Bank should have frozen account while authority to act was in dispute

Categories:

Bank accounts, Closing/Freezing accounts, Instructions not followed, Bank decisions,

Summary:

In August 2024, a dispute arose within a society incorporated under the Agricultural and Pastoral Societies Act 1908 about who held office and who could operate its bank account. Avery, Frances and Joanne said they remained the valid office holders. They told the bank in September 2024 that no changes should be made to the account. In November 2024, the bank replaced all signatories. In January 2025, $14,300 was paid from the account. Avery, Frances and Joanne said the changes were unauthorised and asked the bank to return the money, pay compensation and apologise. The bank refused, and they complained to us.

Published:

July 2026

Our investigation

In examining the bank’s records from September 2024, we found the bank already knew there was a dispute about who could act for the society. A staff member had placed a serious warning note on the account after Avery, Frances and Joanne raised concerns about unauthorised changes. The note said no changes were to be made. That meant the bank needed to take particular care before changing the account mandate.

In reviewing the documents used to change the signatories, we found the bank did not take reasonable steps to confirm it had valid instructions. The change form named the wrong entity. The copy of the constitution supplied with the documents to change the signatories related to a separate incorporated society. The minutes recorded objections from existing signatories, and none of the existing signatories had authorised their removal. We found the bank should not have changed the signatories.

As for what the bank should have done instead, we found its terms allowed it to suspend the account if it needed to clarify who had authority to use it. If the bank had suspended the account when the mandate change was requested, the $14,300 would not have left the account. We found the account should have remained frozen until the authority dispute was resolved.

The dispute about who could lawfully represent the society had not been resolved. Until that dispute was resolved, we could not determine what loss, if any, the bank’s error caused the society. We therefore recommended that the bank suspend the account pending resolution of the dispute.