AN APPRAISAL OF BANKER CUSTOMER RELATIONSHIP IN NIGERIA By AKIN OLAWALE OGUNDAYISI LL.B, B.L, ACIArb.

ABSTRACT The law of banking is concerned not only with the legal framework of banking business but also with the peculiar legal relationship which subsists between bankers and their customer. To the average Nigerian bank customer i . e an ordinary account holder, the relationship between him and his bank or banks begins and end with paying in and withdrawing from his account But in actual fact ,and in law, the relationship is more complex than that but he appears to feel unconcerned or does not wish to bother himself with so complex a web of relationship which to remain confusing and difficult to comprehend .In order to fully understand and appreciate this phenomenon in law, it is essential for one to fully understand the meaning significance of the term „bank‟ or „banker‟ and „customer‟ in law. The relationship which subsist between a banker and his customer contractual and fundamentally that of debtor and creditor. It consists of general and special contracts arising from particular requirement of the business of banker. So to a large extent the major thrust or thematic concern
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of work will be a working definition of the work „bank‟ and „customer,‟ their duties ,peculiarities of banker and customer, contractual relationship and its relationship concerning the customer account and type of account.

TABLE OF CONTENTS Title Page ------------------------------------------------Dedication -----------------------------------------------Certification ---------------------------------------------Acknowledgments -------------------------------------Table of Abbreviations --------------------------------Table of Statutes ---------------------------------------Table of Cases ------------------------------------------Abstract -------------------------------------------------Table of Contents --------------------------------------CHAPTERISATION CHAPTER ONE: INTRODUCTION 1.1. 1.2. 1.3. Introduction Definition of Terms Types of Banks

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CHAPTER TWO: LEGAL FRAMEWORK FOR THE OPERATION OF BANKING SYSTEM 2.1. 2.2. 2.3. Registration Under Companies and Allied Matters Act Licensing Legal Control of Bank Staff

CHAPTER THREE: BANKER CUSTOMER RELATIONSHIP 3.1. 3.2. 3.3. 3.4. 3.5. 3.6. The Nature of the Relationship The Rule in Foley v. Hill The Rights of a Banker Duty of Customer to is Banker Termination of Banker-Customer Relationship New Development in Banker Customer Relationship

CHAPTER FOUR: RECOMMENDATIONS AND CONCLUSION 5.1. 5.2. Recommendations Conclusion

References ----------------------------------------------------------

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CHAPTER ONE INTRODUCTION One of the extended areas of contractual relationship which, exist is that of banker and customer relationship. It shares a major characteristic of any contractual transaction which exist between; principal and agent, bailor and bailee, buyer and seller, hirer and hireree, and debtor-creditor relationship. Generally, the fundamental principle of the law of banking is that of debtor and creditor relationship1. Even where the most obvious implication of the service is that it is rendered on an agency basis, it is still often regarded as negatively by the overriding implication of debtor/creditor aspect. Thus, in Midland Bank Ltd v. Conway Corporation2 where the banker agreed with his customer to accept rents from her tenants, and pay

1 2

M.C. Okany (2001) Nigerian Commercial Law; African-Fep Publishers Limited at .415 (1965) 1 W.L.R. 1165

4

over to the council amount due in respects of rates, it was nevertheless held that they had acted simply as bankers, not as agents3. The relationship is therefore that of debtor and creditor, with the additional feature that the banker is only liable to repay the customer on payment being demanded4, while the ordinary debtor is under an obligation to pay without any demand being made. This was the rule that was established in 1948 in the case of Foley v. Hill5. However, it is important to stress that this rule of relationship does not apply in are cases where a banker and customer are involved in a transaction. In the recent case of Integrated Timber and Plywood Products Ltd v. Union Bank Nigeria Plc6 delivered on Friday 19th Ma 2006, it was made clear that a confirmation of a telex establishing the letter of credit and not ipso facto establish a banker-customer relationship between them as claimed by the appellant. According to Niki Tobi J.S.C., I do not agree with learned counsel that there exist or existed banker and customer relationship in this matter… Thus, the motive behind this research is to look critically into the rule guiding banker and customer relationship and possibly suggest where
3 4

See Chorley and Holden, Law of Banking (1974), 6 th edn. p.25 See Nigerian Farmers Bank Ltd v. Oladipo Moore (1959) LLR 46 5 (1848) 2 H.L. Cas. 28 6 Suit S.C. 342/2001 delivered on 19th day of May 2006; See also www.nigerialaw.org/integrated%20Timber%20and%20Plywood%20Products%20Ltd%v%20Union%20BankNigerian %20Plc.htm as retrieved on 6th March 2008.

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necessary so as to make the law of banking relevant and updated with the dynamic nature of Nigerian economic reforms in the banking sector. History and Development of Banking in Nigeria The history of banking in Nigeria started with the activities of African Banking Cooperation [ABC] which was established in 1982.The activities of the bank was short lived with the emergence of First Bank of Nigeria Ltd. The First Bank had its origin as a trust in 1893 by Sir Alfred Jones supported the colonial governments and managed by Elder Delms – star merchant with the support of the colonial government. The Bank was registered as Bank of British West Africa (BBWA) as a limited liability and commenced business on 31st of march 1893 in Liverpool England. Its Lagos office was opened in the same year in Lagos. In 1899 another Bank was established known as Anglo Bank the authority of the bank was also short lived as the Bank for British West Africa absolved its operation in 1912 the Bank of British west Africa (BBWA) was renamed Bank for West Africa in 1956 to reflect the independent status of west Africa countries served by the Bank. The story of indigenous banking in Nigeria began with the establishment of the National Bank of Nigeria Limited in February19337.

7

http.//www.centbank.org/AboutCBN/history.asp

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This story followed by the Agbonmagbe Bank Limited8 1945who survived all odds remain and later changed its name to Wema Bank. In another development, Dr Nnamidi Azikiwe bought Tinubu‟s property Limited and changed Tinubu Bank .in 1950s the Bank handled by the then eastern regional government and it survived the odds of war crisis.

Definition of Terms The following words appear to be words commonly used but yet have deep meaning in the field of banking and law. There is therefore need to define them and point out their relationship to the subject matter of this research. Bank According to Dr H .L Hart, a Briton in his book „Law of Banking, defines a bank/banker „as a person or company carrying on the business of receiving money and collecting drafts for customers subject to the obligation honoring cheques drawn upon them from time to time by customers to the extent of the amount available on their current account. This definition is no doubt, no exposition of the deposit collection and chequery services of commercial banks and this is similar in conception

8

now known as Wema Bank

7

to Sir John Pagets definition of a bank in his book „Law of Banking‟ where the learned author sees a bank as „corporation of persons who accept money on current account and collect cheques for customers”9. Notwithstanding the variety of definition, the overriding with regards to the definition of a bank is that in as much as the body is legally recognized as a bank, it is not subject to the provision of the provisions of the money Lenders Act10. Some statutes also helped to define the word „bank‟ in their various interpretative sections .For instance, Section 2 of the Bill of Exchange Act 199011 defines banker as to include a body of persons whether incorporated or not who carry on the business of banking. Similarly Section 2 (1) of the evidence Act12 defines Bank /Banker to mean “any person partnership or company carrying on the business as Banker and also includes any savings bank established under the savings Bank ordinance and also any banking company incorporated under any ordinance hereto, before, or hereafter passed relating to such incorporation.

