A-G Bendel v. U.B.A (1986)

[1986] 4 .
Att.-Gen. Bendel v. U.B.A.
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1.
THE ATTORNEY-GENERAL, BENDEL STATE

2.
BENDEL NEWSPAPERS CORPORATION

3.
ETHIOPE PUBLISHING CORPORATION

V.

UNITED BANK FOR AFRICA LIMITED

SUPREME COURT OF NIGERIA

SC. 66/1985

MOHAMMED BELLO, J.S.C. (Presided)

KAYODE ESO, J.S.C.

MUHAMMADU LAWAL UWAIS, J.S.C.

DAHUNSI OLUGBEMI COKER, J.S.C. (Read the Lead Judgment)

ADOLPHUS GODWIN KARIBI-WHYTE, J.S.C.

SAIDU KAWU, J.S.C.

CHUKWUDIFU AKUNNE OPUTA. J.S.C.

THURSDAY, 10th JULY, 1986

BANKING – Documentary Credit – Duty of Issuing and Confirming Banks – Applicable principles.

BANKING – Documentary Credit – Failure of seller to conform with terms of credit – Right of Issuing Bank.

BANKING – Documentary Credit – Whether time is of the essence.

BANKING – Documentary Credit – Failure of seller to conform with terms of credit – Delay by buyer in rejecting documents of payment – Effect thereof.

BANKING – Irrevocable Confirmed Letter of Credit – Effect thereof – Uniform Customs and Practice of Documentary Credits.

CONTRACT – Exemption Clause – Failure of party to observe terms of contract – Whether disentitled to exemption clause.

CONTRACT – Enforceability of contracts – Parties in pari delicto – Effect thereof.

EVIDENCE – Documentary evidence – Effect on proof.

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Issues:

1.
Whether in a documentary credit a confirming bank has a duty to ensure that the contents of documents presented by the buyer are true and correct and that the seller has complied therewith.

2.
Whether an issuing bank is bound to reimburse a confirming bank that has paid the seller/beneficiary upon presentation of documents that did not conform with the terms of the credit.

3.
What is the effect of delay on the part of the buyer on his right to reject documents of payment where the payment was effected upon presentation by the seller of documents that did not conform with the terms of the credit?

Facts:

The appellants were the successors of the Midwest Mass Communication Corporation, (hereinafter referred to as M.M.C.C.) a statutory Corporation and original party to the transaction leading to these proceedings.

The M.M.C.C agreed with one Wilhelm Stiber to buy an Aircraft for the sum of 2,250,000 Deutsche Mark. Payment was to be against confirmed irrevocable Letter of Credit as declared in the purchase agreement.

The M.M.C.C. approached the respondents to open an irrevocable Letter of Credit in favour of Stiber. The application to that effect was accompanied by a cheque for the Naira equivalent of the purchase price; C&F.

The aircraft was to arrive at Benin Airport not later than 30-6-75. The application for the establishment of the Letter of Credit contained a clause which read thus:

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

The respondent opened the Letter of Credit in favour of Stiber and a copy of it was forwarded to the M.M.C.C. The correspondent Bank was the B .H.F. Bank in West Germany. The Letter of Credit stated that the Aircraft was to arrive Benin Airport latest 30th June, 1975 and was valid in West Germany until 15th July, 1975. At the back of the Letter of Credit is an endorsement:

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

The Aircraft did not arrive at Benin Airport on 30th June, 1975 and on 7th July 1975, the respondents wrote to the M.M.C.C. stating:

“We advise that the shipment date of the above credit expired on 30th June, 1975. Kindly instruct us further.”

Upon receipt of the letter, the M.M.C.C. discovered that the Aircraft subject- matter of the contract and Letter of Credit had been sold. The M.M.C.C. then, on 11th July, 1975 wrote to the respondents to suspend payment of the purchase price pending a new beneficiary. The letter did not however disclose that the Aircraft had been sold to someone else. The respondents received the letter on the same day 11th July 1975, but the Benin City Branch only communicated this to the Head Office on 17th July, 1975. Meanwhile, the beneficiary – Stiber

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had been paid by the confirming Bank two days earlier – 15th July, 1975, which was the last day of the validity of the credit and the payment was made against presentation of apparently stipulated documents. The trial court and the Court of Appeal however found that the documents did not conform to the stipulations in the Letter of Credit. The Confirming Bank informed the respondents of the payment immediately after it was made on 15th July, 1975. The cable message was received by the respondents in Lagos on 16th July, 1975 but the documents relating to the payment were delivered to the M.M.C.C. by the Benin Branch of the respondents on 31st July, 1975. The M.M.C.C. took no action in respect of the matter until February, 1978 when the present suit was instituted. The claims, inter alia, were for special damages for fraudulent misrepresentations, refund of the purchase price together with interests; damages for breach of contract and recession of the Contract.

