2015 - 2016
Lending
Property lending
Mr and Mrs H were co-directors of a company called ABC Ltd which they continued to run together – operating its joint accounts for which they were both signatories - after they separated. Mr H complained about being treated differently from his wife after their business relationship also soured and they accused each other of misspending the jointly-owned funds.
The bank acknowledged it hadn’t provided Mr H with the same level of service as Mrs H and offered $2,000 compensation, at which point he complained to us because he wasn’t satisfied.
Mrs H had told the bank about her concerns that Mr H was misspending joint funds and was advised she could freeze joint accounts or change signing authorities. She did neither. Mr H later advised the bank of similar concerns, but the bank didn’t respond.
Sometime later, Mrs H advised the bank she wanted to take out a large debt for ABC Ltd with another lender, which the bank noted. She then put the loan on interest-only payments. Mr H says he was unaware of this. When the relationship further deteriorated, Mrs H asked the bank to freeze all joint accounts, which it did but without telling Mr H. When he found out, he complained it ought to have sought his prior permission.
After we started investigating, Mr H discovered that Mrs H was telling customers to deposit business-related funds into her personal account. He asked the bank to freeze the account but it declined because Mr H had no authority on the account. We encouraged Mr H to provide evidence that the personal account funds belonged to the company and after a six-week delay, the bank froze it.
Mr H was also in negotiations with Mrs H for her to buy him out. The third-party loan Mrs H had taken out was in dispute and Mr H held the bank responsible. Mr H said that in allowing Mrs H to operate ABC Ltd through a personal account the bank had undermined him and drawn out negotiations, resulting in legal bills. He wanted the bank to compensate him for stress and costs (approximately $100,000). The bank would only increase its offer to $9,000.
We found the bank failed its duty of care towards its customer, ABC Ltd, in how it treated Mr H by:
We considered the effect the bank’s wrongful action had had on ABC Ltd, which was the customer in this case. As a company director, Mr H could claim compensation on behalf of ABC Ltd but we didn’t have the power to award compensation for costs he personally incurred. ABC Ltd had suffered no direct financial loss and in our view compensation of $2,000 for the impact the situation had had on the company was reasonable.
Mr H didn’t accept this and presented further argument to support his compensation bid. We considered his submissions but our decision remained the same as our rules do not allow us to award compensation for personal losses in company complaints. See our Quick Guide to Stopping and freezing accounts for more information about bank obligations when an account is in dispute.
Also see our Compensation guide for our approach to compensation for limited liability companies.
