AFRICAN CONTINENTAL BANK LIMITED v. OBMIAMI BRICKS & STONE (NIGERIA) LIMITED
(1990)LCN/0106(CA)
In The Court of Appeal of Nigeria
Thursday, the 31st day of May, 1990
Case Number: CA/E/96/89.
RATIO
DAMAGES: WHETHER THERE IS NEED TO PARTICULARISE ITEMS OF SPECIAL DAMAGES
Now, coming specifically to the items of special damages, the loss of profit should have been particularised in the pleading so as to give notice to the defendant as to how the profit of N20,000,000.00 was arrived at. It is not enough to have stated that figure as part of special damages, as the plaintiff did, as to do that from the point of view of pleading is not better than stating an amount as general damages. The defendant was entitled to know before hand how many blocks would have been moulded from the said raw materials, the cost price of each block or a given quantity thereof and the selling price. The cost of production would take account of all overheads stated in items 1 and 6 of the particulars of special damages and the difference between this and selling price would be the profit. It was therefore vital to have specifically pleaded the projected amount of blocks, the cost price and the selling price. Such particulars cannot properly be revealed in evidence as was done by p.w.3 by way of surprise as the defendant could have been in no position then to controvert them effectively. The law is that there is need for a plaintiff to give sufficient warning of particulars of special damages in the pleading to the defendant so that he may know the case he has to meet. This was so held in B.E.O.O. Industries (Nigeria) Ltd. v. Maduakoh & Anor (1975) 12 S.C. 91 at 108 where the Supreme Court approved Lord Donovan’s observation in Perestrello E. Companhia Limitada v. United Paint Co. Ltd (1969) 1 WLR 570 at 579 as follows: “… if a plaintiff has suffered damage of a kind which is not the necessary and immediate consequence of the wrongful act, he must warn the defendant in the pleadings that the compensation claimed will extend to this damage, thus showing the defendant the case he has to meet and assisting him to compute a payment into court…” Lord Donovan then went further to deal with the need and obligation to particularise items of special damages as follows at pages 579-580: “The same principle gives rise to a plaintiff’s undoubted obligation to plead and particularise any item of damage which represents out-of-pocket expenses, or loss of earnings, incurred prior to the trial, and which is capable of substantially exact calculation. Such damage is commonly referred to as special damage or special damages but is no more than an example of damage which is ‘special’ in the sense that fairness to the defendant requires that it be pleaded. This obligation to particularise in this latter case arises not because the nature of the loss is necessarily unusual, but because a plaintiff who has the advantage of being able to base his claim on a precise calculation must give the defendant access to the facts which make such calculation possible. The matter is clearly stated in Mayne and MacGregor on Damages 12th Edn., (1961) in para. 970, where the learned editors write: “Special damage consists in all items of loss which must be specified by (the plaintiff) before they may be proved and recovery granted. The basic test of whether damage is general or special is whether particularity is necessary or useful to warn the defendant of the type of claim and evidence, or of the specific amount of claim, which he will be confronted with at the trial. PER SAMSON ODEMWINGIE UWAIFO, J.C.A.
JUSTICES:
ALOYSIUS IYORGYER KATSINA-ALU Justice of The Court of Appeal of Nigeria
GEORGE ADESOLA OGUNTADE Justice of The Court of Appeal of Nigeria
SAMSON ODEMWINGIE UWAIFO Justice of The Court of Appeal of Nigeria
Between
AFRICAN CONTINENTAL BANK LTD Appellant(s)
AND
OBMIAMI BRICKS & STONE (NIGERIA) LTD Respondent(s)
SAMSON ODEMWINGIE UWAIFO, J.C.A. (Delivering the Leading Judgment): The introduction into the Nigerian financial system of multiple and differing foreign exchange markets has made a lot of difference to business. The rates of exchange are not the same. The transition from a single foreign exchange market came about in September, 1986. It was rather sudden, and consequently it caused an unusual rush in banking activities within the short period of transition allowed. This appeal deals with the law backing the transition as it affected or tended to affect the transaction between the parties to open a letter of credit (LC) at that time.
On 27 April, 1989 at the Enugu High Court, Ozobu, J., gave judgment in a claim for N22,650,337.50 being special damages as follows:
Particulars of special damages
1. Loss of 1,109 metric tons or 22, 180(50kg) bags of super-white cement at N70.00 per bag N1,552,600.00
2. Loss of 15,125 kos or 605 (25kg) bags of bayerferrox (iron) oxides at N240.00 per bag N145,200.00
3. Demurrage N194,151.29
4. Interest charged by the defendant on aforesaid loan to the plaintiff from 24th September, 1986 to 31st January, 1989 N353,138.96
5. Loan from, and accrued interest thereon charged by, Co-operative and Commerce Bank (Nigeria) Limited N393,247.25
6. Rental for warehouse at Ogbor Hill, Aba N12,000.00
7. Loss of profit N20,000,000.00
Total N22,650,337.50
The learned judge awarded the plaintiff a total sum of N10,827,305.25 as special damages. The plaintiff seems to have founded its action on negligence and pleaded the particulars of the alleged negligence in paragraph 13 of the amended statement of claim. This will be referred to later and fully considered. But the learned judge no doubt based his judgment on an alleged breach of contract as will be shown. The counter-claim filed by the defendant was at the same time dismissed.
The defendant being aggrieved appealed against the judgment. It originally complained on three grounds but these were later substituted with six grounds. Three issues were formulated by the defendant for determination by this Court. Those issues were accepted by the plaintiff as properly arising in this appeal. I shall for obvious reasons set out ground 3 and issue 2. They appear to draw attention although I shall consider the other issues as well.
Ground 3 reads:
“The Court below erred in law in giving judgment in favour of the Plaintiff on the ground that the defendant bank is in breach of contract to send out the letter of credit through the telex message on 25/9/86.”
Particulars of Error
(a) Para. 12 of the Statement of Claim bases the claim of the Plaintiff on the allegation that the defendant neglected to open the letter of credit before the close of business on 26/9/86.
(b) The plaintiff’s 3rd witness said on oath that the opening of the letter of credit was completed around 1p.m. on 25/9/86
(c) No law requires that the opening of the letter must be communicated to the beneficiary of the credit (KLOSA and STAAS) or the Confirming Bank (Deutsche Bank) on 25/9/86 or not later than that date.
