COURT OF APPEAL, ACCRA
TWUMASI, OWUSU-ANSAH AND ANIM JJA
Twumasi JA. This is an appeal from the judgment of the High Court, Accra dated 24 May 2002. It dramatises the horrors of some of the sophisticated banking frauds often heard of in these days. They are mostly technically designed criminal offences capable of detection only through the same lenses of high technology typical of our current computer age. The emphasis here is that modern criminals have left the streets and are using high technology to infiltrate our banking and other financial institutions for their fraudulent operations. It is within this background that the facts of this case must be scrutinised and analysed. The facts were as follows: Victoria Island Properties Ltd was a limited liability company incorporated in Nigeria, Hiku House 28/30 Macarthy Street, Lagos. It is the plaintiff herein. The next limited liability company is called ANZ Grindlays Bank Ltd, 7 Quai du Mont Blanc, Geneva and it is a reputable bank incorporated in and carrying on international banking operations, among others, in Geneva, Switzerland. It is the co-plaintiff in this case. The third limited liability company is our well-known Standard Chartered Bank (Gh) Ltd, with its headquarters at the High Street, Accra, Ghana.
In these proceedings, the plaintiff and the co-plaintiff instituted an action before the High Court, Accra against the Standard Chartered Bank (Gh) Ltd as the first defendant jointly with another gentleman sued as E O Effiong as the second defendant. The latter is described in the statement of claim as a Nigerian national who has been carrying out fraudulent banking transactions, and is currently on trial in a series of bank frauds in the courts of Accra. The facts as contained in the pleadings of the plaintiffs further
reveal that the first plaintiff was the owner of account No 912195 (the plaintiff account) at the co-plaintiff’s bank in Geneva and the said account had been in operation for over ten years. The first plaintiff’s chief executive and principal officer was one Fred Egbe, a Nigerian businessman resident in Lagos who was the sole signatory of the account. In or about August 1997 the second defendant, pretending to be Fred Egbe instructed the co-plaintiff to make a transfer of a sum of US$100,000 to account No 20010004257 in the name of E O Effiong, the second defendant herein, at the International Commercial Bank, Accra. This the second defendant did by forging the signature of Mr Egbe. That attempt failed because the co-plaintiff had no sufficient funds to meet the instructions. On 26 August 1991 the second defendant issued another instruction this time reducing the amount to US$70,000.
Apparently suspicious of the credentials of the second defendant, the ICB returned the sum of US$70,000 unpaid to the co-plaintiff. The second defendant, undaunted, devised a new strategy. He opened a local currency account No 010010279101 (the fictitious account) at the Standard Chartered Bank (Gh) Ltd, Liberia Road Branch, Accra. Thereafter the second defendant, by two telefax instructions, dated 2 and 4 September 1997 caused the co-plaintiff to transfer two sums of US$12,000 and US$70,000 into the fictitious account at the first defendant’s Liberia Road Branch, which he subsequently withdrew on or about 24 September 1997. The first plaintiff did not become aware of this fraudulent transaction until sometime in January 1998 when it received its statement of account at its own request.
The plaintiffs contended that the first defendant bank was negligent in the whole saga and gave the particulars of negligence as follows:
“(a) Failing to make proper preliminary inquiries about the second defendant at the time he opened the account with the bank.
(b) Failing to exercise due care required by international banking standards in paying the colossal sum of US$82,000 to the second defendant even though the latter did not have a foreign currency account at the first defendant’s bank.
(c) Failing to comply strictly with the payment instructions of the co-plaintiff.”
The plaintiffs accordingly claimed against the defendants damages for loss of their money and in respect of the co-plaintiff loss of reputation as a reputable international banking institution. The plaintiffs further contended that they were entitled to damages for what they called a conspiracy between the defendants to cause the alleged loss to the first plaintiff. As special damages, the plaintiffs claimed against the defendants the said sum of US$82,000 plus US$2,000 solicitor’s fees.
In response to these allegations levelled against the defendants, two paragraphs of the statement of defence filed by the first defendant Standard Chartered Bank Ltd merit attention and I reproduce them as follows:’
“(21) The first defendant submits that the first plaintiff has no cause of action against it since the first plaintiff never dealt with it in any way and is not known to the first defendant. It is the contention of the first defendant that the second plaintiff owes the first plaintiff reasonable explanations as to why it transferred funds out of its account without proper instructions, in the absence of which it becomes liable to the first plaintiff together with the second defendant. (22) The first defendant categorically denies all the averments contained in paragraphs (20) to (27) of the statement of claim and submits that the first and second plaintiffs are not entitled to any of the reliefs being sought from the first defendant.”
The trial proceeded in earnest but, curiously enough, the co-plaintiff was conspicuously absent and without any apparent reason. The learned trial judge entered judgment for the first plaintiff after making a finding that it had proved its case against the first defendant Standard Chartered Bank (Gh) Ltd), but held that the first defendant was entitled to indemnity from the co-plaintiff.
In my endeavour to appreciate and understand the magnitude of the task before this court in resolving the crucial issues raised on the pleadings, evidence and other relevant factors involved, I found
as of utmost benefit to me a passage of the judgment of the learned trial judge in the record of appeal and I reproduce it hereunder:
“The first defendant contended that as a collecting bank it acted upon the instructions of the second plaintiff bank and that as the fraud was initiated at the second plaintiff bank, the first defendant was not in the position to know about the fraudulent nature of the transfers. The second plaintiff should therefore be held liable for the loss suffered by the first plaintiff. I share the view of counsel for the first defendant bank that the second plaintiff bank was the depository of the original signature of Fred Egbe, the sole signatory to the first plaintiff’s account. It was therefore the duty of the second plaintiff to exercise maximum care to protect the interest of the first plaintiff by not acting upon the instructions issued by the second defendant to the detriment of its customer, the first plaintiff. In the circumstance, the second plaintiff was the causa sine qua non and cannot escape blame for the loss caused to its customer, the first plaintiff. I am also of the view that as a collecting bank, the first defendant made the payments to the second defendant for and on behalf of the second plaintiff. The second plaintiff therefore cannot escape liability for the commissions and omissions of the first defendant. I find that the first plaintiff has proved its case on all probabilities against the first defendant bank. I also find that the second plaintiff is liable to the first defendant in this matter and must indemnify the first defendant who raised indemnity in its statement of defence.”
The first defendant filed an appeal against the judgment on the following grounds:
(a) that the learned trial judge erred in holding that there was a cause of action against the appellant.
(b) The learned trial judge erred when he held that the appellant was liable for the loss of money to the first plaintiff-respondent.”
The first defendant, pursuant to leave, filed and argued additional grounds of appeal which were as follows:
“(i) The learned trial judge erred in holding that the first defendant-appellant was liable in negligence for the loss of the money.
(ii) After having found that the co-plaintiff must indemnify the first defendant-appellant, the trial judge erred in law when she failed, refused and or neglected to make a consequential order that the co-plaintiff-respondent should pay to the extent of the loss occasioned by the plaintiff-respondent.”
It is a settled principle of the law of negligence that three essential elements must be established by the plaintiff if he should clinch victory against the defendant in an action for damages for negligence. These essential elements are:
(1) that the defendant at the time material to the dispute owed him a duty of care;
(2) that the defendant breached that duty; and
(3) that the plaintiff suffered personal or other damage as a result of such breach.
The question then flows from the foregoing principles: Under what circumstances can one person claim that another person owed him a duty of care? A simple illustration will suffice. If two vehicles are meeting from the opposite directions, then it is obvious that each driver owes a duty of care to the other not to swerve his vehicle into the other’s lane of traffic. It can be seen that there exists between the two drivers a species of relationship. This is what has been known in its legal acceptation as the “neighbour principle.” In an action of negligence, which is explained in the case of Donoghue v Stevenson  AC 562 at 580, HL where Lord Atkin delivering his speech in the House of Lords stated, inter alia:
“Who, then, in law is my neighbour? The answer seems to be —persons who are so closely and directly affected by my act that I ought reasonably to have them in contemplation as being so affected when I am directing my mind to the acts or omissions which are called in question.”
