Businessman loses court battle to have NCB unfreeze account

The Supreme Court has denied an application by David Stewart to compel the National Commercial Bank to remove the freeze on his company’s current account because of allegations that it felt insecure with respect to the business.

In his claim, Stewart, who trades as Speed and Truck World, contends that he became aware that his chequeing account was frozen on May 5, 2023. Despite his efforts, he said he was not given a reason until June 7, 2023, when he received an email dated May 30, 2023.

In the suit, he is seeking damages against the bank, saying that as a result of the freeze, his business operation have been halted, putting him at great reputational, legal and financial risk.

Stewart is seeking several declarations, including that the bank is in breach of the Universal Terms & Conditions Merchant Agreement with the claimant. A declaration is being sought that the bank wrongfully froze the accounts without reasonable or lawful justification.

Stewart is accusing the bank of failing to conduct a proper investigation to determine whether the chargeback applications against the claimant were legitimate prior to restricting his access to his chequeing account.

He said that he first became aware that the chequeing account was frozen when his cheque to a supplier was dishonoured.

He attended a meeting at the bank on May 17, 2023 and was informed that “a transaction” using his point-of-sale machine was fraudulent. The only explanation given to him, he said, was that the transaction was done offline. He said he was told he was not being accused of fraud but that he should go to the police and report a fraud.

Stewart states that, as far as he knows, offline transactions are permissible and he uses that process when there are difficulties with his Internet connection. He said there was $24 million in the account when it was frozen.

Deadline for response

The bank has denied that the claimant was not advised of the reasons for the restriction or given an opportunity to respond. The chequeing account was frozen in accordance with its contractual right to do so under the agreement, the bank contends.

It states that its email of May 30, 2023 indicated that there were five unauthorised and disputed card transactions done during the period April 17 to 19, 2023 in excess of US$250,000 and requested a response from the claimant by June 2, 2023. No response was received from the claimant to enable it to respond to the issuing bank within the stipulated time.

The email to the claimant stated that it was a chargeback query and the defendant had received a claim for “no authorisation” in respect of the five disputed transactions and requested that the claimant provide it with details of the transactions. When the claimant did provide a response, it was out of time and inadequate, particularly with respect to the claimant’s inability to provide the names of the customers or cardholders who purportedly made the purchases and that was a breach of the agreement, the bank outlined in its defence.

After each of the disputed transactions, the bank stated that it observed that the claimant had issued a number of cheques, one of which was in the amount of $900,000 to another merchant who was under investigation by it in circumstances “not dissimilar” to those applicable to the claimant. Upon enquiry, the bank stated that the claimant could not provide an answer about the circumstances concerning the drawing of the cheque.

The defendant further pleads that in all the circumstances set out in its defence, it deemed itself insecure with respect to the claimant’s business and it invoked its right under the agreement to suspend the agreement, freeze the claimant’s account and take such other steps as it deemed necessary. It states also that the amounts in the disputed transactions were charged back against its account with the organisations that issued the cards in question and such amounts were recouped from the claimant’s chequeing account.

Money laundering Suspicion

In its defence, the bank further contends that the claimant was solely responsible for any such losses as his conduct gave the bank reasonable cause to “deem itself insecure in relation to the claimant’s business; believe the claimant has engaged in transactions conducted through his accounts with it that could constitute or be related to money laundering and to take steps to secure itself financially and reputationally”.

Attorney-at-law Stephanie Williams, instructed by Henlin Gibson Henlin, who is representing the claimant, argued that if the defendant was suspicious of money laundering, then it should have followed the procedure under the Proceeds of Crime Act (POCA) and reported the matter to the competent authority.

King’s Counsel Sandra Minott-Phillips and attorney-at-law Jacob Phillips, instructed by Myers, Fletcher & Gordon, who represent the defendant, argued that the claim was hopeless. The attorneys submitted that the conduct of the claimant led the defendant to feel insecure about his business and to be suspicious that he could be using his account to facilitate money laundering. They submitted that under the terms of the agreement, the defendant was entitled to freeze the account.

Justice Althea Jarrett refused to grant the urgent application for orders which was being sought by the claimant after ruling on May 24 that there were no serious issues to be tried in the claim. She awarded costs in favour of the defendant and ordered that a case management conference be set for July 23.

Jarrett found also that there were no serious issues to be tried for whether the defendant was in breach of the contract by freezing the claimant’s account.

Commenting further, the judge said: “I am of the certain view that on these disputed facts, the defendant, a bank in the regulated sector, was entitled to feel itself insecure with respect to the claimant’s business (whether reputationally or by virtue of increased exposure to prosecution or liability under POCA and to believe that the claimant was engaged in transactions conducted through its accounts which could constitute or relate to money laundering.”

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