KUDA MICROFINANCE BANK LTD V. MRS. AMARACHI KENNETH BLESSING (2024) LPELR-80643 (CA).
FACTS
The respondent as plaintiff is a customer to the defendant/appellant. One day when the plaintiff wanted to withdraw some money into her account, she discovered that the defendant had placed restriction on the said account. The defendant claimed that it had been notified by Access bank PLC that the sum of N5,000,000.00 (Five Million Naira) had been erroneously credited into the Plaintiffs account with Access Bank PLC. Pursuant to this notice which was in accordance with relevant CBN Regulations, the defendant had placed the restriction on the plaintiffs account. Consequently, the plaintiff instituted an action at the Federal High Court Ekiti Judicial Division seeking among other reliefs,
- A declaration that the freezing of her account without a court order is illegal, null and void.
- A declaration that the freezing of her account without a court order is a violation of her right to own property as guaranteed in Section 44 of the Constitution of the Federal Republic of Nigeria, 1999 (As Amended).
- An order of the court unfreezing her account and giving her unfettered access to her account.
The trial court after considering the plaintiffs claim, held that the restriction/freezing of her account without obtaining a court order was illegal, null and void; and ordered for her account to be unrestricted. Dissatisfied with the judgement of the trial court, the defendant/appellant filed an appeal.
LEGAL ISSUE
Whether the provisions of CBN guidelines issued on June 11, 2015, and September 13, 2018 and the terms and conditions contained in the account opening form executed by the respondent empowers a bank to restrict a customer’s account without first obtaining a court order.
The appellant argued that it is a microfinance bank, fully licensed by the CBN with its operation being limited to providing its total banking services through its online platform and that the terms and conditions agreed to by both parties; as well as CBN Regulation issued to banks allowed it to place a restriction on the respondents account where there is a suspicion of fraud or illegal activity on the account.
DECISION
The Court of Appeal after considering the terms of the contractual agreement the respondent executed when she opened the account, held that by agreeing to the bank’s terms and conditions, the respondent had contractually consented to the possibility of her account being restricted in cases of suspected fraud.
The court recognized that the appellant (Kuda Bank) had included in their Terms and Conditions, a clause to the effect that; “We reserve the right to close, suspend, freeze, or limit access to your account if- (e) there is a report of, or our investigation reveals that you have engaged in fraudulent or suspicious activity with your Kuda account”. As such they had the right to restrict the respondents account on the occurrence of any of the conditions stipulated in the terms and conditions.
The court further stated that the CBN guidelines made pursuant to the CBN Act and the Banks and Other Financial Institutions Act (BOFIA) 2020, empower banks to block or place a Post No Debit (PND) restriction on an account upon receiving a complaint of fraud.
Furthermore, the Court held that Section 44 of the CFRN 1999, which protects the right to property, is not absolute and can be temporarily deviated from in the course of an investigation without rendering such action unconstitutional. The Court acknowledged that the need to prevent financial crimes and protect the integrity of the banking system sometimes requires urgent intervention, particularly when dealing with suspected fraudulent transactions. It noted that in a modern financial landscape where billions of naira are moved electronically every day, it would be impractical and unreasonable to require banks to always obtain a court order before restricting an account, especially in cases where there is a credible allegation of fraud.
One of the grounds on which the trial court had ruled in favor of the respondent had been that the restriction was placed without a court order. In upholding the plaintiff/respondents claim, the Federal High Court had relied on the locus classicos’ case of GTB V Adedamola. The appellate Court recognized that although in Ademola’s case, it had ruled that a bank cannot freeze a customer’s account solely based on the directive of the EFCC without first obtaining a Court order, as such restriction would amount to a violation of the customers rights, as EFCC directives alone do not have the force of law without judicial authorization. However, the decision in Ademola’s case, cannot apply to the instant case. This is because, in the instant case, the restriction was not at the direction of EFCC but at the direction of another bank (Access Bank). The Court held that for a case to serve as a precedent, it had to be on all fours with the case under consideration, and in this case, the precedent (GTB v. Ademola) would not apply given that EFCC was not a party to the case.
The Court particularly considered the nature of Kuda Bank as a fully digital bank, operating without physical branches, which means that all transactions take place electronically and at a much faster pace compared to traditional banks. In such a system, any delay in responding to a fraud complaint could result in substantial financial losses, making it essential for banks to have the authority to act swiftly when necessary.
The appellate court allowed the appeal and set aside the decision of the Federal High Court Ekiti Judicial Division. In its place, the court recognized that a bank can without obtaining a court order, restrict the account of its customers in cases of fraud.
