Law Enforcement Agencies And Debt Recovery| Eberechi May Okoh

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
Per Sidi Dauda Bage, J.S.C

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. 

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

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.

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

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

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

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.

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.”

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

[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 

How To Recover Small Debt Claims In Lagos State | Adedunmade Onibokun

How To Recover Small Debt Claims In Lagos State | Adedunmade Onibokun

A friend once wanted to recover
the sum of N35,000 (Thirty – Five Thousand
Naira) which had been erroneously deposited into a wrong bank account. Due to
the inability to locate the account owner, my friend was informed by the bank that
only via a court order could the payment be reversed, hence leading to my
friend calling me for help. Would you believe it cost over N5,000 (Five Thousand Naira) to institute a court proceeding at the
Magistrate Court and effect service on the Defendants? Leaving my friend with N30,000 (Thirty Thousand Naira) as the
value of the sum sort to be recovered.

Sometimes, the value of the sum
sort to be recovered could be much higher, for instance N500,000 (Five Hundred Thousand); N3,000,000
(Three Million Naira) or N5,000,000
(Five Million Naira). No matter the amount, a creditor will usually be required
to pay legal fees, most especially if a lawyer is instructed or one proceeds to
court as an option to recover the debt owed.  More often than not, creditors find the legal
and other fees paid to recover a debt as too high. Also, the long period of
time associated with court proceedings further discourages such creditors and
many usually choose to petition the police as an option of recovering the sum. Though
the police do not have the jurisdiction to act as debt recovery agents except
the petition also includes allegations of fraud or deceit.

This high cost of litigation
suffered by creditors especially those seeking to recover small sums, instigated
a cry for a small claims court with a mandate to address the issues of high
cost of litigating small claims and abridge also time of litigation. Thankfully,
the Lagos State Judiciary has established such a court with the introduction of
by Hon. Mr. Justice Opeyemi O. Oke, Chief
Judge of Lagos State on 24th April, 2018. The objective of the small claims procedure is to provide
easy access to an informal, inexpensive and speedy resolution of simple debt
recovery disputes in the Magistrates’ Courts.

The Small Claims Practice
Direction is novel in that it provides in Article 12 (2) that the entire period
of proceedings from filing till judgment shall not exceed sixty (60) days) and
for matters to come under this provisions it must have the following elements
as stated in Article 2 –  

(a)     The Claimant or one of the Claimants resides
or carries on business in   Lagos State;

(b)     The
Defendant or one of the Defendants resides or carries on business in Lagos

(c)      The cause of action arose wholly or in part in Lagos State.

(d)     The claim is for a liquidated monetary
demand in a sum not exceeding N5,000,000
(Five Million Naira), excluding interest and costs.

(e)     The Claimant has served on the Defendant, a

The Practice Direction also recognizes
in Article 10 that Parties may represent themselves at the proceedings in the
Small Claims Court. Partnerships and Registered Companies can be represented by
either a Partner, Company Secretary or any other Principal Officer of the
Partnership or Company.

This is good news for
businesses and persons in Lagos seeking to recover sums below N5, 000, 000 (Five Million Naira) at the Magistrate
Court as it reduces the cost of litigation and abridges the time spent in
court. To institute a proceeding for debt recovery according to the Small
Claims Practice Direction, one may a fill the Small Claims Complaint Form and
file same at the Magistrate Court. For further information on how to take
advantage of the new practice direction in recovering your debt, you may
consult a lawyer or visit the Registry of the Magistrate Court.

Adedunmade Onibokun

Principal Partner

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Have you noticed that the
Police are our default go –to – persons whenever we have anyone of the myriad
of issues we deal with on a daily basis. One act which I find most absurd is
when we make them our debt collectors, this means the police in a way serve as
contract enforcers, which I believe is not right.  A friend once recounted his experience with
the police to me and explained how he had entered into a contract which did not
work out so well, thus finding himself liable to his partner to the tune of a
few millions.

The creditor had become
inpatient and reported my friend to the police, who in turn arrested my friend
at his place of business but released him on bail. Though my friend has long paid his debt, I remember
wondering if the police also had a duty to act as debt collectors or contract
enforcers for the general public.
A look at section 4 of the
Police Act spells out the duty of the police. It states that:-
“The Police shall be employed for
the prevention and detection of crime, the apprehension of offenders, the
preservation of law and order, 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 outside Nigeria as may be
required of them by, or under the authority of this or any other Act”.
From the foregoing, I do
not see the words debt collector stated in the Police Act, do you? So why do
Nigerians call the police for such. I will rather recommend you call a debt
recovery agent.
The courts also frown on
the practice of using the Police as debt collectors. This is illustrated in the
case of A.C (O.A.O) Nig Ltd V. Umanah
(2013) 4 NWLR (Pt 1344) Page 323
where the Court of Appeal held that:
statutory duties of the police under the Police Act is to maintain peace, law
and order in the society. Debt collection or loan recovery is not within the
purview of the statutory duties and powers of the police”.
In conclusion, I will
suggest that the police focus on its primary duties rather than allow
distractions from matters such as debts or loan recovery. Moreover, Nigerians
have to understand that a lawyer is someone you must have on speed dial all the
time before you enter into contractual agreements.