FCMB Ltd v. Ogbuefi [2021] 10 NWLR (Pt. 1783) 1

In 2007, one Hon. Chief Ogbuefi and First City Monument Bank Ltd (FCMB) agreed to do business and make some money. The nature of the relationship as evidenced by the documents executed and exchanged was that Chief Ogbuefi made an equity contribution of N40 Million in the expectation that FCMB will contribute N60 Million to make a total of N100 Million. This N100 Million joint contribution was for joint trading in stocks of blue chips companies which were to be exclusively managed by FCMB. Both Parties agreed that the profit realized from the N100 Million joint venture investment was to be in the ratio of 60% to FCMB and 40% to Chief Ogbuefi.

It was established that after Chief Ogbuefi made his contribution of N40 Million, FCMB failed to give him any information such as acknowledgement of receipt of the N40 Million equity contribution, record of purchase/sale of stocks, dividends/bonuses earned, etc., with regard to the joint business.

After several years with no communication from FCMB, Chief Ogbuefi was notified by a letter from FCMB that all FCMB’s rights in connection with the joint venture business had been assigned to the Assets Management Corporation of Nigeria (AMCON). Chief Ogbuefi later received a letter from AMCON demanding payment of the alleged outstanding loan obligation of over N58 Million.

Alarmed, Chief Ogbuefi engaged his lawyers to come to his aid. His lawyers approached AMCON over the matter. After a careful consideration of all that had transpired, AMCON washed its hands off the situation on the basis that, in reality, the relationship between FCMB and Chief Ogbuefi was not a banker-customer relationship but a joint venture. Accordingly, AMCON wrote Chief Ogbuefi confirming that the purported loan portfolio of Chief Ogbuefi assigned to AMCON by FCMB had been returned to FCMB. Clearly, AMCON understood the limits of its statutory mandate and acted in line. FCMB packaged a joint venture business arrangement as a loan transaction and sold it to AMCON in order to command the coercive powers of the Corporation. But it failed.

Consequently, the road to liability became as clear as a highway. Chief Ogbuefi dragged FCMB on that road through court action at the High Court of the Federal Capital Territory claiming several reliefs. On 19 October 2017, the trial Court upheld his case and dismissed the counter-claim filed by the Bank. The Court held that the relationship between FCMB and Chief Ogbuefi was a joint venture business arrangement and not a lender-borrower relationship. The Court delivered judgment in favour of Chief Ogbuefi against the Bank.

Aggrieved, FCMB filed an appeal which was unanimously dismissed for lacking in merit on 3 February 2021.

AMCON is commended for the role it played in scrutinizing the deal between Chief Ogbuefi and FCMB and rightly assessing its position on time. The trial Court and the Court of Appeal are also commended for the well-reasoned judgments.

It is ordinarily mysterious how a joint venture business translated into a loan transaction. Unraveling this mystery may be good for preserving the integrity of the banking system.

Stephen Azubuike
Author: Stephen Azubuike
Stephen is a lawyer with expertise in Commercial Dispute Resolution and Technology Law practice. He is a Partner at Infusion Lawyers. He has successfully argued cases from the High Courts of various jurisdictions to the Appellate Courts on behalf of financial institutions, other corporate bodies and multinationals. He has worked with a number of startup tech companies. He tweets @siazubuike.
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