9

See United Dominion Trust Ltd v. Kirkwood (1966) 2 K.B. 4 See alo Money Lenders Law Cap.7 Laws of Lagos State 11 Cap. B8 L.F.N. 2004 12 Cap. 112 L.F.N. 1990 now Ca. E14 L.F.N. 2004
10

8

Meanwhile, Section 61 of Banking and Other Financial Institution Act13 define the word “bank” as „banks licensed under this decree‟. In the same manner, „banking business‟ is aptly defined thus: The business of receiving deposits on current account, savings account or other similar account, paying or collecting, cheques drawn by or paid in by customer, provision of finance or such other business as the Governor may by order published in the Gazette, designate as banking business14. Banker Most often, the two words „bank‟ and „banker‟ are used interchangeably without a careful meaning of what they stand for. The Black Law Dictionary15 defines it as any person conducting the business of a bank, that is, a person who keeps a bank16. These definitions seem to be a layman definition of a banker in the light of judicial decisions on the definition of the word. Thus, the Supreme Court in Akwale v. R17 held that the word banker refers to a company carrying on

13 14

Decree No 25 1991 now Cap. B3 L.F.N. 2004 Ibid; See Ojikutu v. Agbomagbe Bank & 2Ors (1966) 2 ANLR 44 15 th 7 Edition 16 See Oxford African Encyclopedia for Schools and Colleges; (1974), Oxford University Press at p.76 where banks is defined as “organizations that handle people‟s money 17 R v. Akwale (1963) 1All NLR 193; Federal Mortgage Bank of Nigeria v. NDIC (1999) 2 NWLR (Pt. 591) 333 at 362-363

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banking and not the individual employees. In his words, Ademola C .J .N. said to the following effect: „The word banker does not in our view include a person who is merely employee of a bank. The relationship between a banker and customer is that of a debtor and creditor in respect of the money deposited with the banker by the customer. This position is clear hen a customer asks for his money if the amount is not paid, the customer can sue the bank. The action will lie against the bank and not the bank manager. The 1st appellant is more an official of the ban carrying out the bank‟s instruction as to the method of its business and how it should be carried out18. Again, Lord Denning while distinguishing between a money lender and banker points out three characteristics features of a banker in United Dominion Trust Ltd v. Kirkwood19 as follows:i) A banker accepts money from and collects cheques from their customer and place them to their customer;

18

Ibid. (1966 2 K.B. 4

19

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ii)

She honours cheques or orders drawn on her by her customers when presented for payment and debit her customer account accordingly;

iii)

Keep current accounts in which the credits and debits are entered.

Banking Staff Flowing from the above definition of terms (bank and banker), it is clear that an individual working for the banker or bank as the case may could only be a member of staff of the bank. Therefore, bank staff is those who operates or direct the operation of the bank. They include the directors, managers, principal officers of the bank through which the activities of the banks is carried out.

Customer Section 2 of the Bill of Exchange Act20 give meaning to the word bank customer as any person whether incorporated or not who has a sort of account with a banker/bank. The United States Uniform Commercial Code defines a customer as any person having an account with a bank or for whom a bank has agreed to collect items, and it includes a bank having an account with another bank.

20

N0 20 0f 1964 now Cap. B8 L.F.N. 2004

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This definition was held in the Court of Appeal case of Oku v. Banigo21 per Akpiroroti J.C.A. that: “To say that where there is a dispute between two banks, thee form of or the resolution of the dispute is the Federal High Court is to read into section 230 (1) (d) what is not there. A lot depends on the transaction between the customer and the banks. The mere fact that a bank takes an action against another bank, does not make such action triable exclusively by the Federal High Court under section 251 of 1999 Constitution. It must depend on the nature of the transaction and the capacity in which one of the banks dealt with the other. There is therefore the need to examine such transaction between an individual customer and his bank to ascertain its applicability22. Flowing from the above, the learned Justice of Court of Appeal is saying in essence that a bank can be a customer to other or another bank where it operates or has some sort of relationship with the said other bank23.

21 22

(2003) FWLR (Pt. 175) p.422 Ibid at p. 430 23 See R v. Grossman (1981) 73 Cr. App. Rep. 302; Crim. LR 396, CA.

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At a time, it was assumed that the existence of an account was an essential feature of a person being confirmed as a customer24. But in the case of Woods v. Martins Bank25, Salmond J. held26 that the plaintiff became a customer of the bank from the time the bank accepted instructions and also to obtain some money from a building society and to make an investment although, these instructions were given before the account was opened. It is significant to note that the word “customer” as used I common parlance is different from its meaning I the law of banking. Thus, a man whose only connection with the bank at the material date and tune was the payment in of a single cheque for collection was a customer of the bank 27. Lord Davy in Commissioner of Taxation v. English, Scottish and Australian Bank Ltd28 held that:
“It is true that there is no definition of customer in the Act, but it is a well settled or known expression and I think, there must be some sort of account either a deposit or current or some similar relation to make a man a customer to a bank.”

Relationship:

24

See Great Western Railway Corporation v. London and County Bank Ltd (1901) AC 44 where it was held that there must be some sort of account either a deposit or current account or some relation to make a man a customer of a bank.
25 26

(1959 A.C. 25 Ibid at p.137 27 See Commissioner of Taxation v. English Scotish and Australian Bank Ltd (1920) A.C. 683 28 Ibid; See Ademiluyi & Lamuye v. ACB Ltd (194) NMLR 137

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The word relationship simple means links, contacts, or dealings between people, group or countries29. In this sense, the type of links and contact that exist between the customer and banker is what constitute the thrust of this research. Cheque: According to Lord Chorley and J . M. Holden, a cheque could be defined as; “An unconditional order, in writing, drawn by one person upon another, who must be a banker signed by the drawer, requiring the banker to pay on demand, or at sight or at presentation, or expressing no time for payment, a sum certain in money to or t the order of a specified person or to bearer30. This definition appears to be more comprehensive and descriptive than what is contained in the bill of exchange. Section 73 of the Bill of Exchange Act 31 defines a cheque as a bill of exchange drawn on a banker and payable on

29 30

Oxford Advance Learners‟ Dictionary Special Price Edition at p.986. Lord Chorley and J.M. Holden: Law of Banking, 1974, 6 th Edition, p.44 31 Cap. 35 L.F.N. 1990

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demand32. Expect it is otherwise specifically provided, the provision of the Act relating to bill of exchange payable on demand apply to cheques33. Bill of Exchange: Section 3(1) of the bill of Exchange Act defines bill of Exchange as an unconditional order in writing addressed by one person to another, signed by the person giving it requiring the person giving it requiring the person to whom it is addressed to pay on command or at a fixed or determinable future and time, a sum certain in money to or to the order of a specified person or to the bearer. A cheque is a type of a bill of Exchange, but does not in its entirely equal to a bill of Exchange34. Types of Banks in Nigeria Banking institutions in Nigeria can be classified as follows; i) The central bank of Nigeria ii) Commercial Banks iii) Development Banks iv) Merchant Banks v) Federal Mortgage Banks

32 33

See the case of Carara Marble Company Ltd. V. Bolado Ltd (1972) 2 ANLR 89 at 93. See A.C.B. Ltd v. Alao (1994) 4 NWLR p.59; See also North and South Insurance Co. v. National Provincial Bank (1936) 1 K.B. 328. There a cheque from wall filed up „pay cash or order‟, the word „cash‟ being in writing and „or order‟ printed. It was held that, it was not a cheque, because it was not payable to a specified person or to bearer, but a direction to pay cash to bearer, the printed „or order‟ being neglected in favour of the written word „cash‟ See also Bavins v. London and South Western Bank (1900) 1 Q.B. 270. 34 Okany M.C. (2001) Africana-fep publishers Limited at p.414.

