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[2025] NSWSC 841
General information, not legal advice.
Supreme Court of NSW
2025-07-29
Hammerschlag CJ in Eq
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Source: NSW Caselaw (www.caselaw.nsw.gov.au). Converted to plain text by ZoeLaw. Not the official version.
Medium Neutral Citation: Merciful Group Incorporated v Norfina Limited t/as Suncorp Bank [2025] NSWSC 841
Hearing dates: 7-8 July 2025
Date of orders: 29 July 2025
Decision date: 29 July 2025
Jurisdiction: Equity - Expedition List
Before: Hammerschlag CJ in Eq
Decision: Proceedings dismissed
Catchwords: BANKING AND FINANCE – CONTRACT – banker and customer – where their contractual relationship is governed by written terms and conditions (Conditions) which permit the defendant bank to close the account immediately to protect the defendant’s Legitimate Interests (a defined term) or to meet the defendant’s prudential requirements or is reasonably necessary to protect the defendant against a material risk of financial detriment – where Conditions provide that except where there are exceptional circumstances (which is not this case) the defendant will give the customer at least 14 days advance notice before closing the account – where the defendant gave notice to close the account for the reason that the defendant lacks the risk appetite involved in continuing to operate the account in circumstances where it concluded that there was a risk that in providing services to the plaintiff, the defendant could be assisting in money laundering or terrorist financing – where the plaintiff customer, contends that the defendant did not have Legitimate Interests in closing the account and its notice to do so is ineffective because it is in breach of the express terms in the Conditions and/or implied terms that the defendant was required to act honestly, for a proper purpose and reasonably in giving notice – where the plaintiff seeks declarations as to the breach and an injunction restraining the defendant from closing the account – HELD – the defendant had Legitimate Interests in closing the account and if the defendant was obliged to act honestly, for a proper purpose and reasonably, it did so – even if the plaintiff had established breach, an injunction requiring the defendant to keep it as a customer and operate a bank account with it would not be granted
Legislation Cited: Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth)
Banking Act 1959 (Cth)
Anti-Money Laundering and Counter-Terrorism Financing Rules 2007 (Cth)
Cases Cited: ASIC v Australia and New Zealand Banking Group Ltd (No 3) [2020] FCA 1421
Bank of New Zealand v Christian Church Community Trust [2024] 3 NZLR 856; [2024] NZCA 645
B-Filer Inc v Bank of Nova Scotia 2005 ABQB 704
B-Filer Inc v TD Canada Trust 2008 ABQB 749
Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337; [1982] HCA 24
Human Appeal International Australia v Beyond Bank Australia Ltd (No 2) [2023] NSWSC 1161
Impact Traders Pty Ltd v Australian and New Zealand Banking Group Limited [2003] NSWSC 964
National Commercial Bank Jamaica v Olint Corpn [2009] 1 WLR 1405
Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia (1998) 195 CLR 1; [1998] HCA 30
Prosperity Ltd v Lloyds Bank Ltd (1923) 39 TLR 372
RCG Forex Service Corp v HSBC Bank Canada 2011 BCSC 315
Shepherd v Felt and Textiles of Australia Ltd (1931) 45 CLR 359; [1931] HCA 21
Category: Principal judgment
Parties: Merciful Group Incorporated (Plaintiff)
Norfina Limited t/as Suncorp Bank (Defendant)
Representation: Counsel:
F Corsaro SC / M A Cowden (Plaintiff)
J Arnott SC / A Poukchanski (Defendant)
Solicitors:
Cordoba Legal (Plaintiff)
Allens (Defendant)
File Number(s): 2025/00173649
Publication restriction: Nil
This dispute between the defendant banker (the Bank) and the plaintiff customer (Merciful) arises out of the closure by the Bank of Merciful’s account (the account) on the grounds that this was justified by its legitimate business needs, being its lack of appetite for the risk involved in continuing to operate the account.
Merciful, a corporation, is a registered charity.
It was founded in 2016. According to its President and founder Mr Rabih Chamma, it was established to provide aid to various countries including, Lebanon, Yemen and the Syrian Arab Republic. Merciful is run by Mr Chamma and his wife, Fatimeh Charafeddine. They are the signatories to the account. Mr Chamma has a number of criminal convictions going back to 2010.
Merciful has had the account since 2019.
This case is not the first difficulty Merciful has had with banks. According to Mr Chamma, in about March 2018, Merciful was “debanked” by St George Bank and in about March 2019, Merciful was “debanked” by the ANZ Bank. HSBC Bank and Arab Bank of Australia have reportedly advised they do not offer banking facilities to charities. In April 2025, Merciful applied to open a bank account with Australian Mutual Bank but was refused. In May 2025, it applied to open an account with Bank of Sydney, which was also refused. It did, however, apparently manage to open an account with Bendigo Bank on 6 May 2025.
