Nov 1, 2018

Law Enforcement Agencies And Debt Recovery| Eberechi May Okoh

“It is important for me to pause and say here that the powers conferred on the EFCC to receive complaints and prevent and/or fight the commission of Financial Crimes in Nigeria pursuant to section 6(b) of the EFCC Act does not extend to the investigation and/or resolution of disputes arising or resulting from simple contracts or civil transactions in this case... Alas! The EFCC is not a debt recovery agency and should refrain from being used as such[1]”. Per Sidi Dauda Bage, J.S.C

The Supreme Court recently delivered a judgment[2] which touched, among other things, on the role of the Nigerian police and other law enforcement agencies in debt recovery. 

The history of the case dates to a banking transaction that went sour between a commercial bank and its customer. The bank had granted a loan to a company, guaranteed by the Managing Director (MD) of the company. The loan was secured by a lien over original payment vouchers, debentures over the floating assets of the company, a legal mortgage over the property of the guarantor and a lien over three Fiat trucks and three Fiat tractors. Over time, the company and its MD suspected the bank was charging excessive interests on the account and employed a banking consultant to audit the account. 

The consultant found that excess charges were indeed levied on the company’s account and wrote the bank asking for a refund of the excess charges. The bank disagreed with the consultant’s findings and the matter was referred to the Chartered Institute of Bankers’ Sub-Committee on Ethics and Professionalism for arbitration. While the matter was pending before the Committee the bank made a demand on the company and its MD for payment of the debt and interest. It subsequently reported the company to the Financial Malpractices Investigation Unit of the Nigeria Police Force, C.I.D. Acting on this report, policemen arrested and detained the MD of the company and did not grant him bail until cash and cheque payments totaling N2,000,000 (Two Million Naira) were paid to the bank.

The company and MD subsequently filed a fundamental rights enforcement action at the Federal High Court. While the suit was pending, the bank made a further complaint of bank fraud and diversion of depositors’ money to the Economic and Financial Crimes Commission (EFCC). Based on this complaint, the EFCC sent an invitation letter to the company and its MD. The latter promptly filed another fundamental rights enforcement suit against the bank and the EFCC seeking a declaratory relief that the invitation by EFCC was unlawful and a violation of the MD’s fundamental right to liberty and dignity of his person and a continuation of the harassment by the bank. The trial court dismissed the suit of the company and its MD. On appeal, the Court of Appeal held that the multiple complaints by the bank to different law enforcement agencies amounted to harassment and a violation of the MD’s fundamental human right. Dissatisfied, the bank appealed to the Supreme Court. The Supreme Court upheld the decision of the Court of Appeal. 

The Supreme Court considered the statutory powers of the EFCC and noted that such powers do not extend to investigating disputes which arise from simple contracts or civil transactions. It further held that the EFCC must scrutinize petitions and advise complainants on the appropriate route to resolve their disputes and refrain from being used as a debt recovery agency. It also noted that the Police ought not to have allowed themselves be used to recover any sums from the MD in exchange for bail. The court held that the bank’s remedy for default in repaying a loan was to write a demand letter to the company and subsequently invoke its power of sale under the mortgage deed. It cautioned that detentions by law enforcement agencies over purely commercial disputes could amount to bad publicity for future investors.

This case has revisited the issue of the involvement of law enforcement agencies in simple contracts. It is pertinent to note that the present case was adjudged to be a pure commercial transaction. The Supreme Court has by this decision provided clarity that the role of law enforcement agencies in society does not extend to resolving commercial disputes where no fraud or criminality can be established. 

There exists a distinction between a commercial dispute and a criminal conversion of funds. A cursory look at the Criminal Code Act[3] will reveal that offences related to cheating and obtaining by false pretense must be preceded by the mens rea of “intention to defraud”. Therefore, where a person with intent to defraud, obtains money by false pretenses, he/she would be accused of having committed a crime. A simple contract that results in a debt or a dispute as to the measure of indebtedness between two contracting parties is a purely civil matter and ought to be resolved by the civil courts or through alternative dispute resolution. 

Persons reporting matters to the Police or other law enforcement agencies must take cognizance of their powers. The general duties of the Police are:

“The police shall be employed for the prevention and detention of crime, the application of offenders, the preservation of law and other, the protection of life and property and the due enforcement of all laws and regulations with which they are directly charged, and shall perform such military duties within or without Nigeria as may be required by them by, or under the authority of, this or any other Act.[4]

The EFCC Act[5] defines an economic and financial crime as follows:

“the nonviolent criminal and illicit activity committed with the objectives of earning wealth illegally either individually or in a group or organized manner thereby violating existing legislation governing the economic activities of government and its administration and includes any form of fraud, narcotic drug trafficking, money laundering, embezzlement, bribery, looting and any form of corrupt malpractices, illegal arms deal, smuggling, human trafficking and child labour, illegal oil bunkering and illegal mining, tax evasion, foreign exchange malpractices including counterfeiting of currency, theft of intellectual property and piracy, open market abuse, dumping of toxic wastes and prohibited goods, etc.”[6]

These provisions clearly exclude civil disputes arising out of simple contracts from the statutory powers of the law enforcement agencies under review. However, many citizens consider law enforcement agencies as a faster route to debt recovery than the civil courts. The Supreme Court has now shown that such practices amount to an abuse of process.

[1] DB Plc v. Opara [2018] 7 NWLR (1617) 92

[2] ibid

[3] Cap C 38 LFN 2004

[4] Section 4 Police Act, Cap P19 LFN 2004

[5] Economic and financial Crimes Commission (Est, etc.) Act Cap E1, LFN 2004

[6] Ibid, section 46

Eberechi May Okoh 

Senior Associate at Streamsowers & Kohn
Source: LinkedIn