JIGNA FARMS LIMITED v. UNION BANK OF NIGERIA PLC (2016)

JIGNA FARMS LIMITED v. UNION BANK OF NIGERIA PLC

(2016)LCN/8336(CA)

In The Court of Appeal of Nigeria

On Monday, the 21st day of March, 2016

CA/A/500/2013

RATIO

BANKING LAW: THE NATURE OF THE RELATIONSHIP BETWEEN A BANKER AND HIS CUSTOMER

The relationship between a banker and his customer is contractual in nature. It is that of a debtor and creditor or principal and agent. A banker is therefore under a duty to honour cheques drawn on it by a customer who has sufficient funds with the bank to cover the amount endorsed on the cheque. Failure to do so constitutes a breach of contract for which the bank will be liable for damages. See STANDARD TRUST BANK LTD V. ANUMNU (2008) 14 NWLR (106) 125, 150-151 and UBA V. UNION BANK PLC (1995) 7 NWLR (405) 72, 81. per. JOSEPH EYO EKANEM, J.C.A.

BANKING LAW: THE NATURE OF THE RELATIONSHIP BETWEEN A BANKER AND HIS CUSTOMER

JUSTICES

ABUBAKAR DATTI YAHAYA Justice of The Court of Appeal of Nigeria

TANI YUSUF HASSAN Justice of The Court of Appeal of Nigeria

JOSEPH EYO EKANEM Justice of The Court of Appeal of Nigeria

Between

JIGNA FARMS LIMITED Appellant(s)

AND

UNION BANK OF NIGERIA PLC Respondent(s)

JOSEPH EYO EKANEM, J.C.A. (Delivering the Leading Judgment): This appeal is against the judgment of the High Court of the Federal Capital Territory, holden at Abuja, (‘the trial Court” for short) in Suit No. FCT/HC/CV/773/10 delivered on 6/5/2013. In the judgment the trial Court dismissed the appellant’s claim against the respondent for “lack of evidential value.”
Aggrieved by the judgment, the appellant has appealed to this Court by means of a notice of appeal which bears seven grounds of appeal.

It is pertinent to state some of the facts of the case leading to this appeal. The appellant has been operating an account with the respondent’s Maitama Branch (Initially as Broad Bank Nigeria Ltd) since 2004. On 22/10/2009, the appellant received an SMS alert of a credit balance of N2,436,487:00 in its said account On the same date, the appellant issued two cheques totalling N2,390,000:00 to its suppliers.
The cheques were returned paid (with the endorsement “DAR”).

The appellant sued the respondent claiming the following reliefs.
“1. A letter of unreserved apology.
2. The sum of N10,000,000 (Ten Million Naira)

being substantial damages for the wrongful dishonour of cheque and defamation of character,
3. The sum of N2,000,000 (Two Million Naira) in legal fee and expenses.”

In its defence, the respondent pleaded that in June 2009, the appellant applied for an agricultural loan in the sum of N20,000,000:00 with the agreement that the sum of N1,408,900.11 being the outstanding debt in the account of Niger Space Cyber Ltd and the sum of N307,820.49 being the outstanding debt in the account of Iyono Ltd with respondent would be defrayed from the agricultural loan. It was further pleaded that the two cheques were returned unpaid for that reason.

The trial Court, as earlier stated dismissed the case of the appellant.

?In the appellant’s brief of argument settled by Ekokoiesua E. Urua, Esq; seven issues are formulated from the seven grounds of appeal for the determination of the appeal. The issues are:
1. Whether the learned trial judge was right in holding that the plaintiff was unable to prove that the two (2) cheques drawn on the Defendant by the plaintiff were dishonoured by the Defendant (Distilled from Ground 1).
2. Whether the learned