Counsel for the first defendant-appellant even went to such extent as to bring at par with contractual relations the neighbour principle as defined by Lord Atkin and submitted that, for the
plaintiff-respondent to succeed, there ought to have been evidence of, contractual relationship between the first defendant-appellant collecting bank and the owner of the lost money, namely the respondent who sued in negligence. Counsel for the respondent submitted that, there was no need for proof of any contractual relationship as propounded. He relied upon statute law which can be found in section 81 of the Bills of Exchange Act, 1961 (Act 55). He submitted that this legal provision imposed a statutory duty of care upon all collecting bankers not to cause damage in the form of financial loss to innocent persons. It is provided under section 81 of Act 55 as follows:
“Protection to collecting Banker
81. Where a banker in good faith and without negligence—
(a) receives payment for a customer of a cheque, whether crossed or uncrossed; or
(b) having credited a customer’s account with the amount of such cheque, receives payment thereof for himself; and the customer has no title or a defective title, to the cheque, the banker does not incur any liability to the true owner of the cheque by reason only of having received payment thereof.”
The above statutory provision, when construed and interpreted by the elementary rules of statutory interpretation, seeks to impose upon all banks a statutory duty of care to all persons, irrespective of whether they directly or indirectly do business with them. The statute reveals clearly the legislature’s knowledge of and apprehension that criminals exist within or outside the society and care must be taken to check them so that they may not use the banks as vehicles for their criminal acts to the detriment of innocent citizens or foreign nationals. The statute imposes sanctions upon banks who do not exercise due care and vigilance. There does not have to be any contractual relationship between the bank and the innocent person who may be a victim of the criminal acts of another person using the bank as a tool, so to speak, a willing or innocent tool. I, therefore, prefer the submission of counsel for the respondent-appellant on the legal position on the issue before this court.
The common law situation where a sort of relationship is required between the plaintiff and the defendant as stated by Lord Atkin in the Donoghue’s case (supra) does not apply to the provisions of section 81 of Act 55. The crucial issue, however, is whether the respondent proved satisfactorily that the appellant bank was negligent.
In this regard, I must perforce reiterate that the facts of the case with regard to the modus operandi of the second defendant were taken from the pleadings and legal submissions. The gist of the plaintiff-respondent’s evidence can be found in summary form in the statement of case filed by counsel for the first plaintiff- respondent and it is as follows:
“(a) Failure by the second defendant in completing the required amount of opening forms. It was proved that instead of two forms only one form was completed.
(b) The discrepancies with regard to the name of the account holder and the named beneficiary in respect of the unauthorised transfers. The second defendant used two names: E O Effiong and E E Ekon.
(c) The inconsistency in the stated profession of the second defendant as the account holder. In one breath he claimed to be a student, in another breath he said he was a trader.
(d) Fictitious Nigerian residential address of the second defendant. This is contained in the evidence of the first plaintiff witness in the record of appeal.
(e) False references given by the second defendant.”
The explanatory notes added to (a) to (d) are my own emphasis from the record of appeal. The testimony of the first plaintiff witness is a catalogue of irregularities committed by the second defendant but which the appellant bank did or could not detect. My view of the totality of the evidence is that the appellant bank should not have allowed the second defendant to open an account with their bank or to withdraw the moneys from the bank if the latter has exercised due care and attention. It looks as if the appellant bank simply closed its eyes or was ignorant of matters or developments which were taking place in the opening of the account by the second defendant; which I doubt because a bank of the first defendant- appellant’s stature ought to be credited with at least a modicum of
experience. I wish to refer to exhibit A, a letter tendered by the first plaintiff witness in evidence and written by the International Commercial Bank, refusing the instructions to transfer US$70,000. The vital portions of the letter read as follows:
“The amount was deemed substantial and was going to an individual with no identifiable business line. Global financial deals by Nigerians which were classified as money laundering were becoming the order of the day. Armed with the information and events stated above, we decided to return unpaid the inward transfer of US$70,000 to the originating bank.”
