Mazi Anthony Sunday O. Nwangwu V. First Bank of Nigeria Plc (2008)
LawGlobal-Hub Lead Judgment Report
SIDI DAUDA BAGE, J. C. A.
This is an appeal against the Judgment of the Enugu High Court presided by AHANONU, J of the Enugu State Judiciary. The said Judgment was delivered on the 30th October 2006 against the defendant.
The Plaintiff, who is the appellant herein had before the trial court per his amended statement of claim dated the 28th September 2004, claim against the defendants as follows:-
(a) The sum of N6, 480,056.47 (Six million, four hundred and eighty thousand and fifty six Naira forty-seven Kobo) being the value as at 31/12/2001 the excess deposit of N1,318.00 paid by the plaintiff in 1982 still retained by the defendant;
(b) The sum of N6,736,616.01 (six million seven hundred and thirty-six thousand six hundred and sixteen Naira ninety-one Kobo), being special damages for loss of profits suffered by the plaintiff from 1984 to 2001;
(c) Interest on the aforesaid sums of N6,480,056.47 and N6,736,616.91 at the rate of 25% per annum with effect from 1/1/2002 until the date of Judgment and thereafter at the rate of 5% per annum until the final liquidation;
(d) The sum of N50 million (Fifty million Naira) as general damages on the footing of exemplary or aggravated damages, for negligence and breach of contract.
The gist of this case is that the Appellant who was the Plaintiff at the trial court, was the sole agent of Horii & Co. Ltd, Tokyo. In August, 1982, he instructed the Defendant, his bankers then, (1st Bank of Nigeria Plc) in their Enugu Main Branch at Okpara Avenue, Enugu, under account No. 64440, to open irrevocable confirmed documentary credit (L/C) for importation of Horii duplicating machine accessories from Horii & Co. Ltd. Tokyo, Japan. He paid N6,063.00 by cheque to cover the defendant’s charges and commissions and 125% of the value of the goods shown in the proforma invoice as Yl,839, 000.00 or N4,745.00 whereby the defendant undertook to pay the Japanese supplier through chartered Bank of Tokyo upon presentation of the shipping documents for the goods to chartered Bank.
The Appellant (Plaintiff before the trial court) on 9/8/82 completed Exchange Control Form “M” which the Respondent (Defendants before the trial court) signed and stamped on the 11/8/82. Form M is the application to Central Bank of Nigeria (CBN) to purchase foreign currency valued Y1,807,200.00 or N4,845.97 for importation of the machines. The seller of the machines fully complied with the terms. of the L/C informed the Respondent accordingly and demanded payment. The Respondent failed to pay contrary to its undertaking in the L/C, despite repeated demand letters by the Appellant. The Respondent’s replies were that it was waiting for CRN to release foreign exchange (forex) and that its file on the matter was missing. The Appellant was constrained to write to CBN, but no response was received. He then consulted a lawyer who wrote letters to CBN, and received replies that the defendant informed him that the L/C had been settled contrary to the Respondents letter.
The Appellant said following non-payment by Respondent, the supplier decided to cut off further supplies to him, after shipment of the goods the subject matter of the L/C for which the supplier was not paid. Appellant stated that he had invested N8,010.00 and made of profit of N7,384.84. If his business had not been interrupted by the Respondents failure to pay the seller on the L/C, he would have made a profit of N6.7 million between 1983 and 2001.
Appellant also said that the 25% (N1,318.00) excess deposit made by him in 1982 had not been refunded to him. Its value as at 2001 was N6.4 million. He engaged a chartered accountant who professionally made calculations and arrived at the aforesaid figures.
The trial Judge in his Judgment upheld the contention of the defendant that registration of Form M by the Plaintiff meant that payment of the supplier was subject to prior release of foreign currency by CBN, He went as far as saying that the commercial instrument known as irrevocable documentary credit (L/C) was not applicable to third world countries, like Nigeria, but should concern free trade environment. Accordingly, the defendant was held not liable for failure to settle the L/C, notwithstanding the clear terms of the instrument. The trial judge took upon himself the task of questioning the use of the dollar as benchmark in the accountant’s report, which the defendant did not challenge.
Pleadings were order, filed and exchanged Hearing commenced in earnest with parties calling witnesses and tendering documentary evidence. The plaintiff called two witnesses, while the defendant called one witness.
The Learned Trial Judge in a reserved Judgment delivered on 30th October 2006 dismissed the Plaintiff/Appellant claims, save for relief No. 1 (1) for which the Appellant was awarded refund of his excess deposit of N1,318 with interest at 19.5% per annum from 1982 till date of Judgment and 5% per annum thereafter with cost of N10, 000.00 Aggrieved and dissatisfied with the decision of the lower Court, the Appellant Appealed to this Court.
The appellant’s learned counsel on the 30th of August 2007 filed his brief of argument on behalf of the appellant, proposed 3 Issues for the determination of this appeal which are reproduced below:
(1) Did the learned trial Judge not commit a fundamental error of law by embarking on a voyage of exploration to discover the intention of the parties to the letter of credit instead of interpreting and given effect to clear provisions of the L/C, which is a written document (Ground 1).
