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In the decision of Uzbekov v Revolut  EWHC 98 (KB) handed out last week, the High Court has struck out a “de-banking” account closure claim bought by an ex-customer of Revolut after his accounts were closed due to adverse media and money laundering suspicions.
The former customer issued a claim for alleged breach of contract seeking nominal damages and declaratory relief. The resulting judgment shows just how limited the causes of action available to an ex-customer whose accounts are closed on suspicions of money-laundering and will be of interest to financial institutions who are facing increased scrutiny on account closures following recent high-profile media and regulatory attention.
In striking out the claim, Mr Justice Chamberlain held that “the costs to the defendant… and the impact on the court’s resources… would be disproportionate to the marginal objective benefit the relief would confer on [the former customer]”.
Mr Ildar Uzbekov, (Mr U) is a former Revolut customer. After an anti-money laundering alert was triggered, Revolut considered media reports which suggested that he may be involved in money-laundering (including articles published by The Sunday Times, Guardian and Observer). After questioning the origin of funds credited to the account and being unsatisfied with the responses from Mr U, Revolut blocked his accounts, submitted a Suspicious Activity Report to the National Crime Agency and ultimately closed Mr U’s accounts without notice, relying on the following wording in its terms and conditions:
“We may close or suspend your account immediately, and end your access to our website, in exceptional circumstances. Exceptional circumstances include the following:
if we have good reason to suspect that you are behaving fraudulently;
if you haven’t given us (or someone acting on our behalf) any information we need, or we have good reason to believe that information you have provided is incorrect or not true;…
if we have good reason to believe that you continuing to use your account could damage our reputation or goodwill”
On closing the account, Revolut returned c.£11,000 of funds from a very recent transaction to the payer as it was entitled to do so. Mr U was able to recover those funds separately from the payer, but claimed it was an embarrassing experience.
In April 2023, Mr U issued a claim alleging that Revolut had closed his accounts in breach of contract when the grounds for doing so under its terms and conditions had not been met, and by returning funds to payers without authority. Although he conceded that he had not suffered financial loss, he alleged he had nonetheless suffered distress and embarrassment. He therefore sought i) declaratory relief concerning Revolut’s alleged non-compliance with its terms and ii) nominal damages for breach of contract.
Revolut applied for summary judgment and/or to strike out the claim as an abuse of process. While Revolut accepted that the breach of contract claim raised triable factual issues, it said a declaration would serve no useful purpose and that the proceedings were wasteful and disproportionate litigation. It relied on Jameel v Dow Jones  QB 946 as authority for a court stopping defamation proceedings as an abuse of process which would not yield any tangible or legitimate advantages in terms of vindication of reputation which would outweigh the drain on the Court’s resources.
In granting Revolut’s application and striking out the Claim, Mr Justice Chamberlain found:
1 The rationale of Jameel and the need to protect parties from disproportionately costly and time-consuming litigation and to prevent an unfair allocation of the court’s resources, applies to more than just libel claims.
2 There was no real prospect the Court would grant declaratory relief, because:
i) Mr U’s relationship with Revolut had ended with no foreseeable prospect of it resuming. A declaration would be entirely backward looking.
ii) Neither an award of damages nor a declaration would establish the falsity of the underlying money laundering allegations nor vindicate Mr U’s reputation.
iii) The relief sought would not serve an objectively useful purpose; it would not bind a third party nor have any wider applicability to other banks.
iv) The Court should be cautious entertaining proceedings for vindicatory purposes which would circumvent existing safeguards for defendants to defamation claims (e.g., the one-year limitation period and need to show serious harm to reputation).
v) Declaratory relief was not in the public interest. The Financial Conduct Authority (FCA) is better placed to consider systematic issues, as it has already done so through its “UK Payment Accounts: access and closures” report. Mr U could have also pursued a complaint through the Financial Ombudsman Service.
3 In noting that Mr U had already incurred costs of £147,000 and trial was listed for several days, Mr Justice Chamberlain held that, even if relief in the form sought was granted, the costs and use of the court’s resources would be disproportionate to the marginal objective benefit relief would confer to the claimant. “The game is not worth the candle”.
Uzbekov continues a recent trend of the Courts upholding bank decisions to close accounts due to suspicions of fraud or criminal activity (see, for example, the recent decision in Harvey v Santander UK Plc  EWHC 2947 (KB), where an application for injunctive relief to remove restrictions on an account was dismissed by the High Court).
This decision will be particularly welcome for financial institutions following the increased levels of scrutiny and attention account closures are now attracting due to recent highly publicised controversies and the FCA’s subsequent report “UK Payment Accounts: access and closures”.
Whilst the current direction of the Courts might be more in the favour of banks in these types of cases, caution should still be taken when approaching decisions to exit customers. It is best practice to maintain a comprehensive audit trial, which includes detailed justifications for any decision, in anticipation of subsequent challenges by customers. Financial institutions should also carefully consider their obligations under the Equality Act 2010 not to discriminate.
Authors: Neil Franklin and Karen Furniss
With contribution from Jake Brown.
This publication is intended for general guidance and represents our understanding of the relevant law and practice as at January 2024. Specific advice should be sought for specific cases. For more information see our terms & conditions.
01 February 2024