Alex O. Onwuchekwa V. Nigeria Deposit Insurance Corporation (2002)

LAWGLOBAL HUB Lead Judgment Report

O. AYOOLA, J.S.C.

The appellant, Alex O. Onwuchekwa, has appealed to this court from the decision of the Court of Appeal (Tobi and Ubaezonu, JJCA, Akpabio, JCA, dissenting) whereby the appeal of the Nigeria Deposit Insurance Corporation (Liquidator of Cooperative & Commerce Bank (Nigeria) Ltd.) (now “the respondent”) was allowed and judgment was entered dismissing the appellant’s claim.

In the High Court of Enugu State the appellant claimed against the Co-operative and Commerce Bank (Nigeria) Ltd (“the bank”) the “sum of ‘332,500 (Thirty two Thousand, Five Hundred Pounds Sterling) being an indemnity or recompense for the value of the money which the defendant negligently failed to remit to London on the plaintiff’s instruction” and damages for negligence and/or breach of contract on the part of the defendant.

The appellant who was a businessman and the bank’s customer sometime in 1983 received a contract from the Federal Electoral Commission to supply certain goods pursuant to which the Commission requested the Central Bank and the respondent to make available foreign exchange to the appellant. The appellant duly requested the respondent to undertake the submission, processing and obtaining from the Central Bank and to request approval for the remittance to the appellant’s overseas suppliers (Tellscar Ltd of London) the sum of ‘332,500 being the FOB value of the goods to be imported into Nigeria. The appellant gave the respondent necessary documents and paid the equivalent sum of money (including bank commission) demanded by the respondent for the processing and remittance of the price of the said goods through the normal banking procedure. The appellant duly took delivery of the goods which were air freighted to Nigeria by his suppliers. However, the respondent failed to remit the purchase price of the goods to the overseas suppliers and neglected to complete fully the form transmitted to the Central Bank. The respondent continued to default by non-remittance of the price of the said goods until a takeover of government ushered in a new military administration which introduced a Trade Debt Refinancing Scheme affecting uncompleted transactions, such as the appellant’s, and requiring defaulting banks, such as the respondent, to resubmit necessary applications for remittance. The appellant alleged that the respondent in responding to the Central Bank’s circular for the Scheme “did not exercise due care and diligence in filling the requisite forms”.

The respondent’s “negligence, wrong figures, careless filling of forms and utter disregard to the care required in processing the application caused the non remittance of the sums involved in the suit”. In consequence of non remittance of the sums the appellant’s suppliers refused to entertain fresh orders from the appellant. According to the appellant, in the circumstances he had to secure from another source foreign exchange with which he paid directly to Tellscar Ltd. He suffered loss and damage. Hence, his claim. The substance of the respondent’s defence was that it “did all that was necessary, and proper in banking practice and operations and relying at all times material on information supplied by the plaintiff “. The rest of the defence was an expatiation of this main defence.

The trial Judge after considering the evidence came to the conclusion that the respondent was negligent. Since nothing turns in this appeal on whether he was right or not in coming to that conclusion his grounds for so concluding are immaterial. Suffice it to say that he entered judgment for the appellant in the sum of ‘332,500.48p “to enable him repay relatives and friends overseas who dipped hand into their pockets and paid the debt which the defendant defaulted (sic) him from paying” and N100,000 damages.

On the respondent’s appeal to the Court of Appeal from that decision the issue considered to be dominant by Ubaezonu, JCA, who delivered the leading judgment, was whether the act of the appellant in making arrangement for the payment of his overseas customers and in paying them offended the Exchange Control (Anti-Sabotage) Act (Cap 114: Laws of Nigeria, 1990). Holding that the issue of illegality was raised in the statement of defence by the bare averment that the appellant “illegally paid his suppliers,” Ubaezonu, JCA, proceeded to consider “whether what the respondent did as disclosed by the evidence amounted to an illegality.” The evidence in question had consisted of the evidence of the appellant who in examination-in-chief had said:

“I made an arrangement with my friends and relations in Europe to settle the bills in foreign currencies. I did settle them. The overseas suppliers wrote me that he was paid while defendant (sic) still battling with remitting the money”;

and, under cross-examination, he said:

“I discussed with my relations when they visited home so that when they went back to London they credited my account in London and I issued cheques to my foreign customers who acknowledged receipt for payment.”

From this evidence he held that the appellant in making payment to Tellscar Limited in London had made payment to or for the credit of any person resident outside Nigeria and had placed a sum to the credit of a person resident outside Nigeria in contravention, respectively, of section 1(1)(a)(i) and section 1 (1)(a) (iv) of the Exchange Control (Anti-Sabotage) Act. He also said that the appellant borrowed foreign currency outside Nigeria contrary to section 1 (1)(e) of the Act.