(2) Whether the lower court failed to appreciate and did misconstrue the obligations created by the letters of credit (L/C)’the subject matter of the Suit (Ground 2, 3, & 4)
(3) Was the trial Judge not the guilty of miscarriage of justice by descending into the arena in considering the measure of the liability of the defendant to the plaintiff in negligence and breach of contract under the L/C, the defendant not having effectively challenged the plaintiffs calculations of the damages and the value of the excess deposit recoverable from the defendant (Ground 5).
The Respondent’s Learned Counsel who on 24/9/2007 filed his Respondent’s brief of argument dated’ 20/9/2007 formulated two issues for determination, which read thus:-
(i) Whether the purported contract/undertaking of the Respondent under Exhibit ‘B’ to pay forex “at sight” overseas, is legally enforceable without recourse to CBN and relevant Exchange control statutes.
(ii) Whether the Appellant’s claims/reliefs for interest, negligence, breach of contract, loss of profit and value of excess Naira deposit were particularized proven and/or legally sustainable.
A close and dispassionate look at the two sets of issues for determination proposed by the Learned counsel of the parties “made ‘me’ to be inclined to be guided by those formulated by the respondent’s counsel in the treatment of this appeal, not only because of their being all encompassing and more elegantly couched, but also because they have indeed encapsulated or captured all the issues at stake in the appeal and those issues raised in the appellant’s brief of argument as well. And in treating the appeal I shall consider the two issues raised by the respondent separately, although in my opinion, the two issues, subsumed all the three issues raised in the Appellants brief of argument.
On Issue 1, ‘whether the purported contract/undertaking of the Respondent to pay forex at sight overseas is legally enforceable without, recourse to CBN’ and relevant Exchange control statutes,’ the learned Counsel to the appellant submits that the present Suit revolves around the engagement entered into by the Appellant and the Respondent which is in writing in Exhibits A and B, viz application for L/C and irrevocable confirmed documentary credit (Lie) No. 140/82/145/ID for Y1,807,200.00. It is therefore the contention of learned appellants counsel that the duty and role of the trial court is to interpret the terms of the written documents and give effect to them, in so far as the words of the documents are clear and the intentions therein expressed are enforceable.
Learned Counsel to the appellant submitted that it is not the duty of the Court to go beyond the clear terms of written documents to seek to discover the intentions and understanding of the parties who made the documents.
Learned Counsel to the appellant submitted that an important canon of interpretation is that words contained in a document should be given their literal and ordinary meaning, unless doing so would result in absurdity. No words, terms or condition should be read into a document not expressly stated therein. See: Total (Nig) Plc V. Akinpelu (2004) 17 NWLR (pt 903) 509 at 527, Egbe V. Alhaji (1990) 1 NWLR (pt.128) 546. Ademola Sodipo (1980) 5 NWLR (pt. 121) 329 Olowosago V. Adebanjo (1989) 4 NWLR (pt.88) 275. Also See: Halsbury Laws of England Vol. II (3rd Ed) paragraph 632 page 384.
Learned Counsel to the appellant further submits that the position of the Respondent that the L/C should be read subject to the condition that CBN should provide Forex before the seller would be paid runs contrary to the clear terms of the contract between the appellant and the respondent under the L/C. After all, the terms of the L/C were drawn up by the defendant and presented to the plaintiff to append his signature. If such an important and novel deviation from the normal rules of L/C was intended, the respondent would not have left that term out of the L/C. The provisions of the Exchange control Act 1962 were duly complied with by the submission to and approval by CBN of form M. The respondents’ contention is untenable. See: Total (Nig) Plc V. Akinpelu Supra.
Learned Counsel to the appellant submits further that an international transaction by documentary credit is sui generis, and is governed by clear cut special rules and regulations which are prescribed to ensure certainty and stability in such transaction. See: Intraco Ltd V. Nots Shipping Corporation of Liberia. The Bhoja Trader (1981) 2 L1oyds Rep. 256, 257. As to the definition of letter of credit See tid. Banky Son & Co. V. Loss T. Sonyth & Co. Ltd (1940) 56 T.L.R. 825, at 828.
Learned Counsel to the appellant further submitted that the parties to this Suit have agreed and clearly specified and practice of Documentary Credits (1974 Revision) ICC Brochure No. 290 (VCP), See Akinsanya V. UBA Ltd (1986) 4 NWLR (pt. 35) 273.
Learned Counsel to the appellant further submits that under sections 3 – 15 of the Exchange control Act, 1962 the Minister of. Finance was empowered to control the acquisition and disposition of foreign currency. The Minister delegated to CBN his powers for the day today administration of the Act, and by and large, foreign exchange transactions require CBN approval for purposes of monitoring foreign trade and control of the nation’s external reserves. See: Exchange Control (Delegation of Powers) Legal Notice No. 82 of 1962 Laws of the Federation of Nigeria (Cap. 113) 1990. One of such control measures was the requirement that an applicant for purchase of foreign currency must complete form M.
