A Lagos Lawyer, Charles Dumber Mekwunye, has slammed a N200 million suit on telecommunications giant MTN Nigeria Communication Limited (MTNN), over an alleged breach of contract.

‪Joined as co-defendants in the suit are Lotus Capital Limited, an investment company; Stanbic IBTC Asset...


A Lagos Lawyer, Charles Dumber Mekwunye, has slammed a N200 million suit on telecommunications giant MTN Nigeria Communication Limited (MTNN), over an alleged breach of contract.

‪Joined as co-defendants in the suit are Lotus Capital Limited, an investment company; Stanbic IBTC Asset Management, an asset management company; as well as IHS Holding Limited and INT Towers Limited.

In the suit, at the Federal High Court in Lagos, Dr. Mekwunye averred that sometime in 2008, he was invited by Lotus Capital and Stanbic IBTC to invest in a fund purportedly established by Lotus Capital called 'Telecoms Private Equity Fund’.  It was presented to him as an investment into MTNN Linked Units, of which he subsequently bought 5,000 units at the rate of $24.56 per unit and paid $122,800 (N18,376,800 million).  He thereafter entered into an agreement with the company, an agent/nominee of Stanbic IBTC Asset Management Company and MTN Nigeria communications.

Dr. Mekwunye stated that by a letter dated July 3, 2008, Lotus Capital informed him that he had been allocated with 4,990 units, which represented 4,990 Linked Units of MTN Communications Nigeria Limited's private placement instead of the 5000 MTN Linked Units.

He further averred that both Lotus Capital and Stanbic IBTC represented to him that at the end of three years, the MTN Nigeria Linked Unit would be exchanged for MTN's Shares in a Special Purpose Vehicle which would be listed at the Nigeria Stock Exchange or a globally recognized stock exchange.  That, he said, was his primary consideration before investing in MTN's Linked Units.

According to him, at the end of the three-year period, Stanbic IBTC, breaching the agreement, failed to create the Exit Special Purpose Vehicle (SPV), arguing that MTN International was already quoted on the Johannesburg Stock Exchange and that it was unwilling to set up another publicly-quoted company, as well as on certain "tax consideration".

The investor said the companies had clearly misinterpreted to him the creation of an Exit SPV without ever intending to set up such a mechanism.  He said that at the time of their contract both companies already knew the relevant tax legislation; that MTN International was already quoted on the Johannesburg Stock Exchange; and that other circumstances as regards public companies remained unchanged in the period from the commencement of the offer through the three years of the contract tenure up to February 2011, and should have been anticipated by MTN International and the defendants.

Dr. Mekwunye said that following the failure/refusal of the defendants  to setup the SPV after three years as stated in the agreement, Lotus Capital,  without his consent or knowledge, entered into a supplemental agreement to the Custodian Terms and Conditions with Stanbic IBTC dated November 1, 2010,  amending the terms of the private placement memorandum regarding the establishment of an SPV, thereby creating an alternative Exit Mechanism which was not listed on the Nigeria Stock Exchange or any globally-recognized stock exchange.

He averred that in further breach of the 2008 agreement, he was not given the 90 days or three months’ notice required under the placement memorandum, but that on April 4, 2013,  Lotus Capital informed him of an upward review of "management fees" without his knowledge/consent, arbitrarily reviewed to one percent of the value of his investment, and with retroactive effect from January 2013.  As a result of that measure, the sum of $1,750, being one percent of the then value of his investment, was deducted by Lotus Capital.  As a result of that decision, a total of $5,250 was deducted each year from his account in January 2013, January 2014 and January 2015. 

In addition to an order compelling the defendants to pay him the sum of N200m in general damages, Dr. Mekwunye is asking the court:

To declare that Lotus Capital is in breach of the contract between them and that there exists a fiduciary relationship between them; and that the defendants improperly induced him to enter into telecom private equity fund management in 2008, by representing to him after three years, all MTN Nigeria Linked Units would be converted into shares in MTN Nigeria through an SPV;
To order the immediate return of the various sums deducted from his account as management or nominee fees, or such as court may find to have been deducted as management fees for each of the three years; and
To order a perpetual injunction restraining the defendants jointly, and severally, their privies, agents, and successors from further deducting any sum as management or nominee or any other fees whatsoever from the dividends accruing to him from the dividends payable on MTN Nigeria Linked Units or from the value of the 5000 MTN Linked Units owned by him.

In their statement of defence, Stanbic IBTC asked court to  dismiss the suit, which it described as “baseless, unmeritorious, and unjustifiable.”

It averred that Dr Mekwunye and other defendants are unknown to it and that it has never had any relationship whatsoever, whether contractual or otherwise, with the investor.

It agreed, however, that Dr. Mekwunye was right that sometime in 2007, MTN International, under a private placement arrangement, offered MTN Linked Units of MTN Nigeria Limited to some private individuals and institutional investors in accordance with the terms and conditions stated in a private placement memorandum, but that it did not either directly, or through Lotus Capital, solicit the interest or investment of the plaintiff in the offer of MTN Linked Units offered under the arrangement.

Stanbic further averred that it never made any misrepresentation to Dr. Mekwunye, and was not privy to the alleged "telecoms private equity investment agreement" he entered into with Lotus Capital.  To that end, the company said it was not possible that Stanbic could have been a party to any misrepresentation allegedly made to the plaintiff that after three years MTN Nigeria would set up an SPV to be listed on the Nigeria Stock Exchange.


Culled from saharareporters BUSINESS



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