POST NO DEBIT DIRECTIVE: LEGAL DUTIES AND LIABILITIES OF BANKS.

-Omobolaji O. Oyeniran [Miss] Esq (Associate Counsel)

A Post-No debit (PND) is usually issued on a bank account for several reasons; when a customer’s account has been hacked, or they lose their ATM card, they can rush to the bank to get a post no debit on the account. Post No debit Order/ directives are also issued by government agencies like the Economic Financial Crimes Commission and the Central Bank of Nigeria. This article expounds the nature of  post- no debit vis a vis the effect of  a placing PND directive on an account; the  duties and liabilities of Banks  where such directives are issued. The article concludes with recommendations for bankers to avert several lawsuits.

NATURE OF POST NO DEBIT

Simply put, Post no debit means a block on a bank account to prevent any form of withdrawal- such as ATM, Debit Cards, cheques, Over-the-Counter(OTCs)- from such an account.  

Post no debit is usually done when customers lose access to their bank accounts details, either through hacking or loss of ATM card, whenever this happens, the customer can inform their bank to place a post no debit on their bank account. The effect of this is that a customer’s access to withdraw from such an account is restricted, however deposits are allowed into the account. The reason for the latter in the banking industry is to ensure that commercial activities are not stalled due to the PNB placement on such accounts.

WHO CAN POST A PND?

Asides the reasons mentioned above, some government agencies like the EFCC, CBN, SEC, AMCON are empowered to direct any bank to place a post no debit on a customer’s account provided some condition precedents are fulfilled (I.e obtaining a Court order). For instance, Section 34 (1) of the EFCC Act empowers the Commission to direct a bank to place a PND on the account of a customer where there is suspicion of financial fraud, provided that it has the fiat of the Court to do so . The section provides as follows: 

“34 (1) Notwithstanding anything contained in any other enactment or law, the Chairman of the Commission or any officer authorised by him may, if satisfied that the money in the account of a person is made through the commission of an offence under this Act and or any of the enactments specified under Section 7 (2) (a)- (f) of this Act, apply to the Court ex-parte for power to issue an order as specified in Form B of the Schedule to this Act, addressed to the manager of the bank or any person in control of the financial institution or designated non-financial institution where the account is or believed by him to be or the head office of the bank, other financial institution or designated non-financial institution to freeze the account.”

This means the EFCC is expected to have obtained a Court order granted ex parte, to effectively direct a bank to place a PND on a customer’s account. 

Similar provisions are contained in the Banks and Other Financial Institution (BOFI) Act. Section 60B of the Act empowers the CBN to direct a bank to place a PND on a Customer’s account 

“where the Governor has reason to believe transactions undertaken in any bank account with any licensed bank as such as may involve the commission of any criminal offence…he may make an ex parte application, for an order of the Federal High Court… and on obtaining such Court Order direct…the Manager of the bank where the account is situated… to freeze forthwith all transactions.”

LEGAL EFFECT OF NOT OBTAINING A COURT ORDER

Failure of these agencies to obtain a Court order before freezing the account of a customer renders such action unlawful. This is the position in the case of Megawealth Ltd Vs SEC (2017) 13 NWLR (Pt. 1583) 345 in which the Securities and Exchange Commission(SEC) failed to secure a court order before freezing the account of the appellant, the Court held that such failure makes the freezing unlawful:

 “The Securities and Exchange Commission must seek judicial order to freeze the account of any person whose assets were derived from the violation of the Act. In the instant case, the respondent did not obtain judicial order before Freezing the appellant’s account. In the circumstance, the action was declared unlawful.” (Pp.378 paras D-E; 380, paras. A-C) 

Apart from being unlawful, freezing of Customer’s account without an order of Court also constitute a violation of the Customer’s right. In the case of GTB Plc Vs Mr Akinsiku Adedamola (2019) 5 NWLR (Pt. 1664) 30 the Court of Appeal held;

“Where there is allegation of commission of crime against a customer of a Bank in relation to the funds in his account, the Commission is empowered by law to set in motion the process of investigating any such funds perceived to be derived from proceeds of crime. In conducting the investigation, the commission is required to observe due process and satisfy the requirements of the law. The Commission or its officers must go to court and obtain an ex parte order before Freezing the account, any failure to follow due process will render the action taken by the Commission a violation of the rights of the customer. (P. 41, paras. F-G)”

Tijani Abubakar JCA emphasized this point in the case of GTB Vs Adedamola where the Honorable justice stated that; 

“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. ..the Judiciary has an onerous duty of preserving and protecting the rule of law…Whenever there is brazen violation of the rights of a citizen, the Courts in the discharge of their responsibility to the society, must speak, frown and condemn arrogant display of power by an arm of government.” pg. 43 par. E-F

The essence of this is to protect the right of the customer from being violated.

