The Attorney-general, Bendel State & Ors. V. United Bank For Africa Limited (1986) LLJR-SC

The Attorney-general, Bendel State & Ors. V. United Bank For Africa Limited (1986)

LawGlobal-Hub Lead Judgment Report


The parties in this appeal are customers and Banker. The Appellants were the plaintiffs in the High Court of Bendel State, while the respondent, the defendants. The three Plaintiffs are:-

(1) The Attorney-General of Bendel State, (as the legal representative of Bendel State)

(2) Bendel Newspapers Corporation and

(3) Ethiope Publishing Corporation

The last two being State Statutory Corporations. The Mid-West Mass Communication Corporation (hereinafter described as M.M.C.C.) before its dissolution was also a State Statutory Corporation and the Plaintiffs are its successors as regards the transaction leading to these proceeding.

The learned trial Judge found that the three Plaintiffs could in law institute the present action. The finding bas not been questioned in this Court and I say no more about it. The facts of the case are as follows:

The M.M.C.C. agreed with one Wilhelm Stiber to buy an Aircraft Per a pro-forma invoice dated 25/3/75 and U, March 1975. The invoice was addressed to the Government of Midwestern State, Benin City, Midwestern Nigeria. The invoice was received in evidence and marked exhibit 1 and reads:-

“1. Aircraft FOKKER F.27A

Serial No. 108

Like purchase Agreement on March 25, 1975
Price 2,250,000
Costs C & F Benin City 50,000

Total 2,300,000

Less Special Discount 50,000
Wilhelm Stiber KG.

” ”
” ”

(Sgd) Wilhelm Stiber

“Payment” against confirmed irrevocable Letter of Credit as declared in purchase agreement”

At the back is a minute which reads:-


Please see o’leaf

  1. Open a Letter of Credit in favour of Stiber through the Central Bank for the plane.

(Sg) T. Akpata (Akpata was the Managing Director of M.M.C.C.)


The next piece of evidence is an application Form D by Midwest Mass Communication Corporation to establish a Bankers Credit addressed to the United Bank for Africa Ltd. Benin City for Two Million, two hundred and fifty thousand Deutshe Mark on behalf of Midwest Mass Communication Corporation in favour of Wilhelm Stiber K.G. 7315 Weilhelm – Teck

The Application was also received and marked Exhibit 2. It was dated 27/5/75. The application was accompanied with a letter bearing the same date (27/5/75) and written by the Director of Finance, Midwest Mass Communication Corporation, Benin City addressed to The Manager, United Bank for Africa Ltd., Benin City and enclosing “a cheque No. BB 179185 for the sum of N658,930.00 against letter of credit in favour of Stiber, on our behalf for the purchase of Aircraft Fokker F.27”. The letter was admitted and marked “Exhibit 5”

Another application (undated) for Establishment of “Confirmed Documentary Credit by Cable” was also received in evidence and marked Exh. 4. It stated the name of Customer as Midwest Mass Communication Corporation and addressed to the United Bank for Africa, Ltd. Benin City Branch requesting it to open an irrevocable Documentary Credit in favour of Wilhelm Stiber K.G. 7315 Wilhelm-Teck for two million two hundred and fifty thousand Deutshe Mark C & F “accompanied by the following documents:-

  1. Combined Certificate of origin, Value, and invoice “Form C”.
  2. Certificate of Origin.
  3. Insurance Policy or Certificate covering all risks etc.
  4. Full set of clean “on board” Bills of Lading etc. covering of 30/6/75.

The application was under a signature stamped ‘Director of Finance, Midwest Mass Communication Corporation’. This application (Exhibit 4) also contains a very important clause. It reads:-

“We agree to hold you and your correspondence harmless and indemnified in an respect of any loss or damage that may arise in consequence of error or delay in transmission of your correspondents messages, or misrepresentations thereof, or from any cause beyond your or their control.”

The letter of credit was then opened as requested by the defendant bank and a copy of it was forwarded to the “Finance Director, Midwest Mass Communication Corporation, Benin City.” It stated the name of the customer as Midwest Mass Communication Corporation, Ring Road, Benin City and the beneficiary’s name as Wilhelm Stiber and the correspondent bank – BERLINER HANDELS – COSE HECHAFT FRANKFURTER BANK (otherwise described as BHF Bank).