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(1)

THE CENTRAL BANK OF NIGERIA The central bank of Nigeria [CBN] is at the head of Nigeria‟s Banking

system. The Bank owned by the Federal Government. It was established by the CBN Act of 1968.The Bank is presently regulated by the CBN Decree 24 of 1991 as emended by Decree 4 of 1997.The CBN is a banker to other Banks and it supervises the lending activities of other Banks in the following ways: (a) The CBN puts a limit on the aggregate credit facility that a commercial Bank can expand to its customers. (b) The CBN is also authorized to determine the percentage of total credit facilities that will be allocated to particular sectors of the economy. (c) The CBN through its periodic money policy fixes the interest rate chargeable by Commercial Banks in various transactions, such as interest on loan deposit, discounting bill of Exchange and treasury bills issued. (d) The CBN exact credit by providing the minimum share of the indigenous borrowers of each bank loan and overdraft compared with total lending. COMMERCIAL BANKS

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Commercial Banks are financial institutions that receive money on savings ad deposit accounts and also act as authorized dealers in foreign, thereby assisting in financial interractional trade particularly in import and export from where they earn the bulk of their income by way of commission and other Bank charges. Commercial Banks perform three major functions which are – [a] Save keeping of money [b] Transfering money [c]Providing loans and overdraft

(3) DEVELOPMENT BANKS Development Banks are special Banks and they defer substantially in operation from both in commercial banks. I addition to the facts that they provide medium and long term financee to enterprises in different sectors of the economy, they also provide managerial advice. The following are some of the Development Banks in Nigeria – (a) The Nigeria Industrial DevelopmentBank – The NIDB was established in January 20th 1984 by restructuring and re-naming a pre-existing industrial Finance Corporation of Nigeria Ltd. The

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Bank was formally known as ICON which had been incorporated in October 1959. The initial objective as contained in the memorandum was to assist enterprises engage in industry, commerce agriculture and the exploitation of natural resources. In Nigeria from the beginning of NIDB had been providing medium and long term loans between 5 to 15 years to both indigenous and foreign owned enterprises in Nigeria. ( b) Nigeria Bank for Commerce and Industry. Another type of Development Bank in Nigeria is the NBCI. The Bank was established in 1973 in anticipation of the larger term financing problems that the indigenization Decree might pose. Since the transfer of the affected industries to indigenous entrepreneurs might involve financial commitment beyond the financial resources it was thought a loose policy to establish this bank in other to provide equity capital and loan to Nigerians for the provision of financial interest in industrial and commercial ventures. The bank does not provide short term credit facilities. The bank is to provide equity capital and loans by way of loans to indigenous persons, institutions and organizations for medium and long term investment in industry and

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commerce. The Bank is presently regulated by the Nigeria Bank for Commerce and industry Act35. 4. MERCHANT BANKS Merchant Banks means any person in Nigeria who is engaged in wholesale banking, medium and long term financing equipment leasing, debt factoring, insurance and acceptance of bills and the management of unit trust. In addition to the activities listed in the above definition, merchant banks perform some common activities for other Banks. The most important activity of merchant bank in Nigeria has been the granting of loans and advances of medium and long term nature. Other forms of financial assistance given by the merchant banks are the following: (a) Syndicated Loans:- this type of loan is provided by two or more banks. Sometimes the size of the loan required is large and individual bank is unable to provide it all because it might amount to putting all its eggs in one basket or the sum required cannot legally be provided to a single borrower by it. For instance, a bank shall not without the prior approval in writing grant to any person any advances loan or overdraft facility or give any financial guarantees or bear any other liability on behalf of any person so

35

Cap. 290 Laws of the Federation of Nigeria 1990.

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that the total value of the advance loan credit facilities, financial guarantee or any other liability in respect of that person is at any time more than 20% of the shareholder funds unimpaired by loses or in the case of a merchant bank more than 50% of the shareholder‟s fund unimpaired by loses36. (b)Bankers Acceptance – These are forms loans provided by merchant Banks by accepting primary notes from the client in return for the loan. The loan is attractive to the bank because it can be used as a ladder to climb above his lending limit. 5. THE FEDERAL MORTGAGE BANK

The Bank was established in 1975 to mobilize resources for housing development and to control the growth and development of mortgage institutions and also invest on building materials including materials industry as a way of ensuring the availability of this input and stabilizing their prices.

36

See Sec. 13 BOFID 1991 Decree No 25 now Cap. B3 L.F.N. 2004

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CHAPTER TWO LEGAL FRAMEWORK FOR THE OPERATION OF BANKING SYSTEM IN NIGERIA The most significant legislation to affect banking transactions in Nigeria was the Banking Act 1952 as amended by the Banking Act 1969 and subsequently in 199137 and 199738. The current law is the Banks and Other

37

Cap 28 LFN 1990

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Financial Institutions Decree No 25 of 199139. The Provisions of the Banking Act made it mandatory for a valid licence to be obtained before any banking business could be transacted in Nigeria. An application for a licence shall be forwarded to the Governor of the Central Bank of Nigeria and all licences to be issued shall be with the prior approval of the Minister of Finance40. The Company and Allied Matters Acts is also relevant in the sense that the proposed person must first of all register as a company before applying for a banking licence. In other words, no person shall carry on banking business in Nigeria except it is a company duly incorporates in Nigeria under the Act41. The Central Bank on Nigeria nowadays is responsible for issuing the Nigerian currency and maintaining the country‟s external reserves is also the sole licensing authority for banks and other financial institutions. The Act that established the Central Bank of Nigeria (CBN) is another statute that governs banking regulation42. The Act vest on the central Bank of Nigeria (CBN) extensive regulatory and supervisory power over the operation of licensed banks and financial institutions. Apart from the power
38 39

BOFA No 4 of 1991 Now designated as Cap. B3 LFN 2004 40 See Sec. 3 Subsection (5) of BOFA as amended. 41 Section 2(1) Ibid. 42 The CBN Act No 24 of 1991 as amended by Act No 3 of 1997 now Cap. C4 LFN 2004

