Whether any law empowers a person or institution to compel a bank to place a restriction on the account of a customer without an express order from the court

By Amaka Ezeno MCLArb

It is now so common to hear that once a person is accused of financial misappropriation in any firm, his/her account will be _frozen_by the bank pending investigation, mostly without an order from a court.

The courts frown against the said practice by banks upon directions from institutions including ICPC, EFCC without the said institution, firstly getting an order from court and serving same on the bank.

The said practice was rendered null and void n the Court of Appeal case of AROGUNDADE vs. SKYE BANK PLC(2020)LCN/14893(CA), where the Court held as follows:

“No person or institution has power unilaterally to place a restriction on the account of a customer. No law allows for such act or action. In a civilized society people abide by the law and consequences are suffered for the violation of the law….. The lower Court in the judgment specifically on page 178 of the records held: “I have to say that the act of refusing to pay Exhibits ‘B, C, D, E and F’ is justifiable considering the fact that the Claimant is undergoing criminal trial for allegation of criminal and financial crimes and I believe that this was precaution taken by the Defendant so as to avoid jeopardizing the ongoing trial or any further investigation.

I also believe that it will(sic) wrong for the Defendant to have tampered with his accounts if at the end of the day, any of the outcomes of the criminal charges is linked to the Claimant’s accounts. Therefore, considering the facts of this case, this refusal cannot amount to a breach of banker-customer relationship and I hereby hold that the Claimant is not entitled to any damages.

The reason the lower Court justified the refusal of the Respondent to honour Exhibits B, C, D, E and F was because there was a criminal charge against the Appellant. The Respondent counsel in the brief submitted that in the circumstance of the case before the lower Court, the doctrine of _lis_ _pendens_ (pending litigation) is applicable and on the strength of that doctrine the lower Court was justified in refusing to honour Exhibits B, C, D, E and F.

The Appellant on the other hand is emphatic on the general principle of the banker/customer relationship which requires that the bank which collects a deposit from a customer is a debtor to the customer and indeed it is an agent of the customer.

The implication of this is that once a customer deposits his money in the bank, the bank has a legal duty to pay back the money as a debtor to the customer, the creditor. The bank as the agent of the customer is holding the money for the customer the principal, and therefore once the principal gives an order by way of a cheque or withdrawal form or slip, the bank as an agent has both a legal and moral duty to honour the cheque or the withdrawal slip. This is because the master in this respect is the customer.

This legal obligation on the customer comes with consequence should the bank refuse to honour instruction of withdrawal of funds from the account of the customer which is funded. See Oyerinde vs. Access Bank Plc (2014) LPELR-23461(CA); UBA. vs. Marcus (2015) LPELR-40397(CA); Citibank Nig. Ltd. vs. Ikediashi (2014) LPELR-22447.

This general principal recognizes some exceptions that is to say, there are circumstances when the bank can refuse to honour the cheque of a customer over a funded account as it was stated in the cases referred to by the Respondent, that is to say when there are legal grounds or reasons not to honour same. In such instances, the refusal of the bank will be justified.

See Diamond Bank Ltd. vs. Ugochukwu (2008) 1 NWLR (Pt. 1067) 1. This Court in Abada (Nig.) Ltd. vs. Unity Bank of Nig Plc & Ors. (2018) LPELR-44003 (CA) in driving home the above point held: “A bank is obliged to pay cheques drawn on it by its customer provided that the customer has sufficient fund to satisfy the amount payable on the cheque and there are no legal bars to payment.

A customer whose cheque has been wrongfully dishonoured is entitled to claim damages against the bank. The claim may be for breach of contract and/or for libel. See Allied Bank (Nig.) Ltd. v. Akubueze (1997) 6 NWLR (Pt. 509) 374 and F.A.T.B Ltd. v. Partnership Inv. Co. Ltd. (2003) 18 NWLR (Pt. 851) 35 SC.”

The question therefore is whether the facts of this case falls within the legal grounds upon which the Respondent could have refused to honour the cheque of the Appellant (Exhibit C) or the withdrawal forms (Exhibits D, E and F). This is what issue 1 is all about.I have relayed the facts above but it will not be out of place to again state briefly the facts as it relates to this issue.

It is not in dispute that the Appellant was a staff and customer of the Respondent. It is also not in dispute that the Appellant was investigated and charged for criminal offence in violation of The Failed Banks (Recovery of Debts) and Financial Malpractices in Banks Act, Cap. F2 of the Laws of the Federation, 2004. The offences the Appellant was charged with were; approving credit facilities without adequate security, failure to take steps to ensure that the books of the bank gave true and fair view of the state of affairs of the bank, granting facility without approval of CBN of unsecured credit, misrepresentation of the shares of Afribank Nigeria Plc on the Nigerian Stock Exchange.

The Appellant was charged with these offences in 2010. This was the amended charge to the original charge in Suit No: FHC/L/294/09. This is found on pages 47-61 of the records. The Appellant was charged by the EFCC as 6th Accused person in Charge No: ID/160c/2011 in the High Court of Lagos State. In the suit before the High Court of Lagos State, the Appellant was charged for conspiracy and fraudulent conversion.

This is found on pages 62-79 of the records. While these criminal charges were hanging on his head, the Appellant issued Exhibit C to CW2 on 26/7/12. On presentation of this cheque, the Respondent did not honour the cheque and endorsed on it ‘DAR.’ The Appellant had earlier presented withdrawal forms which are Exhibits D, E and F on his domiciliary accounts in pound sterling, American Dollars and Euros on 9/3/12 which was not honoured by the Respondent.

On those forms the Respondent endorsed ‘Posting Disallowed.’ The Respondent’s reason for refusing to honour Exhibits C,D, E and F is because of the criminal matters instituted against the Appellant. The Respondent based on those criminal matters against the Appellant had unilaterally placed a restriction and caution on all the accounts of the Appellant with the Respondent. This is the reason for the restriction on the Appellant’s accounts. The Respondent never obtained any Court order to do that but went on unilaterally to place the restriction on the accounts of the Appellant.

Is this a legitimate action which the law allows and permit? I generally do not think so. No person or institution has power unilaterally to place a restriction on the account of a customer. No law allows for such act or action. In a civilized society people abide by the law and consequences are suffered for the violation of the law. This Court has condemned unilateral action of freezing customers account without a Court order in the case of in GT Bank vs.

Adedamola & Ors. (2019) LPELR-47310 (CA) where Abubakar, JCA, (as he then was) categorically stated that the EFCC under Section 34 of the EFCC Act has no powers to instruct a bank to freeze the account of a customer without obtaining a Court order. This is what his Lordship said: “Let me go back to the thin issue to resolve in this appeal.

The compressed facts constituting basis for placing restriction on the Account of the 1st Respondent by the Appellant was following an instruction from the Economic and Financial Crimes Commissions. In fact, the 1st Respondent said so expressly in his affidavit and the statement in support of the application. At paragraph 20 of the affidavit, the Applicant/1st Respondent said as follows. That the order frozen my Bank account was done as a result of crime allegedly committed by another person which I am not privy to.

To be Continued in the next edition…