The trial Judge found for the plaintiffs whereupon the defendant appealed to the Court of Appeal. The appeal was allowed. Being dissatisfied with the judgment of the Court of Appeal, the plaintiffs have appealed to the Supreme Court.

Held (Unanimously Dismissing the Appeal):

1.
The confirming bank is only obliged to examine the documents with care to see that on their face they appear to be what the buyer specified.

2.
When, however, documents that do not conform to the credit requirements are accepted by the buyer the bank is discharged from responsibility to him and he is relegated to his remedies against the seller.

3.
In the instant case, it is established that the correspondent bank had failed to comply with the terms and conditions stipulated in the Letter of Credit.

4.
In a Documentary Credit, the confirming bank need not have personal knowledge of the departure of the goods in this case, the air-craft.

5.
The right to re-imbursement by the confirming bank is only on presentation of apparently conforming documents.

6.
A confirming bank is entitled to reimbursement only on the condition that it complied with the mandate of the mandatory.

7.
Since the confirming bank paid on documents which did not conform to the requirements of the Letter of Credit, the issuing bank, the respondent in this case, had the right to reject the documents provided it acted promptly and did not act in such a manner indicative of ratification.

8.
As between confirming bank and issuing bank and as between issuing bank and the buyer, the contractual duty of each bank under a confirmed irrevocable credit is to examine with reasonable care all documents presented in order to ascertain that they appear on their face to be in accordance with the terms and conditions of the credit, and if they do so appear, to pay to the seller/beneficiary by whom the documents have been presented the sum stipulated by the credit, or to accept

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or negotiate without recourse to drawer drafts drawn by the seller/beneficiary if the credit so provides.

9.
Confirming banks and issuing banks assume no liability or responsibility to one another or to the buyer for the form, sufficiency, accuracy, genuineness, falsification or legal effect of any documents.

10.
Where the confirming bank paid the beneficiary against non-conforming documents and the buyer does not adopt the transaction on account of the breach of mandate, in that event the issuing bank cannot debit the buyer with the price paid.

11.
In the instant case, the respondents had a duty to repudiate their contract with the confirming bank and to refuse to reimburse it.

12.
It is not the law that before one can claim reliance on the exemption clause of contract one must first comply diligently and honestly with the terms and conditions of the contract.

13.
The exemption clause contained in the appellants’ application for the establishment of the Letter of Credit cannot avail the respondent in that the loss in this case was not beyond the control of the respondent for it could and was at liberty to refuse to reimburse the confirming bank – that was not a matter beyond its control.

14.
Undue delay by a party to a credit in the exercise of his right to reject constitutes ratification or waiver of any irregularity committed by the defaulting party. Undue delay may also amount to estoppel.

15.
In transactions of this nature, time is of the essence. The buyer must at once accept or reject documents tendered to him. He is not allowed to delay.

16.
Per OPUTA, J.S.C.:

“The Law Merchant does not take account of the precepts and obligations of the sermon on the Mount. No. Mercantile genius consists mainly in knowing whom to trust and with whom to deal. Fraud and forgery are not the prior pre-occupations of the Law Merchant, rather trust is the basis of commercial intercourse. If this trust is betrayed, then someone is bound to suffer. The question is who will suffer or bear the loss?”

17.
The date on which the aircraft was to arrive at Benin Airport, that is, 30/6/75, was an essential term of the credit. The confirming bank should have therefore been put on notice and should have demanded documentary evidence showing that the Aircraft described in the Letter of Credit, left Germany for Benin on 30/6/75 before paying the seller.

18.
An irrevocable confirmed documentary credit is a definite under-taking of the issuing bank to pay provided that the conditions of the credit are complied with.

