ISSUES

Whether a claim involving the wrongful payment of the proceeds of a cheque to an incorrect party is a banking matter that falls within the exclusive jurisdiction of the Federal High Court by virtue of Section 230(1)(d) of Decree No 107 of 1993?

FACTS

Accountable Finance and Investment Company limited issued a cheque marked "A/C Payee only and not negotiable" drawn on the appellant bank in favour of the respondent company for the sum of N1,000,000. The appellant bank then wrongly paid the sum of N1,000,000 the proceeds of the cheque, to a stranger. The respondent sued the appellant in the Lagos State High Court for payment of the sum of N1,000,000.

The respondent, by an ex parte application, sought and obtained an interim attachment order for N2,000,000 and a Mareva Injunction restraining the appellant from removing its assets from the area of jurisdiction of the court up to the value of N2,000,000.

The appellant then sought to strike out the respondent's claim for lack of jurisdiction of the trial court, or in the alternative vacate the Mareva Injunction, but the trial court held that the State High Court had jurisdiction to hear the suit, and also declined to vacate the Mareva Injunction.

The appellant appealed to the Court of Appeal. Before the hearing of the appeal the appellant sought and obtained an order substituting the attachment order with an order that it provide a bank guarantee in the sum of N2,000,000. which was duly lodged in Afribank Plc. The Court of Appeal thereafter dismissed the appeal, and the appellant appealed to the Supreme Court.

Appeal dismissed.

HELD

1.      On the jurisdiction of State and Federal High Court

Section 230(1)(d) of Constitution (Suspension and Modification) Decree 107 of 1993. provides a limitation to the general and all embracing jurisdiction of a State High Court. Items listed under Section 230(1)(d) can be determined, exclusively by the Federal High Court.

2.      On conversion as tort

Bankers who collect cheques and pay the proceeds to those not entitled to them are guilty of the tort of conversion. The respondent was entitled to sue the appellant in conversion for the proceeds of the cheque which the appellant paid to a stranger who was not the payee. As such, the respondent's claim could be entertained by any state High Court.

3.      On determining exclusive jurisdiction of the Federal High Court

The case did not qualify as a banking transaction in which Section 230(1)(d) applied. It was a tort of conversion which had nothing to do with the exclusive jurisdiction of the Federal High Court. For the exclusive jurisdiction of the Federal High Court to be sustained, the claim must arise from a banking transaction. The respondent simply alleged that his cheque was dealt with by the appellant in a manner inconsistent with his right and therefore actionable in the State High Court.

Layi Babatunde for the plaintiffs/appellants

Prof. S.A. Adesanya, SAN and Waheed Kasali for the defendant/respondent

The following cases were referred to in this judgment:

Nigeria

7 Up Bottling Company Limited & others v Abiola and Sons Bottling Company Limited (2001) FWLR (Part 70) 1650

Karimu Adisa v Emmanuel Oyinwola (2000) 6 SC (Part II) 47

Nigerian Deposit Insurance Corporation v Federal Mortgage Bank of Nigeria (1997) 2 NWLR (Part 490) 735

Ojini v Ogo Oluwa Motors (1996) 1 NWLR (Part 534) 353

Uwaifo v A-G, Bendel State (1982) 7 SC 124

Foreign

Bute (Marquess) v Barclays Bank (1955) 1 QB 202

Fine Art Society v Union Bank of London (1886-87) 17 QBD 705

Kleinwort v Comptoir National d'Escompte de Paris (1984) 2 QB 167

Underwood Limited v Bank of Liverpool and Martins (1924) 1 KB 775

The following statutes were referred to in this judgment:

Nigeria

Bills of Exchange Act, Cap. 35, Laws of the Federation of Nigeria, 1990: S 73

Constitution of the Federal Republic of Nigeria, 1979: S 236(1)

The following decree was referred to in this judgment:

Nigeria

Constitution (Suspension and Modification) Decree 107 of 1993: S 230(1)(d)

