African Continental Bank Limited V. Alhaji Taofiki Aloa (1994)

LawGlobal-Hub Lead Judgment Report

SAMSON ODEMWINGIE UWAIFO, J.C.A. 

The main issues in this appeal concern the Bills of Exchange Act and the Exchange Control Act. They touch upon what to do with a total of forty-five bank drafts with proceeds of ?212,310.00 to which the plaintiff, a Benonois living in Port Novo, claims to be entitled to. The said claim is based on some loans of some amount of unspecified CFA Francs which he allegedly gave to some also unnamed Nigerian traders for the payment of their children’s school fees in the United Kingdom (U.K.) when they met in Cotonou between December, 1980 and January, 1981. The forty-five bank drafts which were said to be in repayment were made payable in the U.K. They were issued by the defendant bank in Lagos, on the application of whom no evidence was led. They were all dated between December, 1980 and January, 1981. The honouring of the drafts ran into difficulty in London. The plaintiff wanted them credited into his account in London. The drafts were not however in his name and were crossed and endorsed ‘A/C payee only. Not negotiable.’9191 The defendant bank in London turned down all efforts by the plaintiff to get the proceeds of the bank drafts.

The plaintiff then took action at the Lagos High Court to seek three declarations and a mandatory order. On 31 May, 1988, C. O. Segun J., granted all four reliefs. The reliefs which the plaintiff claimed against the defendant were stated as follows:-

“1. A declaration that the 45 drafts amounting to #212,310 (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 are 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 drafts.”

The defendant having complained against the judgment in its appeal to this court, raised the following four issues for determination in its brief of argument:-

“(i) Whether the learned trial Judge in law directed himself properly by entering judgment for the plaintiff/respondent in respect of a transaction whose illegality is not only transparent on the fact of it but also pronounced by statute.

(ii) Whether the learned trial Judge in law directed himself properly by holding that the 45 Bank Drafts tendered in evidence are mere Promisory Notes and therefore not within the provisions of Section 3(1) of Bills of Exchange Act Cap. 21 Laws of the Federation of Nigeria.

(iii) Whether the learned trial Judge erred in law by deviating from and/or not following the Supreme Court of Nigeria decision in Chief Harold Sodipo v. Leminkainen (sic) ANR (1986) 1 S.C. 197 by granting judgment to the plaintiff/respondent.

(iv) Whether the learned trial Judge erred in law by relying only on the single uncorroborated evidence of the plaintiff without more to come to a decision that the plaintiff has an enforceable right.”

I think the issues which really arise from the grounds of appeal are two, namely: (a) whether there was apparent or proved illegality affecting the plaintiff’s cause of action; (b) whether, apart from illegality, the evidence justified the plaintiff’s claim to the proceeds of the forty-five bank drafts.

At the lower court, learned counsel for the defendant, Chief Ezeogu, referred to some paragraphs of the statement of claim as showing the illegal transaction which brought about the plaintiff’s claim of right to the drafts in question. He also specifically pleaded illegality in the statement of defence. In regard to the statement of claim, the plaintiff having pleaded that he did a lot of business with some of his Nigerian friends, averred in paragraphs 4, 5, 7, 8 and 9 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 schools 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 C.F.A. 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 allowance 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 shortfall or surplus after the plaintiff would have collected the proceeds of the drafts.
9. The plaintiff received altogether 45 drafts from the Nigerians pursuant to this arrangement the total value of which was ?212,310. The particulars of the drafts are set out in the schedule to this statement of claim.”

The plaintiff in his testimony said he had helped seven Nigerians the same way previously and that he was able to claim the proceeds of seven bank drafts which they later brought to repay him. I must say that there is of course no evidence whatsoever to support this. But even if there had been such evidence it would have no bearing on whether the present transaction was illegal. The plaintiff further said:-

“After this transaction (meaning of those seven bank drafts), 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 down by the defendants in Lagos on its London Branch Office.”

The drafts were admitted in evidence and marked exhibit A to A44.

From the above quoted evidence taken along with the paragraphs of the statement of claim already reproduced above, and what has since transpired, it appears that (1) the said unnamed Nigerians negotiated and obtained loans in foreign currency from the plaintiff; (2) the said loans were to be repaid from the foreign reserve of Nigeria; (3) the loans were negotiated and obtained between December, 1980/January, 1981; (4) the repayment of the loans as per Exhibits A to A44 is what the plaintiff sought to enforce by the action he subsequently brought. I make the following preliminary comments: Not one of those Nigerians was pleaded by name and none testified as to the amount of CFA Francs he received as loan. He did not produce any document in support of his having sent the money through his bankers to the children of the alleged Nigerians in the U.K.