The relevant subsections of section 1 of the Act are in the following terms:

“1 (1) Any person who, whether or not before the commencement of this Act but not earlier than October, 1979 does any of the following things, that is to say-

(a) without the permission of the appropriate authority –

(i) makes any payment to or for the credit of a person resident outside Nigeria; or …

(vi) places any sum to the credit of any person resident outside Nigeria …

(e) without the permission of the appropriate authority, and not being an authorised dealer, while resident in Nigeria buys or borrows any foreign currency outside Nigeria from or sells or lends any person other than an authorized dealer,shall, notwithstanding anything to the contrary in any law, be guilty of an offence under this Act.”

Relating these provisions to the evidence earlier quoted Ubaezonu, JCA, came to the crucial conclusion which in his opinion was conclusive of the appeal in the court below thus:

“Now, the important issue in this case is that the respondent seeks to recover from the appellant the money he paid in contravention of the Exchange Control (Anti- Sabotage) Act of 1984. Can he do this The answer is clearly and regrettably in the negative. No court should aid or assist illegality no matter the circumstance. I say ‘regrettably’ because it seems to me that the failure to get the approval of the appropriate authority to remit the money paid to it (the appellant) was due to the negligence or incompetence of the appellant. The respondent in his effort to save his reputation and perhaps the reputation of this country from his overseas customers ran foul of the law. Be that as it may the hands of the courts are tied by the law (sic: viz) Exchange Control (Anti-sabotage) Act of 1984 Cap 114.”

With that opinion Tobi, JCA, agreed, but not so with Akpabio, JCA, who in a powerful and well considered dissenting judgment held the view that the question of illegality under the Exchange Control (Anti-Sabotage) Act was never canvassed in the pleadings at the trial and that even if the question had been raised, such contention would have been untenable as the contract between the parties was a simple and legitimate one. In his view the whole transaction in London between the Respondent (i.e. the present appellant) and his relations was a “res inter alias”. Even if anyone was to complain it should have been the Central Bank and not the appellant. Their Lordships of the Court of Appeal were unanimous in the view that the respondent had committed a breach of contract. They also agreed on the nature of the loss for which the appellant could recover damages consequent on the breach. Ubaezonu, JCA, after considering the principles relating to award of general damages in contract said:

“With the above principles in mind the damages recoverable in this case would be in the first place the naira equivalent of the money to be remitted to the oversea suppliers to cover the cost of the commodity as well as the incidental expenses, if the respondent’s claim were in order. This amounted to 332,500 plus 350.48. In addition, the respondent suffered some other damage which flows directly from the breach. “(emphasis mine)

The only reason the majority in the court below withheld judgment for the appellant was because it had been mentioned in his pleadings and evidence that he paid his suppliers. It was suggested that he “could have left off everything about paying money to any person overseas as that did not concern the appellant”. (emphasis mine)

I am in agreement with Akpabio, JCA, who in his dissenting judgment held the view that on the pleadings illegality had not been raised as a defence. The respondent who averred that “plaintiff negligently caused the delay in processing his documents” but added as separate sentence thereto “And illegally paid his suppliers” cannot be rightly said to have pleaded the illegality of any transaction or that he was relying on any statute. A cardinal rule of pleading is that whenever a statute is relied on as a bar to the action it should be specially pleaded. See Coburn v Collins (1887) 35 Ch.D 373, Hayward v. Lely (1887) 56 LT 418. Also, a defendant who relies upon the defence of illegality should state the facts on which he relies in his pleadings. The law is well put in Bullen & Leake & Jacob’s Precedents of Pleadings p. 1199 that: “Where the defendant relies upon the defence of illegality, he should distinctly raise that defence by his pleading, and should state the facts or refer to facts already stated in the statement of claim, so as to show clearly what the illegality is: If a man intended to charge illegality, he must state facts for the purpose of showing what the illegality is Bullivant v. Attorney-General for Victoria (1901) A. C. 196, per Lord Davey at 204.” A defendant who alleges that the plaintiff has acted illegally in the sense that he had acted in contravention of a statute must plead what statute had been contravened and in what regard. In this case the prohibition in section 1 of the Act was not absolute. The acts prohibited must have been done “without the permission of the appropriate authority.” Absence of permission of the appropriate authority is a fact which must be alleged even though the onus of proving due permission would be on the person making the payment or doing anything for which permission is prescribed by section 1 of the Act. Quite apart from the pleading question, was this a case in which the defence of illegality availed the respondent The answer involves a consideration of a number of established principles of law against the undisputed background of the fact that the contract which formed the pillar of the appellant’s claim was a lawful contract, it being, simply, a contract between customer and bank for the remittance of money overseas. The law is clear that where the plaintiff’s claim is under a lawful contract such will not fail by reason of illegality of another contract if the plaintiff can establish his case without reference to another illegal contract to which he is a party. However, confusion crept into the consideration of the appellant’s case in the court below because the trial Judge after rightly appreciating the cause of action had described inaccurately the purport of the appellant’s claim in the relief he granted, and also, because in one breath the majority of the Court of Appeal regarded the case as one in which the present appellant had sought “to recover from the appellant the money he paid in contravention of the Exchange Control (Anti-Sabotage) Act of 1984 and, in another, one in which “the damages recoverable in this case would be in the first place the naira equivalent of the money to be remitted to oversea suppliers ….” Ubaezonu, JCA, stated that

