Saeby Jernstoberi Maskinfabric A/s V Olaogun Enterprises Ltd. (1999)

LAWGLOBAL HUB Lead Judgment Report

AYOOLA, J.S.C

There are two appeals before us in this matter. One is by Saeby Jernstoberi Maskinfabric A/S, (the plaintiff in the High Court, respondent in the Court of Appeal and now the appellant in this appeal) from the decision of the Court of Appeal whereby the appeal of Olaogun Enterprises Ltd. (the defendant in the High Court, appellant in the Court of Appeal and respondent in this appeal) to that court from the decision of the High Court of Oyo State was partially allowed and the amount in which the respondent was adjudged liable to pay to the respondent was substantially reduced to DKR 159,514.00 from DKR 470,290.00, while the appeal was dismissed in regard to other aspects thereof. The other is a cross-appeal by the respondent from the dismissal of the rest of his appeal.

By the time the appeal and the cross-appeal reached this court, the facts have been fairly settled. It is now possible to state them briefly, drawing largely from the judgment of the Court of Appeal.

The respondent is a company registered in Nigeria which engaged in large scale agriculture. In 1979 it placed an order for a feed-mill machine as well as its spare parts with the appellant, a limited liability company with registered office in Copenhagen, Denmark, which at all material times was carrying on the business of manufacturing and marketing of agricultural machines or equipment. The appellant manufactured and delivered to the respondent the machines in accordance with the respondent’s order. The total price of the machines and the spare parts was DKR 485,336.00 payable instalmentally, the first payment of 15% of the purchase price being due and payable on the receipt of the shipping document while the balance of 85% was payable by six consecutive half yearly draft with 8% interest worked into each of the installments. Upon this arrangement, the machine and spare parts were to be fully paid for within thirty- six months from the date of the shipment. The respondent defaulted in the payment as agreed, alleging that the machine was defective and that the spare parts it had ordered were not delivered. In consequence of the default, the appellant sued the respondent claiming the purchase price of the machine and spare parts and interest thereon at the rate of 18% per annum calculated at compound interest from 1982 till judgment and thereafter at the rate of 60% on the amount of judgment debt until payment. The respondent, on the other hand, counter claimed for damages for breach of contract and interest on any amount awarded as damages.

At the High Court, counsel on behalf of the respondent contended that the cause of action arose in 1979 and that the action commenced in June 1987 was statute barred. The trial judge (Aderemi. J. as he then was) rightly appreciated that the decisive question was: when did the cause of action accrue Having held that: “Although bills of exchange is the mode of settling money that may be outstanding the transaction is rooted primarily in contract”, he held that the last of the drafts drawn in payment of the purchase price being due in 1982, the action commenced by a writ issued on 10th June. 1987 was not statute-barred. In the event, he entered judgment in favour of the appellant in the sum of DKR 470,290.00 being the amount of bills of exchange issued by the respondent in favour of the appellant and which were dishonoured. On appeal to the Court of Appeal, it was contended by counsel on behalf of the respondent the High Court was in error.

In the Court of Appeal, counsel for the appellant, placing reliance on section 71(1) of the Bills of Exchange Act (Cap 35 LFN, 1990), repeated the argument that it was only when the last draft became due in 1982 that the cause of action accrued. Counsel for the respondent, for his part argued that where under the terms of a contract, payment becomes due and payable from time to time, a cause of action in respect of each payment accrues on its due date and as regards that particular installment time begins to run from that date against the party entitled to receive it. For that submission he relied on the case of Ijale v. A.G. Leventis Co. Ltd. (1961) 2 SCNLR 386; (1961) All NLR 762, 771. Salami JCA delivering the leading judgment of the Court of Appeal with which Ogwuegbu, JCA (as he then was) and Muhammad JCA agreed, held that section 71(1) of the Bills of Exchange Act applied only if only one bill was involved and not when, as in the present transaction, several bills have been drawn. Having so held, he accepted the proposition of law advanced by counsel for the respondent and held that four of the drafts were caught by the limitation. He put his views clearly thus:

“The claim of the respondent is founded on contract and not on bill of exchange. In other words how much of the respondent’s claim is statute barred by Limitation Law Cap 64 of the Laws of Oyo State of Nigeria, 1978. Section 4 of the said law reads as follows:

‘4(1) The following actions shall not be brought after the expiration of six years from the date on which the cause of action accrued, that is to say:

(a) action founded on simple contract or on tort:

The six evenly divided six monthly instalmental payments would be respectively due and payable on or about (a) 4th July, 1979; (b) 4th January, 1980; (c) 4th July, 1980; (d) 4th January, 1981; (e) 4th July, 1981 and (f) 4th January, 1982. The writ of summons commencing the action was taken out on 10th June, 1987. By arithmetical calculation, it seems to me that all six installments except the 5th and 6th are statute barred. Since the instrument (sic: instruments) are issued for the same sum of money the respondent is entitled to judgment in the sum of DKR 79,757,00 for which exhibit H was drawn multiplied by two instruments which gives DKR 159,514.00”

In the result, the Court of Appeal varied the judgment of the High Court by entering judgment for the appellant in that sum.

At the forefront of the appellant’s appeal is the question whether the Court of Appeal was right in holding that the action was statute-barred except in regard to the amount of the 5th and 6th drafts, The appellant in a two-pronged approach argued first, that since the bills were drawn in a set, time did not begin to run against the holder of the bill until the last part of the set is presented and dishonoured; and, secondly, that since the respondent was sued on a single contract and not on the Bills of Exchange, the respondent was in breach of that contract by failing to pay for the equipment. The respondent’s response to these submissions is, somehow, wanting in depth and clarity when it was argued in the respondent’s brief of argument that the bills were not drawn in a set and that “the arrangement to settle the cost price of the bad feed-mill machinery or equipment itself is a contract which has its own express terms which must be seriously viewed by the parties in the light of the state of the law.”

At first, it appeared that great issues touching on Bills of Exchange would arise on this appeal. However, a closer look at the judgments of the High Court and the Court of Appeal reveals that the two courts were at one in holding that the basis of the appellant’s claim was contract and not the drafts. Whatever hesitation I may have about the accuracy of such opinion, I must proceed, as the parties did, on the footing that it was the correct conclusion. Furthermore, the Court of Appeal held, as have been seen, that the drafts were separate bills rather than bills in a set. On this appeal, that view has not been challenged by the appellant. Section 71(1) of the Bills of Exchange Act which the appellant relied on as part of his argument would only be applicable if the bill in question is a bill in a set. One consequence of section 71(1) which provides that:

“Where a bill is drawn in a set, each part of the set being numbered and containing a reference to the other parts, the whole or the parts constitute one bill”,