“N2.5 Billion” Judgment Against Zenith Bank: 5 Reasons Why the Lagos State High Court was Wrong – Prince Nwafuru, MCIArb (UK)

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The recent judgment of the Lagos State High Court (coram: Honourable Justice O.O. Abike-Fadipe) delivered on 08 March 2022 against Zenith Bank Plc in Suit No. LD/ADR/186/2014: Real Integrated and Hospitality Ltd v Zenith Bank Plc and State Universal Basic Education (SUBEB) of Gombe State has continued to generate some reactions within the legal circle. After reading the online report on the judgment, my initial interest was to address the recurrent trend of social media misreporting of Court decisions in Nigeria. However, upon my further reading of the judgment and other documents filed and exchanged by the parties in the case, some of the findings made by the Court piqued my interest, hence, my decision to undertake this case review. As I am aware, Zenith Bank has filed a Notice of Appeal challenging the judgment and also a Motion for stay of execution of the judgment. My intervention is strictly a fair comment on the decision and not intended to prejudice the outcome of the Appeal. Contributions as this should be expected particularly in view of the importance of the decision to our jurisprudence as it dealt with a novel issue that was not present in the previous cases on disputes arising from banker/customer relationship. In the course of my review, I identified 5 reasons why the decision of the Lagos State High Court was wrong.

First, let me correct the Mis-information and the False Media Reports

For context, Nigerian banking industry has had its fair share of bad press. Generally, banks are seen as bullies and their customers as the underdogs. And this is not unconnected with the oft-cited allegation of wrongful, excessive and illegal charges on customers’ accounts which in my view requires some regulatory intervention and reform within the industry. Therefore, it is expected that any major judgment against a Nigerian bank will attract such wide interest and attention. However, as we have seen in this case under review, a lot of misinformation and falsehood are often wrapped-up with the sensational headlines that trail such misreported court judgments. And because of the deep-rooted mistrust of the financial sector, most people including lawyers do not often go beyond the front page to read the judgment in order to interrogate the actual decision. The consequence is that we take this misinformation as the real decision of courts. However, this case is not about illegal, excessive and wrongful charges by a Bank on its customer’s accounts. The central issue in this case is whether Zenith Bank was liable for refusing the Claimant access to the funds that are subject to lien pursuant to the Advance Payment Guarantee (APG) Agreement which mandates the Bank not to allow the Claimant access to the APG sums without the express consent of the 2nd Defendant/Employer. There is yet another fundamental issue of whether the Bank indeed dishonored the instructions of the Claimant. The online reports on the case were meant to mislead the undiscerning public as they were distorted to suit a particular interest.

One of the reports has the headline “ZENITH BANK BRIBERY SCANDAL” “Zenith Bank GMD/CEO, Mr Ebenezer Onyeagwu Ordered to pay N2.5bn to customer”. There is no part of the judgment where the Court held that Zenith Bank bribed or attempted to bribe the Judge or any person at all. The Court never held that “Zenith Bank is a fraud and people must be very careful in their dealings with the Bank”. Third, the N2.5 Billion reported as the judgment sum is false. The Court granted 15% interest per annum on the sum of ₦872,780,552.84 (APG sum) starting from 7th October 2011. The Court also awarded N2.5 Million as the cost of prosecuting the Suit and 10% post judgment interest rate. A simple mathematical calculation will show that the total judgment sum as at the date of the judgment is far below what is being peddled on the social media. Lastly the Court never ordered Zenith Bank’s GMD/CEO to pay the Claimant. The Bank’s GMD/CEO is not even a party in the Suit. Clearly, someone must have sponsored the false report with the sole aim of misleading the public. This underscores the need to read the certified true copy of any judgment before commenting on the case.

The Issue for Determination before the Court

The Court premised its judgment on the two letters of instructions i.e. the letter dated 7th October 2011 which the Claimant claimed represents its instructions to Zenith Bank to transfer the sum of ₦250,000,000.00 to G.K.O Properties Limited Account to offset part of the Claimant’s indebtedness and another letter dated 7th October 2011 in respect of the sum of ₦23,040,000.00 as payment for the importation of the dictionaries. Although, the Court referred to and even quoted extensively from the Advance Payment Guarantee Agreements, it was not clear whether effect was given to the express terms of the APG Agreements and surrounding documents. The law is that in the interpretation of a contract involving several documents, the trial court can only determine the issues before it by considering all the documents including correspondences relating to the contract.