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to issue and revoke banking licences, it can also carry out periodic inspections into the affairs of any bank, sanction banks which violate banking regulations (as imposed by it) and assume control and management of failing banks. For instance, to date, in a bid to sanitize the financial industry, the CBN has revoked the licenses of many banks. Registration Under Companies and Allied Matters Act (CAMA) 1990 Any organization desirous of carrying on banking in Nigeria must first be incorporated under CAMA 199043 as a limited liability company. As it was held in the case of Akinwale and Ors v. R44, only a company or corporate body can operate a bank in Nigeria. An alien or foreign or foreign company subject to the provisions of any law regarding the rights and capacities to engage in trade or business in Nigeria45. By Section 54(4)46 every foreign company intending to carry on business in Nigeria must take all steps necessary to obtain incorporation as a separate entity. Hence, any foreign bank wishing to carry on banking business in Nigeria must undergo another set of registration procedure except where the law provides to the contrary. By Section 35 of CAMA the following

documents must be submitted to the C.A.C.-Corporate Affairs Commission:

43 44

Cap. 51 L.F.N. 1990 now Cap. C20 L.F.N. 2004 (1962) ANLR 193 at p.200 45 Sec. 20(4) of CAMA 46 Ibid

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i. Memorandum and Articles of Association ii. Address of the registered office iii. Particulars of Directors iv. Statement of authorized share capital, signed by at least a Directors v. Statutory declaration of compliance signed by a legal practitioner. Where the C.A.C. refuses, the applicant must be notified within 30 days. By Section 56 of CAMA, the National Council of Ministers may exempt foreign companies from complying with the provision requiring foreign companies to register in Nigeria before they can operate. Foreign companies operating in Nigeria before the Act should have the word “Nigeria” on their names.

Licensing After incorporation as a company in Nigeria, the company must obtain a banking licence from the minister of finance after consultation with the Central; Bank. The applicant must submit a coy of the memorandum of understanding and articles of association as well as the certificate of incorporation. The Bank and Other Financial Institution Act47 provides that

47

Cap. B3 L.F.N. 2004

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no banking business shall be transacted in Nigeria except by a company duly incorporated in Nigeria which is in possession of a valid licence granted by the Ministry of Finance authorizing it to do so and unless before its incorporation in Nigeria the objects of the company as defined n it MoA shall have been submitted to the minister in writing through the CBN for its consideration and approval accordingly. By Section 5(3)48, if the applicant is already carrying on business outside Nigeria, a copy of its latest audited accounts and balance sheet must be submitted. By Section 8 of the Act, the minister may by order revoke any licence for the following reason: i. if the holder ceases to carry on business in Nigeria or is in liquidation; ii. where the bank operation is detrimental to the interest of the depositors or creditors or has insufficient assets to cover its liabilities. The minister may however take any of the following steps prior to revocation; a. Appoint an expert to advise the bank on the proper conduct of the business;

48

Ibid

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b. The minister will report the circumstances to the Federal Executive Council who may order the revocation; c. The minister must give the bank reasonable notice of its intention to revoke and allow the bank to reply with a written statement. A banking licence granted under the Act is not within the contemplation of civil rights under the constitution. Thus, in Merchant Bank Ltd v. Federal Minister of Finance49 the Minster made an order revoking the licence of the plaintiff for breaching regulations regarding liquidity ratio and other conditions and the proper running High Court sought a declaration order that the order was void and different from injunction to be granted to restrain the minister from winding up the bank. The counsel to the Bank argued that the licence can only be revoked by the court or other tribunal established by the constitution. The bank further argued that it is only the court that has the power to deter mine the civil rights of any citizens including a corporate body. The Federal High Court dismissed the action and the Supreme Court it was held that a licence to engage banking business can be revoked by the Minister. It was further held that a licence was a privilege and it was for the minister and

49

(1961) ANLR pt. 4598

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not the court to exercise the powers. The function of the court begins when it is alleged that the powers have not been exercised in accordance with the provisions of the law. It must be noted that where there is any dispute relating to breach of or non-compliance with certain formulates required by law for the lawful operation of banking business, the Federal High Court is the appropriate court50 for the action because it involves government measure except the federal government is a necessary party. Requirements as to minimum-paid-up capital By Section 6 of the Banking and Other Financial Institution Act 1990, no bank shall be granted a licence unless the following conditions are fulfilled: (a) As regard a bank which is not directly or indirectly controlled from abroad, its paid-up share capital is not less than N600,000 (now N20,000,000,000) (b) In respect of a bank which is directly or indirectly controlled from abroad, its paid up share capital is not less than N1.5 million. (c) In respect of a Merchant Bank its paid up share capital is not less than N2 millions

50

See Jamal Steel Structures v. African Continental Bank Ltd (1973) 1 All N.L.R. (part 3) 28; See also the Federal Revenue Court Act No 13 of 1973; Sec.228-230 of the 1979 Constitution and Sec. 249-252 of 1999 Constitution of the Federal Republic of Nigeria.

27

The position above however changed with the amendments of BOFIA by Decree No. 3 of 1997. The minimum paid up capital for any of the categories is not less than N500 million. The bank is deemed to be controlled from abroad if(i) (ii) The Board of Directors is composed of mainly foreigners; Where the majority voting are held by foreigner.

In an effort of the government of Olusegun Obasanjo to reform the economy, the CBN announced a N25 billion minimum paid capital for all banks in Nigeria in 2006. This exercise led to merger and acquisition activities in the banking sector in a bid to consolidate the sector51.

Opening and Closing of Branches Before any licensed bank in Nigeria can open a branch office anywhere or outside Nigeria, consent in writing of the Central Bank of Nigeria must be sought. This control has become necessary in other to avoid too mush rivalry or competition between banks in citing their various branch offices.

51

Bullion; A Publication of CBN of Nigeria, “Banking Sector Reforms and Bank Consolidation in Nigeria”, Vol. 29 No.2 2005

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A bank is only one entity despite any number of branches it may have. Therefore, a single ban is one person in law. Legal Control of Banking Staff Bank as a legal entity operates via the activities of some people such as managers, Directors a principal officers. It is therefore important to consider the legal control of these staff with respect to banking business and operations. Section 18(1) of BOFIA provides that bank staffs must disclose interest with regard to loan and advances. Staffs are further prohibited from having personal interest in any loan, credit or advances and if he has, shall declare it52. Thus in the case of Obanta Commercial Bank Ltd v. Ajayi53, the Court of Appeal held as follows:
Where in the course of his duties and using the bank facilities, an official of the bank receives money from the customer which he either uses or fraudulently converts to his won use; the bank is liable to the customer notwithstanding the fact that it had adopted all necessary measures to prevent the officer from doing so. In the like manner, where the official of the bank fraudulently withdraws money from the account of customers, the bank is liable to the customer.”

52 53

Section 18(b) and (c) of BOFIA (as amended) (2002) FWLR (pt. 92) at p. 1716 Per TABAI J.C.A.

