HIRAT ADERINSOLA BALOGUN v NATIONAL BANK OF NIGERIA LTD. (SC. 244/76) [1978] NGSC 9 (9 March 1978)

Reported

IN THE SUPREME COURT OF NIGERIA

On Thursday, the 9th day of March 1978

SC. 244/76

Between

HIRAT ADERINSOLA BALOGUN ....................... APPELLANT

And

NATIONAL BANK OF NIGERIA LTD.  ................................. RESPONDENT

 

The question in this appeal is whether the appellant is entitled to substantial damages for dishonour of her cheque by the respondent without any allegation, in her pleading, of special or actual damage flowing from such dishonour of the cheque and proof of the same.

The appellant operates two banking accounts with the respondents; one in her private and personal capacity at the Marina Lagos Branch of the respondent's company and the other her practice and clients' account, at the 40, Balogun Street, Lagos Branch of the said company. On the 6th January, 1972, the appellant drew a cheque on the 40, Balogun Street Branch of the respondents for N40 in favour of one of her clients-a Mrs Sidney. A few days later, Mrs Sidney returned to the appellant and produced to her the said cheque which had been marked "Refer to Drawer" by the respondents who had refused to make payment of the sum of N40 to the payee, Mrs Sidney. At the time the cheque was presented to the respondents for payment the appellant had enough money-in fact, more than enough-with the respondents in her client's account to meet the cheque for N40.

The learned trial Judge held that the plaintiff was entitled only to nominal damages especially as she pleaded no special damages and award the sum of N10 as nominal damages.

On appeal to the supreme court the learned Counsel to the respondents contended that the appellant is not entitled to an award of substantial damages in an action based on breach of contract against her bankers for wrongful dishonour of a cheque issued by her on her clients' accounts' account unless she alleges and prove actual damage.

 

HELD

 

(1)     Refusal by a banker to pay a customers cheque when he holds in hand an amount, equivalent to that endorsed on the cheque, belonging to the customer amounts to a breach of contract for which the banker is liable in damages.

 

(2)     The endorsement "R/D" "refer to drawer" or "return to the acceptor" and can always bring claims for defamation and breach of contract.

 

(3)     There is no need for the appellant to plead and prove special or actual damage in order to be entitled to substantial damage.

 

Appeal allowed.

 

A.O. Osipitan Esq. for the Appellant

 

R.K.O. Oriade Esq. (with him J.O. Jimile him & Akin Taylor Esq. for the Respondents.

 

Cases referred to:

 

Addis Vs. Gramophone Co. Ltd (1909) AC 488 at 495.

 

Allen Vs. London Country & Westminster Bank (1915) 31 T.L.R.210.

 

I.L. Alabi Vs. Standard Bank of Nigeria Ltd (1974) 4 ECSLR 574.

 

Baker Vs. Australian and New Zealand Bank Ltd (1958) N.Z.L.R. 907.

 

Bank of New South Wales Vs. Milvain (1884) 10 Victorian L.R.3.

 

Cox Cox (1814) 3 M & S 114.

 

Fatel Vs. National & Grindlays Bank Ltd (1968) 3 A.L.R.C. 249.

 

Foley Vs. Hill (1848) 2 H.L. Case 28.

 

Gibbons Vs. Westminster Bank Ltd (1939) 2 K.B. 882.

 

Hedley Vs. Baxendale (1854) a EXCH 341.

 

Joachim Son Vs. Swiss Bank Corporation (1921) 3 K.B. 110 at 127.

 

Marzetti Vs. Eilliams (1830) 1 B & Ad. 415.

 

Milward Vs. Lloyds Bank (Unreported) 1924.

 

Oyewole Vs. Standard Bank of West Africa Ltd. (1968) All N.L.R. 32 at 35.

 

Pyke Vs. Hiberman Bank (1905) I.R. 195.

 

Rolin Vs. Steward (1854) 14 C.B. 595 or 139 ER 245.

 

Szek Vs. Lloyds Bank Ltd (Unreported) but referred to in Journal of Institute of Bankers P. 123.

 

Statute referred to:

 

Legal Practitioners Decree No 15 1975.

