Measure of Damages for Dishonoured Bills Under Section 57 of the Bills of Exchange Act
In the Supreme Court of Nigeria
Holden at Abuja
On Wednesday, the 4th day of June, 2025
Before Their Lordships
Uwani Musa Abba Aji
Ibrahim Mohammed Musa Saulawa
Emmanuel Akomaye Agim
Chioma Egondu Nwosu-Iheme
Jamilu Yammama Tukur
Justices, Supreme Court
SC/CV/757/2022
Between
UNITY BANK PLC APPELLANT And
1.EFORCE INTERSERVICE LTD RESPONDENTS
2. ALHAJI ABBA M. USMAN
3. LODIGIANI NIGERIA LTD
(Lead Judgement delivered by Honourable Chioma Egondu Nwosu-Iheme, JSC)
Facts
The 1st Respondent was operating a current account with Account No. 0023648377 with the Appellant. Between 26th March, 2015 and 29th April, 2015, the 1st Respondent made various deposits totalling N700,037,240.23 into the said account. The 1st Respondent claimed that it issued several payment instructions to the Appellant which were dishonoured, and which caused the 1st Respondent to lose several business opportunities for which those funds were to be deployed. Consequently, the 1st Respondent filed an action before the High Court of the Federal Capital Territory seeking inter alia, a declaration that the Appellant’s blockage of the 1st Respondent’s account and its refusal to honour the 1st Respondent’s instructions to transfer various funds into various accounts specified by the 1st Respondent, were wrongful and without any lawful justification. The 1st Respondent also sought orders directing the Appellant to lift the blockage of its account; interest on the sum standing in the 1st Respondent’s credit at the rate of 21% per annum with effect from 4th July, 2016 up to the date of the judgement; post-judgement of interest at 10% per annum; and N2,500,000.000.00 as general damages, for breach of contract by the Appellant and loss suffered by the 1st Respondent for the blockage of its account.
The Appellant filed a Statement of Defence and Counter-Claim, wherein it joined the 2nd and 3rd Respondent as Co-Defendants in the Counter-Claim. The Appellant claimed that the 1st Respondent had agreed to discharge the 3rd Respondent’s indebtedness to the Appellant, and it was on this basis that the Appellant placed a lien on the sums in the 1st Respondent’s account. The Appellant counterclaimed for a declaration that it is entitled to the sum of N700,000,000.00 standing in the credit of the 1st Respondent in its Account No. 0023648377 with the Appellant’s FCMB Branch, or a declaration that it is entitled to place a lien on the said amount. The Appellant also sought an order directing the Respondents to immediately transfer the said sum from the 1st Respondent’s account to the 3rd Respondent’s Account No. 0013498269 with the Appellant’s Bank, to partly liquidate the 3rd Respondent’s indebtedness to the Appellant.
After the close of trial and adoption of written addresses, the trial court delivered its judgement wherein it found that there is no contractual relationship between the 1st Respondent and the Appellant regarding the payment of the 3rd Respondent’s indebtedness, and thereby held that the Appellant’s blockage of the 1st Respondent’s account and its refusal to honour the 1st Respondent’s transfer instructions were illegal and unjustifiable. The trial court awarded the 1st Respondent pre-judgement interest of 16% per annum on the sum of N700,037,240.23 standing in its credit, 10% post-judgement interest, and general damages of N35,000,000.00.
Dissatisfied, the Appellant appealed to the Court of Appeal which dismissed the appeal, and affirmed the decision of the trial court. Aggrieved, the Appellant lodged a further appeal at the Supreme Court.
Issue for Determination
The Supreme Court adopted the sole issue formulated by the 2nd and 3rd Respondent:
Whether the Court of Appeal was right in the circumstances of the case, in affirming the judgement of the trial court which awarded 16% as pre-judgement interest on the funds deposited with the Appellant by the 1st Respondent, and in addition, N35,000,000.00 only as general damages.
Arguments
Counsel for the Appellant submitted that, once a party has been fully compensated for the loss or harm suffered by him, it should not be open to the court to award him any other kind of additional damages that may look like a bonus. Counsel further submitted that the award of general damages is improper, where the quantum of loss is certain. It was also submitted that pre-judgement interest is in the nature of a special claim, and cannot be properly awarded on the basis of the equitable principle of breach of fiduciary relationship, but on satisfactory proof of entitlement by the Claimant
Counsel for the Appellant argued that there was no evidence to satisfactorily prove that the 1st Respondent was entitled to pre-judgement interest, and in the absence of such evidence, there was no legal justification for the Court of Appeal to uphold the trial court’s award of 16% pre-judgement interest to the 1st Respondent.
Conversely, Counsel for the 1st Respondent submitted that although the law guards against double compensation, it does not bar the award of damages under different heads in deserving situations, such as where it is glaring from the surrounding circumstances of the case and nature of the injury suffered, that the injured party would not be adequately compensated for his loss, especially where such injury was inflicted by the other party’s flagrant and wilful act(s). Counsel argued that the flagrant dishonouring of a cheque or transfer instructions by the relevant banker, coupled with the anguish and grave injury caused to the drawer’s credit and reputation, puts such cases in a special case of their own that is sui generis, and a successful Plaintiff becomes entitled to recover on several heads of damages, even without pleading or proving the said damages. He referred to HIRAT BALOGUN v NBN (1978) SC 155.