The following books were referred to in this judgment:

Clerk and Lindsell on Torts 15ed, at 1020 paragraph 21-05

Law of Banking, 5ed at 50 by Lord Chorley

Mohammed, JSC (Delivered the Leading Judgment):- Benilux (Nigeria) Limited, who hereinafter shall be referred to as the respondent, had business transaction with Messrs Accountable Finance and Investment Company As a result of the business transaction Messrs Accountable Finance and Investment Company limited issued Cheque No 03370-031150013, Account No 102-3720151-01-95, dated 27 January 1993, in the sum of N1,000,000 (one million Naira) payable to the respondent. The cheque was marked "A/C Payee only" and "Not Negotiable". It was to be drawn on the account of the company at Martins Street Branch of the Trade Bank PLC. Trade Bank PLC is the appellant, in this appeal. In the cheque the appellant was mandated to pay the sum of N1,000,000 to the respondent. Instead of paying the amount to the respondent the appellant paid the one million Naira to a stranger.

When the respondent found out what had happened it challenged the appellant on the wrongful payment. The appellant accepted responsibility, but pleaded for time to enable it rectify the situation and make payment properly to the respondent. When the waiting was too long and the payment was not forthcoming the respondent went to the Lagos High Court and filed the following claims:-

"(i) A declaration that the defendant acted unlawfully and improperly in paying Cheque No 03370-031150013 'A/C Payee only' 'Not Negotiable' drawn on the defendants, by Accountable Finance and Investment Co Ltd in favour of the plaintiffs to a person or persons other than the plaintiffs at the defendants' Martins Street Branch, and otherwise than through a collecting banker acting for the plaintiffs.

(ii) A declaration that the plaintiffs are entitled to be credited with the value of the cheque (i.e. N1,000,000) referred to in paragraph 1 hereof on the expiration of 5 working days from the presentation of the same to the defendants on 28 January, 1993 and that the defendants have wrongfully and improperly deprived the plaintiffs of the use and enjoyment of the said sum of N1,000,000 from 3 February 1993.

(iii) An order that the defendants shall pay the plaintiffs the said sum of N1,000,000 with interest at 50 percent per annum from 3 February 1993 to 31 December 1993 and further interest at 15 percent per annum from 1 January, 1994 until judgment and thereafter at 15 percent per annum until the judgment shall have been satisfied."

Soon after the action had been filed, learned Counsel for the respondent, professor Adesanya, SAN, filed and argued an ex parte motion with the following prayer:-

"An Order of Interim Injunction (Mareva) restraining the defendants, their servants and/or agents from removing from the jurisdiction, disposing of and/or dealing with their assets within the jurisdiction in so far as the same do not exceed the sum of N2,000,000 and in particular its bank balance with the Central Bank of Nigeria or their claims thereto until the determination of the Notice on Motion".

The application was granted. The order was served on the Central Bank which attached the sum of N2 million in the account of the appellant kept with the Central Bank. In response to this order the appellant by way of Notice on Motion, dated 14 December 1994, prayed for striking out the suit for lack of jurisdiction of the trial court. Alternatively, the appellant prayed for the vacation of the Mareva Injunction. In a considered ruling, the trial High Court Judge held that the State High Court had jurisdiction to hear the suit. Secondly, he declined to vacate the Mareva Injunction which he granted earlier.

Dissatisfied with the said ruling, the appellant filed an appeal to the Court of Appeal. Before the hearing of the appeal, at the Court of Appeal, the appellant filed a motion and prayed for an order substituting the order granted by the High Court attaching the appellant's N2,000,000 with the Central Bank of Nigeria with a bank guarantee from any reputable bank in Nigeria. The application was granted. The Court of Appeal ordered the appellant to provide a bank guarantee in the sum of N2,000,000 from Afribank Plc. The bank guarantee was lodged in Afribank Plc on 26 November 1996. The Court of Appeal thereafter heard the appeal and delivered its judgment on 29 May 2000. The appeal filed by the appellant was dismissed. It is against the said judgment that the appellant has filed this appeal.