(d) The ground aforementioned on which judgment was based was not pleaded and cannot be supported by the evidence.”
The second question for determination (i.e. issue 2) was then stated as follows:
“Whether the Plaintiff’s case – that the Deutsche Bank refused to confirm the credit issued by the defendant bank solely because of the fact that the credit so issued was not communicated to KLOSA and STAAS on 26/9/86 – was valid and was the one upon which the court below entered judgment in its favour.”
The fact of the case in a nutshell are these. The plaintiff obtained an import licence for goods and machinery and other equipment. It was for an amount of N1,202,830.00. It did not have funds. It asked the defendant to open an LC for it and at the same time for a loan less than the value of the import licence. The defendant eventually approved the sum of N690,000.00 upon conditions. An agreement to open the LC would appear to have been reached on the same day the letter conveying the approval of the loan was written, that is, 19 September, 1986. While action, it seems, was being taken on the LC, the law regarding access to foreign exchange was altered and two foreign exchange markets were soon to become operative. One was cheaper than the other. The transaction of the type for which the opening of the LC had been agreed between the parties would have to be funded from the costlier foreign exchange market if it was not concluded on or before the last day of the coming into effect of the said law. In this particular case a confirmed and irrevocable LC must be established if it was to benefit from the cheaper market.
The final step taken by the defendant to have the LC confirmed by a foreign banker (Deutsche Bank of West Germany) suggested at the instance of and upon the pressure by the plaintiff was on 26 September, 1986 at 4.20p.m. by tested telex message (exh. 1A). That was the last that was heard of the effort to get the plaintiff to purchase from the cheaper foreign exchange market. The plaintiff now complains that the defendant was responsible for its failure to transact that LC on that market. The goods intended to be purchased were super-white cement and bayerferrox (iron) oxides said to be needed by the plaintiff for the production of multi-coloured cast stone bricks for sale. The defendant in its statement of defence denied responsibility although at the same time making some admissions of certain averments by the plaintiff. Somehow the defendant did not adduce evidence.
What led to this can be shortly stated. The defendant was being defended by Mr. U. N. Anya and with him was Mr. E. Ibe. On 14 February, 1989 after plaintiff’s 3rd witness had testified half-way, Mr. Anya announced that Mr. Ibe would conduct the case for the defendant and asked to be discharged from further participation in the defence. The court granted the request. Mr. Ibe then sought for and was granted an adjournment. Thereafter he brought an application by originating summons before the Chief Judge questioning the propriety of the assignment Order made by the Chief Judge of Anambra State to enable Ozobu, J., to conclude this case which he had begun before he was posted to another Judicial Division. He then applied to Ozobu, J., by motion to stay further proceedings pending the determination of the originating summons. This was refused. Mr. Ibe then asked to be discharge from the case on 23 February, 1989.The learned judge said he would not do that in respect of that day’s hearing and the plaintiff concluded its case that day. Mr. Ibe did not appear in that court anymore. He more or less abandoned the case in a most unethical manner. He denied his client the opportunity of putting its defence before the court on a mere technical and untenable objection.
On the day this appeal was argued, i.e. on 8 March, 1990, Mr. Anyamene for the plaintiff applied to amend the second sentence of paragraph 12 of the amended statement of claim to show that the defendant failed to communicate the opening of the LC to Deutsche Bank before the close of business on 26 September, 1986. Chief Williams for the defendant did not oppose on the ground that it would make no difference to the case. The amendment was duly granted. The said paragraph 12 now reads:
“According to the telex message which the plaintiff received from KLOSA & STAAS dated 25th September, 1986, contents of which the plaintiff’s managing director personally brought to the knowledge of the defendant, the Deutsche Bank was eager to confirm the letter of credit to beat the SFEM deadline if only the defendant acted quickly. Despite this telex message, the defendant still failed to communicate the opening of the said letter of credit to Deutsche Bank before the close of business on the 26th September, 1986.”
It is immediately necessary to refer to paragraph 13 of the amended statement of claim and reproduce it to make it plain what the defendant was alleged to have failed to do, or neglected to do. The said paragraph reads:
“On Friday, 26th September, 1986, at about t 1 a.m. the plaintiff’s managing director called at the defendant’s office in Lagos to collect plaintiff’s copy of the telex message of 25th September, 1986, prepared by the defendant’s employee one Mr. Okonkwo of foreign business department conveying to Deutsche Bank by telex message that the irrevocable letter of credit had been opened in favour of the plaintiff’s beneficiary KLOSA & STAAS. But after a considerable waste of time, at about 4p.m. the defendant informed the plaintiff’s managing director that a telex message prepared on 25/9/86 was after all not sent out and that the message would be sent out in the evening. The plaintiff avers that it was negligence by the defendant that prevented the sending of the message on 25/9/86.”
Particulars of Negligence
Fully aware as per the exporter’s letter dated 28th August, 1986, that Deutsche Bank in Frankfurt, Western Germany was eager to confirm the letter of credit; the defendant failed to advise the said bank of the opening of an irrevocable letter of credit and even when a telex to that effect was prepared on the 25th September, 1986, the telex message was not sent out on that date even though the defendant was aware that SFEM would come into effect on Monday 29th September, 1986 and that a telex message sent out on 26th September, 1986, evening which was Friday could not reach the addressees till Monday 29th September as 27th and 28th being Saturday and Sunday respectively were work-free days in Nigeria and in Western Germany.”
The combined effect of the above paragraphs 12 and 13 shows that the plaintiff asserted the negligence of the defendant as a basis for the damages it suffered in this transaction. The alleged exporter’s letter of 28 August was not tendered. Looking at paragraph 8 of the amended statement of claim, it is plain that it contains the true agreement or contract between the parties. It reads:
“On the 19th of September, 1986, the defendant undertook the duty to establish an irrevocable letter of credit for the importation of the said raw materials as specified in the proforma invoice No.N/1084A/86 of 8th August, 1986, from KLOSA & STAAS, and in consequence took possession of the original proforma invoice of KLOSA & STAAS.”
There is no argument that the defendant performed this contract. What the defendant agreed to open from the said paragraph 8 was an irrevocable LC.
It did open one. Victor Kenayo Obiekwe (P.W.3) said:
“… Mr. Okonkwo has the duty of preparing the Letter of Credit, he prepared it, sent to Mr. Okocha who in turn sent it to Mr. Akiola Asst. Controller of Foreign Bureau of the department.
At about 12.15p.m. on 25/9/86, we took the Telex Register to Mr. Awukuzu, Asst. General Manager Operation who immediately signed it. From his table the Register was taken to the General Manager Mr. Olie, C.N. for his signature which he did. When everything on the Letter of Credit was done before 1p.m. I celebrated because I had beaten the Second Tier Foreign Exchange Market – (SFEM) which was to take effect on Monday 29/9/86”
It is not known in this case all the terms on which the LC was opened since the application by the plaintiff to the defendant to open the LC was not tendered. It was important to tender that application because it is said that:
“A letter of credit comes into being as the result of a formal written application by the applicant, usually the buyer of goods, which is at the same time a request, a mandate and an indemnity. It requests the banker to issue or ‘open’ the credit, sets out the conditions on which he is to act and holds him covered in respect of his doing so… As the application is the foundation on which the credit itself is based it is essential that, in the interests of both buyer and banker, it should be couched in precise and unambiguous language. It need hardly be added that it should take account of the practical implications and possible consequences of compliance with the mandate it embodies.”
See Plaget’s Law of Banking 8th edition, page 633. The LC itself was also not tendered so as to know its terms.
The question of making the said LC confirmed seemed to have arisen later. In fact the letter written by the defendant to the plaintiff on 19 September, 1986 (exh. G) shows that the plaintiff made an application on 16 July, 1986 for an LC. It was not there mentioned that the credit was to be confirmed. The LC opened by the defendant would appear, however, to be irrevocable. It is No. EN/86/HQ.371/86 for DM.836,002-80. The opening of that LC would seem to have preceded the telex later sent for it to be confirmed as per exhibit 1A, whose opening sentence reads: “PLEASE ADVISE AND CONFIRM OUR IRREVOCABLE LC EN.4/86/HQ.371/86 FOR DM.836,002-80… FAVOUR KLOSA & STAAS… AVAILABLE AGAINST PRESENTATION OF THE FOLLOWING DOCUMENTS FOR NEGOTIATION AT BENEFICIARY’S LOCATION.”
It must be realised that the question of Deutsche Bank coming into the matter as the confirming bank was arranged by the sellers, KLOSA & STAAS. That arrangement was communicated to the plaintiff at its address at Enugu by KLOSA & STAAS as per telex dated 25 September, 1986 (exh. L). The said telex reads:
“THIS IS TO CONFIRM THAT WE CONTACTED DEUTSCHE BANK IN GERMANY TODAY AFTER HAVING BEEN ADVICED BY YOU THAT ACB IS GOING TO RELEASE YOUR L/C AS PER OUR NEGOTIATIONS. THEY CONFIRMED TO US THEIR READYNESS TO ADD THEIR CONFIRMATION TO THE L/C AFTER RECEIPT OF SAME ACCORDING TO TERMS AND CONDITIONS GIVEN TO YOU BY LETTER ALREADY. WE HOPE
THAT ACB WILL ACT QUICKLY.”
It seems to me, as I said earlier, that the need to have a confirmed Irrevocable LC came much later than the time a contract was reached by the parties for the opening of an irrevocable LC on 19 September, 1986. At that time it would appear there was nothing officially known of the Second-Tier Foreign Exchange Market (SFEM). The averments in paragraphs 9, 10, and 11 of the amended statement of claim that the defendant then knew of SFEM, and that the plaintiff had by 22 September, given it all relevant documents to take steps to meet the deadline and so qualify under the first-tier, cannot really be supported by facts. It appears that the reality of the coming of SFEM was not established until Decree No.23 known as Second-Tier Foreign Exchange Market Decree 1986 was published in Lagos on 24 September, 1986 in an Extra-ordinary Gazette as Government Notice No.650. That was when Government notice of it was legally given to the banks and their customers. At least no other source of knowledge was pleaded.
It was obviously that Decree that made the plaintiff want to secure confirmation of its LC. It sought to do this by itself scouting for a confirming banker. It appeared to have got one through the efforts of the sellers. That was what gave rise to Exhibit L. It was after exhibit L was received by the plaintiff (not before 25 September) that pressure was put on the defendant by the plaintiff to see how the LC would be confirmed under Section 15(2)(a) of Decree No.23. The transactions permitted to benefit from the First-Tier Market under the said section 15(2)(a) must ensure that (a) all documentations prescribed by the Central Bank to be relevant to the transaction concerned were submitted to the Central Bank; (b) the obligation to which the documentation relates has, having regard to the nature of such transaction, become due and payable and (c) the corresponding naira component of the transaction has been deposited with the Central Bank; whichever occurs last. As regards the present case, the plaintiff would benefit from the First-Tier Market if, after complying with the above conditions, its transaction then fulfilled the provisions of section 15(2)(a) which are that:
“any transaction covered by a specific import licence issued in 1985 or 1986 for which a confirmed and irrevocable letter of credit was established on or before the last day immediately preceding the commencement of this Decree.”
The Decree by itself does not state when its provisions commenced nor the date they were to commence. Section 24 thereof provides as follows:
“24(1) This Decree may be cited as the Second-Tier Foreign Exchange Market Decree 1986.
(2) This Decree shall come into force on such date as the Minister may, by order published in the Gazette, appoint.”
No such Order of the Minister was tendered before the trial court or this Court. But I had, in the interest of Justice, to read the gazette in which the Order was published. It is Supplement to Official Gazette Extraordinary No.59 Vol.73 of 25 November, 1986. The Order is Statutory Instrument 25 of 1986, whose date of commencement was 23 September, 1986. The date of publication, no doubt, created an unusual situation particularly in respect of a Statutory Instrument.
The plaintiff might have given a thought to the actual effective date of the Statutory Instrument (a delegated legislation) and made representations to the Central Bank of Nigeria in the interest of his business instead of blaming the defendant since by the very provisions of Section 24 of Decree No.23 of 1986 the date of the coming into effect of the said Decree was to be made known only by publication in the Gazette. That would seem to suggest that the date of publication should in law be the earliest effective date: See Johnson v Sargant and Sons (1918) 1 K.B. 101 at 103; Blackpool Corporation v. Locker (1948) 1 All E.R. 85 at 92; Jackson Stansfield and Sons v. Butterworth (1948) 2 All E.R. 558 at 564, all of which comment on when a delegated legislation should ideally come into effect. I do not intend to say more than that. So in fact it could have at best been a matter of speculation as to when the Decree would indeed come into operation at the time the defendant was making effort over the confirmation of the LC. It is, in my view a grave matter to attempt to saddle the defendant with liability in the circumstances of the publication of that Order.
Although evidence was not brought to controvert some aspects of p.w.3’s evidence, for reasons I have earlier given, it seems to me that it was impossible from the available evidence for any step to be taken by the defendant to ask Deutsche Bank to add their confirmation to the LC before exhibit L was received. It is most unlikely that p.w.3 travelled to Lagos on 24 September as given in evidence by him in the company of one Njemanze, an official of the defendant bank, with “all the relevant documents” which were delivered to the defendant bank’s Lagos Office.
This is because KLOSA & STAAS had not then approached Deutsche Bank and exhibit L had not even come into existence as at that date. The defendant could not therefore have gone to Lagos on 24 September armed with the necessary assurance with which to instruct the defendant to telex Deutsche Bank for confirmation of its LC which “ACB is going to release.” It seems a fair view to take that the plaintiff’s 3rd witness most probably proceeded to Lagos after he got exhibit L on 25 September and that he might have arrived there late.
Anyway, whatever the position, the plaintiff by paragraph 12 of its amended statement of claim (read along with paragraph 13) based its cause of action on the failure of the defendant to act quickly on the telex (exhibit L) to beat the SFEM deadline. The last sentence of paragraph 12 reads:
“Despite this telex message, the defendant still failed to communicate the opening of the said LC to Deutsche Bank before the close of business on the 26th September, 1986.” Now, it is of utmost importance that if the defendant is to be held liable in that regard, it must be shown by the plaintiff: (1) that the defendant did not send the telex on the 26 September or that it sent it after the close of business that day by Deutsche Bank; (2) that the defendant was aware that Deutsche Bank close their business at 4 p.m.; (3) that Deutsche Bank did not send their confirmation solely on the ground that the telex got to Germany after 4 p.m. (i.e. at 4.20p.m.).
It has not been shown by evidence of substance or of probative value that Deutsche Bank or Banks in Germany close business at 4p.m. In this particular case a communication from Deutsche Bank by way of telex or letter that the telex by the defendant got to them too late for their action as their closing hour was 4p.m. would have been of probative value. The fact that p.w.3 said in evidence that banks in West Germany close at 4p.m. does not shift any burden onto the defendant to rebut. Again, it was not pleaded and not given in evidence that the defendant was aware that banks in Germany close at 4p.m. or that they could not act on the day a telex was sent if sent after 4 p.m. It was such a vital and material fact in the circumstances of this case that it was necessary to plead it.
Furthermore, there is nothing that can be relied upon up till now apart from the hearsay contained in exhibit L that Deutsche Bank was ready to add their confirmation. It is also not clear why Deutsche Bank did not act having regard to the fact that it would appear that the confirmation, as stated in exhibit L, was to have been given “according to terms and conditions given to you by letter already”, since that letter is not in evidence.
I do not see that the defendant’s liability can be founded on its failure to send the telex on 25 September which the learned judge called a breach of contract. There was no such contract. I cannot also in all the circumstances come to the conclusion that the alleged negligence of the defendant caused the plaintiff any damage. In fact it has not been proved that the defendant was in breach of any duty it owed the plaintiff.
I must by way of passing remarks say that the pleading in certain aspects are misleading and that some facts may have been wrongly assumed. I refer to some examples. In paragraphs 1, 3 and 4 of the statement of claim it is pleaded as follows:
“1. The plaintiff is a limited liability company having its head office at No.1 Rustique Mews (off Rehabilitation Road) behind Enugu Airport Emene, Enugu and carries on commercial business of moulding and manufacturing of multi-coloured cast stone bricks.
3. In June 1986 the plaintiff completed the erection of rustique machineries (sic) and other equipment ready to commence production of multi-coloured cast stone bricks at its factory at Emene Enugu, but the production depended on the essential raw materials, namely: super-white cement and bayerferrox (iron) oxides and which could only be imported from overseas.
4. After much expenditure and efforts, on or about 9th May, 1986, the plaintiff obtained an import licence No. 80V0006496 dated 9th May, 1986 valid for foreign exchange to import the said raw materials worth N1,202,830.00 and specified in the import licence from all countries excluding South Africa provided such goods were supplied to the plaintiff on or before the 31st December, 1986. The plaintiff will rely on this document during trial.”
The above averments were answered in the statement of defence as follows:
“2. The defendant admits paragraphs 1 and 2 of the plaintiff’s statement of claim.
3. Paragraph 3 of the statement of claim. The defendant admits paragraph 3 of the statement of claim to the extent only that the defendant was aware of the fact that the plaintiff had erected plants and machineries (sic) in the factory and was awaiting raw materials in order to commence production. But the defendant denies that both Bayer Ferrous oxides and Super white cement were raw material. Rather only Bayer Ferrous oxides was to be used as raw materials, while Super white cement was to be sold for money or money’s worth. This was so stated in the plaintiff’s letter of application for the opening of credit addressed to the defendant which letter, dated the 16th day of July, 1986, will be founded upon at the trial of this suit.
5. Paragraph 4 of the statement of claim. The defendant admits paragraph 4 of the statement of claim to the extent only that the plaintiff obtained an import licence dated the 9th day of May, 1986 and submitted the same to the defendant before the expired (sic) date of 31st day of December, 1986. But the defendant humbly would observe that the plaintiff did not submit the import licence to the defendant until the 16th day of July, 1986 when he submitted the same with his application for LC and overdraft to finance the purchase of goods and export expenses.”
