F.S.B. INTERNATIONAL BANK LTD. V.IMANO NIGERIA LTD. & ANOR (2000)

LAWGLOBAL HUB Lead Judgment Report

ACHIKE, J.S.C.

In the High Court of Lagos, Ikeja Division, the plaintiff, herein respondent instituted this action against the 1st defendant, herein appellant and the 2nd defendant, known as Agricultural and Food Processing Installation Limited. The claim ran as follows:

“i. From the 1st defendant, the sum of N2,062,500 (Two million, sixty two thousand, and five hundred Naira only) being the total value of the First, Second and Third promissory notes of N687,500.00 each, which have been due and presented but dishonoured.

ii. Against the 2nd defendant, the sum of N4,432,085, (Four million, four hundred and thirty-two thousand and eighty-five naira only) being the total value of the remaining promissory notes Nos. 4 to 9 inclusive and the variation on same as at the date of this writ and in accordance with clause 3, Appendix B of the said agreement dated the 28th day of August, 1987, whose breach by the 1st defendant’s failure to honour its confirmation and guarantee renders the whole sum in the agreement due.

In the alternative:

iii. Against the 1st and 2nd defendants, the return of the bills of sale on the vessels MT Aina, MT Agbeke and MT Aliyu and in addition the sum of N3 million, being the sum due for loss of use of the vessels since 28th August, 1987 to date, in accordance with clause 13 of the said agreement.

iv. Against the 1st and 2nd defendants, the sum of N1.5 million being general damages due to the plaintiff in accordance with clause 3 of the said agreement.

v. Against the 1st and 2nd defendants jointly and severally interest at 18% from 29th January, 1998 to the date of judgment in this suit or until the whole sum is liquidated for cash to the plaintiff, as holder in due course for value of promissory notes dated 29/1/88, 29/4/88, 29/7/88, 29/10/88, 29/1/89, 28/4/89, 29/7/89, 29/10/89, 29/1/90, drawn by the 2nd defendant as debtor to the plaintiff and indorsed and confirmed by the 1st defendant as acceptor and guarantor of the 2nd defendant in respect of the said promissory notes.

vi. And for interest on the amount found to be due to the plaintiff at 6% interest or such rate and for such period as may seem to the court just and proper from the date of judgment.

vii. A declaration by the court that the 2nd defendant’s failure to provide the guarantee as required under the clause 3(b) of Appendix B extinguishes their rights of claim, if any, to the vessel or trawler MT Aliyu.”

The appellant, a commercial banker, had earlier on taken a mortgage over the vessels from the 2nd defendant. The facts that may be gleaned from the parties’ pleadings which will lead to better understanding of the controversy between them may now be set out. By an agreement dated 28th August, 1987, the respondent and the 2nd defendant entered into a contract titled “Memorandum of agreement” whereby respondent sold three fishing vessels referred to as ‘trawlers’ in the said agreement. It was common ground that the 2nd defendant who was a customer of the 1st defendant banker, applied to the appellant for a loan to purchase the three fishing trawlers from the respondent. The application was granted and the appellant paid N4,500,000.00 (i.e. N4.5m) to the respondent on behalf of the 2nd defendant as deposit for the vessels. The 2nd defendant then issued nine promissory notes with different maturity dates valued at N5,500,000.00(i.e. N5.5m) for the balance of the three fishing trawlers for which the purchase price was N10,000,000.00 (i.e. N10m). The notes were accepted by the respondent and were to mature at various dates stated thereon. Inter alia, the respondent by a letter dated 28th August, 1988 and addressed to the appellant requested a letter of confirmation from the appellant identifying the signatories to the promissory notes and confirming same (i. e. signatories of the respondent). It transpired that the appellants confirmed the signatories to the promissory notes simply by adding thereupon the words “We Federal Savings Bank of 23 Awolowo Road, Ikoyi, Lagos, hereby add our confirmation” and signed each of them. But the respondent contending to the contrary, argued that by endorsing the promissory notes the appellant constituted itself as guarantor of the promissory notes in the sense that if the 2nd defendant did not pay on the promissory notes the appellant would pay.

By mutual terms of settlement, the 2nd defendant settled the first five promissory notes. The remaining four were not even due for payment when the respondent called on the appellant to pay the sums due as ‘confirmers’. The appellant refused on the grounds that in ‘confirming’ signatures of 2nd defendant on the promissory notes it was not a guarantor for the 2nd defendant. As earlier stated, consequent to this refusal, the respondent sued the’ appellant for the value of all the promissory notes plus interest thereon.

The respondent instituted the action at the Lagos State High Court, having also filed its statement of claim. The appellant failed to file its statement of defence within the prescribed period under the rules of court, although it did so subsequently on 22/12/88. The appellant also filed an application for extension of time to file the statement of defence. But prior to this time, the respondent had filed a summons for judgment under Order 10 of the old High Court of Lagos state (Civil Procedure) Rules, 1972. The summons was supported by a 32 paragraph affidavit sworn to by a litigation clerk in the chambers of the respondent’s solicitors. In response to the respondent’s summons, appellant filed a 19 paragraph affidavit to show cause pursuant to Order 10 Rule 3 of the aforesaid High Court of Lagos State (Civil Procedure) Rules 1972, and annexed the respondent’s letter dated 28th August, 1988 and marked Exhibit ‘A’. The learned trial Judge signed judgment on the summons against the appellant.

Dissatisfied, the appellant appealed against the trial court’s decision to the Court of Appeal. The parties filed and exchanged briefs of argument, the appellant having additionally filed a reply brief. By the majority decision of the Court of Appeal – Sulu-Gambari, JCA delivering the leading judgment and with Pats Acholonu, JCA concurring – the appeal was dismissed, while Uwaifo, JCA, delivered a minority judgment in favour of the appellant. Still dissatisfied, appellant has appealed to this court against the majority decision of the lower court and filed two original grounds of appeal, and with leave of this court, has also filed an additional ground of appeal. Appellant’s learned counsel postulated three issues for determination, to wit:-