Court awards N5m in damages against Ecobank for account restriction

The Court of Appeal sitting in Owerri has delivered a landmark judgment affirming that Ecobank Nigeria Limited acted unlawfully in restricting a customer’s account without a court order.

It described the bank’s actions as a gross violation of customer rights and a breach of fiduciary duty.

The judgment arose from an appeal filed by Ecobank against a decision of the trial court, which had earlier ruled in favour of the Respondent, its customer, and awarded N10 million in general damages.

Justice Ntong Ntong, who delivered the lead judgment, agreed with the lower court’s findings but reduced the damages to N5 million, deeming the original sum excessive in light of the evidence presented.

In resolving the first issue, Justice Ntong emphasised that no bank has the power to freeze or restrict a customer’s account without a valid court order, regardless of internal policies or compliance procedures such as the Central Bank of Nigeria’s Know Your Customer, KYC, regulations.

The court held that while Ecobank claimed it acted under regulatory obligations after a $65,000 cash deposit raised red flags, it failed to demonstrate that such compliance required unilateral restriction of the account.

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It cited relevant precedents, including FBN v. DKN Investments Ltd and GTB v. Joshua, to reinforce the principle that banking institutions must operate within the confines of the law, warning against the use of internal policies to override constitutional rights.

On the second issue, the appellate court found that Ecobank had no legal or contractual basis to assert a right of lien over $10,000 in the respondent’s account, which was allegedly owed to a foreign trading partner, Unique International Trading Ltd.

The bank had argued that it restricted the funds to protect itself from potential litigation threatened by the trading firm.

However, the court ruled that Ecobank’s reliance on the threat of legal action by a third party could not justify the exercise of any lien, especially in the absence of any contractual agreement or court order to that effect.

“Self-help has no place in the civilized world,” the court warned, rejecting the bank’s justification as “misconceived and untenable in law.”

On the final issue, it affirmed that Ecobank had breached its duty of care by unlawfully restricting access to the customer’s funds and dishonouring cheques.

However, it found no sufficient evidence to support the customer’s claim of lost business and goodwill due to the restriction.

Accordingly, the appellate court reduced the general damages from N10 million to N5 million, emphasising that while there was a breach warranting compensation, the initial sum was excessive.