Trendtex v Central Bank of Nigeria

JurisdictionEngland & Wales
CourtCourt of Appeal (Civil Division)
JudgeTHE MASTER OF THE ROLLS,LORD JUSTICE STEPHENSON,LORD JUSTICE SHAW
Judgment Date13 January 1977
Judgment citation (vLex)[1977] EWCA Civ J0113-3
Docket Number1975 T. No. 3413
Date13 January 1977

[1977] EWCA Civ J0113-3

In The Supreme Court of Judicature

Court of Appeal

On Appeal from the High Court of Justice

Queen's Bench Division

(Mr. Justice Donaldson)

Before:

The Master of the Rolls

(Lord Denning)

Lord Justice Stephenson and

Lord Justice Shaw

1975 T. No. 3413

1975 T. No. 3663

Trendtex Trading Corporation Ltd.
Plaintiffs (Appellants)
and
Central Bank of Nigeria
Defendants (Respondents)

MR. F. P. NEILL, Q.C., MR. C. FRENCH, Q.C., MR. M. A. PICKERING, MR. D. P. O'CONNELL and MR. D. HUNT (Instructed by Messrs. Theodore Goddard & Co., Solicitors, London) appeared on behalf of the Plaintiffs (Appellants).

MR. T. H. BINGHAM, Q.C., and MR. A. G. GUEST (instructed by Messrs. Hedleys, Botterell, Roche & Temperley, Solicitors, London) appeared on behalf of the Defendants (Respondents).

THE MASTER OF THE ROLLS
1

In July 1975 the Port of Lagos - Apapa - was congested with shipping. All the berths were occupied. There were 300 to 400 ships outside waiting. More ships were arriving daily. Most of them were carrying cement. All of those waiting were on demurrage. It was because the Government Departments had ordered far too much. No doubt Nigeria needed cement. It was a country which was developing fast. They were building houses, factories, barracks, and so forth. All of the work required cement. Previously the average rate of import through all ports had been two million tons of cement a year. Yet early in 1975 the Government departments then in charge in Nigeria had ordered ten times that quantity, 20 million tons, to be delivered over the next twelve months. The ports were utterly unable to cope with it. Even for all commodities together, the discharging capacity at Lagos/Apapa did not amount to two million tons a year. Yet here was ten times that amount arriving - of cement alone - leaving nothing for other vital imports of food and materials. The crisis was one of the reasons for a change of government in Nigeria. On 29th July, 1975, a new Military Administration took over the reins. One of its first tasks was to find out the root cause of the congestion. It found that the previous administration had made contracts for cement which were "unorthodox, imprudent or inequitable". Not only were the quantities far too large, but there were no proper safeguards in regard to payment of the price or demurrage. As a first step the new Military Administration issued a notice suspending the import of cement into Nigeria. It told suppliers not to load any more cement for the time being. It warned them that it would not pay demurrage unless it was certified as proper. In addition, the new Administration launched a "crash programme" to increase the rate of discharge from the waitingvessels. It set up a Committee to negotiate fresh terms with the suppliers. The object was to reduce the quantities on order and to spread the deliveries over a longer time. Most of the suppliers have appreciated the difficulties and fresh terms have been arranged. The steps thus taken have proved successful. The congestion of vessels has been cleared. But there is an aftermath. It is a large number of legal proceedings.

2

This case is one of them. It is a claim on a letter of credit issued by the Central Bank of Nigeria. We are not concerned with the rights or wrongs of the claim: but only with a preliminary point. The Central Bank of Nigeria claim that they cannot be sued in this country on the letter of credit: because they are entitled to sovereign immunity The plaintiffs dispute this on the ground that this is an ordinary commercial transaction to which sovereign immunity does not apply. So I must describe the nature of the transaction.

3

The story starts with a contract which was made on 25th April, 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%, all to be delivered not later than 15th August, 1976.

4

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-Africa to the extent of U.S.$14,400,000.00 to be valid for payment against shipping documents conformable to the contract of purchase.

5

The Central Bank of Nigeria duly issued a letter of credit in favour of Pan-Africa. It was numbered 83035. It was issued in London through their correspondent bank, the Midland Bank Limited, 60 Gracechurch Street, London. It was transferableabroad 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 $14,400,000.00, but also demurrage of $4,100,00 a day.

6

It is important to notice that the Midland Bank Limited were only correspondents acting as agents for the Central Bank of Nigeria. The Midland Bank Limited 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".

