3PLR – NIGERIA MERCHANT BANK PLC V. AIYEDUN INV. LTD
POLICY, PRACTICE AND PUBLISHING, 3PLR, LAW REPORTS
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NIGERIA MERCHANT BANK PLC
V.
AIYEDUN INV. LTD
COURT OF APPEAL
CA/L/288/94
3PLR/1998/84 (CA)
OTHER CITATIONS
(1998) 2 NWLR (Pt. 537)
BEFORE THEIR LORDSHIPS:
AYOOLA JCA
REPRESENTATION
M.D. BELGORE, ESQ – for the Appellant
Chief T A BANKOLE OKI, SAN (with him I.VA EMERSON, ESQ) – for the Respondent
MAIN ISSUES
BANKING AND FINANCE LAW:- Banking practices – Action for recovery of interest on deposit account – Interest – Meaning and essence of – How money became due to a person (under a contract, express or implied, or a statute, or whether the money was due for any other reason in law) – Whether material
BANKING AND FINANCE LAW:- The operation of a deposit account – Legal implication – Where pleadings do not go further to expressly plead an agreements as to interest will not matter
BANKING AND FINANCE LAW:- Liability to pay interest on an account – Whether cannot be claimed as special damages – Where liability to pay interest is founded on contract – Whether interest accruing on the deposit account should strictly be claimed not as damages but as money due on the contract
Pursuant to a joint venture agreement between the respondent and one Alfredo Enterprises Limited, the respondent deposited the sum of one million naira into a deposit account in the appellant’s bank. It would appear that the said Alfredo Enterprises Limited was indebted to the appellant. It was then agreed between the respondent and the company Alfredo that the appellant should hold a lien and exercise the right of set off on their deposit account for as long as Alfredo remains indebted to the appellant.
The appellant claimed to have exercised the right to set off the one million naira and the interest accruing thereon up to 23rd April, 1992. the respondent instituted this suit to challenge the exercise of such right.
The trial court found that there is no justification for the appellant to exercise the right of set off over the deposit account. The trial court therefor entered judgment in favour of the respondent in the sum of N4,426,075, being the refund of the N1,000,000 deposited with the appellant by the respondent and N3,426,075 as special damages.
The appellant was dissatisfied with the award of special damages and appealed in respect of that alone. On appeal, the appellant contended that there were no averments in the pleadings in support of the claim for interest as special damages and that the respondent did not prove its claim for special damages as required by law or establish a claim for interest and the quantum of such claim.
{Issues}
- Whether operation of a deposit account by a depositor implies the liability of the banker to pay interest on the account and whether in an action emanating from withholding the money due at the end of the contract period by the bank, the depositor has to plead liability of the banker to pay interest.
- Whether it is right for a party in a suit to plead that he would rely on certain unspecified documents at the trial.
MAIN JUDGEMENT
{Held – Summary}
Unanimously allowing the appeal in part
- The essence of interest is that it is a payment which becomes due because the creditor has not had his money at the due date. It may be regarded as representing the profit he might have made if he had the use of the money, or conversely the loss he suffered because he had not that use. The general idea is that he is entitled to compensation for the deprivation. It is immaterial whether the money was due to him under a contract, express or implied, or a statute, or whether the money was due for any other reason in law. In any of such cases, the money was due to him and withheld from him by the debtor after the time that the payment should have been made, in breach of his legal rights
- The operation of a deposit account implies a liability on the banker to pay interest on the account. In an action for recovery of interest on a deposit account as in this case, the fact that the pleadings do not go further to expressly plead an agreements as to interest will not matter.
- The liability to pay interest on an account cannot be claimed as special damages, nor would the averment, whether express or implied, as to the defendant’s liability to pay interest determine the circumstances in which interest could be claimed as damages. If the liability to pay interest is founded on contract, any interest accruing on the deposit account up to the date of the breach by the bank to pay the money due on the deposit account when demanded or due according to the agreement of the parties should strictly be claimed not as damages but as money due on the contract.
- Anything in the nature of interest can only be given as damages for the wrongful detention of money which ought to have been paid. The interest is compensation, whether the compensation is liquidated under an agreement or statute; the essential quality of the claim for compensation is the same and the compensation is described as interest.
