Cash transfers to wrong bank accounts or unintended recipients are common in Nigeria. In fact, since the advent of online/mobile banking, the number of wrong transfer cases in the country has increased. Most of them were irrecoverable due to several considerations relating to the cost of pursuing the recovery vis-a-vis the amount to be recovered as well as lack of understanding of the right steps to take. These innocent mistakes cannot be reversed by a customer’s instructions to his bank or the recipient’s bank. No. The bank may not honour such instruction or complaint unless compelled by the court. This is because the only lawful procedure to reverse such erroneous transfer of money is to obtain a court order directing the bank to reverse the payment.
In order to pursue an erroneous transfer of money, the payer should consult a lawyer who will advise some decisive steps to be taken. Below are some key points to note in seeking to recover money erroneously paid to an unknown person(s):
In this article, we have highlighted the customer’s banking rights in respect of erroneous transfer and procedure for recovery of money paid erroneously to unintended recipients.
Report to the Bank
The first step to take is for the innocent party to report the wrong transfer to the bank of the recipient, preferably in writing, stating all relevant facts as they relate to the transaction accompanied with any proof of the transaction. Upon receipt of such an application, the bank may or may not place a Post No Debit (“PND”) on such an account that received the sum to restrict its owner from withdrawing below the amount in question while the complaint is being investigated.
In respecting the right to privacy of the recipient customer, the Bank may not disclose the details of the receiving customer (such as phone number, email or contact address) but the bank may contact him to confirm if the complaint made against its account is true. Where the complaint is true and the recipient customer consents to a reversal, the transferred sum will be returned immediately without much ado.
Please note that the bank cannot, on its own, debit the account of the receiver of the erroneous payment without the customer’s consent unless the bank is doing so in satisfaction of a court order or other outstanding obligation owed by the account owner to the bank. In F.B.N. Ltd. v. A.P. Ltd. (1996) 4 NWLR (Pt. 443) 438, the court held that when a bank places to the credit of the customer moneys to which the customer is not entitled or which the customer is liable to re-imburse the bank, the bank is entitled to debit the account of the customer without instructions from the customer.
Obtain an order of reversal from Court
The service of a legal practitioner is required here.
Expectedly, the recipient customer will be unreachable to the innocent party as the bank will not disclose the recipient customer’s details. Even, when the recipient customer is reachable, he may refuse to cooperate or consent to the reversal of the transferred sum to the complainant. Where either of the foregoing situations happens, the bank will request for an order of court to reverse the transaction.
A legal practitioner will draft and file an application by way of originating motion, supported by an affidavit disclosing all facts relating to the transaction, a written address and all necessary documents sought to be relied upon. Necessary documents here would include receipts of the transaction, statements of account displaying such debits and a copy of the complaint to the bank.
Where to file the case of erroneous reversal of payment
The proper court to hear an application for reversal depends on two considerations:
- on the sum involved in the transaction and
- the location of the transaction or the bank (where the transaction is done online, the location of the bank or its branch is where the action can be commenced).
In Lagos State, where the amount sought to be recovered is less than N10,000,000 (Ten Million Naira), the action can be filed at the Magistrates’ Court although the Magistrate’s Court in Abuja can only hear cases in which monetary value is not more than N5,000,000 (Five Million Naira).
However, where the amount sought to be reversed or recovered is more than N10,000,000 (Ten Million Naira) and the location is Lagos State, then the action must be filed at the High Court of Lagos State. In Abuja, where the value of the case is above N5,000,000 (Five Million Naira), then, the proper court to file the case is the High Court of the Federal Capital Territory, Abuja.
Where the application is heard and order for reversal granted, and the money is still in the account of the recipient customer, the sum wrongly transferred will be returned to the complainant.
In instances where there is no money in the recipient’s account or the money in the account is not sufficient to satisfy the order of the court, then the complainant must seek the relief of placing a lien (restriction) on such account until a sum equivalent to the sum wrongly transferred is accumulated and reversed back to the complainant’s account.
What the Claimant/Applicant must prove to get reversal order
The order of court for reversal of erroneous payment may be granted upon application and sufficient proof to justify the order. It is important to note that the following must be established in order to merit an order for reversal of erroneous payment transaction:
- Proof of debit of the alleged sum: A person who claims that he made an erroneous payment to another must show proof that his account in a bank has been debited by tendering debit notes covering the sum or his statement of account showing the amount he erroneously paid out. See U.B.N. (Nig.) Plc v. Emole (2001) 18 NWLR (Pt. 745) 501. Usually, a screenshot of the bank’s debit notification (whether SMS or email) or statement of account is sufficient to prove the debit of the alleged sum. Please note that where the evidence is an electronically generated evidence, a certificate of compliance in accordance with the Evidence Act 2011 may be required.