A central element of the Bank’s justification for not wanting to do business with Merciful is that the account was and continues to be used to receive substantial sums of money which are then packaged up into larger sums (often in round dollar amounts) and transferred to a third-party money remitter, often with no description, but sometimes described as “Leb”, “Lebanon”, “Yem”, “Yemen” or “Sy” (meaning Syria) for onward transmission to those and other countries classified by the Bank as high risk and to some of which the Bank itself will not transfer money.
Their contractual relationship is governed by written instrument entitled Terms and Conditions for Suncorp Bank Accounts and for Continuing Credit Accounts (the Conditions).
References to clauses are to clauses in the Conditions.
The following are the pertinent clauses:
1.3 Definitions and Interpretation
…
“Legitimate Interests” means [the Bank’s] legitimate business needs, prudential requirements and/or security requirements (including any reasonable response to material changes to [the Bank’s] business or systems) and any requirements that are reasonably necessary to protect [the Bank] against a material risk of:
(a) a monetary default by [a customer] under a Credit Contract;
(b) [the Bank’s] ability to enforce [its] rights against a Security;
(c) the value of a Security being materially compromised; or
(d) [the Bank’s] financial detriment.
…
We may exercise our rights, powers and discretions in any manner that protects our Legitimate Interests but unless specifically stated we will not be under an obligation to take any action.
…
1.17 Our Rights
We can exercise our rights at any time within the limits of the law where it is necessary to comply with the law or any applicable Code or to protect our Legitimate Interests.
…
15.2 When we can close your account
We can close your Account immediately if:
(a) you break the Terms and Conditions in a material way;
(b) you exceed your Facility Limit by a material amount;
(c) to protect our Legitimate Interests;
(d) we need to by law or to meet our prudential requirements;
(e) you have given us materially false or misleading information;
(f) you act in a manner that in our reasonable opinion threatens the security of our staff or property or any other Person;
(g) we reasonably believe the use of an Account has caused or will cause harm (for example financial abuse or other abuse) to another person;
(h) after 90 days from Account opening, your Account has had no customer initiated Transactions, and the current Available Balance is less than $0.01; or
(i) your account has had no customer initiated Transactions for 36 months, and the available balance at time of account closure is less than $0.01;
(j) your account is overdrawn for more than 90 days and there are no customer initiated transactions during this time.
However, unless there are exceptional circumstances (e.g. fraud or criminal activity), we will give you at least 14 days advance notice before we close your Account.
(Emphasis added.)
The Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) (the Act) is an Act to combat money laundering and the financing of terrorism (collectively, A****ML/CTF).
Section 3(1) of the Act outlines its objects. They include to provide for measures to detect, deter and disrupt money laundering, financing of terrorism and other serious financial crimes.
The Act imposes obligations on providers of what the Act calls “designated services”. Section 6 defines when a designated service is provided and a customer to whom the designated service is provided. The provider of a designated service is a “reporting entity”.
The Bank is a reporting entity, providing designated services when allowing transactions to be conducted on the account.
Section 36, headed “Ongoing customer due diligence”, imposes an obligation on reporting entities to monitor their customers in relation to the provision of designated services, with a view to identifying, mitigating and managing the risk the reporting entity may reasonably face that the provision by it of a designated service at or through a permanent establishment of the reporting entity in Australia might (whether inadvertently or otherwise) involve or facilitate money laundering or the financing of terrorism. The section is a civil penalty provision. Penalties for contravention can be severe.
Section 81 requires a reporting entity to have an anti‑money laundering and counter‑terrorism financing program. The program must have a Part A (general) and a Part B (customer identification). In this case, only Part A is relevant, and in the case of the Bank, the applicable instrument is the Bank’s Joint Anti-Money Laundering and Counter-Terrorism Financing Program, Part A (the Program), referred to below.
Section 85 of the Act provides that the purpose of Part A of a joint anti‑money laundering and counter‑terrorism financing program is to identify, mitigate and manage the risk a reporting entity, like the Bank, may reasonably face that the provision of designated services may involve or facilitate money laundering or financing terrorism.
Division 2 of Part 16 establishes the Australian Transaction Reports and Analysis Centre, or AUSTRAC. AUSTRAC is a regulator and specialist financial intelligence unit whose purpose is to protect the integrity of Australia’s financial system, contribute to the administration of justice and regulate its reporting entity population. [1]
Section 229 makes provision for the AUSTRAC Chief Executive Officer to make rules, which have effect as legislative instruments. The applicable rules are the Anti-Money Laundering and Counter-Terrorism Financing Rules 2007 (Cth) ().
235 Protection from liability
(1) An action, suit or proceeding (whether criminal or civil) does not lie against:
(a) a person (the first person); or
(b) an officer, employee or agent of the first person acting in the course of his or her office, employment or agency;
in relation to anything done, or omitted to be done, in good faith by the first person, officer, employee or agent:
(c) in carrying out an applicable customer identification procedure under this Act; or
(d) in fulfilment, or purported fulfilment, of a requirement under this Act not to commence to provide a designated service, or not to continue to provide a designated service; or
(e) in compliance, or in purported compliance, with any other requirement under:
(i) this Act; or
(ii) the regulations; or
(iii) the AML/CTF Rules.