Learned Counsel to the appellant further submitted that it is clear that at the time L/C was established on 2/9/82, there was CBN approval to open it, pursuant to CBN regulations. The obligation of the Respondent upon fulfillment by the beneficiary of the condition prescribed by the L/C was to pay the beneficiary as per L/C and claim reimbursement from the CBN. On the nature of commercial documentary credit (L/C) See: Pavia & Co SPA V. Thurman – Nelson (1952) 2 QB 84, at 88.
Learned Counsel to the appellant submitted further that the provisions’ of uniform customs & Practice for documentary Credits 1974 Revision .which governs the L/C which is the subject matter of this Suit.
Learned Counsel to the appellant submits and urges the court to resolve both Issues I and 2 in favour of the appellant and to hold that the respondent was under an obligation to pay the appellants supplier in accordance with the terms of the L/C.
Replying, the respondent’s Counsel submitted that an objective interpretation and appraisal of the application for L/C the letter of credit itself and form ‘M’ together with terms and conditions of the appellants application, reveal unequivocally that during the Pre-sfem era all importations and. Transaction requiring forex (including L/C) are subject to approval of form ‘M’ and release of the requested forex by CBN. This is an absolute discretion of the CBN.
Learned Counsel to the respondent stated further that the main grouse of the appellant in this action is the alleged breach of some printed contents of the letter of credit which were construed to be an undertaking by the respondent to pay appellants overseas suppliers at sight on presentation of shipping documents, all those claims of the appellant are subject to Exchange Control Form ‘M’ being duly approved. Also that the credit will not be considered paid until Central Bank of Nigeria provides you or your correspondents with the requisite foreign currency in full reimbursement thereof, and that it is understood and agreed that all risks including exchange risks arising out of or consequent on the issue of this credit are to be borne by me/us alone and that the Bank and/or its correspondents are not responsible for any errors or delays.
Learned Counsel to the respondent further submitted on these issues that the appellant categorically conceded that he read and understood the term and conditions stipulated in both his application for L/C and form ‘M’ hence he is legally bound by the terms and conditions contained therein.
See: (1) Union Bank Plc. v. Prof. Ozigi (1994) 3 NWLR (pt. 333) 385
(2) Bank of the North Ltd v. Aliyu (1999) 7 NWLR (pg. 612)
OMITTED PAGE 10
Learned Counsel to the respondent further submitted that another grouse of the appellant on these issues is whether the CBN had released the forex to the respondent for onward transmission to the appellants overseas suppliers, but same was misappropriated by the respondent. It is on record that the L/C was issued pursuant to the appellant’s application. The appellant never requested or applied to the Respondent that the L/C issued be paid at “sight” as is usually contained in the printed formal of L/C.
Learned Counsel to the respondent further replied that the lame attempt by the appellant to take benefit of the usual printed contents of the letters of credit beyond his instructions and application is an after thought and ineffectual being extraneous to the instruction and contract envisaged in his application for L/C. All the appellant complaint to the respondent was not as to any breach of contract, but only inquired the fate of his forex application to CBN.
Learned Counsel to the respondent further submitted that it is a cardinal rule of construction that its several clauses must be interpreted harmoniously so that various parts are not brought in conflict with their natural meaning.
See:- Ojokolobo V. Alamu (1987) 3 NWLR (pt.61) 377, Unilije Dev. Co. Ltd V. Adeshigbin, (2001) 4 NWLR (pt. 704) 609.FBN V. Excel Plastic Ltd. (2003) 13 NWLR (pt. 837) 412 ratio 4.
Learned Counsel to the respondent further submitted that the instant Forex remittance transaction can only be governed by the terms and conditions contained in Form ‘M’ to which the appellant is signatory and not the L/C, the printed portions of which at best, constitute unilateral contract created by the Respondent and which appellant. For want of privity of contract cannot take benefit of, even if same were made for his benefit. See:- AG (Federal) V. A.I.C. Ltd (2000) 10 NWLR (pt.675) 293 ratio 3, Ikpeazu V. ACB (1965) NWLR P. 374, Union Beverages Ltd. V. Pepsi Cola Int. Ltd (1994) 3 NWLR (pt. 330) 1 ratio 1.
Learned Counsel to the respondent further argued that in any event proof ease of forex on appellants application being a bank transaction cannot be from mere correspondences, in disregard of the eloquent provisions of
97 (1)(h) and (2)(e) of the Evidence Act. The law is trite that an entry book can only be established by admissible secondary evidence in S.97 (2)(e) of the Evidence Act and the court has a duty, during only on admissible secondary evidence and to discountenance, where such untenable evidence was erroneously admitted
Fire Insurance Ltd V. IBWA (2001) 7 NWLR 1- 4, Oguma Associated Co. Ltd V. IBWA 101 (1988) 1 NWLR (pt. 73) 658, Yesufu V. ACB Ltd (1976) 1 ANLR p.328.
Learned Counsel to Respondent urged this court to take judicial notice of the fact that CBN is not just a Bank but a public institution that keeps official records of its transaction. Hence the appellant is yet to discharge the burden of proof resting on him, having failed to apply for, procure or tender any certified true copy of credit advice or CBN forex release/payment slip showing that CBN had released the subject Forex to the Respondent. It is only then that the burden of proof will shift to the Respondent who cannot be expected to tender a nonexistent or imaginary piece of evidence. See:- FBN V. Excel Plastic Ltd (supra) ratio 5.
