Court Orders FG to Pay Babalakin N54bn over Abandoned Federal Secretariat

Wale Babalakin

The federal government has been ordered to pay Resort International Limited, a company owned by Dr. Wale Babalakin, a whopping N54 billion as damages in a landmark ruling delivered by an Arbitration Tribunal, THISDAY has gathered.

Ruling in favour of Resort International Ltd, in a formal award letter dated December 3, 2015, the tribunal, chaired by foremost Nigerian architect, Mr. Fred Adeniyi Coker, supported by a leading legal practitioner, Mr. Yusuf Alli (SAN), and a 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 when Resort acquired the old secretariat complex in Ikoyi, Lagos under the sale of federal government’s assets in the state.

Commenting on the landmark ruling, Gbolahan Gbadamosi, a lawyer and publicity secretary of the Nigerian Bar Association (NBA), described the award as, “the beginning of the end of impunity”.

The ruling signposts the climax of a long and acrimonious relationship between Babalakin, the federal government and the Lagos State Government.

Resort International was granted a lease by the federal government to develop the federal secretariat complex in Lagos into a residential property in 2006.

According to documents on the transaction, the DLA, dated October 10, 2006, granted Resort a 99-year lease to redevelop the disused Federal Secretariat complex, Ikoyi, into 480 luxury apartments.

Work had started on the site when the Lagos State Government suddenly stopped the redevelopment of the complex.
Resort claimed at the arbitration that it had suffered damages totalling N88 billion as a result of the breach of a clause of the DLA by the federal government.

It was gathered that no sooner had the company mobilised to site to begin work than the Lagos State Government reportedly mobilised dozens of riot policemen and street urchins, popularly known as “area boys”, and ordered work to stop indefinitely.

The order to stop work on the site, according to a source, was as a result of a series of actions initiated by an uncompromising Lagos government that many said constituted itself into a major impediment to the project.

The tribunal heard that following the Lagos government action, Babalakin was discredited by several banks and organisations as a result of the negative press which attended the failure of the project.

Real estate analysts, who spoke to THISDAY, were of the view that the federal government was hamstrung by the Lagos State government which once showed interest in acquiring the Federal Secretariat complex or had insisted at the time that it should be accorded the right of first refusal since the property is domiciled in the state.

Trouble was already brewing by the time the property was formally handed over to Babalakin’s Resort International in December 2006.

By 2007, speculation was rife about “political intrigues” plaguing the project. The Oba of Lagos, Alhaji Rilwan Akiolu, fired an early salvo, accusing the Olusegun Obasanjo government of selling the complex to so-called powerful interests instead of the state goverrment, a claim denied by Resort International.

The company’s then executive director, Dr. Niyi Odunlami, later responded to the allegation by asserting that “we won the bid through due process”.

At the time, Oba Akiolu said he had assembled a powerful group of traditional rulers and prominent Lagos citizens to lobby Obasanjo’s successor, President Umaru Musa Yar’Adua, with a view to stopping the project.

Many believe the Lagos State Government mounted hurdles on the path of the project by making insurmountable demands, including the requirement that Resort International as leaseholder must obtain a fresh Certificate of Ownership (C of O) from the state government, irrespective of the documents issued by the federal government on the property.

Among other demands, the company was also required to apply for the consent of the Lagos governor on the property leased to them; apply for a change of use, as well as a development permit from the state government.

According to Odunlami, “The state is demanding between 15 and 50 per cent of the cost of properties from buyers as an additional condition before work can commence. If the buyers should get C of Os from the Lagos State government, it means they are compromising the properties, because the properties already have valid title documents.”

It was gathered that despite all entreaties, the state government did not budge and refused to grant the “No-Objection Approval” required under Clause IV of the DLA. Eventually, the federal government’s inability to secure the No-Objection Approval ultimately proved fatal to the project.

To further frustrate and invalidate the transaction, Lagos State officials reportedly vowed not to consider applications for planning permits or other processes related to projects such as the Federal Secretariat, including those for other redevelopment.

The state government’s inflexible stance caused a past president of the Nigerian Institute of Town Planners (NITP), Dr. Olubunmi Ajayi, to accuse it of putting unnecessary hurdles in the way of leaseholders and investors. He further stated that it was wrong to require owners to obtain fresh title documents.

Speaking on the dispute at last year’s Nigerian Economic Summit in Abuja, Babalakin blamed “the failure of the federal government to fulfill its obligations under the DLA by facilitating all requisite approvals, particularly a No-Objection Approval to the change of use of the demised premises from offices to residential apartments from the Lagos State government.

“The project was stalled for this reason despite the huge sums of money invested on the project by Resort and more importantly, despite the huge debt incurred by Resort from commercial banks, investors and subscribers”.

The tribunal heard that the fundamental terms of the DLA were: “The federal government had ‘good title’ to the complex and full power and legal authority to enter into the agreement; and as a pre-condition enunciated in the DLA, would facilitate the procurement of a No-Objection Approval from Lagos State government.”

Resort claimed that the federal government’s failure to fulfill 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 owing to financial obligations to lenders that it was unable to fulfill.

The company therefore claimed direct expenses, the loss of profit and damages against the federal government to the tune of N88,070,917,933.00. It additionally claimed interest on direct expenditure as well as on the expected profits at the rate of 17.26 per cent.

However, 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.

It also argued that the subsequent promulgation of the Lagos State Model City Development Authority Law was in effect a “frustration” of such contracts.

It explained that the new law effectively sounded the death knell for the Federal Secretarial and other such projects, adding that the law, enacted in 2009, provides that “government institutional offices within a Model City Area shall continue to be used for the public purpose for which the offices were developed and no alteration of use shall be allowed”.

In its deliberations, the tribunal considered the issues arising for determination in the dispute to be: whether the federal government fulfilled its obligations under the DLA; whether the defence of “frustration” was available to federal government as respondent; and whether Resort was entitled to reliefs as set out in its claim lodged in 2014.

The arbitration panel ruled in favour of Babalakin’s company on all three issues presented for determination.

“The claimant proceeded on the strength of these covenants to commence work on the demised premises, only to be stopped by the Lagos State government on the grounds that the land belonged to it and not the respondent,” the tribunal observed.

It also stated that “the inability of the respondent to resolve the dispute between itself and the Lagos State government over the demised premises revealed a defect in title, which is a clear breach of the covenant as to good title”.