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SUIT NO. SC 335/1975.
BEFORE THEIR LORDSHIPS
Commercial Law – Contract – Bank Overdraft – Interest chargeable custom of Bankers – Express agreement on interest – Universal custom of Bankers.
OBASEKI, J.S.C. (Delivering the Judgment of the Court):
In the High Court of the Kano State holden at Kano, the appellant as plaintiff initiated these proceedings claiming against the respondent as defendant
(1) The sum of N43,334.48 being moneys lent to and moneys paid by the plaintiff as Bankers to the defendant at his request and for interest on the moneys due from him and forborne at his request and money found to be due from the defendant to the plaintiff;
(2) Interest at the rate of 10 per cent per annum as from 11th July, 1974 until judgment; and
(3) Interest at the rate of 5 per cent per annum from the date of judgment until the judgment is fully satisfied”
Pleadings were ordered and duly delivered and from the statement of claim, it Is clear that the claim was founded on account stated. In particular, paragraph 4 of the statement of claim reads: .
‘The plaintiff in keeping with its practice with customers’ account forwarded regular statements of account to the defendant and the defendant has never queried the said statement of account and has always admitted owing the plain-tiff. The statement of account of the defendant is attached to this statement of claim and marked Exhibit A and the plaintiff will rely on this statement of ac-count at the trial.”
The defendant in paragraph 4 of his amended statement of defence denied paragraph 4 of the statement of claim and went on to plead in paragraph 5 of the statement of defence as follows:
‘The defendant will contend at the trial that the defendant did not authorise the plaintiff to credit or debit the defendant’s current account opened with the plain-tiff on the 3118/72 with the statement of account of any of plaintiff’s customer or customers.”
Throughout the hearing, the main contention of the defendant was that the plain-tiff wrongly debited his account with the value of some drafts purchased by Mecca and Medina Travelling Agency which he operated and of which he was a director, without his instructions. At the hearing, two witnesses testified at the instance of the plaintiff.
The defendant testified denying owing any amount or receipt of monthly statement of account from the Bank. Alhaji Ibrahim Usman Wudil who had testified at the instance of the plaintiff as P.W.1 was called by and also testified at the instance of the defendant.
At the conclusion of the hearing, the learned trial judge entered judgment in favour of the plaintiff for a reduced amount in the last paragraph of his judgment as follows:
“The defendant is therefore liable to the plaintiff for the debit balance shown on Exhibit E less the amount in Exhibit F2 (£3285) and Exhibit F14 (£6,321) which comes to £9,606 (N43,334.48 less amount in Exhibits F2 and F14 N19,212.00 N24,122.48.
I accordingly enter judgment for the plaintiffs in the sum of N24,122.48 with interest at the rate of 10 per cent per annum from 11th day of July, 1974 till today. The plaintiffs are also entitled to claim 5 per cent Court rate from today until judgment debt Is satisfied.”
Neither the plaintiffs nor the defendant was satisfied with the judgment and being aggrieved, each has appealed from the said judgment to this Court.
The plaintiffs’ appeal was on two grounds which read as follows:
“(1) The learned trial judge erred in law and on the facts when he held that the defendant was liable to the plaintiff in the sum of N43,334.48 less amounts in Exhibits F2B and F14 which the defendant did not sign when In fact the defendant’s account (Exhibits C and E) did not show that the defendant’s account was debited with the amount shown in the said Exhibits F2B and F14 and when Exhibit F2B was not properly before the Court.
(2) Judgment is against the weight of evidence.
The defendants filed several grounds of appeal but the grounds of appeal argued before us are:
(1) That the judgment is against the weight of evidence; and
(2) (added with leave of the Court) That the learned trial judge erred in law and on the facts by holding “that the plaintiff can claim Interest at the rate of 10 per cent per annum on the overdraft in respect of requisition in Exhibits G2, G3 and G4 whereas there was no evidence that the defendant agreed to the rate of Interest or knew that his account was being overdrawn.”
We shall now proceed to deal with the plaintiffs’ appeal before considering the points raised in the defendant’s appeal.
We observe that the main complaint of the plaintiff is that although Exhibits F2B and F14 were tendered along with the other Exhibits, the amount £3285 shown in Exhibit F28 and £6321 In Exhibit F14 which were the requisitions for drafts were not debited against the account of the defendant and no debit notes in respect of these amounts were issued by the Bank or were in evidence. This was, according to Counsel, because they were cash transactions and unlike the other Exhibits of F and G series there was no instruction from the defendant to debit his account with these amounts. He further drew our attention to the fact that the statement of account for the relevant period Exhibit C on which the action was based did not contain any entry of those two amounts. He observed that the learned trial judge may have been misled (1) by the evidence of plaintiffs’ 2nd witness (who tendered the documents) when he said inter alia:
“I can identify the Pilgrims’ list and the requisitions signed by the defendant. I see these documents, they are the debit notes, I am referring to, together with the pilgrims’ list. There are 14 of them.
