2016 - 2017
Mr H ran a company with his friend, Mr L. They had a long-running disagreement over how it was being run that they were unable to resolve. Mr H went to their bank and explained this to the bank, asking it to put a hold on the company’s accounts. He didn’t go into detail about the disagreement.
About two weeks later, Mr H went back to the bank with Companies Register information showing that Mr L had been removed as director, and replaced by Mr H’s wife, Mrs H. Mr and Mrs H completed a new account mandate for the company’s accounts removing Mr L as signatory and adding Mrs H. However, the bank advised that because of the account hold, it couldn’t accept the replacement mandate without confirmation from both Mr H and Mr L that the matter was resolved, or a court order to that effect.
Mr H wasn’t happy. He indicated confirmation from Mr L would not be forthcoming. He also said the dispute wasn’t related to the company’s bank accounts but was about the company’s overall operation and expenses payments. He believed this wasn’t a sufficient reason for the hold in the first place.
Mr H complained to us about the bank’s decision to place the hold on the account, and its decision not to accept the replacement mandate. He also complained that he hadn’t been advised about the requirements for removing the hold when he requested one be placed on the account.
We found that irrespective of whether the dispute between Mr H and Mr L was about the company accounts, the bank acted appropriately by placing the hold on the company’s accounts. The bank’s terms and conditions specified it could suspend an account’s operation. The Code of Banking Practice also states that banks can suspend account operations if it is notified by any party of a dispute over either funds ownership or account operation.
Diary notes showed that at the time he requested the hold, Mr H told the bank that he and Mr L were in dispute. We also established that confirmation that the matter was resolved was not forthcoming.
We agreed the bank ought to have advised Mr H of the required process to remove a hold when he requested it. However, once the bank was on notice, it was appropriate for it to place the hold to protect those with an interest in the account, irrespective of whether Mr H was happy with the hold removal requirements.
We established that the bank had failed to tell Mr L the account had been frozen and this caused further difficulty between the pair. The bank offered Mr H $1,000 for this and the fact it hadn’t explained hold removal requirements. Mr H accepted the offer and the complaint was resolved.