Alhaji Taofik Alao V. African Continental Bank Ltd. (1998)

LAWGLOBAL HUB Lead Judgment Report

KUTIGI, J.S.C.

The plaintiff is and was at all material times a business-man and a citizen of the Republic of Benin living in the town of Port Novo in that Republic. He has and had Nigerian customers and business associates going to that country to purchase goods from him. During the period of 1980-1981, some of his Nigerian business associates approached him in Benin Republic and Europe to help them settle the bills of children and wards in various educational institutions in Europe and America by providing funds abroad to these children through his country’s local currency the CFA Francs, freely convertible currency in the world market. He said the request was made in order to obviate the hardship and inconveniences caused to many Nigerian students abroad due to long delay in obtaining approval of the Central Bank of Nigeria (hereinafter called the CBN) For foreign Exchange applications, thus making timely remittance of funds difficult. He first granted seven requests of his Nigerian customers by providing the needed funds for their children and wards in England in CFA Francs from his own account. When the Nigerians eventually obtained Foreign Exchange approvals from the CBN, Bank drafts covering the amount in Pound Sterling were issued and handed over to them by the defendant bank at its headquarters here in Nigeria to be drawn on its branch in London. These drafts were in turn passed to the plaintiff in settlement and reimbursement of the sums earlier advanced by him. Thereafter the plaintiff paid them in through his own bank in Benin Republic to the defendant’s London branch which honoured the drafts and accordingly had the plaintiff repaid.

Following the success of the first transaction, the plaintiff granted further and similar requests to his other 45 (forty five) Nigerian business associates under the same arrangement. He provided funds abroad to their children and wards through his country’s local currency – the CFA Franc. When the Nigerians eventually obtained approvals from the CBN, the drafts issued by the defendant bank to the Nigerians in relation to the school fees and maintenance allowances for their children, were passed to the plaintiff in settlement and reimbursement of the sums earlier advanced by him. The plaintiff received altogether 45 draft from the Nigerians, the total value of which was E212,310.00. (Two hundred and twelve thousand, three hundred and ten pounds sterling). The drafts were admitted in evidence as Exhibits A to A44.

The plaintiff paid in all the 45 drafts through his Bankers in Benin Republic to the defendant’s London Branch. But this time the defendant’s London Branch office dishonoured the drafts on the first and second presentations. The plaintiff then made enquiries from the Manager of the defendant’s London Branch through his solicitor and got an explanation that as the total amount covered by the drafts was very large, the Manager wanted confirmation from the defendant’s Head Office in Lagos that the drafts were actually issued by them and because additionally the drafts were each marked thus, “Endorsement requires drawer’s confirmation”.

Accordingly the drafts were sent by the London Manager to the Lagos Head Office for confirmation.

After fruitless efforts to get the defendant bank to honour the drafts, the plaintiff sued the defendant bank in the Lagos High Court claiming as follows:-

“1. A declaration that the 45 drafts amounting to E212,310 (Two hundred and twelve thousand three hundred and ten pounds sterling) drawn by the defendant in Lagos on its London Branch Office and presented to the said London Branch Office by the plaintiff through his various bankers arc valid, properly and regularly negotiated drafts.

2. A declaration that the said drafts’ have not expired and are still negotiable.
3. A declaration that the plaintiff is entitled to have the drafts honoured by the London branch of the defendant.
4. An order of the court compelling the defendant to direct its London branch to honour the draft.”

Pleadings were filed and exchanged. The case then proceeded to trial. At the trial the plaintiff testified on his own behalf and called one other witness. Four witnesses testified on behalf of the defendant bank. In a reserved judgment, the learned trial Judge granted all the four reliefs claimed by the plaintiff above. He said:

“The evidence shows clearly that the plaintiff and the said citizens of this country discussed the transaction in Cotonou, Republic of Benin and came to the terms whereby the bank drafts were handed over to the plaintiff in that country. The offer was, presumably, made without dissimulation, in a quixotic attempt to help business associates in need, The plaintiff in my opinion has an enforceable right against the defendants who issued the draft’ to their London branch asking that branch to pay the amounts stated therein. This action therefore succeeds. There will therefore be judgment against the defendants…”

He thereafter granted all the four reliefs claimed as I said before.

