Chief Patrick A. Abusomwan V. Mercantile Bank Of Nigeria Ltd (1987)
LawGlobal-Hub Lead Judgment Report
KARIBI-WHYTE, J.S.C
This appeal is by Plaintiff against the judgment of the Court of Appeal Division, Benin City. On the 21st January, 1986, the Court of Appeal in a unanimous judgment set aside the judgment of the High Court, Benin City, granting Plaintiffs claim against the defendant for N127,273 (one hundred and twenty seven thousand, two hundred and seventy-three naira) being loss of profits as a result of the defendant’s negligence arising from a guarantee dated 30th January, 1978 for the importation of cement. The facts of the case are fairly simple.
Plaintiff is a businessman who deals on the importation of cement. In the ordinary course of his business he entered into an arrangement for the importation of cement from Lime International Corporation New York through one Mr. Bassey and Mr. E. R. Tucker. The arrangement was that cement was to be imported on a regular basis on the terms and conditions specified in the agreement dated 22nd December, 1977. This agreement was tendered in evidence as Exhibit 7.
The arrangement was that the cement was to be shipped to Plaintiff by Lime International Corporation of New York. It was a term of the agreement that the Appellant was to obtain a guarantee from his Bankers for the payment referred to in the memorandum. Plaintiff duly obtained the required guarantee dated 30th January, 1978 from his Bankers, the New Nigeria Bank Ltd. of Mission Road Benin City in favour of Mr. Bassey at the Defendant’s Bank.
This is Exhibit 9 in these proceedings. On the strength of the Guarantee Exhibit 9, and a Pro forma Invoice, Defendant opened a Letter of Credit in favour of Lime International Corporation of New York. The Pro forma Invoice No. LT. 2472 was dated 4th January, 1978 and is Exhibit 12 in these proceedings. It was clearly stated in Exhibit 9 i.e. the Bank guarantee provided by the New Nigeria Bank Ltd, on behalf of the Plaintiff, but in favour of Mr. Bassey, that all documents, Drafts, Bills of Lading and Invoices consequent upon the letter of credit shall be drawn in favour of P. A. Abusomwan, i.e. Plaintiff, and shall be endorsed to New Nigeria Bank Limited. Head Office, Mission Road, Benin City.
But in opening the letter of credit, which is Exhibit 4 in these proceedings, the Defendant Bank directed that the documents be drawn in favour of Heilit (Nigeria) Ltd. and endorsed to itself. The disregard of the instructions in the Bankers Guarantee, Exhibit 9 resulted in the Defendant notifying the arrival of the consignment to Heilit (Nigeria) Ltd. and the endorsement to itself.
As a consequence neither Plaintiff nor his Bankers were informed of the arrival of the cement. Before Plaintiff became aware of the arrival of the cement, which as endorsed in the Proforma invoice to have been shipped to him, Mr. E. R. Tucker, Managing Director of Heilit (Nigeria) Ltd. had taken delivery. It is important to observe that the importation of the cement was financed by Plaintiffs Banker’s Guarantee, Exhibit 9. Before Plaintiff could do anything Mr. Tucker had sold 2,260 metric tons (45,200 bags) of the 4,200 metric tons of cement (84,000 bags) shipped to the Plaintiff. Plaintiff’s intervention in time only resulted in 38,800 bags of the cement from not being sold by Mr. Tucker.
Plaintiff therefore brought an action claiming from the Respondent, the loss suffered as a result of the negligence of Defendants in their failure to adhere to the instructions in the Banker’s Guarantee, Exhibit 9. Defendants denied liability.-They contended in their statement of defence, that Appellant had no account with the Defendant’s Bank and that the Banker’s guarantee relied upon by the Plaintiff was issued in favour of Mr. Bassey E. Ekpo Bassey who had no account with the Defendant branch in Lagos, the guarantee was not binding on the Defendant.
The Defendant’s defence was that it did not know the plaintiff at all times material to this action and that the said Letter of Credit was opened by Heilit (Nigeria) Ltd. of which Mr. E. R. Tucker is the Chairman and Managing Director and that the Defendant recovered from Heilit (Nigeria) Ltd. and Mr. E. R. Tucker jointly and severally the sum of N163,806.55 in suit No. FRC/L/49/78 being the value of the Letter of Credit plus Bank charges and costs … “Although Defendant denied in their pleading that they were negligent, they admitted that the Letter of Credit was opened by them in favour of Heilit (Nigeria) Ltd.
