CAN A BANK OBEY THE ECONOMIC AND FINANCIAL CRIMES COMMISSION’S (EFCC) DIRECTIVE TO FREEZE THE ACCOUNT OF A CUSTOMER WITHOUT A VALID COURT ORDER?

CASE TITLE:                         GUARANTY TRUST BANK PLC v. ODEYEMI OLUYINKA JOSHUA (2021) LPELR 53173(CA)

JUDGMENT DATE:           26TH FEBRUARY, 2021

JUSTICES:                            OYEBISI FOLAYEMI OMOLEYE, JCA

                                           JAMES SHEHU ABIRIYI, JCA

                                           FREDERICK OZIAKPONO OHO, JCA

COURT DIVISION:            LAGOS

PRACTICE AREA:              Banking Law- Banking Business

The Respondent who was a customer of the Appellant Bank (Guaranty Trust Bank) contended that his account with the Appellant was frozen by the Appellant without his knowledge or consent. That the Appellant placed his account under caution and deactivated his ATM card pursuant to a letter dated 13th February, 2017 from the Economic and Financial Crimes Commission (EFCC) without any valid Court order permitting either the EFCC or the Appellant to do same. All efforts by the Respondent to get the Appellant unfreeze the account yielded no fruit.

The Respondent subsequently initiated an action against the Appellant Bank in the High Court of Lagos State wherein he sought for: a declaration that the freezing of his account without a Court Order is illegal; an order directing the Appellant Bank to unfreeze his account, an order of perpetual injunction restraining the Appellant Bank from further freezing his account; general damages and costs of the action.

Both parties agreed that the matter should be determined by the Special Case Procedure under Order 31 of the High Court of Lagos State (Civil Procedure) Rules 2019 without the calling of witnesses although Counsel for both parties filed and exchanged written addresses.

In its considered judgment, the trial Court entered judgment in favor of the Respondent and granted the reliefs sought by him

Aggrieved, the Appellant appealed to the Court of Appeal.

ISSUES

The appeal was determined upon consideration of the following issues:

I. Whether Sections 34 (2 & 3) and 38 of the Economic and Financial Crimes Commission (Establishment) Act 2004, impose any other obligation on the Respondent beyond strictly complying unconditionally with the order/directives of the Economic and Financial Crimes Commission (EFCC) served on it in respect of a Customer’s account?

ii. Whether the doctrine of privity of contract was among the issues submitted to the Court below in the Special Case, and if not, whether the Court below was right in raising the issue, and relying on the doctrine in finding the Appellant liable to the Respondent, without calling on the Appellant to address the Court on same

iii. Whether the matter determined under the Special Case Procedure where trial was not conducted, the Court below is entitled to presume and/or speculate on the existence of an UNPLEADED fact (that EFCC did not obtain a Court Order before issuing the Appellant a directive to freeze the Respondent’s account), and to rely on such unpleaded fact in giving judgment to the Respondent.

iv. Whether the Court below should set aside the award of damages made by the Court below in favor of the Respondent in view of the errors in law made by the Court below in arriving at its findings.

COUNSEL SUBMISSION

Learned Counsel for the Appellant Bank submitted that the trial Court did not interpret Section 34 (3) of the EFCC Act in arriving at its conclusion that the Appellant was wrong in freezing the Respondent’s account without an order of Court. That the wordings of Section 34 (3) of the EFCC Act expressly mandate the Appellant to comply with the directives of the EFCC without having to verify whether EFCC complied with the Act before issuing the directive.

It was submitted that the Section does not require the bank to investigate EFCC’s compliance with the Act before complying with the EFCC’s directive and that the section ought not be interpreted to impose that obligation on the Appellant Bank as that would amount to an interpolation or amendment of the law which the Court must not do. That Section 34 (3) of the EFCC Act does not impose any other obligation on the bank beyond simply complying with the EFCC directive.

Learned counsel for the Appellant submitted that even though it is desirable that banks be satisfied that the EFCC has complied with the Act on the issuance of any directive before proceeding to obey the directives, that there is a lacuna in the Law relating to whether the banks must ascertain the validity of the directive issued.

