Introduction
Most Nigerians know what it means to be named next of kin. We fill in the boxes on forms at the bank, the hospital, and the office. We assume it means we are first in line to collect whatever our loved one leaves behind when they die. But the Supreme Court of Nigeria has clarified that being a next of kin or administrator of an estate is not just about collecting money. It also carries serious legal responsibilities, including the obligation to pay the deceased’s debts before sharing anything among the family.
The case of Daura & Anor v Union Bank of Nigeria Plc (2024) LPELR-62008(SC) is like a story many people will recognise. A woman dies, leaving money in her bank account. Her children obtain the legal authority to manage her estate, withdraw the money, use some for her burial, and share the rest among themselves. Then the bank comes knocking, demanding repayment of a loan the deceased had taken shortly before her death. The children say they did not know about the loan. The Supreme Court says that is not good enough.
This article explains what the Supreme Court decided, what it means for ordinary Nigerians, and the practical steps estate administrators should take to protect themselves and honour the deceased’s obligations.
The Facts of the Case
Honourable Justice Kita Odiete Georgeman, was a judge of the Delta State High Court. She obtained a loan of ₦6,000,000 from Union Bank of Nigeria at an interest rate of 18% per annum in July 2008 but died one month later.
Her children obtained letters of administration over her estate, giving them authority to manage her assets. Thereafter, the children discovered about ₦15,372,668.97 in their mother’s First Bank account which they spent on burial expenses and distributed the remainder among themselves. The loan to Union Bank remained unpaid.
In December 2009, Union Bank sued for recovery of the principal loan of ₦6,000,000 and accrued interest of approximately ₦4.9 million. The children argued that they had no knowledge of the loan when they distributed the estate and that there was nothing left to pay it with.
The trial Court accepted this defence and dismissed the case. On appeal, the Court of Appeal reversed that decision, holding that the children were liable to repay the principal sum and interest up to the date the bank received notice of the customer’s death. The children appealed to the Supreme Court, which dismissed their appeal and affirmed the Court of Appeal’s judgment.
What the Supreme Court Decided
- An Administrator Cannot Claim Ignorance of a Debt
The most important finding in this case is that an estate administrator cannot escape liability for an unpaid debt by claiming they did not know about it. The Court emphasized that an administrator is under a proactive duty to identify and inventory the deceased’s assets and liabilities before making any distribution.
This duty is active, not passive. The Administrator must not wait for creditors to come forward, but should actively search for creditors. In reality, this means writing to every bank the deceased used, submitting the letters of administration, and asking about the status of accounts and any outstanding obligations. When a bank receives a letter of administration, it must disclose the full details of any indebtedness it holds against the deceased customer to the administrator.
The children in this case argued that they distributed the money before they were aware of the Union Bank loan. The Supreme Court found this argument unconvincing. The evidence revealed that the children had initially included Union Bank as a party in their application for letters of administration, then quietly removed the bank’s name and re-filed the application without it, obtaining the letters within two days. One of the children had also personally visited the bank and been told about the loan. The Court found that the children had constructive, if not actual, notice of the indebtedness. Their claim of ignorance did not hold.
- If the Estate Has Already Been Shared, Beneficiaries Can Be Made to Refund
A second important holding concerns what happens when an administrator has already distributed the estate before a creditor comes forward.
The Supreme Court held that a creditor can pursue the beneficiaries directly to recover so much of what they received as is necessary to satisfy the outstanding debt. Relying on established English authorities, the Court affirmed that the rule requiring debts to be paid before distribution cannot be rendered toothless by a premature or careless sharing of the estate. If the money has already been given out, those who received it can be required to refund the amount needed to pay the creditor.
It is important to understand a key legal distinction here. There is a difference between a beneficiary and a personal representative. A beneficiary is someone entitled to inherit from the estate. A personal representative is someone appointed to administer it, whether as an executor under a will or as an administrator under letters of administration. A person can be one, both, or neither.
Generally speaking, creditors pursue the estate through the personal representatives, not the beneficiaries personally; creditors’ claims are against the estate. However, where a beneficiary is also an administrator and has distributed the estate in error without settling debts, they can be held accountable in their capacity as administrator. This is exactly what happened in this case. The children were both administrators and beneficiaries, and having distributed the estate without paying the bank, they were held liable.
This distinction also matters when a specific asset, such as a house or land, secures a loan. If the deceased took a mortgage and used a property as collateral, the bank has priority over that asset and can foreclose on it to recover the debt. Where a loan is unsecured, however, the bank stands as an unsecured creditor. It must be paid from the general pool of estate assets before any distribution is made to beneficiaries.
- A Bank Loan Does Not Die with the Borrower
Many Nigerians assume that when a person dies, their financial obligations die with them. This assumption is wrong.
The Supreme Court drew a careful distinction between the general banker-customer relationship and a loan contract. The general banking relationship ends upon the customer’s death. But a loan agreement is a separate and distinct contract with its own legal life. It does not automatically terminate upon the borrower’s death. It continues to subsist, and interest continues to accrue, until the loan is fully repaid.
This position is consistent with established banking law. When a customer signs a loan agreement, they are bound by its specific terms. Those terms do not include an automatic termination clause upon death. The obligation to pay becomes a debt of the estate, and the administrator, stepping into the shoes of the deceased, inherits that obligation alongside the assets.