 

Idigbe, J.S.C.-The question in this appeal is whether the Appellant is entitled to substantial damages for dishonour of her cheque by the Respondents without any allegation, in her pleadings, of special or actual damage flowing from such dishonour of the cheque and proof of the same? The Appellant who is a barrister and also enrolled as a solicitor of the Supreme Court of Nigeria was, at all times material to the proceedings in the case in hand, actively engaged in practice as a solicitor in the metropolis of Lagos.

 

The facts which appear, from the record, to be not in dispute are as follows: the Appellant operates two banking accounts with the Respondents; one in her private and personal capacity at the Marina Lagos Branch of the Respondents' company and the other her practice and clients' account, at the 40 Balogun Street, Lagos Branch of the said company. On the 6th January, 1972 Appellant drew a cheque on the 40 Balogun Street Branch of the Respondents for N40 in favour of one of her clients-a Mrs Sidney of Ikeja in the Lagos State. A few days later, Mrs Sidney returned to the appellant and produced to her the said cheque which had been marked "Refer to Drawer" by the Respondents who had refused to make payment of the sum of N40 forty Naira (i.e. the equivalent of £N20 i.e. twenty Nigerian pounds) to the payee, Mrs Sidney. At the time the cheque was presented to the Respondents for payment, the Appellant had enough money-in fact, more than enough-with the Respondents in her clients' account to meet the cheque for N40 (i.e. forty Naira).

 

The facts given in evidence by the Appellant, and her witness and which have not, in any way, been challenged are:

 

(1)     On the 31st day of December, 1971 the Appellant whose business account was in credit lodged with the bank for payment into the same account the sum of £N93:2:6 (i.e. N186.25k; one hundred and eighty-six Naira and twenty five kobo, the equivalent of Ninety-three pounds two shillings and six pence).

 

(2)     The Appellant has not a personal, private or other account with the Respondents i.e. at the 40 Balogun Street Branch of the company (hereafter referred to as "the Respondents' Branch" or "the branch").

 

(3)     When, a few days after issue of the cheque Exhibit 'A' which was dishonoured (hereafter also referred to as "the dishonoured cheque") the Appellant immediately telephoned and spoke to the Manager of the branch-a Mr Adeleke, and complained to him about the unmerited treatment she had received from the branch, Mr Adeleke was not only impatient with the Appellant but treated the complaint with levity. It is just as well to mention here that on returning the dishonoured cheque to the Appellant, Mrs Sidney had to say to the Appellant that she was surprised that "a cheque of only £20 from a lady of her type could bounce"; whereupon, annoyed and embarrassed the Appellant immediately paid the sum of £20 to Mrs Sidney from her resources in the office.

 

(4)     The Appellant thereafter went to the bank and on arrival there was, at her request, shown in the accounts department of the bank, her ledger card from which she was satisfied that she had more than enough money to meet the dishonoured cheque. Thereafter she went back to her office and later sent a written complaint, Exhibit B, to the Respondents which drew a reply Exhibit C; further to Exhibit C, the Appellant sent another letter, Exhibit D, to the Respondents.

 

(5)     The Appellant was not allowed to operate her clients' account until after "the matter was sorted out" as per Exhibit 'F', a letter dated 15th March, 1972 from the Respondents.

 

(6)     When Mrs Sidney gave evidence she also confirmed to the court that (a) she read the endorsement "Refer to Drawer" on the cheque and (b) she not only was surprised that a cheque for a mere £20 from a lady of the Appellant's type could bounce but told her so.

 

(7)     At all times material to the issue of the dishonoured cheque the Appellant who practised under the name of "Balogun & Alatishe" kept her clients' account at the Respondents Branch (i.e. 40 Balogun Street, Lagos) under the name of "Balogun & Alatishe" & Co.: Solocitors.

 

Now, in Exhibit B, the Appellant wrote on 21st January, 1972 to the Respondents as follows: "A/C 0376 Balogun & Alatishe & Co. Barristers & Solicitors

 

I issued cheque No. H 014214 for the sum of £20 dated 6th January, 1972. I have just been informed by the recipient that it was returned unpaid when she presented it on the 17th January to the cashier.