“Irrevocable Documentary Credit in favour of Stiber for the sum of Two Million Two hundred and fifty Thousand Deutsche Mark C & F accompanied by the following documents:-

  1. Commercial Invoice
  2. Certificate of Origin
  3. Insurance covered by Consignee
  4. Combined Certificate of Origin, Value and Invoice
  5. Air worthiness Certificate

Covering Despatch latest 30 June 1975 of one Aircraft Fokker F.27A, serial No. 108 (per pro forma Invoice dated 26 March, 1975)from any German Airport to Benin City Airport, Nigeria.”

“This credit is valid in West Germany until 15th July 1975.”

At the back of the letter of credit is an endorsement

“On presentation of documents in strict conformity with the Letter of Credit, You must claim on us by tested cable….. ”

The letter of credit was admitted in evidence and marked Exhibit 8. However, by a letter dated 7th July J975 (Exhibit 15) was addressed to the Finance Director, Midwest Mass Communication Corporation, Benin City, by the defendant, it reads:-

“OUR LC. BN. 29/75/1100 for DM. 2,250,000 favour


“We advise that the shipment date of the above credit expired on 30th June 1975.

Kindly instruct us further.

Yours faithfully,

(Sgd.) per pro: United Bank for Africa Ltd.”

The 2nd P.W., was the Director of Finance of M.M.C.C. on the receipt of the letter (Exhibit 15) took it to Mr. Tayo Akpata, the Managing Director of M.M.C.C. Mr. Tayo Akpata then informed him that the aircraft subject matter of the contract and letter of credit had been sold and that the defendant should reply the letter to stop payment pending a new beneficiary. Exhibit 16 was the reply sent to the defendant. The letter was dated 11th July 1975. The relevant paragraphs reads:-

“Kindly suspend payment of the sum of DM.2,250,000.00 to the beneficiary. You will be informed of a new beneficiary in whose favour the credit will be established.”,

It is to be observed that the letter did not disclose that the aircraft had been sold to someone else.

There is a stamped impression on the letter indicating that the defendant received the letter at its Benin City branch on 11th July, 1975, the very day it was written, but the Benin City Branch only communicated this to the head office by memorandum dated 17th July 1975, two days after the beneficiary was paid by the confirming bank, in B.H.F. Bank in West Germany. The payment was made on 15/7/1975, last day of the validity of the credit against presentation of the apparently stipulated documents (Exhibits 20-20E).

Both the trial Judge and those of the Court of Appeal found they did not conform to the stipulations in the letter of credit (Exhibit 8) or to the application for the credit (Exhibit 4). The B.H.F. bank informed the defendant by a tested cable (Exhibit 18) immediately the payment was effected on 15th July 1975, which was confirmed by a debit note (Exhibit 21) of the same date. The cable was received by the defendant in Lagos on 16th July 1975. But the documents (Exhibits 20-20E) were delivered to the 2nd P. W., the Director of Finance, M.M.C.C. on 31/7/75. P.W.2 took no action until after the White Paper on Odje Commission of Inquiry Report was published and that was sometime in February 1978, when the present suit was instituted in the State High Court, Benin City.

The claims inter alia were for special damages of N658,930.00 for fraudulent misrepresentation, refund of the sum of N658,930.00 together with interests, N658,930.00 damages for breach of contract, recission of the contract.

The plaintiffs called two witnesses and a number of documents, some of which I have clearly referred to in this judgment were received in evidence by consent of both counsel.

The crux of the plaintiffs’ case was that the defendant was bound to comply strictly with the mandate and that payment by the B.H.F bank to the beneficiary against presentation of documents (Exhibits 20-20E) which did not conform to the letter of credit should have been rejected in that the defendant knew or ought to have known that the aircraft had not arrived Benin City on 30th June 1975 as stipulated in the Letter of Credit. They contend that the defendant was not obliged in law to re-imburse the B.H.F. bank in West Germany, since the payment to Stiber was not in conformity with the terms and conditions stated in the Letter of Credit. They contend that the duty to re-imburse the confirming bank, that is B.H.F. Bank, was only if it paid in strict complaince with the mandate as contained in the Letter of Credit. It was their case that the re-imbursement was collusive and fraudulent, particularly when the defendant was aware that the beneficiary of the letter had committed breach of the contract and in that the documents presented by him were known by the defendant to be forgeries.

