Our investigation

The bank acknowledged it should have sought Preston’s approval before agreeing to the request, but it said the transactions were effectively approved in accordance with the account mandate because the wife used her husband's internet banking log-in to make the payments. We disagreed. The bank simply should not have allowed single signatory access. The wife's request should have alerted the bank to the possibility that a dispute was looming about the use of the account’s funds, especially since the bank was already aware of disagreements about payment of certain invoices. Instead of contacting Preston about the request, the bank simply set aside the mandate rules. We found the bank did not act reasonably or in accordance with the mandate.

We could not establish whether the wife used the money to pay legitimate company debts, thus incurring a direct loss to the company. However, we found the bank’s actions greatly diminished Preston’s bargaining power in trying to resolve the dispute about the legitimacy or otherwise of the payments, quite apart from causing him considerable inconvenience.

Outcome

The bank offered the company $3,000 to compensate for the inconvenience of pursuing reimbursement of any payments it could establish were not debts the company owed. The company did not respond to the offer.