Bank right to freeze account during dispute

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Bank right to freeze account during dispute

Categories:

Freezing an account,

Summary:

Ella, David and John were the directors of a company. They were in dispute about the future direction of the business. Ella and David held a meeting and removed John as a director, and upated this change on the Companies Office register. John applied to the court to wind up the company. His lawyer also wrote to the bank advising that the company directors were in dispute. The bank froze the company’s account.

Published:

August 2019

Our investigation

Ella said the bank had unfairly frozen the account. She said John had been validly removed as a director and therefore the bank had no right to suspend the account at his request. As a result, the company had incurred unnecessary legal costs.

The bank said under the terms and conditions for the account, it had the power to freeze the account if it was notified of a dispute over the operation of the account.

We found there was indeed a dispute between the company and the previous director. John was challenging the validity of his removal as director through the court process. While Ella wanted the bank to agree with her that John’s removal was valid, we found that it was not the role of a bank to form opinions on disputes between company directors. We found that as the bank had been notified of a genuine dispute over the operation of the company account, it was able to suspend the account operation in accordance with the terms and conditions.