trial judge was right to rely on the indebtedness of Iyono Limited and Niger Space Cyber Limited (separate legal entities) as justification for the Defendant’s dishonour of the Plaintiff’s cheques and the consequential ridicule and damage to the plaintiffs image reputation and credit (Distilled from Ground 2).
3. Whether the learned trial judge was right to rely on clause ‘e’ of Exhibit J to justify Defendant dishonour of the Plaintiff’s cheques even when the plaintiff had received credit advice sms {indicating sufficient fund in its account) from the Defendant (Distilled from Ground 3).
4. Whether from the available evidence, the learned trial judge was right to hold that plaintiff maintained 3 accounts with the Defendant (Distilled from Ground 4).
5. Whether the learned trial judge was right to dismiss the plaintiff’s suit for lack of evidential value (Distilled from Ground 5).
6. Whether, having already determined that the two cheque were returned unpaid, the learned trial judge was right to hold that Exhibits C1 and C2 (the 2 cheques returned unpaid) were not wrongfully dishonoured (Distilled from Ground 6),
7. Whether, having held

that the two cheques were presented and returned unpaid, the learned trial judge was right to arrive at the conclusion that the principal claim has failed, thereby dismissing/ignoring the claim for damages (Distilled from Ground 7) ”

In the respondent’s brief of argument settled by Segun Adeoti, Esq; issues 1 – 4 of the appellant’s brief of argument are adopted with an issue No. 5 formulated as follows;
“Whether the plaintiff has proved her case on the preponderance of the evidence to be entitled to her claims.

In arguing his issue 1, appellants counsel submitted that the appellant had successfully proved that the two cheques were wrongly dishonoured by the respondent. It was submitted that whenever a cheque properly drawn is not paid by the drawee when require to do so it means that the cheque is dishonoured and the drawee would be liable to the drawer Counsel cited and relied on Sections 47 (1) and 73 of the Bills of Exchange Act LFN 2010, in support of his submission. It was further submitted that a banker is to receive cheques from his customer and is bound to pay the cheques drawn on him by the customer provided there are sufficient funds to

meet such demand Reference was made to Diamond Bank Ltd V. Ugochukwu (2008) 1 NWLR (1067) 24 and Access Bank Plc V. MFCCS (2005) 3 NWLR (913) 476 in support of the submission. It was added that where the dishonor of a cheque is found to be wrongful, the words “Drawer’s Attention Required” Endorsed on the cheque would be libelous.

In respect of his issue 2 it was argued that the indebtedness of Iyono Farms Ltd and Niger Cyber space Ltd was never in issue rather what was in issue was whether the respondent misrepresented facts to the appellant and the appellant acted on it which resulted in its exposure to ridicule. This counsel, submitted was an act or negligence on the part of the respondent as it amounted to a breach of duty of care

Arguing his issue 3, appellant’s counsel submitted that the trial Court erred in law in relying on clause ‘e’ of Exhibit J as good reason for the dishonour of the cheques. This he stated’ is because the appellant relied on the credit advice SMS of the respondent in issuing the cheques. It was his further submission that the conclusion of the trial Court that the two cheques were returned unpaid to fulfil the

condition stated in clause e’ of Exhibit J did not flow from the clear words of the clause. It was argued that the respondent ought to have deducted the total indebtedness of Iyono Limited and Niger Space Cyber Limited from the appellant’s account before notifying the appellant of the credit advice sms.

Arguing his issue 4, appellant’s counsel submitted that the trial Court misdirected itself when it held that the appellant maintained three accounts with the Respondent as the three companies are separate legal entities by virtue of Section 37 of the Companies and Allied Matters Act and the case of SALOMON V. SALOMON (1897) AC 22.

On his issue 5, appellants counsel submitted that no situation arose to warrant the dishonour of the cheques.

On issue 6, counsel submitted that where there is sufficient funds in an account and the drawer issues a cheque to a third party to be drawn on that account and the cheque is returned unpaid, the cheque can be rightly said to be dishonoured. This, he said, defamed the appellant without proof of actual damage thus entitling him to substantial damages

?On issue 7, it was submitted that the principal claim in

the suit, viz libel arising from the wrongful dishonour of the two cheques did not fail. Thus, it was further submitted, the claim for libel together with the ancillary claim of N2 Million for legal fees and expenses against the respondent ought to have been determined in appellant’s favour.

For the respondent, the following arguments were proffered in respect of the issues.

On issue 1, counsel submitted that the trial Court was right in holding that the appellant was unable to prove that the two cheques drawn on the respondent were dishonoured. It was his contention that the appellant did not have enough funds in its account as at the date the two cheques were persecuted. He referred to Exhibit J and further submitted that the two cheques were returned because the balance in the account was reserved to offset the indebtedness of Niger Space Cyber Limited and Iyono Limited Citing the case of OCEANIC SECURITIES INT. LTD V. BALOGUN (2013) ALL FWLR (677) 633, he argued that marking a cheque ‘DAR’ does not necessarily imply dishonor.

?Arguing issue 2, counsel repeated his submission in respect of issue 1 and contended that having voluntarily

executed Exhibit J, the appellant could not resile from it, and that the respondent acted within its ambit.

On issue 3, it?was argued that based on Exhibit J, whenever the deduction was made from the account, it accorded with the agreement.

On issue 4, it was submitted that the trial Court was right in holding that the appellant maintained three accounts with the respondent as it took into account matters it ought to have taken into account in arriving at that decision. It was further submitted that the argument of the appellant on the issue was academic.

?On his issue 5, counsel submitted that the appellant did not show that the two cheques were wrongfully dishonoured but that what emerged was that they were merely returned in order to fulfill the condition in Exhibit J. This, he stated, was admitted in cross-examination by the PW1 at page 147 of the record of appeal. He added that the appellant having failed to discharge the burden of proof was not entitled to the reliefs sought as it could not show that it suffered a wrong. Counsel also pointed out that facts grounding the claim for legal expenses were not pleaded and so Exhibit E (the receipt

for payment of professional fee) went to no issue.

He finally urged the Court to dismiss the appeal.

In his reply, appellant’s counsel contended that the case of OCEANIC SECURITIES INTERNATIONAL LTD V. BALOGUN supra. cited by respondent’s counsel is distinguishable from the instant case on the basis that the respondent in the instant case admitted that the endorsement ‘DAR’ connotes that the two cheques were dishonoured. He went on to submit that libel is actionable perse.

Having examined the issues formulated and argued by counsel on both sides in the light of the grounds of appeal, it is my view that there is only one issue that arises tor the determination of the appeal viz;
Whether or not the trial Court was right in dismissing the case of the appellant.

All the issues raises and discussed by counsel for the parties to this appeal are subsumed under this issue.

It must be borne in mind that the claim of the appellant at the trial Court was for an apology and damages for wrongful dishonour of cheques and libel flowing therefrom. The relationship between a banker and his customer is contractual in nature. It is that of a debtor

and creditor or principal and agent. A banker is therefore under a duty to honour cheques drawn on it by a customer who has sufficient funds with the bank to cover the amount endorsed on the cheque. Failure to do so constitutes a breach of contract for which the bank will be liable for damages. See STANDARD TRUST BANK LTD V. ANUMNU (2008) 14 NWLR (106) 125, 150-151 and UBA V. UNION BANK PLC (1995) 7 NWLR (405) 72, 81.

Section 73 of the Bills of Exchange Act, Cap 88 LFN, 2004 provides as follows:
“A cheque is a bill of exchange drawn on a banker payable on demand; and except as otherwise provided in this Part, the provisions of this Act applicable to a bill of exchange payable on demand apply to a cheque.”

Section 47 (1) of the same Act provides-in part,
“A bill is dishonoured by non -payment-
(a) When it is duly presented for payment and payment is refused or cannot be obtained…”

In the instant case, the two cheques drawn on the respondent by the appellant were duly presented for payment and payment was refused with the endorsement “DAR” thereon. The inscription DAR means in full “Drawer’s Attention Required.” In the case of

OCEANIC SECURITIES INTERNATIONAL LIMITED V. BALOGUN (2013) ALL FWLR (677) 633, 661, MBABA, JCA, stated as follows.
“Can it also be said that the inscription “DAR” written on a cheque by a bank on presentation means that the cheque is dishonoured and that there is no money in the account of the drawer? That cannot be so, except there is concrete evidence to the effect that such inscription connotes such meaning or reference. Ordinarily the inscription “DAR” is an acronym usually interpreted to mean Drawers Attention Required. Of course the drawer’s attention can be required by a bank for myriad of reasons, for example to explain some things before a cheque is cashed, mostly to protect the interest of the customer (drawer) and Bank. It would therefore be wrong for the drawer to run to town with the evil news that the cheque has been dishonoured simply because the cashier or accountant of the bank has written “DAR” on the
cheque.”
However, in the case of STANDARD TRUST BANK LTD V. ANUMNU supra. 157, it was held that;
“Drawer Attention Required’, which expression connotes non-availability of funds in the customer’s bank

account which will equally be wrongful and defamatory to return a cheque so marked if the customer has adequate funds in his account… the connotation to a third party is that there is no fund or no sufficient fund in the account to accommodate the dishonoured cheque.”
It seems clear to me that where a customer, as in this instance, draws a cheque on his bank and, on being duly presented for payment, payment is refused, the cheque is thereby dishonourcd See Section 47 (1) of the Bills of Exchange Act. This is especially so where the Inscription “DAR” is made on the cheque by the banker. In the Black’s Law Dictionary, 8th Ed. Page 501 the word “dishonor” is defined as “To refuse to accept or pay (a negotiable instrument) when presented.” The trial Court was therefore not right in holding that the appellant did not prove that the cheques were dishonoured. Whether or not the dishonour
is wrongful depends on whether or not the customer has sufficient funds in his account to cover the sum in the cheque. Where the customer has sufficient funds in the account to cover the sum in the cheque the
dishonour of the cheque is

wrongful except there are other legally acceptable reasons for refusal of payment.

?There is no doubt that as at 22/10/2009 when the appellant issued the two cheques totaling N2,390,000:00 it had a credit balance of N2,436 487 in its account which was sufficient to cover the total amount of the two cheques. It is common ground that the cheques were returned unpaid with the inscription “DAR”. The reason for the action of the respondent is to be found in paragraphs 10 and 14 of the statement of defence at P.81 of the record of appeal. The paragraphs are as follows;
“10. The Defendant avers that sometime in June, 2009, the plaintiff applied for Agricultural loan in the sum of N20,000,000 with the agreement and understanding that the sum of N1,408,900.11 being outstanding debt in Niger Space Cyber Ltd, the sum of N307,820.49 being debt balance in the account of Iyono Ltd will be defrayed from the Agric Loan of N20,000,000. The loan agreement dated 15th June, 2009 and duly signed on behalf of the plaintiff is hereby pleaded.
14. The Defendant specifically denies paragraph 9 of the Plaintiffs Statement of Claims and say that the two cheques were

returned unpaid due to reason stated in paragraph 10 {supra).

The agricultural loan agreement was tendered in evidence as Exhibit J. The relevant clause thereof Clause E – reads as follows;
“Please note that the outstanding balances in Niger Space Cyber Ltd N1,127,008.70 and Iyono Ltd N307,820.49 will be liquidated from the Agric Loan of N20M approved for Jigna Farms Ltd.” See page 115 of the record of appeal.”

At page 236 of the record of appeal the trial Court held as follows:
“…It is clear that the 2 cheques were merely returned unpaid in order to fulfill the condition stated in Clause ‘E’ of Exhibit J to the effect that the cheque drawn by the plaintiff should not be paid until the sum of N1,716,720.49 being total indebtedness of Iyono Limited and Niger Space Cyber Limited are deducted
from the account ”

I have read over and over clause e of Exhibit J There is no where it is stated therein nor can it be implied therefrom that cheques drawn by the appellant should not be paid until the sum of N1,716,720.49 being total indebtedness of the two companies are deducted from the account of the appellant. All that the clause

says is that the indebtedness of the two companies would be liquidated from the agricultural loan of N20,000,000:00. It was not suggested nor was it the case of the respondent that the balance of N2,436,487:00 standing to the appellant’s credit in its account with the respondent as at 22/10/09 was a part of the agricultural loan facility. It is the law that where parties enter into an agreement in writing, they are bound by the terms thereof and the Court is not allowed to read into such agreement terms which the parties did not agree on. In other words, a Court cannot re-write an agreement already made. See KOIKI V. MAGNUSSON (1999) 8 NWLR (615) 493, 514. Furthermore, it was not pleaded that the loan sum of N20,000,000:00 had been paid into the appellant’s account to trigger off the application of clause e of Exhibit J.

It was also the stand of the respondent that the total sum of N2,436,487 was reserved to enable the respondent recover the debt balance in the account of the two companies as agreed vide Exhibit J. I had earlier observed that it was not the case of the respondent that the said sum was a part of the agricultural loan facility and so there

is nothing to justify the action of the respondent. What in effect that means is that the respondent unilaterally appropriated money in the account of one customer to meet the liabilities in the accounts of other customers without the agreement of the customer or without reasonable notice. The electronic alert sent to the appellant on 22/10/09 did not convey such notice. Even if it may be said that the appellant also kept the other two accounts, which is not so as the appellant is a separate legal entity from the other two companies, the law is that accounts kept by a customer should be kept separate. A bank has no right to transfer money be it assets or liabilities from one account to the other without prior notice or assent of the customer. See AFRICAN CONTINENTAL BANK V. S. O. ADEBESIN & CO LTD (1999) 1 NWLR (585) 13, 24 and IIOKSON & CO. (NIG) LTD V. UNION BANK OF NIG PLC (2009) 1 NWLR (1122) 276, 318 and ANGYU V. MALAMI (1992) 1 NWLR (264) 242, 254. It must also be stated that it cannot be said that the other accounts were kept by the appellant in its own right as the other accounts were not in its name. See UBA V. UNION BANK PLC supra.80.

should be mentioned even though in passing that the submission of appellant’s counsel that Section 169 of the Evidence Act applies against the respondent in that the appellant issued the two cheques based on the SMS alert given by the respondent is not correct. This is because that was not the case pleaded by the appellant. In other words the appellant did not plead that the cheques were issued based on the alert (see pages 4 and 5 of the record).

It is however my view that the respondent wrongly dishonoured the two cheques issued by the appellant and is therefore liable for breach of contract and for libel. The appellant is entitled to damages for the wrongful dishonour of the cheques and for libel. However, the appellant’s claim of N2,000,000:00 for legal fees and expenses must fail for two reasons. The first reason, as rightly submitted by respondents counsel, is that facts grounding the claim were not pleaded and so Exhibit E (the said receipt for the payment) goes to no issue. See ADU V. ENANG (1981) 11 – 12 SC 25, 36, The second reason is that the burden of payment of a legal practitioner’s fee cannot be passed to the adverse party as that is

contrary to public policy. See GUINNESS (NIG) PLC V. NWOKE (2000) 15 NWLR (689) 135.

On the whole, I hold that the appeal has merit and allow it. The judgment of the trial Court is set aside and, in its place, I enter judgment in favour of the appellant in the sum of N250,000.00 for the wrongful dishonour of the cheque.

I assess the costs of the appeal at N50,000:00 in favour of the appellant.

ABUBAKAR DATTI?YAHAYA, J.C.A.: I have been obliged with a copy of the leading judgment of my learned brother Ekanem, JCA just delivered, before now. I agree with his reasoning and conclusion. The appeal has merit and it is allowed. I abide by the order as to costs.

TANI YUSUF HASSAN, J.C.A.: I read the judgment just delivered by my learned brother, Joseph E. Ekanem, JCA.
The appellant has been operating an account with the respondent’s Bank, Maitama Branch, Abuja since the year, 2004. On 22/10/2009, the appellant received an alert of a credit balance in the sum of N2,436,487.00k in its said account. Upon issuing two cheques for payment in the sum of N2,390,000.00k on the same date the alert was

received, the cheques were returned unpaid by the respondent. The reason given by the respondent for dishonouring the two cheques was that the amount would be used to settle the appellant’s indebtedness in the accounts of Niger Space Cyber Ltd and Iyono Ltd with the respondent, as agreed by the parties in Exhibit ‘J’.
Exhibit ‘J’ reads:
“Please note that the outstanding balances in Niger Space Cyber Ltd N1,127,008.70 and Iyono Ltd N307,820.49 will be liquidated from the Agric Loan of N20 Million approved for Jigna Farms Ltd”.

From the above agreement in Exhibit “J”, it follows that the indebtedness was to be deducted from the Agric Loan and not from Jigna Farms Ltd account, the appellant. It is for this reason, I hold the respondent in breach of the agreement in Exhibit “J” and allow the appeal.

I abide by the order as to cost.

Appearances

Okon A. Efut (SAN) with him, Prince A. Igajah, O. K. Rugbere, Esq. and Linus Oko, Esq.For Appellant

AND

Segun Adeoti, Esq.For Respondent