UNION BANK OF NIGERIA PLC

V.

  1. SPARKLING BREWERIES LIMITED
  2. OLO COLD DRINKS NIGERIA LIMITED
  3. OLO PLASTIC IND. NIGERIA LIMITED
  4. OBOLI NIGERIA LIMITED
  5. DELTA CROWN AND SEA CO. LIMITED
  6. MORRISON INT. PRINTING PRESS LTD

 

COURT OF APPEAL

(BENIN DIVISION)

CA/B/103/96

ALOYSIUS IYORGYER KATSINA-ALU, J.C.A (Presided and Read the Leading Judgment)

RABIU DANLAMI MOHAMMAD J.C.A

EMMANUEL OLAYINKA AYOOLA, J.C.A

THURSDAY, 20TH MARCH, 1997

 

Issues:

  1. Did the appellant bank issue irrevocable Letters of Credit for the 3rd to 6th respondents which Letters of Credit it (the appellant) later cancelled?
  2. If the answer to Issue No. 1 is in the affirmative, who can sue the appellant for breach in cancelling the irrevocable Letters of Credit it had previously issued?
  3. Was the trial Judge right in law in holding that the appellant is liable to the six respondents for breach for cancelling the irrevocable Letters of Credit it issued in favour of the 3rd to 6th respondents?
  4. If the answer to issue No. 3 is in the affirmative, was the trial court right in making the various awards of damages it made in favour of the six respondents?

 

 

Facts:

                The six respondents are companies with one common registered office and principal place of business. At all material times they were customers of the appellant bank. The respondents in the trial High Court claimed against the appellant special and general damages for breach of contract alleged to have arisen from an unlawful cancellation of irrevocable letters of credit issued by the appellant for valuable consideration and, in the alternative, damages for unlawful interference with the business of the respondents.

The respondents’ case is that by their contract with the appellant, the appellant agreed to establish letters of credit on their behalf in favour of their overseas suppliers for importation of raw materials for the production of beer and soft drinks. Pursuant to this contract, the appellant in fact issued the letters of credit- Exhibits 10, 10a and 10b. The respondent met all the conditions imposed by the appellants’ correspondent bank. The respondent further stated that after the appellant issued the letters of credit it wrongly cancelled them and did not notify the overseas suppliers. The alleged cancellation of these irrevocable letters of credit resulted in the loss of production and the eventual closure of the 1st and 2nd respondents although the 1st and 2nd respondents were not parties to the contract between the 3rd to 6th respondents and the appellant.

Part of the special damages claimed by the respondents includes: (i) damages for loss of several million of crates and bottles to customers as a result of the closure of the 1st and 2nd respondents, (ii) damages for reactivating the factory of the 1st and 2nd respondents; damages for loss of production and (iii) claim for wrongful cancellation of the letters of credit. None of the 1st and 2nd respondents’ customers was called to testify. The respondent relied mostly on their oral evidence to prove the damages.

The appellant on the other hand denied issuing irrevocable letters of credit on behalf of each of the respondents. Its case was that the application for the issuance of letters of credit was subject to the fulfillment of certain conditions precedent which conditions were not met by the respondents. The appellant denied waving any of the conditions. That although the appellant stated the process of opening of letters of credit these processes were not completed and that the documents exhibits 10, 10a and 10b tendered by the respondents as irrevocable letters of credit were nothing but forms yet to be issued by the appellant.

The trial court in its judgment found that the conditions set down by the appellant, for the issuance of  the irrevocable letters of credit were met by the respondents in that the appellant waived some of the conditions not complied with by the respondents. It also found that the appellant issued the letters of credit which it later cancelled. It therefore found the appellant liable to the respondent and awarded the respondents various damages as claimed. In all, the trial court awarded damages of N3, 335,221,815.00 to the respondents.

The appellant was dissatisfied with the decision and appealed to the Court of Appeal challenging various findings of the trial court and the award of damages made by the trial court. The respondents also cross-appealed on the quantum of damages.

 

Held (Unanimously allowing the appeal and dismissing the cross-appeal):

  1. On Meaning, nature and basis of a confirmed letter of credit- A confirmed letter of credit is a modern practice whereby a buyer agrees to provide a buyer’s confirmed credit in favour of the seller. The buyer requests his banker to open a credit in favour of the seller and in pursuance of that request, the banker or his foreign agent, issues a confirmed credit in favour of the seller. The main reason for this practice is because the seller wishes to be assured in advance, not only that the buyer is in earnest, but also that he delivers the goods. [Akinsanya v. UBA Ltd. (1986) 4 NWLR (Pt. 35) 273 referred to]. (P. 353, paras- A-B)
  2. On Contracts involved by use of irrevocable letter of credit- There are four contracts involved in a transaction consisting of international sale of goods to be financed by means of a confirmed irrevocable letter of credit. These are:
  • Contract between the buyer and the seller;
  • Contract between the buyer and the issuing bank.
  • Contract between the issuing bank and the confirming bank; and
  • Contract between the seller and the confirming bank.

The instant case relates to the second class. The respondents were in essence trying to enforce the contract between the buyer (the respondents) and the issuing bank (the appellant). (P. 353. Paras. B-D)

  1. On Four stages or mechanism of documentary credits- There are four stages or mechanism of documentary credits in an international sale of goods. These are:
  • The contract of sale between the buyer and the seller;
  • The second stage whereby the buyer requests the issuing banker to open a documentary credit in favour of the seller;
  • The third stage whereby the issuing banker notifies the sellers of the opening of the documentary credit directly to the seller; and
  • The fourth stage, which is the realization of the credit.

Normally, the notification of the opening of the documentary credit to the seller would be conclusive of its opening. In the instant case, no such notification has taken place.(P. 379, paras. D-E)

  1. On What confirmed letter of credit must contain- It is trite that where payment for goods are by a confirmed letter of credit the correspondent bank must add its own promise to that of the issuing bank. In the instant case, the documents produced by the respondents as showing that letters of credit were opened does not bear the name of a correspondent bank which would have shown that in addition to their being irrevocable, they were also confirmed. (P. 379, paras. F-G)
  2. On When a confirmed letter of credit is issued- A letter of credit cannot be said to have been issued unless it has been sent to the correspondent bank. Also, a letter of credit is issued only when the contract between the bank and the seller has come into existence. In the instant case, no correspondent bank has been appointed. Therefore Exhibits 10, 10A and 10B are mere completed forms and not issued letters of credit. ( 360, para. B)

Per KATSINA-ALU, J.C.A at page 359, paras. C-G:

“It is manifest from the evidence and Exhibits 10,10A and 10B that the processing of the application and the filing of the Exhibit 10 series started from Ughelli Branch and later sent to Lagos for completion. I find it particularly plain that Exhibits 10,10A and 10B are incomplete forms. A close look at the forms would reveal firstly that the 4th party to thecredit is yet to be filled in- the Negotiating or Advising Bank through whom the proceeds of the credit were to be remitted as clearly indicated in the Exhibit 10 series. I do not believe that this is a case where the Bank undertook to personally notify the credit to the seller. Perhaps it is necessary to re-state that the processing of the application and the filling of Exhibit 10 series started from Ughelli Branch. Simply put it was PW1 who started the process and filled in Exhibits 10, 10A and 10B. Under the column for Advising Bank he filled in the words “Please add your confirmation to this letter of Credit.” This seems to indicate that under this contract, there was going to be a negotiating Bank through whom the proceeds of the credit were to be remitted. Indeed the evidence of PW1 supports this for he said at page 33 as follows:

“There is no correspondent Bank in Exhibit 10. It was the duty of the Head Office Nafest to insert the Correspondent Bank from the Branch Letters of Credit prepared.”

Secondly, the Irrevocable Credit No. is not inserted. And thirdly there is no date on which Exhibits 10, 10A and 10B were issued. In view of all these I am in complete agreement with learned counsel for the defendant that Exhibit 10 series were incomplete forms. In other words they are not issued Letters of Credit as contended by the plaintiffs. They were letters of Credit forms prepared by the Branch and forwarded to the Head Office for further action.”

 

  1. On Locus standi to sue on a contract-

In the instant case, it is clear from the facts that the 1st and 2nd respondents had no import licenses in their names. As such they could not have utilized the ones issued in the names of the 3rd-6th respondents. Therefore, the 1st and 2nd respondents would have no locus standi to institute the action notwithstanding that it financed the processing of the letters of credit in issue. (P.363, paras. F-G)

Per KATSINA-ALU, J.C.A at page 363, paras. E-G:

“In this country it is not uncommon to see a situation where persons who are holders of Import Licences are those who have no money and those who have money have no Import Licences. The parties get together and the person with money finances the man with licence upon terms. But this is a private arrangement between the parties. It does not involve the issuing Bank. This is the situation in the present case. The arrangement whereby the 1st and 2nd plaintiffs financed the 3rd to 6th plaintiffs was a private affair of the parties. There is nothing strange about the arrangement more so when the parties belong to one group. It did not involve the defendant as the Issuing Bank. Moreover there is no credible evidence that the defendant was made a party to the arrangement.”

 “The plaintiff’s evidence on this point was short. I have already reproduced it. It is simply this, that the 1st and 2nd plaintiff’s lost all their crates and cartons to their various distributors country wide. As the plaintiffs could not manufacture the beer and soft drinks as a result of the alleged cancellation of the Letters of Credit, the distributors refused to return the crates and cartons. It was said that the 1st plaintiff lost 12, 000,000 bottles whereas the 2nd plaintiffs lost 18, 000,000 bottles. Would the ipse dixit of the plaintiffs be sufficient proof of the loss? I think not.”

“The minimal proof in the instant case would be evidence of the list of the distributors of the 1st and 2nd plaintiffs and evidence of the quantity of the crates and cartons and how many of these were in possession of each distributor. In addition some of the distributors should have been called as witnesses. Evidence of these matters necessary to prove special damages herein pleaded was visibly non-existent. The fact that the evidence was unchallenged and un-contradicted did not improve the quality of the evidence.

  1. On Admissibility of document in the absence of it makers-

Section 91 of the Evidence of Act permits the admissibility of documents in special circumstances where the maker is absent. In such a situation, what the court has to consider is the weight to be attached to the document. In the instant case, exhibits 19 and 20 were properly received in evidence. The only question is whether the court considered the weight to be attached to them before he came to the conclusion that they established the facts stated therein. From the judgment of the lower court, It is clear that it did not evakuate the evidence in relation to Exhibits 19 and 20. [Attorney-General of Oyo State v. Fairlakes Hotels (1989) 5 NWLR (Pt. 121) 255; Bello v. Ringim (1991) 7 NWLR (Pt. 206) 668 referred to] (Pp. 370, para. G; 371, paras.B-C)

  1. On Whether unchallenged evidence will be accepted in all cases-

It is not in all cases that the unchallenged evidence of a witness will be swallowed hook, time and sinker. In all cases, the requirement is that the evidence must be credible. (P. 371, para. C)

  1. On Evaluation of oral evidence and a document admitted without its maker under Section 91 of the Evidence Act-

Oral evidence and a document put in evidence under Section 91 of the Evidence Act cannot receive the same treatment when it comes to the matter of evaluating such evidence. The former if unchallenged must be accepted as establishing the facts therein stated. As regards the latter, documents admitted by consent or by the court in the absence of their maker, the court still has a duty to consider the weight to be attached to such documentary evidence before coming to the conclusion as to whether or not it establishes facts stated therein, in any case short of that in which there is an admission by the opposing side that it does. [Attorney- General of Oyo State v. Fairlakes Hotels (No. 2) (1989) 5 NWLR (Pt. 121) 255 referred to and applied]. (Pp. 370-371, paras. H-B)

 

  1. KATSINA- ALU, J.C.A: (Delivering the Leading Judgment): This is an appeal by the defendant against the judgment of Akpomudjere J., of 15th April 1996 whereby he awarded damages of N3, 335, 221,815.00 to the plaintiffs.

