Background
This appeal arises from a dispute between Ethiopian Airlines ("the appellant") and Polaris Bank Limited together with the Nigerian Deposit Insurance Corporation ("the respondents"). On 2 April 1990 the appellant instructed Polaris Bank to issue a bank draft for ₦447,000 to its own order for credit into an account held with the second respondent. Instead, Polaris Bank mistakenly issued the draft to the second respondent, which endorsed it. While reconciling accounts at its Addis Ababa office, the appellant discovered the error and wrote to Polaris Bank demanding clarification. Correspondence followed, but investigations dragged on and then lapsed into silence.
After unsuccessful negotiations, the appellant commenced suit on 28 November 1996 at the High Court of Lagos State (Suit No. LD/3760/1996) claiming:
- Refund of ₦447,000 and ₦5 commission;
- Special damages of ₦1,000,000 for negligence in issuing the draft;
- Additional special damages of ₦1,000,000 for facilitating conversion of the sum by the second respondent;
- Interest on all sums at 21% per annum from 2 April 1990 to judgment and 6% thereafter.
Polaris Bank filed a statement of defence and, on 18 September 1997, applied to dismiss the suit as statute-barred. The trial court granted the motion on 6 June 2000. The Court of Appeal (Lagos Division) unanimously affirmed that decision on 1 June 2006. The appellant then appealed to the Supreme Court, challenging only whether the action was time-barred.
Issues
- Whether the Court of Appeal was correct in holding that the appellant’s action is statute-barred under section 8(1)(a) of the Lagos State Limitation Law (six-year limitation for simple contract claims).
Ratio Decidendi
- Under section 8(1)(a) of the Limitation Law, actions founded on simple contract must be commenced within six years from the date the cause of action accrues.
- A cause of action accrues when there is a breach of contract giving rise to enforceable rights and a party entitled to sue.
- For limitation purposes, a statement of claim is the sole pleading the court examines to determine jurisdiction, not statements of defence or counter-affidavits.
- Where a claim is commenced outside the prescribed period, it is statute-barred and the court lacks jurisdiction to entertain it.
Court Findings
The Supreme Court, led by Obande Festus Ogbuinya, JSC, found that:
- The appellant’s relationship with Polaris Bank was a simple contract (banker-customer) subject to a six-year limitation.
- The contract was breached on 4 April 1990 when Polaris Bank issued the draft contrary to the appellant’s instructions. Knowledge of the breach does not delay accrual; the cause of action accrued on breach.
- The appellant’s writ of summons and statement of claim filed on 28 November 1996 — over six years after 4 April 1990 — lay outside the statutory period.
- The suit was therefore stale and statute-barred. The Limitation Law’s plain language required dismissal.
- The trial court correctly dismissed the suit on limitation grounds; the Court of Appeal rightly affirmed that decision. The Supreme Court saw no error of law or fact warranting interference.
Conclusion
By majority, the Supreme Court dismissed the appeal, affirmed both lower court decisions and held that the appellant’s claim was statute-barred. The appellant was denied any relief on its merits and costs were awarded against it.
Significance
- Reinforces the literal rule in statutory interpretation: clear limitation periods must be applied as written.
- Clarifies that in contract cases, the cause of action accrues at breach, not at the date of awareness.
- Emphasises the exclusive role of the statement of claim in jurisdictional inquiries regarding limitation.
- Highlights the importance of precise and diligent pleading; a stale cause of action cannot be revived by subsequent correspondence or delayed knowledge.
- Serves as a cautionary note to financial institutions to act strictly within customer instructions or face enforceable liability.