It was from the ICB that the second defendant came to the first defendant-appellant bank, and succeeded in hoodwinking them by opening a fictitious account in which he had no money and by all sorts of irregularities as outlined above caused the ANZ Bank in Switzerland to transfer the colossal sum of US$82,000 to them and succeeded in withdrawing same from them, that is from the first defendant-appellant bank without any detection by the bank. I consider the conduct of the first defendant-appellant bank as constituting negligence and the learned trial judge was right in his findings on negligence.
The short comment which I consider necessary to make to all banks in this country is that as far back as the year 1961, 43 odd years ago when our legislature enacted the Bills of Exchange Act, 1961 (Act 55), s 81 thereof, all banks must be deemed to know that they owe a duty of care to true owners of any money that is put into a bank and this imposes a strict adherence to rules and regulations or measures that should operate to assist the banks in detecting obvious frauds. If a particular bank has no such rules of practice, that alone constitutes grievous breach of negligence in the same way as when the rules exist but have not been scrupulously followed or applied by the employees of the bank concerned. On the evidence as a whole, I do not find any reason to interfere with the findings of negligence against the first defendant-appellant. Also, I share the learned judges’ conclusion that the second plaintiff or co-plaintiff was negligent because it ought to have detected the forged signature on the cheque. Most importantly it should have sought clearance or confirmation from the first plaintiff before acting upon the instructions to transfer, especially having
regard to the large amount of money involved. Again there had been a previous experience about an attempt to swindle money from that account and therefore the co-plaintiff should have been extra careful. Failure to do so amounted to negligence.
Finally, I come to the issue of indemnity—whether an order should have been made directed to the co-plaintiff to pay the lost money to the plaintiff direct. In responding to this ground of appeal, I entirely agree with the submission of counsel for the plaintiff-respondent to which there was no reply from counsel for the first defendant-appellant. I shall simply quote the submission verbatim from the statement of case of counsel for the plaintiff-respondent:
“My lords the appellant obtained leave of the High Court to amend its statement of defence to plead indemnity. It never filed the pleading, which therefore became ipso facto void under Order 28, r 7 of the High Court (Civil Procedure) Rules, 1954 (LN 140A). The appellant had earlier filed a motion to amend its statement of defence to include a counterclaim of indemnity against the second plaintiff, which it inexplicably withdrew. It therefore did not counterclaim praying the court to make any order compelling the second plaintiff to indemnify it.”
On the legal issue of whether an indemnity can be enforced direct against the third party the English case of Hichens, Harrision, Woolston &Co v Jackson & Sons  AC 266, HL on indemnity was cited by counsel for the first defendant-appellant. In that case, the appellants who had been employed by the respondents to conduct a sale of shares for a stock exchange agency were held to have been entitled to an indemnity for the expenses they had incurred in the execution of their assignment or employment. Under our law, cases on indemnity may be found in respect of practice and procedure under Order 16A of the High Court (Civil Procedure) Rules, 1954 (LN 140A). As to the mode of execution Order 16A, r 9 of LN 140A provides that where a party is adjudged to be entitled to an indemnity against another, he may with leave of the court enforce the judgment against the judgment debtor direct, otherwise he must first satisfy the plaintiff before he claims from the third party.
In the instant case, however, since the first defendant-appellant was unable to effectuate its claim for an indemnity by complying with the rules of procedure, there was no judgment which it can enforce against the co-plaintiff. For the foregoing reasons the appeal fails and it is accordingly dismissed.