This is a case concerned with the modern practice whereby a buyer agrees to provide a banker’s confirmed credit in favour of the seller. The buyer requests his banker to open a credit in favour of the seller and in pursuance of that request,

 

  1. The banker or his foreign agent, issues a confirmed credit in favour of the seller. The main reason for this practice is because the seller wishes to be assured in advance, not only that the buyer is in earnest, but also that he, the seller, will get his money when he delivers the goods: see Akinsanya v. UBA Ltd. (1986) 4NWLR (Pt. 35) 273. There are four contracts involved in this international commercial transaction. These are:
  2. (a) contract between the buyer and the seller;

(b) contract between the buyer and the issuing bank;

(c)  contract between the issuing bank and the confirming bank; and

(d) contract between the seller and the confirming bank

We are concerned here in this appeal with the second class of contract.

The plaintiffs’ case is that by their contract with the defendant, the defendant

  1. Agreed to establish letters of credit on their behalf in favour of their overseas suppliers. The plaintiffs further contend that pursuant to this contract the defendant in fact issued the letters of credit- Exhibits 10, 10A and 10B only to cancel them and not notify the overseas suppliers. In the alternative, the plaintiffs claimed in tort against the defendant for unlawful interferences with their businesses.

The basis of the plaintiffs’ claim can be summarized as follows:

  1. The 6th plaintiff is part of the Group of Companies known and referred to as the Olori Group of Companies and is a customer of the defendant.
  2. The 1st plaintiff brews beer whilst the 2nd plaintiff produces soft drinks.
  3. The 3rd to the 6th plaintiffs made applications to the defendant for the opening of irrevocable Letters of Credit for the importation of raw materials for the production of beer and soft drinks.
  4. That when these various applications were made, it was agreed and understood by all the six plaintiffs and the defendant that the raw materials covered by the Letters of Credit were being imported by the 3rd to 6th plaintiffs for the exclusive use of the 1st and 2nd plaintiffs and that the profits derived from the production made by 1st and 2nd plaintiffs from the use of the raw materials would be shared amongst the six plaintiffs.
  5. The plaintiffs contended that they fulfilled all the conditions set down by the defendant for the opening of these Letters of Credit and that these irrevocable Letters of Credit were eventually established but later cancelled by the defendant.
  6. The alleged cancellation of these irrevocable Letters of Credit resulted in the loss of production and the continual closure of the 1st and 2nd plaintiffs.

The defendant on the other hand has denied issuing irrevocable Letters of Credit on behalf of each of the plaintiffs. Its case was that the application for the issuance of Letters of Credit was subject to the fulfillment of certain conditions precedent which conditions were not met by the plaintiffs. It was the defendant’s case that although it started the processes of opening of Letters of Credit these processes were not completed and that the documents exhibits 10, 10A and 10B tendered by the plaintiff as irrevocable Letters of Credit were nothing but forms yet to be issued by it.

In his judgment, the learned trial Judge found as a fact the conditions set down by the defendant for the issuance of the irrevocable Letters of credit were met by the plaintiffs in that the defendant waived some of the conditions not complied with by the plaintiffs. He also found that the defendant in fact issued the Letters of Credit which it later cancelled. The learned trial Judge found the defendant liable to the plaintiffs and awarded them damages as already indicated. Hence this appeal by the defendant.

The plaintiffs were also dissatisfied with the said judgment. They therefore cross-appealed on the quantum of damages. Their complaint is that the trial court awarded them a lower sum as damages than was in fact proved before the court.

Both parties filed their respective briefs of argument. The defendant formulated four issues for determination in this appeal at pages 3 and 4 of its brief of argument. These read:

  1. Did the defendant Bank issueirrevocable Letters of Credit for the 3rd to 6th plaintiffs which Letters of Credit it (the Defendant) later cancelled.
  2. If the answer to Issue No. 1 is in the affirmative, who can sue the defendant for breach in cancelling the irrevocable Letters of Credit it had previously issued.
  3. Was the trial Judge right in law in holding that the defendant is liable to the six plaintiffs for breach for cancelling the irrevocable Letters of Credit it issued in favour of the 3rd to 6th plaintiffs?
  4. If the answer to issue No. 3 is in the affirmative, was the trial court right in making the various awards of damages it made in favour of the six plaintiffs?

For their part, the plaintiffs raised three issues at page 2 of their brief of argument which read thus:

  1. Having in fact registered the Form M , obtained approval to the same and subsequently issued the Letters of Credit whether the defendant Bank can justify the cancellation of the Letters of Credit because the conditions for registering the Form M was not satisfied;
  2. Do the plaintiffs have any legal status to maintain this action;
  3. Is the award of damages made in favour of each of the plaintiffs sustainable in law.

The issues formulated by the plaintiffs are in essence similar to those raised by the defendants. However I prefer the formulation of learned counsel for the defendant. It is precise and to the point.

At the hearing of this appeal, counsel on behalf of their respective clients, adopted and relied on their respective briefs of argument. They also addressed the court in amplification of the issues raised in the briefs.

Issues 1,2 and 3 relate to liability. The defendant therefore dealt with them together in its brief of argument. It is common ground between the plaintiffs and the defendant that certain conditions were set out by the defendant for the issuance of Letters of Credit to the plaintiffs. Indeed, PW1 was a former Manager of the defendant when these transactions took place testified at page 27 on the Record that the defendant would not issue any Letter of Credit if the conditions for its issuance were not satisfied.

To fully appreciate the case of the plaintiffs it is necessary to set out the following relevant paragraphs of the Statement of Claim:

“7. About the month of March, 1986 by an agreement made between the plaintiffs and the defendant at the defendant’s Head Office/ Principal place of business at No. 40, Marina, Lagos, the parties entered into a “Further Contract’ under the terms of which the defendant as the ‘Issuing Bank’ of documentary credits agreed to open Letters of Credit for the importation of brewery raw materials for the specific purpose of enabling the 1st and 2nd plaintiffs to produce beer and soft drinks in sufficient quantities.

  1. In order to achieve the objective of the said ‘Further Contract’ referred to in paragraph 7 above, and upon the specific and express written directions of the defendant, (as contained in those exchanges of correspondence particularized below), the parties further agreed that all Federal Government of Nigeria ‘Import Licences’ held in the name, and available for use by any and all of the plaintiffs and other members of the OLORI GROUP OF COMPANIES should be utilized for the importation of brewery raw materials for the benefit for sale to the 1st and 2nd plaintiffs at a profit of 15% of the production value.
  2. In pursuance of all those matters pleaded in paragraphs 6-13 above and upon the fulfillment by the respective plaintiffs of all the contractual obligations reserved as to their own part particularly referred to in paragraphs 6 and 12 above, the Defendant- (as ‘the Issuing Bank’, did issue and establish Irrevocable Letters of Credit’ for the account of the respective plaintiffs (as ‘Accreditors’) in the respective amounts, and in favour of those sellers/suppliers of goods and material (as ‘Beneficiaries’) as shown in the Particulars of Letters of Credit Contracts immediately below. All the original letters of credit are in the custody of the defendant and it is given notice to produce the originals at the trial.”

The letters pleaded by the plaintiffs as constituting the terms and conditions for the issuing of the Letters of Credit were tendered by the plaintiffs and received in evidence as Exhibits 1, 2, 3 and 4. The defendant also relied on these sets of documents as constituting the basis on which it agreed to issue the Letters of Credit but went on to aver in its Statement of Defence that the plaintiffs did not satisfy these preconditions hence it declined to complete processing the application for the issuance of the Letters of Credit. The relevant paragraphs of the Statement of Defence in this connection are 15, 16 and 19 and they read:

“15. With reference to paragraphs 12 to 24 of the Amended Statement of Claim, the defendant avers that there were negotiations between it and some of the plaintiff Companies for the opening of Letters of Credit.

  1. That consequent upon these negotiations and exchange of letters between it and some of the plaintiff Companies, it (the defendant) by its letter of 25/7/86 addressed to the 1st plaintiff, agreed to register 1st plaintiff’s Form M with a view to the opening of a letter of credit if the following conditions are met:

“1. Irrevocable undertaking to resume full operation of accounts in our books when production resumes with all sales proceeds paid direct to our branch.

  1. Up-dating of repayment of liability in the name of Olori Motors & Co. Ltd. At our Mission Road branch.
  2. Clearing of overdraft created as a result of loan repayment on Sparkling Breweries Ltd. and Olo Cold Drinks Nig. Ltd. Accounts.
  3. That Inspection of properties mortgaged and those held on simple deposit is undertaken.
  4. Payment of 30% Import Levy/Tariff without increasing the current account overdraft.
  5. 150% cash margin up-front to be held on separate cash margin account.
  6. Payment of Import Duty without increasing the current account overdraft.
  7. A corresponding reduction to the loan (i.e N300,000- if the documentary credit is going to be for N300,000- exactly) separately and in addition to the normal monthly N130,000 repayment.”

The defendant avers that none of the conditions listed above was complied with.

  1. The defendant denies the issuance of irrevocable letters of credit to the plaintiffs as alleged in paragraph 14 of the Amended Statement of Claim and in the alternative, the defendant avers that if any letter of credit was issued (which is denied), it was issued subject to the conditions stipulated in paragraph 16 herein being met which conditions were never met.”

It is clear from the above that issues were joined by the parties on whether the plaintiffs satisfied all the conditions given by the defendant. Whilst the plaintiffs contended that they met all the conditions, the defendant denied they did.

Both parties called evidence in proof of their contentions. PW1 was J.T. Agofure. He was the Manager of the defendant bank, Ughelli Branch at the material time. At pages 26 and 27 of the Record, he gave evidence and said:

“In Exhibit 2 the defendant placed some conditions but waived the conditions on receipt of Exhibit 4. At this time the plaintiffs had the import Licence to import goods. The original is with the Head Office of the Bank which deals with CBN for Foreign Exchange Allocation, Import Licence submitted to the defendant for processing of Irrevocable Letters of Credit admitted as Exhibit 5 and 6: The Original and copies of the 5th and 6th plaintiffs Import Licences were sent to the Head Office. They were both worth N100,000.00 and N300,000.00 respectively. The plaintiffs paid the 200% Cash Margin Credit to cover the cash cover. The bank will never open any Letters of Credit if the conditions are not satisfied in the first place.”

When the PW1 was cross-examined he testified at page 34 of the Record thus:

“Condition 2 of Exhibit 2 was not cleared but the plaintiffs asked for a waiver: see Exhibit 3. I had no power to waive anything as a Branch Manager and so I contacted the Head Office. I received a reply from the Head Office which was positive agreeing to a waiver, it was in form of a letter. I did not receive any letter from the Head Office refusing the waiver.”

Prince Olori, Chairman/Managing Director of the six plaintiff Companies testified as PW2. He stated in part at page 30 of the Record as follows:

“I satisfied all the conditions put forward by the defendant before opening the Letters of Credit. The conditions were payments of duties in advance, 200% cash margin and every other conditions were complied with all conditions stated in Exhibits 2 and 3 that is, I complied with the important ones and waived others and the defendant issued the Letters of Credit.”