DUTIES OF BANKERS IN PLACING PND ON CUSTOMER’S ACCOUNT.

  1. DUTY OF CARE.

As much as some government agencies are empowered to direct the placement of PND on a customer’s account, it is clear, from the above, that such a directive must be accompanied by a Court order directing such banks to place the PND. However, there are instances where banks are simply directed to place the PND without an accompanying court order, and due to fear of disobeying constituted authorities these banks go ahead to freeze their customers’ accounts. The court has emphasized that there is a duty on Bankers themselves to ensure that a Court order is first had and obtained before freezing their customer’s account. This requirement has been given judicial flavor in plethora cases. In GTB Plc Vs Mr Akinsiku Adedamola (2019) 5 NWLR (Pt. 1664) 30 where the respondent bank, while acting under the directives of the EFCC, placed a PND on the account of the appellant without an accompanying court order,  the Court of Appeal,  per Hon. Justice Tijani Abubakar held that;

“Before freezing a customer’s account or placing any form of restraint on any bank account, the bank must be satisfied that there is an order of Court.”pg 43 par. E

Generally, a banker can only deal with a customer’s bank account to the extent of the express or implied authority given it by such a customer.  However the law recognizes certain exceptions which include acts done in the ordinary cause of business and acts required by law. For the latter to be activated, a court order must be secured . Therefore a Banker owes its customer a duty of care to protect the customer’s property, that is under its care from being violated by a third party, even from statutory jingoisms. 

Most times, Bankers argue that they only acted as agents of the particular authority that gave the PND directives, and usually seek to join the agencies as parties to suit. The Court has held that, while acting as agents of the issuing agency, the Banks also have a duty of care  towards their customer to ensure that the duty is not breached except where the iron hand of the law demands, and where it does, they must do so with due process. In the words of Tijani Abubakar J.C.A in GTB PLC Vs Adedamola,

“Our financial institutions must not be complacent, reticent, and toothless in the face of brazen and reckless violence to the rights of their customers.” Pg 43 par. F

In Adetokunbo Odutola Vs Diamond Bank Plc suit No. LD/ADR/800/17 (unreported)  the Court held that the Defendant Bank owes a duty of care to the Claimant/Customer and was therefore liable for the injury that arose from freezing the Claimant’s account. 

  1. DUTY OF DUE DILIGENCE.

Apart from ensuring that the PND directive is accompanied by a court order, there is need for a banker to take due diligence in ascertaining that the PND placed on the bank account does not exceed the duration of the order. In other words, the PND can only subsists within the number of days the court order subsists. Upon the expiration of the Court order, the bank is expected to either apply for renewal of the court order, or remove the PND placed on the account. In UMEZULIKE vs. CHAIRMAN , EFCC (2017) LPELR (43454) 1, the court held that;

“However, I need to state that by the terms of the order, the order made on 23/2/17 should have automatically lapsed after 60 days on 23/4/17. As the ruling at the lower Court was given on 2/6/17, the order had abated and no longer existed. The records do not reveal that any other subsequent order was sought for nor obtained. In effect, there is no existing lawful order of the Court freezing the account of the appellant as at now.” Per HELEN MORONKEJI OGUNWUMIJU ,J.C.A ( Pp. 11-27, para. B )

Therefore, unless a court order is renewed, a banker is expected to unfreeze the account of the customer.

LIABILITIES OF BANKERS

  1. BREACH OF TRUST

Since a banker has a duty of care towards its customer to ensure that before any action is taken contrary to the authority given it by the customer, the banker must obtain a Court order, failure to do this amounts breach of that duty of care. Interestingly, the Nigerian Courts have granted some  aggrieved customers  damages against their banks for breaching the duty and  the court will be glad to do so in a bid to enforce the rule of law and by following the infallible doctrine of stare decisis. 