They also contended that since Heilit (Nigeria) Ltd was named in the Pro Forma Invoice LT. 2472 of 4th January, 1978 as having been sold the consignment, and that there was no mention of Plaintiff in the original invoice and Bill of Lading, they were not in any way negligent to have advised Heilit (Nigeria) Ltd. by letter dated 27th April, 1978 to collect from them the shipping documents in respect of the said consignment.
In other words, the contention of the Defendant at the trial was that although they opened a Letter of Credit on the authority of a Banker’s guarantee provided by Appellant’s Bank, the Letter of Credit was opened on behalf of Heilit (Nigeria) Ltd, who was Its customer; there was no relationship of Banker and Customer between Plaintiff and itself because neither Plaintiff nor Bassey E. Ekpo Bassey was its customer. Secondly since the Proforma Invoice indicated Heilit (Nigeria) Ltd. as the person to whom the cement was to be sold and there was no mention of the name of the Plaintiff, they (Defendants) did not owe him any duty of care with respect to the consignment, and were within their legal rights to deal with Mr. Tucker who at all material times was the Managing Director of Heilit (Nigeria) Ltd. Plaintiff was a total stranger to the transaction. Plaintiff gave oral testimony and called one witness. Exhibits 1-11 were tendered making a total of 19. Defendant tendered two Exhibits, 20, 21. Defendants did not give any oral testimony and rested on the case of the Plaintiff. The learned trial Judge held Defendants liable on the claim before him and entered judgment for the sum of N124,729.40 and costs of the action assessed at N500. The learned trial Judge found that” … Defendant accepted Exhibit 9 as per memorandum in Exhibit 2 and acted on it as per Exhibit 4 but failed to comply with the condition that all documents, drafts, bills of lading and invoices shall be drawn in favour of Mr. P. A. Abusomwan and shall be endorsed to New Nigeria Bank Limited, Head Office, Mission Road, Benin City.” The learned Judge held that on the requirement of the observance of the conditions in Exhibit 9 Defendants owed a duty of care to the Plaintiff and were negligent in failing to observe those conditions. The learned trial Judge rejected the defence of res judicata pleaded by the Defendants. Defendants appealed to the Court of Appeal. Defendants and Plaintiffs shall hereafter be referred to as Respondents and Appellants respectively.
The Court of Appeal set aside the judgment of the learned trial Judge on the ground that Respondents owed no duty to the Appellant and had not acted negligently towards him. Appellant has accordingly filed seven grounds of appeal against that judgment. The grounds of appeal excluding the particulars are as follows-
“1. The learned Justices of the Court of Appeal misdirected themselves in law when they held:
“I am of the firm view that the Respondent cannot sue on account of any failure to observe any stipulation in this Exhibit 9.”
- The learned Justices of the Court of Appeal misdirected themselves in law when they held: “There is therefore no basis for holding the Appellant liable on a charge of negligence in its dealing with Exhibit 9.”
- The learned Justices of the Court of Appeal misdirected themselves in law when they held:
“To hold that the Appellant was negligent for he owed a duty of care to the Plaintiff in respect of the observation (SIC) of the above conditions in Exhibit 9 is to make the Appellant a party to this said Exhibit 9 which is a document that binds only the donor New Nigeria Bank Limited and the donee Basil E. Ekpo Bassey and no one else.”
- The Learned Justices of the Court of Appeal misdirected themselves in law when they held:
“The Appellant accepted the Bank Guarantee for the benefit of Bassey and/or Tucker, and used it to get the cement into Nigeria as purchased by Heilit Nigeria Limited, and Tucker would seem to have access to any goods obtained by Heilit Nigeria Limited. And he would have been in a position to satisfy the agreement with the Respondent, but his greed overcame him, and he went to sell some of the cement clandestinely. That does not mean that Merchantile Bank of Nigeria Limited was negligent in dealing with the shipping documents in relation to this importation of cement for one thing, the evidence shows that Tucker took delivery of the cement in the ship while the Appellant Bank had custody of the documents. Tucker used none of the shipping documents to get hold of the cement and sell part of it. If he had reached and used those documents, then a case of being negligent in her keeping of these bills and invoices would have been established against the bank, and she would have been said to have made it possible by such negligence for Tucker to have taken delivery of the cement.”