The import licence in question was issued on 9 May, 1986 for a value of N1,202,830.00. It was admitted as exhibit F. The description of the items to be imported for that amount was as follows:
“Iron oxides, earth colours containing 700% or more by combine weight of iron evaluated as F203 Portland cement, cement fonder, slag cement, super sulphate cement & similar hydraulic cements whether or not coloured or in the form of clinker Miami stone manufacturing machinery, Brick making manufacturing, complete Rustique Brick manufacturing machinery.”
The plaintiff in paragraph 3 of its statement of claim gave the impression that in June 1986 it had completed the erection or Rustique machinery and other equipment. The defendant in paragraph 3 of its statement of defence surprisingly admitted this. Also in paragraph 4 of the statement of claim the plaintiff pleaded that the value of the import licence was for only raw materials. The defendant did not expressly or impliedly deny this.
There is no doubt that these averments are misleading. The import licence dated 9 May, 1986 talks about Rustique machinery and other machinery. It is quite perplexing that the plaintiff pleaded that these machines were erected in June 1986, and then pleaded in paragraph 4 that the import licence was for raw materials worth N1,202,830.00. This raises a query as to what machines were at that time to be used for the moulding of blocks for sale from super white cement and bayerferrox (iron oxides) for which so much projected loss from sales was claimed as special damages.
I have observed also that some documents and evidence have not been made available. All these matters have to a large extent made a determination of this case unduly difficult or problematic. But I am satisfied from the evidence tendered and the Decree that the plaintiff failed to prove that the defendant acted in breach of contract or was negligent to cause it damages or loss. If I were however to hold the defendant liable, the amount of damages would have been the difference in naira between the cost of buying foreign exchange from the First and Second-Tier Foreign Exchange Markets in respect of later financing the said LC. This is partially on the basis that a defendant cannot be liable for damages that are not remote. As said by Lord Wright in Liesbosch Dredger v. Edison Steamship (1933) AC. 449 at 460:
“The law cannot take account of everything that follows a wrongful act; it regards some subsequent matters as outside the scope of its selection, because ‘it were definite for the law to judge the cause of causes’, or the consequences of consequences… In the varied web of affairs the law must abstract some consequences as relevant, not perhaps on grounds of pure logic, but simply for practical reasons.”
In other words, I would have disallowed any damages that were not within the contemplation of the parties at the time of the contract: See Hadley v. Baxendale (1854) 9 Ex. (1843-1860) All ER Rep. 461; Alraine (Nig.) Ltd. v. M. A. Eshiett (1977) 1 S.C. 89; or not arising from the alleged negligence.
Now, coming specifically to the items of special damages, the loss of profit should have been particularised in the pleading so as to give notice to the defendant as to how the profit of N20,000,000.00 was arrived at. It is not enough to have stated that figure as part of special damages, as the plaintiff did, as to do that from the point of view of pleading is not better than stating an amount as general damages. The defendant was entitled to know before hand how many blocks would have been moulded from the said raw materials, the cost price of each block or a given quantity thereof and the selling price. The cost of production would take account of all overheads stated in items 1 and 6 of the particulars of special damages and the difference between this and selling price would be the profit.
It was therefore vital to have specifically pleaded the projected amount of blocks, the cost price and the selling price. Such particulars cannot properly be revealed in evidence as was done by p.w.3 by way of surprise as the defendant could have been in no position then to controvert them effectively. The law is that there is need for a plaintiff to give sufficient warning of particulars of special damages in the pleading to the defendant so that he may know the case he has to meet. This was so held in B.E.O.O. Industries (Nigeria) Ltd. v. Maduakoh & Anor (1975) 12 S.C. 91 at 108 where the Supreme Court approved Lord Donovan’s observation in Perestrello E. Companhia Limitada v. United Paint Co. Ltd (1969) 1 WLR 570 at 579 as follows:
“… if a plaintiff has suffered damage of a kind which is not the necessary and immediate consequence of the wrongful act, he must warn the defendant in the pleadings that the compensation claimed will extend to this damage, thus showing the defendant the case he has to meet and assisting him to compute a payment into court…”
Lord Donovan then went further to deal with the need and obligation to particularise items of special damages as follows at pages 579-580:
“The same principle gives rise to a plaintiff’s undoubted obligation to plead and particularise any item of damage which represents out-of-pocket expenses, or loss of earnings, incurred prior to the trial, and which is capable of substantially exact calculation. Such damage is commonly referred to as special damage or special damages but is no more than an example of damage which is ‘special’ in the sense that fairness to the defendant requires that it be pleaded.
This obligation to particularise in this latter case arises not because the nature of the loss is necessarily unusual, but because a plaintiff who has the advantage of being able to base his claim on a precise calculation must give the defendant access to the facts which make such calculation possible.
The matter is clearly stated in Mayne and MacGregor on Damages 12th Edn., (1961) in para. 970, where the learned editors write:
“Special damage consists in all items of loss which must be specified by (the plaintiff) before they may be proved and recovery granted. The basic test of whether damage is general or special is whether particularity is necessary or useful to warn the defendant of the type of claim and evidence, or of the specific amount of claim, which he will be confronted with at the trial.”
(Italics added by me)
It must be clearly understood from the entire nature of all the special damages claimed by the plaintiff in items 1, 2, 4, 6 and 7 in this case that it was asking both for the capital and other overheads he would have incurred in the September 1986 transaction and also for the alleged loss of profit. That is improper. This is so because if that transaction of September 1986 had come true (under the First-Tier Foreign Exchange Market), the plaintiff would have had to pay for the raw materials, pay demurrage and rental where necessary and pay interest on the loan it got from the defendant. Whether it would have taken up to about 2 years to repay the loan would have depended on unforeseen contingencies. The claim in items 3 and 5 for demurrage and for loan from the Co-operative and Commerce Bank (Nigeria) Limited and interest thereon was necessitated by a later LC opened by the plaintiff. That has nothing to do directly with the September 1986 transaction since in any event, apart from the LC for September 1986, the plaintiff would necessarily have had to open other LCs for its business under the Second-Tier. So in effect, the plaintiff placed no order that was paid for as regards the September 1986 transaction. It might have missed that opportunity. Therefore all it could hope to get in an action like this, as an alternative to the difference computed in naira between the cost of buying foreign exchange from the First and Second-Tier Foreign Exchange Markets as I earlier said in this judgment, if properly asserted and proved as a necessary consequence of that loss of opportunity, would have been loss of profit and no other. The plaintiff unfortunately has failed in both alternatives, and in all respect: it did not claim for the difference in naira for inability to purchase from the First-Tier Foreign Exchange Market or properly plead and prove loss of profit. In any event it failed to prove breach of contract or negligence.