7

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 28th April, 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 Limited, London, is one. We are irrevocably committed to honour our engagements under THIS CREDIT. Moreover, our correspondent, The Midland Bank Limited, 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 11th March, 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."

8

The transfer to Trendtex. In order to fulfil their contract to supply the cement, Pan-African entered into a contract with theTrendtex Trading Corporation Limited of Zurich, Switzerland. The contract was dated 24th July, 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.

9

On the same day, 24th July, 1975, the credit was transferred to Trendtex. It was done by means of a new 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.$14,280,000.00, the price of the cement and again demurrage at $4,100.00 a day.

10

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.

11

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 Limited, 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. TheGempita came on demurrage on 5th September. The Sugar Importer on 26th September. The Newport on 25th October. The Constantinos on 26th October. The Leodamas on 31st October, and the Dinos Methanitis on 20th November, 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 24th September from the Midland Bank to the bankers of Trendtex: "Please inform Trendtex Trading Corporation Limited, 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."

12

Trendtex also wanted payment of the price for the October shipments but the Bank refused to pay. This was because of a message on 8th October, 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...

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3 firm's commentaries
  • Disputes With States
    • United Kingdom
    • Mondaq UK
    • 15 September 2021
    ...held that a State was not entitled to immunity in respect of commercial transactions (Trendtex Trading Corp v The Central Bank of Nigeria [1977] QB 529 The State Immunity Act 1978 was passed and then in 1981, the House of Lords confirmed that the restrictive theory applied at common law (I ......
  • Disputes With States
    • United Kingdom
    • Mondaq UK
    • 15 September 2021
    ...held that a State was not entitled to immunity in respect of commercial transactions (Trendtex Trading Corp v The Central Bank of Nigeria [1977] QB 529 The State Immunity Act 1978 was passed and then in 1981, the House of Lords confirmed that the restrictive theory applied at common law (I ......
  • The Sandline Affair Illegality And International Law*
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    • Mondaq Australia
    • 20 July 2001
    ...Law (1998, 5th edition, Oxford University Press, Oxford) 553. 18 Trendtex Trading Corporation v Central Bank of Nigeria [1977] Queen's Bench 529. 19.[1990] 2 Appeal Cases 20.Ibid 513. 21.This section is common to all of the various state acts in Australia: see 1986 Commercial Arbitration Ac......
9 books & journal articles
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    • United Kingdom
    • International Journal of Evidence & Proof, The Nbr. 10-1, February 2006
    • 1 February 2006
    ...(1900).239 [2004] EWCA Civ 1123, [2005] 1 WLR 414 at [82], [274], [436–437].240 For: Trendtex Trading Co. Ltd v Central Bank of Nigeria [1977] 1 QB 529, 553–4; Maclaine Watson& Co. v Depar tment of Trade [1988] 3 WLR 257, 1115; R v Commissioner for the Metropolis, ex p.Pinochet (No. 3) [199......
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    • University of Western Australia Law Review Nbr. 40-2, September 2016
    • 1 September 2016
    ...to rivers. On Trendtex Trading Corporation v Credit Suisse [1982] AC 679; [1981] 3 All ER 520 generally see Reichel, supra 166-179. 52[1977] 1 QB 529; [1976] 3 All ER 437; [1976] 1 WLR 868. 2016] The Trendtex Principle In Australian Law: Context And Recent Developments against Credit Suisse......
  • Foreign states in Australian courts.
    • Australia
    • Melbourne University Law Review Vol. 29 Nbr. 3, December 2005
    • 1 December 2005
    ...duty they must strive equitably to take into account all interests in the litigation. (1) Trendtex Trading Corp v Central Bank of Nigeria [1977] QB 529 (2) A-G (UK) v Heinemann Publishers Pry Ltd (1988) 165 CLR 30, 40 (Mason CJ, Wilson, Deane, Dawson, Toohey and Gaudron JJ) ('Spycatcher'). ......
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    • Maastricht Journal of European and Comparative Law Nbr. 24-3, June 2017
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    ...Argentina’ssovereign immunity before German Courts); for English law, see Trendtex Trading Corporation Ltd. v. Central Bank ofNigeria, [1977] 1 QB 529. Refer, for an overview of European case law on sovereign immunity, to A. Reinisch,‘European Court Practice Concerning State Immunity from E......
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