- The learned Justices of the Court of Appeal misdirected themselves in law when they held:
“This Exhibit 9 is only an undertaking to help the Respondent satisfy the terms he had accepted under the Exhibit 7.
It was no contract between either the Respondent or the New Nigeria Bank Limited and the Appellant, the Merchantile Bank of Nigeria Limited, Lagos. That the Appellant is mentioned in the Exhibit 9 is immaterial. as it is only a side issue, the main concern being that Mr. Bassey E. Ekpo Bassey is to be paid. Mr. Bassey E. Ekpo Bassey appeared to have an account with the Appellant Bank. The Appellant dealt with Mr. Bassey and not with the Respondent or the New Nigeria Bank which might make conditions for the Respondent but not for Mr. Bassey.
- The learned Justices of the Court of Appeal erred in Law in placing so many premiums on Exhibit 7 when the case made by the Appellant on the pleading was on Exhibit 9 and Exhibit 4.
- The Judgment of the Court of Appeal is against the weight of evidence.
Counsel have differently formulated the issues for determination. Appellant counsel’s formulation is prolix requiring eight issues to be determined. I prefer the more compact formulation of the issues by counsel to the Respondent, which limits the issues to be determined to the ratio of the Court of Appeal. In the lead judgment of Ikwechegh JCA to which Eboh, and Jacks JJCA concurred, the reason for the judgment was stated as follows: “In my view this appeal succeeds on the ground that it was faulty deduction from the evidence before the Court, to wit the documents in evidence at the trial, to hold appellant liable in damages for negligence. The proper evaluation of these documents would lead to the conclusion that the Appellant was a total stranger to the Respondent, owed him no duty, and did not act negligently.”
The issues to be determined in this appeal which covers all the grounds of appeal therefore are limited to the question of the Negligence vel non of the Respondent towards, the Appellant. They are as follows –
- Whether Exhibit 9, the Guarantee by the New Nigeria Bank can create or impose in Law a duty of care on the Respondent so as to make it liable in Negligence to the Appellant.
- Whether Appellant established by evidence before the Court any special relationship or Nexus in law between him and the Respondent such that could create a duty of care as required to sustain an action under the Law of Negligence
- Was the Court of Appeal right, to hold that Appellant whose Banker’s Guarantee (Exhibit 9) accepted and utilised by the Respondent in financing the importation of cement, resulting in the loss to him, was such a total stranger to the Respondent that no duty of care was and could be owed to him in respect of Respondent’s non-compliance with the instructions in the Banker’s Guarantee.
- Was the Court of Appeal right in importing into the case facts not in evidence and deciding the appeal on the basis of such facts.
Concisely stated, all that these issues attempt to say is that Appellant’s action being in negligence, the Court of Appeal ought not set it aside by importing into the case facts not in evidence before the trial Court.
It is common ground and not disputed that the action is founded on Negligence. This is clear on the writ of summons and the Statement of claim. The particulars of negligence alleged are clearly set out in the Statement of claim. Counsel to the Appellant in his brief stressed this fact, and referred to paragraphs 8, and 11 in the Statement of claim, where it was pleaded as follows-
“8. The Defendant in opening the Letter of Credit acted contrary to the instructions referred to in the preceding paragraph and or negligently carried out the instructions in that:
(a) The Defendant failed and neglected to direct all documents, drafts, bills of Lading and invoices to be drawn in favour of P. A. Abusomwan and be endorsed to the New Nigeria Bank Limited as provided in the Banker’s Guarantee.
(b) directed all such documents and other Bills of Lading to be drawn in favour of and to be endorsed to Heilit Nigeria Limited a third party which did not provide the Banker’s Guarantee on which basis the Letter of Credit was opened.
11 ” … out of gross negligence, the Defendant failed, refused and or neglected to notify the Plaintiff or the New Nigeria Bank Limited of the receipt of the shipping documents in respect of the consignment of cement to the Plaintiff on board the Vessel M/V “Fast Bird.”