The Bank is an authorised deposit-taking institution, under the Banking Act 1959 (Cth) and is subject to regulation by the Australian Prudential Regulation Authority (APRA). Pursuant to that Act, APRA issues prudential standards with which the Bank must comply.
APRA has issued a prudential standard (CPS 220 – Risk Management) which requires the Bank to maintain a Board-approved risk appetite statement, risk-management strategy and risk-management framework of policies and procedures consistent with its strategic objectives and business plan.
In compliance with the standard, the Bank has a Board-approved risk appetite statement, risk-management declaration and risk-management strategy.
Risk tolerance is defined for identified risk categories including operational risk. The Bank has an obligation to identify unacceptable money laundering/terrorism financing risks and where necessary exit relationships that it assesses are being used for those purposes.
The Program includes a transaction monitoring program, watchlist management and cross-border payment screening.
The Bank has an internal system called Net Reveal on Demand (NRoD), which monitors customer transactions and risk assessment ratings. NRoD triggers alerts which are monitored by the Bank’s AML/CTF operations team and which are then analysed and case managed. Outcomes are recorded and certain findings are escalated to the AML/CTF Compliance Officer or other executives. If an alert is deemed to be suspicious or high risk, enhanced customer due diligence (ECDD) is implemented. If the trigger is considered to be high risk, an internal team of the Bank, called AML/CTF Operations, is required to undertake a series of steps based on the circumstances of the trigger giving rise to the money laundering/terrorism financing risk.
The program provides, relevantly, that:
… If AML/CTF Operations deems that one of the following steps is not applicable to the particular trigger, it may choose not to carry out that step. However, it must record the reason for this determination.
(a) review the information held about a customer and identify if there is an ML/TF risk in continuing to provide the designated service to the customer.
…
(b) implement any interim measures it considers necessary in order to mitigate and manage the ML/TF risk, such as implementing any of the measures listed in (c) below on an interim basis;
(c) seek any further information necessary to understand the ML/TF risk or to determine which measure/s should be implemented to appropriately mitigate and manage the ML/TF risk. In particular, AML/CTF Operations will consider whether to:
(i) ask for information from the customer or third-party sources to:
▪ clarify or update customer information;
▪ clarify or update beneficial owner and control structure information;
▪ obtain any additional customer (including PEPs) or beneficial owner information, including where appropriate, taking reasonable measures to identify the source of wealth and source of funds for the customer and each beneficial owner; and
▪ clarify the nature and purpose of the customer’s ongoing business with the relevant reporting entity/ies.
…
Mr Paul Gardner is the Bank’s Executive Manager, Financial Crime – Strategy & Operations. Mr Gardner was the person within the Bank who made the decision that Merciful should be exited as a customer of the Bank. He did so because he formed the view that the continued provision by the Bank to Merciful of designated services posed an unacceptable money laundering/terrorism financing risk that could not be appropriately mitigated and managed, having regard to the Bank’s systems and controls for managing such risk. He approved the recommendation to exit Merciful as a customer of the Bank, which led to the Deposits and Card Maintenance team at the Bank issuing a notice of termination of Merciful’s accounts.
I will now deal with the central events that led to the making of that decision.
Between November 2019 and March 2022, four Transaction Monitoring Program (TMP) alerts were registered on Merciful’s account by the Bank’s AML/CTF Operations Team in accordance with triggers within the Program which are activated where transactions are unusually large relative to the customer profile, are to or from a high-risk country, or where there are irregular patterns of account activity.
On 18 March 2024, the AML/CTF Operations Team received a referral from the Bank’s Fraud Detection Team in respect of Ms Charafeddine, based on the large amount of money that had been sent to Ceylon Exchange. This led to the carrying out of ECDD.
On 3 June 2024, Merciful’s risk rating in NRoD was, as a result of the ECDD, manually increased from the “standard” to “high”.
On 17 December 2024, the AML/CTF Operations Team received a referral from the Fraud Detection Team, the stated reason being large transfers being sent overseas, spiked activity in multiple high value transactions and large payments sent to Ceylon Exchange for the purposes of aid.
On 27 December 2024, the Fraud Detection Team registered a further alert in relation to the account.
On 17 February 2025, the AML/CTF Operations Team received another referral from the Fraud Detection Team relating to the account.
On 1 April 2025, the Bank conducted a customer transaction profile review as a result of ECDD. The review identified that a sum of money exceeding $5 million had been received by way of “external credits” from various third parties with references to “Lebanon”.
The review referenced three media articles, identifying by name two men who on the basis of the articles engaged in criminal activity.
On the same day, a manual risk rating of “high” was applied to the account, maintaining the high risk rating of the account.
