A joint bank account is an account operated in the names of two or more persons. Joint accounts are commonly used by spouses, business partners, family members and other persons who wish to operate an account together.
A common question is whether a bank can freeze a joint account because of a problem involving only one of the account holders.
Yes, a bank can place a restriction on a joint account in appropriate circumstances. However, the fact that one joint account holder has a dispute, debt or legal problem does not automatically give the bank an unrestricted right to freeze the entire account.
The legality of the restriction depends on the reason for the freeze, the account mandate, the bank’s contractual terms, any applicable regulatory or statutory authority and, where relevant, the existence and scope of a court order.
Nigerian case law also establishes that a bank owes its customers contractual duties and must exercise reasonable care and skill in operating their accounts. In Bernard & Anor v. FCMB Ltd (2022) LCN/16024(CA), the Court of Appeal considered a restriction placed on a business savings joint account and affirmed that an unjustified restriction can constitute a breach of the banker-customer relationship.
What Is a Joint Bank Account?
A joint account is an account opened in the names of two or more persons.
The manner in which the account can be operated is determined by the account mandate.
For example, a joint account can be structured so that:
- either account holder can give instructions independently;
- all account holders must sign before a transaction can be carried out; or
- a specified number of the account holders must authorise a transaction.
The Central Bank of Nigeria’s account-opening framework recognises joint accounts and provides for an account mandate specifying the authority by which the account is to be operated.
The particular mandate governing the account is therefore important when determining the rights of the joint account holders.
Can a Bank Freeze a Joint Account?
Yes.
A bank can restrict a joint account where there is a lawful basis for doing so.
For example, a restriction can arise where:
- there is a valid court order;
- the bank is required to comply with a lawful regulatory or statutory requirement;
- there is a legitimate dispute concerning the ownership or operation of the funds;
- the account is connected with a suspected fraudulent transaction;
- the bank is acting pursuant to a valid contractual right; or
- circumstances surrounding the account require the bank to suspend transactions pending clarification.
The bank’s terms and conditions can also be relevant. For example, Zenith Bank’s published account-opening terms provide for the bank to place a hold on an account where there is a dispute concerning funds or another person claims an interest in the funds.
However, the existence of a joint account does not give the bank an unlimited power to freeze it whenever one of the account holders has a personal problem.
Can a Bank Freeze the Entire Joint Account Because of One Account Holder?
It depends on the circumstances.
This is the more important question.
Where the reason for the restriction relates specifically to one account holder, the bank should have a proper basis for determining the extent of the restriction.
For example, suppose A and B maintain a joint account containing ₦10 million.
A becomes the subject of a legal dispute concerning ₦2 million belonging to A personally.
The fact that A is a joint account holder does not automatically establish that all ₦10 million in the joint account belongs to A or that the entire account should be permanently frozen.
The bank must consider the nature of the claim, the account mandate, the source and ownership of the funds where relevant, and the terms of any court order or other legal authority relied upon.
What If One Joint Account Holder Owes Money to a Creditor?
A personal debt owed by one joint account holder does not automatically mean that the creditor is entitled to all the money in the joint account.
Where the creditor has obtained a judgment against one account holder, the appropriate judgment-enforcement procedure must be followed.
A creditor cannot simply instruct a bank to take the money of the other joint account holder merely because the debtor happens to be a joint account holder.
Where a court order is involved, the precise terms and scope of that order become critical.
The non-debtor joint account holder should therefore obtain legal advice immediately if a joint account has been restricted because of the other holder’s personal debt.
Can a Bank Freeze a Joint Account Because of a Court Order?
Yes.
Where a valid court order directs a bank to restrict or preserve funds in a joint account, the bank is required to comply with the order within its terms.
However, the court order should be examined carefully.
The important questions include:
- Which account is affected?
- Which account holder is the subject of the proceedings?
- What amount is affected?
- Does the order apply to the entire account?
- Does it restrict withdrawals or completely freeze the account?
- How long is the order intended to operate?
- Was the order made by a court with jurisdiction?