 

Kindly investigate and let me know your findings.

 

Yours faithfully,

 

Mrs A. Balogun"

 

By their reply of the same date, the 21st January 1972 (Exhibit 'C'), the Respondents wrote to the Appellant as follows:

 

"M/S Balogun, Alatishe & Co. 27/29 Martins Street

Lagos

 

Dear Sirs,

 

Dishonoured Cheques

 

We refer to your letter dated 21st January, 1972 on above and (sic) will inform you that the balance in your current account as at 17th January, 1972 was £10.5.10, hence we were unable to honour your cheque of £20.

 

Please be informed that the current balance in your account is now £0.6.5 debit.

 

(Sgd.) R. Adeleke

 

Manager: for National Bank of Nigeria Limited"

 

On the 25th January, 1972 the Appellant wrote again in Exhibit 'D' to the Respondents as follows:

 

"Mr R. A. Akeleke Manager

National Bank Nigeria Ltd. 40 Balogun Street

Lagos

 

Dear Sir,

 

Account No. 0376

 

I have received your letter dated 21st January, 1972. It appears that this letter was written without your going through the items of my statement of account.

 

I paid in a total of £243.2.6 on 31st December, 1971 and 3rd January, 1972. I have only issued cheques up to the value of £165.19.9 against the account.

 

One of your clerks went through the statement with me and discovered the error. Unless one of the two cheques was returned to your bank unpaid (I have no notice of this), I insist that my account is in credit coupled with the fact that I was in credit at the end of December 1971.

 

Yours faithfully

 

Mrs A. Balogun"

 

By Exhibit 'F' dated 15th March, 1972 (nearly two months later) the Respondents replied to Exhibit 'D' thus:

 

"Mrs A. Balogun Balogun, Alatishe & Co. 27/29 Martins Street Lagos

 

Dear Madam,

 

Current A/C 0376

 

We refer to your letter dated 25th January, 1972 on our above account, and will state that we have discovered the error committed, and your account has been rectified accordingly.

 

We hereby tender our unreserved apology and we promise that proper care of the account will be taken in future.

 

Yours faithfully

 

R. Adeleke

 

Manager: for National Bank of Nigeria Limited"

 

On 10th January, 1972 the Appellant, as plaintiff, commenced these proceedings claiming from the Respondents as defendant the sum of "N50,000 damages suffered by the plaintiff as a result of the defendants' breach of contract...." It is pertinent, we think, to note that in paragraph (12) of her statement of claim, the Appellant pleaded: "As a result of the defendants' wrongful refusal to pay the sum of £20 the plaintiff suffered damages in the way of her profession." In a reserved judgment by which the learned trial Judge in the court below award the sum of N10 (£N5) as nominal damages he made the following observations in some of the passages of the said judgment:

 

"...I think it is fair to say that by his address Mr Falodu, learned Counsel for the defendants, conceded that the plaintiff was entitled to succeed. He contended, however, that the plaintiff was entitled only to nominal damages especially as she pleaded no special damages. It was submitted that only a trader could obtain substantial damages in like circumstances. In support of Mr Falodun's submission... reference was made to Gibbons Vs. Westminster Bank Ltd. (1939) 2 K.B. 882 where Lawrence J. at (P.888) concluded:

 

'...In my opinion this matter should be treated as covered by these authorities, and I hold accordingly that the corollary of the proposition laid down by them, in the law-namely, that a person who is not a trader is not entitled to recover the substantial damages for wrongful dishonour of his cheque, unless the damage which he suffered is alleged and proved as special damage...'

 

That statement of the law is better understood when it is remembered that in an action for breach of contract, as this is, damages are not at large and a plaintiff must always plead and prove his actual loss otherwise he is entitled to nominal damages only. Two exceptions to this general rule are known. One is an action for breach of promise to marry and the other where a trader who is in funds at his bank has cheque dishonoured wrongfully. Lord Atkinson in Addis Vs. Gramophone Co. Ltd. (1909) A.C. 488 at 495 has said that these exceptions ought not to be extended. Taylor C.J. in Coyewole Vs. Standard Bank of West Africa Ltd. (1968) 2 All N.L.R. 32 at 35 felt unable to extend the exception to include persons other than a trader and I must refuse to so extend in this case. Mr Osipitan, learned Counsel for the Plaintiff, invited me to equate a solicitor issuing a cheque in the course of his practice to a trader but I regret that I must decline that invitation...."