It will be noted further that the reason given for the said Nigerians approaching the plaintiff for urgent assistance is the delay in getting the Central Bank of Nigeria to give approval for the remittance of money to their children. In the present case, the loans were said to have been given between December, 1980 and January, 1981. Yet, an examination of the 45 bank drafts (Exhibits A to A44) shows that the earliest one was issued on 10/12/80, 2 others on 15/12/80 and 17/12/80 respectively, 6 on 29/12/80, 2 on 30/12/80, 28 in January, 1981 (most of them early January) and 6 in the first week of February, 1981. It follows that it was about the same time that the alleged loans were given that the bank drafts were issued. One may then ask what delay by the Central Bank the said Nigerians were worried about that made them approach the plaintiff?

From all the preliminary comments I made above and as further noted, the proximity between the time of the alleged loans and the issuance of the bank drafts is relevant for consideration in the present case because the defendant pleaded in sub-para. 18(2) of particulars of fraud that all or most of the applications made for foreign exchange to the Central Bank of Nigeria in respect of the 45 bank drafts were fraudulently made in the names of non-existent educational institutions or students in the United Kingdom. It pleaded certain documents including a letter addressed to the defendant branch in London by the South Coast International School of Management Marketing and Sales Ltd., Bournemouth, on 27 October, 1983 by a certain Babatunde Adio (one of the so-called student beneficiaries of the bank drafts). It reads;-

“Your letter dated 24 October, 1983 refers. We regret to have advise you that the above-named has never been a student at this school and is unknown to us. In addition the letter purportedly from us to the Central Bank of Nigeria is not genuine and the signatory Moris Bruce-Foreign Students Adviser’ is not and has never been an official of this school.

We intend very shortly to take this matter up with the Nigeria High Commission in London and we are also advising the local police.”

The letter and three annexures were admitted as exhibits E, E1-E3. The draft involved, exhibit A19, was for ?8,800.00. There was also evidence that most of the schools or institutions where some student beneficiaries were said to attend were non-existent.

This obvious evidence of an attempt to swindle from this country’s foreign exchange reserve escaped the thoughtfulness of learned counsel for the plaintiff, Mr. Alao Aka-Bashorun. First, he submitted in the count below that the drafts are not bills of exchange but promissory notes and that the defendant is bound to honour them. Second, that the evidence led by the defendant that the schools were non-existent went to no issue and that being an allegation of crime it must be proved beyond all reasonable doubt. The learned trial Judge held that the drafts were promissory notes. He added: “If Exhibits A to A44 are mere promissory notes made by the defendant/bank to pay the amount stated therein, then they are bound to pay up”. As regards the schools, he said: “The evidence given by them was that the schools mentioned in the various drafts were non-existent. This is an allegation of crime and proof beyond all reasonable doubt is required to sustain it.”

I have illustratively referred to only two aspects of the submission of learned counsel for the plaintiff and the reliance on them by the learned trial Judge to eventually give judgment for the plaintiff. That was how all other untenable submissions of learned counsel for the plaintiff were accepted. That was how, in particular, the learned Judge avoided the effect of the decision in Sodipo v. Lemminkainen OY (No.2) (1986) 1 NWLR (Pt.15) 220 which was cited to him by learned counsel for the defendant. He went to rely on the definition of ‘securities’ under section 2(1) of the Exchange Control Act 1962, which has no bearing whatsoever on the issue at hand, when what his attention was drawn to was section 3(1) of the Bills of Exchange Act as to what a bill of exchange is, and then held that the bank drafts were promissory notes. He further said inter alia:-

“It seems to me from the above provisions of section 2(1) that the Exchange Control Act has removed promissory (sic) notes out of the application of the Act. It would therefore not apply to the transaction which is the subject matter of this action. There cannot therefore be a contravention of any of the provisions of the Exchange Control Act 1962 and the transaction cannot be illegal nor tainted with illegality under the Laws of this country. If it is illegal, this court would not lend its aid to enforcing it… 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 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 drafts to their London Branch asking that branch to pay the amount stated therein.”

I cannot pretend to follow the reasoning in the above-quoted passage nor to comprehend how, even if the drafts were promissory notes intended to repay foreign currency loans which had allegedly been received, the transaction would not be a contravention of the Exchange Control Act in the circumstances of this case. In my view, the learned trial Judge was in error to have held first, that the bank drafts were not bills of exchange but promissory notes and secondly, that there was no illegality in the transactions. In Black’s Law Dictionary 5th Ed. page 215, a cheque is defined as: “A draft drawn upon a bank and payable on demand, signed by the maker or drawer, containing an unconditional promise to pay a sum certain in money to the order of the payee.” At page 132, a bank draft is called a cheque, draft or other order for payment of money, drawn by an authorised officer of a bank upon either his own bank or some other bank in which funds of his bank are deposited. It is plain that a bank draft is a cheque: it is sometimes called a certified cheque.

