APPEAL NO: SC.126/1989

CITATION: (1996) 12 LLER 1

Before Their Lordships















The facts of this case, as presented by the plaintiffs, are that on the 14th day of March, 1975, the 2nd defendant, as purchaser, entered into the contract of sale, Exhibits P-P1, with a foreign company, Gilt Investment Ltd., as sellers, for the supply of 240,000 metric tons of bagged cement to be shipped from Barcelona, Spain to Lagos, Nigeria. Pursuant to the said contract, the Central Bank of Nigeria, acting on behalf of the defendants, opened a Letter of Credit, Exhibit R with the Deutsche Bank in Frankfurt, West Germany in favour of the said Gilt Investment Ltd., hereinafter referred to simply as “Gilt”, to cover the cost of cement and demurrage that might be incurred as a result of the shipment of the cargo of cement from Barcelona to Lagos.

On the 16th May, 1975, Gilt, through their agent and/or representative, Equatorial Lines of Lagos, entered into a charter-party, Exhibits A-A3, with the plaintiffs for the hire of the plaintiffs’ vessel, MV Fotini, for the purpose of conveying the defendants’ cargo of cement from Barcelona to Lagos as aforesaid.

I think it ought to be stressed at this stage that neither of the defendants was a party or privy to the said charter-party. There was also no evidence that either of them was at all material times aware of the provisions and contents thereof. Exhibits A-A3 expressly made similar provisions relating to payment of demurrage as were contained in Exhibits P-P1 and R. Under these provisions, demurrage not exceeding U.S. $3,500.00 per diem shall be for the account of the buyers but payable under the terms of the said Letter of Credit, Exhibit R, opened in favour of Gilt.

The vessel, duly loaded with the said cargo of bagged cement, arrived at the Lagos Port, its terminal destination, on the 1st July, 1975 and promptly gave due notice of readiness to discharge. Unfortunately Lagos port was heavily congested at the material time. The vessel, having waited for some two months and had not commenced discharge was ordered by the defendants acting through their agents, to proceed first to the port of Takoradi and then to Tema, both in Ghana for the discharge of its cargo.

The plaintiffs who are the owners of MV Fotini agreed to divert their vessel to Ghana as directed by the defendant’s agents. However, before the vessel could be finally discharged of its cargo of bagged cement, it had entered into demurrage. It is the plaintiff’s case that their vessel was in demurrage for a total of 292 days from 16th July, 1975 to the 4th May, 1976. They also claimed that in accordance with the provisions in the charter-party, Exhibits A-A3, demurrage was on a basis of U.S. $3,000.00 per day. Accordingly they were entitled to a total of $876,000.00 as demurrage for the said period of 292 days out of which the defendants only paid $591,500.00 leaving an outstanding balance of $284,500.00 unpaid.

The defendants, on the other hand, claimed firstly, that they had no contractual relationship of whatever nature with the plaintiffs, and secondly, that they had paid Gilt with which they entered into contract the agreed price of the cement supplied together with a further sum of $730,030.00 which represented the full demurrage incurred up to the date MV Fotini completely discharged its cargo at Tema port in Ghana as negotiated by their agent, the Cement Contracts Negotiating Committee and accepted by Gilt. They claimed that this demurrage was liquidated by seven instalmental payments and that they owed nothing to the plaintiffs as evidenced by Exhibits T-T6 and U. They explained that Gilt hired the vessel MV Fotini from the plaintiff company and that Gilt received all the amount due to the plaintiffs from the defendants for payment to the said plaintiffs.