DELIVERING THE LEADING JUDGEMENT AYOOLA JCA
This is an appeal from the decision of the Lagos High Court (Alabi, J) giving judgment for the plaintiff in the sum of N4,426,075.00, being as to N1,000,000 refund of money deposited with the defendant by the plaintiff and, as to the balance, interest on the said sum. The defendant who is the appellant in this appeal is referred to as the defendant, while the respondent who was the plaintiff at the trial is referred to as the plaintiff in this judgment. This appeal is limited to the award of the sum of N3,426,075 as special damages. The main complaints of the defendant on this appeal are that there wee no averments in the pleadings in support of the claim for interest as special damages; and that in any event the plaintiff did not establish its claim for special damages as required by law nor had it established a claim for interest and the quantum of such claim.
The background facts as found by the learned trial judge, were as follows. The plaintiff and one Alfredo Enterprises Limited entered into a joint venture agreement pursuant to which the plaintiff deposited the sum of one million naira into a deposit account with the defendant. The plaintiff and Alfredo Enterprises Ltd (‘Alfredo’) entered into an agreement whereby it was agreed between them that the defendant should ‘hold a lien and exercise the right of set off on our deposit account with Nigeria Merchant Bank.. for as long as the company remains indebted to the Bank. The defendant claimed to have exercised the right to set off One Million Naira plus the interest accruing thereon up to 23rd April 1992 on the plaintiff’s deposit account to the loan account of Alfredo. The learned judge found that there was no basis or justification for the defendant to exercise the right of set off over the deposit of One Million Naira which the plaintiff kept with it, and that the plaintiff was entitled to a refund of that sum. Against that finding there has been no appeal. As earlier said, this appeal concerns the award of interest.
On the question of interest, the judge was of the opinion that: ‘The fact that the plaintiff is entitled to interest is not in doubt He buttressed this opinion by reference to paragraph 16 of the statement of defence wherein the defendant averred that it transferred the principal sum plus interest up to 23rd April, 1992 from the plaintiff’s deposit account to the loan account of Alfredo. The obvious inference from that averment is that the plaintiff’s deposit had been attracting interest. The judge relied on the uncontroverted evidence of the plaintiff’s expert witness to fix the rate and quantum of interest.
At the forefront of the argument of counsel for the plaintiff on this appeal is the pleading question. Plaintiff’s counsel submitted that the evidence which was adduced to establish the claim for special damages or interest related to facts which were not pleaded and therefore went to no issue. the plaintiff pleaded in regard to the deposit account which was the basis of his case thus in paragraph 9 of the statement of claim:
“The plaintiff on or about the 29th day of November, 1986 deposited a sum of N1,000,000 (One million Naira) in its name with the defendant, this deposit account in the plaintiff’s name being intended to establish the good faith of the plaintiff”.
Part of the plaintiff’s case on this appeal is that the plaintiff’s pleadings did not justify the admission of evidence of the defendant’s liability to pay interest on the deposit account. It was submitted that the plaintiff should have pleaded the agreement of the parties as regards interest and the terms of such agreement. It has not been denied that there was ample evidence from which it could reasonably be inferred that the deposit account did attract interest.
The letter (Exh P5) dated 13th October, 1989 written by the defendant to the plaintiff concerning interest on the deposit is one such piece of evidence. However, the defendant now says that and other pieces of evidence going to liability to pay interest on the deposit and quantum of such go to no issue. the question is: was the defendant right in that contention? Part of the answer, I believe, is to be found in general banking law. If the averment that a deposit account implied a liability to pay interest thereon, the fact that the pleadings did not go further expressly to plead an agreement as to interest would not matter. Where there was a particular agreement as to interest, the party who relies on that agreement should plead it. I do not think that was the position in the present case. I think the point had been well made by this court (Kaduna Judicial Division) in the case of Angyu v Malami (1992) 9 N. W I R (part 264) 264) 242 at pages 254-255 as follows per Uthman Mohammed, J C A (as he then was) as follows:-
“I believe that it has gained notoriety which requires no proof that the advantage that a customer gains by opening a deposit account is that the banker pays interest on sums paid into such account See Chity on Contracts . Specific contract 24th Edition, para 2586, at page 246. I do not agree that the existence of a deposit account does not per se, involve payment of interest. It is plain without saying so that it does”.
