HASTON (NIGERIA) LIMITED V. AFRICAN CONTINENTAL BANK PLC. (2002)

Background

Haston (Nigeria) Limited maintained current account No. 05604 at the Calabar branch of African Continental Bank Plc. Victor Ndoma-Egba was described on the bank’s mandate card as the company’s chairman and was the sole signatory to the account. His specimen signature and passport photograph were supplied to the bank. In March 1993, Ndoma-Egba discovered irregular withdrawals from another account of a legal practice with which he was associated. He consequently examined the ledger of Haston’s account and found that three cheques had been honoured: one dated 11 February 1993 for N158,000.00, another dated 16 February 1993 for N52,200.00, and a third dated 8 March 1993 for N2,500.00. The total amount was N212,700.00. The signatures on the cheques were forged.

Haston demanded that the bank restore the money and provide the relevant instruments and account information. The bank allegedly failed to cooperate adequately. Haston therefore commenced proceedings claiming N212,700.00, interest at 54 per cent per annum from the dates of withdrawal until judgment, and general damages for breach of contract, negligence and loss of reputation. The trial High Court found that the signatures were forgeries and entered judgment for the principal sum, the claimed interest and N3.5 million as general damages. The Court of Appeal set aside the judgment, holding, among other things, that the action was incompetent because there was no proved board or shareholder resolution authorising its commencement. Haston appealed to the Supreme Court.

Issues

1. Whether the company’s action was a nullity for want of proof of a resolution authorising the proceedings.
2. Whether a banker-customer relationship existed between Haston and the bank, and what duties arose from that relationship.
3. Whether the trial court’s awards of the principal sum, interest and general damages were justified.

Ratio Decidendi

The Supreme Court allowed the appeal in part. It held that the proper plaintiff in an action concerning a wrong done to a company is the company itself, consistent with the rule in Foss v. Harbottle. Haston had sued in its own name, not Ndoma-Egba personally, and therefore the action was properly constituted. The bank’s challenge was directed largely at Ndoma-Egba’s authority and status, even though he was merely the company’s witness and the company itself was the named plaintiff.

The Court further held that the bank was not entitled, on the evidence, to deny that Ndoma-Egba was the company’s chairman. The bank had described him as chairman on its own mandate documentation, accepted him as the sole signatory, and operated the account on that basis for several years. In the circumstances, “chairman” meant chairman of the board and necessarily involved directorship. Under section 279(3) of the Companies and Allied Matters Act 1990, a director must act in what he believes to be the best interests of the company and must exercise the care, diligence and skill expected of an ordinarily competent director.

Applying section 65 of the Companies and Allied Matters Act, the Court concluded that the company had expressly or impliedly authorised Ndoma-Egba to act in matters concerning the account. The bank had not produced evidence proving that the action lacked corporate authorisation. The company’s capacity to sue was therefore not displaced.

The Court also reaffirmed that the relationship between banker and customer is contractual and has been described as one of debtor and creditor and, in appropriate respects, principal and agent. A bank owes its customer a duty of care, including the duty to send statements of account at regular intervals as agreed. Upon being informed of suspected fraudulent withdrawals, the bank should have taken the complaint seriously, reported the matter to the police and conducted an internal investigation rather than simply waiting for further demands.

Court Findings

The Supreme Court accepted the trial court’s finding that the signatures on the three cheques were forged. The amount proved by the evidence was N212,700.00, which corresponded with the amounts shown on the three cheques and with the principal claim. The Court rejected the Court of Appeal’s technical approach to the alleged discrepancy between the pleaded amount and the evidence. The applicable principle is that where a claimant proves less than the amount claimed, the claimant may recover the lesser amount proved. Here, however, the figures were adequately reconciled.

The award of 54 per cent interest was also restored. The evidence concerning the interest paid by the company on replacement borrowing was not material to the basis on which the interest was claimed. The claim was founded on the pleaded prevailing rate, and the bank, which was better placed to provide contrary evidence regarding the prevailing rate, did not do so. The trial judge was therefore entitled to accept the unchallenged evidence.

However, the Supreme Court upheld the setting aside of the N3.5 million general damages award. An award of the principal sum and interest already compensates the company for the loss naturally flowing from the bank’s breach of contract; awarding additional general damages for the same contractual loss would amount to double compensation. The alleged negligence was substantially the same conduct constituting the breach of the banker-customer contract and did not create an independent tort claim on the facts. The claim for loss of reputation also failed because Haston did not tender any dishonoured cheque or produce sufficient evidence of injury to its credit.

Conclusion

The appeal was allowed in part. The Supreme Court set aside the Court of Appeal’s decision insofar as it nullified or dismissed the company’s action and restored the trial court’s awards of N212,700.00 and 54 per cent interest from the dates of the fraudulent withdrawals until judgment. The N3.5 million award for general damages was not restored. The appellant received N10,000.00 costs in the Supreme Court, with no order as to costs in the Court of Appeal.

Significance

The decision is important in Nigerian banking and company law. It confirms that a company may sue in its own name for an injury to its assets and that a defendant challenging corporate authority must support that challenge with evidence. It also prevents a bank from accepting an individual as a company’s authorised account representative and later disowning that representation when liability arises. More broadly, the judgment emphasises the bank’s continuing duty of care in monitoring customer accounts, responding to reports of forged instruments and maintaining appropriate account records. It equally clarifies that contractual compensation should not be duplicated through a separate general damages award where the alleged negligence is merely a restatement of the contractual breach.