Omotayo Johnson, Esq.
LL.B (LASU), B.L. (KANO).
G-mail: oluwadamipe7@gmail.com
Introduction
In what is perceived as an attempt to fast track the transitioning into a cashless economy, the Central Bank of Nigeria (CBN) by a statement posted on its website on Thursday, “directed Deposit Money Banks (DMBs) to commence the payment of the redesigned Naira notes over the counter, subject to a maximum daily payout limit of N20,000”. Even with daily payout benchmarked at N20,000, most banks have struggled to meet customers demand, in what have been epitomised by theatrical displays in banking halls and never ending long queues at ATM points, as Nigerians and banking customers struggle to grapple with the incumbent cashless regime.
Fundamental to the banker-customer relationship is the invariable duty of the bank to ‘honour and pay customer’s cheque standing to his credit in the bank’. Against the above backdrop, this paper juxtaposes the present realities in the Nigeria banking sector with the principles of law regulating banker-customer relationship, and purports to resolve questions on whether a bank have any ground to dishonour a customers’ demand for pay, and the possible remedies available to a customer whose demand for payment was ‘wrongly’ dishonoured.
Nature of Banker-Customer Relationship
The relationship that subsists between a bank or financial institution and its customer is essentially a contractual relationship[1] which is usually categorised as a debtor-creditor relationship.[2]
The Court of Appeal in UBA v. Yahuza[3] better described the relationship in these words:
“It is settled that in law and the practice of banking, the relationship between a bank and its customer is contractual. By the contract, the bank undertakes to receive money and collect bills for its customer and the proceeds so received are not to be held in trust for the customer, but the bank borrows the proceeds and undertakes to repay them on demand by the customer”.
Duty of Banks to Honour and Pay Customers’ Cheques
The duty of the bank to honour and pay customers’ cheque is very fulcrum that pivots the banker-customer relationship. Provided there is sufficient fund standing to the credit of the customer in the bank, the bank is obliged to honour and pay cheques duly drawn by the customer. In Muomah v.Enterprise Bank Ltd,[4] the court summarised in succinct that:
“When a customer whose account has money makes a demand on the bank, it must comply because it is a debtor”.
The position is the same where a customer is granted an overdraft facility. In Issa v. Union Bank,[5] the court held that, a customer who has been granted an overdraft facility is entitled to damages from the bank if cheques drawn to utilize the facility are dishonoured by the bank.
The cheque (or withdrawal slip) is seen as an order from the customer to the bank to withdraw the amount stated in the cheque from the amount standing to his credit in his account with the bank or an agreed overdraft to the bearer’s credit, provided that there is no legal barrier making such funds though sufficient but, unavailable for that purpose.
Do the Banks have any Defence to this Duty?
There are no exceptions to this duty, rather, it is conditional on the fact that:
- The state of the account of the customer is in credit, or there has been an overdraft facility granted to warrant so (the credit);
- There is no legal reason or excuse why the cheque should not be honoured.[6]
Perhaps the banks may use the executive directive of the CBN to pay maximum of N20,000 per day as an excuse for the non-payment of customers’ money in their custody. Contrary to this view, it is arguable that, the directive of the CBN as the apex regulatory bank, was only intended to limit the amount of money a customer may demand per day, it does not in any way discharge the banks of their duty to pay customers’ their money upon demand. There have been several cases where the banks, in sheer breach of their duty, have refused to pay at all or to the tune of N20,000 when such demand was made by their customers.
Remedies Available to the Customer against the Bank
Where a cheque has been drawn by a customer and the bank wrongly dishonoured it, the customer can maintain an action against the bank for breach of contract and be entitled to substantial damage (if he is a person in business). In UBA Plc v. Chimaeze,[7] the Supreme Court held that:
“A bank is bound to honour cheque issued by its customer if the customer has enough funds to satisfy the amount payable on the cheque in respect of the relevant account and that refusal to honour the cheque will amount to a breach of contract which would render the banker liable in damages”.
A customer may also sue the bank in tort for defamation.[8]
Conclusion
The relationship between a banker and customer is one of a contract between a debtor and a creditor with the additional feature that the banker is only liable to repay the customer on payment being demanded. There is no obligation on the part of the banker or debtor to seek out his creditor, the customer and pay him: obligation is only to pay the customer or some person nominated by the customer, when the customer makes a demand or gives a direction for payment. Thus, to refer a cheque back to its drawer when the customer has money in his account constitutes negligence and is wrongful.[9]
[1] See, FGN v. Insterstella Comms Ltd. (2015) 9 NWLR (Pt.1463) pg. 1 at 37
[2] See, Ecobank (Nig.) Ltd v. Anchorage Leisures Ltd & Ors (2016) LPELR-40220(CA)
[3] (2014) LPELR-23976(CA)
[4] (2015) LPELR-24832(CA)
[5] [5](1993) NWLR (PT 288) P. 502.
[6] One of the circumstances that can make a customer’s fund to be sufficient but unavailable for the purpose of withdrawn by cheque is when there is a garnishee order being placed on the customer’s account with the bank.
[7] (2014) LPELR-22699(SC)
[8] Emmanuel Omotayo Johnson; “Law of Banking BUL 402: Law of Banking II (Santa’s Note)”, S.A.R.I. 2019, pg.8
[9] See, STB Ltd. v. Anumnu (2008) 14 NWLR (Pt. 1106) 125 at 151
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