 

This appeal is from the said judgment of which the passages set out above in quotation form part. A number of grounds of appeal were filed but before us the Appellant had leave of this Court to argue that it is erroneous in law to ascribe such a very narrow interpretation to the meaning of the word 'trader' as used in the case of Rolin Vs. Steward (1854) 14 C.B.595: 139 E.R.245. On the other hand the sum of the argument of learned Counsel for the Respondent is that the interpretation given by the learned trial Judge in the court below in the case in hand is justified. A solicitor, learned Counsel for the Respondent argued, is not a "trader" and, in accordance with the decision of Lawrence J. in Gibbons Vs. Westminster Bank Ltd. (supra), he is not entitled to an award of substantial damages in an action, based on breach of contract against his Bankers for wrongful dishonour of a cheque issued by him on his clients' account unless he alleges and proves actual damage.

 

We think it is necessary, at this stage, to trace the history of this aspect of the law relating to damages for breach of contract. The role or predominating business of banker is the business of banking which consists in the main in the receipt of monies on current or deposit account and the payment of cheques drawn by, as well as the collection of cheques paid in by, a customer-See also Atkin L.J. in Joachimson Vs. Swiss Bank Corporation (1921) 3 K.B.110 at 127. Therefore, the receipt of money from or an account of his customer by a banker constitutes the latter the debtor of the former (Foley Vs. Hill (1848) 2 H.L. Cas.28); and the banker undertakes to pay any part of the money thus due from him to the customer against the written orders of the customer (Joachimson Vs. Swiss Bank Corporation (Supra). Accordingly, the relation so constituted is that of principal and agent and, therefore, a cheque drawn on the banker by the customer represents the order of the principal to his agent to pay, out of the principal's money in his hands, the amount stated on the cheque to the payee endorsed on the cheque. Therefore, it has long been established that refusal by a banker to pay a customer's cheque when he holds in hand an amount, equivalent to that endorsed on the cheque, belonging to the customer amounts to a breach of contract for which the banker is liable in damages. The only question which arose, in these circumstances, has always been that relating to the quantum or amount of damages. The general rule for measuring or quantifying damages for breach of contract was that established by the leading case of Hadley Vs. Baxendale (1854) 9 Exch.341 which is that the party in breach is liable in damages in the amount which flows directly and naturally from his failure to keep his own part of the contract or bargain provided that such damage could reasonably have been within the contemplation of the parties at the time when the contract was made. But it rarely happens that a banker knows the circumstances under which a customer has had to issue a cheque which he refused to honour and this makes it very difficult to apply the rule in Baxendale (supra) in measuring damages in those circumstances. It is on this account that damages awarded for wrongful dishonour of cheques by a banker are generally nominal, save in the instances which the law has come to regard as exceptional; and these constitute the exceptions with which we will deal anon. Direct and/or natural damage arising from a breach of contract by a banker to honour the cheque of his customer apart, there is, however, also the serious likelihood of considerable danger to the reputation of a customer and generally to his business; (if he-the customer-is engaged in business). People generally, whether or not in business, do not deal with a person whose cheques are not paid, although it is conceded that instances of disinclination to deal with such a person more readily abound in the field of business. As it is always extremely difficult to have accurate estimate of the extent of damage under this "head", it has, therefore, been laid down by a long line of cases beginning with that of Marzetti Vs. Williams (1830) 1 B & Ad 415 that damages in such cases are "at large", which is to say that in such cases a jury may within reason make an award of any such sum as they consider the circumstances of the breach of contract or dishonour of cheque warrant although there has been no proof of any actual loss (i.e. special damage) to the customer. In the case of Marzetti (supra) in which a trader sued his bankers for wrongful dishonour of cheque although there was no evidence to show that the plaintiff had sustained any injury from the banker's mistake, Lord Tenterden C.J. remarked:

 

"I cannot forbear to observe that it is a discredit to a person and therefore injurious in fact, to have a draft refused payment for such small a sum, for it shows that the bankers had very little confidence in the customer. It is an act particularly calculated to be injurious to a person IN trade." (See 109 E.R. 842: and (1830) 1 B Ald.415 at 424).