The Claimant’s case was that Zenith Bank did not honour the instructions in the above letters irrespective of the fact that its account was in credit in excess of the amount of the two transfer instructions. The letters were tendered and admitted as Exhibits C4 and C5. Zenith Bank on its part claimed that on 17th January 2011, it issued two APGs with the total sum of ₦872,780,552.84 on behalf of the Claimant and in favour of the 2nd Defendant in respect of a contract for the supply of Advance English Dictionaries awarded to the Claimant by the 2nd Defendant. Part of the conditions for the issuance of the APGs was payment of the sum of ₦872,780,552.84 (APG sum) by the 2nd Defendant into the account of the Claimant with Zenith Bank and that it was a term of the APGs that a lien should be placed on the entire APG sum as cash collateral until the Claimant was discharged by the 2nd Defendant of all liabilities. Even though the value of the two APGs was the sum of ₦872,780, 552.84, Zenith Bank argued that it only received the sum of ₦785,502,507.44 as advance payment and only the said sum was held as cash collateral as shown on the Statement of Account before the Court.

Zenith Bank tendered in evidence the letter dated 16th June 2011, where the 2nd Defendant had called up the APGs on the ground of non-performance and breach of contract due to delay on the part of the Claimant and the said letter indicated that the 2nd Defendant has terminated the contract with the Claimant. The 2nd Defendant vide a letter dated 7th July 2011 again wrote to Zenith Bank demanding the return of the cash collateral but the Bank in its Defence stated that it could not release the APG sum to the 2nd Defendant because of the two separate suits filed by the Claimant in Abuja and the present suit before the Lagos High Court. Zenith Bank claimed that it was further hamstrung by another suit bothering on the same APGs that was filed by the 2nd Defendant at the High Court of Gombe State in Suit N0: GM/20/2016 and that the Gombe State High Court had entered Judgment in favour of the 2nd Defendant which was affirmed by the Court of Appeal. These two judgments were tendered and admitted in evidence as Exhibits D14 and D15 respectively. Zenith Bank also demonstrated through documentary evidence (the Statement of Account) that the Claimant has been withdrawing from its account with the Bank without any restrictions.

Despite the above facts, the Lagos High Court held that Zenith Bank is in breach of contract when it failed to comply with the Claimant’s instructions in the letters of 7th October 2011. The Court further held that the Bank should pay the Claimant interest of 15% per annum on the sum of ₦872,780,552.84 from 7th October 2011. In awarding the 15% interest on the APG sums, the Court noted that the sum awarded was not an APG sums but rather as damages for the unwarranted and unlawful withholding of the Claimant’s money, claiming a lien thereon when the Bank had transferred the APGs sum from the Claimant’s account since 17th February 2011.

My View on the Judgment

Below are 5 reasons why the decision may not stand on Appeal

1. The Court misunderstood the Case of the Parties

The first point of contradiction in the judgment is the failure of the Court to appreciate the actual facts in dispute between the parties based on evidence and pleadings before the Court. The Court appeared to have ignored or glossed over some of the issues canvassed by Zenith Bank and the 2nd Defendant and was only focused on the case of the Claimant even when the Claimant failed to prove its case. The Court missed the point when it held that the cause of action is premised on Zenith Bank’s failure to honour its payment instructions of 7th October 2011 and that the references to the APGs are to establish that as at the date of the payment instructions, Zenith Bank was aware that the Claimant had completed the supply of the books to the 2nd Defendant and so the money in its account was free from the lien placed thereon in consequence of the APGs. This in my view is the genesis of the error in the Court’s findings because this particular finding did not take into account the express provisions of the APG Agreements and the overwhelming evidence adduced by the Bank and the 2nd Defendant to prove that the Claimant was not entitled to the APG sums in the first place. And as I shall show later, the Court also ignored the impact of the decision of Gombe State High Court which was later affirmed by the Court of Appeal. In essence, the reasoning that the APGs had ceased to have effect because according to the Trial Court, Zenith Bank ought to have known that the Claimant has fulfilled the contract it has with the 2nd Defendant is not supported by any iota of evidence. Indeed, and with the greatest respect, this line of reasoning and finding is perverse as it contradicts the pleadings and evidence of the parties. Interestingly, the Lagos State High Court in the same judgment agreed with Zenith Bank that it has the right to place a lien on the sum of ₦872,780,552.84 (APG sums). And in another breadth, took the view that Zenith Bank should have ignored the letters from the 2nd Defendant and allow the Claimant unfettered access to the APG sums because the underlying contract has been performed. Had the Lagos Court appreciated the real issue between the parties by giving adequate and proper consideration to the evidence of the Defendants, it would have reached a different conclusion.