Dissatisfied with the judgment of the trial High Court, the defendant bank appealed to the Court of Appeal, Lagos Judicial Division. In the Court of Appeal, four issues were submitted for resolution by the defendant. Those issues were conveniently and quite properly too in my view reduced into two by the Court of Appeal thus:-

“(a) Whether there was apparent or proved illegality affecting the plaintiff s cause of action; and

(b) Whether apart from illegality, the evidence justified the plaintiff’s claim to the proceeds of the 45 bank drafts.”

The Court of Appeal in a considered judgment allowed the appeal and set aside the judgment of the High Court together with the order for costs.

Aggrieved by the decision of the Court of Appeal, the plaintiff has now further appealed to this Court. Eight grounds of appeal were filed.

Counsel filed and exchanged briefs of argument in accordance with our Rules of Court. These were adopted at the hearing during which additional oral submissions were made by counsel. Learned counsel for the plaintiff, Mr. Nwadialo, SAN has in his brief submitted seven issues as arising for determination in the appeal. But having regard to the two issues considered by the Court of Appeal above in arriving at its decision how appealed, I think the only issue which really arises for consideration in this appeal is the plaintiff/appellant’s issue (1). It reads thus:

“Whether the facts relied upon by the plaintiff in his statement of claim disclose exfacie contravention of section 3(1) and 7(c) of the Exchange Control Act, 1962 thereby rendering the loan agreement, illegal and unenforceable and disentitling him to the proceeds of the 45 bank drafts Exhibit A-A44.”

I have endeavoured to summarise the facts of the case above already. In his Statement of Claim the plaintiff amongst others pleaded as follows:

“4. Between 1980 and 1981 some of these Nigerians in the ordinary course of business, approached the plaintiff in Benin or/and in Europe to enable them settle various schools and universities bills of their children and dependants in Europe and America thus sparing such children and dependants hardship and inconveniences which late settlement of school and other bills might entail.

5. The Nigerian friends who approached the plaintiff to accommodate them as stated in the foregoing paragraph did so because of the long delay in their getting the Central Bank of Nigeria’s approval for Foreign Exchange applications to enable them remit funds to their children and dependants abroad.
6. The plaintiff granted the requests of his Nigerian friends in this regard and provided funds abroad to them through his country’s local currency, the CFA Francs which is fully and freely convertible in the world currency market being aligned to French Francs.
7. When the Nigerians eventually obtained the foreign exchange approvals from the Central Bank of Nigeria, the drafts issued by the defendant to the Nigerians in relation to the School Fees and maintenance allowances of their children and other dependants were passed to the plaintiff in settlement and reimbursement of the sums earlier advanced by him.
8. The plaintiff and the said Nigerians also agreed on how to meet any shortfall or surplus as the case might be, should there be any such shortfall or surplus after the plaintiff would have collected the proceeds of the draft’.
9. The plaintiff received altogether 45 drafts from the Nigerians pursuant to this arrangement the total value of which was E121,310. The particulars of the drafts are set out in the schedule to this Statement of Claim.
10. The plaintiff paid the 45 drafts mentioned in paragraph 9 above through his bankers in Cotonou, Benin Republic but the defendant London branch of lice dishonoured the drafts on the first and second presentations.”

In his evidence in chief the plaintiff as pleaded testified as follows:”

After this transaction, other customers of mine came seeking for my help in the same way. This was between December, 1980/January, 1981. The customers were all from Nigeria and I decided to help them like the first one. I loaned them the money and transferred the money to their children through my bank and they came back with their bank drafts and remittance slips. The drafts were endorsed at the back for me by them and paid into my account. In all 45 bank drafts were brought drawn by the defendants in Lagos on its London Branch Office. These arc the bank drafts. Tendered, as no objection, admitted and marked Exhibit A to A44. I took the drafts to my bank and it look the bank some lime and they adopted the same procedure as before. My bank later wrote to me to say that the drafts were returned unpaid with an endorsement on each draft. My bank also endorsed the back of the drafts as guarantee for payment and sent them back again. The bank drafts were returned again and my bank informed me. I was advised to travel to London to enquire why the drafts were not paid. I went to ACB London Branch but before his I met one Dr. Williams in London, a solicitor. I gave the drafts (Exhibits A-A44) to Dr. Williams and the other receipts. The total value of the bank drafts is E212,310.00 (Two hundred and twelve thousand, three hundred and ten pounds sterling). Dr. Williams then informed me that they have refused to pay and advised me to sue the ACB. I want the court to help me recover the money from the bank as interest is being charged on my account monthly. I am now in a big debt. I have only helped parents whose children were suffering in English schools.”