Bank internal reports dated in early April 2025 make the following recordals:
(a) depositing illegally derived funds/assets into a legitimate financial system; (b) transferring the funds/assets through a series of accounts, financial institutions and/or countries (to conceal or disguise the existence or source of proceeds of illegal activities); and (c) spending or reinvesting the funds in a legitimate enterprise or further funding ongoing illegal activity.
The reasons Mr Gardner considers Merciful to be outside the Bank’s risk appetite for the purpose of compliance with the Program include:
charities can be used for facilitation of financial crime, particularly when they have a connection with high risk destinations, individuals or groups. AUSTRAC has identified links to foreign countries considered high risk for terrorism financing as being a particular risk factor for non-profits;
there had been a sudden, significant, increase in the volume and value of funds transmitted through the account between FY2023 and FY2024, which is one of the indicators AUSTRAC identifies as being suspicious. Mr Gardner’s experience observing the transactional data of other charities is that the volume and value of funds into the accounts of charities tends to remain relatively stable, with charities generally experiencing modest growth in the value and/or volume of donations over time. The economic climate during that time meant that many people experienced cost of living pressures. A 225% increase in funds into the account is unusual, and contributed to concerns about the legitimacy of Merciful’s activities and whether the funds received into the account are used for charitable purposes;
there were instances in which merchant facilities (like Eftpos) had been used to process multiple high value transactions between $10,000 and $45,000, which can be an indicator that the merchant facility is being used to process funds which were obtained illegally. The use of merchant facilities provides another method to deposit funds into an account where the true source of those funds may be obscured. This is of greater risk where it is linked to a designated service, such as a bank account;
open source media searches indicated that certain parties who matched the names provided in payment references accompanying deposits into the account had reported links to organised crime or terrorism ideologies;
Merciful forwards a large proportion of the money it receives to money remitters, which can be used to send funds to “perimeter” or high risk jurisdictions to which the Bank itself will not send funds. Transactions via money remitters may be used to obscure the true destination of funds;
payments were made from the account for high value consumer purchases from retail vendors, including Louis Vuitton, Gucci, Jaggards (a gold dealer), Marc Jacobs and Fendi which is behaviour inconsistent with the operation of a charity;
from June 2025, Mr Chamma was permanently disqualified from providing or managing National Disability Insurance Scheme, or NDIS, services.
On 15 April 2025, Mr Gardner received a Senior Management Report dated 11 April 2025, recommending that Merciful be exited because continued provision of designated services by the Bank posed an unacceptable money laundering/terrorism financing risk to the Bank that could not be appropriately mitigated. The Report contained the following Executive Summary:
– MERCIFUL GROUP INCORPORATED and associated parties were reviewed due to links to a number of high risk jurisdictions and large volume of funds through charity account which are onforwarded to currency exchange (Ceylon Exchange).
– The ACNC financial statement reveals a significant increase in donations over the past three years, inconsistent with the expected economic climate: 2022 ($2,391,600), 2023 ($4,412,591), and 2024 ($9,926,518). The profit and loss statements indicate that the majority of expenses are attributed to ‘project and events expenses’.
(ACNC is the Australian Charities and Not-for-profits Commission.)
He then decided that Merciful should be exited as a customer of the Bank. Merciful was outside the Bank’s risk appetite in that the continued provision by the Bank to Merciful of designated services posed an unacceptable money laundering/terrorism financing risk that could not be appropriately mitigated and managed having regard to the Bank’s systems and controls for managing money laundering/terrorism financing risk. Mr Gardner approved the recommendation to exit Merciful as a customer.
On 16 April 2025, the Bank gave written notice (Notice) to Merciful that on 8 May 2025, the Bank would be closing its account “in accordance with section 15.2 of the Terms and Conditions for Suncorp Bank Accounts”.
After careful review of its relationship with your client against its policies and procedures, Suncorp Bank identified your client as operating outside of Suncorp Bank’s risk appetite. On that basis, Suncorp Bank made a risk-based decision that it is no longer willing to provide banking and financial services to your client and decided to close your client’s account in order to protect Suncorp Bank’s legitimate interests. Suncorp Bank provided 23 days’ notice of the Account closure.
Merciful commenced these proceedings by Summons sued out of this Court on 6 May 2025.
On 6 May 2025, Slattery J (sitting as duty judge) granted an injunction, ex parte, restraining the Bank from terminating the account unless required by law and subject to further order of the Court. On 19 May 2025, Elkaim AJ (sitting as duty judge) extended the operation of the injunction and listed the matter in the Expedition List on 4 July 2025. On that day, sitting as Expedition List Judge, I fixed the matter for final hearing on 7 July 2025 on an estimate of one day. The hearing ran into a second day.
Mr Chamma was the only witness called for Merciful. He affirmed four affidavits. Three had been prepared for and read on Merciful’s interlocutory application. The fourth affidavit was affirmed on the morning of the hearing. His substantive evidence was directed at establishing that Merciful is a legitimate provider of charitable aid to various countries in Africa, the Middle East and South East Asia and that there is a legitimate explanation for each of the matters which formed the basis for, or materially contributed to, the Bank’s decision, and that, in fact, the Bank did not and does not have any legitimate business need or prudential requirement to close the account. He was cross-examined briefly, principally on how Merciful operates and on his failure to disclose his criminal convictions in the NDIS application for registration.
