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On Duty on financial institution to reverseunauthorized debit on customer's account within seventy-two hours ofcustomer's written notification -: An insight into the Court of appeal landmarkdecision.

 Summary ofFacts:

Theappellant and the respondent had a banker-customer relationship under which therespondent maintained a current account with the appellant. On 21st October2016, at about 5pm, and after close of business activities, the respondentreceived several SMS alerts of the unauthorized withdrawal of N9,293,578.15 ininstallments from its account on its managing director's cell phone with an MTNnumber (the only telephone number registered in respect of the account with theappellant). And the withdrawals were effected through the appellant's onlinebanking platform.

On receipt of the SMS, the respondentcomplained via phone conversation and SMS to its account officer with theappellant at about 6pm on the same day. Later, on 24th October 2016, therespondent wrote a letter to the appellant requesting the immediate reversal ofthe debits to its account.

Subsequently,on 10th November 2016, the respondent issued a cheque for the transfer of N8million,but the cheque was dishonored by the appellant on ground that the respondentdid not have sufficient money in its account to cover the cheque. By a letterdated 11th November 2016, the respondent's solicitors demanded the return ofthe money withdrawn from the respondent's account and gave notice of therespondent's intention to sue if the appellant failed to comply with thedemand. In response, the appellant wrote a letter dated 22nd November 2016, andon 26th November 2016, the appellant was served with the originating processesof the respondent's Suit filed on 1st November 2016.

Therespondent averred that the appellant failed in its duty to release therespondent's money upon the respondent's demand. The respondent also statedthat the unauthorized withdrawals resulted from the appellant's negligencebecause the respondent had never used the hardware token device issued to it bythe appellant through which the unauthorized withdrawals were made and that itsmanaging director never received any One Time Pin (OTP) SMS on the hardwaretoken device or on his designated telephone number in respect of theunauthorized transactions.

Theappellant admitted the loss or unauthorized withdrawal of N9,293,578.15 fromthe respondent's current account. The appellant also admitted that the hardwaretoken device it issued to the respondent's managing director and which waslinked to the respondent's internet bank platform with the appellant was neverused by the respondent to withdraw any money from its account. The appellant,however, stated that the withdrawals were made using software token because therespondent's managing director compromised his e-mail profile and thereby gavethe perpetrators of the fraud access to his e-mail where they accessed theU-token activation OTP and password either through physical access or socialengineering.

Furthermore,the appellant pleaded that it was able to recover N4,692,097 of the amountwithdrawn and would credit same to the respondent's account. Relying on anindemnity and the exclusion clauses in forms signed by the respondent, theappellant stated that it was not liable for the balance unrecovered amount. Theappellant also stated that the respondent did not have sufficient money in itsaccount when it issued the cheque for N8million hence the cheque wasdishonored.

Therespondent filed a reply to the appellant's statement of defence by which itgave notice that it would challenge the enforceability of the indemnity pleadedby the appellant as being against public policy. Four witnesses testified forthe respondent and they tendered documentary evidence.

PW3,an Inspector of Police, gave unchallenged evidence that he investigated theappellant's complaint against one Ejike Nwabara in respect of the withdrawalsfrom the respondent's account. PW3 said Ejike Nwabara admitted having anaccount with the appellant but denied knowing the respondent. PW3 also said theappellant failed to give the police evidence to aid its investigation andprosecution of Ejike Nwabara so he was released from detention.

PW4,a fraud analyst and employee of MTN Nigeria Ltd, gave expert evidence. Hetestified unchallenged and uncontradicted that the respondent's mobile phonenumber was taken off the appellant's data base at the time the transactionswere done to avoid the identification of the person making the withdrawals andto avoid detection of the transactions at the time they were being done. Healso testified about a similar case in another bank which showed thattransaction was done by the bank's employees.

DWItestified under cross examination that the unauthorized withdrawals were madeby software token and not the hardware token device issued to the respondent'smanaging director by the appellant. DWI confirmed that a review of the hardwaretoken showed it was never used by the respondent: DW1 further testified thatthe appellant laid a criminal complaint to the police which resulted in thearrest of one Ejike Nwabara, but did not show what the appellant stated in itscriminal complaint to the police. The appellant, however, did not show that therespondent's U-direct token activation OTP and password was accessed by thefraudsters either through physical access or social engineering and failed toprove that they used that access to make the unauthorized withdrawals from therespondent's account with the appellant. The appellant also adduced evidencethat the respondent had only N5,058,574.24 in its account on 10th November 2016after the unauthorized withdrawal of N9,293,578.15 when it presented its chequeof N8million hence the cheque was dishonored.