By Section 73 of the Bills of Exchange Act (as codified) in Cap. 113 vol. II Laws of the Federation of Nigeria, 1990, the following definition of a cheque is given:

“73. A cheque is a bill of exchange drawn on a banker payable on demand; and except as otherwise provided in this part, the provisions of this Act applicable to a bill of exchange payable on demand apply to a cheque.”

A cheque or bank draft is therefore an aspect of a bill of exchange which itself is defined in section 3(1) as follows:-

“3(1) A bill of exchange is an unconditional order in writing, addressed by one person to another, signed by the person giving it, requiring the person to whom it is addressed to pay on demand or at a fixed or determinable future time a sum certain in money to or to the order of a specified person, or to bearer.”

The plaintiff himself treated the drafts in question as cheques. He paid them into his bank account in Cotonou for clearance in London into his bank account there. That means he regarded them as a means of payment, bills of exchange. Section 5 of the Bills of Exchange Act provides:-

“5(1) A bill may be drawn payable to, or to the order of, the drawer; or it may be drawn payable to, or to the order of, the drawee.

(2) Where in a bill the drawer and the drawee are the same person, or where the drawee is a fictitious person or a person not having capacity to contract, the holder may treat the instrument, at his option, either as a bill of exchange or as a promissory note.”

Provisions similar to Sections 3(1) and 5 of the Bill of Exchange Act were considered in the rather technical decision of the House of Lords in Gordon v. London City and Midland Bank Ltd. (1903) A.C. 240 where it was held that a bankers’ draft payable to order on demand addressed by one branch of a bank to another branch or head office of the same bank and not crossed is not a cheque. Although in the present case the drafts were addressed by one branch of the defendant bank to another, they were all crossed, unlike those in the Gordon’s case. Lord Lindley observed at page 250:-

“But I agree with the Court of Appeal in thinking that the bank, which is both drawer and drawee of these instruments, is not entitled to treat them as bills of exchange as defined in S. 3 of the Bills of Exchange Act, although a holder may sue the bank upon them, and treat them either as bills of exchange or as promissory notes: see S. 5 sub. s. 2.”

It seems to me unrewarding for the plaintiff to have argued and for the learned trial Judge to have accepted the argument that the drafts were not bills of exchange but promissory notes. They were obviously a medium of payment in pounds sterling – a foreign currency. That was the material issue. It is what brings about the illegality under section 7(e) of the Exchange Control Act.

It is without dispute clear that the plaintiff’9191s 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 ?212,310.00 and the promise by those Nigerians to repay him in pounds sterling. The said promise, according to him, was sought to be fulfilled by the procurement of 45 bank drafts issued in the names of various persons and institutions but the proceeds of which he has been unable to realise. These matters involve foreign exchange control. I must therefore turn to the Exchange Control Act. Section 2(2) provides:

“2(2) 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.”

I shall next refer only to section 3(1) and 7(c) in view of the facts of this case. Section 3(1) provides:-

“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 gold or foreign currency from or sell or lend any gold or foreign currency to any person other than an authorised dealer. Section 7(c) states:-

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

………………………………………………………..

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

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 authorised dealer. Later, those Nigerians made payment in respect of the said loans outside Nigeria by procuring 45 bank drafts encashable in the U.K. This contravenes section 7(c) being without the minister’s permission. Both acts are consequently illegal. 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 sections 1(1)(e) and 1(1)(d)(iii) respectively of the Exchange Control (Anti-Sabotage) Act, 1984 now in Cap.114, Vol. II Laws of the Federation of Nigeria, 1990 and severely punishable.

The illegality involved in this matter has been the pith and substance of the defence in the court below and the defendant/appellant’s argument in this appeal. I do not think, with due respect, that Mr. Nwadialo for the respondent has any reply to that contention. He says in the respondent’s brief: “It was for the Nigerians who borrowed the moneys from the respondent in Benin Republic to obtain any necessary permission required for such external loans under the law of their country. This was certainly not the concern of the respondent”. As already shown, the Exchange Control Act applies to both Nigerians and non-Nigerians. Once illegality is committed, a transaction under the Act is not spared simply because the plaintiff who relies on it is not a Nigerian, or that the person who normally should ensure that the minister’s permission was obtained did not do so. The transactions are simply tainted with illegality and no action is available to any of the parties: exturpi causa non oritur actio. All through the said brief I have been unable to find, with due respect, any submission of substance worthy of attention.