He says that Merciful has policies and procedures in place to ensure that funds received are being used for its charitable purposes and that several of the countries where it operates have ineffective banking systems that make the use of conventional electronic funds transfer difficult or, in some cases, impossible.
He says that whilst Merciful is not of itself an Islamic charity, from its fundraising events, interactions with donors and those who follow it on social media he knows that many individuals or organisations who give it money subscribe to the Islamic faith and pay money to it in discharge of their duty to donate a percentage of their wealth to the poor and needy. Merciful provides a service to collect these contributions.
He says that Merciful holds well-attended fundraising dinners in reception centres and restaurants at which it auctions off goods and products, ranging from new mobile phones and luxury items to motor vehicles. Goods are purchased by Merciful using funds raised from sponsors. Merciful has grown exponentially over the last few years.
He says that for reasons including the problematic economic climate in Lebanon it receives large donations intended for charitable aid in that country.
As to the persons identified in the media articles, he says that there are persons with those names who have dealings with Merciful but they are not the same people.
As finally articulated, Merciful argues that the Bank lacked any “legitimate basis” under cl 15.2 to terminate its relationship with Merciful and that its attempt to do so was in breach of the express terms and also implied terms of the Conditions and is therefore ineffective. It argues that the Bank is obliged to retain it as a customer and to continue to provide banking services to it.
It argues that:
under cl 15.2, the Bank can only close the account if it is necessary for the Bank to do so. This requires the Bank to have a necessity to terminate. It argues that necessity does not connote convenience, expedience or preference but “indicates a standard of reasonable compulsion” requiring more than a “subjective judgment” on the part of the Bank that continuing the relationship is undesirable. It argues that whether there is or was necessity is not judged by what the Bank believed (honestly, reasonably or otherwise) but whether the facts objectively establish the existence of that necessity;
“Legitimate Interests” as defined in cl 1.3 are not “open ended” but are confined to legitimate business needs, prudential requirements and security requirements. Those interests do not (and presumably cannot ever) include “risk appetite”, “reputational concerns” or “subjective discomfort”;
to demonstrate necessity, the Bank must show that there was a present or imminent threat to one of its defined interests, which could not reasonably be mitigated other than by termination of Merciful’s banking facilities, and that the basis for its conclusion rested on “objective facts, not assumptions or speculation”;
necessity has not been demonstrated because:
(a) closure of the account is not the culmination of a compliance process or the result of a regulatory directive but instead a unilateral administrative judgment made by the “decision maker” (presumably Mr Gardner) on the basis of incomplete recommendations in key respects and based on a factually inaccurate foundation; (b) the Bank’s avowed business need was to avoid the risk of being associated with money laundering or regulatory breach, but it presented no evidence that Merciful had engaged in such conduct and made no request for further information; (c) the asserted risks were speculative and unsupported by regulator engagement or finding.
On implied terms, Merciful argues that:
exercise of the right to terminate under cl 15.2, is limited by an implied obligation to act honestly, for a proper purpose, reasonably and not arbitrarily or capriciously;
the Bank’s actions were “deficient in multiple respects”:
(a) it had no prior engagement with Merciful, which was not given any opportunity to respond to or clarify its transactions. There was no inquiry into the purpose of transactions deemed “suspicious”; (b) the Bank relied on open-source searches, media speculation, and inferences rather than seeking to obtain information from Merciful itself to interrogate the objective facts surrounding the transactions the Bank considered as “suspicious”; (c) the Bank failed to consider an alternative course of action to termination which could have included transaction monitoring, temporary suspension of certain payments, verification of donors or counterparties, and engagement with Merciful to clarify suspicious activity;
investigation by the Bank would have revealed innocent and charitable explanations for all spikes in donation values. There is no evidence of money laundering and no transaction was identified as unlawful or non-charitable. No transaction violated any law, or was knowingly made in breach of the Bank’s compliance policies or was made directly in a manner which would trigger sanctions enforcement. The persons referenced in the media articles have common surnames the use of which without further verification was a “wholly inadequate basis” for action with such serious consequences. Mr Chamma’s behaviour in relation to NDIS (did not disclose fraud, is currently subject to appeal and postdated the termination notice) and is “irrelevant” to the legitimacy of Merciful’s operations or the risk profile of its account;
these “features are wholly inconsistent with an exercise of contractual discretion in good faith and for a proper purpose”.
Merciful’s closing written submissions do not assert that the Bank acted dishonestly, unreasonably, arbitrarily or capriciously. It was not put to Mr Gardner that the Bank had breached its own internal requirements or protocols in the manner in which it approach closing the account. A submission to this effect did not find its way into Merciful’s written submissions, nor was it developed in oral argument. No such breach was pleaded nor is one evident, and it is not clear what the juridical consequence would be if it was correct.