2. The Court granted to the Claimant what it did not ask:

It is settled beyond citing of authorities that a Court is bound by the reliefs claimed by the Claimant. A Court of law is not expected to play the role of Father Christmas by dishing out reliefs not sought by a Party. The Claimant specifically asked for 15% interest per annum on the sum of ₦872,780,552.84 (the APGs sum). The Claimant never prayed for damages (general or special) for breach of contract. In its judgment the Trial Judge noted that the 15% interest on the sum of ₦872,780,552.84 was not on the APG sums but as “damages for the unwarranted and unlawful withholding of the Claimant’s money”. How far can a Judge go to assist a Claimant in a case? Just as the Court is not permitted to make a contract for the parties, it is not in the place of the Trial Court to substitute the relief sought by the Claimant for a different relief. It would have been a different thing if the Court had outrightly refused the prayer for 15% interest and then proceeded to grant damages as a different head of claim and even this would not have been possible in this case as it was obvious even to the Judge that the Claimant failed to prove its case. By awarding damages not sought nor proved by the Claimant, the Trial Judge made a case for the Claimant and turned itself into Father Christmas.

3. Misapplication of the Principles and Authorities on Dishonouring of Cheques/There was no Conclusive Evidence or Proof that Zenith Bank dishonoured the Claimants’ Instructions:

A case is an authority for what it decides and nothing more. See Skye Bank Plc v. Akinpeju (2010) 9 NWLR (Pt. 1198) 179 and Okafor v Nnaife (1987) 4 NWLR (Pt. 64) 129. A Judge, just as Counsel, when citing or relying on authorities to support a position should be mindful of the peculiar facts of the case in order to ascertain if the cited authorities are on all fours with the case being decided. In the instant case, the authorities cited and applied by the Trial Judge on the issue of dishonoring of cheques do not fit into the peculiar facts of this Suit. I have noted at the prelude to this write-up that this case presents peculiar facts in our jurisprudence of banker/customer relationship and it will not be proper to whimsically apply the traditional authorities on dishonor of cheques or instructions. For instance, the Court relied on Aminu Ishola Investment Ltd v Afribank Nig Plc (2013) LPELR-20624 which was a case on dishonor of cheque. The principle in Aminu Ishola’s case does not fit into this case for several reasons. First, in this case, the Claimant never claimed that it issued cheques which were dishonoured by Zenith Bank. The distinction is significant because when a cheque is dishonoured by a bank, endorsements such as “drawer confirmation required”, “drawer attention required” or “refer to drawer”, as the case may be, are usually made by the bank. In this case, the Claimant claimed to have written two instruction letters to Zenith Bank, a fact that was hotly contested and disputed by the Bank during the trial. The dispute over the delivery of the Claimant’s instructions means that those previous authorities on dishonor of cheque should not have formed the anchor for the decision of the Trial Court in this case. At the Trial Court, Zenith Bank was able to show that the only writing, endorsement or comment made on Exhibits C4 and C5 is that of the Claimant and not by the Bank. There was no evidence of delivery of those letters to Zenith Bank, a fact that is very significant in determination of the issue of dishonouring of customer’s instructions. It follows that the cases of Allied Bank of Nigeria Ltd v. Akubueze (1997) LPELR-429 (SC0; Wilson v United Counties Bank Ltd. (1920) A.C. 102; Ojiakor v FCMB (2015) LPELR-40418 (CA); Ecobank Nigeria Plc v Rono Rufus Opara (2019) LPELR-48828 (CA); Union Bank of Nigeria Plc v Chimaeze (2006) LPELR-11747 (CA); Hirat Aderinsola Balogun v. National Bank of Nigeria Ltd (1978) ALL NLR 63 and Inoma v Nzekwu (2007) LPELR-8715 (CA) cited by the Lagos State High Court were totally inapposite.

4. The Consequence of the Gombe State High Court Judgment which was affirmed by the Court of Appeal on the APG sums.

The Lagos State High Court appeared not to have appreciated the impact of the decision of Gombe State High Court ordering Zenith Bank to pay the APG sums to the 2nd Defendant. Even before that decision was handed down by the Gombe State High Court, it would have been reckless for Zenith Bank to release the APGs sums to the Claimant in view of the letters written by the 2nd Defendant as far back as 2011 instructing the Bank not to release the APG sums. With the judgment in the Gombe case, Zenith Bank could not have allowed the Claimant in the Lagos State High Court Suit access to the APG funds without being held in contempt. Curiously, the Lagos State High Court took the view that the Gombe High Court judgment and the Court of Appeal judgment are irrelevant. Whichever way one looks at the issue, it is difficult to fault Zenith Bank. Between 2011, when the Claimant filed the Suit No: FCT/HC/CV/5354/11 in Abuja and the second Suit (Suit No. FCT/FH/3741/2012) which were both struck out by the FCT High Court and up to 2016 when the 2nd Defendant instituted another suit bothering on the same APGs at the High Court of Gombe State in Suit No: GM/20/2016, Zenith Bank became hamstrung and incapacitated as far as the APG funds are concerned. And it is not fair to say that Zenith Bank was a beneficiary of the “malevolent game of chess it plunged both the Claimant and the 2nd Defendant into.” As held by the Lagos State High Court. This is an unfair statement against Zenith Bank to put it mildly. With all the intervening circumstances brought about by the various Suits and later the Gombe High Court judgment, the Lagos State High Court ought to have taken these facts into consideration rather than dismissing them as being irrelevant.