I must however point out by way of emphasis that from the evidence of p.w.3, items 3, 4, 5 and 6 are alleged expenditure or liabilities incurred by the plaintiff on a completely different transaction from the one that failed to materialise in September, 1986. It is a misconception to think that the defendant could in any way be held responsible for these amounts.
I will accordingly allow this appeal and set aside the judgment of the lower court together with the order for costs. I dismiss the plaintiff’s claim as being without merit. As regards the counterclaim, there was no basis for dismissing it by the lower court when issues had not been joined on it and no formal ruling was given as to its propriety. The dismissal is set aside and an order that the counterclaim be placed back on the cause list for trial is made. I assess costs in favour of the defendant at N1,000.00 in the court below and N1,500.00 in this Court.
ALOYSIUS IYORGYER KATSINA-ALU, J.C.A.: I have read in draft the judgment just delivered by my learned brother Uwaifo, J.C.A. I am in complete agreement with his reasoning and conclusion.
In the determination of this appeal it is necessary to establish the relevant contract between the plaintiff and the defendant.
It is now settled that there are four separate and distinct contracts which arise from a transaction consisting of an international sale of goods to be financed by means of a confirmed irrevocable letter of credit. In United City Merchants (Investments) Ltd. v. Royal Bank of Canada (1983) 1 AC. 168 the House of Lords per Lord Diplock said:
“It is trite law that there are four autonomous though interconnected contractual relationships involved. (1) The underlying contract for the sale of goods, to which the only parties are the buyer and the seller; (2) the contract between the buyer and the issuing bank under which the latter agrees to issue the credit and either itself or through a confirming bank to notify the credit to the seller and to make payments to or to the order of the seller (or to pay, accept or negotiates bills of exchange drawn by the seller) against presentation of stipulated documents; and the buyer agrees to reimburse the issuing bank for payments made under the credit. For such reimbursement the stipulated documents, if they include a document of title such as bill of lading, constitute a security available to the issuing bank; (3) if payment is to be made through a confirming bank the contract between the issuing bank and the confirming bank authorising and requiring the latter to make such payments and to remit the stipulated documents to the issuing bank when they arc received, the issuing bank in turn agreeing to reimburse the confirming bank for payments made under the credit; (4) the contract between the confirming bank and the seller under which the confirming bank undertakes or pay to the seller (or to accept or negotiate without recourse to drawer bills of exchange drawn by him) up to the amount of the credit against presentation of the stipulated documents.”
See also Akinsanya v. United Bank for Africa (1986) 4 NWLR (Part 35) 273.
I agree with Chief Williams for the defendants that the instant appeal is directly concerned with the second contract i.e. the contract between the plaintiffs herein and their banker – the defendant herein.
Paragraph 8, of the amended Statement of Claim and Paragraph 11 of the Statement of Defence seek to show that there was a contract for the opening of an irrevocable letter of credit. Paragraphs 8 reads as follows:
“8. On the 19th of September, 1986, the defendant undertook the duty to establish an irrevocable letter of credit for the importation of the said raw materials as specified in the proforma invoice No.N/1084A/86 of 8th August, 1986, from KLOSA & STAAS, and in consequence took possession of the original proforma invoice of KLOSA & STAAS.”
And Paragraph 11 of the Statement of Defence reads:
“11. The defendant admits paragraph 8 of the statement of claim, to the extent only that in its normal course of duty it commenced to establish irrevocable letter of credit on satisfying itself that the preliminary requirements for opening of irrevocable letter of credit such as the funds and the proforma invoice have been met by the plaintiff.”
There is no doubt that the defendant admitted entering into an agreement with the plaintiff to open a letter of credit in favour of the plaintiff’s overseas supplier KLOSA & STAAS. This agreement was concluded on 19th September, 1986. The question therefore is whether the defendants performed their part of the contract.
Victor Kanayo Obiekwe was the Managing Director of the Plaintiff Company. He gave evidence as PW3. Part of his testimony reads:
“… Mr. Okonkwo has the duty of preparing the letter of credit, he prepared it, sent to Mr. Akinola Asst. Controller of Foreign Bureau of the department. At about 12.15p.m. on 25/9/86 we took the Telex Register to Mr. Awukuzu, Asst. General Manager Operation who immediately signed it. From his table the Register was taken to the General Manager Mr. Olie C. N. for his signature which he did, when everything on the letter of credit was done before 1p.m. I and some staff of the defendant company began to celebrate.”
The evidence of PW3 Victor Obiekwe shows that a letter of credit was in fact issued before 1p.m. on 25/9/86. On the opening of the letter of credit the defendants had performed their part of the contract. The defendant herein was then obligated merely to notify KLOSA and STAAS (the seller) either itself or through a confirming bank, in this case the Deutsche Bank suggested by the plaintiffs. It follows therefore that the defendant having sent a telex to inform Deutsche Bank owed no further duty as whether to ensure that the plaintiff was able to pay the seller (KLOSA and STAAS) on the First Tier Foreign Exchange Market. It must be remembered that under the second contract indicated in the Royal Bank of Canada’s case, the defendant in law is not to act within a time schedule to notify the confirming bank.
But the Plaintiff’s case is premised on an alleged contractual obligation on the part of the Defendant to ask Deutsche Bank to confirm the letter of credit on or before 26th September, 1986. Indeed it is their case that the relevant contract concluded before 1p.m. on 25/9/86 was not communicated to the confirming bank before 4p.m. on 26/9/86 which was a Friday. See paragraph 12 of the statement of claim which reads as follows:
“12. According to the telex message which the plaintiff received from KLOSA & STAAS dated 25th September, 1986, contents of which the plaintiff’s Managing Director personally brought to the knowledge of the defendant, the Deutsche Bank was eager to confirm the letter of credit to beat the SFEM deadline if only the defendant acted quickly. Despite this telex message, the defendant still failed to communicate the opening of the said letter of credit to Deutsche Bank before the close of business on the 26th September, 1986.”
