Scribd
Upload
190 views5 pages

Trendtex Trading Corporation V. Central Rank of Nigeria

Trendtex Trading Corporation sued the Central Bank of Nigeria for payment under a letter of credit used to finance Trendtex's shipment of cement to Nigeria. Trendtex shipped six vessels of cement to Nigeria but was only paid for the first four shipments. The Central Bank instructed the Midland Bank to stop payment for demurrage and the last two shipments due to port congestion in Nigeria. Trendtex claimed damages for unpaid demurrage and the last two shipments. The Central Bank argued it had sovereign immunity from the suit but the court retained $14 million pending appeal of its decision to set aside the writ against the Central Bank.

Uploaded by

dianne rosales
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
190 views5 pages

Trendtex Trading Corporation V. Central Rank of Nigeria

Trendtex Trading Corporation sued the Central Bank of Nigeria for payment under a letter of credit used to finance Trendtex's shipment of cement to Nigeria. Trendtex shipped six vessels of cement to Nigeria but was only paid for the first four shipments. The Central Bank instructed the Midland Bank to stop payment for demurrage and the last two shipments due to port congestion in Nigeria. Trendtex claimed damages for unpaid demurrage and the last two shipments. The Central Bank argued it had sovereign immunity from the suit but the court retained $14 million pending appeal of its decision to set aside the writ against the Central Bank.

Uploaded by

dianne rosales
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 5

TRENDTEX TRADING CORPORATION v.

CENTRAL RANK OF
NIGERIA

The story starts with a contract which was made on April 25, 1975,
before the crisis broke. The Ministry of Defence in Nigeria agreed to
buy 240,000 tons of Portland cement from an English company, the
Pan-African Export and Import Co. Ltd. The price was U.S. $60.00
per ton c.i.f. Lagos/Apapa ports. Shipment at the rate of 20,000
tons a month, plus or minus 10 per cent., all to be delivered not
later than August 15, 1976.

In pursuance of that contract the Ministry of Defence instructed the


Central Bank of Nigeria to open a letter of credit in favour of Pan-
African to the extent of U.S. $14,400,000 to be valid for payment
against shipping documents conformable to the contract of
purchase.

[*361] The Central Bank of Nigeria duly issued a letter of credit in


favour of Pan-African. It was numbered 83035. It was issued in
London through their correspondent bank, the Midland Bank Ltd.,
60, Gracechurch Street, London. It was transferable abroad once
only and was subject to the uniform customs rules of the
International Chamber of Commerce relating to documentary
credits (1962 revision). It covered not only the price of $14,
400,000, but also demurrage of $4,100 a day.

It is important to notice that the Midland Bank Ltd. were only


correspondents acting as agents for the Central Bank of Nigeria.
The Midland Bank Ltd. did not confirm the credit so as to make
themselves liable on it. They only advised the seller of its terms. On
the credit itself, they said:

“We are requested to advise you of the terms of a credit


which is irrevocable on the part of our principals but
does not bear our confirmation.”

The responsibility of the Central Bank of Nigeria

The point about confirmation had been expressly raised by


suppliers: and the Central Bank of Nigeria had said that
confirmation was unnecessary. They wrote an important letter on
April 28, 1975, to the suppliers’ bank in these words:

“I write to inform you that no confirmation is required


for credits opened by us direct with our correspondent
banks, of which the Midland Bank Ltd., London, is one.
We are irrevocably committed to honour our
engagements under this credit. Moreover, our
correspondent, the Midland Bank Ltd., has our authority
to pay the beneficiary the full value of this letter of
credit through your bank on presentation of relevant
shipping documents to them in London, provided the
documents are in order. (See our letter of authority
dated March 11, 1975, to our correspondent bank
attached.) As a government bank and a prime bank, no
supplier should have any cause to doubt our ability to
pay our bills promptly. The question of our
correspondents confirming our letters of credit should,
therefore, not arise.”

The transfer to Trendtex

In order to fulfil their contract to supply the cement, Pan-African


entered into a contract with the Trendtex Trading Corporation of
Zurich, Switzerland. The contract was dated July 24, 1975. By it
Pan-African agreed to buy 240,000 tons of Portland cement from
Trendtex. The price was U.S.$59.50 per ton, c.i.f. Lagos/Apapa,
thus showing a small profit of U.S.$00.50 a ton to Pan-African. All
other terms were to be as expressed in the Central Bank of Nigeria
letter of credit (Midland Bank advice no. 83035) as transferred to
the seller by the buyer.

On the same day, July 24, 1975, the credit was transferred to
Trendtex. It was done by means of a new irrevocable letter of credit
issued by the Central Bank of Nigeria through its correspondent the
Midland Bank, London. It was numbered (83035A) and was for U.S.
$14,280,000, the price of the cement and again demurrage at U.S.
$4,100 a day.

In order to fulfil this contract to supply cement, Trendtex agreed to


buy 240,000 tons of cement from Alsen-Breitenburg of Hamburg,
and established a letter of credit issued by a Swiss bank for the
price.