Learned Counsel to the Respondent submitted that in the absence of any enforceable contractual obligation to provide Forex without recourse to CBN or admissible proof of CBN release of the requested forex to the Respondent, we pray this court to resolve Issue 1 in favour of the Respondent.
Issue NO.3 of the Appellants brief of argument to wit ‘whether the trial Judge was not guilty of miscarriage of Justice by descending into the arena in considering the measure of the liability of the Respondent to the Appellant in negligence and breach of contract under the L/C, the defendant not having effectively challenged the plaintiff’s calculations of the damages and the value of the excess deposit recoverable from the Respondent’, Learned Counsel to the Appellant maintained that the first relief sought by the appellant is payment of the value as at 31/12/2001 of the excess deposit ofN1,318.00 paid by the appellant in 1982, which had not been refunded to him. The report of PW2, a chartered accountant, contains calculations on how the value of that amount as at 31/12/2001 should be N6,480,056.47. PW2’s evidence was not contradicted nor did the defendant offer alternative calculation. The Court, having found (page 129 of the Record), that “the defendant had not bothered to attack frontally the rate of annual interest (19.5 per cent) used by the Plaintiff to calculate the current value of the deposit, just as he had not contested the use of the ‘dollar as bench mark in the calculation” should have held that the figure is correct, proper and authentic, having been admitted by the defendant, which is a banker. The report is that of a reputable professional accountant, a member of ICAN. No further proof was necessary for the court, having regard to Section 75 of the Evidence Act.
Learned Counsel to appellant further submitted that the second relief claimed by the appellant is special damages for loss of profits for the period 1984 – 2001. The appellant has calculated the loss and arrived at the sum of N6, 736,616.91 again, the Respondent has not discredited ‘Or controverted it; the court is urged to accept the professional valuation and award the said amount under this head.
Learned Counsel to the appellant further submitted that the third relief is claim for interest on the said sum ofN6, 480,056.47 and N6,736,616.91 at the rate of 25% per annum from 1/1/2002 until Judgment and thereafter at 5% Per annum until final liquidation thereof. The plaintiff is entitled to interest as the plaintiff has been kept out of his money for which the defendant ought to compensate the plaintiff accordingly. Such interest is referred to as contractual interest and it accrues from day to day until the date ‘of Judgment See’;
(a) N.G.S. Co. Ltd V. NPA (1990) 1 NWLR (pt.129) 741
(b) ACME Builders Ltd V. Kaduna Water Board (1999) 2 NWLR (pt,590) 288
‘A9 UBA Plc V. BTL Ind. Ltd (2004) 18 NWLR (pt. 904) 180, 235.
Learned Counsel to the appellant further submits that the fourth and final relief sought by the appellant is payment of N50.million as general damages on the footing of exemplary or aggravated damages are awarded against oppressive and arbitrary action where it is necessary to show that the law cannot be broken with impunity, See: Me Gregor on Damages (14th Ed) pp.231 – 2 paragraph 318-9. Also See: Odiba V. Ezege (1988) 7 KLR (pt.68) 1731, 1750. Elioehin (Nig) Ltd V. Mbadiwe (1986) 1 NWLR (pt.14) 47.
Learned Counsel to appellant finally urges this court to resolve issue 3 in favour of the appellant. Replying to the argument above. the learned counsel to the Respondent submitted that on the claim ofN50 million damages for Negligence and breach of contract. It is trite that Negligence is a cause of action and not a head of claim, for which damages can be awarded, See: C & C Construction Ltd V. Okhai (2003) 18 NWLR (pt. 851) 79 ratio 6.
Learned Counsel to the Respondent further submitted that it is equally settled, that general damages cannot be awarded in an action for breach of contract, as general damages belong to the realm of torts. See:- Ndinwa V. Igbinedion (2001) 5 NWLR (pt. 705) 140 ratio 2. Barau V. Cubitts Nig Ltd. (1990) 5 NWLR (p. 152) 630 ratio to.
Learned Counsel to the Respondent said that the Appellant had earlier in his pleadings and evidence in Court categorically abandoned his cause of action on Negligence and restricted his complaint to breach of contract. This is as per paragraph 12 of his Amended statement of claim at page 25 of the Record, as well as Appellants evidence under Cross-examination at page 52 lines 3 – 5 of the Record of Proceedings. Issues were not even joined by the appellant and Respondent on the cause of action for negligence, to warrant any consideration of the N50 million claim predicated thereon. Having admitted the Respondent’s diligence his future to plead/prove that Respondent failed to exercise due care, which is a vital ingredient of Negligence, this Court is urge to affirm the lower court’s dismissal of this cause of action See: Royal Ade (Nig) Ltd V. N.O.C.M. Plc (2004) 8 NWLR (pt. 874) 206 ratio 1 & 2.
