Federal secretariat: FG to pay Babalakin’s firm over N26.5bn

An arbitration panel has awarded N26.5bn to Resort International Limited over the Federal Government’s breach of an agreement for the redevelopment of the Federal Secretariat Phases I and II in Ikoyi, Lagos.

The three-man panel delivered a two-to-one split decision on December 3, 2015 in favour of Resort International Limited, which is owned by a lawyer and businessman, Dr. Wale Babalakin.

Two members of the tribunal, Mr. Fred Coker (the presiding arbitrator) and Mr. Yusuf Ali, SAN, held in the majority award that the Federal Government was in breach of the Development Lease Agreement made between it and RIL on October 10, 2006.

The third member of the panel, Alhaji Ibrahim Abdullahi, SAN, disagreed with the majority award, holding that the Federal Government was not in breach of the agreement.

The award to the firm comprises N12.319bn as direct expenditure on the project, N9.006bn as expected income and loss, N5bn as general damages for the hardship occasioned on account of the breach, N166,855,219 as cost of the arbitration and a refund of N20,567,719 as the outstanding fees and expenses.

In the majority decision, the panel also ordered the respondent to pay to the claimant interest on the direct expenditure at the rate of 17.26 per cent until liquidation of the sum awarded.

The panel also held that the respondent should pay to the claimant interest on the expected profit at the rate of 17.26 per cent until liquidation of the sum awarded.

The majority judgment held that the failure of the Federal Government to facilitate the approval of the Lagos State Government without objection for the redevelopment of the property amounted to a breach of the Development Lease Agreement made between the two parties on October 10, 2006.

The final award read in part, “It was clearly stated in the DLA as well as the pleadings that the respondent was to facilitate the obtaining of the approval without objection from the Lagos State Government. To ‘facilitate’, in the opinion of this tribunal requires more active steps than yielding to request for documents by the claimant; it requires the use of the influence of the respondent, as the Federal Government, to obtain the approval from the Lagos State Government.

“The respondent clearly failed to do this and it amounted to a failure of its obligation under clause (iv) of the lessor’s covenants to the effect that it had good title to the demised premises, it had the authority to enter into the agreement there were no third party claims or interest on the property and it would indemnify the claimant for any loss arising from any third party claim to the demised premises.”

By the DLA, the company was to convert the two phases of the Federal Secretariat into self-contained condominium of luxury residential apartments for sale and/or lease to Nigerians in Diaspora.

The company claimed to have commenced engineering works at the project site and obtained loans from its bankers as well as deposits form potential purchasers, but that it was unable to successfully execute the contract due to the Federal Government’s failure to fulfil its obligation under the agreement.

Specifically, the company claimed that the Federal Government failed to “deliver vacant possession of the property and to facilitate a no objection approval from the Lagos State Government as stated in the agreement.

While the company’s application for the no objection approval was still pending, the state government enacted Law No. 15 of Lagos State of Nigeria, Section 14, of which prohibits the conversion of government and institutional offices within certain areas in the state to residential property.

The law also states that such offices shall continue to be used for the public purposes for which they were developed.

In his dissenting decision, however, Abdullahi ordered the Federal Government to refund N5.6bn incurred by the Resort International Limited as expenditure on the project, N3.4bn as the sum paid for the lease, N1.8bn as fair and adequate compensation as well as N20.6m for certain fees paid by the company.