19.
Under the Uniform Customs and Practice for Documentary Credits, once an irrevocable credit is established as regards

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a beneficiary it cannot be modified or revoked without the consent of the said beneficiary. The confirming bank is not usually concerned with the performance of the underlying contract of sale between the buyer and the seller.

20.
Although in documentary credit parties deal in documents and not in goods yet where the credit itself makes the performance of the contract of sale (or documentary proof of it) a condition for payment to the seller more obligation is imposed both on the issuing bank and on the confirming bank.

21.
If parties keep documents which are sent them in consequence of some mandate which they themselves have issued, and keep them for an unreasonable time that may amount to ratification of what had been done within their mandate.

22.
A document tendered in court is the best proof of the contents of such document and no oral evidence will be allowed to discredit or contradict the contents thereof except in cases where fraud is pleaded.

23.
Where the parties are in pari delicto, it is safer to let the loss lie where it falls, in pari delicto melior est conditio defendantis where the parties are equally at fault, the situation of the defendant is the more favourable.

24.
In the instant case, while the respondent would have been found liable for breach of contract or negligence, the appellants’ delay and inaction in rejecting the payment to the seller for a period of thirty one months after the receipt of the documents defeats their claims. They have slept over their right.

Nigerian Case Referred to in the Judgment:

Akinsanya v. U.BA. Ltd. (1986) 4 . (Pt.35) 273

Foreign Cases Referred to in the Judgment:

Bank Melli Iran v. Barclays Bank (1951) 2 LL. Rep. 367 at 378.

Panchaud Freres SA.Et. General, Grain Co. (1970) 1 LL. Rep. 53 (CA)

Rayner v. Hambros Bank (1943) 74 LL. Rep. 10 (C.A.)

United City Merchants (Investments) Ltd. v. Glass Fibres and Equipments (1982) A.C. 168

United City Merchants (Investments) Ltd. v. Royal Bank of Canada (1983) P.C. 168

Westminster Bank Ltd. v. Banca Nazionale di Credito (1928) 31 L.I.L. Rep 306

Foreign Statute Refereed to In the Judgment:

Uniform Customs Practice, Art 8, Art 12.

Appeal:

This was an appeal against the judgment of the Court of Appeal which allowed the appeal against the trial Judge’s judgment. The Supreme Court dismissed the appeal.

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History of the Case:

Supreme Court:

Appeal No: SC.66/1985

Date of Judgment: Thursday 10th July, 1986

Names of Justices that sat on the appeal: Muhammed Bello, J.S.C. (Presided); Kayode Eso, J.S.C.; Muhammadu Lawal Uwais, J.S.C.; Dahunsi Olugbemi Coker J.S.C. (Read the Lead Judgment); Adoiphus Godwin Karibi-Whyte, J.S.C.; Saidu Kawu, J.S.C.; Chukwudifu Akunne Oputa, J.S.C.

Names of Counsel: T. A. Akomolafe-Wilson (Mrs.) Principal State Counsel – for the Appellants

Chief F. R. A. Williams, SAN (with him, T. E. Williams) – for the Respondents

Court of Appeal:

Division of the Court of Appeal from which the appeal was brought: Court of Appeal, Benin

Names of Justices that sat on the appeal: Sunday James Ete, J.C.A. (Presided); Rowland Obiora Okagbue, J.C.A. (Read the Lead Judgment); Abai Ikwechegh, J.C.A.

Appeal No.: FCA/B/109/81

Date of judgment: Tuesday, 10th July, 1984

Names of Counsel: Chief F. R. A. Williams (with him, T. E. Williams) – for Appellant

Akhigbe S. G. (with him, Osakue D.L.D., (Mrs.) V. E. Omoike, (Mrs.), C. I. Avielele and Mr. O. Ate -for Respondents

High Court:

Name of the High Court: High Court of Justice, Benin City.

Name of the Judge: V. E. Ovie-Whiskey, C.J.