Counsel referred to the testimony of the Appellant in proof of negligence at the trial which was uncontradicted, and that Respondent did not give evidence. He referred to the endorsement in Exhibit 9 directing Respondent Bank that all documents, Bill of Lading andInvoices shall be drawn in favour of the Appellant and endorsed to the New Nigeria Bank Limited, Head Office, Mission Road, Benin City. Counsel also referred to the finding of fact of the trial Judge that Respondent Bank was negligent since they owed a duty to Appellant to observe the conditions in Exhibit 9.
In his reply Dr.Ineneji for the Respondent submitted that although the action appears to be founded on the tort of negligence, not contract, all the arguments in support of the brief of argument filed by the appellant and the particulars of the grounds of appeal suggest a contractual relationship. Appellant has failed to prove such a relationship with the Respondent. Counsel referred to the particulars of the grounds of appeal in 1, 2, 3, 4.Counsel submitted in his brief that on the evidence as a whole there was no contractual relationship between Appellant and the Respondent Bank and that the trial Judge also so found. Counsel submitted that the finding in the Court of Appeal that no contractual relationship existed between Appellant and Respondent amounts to a concurrent finding of fact on the issue.
It seems to me the issue stressed by Dr. Ineneji is not material to the determination of this appeal. This is because the Court of Appeal did not consider it an important issue having observed as follows –
“Now, the question that is all important is how did the appellant bank help Tucker to cheat the respondent How did such negligence if there was any, enable Tucker to take possession of what cement was meant for the respondent These questions are the very foundation and back bone of this appeal. ”
Thus the all important question to the Court of Appeal in this case was whether the Respondent was negligent towards the Appellant, and whether appellant’s loss arose from such negligence. As the Court of Appeal correctly pointed out, to appreciate the evidence upon which the trial judge gave Judgment one has to refer to Exhibits 2, 4, 8, 9,12 to find evidence of duty on the part of the Respondent towards the appellant. It is in these documents that one can discover the relationship, if any between Appellant and the Respondents.
In his consideration of these documents, the learned trial Judge arrived at the conclusion that Exhibit 7 created no contractual relationship between the Plaintiff and the Defendant Bank. He however, went on to hold that Exhibit 9, the Guarantee worth N100,000 by the New Nigeria Bank Ltd. on behalf of the Plaintiff to the Defendants and accepted by them for Mr. Bassey created a fiduciary relationship between the parties thus subjecting the Defendant Bank to a duty of care to the Plaintiff in respect thereof. The trial Judge particularly relied on the endorsement in Exhibit 9 to the effect that
“All documents, drafts, bills of lading and invoices shall be drawn in favour of Mr. P. A. Abusomwan and shall be endorsed to New Nigeria Bank Ltd. Head Office. Mission Road, Benin City.”
He also came to the conclusion, which has not been disputed before us that the irrevocable Letter of Credit, Exhibit 4 was raised on the strength of Exhibit 9 and Exhibit 12, the proforma invoice. He also concluded that although Plaintiff kept no account with the Defendant Bank, the fact that Exhibit 9 with specific instructions endorsed was deposited with the Defendant Bank, on behalf of the Plaintiff and in favour of Mr.Bassey and accepted by the Defendant Bank, the Plaintiff therefore became a customer of the Defendant Bank.
In determining the question of negliegence, the trial Judge found as a fact that the Defendant Bank raised the Letter of Credit Exhibit 4, on the basis of Exhibit 9, but in favour of Heilit (Nigeria) Ltd. instead of Mr. P. A. Abusomwan who provided the Bank Guarantee, and to whom the consignment of cement was being sent. He held that it was this negligence that enabled the consignment of cement to fall into the hands of Mr. Tucker, Chairman of Heilit (Nigeria) Ltd. The learned Judge concluded as follows – at p. 31 lines 8-19.
“I find that the defendant accepted Exhibit 9 as per memorandum in Exhibit 12 and acted on it as per Exhibit 4 but failed to comply with the condition “all documents, drafts, bills of lading and invoices shall be drawn in favour of Mr. P. A. Abusomwan and shall be endorsed to New Nigeria Bank Ltd, Head Office, Mission Road, Benin City.” I hold that the defendant was negligent for he owed a duty of care to the Plaintiff in respect of the observation of the above conditions in Exhibit 9. The defendant is liable to the Plaintiff for the loss he suffered as a result of this negligence.”