The defendant denied liability for the claims. It contended that the documents which the seller presented before payment by the B.H.F. Bank on their face conformed to the credit, that it was not concerned with whether or not the aircraft was despatched, its only concern was to ensure that the documents (Exhibits 2O-20E) were in conformity with those required under the Letter of Credit. The defendant further averred that the contract between the M.M.C.C. and itself was governed by the Uniform Customs and Practice for Documentary Credit (1962) Revision, and in particular to Articles 8, 9,12, 30, 35 thereof. Further, it pleaded that it would be relying on the exemption clause and the indemnity clause contained in the M.M.C.C. ‘s application for the credit, that the falsification of documents by Wilhelm Stiber were matters beyond the control of B.H.F. Bank and the payment by B.H.F. to Wilhelm Stiber following the presentation of the documents was a matter beyond the control of the defendant, and finally it disclaimed liability of any losses and or damage suffered by the plaintiffs.

The learned trial Judge found in favour of the Plaintiffs and entered judgment of the sum of N586,664.83 “being the proposed cost, interest, commission, rates and expenses in respect of the aircraft which was never delivered, plus the sum of N72,265.17 being the balance outstanding to the plaintiffs in the hands of the defendant out of the sum deposited by the plaintiff.

The defendant appealed to the Court of Appeal. The appeal was allowed although the court agreed that the documents against which payment was made to Stiber were non conforming. Okagbue, J .C.A. in the lead judgment stated:-

“The bank is only obliged to examine the documents with care to see that on their face they appear to be what the buyer specified. However it cannot be contended in all seriousness that the documents upon which the bank has allegedly paid in the instant case were conforming documents. On the broad assumption that the payment has been made against – non conforming documents the payment as buyers have a right to reject the documents, and may refuse to re-imburse the bank or if as in this case the credit has been prepaid they may recover the amount prepaid.”

I agree, with him that his statement represents the finding of the trial Judge and the legal effect thereof.

He however went on to say, and I agree with him, that “When documents that do not conform to the credit requirements are accepted by the buyer the bank is discharged from responsibility to him and he is relegated to his remedies against the seller. The learned justice held that the documents (Exhibits 20-20E) were tendered to the plaintiffs (i.e. P.W.2 on 31/7/75) and that the plaintiffs did not reject the documents or raise any query till the Odje Commission dug up the matter, about a year later. He went on to say that the delay in this case was inexcusable as an examination of documents involve none of the complexities that may be involved in an inspection of merchandise to verify quantity and quality.”

“Certainly where the buyer fails reasonably to reject non-conforming documents, it is manifestly inequitable to permit him at a later date to update his own act to the detriment of the bank.”

The learned justice also considered the plaintiffs’ contention that on the 11th July, 1975, the defendant was asked to suspend payment and that was before they received the documents, and that as far as they were concerned the matter was at an end.

He rejected the contention, holding that that view was misconceived. The principle of ratification is that it is ex post facto. That since the banker’s undertaking was under an irrevocable confirmed credit, the credit cannot be cancelled at the instance of the buyer without the agreement of all the parties concerned with the credit.

Finally, the learned justice held that the trump card of the defendant, was the exemption clause in the agreement between the banker and the customer and also the various Articles of the Uniform Customs (U.C.P.) pleaded in paragraph 33 of this statement of claim.

The appeal of the defendant was allowed for these reasons, and judgment of the trial court was set aside, and the plaintiff’s case was dismissed in toto.

The Notice of Appeal gave five grounds of appeal, but only four were stated in the Appellant’s brief. The first and second grounds were argued together and the argument in respect of the third appear to have merged into those first two grounds. The fourth which I consider to be decisive of this appeal is the “exemption clause and indemnity clause in Exhibit 8 – the plaintiffs’ application for the confirmed Irrevocable Documentary Credit.

In his argument, and in his Appellants’ brief, great stress was placed on the findings of fact and of the legal consequences attendant on them.

The three questions of determination are better set out in the Respondent brief, and I reproduce them:-

  1. Was it established that the correspondent bank had failed to comply with any of the terms and conditions stipulated in the letter of credit
  2. Was there a duty on the Respondents to have repudiated their contract with the corresponding bank and to have refused to reimburse it
  3. Whether, having regard to the terms of the contract between the Appellants and the Respondents, the Respondents are liable to compensate the Appellants for their loss arising from the failure of the seller to supply or deliver the goods sold.”

It is correct as found by the learned trial judge that the documents presented (Exhibits 20-20E) against which payment was made to the beneficiary were non-conforming.

