Access Bank Plc v Akingbola & Ors

A company director who causes a company to purchase its own shares with company funds is liable to restore the resulting loss where the transaction is unlawful. The ordinary-course-of-business exception for financial assistance depends on the particular transaction, not merely on whether lending forms part of the company’s business. Lending specifically directed to the purchase of the company’s own shares, controlled by the company, undocumented, unsupported by ordinary lending procedures and lacking genuine customer participation cannot qualify. Serious allegations are proved on the balance of probabilities, with the strength of evidence proportionate to their seriousness. A director who causes company money to be paid to companies connected with him, without lawful justification, is liable for the misappropriation and may be subject to tracing relief.

Access Bank, formerly Intercontinental Bank plc, sued its former Group Chief Executive and connected companies. The claims concerned an alleged unlawful scheme by which the bank acquired its own shares, payments to companies in the Tropics Group, and transfers used to acquire United Kingdom properties.

The defendant denied that the bank had purchased its own shares, contending that the transactions were customer purchases funded by ordinary-course loans. He also claimed that the Tropics payments reimbursed a stockbroker for share purchases made on the bank’s instructions. The central issues were whether the share scheme and payments were unlawful, whether the defendant was responsible, and what relief and tracing consequences followed.

The claim succeeded on the unlawful share purchase and Tropics payments claims. The court also granted tracing relief in relation to the first Fuglers payment. No order was made on the second Fuglers payment because the claimant accepted that recovery under the Tropics claim would avoid double recovery.

1. Unlawful share purchases. The shares in the box were bought with the bank’s own funds, recorded through accounts used to conceal the transactions, and warehoused in the name of ICML. No customer purchasers, genuine customer loans, repayments or payments of dividends to customers were identified. The crossings to purported customers and their later reversals were consistent with the bank being the vendor and owner.
2. The defendant knew of and was responsible for the strategy. The documentary evidence, including the October and November memoranda and the Insider Trading Memo, showed a strategy to purchase bank shares, support the share price and transfer shares out of the box. The court rejected the defendant’s explanations and found that the serious allegations were proved on the balance of probabilities.
3. Even if the transactions had involved customer loans, they would not have been within the ordinary-course exception in section 159(3)(a) of the Companies and Allied Matters Act. The loans would have been specifically for the bank’s shares, controlled by the bank, directed towards maintaining its share price and outside ordinary lending procedures. The principles in Steen v Law and Fowlie v Slater applied.
4. The defendant was liable under section 283 for the loss caused by the unlawful share scheme. The court rejected relief under section 558 because he had not acted honestly and reasonably. The recoverable loss was assessed at approximately N144.965 billion after the permitted deduction.
5. Tropics payments. The payments were not reimbursement for share purchases. The alleged supporting documents and explanations were fabricated or belated, the shares allegedly purchased were not identified, and the payment was made to relieve the Tropics Group’s indebtedness, which the defendant had guaranteed. The defendant was central to the decision and benefited from it.
6. Fuglers 1. Bank funds were caused to be paid to acquire properties for companies connected with the defendant. This was a breach of duty and trust, and the claimant was entitled to trace into the properties or their sale proceeds. The claimant had to elect between capital appreciation and interest.