Santander: Bank says it was contractually entitled to act as it did
A struck-off solicitor still advising clients on legal matters has failed to obtain an injunction to compel a bank to unfreeze his account over questionable payments he received from abroad.
His Honour Judge Blair KC, sitting as a deputy High Court judge, said Michael John Harvey had failed to provide “any documentary evidential support… which provides any assurance that the deposited monies are not the proceeds of crime”.
Mr Harvey applied for the interim injunction pending the hearing of his breach of contract claim against Santander for failing to follow his instructions to make payments from the account.
He opened it at what was then Abbey National in 2004, not long after he had been struck-off due to his involvement in promoting investment schemes dishonestly. “The schemes he had helped promote failed and a great many people lost a significant amount of money,” the judge recounted.
However, “given his legal knowledge and the connections which he had in the Luton area”, Mr Harvey “decided to undertake legal work not requiring a regulated lawyer”, making a “very modest living” this way.
He described how, for example, “he could do preliminary work on behalf of a client who wished to pursue a property transaction more cheaply by undertaking such things as pre-contractual inquiries and searches.
“His client could then present the product of his work to someone who was permitted to conduct the regulated activities reserved to legal professionals, such as conveyancing.”
Mr Harvey told the court that he also accepted the “preliminary deposit” of client monies into his business account, before sending it onwards later. He said this use was envisaged and explained to Abbey National when he opened the account and was a feature of how he operated it over the years.
In July 2022, he received a payment £50,029 from a man in Dubai and then, over two weeks in October 2022, five large payments from an Indonesian company, together amounting to £369,941. He said both related to transactions for clients.
The July payment triggered an alert on Santander’s systems and the bank told the court that it was not satisfied with Mr Harvey’s answers about the money’s source and legitimacy.
It then looked at other activity on the account, including the October payments, which led the bank to suspect the payments related to fraud or another criminal act “because of their origin, stated purpose and amount”, its head of investigations and intelligence said in evidence.
Also, he said, Mr Harvey’s history of having been struck off gave the bank “further cause to suspect the account was being misused and/or the payments related to fraud or another criminal act”.
The bank decided in early November 2022 to close the account but could not do so before paying away the £490,000 it held.
Santander instead froze the account “because the money could not properly be paid to the claimant without the bank being at risk of suffering penalties from its regulators and/or potentially being charged with complicity in criminal money laundering and/or facing claims for compensation from the lawful owners of the funds if the claimant were to misapply them (since they were probably held on trust)”.
It was over a month before the bank responded to Mr Harvey’s questions about why it had frozen the account, only to say that it was unable to provide an explanation.
HHJ Blair said: “I have little doubt that this was because the defendant had made suspicious activity reports to the National Crime Agency, since the domestic proceeds of crime and anti-money-laundering legislation would expose the defendant to penalties if it were to have tipped-off the claimant about the action it had taken.”
The police then obtained a freezing order over the account but, although this expired in January 2023, Santander has continued to freeze it.
“It is not possible to know whether or not the police are still investigating any of the monies in the claimant’s account,” the judge said.
HHJ Blair criticised Santander for not engaging with Mr Harvey, who made “the perfectly legitimate points that if he had not brought this claim he would probably have heard nothing more from the bank”.
In opposing the application, Santander argued that it was contractually entitled to act as it did because it had reasonably requested information from Mr Harvey as to the legitimacy of the sources of the monies, which he did not provide.
Also, it submitted, allowing Mr Harvey to re-direct monies away from the account may have placed it in breach of legislation and open to regulatory action.
HHJ Blair held that there was “plainly a serious issue to be tried” – namely whether the bank had a contractual right to decline to execute Mr Harvey’s instructions.
He decided against ordering an injunction “because I do not feel a high degree of assurance that the claimant will succeed in satisfying a court at trial that the defendant has not been exercising its contractual rights under its 2022 general terms and conditions to freeze the account, to close it and to decline to execute the claimant’s instructions”.
He explained: “This is most particularly because of the lack of any documentary evidential support provided by the claimant to the defendant (or even now to this court) which provides any assurance that the deposited monies are not the proceeds of crime and that the proposed property transactions are not an attempt to money-launder them.
“None of the claimant’s own explanations satisfactorily deals with the legitimacy of the source of the monies, still less has he provided any evidential support for it.”
Were he to grant the injunction and this proved to be the wrong move, damages would be an “inadequate remedy” for Santander, which may then face regulatory and/or criminal sanctions as well as potential actions from third parties.
Mr Harvey was “not someone who would have the resources to meet those damages”, while the bank would be able to should his claim succeed.
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