A Nigerian bank is facing legal action for allegedly paying out Ff 340,800 (US$47,575) on a letter of credit (L/C) transaction before goods had been shipped or received.

According to a Nigerian online news provider, importer the Betcy Group filed a law suit in a Lagos High Court which alleged that Hallmark Bank's negligence caused Betcy losses of Ff340,800. The importer's counsel is asking the court to add interest to this sum at the rate of 21 per cent per annum from 28 February 28 1998 until final judgment is given and thereafter at the annual rate of 7.5 per cent of the judgment debt.

Betcy apparently reached an agreement with Industrie Service of France to install machinery, plant and equipment for the production of bottled natural water. As part of the agreement an irrevocable L/C was to be opened with Hallmark Bank.

Discrepancies

The report carried by the Vanguard news service notes that the bank wrote to the importer informing Betcy of discrepancies in the documentation. The bank subsequently paid the L/C.

Betcy apparently objected to the L/C being paid until 'most' of the machinery was delivered when it replied to the bank's letter. The importer also claims it earlier wrote on 2 February 1998 'instructing' the bank not to pay until certain unreported terms are met. It is unclear from the news report whether these terms were the same as those incorporated in the L/C.

The importer has reportedly alleged that Hallmark Bank refused to take all reasonable care and failed to obey the instruction against making the remittance.

Defence

According to the Vanguard, Hallmark Bank is defending the importer's claim by contending that it was not in breach of its contract with Betcy, neither is it negligent in handling the transaction the subject matter in this suit. The bank is apparently also insisting that it paid out to the French company on Betcy's instructions.

The court until a further hearing on 18 June 2002 has adjourned the matter.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO