ECOBANK v. MAC DISTRIBUTION (NIG) LTD (2021)

ECOBANK v. MAC DISTRIBUTION (NIG) LTD

(2021)LCN/15124(CA)

In The Court Of Appeal

(LAGOS JUDICIAL DIVISION)

On Thursday, March 04, 2021

CA/L/381/2017

Before Our Lordships:

Hussein Mukhtar Justice of the Court of Appeal

Paul Obi Elechi Justice of the Court of Appeal

Patricia Ajuma Mahmoud Justice of the Court of Appeal

Between

ECO BANK PLC APPELANT(S)

And

MAC DISTRIBUTION NIGERIA LTD RESPONDENT(S)

RATIO

DUTY OF THE TRIAL COURT TO PROPERLY EVALUATE THE EVIDENCE ADDUCED BEFORE IT; WHEN AN APPEAL AGAINST THE DECISION OF TRIAL JUDGE WOULD BE ALLOWED

In Okpala v NEPA (2003) 14 NWLR pt. 840 page 383 at 410 the Court held as follows: “A judge has the onerous duty to carefully and squarely weigh every case in the balance with utmost great care and caution. In other words, the hallmark of the end of a case should be seen in the just decision arrived at and meted out to the parties. The effect is to give a sense of conviction and satisfaction to all parties and non-parties alike.” In the instant case, the trial Court did not properly evaluate the evidence before it and the Court of Appeal has the power to review the said evidence as appraised above. See Akpan v. Union Bank of Nigeria Plc [2003] 6 NWLR pt. 816 pg. 27 at 298 where Edozie, J.C.A. held as follows: “An appeal against the decision of trial judge would be allowed if such decision was based on improper evaluation of evidence. See Seismograph V. Akporuovo [1974] 6 SC 119 at 140″. Where the trial judge failed to properly consider and evaluate the evidence adduced by both sides to the dispute, the Court of Appeal has a duty to consider and evaluate such evidence and make proper findings.” PER HUSSEIN MUKHTAR, J.C.A.

EFFECT OF THE FAILURE OF A CUSTOMER IN A BANKER- CUSTOMER RELATIONSHIP TO TAKE REASONABLE AND ORDINARY PRECAUTIONARY MEASURES AGAINST FRAUD OF AS A DIRECT RESULT OF NEGLECT OF SUCH PRECAUTION LOSS IS SUSTAINED

It is pertinent to note that, in a banker-customer relationship, the Respondent also has a corresponding duty to take reasonable and ordinary precautionary measures against fraud. The Respondent ought to have waited for Exhibit B5 to clear before releasing the bags of rice to its first time customer or if he has to release instantly, the draft must be from his own bank. See Bisi Salawu v Union Bank of Nigeria Ltd (1986) 4 NWLR (Pt. 38) 701 at 707, where this Court in dismissing an appeal, founded on a claim of negligence/fraud against a Bank for customer’s failure to adhere to an established banking procedure in judgment of cash deposits which resulted to fraud, held as follows: “I entirely agree with the learned trial judge that the appellant himself unwittingly encouraged and facilitated the commission of fraud by Mr. Aboderin. A customer has a duty to take reasonable and ordinary precaution against fraud and if as a direct result of neglect of such precaution loss is sustained, he must bear the loss as between himself and the banker. See London Joint Stock Bank Limited V. Macmillan & Authur (1918) AC 777.” PER HUSSEIN MUKHTAR, J.C.A.

HUSSEIN MUKHTAR, J.C.A. (Delivering the Leading Judgment): This Appeal is against the judgment of the High Court of Lagos State Lagos division, delivered by Bankole-Oki, J. on 9th February 2017. In the judgment, the learned trial judge found the Appellant liable to the Respondent in the sum of N13,230,000.00 (Thirteen Million, Two Hundred and Thirty Thousand Naira Only) being the value of 2 forged bank drafts which were deposited with the Appellant by one customer of the Respondent.

