High Court refuses summary judgment where bank account frozen without notice

The High Court has dismissed a bank's application for summary judgment in respect of a customer's claim for breach of contract, for freezing its accounts following a routine anti-money laundering check: A. F. Kopp Limited v HSBC UK Bank plc [2024] EWHC 1004 (Ch).

This decision is interesting in the context of a financial institution's contractual right or discretion to freeze/close a customer's account without notice, where there is suspicion of fraud or criminal activity (see our previous blog post). Here, the bank sought to dispose of the claim at an early stage, with a summary judgment application focused on the question of whether or not the loss claimed was excluded by the terms and conditions governing the accounts. In claims of this nature, banks will often be assisted by their express contractual right/discretion to freeze/close the account, but this was not the focus of the present application. The judgment is a reminder of the continuing risk of account-holder claims, even where the action taken by the bank is to seek to prevent financial crime occurring through use of accounts provided to customers, and the potential difficulties which banks may face when trying to dispose of such claims on a summary basis.

In the present case, the customer alleged that the bank's actions caused it to breach its obligations owed to third party principals, resulting in alleged loss of profits suffered by those third parties for which the bank was liable to indemnify the customer (where the customer had reached a settlement agreement with the third parties). The customer said the bank breached its terms and conditions by conducting its safeguard review "unreasonably, arbitrarily and haphazardly". The bank applied for summary judgment on the basis of an exclusion clause in its terms and conditions, which excluded liability for "indirect" loss of profit. Although the court strongly inclined to the view that the losses were indirect or consequential losses, it was not satisfied that the customer had no real prospect of challenging the reasonableness of the clause for the purposes of the Unfair Contract Terms Act 1977 (UCTA).

The decision is consistent with previous decisions in which the court has shown reluctance to grant summary judgment when faced with a question of whether an exclusion clause is "unreasonable" under UCTA (see our blog post on a similar recent decision in Last Bus Ltd v Dawson Group Bus & Coach Ltd [2023] EWCA Civ 1297). The court noted that, given the fact-sensitive nature of a challenge to the reasonableness of an exclusion clause, cases where summary judgment is granted are likely to be extremely rare. In the present case, there were obvious matters requiring further investigation which could only be dealt with at trial.

For more information, please see our Litigation blog post.