[Majiyagbe: I seek to tender them in evidence Alabi: I have no objection
Court: The 14 documents each consisting of debit notes, draft requisitions, list of pilgrims tied together are hereby admitted and marked Exhibits F1 -14]
I see Exhibits F1-14, they cover the period dated December, 1972 all of them bear the same month. 1 see amounts in Exhibits F1-14 (read out and checked against Exhibit C) the figures of the amounts on them all appear in Exhibit C.”
and (2) by the defendant’s evidence which inter alia reads:
“I see Exhibits Fl-14. In Exhibit F2B the signature for draft 30 for £3285 is not mine. In Exhibit F14 the signature on the bill of draft for £6,321.0.0 is not mine. In F11 the signature on the bill of draft No. 159 of 27/12/72 for £22069.0.0 is also not mine. The rest of the Exhibits have my signature on all of them.”
which gave the Impression that Exhibit F2B and Exhibit F14 had debit notes. The learned Counsel for the defendant in reply contended that if there was any error, it was as a result of the evidence of PI.W.2.
The portion of the judgment where the learned trial judge held that the amounts in Exhibits F28 and F14 were erroneously debited to the account of the defendant and where he proceeded to deduct them in order to arrive at the ‘true’ balance reads:
“Having accepted Exhibits C and E as certified copies of the defendant’s statement of account compared and checked with the books, I find that prima facie the defendant is owing the plaintiffs the amount shown on Exhibit E which was the last statement to be prepared. I say that the defendant is owing the amount shown on Exhibit E prima facie because he can bring rebutting evidence to show that he is not owing the amount shown on the statement. The last amount shown on Exhibit E which is a continuation of Exhibit C is N43,334.48k, and this is what the plaintiffs are claiming from the defendant. …. In this case the plain-tiffs alleged that the defendant signed all requisition forms on Exhibits F1-14 and Exhibits G1 -4 and that his account was debited with the amount shown on the requisitions. The various amounts on the requisitions have been shown by evidence of P.W2 to have appeared in Exhibit C. This statement was found correct.
The defendant however admitted signing the requisition form on Exhibits F1, 2A, 3-10, F12 and 13 but that he was deceived Into doing so by the plaintiffs’ employees. 1 have carefully compared the signature on Exhibit F11 with those on the above and I disbelieve the defendant when he denied signing Exhibit F11. I accept the evidence of P.W.1 and P.W.2 that he signed those requisitions on his own volition. ….. I also accept the defendant’s evidence that he did not sign the requisition forms on Exhibits F2B and F14, the total amount of which added up to £9,606 (N19,212.00) …..
The defendant is liable to the plaintiff for the debit balance shown on Exhibit E less the amount in Exhibit 1728 (£3285) and Exhibit F14 (£6,321) which comes to £9,606 (N19,212.00)”
We have ourselves examined Exhibits F2B and F14 as well as the oral evidence of PI./W.2 and found that the documents did not include any debit notes. Similarly, we have examined Exhibit C to see If the amounts stated in Exhibit F2B and Exhibit F14 appear in the debit column and are satisfied that the afore-said amounts did not appear at all in the statements of account Exhibits C and E on which the claim was founded.
The learned trial judge was therefore in error on the facts when he said:
‘The various amounts on the requisitions have been shown by the evidence of P.W.2 to have appeared in Exhibit C. This statement was found correct.”
and erred also in deducting the amounts in Exhibits F2B and F14 from the sum claimed. It seems to us that Exhibit F2B and Exhibit 14 go to no issue and as it is the law that evidence which go to no Issue should be rejected, the evidence constituted by these two Exhibits should have been jettisoned.
The appeal by the plaintiffs succeeds.
With regard to the cross appeal filed by the defendant, we observe that learned Counsel for the defendant argued his two grounds together. However, the only point of contention raised by the defendant’s Counsel was as to the rate of interest charged on the overdraft. Although a ground of illiteracy appeared in the grounds of appeal tiled, on the objection of Counsel for the plaintiff, Counsel was not allowed to raise the ground of illiteracy of the appellant as it was not made an issue in the court below so as to engage the attention of all parties in their pleadings and evidence, and the consideration of the learned trial judge. It appears this ground was the foundation of defendant’s appeal as learned Counsel for the defendant kept on (returning to it and found it almost impossible to argue his appeal without referring to that ground. He contended that there was no express agreement between plaintiffs’ Bank and the defendant on the rate of interest to be charged on overdraft and that the overdraft he took from the plaintiffs’ bank earlier on had been liquidated.
On the 1st ground “that the judgment is against the weight of evidence”, we can find no substance whatsoever. The judgment is amply justified by the overwhelming evidence in support of plaintiffs’ claim.
The amounts contained in the requisitions tendered along with the debit notes in Exhibits F1, F2A, F3 to F13 and G1 to G4 were debited to the defendant’s ac-count on the express instructions of the defendant and it was these debits that ate up the funds in the defendant’s account and caused his account to be overdrawn.
Having given written instructions to the plaintiff’s Bank to debit his account with these amounts in the aforesaid requisitions, it is not open to the defendant to con-tend the contrary.