The Respondent was a customer of the Appellant. It operated a current account number 0860010230322801 at the Appellant’s branch at 187 Faulks Road, Aba, Abia State. On 7th September, 2011, the Respondent entered into a transaction to sell rice to one Desmond Peters – a first time customer. The transaction was for Desmond Peters to buy 1,800 (One Thousand, Eight Hundred) bags of rice at a price of N7,350.00 (Seven Thousand, Three Hundred and Fifty Naira Only) per bag. In furtherance of the said rice transaction, Desmond Peters lodged two spurious Skye bank drafts both dated 6 September, 2011

totaling the sum of N13,230,000.00 (Thirteen Million, Two Hundred and Thirty Thousand Naira Only) into the Respondent’s account. The two drafts were admitted as Exhibit B5 at the trial of this suit.

On the same day (7th September, 2011), the Appellant received a call from the Respondent’s Finance Manager, one Mr. Ramish, to confirm whether any instruments were lodged in the Respondent’s account and in what mode the lodgments were made. The Appellant confirmed to the Respondent that instruments were lodged in the aforesaid account and that they were bank drafts. This information was communicated to the Respondent’s Finance Manager through a telephone call.

At the material time in question, the banking rule and procedure under the Nigeria Bankers’ Clearing House Rules, which applies to all negotiable instruments, Exhibit B5 inclusive is for all bank instruments to go through a 3-working day clearing cycle before any value could be attached to such instruments. By the aforesaid banking rule and practice, therefore the drafts in Exhibit B5 were to clear on Monday, 12 September, 2011 since they were lodged on Wednesday, 7

September, 2011. Therefore, the Respondent was to wait until the instruments were cleared before they could be accessed as cash. i.e. before value could be given to the drafts. This banking rule and practice is well known to the Respondent.

On 8 September, 2011, the Respondent was informed that the drafts in Exhibit B5 were spurious and no value should be given to it. On the same day, the Respondent also received an automated SMS alert message on its telephone number 08088666615 that Exhibit B5 is spurious. The said telephone number is the same line which the Respondent directed the Appellant to use for purposes of communicating alerts on its account as contained on its account mandate form. The SMS alert message log and the account mandate were admitted as Exhibits C5 and C1 respectively.

Sometime in November 2011, the Respondent complained to the Police alleging that the Appellant was part of the fraud in respect of Exhibit B5. Thereafter, the Police proffered a charge against the Appellant’s Staff and the said charge was struck out for lack of evidence indicating that the Respondent could not link the Appellant to

any fraud in respect of these forged drafts.

The forged bank drafts were lodged by one Desmond Peters, a first-time customer of the Respondent into the Respondent’s account operated with the Appellant. The drafts were found to be forged bank drafts during the clearing process within the 3-day working cycle as provided by the Nigeria Bankers Clearing House Rules and the Respondent was notified in this regard through an SMS alert. The learned trial Judge found the Appellant liable in negligence in the sum of N13,230,000.00 (Thirteen Million, Two Hundred and Thirty Thousand Naira Only) being the value of the two fake bank drafts. The learned trial Judge absolved Skye Bank Plc (sued as 2nd Defendant) of any liability on grounds that the suit did not disclose any reasonable cause of action against them.

Being dissatisfied with the said Judgment, the Appellant lodged an appeal to this Honourable Court through a Notice of Appeal dated and filed on 15 February, 2017 and predicated on three (3) grounds.

The Appellant was aggrieved by that judgment, and filed its Notice of Appeal on 15th February, 2017 predicated on three grounds, from which the

following twin issues were distilled for determination:
(a) Whether the learned trial Judge was right in finding the Appellant liable in negligence for the value of the two forged bank drafts? (Grounds 1 & 2).
(b) Whether the Appellant owed the Respondent any duty of care, which was not fulfilled, in respect of the forged bank drafts as to make the Appellant liable to the Respondent?
(Ground 3)

The Respondent equally adopted the same twin issues formulated by the Appellant.

Issue One:
Whether the learned trial Judge was right in finding the Appellant liable in negligence for the value of the two forged bank drafts?

