until entire sum is fully paid.

However, in its amended statement of defence filed by Novolex Solicitors, First Bank, while describing the plaintiff‘s suit as speculative, vexatious and an abuse of judicial process, urged the court to dismiss same with substantial cost on the ground that the reported transactions in this instance showed that the plaintiff’s card was used to order auto parts in United Kingdom and to pay for airline tickets. These transactions could not have been possible without at least the initiator or enabler knowing the number and other details, thus buttressing the fact that the plaintiff must have compromised his security information.

First Bank also stated that as a precautionary measure to prevent further dissipation of the funds therein and to enable the bank carry out full investigation into the complainant’s withdrawals, another account was opened for the plaintiff to enable him to continue his normal banking transactions. In her Judgement,Justice Shagari said: “On critical examination of the facts and circumstance of this case, First bank has not done due diligence to the complaint of the plaintiff in providing the plaintiff and this court with details investigation of the online fraud carried out on the plaintiff account.

“On the whole, the plaintiff has proved his case on preponderance of evidence while the burden of proof has now shifted to First bank, as the bank did not provide sufficient investigation report to the online fraudulent transaction on the plaintiff account they relied on card holder clause and shifted the liability on the plaintiff,but strict to sense First bank is liable to the Plaintiff’s claim I so hold.

“Consequently the claim of the Plaintiff succeed and relief sought are granted on the second claim of N10million as compensation, I also award a compensation of N3million against First bank as contained in the relief. The plaintiff’s claim succeeds”.

The appeal filed by first bank in these two cases are awaiting hearing.