African Continental Bank Limited V. Obmiami Bricks & Stone (Nigeria) Limited (1990)

LawGlobal-Hub Lead Judgment Report

SAMSON ODEMWINGIE UWAIFO, J.C.A. 

T

he introduction into the Nigerian financial system of multiple and differing foreign exchange markets has made a lot of difference to business. The rates of exchange are not the same. The transition from a single foreign exchange market came about in September, 1986. It was rather sudden, and consequently it caused an unusual rush in banking activities within the short period of transition allowed. This appeal deals with the law backing the transition as it affected or tended to affect the transaction between the parties to open a letter of credit (LC) at that time.

On 27 April, 1989 at the Enugu High Court, Ozobu, J., gave judgment in a claim for N22,650,337.50 being special damages as follows:
Particulars of special damages
1. Loss of 1,109 metric tons or 22, 180(50kg) bags of super-white cement at N70.00 per bag N1,552,600.00
2. Loss of 15,125 kos or 605 (25kg) bags of bayerferrox (iron) oxides at N240.00 per bag N145,200.00
3. Demurrage  N194,151.29
4. Interest charged by the defendant on aforesaid loan to the plaintiff from 24th September, 1986 to 31st January, 1989  N353,138.96
5. Loan from, and accrued interest thereon charged by, Co-operative and Commerce Bank (Nigeria) Limited N393,247.25
6. Rental for warehouse at Ogbor Hill, Aba N12,000.00
7. Loss of profit  N20,000,000.00
Total N22,650,337.50

The learned judge awarded the plaintiff a total sum of N10,827,305.25 as special damages. The plaintiff seems to have founded its action on negligence and pleaded the particulars of the alleged negligence in paragraph 13 of the amended statement of claim. This will be referred to later and fully considered. But the learned judge no doubt based his judgment on an alleged breach of contract as will be shown. The counter-claim filed by the defendant was at the same time dismissed.

The defendant being aggrieved appealed against the judgment. It originally complained on three grounds but these were later substituted with six grounds. Three issues were formulated by the defendant for determination by this Court. Those issues were accepted by the plaintiff as properly arising in this appeal. I shall for obvious reasons set out ground 3 and issue 2. They appear to draw attention although I shall consider the other issues as well.
Ground 3 reads:
“The Court below erred in law in giving judgment in favour of the Plaintiff on the ground that the defendant bank is in breach of contract to send out the letter of credit through the telex message on 25/9/86.”
Particulars of Error
(a) Para. 12 of the Statement of Claim bases the claim of the Plaintiff on the allegation that the defendant neglected to open the letter of credit before the close of business on 26/9/86.
(b) The plaintiff’s 3rd witness said on oath that the opening of the letter of credit was completed around 1p.m. on 25/9/86
(c) No law requires that the opening of the letter must be communicated to the beneficiary of the credit (KLOSA and STAAS) or the Confirming Bank (Deutsche Bank) on 25/9/86 or not later than that date.
(d) The ground aforementioned on which judgment was based was not pleaded and cannot be supported by the evidence.”

The second question for determination (i.e. issue 2) was then stated as follows:
“Whether the Plaintiff’s case – that the Deutsche Bank refused to confirm the credit issued by the defendant bank solely because of the fact that the credit so issued was not communicated to KLOSA and STAAS on 26/9/86 – was valid and was the one upon which the court below entered judgment in its favour.”

The fact of the case in a nutshell are these. The plaintiff obtained an import licence for goods and machinery and other equipment. It was for an amount of N1,202,830.00. It did not have funds. It asked the defendant to open an LC for it and at the same time for a loan less than the value of the import licence. The defendant eventually approved the sum of N690,000.00 upon conditions. An agreement to open the LC would appear to have been reached on the same day the letter conveying the approval of the loan was written, that is, 19 September, 1986. While action, it seems, was being taken on the LC, the law regarding access to foreign exchange was altered and two foreign exchange markets were soon to become operative. One was cheaper than the other. The transaction of the type for which the opening of the LC had been agreed between the parties would have to be funded from the costlier foreign exchange market if it was not concluded on or before the last day of the coming into effect of the said law. In this particular case a confirmed and irrevocable LC must be established if it was to benefit from the cheaper market.