It was submitted for the Appellant that the Appellant was not liable in negligence to the Respondent in respect of the two forged bank drafts and that the lower Court based its decision on a wrongful evaluation of evidence. That a proper evaluation of the Record of the Court reveals that the two bank drafts admitted as Exhibit B5 were forged and no value could be attached to them as to make the Appellant liable to the Respondent. The said Exhibit B5 were lodged into the Respondents account on Wednesday, 7

September, 2011 hence they are expected to clear on Monday, 12 September, 2011. The Respondent ought to have waited until Monday, 12 September, 2011 when the instruments are cleared before releasing the alleged bags of rice to its first-time customer, Desmond Peters. That it is only through clearing that the genuineness or otherwise of Exhibit B5 could be deciphered.

The Court was urged to resolve the issue in favour of the Appellant against the Respondent.

The learned counsel for the Respondent Babatunde Busari, Esq., however erroneously left the issue to argue grounds of appeal. While issues are distilled from the grounds of appeal, no argument on ground of appeal can be countenanced by the Court. The Respondent’s arguments will therefore be considered as much as it is predicated on the issues for determination not on grounds of appeal. He argued that the decision of the trial judge which found the Appellant liable was predicated on the failure of the Appellant to take reasonable care to timeously inform the Respondent of the ‘spurious drafts” and the failure of the Appellant to adhere strictly to the mandate of the Respondent to notify it through

telephone, email, SMS and internet banking as contained in the account opening form, Exhibit C1 which was tendered by the Appellant during trial. The learned counsel has however not stated how timeous the Appellant should have informed him or how belated the information was that constituted negligence on the part of the Appellant causing the Respondent the financial loss it has suffered.

It was submitted for the Respondent that the learned trial judge had found that the two drafts, upon which the Respondent gave out its goods, were in fact paid into the bank account of the Respondent which is domiciled with the Appellant, and this was confirmed upon enquiry by the Appellant. The Court also found that the drafts were taken by the Appellant for clearing on the next day (8 September 2011) but was informed via a letter from the 2nd Defendant (Skye Bank) that the drafts were spurious.

Upon becoming aware on 8 September, 2011, the Appellant immediately debited the account of the Respondent with value of the two bank drafts. But it failed to immediately inform the Respondent. The Appellant only struggled to make the Court believe that it sent a text

message. Although under cross-examination, its DW1 could not show to the Court in its SMS log, Exhibit C5, that any such message was sent.

The learned trial judge in the judgment observed thus:
“I have carefully looked at the entries in the statement of account, vis-a-vis the SMS alerts and I find that indeed the Statement of Account shows a credit of the said amount on 7/9/11. The SMS message however shows a debit of the same amount on 8/9/11.
I am of the view however, that the crucial issue here is not whether the account was actually credited with the amounts as an available balance or just reflected in the ledger balance. This invariably means that the arguments on the Rules of the Nigeria Bankers Clearing House are not relevant in determining whether the 1st Defendant breached its duty of care to the Claimant.”

It was further submitted for the Appellants that the arguments of the Appellant as to relevance of the Nigeria Bankers Clearing House Rules go to no issue because the two bank drafts paid into the Respondent’s account were not cashed. The trial judge went on to emphasize this point by stating thus:

“In my view, the circumstances surrounding the payment of the cheques and the subsequent conduct of the 1st Defendant as it relates to the Claimant and the said drafts is really the crux of this issue.”

It was further argued for the 1st Respondent that the allegations that the two drafts were forged was not established during trial as the Appellant failed to produce the original copies during trial to enable the trial Court examine the evidence.

It was submitted, for the 1st Respondent that the learned trial Judge was right when he found that the Respondent altered its position when it was informed by the Appellant that drafts had been paid and thereafter seeing the alert. That the Appellant never contested the fact that the goods were actually released to the customer. The Court was urged to resolve the issue against the Appellant and in favour of the Respondent.