[*362] The shipments

During August and September 1975, Trendtex shipped four


consignments of cement under their contract with Pan-African. In
August they shipped 9,000 tons on The Gempita and 13,000 tons
on The Sugar Importer. In September 10,600 tons on The Newport
and 9,000 tons on The Constantinos. For those shipments Trendtex
presented shipping documents to the Midland Bank Ltd., London,
and were paid the price. In October 1975, Trendtex made two
further shipments: 10,560 tons on The Leodamas and 10,900 on
The Dinos Methanitis. They presented the shipping documents for
these last two to the Midland Bank but were not paid the price.
When each of those six vessels arrived off Lagos, the port was
congested with hundreds of vessels loaded with cement, all waiting
to discharge. Each waited its turn. The Gempita came on demurrage
on September 5. The Sugar Importer on September 26. The
Newporton October 25. The Constantinos on October 26. The
Leodamas on October 31, and The Dinos Methanitis on November
20, 1971. Trendtex claimed payment of this demurrage under the
letter of credit. They presented documents, all in order, to the
Midland Bank, London, in support of their claim for demurrage. But
the Midland Bank declined to pay. This was because of a telex
message sent on September 24, from the Midland Bank to the
bankers of Trendtex:

“Please inform Trendtex Trading Corporation Ltd.,


Zurich, beneficiaries of our account 83035A that we
have received the following authenticated message from
our principals, Central Bank of Nigeria, Lagos, reading
as follows: ‘Please stop demurrage payments against
specified documents unless such documents have been
certified for payment by the Central Bank of Nigeria.’
Please request beneficiaries to be guided, accordingly.”

Trendtex also wanted payment of the price for the October


shipments but the bank refused to pay. This was because of a
message on October 8, 1975, from the Central Bank of Nigeria to
the Midland Bank and relayed to Trendtex:

“The Nigerian Federal Military Government has directed


that in view of our port situation, shipping companies
must give two months’ notice to the Nigerian Ports
Authority before sailing. In view of this, you are
requested not to pay against documents presented in
respect of letters of credit we have opened unless such
documents are accompanied by certificates confirming
that clearance has been obtained for the ships to sail to
Nigeria. Thus, when documents are presented, no
payment should be made until we confirm to you that
the ship has obtained necessary clearance to sail to
Nigeria.”

On October 8, 1975, representatives of Trendtex went to Lagos and


made representations to the Nigerian government. They were told
that no payment whatever would be made on the last two vessels:
and demurrage would only be paid on the first four vessels if
certified by the Central Bank of Nigeria for payment.

The action
On November 4, 1975, Trendtex issued a writ in the High Court of
Justice in London against the Central Bank of Nigeria. They claimed
demurrage on all six vessels. They claimed the price of the cement
shipped on the last two vessels. They claimed damages for non-
acceptance of the [*363] balance of 175,340 tons still outstanding
(out of the 240,000 tons ordered). They claimed damages on
account of their obligations to their suppliers, Alsen-Breitenburg.

The Central Bank of Nigeria applied to set aside the writ on the
ground that the Central Bank of Nigeria is a department of the
Federal Republic of Nigeria and, therefore, immune from suit.

On March 26, 1976, Donaldson J. [1976] 1 W.L.R. 868 set aside the
writ. Trendtex appeal to this court. Trendtex also applied for an
order that the bank do retain $14 million in London to meet the
claim. Mocatta J. made that order. It is effective because the bank
have that sum to their credit with the Midland Bank. The money is
being retained here pending the appeal.

One thing I would mention at the outset. There was a string of


contracts for the purchase of cement – by the Ministry of Defence at
Lagos from the Pan-African company in London – by the Pan-African
company from Trendtex – and by Trendtex from Alsen-Breitenburg.
Those contracts are altogether distinct from the contracts contained
in the letter of credits. The contract sued upon in this action is the
contract contained in the letter of credit issued by the Central Bank
of Nigeria in favour of Pan-African and transferred to Trendtex.
Trendtex can sue upon that contract as a distinct contract
completely separate from the contract of sale. In the provisions of
Uniform Customs issued by the International Chamber of Commerce
it is said:

“Credits, by their nature, are separate transactions from


the sales or other contracts on which they may be
based and banks are in no way concerned with or bound
by such contracts.”

See Gutteridge and Megrah, The Law of Bankers’ Commercial


Credits, 5th ed. (1976), p. 205 (and p. 59).

Another point I would mention is that many people must have


suspicions about the validity of the contracts made by the previous
administration. There must have been some mismanagement
somewhere to lead to this pile-up of vessels off Lagos. This may
give rise in some of these claims to defences on the merits. But no
considerations of that kind arise at this stage. The only question
now is whether the action should be allowed to proceed at all. Is it
to be stayed or struck out on the ground of sovereign immunity?
The case has been presented to us by both sides in a manner to
which I would pay sincere tribute. The documents have been
prepared admirably with all the relevant material and authorities
collected, photographed and arranged for convenient study. The
arguments have been put forward convincingly by two of the most
able and persuasive advocates of the day. We cannot hope to do full
justice to them, but we are much indebted to them.

You might also like

pFad - Phonifier reborn

Pfad - The Proxy pFad of © 2024 Garber Painting. All rights reserved.

Note: This service is not intended for secure transactions such as banking, social media, email, or purchasing. Use at your own risk. We assume no liability whatsoever for broken pages.


Alternative Proxies:

Alternative Proxy

pFad Proxy

pFad v3 Proxy

pFad v4 Proxy