Learned counsel to the Respondent submits on claim of N1, 318 Excess deposit and interest, this claim was premised on “Losses Suffered by the Appellant and current value of the Appellants fund retained by the Respondent”. The appellant who never pleaded US dollar as the basis of his claim contends on this head that he is entitlement to it. Appellant is to be reminded that the gravermen of his claim is for refund of N1,318 excess deposit he made Naira currency in 1982. So what has informed the appellant of his sudden preference for dollar was the excess deposit made in dollars or the refund claimed in dollars.
The claim on dollars must be discountenanced See: Okonji V. Ntokanma (1999) 14 NWLR (pt. 638) 250 Bamgboye V. University of Ilorin (1999) 10 NWLR (pt. 622) 290.
Learned Counsel to Respondent further submitted that as pleaded by the appellant himself at paragraph 5 of his Amended statement of claim, the compulsory .deposit of 125% was required of all Applicants for forex: The Appellant had also read this term of the bargain and freely made the extra deposit. Again the state of the pleadings and evidence show that the Appellant agreed that the entire naira deposit was forwarded to CBN hence in the absence of bank entry showing that the naira deposits had been retrieved from CBN, there was no basis for the award for refund of the excess deposit with interest. We refer to Section 97 (2)(e) of the Evidence Act.
Learned Counsel to the Respondent again submitted on claim of special damages for loss of profit, being an item of special damages, the law mandatorily requires that it be specifically pleaded and particularized. This requirement of law has obviously not been complied with in this case; as .the appellant has. Not detailed how he arrived at the net profit margin he claims or projects to reap in the future. It is not enough for the appellant to claim that “In or about 1983 “that he realized a net operating profit of not less that N7,384.84” he must go further to plead particulars and prove how he arrived at the said figure See: AG (Oyo State) V. Fairlakes Hotels (1989) 5 NWLR (pt. 121) 255 ratio 14 particularly of page 284 paragraph C. DBA Plc V. Samba Petroleum (2002) 16 NWLR (pt. 793) 391 ratio 10. This Court should affirm the dismissal of this head of claim by thy lower court.
Learned Counsel to the Respondent again submitted on claim of interest, that it is unsustainable being outside the contemplation of the parties at the time they entered into conditional contract. Respondents cannot award interest on money not kept by it. See: Saby Jernstoberi M.F. A/S Vs. Olaogun Ent. (1999) 14 NWLR (pt. 637) 128; FBN Plc V. EXCEL PLAST IND. LTD (supra) ratio 10. He finally urge this Court to resolve this Issue No.3 in favour of the Respondent.
In response to the arguments of the Respondent in his brief, the Appellant his Reply brief dated the 2/10/2007 and filed on the 3/10/2007. For the purposes of clarity some points are addressed.
Learned Counsel to the appellant replied paragraph 4-26 of the Respondent brief that he withheld Form M, and later produced some at Cross-exanimation. The CBN is the sole regulator of forex it has the power and authority to authorize commercial banks to effect payment of L/C, CBN does not deal with Private individuals.
Learned Counsel to the appellant in his Reply Brief submitted that the distinction between Bill for collection and Documentary credit has been made very clear in Akinsanya V. UBA Ltd (Supra).
Learned appellants Counsel said application for L/C is a directive to the Respondent by the appellant to issue an instrument for payment of the supplier upon receipt of the shipping documents by the Issuing Bank or its correspondent Bank. The appellant is not expected to issue out a new directive to the Respondent.
Learned Counsel to the appellant further argued on the Reply Brief that it is the law that a party to a contract does not need to sign it if he does not undertake any obligation under it. However he is not deprived of his right to claim under it against a party Who undertakes an obligation in his ‘favour’ See: 8 HLE (3rd Ed) page 94 paragraph 165.
Learned Counsel to the appellant further stated that the role of the accountant was to calculate the losses in monetary terms, based on those facts which have not been challenged by the respondent. The calculation should have been taken as admitted by the respondent and the Lower Court should have given judgement accordingly. See: Incar Nigeria Ltd V. Adegboye (1985) 2 NWLR (pt. 8) 453, 461-2. Obembo V. Wemabod Estates Ltd (1977) 5 SC 115 & Ors.
Learned Counsel to the appellant finally urged that this Court should award damages and interest as claimed, as per the accountant’s calculations and prayed this Court to reverse the decision of the Lower Court and enter Judgment in favour of the appellant as claimed.
In considering the issues raised in this appeal, which involves a most important aspect of commercial law, which deals with the letters of credit, for short L/C. Lord Denning L.J., Cashe then was) dealt with the increasing sale of goods across the world, in the case of Pavia & Co. S.P.A. v. Thurmann Nelsen (1952) 2 QB. 84 where he said at page 88 as below:
“The sale of goods across the world is now usually arranged by means of confirmed credits. The
buyer request his banker to open a credit in favour of the seller, and in pursuance of that request the banker, or his foreign agent issues a confirmed credit in favour of the seller. This credit I promise by the banker to pay money to the seller in return for the shipping documents.
Then the seller, when he “presents the documents, gets paid the contract price. The conditions of credit must be strictly fulfilled; otherwise the seller would not be entitled to draw on it”
Before I discuss the Law which governs the issuance of L/C in International trade transactions, I would like to set out the facts of this case and then juxtapose them with the Laws on the subject for the proper determination of this appeal.