It is pertinent that the evidence of the lodgment of the forged bank drafts in the Respondent’s account on 07/09/2011 are reflected in Exhibit C5 and B6 tendered at the trial. These are the Respondent’s Statement of Account and SMS log alerts respectively. The learned trial Judge in examining

these exhibits in his judgment made a correct finding that deposit of a draft does not put the customers account in funds. The learned trial Judge’s specifically observed thus:
“To this extent, I uphold the argument of learned counsel to the 1st Defendant, that the deposit of a bank draft and the simultaneous crediting the customer’s account does not put the customer’s account in funds. The case cited by the learned counsel to the 1st Defendant has clarified this issue. This is the case of Union Bank of Nig. v Nwoye (2012)2 BFLR @ 316.”

However, the learned trial Judge misapplied the above position of the law to the facts of this case when he stated as follows:
“It is to be noted as suggested by learned Counsel to the Claimant that the fact that the 1st Defendant has stated that a draft had been paid, would presumably assure the customer that payment had in fact been made.”

Contrary to this finding, the DW1 and DW2 did not testify that once bank draft is lodged into the Respondents account, it is as good as cash. What the evidence on the Record revealed, is that once a bank draft is lodged, it goes

out for clearing and within the 3 day period for clearing, the Bank can either reverse the account or leave the deposit there. CW1 also admitted this crucial piece of evidence during his cross-examination.

Based on this wrongful assessment of evidence, the learned trial Judge then continued and held as follows:
“I find that by the very nature of a bank draft, the Claimant had more of a reassurance that the draft was good to be acted upon. The significance of the 1st Defendant’s officer, Raliat of asking whether it was draft or cheque that was paid in, cannot be lost on the Court … it is therefore expected that there is a presumption of regularity of the said drafts, particularly when its account officer had confirmed that they were bank drafts.”
The trial Judge then concluded as follows:
“It should be noted that the Claimant altered its position when it had first been told by the 1st Defendant’s official that drafts had been paid in and thereafter seeing the credit alert in its account.”

The said Exhibit C5 and Exhibit B6 for total sum of N13,230,000.00 (Thirteen Million, Two Hundred and Thirty Thousand Naira Only) as

evidenced by these exhibits were not available as cash. The exhibits disclosed reference details as “Outward Clearing Sky CQ” meaning outward clearing Skye bank Cheque i.e. the bank drafts are meant for clearing. The learned trial judge therefore seemed to misconstrue the said exhibits to mean that that the Respondent was justified to have altered its position when it was told by the Appellant’s official that the forged drafts had been paid in its account.

The content of these exhibits and the facts which the exhibits sought to establish was stated by DW1 in his evidence as follows:
“It is CBN Rule that if clearing cheque goes out, it must stay 3 days. During that time the Bank can either reverse the account or leave the deposit there. It was reversed in this case by the Bank.”

The banking custom which the Appellant established is to the effect that an instrument such as a bank drafts in this case must be presented for clearing and credited to the account of the paying customer within three working days of its being paid into the customer’s account. However, where the instrument is forged as in this case and detected during clearing, the account

will be reversed within the three-working-day cycle.

It seems that the Court below did not avert his mind to the fact that it is only through the clearing of Exhibit B5 at the Clearing house that the authenticity of the instrument could be deciphered. If the trial judge had properly evaluated these two pieces of evidence, he would have appreciated the following basic facts:
(a) Exhibit B5 are negotiable instruments and are subject to clearing at the clearing house;
(b) It is only after the Exhibit B5 are cleared latest on Monday, 12 September, 2011 that the authenticity or otherwise of Exhibit B5 could be deciphered;
(c) The Respondent ought to wait after the clearance of Exhibit B5 before releasing the alleged bags of rice to its first time Customer, Desmond Peters;
(d) Exhibit B5 was returned as forged and unpaid on 8 September, 2011, hence the Respondents account was reversed accordingly; and
(e) Therefore, Exhibit B5 is inoperative and no right to enforce payment or any benefit there from may inure to the Respondent.