In my view, the averment that the defendant did open a deposit account in the name of the plaintiff implies an obligation to pay the plaintiff interest on the sums in the account. That implication is confirmed by the conduct of the defendant in writing the letter which had been referred to as exhibit P 5 informing the plaintiff of the rates of interest operating from time to time, and in transferring not only the principal sum of N1,000,000 but also the interests accruing thereon to offset the alleged indebtedness on the account of Alfredo, as pleaded in para. 16 of the statement of defence. I think it is really too late in the day for the defendant now to contend that the evidence as to liability of the defendant to pay interest on the deposit account went to no issue. This is because, the plaintiff having averred that the account was a deposit account went on to claim interest thereon. If the defendant had wanted to contest the questing of its liability to pay interest, it would have denied that liability by its pleadings. I may well observe, in passing, that were it to do so, it would have been had put to explain paragraph 16 of its statement of defence and the letter exh P 5 It must be said that the rule that evidence of facts not pleaded goes to no issue is not a technical rule but one that is founded on justice and the principles of fair hearing. Where, therefore, on the totality of the pleadings, the court can come to the conclusion that the defendant knew what the plaintiff was claiming and the facts on which he based his claim, it cannot be said that the demands of fair hearing had not been met merely because the plaintiff had failed to couch his pleadings in a particular manner. The averment in this case that there was a deposit account followed by a claim for interest thereon is sufficient to put the question of liability to pay such interest in issue. I come to the conclusion that the evidence in regard to the question of interest was in conformity with the pleadings.
However, the liability to pay interest would not imply that accrued interest could be claimed as special damages, nor would the averment, whether express or implied, as to the defendant’s liability to pay interest determine the circumstances in which interest could be claimed as damages. In so far as the liability to pay interest is founded on contract, any interest accruing on the deposit account up to the date of the breach by the bank to pay the money due on the deposit account when demanded or due according to the agreement of the parties, should strictly be claimed not as damages but as money due on the contract. The question of damages would arise as a result of any loss, suffered by the customer by reason of the breach. The failure of the Bank to pay the money due on the deposit account on demand by the plaintiff was a breach of contract: (See President of India v La Pintada Compania Navigacion S A (1985) A C 104 127) Such breach would justify a claim for compensation. it would not really matter if the compensation claimed is described as interest or as damages, as long as the compensatory nature of the award for loss suffered as a result of withholding money to which the plaintiff is entitled is borne in mind. In the House of Lords case of Riches v Westminster Bank Limited (1947) A C 390 at p 400 Lord Wright said:
“.in my opinion the essence of interest is that it is a payment which becomes due because the creditor has not had his money at the due date. It may be regarded as representing the profit he might have made if he had the use of the money, or conversely the loss he suffered because he had not that use. The general idea is that he is entitled to compensation for the deprivation. From that point of view it would seem immaterial whether the money was due to him under a contract express or implied or a statute or whether the money was due for any other reason in law. In either case the money was due to him and was withheld from him by the debtor after the time that the payment should have been made, in breach of his legal rights, and interest was a compensation, whether the compensation was liquidated under an agreement or statute. The essential quality of the claim for compensation is the same and the compensation is described as interest. For reasons that go back far in history the distinction between interest proper as it had been called, that is interest due under a contract, statute or the like, and interest by way of damages, that is, not due under an agreement express or implied has since been recognized in England whether in the ecclesiastical or common law courts”.
In Webster v British Empire Mutual Life Assurance Co (1880) 15 Ch 169, 174 James L J said:
“..anything in the nature of interest can only be given, in my view, as damages for the wrongful detention of money which ought to have been paid”.
Notwithstanding that an award of damages in the nature of interest can be given for wrongful detention of money which ought to have been paid, it is nevertheless useful to bear in mind the distinction between contractual interest which is interest agreed as consideration for the creditor conferring upon the debtor (the Bank) the right to use the money lodged in the deposit account, and operative during the contractual period, and other claim in the nature of interest for which the agreement as to interest in respect of the contractual period can no longer be used as basis.
In the present case, the contractual period terminated when the plaintiff by its solicitors wrote to the defendant on 25th July, 1992 making a dem” for the payment of the sum of N1,847,329.24.. which represents total amount accruing to our clients deposit account with your organisation till date. That letter was exh P 9 at the trial. Any claim resulting from the failure of the defendant to pay the sum demanded and rightly accruing to the plaintiff on the deposit account can only be for compensation for unlawful deprivation of the money. If the amount claimed as compensation is described as interest it could not be interest proper calculated at the contractual rate but damages in the nature of interest, which by its compensatory nature and depending on the circumstances may be equal to the contractual rate or may exceed it or be below it. In this case, the plaintiff’s statement of claim had been silent as to any loss suffered by it by reason of the unlawful deprivation of the money due to it between the date on which Exh p9 was written and that in which the action was commenced. Although in the relief, claims for interest were set out as special damages and the rates included, there were no averments in support of the claim for interest as special damages. The plaintiff should have averred that by reason of its being unlawfully deprived of the money to which it was entitled it had suffered loss, that the particular loss was within the contemplation of the parties and the quantum thereof.
