African Continental Bank Ltd V. Festus Sumoila Yesufu (1978)

LawGlobal-Hub Lead Judgment Report

BELLO, J.S.C. 

The facts of the case in this appeal are as follows: The appellants are commercial bankers and the respondent is their customer. In 1968, the respondent opened a current account in his personal name of Festus Omoregie Eke in the Warri Branch of the Appellants’ bank. In January 1969, he opened another current account No. 8080 in the business name of “Sarah Yesufu Trading Company” and that account was also known as account No. 1. By a letter dated 29th January, 1969, the respondent requested the appellants to consolidate the two accounts and consequently the appellants transferred the balance of the first account to the account No. 8080 (account No. 1).

In connection with the business of the respondent as a seller and exporter of rubber to his foreign customers, the appellants acted as his negotiating and collecting bankers. Whenever the respondent shipped any rubber, he presented his letters of credit and shipping documents to the appellants who negotiated the same on his behalf and collected the payments from foreign banks for the goods shipped. In respect of that export business the appellants maintained another account designated as suspense account No. 8081, (account No.2) in favour of the respondent.

In so far as the export business was concerned, the two accounts according to the evidence of PW.1, the then manager of the Warri bank, were operated in this manner: upon the presentation of bills by the respondent to the bank for negotiation or collection, the appellants advanced to the respondent money by way of an over-draft to the value of the bills and credited his consolidated current account with the amount and at the same time debited the suspense account with the same amount. When the bills were negotiated or collected and paid, the suspense account would be credited with the proceeds. It may also be pointed out that on 3rd August, 1970, the appellants transferred the balance of the suspense account, which then stood at a debit of 77,118pounds:14s:9d, to the consolidated current account and thereafter all the financial transactions between the parties were entered into in the consolidated current account No. 8080 (account No.1).

It was in respect of the aforementioned accounts that in proceedings commenced by the appellants in the High Court of Benin City, they claimed from the respondent the sum of 161,185pounds: 4 s: 0d being money payable by the respondent to the appellants for money lent by the appellants to the respondent and for money paid by the appellants for the respondent as his bankers and forborne at interest at the Respondent’s request and outstanding on the Respondent’s account as debit balance. They also claimed interest at the rate of 9 per centum from the date of the writ until judgment or payment. At the trial of the action the appellants called seven witnesses who testified on their behalf. The Respondent’s statement of the composite account, which shows a debit balance of 161,185pounds:4s: 0d, was admitted in evidence as Exhibit 5. Although the respondent had filed and delivered a voluminous Statement of Defence, he did not give evidence and did not call any witness. He rested his case on the evidence adduced by the Appellant.

After a review of the evidence adduced by the Appellant, the learned trial Judge made the following findings:

1. that the bulk of the amount claimed was in respect of bills which the appellants collected and undertook to negotiate for the respondent and that when some of those bills were dishonoured and some were under-paid, the appellants did not give notice to the respondent of their dishonour and under payment. Relying on (Bank of Scotland v. Dominion Bank (Toronto) (1891) AC 592), the learned trial Judge stated that the appellants had a duty to give such notice to the respondent and he found the appellants in breach of that duty;
2. that the appellants had not been sending periodic statements of account to the respondent and, consequently, the respondent could not be held to have implied notice that those bills were not collected and were not paid;
3. that the letter dated 21st July, 1971, Exhibit 10A, from the respondent to the appellants and the evidence relating to the discussion the respondent had with the solicitor of the appellants (PW.4) did not amount to an admission of the Respondent’s indebtedness to the appellants. The learned trial Judge then arrived at the following conclusion: “As pointed out by Mr. Okeaya Inneh, the claim put forward by the bank embraces a lot of items which were neither specified in the Statement of Claim nor in the evidence of the principal witnesses who testified for the bank. But prominent in the claim were the uncollected or short-paid bills for which the bank has been unable to account to the defendant. On the basis of non or short collection without notice to the defendant, the latter became heavily indebted to the bank, and thereby incurred substantial amount of compound interests on the alleged overdrafts as could be seen particularly on pages 1, 15, 16 and 17 of Exhibit 5. I am of the view that in failing to notify the defendant of the state or fate of his bills which he presented to the bank to collect for him, the bank was certainly negligent, and it cannot turn round to ask the defendant to pay the difference between the face values of the bills and the amounts actually received by them from their overseas agents. It would be wrong to allow the bank to take advantage of its own negligence for which it has offered no explanation to make a claim on the defendant for the difference received or non-payments by the bank from overseas, and which in its books are now considered as over-drafts against the defendant.” (Underlining is ours)