Merciful’s closing written submissions include a document in column form entitled “Suncorp’s Incorrect Assertions - What a Reasonable Investigation Would Have Revealed”. The first column seeks to identify each “Bank’s Factual Assertion” said to be “Incorrect or Misleading”. The document does not engage much (if at all) with any factual assertion made by the Bank which is incorrect or misleading, but rather seeks to provide answers to a series of matters, which are either correct or construed by the Bank as giving rise to appearances, which they undoubtedly do.
In its Further Amended Statement of Claim (filed with leave on the second day of the hearing) Merciful moves for:
a declaration that the Conditions include an implied term that the Bank:
(a) would act reasonably and in good faith in the exercise of any discretion to close the account under cl 15.2; (b) is required to identify to Merciful the facts it relied upon to justify any closure of the account pursuant to cl 15.2; and (c) would not exercise its contractual rights in a manner that rendered Merciful incapable of performing the contract or undermined its commercial purpose.
(a) in breach of the Conditions; (b) a breach of the implied terms; and (c) invalid and of no effect.
an injunction restraining the Bank from acting on, giving effect to, or otherwise treating the Notice as valid (or from attempting to act upon or enforce), on the basis that the notice does not constitute a valid notice for the purpose of cl 15.2.
Merciful correctly did not press untenable declarations that the Bank had engaged in unconscionable conduct. Damages are claimed in the pleading, but no submissions were addressed to that issue.
Merciful did not address the asserted implied term that the Bank would not exercise its contractual rights in a manner that rendered Merciful incapable of performing the contract or undermined its commercial purpose. It is difficult to discern any meaningful field of operation of such a term going beyond a breach of cl 15.2 or the asserted good faith or reasonableness term.
As to the operation of cl 15.2 in its express terms, the Bank argues that:
the Bank operates in a highly regulated and public policy driven environment, under which it is required to act to reduce risk that its services might involve or facilitate money laundering or terrorism financing. Its legitimate business needs and requirements (within the meaning of the definition of Legitimate Interests in cl 1.3) must be viewed in this context;
it is entitled and required to set and comply with its institutional risk appetite guidelines, allocate its operational resources to the risks it is willing to manage and discharge itself of risks it is unwilling to take;
it has a legitimate business need to operate within its chosen risk tolerance, to comply with its internal risk policies and procedures and fulfil its statutory obligations. Failure to do so can result in increased operational costs, increased cost of monitoring high risked customers and reputational impact. Failing to comply with the Program and other regulatory obligations can result in material financial detriment which could be the imposition of civil penalties, AUSTRAC enforcement action or adverse regulatory findings which could require costly remediation;
its decision to terminate the account was soundly taken, in protection of those Legitimate Interests, including its need to manage its business risk in conformity with its external regulatory obligations and internal policy and procedures. The risk rating the Bank assigns to a customer pursuant to its due diligence procedures is not assessed on subjective merits;
the Conditions do not impose on it any obligation to investigate the truth of any allegations which might be implied by patterns of activity on the part of a customer or make any factual findings. The Conditions do not require it to form a view about the ultimate purpose of activity it has detected;
it is entitled and required to make a commercial decision about whether continuation of the account is consistent with the risk management framework it has adopted to achieve compliance with its regulatory obligations, and it did so.
As to implied obligations, it argues that:
no duty of good faith is to be implied into the exercise of its rights under cl 15.2 because such a duty is inconsistent with the express language of the Conditions (presumably the provision that permits the Bank to exercise the power in the manner it choses);
when terminating under cll 15.2(c) or (d), no duty to act reasonably is to be implied, given that such a term is expressly imposed in cll 15.2(f) and (g) but nowhere else;
in any event, it acted in good faith, for a proper purpose and reasonably;
there is no room for the implication of a term requiring the Bank to identify to Merciful the facts it relied upon (either before or after acting under cl 15.2).
It will be noticed that cl 15.2(c) is infelicitously drafted. The inclusion of the word “if” in the chapeau does not work grammatically with paragraph (c). The inclusion of that word is an obvious typographical error and cl 15.2 read sensibly is “We can close your account immediately… to protect our Legitimate Interests”. No one suggested differently.
Central to Merciful’s argument on the operation of cl 15.2 is that the Bank needed to have a “necessity” to terminate. In para 8 of Merciful’s closing written submissions, it is put that the “term necessary as used in cl 15.2, is not a term of art but a word with established legal meaning”. Nowhere in cl 15.2 do either of the words necessary or necessity appear. The words “reasonably necessary” appear in the definition of “Legitimate Interests” in cl 1.3, but not in that part of the definition that incorporates the Bank’s legitimate business needs and prudential requirements.
The Bank has the express right to close the account to protect its Legitimate Interests as defined in cl 1.3, being:
its legitimate business needs;
its prudential requirements;
any requirements that are reasonably necessary to protect it against a material risk of financial detriment to it.
