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BANK OF THE NORTH LIMITED
COURT OF APPEAL
WEDNESDAY 16TH JUNE 1993
BEFORE THEIR LORDSHIPS
OBINNAYA ANUNOBI OKEZIE;
RAPHAEL OLUFEMI ROWLAND.
BANKING – Effect of failure of bank to give notice of dishonour of cheque
PRACTICE AND PROCEDURE – Bindingness of pleadings as basis of evidence led and made by court
T.E. Williams – for the appellant
J.M.O. Oyetunde with him H. G. Bok) for the respondent
OBINNAYA ANUNOBI OKEZIE (Delivering Leading Judgement)
This is an appeal against the judgement of Honourable Justice Kaumi Kolo, Chief Judge of the High Court of Borno State, holden at Maiduguri delivered on the 9th day of November 1989 in which he gave judgement for the plaintiff against the defendant in the sum of N494,593.39k plus compound interest on same at the rate of 13½% from the 28th February 1987 until date of judgement i.e. 9th November 1989 – plus 10% interest from 9/11/89 until full payment. The learned trial Judge granted a declaration that the respondent is entitled to sell appellant’s landed property covered by the certificate of occupancy No.BO/2167 deposited as security for the loan of N50,000.00 to settle the judgment debt.
The action was brought by the plaintiff Bank against the defendant for the balance of the amount claimed to be due and owing on its customer’s overdraft current account. The defendant was initially granted N50,000.00 plus interest at the rate of 11%. According to the plaintiff’s evidence as at 30th, December 1980, there was a debit balance of N54,928.58 in the defendant’s account. See P.41 lines 14-18 of the records. Between that date and 2nd June, 1982 sum totalling N37,000.00 were paid into the account. See P.41 lines 22-26 of the records. The controversy between the parties arose from the decision of the plaintiff to debit the account of the defendant with sum of N185,650.10 made up of five cheques issued by third parties to the defendant which the defendant paid into his overdraft account but which the plaintiff claimed were subsequently dishonoured and lost is transit.
The plaintiff called four witnesses in support of its claim. The defendant did not call witness.
The defendant (now appellant) categorically denied owing the respondent any amount and if there is any such debt, he claimed to have discharged it.
In his final judgment the learned trial Judge concluded that the appellant’s account was properly debited with sum in question.
It is against this judgment that the appellant has appealed to this court filing one original Notice and Ground of Appeal but later filed An Amended Notice of appeal and Grounds of Appeal with the leave of court.
The grounds are as follows:-
(a) Each of the said cheques was drawn by a third party.
(b) On the evidence before the court, the plaintiff accepted the said cheques as absolute (as opposed to conditional) payments.
(c) Although the five cheques were credited to the account of the defendant between 9/12/78 and early 1979 no notice of dishonour to the plaintiff’s witness) around June 1979 and the plaintiff claimed that all the cheques were lost.
(d) Even if the cheques can be regarded as conditional payments by defendant to the plaintiff, by reason of the facts stated in item (c) hereof, the plaintiff having dealt with the five cheques in such manner as to rendered them useless to the defendant it (the plaintiff) must now be considered as having taken them absolutely.
(iii) The plaintiff has failed to prove the amount (if any remaining unpaid) out of the N50,000.00 overdraft. Accordingly, the declaratory order relating to its power of sale under the deed of mortgage ought not to have been made.
(iv) Judgment is against the weight of evidence.
Briefs of argument were filed, exchanged and adopted by counsel for both parties the hearing of the appeal. In the appellant’s brief of argument, three issues for determination of the appeal were formulated.
They are as follows:
“i. Whether, on the evidence before the court below, the respondent has established that the five cheques paid in by the appellant were in fact dishonoured.
iii. In the light of the answers to the foregoing questions what final order should the court below have made on the various reliefs claimed by the respondent.
The respondent, on the other hand also formulated three issues as follows:
iii. Whether, having regard to the evidence before it the court was right in giving judgment in favour of the respondent as above.
I have examined carefully the issues postulated by both parties and I am of the view that the three issues formulated by the learned counsel for the appellant could be more appropriately adequate to dispose of the appeal.
In the first issue, Mr.T. Williams learned counsel for the appellant in his brief and in the oral argument before us submitted that proof that a cheque was dishonoured can only be given by evidence that (a) the cheque was presented for payment to the drawee bank and (b) dishonoured on presentation for payment.
We were referred to the conclusion of the learned Chief Judge which is being contended that the five cheques were presented and dishonoured opined at page 83 of the record thus:
“There is ample evidence clearly showing that the five cheques in question were dishonoured and consequently his account being debited with the sum of N185,650.00 as the proceed of the cheques were already paid.”
Before I state the response of the respondent on the point, (if any) to the above argument and in order to appreciate the real points in issue between the parties, it is necessary to peruse the pleadings of both parties. To this end it is necessary to set out some paragraphs of the statement of claim in this connection which are to be found in paragraphs 9 and 11 of the statement of claim thereof and they are as follows:
“9. the respondent, in the course of its normal banking duties despatched the cheques for payment by the Drawee Bank – i.e. Kano City Branch of Bank of the North Limited, Kano.
In paragraph 13 of the statement of defence, referred to by the respondent, the appellant pleads as follows:
“13. The defendant denies paragraph 13 of the statement of claim and puts the plaintiff to strictest proof of the fact that the N185,650.00 cheques were presented but not paid by the Drawee Bank. The plaintiff admits that his account No.400219 was not credited with the sum as the plaintiff had claimed that the cheques got lost in transit…………………….”
Learned counsel for the appellant submitted that there is no averment that the cheques were ever received by the Kano City Branch or that bank dishonoured any or all the cheques. Nor is there any allegation that the cheques or any of them were “lost in transit.”
In this regard P.W.1, Mohammed Musa deposes as follows:
“The five cheques were dishonoured and re-submitted but still dishonoured. The cheques got lost in transit. The value of the five cheques was N185,650.00. The fact that the five cheques were dishonoured and at the same time they got lost in transit were brought to the notice of Bala Yau this appellant.”
See Record of Proceedings P.32 lines 14-19.
It is submitted that this evidence goes to no issuing from the pleadings. The alleged loss of the cheque is a material fact which ought to have been pleaded.
Learned counsel for the respondent referred to the paragraph 13 of the defence and submitted that there is overwhelming evidence to prove that the five cheques were in fact dishonoured. The appellant both in his pleadings and in his evidence admitted and acknowledge that the five cheques were in fact never honoured. Learned Counsel further submitted that the appellant having admitted in his pleadings that the value of the five cheques was in fact never credited to his account, the question if actual proof of whether or not the cheques were physically presented to and actually dishonoured by the Kano-City branch of the bank is irrelevant. Learned counsel argued that the burden of proving that the cheques were dishonoured shifted to the appellant which has not been discharged. He contended that the appellant made efforts to obtain replacement cheques for the amount in question – see Exhibit C.
The learned counsel concluded that the appellant admitted the five cheques were not honoured or credited to his account, the respondent need not adduce evidence to prove how the drawee bank presented with the cheques and how same got lost in transit. Reliance was placed on section 76 of the Evidence Act.
I am in agreement with the submission of learned counsel for the appellant which has not been faulted by the learned counsel for the respondent in his brief and oral argument before us that there is no averment that the cheques were presented to the drawee bank – Kano City Branch – for payment and dishonoured any or all of the cheques. Nor is there an allegation that the cheques were lost “in transit”. Such issues were not before the trial court.
It is now perfectly settled that pleadings control the evidence and the findings. There are plethora of decided cases on this principle which point to one conclusion and that is to the effect that findings of facts cannot be based on matters for which there is no pleadings and for which no evidence has been adduced. I hold the view that the matter of dishonour of cheques and the alleged loss are material facts which ought to have been pleaded. As there facts were not put in issues in the pleadings, they do not arise for any findings by the learned trial Chief Judge, See: Aniemeka Emegokuwe v. James Okadigbo (1973) 4 S.C.113 p.117; AFRICAN CONTINENTAL SEA WAYS LIMITED v. NIGERIAN DREDGING ROADS ; (1977) 5 S.C. 265 pp.247-250.
It would therefore be wrong for the trial court to provide the respondent with a case different from what it set up in its pleadings for which no satisfactory evidence was adduced. See: George & Ors v. Dominion Flour Mill Ltd (1963) 1 SCNLR 242; (1963) 1 All NLR 71; N.I.P.C. v. Thompson Organisation (1969) 1 NMLR p.99 and Shell B.P. Ltd v. Abedi & Ors (1974) 1 All NLR (Pt.1) established that parties are bound by their pleadings and evidence adduced in proof of those averments.
The conclusion I have reached is that the trial court was wrong in finding that the five cheques in question were dishonoured when the respondent did not aver such in the pleadings.
This leads me to consider the second issue relating to payment by cheques.
The law regarding payment by cheques which in law is a bill of exchange is put succinctly in Chalmers on Bill of Exchange as follows:
“Where a bill or note is given by way of payment, the payment may be absolute or conditional, the strong presumption being favour of conditional payment. It is immaterial whether the instrument is payable on demand or at a future time.”
See Pp.338-339 of the 13th Edition of the monograph.
The learned counsel Mr. Williams has invited us to hold on the facts of this case that the five cheques were accepted by the respondent bank as absolute as opposed to conditional payment of cash to the bank. In the first place, he submits that each of the five cheques was drawn by a third party on another branch of the respondent bank and the appellant was not a party to the instrument. In the second place it was common ground between the parties that:
“The appellant without waiting for the equal period to ensure clearance of the cheque……. was granted withdrawal against the uncleared cheques.”
The learned counsel for the appellant then concluded that the reason for this favourable treatment was because the appellant:
“Convinced the Maiduguri branch Manager of the respondent bank that all the five cheques would be honoured promptly.”
See p.16 paragraph 11 of the statement of claim:
which is denied in paragraph 3 of the defence (page 20 of the record of proceedings).
The respondent contends that the facts and evidence show that:
(a) the appellant maintained accounts at the Maiduguri branch of the respondent bank, (See paragraph 2 of the respondent’s statement of claim and Paragraph 5 of the appellant’s statement of defence at page 20 of the record of proceedings).
(b) the five cheques in question were cheques issued in favour of the appellant by third parties of paragraph 7 of the statement of claim at pages 15-16 of the Record of Proceedings which is admitted by the appellant in paragraph 2 of the statement of defence at page 20 of the record of proceedings.
(c) that the said cheques were drawn on the Kano – City branch of the respondent bank and that same were despatched for payment by the said Kano City branch (see paragraph 9 of the record of proceedings which is admitted by the appellant in paragraph 2 of the statement of defence at page 20 of the record of proceedings):
(d) that the appellant knew that the cheques would take a few weeks (from the date of payment of same into his account at Maiduguri) to be cashed in Kano (see paragraph 7 of the appellant’s counter-claim at page 26 of the record of proceedings).
It is the submission of the learned counsel for the respondent that the above admissions are proof beyond reasonable doubt that the five cheques were never knew the cheques were accepted on the condition that when presented they would be honoured.
The respondent further stated that it is settled banking practice that when customer draws on “uncleared effects” he is merely asking for a loan or overdraft which he is bound to repay.
From the argument of both counsel and having perused the pleadings and the evidence adduced in this case I come to the conclusion that the appellant lodged five cheques and took value for them, when he had no money in his account, before the effects of the one paid in were cleared. He was only asking for an overdraft.
See Adereti v. Attorney-General of Western Nigeria (1965) 1 All NLR 254; Cuthbert v. Roberts Lubbock & Co (1909) 2 Ch.D. 226.
Let me say unhesitating here that the learned Chief Judge was right to have come to the conclusion that the account of the defendant was in red prior to the debiting of the sum of N185,650.00 in his account. That the defendant knew he had no money when he lodged the cheques.
Now since the appellant admitted that the five cheques in question would take a few weeks to cash at Kano he is deemed to have known that the cheques were accepted by the respondent on condition that they would be paid when presented for payment. Certainly this is not an absolute payment.
Learned counsel for the appellant further submitted that even if this court is unable to accept the submission that the respondent bank accepted the five cheques as absolute payments, the only alternative findings that the cheques were accepted on condition that when presented, they will be honoured. In that situation the appellant respectfully adopts the law as stated in the 26th Edition of Chitty on Contracts Vol.1 para.1551 p.982 which reads:
“Duties of Creditor holding a negotiable instrument upon which the debtor is not primarily liable, is accepted by the creditor as conditional payment, he is bound to do all that a holder of such instrument may do in order to get payment; thus it is his duty to present a cheques within a reasonable time, and if he fails to do so, and the debtor is thereby prejudiced, the creditor is guilty of laches and makes the cheques his own so that it amounts to payment of the debt. Similarly, the creditor must give due notice of dishonour and take other necessary steps to preserve his remedy against the parties secondarily liable. It is necessary to give notice of dishonour to the debtor only where he is a party to the negotiable instrument to whom such notice is required to be given.