The plaintiffs called an expert witness, P.W.1. His evidence was unchallenged and was that the documents did not conform. He said all the documents should bear a date 30th June 1975 or a date prior to that day. He said that the documents should cover the despatch of the Aircraft which must leave any airport in West Germany on or before 30/6/75; so that any document bearing a date subsequent to 30/6/75 cannot be said to be a despatch of the aircraft on or before that day. None of these documents – bear a date on or before 30/6/75. I will therefore answer the first question in the affirmative. The learned justice of appeal in the lead judgment concurred in the finding that the documents did not conform to the stipulation in the credit. I am unable to accept the argument of Chief Williams, learned Senior Advocate. On the face of the documents, the documents could not have covered the dispatch of the aircraft on the 30th June 1975, being the latest date it was expected to depart from West Germany. The non compliance was by the beneficiary with conditions stipulated in the Letter of Credit.

The law is clear that the confirming bank need not have personal knowledge of the departure of the aircraft. The material default is that the banker failed to detect the irregularity appearing on all of the stipulated documents which covered the departure of the aircraft by or on 30/6/75. It is question for the trial judge to decide assisted by the evidence of an expert, P. W.1.

The next question is whether the defendant had duty to repudiate their contract with B.H.F. Bank in West Germany, the confirming correspondent Bank. The law is clear that the right to reimbursement by the confirming bank is only on presentation of apparently conforming documents. A confirming bank is entitled to reimbursement only on the condition that it complied with the mandate of the mandatory. With the finding that it paid on documents which did not conform, the defendant, as the issuing bank had the right to reject the documents provided it acted promptly and did not act in such a manner indicative of ratification. Rather, it re-imbursed the confirming bank on the defective and forged documents. Lord Diplock, in United City Merchants (Investments) Ltd. v. Glass Fibres and Equipments Ltd. (1982) A.C. 168, stated the law on the subject at p. 184 E-H:-

“It has, so far as I know, never been disputed that as between confirming bank and issuing bank and as between issuing bank and the buyer the contractual duty of each bank under a confirmed irrevocable credit is to examine with reasonable care all documents presented in order to ascertain that they appear on their face to be in accordance with the terms and conditions of the credit, and, if they do so appear, to pay to the seller/beneficiary by whom the documents have been presented the sum stipulated by the credit, or to accept or negotiate without recourse to drawer drafts drawn by the seller/beneficiary if the credit so provides. It is so stated in the latest edition of the Uniform Customs. It is equally clear law, and is so provided by article of the Uniform Customs, that confirming banks and insulting banks assume no liability or responsibility to one another or to the buyer “for the form, sufficiency, accuracy, genuineness, falsification or legal effect of any documents.” This is well illustrated by the Privy Council case of Gum Sigh & Co. Ltd. v. Banque de I’Indochine (1974) 1 W.L.R. 1234, where the customer was held liable to reimburse the issuing bank for honouring a documentary credit upon presentation of an apparently conforming document which was an ingenious forgery, a fact that the bank bad not been negligent in failing to detect upon examination of the document.”

Therefore where the correspondent bank, B.H.F. Bank, in the instant case, paid the beneficiary against non conforming bank and the buyer does not adopt the transaction, on account of the breach of mandate, in that event the issuing bank cannot debit the buyer with the price paid. See Goode Commercial Law pages 668 and 671. I will answer the second question in the affirmative. The defendant was perfectly entitled to refuse reimbursement of the purchase price paid to the seller, Stiber, by B. H. F. Bank. Chief Williams has submitted that the trial court was in error in finding that the beneficiary Stiber was paid on the 11th July 1975 whereas payment was on 15/7/75. I agree that a careful examination of the documents and the evidence of 1st P.W. show clearly that the documents were presented and paid on 15/7/75 and not on 11/7/75. And that the credit remained valid until that day.

From the standpoint of the concurrent finding of the two courts on the issue of non conformity of the documents, the plaintiffs would have been entitled to judgment and the judgment of the trial court would have been restored.

However the decisive issue is the exemption clauses in U.C.P. and the indemnity clause in exhibit 8, coupled with what the learned justice of appeal described as ratification of the appellants by their inaction after the receipt of the documents.

But the Court of Appeal found that the appellant having received the document since July 1977 and did not reject them nor disclaim the payment, until February 1978, after the lapse of such a long time cannot protest against the payment by defendant.