Suit No.: B/39/78

Date of Decision: Tuesday, 20th March, 1979

Names of Counsel: Mr. Kuyatsemi (Solicitor-Gen. Bendel State)

Mr. Odigie (with him, Acting Senior State Counsel Grade 1) – for the plaintiffs

Mr. Victor Omage – for the defendants

Counsel:

T. A. Akomolafe-Wilson (Mrs.) Principal State Counsel – for the Appellants

Chief F. R. A. Williams, SAN (with him T. E. Williams) – for the respondents

COKER, J.S.C. (Delivering the Lead Judgment): The parties in this appeal are customers and Banker. The appellants were the plaintiffs in the High Court of Bendel State, while the respondent, the defendants. The three plaintiffs are:

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Att.-Gen. Bendel v. U.B.A.
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(1)
The Attorney-General of Bendel State, (as the legal representative of Bendel State)

(2)
Bendel Newspapers Corporation and

(3)
Ethiope Publishing Corporation

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

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

The M.M.C.C. agreed with one Wilhelm Stiber to buy an Aircraft Per a pro-forma invoice dated 25/3/75 and 26, March 1975. The invoice was addressed to the Government of Midwestern State, Benin City, Midwestern Nigeria. The invoice was received in evidence and marked exhibit 1 and reads:

” 1. Aircraft FOKKER F. 27A

        Serial No. 108

Like purchase Agreement on March 25, 1975

                 Price                                                                                             2,250,000

                 Coats C & F Benin City                                                                    50,000

                Total                                                                                              2,300,000

                Less Special Discount                                                                        50,000

                                                                                                                       2,250,000

                Wilhelm Stiber KG.

                    "                "

                    "                "

7313 WEI LHEIM – TEC (Sgd) Wilhelm Stiber.

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

At the back is a minute which reads:

“DF鈥�

Please see o’leaf

2.
Open a Letter of Credit in favour of Stiber through the Central Bank for the plane.

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

14/5.”

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

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

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Aircraft Fokker F.27″. The letter was admitted and marked “Exhibit 5”

Another application (undated) for Establishment of “Confirmed Documentary Credit by Cable” was also received in evidence and marked Exh.

1.
It stated the name of Customer as Midwest Mass Communication Coiporation and addressed to the United Bank for Africa, Ltd. Benin City Branch requesting it to open an irrevocable Documentary Credit in favour of Wilhelm Stiber K.G. 7315 Wilhelm-Teck for two million two hundred and fifty thousand Deutshe Mark C & F “accompanied by the following documents:

1.
Combined Certificate of origin, Value, and invoice “Form C”.

2.
Certificate of Origin.

3.
Insurance Policy or Certificate covering All risks etc.

4.
Full set of clean “on board” Bills of Lading etc. covering of 30/6/75.

Aircraft Fokker 27 A serial No. 108 from any German Airport to Benin City.” and that the credit is to be made valid until 15/7/75.

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

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

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

“Irrevocable Documentary Credit in favour of Stiber for the sum of Two Million Two hundred and fifty Thousand Deutsche Mark C & F

accompanied by the following documents:

1.
Commercial Invoice

2.
Certificate of Origin

     3.           Insurance covered by Consignee

4.
Combined Certificate of Odin, Value and Invoice

    5.            Air worthiness Certificate Covering Despatch latest 30 June

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

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

At the back of the letter of credit is an endorsement

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

The letter of credit was admitted in evidence and marked Exhibit 8. However, by a letter dated 7th July 1975 (Exhibit 15) was addressed to the Finance

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Director, Midwest Mass Communication Corporation, Benin City, by the defendant, it reads:

“OUR LC. BN. 29/75/1100 for DM.2, 250,000 favour WILHELM STIBER K.G., W. I. Germany

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

Kindly instruct us further.

        Yours faithfully,

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

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

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

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

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

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

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

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

The crux of the plaintiffs’ case was that the defendant was bound to comply strictly with the mandate and that payment by the B.H.F. bank to the beneficiary against presentation of documents (Exhibits 20-20E) which did not conform to the letter of credit should have been rejected in that the defendant knew or ought

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to have known that the aircraft had not arrived Benin City Oil 30th June 1975 as stipulated in the Letter of Credit. They contend that the defendant was not obliged in law to re-imburse the B .H.F. bank in West Germany, since the payment to Stiber was not in conformity with the terms and conditions stated in the Letter of Credit. They contend that the duty to re-imburse the confirming bank, that is B.H.F. Bank, was only if it paid in strict compliance with the mandate as contained in the Letter of Credit. It was their case that the re-imbursement was collusive and fraudulent, particularly when the defendant was aware that the beneficiary of the letter had committed breach of the contract and in that the documents presented by him were known by the defendant to be forgeries.