The appellant identified the following two issues for the determination of the appeal:-

"(i) Whether the High Court of Lagos State is vested with jurisdiction to hear and determine the plaintiff's claim; and

(ii) whether the ex parte order of Mareva Injunction ought not to have been discharged in the circumstances."

The respondent adopts the issues as formulated by the appellant. The only issue pertinent for the determination of this appeal, in my view, is the issue questioning the jurisdiction of Lagos State High Court to decide the suit filed by the respondent. The issue about the ex parte order of Mareva Injunction has been overtaken by events before the hearing of the appeal at the court below. The application to substitute the Mareva Injunction with a bank guarantee which the court granted had removed the Mareva Injunction from being an issue in dispute between the parties. An issue in dispute is the subject of litigation. It is a matter for which a suit is brought and parties join issues for the determination of the dispute. Courts will only consider a justifiable controversy upon existing state of facts and not upon hypothetical dispute or academic moot. The issue of Mareva Injunction is no more pertinent as a dispute between the parties. I therefore strike out issue II being an incompetent issue.

On jurisdiction, learned Counsel for the appellant, Layi Babatunde, maintained the submission he made both at the High Court and the Court of Appeal that a State High Court has no jurisdiction to determine the respondent's claims as endorsed on the Writ of Summons. Learned Counsel submitted that there is no doubt that the respondent's claim had arisen because of a banking transaction which the company alleged had occasioned a loss to it. But, Counsel further argued that the Federal High Court has exclusive jurisdiction to the exclusion of any other court in civil causes and matters arising from banking, save those transactions between banker and customer. He referred to Section 230(1)(d) of the Constitution (Suspension and Modification) Decree 107 of 1993 which was the law applicable at the time the cause of action arose. To buttress his argument the learned Counsel referred to the case of Uwaifo v AG Bendel State (1982) 7 SC 124. Let me refer to the provision of Section 230(1)(d) of Constitution (Suspension and Modification) Decree 107 of 1993. It provides as follows:-

"230 (1)     Notwithstanding anything to the contrary contained in this Constitution and in addition to such other jurisdiction as may be conferred upon it by an Act of the National Assembly or a Decree, the Federal High Court shall have and exercise jurisdiction to the exclusion of any other court in civil causes and matters arising from:-

(d)     Banking, banks, other financial institutions, including any action between one bank and other, any action by or against the Central Bank of Nigeria arising from banking, foreign exchange, coinage, legal tender, bills of exchange, letter of credit, promissory note and other fiscal measures. Provided that this paragraph shall not apply to any dispute between an individual customer and his bank in respect of transaction between the individual customer and the bank."

Mr Layi Babatunde argued that the dispute between the respondent and the appellant would not fit in the proviso to Section 230(1)(d) of Decree 107, because the respondent had no account with the appellant and there is no banker/customer relationship between them. In Karimu Adisa v Emmanuel Oyinwola (2000) 6 SC (Part 2) 47 at 65 this Court held that the unlimited jurisdiction of the High Court of a State may be limited as provided for by the Constitution. The State High Court has no jurisdiction in matters provided under Section 230(1)(d) of Decree 107 except disputes between an individual customer and his bank in respect of a transaction between the individual customer and the bank. In other words, Section 230(1)(d) of Decree 107 provides a limitation to the general and all embracing jurisdiction of a State High Court. Items listed under Section 230(1)(d) of Decree 107 can be determined, exclusively only by the Federal High Court.

Mr Layi Babatunde further submitted that under Section 73 of the Bills of Exchange Act, Cap. 35, Laws of the Federation of Nigeria, 1990 a cheque is defined as "a bill of exchange" and as such a cheque cannot therefore be a chattel for it to be converted to the use of someone else.