Anthony Sunday O. Nwangwu trading in the name & Style of A.S.O. Nwangwu & sons Enterprises (WA) Ltd, having decided to import Horii duplicating machine accessories from Horii & Co. Ltd, Tokyo, Japan. After the deal, approached and contracted with the 1st Bank of Nigeria Plc, to open a letter of credit in favour of Horii & Co. Ltd Tokyo Japan.
Hereinafter in this judgment, Anthony Sunday O. Nwangwu aforesaid, will be referred to as the Appellant while the 1st Bank of Nigeria Plc will be referred to as the Respondent. The Letter of credit was for YI,839,000.00 or N4,745.00 (Exhibits A and AI) The L/C was opened on 2/9/82 as No. 140/82/145/ID (Exhibit Band BI) whereby the Respondent undertook to pay the Japanese supplier through chartered Bank of Tokyo upon presentation of the shipping documents for the goods to chartered Bank.
The appellant on 9/8/82 completed Exchange Control Form ‘M’ which the Respondent signed and stamped on the 11/8/82 (Exhibit Y) Form M is the application to Central Bank of Nigeria (CBN) to purchase foreign currency valued, Yl,807,200.00 or N4,845.97 for importation of Horii duplicating machine accessories from Horii & Co. Ltd, Tokyo’ japan. It was processed, approved and assigned CBN No. 140/82170. Paragraph I of Form “M” shows that payment to foreign supplier should be by L/C or Bill for collection.
The seller fully complied with the terms of the L/C informed the Respondent accordingly and demanded payment (Exhibits C, CI & D). The Respondents failed to pay contrary to its undertaking in the L/C, despite repeated demands by the appellant (Exhibits F, H, J & K). The Respondents replies were that it was waiting for CBN to release foreign exchange (Forex) and that its file on the matter missing (Exhibits G, L & M). The appellant was constrained to write to CBN (Exhibits N & O) but no response was received. He then consulted a lawyer who wrote letters to CBN (Exhibits P & O) and received replies (Exhibits R & S) CBN stated in Exhibit S that the Respondent informed it that the L/C had been settled contrary to the Respondents’ letter (Exhibit L).
The Appellants case is that following the non-payment by Respondent the supplier decided to cut off further supplies to him (Exhibits T & U) after shipment of the goods the subject matter of the L/C for which the supplier was not paid. In that transaction he invested N8, 010.00 and made profit of N7,384.84 Exhibit V, VI – V12. If his business had not been interrupted by the Respondents failure to pay the seller on the L/C he would have made a profit of N6.7 million between 1983 and 2001 (pages 104 – 6 of the Record).
The appellants evidence is that 25% of (N1,318.00) excess deposit made by him in 1982 had not been refunded to him. Its value as at 2001 was N6.4 million. He engaged a chartered accountant who professionally made calculations and arrived at the aforesaid figures. The chartered accountants report which was received as Exhibit Z, contains calculations of losses suffered by the Appellant as a result of the Respondents failure to settle the L/C. It was not challenged by the Respondent (Pages 106- 8 of the Record).
The Trial Judge in his Judgment upheld the contention of the Respondent that the registration of Form ‘M’ by the Appellant meant that payment of the supplier was subject to prior release of foreign currency by CBN. He went as far as saying that the commercial instrument known as irrevocable documentary credit (Lie) was not applicable to third world countries, like Nigeria, but should concern free trade environment. Accordingly, the Respondent was held not liable for failure to settle the L/C, not withstanding the clear terms of the instrument. The trial Judge took upon himself the task of questioning the use of the dollar as benchmark in the accountant’s report, which the Respondent did not challenge. The trial court in it’s considered judgment dismissed the Appellant’s claims save for N1318 (plus interest) granted under relief No. I in his amended statement of claim. It is from this decision that the Appellant has appealed to this Court.
What then is a letter of credit? A mere authoritative statement in the matter of documentary credit is to be found in the. pronouncement of. Lord Diplock in United City Merchants (Investments) Ltd V. Royal Bank of Canada (1983) A.C. HL. 168. As the Law Lord said, for the proposition upon the documentary credit point both in the broad Form or the narrow Form, there is paucity of direct authority in both the English and Privy Council cases and were in the courts in the United States of America. That being the case, it is no wonder them, that there is no precedent in this country to turn to in this matter, the more so as this country is quite young in entering into international commercial credit, which type of transaction is based on documents. Lord Diplock separated the contracts into four parts these are:-
(a) The contract between buyer and the oversea seller.
(b) The contract between the buyer and the local issuing bank.
(c) The contract between the issuing bank and its oversea confirming or correspondent bank and
(d) The contract between the correspondent bank and the seller.
In respect of the first contract between the buyer and the oversea seller, only the buyer and the seller are involved. Indeed, without the underlining contract above, the other three contracts would not arise. The Buyer and the Seller negotiate and agree upon the terms for the purchase of the goods, the mode of the’ credit and the mode of transportation or dealing of the goods from the country of purchase to the country to which the goods are to be delivered.
