Engr. Adedayo Lawrence Olatunji (‘the 1st Respondent’) maintained a banking relationship with United Bank for Africa (‘the Appellant’) for approximately ten years. During that period, Omolola Toba Ayeni (‘the 2nd Respondent’), an employee of the Appellant, served as the 1st Respondent’s Relationship Manager. In the course of their banker-customer dealings, the 2nd Respondent presented the 1st Respondent with an investment proposal for a one-year fixed deposit commencing on 1 July 2021. Relying on her representation and on the confidence arising from their established banking relationship, the 1st Respondent invested the sum of ?71,600,000.00. A certificate of investment was subsequently issued to him. However, when the investment matured, neither the principal sum nor the agreed interest was paid.
After the investment matured, the 1st Respondent made inquiries concerning the outstanding funds. The Appellant informed him that the 2nd Respondent had diverted the investment proceeds and maintained that no fixed deposit contract existed between the bank and the 1st Respondent. The Appellant’s position was that the transaction did not amount to a valid or authorised fixed deposit arrangement with the bank and that it should not be held responsible for the misconduct of its employee. Faced with the loss of both the capital and the anticipated return, the 1st Respondent instituted an action against the Appellant and the 2nd Respondent, seeking recovery of the investment sum together with the other reliefs endorsed in his claim.
The trial Court found the Appellant vicariously liable for the diversion of the 1st Respondent’s investment funds by the 2nd Respondent. It ordered the Appellant to pay ?71,600,000.00, being the principal sum, together with pre-judgment interest at the rate of 10% per annum. The Court also awarded ?2,500,000.00 as general damages, post-judgment interest at the rate of 8% per annum until the judgment debt was fully liquidated, and ?500,000.00 as costs.
Dissatisfied with the decision, the Appellant appealed to the Court of Appeal. One of the issues submitted for determination was: Whether, in the absence of conclusive documentary evidence establishing the consummation of a fixed deposit contract between the Appellant and the 1st Respondent, the trial Court was right to hold that the sum of ?71,600,000.00, being the capital sum intended for the fixed deposit, was diverted from the 1st Respondent’s account by the 2nd Respondent in the course of her employment with the Appellant and, consequently, to hold the Appellant vicariously liable.
ARGUMENTS
Learned counsel for the Appellant submitted that the 1st Respondent’s act of signing blank cheques and delivering them to the 2nd Respondent constituted a private arrangement between the two Respondents. Counsel argued that this arrangement enabled the diversion of the funds and that the Appellant could not properly be held liable for a transaction which, on its case, was neither authorised nor undertaken on its behalf. It was further contended that no fixed deposit contract existed between the Appellant and the 1st Respondent in respect of the sum of ?71,600,000.00. Accordingly, counsel maintained that the trial Court’s award of the principal sum was perverse and ought to be set aside because there was no conclusive documentary evidence establishing the alleged fixed deposit transaction.
Counsel further contended that the 1st Respondent’s conduct amounted to contributory negligence. By signing blank cheques without imposing any express limitation on their use, the 1st Respondent was said to have exposed himself to an obvious and foreseeable risk. Counsel maintained that the trial Court ought not to have imposed liability on the bank for the fraudulent acts of the 2nd Respondent, particularly where the customer’s own conduct allegedly created the opportunity for the diversion.
In response, learned counsel for the 1st Respondent maintained that the transaction arose directly from the confidence which the 1st Respondent reposed in the Appellant through its appointed relationship manager. Counsel submitted that the dealings between the 1st and 2nd Respondents occurred in the ordinary course of the Appellant’s banking business and that the 2nd Respondent acted, or appeared to act, in her official capacity as an employee of the bank. The Appellant could not therefore avoid liability merely by characterising the transaction as unauthorised or by asserting that its employee had acted fraudulently. From the customer’s perspective, the proposal was communicated through the very officer whom the bank had designated to manage his account and banking relationship.
Counsel also emphasised that the 1st Respondent dealt with the 2nd Respondent as a member of the Appellant’s staff and not as a private investment promoter. It was submitted that the 1st Respondent had not previously engaged in fixed-term deposits or signed blank cheques in the manner alleged by the Appellant. Counsel urged the Court to uphold the trial Court’s finding that the 2nd Respondent’s conduct was sufficiently connected with her employment and that the Appellant was consequently vicariously liable for the loss.
DECISION OF THE COURT
In resolving the issue, the Court of Appeal held that:
A bank will be held vicariously liable where its employee defrauds a customer in the course of interacting with the bank. This is because the bank, as the employer and principal, is presumed to repose confidence in the employee’s competence, integrity and character by holding the employee out to customer as fit to conduct its business and manage customer relationships.
The Court explained that an employer’s liability arises where the wrongful act is sufficiently connected with the employee’s duties and is committed in the course of the employment. The fact that the employee acted fraudulently or without the employer’s authority does not, in itself, absolve the employer of liability, particularly where the customer dealt with the employee in her official capacity.
In the instant case, the Court of Appeal held that the Appellant was vicariously liable for the acts of the 2nd Respondent, its relationship manager, who dealt with the 1st Respondent in her official capacity in respect of the fixed deposit investment.
Issue resolved in favour of the 1st Respondent.