I reject Merciful’s submission that there must be a “standard of reasonable compulsion” (whatever that may mean) present for the Bank to exercise that right.
As to the business needs relied upon, they are required to be legitimate. This, I think, imports an element of objective assessment. In the context of the Bank’s business they must be factors to which rational regard may be had as requiring protection. Prudential requirements likewise import such an element of objectivity. As to material risk of financial detriment, there must be an identified financial risk of substance and the Bank’s steps must be reasonably necessary to protect against that risk.
Two questions arise:
did the Bank have a legitimate business need or prudential requirement to protect or a material risk of financial detriment to protect against; and
if so, in determining that the account should be closed in response to protecting that need, requirement or against that financial detriment, did the Bank meet the threshold for doing so imposed by cl 15.2?
As to the first, protecting against the risk of designated services being provided by the Bank being used for money laundering/terrorism financing and protecting against the risk of financial detriment from that being the case is, self-evidently, a legitimate business need and prudential requirement. That risk manifestly also entails a material risk of financial detriment not only from regulators but also of reputational harm.
Given that Merciful has otherwise failed, it is likewise not necessary to deal with whether, had it won, a final injunction would be ordered. However, I consider it nevertheless appropriate to deal with the question, because it involves a question of some substance.
The parties did not treat with the question of whether the closure of the account was effective even if the Notice was non-compliant, either because notice is not properly a precondition to closure but rather a collateral obligation or because the Bank had a right to terminate on reasonable notice outside the ambit of cl 15.2, which in either event would restrict Merciful to a claim for damages only.
I would, in any event, not have granted the injunction Merciful seeks.
Some authorities indicate that an injunction requiring a bank to continue to provide banking services to a customer is not available or at least is an extraordinary remedy and the Court should exercise caution before requiring a bank to continue a business relationship with a customer against its will: see, for example, Prosperity Ltd v Lloyds Bank Ltd (1923) 39 TLR 372 at 374-5; B-Filer Inc v Bank of Nova Scotia 2005 ABQB 704 at [43]; B-Filer Inc v TD Canada Trust 2008 ABQB 749 at [53]; RCG Forex Service Corp v HSBC Bank Canada 2011 BCSC 315 at [59]-[60]; Impact Traders Pty Ltd v Australian and New Zealand Banking Group Limited [2003] NSWSC 964 at [32], [36]; National Commercial Bank Jamaica v Olint Corpn [2009] 1 WLR 1405 at [1]; Bank of New Zealand v Christian Church Community Trust [2024] 3 NZLR 856 at [186]-[187]; [2024] NZCA 645.
I proceed on the basis that in an appropriate case an injunction in effect requiring the parties to keep on foot a relationship such of that as the parties in this case, akin to the grant of a decree of specific performance, is open: see Human Appeal International Australia v Beyond Bank Australia Ltd (No 2) [2023] NSWSC 1161 at [148]. The traditional reluctance to order specific performance in contracts of personal services has somewhat dissipated. In the employment context, see for example, Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia (1998) 195 CLR 1 at [79]; [1998] HCA 30 where an injunction having the effect of keeping an employment relationship on foot was given.
Whether it should be granted depends on all the circumstances. The descriptor “extraordinary remedy” is of little assistance.
In the particular circumstances of this case, had Merciful established breach, I would not have granted the injunction it seeks, because of one or more or all of the following:
the context in which this relationship has broken down involves the Bank having made a judgment that there is external risk to it in continuing the relationship and the Bank does not have the appetite for taking that risk. I consider that it would be inappropriate to force the Bank to take that perceived risk in the highly regulated environment in which it operates with regard to its AML/CTF obligations;
The proceedings are dismissed.
The injunction ordered by Slattery J on 6 May 2025 and continued by Elkaim AJ on 19 May 2025 is dissolved.
I provisionally order that Merciful is to pay the Bank’s costs of the proceedings. This order will solidify seven days after delivery of this judgment unless any party notifies the other party and my Associate, in writing, that some other order is sought, specifies the order and provides brief grounds. If notice is given, the order will not take effect and I will determine any costs issues.
Before publication of this judgment beyond the parties and their legal advisers, I will hear them on whether any restrictions on publication should be maintained or imposed.
The Exhibits are to be returned.
**********
Program para 1.1.
AML/CTF Rules 15.1-15.11. See also AML/CTF Rules 9.1.1-9.8.3.
Merciful Group Incorporated
Norfina Limited t/as Suncorp Bank [2025] NSWSC 841
(1982) 149 CLR 337
(1998) 195 CLR 1
(1931) 45 CLR 359
The AML/CTF Rules contain practical and operational details of the AML/CTF regime, guidance notes and a compliance guide to assist reporting entities to interpret their obligations, and a “best-practice” approach for reporting entities.