 

Marzetti's case (supra) was followed in the case of Rolin Vs. Steward (1854) 14 C.B.595, which was a case by the plaintiffs who were in business (they were in fact merchants and shipowners) against the defendant a public officer of a company carrying on the trade and business of bankers in England under the name and style of East of England Bank. The action was for dishonour of three cheques and a domicile bill due to the inadvertence of a clerk in the office of the bankers. The plaintiffs gave no evidence that they actually suffered injury. A jury awarded them £500. It was held that the jury were entitled to give substantial damages, though £500 was, in the circumstances, excessive; £200 was eventually agreed upon.

 

The case of Marzetti (supra), therefore, put it beyond doubt that where a banker without justification dishonours his customer's cheque, he is liable to the customer in damages for injury to his credit and the case of Rolin Vs. Steward makes it clear that if the customer is also "in trade"-we prefer to use the actual words of Lord Tenterden, "in trade" for reasons we will show later-at the time of such dishonour then damages for such injury to the customer's credit will be at large and a jury may within reason award substantial damages although there is no evidence from such customer of any actual damages suffered by him. It was not until 1939, that there was a decision by a court that the converse is the law i.e. that in an action by a "non-trader" for wrongful dishonour of his cheque by his bankers, only nominal damages should be awarded unless the non-trader and proved actual damage in which case substantial damages may be awarded in his favour; the decision was given by Lawrence J. in the case of Gibbons Vs. Westminster Bank Ltd. (Supra). That decision which undoubtedly is good law-subject to the reservation which we make in this judgment-has been followed in a number of court decisions and approved by a number of text writers. The judgments in which Gibbons case (supra) has been followed include such weighty decisions as the New Zealand case of Baker Vs. Australian and New Zealand Bank Ltd. (1958) N.Z.L.R.907 (decided by Shorland J); (2) the Australian case of the Bank of New South Wales Vs. Milvain (1884) 10 Victorian L.R. (Cases-at-Law) at P.3 decided by Stawell C.J. and Holrovd J. (3) Oyewole Vs. Standard Bank of West Africa Ltd. (1968) 2 All N.L.R. at P.32 decided by Taylor C.J. (4) Fatel Vs. National & Grindlays Bank Ltd. (1968) 3 African Law Reports Commercial at P.249; also in Modern African Banking Cases (1973) Ed. at 170 decided in the High Court of Uganda. (In Patel, Rolin's case was properly applied to the facts before the court but the statement of Lawrence J. regarding "non-traders" was approved in passing) and (5) I.L. Alabi Vs. Standard Bank of Nigeria Ltd. (1974) 4, East Central State Law Reports 574 decided in the High Court of Kaduna by Wheeler Ag. S.P.J. The above decision are, indeed, weighty and this Court has considerable respect for them, However, we are of the respectful opinion that the foregoing cases, like the case in hand (i.e, the decision on appeal before us), give a far too narrow interpretation to the expression "trade" and/or "trader". Earlier on, we drew attention to the expression "person in trade" (and not "trader") used by Lord Tenterden in Marzetti's case (supra). While it is true that a trader is in business, all persons in business are not necessarily traders; for instance, the ordinary citizen who, daily, exhibits his various articles or stock-in-trade in the market for the purpose of selling for gain is engaged in business and is a trader but the citizen who runs a private school although engaged in business can hardly be referred to as a trader. Although a "person in trade" is a "person engaged in business" he is not necessarily a trader; but a trader is necessarily engaged in business. Therefore, we prefer the expression "person in trade" for it refers to persons engaged in some occupation, usually skilled but not necessarily learned, as a way of livelihood. That being the view we take of the expression "persons in trade" a class of people against whom-in the words of Lord Tenterden-a banker's act of wrongful dishonour of cheque is "particularly calculated to be injurious", we find it difficult to exclude all "non-traders" that is, all persons who are not traders (and this may inc

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