At the conclusion of hearing, Anyaegbunam, C.J., after a review of the evidence found for the defendants and dismissed the plaintiff’s claims. He upheld the defendants’ contention that there was no privity of contract between the plaintiffs and the said defendants in respect of which the plaintiffs were entitled to any demurrage as against the defendants. He held that the contract in issue was between Gilt and the respondents and that demurrage had infact been paid by the respondents to the said Gilt as evidenced by Exhibits T-T6. The learned trial Chief Judge stated:-

“The main question that calls for determination is not who pays demurrage fee but to whom it should be paid. In Exhibits P-P1, it is stated inter alia in Exhibit P1 under clause (IX):-

“Demurrage shall be payable (in addition to the full purchase price) under the terms of the Letter of Credit, on presentation at the Bank designated in sub-clause (V) above of time sheet and statements of facts duly certified as correct by the ship’s master, and by the ship’s agents in Lagos.”

The above is a portion of an Agreement between the Federal Military Government of Nigeria on the one hand as the buyer and Gilt Investment Limited on the other hand as the seller. The plaintiff/company is not anywhere mentioned in the said agreement. Exhibits A-A3 is an agreement between the plaintiff/company and Equatorial Lines. The defendants are not mentioned in it at all.

The contract for purchase, carriage and delivery of the cement was between the Federal Ministry of Defence and Messrs Gilt Investment Limited. All the parties accepted this fact.”

He considered the letter the Permanent Secretary, Federal Ministry of Transport wrote to the plaintiffs, Exhibit B, together with the Agreement of Discharge between Gilt and the defendants, Exhibit U, and concluded thus:-

“All these go to show that the only company that had contract in connection with demurrage is Gilt Investment Limited and that the contract had been fulfilled to the satisfaction of all the parties concerned hence Exhibit U.

With this I have no option except to dismiss the plaintiff’s claim. It is hereby dismissed.”

Dissatisfied with this decision of the trial court, the plaintiffs lodged an appeal against the same to the Court of Appeal, Lagos Division, which in an unanimous judgment dismissed the appeal on the 7th day of July, 1988 and affirmed the decision of the trial court. Delivering the judgment of the Court of Appeal, with which Babalakin, J.C.A. as he then was, and Awogu, J.C.A. agreed, Akpata, J.C.A., as he then was, concluded as follows:-

“I am satisfied that, in the light of the pleadings and the totality of the evidence adduced by the parties and the relevant legal authorities applicable to this case, the respondents were not liable to pay demurrage or damages to the appellants either in contract or in tort. The appeal fails and the judgment of Anyaegbunam C.J. delivered on 2/7/86 is upheld. The appeal is dismissed with costs assessed at N300.00 in favour of the respondents.”

Aggrieved by this decision of the Court of Appeal, the plaintiffs have further appealed to this court.

Accordng to the Supreme Court,

It is clear to me from all the issues formulated by the parties for the determination of this court that they relate to one basic question, namely, whether on the facts of this case as pleaded and testified to by the parties, the appellants are entitled to any further payment in respect of demurrage as claimed or at all.

The court went on to hold that;

In the present case, the original “contractual” carrying voyage with accrued demurrage came to an end as soon as the offer in respect of the latter carrying voyage from Lagos to Ghana was made by the respondents and accepted by the appellants. As at that stage, the vessel, MV Fotini was already in demurrage which commenced since the 16th July, 1975. The maxim is firmly settled that once on demurrage, always on demurrage until the vessel is fully discharged unless, of course, the owners of such vessel removed it for their own purpose or convenience.There is no suggestion in the present case that the appellants at any stage removed their vessel for their own purpose or convenience.

It is not in dispute that the appellants fully executed their own part of the obligation and/or services requested of them by the respondents under what, in my view, is an unenforceable contract. It is also common place that the respondents had the benefit of the appellants’ services and that no scale in respect of demurrage, remuneration or compensation was fixed or agreed upon with regard to the unforeseen and additional voyage to Ghana. It is further clear that the services rendered by the appellants to the respondents which entailed definite loss of earnings by way of demurrage as a result of the subsequent voyage from Nigeria to Ghana and/or the delay suffered by the appellants before the respondents’, cargo was fully discharged from their vessel were never intended to be gratuitous. It seems to me clear that the appellants would be entitled to a reasonable compensation for their loss on the basis of quantum meruit.

Appeal allowed.