The only witness for the Defence was Godfrey Ogeh. He testified as DW1. He denied that the defendant ever waived any of the conditions or that it ever wrote any letter waiving any of the conditions. In the course of his evidence he stated at pages 43-44 of the Record that:

“I see Exhibit 2 which was written by the defendant to the 1st plaintiff asking for conditions. I also see Exhibit 3 which was a letter from the plaintiff asking for waiver of the conditions

……………………………………………………………………………………………………………………………………………….

The defendant never waived any of the conditions.”

In holding that the defendant had waived the pre-conditions not fulfilled by the plaintiff, the learned trial Judge reasoned as follows at page 120:

“On the further issue of waiver of the conditions, the court is of the firm view that the remaining conditions 2,3 and 8 were waived because the defendant would not have embarked on any action at all, in view of the tenor of Exhibit 2 if it did not waive the remaining conditions in Exhibit 2. Exhibit 2 was dated 25/7/86 while the defendant’s entries on Exhibit 5 Import Licence and Exhibit 11 Form ‘M’ were dated 11/8/86. These were later cancelled. The Court is therefore of the view, that the conditions stipulated in Exhibit 2 were subsequently waived and the cancellation of the Letter of Credit could not have been due to the non-compliance with Exhibit 2.”

I shall deal first with the issue of waiver. On behalf of the defendant, learned counsel submitted that quite apart from the fact that the issue of waiver was not pleaded, the evidence of waiver relied upon by the plaintiffs was the alleged existence of a letter of waiver which the defendant denied. It was pointed out that the learned trial Judge made no specific inferences from other document. It was argued that it seemed odd that the defendant did not address the alleged letter waiving certain conditions contained in its Exhibit 2 to the plaintiffs who by Exhibit 3 applied for a waiver but addressed it to the Bank Manager at Ughelli.

For the plaintiff, it was submitted that the fact, proved by evidence, that the defendant registered the Forms ‘M’ shows that the conditions were actually satisfied or the defendant waived any rights to insist on the conditions. It was also said that Exhibit 3 the letter appealing for waiver was addressed to the Manager of the defendant Ughelli Branch. PW1 had stated in his evidence that on the receipt of Exhibit 3, he contacted the Head Office of the defendant who sent them a letter agreeing to the waiver. The plaintiffs contended that in these circumstances there was no way the letter approving the waiver would be in their possession since it was strictly correspondence between the Ughelli Branch and the Head Office of the defendant Bank.

The question whether or not the waiver was pleaded was dealt with in an application in the course of the proceedings in this matter in this court. It no longer arises for consideration in the substantive appeal.

I shall now consider whether the defendant in fact granted a waiver to the plaintiffs. This can be ascertained from the evidence led at the trial by the contending parties. The plaintiffs through PW1 asserted that the Head Office of the defendant Bank waived some of the conditions in Exhibit 2. The Defendant Bank on the other hand denied this allegation. The question is which of the two versions of the story is more credible. PW1 gave evidence to the effect that the Head Office of the defendant sent him a letter wherein it waived some of the conditions precedent to the issuance of letters of credit. That letter was however not tendered and received in evidence.

I am unable to accept the evidence of PW1 on the existence of a Letter of waiver. Exhibit 3 was addressed to him as the Manager of the defendant Bank at Ughelli. It was he who issued Exhibit 2. In his testimony PW1 said that when he received Exhibit 3, he contacted the Head Office of the defendant Bank who subsequently sent him a letter approving the waiver. It was his duty to inform the plaintiffs in writing in reply to Exhibit 3, that the Head Office had granted them a waiver. This, he did not do. Neither did he provide them with a copy of the said letter from the Head Office. It must be pointed out here that it was this witness who gave Prince Olori (PW2) copies of Exhibits 10, 10A and 10B- the alleged letters of credit. In my judgment, the failure of PW1 to write the plaintiffs that they were granted a waiver nor send them a copy of the alleged letter from the Head Office means only one thing, that is, that no such letter existed.

I turn my attention now to the issue of whether the defendant in fact issued irrevocable letters of credit for the plaintiffs which it later cancelled. The case of the plaintiffs is that the defendant in fact issued the letters if credit Exhibits 10, 10A and 10B but later cancelled them and did not notify their overseas suppliers. Paragraph 14 of the statement of claim is relevant. It provides:

“14. In pursuance of all those matters pleaded in paragraphs 6-13 above, and upon the fulfillment by the respective plaintiffs of all the contractual obligations reserved as to their own part particularly referred to in paragraphs 6 and 12 above, the defendant- (as ‘the Issuing Bank’), did issue and establish ‘Irrevocable Letters of Credit’ for the account of the respective plaintiffs (as ‘Accreditor’s) in the respective amounts, and in favour of those sellers/suppliers of goods and materials (as ‘Beneficiaries’ ) as shown in the Particulars of Letters of Credit Contracts immediately below. All the original letters of credit are in the custody of the defendant and it is given notice to produce the originals at the trial.”

The case of the defendant is that it never issued irrevocable letters of credit in favour of the plaintiffs. The defendant Bank admits that it initiated the machinery for the issuance of the letters of credit which process started from the Ughelli Branch where the Exhibit 10 series (10, 10A and 10B) were prepared. The case of the Bank is that the process was aborted because the plaintiffs did not fulfill all the conditions for the issuance of the letters of credit. See paragraph 16 of the Further Amended Statement of Defence which I have earlier on reproduced.

It was contended that from the evidence of PW1 who tendered the alleged letters of credit- Exhibits 10, 10A and 10B, that it is clear that he sent the originals of these documents from the Ughelli Branch to the Head Office in Lagos and these originals are still with the defendant Bank.

It is manifest from the evidence and Exhibits, 10, 10A and 10B that the processing of the application and the filling of the Exhibit 10 series started from Ughelli Branch and later sent to Lagos for completion. I find it particularly plain that Exhibits 10,10A and 10B are incomplete forms. A close look at the forms would reveal firstly that the 4th party to the credit is yet to be filled in- the Negotiating or Advising Bank through whom the proceeds of the credit were to be remitted as clearly indicated in the Exhibit 10 series. I do not believe that this is a case where the Bank undertook to personally notify the credit to the seller. Perhaps it is necessary to re-state that the processing of the application and the filling of the Exhibit 10 series started from Ughelli Branch. Simply put it was PW1 who started the process and filled in Exhibits 10, 10A and 10B. Under the column for Advising Bank he filled in the words “Please add your confirmation to this letter of Credit.” This seems to indicate that under this contract, there was going to be a negotiating Bank through whom the proceeds of the credit were to be remitted. Indeed the evidence of PW1 supports this for he said at page 33 as follows:

“There is no correspondent Bank in Exhibit 10. It was the duty of the Head Office Nafest to insert the Correspondent Bank from the Branch Letters of Credit prepared.”

Secondly, the Irrevocable Credit No. is not inserted. And thirdly there is no date on which Exhibits 10, 10A and 10B were issued. In view of all these I am in complete agreement with learned counsel for the defendant that Exhibit 10 series were incomplete forms. In other words they are not issued Letters of Credit as contended by the plaintiffs. They were letters of Credit forms prepared by the Branch and forwarded to the Head Office for further action.

The question now is: why did the defendant not issue the Letters of Credit? The case of the defendant is that the process was aborted because the plaintiffs did not fulfill all the conditions for the issuance of the letters of credit set out in Exhibit 2. That the plaintiffs did not fulfill all conditions is not in dispute. PW2 Prince Olori who is the Chairman/Managing Director of the six Plaintiff Companies testified inter alia that:

“I complied with the important ones and waived others …..” PW1 under cross-examination stated: I see Exhibit 2. The plaintiffs complied with Exhibit 2 substantially …… Condition 2 of Exhibit 2 was not cleared but the plaintiffs asked for a waiver: see Exhibit 3.”

Exhibit 3 however makes it abundantly clear that items (2), (3) and (8) were not complied with by the plaintiffs.

I have already dismissed the argument that the defendant granted a waiver. The plaintiffs knew then and know now that the refusal of the defendant to issue the letters of credit requested by them was because they did not satisfy all the conditions in Exhibit 2. They also knew then as they know now that Exhibit 10 series were not irrevocable letters of credit but letters of credit forms prepared by the Branch at Ughelli for further action and subsequent issuance by the Head Office. Exhibit 12 is a letter addressed to the Executive Director of the defendant by Prince Olori (PW2). It is quite revealing. It reads:

“CONFIDENTIAL

SBL/FA/57/Vol. 11                                                          17th Sept 1986

 

The Executive Director (OUC)

Union Bank of Nigeria Limited,

Head Office (Advance Department)

No. 40, Marina,

Lagos.

Dear Sir,

LETTERS OF CREDIT FACILITY OF N300,000 FAVOUR SPARKLING BREWERIES LIMITED

I write once more for a reconsideration of the above Facility, which has been suspended by your IRREVOCABLE CREDITS FORM CRE83, duly signed by your Branch, I made a trip to Western Germany to discuss with our suppliers of the HOPS and the CHEMICALS which are urgently required by us to resume production. I took along photocopies of your Form CRE 83, on the strength of which our Oversea Suppliers agreed to lend us some little quantity HOPS, which we air-freighted to Nigeria and which enabled us to resume skeleton production. I am now committed to our overseas Suppliers and your suspension of further action on our Letters of Credit (for which we have obtained Approved Forms M from N/PHX) is quite embarrassing to me.

I am appealing to you, therefore, to reconsider your stand in this matter, and to lift the embargo placed on the Letters of Credit requested by us. The raw materials are urgently needed and time is not on our side.

The Account at your Ughelli Branch has been reactivated, and it is our intention to meet the loan repayment from this month.

I plead for your full co-operation and a favourable response urgently.

Yours faithfully,

For: SPARKLING BREWERIES LIMITED

(SGD.)

PRINCE M.O OLORI

CHAIRMAN/MANAGING DIRECTOR”

[Italics for emphasis]

I am satisfied that the defendant did not commit a breach of its contract to issue irrevocable letters of credit in favour of the plaintiffs. The conditions precedent were not fulfilled and the defendant was therefore, discharged from any further performance on its side.

LOCUS STANDI OF THE 1ST AND 2ND PLAINTIFFS

It is the contention of the defendant that the 1st and 2nd plaintiffs have no locus standi to bring this action. It was pointed out that the alleged letters of credit listed in paragraph 14 of the Amended Statement of Claim in respect of which the action was brought were in favour of the 3rd to 6th plaintiffs. The said plaintiffs are in the Group known as the Olori Group of Companies. The 1st and 2nd plaintiffs are also in this group. No application was made for the issuance of letters of credit by the 1st and 2nd plaintiffs and none was processed on their behalf. It was however said that in an attempt to confer standi on the 1st and 2nd plaintiffs in this action, the plaintiffs pleaded as follows in their Amended Statement of Claim:

“5. In addition to the foregoing, the 1st and 2nd plaintiffs aver that they also bring this action in their capacity as those persons for whose benefit and advantage the contractual agreements with the defendant more specifically pleaded in paragraphs 7,8,12,13 and 14 of this Statement of Claim were entered into, and to whom the rights acquired under the said contracts have accordingly been transferred.