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

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

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

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

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

He however went on to say, and I agree with him, that “When documents that do not conform to the credit requirements are accepted by the buyer the bank is discharged from responsibility to him and he is relegated to his remedies against the seller.

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The learned justice held that the documents (Exhibits 20-20E) were tendered to the plaintiffs (i.e. P.W.2 on 31/7/75) and that the plaintiffs did not reject the documents or raise any query till the Odje Commission dug up the matter, about a year later. He went on to say that the delay in this case was inexcusable as an examination of documents involve none of the complexities that may be involved in an inspection of merchandise to verify quantity and quality.”

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

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

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

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

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

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

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

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

1.
Was it established that the correspondent bank had failed to comply with any of the terms and conditions stipulated in the letter of credit?

2.
Was there a duty on the respondents to have repudiated their contract with the correspondeng (sic) bank and to have refused to reimburse it?

3.
Whether, having regard to the terms of the contract between the appellants and the respondents, the respondents are liable to compensate the appellants for their loss arising from the failure of the seller to supply or deliver the goods sold.”

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

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

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

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

“It has, so far as I know, never been disputed that as between confirming bank and issuing bank and as between issuing bank and the buyer the contractual duty of each bank under a confirmed irrevocable credit is to examine with reasonable care all documents presented in order to ascertain that they appear on their face to be in accordance with the terms and conditions of the credit, and, if they do so appear, to pay to the seller/ beneficiary by whom the documents have been presented the sum stipulated by the credit, or to accept or negotiate without recourse to drawer drafts drawn by the seller/beneficiary if the credit so provides. It is so stated in the latest edition of the Uniform Customs. It is equally clear law, and is so provided by article of the Uniform Customs, that confirming banks and issuing banks assume no liability or responsibility to one another or to the buyer “for the form, sufficiency, accuracy, genuineness, falsification or legal effect of any documents.”

[1986] 4 .
Att.-Gen. Bendel v. U.B.A.
(COKER, J.S.C. )
559

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This is well illustrated by the Privy Council case of Gian Sigh & Co. Ltd. v. Banque de I’lndochine (1974) 1 W.L.R. 1234, where the customer was held liable to reimburse the issuing bank for honouring a documentary credit upon presentation of an apparently conforming document which was an ingenious forgery, a fact that the bank had not been negligent in failing to detect upon examination of the document.”

Therefore, where the correspondent bank, B.H.F. Bank, in the instant case, the beneficiary against non-conforming bank and the buyer does not adopt the transaction, on account of the breach of mandate, in that event the issuing bank cannot debit the buyer with the price paid. See Goode Commercial Law pages 668 and 671.1 will answer the second question in the affirmative. The defendant was perfectly entitled to refuse reimbursement of the purchase price paid to the seller, Stiber, by B.H.F. Bank. Chief Williams has submitted that the trial court was in error in finding that the beneficiary Stiber was paid on the 11th July 1975 whereas payment was on 15/7/75.1 agree that a careful examination of the documents and the evidence of Is1 P.W. show clearly that the documents were presented and paid on 15/7/75 and not on 11/7/75. And that the credit remained valid until that day.

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

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

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

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

Not a word was said on this ground by the learned Principal State Counsel before the court. I am unable to find any support for this proposition.

I have already stated the view of the court below of failure of the plaintiffs to reject the documents and the delay of about 31 months after plaintiffs received the documents on 31/7/75 until February 1978, when this action was commenced. To say the least, the delay is inexcusable.

I do not consider Article 12 of Union Customs pertinent in this regard as submitted by Chief Williams and the court below. The fact is that the defendant, while not capable of stopping the correspondent bank from the wrongful payment to the beneficiary, had the right not to re-imburse the B.H.F. Bank for the reason that the documents did not conform. So, in my

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view, Article 12 Universal Customs is not relevant. Also ineffective is the provision contained in exhibit 4. It states:

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

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

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

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

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

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

“COVERING DESPATCH Latest 30 June 75 OF ONE AIRCRAFT FOKKER F27A. SERIAL NO. 108, (as per Proforma Invoice dated 26 March 75) from any German Airport to Benin City Airport, Nigeria.”

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

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

[1986] 4 .
Att.-Gen. Bendel v. U.B.A.
(OPUTA, J.S.C )
561

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

ESO, J.S.C.: I have had a preview of the judgment which has just been delivered by my learned brother Coker J.S.C. and I am in complete agreement. I adopt my reasoning in the case A.M.O. Akinsanya v. U.S.A. Suit SC.95/1 985 delivered this morning in regard to the general law on international credit.