A bank should not treat an order concerning one person as automatically authorising restrictions beyond the terms of the order.
Can the Police Cause a Joint Account to Be Frozen?
A police investigation can result in a bank account being restricted, but the bank’s legal authority to impose the restriction must still be considered.
This issue arose in Bernard & Anor v. FCMB Ltd.
The appellants operated a business savings joint account with FCMB. They complained that the account had been frozen following a Nigerian Police Force instruction. FCMB maintained that it had acted pursuant to a Post No Debit order from a Magistrate Court.
The Court of Appeal ultimately dealt with the question of damages and affirmed the lower court’s refusal to award punitive or exemplary damages. Importantly, however, the judgment discussed the contractual banker-customer relationship and the bank’s duty to exercise reasonable care and skill.
The case demonstrates why the actual legal authority relied upon by the bank must be established rather than simply accepting that a law-enforcement agency requested the restriction.
Can One Joint Account Holder Ask the Bank to Freeze the Account?
A joint account holder’s ability to cause a restriction depends on the circumstances and the terms governing the account.
A bank is not necessarily required to obey a unilateral instruction from one account holder simply because that person is a joint holder.
However, where one account holder raises a genuine dispute concerning the funds, the bank can take protective steps to avoid improperly releasing money while the dispute is resolved.
The bank’s contractual terms can expressly provide for such circumstances. For example, published Nigerian banking terms can permit the bank to place a hold where it knows or believes that there is a dispute concerning funds in an account.
Therefore, the appropriate question is not simply whether one joint account holder requested the freeze, but whether the bank had a lawful basis for acting on that request.
Can a Joint Account Be Frozen Because One Holder Dies?
The death of one joint account holder can affect the operation of the account.
The precise consequences depend on the account mandate, the applicable contractual terms and the circumstances of the account.
For example, banking terms can provide for transactions to be restricted temporarily after the death or legal incapacity of a joint account holder while the bank verifies the relevant documents and determines how the account should continue to be operated. Nigerian banking terms contain provisions addressing restrictions in such circumstances.
The surviving account holder should therefore notify the bank promptly and provide the documents requested by the bank.
Can a Bank Freeze a Joint Account Because of Fraud?
Yes, where the bank has a lawful basis for doing so.
A bank dealing with a suspected fraudulent transaction can take steps to preserve funds and investigate the transaction.
This becomes particularly important where the suspicious transaction was made through or into the joint account.
However, the bank’s action must still have a proper legal, regulatory or contractual basis.
The restriction should also not be treated as a finding that every joint account holder committed fraud merely because the account was involved in a suspicious transaction.
What If Only One Person Put Money Into the Joint Account?
The fact that only one joint account holder deposited the money does not, by itself, answer every question concerning beneficial ownership.
The circumstances surrounding the account and the relationship between the account holders must be examined.
For example, two business partners can operate a joint account even though their individual contributions are different.
Similarly, a husband and wife can operate a joint account into which only one spouse makes regular deposits.
The bank’s records and account mandate establish the banking relationship, while questions concerning beneficial ownership can require additional evidence.
This distinction can become important where a third party seeks to attach or restrict funds in the account because of a dispute involving one account holder.
Can a Bank Freeze a Joint Account Without a Court Order?
Not every joint-account restriction requires a court order, but a bank must have a lawful basis for the restriction.
This is consistent with the broader position on bank-account restrictions.
A bank can have contractual or regulatory grounds for imposing certain restrictions without first obtaining a court order. However, where the bank is relying on a third-party directive or purported judicial authority, the source and scope of that authority must be examined.
In Bernard v. FCMB, the Court of Appeal referred to the principle that a bank must be satisfied that there is a court order before freezing a customer’s account or placing a restraint on the account in the circumstances discussed in that case.
The position therefore cannot be reduced to the statement that every bank freeze requires a court order or that no bank freeze requires one.
The reason for the restriction determines the legal analysis.
What Should You Do If Your Joint Account Is Frozen?