  1. About the month of March, 1986 by an agreement made between the plaintiffs and the defendant at the defendant’s Head Office/ Principal Place of business at No. 40, Marina, Lagos, the parties entered into a ‘Further Contract’ under the terms of which the defendant as the ‘Issuing Bank’ of documentary credits agreed to open Letters for the importation of brewery raw materials for the specific purpose (known to the defendants) of enabling the 1st and 2nd plaintiffs to produce beer and soft drinks in sufficient quantities.
  2. In order to achieve the objective of the said ‘Further Contract’ referred to in paragraph 7 above, and upon the specific and express written directions of the defendant (as contained in those exchanges of correspondence particularized below), the parties further agreed that all Federal Government of Nigeria ‘Import Licences’ held in the name of, and available for use by any and all the plaintiffs and other members of the OLORI GROUP OF COMPANIES should be utilized for the importation of brewery raw materials for the benefits of the 1st and 2nd plaintiffs. In the alternative it was understood that the 3rd to 6th plaintiffs shall import the brewery raw materials for sale to the 1st and 2nd plaintiff at a profit of 15% of the production value.”

It was pointed out that the defendant denied being a party to any agreement as claimed by the plaintiffs in paragraph 11 of the Further Amended Statement of Defence which reads:

“11. The defendant denies paragraph 5 of the Amended Statement of Claim and avers that it was neither aware of nor was it a party to any agreement or arrangement as stated in paragraphs 6,7,8,12,13 and 14 of the Amended Statement of Claim.”

Starting with Exhibit 2, the defendant admits that it was prepared to open letters of credit for any of the companies in the Olori Group upon compliance with the conditions imposed in Exhibit 2. It was submitted that there is nothing in Exhibits 2 and 3 or in any other Exhibits tendered by the plaintiffs where one would expressly find an agreement between the plaintiffs and the defendant to the effect that:

  • Any application for the issuance of any letter of credit by any of the six (6) plaintiffs will be regarded as an agreement that the goods brought in by the applicants of the credit will be passed on to the 1st and/or 2nd
  • That profits either of the goods covered by the credit and/or profits made by the 1t and/or 2nd plaintiffs after using the goods so ordered will be shared in a certain percentage.

In giving judgment for the plaintiffs, the learned trial Judge inferred a contract between the plaintiffs and the defendant in the manner set out above. It was said that he was in grave error.

For the plaintiffs, it was submitted that the 1st and 2nd plaintiffs instituted this action based on the Tripartite Agreement pleaded in paragraph 8 of the Amended Statement of Claim. It was also said that all the plaintiffs, in the alternative claimed in tort for lawful interference with their business. It was pointed out that the evidence in respect of the tripartite contract was given by PW1. The testimony of this witness, it was argued, was corroborated by other facts proved before the court and these include:

“(i) In March, 1986, by Exhibit 1, the Bank asked the plaintiff to let it know of the import licences allocated to the Group. This is the same month the plaintiff said the agreement was reached.

(ii) By Exhibit 2, the 3rd– 6th plaintiffs had applied for import licences, but instead of treating the 3rd to 6th plaintiffs as separate entities, the Bank treated them as a Group.

iii) The import licences had to be amended to include raw materials. See pages 145 and 147 of the Records.

(iv) The 3rd to 6th plaintiffs do not owe the Bank at all.

(v) The plaintiffs did not protest by Exhibit 3 because that was the understanding.

  1. vi) The cash cover for the transaction was provided by the 1st plaintiff and that was why on the testimony of DW1, the same was credited to it later on. See page 48, line 3 of the Records.

(vii) All through the transaction, the correspondences show that the plaintiffs were treated as a Group i.e. the Olori Group of Companies.

(viii) All the item for which the letters of Credit were issued are used in brewing.

It was therefore submitted that from the facts before the court it is evident that there was such a Tripartite contract as alleged by the plaintiffs.

In the circumstances, it was urged on us to affirm the finding of the lower court that the 1st and 2nd plaintiffs have locus standi to maintain this action.

In the course of his judgment, the learned trial Judge held at page 124 as follows:

“The court has carefully examined the arguments put forward on this aspect of the matter and it is of the view that there was no transfer of Import Licence itself at the bottom of Exhibit 5 is not the type envisaged by the arrangement of the parties in this case ………… it was the 1st plaintiff who provided the cash cover for the Letters of Credit for the 3rd-6th plaintiffs who were holders of Import Licences. The applications for letters of credit were in the respective names of the 3rd– 6th plaintiffs.

The court is of the firm view that the defendant always referred to the plaintiffs as one group (see Exhibit 1) and so cannot now deny it on this occasion.”

It is not in dispute that the 1st plaintiff provided the cash cover for the opening of the letters of credit. It is also not in dispute that the defendant dealt with the plaintiffs as a group.

The defendant had submitted that Import Licences were not transferable and since the 1st and 2nd plaintiffs had no Import Licences in their names, they could not utilize the ones issued in the names of the 3rd– 6th plaintiffs. The learned trial Judge was in complete agreement with these views. This was sufficient to dispose of this issue in favour of the defendant.

In this country it is not uncommon to see a situation where persons who are holders of Import Licences are those who have no money and those who have money finances the man with licence upon terms. But this is a private arrangement between the parties. It does not involve the issuing Bank. This is the situation in the present case. The arrangement whereby the 1st and 2nd plaintiffs financed the 3rd to 6th plaintiffs was a private affair of the parties. There is nothing strange about the arrangement more so when the parties belong to one group. It did not involve the defendant as the Issuing Bank. Moreover there is no credible evidence that the defendant was made a party to the arrangement. In my judgment therefore the learned trial Judge was in grave error when he held that the 1st and 2nd Plaintiffs had locus standi to bring this action.

I now turn to issue 4 which relates to the award of damages. The relevant paragraph in this connection is paragraph 27 of the Amended Statement of Claim which reads:

“27. WHEREFORE all the plaintiffs claim against the defendant as follows:

  • An order of injunction restraining the defendant and all their agents whomsoever from taking any steps or any further steps to sell any of the plaintiffs’ properties mortgaged to it since the defendant is in fact indebted to the plaintiffs.
  • The sum of N656, 000. 00 only being special and general damages against the defendant for breach of contract arising from the unlawful cancellation of Irrevocable Letters of Credit issued by the defendant, and so issued for valuable consideration given by the plaintiffs to the use of the defendant, and for the specific purposes and benefits of the plaintiffs’ businesses.
  • Pursuant to paragraph 26 the sum of 554, 732, 565.00 for the 1st plaintiff and N103, 723, 000.00 for the 2nd
  • Pursuant to paragraph 25, the sum of N6,000,000.00 being the value of 12,000.000 crates for the 1st plaintiff and N9,000,000.00 being the value of 18,000,000 for the 2nd

OR IN THE ALTERNATIVE TO (ii), (iii) & (iv) ABOVE:

  • The said sum of N16, 315, 365, 565 being special and general damages for unlawful interference with the business of the plaintiffs.
  • Interest on the said sum of N16, 315, 365, 365 only from the 1st day of April, 1989 until payment.
  • Further and or other reliefs.

IN THE FURTHER ALTERNATIVE TO (v), (vi) & (vii) ABOVE:

  • The sum of N42,325,000.00 being special and general damages for unlawful interference with the business of the 3rd
  • The sum of N42,325,000.00 being special and general damages for unlawful interference with the business of the 5th
  • The sum of N42,325,000.00 being special and general damages for unlawful interference with the business of the 5th
  • The sum of N42,325,000.00 being special and general damages for unlawful interference with the business of the 6th

The first claim, as will be seen, is grounded in contract whilst the alternative claims are grounded in Tort. The learned trial Judge awarded on breach of contract.

I have already come to the conclusion that there was no breach of contract. It follows that there was no basis for the award of damages, and therefore any consideration of this issue would be an unnecessary academic exercise.

Be that as it may, I shall deal with the issue of award of damages just in case I have been wrong in my conclusion that there was no breach of contract.

Now, the principles governing the award of damages for breach of contract have been well settled in the case of Hadley v. Baxendale (1843- 1860) All ER 461. This case has been consistently followed by our courts in this country. Recently the Supreme Court in the case of Kusfa v. United Bawo Const. Co. Ltd. (1994) 4 NWLR (Pt. 336) I re-affirmed the principles laid down in that case when it observed at page 11 as follows:

“The modern law on the measure of damages in contract cases was laid down by  Alderson B. In Hadley v. Baxendale (supra) wherein the noble and learned Baron said:

“Where two parties have made a contract which one of them has broken the damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and responsibly be considered as either arising naturally, i.e. according to the usual course of things from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties at the time they made the contract as the probable result of the breach of it. If special circumstances under which the contract was actually made were communicated by the plaintiffs to the defendants, and thus known to both parties, the damages resulting from the breach of such a contract which they would reasonably contemplate would be the amount of injury which would ordinarily follow from a breach of contract under the special circumstances so known and communicated. But, on the other hand, if these especial circumstances were wholly unknown to the party breaking the contract, he at the most, could only be supposed to have had in his contemplation the amount of injury which would arise generally, and in the great multitude of cases not affected by any special circumstances, from such a breach of contract. For had special circumstances been known, the parties might have specially provided for the breach of contract by special terms as to be damages in that case, and of this advantage it would be very unjust to deprive them.”

The above rule, laid down by Alderson B., has been followed ever since both by the English Courts and our Courts in Nigeria.”

Against that background I shall now proceed to examine the damages awarded by the trial court.

  1. AWARD OF 2.5 BILLION NAIRA FOR LOSS OF CRATES

The claim for loss of crates was for 15 Billion Naira as set out in paragraph 25 of the Amended Statement of Claim which reads:

“25. In addition to the foregoing, the 1st and 2nd defendants aver that consequent upon the cancellation of the letters of credit their facilities had to close down and lay off staff. The effect of the closure meant that they were no longer able to produce and deliver to their distributors for sale consequently several of their distributors and staff instituted legal actions against them. In addition to the legal actions, the distributors also seized and sold all their crates and bottles all of which amount to:

  • 12,000,000 crates with bottles for the 1st plaintiff; and
  • 18,000, 000 crates with bottles for the 2nd

The plaintiffs aver further that the price of crate today is N500.00 each.”

The evidence led in proof of this averment was given by PW2 Prince Olori. At page 37 of the Record he testified thus:

“The first & 2nd plaintiffs lost all their crates and cartons to various distributors Country wide, because they are the properties of the plaintiffs. As the plaintiffs could not manufacture the beer and soft drinks as a result of the cancellation of the Letters of Credit, the distributors refused to return the crates and cartons Country wide. 1st plaintiff had 12,000,000 bottles whereas 2nd plaintiff had 18 million bottles. The value of Carton of beer is N500 and soft drink N500. I see the receipt with which I bought this carton and crates. Receipts tendered and admitted as Exhibits 21 and 22. The crates and cartons are taken as returnable deposits. 2 crates one of Olo soft drink and sparkling beer tendered and marked Exhibits 23 and 24, I am claiming what is contained in the Amended Statement of Claim.”

In awarding the sum of N2.5 billion Naira to the 1st and 2nd plaintiffs on this head of claim, the trial Judge stated at page 128 of the Record as follows:

“The 1st plaintiff is claiming for N12,000,000 crates of bottles at the rate of N500,00 per crate and this amounts to N6 Billion. Also the 2nd plaintiff is claiming for the sum of N18,000,000 crates at the cost of N500.00. The plaintiffs tendered Exhibits 21, 22 as receipt for N500 with which he bought the crates of mineral and beer (see Exhibits 23 & 24) for both crates. The 2nd plaintiff is claiming N9 billion for its crates of mineral. Although prices of things in the country have escalated but the plaintiffs are expected to mitigate their expenses. However, they are both awarded N2.5 billion to repurchase their crates.”

