“It is not every debt that can be attached by way of garnishee proceedings, and so, it has to be discerned if any sum is due and payable by the garnishee to the judgement debtor. Also, that the debt has to be certain in amount, and the judgement debtor must have a vested immediate legal right to it. It is therefore, in that light that any funds coming into the customer’s account does not belong to the customer, where the said customer is indebted to the bank, since that fund is used to settle the indebtedness”
In the Supreme Court of Nigeria
Holden at Abuja
On Friday, the16th Day of June, 2017
Before Their Lordships
Ibrahim Tanko Muhammad
Mary Ukaego Peter-Odili
Olukayode Ariwoola
Kumai Bayang Aka’ahs
Amina Adamu Augie
Justices, Supreme Court
SC.337/2013
Between
Barbedos Ventures Limited...........................Appellant
And
First Bank of Nigeria Plc…Respondent
Lead Judgement delivered by Hon. Amino Adamu Augie, JSC
Facts
The Appellant entered into a contract with the Zamfara State Government, for the supply of 12,500 metric tons of Urea for distribution to/sale to Farmers in the State for the 2008 farming season. The total costs of the contract awarded and executed by the Appellant was N1, 462,000,000.00 (One billion, four hundred and sixty-two million Naira) only. After due execution of the contract, payment was withheld; thereby necessitating the referral of the dispute that ensued to arbitration in line with the Arbitral Clause in the contract. At the conclusion of the proceeding, the Appellant was awarded the sum of N1, 062,000,000.00 as principal claim, 19% pre- award simple interest per annum, 10% post-award simple interest and N8, 000,000.00 as costs.
The application for recognition and enforcement of the Final Award as the judgement of the High Court of Zamfara State, was granted by the Court with a further award of 10% post judgement interest per annum from the date of the Ruling until the final liquidation of the Award. The Appellant thereby, sought Garnishee.
Orders to attach the funds of the State Government’s Federation Accounts Allocation Committee (FAAC) account with the Respondent, in satisfaction of the judgement debt. The Application was granted by the Court and an Order Nisi made against the Respondent.
Upon being served with the Garnishee Order, the Respondent promptly filed an Affidavit of Return, wherein it averred that it is not indebted to the Judgement Debtor and that the Zamfara State Government is actually indebted to it pursuant to the credit facilities granted to it in the sum of N15, 000,000,000.00. As security for the loan, the State Government irrevocably agreed to repay the credit facilities monthly through funds in its account with the Respondent, where the Z,amfara State Government receives its monthly allocation from the Federal Government The Appellant filed a Counter-affidavit to which the Respondent filed a Further Affidavit. The High Court, after considering the processes before it, made the Garnishee Order Absolute.
Dissatisfied with the decision, the Respondent successfully appealed to the Court of Appeal, which allowed the appeal and set aside the Garnishee Order Absolute. Unhappy, the Appellant has now approached the apex Court The Respondent filed a Notice of Preliminary Objection to the competence of the appeal.
Issue(s) for Determination
The Appellant formulated three issues for determination, while the Respondent formulated a sole issue which was adjudged as encompassing issues formulated by the Appellant thus:
“Whether having regard to the extant provisions of Section 83, 87 and 88 of the Sheriff and Civil Process Act Cap. S6 Laws of the Federation of Nigeria, 2004, the facts and circumstances of this case, the Court of Appeal acted correctly in setting aside the Garnishee Order Absolute made against the Respondent by the trial Court?”
The Court, however, opined that the substantive issue for determination was
What is the priority of interest created by the debt owed by the Zamfara State Government to the Appellant on one hand (created by a judgement of Court) and the Respondent bank on the other hand (created by an Instrument — the Term Loan Agreement)?
An underlying threshold procedural and jurisdictional issue, was also highlighted for determination by the Court to wit
Whether the Respondent is a proper Garnishee in the circumstance?
Arguments
On the Preliminary Objection raised to the competence of the appeal, the Respondent argued that the grounds of appeal are all of facts or at best, of mixed law and facts, requiring the leave of Court to file the appeal. The Respondent submitted that the Appellant having failed to obtain the requisite leave, the Supreme Court lacks the jurisdiction to entertain the appeal. The Appellant insisted that the Preliminary Objection was erroneous, since it was appealing AS OF RIGHT from the decision of the Court of Appeal in a civil proceeding and that the grounds of appeal are of law only as donated by Section 233(2)(a) of the Constitution of the Federal Republic of Nigeria, 1999. Counsel submitted that the exercise of such right is not conditional on obtaining leave of Court.
