N6.7bn: Petrocam sues Union Bank over breach of contract

Petrocam has sued Union Bank for gross negligence and breach of agreement

A multinational oil company, Petrocam Trading Nigeria Limited, has slammed N6,754,918,533.71 suit on Union Bank of Nigeria Plc over an alleged negligence and breach of contract.

In a statement of claim filed before a Lagos high court on behalf of the Petrocam company by a Lagos lawyer Barrister Gboyega Oyewole SAN, it was alleged that the company and Union Bank in the course of ordinary business, entered into joint venture agreement with marketers to jointly collaborate in opening letter of credit confirmation lines for the importation of petroleum products from foreign sellers of the product.

The joint venture accounts are domicile with the bank.

In executing the letter of credit confirmation lines, the bank is expected to use the naira sum in the account in
bidding and purchasing foreign exchange (FOREX) for liquidation of mature letters of credit.

Sometimes in 2014, the company approached the bank for an import finance facility line of $45million in its favour to finance the importation of petroleum products, upon securing the finance facility, various letters of credit were raised to utilize the dollar facility and so the import finance facility was later increased to $100 million.

The letters of credit were to be paid back with sales proceeds and subsidy reimbursement. Bank Guarantee were provided as security for the sale proceeds.

However the bank was alleged to have failed, neglected and refused to perform its duty as an agent between the company and Central Bank of Nigeria to secure foreign exchange for the liquidation of matured letters of credit as at when due.

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Petrocam says the bank rather than make bids on behalf of the company within the period of 2014/2015 in the first quarter of the transaction when the letter of instructions were given by the company was only able to purchase forex to liquidate these mature letters of credits within the period of 2016/2017, whereas 90% of the transactions were done in 2014/2015 when dollar was at the rate of N155-N160 per dollar.

However,the company failed to bid on these transactions until when foreign exchange increased to N288-N320 per dollar.

The company avers further that over N4billion was domiciled with the bank in the joint venture account as at February, 2015 and over N2.4billion in Petrocam current account for purchase of foreign exchange to liquidate these matured letters of credit but the bank was only able to secure bid for $21,625,935.30 within the period of 90 days when they were expected to liquidate the full value of $76,369,569.30 which exposed the company to heavy losses as a result of the failure to bid as at when due by the bank within the transaction cycle.

By reason of the several acts of gross negligence and breach of the banker-customer relationship subsisting between the company and the bank, the company’s joint venture account maintained with the bank for the funding of trade facility has been unlawfully debited with a total sum in excess of N6,704,918,533.71.

The company also averred that the various exorbitant charges made on the company’s account by the bank was revealed by the report of an independent consultant engaged by the company.

Wherefore the company claims against the defendant are as follows: A declaration that the bank’s breach of its duty and obligation under the subsisting banker-customer relationship between the company and the bank as a result of the bank’s failure in handling the company’s trading facility in accordance with the agreement and understanding between the parties, banking regulation, best practices, customs, and banking convention resulted in unlawful debits and exorbitant interest charges on the company’s current account domicile with the bank.

An order directing Union Bank to credit or reverse the wrongful debit on the company’s current account maintained with the bank for the funding of the letter of credit totaling the sum of N6,704,918,533.71 arising from the bank’s breach of its duty to the company,interest on the said sum of N6,704,918,533.71 at the rate of 22% per annum being the prevailing interest rate from commencement of this suit to the date of judgement, and thereafter 7%interest from the date judgement is given till the final liquidation of the judgment sum.

That N50million be awarded as general damages in favour of the Petrocam company.

Union Bank did not file any defence to this suit, rather it has filed another suit against Petrocam Trading Company Limited and its managing Director Mr Patrick Ilo before a Federal high court in Lagos claiming the sum of N10,062,643,928.72 and $5,247,693.82 plus interest at the rate of 27% per annum.

That N20million be awarded as cost of instituting the said legal action against Petrocam Trading company and its Managing Director.

Meanwhile, Petrocam company and its Managing Director has filed preliminary objection against the suit, drawing the attention of the court to their own pending suit against the bank at a Lagos high court.