What a bank must establish to succeed in a recovery suit
Recovery claims are lost less often on whether money is owed than on the documents relied on to prove it.
A facility has gone unserviced and the security is a property whose title now looks less certain than it did at disbursement. A guarantor says he signed nothing of the sort. A customer says the account was debited with charges never agreed. Or judgment has been obtained and the difficulty is no longer proving the debt but actually recovering it. Recovery matters turn less on whether money is owed than on documents, and on whether the right procedure was used at the right moment.
The law
What the law provides
A claim to recover a debt is, at bottom, a claim in contract. The lender must establish the facility, the terms on which it was granted, the drawdown, and the sum outstanding as at the date of the claim. The statement of account is central, and its admissibility and weight are governed by the Evidence Act 2011, which makes specific provision for computer-generated records and requires a certificate as to how the record was produced. Recovery claims are lost on this point with some regularity.
Where the debt is secured, realisation depends on whether the security was validly created and perfected. A legal mortgage over land requires the deed, and where the Land Use Act requires the Governor's consent to the transaction, an unperfected security is exposed. A charge over company assets requires registration at the Corporate Affairs Commission within the period prescribed by the Companies and Allied Matters Act 2020; an unregistered charge may be void against a liquidator and other creditors.
A guarantee is a contract in its own right and is construed strictly. The guarantor's liability does not exceed what the instrument provides, and material variation of the principal contract without the guarantor's assent may discharge them.
On the customer's side, a bank owes duties in the operation of an account, including to debit only what is authorised. Where charges or interest are applied outside the agreed terms, they are recoverable, and an account may be referred for reconciliation by an expert appointed for the purpose.
The process
What happens in practice
Before proceedings, a demand is made and the documents are assembled: the offer letter and its acceptance, the security documents and evidence of their perfection, the guarantee, and a certified statement of account with the certificate the Evidence Act requires. Where that exercise reveals a defect, it is very much better to know before filing than under cross-examination.
Where the claim is for a liquidated sum and there appears to be no defence on the merits, the undefended list procedure under the High Court rules is available. The claim is filed with an affidavit setting out the grounds for believing there is no defence, and the defendant must file a notice of intention to defend, with an affidavit disclosing a defence on the merits, before the return date. If none is filed, or the affidavit discloses no defence, judgment may be entered without a full trial. If a defence is disclosed, the matter is transferred to the general cause list and proceeds in the ordinary way.
After judgment, enforcement is a separate exercise. Garnishee proceedings attach money held by a third party — commonly a bank — for the judgment debtor. The court makes an order nisi, the garnishee shows cause, and the order may then be made absolute. Where the judgment debtor is a company, other routes may be available depending on the circumstances.
Nothing in this description should be taken as an indication of the outcome or duration of any particular matter.
Our role
How the firm acts
We review facility and security documentation and advise on what the documents will actually support before a claim is issued. We prepare statements of account for tender in compliance with the Evidence Act, and identify defects in perfection or registration while there is still time to address them.
We prepare and file recovery claims, including under the undefended list procedure where it is appropriate, and appear at trial and on appeal. We act in the realisation of security, in claims on guarantees, and in garnishee and other enforcement proceedings. We also act for customers in disputes over the operation of accounts, including claims for the recovery of charges and interest applied outside the agreed terms.
Questions
Questions clients commonly ask
What is the undefended list?
It is a procedure under the High Court rules for claims to recover a liquidated sum where the claimant believes there is no defence on the merits. The defendant must file a notice of intention to defend supported by an affidavit disclosing a defence before the return date. If no defence is disclosed, judgment may be entered without a full trial.
We have judgment but no payment. What now?
Enforcement is a separate stage. Garnishee proceedings can attach money held for the judgment debtor by a third party such as a bank, by an order nisi that may then be made absolute. Which route is appropriate depends on what the debtor has and where it is held.
Does an unregistered charge still secure the debt?
Not reliably. A charge over the assets of a company must be registered at the Corporate Affairs Commission within the period prescribed by CAMA 2020. An unregistered charge may be void against a liquidator and other creditors, which leaves the lender ranking as unsecured at the moment security matters most.
Can a guarantor be released?
A guarantee is construed strictly and the guarantor's liability is limited to what the instrument provides. Where the principal contract is materially varied without the guarantor's assent, the guarantor may be discharged. Whether that has happened depends on the wording of the instrument and what was in fact varied.
The bank has charged interest we never agreed. Is that recoverable?
Charges and interest applied outside the agreed terms are in principle recoverable, and the account may be referred for reconciliation by an expert appointed for that purpose. The offer letter, the acceptance and the full statement of account are the starting point.
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