Thedocuments tendered in evidence included exhibit D - the respondent'ssolicitor's letter of demand; exhibit F- the respondent's reply to the letterof demand; exhibit H - the terms of the online/ internet banking relationshipbetween the parties entered into in 2008; exhibit L - an indemnity in respectof NIBSS payment system executed in 2015, but which did not incorporate exhibitH executed in 2008 expressly by reference; and Exhibit K - which containedexclusion clauses.

Inits judgment, the trial court expunged exhibit F from its record on ground thatit was written when litigation was anticipated. The trial court relied on theGuidelines on Electronic Banking in Nigeria issued in 2003 under the CentralBank of Nigeria (Establishment) Act though it was not specifically pleaded byeither party. The trial court found and held that the appellant was negligentin allowing the withdrawal from the respondent's account and acted wrongfullyin dishonoring the respondent's cheque. So, the trial court granted therespondent's claims which included N1 million claimed as fee paid to counseland N500,000 as damages for the appellant's wrongful dishonor of therespondent's cheque.

Theappellant appealed to the Court of Appeal. The respondent also cross-appealedon grounds that the Cyber Crimes (Prohibition, Prevention, Etc.) Act 2015prescribed a minimum of N5million damages for unauthorized debits by a bank onits customer's account; and that damages awarded to it for the dishonor of itscheque was low.

Held:Unanimously allowing the appeal in part and dismissing the cross-appeal.

Thefollowing issues were raised and determined by the Court of Appeal:

(a)On Duty on financial institution to reverse unauthorized debit on customer'saccount within seventy-two hours of customer's written notification:-

Section37(3) of the Cyber Crimes (Prohibition, Prevention, Etc.) Act 2015 states thata financial institution that makes an unauthorized debit on a customer'saccount shall, upon written notification by the customer, provide clear legalauthorization for such debit to the customer or reverse such debit within 72hours and that any financial institution that fails to reverse such debitwithin 72 hours, commits an offence and is liable on conviction to restitutionof the debit and a fine of N5,000,000. In this case, by virtue of section 37(3)of the Cybercrimes (Prohibition, Prevention, Etc.) Act 2015, the appellant wasbound to provide clear legal authorization for the unauthorized debits orreverse the unauthorized debits within 72 hours after it was informed by themanaging director of the respondent on 21st October 2016 or after it receivedthe formal letter from the respondent on 24th October 2016 complaining aboutthe unauthorized debits. The appellant did not provide any clear authorizationof the debits within 72 hours of receipt of the respondent's letter. Therefore,the appellant was bound to reverse the debits within the same 72 hours.

(b)On Punishment for failure by financial institution to provide legalauthorization for debit on customer's account or reverse same:-

Section37(3) of the Cyber Crimes (Prohibition, Prevention, Etc.) Act 2015 makes afinancial institution's failure to provide clear authorization of anunauthorized debit or reverse the debit within 72 hours of being notified ofthe debit by the customer an offence punishable by a fine of N5million. Theprovision does not prescribe any general damages that the court must award forsuch wrongful debits. The N5million mentioned in the provision of the sectionis the fine it prescribes as punishment for the offence created therein.

Onwhether fee paid to counsel can be claimed as special damages:-

Anaward of cost of attorney's fee as special damages for breach of contract runscontrary to the legally recognized principle for the award of damages forbreach of contract. In this case, the trial court erred when it awarded N1million as cost of the respondent's attorney's fee for prosecuting this suit asspecial damages to the respondent for breach of the banker-customer contract.

3a.On When letter written by person interested in anticipated proceedings shouldbe admitted in evidence:-

Aletter written as a reply to a letter of demand and intention to sue if thedemand was not complied with is admissible in evidence. This is so becausewhere a person receives but fails to respond to a business letter which by thenature of its content requires a response or a refutal of some sort, the personwill be deemed to have admitted the contents of the letter. In this case, itwas the respondent's letter (exhibit D) that evoked the appellant's replyletter (exhibit F). The appellant was bound by law to respond to exhibit D ifit disputed the facts and claims therein and if it failed to so respond, itslack of response would have been deemed an admission of the contents of exhibitD.

(b)On when letter written by person interested in anticipated proceedings shouldbe admitted in evidence:-

Equityfollows the law and is applied to ameliorate the rigidity and inflexibility ofthe law. In this case, though exhibit F was written by the appellant, a personinterested, when the respondent's suit was anticipated, it would be inequitableto exclude the exhibit under section 83(3) of the Evidence Act, which rendersinadmissible any statement made by a person interested at a time whenproceedings were pending or anticipated involving a dispute as to any fact thestatement might tend to establish.

Thisis because exhibit F was written in response to the respondent's letter(exhibit D), which had been admitted in evidence and which required a responsefrom the appellant so the appellant would not be deemed to have admitted thecontents of exhibit D as correct.