The Appellant’s brief and the oral argument of the learned Principal State Counsel failed to advance any meaningful argument under ground 4 regarding the exemption clauses and other defences pleaded in paragraphs 33 and 34 of the statement of defence. The appellants’ contention for which I cannot find any support was “that before one can claim reliance on the exemption clauses one must first comply diligently and honestly with the terms and condition of the credit.”

Not a word was said on this ground by the learned Principal State Counsel before the Court. I am unable to find any support for this proposition. I have already stated the view of the Court below of failure of the plaintiffs to reject the documents and the delay of about 31 months after plaintiffs received the documents on 31/7/75 until February 1978, when this action was commenced. To say the least, the delay is inexcusable.

I do not consider Article 12 of Union Customs pertinent in this regard as submitted by Chief Williams and the Court below. The fact is that the defendant, while not capable of stopping the correspondent bank from the wrongful payment to the beneficiary, had the right not to re-imburse the B.H.F. Bank for the reason that the documents did not conform. So, in my view, Article 12 Universal Customs is not relevant. Also ineffective is the provision contained in exhibit 4. It states:-

“We agree to hold you and your correspondents harmless and indemnified in respect of any loss or damage that may arise …. from any cause beyond your control.”

I hold that the loss in this case was not beyond the control of the defendant, for it could and was at liberty to refuse to re-imburse the B.H.F. Bank as they had the right to refuse – that was not a matter beyond its control. To the extent, I agree with the learned trial judge. It is not a question of stopping payment or rescinding the contract and consent of the other party is not necessary. The point is that the B.H.F. Bank has not made a case for reimbursement against the defendant. The plain fact is that neither Stiber, nor the B.H.F. Bank was entitled to payment on the credit.

I however agree that the appellants’ delay and inaction in rejecting the payment to Stiber for a period of thirty one months after the receipt of the documents defeats their claims in this action. See Westminster Bank Ltd. v. Banea Nazionali di Credits (1928) 31 LL. L. Rep. 306 and Bank Nelli Iran v. Barclays Bank (D.C.& O) (1951) 2 Lloyd’s Rep. 367.

It is for this reason and that I will dismiss the appeal and confirm the decision of the Court below. The Respondent is entitled to the costs of this appeal which is fixed at N300.00.

BELLO, J.S.C. (Presiding): I had the privilege of reading in draft the judgment just delivered by my learned brother, Coker, J.S.C. I agree with his reasoning and conclusion that the appeal should be dismissed.

I may only emphasize that one of the terms of the letter of credit reads:

“COVERING DESPATCH Latest 30 June 75 OF ONE AIRCRAFT FOKKER F27 A. SERIAL NO. 108, (as per Proforma Invoice dated 26 March 75) from any German Airport to Benin City Airport, Nigeria.”

The evidence shows that the paying bank in Germany paid the seller without having any document showing the despatch of the aircraft in accordance with the terms of the credit. It appears on the authority of the judgment of Parker J. in Rayner & An. v. Hambros Bank (1943) 74 Lloyd’s Rep. 10 (C. A.) the paying bank ought to have called for documentary evidence of despatch. Failure to do so constituted a breach of their obligation to comply strictly with the terms of the letter of credit. The Respondent suffered the same fate as the paying bank. I would have found the Respondent liable for breach of contract or negligence but for the fact that the Appellants slept over their right for over a period of over thirty months.

Undue delay by a party to a credit in the exercise of his right to reject constitutes ratification or waiver of any irregularity committed by the defaulting party. Undue delay may also amount to estoppel: See Bank Melli Iran v. Barclays Bank (1951) 2 Lloyd’s Re. 367 at 378 and Panchaud Freres S.A. Et. General Grain Co. (1970) 1 Lloyd’s Rep. 53 (C.A.). Only six week’s’ delay was involved in the Bank Melli Iran case.

In the present case on appeal the Appellants slept over their right for over thirty months. Their claim must fail on this ground.

ESO, J.S.C.: I have had a preview of the judgment which has just been delivered by my learned brother Coker J.S.C. and I am in complete agreement. I adopt my reasoning in the case A.M.O. Akinsanya v. U.B.A. Suit SC.95/1985 delivered this morning in regard to the general law on international credit.

I also hold that the appellants delay in rejecting the documents, even after they had known or ought to have known that there was no plane coming forth from Stiber or ever likely to come forth as fatal.

I will also dismiss the appeal which is hereby dismissed with N300.00 Costs.


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