The Right of Creditors to Attach a Joint Account where Only One Party is Indebted (Part I)
Dr Martin Tallhause looked out of his 15th-floor office window at the busy façade of the hustle and bustle of Ikoyi. He looked like he had just seen a ghost; worst still, he looked like he had just seen red; red on the bank account he maintains jointly with his business partner, Mr Chip Munk. His account officer had just informed him on the phone that pursuant to the Central bank of Nigeria’s Operational Guidelines on Global Standing Instruction (GSI) Individual, (“GSI Guidelines” or the “Guidelines”) the joint account he maintains with Mr Munk for the purpose of pooling resources for their tech start-up has been debited.
Mr Chip is indebted to Moneybag bank to whom he had granted a GSI mandate. Dr Tallhause is not a party to that transaction; but because he maintains a joint account with Mr Munk, the funds in their joint account have been charged to satisfy the debt owed by Mr Munk.
This article therefore examines the foregoing scenario, especially with regards to the powers of creditors to charge or levy enforcement of a judgement on a joint account maintained by a debtor and a third party.
Attachment of a Joint Account
A joint account is a bank account shared between two or more persons, natural or juridical. While their contributions may not be the same, they have equal access to the account and equal obligations to pay the charges that arise during the use of the account. In other words, each one has a right to deposit and withdraw from it without the consent of the other, subject to any specific mandate to the contrary. A creditor might choose to go after the funds in a joint account either because it is easier to access or because a debt remains unsatisfied even after charging or liquidating the other assets of the debtor.
The question that arises, therefore, is – can a creditor attach, garnish, or otherwise enforce a judgement on an account a debtor jointly holds with a third party? The Central Bank of Nigeria (CBN), under the GSI Guidelines, has taken the position that a creditor bank or Financial Institution can attach funds standing to the credit of a debtor in any account maintained by the said debtor in any Nigerian bank. This is provided that the said debtor has executed a GSI mandate in favour of the bank. This applies only to individuals and not corporates.
This restricted application constitutes a significant source of frustration to banks and other financial institutions, mainly since loans to corporates constitute more than 65 percent of the financial sector’s average outstanding loans. The question as to whether a bank can attach a joint account belonging to individuals is quite straightforward in light of the CBN GSI guideline. The question of the legality of such attachment, especially with regards to the rights of a third party over such funds, is untested in court.
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