The creditor, however is not under such strict duties if it is the debtor who is primarily liable on the negotiable instrument given as conditional payment; in the case the onus is on the debtor to show a sufficient reason for failing to pay when it fell due.”
It is the submission of the learned counsel for the appellant that the respondent and the drawers of the cheques of the cheques were not put on notice of the dishonour of the cheques in which case the appellant was not liable. He referred to the Bills of Exchange Act – Cap.35 Laws of the Federation 1990, sections 47, 48 and 49 which made provisions how the notice is to be given and within a reasonable time. This was not done. The respondent thereafter made the cheques his own. The following cases were relied upon: Bridges v. Berry (1810) 3 Taunt 130 (128 ER 51); Growe v. Clay 9 Ech.604 (156 ER 258). The respondent was guilty of laches: Peacock v. Pursell (1863) 14 CB (NS) ER 630 and Camidge v. Allenby (1827) 6 B & C 373 (108) ER 489.
The learned counsel for the respondent contended that from the evidence before the court the respondent had discharged its duties by presenting the cheques for payment within a reasonable time and the fact f their dishonour and ultimate loss was duly acknowledge and accepted by the appellant, judging from steps and actions taken by him: The appellant is therefore estoppel from denying that he:
(a) knew that the five cheques were accepted by the respondent bank on the condition that when presented they would be paid and:
(b) knew that the five cheques were dishonoured and ultimately lost in transit and accepted responsibility for same.
I find it necessary to set out some provisions of sections 47, 48 and 49 of the Bills of Exchange Act 1990 material to this case are:-
“47(i) A bill is dishonoured by non-payment-
(a) when it is duly presented for payments and payment is refused or cannot be obtained or where an advice is rent through the post office in pursuance of subsection (3) of Section 45 of this Act, payment is not obtained.
(ii) in this case of a bill payment on demand, within ten days from the time the advice is posted.
(a) where a bill id dishonoured by non-acceptance, and notice of dishonour is not given, the rights of a holder in due course subsequent to the omission shall not be prejudiced by the omission.
(L) the notice may be given as soon as the bill is dishonoured and must be given within reasonable time thereafter, and in the absence of special circumstances, notice shall not be deemed to have been given within a reasonable time unless-
(i) where the person giving and the person to receive notice reside in the same place, the notice is given or sent off in time to reach the latter on the day after the dishonour of the bill.
(ii) where the person given and the person to receive notice reside in different places, the notice is sent off on the day after the dishonour of the bill, if there be a post at a convenient hour on that day, and if there be no such post on that day then by the next post thereafter.
The main contention of the appellant in this aspect of the dishonour of the five cheques is that the appellant was never put on notice neither were the drawers about the dishonour of the cheques. In order to prove that a cheque had been dishonoured notice must be given See: sections 47(1), 48 (supra). This was not done. By the action of the respondent it made the cheques its own. See: Bridges v. Berry (supra). In that case, the defendant being unable to pay a bill when due, which he had accepted, obtained time, and indorsed to the plaintiff as a security; a bill drawn by himself to his own order, which was due, was dishonoured by the laches the defendant was not only discharged of the one bill but also as acceptor of the other.
By failing to give notice of the dishonour the respondent prevented the appellant from giving notice to the third parties who gave the appellant the cheques.
The notice must be given within a reasonable time. In this connection the P.W.1 testified that between December, 1978 and March, 1979 the appellant took value for the five cheques which were sent to Kano City Branch for clearance and was dishonoured. The cheque got lost in transit. The respondent waited for about a year before it informed the appellant that it had debited his account. This was by the undertaking given in Exhibit C in 3/12/79. The learned trial Judge discarded Exhibit C and I wonder whether he really saw it.
The said Exhibit was an agreement made between the appellant and the respondent on 3/12/79 to replace the cheques when he was informed about the state of his account. The Exhibit J dated 6/2/85 demanded to know the current balance of indebtedness to the respondent Exhibit K referred to the mortgage property which is in issue here.
The law frowns on laches See: section 49(1) (supra) In Peacock v. Pursell (supra) the case evaluated in non payment of the bill coupled with this fact, the holders having neglected to present the bill and give to the defendant notice of its dishonour, all remedy upon it is lost. The security is marred by the plaintiff’s own laches. The legal effect of taking a bill as a collateral security is, that if, when the bill arrives at maturity, the holder is guilty of laches, and omits duly to present and give notice of dishonour, if not paid, the bill becomes money in his hands as between him and the person from whom he received it. That being so, the plaintiff’s debt is satisfied.”
