Banks are obliged to act on the terms agreed with clients when opening the account

The opening of a joint bank account in the name of more than one person is a common banking practice, giving the right to any of the beneficiaries to collect money, regardless of the relationship between the beneficiaries.

Banks are required, on request, to act based on the terms agreed with its clients when opening the account and to remain impartial and unaffected by any disputes between the beneficiaries of the account. A bank’s refusal to pay money to a beneficiary requesting payment, leaves it exposed and accountable to the extent that the beneficiary acquires an actionable right to claim the amount in court.

Usually, such issues arise between spouses who may separate and one of them goes to the bank to collect the money from their joint account. The source of the money, whether it comes from joint savings or the sale of property of one or both of the spouses or from any other source, should not concern the bank, which has to act on the basis of the account agreement. Any dispute between the spouses should be resolved by them personally or in court, in the context of resolving their property relations.

The Supreme Court dealt with the above matter in its judgment issued in Civil Appeals 41 & 76/2011 dated June 30, 2017. A banking institution had paid the money from an account jointly belonging to spouses to the husband, then after allegations from the wife, unilaterally opened a new joint account in both spouses’ names and transferred the said amount into it without having received any instructions from the husband.

The husband filed an action against the bank claiming payment of the amount of the deposit plus interest and costs. The court of first instance accepted the husband’s claim and ordered the bank to pay him. It held that the bank did not commit any mistake when giving the money from the joint account to the husband and it did not have to correct it. The joint account could be operated under the instructions of just one of the signatories.

According to the judgment of the court of first instance, the bank had to accept the husband’s instructions on the basis of the terms of the agreement made upon opening the joint account and the bank was ordered to pay him the amount it transferred from his account to the new joint account. The court stressed that the wife did not have the right to claim that she had contributed to the acquisition of the amount. This matter would be decided by the Family Court, which has sole jurisdiction to decide on the spouses’ property rights. In view of the fact that there was an order issued by the Family Court prohibiting the husband from collecting any amount from the balance of the deposit, any rights of the wife to the amount to be awarded to the husband were not affected.

The Supreme Court held that there was no need to intervene, since the court of first instance correctly concluded that the agreement between the bank and the spouses regarding the fixed term deposit, was that any beneficiaries could operate the account and withdraw money. Hence, the Supreme Court added, the husband’s instructions to withdraw money from the previous joint account and its deposit into an account whose sole beneficiary was the husband was legal and in accordance with the agreement. The court dismissed the appeals. The dispute between the two spouses correctly remained to be resolved by the Family Court.

George Coucounis is a lawyer specializing in the Immovable Property Law, based in Larnaca, e-mail: [email protected], tel: 24818288