Counsel for the 1st Respondent argued further that in commercial transactions, a party that holds on to the money of another and deprives the other person of its use for a long time without justification, is liable to pay compensation by way of interest, even where interest is not claimed in the writ. Counsel urged the Apex Court, to affirm the concurrent findings of the Court of Appeal and the trial court.
Counsel for the 2nd and 3rd Respondent on his part, argued that the Appellant had breached the provisions of Section 57 of the Bills of Exchange Act by failing to honour the Respondent’s transfer instructions and under the said provision, the measure of damages was liquidated damages. Counsel argued that the award of damages and pre-judgement interest to the 1st Respondent by the trial court was thus, rightly affirmed by the Court of Appeal.
Court’s Judgement and Rationale
Having examined these background facts, the Supreme Court reiterated the long settled position of the law that for a contract to come into existence, there must be a definite offer by the offeror, and a definite and unconditional acceptance of the terms of the offer by an offeree. The Court relied on N.N.P.C v FUNG TAI ENG. CO. LTD (2023) 15 NWLR (PT. 1906) 117
The Apex Court held that it was evident in the 1st Respondent’s averments in its Statement of Claim in the records, that the 3rd Respondent had a loan obligation to the Appellant and the 1st Respondent which was a company in which one of the Directors of the 3rd Respondent was the Managing Director, had made a conditional offer to the Appellant to buy the three properties of the 3rd Respondent used to secure the loan as consideration for the payment of the 3rd Respondent’s outstanding loan agreed with the Appellant by the 3rd Respondent, further to which, the 1st Respondent deliberately funded its account with the Appellant as a sign of good faith. However, the 1st Respondent’s conditional offer could not be consummated into an agreement because the condition stipulated by the 1st Respondent (that the outstanding amount has to be an amount agreed to be so outstanding between the Appellant and the 3rd Respondent) could not be achieved, and in spite of this non-agreement, the Appellant proceeded to place a lien on the funds deposited by the 1st Respondent as lien against the 3rd Respondent.
The Supreme Court held that generally, the act of a subsidiary company cannot be imputed to the parent company, nor can the act of the parent company be imputed to the subsidiary company because a subsidiary company has a separate legal entity different from the parent company. The Supreme Court held that although it is not in evidence that the 1st Respondent and the 3rd Respondent are related as parent company/subsidiary company or vice versa, however, even if they were, they still maintain separate legal personality such that the act of one cannot be imputed to the other.
The Apex Court agreed with the Court of Appeal that the 1st Respondent was a third party to the debt liability of the 3rd Respondent to the Appellant, regardless of whether the 1st Respondent had offered to assist the 3rd Respondent to discharge its loan obligations to the Appellant, because there was no agreement between the 1st Respondent and the Appellant in this regard, hence, no valid and enforceable contract existed between them. The Court held that it was thus, mischievous of the Appellant to assume that, even though the proposal made to it by the 1st Respondent could not be consummated, it has the locus standi to put a lien on the 1st Respondent’s funds and deal with the funds as it pleased, probably for the mere fact that the 1st and 3rd Respondent shared a common director.
The Supreme Court held that the Appellant breached the banker/customer relationship between it and the 1st Respondent, which is distinct from the failed transaction between them in relation to the 3rd Respondent. The Court held that under Section 57 of the Bills of Exchange Act which made provisions for the measure of damages against a party who dishonours a bill of exchange such as a cheque, once a bill is proved to be dishonoured under the section, all the damages payable for that breach shall (mandatory) be deemed to be liquidated damages.
On what liquidated damages is, the Apex Court held that damages is said to be liquidated when it is assessed beforehand by parties to an agreement, or fixed by some statute. The Court referred to RUTHLINZ INTERL INVEST. LTD v IHEBUZOR (2006) 8 NWLR (PT. 983) 435. The Court concluded that it thus, goes without saying that all the heads of damages itemised under Section 57 of the Bills of Exchange Act which comprise of the amount of the bill, interest thereon from the time of presentation or maturity, and the expenses of noting or expenses of protest, shall ordinarily be due to the 1st Respondent as of right, and the Court may even proceed further to award general damages for breach of contract as it did in the instant case, or even punitive damages.
In conclusion, the Supreme Court found that the Court of Appeal properly considered the judgement of the trial court, and came to the right conclusion when it affirmed the judgement, hence, there was no reason for the Supreme Court to interfere with the finding.
Appeal Dismissed.
Representation
P. O. Aihiokhai with I. K. Eshiett for the Appellant.
A. Oyedele with Tomisin Ologunorisa for the Respondent.
Reported by Optimum Publishers Limited, Publishers of the Nigerian Monthly Law Reports (NMLR)(An affiliate of Babalakin & Co.)