“as a result of the breach the respondent’s business name has been blacklisted in England and there is no likelihood of his being able to do business with his suppliers or any other British firm. This is a serious damage which arises directly from the breach. It is my considered view that the respondent shall be entitled to substantial damages for the damage be has sustained whether the damages he has sustained are called general damages or by any other name. The trial court awarded N100.00. I see no reason to disturb the award.”

Yet, at the end of the day, the majority of the court below dismissed the appellant’s case in its entirety by reason of illegality, even in regard to the claim for general damages, without adverting (to the fact that the damages of N100,000 awarded was for breach of a contract which was not, and could not by any stretch of imagination be, at all tainted by any illegality.

Akpabio, JCA, was clear in his conclusion that the “main complaint of the respondent [the appellant here] against the appellant [the respondent here] is not filling the appropriate form accurately thus making it impossible for the Central Bank to grant their approval within the time prescribed between the respondent and his oversea suppliers.” That view is consistent with the cause of action disclosed in the appellant’s statement of claim. It is clear from the relief sought by the appellant in the action that what he sought was ‘recompense for the value of the money which the defendant negligently failed to remit to London on plaintiff’s instruction and general damages “for negligence and/or breach of contract on the part of the defendant.”

In these circumstances the majority of their Lordships of the Court of Appeal were wrong when they approached the matter on the basis that the appellant “seeks to recover from the (respondent) the money he paid in contravention of the Exchange Control (Anti-Sabotage) Act of’ 1984.” Whether the appellant did or did not pay his suppliers was not a material averment to his cause of action as long as he was able to show, in regard to the breach of contract that there was a breach and in regard to negligence that he suffered damages. The trial court and the court below found both established not at all on the basis that he had paid his overseas suppliers. It is evident that the conclusion arrived at by the majority of the court below is flawed by a misconception of the appellant’s claim which led to a failure to apply the appropriate principles of law. Where an appellate court misconceives a plaintiff’s case, its decision can hardly be right. Whether the appellant’s claim is regarded as a claim in contract or one in negligence, it is clear that the basis of his claim was the contract he had with the bank for the remittance of funds to his suppliers overseas. To establish a breach of that contract or negligence in its performance he did not need to allege and prove that he entered into a contract with a third party. I quickly refer to two relevant principles in this regard. The first is that: “It is not in every case that a plaintiff’s claim under one contract will fail because of illegality in another contract to which he is a party. A claim under a lawful contract will not fail by reason of illegality in another contract if the plaintiff can make out his claim without reference to the illegal agreement.”

The second is that:

“If a person asserts a right in the law of tort and the tort claim is one in respect of which the plaintiff must show a contract as a necessary element, then it would seem that for the tort claim to be good the plaintiff must show a lawful, not illegal, contract.”

These two principles are usefully set out in Enonchong: Illegal Transactions (pub. 1998) at pp 54 -55. I gratefully adopt them. I am of the view that learned counsel for the appellant was right when he submitted that: “the consequences of the breach of this apparently legal contract are not to be affected by extraneous factors such as the appellant’s efforts to privately pay his oversea suppliers.” The majority of the court below took a wrong turning when they misconceived the appellant’s claim and proceeded to use a transaction which they described as illegal, to which the respondent was not a party and which had no direct relevance to the contract in respect of which the action was brought or to the liability of the respondent under that contract, to deprive the appellant of his rights under a perfectly legal transaction. Besides, necessary consequence should have been given to the fact that a stranger to an alleged illegal transaction will not normally be allowed to raise a defence of illegality founded on a transaction to which he is not a party. It is right to observe, that Ubaezonu, JCA, and Tobi, JCA, felt constrained to dismiss the appellant’s claim only because they felt that their hands were tied and, apparently, that all forms of illegality have the same consequence of defeating all claims against which a defence of illegality is raised. It is to be observed that public policy is at the root of the defence of illegality. A decision to allow the defence or permit recovery sometimes cannot be divorced from public policy considerations. Sometimes it is expedient to consider whether to allow the plaintiff’s claim will be contrary to public policy or whether to deny the claim on the ground of the defence of illegality will occasion him such an injustice as to be contrary to another aspect of public policy which is that a citizen should not without just cause be deprived of his entitlements. The court is not precluded from weighing competing aspects of public policy and, after so doing, from deciding which one should be the overriding public policy in each particular case. It was in this vein, I believe, that Devlin, J. said in St John Shipping Corporation v. J. Rank Ltd. [1956] 3 All ER 683, 691:-

