Money paid to an agent under a failed contract must be refunded upon demand before remittance to the principal

FIRST BANK OF NIGERIA PLC v. ALEXANDER .N. OZOKWERE

SUPREME COURT OF NIGERIA

(ONNOGHEN; MUNTAKA-COOMASSIE; NGWUTA; ARIWOOLA; KEKERE-EKUN, JJ.SC)

FACTS

Cyprian Ozokwere, the deceased brother of Alexander N. Ozokwere (the Respondent), sometime in 1982 placed an order for the supply of motor spare parts valued at $186,990 from Goodfit Trading Company Limited (Goodfit), payable under a Documents against Payment contract. The contract for the supply of the motor spare parts provided that payment for the said goods would be made through First Bank of Nigeria Plc (the Appellant). The transaction was for the sale of goods by description.

On or about 18th February 1983, Goodfit delivered to the Respondent through the Appellant a bill of lading and a bill of exchange together with the Remittance for Collection and/or Acceptance Order as a result of which the Respondent paid the total price of the goods valued at $186,990 as stated in the invoice to the Appellant. The relevant documents indicated that the goods ordered were FEBI motor spare parts. However, Goodfit shipped and delivered goods of a different description, namely ladies’ wear, in breach of its contract with the Respondent’s brother. The goods were confiscated and sold by the Department of Customs and Excise.

Upon discovering this development, the Respondent duly informed the Appellant and demanded a refund of the sum paid to the Appellant, who refused to refund the money. The Respondent, as Administrator of the Estate of Cyprian Ozokwere, sued Goodfit and the Appellant for the refund of the money paid to the Appellant and interest. During the trial, the court struck out the name of Goodfit from the suit and relying on the evidence before the court showing that the Respondent had paid the money to the Appellant and that the money remained in the custody of the Appellant, the trial court found in favour of the Respondent. The trial court entered judgment in the sum of $186,990 but struck out the claim for interest.

The Appellant appealed to the Court of Appeal, which dismissed the appeal. Still dissatisfied, the Appellant further appealed to the Supreme Court.

One of the issues for determination was: Whether the Court of Appeal was right to uphold Respondent’s claim/allegation of breach of contract of sale/supply on which his entire case was predicated)despite lack of privity of contract with the Appellant and non-joinder of the overseas suppliers against whom the breach was alleged.

ARGUMENTS

Learned Senior Counsel for the Appellant argued that the lower court was in error when it held the Appellant liable on the equitable principle of “money had and received,” as the application of that principle by the court was based on speculation and prejudicial conclusions. He contended that the said principle can only apply to, or is applicable between, parties to a failed contract, which, in his view, is the contract between the Respondent and Goodfit. Since the Appellant is not privy to that contract, the equitable remedy is inapplicable to the Appellant.

Learned Senior Counsel submitted that the foundation of the Respondent’s claim for the refund of the sum paid to the Appellant is the allegation of breach of contract of sale by the overseas suppliers, Goodfit, resulting from the non-supply of the exact goods ordered; that the Appellant is not privy to that contract and can therefore not be liable for any breach thereof; that breach of the contract by Goodfit cannot be assumed, as same has not been proved, particularly as the said Goodfit is not a party to the action; that it was wrong to have struck out the name of Goodfit when there is no evidence on record that substituted service was ordered on it and effected; and that the action of the Respondent at the trial court was fatally defective without the joinder of Goodfit, who allegedly committed the breach of the contract of sale.

In response, learned Senior Counsel for the Respondent argued that it is the pivot of the Respondent’s claim in this matter that the amount paid on the bill of exchange drawn on the Appellant is still with the Appellant, even when Goodfit had instructed the Appellant to transfer the money into its Nigerian bank account. He submitted that the bill of exchange was drawn by Goodfit and remitted through the Hong Kong and Shanghai Banking Corporation to the Appellant for collection in Nigeria as the collecting banker; that the correspondent or remitting banker is therefore an agent of the drawer of the bill of exchange, Goodfit while the Appellant, being the collecting bank, is an agent of the remitting bank and a sub-agent of the said drawer. Learned Senior Counsel further submitted that the Respondent, in the circumstances of this case, is entitled to recover the money so paid to the Appellant, particularly as the Appellant is yet to part with possession of same to the principal; that once the goods supplied under a contract of sale by description fail to meet the description, the buyer is entitled to repudiate the contract and claim a refund, as in this case; and that the Appellant, as an agent of the correspondent banker and by extension an agent of the drawer of the bill of exchange, can only escape liability where it has parted with the funds before notice of any defect.

Learned Senior Counsel further argued that the lower courts concurrently found that demand was duly made by the Respondent, following the discovery of the defect in the goods supplied, for a refund of the money; that the Appellant neither paid the money to the principal nor complied with the instructions of the principal to transfer the funds; and that the principal itself can no longer recover the money as such a cause of action would be caught by the Limitation Law. He finally submitted that an agent who refuses to comply with the express instructions of the principal cannot, in the same vein, hide under the protection of the principal.

DECISION OF THE COURT

In resolving the issue, the Supreme Court held that:

An agent must return any money that was paid to him by mistake on behalf of their principal, especially when the money relates to a contract that has failed and the agent has not yet transferred the money to the principal at the time the refund is requested. The Supreme Court explained that if money is paid to an agent for the principal, and the person who paid it is entitled to get it back, the agent is personally responsible to repay it. This applies where the money was paid by mistake, under pressure, or because of fraud or a wrongful act. The agent must repay it if repayment is demanded, or if notice is given that the payer intends to demand it, before the agent has handed the money to the principal or otherwise acted in reliance on the payment as valid.

In this case, the Supreme Court held that the Respondent asked the Appellant to return the money before it was paid to the principal, after discovering that the goods delivered were defective. The Court found it would be highly unfair for the Appellant to continue holding the money, which no one else has claimed, simply because the Appellant was not a party to the contract between the Respondent and Goodfit.

Issue resolved in favour of the Respondent.

A.B. Anachebe, SAN with F.C. Anachebe (Mrs.), Charles Jibua Esq., Sherif

Mohammed Esq., and Uche Uchenna Esq. for the Appellant.

Dr. Onyechi Ikpeazu, SAN and Ben Osaka Esq., for the Respondent.

This summary is fully reported at (2014) 2 CLRN in association with ALP NG & Co.

See www.clrndirect.com ; www.alp.company.