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

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

UWAIS, J.SC. I agree with the judgment read by my learned brother Coker, J.S.C. and the conclusion therein that this appeal should be dismissed. The appeal is hereby dismissed with N300.00 costs to the respondent.

KARIBI-WHYTE, J.S.C.: I have read the judgment of my learned brother Coker, J.S.C. in this appeal, I entirely agree with his conclusion that this appeal be dismissed. My learned brother Coker J.S.C. has dealt exhaustively with the facts and the applicable law to which I subscribe. I have also had the privilege of reading in advance the judgment of Oputa J.S.C. in which he considered the question whether appellants have not by their behaviour been estopped from bringing any claim against the respondents. I am also in entire agreement with his conclusion that they are so estopped.

I therefore do not consider it necessary to express any further opinion in this appeal since my opinion agrees with the reasoning and conclusions of my learned brothers. I adopt them as mine.

I also adopt all consequential orders made by my learned brother Coker, J.S.C. in his judgment.

KAWU, J.S.C.: I entirely- agree with the judgment of my brother, Coker, J.S.C., in this appeal, the draft of which I have had the privilege of reading.

In the result, I dismiss the appeal and affirm the judgment of the Court of Appeal with costs to the respondent against the appellants, assessed at N300.00.

OPUTA, J.S.C.: The plaintiffs’ claims against the defendant as set out fully in paragraph 26 of their statement of claim are as follows:

“(a) Proposed cost of Aircraft Fokker

              F.27A Serial No. 108, interest,

             commission charges, rates and

expenses  ..........................................................................................N613,368.79

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(b) Excess payment or balance outstanding

        to MMCC/Plaintiffs'

credit approximately ………………………………………………………………N45,361.21

Total amount paid by cheque on

or about 27/5/75 ………………………………………………………………….N658,930.00

The facts of the case are in the main not in dispute and those facts have been clearly and fully set out in the lead judgment of my learned brother Coker, J.S.C. with which I am in complete agreement. I only want to emphasise two points namely:

1.
That we are in this case dealing with an Irrevocable Credit.

2.
Whether or not the behaviour of the plaintiffs/appellants in the entire transaction had not shut all the available doors open to them to make any valid claim against the defendant/respondent.

One does not need a magnifying glass to see that Stiber, with whom the appellants decided to deal, was an entirely dishonest man, a rogue, who purported to sell to the plaintiffs an Aircraft that had already been sold by its rightful and legitimate owners. The first question that naturally follows is – Why did the plaintiffs choose Stiber of all people? That question was not answered directly. But from all the surrounding circumstances the latin maxim pares cum paribus facilime congrigantur (birds of the same feather flock together) seems to be at least a good guess at the answer.

The Law Merchant does not take account of the precepts and obligations of the Sermon on the Mount. No. Mercantile genius consists mainly in knowing whom to trust and with whom to deal. Fraud and forgery are not the prior pre-occupations of the Law Merchant, rather trust is the basis of commercial intercourse. If this trust is betrayed, then someone is bound to suffer. The question is who will suffer or bear the loss? There are four distinct though inter-related contracts involved in this case, namely:

1.
The main and principal contract of the sale of an Aircraft between the plaintiffs and Stiber.

2.
Then the subsidiary contract between the plaintiffs and the defendant/bank (the Issuing Bank).

3.
Then the third contract between the defendant/Issuing Bank and the Confirming or Correspondent Bank in Germany – the Berliner Handels Gesskschaft Frankfurther Bank (B.H.F. for short).

4.
Finally there is the contract between the Confirming Bank (B .H.F.) and the Seller, Mr. Stiber.

There is no doubt that the plaintiffs’ money totalling N658,930.00 had been paid to Stiber who issued his receipt tendered as EX .20. It is conceded on all sides that no aircraft was in fact delivered by Stiber before or after he got payment as per EX.20. Who is now to bear the loss?

