In Pa Sam Nang v HSBC Ltd,20 the plaintiff was a customer of the bank. His account had been suspended pending the bank’s due diligence and risk management review of transactions on his account. The bank’s standard terms of business provided for such suspension, apparently without reference to a particular timeframe.
The plaintiff’s lawyers failed to persuade the bank to lift the suspension. Therefore, the plaintiff commenced legal proceedings against the bank, in order obtain a ruling that his account had been wrongfully suspended. Interestingly, the plaintiff applied for summary judgment ( judgment without trial); therefore, the bank was only required to show (at this stage) that it had a credible defence, such that the proceedings should be allowed to proceed to trial.
What may have made things rather difficult for the bank was that the plaintiff’s account had been suspended for almost a year by the time of the court hearing. The bank also appears to have been hampered in what evidence it could deploy, in its defence to the plaintiff’s application, for fear of compromising the investigation before it had concluded.
Not surprisingly, the court granted the bank permission to defend the plaintiff’s action. In short, the bank had a contractual right to suspend the operation of a customer’s account and, in all the circumstances, it could not be said that the bank had acted irrationally, despite the ongoing period of the suspension.
Interestingly, the court declined to dismiss the plaintiff’s application for summary judgment outright; this suggests some judicial acknowledgment of the bank’s lack of engagement with the plaintiff as to reasons for the suspension of his account. Indeed, a principal concern of the plaintiff appears to have been what he regarded as the bank’s “big brother” treatment or “high handed” manner.21 In passing, it should be noted that the plaintiff appears to be a wealthy and well connected individual who has found the resources and lawyers (not always an easy task) to take on the bank on its “home turf”.
At the time of writing, the plaintiff has applied for permission to appeal the court’s refusal to grant summary judgment. Even if granted permission to appeal to the Court of Appeal, an appeal faces significant challenges. The lower court exercised a wide discretion (based on the evidence before it) in refusing the plaintiff’s application and the bank’s terms of business appear to be standard in the industry. There is also the point that, in the current regulatory environment, most banks in Hong Kong are taking their due diligence responsibilities more carefully. If the case does proceed to trial (rather than settlement), or to an appeal, it will be one to watch. Even if the plaintiff succeeds in attacking (for example) the period of the suspension of his account, he will still have to establish his loss and the bank will, presumably, seek to rely on the usual contractual provisions purporting to limit that loss.