Bonkolans Investment Ltd & Ors V. Central Securities Clearing System Ltd & Ors (2009)

LawGlobal-Hub Lead Judgment Report

AYOBODE O. LOKULO-SODIPE, J.C.A.

This is an appeal against the decision/judgment of the Investment and Securities Tribunal, Abuja delivered on the 29th October, 2004 in Case No: IST/OA/03/2003. The parties in the case are – (1) CENTRAL SECURITIES CLEARING SYSTEMS LIMITED and (2) THE NIGERIAN STOCK EXCHANGE as Applicants and (1) BONKOLANS INVESTMENT LIMITED; (2) LAWRENCE OKWUFULEZE; (3) DIAMOND BANK NIGERIA LIMITED; (4) SECURITIES AND EXCHANGE COMMISSION; (5) B & N INTERNATIONAL LIMITED; and (6) MR. BASIL OKOLIE NKENCHOR as Respondents.

The Investment and Securities Tribunal, Abuja (hereinafter simply called the lower Tribunal) dwelling on the history of this case in its judgment, stated to the effect that it was commenced on 9th December, 2003 by an Originating Application with the present 1st Applicant as the sole Applicant. The 1st Applicant filed an amended Originating Application on 12/2/2004 and yet another one on 22/3/2004 pursuant to its (i.e. lower Tribunal’s) order made on 11/3/2004. It was after this that the 2nd Applicant came into the case and a joint amended Originating Application was filed by the two Applicants on 24/5/2004. The Applicants thereafter filed an amended joint Originating Application on 13/9/2004 pursuant to the order of the lower Tribunal. In its judgment, the lower Tribunal in relation to this process, said thus: “The Applicants filed yet another joint amended originating application on 13/3/2004 pursuant to the order of 10/9/2004 which would appear in the course of this judgment as abandoned as the Applicants now sought to rely on the joint amended originating application dated 11th May. 2004 and filed on the 24th of May, 2004.” (Underlining provided by me). Apart from the joint Originating Applications which the Applicants filed, they also filed documents which they called, Statement of the 2nd Applicant by Mrs. Josephine Igbinosun on 18/6/04; Statement of the Applicant’s 1st witness by Mr. Omonosa Agidigbi on 25/6/04; 2nd witness’ statement dated 26/6/04 by Mrs. Josephine Igbinosun; and another 1st witness statement dated 26/8/04 by Mr. Adebayo Egunbiyi.

I have earlier underlined what the lower Tribunal said in relation to the Originating Application upon which the case before it was tried. The Records of Appeal in respect of this case are in two volumes. I have diligently scrutinised the said two volumes and I cannot but say that the only Originating Application contained therein is the Amended Originating Application filed on 13th day of September, 2004 pursuant to the Order of the Honourable Tribunal dated 10th September, 2004. In the process there is a 7th Respondent, namely, Economic & Financial Crimes Commission. The claims of the Applicants against the Respondents as set out in the process in question are:-

“1. A declaration that the 1st, 2nd, 5th and 6th Respondents are liable to make restitution to the investors who suffered losses as a result of the fraudulent sale by the 2nd Respondent acting as agent/servant of the 1st Respondent of the 3,130,469 units of Nestle Plc shares, the subject of this action.

2. A declaration that the Applicants are entitled to indemnity from the 1st, 2nd, 5th and 6th Respondents jointly and severally to the extent of their losses as stated in this application.
3. An ORDER compelling the 1st, 2nd, 5th and 6th Respondents jointly and severally to indemnify the Applicants herein to the extent of their losses as stated in this application.
4. An ORDER directing the 1st, 2nd, 5th and 6th Respondents to jointly and severally restore the investors who suffered losses as a result of the fraudulent sale of the Nestle Plc shares to their original positions before the scam.
5. An ORDER of perpetual injunction restraining the 1st, 2nd, 5th and 6th Respondents whether by themselves, their agents, privies, assigns, successors-in-title or anyone howsoever acting through them from dealing with, withdrawing, transferring, charging, dissipating, or in any way howsoever disposing or removing all money or part thereof standing to their credit in their accounts and other related accounts at Diamond Bank Nig. Ltd., Plot 1261 Adeola Hopewell Street, Victoria Island, Lagos.
6. An Order directing the 7th Respondent to release to the applicants the sum of N338,582,,017.20 (three hundred and thirty-eight million, five hundred and eight-two thousand and seventeen Naira, twenty kobo only) contained in a Diamond Bank Draft Number 00816476 paid over to the 1st and 5th Respondents on the authorization of the 6th Respondent being part of the funds traced by the Applicants on behalf of the investors who lost their investments in the fraudulent transactions in the Nestle Plc shares to be used to restore the affected investors.
7. A declaration that (sic) the sum of N338,582,017.20 (three hundred and thirty-eight million, five hundred and eight-two thousand and seventeen Naira twenty kobo only) contained in a Diamond Bank Draft Number 00816476 paid over to the 7th Respondents (sic) by the 3rd Respondent from the accounts operated by the 1st and 5th Respondents on the authorization of the 6th Respondent being part of the funds being traced by the Applicants on behalf of the investors is part of the proceeds of the 3,130,469 units of Nestle Plc Shares being traced to the accounts of the 1st, 5th and 6th Respondents.”