This award has been attacked. It was submitted for the defendant that the alleged damages or loss was too remote having regard to the principles laid down inHardley v. Baxendale (supra). It was argued that it was wrong to hold the defendant liable to the wrongful acts of the customers of the 1st and 2nd plaintiffs. It was said that the loss was not within the contemplation of the parties. It also did the evidence led in proof of the loss and claim of that magnitude fell short of that required to prove special damages. The mere ipse dixit of the plaintiff cannot in the instant case be sufficient since by the nature of the loss, there must be documentary evidence of the quantity of bottles and crates, the list of the distributors of the 1st and 2nd plaintiffs. Learned counsel for the defendant relied on the case of Omole& Sons Ltd. V. Adeyemo (1994) 4 NWLR (Pt. 336) 48 at 54.

For the plaintiffs it was submitted that this loss is recoverable in tort where the principle is restitution in integrum. It was pointed out that the trial court actually found that this quantity of crates was lost. The loss, it was contended, clearly flowed from the closure of the factories. It was submitted that in all the circumstances of this case, the loss is not too remote and is recoverable.

On the issue of there not being sufficient evidence in proof of this item, it was the contention of the plaintiffs that the defendant was in essence asking for proof of this item, it was the contention of the plaintiffs that the defendant was in essence asking for proof beyond a reasonable doubt. The evidence given by the plaintiffs was unchallenged and uncontradicted and was therefore rightly accepted. See Kosile v. Folarin (1989) 3 NWLR (Pt. 107) 1 at 12; NEPA v. Alli (1992) 8 NWLR (Pt. 259) 279.

It was also the contention of the plaintiffs that there is no general rule that the mere ipse dixit of a witness does not suffice. Learned counsel relied on the case of Odinaka v. Moghalu (1992) 4 NWLR (Pt. 233). 1. It was argued that if the evidence is unchallenged and lends itself to the quantification of the loss actually suffered, then the burden of proof has been discharged. See Nzeribe v. Dave Engineering Co. Ltd. (1994) 8 NWLR (Pt. 361) 124.

It is now firmly settled that where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and reasonably be considered as either arising naturally, that is to say, according to the usual course of things from such breach of contract itself, or such as may reasonably be supposed to have been on the contemplation of both parties at the time they made the contract as the probable result of the breach of it: See Kusfa v. United Bawo Const. Co. Ltd.(1994) 4 NWLR (Pt. 336) 1. In the instant case, I have held that, on the evidence, there was no breach of contract. But assuming for one moment that there was, what would be damages recoverable as a result of such breach? I think the plaintiffs would only be entitled to damages representing the loss of profit which they would have made, that being a loss which at the time of the contract was foreseeable by the defendant as the probable liable for the wrongful acts of the customers of the 1st and 2nd plaintiffs. Clearly the loss arising therefrom cannot with any degree of seriousness be said within the contemplation of the parties. It was too remote.

I come now to the question whether the plaintiffs proved their claim for loss of crates pleaded in paragraph 25 of the Amended Statement of Claim which I have read earlier on in this judgment.

It is trite law that special damages must be strictly proved: see Nzeribe v. Dave Engineering Co. Ltd. (1994) 8 NWLR (Pt. 361) 124; Omole& Sons Ltd. V. Adeyemo (1994) 4 NWLR (Pt. 336) 48 at 54; Bassil v. Fajebe (1990) 6 NWLR (Pt. 155) 172; Odiba v. Azege (1991) 7 NWLR (Pt. 206) 724; Osuji v. Isiocha (1989) 3 NWLR (Pt. 111) 623; Odinaka v. Moghalu (1992) 4 NWLR (Pt. 233) 1. The plaintiff’s evidence on this point was short. I have already reproduced it. It is simply this, that the 1st and 2nd plaintiffs lost all their crates and cartons to their various distributors’ country wide. As the plaintiffs could not manufacture the beer and soft drinks as a result of the alleged cancellation of the Letters of Credit, the distributors refused to return the crates and cartons. It was said that the 1st plaintiff lost 12,000,000 bottles whereas the 2nd plaintiff lost 18,000,000 bottles. Would the ipse dixit of the plaintiff be sufficient proof of the loss? I think not. What is required in proof of special damages is credible evidence: see Odinaka v. Moghalu (supra). It was said for the plaintiffs that if the evidence is unchallenged and lends itself to the quantification of the loss actually suffered then the burden of proof has been discharged. I agree. But this is subject to the quality of the evidence. If the quality is good, then the court seised of the matter has no option but to accept theevidence. If the evidence is of such quality that no reasonable tribunal can accept it, then it should be rejected: see Kosile v. Folarin (supra); Bassil v. Fajebe (supra) In Kosile v. Folarin the Supreme Court at page 12 per Nnaemeka- Agu, J.S.C. said:

“Proof of special damages is not radically different from the general method of proof in civil cases. It is equally proved on a balance of profitability. Where the plaintiff pleads special damages with particularity and gives some evidence of it and the defendant does not challenge or contradict the evidence given, he has discharged his onus of proof and unless the evidence is of such quality that no reasonable tribunal can accept it, it ought to be accepted. This is because where evidence called by the plaintiff in a civil case is neither challenged nor contradicted his onus of proof is discharged on a minimal proof.” (Italics for emphasis)

The minimal proof in the instant case would be evidence of the list of the distributors of the 1st and 2nd plaintiffs and evidence of the quantity of the crates and cartons and how many of these were in possession of each distributor. In addition some of the distributors should have been called as witnesses. Evidence of these matters necessary to prove special damages herein pleaded was visibly non-existent. The fact that the evidence was unchallenged and un-contradicted did not improve the quality of the evidence.

I must not be misunderstood. No doubt, there may be situations where the evidence of special damages will rest on the ipse dixit of the plaintiff. But each case must be treated on its peculiar facts and circumstances: See Odinaka v. Moghalu (supra). In this case the Supreme Court cited with approval the dicta of the Judicial Committee of the Privy Council in Ade Boshali v. Allied Commercial Exporters Ltd. (1961) 2 SCNLR 322 as follows:

“The Federal Supreme Court took the view that the figure of 6d per yard for loss of profit on the sale of the goods awarded by the trial Judge rested on the ipse dixit of the appellant that he would have made a profit of 6d and that this was not sufficient proof of his actual loss of profit. The only evidence as to loss of profit came from the appellant who was an expert in the trade and whose evidence was accepted by the Trial Judge. He was not cross-examined on the basis that his claim was excessive. The trial Judge was in their Lordships’ view fully entitled in the absence of any contrary evidence to take the figure of 6d per yard as the appellants’ loss of profit.”

In Basil v. Fajebe (supra) this court observed and held as follows:

“The receipt of payment was not produced nor was the plaintiff’s clerk’s record of transaction mentioned above. None of the workers was called as a witness …………………………………………………………………………………………………………………………………….

From the nature of the above evidence the only damages that could be allowed is general damages of N1, 000.00K

The learned trial Judge gave reason for awarding the whole amount of N35, 000.00k claimed thus:

‘I observe in conclusion that where evidence of special damages suffered by a claimant remains unchallenged and uncontradicted (as in this present case) the court must act on it. See Incar Nigeria Ltd. And Another v. Mrs. M.R. Adegboye (1985) 2 NWLR (Pt. 8) 453.’

With the greatest respect to the learned trial Judge he fell in error because the uncontradicted evidence that would be believed would satisfy minimum requirement of matters necessary to prove special damages. The case of Incur Nigeria Ltd. &Anor v. MrsAdegboye (correct title) relied upon by the learned trial Judge was a case where the owner of the vehicle stated that she made N500.00 per day from the use of her vehicle and that evidence was uncontradicted. The court made award as claimed after deducting for non-working days. ………………………………………………………………………………

In this present case further evidence of payment to third parties was given and therefore such cannot be strictly proved but they were not.”

Similarly in  Omole& Sons Ltd. V. Adeyemo (supra) this court held at page 71 thus:

“The point is, even though the above piece of evidence could suffice as proof, given the fact that it was not debunked or controverted, it definitely will not suffice for proof of a claim that is special and need to be proved strictly with receipts and the evidence of an expert on automobile i.e. an automobile engineer. A claim for special damages must be supported by credible evidence. See Oshinjinrin v. Elias (1970) 1 All NLR 153; Agbaje v. James (1967) NMLR 49.”

In my judgment, there was no credible evidence for the claim in respect of loss of crates and cartons. It should have been rejected. The learned trial Judge was clearly in error when he made an arbituary award of N2.5 billion under this head of damage. That award is accordingly set aside.

  1. AWARD OF N554, 732, 565.00 AND 103, 723, 000.00 RESPECTIVELY FOR REACTIVATING THE FACTORIES OF THE 1ST AND 2ND PLAINTIFFS

The claim for these amounts is set out in paragraph 26 of the Amended Statement of Claim. Paragraph 26 reads:

“26. The 1st and 2nd plaintiffs further aver that consequent upon the act of the defendant they had to close their factories and recently when they commissioned a study to determine the cost of reactivation of the 1st plaintiff’s factories the expert valuers BREW TECH NIGERIA LIMITED said that it will require the sum of N554, 732, 565.00 for the 1st plaintiff, whilst MessrsMato-Jala& Co. Limited the expert valuers for the 2nd plaintiff said it will cost N103, 723, 000.00. The plaintiffs shall rely on the written report of the experts at the hearing of this suit.”

The evidence led in proof of this averment was given by Prince Olori at page 32 of the Record. He testified thus:

“The plaintiffs have not gone into operation and for it to be re-overhauled before it can go into opening. I contacted experts for the overhauling and they brought out a report. Seeks to tender the letter from expert and a covering letter admitted and marked as Exhibits 19 and 19, in respect of Sparkling Breweries Ltd. In respect of Olo Cold Drinks the covering letters and report are admitted as Exhibits 20 and 20.”

The learned trial Judge accepted this evidence and in making the award he stated:

“For the reactivating the brewery and the soft drinks, the plaintiffs tendered Exhibits 19 and 20 to buttress their claims. Their evidence remains unchallenged. In the case of Nigerian Land and Sea Food Ltd. V. Road Side Engineering supra the Court of Appeal stated that the proper approach for the award of special damages is not whether the evidence on the special damages was detailed or scanty but whether there were any evidence however slight adduced by the claimant to prove his claim. The claims under this are therefore awarded.”

Learned counsel on behalf of the defendant pointed out that the makers of Exhibits 19 and 20 were not called as witnesses. That being so, it was contended that the Reports were inadmissible, being hearsay evidence. Learned counsel relied on the Supreme Court decision the case of Uwa Printers Ltd. V. Investment Trust Ltd. (1988) 5 NWLR (Pt. 92) 110. He urged that the awards under this head of damages be set aside.

On behalf of the plaintiffs it was submitted that although the makers of Exhibits 19 and 20 were not called to testify, the Report are admissible under Section 91 of the Evidence Act. Counsel relied on the case of Attorney General of Oyo State v. Fairlakes Hotels (N0. 2) (1989) 5 NWLR (Pt. 121) 255; Uwa Printers Ltd. V. Investment Trust Ltd. (supra). The only question, it is urged, is the weight to be attached to the reports.