The defendant on the other hand pleaded in its amended statement of Defence specifically that the alleged transactions or agreement” arc illegal amongst others. Paragraphs 4,5,6 & 7 of the Amended Statement of Defence read thus:-

“4. As 10 paragraph 4 of the Statement of Claim, the defendant will contend that the alleged transactions or agreements between the plaintiff and “the Nigerians” in Benin Republic and/or in Europe offend the provisions of Exchange Control Act No. 16 of 1962 Laws of the Federal Republic of Nigeria, in particular sections 3, 7 and 8 thereof as well as Decree No.7 of 1984 and therefore illegal, null and void.

5. In further answer to paragraph 4 of the statement of claim, the defendant avers that the plaintiff is unknown to the defendant.
6. Facts pleaded in paragraphs 5, 6, 7 and 8 of the Statement of Claim are unknown to the defendant. In any event the defendant repeats its contention in paragraph 4 hereof.
7. In answer to paragraph 9 of the Statement of claim, the defendant avers that the plaintiff is not a lawful holder of the said drafts in that they were not duly endorsed to the plaintiff by the payee/beneficiaries whose particulars are set out in schedule to the Statement of Defence annex hereto. In the alternative, the defendant contends that the endorsements (if any) are bad in law in that each of the 45 banks drafts were crossed and marked “Not Negotiable A/C payee only.”

The relevant provisions of Sections 3, 7 & 8 of the Exchange Control Act No. 16 of 1962 pleaded above are as follows:-

“3. (1) Except with the permission of the Minister, no person other than an authorised dealer, shall, in Nigeria, and no person resident in Nigeria other than an authorised dealer, shall, outside Nigeria, buy or borrow any gold or foreign currency from or sell or lend any gold or foreign currency to any person other than an authorised dealer.

7. Except with the permission of the Minister, no person shall do any of the following things in Nigeria, that is to say:-

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

(b) make any payment to or for the credit of a person resident in Nigeria by order or on behalf of a person who is resident outside Nigeria; or

(c) make any payment whatsoever in respect of any loan, bank overdraft or other credit facilities outside Nigeria; or

(d) place any sum to the credit of any person resident outside Nigeria:

Provided that where a person resident outside Nigeria has paid a sum in or towards the satisfaction of a debt due from him, paragraph (c) or (d) of this section shall not prohibit the acknowledgment or recording of the payment.

8(1) Subject to the provisions of this section, no person resident in Nigeria shall, without the permission of the Minister, make any payment outside Nigeria to or for the credit of a person resident outside Nigeria, or take or accept any loan, bank overdraft or other credit facilities.”

Delivering the lead judgment (with which the other Justices agreed), Uwaifo, J.C.A. said:

“It is without dispute clear that the plaintiff’s action is founded on the loan transactions he said he entered into with some (unnamed) Nigerians by which he loaned them according to him, CFA Francs in Cotonou to the value of E212,310.00 and the promise by those Nigerians to repay him in pounds sterlings. The said promise, according to him, was sought to be fulfiled by the procurement of 45 bank drafts issued in the names of various persons and institutions but the proceeds of which he had been unable to realise. These matters involve foreign exchange control. I must therefore turn to the Foreign Exchange Act… From the facts relied on by the plaintiff, some Nigerians resident in Nigeria took loans of CFA, Francs (i.e borrowed foreign currency) from him in Cotonou. That clearly contravenes section 3(1) of the Exchange Control Act without the Minister’s permission, he not being an authorized dealer. Later those Nigerians made payment in respect of the said loans outside Nigeria by procuring 45 bank draft in the UK. This contravenes section 7(c) being without the Minister’s permission. The first act which contravenes section 3(1) and the second act which contravenes section 7(c) apart from being illegal are now criminal offences under section 1(1)(e) and 1 (1)(d)(iii) respectively of the Exchange Control (Anti-sabotage) Act, 1984 now in Cap. 114, Vol. VIII Laws of the Federation of Nigeria, 1990 and severely punishable.”

I entirely agree.

The illegality involved in this matter has been the pith and substance of the defence both in the trial High Court and in the Court of Appeal as well as in this Court. The Exchange Control Act applies to Nigerians and non-Nigerians alike vide section 2(2) of the Act which reads:

“The obligations and prohibitions imposed by this Act shall, unless otherwise prescribed, apply to all persons notwithstanding that they are not in Nigeria and are not Nigerian citizens.”