Where the mode of payment chosen in the contract between the Buyer and Seller is that of documentary credit, the Buyer is under duty to the seller to ensure that a credit is issued, within a reasonable time or on agreed time and the credit must comply with conditions which have been laid down by the parties to the agreement. Indeed, Article 37 of the Uniform customs provides.”
“All credits, whether revocable or irrevocable must, stipulate an expiry date for presentation of documents for payments, acceptance or negotiation notwithstanding the stipulation of a latest date for shipment”
In which case, a statement of the latest date for shipment is not ever sufficient, if the credit contains no expiry date, the seller is entitled to reject it Article 41 of the Uniform customs.
Finally, on contracts between the Buyer and the Seller” the acceptance of documents under a letter of credit does not preclude the Buyer from rejecting the goods subsequently if the goods, on their arrival, do not conform to the contract of sale. In the present appeal between the Appellant and the Respondent the first contract was not made an issue, and therefore this court will not bother to discuss it.
The second contract which is between the Buyer and the issuing Bank is the main issue in the instant appeal before this court.
The relationship is one of a Banker and Customer, But not quite. In an ordinary banking transaction, a customer requiring a loan or overdraft facility enters into a simple informal contract known to the common law or; if a statutory provision is involved in the contract known to statute. In an application for a documentary credit under discussion, there is a standard form of application the form usually incorporates the Uniform customs and the Buyer is required to fill the document where the terms of the contract are set out in detail. In the instant appeal, such application is Exhibits Band BI which the Respondent is agreed to issue to the paying or confirming Bank that is the Chartered Bank of Tokyo, the following is contained:-
“Whereby the Respondent undertook to pay the Japanese supplier through Chartered Bank of Tokyo upon presentation of the shipping documents for the goods to Chartered Bank”
The seller that is Horii & Co. Ltd, Tokyo as agreed in the L/C presented the shipping documents to the Chartered Bank of Tokyo the correspondent Bank of the Respondent (1st Bank of Nigeria Plc), but the seller was not paid as agreed. Chartered Bank informed it that Respondent could not pay as it was awaiting the release of forex from the Central Bank of Nigeria CBN, contrary to the irrevocable agreement between the appellant and the Respondent contained in the L/C. Following non-payment by Respondent, the supplier decided to cut off further supplier to the appellant (Exhibit T & U) after shipment of the goods the subject matter of the L/C for which the supplier was not paid,
In its response, the Respondent said the substratum of the Appellants case is that he was sole agent of Horii & Co. Ltd, and that he applied through the Respondent for foreign exchange to pay for goods delivered to him. It was also the Appellants’ case that having opened an irrevocable letter of credit for him; the Respondent was obliged to provide and remit the requested foreign exchange.
The Respondent continued that the Appellant completed Form ‘M’ which was an application for foreign exchange addressed to the Central Bank through the Respondent, and that the letter of credit opened for the Appellant was subject to approval of form ‘M’ and release of foreign exchange by CBN. The Respondent categorically maintained that she did all that was required of her towards procuring the requested foreign exchange through CBN in accordance with the law and Fiscal policy/Procedure during the pre-sfem Era, and that the CBN failed to approve, being the sole regulatory body empowered to do so.
The Appellant did not contest the existence of the law and Fiscal Policy/Procedure during the Pre-sfem era, by the CBN. He did not contest having filled Form ‘M’. What the Appellant maintained is that the irrevocable letter of credit once opened in his favour by the Respondent, the Respondent was duly bound to pay for it, regardless of the law or the Fiscal Policy/Procedure of the CBN, which was not made or incorporated in the agreed letter of credit. The Respondent maintained even though it opened the irrevocable letter of credit for the Appellant, it could not go ahead to pay same, because it was caught by the existing law which forbids any Commercial Bank to undertake any foreign exchange transaction without channeling same through the Central Bank. The Respondent maintained it would amount to illegality to do otherwise. It maintained that the Appellant in recognition of this fact filled form ‘M’ which was processed by it and sent to the Central Bank. The non release of the forex was by the CBN. In all the Respondent denied negligence or breach of contract and the consequential reliefs predicated thereon.
The Appellant agreed having filled form ‘M’ but maintained that the main purport of doing that was not to subject the payment of the L/C to the release of forex by CBN, but the obligation to pay on the Respondent remains binding because of the irrevocable letter of credit, and the Respondent was to be reimburse later by the CBN.
It is the view of this Court that from the facts, the relationship between the Appellant and the Respondent is that of a contract. The definition of contract contained in Chitty on Contracts General Principles (Twenty Seventh Edition) is:-
“There are two main competing definition of a contract in the Common Law. The first which is adopted by the Twenty Sixth Edition of this work, defines a contract as a promise or set of promises which the law will enforce. The competing view which was taken by the second edition of this work is that a “contract is an agreement given rise to obligation which are enforced or recognized by Law”.
The question is where there is an existing statutory law in the country, can a contract because it does not specify such laws be enforced in law ignoring the existence of the law. Again chitty on contracts, General Principles Twenty Seventh Edition at Page 11 paragraph 1 – 009 provides:-
“Nevertheless recognition of the principle of the binding force of contracts does not mean that contracts or particular terms of contracts will always be enforced. This is the clearest in cases of illegal contracts”.
