(COURT OF APPEAL)*

SUDAN COMMERCIAL BANK v. EL SADIG MOHAMED EL SADIG

AC-REV.220-1966

Principles

·  Banking—Relationship between the bank and its customer is contractual.

The relationship of the bank to its customer is based on contract.

Judgment

Advocates: Kronfli and El Rasheed for applicant

Mohamed El Awad El Hassan for respondent

Babiker Awadalla C.J. January 31, 1967: —This S an application against the summary dismissal by His Honour the Province Judge, Khartoum, of an application to him against the judgment and decree of the learned District Judge, Khartoum, in CS-4

Applicant in this case is the Commercial Bank of Khartoum and respondent is a merchant of Khartoum, who keeps an account with the said bank. The cause of action arose out of an alleged failure on the part of the bank to remit money to a third party in France who was selling watches to respondent, which were to be delivered on C.O.D. basis.

It appears from the facts that in September 1963, respondent obtained an import licence for 3,6oo watches deliverable in installments of 300 monthly for a period of one year. The agreement between respondent and his supplier was that each installment was to be paid for separately as and when the documents are received by the bank (applicants).

Four lots were received and duly paid for by remittances from the bank on receipt of the documents. Those remittances were admittedly made according to respondent’s instructions and the amounts debited against respondent’s account.

Documents for the fifth lot were received by applicants on December 19, 1963, and they notified respondent who directed them to remit the value, viz., 954 American dollars and 30 cents, to the supplier in France. Applicants delayed the remittance for eleven days and then remitted the money to New York instead of France. They allege that they had to do so because the supplier wanted it to be paid in American dollars and that necessitated remittance through their agent in New York. The New York agent for some reason or another remitted the money to a bank in Belgium instead of directly to the supplier’s bank in France and it took almost six months before the supplier was paid. In the meantime the supplier abstained from making further supplies invoking a term in his contract with applicant, which entitled him to withhold future lots on failure to pay for any consignment for which payment was due. As such, respondent alleges that he had lost three lots for, viz., January, February and March 1964, amounting in all to 900 watches. From April 1964, and until the licence expired, two lots only were received and the import licence expired. It was—in his contention—futile to renew the licence because by then watches of the same make had inundated the market. He assessed his loss of profits on those three lots at £S.I, 440.

The following issues were framed by the court below:

(i) Were defendants (applicants) negligent in remitting the money to the supplier within a reasonable time?

(ii) If so, were they guilty of any—and, if so, what—breach of their contract with plaintiff (applicant)?

(iii) If the answer to (i) is in the affirmative did such delay result in any—and, if so, what—damage to plaintiff?

(iv) What is the quantum of damage?

In his judgment the learned District Judge treated the first two issues as one and found in favor of respondent. He found as a fact that applicants knew that the dealing between respondent and his supplier was one based on a contractual relation and therefore required that degree of promptitude and circumspection which the dictates of good banking business call for. On the third issue, he rejected applicants’ contention that they are not responsible for the delay in remittance as such delay occurred in remitting the money from New York to France. In the learned District Judges opinion, the mistake of the agent is the responsibility of the principal. Regarding the quantum of damages he assessed respondents loss at £S.990.000m/ms. and gave judgment accordingly.

Applicants applied to His Honour the Province Judge who dismissed their application summarily and hence the present application.

In my view this application should be dismissed. The learned District judge was quite right in that applicants have committed a breach of contract and that accordingly they are liable to put respondents, so far as may be, in the position in which they would have been had that contract been properly performed. That the duty of applicants arises out of contract is no doubt firmly established in the law of banking. In Paget, Low of ranking. 42 (6th ed., 1961), t is stated as follows:

The relationship of banker to customer is one of contract, though until recently this way of looking at the matter seems not to have attracted much attention in the courts. The relationship consists of a general contract which is basic to all transactions together with special contracts which arise only as they are brought into being by the express or implied acts of the parties.”

Applicants cannot of course shield behind the mistake of any intermediary chosen by them to perform the contract or part of it on their behalf, for any damage caused to respondent through the default of that intermediary will have to be made good by them in accordance with the principle of respondent superior.

I do not at all share the view of the learned advocate for applicant that the damages awarded fall outside the ambit of the rule laid down in Hadley v. Baxendale (1854) 9 Ex. 341. I think the criterion followed by the judge in assessing the profit is a reasonable one. Furthermore, I do not think that applicants as bankers—can seriously contend that it was not in their contemplation that the consignment of watches which they had been called upon to deal with in their normal course of business, was not intended by respondent for the purpose of trade.

This application is accordingly dismissed with costs.

Osman El Tayeb J. January 31. 1967: —I agree. I have nothing useful to add.

El Fatih Awouda J. January 31. 1967: —l concur.