Bank's information unclear and notification incomplete

Freezing an account,
A dispute arose between two members of an extended family who operated a partnership to manage their properties. The partnership’s bank accounts required two account holders to approve transactions. One member, Morgan, threatened to freeze the partnership’s bank accounts. The other member, Logan, asked the bank whether it could freeze accounts on the instruction of one account holder only. The bank replied that it could freeze accounts if asked by two or more account holders. This response left Logan satisfied that his position was secure.
June 2015

What the bank did not make clear was that it could also act on the instruction of one account holder alone. Morgan asked the bank to freeze the accounts, which it did. Despite attempts to resolve the dispute, the accounts remained frozen a year later, and Logan approached us requesting the accounts be unfrozen.

Our investigation

We explained that we had no grounds to compel the bank to unlock the accounts.

Logan said the bank had given him unclear information, and he was also unhappy it had not subsequently told him or other partners of its action. Had he known Morgan could freeze the accounts, he would have taken steps to protect the funds.

Logan said the freeze meant the partnership had been unable to renovate a property and had lost potential rental income. The partnership had also incurred interest charges on a loan needed to continue its activities. In addition, the partners had needlessly spent money to hold a meeting a week after the freeze – money they wanted the bank to reimburse.

The bank acknowledged it had given unclear information, and had not notified other account holders of its actions. It offered $5,000 compensation for inconvenience. Logan sought independent advice about whether the offer was adequate. 

We considered the offer reasonable in the circumstances because:

  • the bank could have frozen the accounts as soon as it became aware of the dispute
  • the inconvenience was the result of the bank acting on instructions, not the result of advice it had given
  • the bank was not responsible for the duration of the dispute (and hence of the freeze)
  • minutes of the meeting held after the accounts were frozen showed that those present still dealt with other business, so the bank should not have to reimburse meeting costs.


Logan accepted the $5,000.

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