On the other hand, Learned Counsel for the Respondent contended that the Appellant breached the contract agreement and fiduciary relationship between it and the Respondent by freezing the Respondent’s account without following the due process of the law thereby denying the Respondent his legitimate and hard-earned funds. That the EFCC Act provides for a procedure that must be followed by EFCC in directing a bank to freeze a customer’s account where there is suspicion of crime against a customer, When the law provides through an Act, a procedure to be followed in carrying out any duty, anything done in respect to that which negates the provisions of the law runs afoul of the law and is therefore an illegality.

By virtue of this, the Appellant’s action of freezing the Respondent’s account without recourse to the guideline provided by the law in Section 34 (1) of the EFCC Act is illegal. That while there is nothing that preludes a bank from verifying from EFCC whether a Court order was obtained, Section 34 (3) of the EFCC Act only applies where Section 34(1) and (2) of the Act has been complied with.

Furthermore, that the Appellant had an obligation to investigate if EFCC complied with the Act since it owed a duty of care to the Respondent.

DECISION/HELD:

In the final analysis, the Court of Appeal dismissed the appeal and the judgment of the trial High Court was affirmed.

RATIOS

1. BANKING LAW- BANKING BUSINESS: Whether a bank must obey a directive from the Economic and Financial Crimes Commission to freeze the account of a customer without a Court order –

“…In G.T.B. PLC v. Adedamola (2019) 5 NWLR (pt. 1664) 30 at 43 this Court stated as follows: Before freezing customer’s account or placing any form of restrain on any bank account, the bank must be satisfied that there is an order of Court. By the provisions of Section 34(1) of the Economic and Financial Crimes Commission Act 2004, the Economic and Financial Crimes Commission has no power to give direct instructions to banks to freeze the account of a customer without an order of Court, so doing constitutes a flagrant disregard and violation of the rights of a customer… Our financial institutions must not be complacent, reticent and toothless in the face of brazen and reckless violence to the rights of their customers… It is clear from a reading of the entire Section 34 of the EFCC Act that the Commission if satisfied that money in the account of any person is made through the commission of an offence may apply to the Court ex-parte for the power to freeze the account. The EFCC may by an order issued by the Court direct the freezing of the account. The bank shall then take necessary steps to comply with the requirements of the order. “Order” rings a loud bell in both Subsections (2) and (3) of the said Section 34 of the EFCC Act. This is not surprising because the freezing of the account of a person will be done if the money is reasonably subjected by the Court to have been made through the commission of an offence. It is then that the Court makes the order sought by the EFCC. Without that order the EFCC cannot direct the freezing of the account of any person. Without the order the bank or any financial institution cannot freeze the account of any person. The order of the Court is the basis for any other action under the section as allegation that money is made through the commission of an offence is a serious allegation. It is for this reason that the bank must ensure that there is an order of Court before it proceeds to freeze the account of any person. That is what Section 34(3) means by the bank taking necessary steps to comply with the order. In my view, a bank fails to enquire whether or not EFCC had obtained an order of Court at its peril. I agree with learned counsel for the Respondent that the procedure set out in Section 34 of the EFCC Act must be followed by the EFCC and the bank or other financial institution.” Per ABIRIYI, J.C.A

• BANKING LAW- BANKING BUSINESS: Effect where a bank freezes the account of a customer without a Court order

“I do not agree with learned counsel for the Appellant that the Appellant was being punished for the sin of EFCC and that the Act did not give the Appellant the option of disobeying EFCC. With respect to learned counsel for the Appellant, the Appellant had no business obeying an unlawful directive of the EFCC. The Appellant is only expected to comply with a lawful directive of the EFCC otherwise the rights of customers to their money in the bank would be arbitrarily interfered with. This would be contrary to the safeguards provided for under Section 34 of the EFCC Act. Section 34 of the EFCC Act is intended to prevent the EFCC from interfering arbitrarily with the rights of customers of the banks or other financial institutions to their funds. That purpose will not be achieved if the banks aid the EFCC as in this matter to illegally get their customers’ accounts frozen through the back door. I agree entirely with learned counsel for the Respondent that the Respondent was entitled to damages for failure of the Appellant to ensure that the provisions of the EFCC Act were complied with before freezing the Respondent’s account. I agree with learned counsel for the Respondent that if the Appellant kept the EFCC company in its breach of the law, the Appellant cannot escape liability for the illegal freezing of the account of the Respondent.” Per ABIRIYI, J.C.A