Factual and Procedural Background
Company A operated three bank accounts with Company B beginning in 2005. In late 2006 adverse press reports suggested that Company A’s investment-club activities might constitute a pyramid or Ponzi scheme. Pursuant to anti-money-laundering guidance, Company B sought Company A’s audited accounts in August 2007, but none were produced.
On 14 November 2007 Company B gave 32 days’ notice of its intention to close the accounts, later extending the notice period to 14 January 2008. On 11 January 2008 Company A obtained an ex parte injunction restraining closure. Judge Jones dismissed that injunction application after an inter partes hearing; however, the Court of Appeal (per Judge Panton P and others) reinstated the injunction pending trial. Company B appealed to the Privy Council, which issued the present opinion.
Legal Issues Presented
- Whether a bank may terminate banking services on reasonable notice when the customer’s accounts are in credit and no unlawful activity is proven.
- Whether statutory provisions—specifically section 4(3)(c) of the Banking Act and various sections of the Fair Competition Act—restrict a bank’s contractual right to terminate the relationship.
- Whether Company B’s notice of termination constituted tortious inducement of breaches of contract between Company A and its investors.
- Whether an interlocutory injunction compelling the bank to continue providing services should be granted, having regard to established principles on injunctions.
Arguments of the Parties
Appellant's (Company B’s) Arguments
- The banking contract was terminable on reasonable notice absent any express contrary term or statutory bar.
- Sections of the Banking Act and Fair Competition Act cited by Company A were irrelevant to contractual termination rights.
- No triable issue existed; therefore the injunction should be refused.
Respondent's (Company A’s) Arguments
- Company B acted maliciously and contrary to statutory duties under the Banking Act and Fair Competition Act, thereby invalidating its notice.
- The bank abused a dominant market position and unlawfully refused to supply services under the Fair Competition Act.
- Closure of the accounts would induce breaches of contract with investment-club members.
- The period of notice was, by implication, unreasonable.
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| OBG Ltd v Allan [2008] 1 AC 1 |
Tort of inducing breach of contract requires knowledge of, and intention to procure, the breach. |
Used to dismiss Company A’s allegation that Company B knowingly induced breaches of contract with investors. |
| American Cyanamid Co v Ethicon Ltd [1975] AC 396 |
Framework for granting interlocutory injunctions: serious issue, adequacy of damages, balance of convenience. |
Provided the general test against which the lower courts’ approaches were measured. |
| R v Secretary of State for Transport, ex parte Factortame Ltd (No 2) [1991] 1 AC 603 |
Confirms that the central question on interim relief is the course likely to cause least irremediable prejudice. |
Reinforced the view that classification as “prohibitory” or “mandatory” is secondary to practical consequences. |
| Films Rover International Ltd v Cannon Film Sales Ltd [1987] 1 WLR 670 |
Emphasises focus on practical consequences rather than formal categorisation of injunctions. |
Cited to criticise the Court of Appeal’s “box-ticking” classification approach. |
| Shepherd Homes Ltd v Sandham [1971] Ch 340 |
Mandatory injunctions may require a “high degree of assurance” of ultimate success. |
Illustrated circumstances where greater certainty is needed before compelling affirmative action. |
Court's Reasoning and Analysis
1. Contractual right to terminate. Citing standard banking law texts, the court affirmed that, absent an express term to the contrary, a bank–customer relationship is terminable on reasonable notice.
2. Banking Act. Section 4(3)(c) merely defines “fit and proper” persons for licensing purposes and does not modify contractual terms between a bank and its customers. Therefore it created no triable issue.
3. Fair Competition Act. (a) Dominant position: the evidence showed a competitive Jamaican banking market; even if Company B were dominant, refusing a customer did not impede competition. (b) Section 34(1)(b): when read contextually, the provision addresses discriminatory pricing practices, not simple refusal to supply. (c) Section 35: alleged collusion was unsupported; another bank’s earlier similar decision did not evidence concerted action.
4. Inducement of breach of contract. Applying OBG v Allan, the tort requires knowledge and intention, neither of which was evidenced.
5. Interlocutory injunction principles. The court found no triable issue; thus, under American Cyanamid, injunctive relief was inappropriate. It criticised the lower courts for classifying the order as “mandatory” or “prohibitory” instead of assessing which course would cause the least irreparable harm, in line with Films Rover and Factortame. The potential prejudice to Company B (reputational, legal and operational) and the weak merits of Company A’s case militated against an injunction.
6. Ex parte practice. The court highlighted misuse of last-minute ex parte applications contrary to procedural rule 17.4(4) and emphasised the principle of audi alteram partem.
Holding and Implications
HELD: The appeal was allowed, costs awarded to the Appellant, and the order of Judge Jones refusing the injunction was restored.
Implications: Company A’s accounts may be closed upon expiry of the notice period, and the decision reinforces a bank’s right to terminate customer relationships on reasonable notice. The judgment also cautions against tactical ex parte injunction applications but sets no new substantive precedent.