In setting aside the judgment of the High Court, the Court of Appeal proceeded on the basis that there was no contractual relationship between Plaintiff and the Defendant Bank, and that Exhibits 7 and 9 created no contractual relationship between them. In their consideration of Exhibits 2, 4, 7, 8, 9, 12, the Court of Appeal said,
“The operative agreement is the Exhibit 7 which is between Bassey/Tucker and the respondent. Neither the New Nigeria Bank Limited Benin City, nor Merchantile Bank Limited, Lagos was a party to this agreement. Neither of these Banks could take any benefit directly from this Exhibit 7, and neither could in law qualify, modify or alter this agreement. The Exhibit 9 could therefore, in my view, not modify or alter the Exhibit 7. The Exhibit 9 was not an agreement entered into between the respondent and the appellant. It was the New Nigeria Bank Limited, Benin City that issued the Exhibit ‘.’, and if any liability arose from it, only the said bank could sue on the strength of this Exhibit 9, and if ,but certainly not the respondent for the respondent did not give this guarantee. It was given for his benefit, in his favour. It was given to Mr. Bassey or Mr. Tucker, Bassey and/or Tucker received it for their use and accepting it for payment. They became liable to supply the cement to the respondent. … ”
The Court of Appeal completely relied on the view that the relationship of the parties was entirely contractual and nothing else, and no rights could arise between the parties except under such relationship. The Court said,
“The only agreement, contract or arrangement the breach of which would give the parties right to sue or be sued is the agreement in Exhibit 7 the parties thereto being Bassey, Tucker and the Respondent. In so far as Exhibit 9 created rights or duties, or obligations its force lay with the New Nigeria Bank Limited, Mission Road, Benin City and Mr. Bassey E. Ekpo Bassey.
The appellant is not concerned in it and cannot be held to be answerable for anything done amiss in regard to it. The only person who could be sued on this Exhibit 9 – even then only by the New Nigerian Bank Limited, Mission Road, Benin City – is Mr. Bassey E Ekpo Bassey who accepted it for payment for the cement he undertook to supply to the Respondent, and that only in the event of his failure to so supply the cement. I am of the firm view that the respondent cannot sue on account of any failure to observe any stipulation in this Exhibit 9. ”
Finally on this the Court of Appeal held,
“To hold that the appellant” was negligent for he owed a duty of care to the Plaintiff in respect of the observation (sic) of the above conditions in Exhibit 9″ is to make the appellant a party to the said Exhibit 9 which is a document that binds only the donor, the New Nigeria Bank Limited, and the donee Mr. Bassey E. Ekpo Bassey, and nobody else.”
The Court went on to hold that,
” … Exhibit 9 could not alter Exhibit 7, and the New Nigeria Bank Limited, not being a party to Exhibit 7 could not alter it in any manner and so widen its scope of operation so as to give the respondent the right to sue non-parties under his agreement. There is therefore no basis for holding the appellant liable on a charge of negligence in its dealings with the Exhibit 9. Mr. Bassey probably may sue the appellant on the strength of Exhibit 9 for a proper cause; and so also could the New Nigeria Bank Limited sue Mr. Bassey if the latter failed to supply the cement after getting Exhibit 9. The respondent could only sue Bassey/Tucker on the strength of the agreement, Exhibit 7, but not on the strength of this Exhibit 9 which would be only the evidence of his payment for the cement.”
Still relying on the privity of contract fallacy which has long disappeared, the Court of Appeal concluded as follows-
“The proper evaluation of these documents would lead to the conclusion that the appellant was a total stranger to the respondent, owed him no duty, and did not act negligently.”