One cannot but conclude that the Court below had failed to properly evaluate the evidence adduced and

assess the duty of care on the part of the Appellant and the Respondent to determine where negligence lies in the instant case and to what extent. There seems to be nothing from the evidence on record showing that the Appellant is liable to the Respondent in the sum of N13,230,000.00 (Thirteen Million, Two Hundred and Thirty Thousand Naira Only) being the total value of the forged bank drafts because the forgery was not shown to be detectable on the face of the two drafts. The Respondent could have exercised caution by not releasing the goods to an unknown customer until the drafts were cleared or insist on a draft purchased from the same bank to minimise risk. The Respondent’s own attitude of releasing rice to its first time customer before the cheques went to the clearing house was the bottom line of his financial loss.
In Okpala v NEPA (2003) 14 NWLR pt. 840 page 383 at 410 the Court held as follows:
“A judge has the onerous duty to carefully and squarely weigh every case in the balance with utmost great care and caution. In other words, the hallmark of the end of a case should be seen in the just decision arrived at and meted out to the

parties. The effect is to give a sense of conviction and satisfaction to all parties and non-parties alike.”
In the instant case, the trial Court did not properly evaluate the evidence before it and the Court of Appeal has the power to review the said evidence as appraised above. See Akpan v. Union Bank of Nigeria Plc [2003] 6 NWLR pt. 816 pg. 27 at 298 where Edozie, J.C.A. held as follows:
“An appeal against the decision of trial judge would be allowed if such decision was based on improper evaluation of evidence. See Seismograph V. Akporuovo [1974] 6 SC 119 at 140″. Where the trial judge failed to properly consider and evaluate the evidence adduced by both sides to the dispute, the Court of Appeal has a duty to consider and evaluate such evidence and make proper findings.”
It is pertinent to note that, in a banker-customer relationship, the Respondent also has a corresponding duty to take reasonable and ordinary precautionary measures against fraud. The Respondent ought to have waited for Exhibit B5 to clear before releasing the bags of rice to its first time customer or if he has to release instantly, the draft must be from his own bank.

See Bisi Salawu v Union Bank of Nigeria Ltd (1986) 4 NWLR (Pt. 38) 701 at 707, where this Court in dismissing an appeal, founded on a claim of negligence/fraud against a Bank for customer’s failure to adhere to an established banking procedure in judgment of cash deposits which resulted to fraud, held as follows:
“I entirely agree with the learned trial judge that the appellant himself unwittingly encouraged and facilitated the commission of fraud by Mr. Aboderin. A customer has a duty to take reasonable and ordinary precaution against fraud and if as a direct result of neglect of such precaution loss is sustained, he must bear the loss as between himself and the banker. See London Joint Stock Bank Limited V. Macmillan & Authur (1918) AC 777.”
The Court below was in error by finding the Appellant liable to the Respondent in negligence in the sum of N13,230,000.00 (Thirteen Million, Two Hundred and Thirty Thousand Naira Only) being the value of two forged bank drafts.

My vision is well focused to resolving issue 1 in favour of the Appellant. It further renders issue 2 insignificant. The appeal has merit and succeeds on this score. It is hereby allowed.

Accordingly, the judgment of the Court below rendered by Bankole-Oki, J. on 9th February, 2017 is hereby set aside. In the stead, the Respondent’s suit against the Appellant, at the Court below being bereft of substance, is hereby dismissed.
The parties shall bear own costs.

PAUL OBI ELECHI, J.C.A.: I agree with my learned brother HUSSEIN MUKHTAR, J.C.A. that the judgment of the lower Court delivered by Bankole Oki J., on the 9th February, 2017 is hereby set aside.

The Respondent’s suit against the Appellant at the Court below being bereft of substance is hereby dismissed. Also, parties are to bear their own costs.

PATRICIA AJUMA MAHMOUD, J.C.A. I have had the privilege of reading before now a copy of the lead judgment of my learned brother, HUSSEIN MUKHTAR, JCA and I entirely agree with his reasoning and conclusions.

For the same reasons contained in the lead judgment which I hereby adopt as mine, I also hold that this appeal has merit and I allow it.

Consequently, the judgment of the lower Court delivered by Hon. Justice Bankole-Oki is hereby set aside.
I too make no order as to costs.

Appearances:

Olumide Aju, SAN with him, A. N. Okoye, Esq. For Appellant(s)

Babatunde Busari, Esq. with him, Benson Nweze, Esq. For Respondent(s)