29

The above quotation from the learned Justice of Court of Appeal elucidates the responsibility of the bank to its customer even though the bank staff is responsible for such injurious act done to its customer. This principle has a bearing with the tortuous law of vicarious liability54. Section 19(1)(a)-(b) further provides that a person who is bankrupt or has suspended payment or compounded with his creditors or fond of profession misconduct shall be managed by agent except as approved by C.B.N55. Subsection (2) prevents a director of another bank or company who has a voting right above 100 percent from being a director of the bank, while subsection (3) prevents a director of another bank o company not being a subsidiary of the bank or who is engaged in another vocation. Every staff of a bank is expected to sign a code of conduct upon the prescription of C.B.N. from time to time56. Similarly, the Chief Executive Officers (CEO) of the bank shall cause the officers to sign its own code of conduct approved by the Board of Directors of the bank57. Section 29 provides for the appointment of approved auditor whose is to provide annul information of the bank to stakeholders on the bank account, balance sheet, profit and loss account and every such other report
54

See Kodilinye: The Nigerian Law of Torts; 1990; Spectrum Law Publishing at p.229-249; Dola v. John (1973) 3 ECSLR 302; Attorney General v. Dadey (1971) 1 E.L.R. 228; Popoola v. Pan African Gas Distributors Ltd (1972) 1 All N.L.R. (part 2) 395; James v. Mid Motors (Nigeria) Ltd (1978) 2 L.R.N. 187 55 Subsection (1) paragraph (a)-(b) 56 Subsection (4) 57 Subsection 5

30

and information as may be requested by C.B.N. section 30 make provision for the appointment of directors of banking and examiners. In other to compliment this, Section 32 provides for special examination and investigation of the books and affairs of the bank where it is satisfied that in the interest of the public, depositors and customers, the bank has a no sufficient assets to cover its liabilities of its banking business is seen detrimental to the public. Although Section 41 gives the president of the Federal Republic of Nigeria power to declare a trade union not to exist where its members employed in banking industry tends to distraught the activities of the banking sector and Nigeria economy via a publication of official gazette, yet, this provision is contrary to the Fundamental Human Rights of individual to join association granted under the constitution58. Section 43 deals with the act of corruption of banking officials. It states that: Any director, manager, officer or employee of a bank or nay person receiving remuneration from the bank who ask for, receives, consents or agrees to receive any gift, commission, employment, service, gratuity, money, property or thing f value

58

Section 40 1999 Constitution

31

for his own personal benefit or advantage or for that of any of his relations, from any person(a) for procuring or endeavoring to procure for any person any advances, loans or credit facility from the bank; or (b) draft, note, cheque, bill of exchange or other obligation by that bank; (c) for permitting any person to overdraw any account with that bank without proper authority or compliance with rules and

guidelines for the purpose, is guilty of an offence and liable on conviction to a fine of N10,000 or to imprisonment for 3 years or both such fine and imprisonment and in addition any such gift or any other commission shall be forfeited to the Federal Government. The above provision shall not derogate from any other similar law promulgated fro same purpose and shall without prejudice be applicable suo motto59. Owing to the provision of Section 44 of the Act, certain person such as people of unsound mind, convicted of serious crimes, with professional

59

Section 43(2) BOFIA 1991

32

disqualification, declared of bankruptcy e.t.c. are not allowed to be bank officers. It is important to point out that all the above provisions on bank staff regulations are put in place to ensure a level of sanity and to repose confidence in the banking sector.

CHAPTER THREE BANKER AND CUSTOMER RELATIONSHIP The Nature of the Relationship Earlier, we have defined a customer as a person who has some account either deposit or current account or some similar relationship with the bank60. In the same manner, the Bills of Exchange Act defines a banker to include a body of persons whether incorporated or not to carry out the

60

Oku v. Banigo (2003) FWLR (pt. 175) p. 422 and Section 2 Bils of Exchange Act Cap. 38 L.F.N. 2004

33

business of banking. The business of banking according to the Act generally must include a major part of the business apart from lending the acceptance of deposits and collection of cheques and other orders of payment. The relationship between a banker and customer is essentially contractual but fundamentally is that of debtor (banker) and creditor (customer) with the roles reversed. It may also be the relationship between the principal and the agent. Also, it may be the relationship between the bailor and the bailee61. Generally speaking, the relationship between a banker and customer is governed by the following: (a) The General Rule of Contract

The relationship between a banker and customer is contractual in nature and there is no comprehensive definition of duties and obligation specified of the parties involved. Therefore, every thing is implied. In Johnson (Liquidator of Merchant Bank) Ltd v. Odeka62, he court held that where a bank lends money to a customer, no action accrues until the banker make notice or demand the return of money. Hence, the bank cannot sue without express demand for the money.

61 62

See Steven Industries v. Bank of Commercial Credit International Nig. Ltd (1999) 7 SCNG 238 (1968) 3 A.L.R. 41

34

Similarly in Wema Bank Ltd v. Okotwo63, the court held that the relationship between a banker and customer constitutes a specialty contract. The relationship between a banker and its customer is that of a debtor and creditor. The relationship between a banker and its customer is that of a debtor and creditor. When a person has an account which is in credit, the bank is deemed to be his debtor to the extent of the credit balance64. In Chief Festus Yesufu v. Cooperative Bank Ltd65, the Supreme Court held that the relationship between a banker and its customer is that of a debtor and creditor and is founded in a simple contract. A banker is under an obligation to pay his customer the amount standing to the customer‟s credit on his account.

(b)

The Rule Of Agency

The rule of agency can be identified where the banker acts as agent for its customer in collecting or paying cheques on its behalf. In this case, that banker is the agent while the customer is the principal. The agent (banker) is bound to accept and pay the order made by the principal (customer) in the

63 64

(1980) 3 CCSCJ 219 at 222 See Expeyoung v. State (1967) 1 All N.L.R. 285 at 287; Braimoh v. C.O.P. (1968) 1 NMLR 272 at 277. 65 (1994) 9 SCNG 6 at 81

35

cheques. This is however, subject to certain rules of exceptions66. According to Layi Afolabi67:
The acceptability of cheques as a medium of payment in a society depends on a number of factors which include, the development of banking habit, the legal provision against the issuance of dud cheque could be converted into cash and some specific protection the cheque guarantee card systematic… offered.

Thus, in Bavins v. London and South Western Bank68, the plaintiff received an instrument in the form of a cheque reading “pay to J. Bavins the sum of sixty-nine pounds provided the receipt form at the foot hereof is duly signed, stamped and dated.” This document was stolen from the plaintiffs, the receipt form being then unsigned. Afterwards, it was paid into the defendant bank for collection bearing an endorsement and with the receipt form signed, these signatures were forged. In an action, it was held that the instrument was not a cheque. (c) The Rule of Bailor and Bailee

Where the banker retains its customers deeds and documents for safekeeping, it is said to be acting as a bailor for the customer(bailee) the principal business of a banker is to receive money form customer either a

66 67

See Barins v. London and South Western Bank (1900) Q.B. 270 Layi Afolabi: Law and Practice of Banking ; Heinemann Educational Books Nig. Plc. (1999) p.131 68 Supra

36

current account or deposit account ad in the former case to pay cheques drawn by the customer. A banker also discounts bills and promissory notes and makes advances by way of loans and overdraft. A banker sometimes undertakes agency of other foreign banks, effect purchases and sales of securities collect cheques, dividends, coupons and foreign bills, make periodically and other payment, pay customers acceptances, issue drafts and letters of credit, conduct foreign exchange business, accept bills for customers takes charge of securities and other valuables for customers. The Rule in Folley v. Hill69 The debate over the relationship between a banker and customer became conspicuous in the locus classicus case of Folley v. Hill70. It was clearly stated that money once paid into a bank ceases altogether to be the money of the customer. It is the money of the banker who is bound to return an equivalent by paying similarly fund to hat deposited with the banker wherever he asks for that amount. The fact of the case was that the plaintiff sued the defendants in chancery for an account of money received by them as his bankers. The account being so simple as not to be a matter for a court of equity, the
69 70