It seems to me pertinent and necessary to observe that there appears to be a crucial misunderstanding of the issue before the Court. The claim before the Court is clearly one for an action for damages for negligence. The statement of claim in support of the writ of summons distinctly at paragraphs 6, 7, 8, 11, 12, pleaded the particulars of alleged negligence. The defendants at paragraphs 9, 10, 13 denied the allegations of negligence. It was therefore unarguable that the question of negligence was an issue between the parties to be resolved at the trial. At the trial plaintiff led evidence in support of his pleading. The defendant relied on the case of the plaintiff and did not lead any evidence. The trial Judge accordingly on the evidence before him found the allegations of negligence established. The trial Judge was right as to his findings of fact of negligence. In J.O.O. lmana v. Madam Jarin Robinson (1979) 3 & 4 S.C. at pp. 9-10, Aniagolu J.S.C., stated the position,
“It is clear to us that once pleadings have been settled, and issues joined, the duty of the Court is to proceed to the trial of the issues – see The Gold Coast and Ashanti Electric Power Development Corporation Ltd. v. The Attorney- General of the Gold Coast (1937) 3 W.A.C.A. 215 and if one party fails or refuses to submit the issues he has raised in his pleadings for trial by giving or calling evidence in their support, the trial judge must, unless there are other legal reasons dictating to the contrary, resolve the case against the defaulting party.”
The Court of Appeal proceeded to reverse the finding of fact of learned trial Judge that the Respondent Bank by failing to adhere to the instructions in Exhibit 9 with respect to opening of letters of credit was negligent in the discharge of its duties and was therefore liable to the Plaintiff in damages.
It is important to appreciate the fact that the question whether the defendant bank observed the instructions endorsed on Exhibit 9 is a question of fact the finding of which was made by the trial Judge. Findings of fact are matters peculiarly within the province and reserved for the trial court – see Military Governor, Western State v. Afolabi Laniba & anor (1974) 1 ALL NLR. (Pt.2) 179. See Ebba v. Ogodo (1984)4 SC.84, Woluchem v. Gudi (1981) 5 SC. 291. The presumption is that such findings of facts are correct. In this case the findings of fact were not challenged. It was only contended that there is no contractual relationship between the parties. The Court of Appeal appears to be relying on the evaluation of the documents, involved in the transaction. It was the view of the Court of Appeal that on the evaluation of the documents as a whole the Plaintiff was a total stranger to the respondent, and to whom no duty was owed, and accordingly did not act negligently. The Court of Appeal appears to be of the view that no action for negligence can arise in a contract on behalf of a person not a party to the contract.
It is our law that where there is ample evidence and the trial judge failed to evaluate it and make correct findings, the Court of Appeal is at Liberty to evaluate such evidence and make proper findings, unless the findings rest on the credibility of witnesses – See Shell-BP Development Co. of Nigeria Ltd. v. His Highness Pere Cole & Ors. (1978) 3 SC.183.
The question now is whether, if it is conceded that there is no contractual relationship between the appellant and the respondent that is the end of the matter, quaesitio cadit. The matter does not end there. Since the 1920s the trend has developed of discarding the 19th Century view that a tort can not arise from the breach of contract. It is now the law that an action in tort for negligence can arise de hors contract of the parties. The former view was that if a person undertook a contractual obligation towards another, and his mis-performance or non-performance resulted in damage to a third party, the third party so injured could not sue unless he can show that the obligation of the contracting parties extended to him. For instance in Winterbottom v. Wright (1842) 10 M & W. 109, 114 Lord Arbinger said,
“Unless we confine the operation of such contracts as this to the parties who entered into them, the most absurd and outrageous consequences, to which I can see no limit would ensue.”
The fog over remedies arising from breach of contractual obligations introduced into the law by what was conveniently regarded as the “privity of contract fallacy” was cleared by the brightness brought in the lucidity of the arguments of Lord Atkin in Donoghue v. Stevenson (1932) A.C. 562. The effect of Donoghue v. Stevenson (Supra) is that where a person is injured from a transaction arising from the contract of two persons, the third party is not precluded from bringing action on the grounds that he was not a party to the contract the mis-performance or non-performance of which has resulted in the damage. The duty imposed here is not because there was a contract but because the defendant had impliedly undertaken not to injure the Plaintiff. The rationale in truth is that, even though not so expressed, the obligations towards the contracting party extended to all such persons who were likely to be injured by the acts or omissions of the Defendant. They are the neighbours in contemplation or ought to be in contemplation of the defendant.
