NIB slapped with $60 million judgement debt

 February 22, 2013 (Page 22)

The National Investment Bank (NIB) suffered a setback yesterday when it was ordered by the Commercial Court in Accra to pay $60 million to Dominion Corporate Trustees Limited, a firm in the United Kingdom (UK).

The bank was also ordered to pay 11 per cent interest on the said amount with effect from January 29, 2009 until the date of final payment of its debt.

Per the orders of the Commercial Court, the bank, as of January 29, 2013, had an outstanding debt of $86.4 million, which includes $26.4 million interest on the amount.

In a two-hour ruling, the court, presided over by Mr Justice Amadu Tanko, held that there was no evidence to support the bank’s allegation of negligence and fraud on the part of the plaintiff and two other defendants, Eland International Ghana Limited and the former Managing Director of the NIB, Mr Daniel Charles Gyimah.

Background to case

The plaintiff, Dominion Corporate Trustees Limited, through its lawyer, Nene Amegatcher, sued the NIB, Eland International Ghana Limited and Mr Gyimah on March 4, 2010, claiming the sum of US$60 million guaranteed by the bank.

By a collateral management agreement dated November 10, 2001, the NIB and Eland International Ghana entered into a binding agreement under which Eland International  would order and supply Eland International Ghana Limited with various commodities from abroad on credit.

Under the arrangement, the NIB was to hold the commodities in bond, regulate their sale and put the money realised from the sale in an escrow account which was created and controlled by the NIB and then later remit to Eland International Limited.

As a follow up to the 2001 agreement, the NIB, acting through Mr Gyimah, on May 7, 2007 guaranteed, per Aval, 30 promissory notes issued by Eland International to facilitate the said agricultural projects.

However, by the terms of the Aval guarantee, the plaintiff was entitled, upon maturity of the notes, to claim its value directly from the NIB without recourse to Eland International Ghana Limited.

Accordingly, in January 2009, the plaintiff contacted Ghana International Bank, which was the NIB’s correspondent bank in the United Kingdom, and requested for the payment of the sum of US$60 million being the maturity value of the notes.

Unfortunately, the request was not honoured, resulting in the plaintiff following up by making demands directly on the NIB, only to be told that NIB had no knowledge whatsoever of the existence of the notes or the guarantee granted on its behalf by Mr Gyimah.

The plaintiff resorted to a court action on March 4, 2010 after its repeated demands yielded no results.

The ruling

Relying extensively on the Companies Code (Act 179), the Banking Act 2004 (Act 673) and other legal authorities, the court held that Mr Gyimah’s authority to issue a promissory note was at the heart of the issues before the court.

According to the court, the fact that Mr Gyimah was the Managing Director of the NIB was not in dispute and for that reason his actions or inaction was on behalf of the NIB.

It said the plaintiff adduced 28 exhibits, as well as ‘mass’ oral evidence, which all pointed to the fact that the NIB ought to be liable for actions made for and on its behalf by Mr Gyimah.

The court held that the NIB board did not raise any queries when Mr Gyimah embarked on the transaction on behalf of the NIB, adding that evidence led in court was “revealing” and led to the issue of “management’s indifference to the transaction”.

It held that a defence witness had led evidence that the NIB received $45 million in liabilities and it was, therefore, “erroneous to say the transaction did not have the blessing of the NIB”.

The court said “an inept corporate attitude” on the part of the NIB should not be a “pretext by which the NIB should renege on its obligations”. adding, “The state of mind of Mr Gyimah was the state of mind of NIB.”

NIB’s response 

The NIB had held that the plaintiff should have known that Mr Gyimah lacked the power to act and had, accordingly, acted “irregularly”, but the court held otherwise and subsequently described the NIB’s tagging of the transaction as fraudulent and forged as “smuggled”.

According to the court, the NIB failed to “impeach, contradict and rebut” the evidence of the plaintiff, adding that the bank also failed to lead “admissible, credible and relevant evidence”.

It said the NIB rather raised allegations of fraud and forgery against Mr Gyimah and further pointed out that although the allegation of forgery was material, the bank failed to lead evidence to that effect.

Rather, the NIB decided to “surprise” and “ambush” Mr Gyimah by introducing elements of fraud and forgery into the case without proving them.

Describing the plaintiff as an “innocent third party”, the court held that Mr Gyimah was presumed by law to have the authority of the NIB to honour the promissory notes.

On the issue of whether or not  Eland International Ghana Limited was liable to indemnify the NIB against the plaintiff’s claim, the court said no, adding that the NIB’s claim that the transaction was “tainted by fraud” was not tenable and consequently dismissed the NIB’s counter-claims.

It further pointed out that the entire transaction involving the issuance and purchase of the promissory notes was legal under the Banking Act, 2004 (Act 673).

By the court’s judgement, the plaintiff, Eland International Ghana Limited and Mr Gyimah were entitled to claims, but their lawyers, Nene Amegatcher, Mr Kwasi Adu Mante and Mr Kwaku Asirifi, respectively, were advised to file formal claims for costs and damages.

Nene Amegatcher had prayed the court to award GH¢5 million in favour of his client, but the court advised him to put the request in a formal application.