Mistakes happen and, when it comes to money, any delay may mean forfeiture. It is common for one to intend to send money electronically to B’s bank account but inadvertently send it to X, who is completely unknown to the sender. As such, the sender does not have the option of contacting X to ask for a refund. Plus, the sender may not be able to avoid or delay their obligation to pay B, so it becomes imperative that the sum inadvertently transferred is recovered as soon as possible. As such, a Court Order is necessary in the absence of a voluntary return of the money by the recipient. In this article our partner, A. Tope Tokan-Lawal, discusses how to apply for and secure a Court Order to recover money inadvertently transferred to a third party.
Essentials for an inadvertent transfer cause of action:
- Relationship: the recipient is unknown to the sender.
- Intention: the transfer was made by the sender to the recipient unintentionally.
- Unjust enrichment: the recipient has received a benefit from the sender in a situation that the law should recognise as unfair.
Preliminary Action: Notice to Banks
First, notice of the inadvertent transfer must immediately be given to both the sender’s bank and the recipient’s bank. For legal reasons, a bank will not be able to disclose X’s contact details, nor will the bank be able to unilaterally return the money to the sender’s account without a Court Order. However, the bank may be able to put a temporary hold on the recipient’s account pending the issuance of the Court Order. It may be likely that the recipient, upon becoming aware of the hold, may also voluntarily decide to return the money to you. However, this may be unlikely as the recipient may not have the sender’s bank account details.
Filing the Application in Court
In seeking a Court Order, it is essential that the proper application is filed in the proper court, and all the necessary parties are properly served. The proper court will depend on the sender’s state and the sum in question. In Lagos, for example, an application can be made at either the Magistrate Court (if the sum is less than ₦10,000,000) or the High Court (if the sum is ₦10,000,000 or above). The necessary parties are the sender (as the Applicant), and the recipient and the recipient’s bank (as the Respondents). The names of the parties must be as shown in the transaction receipt and reflect their legal/proper names.
The lawsuit must be commenced by an Originating Application seeking an order “directing and compelling” the recipient’s bank to reverse and refund the sum to the sender’s bank account. The application will also state that the transfer was “inadvertent”, and the sender has no relationship or business with the recipient. The Originating Application must be submitted with an Affidavit and a Written Address. The Affidavit must be sworn to by the sender or an official of the sender (if the sender is not an individual), with the transaction receipt attached.
Serving the Parties
After the Originating Application is filed, it must be served on the respondents to ensure that they have notice of the lawsuit. Service is also necessary as failure to properly serve the respondents would mean the court lacks jurisdiction to determine the suit against them. Thus, making any efforts futile.
The Originating Application must state the address of the parties. The address of the recipient’s bank will be that of its head office. The same address may be listed for the recipient or listed as unknown if so. To achieve proper service on the recipient whose address is unknown, an application by motion to serve the recipient through “substituted means” must be made to the court. The application for substituted service will request an order permitting the Applicant to serve the recipient by pasting all the court documents on the wall of the courthouse or the bank. A request to serve the recipient through the bank would likely fail as the bank does not have a duty to effect such service and service on the bank does not confirm that notice will be given to the recipient. Upon obtaining this order, the bailiff will conduct the service and ensure that proof of the service is placed in the court file.
Hearing of the Originating Application
The Court will not hear the Originating Application unless it confirms that the Respondents have been properly served. It is unlikely that the bank or the recipient will appear in court after they have been served, unless there are other factors which may make it necessary for them to object to the suit. Where the Respondents do seek to appear in and defend the case, they would have to file Counter-Affidavit(s) which the Applicant can thereafter respond to by a Reply.
The Originating Application is heard like any other motion presented in court, as such, there is no requirement of a trial. However, it is advisable that the sender/sender’s representative be present in court as the Magistrate/Judge may seek clarification in the court at the hearing. Once heard, a later date will be announced for the judgment. In limited circumstances, the court may require a trial because of existing issues of fact before it can make a decision.
Judgment and Post Judgment Notice to the Bank
When the judgment is delivered, an application by letter to the court’s registrar will be made for a certified copy of the judgment, which must be obtained and served on the recipient’s bank for compliance. The bank will be obligated to credit the Applicant’s account, from the recipient’s account, with full money. Where the money in the recipient’s bank account is insufficient, the bank will credit the Applicant whenever the recipient’s account is credited until the money is recovered in full.
Key Takeaways
The lawsuit to recover money inadvertently transferred is not based on contract or tort, but quasi-contract or restitution, which arose out of Common Law. It is an equitable action which created an obligation on the recipient to repay or return the money by mandating restitution for an unjust enrichment obtained at the expense of the sender. The court, in hearing such a claim, will have to ask whether 1. There was a mistake, 2. Did the transfer by the sender to the recipient result from the mistake, 3. Is the recipient entitled to the money transferred to it, and 4. Is there any defence to prevent the return of the money.
Disclaimer: This article is provided for informational purposes and is not intended as a replacement for legal advice or representation by a legal practitioner. The procedure may vary in different states, and it is essential to confirm to avoid undue delays in the proceedings.
Nice one.
Thank you Linda!
I learnt from the write up if the amount is not substantial enough for the proceedings then the Sender might as well consider letting go which in a way serves as encouragement for not refunding inadvertent transfers. If I’m wrong someone knowledgeable in the discourse should do well to correct me please. Thanks
Hi Balmydealz, thank you for the comment. Do note that filing fees at the Magistrate Court are quite minimal but you are right – the cost of litigation does deter many from seeking a court order for reversal. Hence the requirement that notice be given to the bank in the hopes that the recipient’s account is put on hold which may make the recipient issue a refund. Also note that if the recipient is known to you, you should contact him/her immediately and ask for a refund. If they refuse/fail to do so, then you should report them to the recipient’s bank and CBN (anticorruptionunit@cbn.gov.ng) as their conduct amounts to fraud and the money will be returned you. The recipient will also be liable for their fraudulent act.
Very educating. Thank you for this piece.
Thank you Adepeju! We’re glad to hear that.