The law has been well established in this country on the effect of illegality on a transaction. As was held to be the law in Onyinke v. Okeke (1976) 10 NSCC 146 at 150, 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. In my view, an act which is directed at repaying an illegal loan is itself illegal because it is a promise to promote obligations arising out of the very act of the illegal loan. It is as much as illegal as the execution of a deed of charge in respect of gaming debts which by virtue of the Gaming Act 1835 were deemed to be illegal as in Williams Hill (Park Lane) Ltd. v. Hofman (1950) 1 All E.R. 1013.

In Sodipo v. Lemminkainen OY (1985) 2 NWLR (Pt.8) 547, Aniagolu, J.S.C. in his leading judgment said at 557-558 inter alia:

“No court… ought to enforce an illegal contract or allow itself to be made the instrument of enforcing obligations alleged to arise out of a contract or transaction which is illegal, if the illegality is duly brought to the notice of the court….

It mattered not whether the defendant pleaded the illegality or not. If the evidence adduced by the plaintiff proved the illegality, the court ought not to assist him… A contract may be against public policy either from the nature of the acts to be performed or from the nature of the consideration. Where the illegality of the contract, although not pleaded, is disclosed in the evidence it is the duty of the court to take objection…

The same principle applies in respect of a contract which is made illegal by a statutory order, even though the question of illegality is raised by the party who has been guilty of it, and even though the other party honestly believed, as a result of the statements made to him by the party guilty of the illegality, this no breach of the order was being committed, the reason for this attitude of the law being that the contract sought to be enforced was altogether prohibited.”

These views were largely reiterated in Sodipo v. Lemminkainen OY (No.2) (1985) 1 NWLR (Pt.15) 220 where also section 3 of the Exchange Control Act was considered. They are aptly relevant to this case and answer Mr. Nwadialo’s submission that it was the responsibility of the Nigerians who borrowed CFA Francs from the plaintiff to get the necessary permission.

I believe it must be clear beyond doubt that the plaintiff, upon the combined effect of sections 3(1) and 7(e) 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 bankers’ drafts are equally illegal and unenforceable.

I will add that from the nature of the evidence in this case, particularly having regard to exhibits E, E1 to E3, it would appear that the plaintiff in collaboration with others had contrived to benefit unlawfully from the foreign exchange reserve of this country. It seems to me that no part of the ?212, 310.00 was intended to meet educational fees. I cannot forbear to draw attention to the implication of what had happened. The plaintiff had resorted to subterfuge to deplete for personal and diabolical ends the foreign reserves of this country. He flouted the law of the land.

He is an alien but some Nigerians collaborated with him. This instance might, must be, is, a tip of the iceberg. In the prevailing world economic order, it is no exaggeration to say that a buoyant foreign reserve is the life-blood of our development. It ought not to be allowed to be misused. It appears in this case to have been attempted to be done with much ease just by presenting fake documents.

All that is frightening enough. But what I find extremely worrying is that in the face of the clear illegality and fraud shown, the effort nearly received judicial approval.

I think it is necessary to advise that trial courts should take a firm stand against illegality (and fraud) properly brought to their attention, and proved, for, as said by Bairamian J. F. in George v. Dominion Flour Mills Ltd. (1963) 1 SCNLR 117 at 121,”… the courts administer the law of the land and will not help a plaintiff who breaks it.” In the same case at page 120, the Federal Supreme Court quoted with approval the observation of Kennedy, J., in Gedge v. Royal Exchange Assurance Corporation (1900) 2 Q.B. 214 at 220, part of which reads:-

“No court ought to enforce an illegal contract or allow itself to be made the instrument of enforcing obligations alleged to arise out of a contract brought to the notice of the court, and if the person invoking the aid of the court is himself implicated in the illegality.”

This admonition cannot be more relevant for strict and uncompromising compliance than in the observance of the Exchange Control Laws. For this reason and others already given the decision of the learned trial Judge in this case is entirely perverse and cannot be allowed to stand. He unfortunately overlooked patent illegality and fraud.

I accordingly allow the appeal and set aside the judgment of the lower court together with the order for costs. I would instead dismiss the action. I would in addition order that the 45 bank drafts be impounded and photostat copies of them immediately brought to the notice of the Minister of Finance and also the Attorney-General of the Federation and Minister of Justice together with each of this judgment for their necessary attention. I award the defendant/appellant N2,000.00 as costs in the court below and N2,500.00 as costs in this court against the plaintiff/respondent.

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Other Citations: (1994)LCN/0204(CA)