5. Unwarranted Rebuke and Scathing Remarks against the Bank by the Court

A Court of law is expected to premise its decisions and findings on pleadings and evidence before it. Any material decision of the Court not supported by evidence is characterized as a perverse finding. When a Court makes such perverse findings, it gives the public the impression that the Court is biased. A lot of findings made by the Lagos State High Court in the judgment are not supported by evidence or pleadings of the parties. It was concerning reading those scathing and denunciatory comments against Zenith Bank. The Bank was not a party to the underlying contract between the Claimant and the 2nd Defendant and it was unfair to employ such strong words on the Bank given the evidence before the Court. Such scathing remarks smacks of a clear descent into the arena by the Judge as it was uncalled for. As I noted earlier, it would have been very reckless on the part of Zenith Bank to allow the Claimant access to the APG funds on the face of the letters from the Employer/the 2nd Defendant instructing the Bank not to release any fund, coupled with the various litigations in the various Courts over the subject matter. In the case of ZENITH BANK v. ATO PROPERTIES LTD (2019) LPELR-47783(CA) which incidentally emanated from this same Lagos State High Court, Zenith Bank was held liable for releasing funds under Advance Payment Guarantee because the Court was of the view that the Bank prior to releasing the APG funds had knowledge that the contractor has not performed the job. The role of Zenith Bank was merely to act on the instructions of the 2nd Defendant on the APG transaction not being a party to the main contract. It is therefore wrong to accuse Zenith Bank of being a beneficiary of the malevolent game of chess it plunged both the Claimant and the 2nd Defendant into. More undeserving was the statement made by the Court that when the Lagos State High Court ordered that the money be paid into an interest yielding account in the name of the Claimant and the 2nd Defendant pending the determination of the Suit, the said Order was “curiously varied” by the consent of all the parties on 20th September 2016 so that the money remained in the 1st Defendant’s custody without interest.” This is a clear case of prejudicial statement not supported by evidence. It was totally unnecessary and uncalled for. In the course of trial, Zenith Bank adduced uncontroverted evidence at the Lagos High Court proceedings to show that it could not have paid the APG sums to either the Claimant or the 2nd Defendant because of the Suits filed in Abuja and Gombe State over the same subject matter. It was also the agreement of the Parties as clearly evidenced in the APG Offer Letters that the APG sums should be placed in a non-interest yielding account. What then made the Lagos Court to employ the term “curiously” in describing the agreement willingly reached by the parties? Was the Lagos State High Court suggesting that Zenith Bank coerced or deceived the Claimant and the 2nd Defendant to reach such a compromise? It is difficult to understand the basis for the unwarranted judicial rebuke of Zenith Bank in this case. The judicial tirade against Zenith Bank continued in other parts of the judgment where the Trial Court accused the Bank of acting unconscionable and that the Bank robbed Peter to pay Paul. What evidence informed this finding? None that I can see. The Court also held in another part of the judgment that Zenith Bank withheld evidence just because the Account Statement tendered by the Bank does not contain entry for October 2011. This is a clear case of misapplication of the provision of the Evidence Act on withholding of evidence. The same Trial Court in its judgment acknowledged that Zenith Bank indeed certified Exhibit C6, which is the version of the Statement of Account tendered by the Claimant that has entries for October 2011. How can the same Bank that had certified a Statement for the Claimant turn around to withhold the same evidence? It does not add up at all.

It will be interesting to see how all these issues and probably more will pan out on appeal. Before I draw the curtain, it remains to restate the age long principle that it is not the function of a Court to make contracts for parties or to change their agreement as made. The Court has a duty not to look at a contract in a narrow manner for its interpretation, the entire documents must be looked into and in conjunction with the dealings of the parties in order to discover the intention of the parties. See BAKER MARINE NIG LTD. v. CHEVRON NIG LTD (2006) LPELR-715(SC) and FGN & ORS v. ZEBRA ENERGY LTD (2002) LPELR-3172(SC).

Prince Nwafuru is a commercial lawyer
based in Lagos and a Partner at The Law Suite

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