(1848) 2 H.L. Cas. 28 Lord Chorley and J.M. Holden, Law of Banking (1974), 6 th edn p.24

37

plaintiff shifted his ground and claimed that the relationship was equitable like that of principal and agent, and that he was entitled to an account on that basis. The defendants had received the money in question many years before the suit was brought, and had agreed to pay 3 percent interest, but no interest has been paid or credited for over six year. The plaintiff claimed that the relationship being of a fiduciary nature the statutes of limitation did not apply to it. It was held that the relationship was the ordinary relation of debtor and creditor. According to Lord Cottenham:
Money paid into a banker‟s is money known by the principal to be placed there for the purpose of being under the control of the banker; it is then the banker‟s money; he is known to deal wit it as his own; he makes what profit he can, which profit he retains to himself… he has contracted, having received that money to repay to the principal when demanded a sum equivalent to that paid into his hands71.

The above case no doubt, confirms that this debtor and creditor relationship is the basic principle of the law of banking72. What then is the complication of the rule in Folley v. Hill? It means that the bank deposit is a loan of money to the bank by the depositor. Once the bank is in possession of it, it becomes the property of the bank to use it as it pleases. This was
71 72

Ibid See Midland Bank Ltd v. Conway Corporation (1965) 1 W.L.R. 1165

38

explained by the Supreme Court in the case of Ekpenyong v. R. where Braiman J. said to the following effect: When a person has an account which is n credit, the bank is its debtor to the extent of the credit balance and when he draws money in his account, the money he is paid, is the money of the bank. In other words, the customer‟s right to be paid the outstanding in his account is contractual. Where the right is denied, his remedy is to acclaim for the repayment of the debt. As it has been pointed earlier on, the contract between a banker and customer lacks original formality. This lack of formality means that the contract is made by oral rather than written agreement, completion of largely administrative forms, the sending of brief letters are on the basis of banking custom and practice. Another implication of the rule is that demand is conditional precedent that must be complied with before there could be a liability on the part of the bank. Thus, in Joachimson v. Swiss Bank Corporation73 Atkins L.J. reiterated that:
The bank undertakes to receive money and collect bills for its customers but the bank borrows the proceeds and undertakes to repay them. The promise to repay is to repay at the branch of the bank where the account is
73

(1921) 3 K.B. 110

39

kept and during banking hours. It includes the promise to repay any part of the amount due against the written order of the customer, addressed to the bank at the branch and as such, written orders may be outstanding in the ordinary course of business for 2 or 3 days. It is a term of the contract that the bank will not cease to do business except upon reasonable notice. The customer, on his part, undertakes to exercise reasonable care in executing the written orders so as not to mislead the bank or to facilitate forgery. I think, it is necessarily a term of such contract that the bank is not liable to pay the customer the full amount of his balance until he demands repayment from the bank at the branch.

The issue emphasized here is whether demand was necessary to create the cause of action against the banker and it was held on the affirmative. From the foregoing, the relationship between a banker and customer apparently creates obligations and duties for the parties involved. While the banker owes the customer certain duties, the customer on other hand has obligations to perform. Thus, for there to be an actionable suit, the party acclaiming must have kept his own side of this duty to shift the liability on the other party. Duties of a banker to a customer The duties of a banker could be many owing to the dynamism in business world and changes in technological advancement, the duties of a banker to a customer can be an omnibus one encompassing various aspects of banking
40

business. However, there are major duties which are fundamental. They include: (i) Duty to honour customers’ cheques

A banker owes it an obligation to honour customer s cheques once there is sufficient credit in his favour to meet up the demand. If the amount is not paid, the customer can sue the bank74. The law is that a banker is bound to pay a cheque drawn on him by a customer in legal form provided he has in his hands sufficient and available funds for the purpose or provided the cheques are within the limit of an agreed overdraft and may so pay them within a reasonable margin after the banks advertised closing time. In the case of cheques and other documents, the banker is entitled to a reasonable time for clearing or collecting according to their respective nature. Mere crediting as cash is not sufficient to entitle the customer to draw against the cheque before clearing. These must be an agreement express or implied to permit the customer to withdraw75. In Aderibigbe v. NBN76, Savage J. identified two important conditions which must guide a bank in distinguishing the primary duties to honour cheques of customers.

74

See Akwale & Ors v. Queen (1963) All N.L.R. 193 at 200; Allied Bank Nig. Ltd v. Jonas Akubueze (1995) 4 N.W.L.R. pt. 390, p.439 75 Onyech v. NBN Ltd (1977) 1 All N.L.R. 296 at 303 76 (1977) All N.L.R. at 401

41

-

the first is that the account of the customer is in credit or there has been an overdraft facility granted to warrant same; and

-

secondly that there is no legal reason or excuse to the contrary.

Where originally there is a restriction the moment the bank becomes aware of the lifting of the embargo, it must allow the customer to draw on the account. A customer of a bank whose cheque was wrongly dishonored can bring claims for defamation and breach of contract together in one single action77. The imputation of wrongful dishonour of cheque from either the very act of unlawful dishonour of the cheque where the customer has enough funds to meet the amount on the cheque or the endorsement “R/D” thereon is that the customer is dishonest and untrustworthy78. In Adeleke v. NBN Ltd79, an action on libel was however successful instituted where the plaintiff, an army officer issued a cheque which the defendant bank on receipt erroneously presented for payment to one of its own branches. In consequence, the cheque was returned unpaid though the plaintiff had ample fund in his bank account. A senior officer was given

77 78

Balogun v. NBN (1978) 3 Sc 155 at 173 Ibid. (1978) 1 L.R.N. p.157

79

42

notice of the dishonour. It was held that the notice of dishonour constituted a libel to the plaintiff. Exceptions to the duty to honour cheque The rule that a banker is bound to accept and pay the cheque drawn by a customer is not sacrosanct. There are instance where it can reject a cheque. These constitute exceptions to the rule. The instances include: (a) Countermand of payment:- This is an official instruction by a customer to the banker to ignore the order to pay or simply not to honour a cheque issued by the customer. The instruction of countermand of payment given to the banker must be in writing clear and in an unambisous term dully signed by the customer. The correct number of the cheque and amount must be stated. Notification of the stoppage must come directly for the bank80. Thus, in Nwandu V. Barclays Bank D, Co81, the plaintiff issued a post-dated cheque for E 1320. Before presentment he made a valid countermand of the cheque. The bank negligently honoured the cheque on presentment and the plaintiff demanded for the refund of the sum paid by the bank to be re-credited t his account. The court held that the countermand was valid and that the bank was liable. The learned trial judge
80 81

