Abu Dhabi court orders bank to refund Dh365,836 to customer

The Abu Dhabi commercial Court of Appeal has upheld a lower court ruling ordering a national bank to refund Dh365,836.23 to a customer after it was proven that funds were deducted and transferred from his account to another bank without his explicit prior authorisation.

In a final judgment that is no longer subject to appeal, the court also ordered the bank to bear legal costs, affirming the findings of a court-appointed banking expert whose report formed the basis of the ruling.

The verdict is seen as a significant precedent in regulating the relationship between customers and banking institutions in the UAE, particularly in cases involving entities within the same banking group. The court firmly upheld the principle that a customer’s bank account enjoys independent legal protection and cannot be used to settle other liabilities without clear and express consent.

According to legal counsel Mohammed Al Hais, who represented the claimant, the case dated back to when the customer obtained a personal finance facility under a Murabaha agreement from a national bank worth Dh870,115.84. The agreement stipulated repayment over 48 monthly instalments of Dh18,127 each, supported by a security cheque covering the total amount.

However, the customer later discovered that the bank had been deducting monthly amounts from his account and transferring them to another bank without his knowledge or approval.

Court documents show that the total value of these deductions reached Dh307,749.35 by the time the case was filed. The claim included a detailed breakdown of the transactions, which began on December 27, 2023, and continued over several months, with varying amounts including Dh11,280.98, Dh6,300 and Dh11,465 repeatedly debited.

The claimant sought a court order to prevent the bank from making any future deductions without his explicit written consent.

A turning point in the case came with the appointment of a banking expert, whose report confirmed that the transferred amounts were used to settle outstanding liabilities linked to other facilities held by the customer at the second bank, including a personal loan and a credit card.

Crucially, the expert found no evidence of any explicit or prior authorisation from the customer permitting such transfers.

The Court of First Instance relied on this finding, ruling that the deducted amounts were unlawfully withdrawn and must be repaid, as the transactions were not carried out in accordance with approved banking procedures or the regulations of the UAE Central Bank.

The bank argued in its defence that the customer had agreed to general terms and conditions, and that both banks belonged to the same banking group, which justified the deductions to settle existing debts.

But the court rejected this defence, stating that belonging to the same banking group does not give banks automatic authority to withdraw funds from customer accounts without explicit consent.

It further stressed that even if debts exist, banks must follow proper legal and banking channels to recover them, rather than making internal deductions without approval.

Legal counsel Al Hais said the ruling sends a clear message that confirmed indebtedness does not override the legal safeguards protecting individual bank accounts.

During the appeal, the bank sought to overturn the ruling or appoint a new expert, citing objections to the original report.

However, the Court of Appeal dismissed these requests, stating that the expert report was consistent with the case file and sufficient to resolve the dispute, and that there was no need to appoint a new expert.