In my view there is no reason to belabour the issues raised by the parties in this appeal. I am in agreement with the defendant that the ward of special damages was erroneous both because such claim was not properly pleaded and because exhibit p 22 relied on as establishing the quantum of such damages was; first, without factual basis in relation to any loss suffered by the plaintiff; secondly, because the figures mentioned therein is at variance with what the parties agreed to be accrued liability of the defendants up to the determination of the deposit agreement; and, thirdly, if loss suffered was to be on the basis of deprivation of money, the money the plaintiff has been deprived of was N1,847,329.24 and the date of the withholding of the money in breach of contract was when a demand for its payment was made on 25th July, 1992. The loss suffered by the plaintiff as a result of the deprivation which could be compensated for in damages could only be assessed as from that date. The long and short of it is that the document Exh p 22 relied on by the judge should not have been relied on. Even if the question of special damages had properly arisen the report Exh p 22 is patently defective to be reliable evidence of the plaintiffs loss. It seems unrelated to the cause of action as it erroneously varied the contractual rate during the currency of the contract and did not advert to the amount which the plaintiff had demanded from the defendant the refusal to pay which was the basis of the claim for special damages.
The learned judge had embraced the report exh p22 and used it uncritically in assessing damages. He was in error in so doing. He was also in error in his view that because the plaintiff did not indicate an agreement to a variation of the contractual rate of interest that amounted to a rescission of the agreed rate of interest. The proper views, I think, is that the original rate of interest continue until it is varied by mutual agreement or until the contractual period ended. In this case, on the evidence, the parties are in agreement as to what was due to the plaintiff at the time when the contract came to an end pursuant to the demand by the plaintiff of the payment of the money due on its deposit account. There is no doubt that the plaintiff is entitled to that amount which consisted of principal sum and an accrued interest. Even though he claimed these as special damages, I think one should not insist on a preference for claiming it as money due on the contract. I would give judgment for what the parties have on the evidence agreed that was the money the plaintiff should have been paid in performance of the contract and which had been wrongfully withheld.
Entitlement to special rather than general damages that is to say, compensation for loss for the unlawful deprivation of that money specially quantifiable and beyond what is the natural consequence of the deprivation of the money has not been pleaded or proved.
Before I part with this appeal it is pertinent to advert to one pleading question raised in this appeal in regard to the consequence of a party pleading that he would rely on certain unspecified documents at the trial.
The plaintiff contended that such averment made the contents of such document part of the pleadings. In this case, the plaintiff in para 30 of the statement of claim pleaded thus:
“The plaintiff at the trial will rely on all letters and documents between the parties pertaining to this suit”.
Although the principle is established that if an agreement in writing is referred to in a pleading it becomes part of the pleading and it is open to the Court to give the agreement its true legal effect; irrespective of the terms used in the pleading to indicate such effect, that proposition of law should not be used to cover such averment as shown above which lacks specificity. Besides, a report, such as Exhibit p 22 in this case, prepared by a witness for the plaintiff and tendered at the trial by the witness, cannot be described as documents between the parties pertaining to the suit. At the appropriate time and when the occasion arises the true ambit of the proposition of law in such cases such as Banque Genevoise v Spetsai Ltd (1962) 2 SCNLR 310; (1962) 1 All N.L.R 570 ought to be defined.
It is also expedient to state that had the plaintiff appealed from the decision denying him general damages he may have had a strong chance on this appeal of being awarded general damages. However, it will not be right for this court suo motu to consider the question of award of general damages which have not been in issue on this appeal.
Be that as it may, for the reasons which I have given in this judgment, I would allow the appeal to the extent only that the judgment of the court below will be varied.
I would set aside the judgment of the High Court entered in favor of the plaintiff in the sum of N4,426,075.00 and in substitution therefore enter judgment for the plaintiff in the sum of N1,847,329.24 The award of costs to the plaintiff in the Court below should stand. The defendants are entitled to costs of the Appeal which I assess as N3,000.
Uwaifo and Pats-Acholonu JJCA concurred.
Cases referred to in the judgment:
Angyu v Malami (1992) 9 NWLR (pt 264) 242
Banque Genevoise v Spetsai Ltd (1962) 2 SCNLR 310