Since the respondent is not a customer of the appellant's bank, the case of the appellant falls within the exclusive jurisdiction of the Federal High Court.

In his reply to the above submission, learned Counsel for the respondent pointed out that the respondent's Statement of Claim stated that the appellant unlawfully and improperly paid over to a person other than the plaintiff/respondent a crossed cheque, marked "A/C Payee" only and "Not Negotiable". And it is the act of paying such cheque to a person other than the plaintiff/respondent that brought about the claim of the plaintiff in the first relief. The relief of the plaintiff/respondent is founded in the tort of conversion. This is clear, because the appellant dealt with the respondent's cheque in a manner inconsistent with the respondent's rights whereby the respondent has been deprived of the use and possession of the same. The tort of conversion is committed when the person entitled to the possession of a chattel is permanently deprived of that possession and the chattel is converted to the use of someone else: see Clerk and Lindsell on Torts (15ed) at 1020 paragraph 21-05 and Ojini v Ogo Oluwa Motors (1996) 1 NWLR (Part 534) 353.

Now, it is settled law by a long string of authorities that bankers who collect cheques and pay them to those not entitled to the proceeds in the cheques are guilty of the tort of conversion. See Kleinwort v Comptoir National d'Escompte de Paris (1984) 2 QB 167 and Fine Art Society v Union Bank of London (1886-87) 17 QBD 705. In AL Underwood Limited v Bank of Liverpool and Martins (1924) 1 KB 775 Banks LJ opened his judgment with the following statement:-

"The facts in this case are not seriously in dispute. The real issue between the parties is as to the true inference to be drawn from those facts, and the fate of this appeal depends, in my opinion, upon what the true inference is. The material facts are as follows: [His Lordship then stated the facts as above set out, and proceeded as follows:] One defence relied on by the appellants was that on those facts there was no evidence of any conversion of the cheques. Unless the appellants can justify their action upon one or other of the defences upon which they rely they appear to me quite clearly to have been guilty of a conversion of all the cheques".

In Bute (Marquess) v Barclays Bank (1955) 1 QB 202 one McGaw was appointed manager of three farms in Scotland belonging to the plaintiff. His duties included the making of applications to the Department of Agriculture for Scotland for hill sheep subsidies in respect of the farms. In January 1949, he forwarded three such applications. Before the subsidies were paid, McGaw left plaintiff's employment. In September, 1949, the Department, in accordance with their usual practice, sent to McGaw, in satisfaction of the applications three warrants crossed "Not Negotiable" and stated that if the warrants were presented within one month through a bank Mr McGaw should be paid £133,10s (in one case) in respect of hill sheep subsidy, 1949. Mr McGaw opened a personal account with the warrants. He was later permitted by the Bank to withdraw the proceeds of the warrants. The Bank ("Barclays Bank") was sued for conversion and it was held that the plaintiff was entitled to recover the amount payable under the warrants.

I have no doubt that the respondent, in the case in hand, can sue the appellant in conversion for the proceeds of the cheque which the appellant paid to a stranger who is not the payee of the cheque. The plaintiff/respondent's case is simply a tort of conversion and the action filed by the plaintiff/respondent against the appellant can be entertained by any State High Court. See 7 Up Bottling Company Limited & others v Abiola and Sons Bottling Company Limited (2001) FWLR (Part 70) at 1650. Having failed to have this issue resolved in its favour this appeal has accordingly failed and it is dismissed.

The judgment of the Court of Appeal is hereby affirmed. I award N10,000 costs in favour of the respondent.

Kutigi, JSC:- I read in advance the judgment just delivered by my learned brother Mohammed, JSC. I agree with him that there is no merit in the appeal. The plaintiff's action is clearly founded on the tort of conversion and it is not caught by the provisions of Section 230(1)(d) of Decree 107 of 1993. The appeal therefore fails and it is dismissed with N10,000 costs in favour of the respondent against the appellant. The judgments of the lower courts are affirmed.