UBN HELD LIABLE FOR FAILURE TO REMIT FOREIGN EXCHANGE: LESSONS

The Story

In 1982, Omni Products (Nig.) Ltd. (“Omni Products”) and Amechi Christopher E’Chukwu (“The Appellants”) applied to and obtained from the Federal Ministry of Finance approvals for the remittance of foreign exchange to their foreign principals, Bekaert International Trade, Belgium. Union Bank of Nigeria Plc (“UBN” or “The Respondent”) was aware of the approvals.

The Appellants issued cheques to UBN to enable UBN make the foreign exchange remittances as approved. UBN was unable to make all the remittances on behalf of the Appellants as mutually agreed. Specifically, UBN failed to remit the sum of £13,603.50 for which the Appellants had paid the equivalent of about N15,000. You read it right. N15,000 for £13,603.50!

The Appellants were aggrieved. Their complaint was that UBN was negligent and lackadaisical in carrying out their instructions to make foreign remittances to their foreign principals. The Appellants alleged that in consequence, Omni Products lost the sole agency of the Belgium principal. Moreover, UBN had lost all the Appellants’ documents.

The Appellants then commenced an action in court against UBN bothering on combination of breach of contract and negligence. For these, they claimed the principal money involved, interests on the principal sum and general damages.

In reaction, UBN denied liability, contending that it was a mere conduit pipe and that all foreign exchange transactions at the relevant time were vested in the Central Bank of Nigeria (CBN). It further contended that it had done all that was required of it by completing the necessary documentation and forwarding same to CBN. It pleaded that it was the CBN that failed to release the sum of £13,603.50 for which the Appellants had paid the N15,000.

At the conclusion of hearing, the trial Court partly found in favour of the Appellants. UBN appealed to the Court of Appeal. The Appellants also cross-appealed because they were not satisfied with some aspects of the Judgment which was in their favour. The Court of Appeal dismissed the appeal of UBN on 27 March 2006 and partly allowed the cross-appeal but refused the claim for general damages on the ground that same amounted to double compensation. Note that the trial Court had awarded N500,000 to the Appellants as general damages. The Court of Appeal refused to confirm the award in view of the fact that the Appellants already got judgment for a refund of the deposit and interest on it.

In effect, the Court of Appeal ordered UBN to pay the Appellants the sum of £13,603.50 or N1,741,124 (Naira equivalent as at 1995 when the action was filed) being the value of the sum of N15,000 deposited with UBN in December 1982 for remittance to the Belgium company. The Court also awarded interest on the sum of £13,603.50 or N1,741,124.

UBN is bound to pay damages

Still aggrieved, the Appellants appealed to the Supreme Court. On 5 June 2020, the Supreme Court allowed the appeal. The apex Court held that the Appellants were entitled to interest on the deposit at the applicable interest rate as at the date of Judgment by the trial Court, 27 March 2003. Eko, JSC reasoned that since banks charge compound interest as a custom, “It is, therefore, reasonable by this same custom for the Respondent bank, in equity, to be made to pay interest on money it “had and received” for a purpose not carried out.” The apex Court also held that a customer of a bank like the Appellants is entitled to claim interest as of right on the basis of a breach of fiduciary duty owed him by a bank. 

The Supreme Court overruled the position of the Court of Appeal refusing the grant of general damages on grounds of double compensation. The Court restored the N500,000 awarded by the trial Court as general damages. Kekere-Ekun, JSC explained (at page 115 of the report):

I agree with learned Counsel for the Appellants that the claims for general damages is separate and distinct from the claims for a refund of the initial deposit and accrued interest thereon. Those claims are for the Appellants being kept out of their funds, which would have earned interest if it had been returned to them and invested. The claim for general damages was for the loss flowing naturally from the Respondent’s failure to remit the money to their agent, who consequently lost confidence in them and terminated their relationship.

The Supreme Court was right in its conclusion. It is left for UBN to proceed against the CBN if it felt strongly about its defence in the suit that it was the CBN that exposed the bank to liability by failing to release the sum of £13,603.50 in question.

Omni Products (Nig.) Ltd. v. UBN Plc [2021] 10 NWLR (Pt. 1783) 92 SC



Stephen Azubuike
Author: Stephen Azubuike
Stephen is a lawyer with expertise in Commercial Dispute Resolution and Technology Law practice. He is a Partner at Infusion Lawyers. He has successfully argued cases from the High Courts of various jurisdictions to the Appellate Courts on behalf of financial institutions, other corporate bodies and multinationals. He has worked with a number of startup tech companies. He tweets @siazubuike.

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