Regarding the main issue, the Appellant argued that since the Respondent opened and maintained a current account for the Judgement Debtor as its customer and received payments into the account as its Bankers, the legal relationship between the Respondent and the Judgement Debtor, was that of a Debtor and Creditor founded on a simple contract with the Respondent as a Debtor in respect of the credits received into the current account. CHIEF FESTUSYUSUF v CO–OPERATIVE BANK LTD (1994) 7 NWLR) PT. 359)676 AT 692. It was submitted further that the Court of Appeal erroneously treated clauses of the Loan Agreement between the Respondent and the Judgement Debtor as a Charge, thereby confusing a Power and a Charge.
On the contrary, the Respondent argued that there is no debt due from it to the Judgement Debtor. Rather, the Judgement Debtor was indebted to the Respondent on the credit facilities extended to it, pursuant to an existing banker/ customer relationship, and that the funds accruing into the FAAC Account to which the Garnishee Order Nisi related, was charged to it as security for repayment of the debt. The credit balance was not available for attachment, and the Respondent was entitled to set-off the credit balances in the account for liabilities in any respect; be it actual, contingent, primary or collateral.
Court’s Judgement and Rationale
Deciding the Preliminary Objection, the Court agreed with the Appellant that same was lacking, in substance The decision appealed against related to a Final Award of an Arbitrator, which was recognized for enforcement as judgement of the High Court of Zamfara State, upon which a Garnishee Order Nisi and Absolute was made. The Court of Appeal, in setting aside the Order, considered the provisions of Sections 83 to 91 of the Sheriff and Civil Process Act. Each of the grounds of appeal and their particulars raised a question of law; none required questioning the evaluation of the facts, before the application of the law.
In relation to the substantive issue, Their Lordships held that, the facts underlying the relationship between the Respondent and the Zamfara State Government whereby the said account is a domiciliation account and the Accountant-General of the latter had issued an Irrevocable Standing Payment Order for monthly loan repayment subject to full recovery of the facility sum, show that the sum in the account does not amount to a credit balance. It is rather money charged in favour of the loan facility given to the State Government by the Respondent. The Zamfara State Ministry of Finance, also issued letters of set-off dated 28/3/2012 and 26/11/2012 respectively, in favour of the Respondent in addition to any existing security. This scenario is different from the deemed general position where the Bank is ordinarily a debtor to the Judgement Debtor. The Respondent is a Creditor to the Zamfara State Government, and cannot be proceeded against as Garnishee within the meaning of Section 83 of the Sheriff and Civil Process Act.
The right of set-off is usually available to a Banker, when it assumes the position of creditor in a banker-customer relationship. The reserved right of set-off, underscores the position that the Respondent is a Creditor to Zamfara State Government and therefore, not a proper Garnishee against whom the Garnishee Order ought to be made.
Further, the interest of the Appellant was derived from the Garnishee Order, and could be described as an Equitable Charge, while the security created in respect of the Zamfara State Government’s Account, could aptly be described as a Floating Charge over all the money that comes into the account, and the Respondent has a right of hypothecation over the account balance.
The Respondent’s interest takes priority over the Appellant’s interest, because a legal interest takes priority over an equitable interest WORTLEY v BIRKHFAD (1754) 2 VES SEN 571, 574. Assuming that the Respondent’s interest remains an equitable charge, it still takes priority, since it was created first in time.
The Respondent’s right of set-off, cannot be defeated by the Garnishee Order Nisi .The Term Loan Agreement, did not make provision for a formal demand, before the Respondent could exercise its right of set-off. The right accrued automatically when the Garnishee Order Nisi was made, by which the Respondent’s interests crystallized as a Fixed Charge over the balance in the account.
Based on the foregoing, the appeal was adjudged as lacking in merit. The decision of the Court of Appeal was affirmed and costs of N500, 000.00 awarded to the Respondent against the Appellant.
Appeal Dismissed.
Representation:
Chief O.E.B. Offiong, SAN with Princess Chi 0. Igwe, Clementina Fakoya, Esq., Ifeanyi Ndumnego, Esq., Francis Genesis, Esq., Ufedo Tom-Aba, Esq. and Dooshima Adaguusu, Esq. for the Appellant
Mas’ud Alabelewe, Esq. with Emmanuel Ejim, Esq. and Usman Idris, Esq. for the Respondent.
Credit: Optimum Publishers Limited
(Publishes of Nigerian Monthly Law Reports (NMLR))