See Nwandu v. Barclays Bank D, Co, (1962) 2 All N.L.R. Part 2-4, p.218 Supra

43

maintained that the bank having disregarded the express direction to dishonour, the subsequent payment cannot n law be a valid discharge of the banks‟ duty. (b) Notice of customer’s death:- If such notice comes from a valid

quarter, the bank must stop such. Here, the spouse of the deceased; next of kin or parent, could be regarded as valid quarter. (c) Notice of customers’ mental Incapacity:- Where the bank is informed or aware of the mental incapacity of the customer, it could stop the payment of a cheque ordered by him. (d) On service of a garnishee order:- This is an order from the court obtained by a judgement creditor ordering that a debit owned or accruing due by a third party to the judgement debtor at the time of service of the order be paid to the judgement respect creditor. Where the order is served on a bank in respect of money held in a customer‟s bank, account, the bank is the third party (the garnishee). The bank‟s customer is the judgement debtor and the party that obtains the order is the judgement creditor. (e) The cheque must be properly drawn and not state:- A cheque is state when it has been in circulation for a considerable period of time, usually more than 6 months.
44

(f) Where there is an insolvency order made against the customer, such cheque or any cheque ordered by him would be rejected. (ii) Duty not to pay without authority

Liability of the bank arises in any of the following ways:(a) Where the cheque has been countermanded82. In Curtis v. London City & Midland Bank83, a cheque drawn on the same day and countermanded on the same day by telephone but due to delay it some days before the countermand of payment order was received by the manager. The court held that the countermand was still effective. (b) Where the drawer’s signature is forged. Sec. 24 of Bill of Exchange Act provides that where a signature on a bill is forged or placed thereon without the authority of the person whose signature it purports to be, the forged or unauthorized signature is wholly inoperative84. (iii) Duty of Secrecy

The bank and its staff are obliged to keep secret information regarding the business and account of customers. For the above reason every bank official

82 83

See Adeleke v. NN Ltd Supra (1908) 11 K.B. 293 84 See Chief Victor Ndoma Egba v. African Continental Bank Plc Suit No. S.C. 40/2001 decided on 15 th Day of July, 2005; (2005) FWLR (pt. 283) p. 152 at pp.180-182.

45

is required to sign a declaration of secrecy in respect of the bank‟s business. The duty of the bank to keep secret every information regarding the customer‟s account is not without exception. These exceptions are: (a) Where disclosure is required by law. In any proceeding before the court of law any of the parties may make an application to the court under the Banker‟s Book. Evidence Act 1879 which is a statute of General Application in Nigeria provide for an order to the court permitting him to inspect and take copies of the entries in a banker‟s books for any of the purposes of such proceedings. By virtue of Sec. 7 of the Act, the order may be made either with or without suing the bank or any other party and shall be served on the bank three (3) days before the same is to be obeyed unless the court or judge otherwise directs. By Section 97(1)(a) of the Evidence Act85, evidence may be given of the existence of the content of an entry in a banker‟s book. A police officer may obtain information pertaining to the account of an accused in a criminal proceedings but such officer must obtain an order of the court to do so. It is advisable that where a police officer failed to comply with the procedure such permission should

85

Cap. 112 L.F.N. 1990 now Cap E8 L.F.N. 2004

46

be refused otherwise the bank will be liable for a breach of the duty of secrecy. Section 317 of CAMA86, empowers inspectors of companies during investigation to inspect all books and documents relating to the company or as the case may be in their custody or power. Section 318 also empowers inspectors to call for Director‟s Bank Accounts. (b) Where the bank has a duty to the public to do so:- the extent of this duty is uncertain and certainly seldomly invoked. It could probably apply in war times if the bank discovers that one of its customers is trading with the enemy. (c) Where the bank’s own interest requires disclosure:- This occur for example where legal proceedings are required to enforce the repayment of an overdraft or where a surety has to be told the extent to which his guarantee is being relied upon. (d) Where the bank has the express or implied consent of its customer to do so;- where he supplies a reference to its customer or where it replies to a status inquiry from another bank.

86

Cap. 59 L.F.N. 1990

47

(iv)

To render statements of accounts to its customers periodically or upon request.

(v)

The bank has a duty to collect cheques and normal banking instruments for his customers and to credit the amount collected to the account.

(vi)

Duty to exercise proper care and skill in carrying out any business it has agreed to transact for his customers.

(vii) Duty to give reasonable notice before closing a credit account. There are two reasons behind this. First of all, it gives the customer time to make other arrangement. Secondly, it means that the bank does not have to return cheques already issued by the customers. This saves administrative effort and prevents an allegation that the ban damages its customer‟s reputation by returning the cheque unpaid. The Rights of a Banker The rights of a banker include the following: (i) To change his customers reasonable commission for services rendered to them and to charge interest on loans given to them. (ii) To be indemnified by his customers for expenses and liabilities incurred while acting for them.

48

(iii)

To exercise a lien over any of its possession other than those deposited for safe keeping for any money owing to it.

(iv)

To dispose of his customer‟s money as it pleases provided it honours the customer‟s values cheques.

(v)

To combine or set off accounts where a customer has more than one account with a bank. The bank is entitled to settle an overdrawn balance on same accounts by transferring money from the credit balance. The right would arise where the bank for example, received the notice of the death or mental incapacity of his customer or where his customer has a bankruptcy made against them.

Duties of a Customer to his banker A customer owes his banker certain duty. This is the corresponding effect of banker/customer relationship. Such duties include but not limited to the following: (a) A customer has a duty to exercise reasonable care in drawing cheques

to guide against alteration and from being misled. London Joint Stock Bank v. Macmillan & Authur87, a clerk was influenced by the respondent to

87

(1918) A.C. 977

49

prepare cheques. He prepares a cheque payable to a firm to the bearer showing the sum of two pounds in figure only but not in words. One of the parties signed the figure of 120 pound and wrote the amount n words and cashed the cheque at the London Joint Stock Bank. The House of Lord held that the plaintiff action must fail because the customer holds a reasonable duty to take care in drawing the cheque. (b) The customer has a duty to notify the bank of cheques in his name

which he knows are forged. Where a customer discovers that his signature is being forged and such forgery appears as genuine, he is obliged to inform his bankers immediately. His failure will estop him from claiming from his bankers payments made on such forged signatures88. A banker on being notified of the forgery cannot debit his customer‟s account on the basis of a forged signature since he has no mandate from the customer89. A bank who collects for a customer an amount stated on a forged cheque will be liable for money it has received for conversion at the instance of the true owner unless the bank did so in good faith and was not negligent. In the case of Standard Bank v. Bank of America90, a bank mistakenly pays out money in honour of a cheque which was later discovered to be a forged document; such money is recoverable at the instance of the bank.
88 89

See The Nigerian Advertising Services Ltd v. UBA Ltd (1965) L.L.R. 84 at 114 UBA Ltd v. Savannah Bank Ltd (1977) 10-12 C.C.H.J. 255 at 259 90 (1976) 1 F.N.L.R. 112 at v114

50

(c)