The recent decision of the English House of Lords has summed up the law admirably in Ann v. Merton London Borough Council (1978) A.C. 728, where Lord Wilberforce stated as follows –
“Through the trilogy of cases in this House – Donoghue v. Stevenson (1932) A.C. 562, Hedley Byren & Co. Ltd. v. Heller & Partners Ltd. (1964) A.C. 465; Dorset Yacht Co. Ltd. v. Home Office (1970) A.C. 1004, the position has now been reached that in order to establish that a duty of care arises in a particular situation, it is not necessary to bring the facts of that situation within those of previous situations in which a duty of care has been held to exist.
First one has to ask as between the alleged wrong doer and the person who has suffered damage there is a sufficient relationship of proximity or neighbourhood such that, in the reasonable contemplation of the former; carelessness on his part may be likely to cause damage to the latter – in which case a prima facie duty of care arises. Secondly, if the first question is answered affirmatively, it is necessary to consider whether there are any considerations which ought to negative, or to reduce or limit the scope of the duty or the class of person to whom it is owed or the damages to which a breach of it may give rise.
Surely, duty arising from proximity in law or fact, and not contract is a condition precedent for liability in negligence. This was emphasised by the cases decided since after Donoghue v. Stevenson (Supra) – See Clay v. A. J. Crump & Sons Ltd. (1984) 1 QB. 533 Candler v. Crane, Christmas & Co. (1951) 2 KB. 164. I think the doctrine of proximity as the foundation of duty of care in tort, is now firmly established. It has replaced the ertswhile “privity of contract” fallacy .
I now turn to the facts of the case before us and apply the principles enunciated above. The facts are that Exhibits 9, the Guarantee, was made by the New Nigeria Bank Ltd. on behalf of the Appellant with the Respondent Bank in favour of Mr. Bassey. The endorsement on Exhibit 9 clearly provided that
“All documents, Bill of Lading and Invoices shall be drawn in favour of Mr. P. A. Ahusomwan and shall be endorsed to New Nigerian Bank Limited, Head Office, Mission Road, Benin City.”
However, when the Respondent Bank issued Exhibit 4, the Letter of Credit relying on Exhibits 9 and 12, it was raised in favour of Heilit (Nigeria) Ltd. instead of Mr. P. A. Abusomwan, on whose behalf Exhibit 9 was made. This was despite the fact that Exhibit 12 clearly indicated Appellant as the shipper of the consignment. Respondent Bank owed a duty to the New Nigeria Bank Limited to carry out the instructions on Exhibit 9. Appellant is such a person whose relationship with Exhibit 9 is so proximate that there is a duty to ensure that he was not injured by any acts of mis-performance or non-performance. The failure on the part of the Respondent to adhere to the instructions in Exhibit 9 is a mis-performance and is a breach of the duty to take care not to injure the appellant. Appellant was injured by this negligence.
The error in the view adopted by the Court of Appeal was that it relied on the privity of contract fallacy to hold that appellant not being a party to the contract could not sue. Appellant was the person on whose behalf Exhibit 9 was made and the specific instructions endorsed therein was intended to protect the interest of the appellant. Since Respondent Bank ignored the instructions in Exhibit 9, and this resulted in the loss claimed by the appellant, it was the breach of the duty of care owed to the appellant and which is an actionable wrong.
It is interesting to observe that even proceeding on the Privity of contract principle, and having accepted that Exhibit 9, the Guarantee was made by the New Nigeria Bank Limited, Mission Road, Benin City, with the Respondent Bank, on behalf of the Plaintiff in favour of Mr. Bassey, it should have been clear to the Court below that the New Nigeria Bank Limited was agent of the Plaintiff, who was disclosed in Exhibit 9. A disclosed principal may sue or be sued on any contract made on his behalf by agent acting within the scope of his authority – see Langton v. Waite (1868) L.R. 6 Eq. 165. Since Plaintiff did not bring his action in contract, but in tort, the above consideration does not arise.
The Court of Appeal was clearly wrong in their evaluation of the documents. They were clearly also wrong in setting aside the findings of fact of the trial Judge without showing that it was perverse. All the grounds of appeal argued succeed. The appeal is accordingly allowed.
The Judgment of the Court of Appeal and Costs awarded are hereby set aside. Judgment of the High Court and costs are restored.
Respondent shall pay to appellants costs assessed at N300 in this Court and N150 in the Court below.
SC.71/1986
