SARAGO GHANA LIMITED v. FBN BANK GHANA LIMITED
July 28, 2022
COURT OF APPEAL
GHANA
CORAM
- B. ACKAH-YENSU, J.A. (PRESIDING)
- S. BERNASKO ESSAH. J.A.
- GEORGE KOOMSON, J.A.
Areas of Law
- Banking and Finance Law
- Commercial Law
- Contract Law
- Civil Procedure
July 28, 2022
COURT OF APPEAL
GHANA
CORAM
AI Generated Summary
Barbara Ackah-Yensu, JA, writing for the Court of Appeal, addressed whether FBN Bank (International Commercial Bank Ltd) properly established a series of letters of credit requested by Sarago Limited to finance sugar imports, thus entitling the bank to charge processing, commitment, LC commission, and cancellation fees. The High Court had found the bank established the LC but, because Deutsche Bank London as correspondent declined to confirm and advise the LC, ordered refund of commitment and cancellation fees while allowing processing and LC establishment fees, plus damages and costs. On appeal, the bank argued industry practice did not require confirmation and blamed the beneficiary, 5 Stone Commodities Inc., for failure of due diligence. Examining the facility terms (including DSRA provisions), SWIFT instructions, correspondent communications, and documentary credit rules (UCP 600), the Court held the LC was never “opened” to the beneficiary, so the bank had not fully performed. The appeal was dismissed and the High Court’s orders affirmed.
ACKAH-YENSU, JA
INTRODUCTION
The key issue for determination in this appeal is whether or not the Defendant/Appellant duly established the Letters of Credit as requested by the Plaintiff/Respondent so as to justify the payment by the Plaintiff/Respondent of all the fees charged them for the purported establishment of the said Letters of Credit. For ease of reference, we shall refer to the parties by their designations at the trial court.
BACKGROUND FACTS
In the High Court (Commercial Division) Accra, the Plaintiff took out a writ of summons against the Defendant for the following reliefs:
“i. Recovery of the sum of Three Hundred and Seventy-Five Thousand One Hundred and Eleven Ghana Cedis, Thirteen Pesewas (GH¢375,111.12) being the commitment fee, processing fee, commission and cancellation fees for the Letters of Credit.
ii. Interest on the said amount at the Defendant’s lending rate with effect from 24th December 2014 until date of final payment.
iii. General Damages.
iv. Costs.
v. Any other relief that the Honourable court deems fit.”
In their Amended Statement of Claim, the Plaintiff averred that in December 2014, they applied for an import finance facility in the form of Letters of Credit of Fourteen Million Ghana Cedis (GH¢14,000,000.00) (“the facility”) from the Defendant Bank to finance the importation of sugar for its business. The Defendant Bank approved the facility by letter dated 15th December 2014 in which letter the Bank set out the terms and conditions for the grant of the facility.
By the terms of the offer letter and facility agreement, it was agreed that the Defendant would charge a commitment fee and processing fee of 1% each on the amount of the facility to be paid at the time of initial disbursement of the facility. It was also agreed that a commission of 0.50% would be paid on the establishment of Letters of Credit in favour of the Plaintiff. The Defendant Bank however failed to provide the finance facility required. Consequently, no funds were credited to Plaintiff’s account for drawdown. The Defendant Bank also failed to establish the Letters of Credit that would have enabled the Plaintiff to undertake the importation of the sugar.
The Plaintiff averred that notwithstanding the failure of the Defendant to discharge its obligations under the transaction, they debited the Plaintiff’s account with an amount of Three Hundred and Seventy-Four Thousand, Four Hundred and Fifty-Three Ghana Cedis, Thirteen Pesewas (GH¢374,453.13