The customer must indemnify the bank for services rendered on his

behalf. Termination of Banker-Customer Relationship The contractual agreement between a banker and customer can be determined by either the customer, the bank or by the operation of law. (a) Termination by the customer occur where customer demand full payment of his credit balance. This was the rule in Joachimson v. Swiss Bank91 where it was held an overdraft together with associated charges must first be replied before an account can be closed. (b) Termination by the bank can be effected by giving reasonable notice of the termination of the relationship to the customer if the account is in credit and immediately, if the account is overdrawn. (c) Termination by Operation of law can occur by either or all of: death, mental incapacity and insolvency. New Development in Banker and Customer Relationship Owing to recent recapitalization and consolidation policy in the banking sector complied with the rapid growth of information technology, the duty of banker and obligation of customer is wearing a new look. There is a generating debate that banks should be compelled to re-invest into the

91

Supra

51

community as part of their corporate social responsibility. This according to the proponent would affect the social well-being of their customers thus encourage them to continue in the relationship which exists between them. The effect of this has argued would strengthen the banker-community relationship (that is the relationship between a bank and the environment where it operates). Another significant area which calls for reform of the rule of banker and customer relationship is the use of credit card, Automated Machine Transaction, online transaction e.t.c. which now form part of business interaction between a banker and customer. Definitely, this new area has not been covered by law especially in Nigeria. The circumstance surrounding the use of information technology could definitely alter or add to or subtract from the position of law, or originate a new principle which will guide the banker-customer relationship. Therefore, the concluding chapter is wholly dedicated to recommending solutions to this and other issues arising from the relationship as discussed above.

52

CHAPTER FOUR RECOMMENDATIONS AND CONCLUSIONS Recommendations Without prejudice to either the legal or banking profession on the view regarding banker/customer, the recommendations made underneath are general and of useful importance in strengthening the relationship and reforming the rules that guides it. Although many of the recommendations are not new to either of the profession, yet, they are often overlooked and jettisoned. Thus, it is believed that the rule guiding customer/banker relationship cannot be properly appreciated if the recommendations are not
53

taken into consideration and fully applied in every transaction between the profits involved. It is therefore my recommendation: I. that a thorough and reformed study be carried out from time on the topic banker-customer relationship as to update and appreciate the rule that provides for same. II. that a comprehensive compilation and definition of terms be made and published on banking which will accommodate most of the terms defined in the search work. III. There should be public awareness on most of the relevant provisions of the law guiding banking establishment and practice. This will clarify the customers of thorny issues and assist them take appropriate legal step where the need arise. IV. that in most local community where customers are ignorant of the law guiding banker and customer‟s relationship, banks should be made to enforce the rule and fulfill their contractual obligation. This can be achieved by making law that would ensure compliance and in default, provides for remedy V. that the common law rule as it applies to the relationship is adopted by virtue of a local legislation. Hence its application should therefore

54

follow the qualifications in its subsection which says as local legislations allow it. It is my submission that the debtor /creditor relationship as well as other implications of the rule should be applied subject to the circumstance generally established in the transaction. i. That the duties of a banker to a customer and that of a customer to a banker are subject to new developments and as such not exhaustive. ii. That the rule on banker and customer relationship be expanded to cater for new transactions not apprehended by the rule in Folley v. Hill and subsequent once. This can best be done through judicial interpretation. iii. That a special law report should be carried out on cases decided by court of appeal and supreme court by interested individual or government so as to help further studies and research on banker/customer relationship. Conclusion In conclusion, this work has successfully explored and discussed all necessary ingredients of banker and customer relationship. No doubt, the relationship existing between a banker and his customer is that of debtor and
55

creditor, with the additional feature that the banker is only liable to repay the customer on payment being made92. This conception as painted out involved a departure from the original objective of the depositor which was simply the safe custody of his money, an aim which he probably shared with the majority of his descendants since the average customer at a bank has not the least idea that he is lending his money to a banker to do what he likes with it93. Thus, the introductory part of this work had related the necessary terms used in banking law and practice as far as it affects banker/customer relationship .It is discovered that the operation of banks today can be traced back to its history especially in Nigeria. Although there are different kinds of banks established for different purposes and functions, their core duty does not leave out the concept of banker/customer relationship. It therefore believed that this project would go a long way in reshapening and restructuring the use and misuse of terminologies as well as appreciating the lessons of the past n forecasting the future development in the banking law and practice.

92

93

M.C Okany, Nigeria commercial Law‟,2001,African Fep Publishers Limited at pp 415-437 Op cit.

56

To buttress the above, the legal framework of any contractual transaction cannot be underestimated in the operation of such transaction or business. This is true in the operation of banks. Bankers and customers, though freely involved in a contractual agreement s of different sorts are confined within the specification of law. In Nigeria therefore, the appropriate laws and legislations such as; common law, company and Allied matters Act 1990, central Bank Act, Banking and other Financial Institution Act, Banking and other Financial Institution And money laundering Act, Economic, Financial and Crime Commission (Establishment) Act among others serves as regulatory mechanism for proper shapening of the relationship that exist between banker and customer. These legislations does not only stipulates what should be done, within the contractual agreement, but also regulate the activities of the bank most of which favours the customer for example, it was explained how relevant sections of the relevant Acts compel registration of the banks before they can be licensed to operate. Such grant of license could even be revoked where appropriate by the appropriate authority (i.e. the central Bank Governor). Other provisions include the require of law as to minimum- paidup capital; opening and closing of branches of a bank, legal control of

57

banking staff etc .These regulations are put in place to ensure the integrity of financial institution as well as promote the use of banks by customers. Consequently, banker and customer relationship is adequately guided by law. But the attendant question is how effective or efficient are the number of local legislation in Nigeria as far as the issues between bankers and customers are concerned, obviously, the advert of technological advancement globally which had major impact on the banks has not yet been catered for by our legislation. Also, the question whether or not the common law doctrine should always be applied without any cote of reservation as far as banker and customer relationship is concerned begs for answer. As reiterated above, the basic target of the banker/customer relationship is debtor–creditor relationship; this is the general rule as firstly discussed in the chapter three of this work. In simplifying the concept, three different rule apply ipso fact .This include the general rule of contract, the rule of agency and the rule between a bailor and bailee /customer relationship therefore, is a combination o these three. These rules where considered in the locus classicus case of Folley v. Hill94 and Nigerian case of Wema Bank Ltd v. Okotwo95
94

(1848) 2 H.L. Cas .28

95

(1980) 3 CCSCJ 219 and 222

58

Following these precedents are the reciprocal duties and obligation a well explained here that the duty of a customer to a banker is important in order to ensure a corresponding adherence to the contractual agreements. Where either of the party wants to discontinue the relationship, the law provides the termination which has pointed out can be; iv. v. vi. by death i.e. by operation of law by the banker, or by the customer

Certainly, the new development in the banking sector call for modification on the banker customer relationship. With the use of Automated Machine otherwise known as ATM, online transfer, e- banking, and use of credit card, the scope of banker customer relationship might be extended to cover new issues or grounds as they arise. Thus, research work will not be completed without suggested solutions to some of the visible problems that features in the application of the rule that guides the relationship-more so, that various sector of Nigeria legal system is witnessing updated reformation, It is believed that the banking sector should not be left behind.

59

In addition to the recent bank reform, witnessing recapitalization, consolidation, restructuring and sanitization exercise recently carried out by the Governor of Central Bank of Nigeria, Sanusi Lamido Sanusi, issues involving banker and its customer will definitely need a more comprehensive legal regime.

60

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