- Proof that the payment was made in error: Erroneous payment is established if the payer shows that he has no business dealing with the receiver to warrant the payment. Please note that a contractual transaction that goes bad is not the same as an erroneous payment even though there may be an element of mistake of fact in the former. Where a payment has been induced by fraud and the innocent payer becomes aware of the fraudulent scheme and wishes to rescind the transaction, it will be better to consult a lawyer on the best approach to arresting the situation and recovering any money paid.
- Proof of the Receiver’s particulars and bank account details: In order to prove that the defendant or respondent against whom an action has been filed is the proper party to sue in relation to erroneous payment transaction, the claimant/applicant must set out in a supporting affidavit or written deposition (as the case may be) the relevant particulars of the receiver of the erroneous payment, namely: Names, Banker, Account Number, Branch (if any) and other relevant information (as may be shown in the bank statement or debit notification).
- Proof of complaint to the bank and service of demand notice: Usually, the court would like to verify if any pre-litigation efforts were made to resolve the issue before filing an action. Failure to complain or serve demand notice may not vitiate the case but it helps the court to grant the order without delay, especially where the bank and the receiver of the erroneous payment fail to appear in court (as is usually the case). But where a claimant cannot prove that he made such preliminary steps, the Court would be reluctant to grant the order in the defendants’ absence and insist on service of court process and hearing notices more than once to avoid being misled into giving a wrong order.
- Service of court documents on the bank and the receiver of the erroneous payment: Service of originating court process on any person sued as defendant is fundamental to the success of a case. Failure to effect service of court process evinces a breach of fair hearing for which the action can be struck out or any judgment erroneously given, in such a case, may be set aside on appeal. Usually, since the recipient’s address is unknown (and will not be disclosed by the bank), the claimant is expected to obtain an order of substituted service of the court process on the account owner through his bank. With an order of substituted service, the claimant can serve a copy of the court documents for both the bank and the account owner through any nearest branch of the bank.
The Use of Police to Recover Money
It is wrong to attempt to use or resort to the police for the reversal of an erroneous payment transaction even if the payment was induced by fraud. The police officers have no power or authority whatsoever to order or direct or request a bank to transfer money from a one bank account with the bank to another account with either the same bank or another bank. That is the prerogative of the court. See Societe Generale Bank (Nig.) Ltd, v. Afekoro (1999) 11 NWLR (Pt. 628) 521 (Pp. 539- 540. paras. H-A), where OGUNDARE, J.S.C. at page 540, paras. A-D held as follows:
“Following 3rd Respondent’s report to the Police that he was defrauded of the sum of seven million Naira (N7m), the Police commenced investigation and, in the process, froze the accounts of some persons (including the 1st Respondent) in the Appellant bank and had the balances on those accounts paid into a suspense account in the bank pending conclusion of their investigations. At the close of their investigations, rather than charge to court the persons, if any, against whom any case was made out and leave it to the court to make an order as to the disposal of the amount in the suspense account, the Police wrote to the Appellant bank ‘requesting’ it to transfer the balance in the suspense account to the account of the 3rd Respondent in the International Merchant bank (IMB). The Appellant bank complied after it had obtained an indemnity from the 3rd Respondent. I have searched through the Police Act and the Criminal Procedure Act and the Criminal Procedure Law of Lagos State and I can find nothing in them to support the action of the Police. Nor has learned counsel for the 3rd Respondent shown to us any authority to back up the Police action. The request for transfer is clearly illegal.”
It is therefore imperative to follow due process in order not to create avoidable liability for the innocent payer who resorts to using the Police for money recovery in violation of the receiver’s rights.
Where money erroneously paid into a bank customer’s account that is indebted to his bank
Problems may arise if money is erroneously paid into an account of a customer that is indebted to the bank and the bank debits the account to satisfy the customer’s outstanding obligation. The law recognizes the bank’s right to set off against any fund in the account of a debtor customer. According to the court in Barbedos Ventures Ltd. v. FBN Plc (2018) 4 NWLR (Pt. 1609) 241, money paid into a bank customer’s account does not belong to the customer where the customer is indebted to the bank since that money is used to settle the indebtedness. However, it is doubtful if the right of set off can be exercised against money erroneously paid into the bank account of a debtor customer. For the bank’s right of set-off to be exercisable, the money in question must have come into the customer’s account lawfully or he must be entitled to the money in the first place. For example, the bank cannot exercise a set off right against money stolen by the customer or money constituting proceeds of crime or money erroneously transferred by an innocent party.
