Banks' suspension of customer accounts for suspected fraud: High Court refuses interim order to unfreeze

In the context of a breach of contract claim brought by a customer against a bank for freezing their account on the basis of suspected fraud or criminal activity, the High Court has dismissed the customer's application for an interim mandatory injunction to compel the bank to unfreeze the account: Harvey v Santander UK plc [2023] EWHC 2947 (KB).

This decision continues a trend of the court upholding banks' decisions to exercise their contractual rights to freeze a customer’s account without notice in circumstances where they suspect fraud or criminal activity (see our previous blog posts here and here).

The decision considers the common law principles that the court will take into account in considering whether to grant an interim mandatory injunction application brought under CPR Part 25 by a customer against a bank. The court will generally approach these injunctions with caution and they are typically granted only in clear-cut cases where the court has a high degree of assurance that the party seeking the injunction will succeed at trial. This is because mandatory injunctions can significantly alter the status quo and may impose substantial burdens or obligations on the party against whom they are issued.

In the present case, the court was not satisfied that this was a case in which an interlocutory mandatory injunction should be granted because it did not feel a high degree of assurance that the customer would succeed in satisfying a court at trial that the bank had not been exercising its contractual rights to freeze the account, to close it and to decline to execute the customer’s instructions. Further, the court was concerned that if it were to grant the injunction and at trial it was proved that it was wrong to do so, then damages would be an inadequate remedy for the bank because it may face regulatory and/or criminal sanctions and/or potential actions from third parties who might claim the funds were misapplied.

For more detail, see our Banking Litigation Notes blog post.