It is interesting to note that though the Applicants filed a joint amended Originating Application before the lower Tribunal, each of the two Applicants that filed this joint process was represented by different counsel throughout the proceedings and that the reason for this as proffered by the learned counsel for the 1st Applicant (now 1st Respondent) at page 152 of the Records is that the claim of the CSCS was different from that of the 2nd Applicant (now 2nd Respondent). Be that as it may.

The 1st and 6th Respondents filed a Reply dated 6/7/2004 to the amended Originating Application and the Applicants filed what they called ‘Answer’ dated 23/7/2004 to the 1st and 6th Respondents’ Reply, and a further Answer dated 26/8/2004 to the said Reply.

The 2nd Respondent never participated in the case. He was said to have absconded the country at the stage when the Police were investigating the “shares scam”. The 3rd Respondent likewise did not file any pleading in the case. It however filed an affidavit to show that the 6th Respondent’s money in its custody had been paid to the EFCC. The 4th Respondent did not file any pleading and did not call any witness at the hearing. The party however filed a written address after hearing was concluded. Each of the two Applicants called a witness in the proof of its case and tendered exhibits. The 1st and 6th Respondents did not call any witness at the hearing but subpoenaed an official of the UBN Registrars to tender some documents.

The lower Tribunal in its judgment dated 29th of October, 2004 being appealed against, stated the facts of the case to be as follows: that sometime in 2002 it was discovered that some stock broking firms fraudulently introduced some share certificates including 3,130,469 units of Nestle Plc shares into the 1st Applicant’s depository and same were cleared and sold. Upon this discovery, the 1st Applicant alerted the 2nd Applicant who then carried out an in-house inquiry into the incident and at the end of the exercise it was discovered that the 1st Respondent through the 2nd Respondent was responsible for the fraudulent sale of the shares. As soon as the house that initiated and executed the fraud was ascertained, the matter was reported to the police and the police arrested those suspected to be connected with the fraud. The 2nd Respondent however absconded. The case was also reported to the 4th Respondent who invited the 1st Applicant and some others found to be involved in the fraudulent sale of the shares. At the APC, it was further found that the fraud was able to scale through the 1st Applicant’s framework because of collusion from the staff of the said 1st Applicant who fraudulently introduced the shares in question into the CSCS system by entering them into its depository. The APC held amongst others that the chief executive/principal officers of the 1st Applicant neglected/failed to effectively exercise due care and supervision over the activities and staff of the company which facilitated the introduction of the forged certificates into the CSCS system. The APC also held that the CSCS and UBN Registrars being primarily liable, shall jointly restore the affected investors to their original positions before the scam in respect of the Nestle shares. The Applicants by the action which they instituted are seeking to be indemnified by the 1st and 2nd Respondents from the losses incurred in clearing the shares which the 1st Respondent guaranteed their genuineness and undertook to indemnify the Applicants against all liabilities as a result of the transfer and most importantly for the 1st, 5th and 6th Respondents to make restitutions to the investors who have suffered losses as a result of the fraudulent sale of the 3,130,469 units of Nestle Plc shares by the 2nd Respondent acting as agent/servant of the 1st Respondent.

The lower Tribunal having evaluated the evidence before it, and having also given due consideration to the addresses of parties: (i) found the 1st, 2nd, 5th and 6th Respondents liable to make restitution to the investors who suffered losses as a result of the fraudulent sale of the 3,130,469 units of Nestle Plc shares by the 2nd Respondent acting as agent/servant of the 1st Respondent. The lower Tribunal specifically said “As there is no way the instant case would be resolved without alluding to the previous appeal, the 1st Respondent is hereby grouped among the stock broking firm (sic) liable to restore investors in the appeal between CSCS Vs. SEC, Appeal No. IST/APP/01/2003”; (ii) ordered the 1st, 2nd, 5th and 6lh Respondents jointly and severally to restore the investors who suffered losses as a result of the fraudulent sale of Nestle Plc shares to their original positions before the scam in line with the review made by the Apex regulator SEC as directed by this Tribunal in appeal between CSCS Vs. SEC, Appeal No. IST/APP/01/2003; and (iii) directed the 4th Respondent to take into consideration this judgment and include the 1st Respondent in carrying out its (i.e. lower Tribunal) earlier order in CSCS Vs. SEC Appeal No. IST/APP/01/2003 and that in so doing any asset belonging to the 1st, 2nd, 5th and 6th Respondents which had been identified shall be applied in carrying out the order.

The 1st, 5th and 6th Respondents as Appellants being dissatisfied with the judgment of the lower Tribunal lodged a Notice of Appeal dated 15/11/2004 against the same. The Notice of Appeal was filed on the same 15/11/2004. The Notice of Appeal contains nine (9) grounds of appeal. The grounds of appeal shorn of their Particulars read thus: –

“GROUND 1

The decision of the Investment and Securities Tribunal delivered on 29th day of October, 2004 is against the weight of evidence.

GROUND2