The final step taken by the defendant to have the LC confirmed by a foreign banker (Deutsche Bank of West Germany) suggested at the instance of and upon the pressure by the plaintiff was on 26 September, 1986 at 4.20p.m. by tested telex message (exh. 1A). That was the last that was heard of the effort to get the plaintiff to purchase from the cheaper foreign exchange market. The plaintiff now complains that the defendant was responsible for its failure to transact that LC on that market. The goods intended to be purchased were super-white cement and bayerferrox (iron) oxides said to be needed by the plaintiff for the production of multi-coloured cast stone bricks for sale. The defendant in its statement of defence denied responsibility although at the same time making some admissions of certain averments by the plaintiff. Somehow the defendant did not adduce evidence.

What led to this can be shortly stated. The defendant was being defended by Mr. U. N. Anya and with him was Mr. E. Ibe. On 14 February, 1989 after plaintiff’s 3rd witness had testified half-way, Mr. Anya announced that Mr. Ibe would conduct the case for the defendant and asked to be discharged from further participation in the defence. The court granted the request. Mr. Ibe then sought for and was granted an adjournment. Thereafter he brought an application by originating summons before the Chief Judge questioning the propriety of the assignment Order made by the Chief Judge of Anambra State to enable Ozobu, J., to conclude this case which he had begun before he was posted to another Judicial Division. He then applied to Ozobu, J., by motion to stay further proceedings pending the determination of the originating summons. This was refused. Mr. Ibe then asked to be discharge from the case on 23 February, 1989.The learned judge said he would not do that in respect of that day’s hearing and the plaintiff concluded its case that day. Mr. Ibe did not appear in that court anymore. He more or less abandoned the case in a most unethical manner. He denied his client the opportunity of putting its defence before the court on a mere technical and untenable objection.

On the day this appeal was argued, i.e. on 8 March, 1990, Mr. Anyamene for the plaintiff applied to amend the second sentence of paragraph 12 of the amended statement of claim to show that the defendant failed to communicate the opening of the LC to Deutsche Bank before the close of business on 26 September, 1986. Chief Williams for the defendant did not oppose on the ground that it would make no difference to the case. The amendment was duly granted. The said paragraph 12 now reads:
“According to the telex message which the plaintiff received from KLOSA & STAAS dated 25th September, 1986, contents of which the plaintiff’s managing director personally brought to the knowledge of the defendant, the Deutsche Bank was eager to confirm the letter of credit to beat the SFEM deadline if only the defendant acted quickly. Despite this telex message, the defendant still failed to communicate the opening of the said letter of credit to Deutsche Bank before the close of business on the 26th September, 1986.”

It is immediately necessary to refer to paragraph 13 of the amended statement of claim and reproduce it to make it plain what the defendant was alleged to have failed to do, or neglected to do. The said paragraph reads:
“On Friday, 26th September, 1986, at about t 1 a.m. the plaintiff’s managing director called at the defendant’s office in Lagos to collect plaintiff’s copy of the telex message of 25th September, 1986, prepared by the defendant’s employee one Mr. Okonkwo of foreign business department conveying to Deutsche Bank by telex message that the irrevocable letter of credit had been opened in favour of the plaintiff’s beneficiary KLOSA & STAAS. But after a considerable waste of time, at about 4p.m. the defendant informed the plaintiff’s managing director that a telex message prepared on 25/9/86 was after all not sent out and that the message would be sent out in the evening. The plaintiff avers that it was negligence by the defendant that prevented the sending of the message on 25/9/86.”

Particulars of Negligence
Fully aware as per the exporter’s letter dated 28th August, 1986, that Deutsche Bank in Frankfurt, Western Germany was eager to confirm the letter of credit; the defendant failed to advise the said bank of the opening of an irrevocable letter of credit and even when a telex to that effect was prepared on the 25th September, 1986, the telex message was not sent out on that date even though the defendant was aware that SFEM would come into effect on Monday 29th September, 1986 and that a telex message sent out on 26th September, 1986, evening which was Friday could not reach the addressees till Monday 29th September as 27th and 28th being Saturday and Sunday respectively were work-free days in Nigeria and in Western Germany.”

The combined effect of the above paragraphs 12 and 13 shows that the plaintiff asserted the negligence of the defendant as a basis for the damages it suffered in this transaction. The alleged exporter’s letter of 28 August was not tendered. Looking at paragraph 8 of the amended statement of claim, it is plain that it contains the true agreement or contract between the parties. It reads:
“On the 19th of September, 1986, the defendant undertook the duty to establish an irrevocable letter of credit for the importation of the said raw materials as specified in the proforma invoice No.N/1084A/86 of 8th August, 1986, from KLOSA & STAAS, and in consequence took possession of the original proforma invoice of KLOSA & STAAS.”