“It may be questionable also whether public policy is well served by driving from the seat of judgment everyone who has been guilty of a minor transgression. Commercial men who have unwittingly offended against one of a multiplicity of regulations may nevertheless feel that they have not thereby forfeited all right to justice, and may go elsewhere for it if courts of law will not give it to them …. I have said enough, and perhaps more than enough, to show how important it is that the courts should be slow to imply statutory prohibition of contracts and should do so only when the implication is quite clear.” I have digressed slightly to show that the majority of the court below may not have been as helpless in the particular circumstances of this case as they thought they were. When a court feels uneasy about the justice of its conclusions it should pause to examine the relevant law and facts more deeply before it accords finality to such conclusions.

Such deeper reflection in this case would no doubt have necessitated such construction of the Act that would reflect the mischief at which the Act aimed, which in this case, as the preamble showed, “was to make special penal provisions with respect to acts subversive of the exchange control legislation in force in the country.” It is to be doubted if the Act was designed to prohibit such casual family transaction as the appellant’s relation in London helping him to pay his indebtedness overseas when there was nothing to show that the transaction was a contrivance to circumvent our exchange control laws. The ambit of section 1 of the Act is so wide as to be absurd were it to be construed literally without qualifications. For instance a resident of Nigeria who on a visit to London borrowed N310 to pay his taxi fares to the airport would have committed an offence, and one who borrowed or even got a gift of N350 which he paid into his London account from which he issued a cheque to settle his hotel bills would similarly have committed a contravention of one paragraph or the other of section 1(1) of the Act. Examples can be multiplied all going to show that the courts were bound to imply qualifications in the provisions of section 1 of the Act. Since, however, the Act itself has been repealed in 1995 by section 38(1) of the Foreign Exchange (Monitoring and Miscellaneous Provisions) Decree No 17 of 1995, any comment on the Act beyond what may be necessary for the case in hand is of purely historical and academic interest. Suffice it to say that for the purpose of this case enough attention had not been paid, first to the mischief at which the Act aimed and, secondly, to the absence of any evidence to show that the offer of the appellant’s relations to make funds available to him in England to pay his debts, without more, came within that mischief. In my judgment the majority of the Court of Appeal should not have held that a defence of illegality had been properly raised and, if it had been, that it was established so as to defeat the appellant’s claim. Before I part with this appeal, I add that I do not think there is substance in the argument raised by counsel for the appellant that the proceedings in the court below were a nullity. On 14th November, 1996 the bank filed its notice of appeal from the decision of the High Court in the court below. On 12th March, 1998, a winding up order was made against the bank. On 15th June, 1998, the court below gave judgment in the appeal. On these facts counsel for the appellant argued that by virtue of section 417 of the Companies and Allied Matters Act the proceedings were a nullity. That section provides that:

“If a winding up order is made or a provisional liquidator is appointed, no action or proceedings shall be proceeded with against the company except by leave of the court.”

The provisions of an enactment should not be read so as to deny access to the court. There is nothing in section 417 which prohibits such company as is described in the section from proceeding with action or proceedings against another person. What that section prohibited subject to leave of the court is proceeding with an action or proceedings against the company. By virtue of section 425(1)(a) of the Companies and Allied Matters Act the liquidator in a winding up by the court shall have power, with the sanction either of the court or of the committee of inspection, to bring or defend any action or other legal proceeding in the name and on behalf of the company. I do not read section 417 as introducing a further restriction of what is permitted by section 425(1)(a) .. Be that as it may, the appellant having succeeded on what I consider to be the main issue in the appeal, I allow the appeal. I set aside the decision of the Court of Appeal allowing the respondent’s appeal in that court. I restore the judgment of the High Court whereby, judgment was entered for the appellant in the sum of ‘332,500.48p and N100,000 being general damages. For avoidance of doubt I state that the first sum awarded is as claimed by the appellant “recompense for the value of the money which the defendant negligently failed to remit to London on plaintiff’s instructions”, and that the second sum is general damages for breach of contract. I award to the appellant N5,000 being costs of the appeal in the court below and N10,000 being costs of this appeal.

SC.98/2000