The dispute arose when the Benin Chief Magistrate Court granted the police an order to inspect and copy the ledger of DKN Investment Ltd’s account with First Bank of Nigeria (FBN) as part of an investigation into alleged kidnapping threats and fraud. However, FBN went beyond the court’s directive by freezing the account entirely, citing a police directive.

DKN Investment Ltd, unable to access its funds for 90 days, sued FBN for breach of contract and sought damages. The trial court ruled in favor of DKN, awarding ₦10 million in general damages. FBN appealed, arguing that the freezing was justified by the magistrate’s order and police instructions. The Court of Appeal dismissed the appeal, reinforcing strict limits on account freezes.

Key Legal Principles

1. Banks Cannot Freeze Accounts Without Clear Judicial Authorisation

The Court of Appeal emphatically rejected FBN’s argument that the magistrate’s order implicitly permitted freezing the account. The order (Exhibit G) explicitly authorised only inspection and copying of records not a freeze. The court held that banks lack unilateral power to freeze accounts without a specific court order. The police, too, cannot mandate such action without judicial backing. This principle safeguards customers from arbitrary financial lockdowns and upholds the rule of law.

2. The Banker-Customer Relationship is Contractual and Sacred

The court reiterated that a bank’s refusal to honor a customer’s valid cheque, especially where funds are available, constitutes a breach of contract. The judgment emphasised that banks must operate within the bounds of their contractual and statutory duties. Freezing an account without legal justification disrupts commerce and undermines trust in the banking system.

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3. General Damages: Compensation for Invisible Harm

The court upheld the ₦10 million general damages award, stressing that such damages compensate for intangible losses like reputational harm and operational disruption. Unlike special damages, general damages need not be meticulously proven, they are presumed to flow naturally from the wrongful act. The appellate court deferred to the trial judge’s discretion, noting that the 90-day freeze and dishonored cheques justified the award.

4. Documentary Evidence Speaks for Itself

The court dismissed FBN’s attempts to reinterpret Exhibit G, affirming the principle that documents must be construed by their plain terms. The magistrate’s order was unambiguous, and FBN’s deviation from its text was indefensible.

Conclusion

The case is a cautionary tale, banks and police must tread carefully when restricting account access, ensuring strict adherence to judicial mandates. For customers, it reaffirms that the law protects their funds from capricious lockdowns. In an era of increasing financial surveillance, this ruling is a timely reminder that due process cannot be sidelined.

The Court of Appeal’s dismissal of FBN’s appeal sends a clear message, in the balance between security and liberty, the scales tilt firmly toward the rule of law