I do not have any doubt in my mind that both the appellant and the Respondent at the time the irrevocable letter of credit was opened knew it was the pre-sfem era. It would be illegal on the part of the Respondent not to act in accordance with the law and the Fiscal Policy and procedure of the CBN to release or remit any foreign exchange in Execution of any contract without going through the CBN being the sole regulatory body empowered to do so. There is no doubt the Appellant completed form ‘M’ which was an application for foreign exchange addressed to the Central Bank through the Respondent, and that the letter of credit opened for the Appellant was certainly subject to approval of form ‘M’ and release of foreign exchange by CBN. I am unable to find the basis of the Appellants claim in law that the contract even if illegal was binding on the Respondent to pay the credit, and that the essence of form ‘M’ was to get reimburse later by CBN, this is illogical.
Again the Appellant insisted that the Respondent was liable in this Suit since the parties have agreed and clearly specified that their engagement should be governed by the Uniform Customs and Practice of Documentary credits (1974 Revision) ICC Brochure No. 290 (UCP). The Appellant relied on the Supreme Court decision in Akinsanya V. V.B.A Ltd (Supra). I wish to state that the case of Akinsanya V. U.B.A Ltd is clearly distinguishable from the instant appeal before this court. Akinsanya’s case dealt with the 4th contract involving international Commercial transaction by documentary credit, that is the contract between the seller and Confirming Bank.
The instant appeal deals with the 2nd contract that in the contract between the Buyer and the Issuing Bank
In Akinsanya’s case the Confirming Bank that is the Swiss Bank as agent of the Respondent, had been held to have acted on defective documents and the appellant had as a result thereby incurred a loss, then the Appellant could claim against the Respondent, who could in turn, refuse to reimburse the Swiss Bank.
In the instant appeal which is a contract between the Buyer and the Issuing Bank, the Respondent was not found to have acted on any defective document, and its refusal to pay for the open letter of credit was governed by law and the Fiscal Policy and procedure during the pre-sfem era which permits only the CBN to approve, release or remit foreign exchange, being the sole regulatory body empowered to do so.
I am in agreement with what the trial Judge said in his judgment at page 124 of the Records that:-
“As far as this court is concerned reliance on Exhibits by plaintiff at best supports that plaintiff too had expected the forex to come from the CBN despite his present posturing. This of course is contrary to the main thrust of the plaintiffs case that the defendant was to directly provide and pay the overseas suppliers. It is the view of this court that the agreement of the parties at the inception of the contract was that the foreign exchange was to come from the CBN. That was why the plaintiff completed the form ‘M’ (Exhibit Y) that was why the plaintiff waited diligently from 1982 to 2002 for the CBN to release the foreign exchange. That was why the plaintiff never complained until to court about 20 years later that the defendant breached the contract”.
I wish to state at this point that the Appellate court will not interfere with the decision of the lower Court, unless it found such a decision to be perverse. A perverse decision of a court will arise where the court misconceived the issue presented before it. The case of Udengwu v. Uzuegbu (2003) 13 NWLR (pt. 836) 136. Again where a Court of trial unquestionably evaluates the evidence and justifiably appraises the facts, it is not the business of the appellate court to substitute its own views for those of the trial court. See: Woluehem V, Gudi (1981) 5 S.C, 291. Agbeje V. Ajibola (2002) 93 LRCN 1 at page 17 ratio 10.
This court is in complete agreement with the decision of the trial court contained in page 126 of the Records, that it is clear that relief (ii) (iv) and part of (iii) of the Plaintiff claim cannot be sustained. The plaintiff failed to prove that the defendants were responsible for his allege loss of profits. Nor did he prove the allege negligence and or breach of contract on the part of the defendant.
Let me pause at this point to mention that the 2 remaining contracts in international commercial credit based on documents which are, the contract between the Issuing Bank and its oversea Confirming Bank and the contract between the correspondent Bank and the seller, which are part of the dictum of Lord Diploek in United City Merchants (Investments) Ltd case have not been made issues in this appeal, thus it would not be relevant to discuss any thing on them.
On the excess deposit of N1,318 made by the Appellant to the Respondent since 1982, I agree with the finding of the trial court contained at page 129 of the Records, that the excess deposit is returnable to the plaintiff as money paid for a consideration, the court holds also that the plaintiff is entitled to have the deposit refunded with some interest.
Accordingly as contained at page 130 of the Records the trial Judge in his judgment finds that the present action succeeds partially. The plaintiffs claim for loss of profits general damages for negligence and breach of contract and interest thereon fails and is hereby dismissed which this court affirms.
In sum, the appeal succeeds in part, and is thus partly allowed by me. The plaintiff/Appellant is entitled to the refund of the sum of N1,318.00 with compound interest at the rate of 19.5 per cent per annum with effect from August, 1982 to today 9/7/2008. Also 5% interest per annum on (a) above with effect from today 9/7/2008, until liquidation and no more.
No order as to cost.
Other Citations: (2008)LCN/2861(CA)