It was the contention of the plaintiffs that the facts in Exhibits 19 and 20 were within the knowledge of the markers. That they actually did the assessment, inspection and costing. None of the information contained therein was supplied to the makers by the third party. It was urged upon us to attach due weight to the reports especially having regard to the fact that the reports were not challenged, contradicted or in any manner impugned.

The plaintiffs further contended that the damages under this head are not remote. It was said that should this court hold however that the damages are remote in contract, they are recoverable in a claim in tort. Learned counsel urged us to affirm the award.

Section 91 of the Existence Act permits the admissibility of documents in special circumstances where the maker is absent. See Attorney-General of Oyo State v. Fairlakes Hotels (1989) 5 NWLR (Pt. 121) 255; Bello v. Ringim (1991) 7 NWLR (Pt. 206) 668. In such a situation what the court has to consider is the weight to be attached to the document. The Supreme Court in Attorney-General of Oyo State v. Fairlakes Hotels explained the relative treatment to be given to oral and documentary evidence admitted by consent of both counsel in the absence of the maker. It said:

“Oral evidence and a document put in evidence under $.90 of the Evidence Act cannot on the authorities receive the same treatment when it comes to the matter of evaluating such evidence. The former if unchallenged must be accepted as establishing the facts therein stated. As regards the latter documents admitted by consent or by the court in the absence of their maker under $.90 of the Evidence Act, the court still has on the authorities a duty to consider the weight to be attached to such documentary evidence before coming to the conclusions as to whether or not it establishes facts stated therein, in any case short of that in which there is an admission by the opposing side that it does.”

Exhibits 19 and 20 were properly received in evidence. The only question is whether he considered the weight to be attached to them before he came to the conclusion that they established the facts stated therein. From the excerpt on the judgment earlier reproduced, it is clear to me that the learned trial Judge did not evaluate the evidence in relation to Exhibits 19 and 20. His main reason for awarding the damages under this head is because the evidence of PW2 was not challenged. I have already dealt with the issue of unchallenged evidence given by a witness. It is not in every situation that the unchallenged evidence of a witness will be swallowed hook, line and sinker by the court. In all cases the requirement is that the evidence must be credible.

The next question is: was the award under this head too remote? The plaintiffs think not. It seems to me however that the claim for reactivating the factories of the 1st and 2nd plaintiffs was not based on any existing contract between the parties. There was in fact no evidence of any contract: See Uwa Printers Ltd. V. Investment Trust Ltd (supra). Also it cannot be said that this loss was at the time of the contract foreseeable by the defendant as the probable consequence of their breach. It was also not within the contemplation of the parties but was too remote. Accordingly I disallow this head of damage as it is speculative. Therefore the award is set aside.

  1. AWARD OF N17, 104, 700.00 AND N 20, 200, 000. 00 RESPECTIVELY TO THE 1ST AND 2ND PLAINTIFFS FOR LOSS OF PRODUCTION

This award made in favour of the 1st and 2nd plaintiffs for loss of production can only be sustained if as they claimed there was a collateral agreement between the plaintiffs and the defendant whereby the defendant agreed to open letter of credit for the importation of brewery raw materials for the specific purpose of enabling the 1st and 2nd plaintiffs to produce beer and soft drinks in sufficient quantities. Since the 1st and 2nd plaintiffs were not the applicants for the letters of credit, they can only succeed if there was a collateral contract between the plaintiffs and the defendant for the sharing of profits in respect of the goods covered by the letters of credit. Even if they proved a collateral contract, they would go further to prove that the pre-conditions for the issuance of the letters of credit were met and that the credit was in fact issued. I have held earlier on in this judgment that there was no collateral contract between the plaintiffs and the defendant. More importantly, I have already come to the conclusion that the defendant did not issue Letters of Credit because the plaintiffs did not meet the conditions stipulated in Exhibit 2.

Again this was a claim of special damages suffered. Special damages must be strictly proved. The evidence called by the plaintiff’s fell short of the evidence required to prove a claim of this nature. It must be remembered that the learned trial Judge rejected the production figure of 400,00 cartons given on behalf of the 1st plaintiff. He used the figure 130,000 based on Exhibit 28. But a close look at Exhibit 28 series shoes that the figure 130,000 is grossly exaggerated. Exhibit 28 shows a production figure of 129,030 for the month of January, 1986. Exhibit 28 (1) has 124, 682 as the production figure for the month of February 1986. Exhibit 28 (2) shows a figure of 40, 312. Exhibits 28 (3) and 28 (4) have 106, 280 and 63, 305 respectively. Surely these figures are a far cry from 400,000 and 130,000.

For the 2nd plaintiff, no document showing production figures was ever tendered in evidence. It was the mere ipse dixit of PW2. That clearly would not suffice in a claim of this nature. This head of damage has no basis whatsoever and it should have been rejected. Consequently, it is hereby set aside.

  1. DAMAGES OF N32, 325, 000.00 EACH AWARDED IN FAVOUR OF 3RD TO 6TH PLAINTIFFS

The basis of this claim and the award made by the trial court is that although these plaintiffs are the applicants for the Letters of Credit, they have agreed with the Defendant that the 1st and 2nd plaintiffs would use the raw materials covered by the credit and take 15% each of the profits made by the 1st and 2nd plaintiffs. This award, like the previous one, can only stand if:

  • The conditions precedent to the issuance of the Letters of Credit were met by plaintiffs.
  • The defendant was a party to the profit sharing arrangement
  • The special damages suffered by the 1st and 2nd plaintiffs on the loss of production was proved.

These issues have already been found against the plaintiffs in favour of the defendant. If the defendant had been in breach of their contract with the 3rd-6th plaintiffs the damages they would have been entitled to would have been the profit N32,325, 000.00 said to be 15% of the profit the 1st and 2nd plaintiffs would have made. I have discussed this earlier in this judgment. There is no evidence before the trial court on the profit each of 3rd– 6th plaintiffs would have made. The learned trial Judge was in grave error when he made the award of N32, 325, 000. 00 each in favour of the 3rd to 6th plaintiffs based on 15% profit each of the profits made by the 1st and 2nd plaintiffs. This award is accordingly set aside. All the issues have been resolved in favour of the defendant. This means that the defendant is not liable to the plaintiffs in contract or in tort. This appeal therefore succeeds.

As I indicated earlier in this judgment the plaintiffs were also dissatisfied with the judgment of the trial court. Their compliant was that the trial court awarded them a lower sum as damages than was in fact proved before that court. The cross-appeal is therefore only on the quantum of damages.

The plaintiffs at page 2 of their cross-appellants’ brief of argument dated the 11th of June, 1996 and filed the same day submitted two issues for determination which states as follows:

  • Whether the learned trial Judge was right in computing damages for loss of profit on the basis of the production ratio of the 1st plaintiff where there was uncontradicted evidence of the quantity of beer the raw materials will produce.
  • Whether the learned trial Judge was right to award N2.5 billion for crates to the 1st and 2nd plaintiffs when the sum of N6, 000, 000,000.00 and N9, 000,000,000.00 respectively was proved.

The defendant in its brief of argument adopted the issue for determination as formulated by the plaintiffs.

On the 1st issue learned counsel for the plaintiffs referred to the evidence-in-chief of PW2 at page 31 of the Record where he stated as follows:

“If the products had been imported they would have looked (sic) (lasted)

3 years and …….. the amount of production was N400,000 cartons a month.”

The defendant called DW1 who gave evidence at page 46 of the record as follows:

“The plaintiffs informed the defendant of the production figure of the 1st plaintiff. I see the documents ………”

Whereupon, letters from the 1st plaintiff showing the quantity of beer produced for certain months were tendered as Exhibits 28, 28 (1).

In his judgment the learned trial Judge at page 127 of the Record held that:

“The plaintiffs have given evidence that they were producing 400,00 cartons of beer every month but this was challenged by the defendant by producing Exhibit 28. The court has found from Exhibits 28, 28 (1)- 28 (4) that the average per month will be 130,000 instead of 400,00”

It was submitted on behalf of the plaintiffs that was sought to be proved was the quantity of beer that the raw materials would produce. The evidence before the court was that producing at 400,000 cartons per month the raw materials would last 3 years. It was argued that if the court found the average per month was 130,000, it meant that at that rate of production the raw materials would last for more than 3 years but it would still produce the same quantity of beer. In the circumstance, it was said that the learned trial Judge should have acted on the figure provided by the plaintiffs and award the sum of N87, 392, 000.00 to the 1st plaintiff. Counsel relied on the case of Nzeribe v. Dave Eng. Co. Ltd (1994) 8 NWLR (Pt. 361) 124; AG of Oyo State v. Fairlakes Hotels (No. 2) (1989) 5 NWLR (Pt. 121) 255.

                For the defendant, it was said that the contention of the plaintiffs’ counsel amounted to an attempt to rewrite the judgment of the lower court on the issue of credibility. It was submitted that the trial Judge in essence rejected not only the production figures but by implication the testimony that the supply would have lasted 3 years. It was contended that the plaintiffs cannot accept or conceded that the trial Judge was right in not accepting their production figures but was bound to accept that the materials would have lasted 3 years.

It was pointed out that another basic flaw in the submission of counsel for the plaintiffs is that the production figure given by the plaintiffs was not said to be based exclusively on raw materials to be imported through the Letters of Credit. For counsel to come to the conclusion reached in his brief, there must be evidence before the court that the monthly production given in evidence by PW2 is based solely on the utlisation of raw materials to be imported. It was contended that the evidence of PW2 on the monthly production figure of the 1st plaintiff is evidence of general production figure not tied to the materials to be imported.

Firstly, I have reached the conclusion in this appeal that the defendant was not in breach of its contract with the plaintiffs because they did not satisfy the conditions for the issuance of letters of credit. Consequently the plaintiffs were not entitled to damages representing the loss of profit which they would have made. In the second place both the 1st and 2nd plaintiffs were not the applicants for letters of credit and they also failed to prove by credible evidence the collateral contract which they pleaded. Thirdly, since the claims were by way of special damages, they had to be strictly proved. The monthly production figures given on behalf of the 1st plaintiff were, rightly in my view, rejected by the learned trial Judge who used the figure 130,000 based, according to him, on Exhibit 28. But even this figure accepted by the learned trial Judge was largely exaggerated. A close look at Exhibit 28 series shows that the month of January 1986 (Exhibit 28) the production figure was 129, 030 cartons/crates for the month of February, 1986 (Exhibit 28 (1) the production figure was 124, 682 cartons/crates; the production figure for the month of May, 1986 (Exhibit 28 (2) was 106, 280 cartons/crates and the production figure for the month of June 1986 (Exhibit 28 (4) was 63, 305 cartons/crates.

As for the claim by the 2nd plaintiff that it was producing 100,000 crates per month, there is no documentary evidence to support this. By the nature of the claim, it is imperative that there must be documentary evidence in terms of Exhibit 28 series in support of the claim. The mere ipse dixit of PW2 Prince Olori does not amount to strict proof in the circumstances of the case: See Omole& Sons Ltd. V. Adeyemo (supra). Clearly therefore both the 1st and 2nd plaintiffs did not prove their claims strictly as required by law.

The 2nd issue is whether the learned trial Judge was right in awarding N2.5 billion for crates to the 1st and 2nd plaintiffs when the sum of N6 billion and N9 billion was proved.

