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In a landmark decision, Justice Chukwujekwu Aneke of the Federal High Court in Lagos has mandated Union Bank of Nigeria to immediately remit N811,174,229.25 to the Chief Registrar of the court. This amount represents the principal claim by Shago Payments Limited, a fintech company, against the bank over allegations of chargeback fraud.
The court instructed that the sum be held in trust in an interest-yielding account managed by the Chief Registrar. This account can be with any of the following banks: First Bank Nigeria Limited, Zenith Bank Plc., or Guaranty Trust Bank Limited. This arrangement will remain in place pending the hearing and determination of the ongoing suit against the bank and two other entities.
The ruling came following an ex parte application by Dr. Oladapo Olanipekun, SAN, representing Shago Payments Limited. Justice Aneke ordered Union Bank to file an affidavit within three days confirming compliance with the payment order. This affidavit must be served on the plaintiff’s counsel.
In his ruling, Justice Aneke stated, “After considering the application and submissions of counsel, it is hereby ordered as follows: that an order of interim injunction is made restraining the 1st defendant from taking any step or action in furtherance of the alleged chargeback claims.” The judge specifically prohibited any actions affecting the plaintiff’s accounts, including combining or setting off credit balances or any other form of distraint.
Additionally, the court issued an order preventing Union Bank from misrepresenting Shago Payments Limited as a debtor. This includes prohibiting the listing of the company on the Credit Risk Management System List of the Central Bank of Nigeria or any credit bureau, pending further hearings.
The case has been adjourned to August 1, 2024, for further mention.
Shago Payments Limited alleges that Union Bank unauthorizedly debited a total of N940,321,051.58 from its account, with N811,174,229.25 specifically attributed to chargeback fraud. The fintech firm accuses the bank of negligence and fraudulent conduct, citing a breach of the Quincecare duty and multiple regulatory obligations. They have also requested the Central Bank of Nigeria and the Securities and Exchange Commission investigate the bank for unethical and unsound business practices and are seeking N10 billion in damages.
Other defendants in the case include Global Accelerex Ltd. and Interswitch Ltd. The plaintiff asserts that the bank continued to process fraudulent chargeback requests and debited its settlement account without authorization, even after warnings about the fraudulent claims.
This case underscores significant concerns in the financial ecosystem regarding the management and oversight of digital payment processes, highlighting the need for robust regulatory frameworks to protect fintech companies from fraudulent activities.