The law is very clear on the effect of illegality on a transaction or contract. It is the law that a contract is illegal if the consideration or the promise involves doing something illegal or contrary to public policy or if the intention of the parties in making the contract is thereby to promote something which is illegal or contrary to public policy. An illegal contract is a void contract and it cannot be the foundation of any legal right. In other words when the object of either the promise or the consideration is to promote the committal of an illegal act, the contract itself is illegal and cannot be enforced. (See: Herman v. Jeuchner (1885) 15 QBD 561; William Hill (Park Lane) Ltd. v. Hofman (1950) 1 All ER 1013; Chief Onyiuke III v. Okeke (1976) 1 All NLR (Pt. 1) 181; Sodipo v. Lemminkainen OY (No.2) (1986) 1 NWLR (Pt. 15) 220.

Uwaifo, J.C.A. must therefore be right when he observed later in the lead judgment that:-

“I believe it must be clear beyond doubt that the plaintiff upon the combined effect of Section 3(1) and 7(c) of the Exchange Control Act, cannot seek the aid of the Court to have the reliefs he has sought. The entire transaction from the pleading and evidence of the plaintiff is illegal and the so called obligations arising out of the procurement of the banker’s drafts are equally illegal and unenforceable .”

Clearly, the transactions herein show that offences have been committed against sections 3(1), 7(c) and 8 of the Exchange Control ACI. They arc therefore illegal transactions which law courts will not enforce.

It is interesting to note as well that apart from failure to obtain Minster’s approval or permission for the transactions as required by the Exchange Control Act, the omissions and/or commissions mentioned hereunder were never explained:

(1) The plaintiff did not tender a statement of account or any document at all for that matter, to show how the alleged remittances passed through his bank account to the beneficiaries in UK.

(2) The plaintiff did not name, let alone call as a witness any of his Nigerian business associates who borrowed the foreign currency from him.

(3) The plaintiff did not tender any agreement between him and any of his so called business associates.

(4) The 45 bank drafts were issued in the names of various institutions in Britain, and each draft was especially and restrictively crossed and marked “Account Payee Only Not Negotiable”, but nevertheless the drafts were each endorsed by the business associates to the plaintiff. How come

In fact at the hearing of the appeal, this court showed some concern about the alleged transactions particularly the requirement of the permission of the Minister above. In open court we asked the learned counsel for the plaintiff Mr. Nwadialo, SAN., to produce for us the permission of the Minister if in fact there was one. The Court even went further to tell counsel that it was prepared to adjourn hearing to another date, if counsel would produce the Minister’s approval or permission for the transactions. Regrettably, Mr. Nwadialo’s reply was simply that he was before us to argue the appeal only and that the transactions took place a long time ago. When the court again told counsel that the records of the transactions would still be there, counsel was not keen in buying that idea. He is probably right. You cannot produce any approval if none was granted or obtained. I shall leave it at that. It is obvious that the business transactions were shrouded in secrecy and they were without doubt exfacie illegal.

Before I conclude, I must refer to one useful point which the plaintiff made. It was that the Court of Appeal ought to have in its consequential order, after allowing the appeal, directed that the proceeds of the drafts, that is E212,310.00 be returned to the Central Bank of Nigeria, in keeping with the practice where student” beneficiaries could not be traced. He said by failing to make this order, the Court of Appeal has made the defendant to benefit from illegal transactions by retaining the foreign exchange allocation for its own purpose. I think he is right here. Even though it is not for his own exclusive benefit, the point is nevertheless valid.

From all I have said above, the conclusion is that this appeal lacks merit and ought to be dismissed. It is accordingly dismissed. The judgment of the Court of Appeal is confirmed. The consequential order made by the Court of Appeal is, however, amended by the addition of the following order:-

“The proceeds of the 45 bank drafts, that is, E212,310.00 shall be returned by the defendant 10 the Central Bank of Nigeria (the CBN).”

I must say here now that the Exchange Control Act No.16 of 1962, has since been repealed by the Exchange Control (Repeal) Decree No.8 of 1995.

The defendant/respondent is awarded costs assessed at ten thousand (10,000.00) naira against the plaintiff/appellant.

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SC.14/1995