I have dealt exhaustively with this issue in the main appeal. I do not think it is necessary for me to repeat myself here except to say that the damages claimed are too remote. See Hardley v. Baxendale (supra). Kusfa v. United Bawo Const. Co. Ltd. (supra). The loss could not be said to be within the contemplation of the parties nor did it arise naturally from the alleged breach. I also come to the conclusion that the evidence led in proof of the loss and claim of that magnitude falls for short of the evidence required to prove special damages. The cross-appeal therefore has no merit and it fails.

In the result, the appeal succeeds and is allowed. The judgment of Akpomudjere J., together with the costs delivered on 15th April, 1996 is hereby set aside. The cross- appeal has no merit whatsoever and is accordingly dismissed. The defendant is entitled to costs which I assess at N2, 000.00 in the lower court and N3, 000. 00 in this court.

MUHAMMAD, J.C.A.: I have had the opportunity of a preview of the judgment just delivered by my learned brother Katsina-Alu, J.C.A., and I agree that there is merit in the appeal and it should be allowed. The plaintiffs’ claim against the defendant as per paragraph 27 of the amended statement of claim is as follows:

“(i) an order of injunction restraining the defendant and all their agents whomsoever from taking any steps to sell any of the plaintiffs’ Properties mortgaged to it since the defendant is in fact indebted to the plaintiffs.

(ii) the sum of N656, 910, 000.00 only being special and general damages against the defendant for breach of contract arising from the unlawful cancellation of Irrevocable Letters of Credit issued by the defendant and so issued for valuable consideration given by the plaintiffs to the use of the defendant, and for the specific purposes and benefits of the plaintiffs’ businesses.

(iii) Pursuant to paragraph 26 the sum of 554, 732, 565. 00 for the 1st plaintiff and 103, 723, 000.00 for the 2nd plaintiff.

(iv) pursuant to paragraph 25 the of N6, 000,000. 00 being the value of 12,000,000 crates for the 1st plaintiff and N9, 000, 000.00 being of 12, 000, 000 crates for the 1st plaintiff and N9, 000, 000.00 being the value of N18, 000, 000 for the 2nd plaintiff.

OR IN THE ALTERNATIVE TO (ii) (iii) & (iv) ABOVE

(v) the said sum of N16, 315, 365, 565 being special and general damages for unlawful interference with the business of the plaintiffs.

(vi) interest on the said sum of N16, 315, 365, 565 only from the 1st day of April, 1989 until payment.

(vii) further and other reliefs.

IN THE FURTHER ALTERNATIVE TO (v) (vi) (vii) ABOVE

(viii) the sum of N42, 325, 000. 00 being special and general damages for unlawful interference with the business of the 3rd plaintiff.

(ix) the sum of N42, 325, 000. 00 being special and general damages for unlawful interference with the business of the 4th plaintiff.

(x) the sum of N42, 325, 000.00 being special and general damages for unlawful interference with the business of the 6th plaintiff.

(xi) the sum of N42, 325. 000.00 being special and general damages for unlawful interference with the business of the 6th plaintiff.’

The plaintiffs’ contention is that the 3rd, 4th, 5th and 6th plaintiffs entered into a contract with the defendant that the defendant would establish letters of credit on their behalf in favour of their overseas suppliers. It was the plaintiffs’ case that they fulfilled all the conditions set down by the defendant for the opening of the letters of credit. According to the plaintiffs, the defendant indeed established the irrevocable letters of credit resulted in loss of production and eventual closure of the 1st and 2nd plaintiffs.

The defendant on the other hand denied issuing any irrevocable letters of credit to any of the plaintiffs. Its contention was that the issuance of letters of credit was subject to the fulfillment of certain conditions precedent which conditions, that was why it issued the letters of credit. The defendant denied waiving any of the conditions.

Pleadings were filed and exchanged. At the hearing of the suit both parties adduced evidences. In this judgment the trial Judge found in favour of the plaintiffs. He found the defendant liable and awarded damages of N 3, 335, 221, 815.00 to the plaintiffs. Aggrieved with this decision the defendant, hereinafter referred to as the “appellant”, appealed to this court. The appellant’s amended notice of appeal contained nine grounds. The plaintiffs, henceforth referred to as the “respondents” were also not satisfied with the decision. They maintained that the trial Judge awarded them a much lower sum as damages than the amount they actually proved before the lower court. They therefore cross-appealed as to the quantum of damages.

Both parties filed their respective briefs. The appellant formulated four issues for the determination in its brief while the respondents identified three issues for determination.

In my opinion the crucial issue upon which the success or otherwise of this appeal hinges is whether or not the appellant has issued irrevocable letters of credit which it later cancelled. Exhibits 10, 10A and 10B are said to be the irrevocable letters of credit issued by the appellant. The appellant on the other hand contended that the said exhibits were nothing other than forms yet to be issued. It should be noted that Exhibits 10, 10A and 10B emanated from the appellant’s branch at Ughelli. They were prepared by PW1 who was at the time the appellant’s Branch Manager at Ughelli. He sent the said exhibits to the appellant’s Head Office to be issued. He also gave copies to the plaintiffs’ Managing Director.

Looking at the Exhibit 10 series one would see that none of the exhibits is dated. Secondly none of the exhibits is numbered i.e. where it is stated “IRREVOCABLE CREDIT NO: The space for the number has not been filed. Thirdly no correspondent Bank has been named. In my opinion because none of the exhibits is dated or numbered and a correspondent Bank has not been named, the exhibits 10, 10A and 10B cannot be said to be issued Letters of Credit. Letters of Credit cannot be said to have been issued unless it has been sent to the correspondent Bank and the seller has come into existence. In our present case no correspondent Bank has been appointed. I therefore hold that Exhibits 10, 10A and 10B are completed forms and not issued letters of credit.

Having arrived at this conclusion there is no need to consider the issue of waiver. The issue of waiver could only arise had the letters of credit been issued. According to the appellant, the letters of credit were not issued because the respondents themselves conceded that they did not comply with all the conditions.

Since there was no issuance of the letters of credit, it necessarily follows that there could be no cancellation of same. As there was no cancellation of the letters of credit, it means that the respondents have no cause of action.

It is for the above reasons and the fuller reasons contained in the leading judgment that I allow the appeal. The judgment of the lower court is set aside. In its stead, I dismiss the respondents’ claim. The cross-appeal is dismissed. I award N2,000.00 costs to the appellant in the court below and N3, 000. 00 in this Court.

 

AYOOLA, J.C.A: I have the privilege of reading in draft, the judgment delivered by my learned brother, Katsina-Alu, J.C.A. I agree that the appellant’s appeal should be allowed and the respondent’s cross-appeal be dismissed.

The six plaintiffs in the action with which this appeal is concerned averred in their join amended statement of claim that they are Limited Liability Companies incorporated under the Laws of the Federal Republic of Nigeria with one common registered office and principal place of business, and that at all material times, they were customers of the defendant, a Bank incorporated in Nigeria. They claimed against the defendant special and general damages for breach of contract alleged to have arisen from an unlawful cancellation of Irrevocable Letters of Credit issued by the defendant for valuable consideration and in the Letters of Credit issued by the defendant for valuable consideration and in the alternative, damages “for unlawful interference with the business of the plaintiffs.”

The plaintiffs described the contracts on which they sued in paragraphs 6 and 7 of the amended statement of claim. In summary, the facts averred in paragraph 6 are that the claim arose from “diverse contracts” between their “respective selves” and the defendant as the “Issuing Bank of documentary credits.” The terms of the contract alleged are that for valuable consideration the defendant agreed to issue and establish Irrevocable Letters of Credit in favour of a third party. Paragraph 7 of the amended statement of claim had been quoted in full in the judgment of my learned brother, Katsina-Alu, J.C.A. It suffices to call attention to an averment of a “further contract” tripartite in nature made in March 1986 between the plaintiffs and the defendant. A further term of that agreement was averred in paragraph 8 of the amended statement of claim. In paragraph 11 of the amended statement of claim (hereinafter referred to simply as “the statement of claim”) the plaintiffs averred that the type of letter of credit to be issued was “Irrevocable and confirmed Letter of Credit.

The plaintiffs’ case in that they having fulfilled the conditions of the agreement, “the Defendant (as the Issuing Bank) did issue and establish ‘Irrevocable Letters of Credit’ for the account of the respective plaintiffs (as ‘Accreditors’)” in favour of the sellers and suppliers of goods.

The breach alleged by the plaintiffs in paragraph 15 of Statement of Claim is that subsequent to the issue and establishment of the said Letters of Credit’,  but before they could be utilized by the plaintiffs the defendant unilaterally repudiated the terms of the contract, by cancelling procuring the cancellation of each and every one of the letters of credit. The losses suffered by them as a result of the breach of the letters of credit. The losses suffered by them as a result of the breach were pleaded in paragraph 18-26 of the statement of claim.

The gist of the defence was a denial of the contract alleged by the plaintiffs. The defendant averred that there were negotiations between it and some of the plaintiffs for opening of letters of credit and that consequent upon these negotiations it agreed to  register 1st plaintiff’s Form M with a view to the opening of a letter of credit subject to certain specified conditions none of which was complied with. The defendant denied the issuance of irrevocable letter of credit to the plaintiffs and averred, if such were issued, the issuance was subject to the conditions specified which were never met. However, by a further amendment of the statement of claim, the plaintiffs pleaded waiver of the conditions in the following terms:

“14 (a) Further to paragraph 14 above the plaintiffs aver that the defendant was satisfied with the obligation or conditions fulfilled by the plaintiffs before issuing the Letters of Credit. The defendant therefore waived all rights to insist on any condition not fulfilled and is now estopped from insisting on any such condition.”

The trial Judge in a judgment unduly dominated more by a rehearsal than thorough consideration of submissions of counsel, held that letters of credit were established and that there was a waiver of some of the conditions prescribed by the defendants. Confirming his findings that the letters of credit have been established, the Judge said:

……………………. The plaintiffs have brought action against the defendant for its failing to carry out its contractual obligations that it to notify the sellers of Letters of Credit established on their behalf. The Court holds that the plaintiffs have a right to bring the present action on this second aspect of the contract ………” (emphasis mine)

The Judge found the alleged tripartite contract proved. In regard thereto, he said:

“The Court hold that the defendant is also liable to the plaintiffs for Breach of Contract in this regard.

His reasons: “There was no transfer of Import Licence and the defendant is estopped from its stand of regarding the plaintiffs as a group with whom he entered into the contract, and had acted in the past …..” In conclusion the Judge found the allegation of unlawful; interfering with plaintiffs’ business established.

In regard to damages the Judge had this to say:

“The Court is of the firm view that this is a proper case where the plaintiffs ought to be entitled to the award of damages because as a result of the failure of the defendant to notify the seller of the establishment of Letters of Credit the business of 1st and 2nd plaintiffs collapsed beyond repairs.”

It was on this narrow basis that he awarded damages. It is evident that the path of enquiry set by the averments in the statement of claim makes it a threshold question whether any letter of credit was issued and established. The position taken by the plaintiffs both at the trial and on this appeal is that the letters of credit were issued. On this appeal the plaintiffs sought to draw a further disintinction not reflected in their pleadings between “establishing” a letter of credit and “issuing” a letter of credit. It was argued that a letter of credit becomes “established” when after issuance the beneficiary (seller) is notified. The authority cited for this proposition is a passage quoted from Documentary Credits by Frans P. De Rooy at pp. 80-81, as follows:

“The argument that the credit is established at the moment when the contract is concluded between the applicant and the Bank or, slightly later at the moment when the Bank has turned the instruction into advice of issuance of credit is contrary to the nature of documentary credit. As long as the bank has still not placed the advice of issuance outside its control by dispatching it, it can amend it and not send it. This may be an infringement of its contractual liability towards the applicant but it does not mean that it has a liability towards the beneficiary as yet.”