Counsel for the defendant is also on slippery ground in his contention in ground 2 above that there was no evidence that the defendant agreed to the rate of interest or know that his account was being overdrawn.
The portion of the judgment being complained of reads:
“If a customer draws a cheque for a sum in excess of the amount standing to the credit of his current account, it is really a request for a loan and if the cheque is honoured, the customer has borrowed money.” I agree with learned Counsel’s submission. If one looks at Exhibit C, the penultimate page, one would see that when the defendant signed the requisition Exhibits G2, 3 and 4, the amount standing to his credit in his account was Insufficient to meet the value of the drafts so requested and so when the drafts were issued by the plaintiffs the balance of that amount was lent by the plaintiffs. I accordingly so find. The plaintiffs are therefore entitled at common law to claim interest on such loan (overdraft) but could be supported on the ground of universal custom of bankers … [Holder v. Inland Revenue Commissioners (1932) A.C. 624]
I hold that the plaintiffs can claim interest at the rate of 10 per cent per annum on the overdraft”
There is evidence [Exhibit B – an undertaking by the defendant in writing given on the 3rd of November, 1972] which clearly shows that the defendant knew that the interest rate the plaintiffs’ bank was charging at that time was 10 per cent and agreed that interest should be chargeable on the overdraft granted to him. We refer to Exhibit B. It reads:
I confirm that I have been granted an overdraft of £5000.0.0 (five thousand pounds) which is repayable by 31.1.73.
I agree that the interest for the time being is chargeable at 10% per annum with monthly rests.
Nhaji Maiwada Abubakar”
Looking at Exhibit C, we find that the amounts in Exhibits G1, G2, G3, and G4 were drawn from the defendant’s account on the 2nd day of January, 1973. These withdrawals went to reduce the account which was in credit to a debit of over N46,000 and despite several subsequent payments by the defendant, he only succeeded in reducing this heavy overdraft to the amount claimed in the writ at the time the writ was filed.
Where there is no express agreement, it is settled law that the Bank Is entitled to charge compound interest on the basis that there is a custom to that effect or that the customer has impliedly consented where without protest he allows his ac-count to be debited.
See Pagets’ Law of Banking, 8th Edition page 134. See Paton v. Inland Revenue Commissioner (1938) A.C. 341.
As Banking is of comparatively recent origin in this country, the origin of the custom of Bankers to charge interest on overdraft has to be traced to England from which our legal and judicial systems derived a lot of inspiration and guidance. In the case of Paton v. Inland Revenue Commissioners (1938) A. C. 341 which went up to the House of Lords, Lord Macmillan delivering his judgment observed at p.357 as follows:
“My Lords, the origin of this agreeable fiction whereby debits are to be deemed to be paid without payment may be traced historically to- the ingenuity of lenders in devising a method of obtaining compound interest without contravening the usury laws. It was illegal by an antecedent contract to stipulate for the payment of compound interest “but If you agree to settle account at the end of six months, that not being part of the prior contract and then stipulate that you will forbear for six months upon those terms (i.e. that the interest shall carry interest for the subsequent six months) that is legal” per Lord Chancellor Eldon in Ex parts Bevan 9 Ves 223, 224. On this principle, it was held in Eaton v. Bell 5 B AND Aid 34 that Bankers who with the knowledge of and without objection by their customers debited them with interest with half yearly rests in accordance with their general practice did not offend against the usury laws. This method of dealing with loan account which became common form among bankers survived the abolition of the usury laws and is well established as the ordinary usage prevailing between bankers and customers who borrow from them and do not pay the interest as it accrues.”
and Lord Maughan said at p.364:
“In the first place, I would observe that the Legislature must be taken in 1915 to have been fully conversant with the usual practice of Banks in the United Kingdom In relation to short loans and overdrafts. Unless the practice were de-parted from there would always be a payment of interest by the customer, that is either an actual payment or an apparent payment.”
As already stated above, the evidence on record of express agreement to the rate of interest the Bank (plaintiffs’ Bank) charged is fatal to the defendant’s main contention in his appeal. The grounds of appeal therefore fail and defendant’s appeal is hereby dismissed.
The plaintiffs’ appeal succeeds as already stated and it is hereby allowed. The amount for which the defendant was adjudged liable by Kalgo, Ag. J. in his judgment is hereby set aside and in its stead we substitute the sum of N43,334.48k (forty three thousand, three hundred and thirty four Naira, forty eight Kobo) with Interest at the rate of 10 per cent per annum from 11th July, 1974 to 22nd July, 1975 and thereafter at the rate of 5 per cent per annum till date of payment of the judgment debt. For the avoidance of doubt, we make the following orders:
‘There will be judgment for the plaintiffs for the sum of N43,334.48 (forty three thousands, three hundred and thirty four Naira, forty eight kobo) with interest at the rate of 10 per cent per annum from the 11th day of July, 1974 (the date of filing of the writ) till 22nd July, 1975 (the date of judgment in the high Court). This judgment debt shall bear interest at the rate of 5 per cent till payment.”
And this shall be the judgment of the Court.
The defendant shall pay the plaintiff costs of this appeal assessed at N100.00.