Notwithstanding his finding that the respondent “became heavily indebted to the Bank,” nevertheless, the learned trial Judge dismissed the Appellants’ claim in its entirety on the ground that the indebtedness was incurred through the negligence of the appellants by their failure to give notice of non-payment or short payment of the bills to the respondent. It is against that decision that the appellants have appealed to this court upon the only ground that the decision is against the weight of evidence.

Learned counsel for the appellants, relying on Exhibits 9 and 10A and the evidence of the undertaking given by the respondent to the Solicitor of the appellants (PW.4) to pay the debt, contended that there is irrebutted evidence amounting to admission of the debt by the respondent and that the learned trial Judge ought to have found the respondent liable on the basis of that admission. He further submitted that there is ample evidence showing that the appellants had been sending statements of account, and in particular had sent Exhibits 5 and 7, to the respondent and that evidence has not been rebutted. He urged us to allow the appeal and enter judgment for the appellants in the amount claimed. In reply learned counsel for the respondent emphasized the point that although the respondent did not give evidence, the onus was still on the appellants to prove their claim and that they failed to discharge the burden of proof. He submitted that Exhibit 10A, which was written by the respondent in answer to Exhibit 9, ought to be excluded from the records of appeal on the ground that it was not pleaded and consequently it went to no issue. In the alternative he argued that if the letter, Exhibit 10A, was rightly admitted in evidence, then the interpretation put on it by the learned trial Judge “that it could not amount to admission of his (respondent’s) indebtedness” was correct. He conceded that the statement of account, Exhibit 7, was sent to the respondent but contended that the weight to be attached to it should be very minimal since it was not signed by the bank official who prepared it and the official who checked and examined it did not testify at the trial.

Upon a proper consideration of the case, concluded the learned counsel for the respondent, and having regard to that fact that there is no evidence of the whereabout of the bills in question and that their position is still uncertain, the appellants failed to prove the precise amount due to them from the respondent and the appeal ought to be dismissed.

The matter under consideration in this appeal may be put in a nut-shell: two witnesses (PW.1 and PW.6), who were the managers of the bank at the material time, testified that the respondent was indebted to the appellants in the sum of 161,185pounds:4s:0d and they produced the Respondent’s statement of account (Exhibit 5) which showed a debit balance in that sum. The solicitor of the appellants also testified that in the reply (Exhibit 10A) to his letter demanding that the respondent should settle his debt, then in the sum of 179,310pounds:7s:7d, the respondent stated that he intended to liquidate his total indebtedness and at a meeting thereafter with the solicitor he further agreed to settle the debt and made a part payment of 40,000 Pounds. The learned trial Judge, as we have earlier on indicated, found that the respondent “became heavily indebted” to the appellants and nevertheless dismissed the appellants’ claim in its entirety on the only ground that the appellants did not give notice of dishonour or under-payment of the respondent’s bills which formed the bulk of the amount claimed. There are two issues for determination in this appeal.

Firstly, whether the appellants have a right of recourse against the respondent in respect of the bills which were dishonoured by non-payment. Secondly, whether they have the same right in respect of the bills which were under-paid on collection. Subject to the qualification which we will in due course point out, we think the learned trial Judge correctly stated the law relating to the duty of a banker to give notice of dishonour of his customer’s bills. It is trite law in England but if a banker undertakes the collection of bills for a customer, he is bound to present them for acceptance and payment in accordance with the provisions of the Bills of Exchange Act 1882, and must give notice of dishonour to his customer if they are dishonoured: See 3 Halsbury’s Laws of England, 4th Ed. p.81 para. 106 and Bank of Scotland v. Dominion Bank (Toronto) (1891) AC 592 which was cited by the learned Judge. The duty to give such notice is a statutory duty and it is founded under the provisions of the Bills of Exchange Act, 1882. Sections 47 and 48 of the Act provide:

“47. Dishonour by non-payment

(1) A bill is dishonoured by non-payment

(a) when it is duly presented for payment and payment is refused or cannot be obtained, or