KUDA MICROFINANCE BANK LIMITED V. MRS. AMARACHI KENNETH BLESSING (2024) LPELR-80643(CA)

Case Title: Kuda Microfinance Bank Ltd v. Amarachi Kenneth Blessing

Citation: (2024) LPELR-80643(CA)

Court: Court of Appeal, Ekiti Division

Date of Judgement: December 27, 2024.

Parties: 

KUDA MICROFINANCE BANK LIMITED (APPELLANT): Kuda Bank is a Nigerian Microfinance Bank operating digitally and offering full banking services through its mobile application. It is under the regulatory and legal framework of relevant financial institutions and laws in Nigeria.

MRS. AMARACHI KENNETH BLESSING (RESPONDENT): a private citizen and customer of Kuda Bank having an account domiciled with Kuda Bank.

Brief Statement of Facts

The Respondent as Plaintiff is a customer to the defendant/appellant and until one day when the Plaintiff who wanted to withdraw some money into her account discovered that the defendant had placed restriction on the said account. The defendant contended that a notification from Access Bank Plc was received in accordance with CBN Regulation informing the defendant that the Plaintiff was erroneously credited with the sum of N5,000,000.00 into her account maintained with the defendant. As a result of the restriction placed on her account with the defendant, the Plaintiff was aggrieved and instituted an action by way of an originating summons seeking for the determination of the following questions:

• Whether the defendant has the power to freeze the account of the plaintiff without obtaining court order from a court of competent jurisdiction?
• Whether on the construction of section 44 of the Constitution of the Federal Republic of Nigeria 1999 (as amended) and without obtaining court order, the defendant has not infringed on the plaintiff’s right to property?
• Whether on the basis of a purported complaint and without any court order, the defendant has the legal right to freeze the plaintiff’s bank account and deny plaintiff access to her fund?

The trial court in its considered judgement resolved issues 1 and 3 in the affirmative and granted reliefs accordingly in favour of the plaintiff, refusing specific reliefs. Dissatisfied with the judgement of the trial court, on 7th May, 2024, the defendant filed a notice of appeal challenging the decision of the trial court.

Issues for Determination

The appellant formulated two issues for determination:

• Whether the lower court did not come to a perverse decision when it found in favour of the respondent and granted the reliefs sought in the case?
• Whether the lower court did not reach a perverse decision when it exercised its jurisdiction over the matter and held that Access Bank Plc was not a necessary party to the suit?

The respondent formulated two issues for determination:

• Whether the appellant can safely rely on the relevant Central Bank of Nigeria (CBN) Regulations and Terms and Conditions with the respondent to freeze the respondent’s account in the circumstances of this case?
• Whether failure to join Access Bank Plc as a party violates the lower court’s jurisdiction to determine the matter?

Arguments by Kuda MFB and Amarachi Kenneth Blessing

Learned counsel for the appellant argued on issue one, that as a bank, the appellant has a modus operandi and the respondent has agreed to the terms and conditions before opening an account with the appellant. He argued the bindingness of the terms and conditions an exercise of which cannot amount to a breach of a party’s fundamental right. Citing the case of Nwaribe v. Owerri Municipal Council & Ors (2015) LPELR-24433, learned council argued that terms and conditions properly incorporated into a contract are enforceable. Drawing on the terms and conditions, the appellant can place a restriction on an account pursuant to the conditions therein and the trial court ought to interpret those terms and conditions literally (Citi Bank (Nig) Ltd v. Ikediashi (2020) 13 NWLR (Pt. 1741) 337). Learned counsel also based his argument on the CBN Regulation on which the appellant placed reliance, empowering them to block or place ‘No Debit’ restriction on accounts upon receipt of fraud complaint.