To answer this question one had to get at the root of the system of documentary credit. The purpose essentially is the protection of the seller not the buyer. Thus the contract, from that angle is so one-sided that one wonders if it can ever be written on both sides of the same paper. The purpose for which the system of confirmed and irrevocable documentary credit (like EX. 4 in this appeal) had been developed in international trade is to give the Seller (here unfortunately Stiber) an assured right to be

[1986] 4 .
Att.-Gen. Bendel v. U.B.A.
(OPUTA, J.S.C )
563

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paid before he parts with control of his good, see United City Merchants (Investments) Ltd. v. Royal Bank of Canada (1983) P.C. 168 at p. 183. The unfortunate thing in this case is that Stiber had no Aircraft to sell and none to part with. But he was paid by the confirming Bank – B.H.F. It is true that according to the approved international practice embodied also in the Uniform Custom and Practice For Documentary Credits “all parties concerned deal in documents and not in goods (Article 8)”. But having said that, one must also quickly add that banks (both issuing and confirming Banks) must examine all documents with reasonable care to ascertain that they appear on their face to be in accordance with the terms of the credit. They must appear to conform.

The confirming Bank (B.H.F.) had EX. 8, an Irrevocable Confirmed Documentary Credit. Exhibit 8 on its face shows that the Aircraft Fokker F.27A Serial No. 108 was to leave “any German Airport to Benin City Airport on 30/6/75”. This was an essential term of the Credit. The Confirming Bank should have therefore been put on notice and should have demanded documentary evidence showing that the Aircraft described in the Letter of Credit, EX. 8 left Germany for Benin on 30/6/75 before paying Stiber on EX.20. This was not insisted on. In fact from the evidence before the court, EX.20, the Receipt signed by Stiber, was dated IP1′ July 1975 while the documents supposed to have been presented to the Confirming bank and on which the Bank was to pay were in fact presented on 15th July 1975. If this is not fraud, well I do not know what is. Chief Williams, S.A.N. in his Brief and oral argument urged the Court to hold “that EX.20 is not conclusive evidence of the date of payment”. Chief Williams however did not dispute that EX.20 is a receipt and that it bore the date 11th July 1975″ as date of payment. A document tendered in court is the best proof of the contents of such document and no oral evidence will be allowed to discredit or contradict the contents thereof except in cases where fraud is pleaded. There was fraud here but it will not be in the interest of the defendant/ bank or its agent the Confirming Bank (B.H.F.) to plead their own fraud. On the totality of the evidence, one is bound to come to the conclusion that the Confirming Bank (the B.H.F.) either fraudulently paid Stiber on 11th July 1975 without any conforming documents or that it was grossly negligent in paying Stiber without any documentary evidence that the Aircraft left Germany for Benin City on 30th June 1975, a date which appeared conspicuously on the face of the Letter of Credit, EX. 8.

Now since we are considering the liability of the defendant/bank, the Issuing Bank, it is essential to look again at EX. 8 the Documentary Credit. Both parties agree that EX. 8 is an irrevocable confirmed documentary credit. This means that it is a definite undertaking of the issuing bank here the defendant/bank, to pay, provided that the conditions of the credit are complied with. Under the Uniform Customs And Practice For Documentary Credits, once an irrevocable credit is established as regards a beneficiary, like Stiber in the case on appeal, it cannot be modified or revoked without the consent of the said beneficiary. The Confirming Bank is not usually concerned with the performance of the underlying contract of sale between the buyer and the seller. So that in this case even if the B.H.F. paid Stiber after knowledge that Stiber had committed a breach of his contract with the plaintiff/appellant the defendant/bank will still be obliged to reimburse

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the B.H.F. (the Confirming bank) under the terms of the irrevocable Letter of Credit EX. 4 and EX. 8. This is so because by EX. 8, the Letter of Credit, the defendant as Issuing Bank is left without a right of retraction or other means of avoiding its obligation. Since by EX. 8 the defendant/bank had irrevocably committed the specified dollar value – the amount stated on EX. 8 to honour a payment generated upon the happening of a specific event – the presentation of documents that appear to conform with the terms of the Credit. (Of course under Article 8(c)) of the Uniform Customs if the documents do not conform the defendant/bank can stop payment or refuse to reimburse the Confirming bank). This is of course the general rule. There are exceptions to this rule. One of such exceptions is if the performance is a condition of the credit. In this case the Letter of Credit itself specifically provided for the Aircraft to leave any Airport in Germany to Benin City Airport by 30/6/75. There was therefore in the Letter of Credit EX. 8 clear reference and clear involvement of the defendant/bank per EX. 8 and the B.H.F. Confirming bank per EX. 8 in the performance of the essential and underlying contract of sale between the plaintiffs and Stiber. In fact the defendant/bank seemed to have acknowledged this fact by its Letter of 7lh July 1975 namely

“We advise that the shipment date of the above credit expired on 30th June 1975. Kindly instruct us further”.

