The Court of Appeal has held that a bank which freezes a customer’s account on the directive of a law enforcement agency, without first verifying that the directive is backed by an order of court, may be held jointly and severally liable with the agency for the resulting violation of the customer’s fundamental rights.
The court so held in NPG Event, Gardens & Parks Ltd v. Zenith Bank Plc, decided by a panel comprising Bola, Kwahar and Onwosi, JJ.CA.
FACTS
The appellant, NPG Event, Gardens & Parks Limited, maintained a bank account with Zenith Bank Plc, the respondent. A Post No Debit restriction was placed on the account for a period of six months, following a directive said to have been issued by the Economic and Financial Crimes Commission. As a result, the appellant was unable to operate the account or access the funds in it.
The appellant commenced proceedings at the Federal High Court, seeking declarations that the restriction placed on its account without a valid court order was unlawful, unconstitutional, null and void. It also sought an order directing the respondent to lift the restriction and restore access to the account, a perpetual injunction restraining further interference with the operation of the account, and general damages of N100,000,000.
The Federal High Court dismissed the claims, holding that the restriction was valid as it was done pursuant to the directive issued by the Commission in the course of investigating the appellant. The court further held that the Commission had statutory investigative powers and that the respondent could comply with the directive pending the conclusion of the investigation.
Dissatisfied, the appellant appealed. One of the issues raised for determination was whether the respondent breached the appellant’s fundamental right by placing a Post No Debit on its account without following due process.
ARGUMENT
For the appellant, counsel argued that as the financial institution entrusted with the account, the respondent owed a duty to ensure that any instruction to restrict an account was supported by lawful authority. Being a regulated financial institution, it was expected to understand the legal incidents of the banker and customer relationship and the protection accorded to a customer’s property.
Accordingly, where a directive from a law enforcement agency substantially interfered with the customer’s access to funds, the respondent was required to satisfy itself that the directive was backed by the requisite judicial authority.
Counsel further submitted that the existence of an investigation did not deprive the appellant of its proprietary rights or entitle the respondent to restrict access to the account indefinitely. The respondent could not rely merely on the fact that the directive emanated from the Commission to justify the restriction, particularly where the law prescribed a specific procedure for interfering with a person’s property, and that procedure had to be strictly followed.
He therefore contended that the respondent could not feign ignorance of the legal requirements governing the restriction of a customer’s account. It was not sufficient for the bank to act mechanically on the directive; it ought to have requested or verified the existence of the requisite court order before placing the account on Post No Debit. Its failure to do so rendered it liable for the consequences of the unlawful restriction, notwithstanding that the directive originated from the Commission.
In response, counsel for the respondent contended that the responsibility for obtaining any requisite court order rested solely with the Commission, while the respondent’s role was limited to complying with the directive issued by the law enforcement agency. He argued that the respondent neither initiated the investigation nor independently exercised any coercive power over the account, but merely acted upon a directive issued by the statutory agency responsible for investigating economic and financial crimes.
Counsel maintained that the respondent was entitled to presume the regularity of the directive and was not required to independently verify whether the agency had complied with the procedural requirements for issuing it. He further argued that if there was any defect in the process by which the restriction was procured, such defect was attributable to the Commission and not to the respondent, and that the proper complaint, if any, should have been directed against the investigative agency that issued the instruction rather than the financial institution that complied with it.
DECISION OF THE COURT
In resolving the issue, the Court of Appeal held that:
A bank is estopped from feigning ignorance of, or claiming that it has no duty or responsibility to ascertain whether, a directive of a law enforcement agency to freeze a customer’s account is made pursuant to an order of court. A bank that nevertheless complies with the instruction of a law enforcement agency to freeze a customer’s account without a court order may be held jointly and severally liable with the agency for the resulting violation of the customer’s fundamental rights.
The Court of Appeal further reaffirmed that no bank or law enforcement agency possesses legal competence, without a valid court order, to close a customer’s account, seize funds, place a lien on the account or otherwise interfere with the customer’s property.
The court held that even where a law enforcement agency exercises its investigative powers to take temporary possession of property, such power must be exercised strictly in accordance with the procedure prescribed by law, as an allegation of crime or the pendency of an investigation does not, without more, stop a person from enjoying his fundamental right to use and enjoy his property.
In the instant case, the Court of Appeal rejected the respondent’s contention and held that it could not escape liability by relying on the Commission’s directive to freeze the appellant’s account without first verifying its validity and satisfying itself that the directive had the requisite legal foundation.
The Court of Appeal consequently awarded general damages of N5,000,000 against the respondent.
Issue resolved in favour of the appellant.
Appearances
Emeka Denis Eze for the respondent.
The summary is fully reported at (2026) 7 CLRN in association with ALP NG & Co.
What it means in law
The decision relocates a risk that banks in Nigeria have long treated as somebody else’s. The industry practice has been to implement a Post No Debit instruction on receipt, on the footing that the requesting agency bears responsibility for its legality and the bank is a mere conduit. The Court of Appeal has now held that the conduit argument is not available. A bank is a regulated institution presumed to know the law governing the banker and customer relationship, and estoppel prevents it from pleading ignorance of a requirement it is taken to understand.
The practical consequence is joint and several liability. A customer whose account has been restricted without judicial authority need not pursue the agency alone, and may proceed against the bank, which is the more accessible defendant and the one holding the funds. That materially changes the incentive structure, because the cost of unlawful restriction now falls in part on the institution best placed to prevent it.
The decision should be read alongside the appellate authority on the powers of the anti-corruption agencies themselves. The Court of Appeal has previously held, in litigation involving the Commission and a state government, that a Post No Debit may be placed for a limited period before an order of court is obtained, and the Supreme Court has confirmed the agencies’ power to investigate accounts across the tiers of government. Nothing in this decision disturbs either proposition. What it addresses is the position of the bank once the permitted window has passed or where no court order exists at all. A six month restriction, as in this case, is far outside any such window.
Three points of practice follow. First, compliance departments will need a documented verification step, requiring sight of the order or of evidence that one has been obtained, and a diary for the expiry of any temporary restriction. Second, the ruling is likely to generate a body of claims from customers whose accounts have been restricted for extended periods, and the modest award of N5 million against a claim of N100 million indicates that damages will be assessed conservatively rather than punitively. Third, the reasoning is grounded in the constitutional protection of property under Section 44 and the enforcement machinery of Chapter IV, which means the appropriate procedure for an aggrieved customer is a fundamental rights application rather than an ordinary civil suit.
The wider principle stated by the court deserves particular attention: an allegation of crime, or the pendency of an investigation, does not by itself suspend a citizen’s right to use and enjoy his property. That is a restatement of the presumption of innocence in proprietary terms, and it is the answer to the practice of indefinite restriction on the strength of an open file.
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