In Adetokunbo Odutola Vs Diamond Bank Plc suit No. LD/ADR/800/17 (unreported)  the Court held that the Defendant Bank failed in its duty of care to the Claimant/Customer and was therefore liable for the injury that arose from freezing the Claimant’s account. The court further awarded the sum of 25milliom naira as damages for unlawfully freezing the Claimant’s bank account. 

  1. TORT OF DEFAMATION

Bankers can be liable in tort for defamation to their customers whenever they freeze their customers’ account is regardless of whether or not the freezing is published to the whole world or in the press that the customer was fraudulent. In Royal Pet. Co. Ltd Vs F.B.N Ltd (1997) 6 NWLR (Pt. 510) 584 

“The tort of defamation is committed when a customer’s account is frozen regardless of whether or not the Freezing is actually published to the whole world or in the press that the customer was fraudulent. [Allied Bank (Nig.) Ltd. v. Akubueze (1995) 4 NWLR (Pt. 390) 493 at 508 referred to.” (P. 599, para. H)        

The effect of this failure is that banks are bombarded with cases from aggrieved clients, and in most cases, they are found liable for breach of care. Consequently, several amounts are awarded as damages in favor of the customer. Many banks have lost a few millions in suits of this nature. The ripple effect is a drop in the profit margin of such banks which in turn affects the remuneration or job security of their employees as well as their Corporate Social Responsibility (CSR) to the public. 

Apart from the effect on the profit margin of a bank, recurrent failure stimulates the institution of legal suits in Courts on the issue. The Nigerian courts are known to be plagued with backlogs of cases, both relevant and frivolous, where banks fail to put their houses in order, their actions would be a catalyst to bringing in  more suits before the already overburdened courts, suits that could be avoided.

More so, the negligence of bankers on placing PNDs without due process has caused a lot of customers their source of livelihood. Such actions at times ruin business empires built over the years due to the fact that the customer is suddenly rendered financially handicapped which prevents them from meeting up with business obligations both nationally and internationally. Some even become objects of law suits for issuing DUD-Cheque to several clients, while some have to sell valuable properties at lower prices just to fulfill their financial obligations and not be submerged in the unforeseen circumstance thrust on them by their bankers.

RECOMMENDATIONS 

The issue in discourse being a fundamental one cutting through different facets of the society and affecting many stakeholders, there is need for the main players, especially the banker and the customer to actively play some roles so as to reduce, if not possible to forestall, casualties. Hence, it is recommended as follows:

  1. All Bankers should send circular to all their branches educating them on PND directives and the importance of obtaining court orders before placing a customer’s account on PND.
  2.  To effectively supervise the execution of the circular,  the Legal Unit in the Banks and/or other Financial Institutions (OFIs)  should ensure that any PND directive sent to them is scrutinized and well profiled to ascertain whether such directive has a court order attached to it, and where none is attached, to obtain one immediately. Furthermore, the Legal Unit should ensure the PND placement on the account does not exceed the duration of the court order, and upon the expiration of such order, apply for renewal of  the Order or unfreeze the customer’s account (s).
  3. Placement of PND on customer’s account should be done with utmost discretion to prevent customers from withdrawing all the monies that are sought to be frozen. Where no discretion is displayed, Bankers may have to be answerable to the agency that issued the directives.
  4. Compliance strategies should be put in place by Banks to ensure that no members of staff do not run afoul of the Bank’s policy on confidentiality by divulging the news of an impending PND placement to a customer. Also, measures are to be put in place to ensure that the Legal Unit efficiently supervises the execution of placement of PNDs in line with legal requirements.
  5. In order to prevent gross financial catastrophe, a customer whose account is frozen  should approach the court for variance or vacation of the court order. This, of course, would be better done with the help of a legal practitioner.

In conclusion, all parties have a role to play. A duty on the Banker’s part, is a corresponding right on the customer’s part. Both parties, apart from being objects of statutory biddings and judicial pronouncements,  are also key players in a contract that is statutorily  flavored, thus the need for each one of them not to breach the other’s trust, except as required by due process of the law. Therefore, it is imperative for bankers to ensure that anytime they are directed by the EFCC or CBN or any other government agencies to place a PND on a customer’s’ account, such should be accompanied by a court order, and where a Court order is not attached to the directive, the Bank must take further steps to obtain one before doing so. Failure to do this amount to violation of the Customer’s right, and the act of freezing is unlawful.

About the Author

Omoboolaji Oyeniran (Miss) is an Associate at the firm of Path Solicitors.

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