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.”