I have already indicated that the agreement to issue a letter of credit was reached on 19/9/86. No where in paragraph 8 was it ever stated that the defendant undertook to ask Deutsche Bank to confirm the letter of credit on or before 26th of September, 1986. It must be pointed out that the parties did not have the Second Tier Foreign Exchange Market Decree No.23 of 1986 in their contemplation when they entered into this contract. The decree itself was published on 24.9.86 and came into force on 29.9.86. A careful perusal of paragraph 12 of the Statement of Claim will show that the case put forward was not that there was any such contract but only that the defendant was aware that the Deutsche Bank was eager to confirm the letter of credit “to beat the SFEM deadline if only the defendant acted quickly.” There indeed was no such contract. The plaintiffs could not have known of the SFEM Decree before it was promulgated on 24.9.86. And the telex message certainly did not form part of or vary the contract into which the parties had already entered. More than that the telex message indicating readiness to confirm was not from Deutsche Bank but from a third party. It constituted no more than hearsay evidence. There is nothing other than that hearsay (which is no evidence at all) that Deutsche Bank had agreed to confirm. Therefore I also hold that there was no breach of contract on the part of the defendant.
I am also in complete agreement with the views on damages. I too dismiss the appeal with costs as assessed and abide by the order in respect of the counter-claim.
GEORGE ADESOLA OGUNTADE, J.C.A: This case raises some difficulties arising mainly from the poor presentation of the defendant/appellant’s case on the pleading. It seems to me that a pleader must ensure that he does not through a careless and imprecise pleading lead the court into a situation where the pleading is taken as making an admission of a fact when such fact has only been half-heartedly or ambivalently pleaded by his adversary. This is the more so where the statement that smacks of an admission is equally consistent with a true admission of an adversary’s pleading as it is with a denial of it. This in my view is what has happened in this case.
The plaintiff’s claim as framed before the lower court would appear to be founded on the negligent performance of a duty arising from a contract by the defendant/appellant. It was claim in contract and not on the tort of negligence as some of the averments in the plaintiff’s amended statement of claim would appear at first to suggest. See Khatoun v. Holland West Africa Lines & Anor (1961) All N.L.R. 318 at 323; (1961) 2 SCNLR 47 and Turner v. Stallibrass 67 L.J. Q.B.N.S. 52.
The first thing to do is to identify the contract, a breach of which the plaintiff sued upon.
In paragraphs 8, 9, 10, 11 and 12 (as amended before this court) and 13 of the Statement of Claim, the plaintiff pleaded thus:
“8. On the 19th of September, 1986, the defendant undertook the duty to establish an irrevocable letter of credit for the importation of the said raw materials as specified in the proforma invoice No.N/1084A/86 of 8th August, 1986, from KLOSA & STAAS, and in consequence took possession of the original proforma invoice of KLOSA & STAAS.
9. The second tier foreign exchange market (SFEM) was to come into operation on the 29th of September, 1986 and only confirmed letter of credit completed before that date would be transacted under the first tier market while others from that date would be under the second tier market which is costlier than the first tier. The defendant was aware of this fact and also that several importers and banks were expediting actions so as to beat that date and benefit from the first tier market.
10. The plaintiff promptly complied fully with the terms and conditions stipulated in the defendant’s letter of undertaking dated 19th September, 1986.
11. Although the defendants was aware that the second tier foreign exchange market (SFEM) would come into operation on Monday 29th September, 1986, and all relevant documents were submitted to the defendant’s branch office, Enugu, on or before Monday, 22nd September, 1986, to enable the branch office prepare all relevant documents in good time to meet the deadline, the defendant neglected to take the necessary steps to beat the said deadline.
12. According to the telex message which the plaintiff received from KLOSA & STAAS dated 25th September, 1986, contents of which the plaintiff’s Managing Director personally brought to the knowledge of the defendant, the Deutsche Bank was eager to confirm the letter of credit to beat the SFEM deadline if only the defendant acted quickly. Despite this telex message, the defendant still failed to communicate the opening of the said letter of credit to Deutsche Bank before the close of business on the 26th September, 1986.
13. On Friday, 26th September, 1986, at about 11a.m. the plaintiff’s managing director called at the defendant’s office in Lagos to collect plaintiff’s copy of the telex message of 25th September, 1986, prepared by the defendant’s employee, one Mr. Okonkwo of foreign business department conveying to Deutsche Bank by telex message that the irrevocable letter of credit had been opened in favour of the plaintiff’s beneficiary KLOSA & STAAS. But after a considerable waste of time, at about 4p.m. the defendant informed the plaintiff’s managing director that a telex message prepared on 25/9/86 was after all not sent out and that the message would be sent out in the evening. The plaintiff avers that it was negligence by the defendant that prevented the sending of the message on 25/9/86.”
A close examination of the above extracts from plaintiff’s Amended Statement of Claim reveals that the plaintiff had only pleaded one contract made on 19th September, 1986, by which the defendant/appellant agreed to open a letter of credit for the plaintiff in favour of KLOSA & STAAS in West Germany. According to the pleading, it was only on 25 September, 1986, six days after the pleaded contract that the plaintiff’s managing director brought a telex message to the attention of the defendant/appellant, the substance of which is that the Deutsche Bank would confirm a letter of credit in favour of the sellers if one was communicated to it (Deutsche bank) before the close of business on 26-9-86. It was never pleaded that the defendant/appellant agreed that it would communicate the letter of credit to Deutsche bank before 26-9-86. All that the plaintiff pleaded was the knowledge or an awareness of the contents of the telex message. Not that the defendant/appellant agreed to be so bound.
In the principle of pleading, it is settled that a defendant could only admit a fact pleaded by a plaintiff. If the plaintiff did not plead a contract, it is unexpected and indeed unacceptable that the defendant would admit the existence of a contract not pleaded. It is the plaintiff that nominated the issues for adjudication in a civil case and not vice versa unless the defendant has a counter-claim. As the plaintiff did not plead the existence of another contract made on 25-9-86, it was not therefore open to the defendant/appellant to admit that such a contract existed.