It is worth noting that this principle applies to loan contracts specifically because they are not personal in nature. Certain contracts are personal, meaning they are tied to the individual and cannot be performed by anyone else, such as an employment contract or a contract for personal services. When the person dies, such contracts terminate. A loan contract is different. The obligation to repay money is capable of being performed by the estate, and therefore it survives the borrower’s death.
The practical implication is significant: the longer an estate delays in identifying and settling a loan, the larger the debt grows. Administrators who move slowly or distribute assets without first accounting for outstanding loans are not simply deferring a problem; they are creating one. They are allowing it to compound.
There is, however, one avenue of relief: an administrator can approach the bank and formally apply for restructuring, a moratorium, a deferral, or, in appropriate cases, a partial waiver of accrued interest. These are not automatic entitlements, but banks do have the discretion to grant them on a case-by-case basis. If the estate is genuinely unable to service the full obligation immediately, a well-presented application to the bank can produce a more manageable arrangement.
- The Procedural Lesson: A Victory That Came Up Short
The Supreme Court also made an important observation regarding the loan’s interest. The Court of Appeal had held that interest should stop accruing from the date Union Bank received formal notice of the customer’s death. The Supreme Court disagreed with this in principle, holding that under the terms of the loan contract, interest continues to run until the entire sum is liquidated, regardless of when the bank learns of the borrower’s death.
However, because Union Bank had not filed a cross-appeal challenging the Court of Appeal’s ruling on interest, the Supreme Court could not intervene. The well-settled principle is that a court cannot grant a party relief they did not ask for, and an unchallenged finding of a lower court remains valid and binding.
The result is that Union Bank secured a judgment for repayment of the principal and some interest, but left behind a ruling that the Supreme Court itself acknowledged was inconsistent with the loan contract. The lesson here for legal practitioners is that when appealing, examine every adverse finding, not just the most obvious ones. A comprehensive approach to appellate procedure requires that every ground on which the lower court’s decision may be faulted be identified and pursued.
On the legal weight of the Supreme Court’s pronouncement on interest, it bears noting that because the issue was not brought properly before the Court by way of appeal, the holding on this point technically carries the character of an obiter dictum rather than a binding ratio decidendi. In practice, however, the Supreme Court’s words carry persuasive weight even when spoken in passing, and a future court faced squarely with the same question is likely to regard this pronouncement as significant authority.
What This Means for Ordinary Nigerians
If You Are Named as an Administrator or Executor of an Estate
Do not distribute anything until you have completed the following steps.
First, write to every bank or financial institution the deceased used, and submit your letters of administration to each. The bank is required to disclose the account status and any outstanding obligations upon receipt of this document. Second, make inquiries beyond the banks. Examine the deceased’s documents and personal records for evidence of loans, debts, or other liabilities. If the deceased had a relationship manager at a bank, contact that person directly.
Third, settle all debts and liabilities before distributing anything. The legal order of priority is: burial expenses first, then creditors, and only then are the remaining assets distributed to beneficiaries. If you distribute before paying creditors, you expose yourself to personal liability as an administrator.
Fourth, if the estate cannot immediately meet the full loan obligation, approach the bank formally and apply for restructuring, a moratorium, or a deferral. Document your application carefully. Banks are regulated entities and are required to respond to such applications appropriately.
Fifth, be mindful of the specific banks you list when applying for letters of administration. The letters issued by the probate registry are typically restricted to the institutions you have named. If you later discover the deceased had accounts elsewhere, you will need to take further steps to bring those within the scope of your authority.
If You Are a Potential Beneficiary
Your entitlement to inherit is always subject to the debts of the deceased. You receive what is left after the creditors have been paid, not before. If you receive a share of an estate that was distributed without first settling an outstanding debt, a creditor may come after you to recover that share.
If you are purely a beneficiary and not an administrator, your personal exposure is more limited. But if you are both a beneficiary and an administrator, you carry full legal responsibility for ensuring that debts are paid first. The emotional pressure to quickly divide the estate among grieving family members is understandable. The legal consequences of doing so prematurely can be severe.
A Word for Everyone
This case also serves as a prompt for a conversation that most Nigerian families avoid. If you have financial obligations, especially bank loans, tell your family. Tell your next of kin. Make a note that is kept in a place that is accessible. The children in this case ended up in prolonged litigation, partly because they claimed they did not know about the loan. Whether or not that claim was credible, the difficulty might have been avoided if the deceased had disclosed the loan to her family, or if the family had made the proper inquiries before distributing the estate.
Financial transparency within families is not just good practice; it is essential. As this case shows, it can be the difference between a peaceful transfer of an estate and years of litigation.
Conclusion
Daura & Anor v Union Bank of Nigeria Plc is a decision that deserves to be widely known and understood. Its implications reach far beyond the courtroom. Every Nigerian who has ever been named as a next of kin, every person who may one day take out letters of administration for a parent or guardian, and every family navigating the aftermath of a death has a stake in understanding what this case says.
The law is clear: the deceased’s debts must be paid before the estate can be distributed. A loan does not disappear when the borrower dies. An administrator who distributes an estate without first identifying and settling the debts of the deceased does so at their legal peril. And a bank’s contractual right to recover interest on a loan continues until the loan is fully repaid.
These are not obscure legal technicalities. They are principles with direct, practical consequences for Nigerian families. The Supreme Court has spoken on them; now the responsibility lies with all of us to understand and act accordingly.