OnWhen appellate court will not interfere with award of damages by trial court:-

Appellatecourt will not interfere with an award of general damages unless it is shownthat the trial court did not properly exercise its discretion in making theaward. In this court, the respondent did not show why it considered the sum ofN500,000 awarded as general damages by the trial court as too low. It was notenough for the respondent to merely assert that the amount awarded was too low.The respondent who so asserted ought to have demonstrated by reference to thefacts of the case that the amount was indeed too low, but it failed to showthat the trial court did not exercise its discretion in making the awardjudicially and judiciously.

OnPurpose of award of costs:-

Thepurpose for the award of costs is to compensate the successful party for someof the loss incurred in litigation.

Onwhen exclusion or exemption clause in contract is enforceable:-

Foran exclusion or exemption clause to be enforceable and applicable, the wordconveying the exemption must be clear, specific and unambiguous and mustexactly cover the liability, which is sought to be excluded. In this case, theindemnity relied on by the appellant did not cover the liability of theappellant to refund the respondent's money withdrawn without the respondent'sknowledge and authority from its account in the custody of the appellant. Theliabilities covered by the indemnity were specifically listed therein, and itdid not relieve the bank from liability for unauthorized withdrawals ordealings with customers' funds or for breach of its duty to manage and maintainthe customer's account, protecting and securing the customers funds thereinwith due care and diligence.

Onwhen burden of proof shifts to defendant in civil cases:-

Byvirtue of section 133(1) and (2) of the Evidence Act, 2011, where a claimantestablishes his case as pleaded, the evidential burden shifts to the defendantto rebut the case presented by the claimant. In this case, the respondentestablished its case that the withdrawals were unauthorized as pleaded. Theevidential burden then shifted to the appellant to rebut the case presented bythe respondent by showing that it was not responsible for the loss orunauthorized withdrawal of N9,293,578.15 from the respondent's account in itscustody. But the appellant failed to show how and why the money was withdrawnor removed from the respondent's account without the prior knowledge andauthorization of the respondent.

Inthe circumstance, the trial court rightly decided that the appellant wasnegligent in the maintenance of the respondent's account with it on the basisthat the appellant breached its duty of care to the respondent to ensure thatthe respondent's money in its custody and control were safe and secure with itby allowing the unauthorized withdrawal of the respondent's money in itscustody.

OnPrinciples guiding variation of contract:-

Variationof contract involves a definite alteration of the contractual obligations bymutual agreement of both parties. Variation is analogous to the entry of a newcontract. The requirements of offer, acceptance and consideration are thus imposed,and the parties must have acted in some way to their benefit or detriment ineither agreeing the variation or as a result of the variation. Where partiesenter into an agreement and subsequently decide to introduce new terms, theycan only do so by specific reference to the earlier agreement to the effectthat the latter agreement has introduced new terms thereof. In this case,exhibit H (the foundation of the online/internet banking relationship betweenthe parties entered into in 2008 specifically with respect of U-Direct onlineor internet banking platform did not contain any indemnity clause.

Thesubsequent agreements which contained the purported indemnities clause did notexpressly or remotely mention exhibit H. From the totality of the pleaded factsand the evidence before the court, the respondent simply demonstrated that theindemnity which was an exclusion clause the appellant relied on to exculpateitself from liability were not incorporated in the agreement giving rise to thepresent cause of action which was exhibit H.

DWI'stestimony was direct and unequivocal. He also confirmed that the Hardwaretoken-exhibit G was never utilized by the respondent. Exhibit L which was anindemnity with respect of NIPPS executed in 2015, 7 years after the onlinebanking relationship ensued, did not incorporate exhibit H executed in 2008expressly by reference hence could not fall within its contemplation. If theappellant intended the indemnity to bind exhibit H which was founded on theonline banking, it would have expressly mentioned same in exhibit L or exhibitK.

Onwhether damages awardable of banker's wrongful dishonor of customer's cheque-

Damagesare awardable for a bank's wrongful dishonor of its customer's cheque. In thiscase, the trial court was right to have awarded general damages for the wrongdishonor of the respondent's cheque by the appellant.

Onthe factors to be considered by the court in awarding costs. The followingfactors are to be considered by the trial court in awarding costs.

Thesummons fees paid.

Theduration of the case.

Thenumber of witnesses called by the party in victory.

Thevexatious or frivolous nature of the action or defence of the party failed inthe litigation.

Thecost of legal representation.

Themonetary value at the time of incurring the expenses; and

Thevalue and purchasing power of the currency of award at the time of the award.

The post UBA Plc Vs Vertex Agro Ltd first appeared in BarristerNG.com on January 23, 2021.

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