This passage is hardly authority for the proposition put forward by the plaintiff. It is clear that the author was not drawing a distinction between the words “established” and “issue”. What was being discussed was that the time when an obligation would arise between the issuing bank and the beneficiary.

In the context of the present case, the question whether and at what stage a contract could arise between the bank and the seller is immaterial and irrelevant to the issue. The question that arises in the case is which of the competing contentions between the parties is to be preferred. The plaintiffs’ contention put shortly and simply that the defendant has already carried out their request to open a letter of credit but in breach of the resulting legal relationship created cancelled the letter of credit; and refused to notify the sellers. The defendant on the other hand contended that the plaintiffs’ request had not at all been carried into execution because conditions precedent to a performance of the agreement had not been fulfilled by the plaintiffs. It was in this context that the question of waiver pleaded by the amendment granted by this court on the plaintiff’s application arose. If the defendant had already performed the contract it cannot abort it by claiming that a condition precedent has not been fulfilled by the plaintiffs. Before these contentions are considered it is pertinent to observe that as a party is bound by his pleadings, he must not be permitted to set up a case contrary to those pleadings. The case that the plaintiffs sought to make on their pleadings is that the letters of credit had been issued and established. Even if the distinction which the plaintiffs now seek to make on this appeal between ‘issuance and ‘establishment’ of a letter of credit is valid, it is a distinction which cannot help the plaintiffs’ case. If anything, paragraph 14 of the amended statement of claim in which it was pleaded that the letters of credit were issued and established would completely destroy the cause of action the plaintiffs relied on, by reason of the fact that issuance and establishment of the letters of credit would be, as far as the plaintiffs were concerned, sufficient performance of the obligation of the defendant.

The four stage mechanism of documentary credits has been noted in Benjamin’s Sale of Goods (1stEdn.) paras 2004-2007 as follows: (1) contract of sale between the buyer and the seller; (2) the second stage, whereby the buyer requests the issuing banker to open a documentary credit in favour of the seller; (3) the third stage, whereby the issuing banker notifies the seller of the opening of the documentary credit directly to the seller; (4) the fourth stage, which is the realization of the credit. Normally the notification of the opening the documentary credit to the seller would be conclusive of its opening. In this case no such notification has taken place. The plaintiffs rely on Exhibits 10, 10(a) and 10(b) as evidence that Letters of Credit were opened. But those documents are incomplete in that they bear no date norcredit number. If one has to go by the plaintiffs’ pleadings in the absence of the document which forms the basis of their instructions to the defendant, (by para. 10 of the statement of claim) the agreement to open letters of credit between the parties were founded upon the terms under which the plaintiffs agreed to buy from the sellers. As para. 11 of the statement of claim shows “payment of the goods should be effected by means of Irrevocable and confirmed Letters of Credit, to be transferred by the Telegraphic Transfer ………..” It is trite that where payment for goods is by a confirmed letter of credit the correspondent bank must add his own promise to that of the issuing bank. The documents produced by the plaintiffs as showing that letters of credit have been opened bears neither name of a correspondent bank which would have shown that in addition to their being irrevocable, they were also confirmed. The evidence by the plaintiffs’ witness in regard to Exhibits 10, (1) and 10 (b) that “no corresponding Banks are shown because it is the Foreign Exchange Section of the Head Office that inserts the corresponding Bank” shows that the documents were materially incomplete to represent an opened Letters of Credit.

There cannot be any doubt but that the learned Judge’s conclusion is seriously flawed when he held, in effect that the action was maintained or could also be maintained against the defendant for its failure to notify the seller after “establishing” the Letter of Credit and that “this amounted to a breach on his part of the second contract.” On the evidence before him, it was clear that a letter if credit had neither been opened nor established. The evidence of the 1st plaintiff witness which he relied on totally, are mere assertions: that the bank opened irrevocable letters of credit which “are incapable of being cancelled or modified” and “cannot be revoked”. None of those assertions can stand up to close legal scrutiny. None of them was supported by his testimony which showed that a material particular (the corresponding bank) was yet to be inserted by the defendant’s Head Office. It was also not supported by the documents. Exh.10, 10A, 10B, which showed omissions as to date and number.

The learned Judge’s conclusions were so bedeviled with incomprehensible statements that it was clear that he was probably much confused by the plaintiffs’ formulation of their claim. An instance is the following statement made by him:

“The Court is of the firm view that the defendant always referred to the plaintiffs as one group ….. and so cannot now deny it on this occasion. The Court holds that the defendant is also liable to the plaintiffs for Breach of Contract in this regard as there was no transfer to (sic) Import Licence ………….”

Furthermore the reliance of the Judge of the case of African Continental Bank v. Obmiami Brick & Stone (Nig.) Ltd. (1990) 5 NWLR (Pt. 149) 230 shows, I venture to suggest, an inadequate apprehension of the main issue in this case. The Obmiami Case decided on its facts shows that there was sufficient evidence that a letter of credit was opened.

It is evidence that the Judge was wrong in the view he held that a letter of credit was “opened” “issued” or “established” whatever term is used having regard to the interchangeable use of these words in the pleadings and in the judgment. The fact is that there could not have been a cancellation or revocation of what had never come into existence. The first issue formulated in the appellant’s brief must be resolved in favour of the defendant.

I pass on quickly to the question of waiver. In regard thereto, it is pertinent to observe that the waiver pleaded by the amendment granted by leave of this Court was an implied waiver by conduct, such conduct being the alleged issuance of the letter of credit. The evidence as to express waiver by any letter written by the defendant went to no issue properly arising on the pleadings. On the question of waiver, the Judge said:

“On the further issue of waiver of the conditions, the Court is of the firm view that the remaining conditions 2, 3 and 8 were waived because the defendant would not have embarked on any action at all, in view of the tenor of Exhibit 2 if it did (sic) waive the remaining conditions in Exhibit 2. Exhibit 2 was dated 25/7/86 while the defendant’s entries on Exhibit 5 Important Licence and Exhibit 11 Form M were dated 11/8/86. These were later cancelled. The Court is therefore of the view, that the conditions stipulated in Exhibit 2 were subsequently waived and the cancellation of the Letter of Credit could not have been due to the non-compliance with Exhibit 2.”

These findings were made when no issue as to waiver arose on the pleadings. The curious thing however, is that when after these findings had been made, and on this appeal, the plaintiffs sought and obtained leave to plead waiver, the only conduct they alleged as ground of implied waiver was the issuance of the letters of credit. It is evident therefore that the type of conduct which the Judge found as constituting waiver did not at all arise from the pleadings. There being no issuance of any letter of credit, the plea of waiver must fail.

Besides, the fact relied on by the Judge do not support the conclusion that there was an implied waiver. Although the defendant’s entry on Exh. 5 and Exh. 11 were dated 11/8/86 after the letter imposing conditions (Exh. 2) dated 25th July 1986 had been written, the request for waiver (Exh. 3) was made on 15th August 1986 subsequent to the entries referred to by the Judge. Furthermore the letter Exh. 12 dated 17th September 1986 did not mention any waiver but contained a promise to reactivate an account and to meet repayment. These were some of the conditions contained in Exh. 2.

Be there as it may, on the facts pleaded, there was no waiver of conditions. The obligation of the defendant to open letters of credit would not arise unless and until the plaintiffs fulfilled the conditions precedent conveyed by the letter Exh 2. There being no fulfillment of those conditions the defendant could not be rightly held to be liable for breach of contract.

Although the Judge purported to find the claim for unlawful interference established, it is clear that the alternative claim was predicated on there being a contract and a breach of that contract. The defendant has appealed against the “whole decision” which must include the Judge’s view on the alternative claim. It is evident that if there was no breach of contract and if the condition precedent to the performance by the defendant of any obligation has not been fulfilled, there would be no unlawful interference with business as the two claims were based on the same facts. The whole tenor of the appeal had been to challenge the basis of the whole decision and substitute therefore an order dismissing the action in its entirety.

Being of the view that the defendant should not have been found liable, I do not consider that the issue of quantum of damages need be dealt with at any length. I agree entirely with the opinion of my learned brother, Katsina-Alu, J.C.A. on the issue of damages as well.

In the result for the reasons I have given, and the fuller reasons in the judgment of Katsina-Alu, J.C.A., I would allow the appeal in its entirety and dismiss the cross appeal, I would order that the judgment of the Court below together with the order for costs be set aside and substitute therefore an order dismissing the plaintiff’s credit. I abide by the orders as to costs made by my learned brother, Katsina-Alu, J.C.A.

 

ANALYSIS

 

The Letter of credit transaction in this case was consummated at the time when letters of credit were manually processed and transmitted to correspondent Banks overseas through surface mails. However, letters of credit are now processed electronically and the various fields of the letters of credit MT 700 must be completed before an L/C can move from creation, modification and authorisation stage. In the light of the above, it is pertinent to state the position of the Court on what confirmed letters of Credit must contain. “It is trite that where payment for goods are by a confirmed letter of credit the correspondent bank must add its own promise to that of the issuing bank”.

In the instant case, the documents produced by the respondent as showing that letters of credit were opened does not bear the name of a correspondent bank which would have shown that in addition to their being irrevocable, they were also confirmed.

Furthermore, there is no correspondent bank irrevocable credit number and date indicated on the purported letter of credit’. Consequently, the Appeal Court rightly held that there was no letter of credit issued but were letters of credit forms prepared by the Bank and forwarded to the Head office for further action.

It should be noted that the presence of the name of the correspondent Bank, letters of credit number and date are not sufficient to reach a conclusion that a letter of credit had been established by a Bank in the present day L/C management and practice especially with the advent of SWIFT.

What will determine whether a letter of credit had been established or not are the details on the last page of MT 700 which will show if the letter of credit had been authorised, transmitted to the correspondent Bank and duly acknowledged by them. Furthermore, for the establishment of the letter of credit to be conclusive, the correspondent Bank must advise same to the beneficiary and forward evidence of such transmission to the issuing Bank.

The above position is in tandem with the decision of the Court of Appeal in this case which held that where there are conditions precedent before the establishment of letter of credit, an L/C cannot come into existence until those conditions are met. The Court further held:

  • “The defendant was not in breach of its contract with the plaintiff because they did not satisfy the conditions for the issuance of letters of credit.
  • Letters of credit cannot be said to have been issued unless it has been sent to the correspondent Bank.
  • That the notification of the opening of the documentary credit to the sellers would not be conclusive of its opening.
  • That it is trite that where payment for goods is by a confirmed letter of credit, the correspondent bank must add his own promise to that of the issuing bank.”

It is clear that none of the above ingredients are present in the instant case. Consequently, the incontrovertible conclusion is that there was on L/C established for which reliance can be placed by the beneficiaries.

Under the Uniform customs and practice (prescribed by the International Chambers of Commerce), it is within the competence of the issuing Bank to advice a letter of credit to a correspondent Bank overseas and not that of the applicant. The purported transmission of the letter of credit to the beneficiaries overseas is a fierce when versed against letters of credit management practice and the letters of UCP 600 and past editions.

The case is a landmark judgement in the annals of letters of credit practice but should be read with current developments especially the emergence of SWIFT in the transmission of letters of credit among Banks.