Learned counsel for the appellant argued on the second issue, that the trial court erred in law by holding that Access Bank Plc is only a desirable party and not a necessary party to the suit. He argues that Access Bank Plc initiated the whole restriction of the respondent’s account and that makes Access Bank Plc a necessary party to the suit. He cited the case of Panalpina World Transport Ltd v. J.B. Olandeen International & Ors (2010) 19 NWLR (Pt. 1226) in arguing that a court should order a joinder of a party whose presence is necessary for the effectual and complete adjudication of all questions arising for determination.

Learned counsel for the respondent argued issue one, that the CBN Regulation and the Terms and Conditions relied on by the appellant does not give the appellant the right freeze the respondent’s account. He argued that Access Bank Plc merely lodged a complaint to the appellant against an erroneous transfer made to the respondent’s account, and in no way, made a claim of fraudulent activity against the respondent. He further argued that the regulations made pursuant to the CBN Act has the status of law and where the law makes provisions for the mode of doing a thing, another mode cannot be applied, citing the case of Yakubu & Anor v. Umenuadi & Anor (2020) LPELR-49958. The learned counsel argued that even where the terms and conditions stipulate issue of erroneous transaction, the CBN Regulation supersedes such terms and conditions.

On the second issue, learned counsel for the respondent argued that Access Bank Plc is neither a proper or a necessary party to the case as the matter can be safely determined without joining the bank, and as no cause of action against the Access Bank was disclosed by the respondent. He cited the case of NBA v. Kehinde (2017) 11 NWLR (Pt.1576) 225.

Court’s Decision

Allowing the appeal, the court held that the trial court erred in law when it held in favour of the respondent, that the freezing of the respondent’s account without a court order infringed on her right to property encapsulated in section 44 of the Constitution. The court ruled that a bank may freeze a customer’s account without a court order if fraud or suspicious activity is reported and the customer has agreed to such terms.

Ratio Decidendi

The court reached its decision chiefly based on the principle of sanctity of contract – the bindingness of contractual terms. In reaching its decision, the court paid regard to the CBN Regulation and the Terms and Conditions of Kuda Bank and its customers. The court based its decision on the principle of contract by which parties are bound by the agreements they freely and willingly sign into. The court would take no liberty to save a party from reasonable terms and conditions freely and willingly signed, and by virtue of consent, agreements made must kept.

The court reasoned that Section 44 of the Constitution is not absolute and can be temporarily deviated from in the course of an investigation without rendering such action unconstitutional, and in the circumstances of the case, freezing a customer’s account pursuant to the CBN Regulation is a reasonable restriction to the right to own property. 

The court also found its decision on the reasoning of regulatory backing. The CBN guidelines issued on June 11, 2015, and September 13, 2018, 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 fraud complaint. This represents an institutional approach towards preventing and addressing fraud in the financial sector. 

Conclusion

Kuda Microfinance Bank Ltd v. Amarachi Kenneth Blessing is a landmark case that seems to lay to rest the lingering debate on the right of banks to freeze customers’ account in Nigeria. The Court of Appeal overturned the Federal High Court’s decision, finding that the lower court had wrongly ignored the parties’ contract and relevant CBN regulations. The court held that Kuda’s Terms and Conditions, along with CBN instruments, lawfully empowered the bank to restrict the Respondent’s account without a court order in cases of suspicious inflows.

The decision of the court in the case is a representation of the court’s attitude towards agreements made by parties. The courts have tended to honour the terms and conditions of agreements made by consenting parties, and resorts to the bindingness of such terms in the event of a breach or legal action. The Court of Appeal’s decision reflects a more wholistic approach and analysis of the facts of the case, critically examining the import and implications of the CBN Regulation on banks and their customers.

The judgment offers clarity on the extent of banks’ powers in situations as the circumstances of this case, while establishing an important precedent for digital banking operations in Nigeria. Given the increasing reliance on electronic transactions and the rapid growth of digital banks like Kuda Bank, it is crucial to have legal frameworks that enable banks to respond swiftly to fraud while ensuring that customers have appropriate channels for redress.

This judgement reflects the role of the law towards strengthening institutional firewalls to prevent crime, and implement financial security laws.