The above letter was tendered as EX. 15. The appellants replied on llth July 1975 asking the defendant/bank to:

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

This letter from the appellants was tendered as Ext 16. Although.in documentary credit parties deal in documents and not in goods yet still where the credit itself makes the performance of the contract of sale (or documentary proof of it) a condition of payment to the seller more obligation is imposed both on the defendant/bank and on the B.H.F. confirming bank. Both Banks failed to carry out the stipulations required by the Credit EX. 4 and EX. 8.

Normally such failure by the defendant/bank would have made it liable to the plaintiffs. But this case was far from being normal. Firstly it was the defendant/ bank in EX.15 that had to remind the appellants that “June 30th” has come and gone and yet no Aircraft had arrived Benin Airport. One should have thought that it would have been the other way round. Secondly when the documents on which the irregular or fraudulent payment was made to Stiber were received the appellant had a duty to immediately accept or reject in unequivocal terms those documents. They did not do that. They conveniently forgot about their Aircraft deal with Stiber for two years and 7 months. The matter should have been buried and forgotten but for the Odje Commission of Inquiry. The big question now is – Can the appellants now complain? I seriously doubt it. The plaintiff now appellants by their conduct will now be deemed caught by the equitable doctrine of Estoppel in pais. They accepted all the documents on which the irregular or fraudulent payment was made to Stiber. They did not complain. It was their duty to reject those documents immediately. Had they done this perhaps they may be heard to complain against the defendant/bank. But having waited all these years, they have put the defendant/bank in a terribly awkward and uncomfortable

[1986] 4 .
Att.-Gen. Bendel v. U.B.A.
(OPUTA, J.S.C )
565

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situation having regard to the fact that EX. 8 on which the Confirming Bank paid in 1975 was an irrevocable letter of credit. By this atrocious delay or rather by this non-rejection of the documents, the defendant/bank cannot now recover anything from the German Confirming Bank. Why should the defendant/bank be made to suffer from the nonchalant and rather casual way the plaintiffs/ appellants behaved in this whole transaction? But for the Odje Commission of Inquiry nobody might have heard about this case. Was there a conspiracy of silence between those who ordered the aircraft and Stiber? I do not know. But what I do know is that it will now be inequitable to call on the defendant/bank to bear the loss occasioned:

i.
By the plaintiffs choosing to deal with Stiber.

ii.
By the plaintiffs not acting expeditiously when on 30/6/75 no aircraft arrived at Benin Airport.

iii.
By the plaintiffs not rejecting all the documents on which the irregular (or even fraudulent) payment was made to Stiber.”

I agree with Roche, J. in Westminster Bank Ltd. v. Banco Nazionale di Credito (1928) 31 L.I.L. Rep 306 that:

“If parties keep documents which are sent them … in consequence of some mandate which they themselves have issued, and keep them for an unreasonable time that may amount to ratification of what had been done within their mandate.”

The seeming casual behaviour of the appellants, their inaction for over one year to complain that Stiber was paid irregularly -all these will, and should, from any dispassionate angle, amount to ratification of what had been done. The appellants cannot now turn round and sue the defendant/bank.

In transactions of this nature, time is of the essence. The buyer must at once accept or reject documents tendered to him. He is not allowed to delay. It follows that the appellants in this case have adopted the irregular payment made to Stiber. The appellants’ inaction has greatly prejudiced the position of both the defendant Issuing Bank and the German Confirming Bank vis-a-vis Stiber. When the parties are in pad delicto, it is safer to let the loss lie where it falls. Also in pari delicto melior est conditio defendantis – where the parties are equally at fault, the situation of the defendant is the more favourable.

In the final result, and for all the reasons given above, and for the fuller reasons given in the lead judgment of my learned brother Coker, J.S.C. which I now adopt as mine, this appeal ought to be dismissed and it is hereby dismissed. I adopt all the consequential orders made in the lead judgment.

Appeal dismissed.

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