If a joint account has been frozen, the account holders should act promptly.
1. Ask the Bank Why the Account Was Frozen
Request a written explanation.
Ask the bank to identify:
- the reason for the restriction;
- the date it was imposed;
- the person or authority that requested it;
- the amount affected; and
- the legal or contractual basis relied upon.
2. Ask for Details of Any Court Order
If the bank says that the restriction resulted from a court order, ask for:
- the name of the court;
- suit number;
- date of the order;
- parties to the proceedings; and
- the specific terms of the order.
This information will help determine whether the order actually authorises the restriction imposed on the joint account.
3. Identify Which Account Holder Is Affected
If the restriction arose because of one account holder, establish precisely what allegation or liability concerns that person.
The other joint account holder should not simply assume that their own interest in the funds has disappeared.
4. Provide Supporting Documents
Where appropriate, provide documents showing:
- the source of the funds;
- ownership of particular funds;
- the purpose of the account;
- the nature of the relationship between the account holders; and
- the legitimacy of disputed transactions.
5. Make a Formal Complaint
If the bank fails to provide a satisfactory explanation, submit a formal complaint to the bank and retain evidence of the complaint.
6. Seek Legal Advice
Where the restriction is causing financial loss or appears to lack lawful justification, obtain legal advice on the appropriate remedy.
Can You Sue a Bank for Wrongfully Freezing a Joint Account?
Yes.
A joint account holder can bring a claim where the bank has wrongfully restricted the account and the facts establish a breach of the bank’s contractual or other legal obligations.
The Court of Appeal’s decision in Bernard & Anor v. FCMB Ltd is particularly relevant. The case concerned a business savings joint account and involved a claim arising from the restriction placed on the account. The court recognised the contractual banker-customer relationship and affirmed the lower court’s finding that the bank had breached its contractual obligations in the circumstances, although the particular appeal concerned the refusal to award punitive or exemplary damages.
Depending on the circumstances, a customer can seek appropriate reliefs including:
- a declaration that the restriction was unlawful;
- an order lifting the restriction;
- damages for established loss;
- interest where legally recoverable; and
- other appropriate reliefs.
The precise remedies depend on the facts and the legal basis of the claim.
Can the Other Joint Account Holder Claim Damages?
Potentially, yes.
If a bank wrongfully restricts a joint account, the consequences can affect more than the account holder who was the subject of the original dispute.
For example, if the restriction prevents the other joint account holder from accessing funds legitimately belonging to them and the bank has no lawful basis for doing so, that person can have a basis for pursuing appropriate relief.
However, the claimant must establish their legal interest and the loss suffered.
The mere fact of being named on a joint account does not automatically establish entitlement to every head of damages.
How Can You Protect Yourself When Operating a Joint Account?
Joint account holders should understand the mandate governing their account before depositing substantial funds.
They should also keep records showing:
- who contributed money;
- the purpose for which the account was opened;
- how withdrawals are authorised;
- the ownership arrangement agreed between the parties; and
- any agreement regulating the use of the funds.
Where substantial personal or business funds are involved, maintaining clear documentation can make it easier to resolve a dispute if the account is later restricted.
Conclusion
A bank can freeze a joint account in Nigeria where there is a lawful basis for doing so, but the bank does not have an unrestricted power to freeze the account simply because one of the joint account holders has a personal dispute or liability.
The account mandate, contractual terms, source of the restriction, applicable law and, where relevant, the terms of any court order must be examined.
The decision in Bernard & Anor v. FCMB Ltd demonstrates that the banker-customer relationship is contractual and that a wrongful restriction of a customer’s account can amount to a breach of the bank’s obligations.
If your joint account has been frozen, you should first establish why it was frozen, who requested the restriction and what legal authority supports it. If the bank cannot justify the restriction or has gone beyond the scope of its authority, legal remedies can be available to the affected account holder.
If your joint account has been frozen, Lexforte Attorneys can review the account mandate, the reason given by the bank and any court or regulatory directive involved, and advise you on the appropriate steps to challenge the restriction.