Once in a while and due to negligence a banker may wrongly dishonour the cheque of a customer who carries on business. This piece examines the liability of the banker and the remedy of the customer in such cases.

In Union Bank v Chimaeze (2014), the respondent as plaintiff at the trial court, commenced an action against the bank and claimed the sum of N30,000,000 as general and special damages for the wrongful dishonour of the cheque he drew on the bank in favour of Lever Brothers Nig. Plc despite the fact that he had enough credit in his account to clear the cheque. The plaintiff was a major distributor for the company. The trial court held that the bank had wrongly dishonoured the plaintiff’s cheque for the sum of N205,936 issued in favour of Lever Brothers and awarded the sum of N100,000 and N250,000 as general and special damages against the bank. Union Bank was dissatisfied and appealed against the judgment. The Court of Appeal increased the general damages to N1,000,000. Union Bank further appealed against the decision. The Supreme Court, per Muhammad JSC said,

“In the case at hand, one of the reasons the lower court (the Court of Appeal) relied upon in its interference with the general damages the trial court awarded the respondent/cross-appellant (Union Bank) is the undisputed fact of his being a trader. Award of damages for the dishonour of cheques issued by the respondent who is in fund is sui generis. The very act of dishonouring a trader’s cheque without more, on the authorities, entitles him to substantial damages.”

His lordship Muhammad JSC said further,

“Damages awarded in this class of claims is aggravated not only for the inconvenience caused the claimant but injury done to his reputation, credit, loss incurred following the wrongful dishonour of his cheque and for his overall anguish as well. The object of the award made for the respondent/cross-appellant (Chimaeze) here is to put him as far as possible, in the position he would have been but for the negligence of the appellant/cross-respondent (Union Bank) in dishonouring his cheque.” See also, Hirat Balogun v National Bank of Nigeria (1978), Citibank v Gratis Properties (2015).

In Balogun v National Bank (1978), the bank was found to have wrongfully dishonoured the appellant’s cheque and the trial court awarded general damages of N10. On appeal, the Supreme Court increased the award of damages to N100 and held per Idigbe JSC,

“Therefore, it has long been established that refusal by a banker to pay a customer’s cheque when he holds in hand an amount equivalent to that endorsed on the cheque belonging to the customer amounts to a breach of contract for which the banker is liable in damages. The only question which arose in these circumstances has been that relating to quantum or amount of damages.”

His lordship Idigbe JSC said further,

“Direct and/or natural damage arising from a breach of contract by a banker to honour the cheque of his customer apart, there is however also the serious likelihood of considerable danger to the reputation of a customer and generally to his business (if the customer is engaged in business). People generally, whether or not in business, do not deal with a person whose cheques are not paid, although it is conceded that instances of disinclination to deal with such a person more readily abound in the field of business. As it is always extremely  difficult to have an accurate estimate of damages under this “head”, it has therefore been laid down by a long line of cases beginning with that of Marzetti v Williams (1830), that damages in such cases are “at large”, which is to say that in such cases a jury may within reason make an award of any such sum as they consider the circumstances of the breach of contract or dishonor of cheque warrant although there has been no proof of any actual loss (i.e. special damages) to the customer.”

It must be made clear that this injury to reputation and award of substantial damages for wrongful dishonour of cheques only applies to customers who are in business either as traders or professionals. A person in paid employment who operates a salary account cannot expect to obtain substantial damages for wrongful dishonour of his cheque and may in fact only get nominal damages.