THE Federal Government has been ordered to pay N54 billion in damages to Dr. Wale Babalakin’s Resort International Limited, in a decision handed down by an Arbitration Tribunal in December 2015.
The arbitral award comes against the backdrop of a lease granted Babalakin’s company to develop the federal secretariat complex in Lagos into residential properties before it was controversially stalled. The Lagos State Government stopped work on the site in September 2007.
The tribunal heard that Babalakin “was discredited by several banks and organisations as a result of the negative press which occurred due to the failure of the project.”
Findings in favour of Resort in a formal award dated December 3, 2015, the tribunal, chaired by Fred Adeniyi Coker, supported by Mr. Yusuf Alli (SAN) and 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.
Gbolahan Gbadamosi, lawyer and publicity secretary of the Nigerian Bar Association (NBA), said of the award: “This is the beginning of the end of impunity.”
The DLA, dated October 10, 2006, granted Resort a 99 years’ lease to re-develop the disused federal secretarial complex in Ikoyi, into 480 luxury apartments. Work had started on the site when the Lagos State Government stopped the redevelopment of the complex. Resort claimed at Arbitration that it had suffered damages totalling N88 billion due to the breach of a clause of the DLA by Federal Government.
The tribunal heard that the fundamental terms of the DLA were that: federal government had ‘good title’ to the complex and full power and legal authority to enter into the agreement; and as a condition of the DLA would facilitate a ‘No-Objection Approval’ from Lagos state government.
Resort also claimed that the federal government’s failure to fulfil 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 due to financial obligations to lenders that it was unable to fulfil. The company claimed direct expenses, loss of profit and damages against federal government to the tune of N88,070,917,933.00. It additionally claimed interest on the direct expenditure as well as on the expected profit at the rate of 17.26 percent. 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. The federal government also argued that the subsequent promulgation of the Lagos State Model City Development Authority Law was in effect a ‘frustration’ of contract.
In its deliberations, the tribunal considered the issues arising for determination in the dispute to be: whether federal government fulfilled its obligations under the Development Lease Agreement; whether the defence of ‘frustration’ was available to the federal government as respondent; and thirdly, whether Resort was entitled to reliefs as set out in its claim lodged in 2014.
The arbitration panel found in favour of Dr. Babalakin’s company on all three issues for determination.
In considering an award of damages to Resort in December 2015, the tribunal noted that, “it is the claimant’s claim that it suffered unquantifiable harm flowing from the failure of the respondent to fulfil its obligations under the DLA. These included damage to its reputation with subscribers and its relationship with finance partners.”
The arbitration panel concluded that the federal government “has not shown any extenuating circumstances for its flagrant violation of its covenant under the DLA. The respondent did not even try to address these points of the Claimant as to its general loss of business, reputation, goodwill and credibility.”
The tribunal awarded damages as follows: N12 billion as Direct Expenditure with interest at 17.26 percent from September 2008. N9 billion as Loss of Expected Income with interest at 17.26 percent from September 2008 and N5 billion as special damages.
The totality of the awards means that as at January 2016, the federal government owed Resort International Limited N54 billion which continues to accumulate interest at 17.26 percent per annum. The tribunal also confirmed Resort International Limited’s title to the federal secretariat property.