However, the defendant/appellant in paragraph 18, 19 and 19(a) of the amended statement of defence pleaded thus:
“18. Paragraph 12 of the statement of claim. The defendant denies paragraph 12 of the Statement of Claim and states that it is not true that the letter of credit was not opened on the 25th day of September, 1986. The defendant opened a letter of credit on the 25th day of September, 1986 and communicated the same to the Deutsche Bank the same day. It is not the duty of the defendant to inform a beneficiary of the letter of credit that its letter of credit has been established and opened. It is the duty of the advising or correspondent bank and in this case Deutsche Bank which is to advise the supplier and in this case Klosa and Staas.
19. Paragraph 13 of the statement of claim. The defendant denies in the strongest terms paragraph 13 of the statement of claim and the plaintiff is put to the strictest proof thereof.
19(a). In further answer to paragraph 13 of the Statement of Claim. The defendant avers that it made it clear to the plaintiff that the defendant could not guarantee any line or lines of credit and that the defendant could not therefore be held liable in any manner whatsoever for none confirmation of the letter of credit. This was initially agreed upon between the plaintiff and the defendant and the agreement was put into writing in a document dated 24th day of September, 1986. The document will be relied upon at the trial of this suit.” (Italics mine)
The impression one gets by reading paragraphs 18 of the amended statement of defence is that the defendant/appellant had by contract bound itself to send Deutsche bank a telex message concerning the letter of credit issued at the instance of the plaintiff in favour of KLOSA and STAAS before the close of business on 26-9-86. This is because the defendant/appellant pleaded that it actually did so. This by itself would suggest that the defendant had admitted the averment in paragraph 12 of the amended statement of claim.
In United City Merchants (Investments) Ltd v. Royal Bank of Canada (1983) 1 A.C. 168, Lord Diplock discussed the four autonomous though interconnected contracts which can arise from a transaction upon a confirmed letter of credit. He referred to the second of such contracts thus:
“The contract between the buyer and the issuing bank under which the latter agrees to issue the credit and either itself or through a confirming bank to notify the credit to the seller and to make payments to or to the order of the seller (or to pay, accept or negotiate bills of exchange drawn by the seller) against presentation of stipulated documents; and the buyer agrees to reimburse the issuing bank for payments made under the credit. For such reimbursement the stipulated documents, if they include a document of title such as bill of lading, constitute a security available to the issuing bank.”
See Akinsanya v. U.S.A. (1986) 4 N.W.L.R. (Pt.35) 273.
The type of contract referred to in above passage by Lord Diplock is the one used by the parties in this case. So that, the defendant/appellant would ordinarily have the duty to notify the sellers – KLOSA and STAAS or Deutsche bank (Sellers’ agent) of the opening of the letter of credit. The defendant/appellant would not ordinarily have the duty to notify either the sellers or the agent on a particular date. Judicial authorities would appear to suggest however that this should be done within a reasonable time as would not frustrate the commercial purpose of the transaction.
As I said earlier, the defendant/appellant pleaded that it notified Deutsche bank of the opening of the letter of credit by telex on 25-9-86. In the contract properly pleaded by the plaintiff, it would be immaterial if the defendant had sent the notification a week later than it did since it would still have thus fulfilled its contractual duty to open a letter of credit in favour of KLOSA and STAAS.
But the date 26-9-86 assumed decisive importance in this case on the pleadings and evidence only by reason of Section 15(2)(a) of the Second
Tier Foreign Exchange Market Decree 1986 published on 24-9-86 which provides:
“any transaction covered by a specific import licence issued in 1985 or 1986 for which a confirmed and irrevocable letter of credit was established on or before the last day immediately preceding the commencement of this Decree.”
The case of the plaintiff is that it was forced to purchase foreign exchange for the transaction with KLOSA & STAAS on the second-tier at a rate higher than it would have paid if the defendant/appellant had notified Deutsche bank of the letter of credit before 26-9-86.
The evidence before the lower court from P.W.3 is that the defendant/appellant did not open the letters of credit on 25-9-86. That being so the defendant/appellant who did not by the contract made on 19-9-86 have any obligation to notify the sellers or their agents on a particular date would appear not to be in breach of that contract and since the plaintiff had not pleaded any other agreement whereby the defendant/appellant had agreed to send a notification to Deutsche bank on or before 26-9-86, the mere fact that the defendant/appellant pleaded that it sent a notification on 25-9-86 would not bring into existence a contract not shown by plaintiff to exist.
This is the major misfortune of the plaintiff’s case. It is such that, one can say, that even at the close of pleadings, the plaintiff’s case had as conceived been destined to fail. The plaintiff would need to plead and prove this new contract (taking the pleaded contract of 19-9-86 as the old contract) in order to succeed. Not having pleaded it, the question of liability of the defendant/appellant could not arise.
The truth of the matter is that even if the defendant/appellant had seen the contents of the telex message exhibit 17, the defendant/appellant’s awareness of the situation mentioned in the exhibit is not the same thing as saying that the defendant/appellant was bound to accommodate that situation one way or the other. A banker must be expected to have at heart the interest of its customers. But a banker is not an insurer of the occurrence of an event in respect of which it has not bound itself by contract.
The judgment of my learned brother Uwaifo J.C.A. has dealt with the question of damages payable to the plaintiff in the event I am held wrong in my views as to the liability of the defendant/appellant. I fully endorse his views on the question of damages and adopt them as mine. I think the damages awarded can be faulted on the ground of their remoteness. Assuming that I had been able to hold the appellant liable I would not have awarded more than the difference between the cost of purchasing plaintiff/respondent’s goods on the SFEM rate and purchasing the same goods on the second tier rate.
I would allow this appeal with costs as in the lead judgment. I also agree that the counter-claim was wrongly dismissed. I make an order setting aside the order dismissing the counter-claim. It is ordered that the counter-claim be placed back on the cause list for normal trial.
Appeal Allowed
Re-trial ordered for counter-claim.
Appearances
Chief F.R.A. Williams, S.A.N. (with him, E. C. Ibe Esq. and T. E. Williams Esq.) For Appellant
AND
- N. Anyamene Esq., S.A.N. (with him, C. Emole Esq.) For Respondent