See also Camidge v. Allenby (1827) (supra) where it was held that the vendor of the goods was guilty of laches and had made the note his own, and, consequently that they operated as a satisfaction of the debt.
I am of the same opinion that the laches of the respondent in not duly presenting the cheques or bills constituted thus a payment before the action.
This case stands or falls in accordance with averment in the pleadings and the evidence in proof of those averments.
The conclusion I have reached is that the learned trial Chief Judge was wrong in finding the appellant liable to the respondent when the respondent did not sue pleadings and in the absence of any evidence adduced in that regard.
As regards the relief granted by the learned Chief Judge, which gave judgment for N494,893.39k with interest 131/2 % per annum from 28/2/89 till 9/11/89 and 10% per annum from that date till the date of payment. The court it is submitted granted a declaration that the respondent is entitled to sell the mortgaged landed property covered by the certificate of occupancy. It is further submitted that in the light of the arguments so far advanced, the sum award must be set aside on the ground that the sum of N185,650.00 was wrongly debited to the appellant’s account at the time when debited and this falsified the computation and balance due from the appellant.
The learned counsel for the respondent submits that the complaint appellant is that since his account was wrongfully debited with N185,650.00 (value of the five cheques) the judgment in favour of the respondent must be set aside. It is further submitted that this ground must fail because as shown above the appellant has admitted that he has:
(a) taken full value of the five cheques even though the effects were never cleared. (Refer to paragraph 8 of the appellant’s counter-claim at page of the record of proceedings).
(b) accepted to make good the value of the five cheques (refer to Exhibit “C” and also lines 22-25 at page 51 of the record of proceedings where the appellant admitted taking steps to replace the lost cheques) –
(c) admitted in Exhibits C, F, G, J and K that he is indebted to the respondent bank to the full debit balance in his account which included the N185,650.00 debited his account on notice.
Learned counsel finally submitted that the above overwhelming admission of indebtedness, some of which were written by the appellant’s solicitors, submits that the judgment of the learned trial Judge is just.
I have considered the submission of counsel on the sides. I agree with the submissions of learned counsel for the appellant that the sum of N185,650.00 was wrongly debited to the appellant’s account at the time when it was debited and thus falsified the computation of interest and the balance due from the appellant. In other words the dismissal of the suit should be without prejudice to the respondent’s claim for what may be due on a true account between the parties. In regard to the claim about the mortgage, it was not in dispute in the court below that the mortgage was executed as security for the N50,000.00 overdraft facilities granted to the appellant. See paragraph 3 of the statement of claim which is admitted in paragraph 2 of the defence. It is clear from the evidence in the court below that there was no application for increased overdraft. There was evidence that the appellant paid N58,000.00 which went for the settlement of the N50,000.00 overdraft. The onus is on the respondent to show that the appellant is owing in respect of the overdraft to justify the exercise of its power of sale under the mortgage. The state of the evidence in this case is such that it cannot reasonably be said that this onus was discharged.
In the premises this appeal ought to be allowed and it is hereby allowed. The judgment of the court below is set aside and an order dismissing the respondent’s claim is submitted for the following among other reasons:
(a) The respondent has failed to establish before the court below that the five cheques paid in the appellant were in fact dishonoured.
(b) Having regard to the facts and circumstances relating to the said five cheques, it was right and proper for the respondent to have debited the account of the appellant with the total of the said cheque.
(c) The respondent has failed to discharge the onus on it of proving anything was owing to it by the appellant out of the overdraft of N50,000.00 granted to the said appellant.
(d) The mortgage was executed as security for the aforementioned overdraft of the said N50,000.00
(e) In the premises, the decision that the appellant shall pay the sum of N494,593.39 to the respondent with interest and the declaration that the respondents is entitled to the mortgage property is set aside.
Appeal allowed with costs to the appellant assessed at N800.00.
Musdapher and Rowland JJCA concurred.
Cases referred to in the judgment:
Adereti v. A-G Western Nigerian (1965) 1 All NLR 254
African Con. Seaways v. Nig. Dredging Roads & General Works Ltd (1977) 5 S.C. 255.
Emegokwue v. Okadigbo (1973) 4 S.C. 113
George v. Dominion Flour Mill Ltd (1963) 1 SCNLR 117
N.R.C v. Thompson Organisation (1969) 1 NMLR 91
Shell B.P. Ltd v. Abedi (1974) 1 All NLR 1