Chapter 15 of the AML/CTF Rules requires a reporting entity to engage in ongoing customer due diligence, have a transaction monitoring program, and to have an enhanced customer due diligence program which must be applied when it determines that money laundering/terrorism financing risk is high. [2]
Section 123(1) makes it an offence for a reporting entity, or its officers, employees or agents, to disclose information in relation to reports of suspicious matters made under s 41 of the Act (or further information from such reports given to AUSTRAC under ss 49 and 49B of the Act), where such disclosure would or could reasonably be expected to prejudice an investigation of criminal offences or proceeds of crime legislation.
Section 235 of the Act states:
Source of wealth unable to be established through open-source searches. True wealth generation is unable to be ascertained
Unable to verify the legitimacy and nature of business of sending party from open-sourced searches
True purpose of credits unable to be established
Due reported donations increasing by 225% between FY2023 and FY2024
Customer is funded by external credits from various third parties and inconsistent Eftpos settlements-reported donations increased from $4,412,591 in FY2023 to $9,926,518 in FY2024 which does not align with expected pattern for charity
Funds are then on forwarded to exchange platform (Ceylon Exchange) or various third parties
No business expenditure identified which does not align with expected outgoings of business product holdings
Charity declared to work within high-risk jurisdictions ie. Afghanistan, Bangladesh, Lebanon, Libya, Nigeria, Pakistan, Sri Lanka, Syrian Arab Republic and Yemen
Large volume of funds flowing through account which does not align with expected transactional activity for business of this type. Transactional activity consistent with the layering stage of the money-laundering cycle – use of an additional account to filter funds through
The internal reports make reference to the media articles and individuals referred to in those articles.
Mr Gardner explained that the three stages of money laundering are “placement”, “layering” and “integration”, which respectively involve:
He says that he personally meets all Merciful’s operating expenses. It operates on a 0% administration fee basis, so that every dollar donated to it is provided in charitable aid, rather than being absorbed by it.
The Bank called Mr Warren Ronald Dickins, the Bank’s Head of Financial Crime Compliance, who gave affidavit evidence about the Bank’s approach to risk management, and Ms Jaime Allison McKenzie, the Bank’s solicitor on the record, who gave affidavit evidence, amongst others, about Merciful’s website and its operation in the context of making donations. Neither was cross-examined.
The Bank argues that s 235(1)(e) of the Act protects it from Merciful’s claim because in terminating the account it acted in good faith, in compliance or purported compliance with the Act or the AML/CTF Rules.
Finally, the Bank argues that even if breach is established, the remedy of an injunction which requires the Bank to maintain a relationship with a customer, which it does not want, should not go. The Bank points out that Merciful now has arrangements with another bank which is apparently prepared to deal with it and take the risk which the Bank does not wish to take.
As to the second, whether an occasion to protect the Bank’s business needs, meet its prudential requirements or protect itself against a material risk of financial detriment by closing the account has arisen, must involve the making of a judgment.
Whether the Bank should, in response, close the account cl 15.2 requires no more than that the Bank exercise a rational or bona fide judgment or reach a rational honest opinion or belief that that step should be taken.
I reject Merciful’s submission that the Bank was required to identify to Merciful the facts it relied upon to justify closure, or to give reasons, or to engage with Merciful or investigate its concerns with it or give it some opportunity to respond to an inquiry before exercising its express contractual right. The Conditions contain no such obligations and the suggested terms do not meet at least three of the five requirements for the implication of a term, which are that (1) it must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; (3) it must be so obvious that “it goes without saying”; (4) it must be capable of clear expression; (5) it must not contradict any express term of the contract: Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337 at 347 (Mason J); [1982] HCA 24. The asserted terms are neither fair nor equitable, the Conditions operate without them and they contradict the express entitlement of the Bank to close the account immediately and the right of the Bank to exercise its rights, powers and discretions in any manner that protects its Legitimate Interests.
On the other hand, there is a clear implication in cl 15.2 itself that the opinion or judgment does not have to be reasonable when it comes to legitimate business needs or prudential requirements, because no such requirement is imposed in cll 15.2(c) and (d) whereas in cll 15.2(f) and (g) it is.
But, in any event, the Bank has not only established that it acted rationally, honestly and in good faith but also that its response was reasonable and for a proper purpose, indeed prudential because:
Merciful was sending large amounts of money from the account to a third-party money remitter (consistent with layering – a well-known technique for money laundering) coupled in some cases with no designation and in others with the country designations referred to earlier – for onward transmission to high risk countries to which the Bank itself would not send money;
the Bank’s highly sophisticated systems assessed the account as high risk;
the source of Merciful’s wealth and credits was unable to be established through open-source searches;
reported donations increased over a short period by 225% when the economic climate made this unusual;
merchant facilities were being used to process high-value transactions;
large sums of money were being spent (by a charity) on high-value luxury goods;
despite appearing to be a substantial operation, Merciful was incurring no business expenditure;
there was an ostensible connection with men whose names matched individuals associated with crime.
Each of these matters was, on its own, sufficient to justify the Bank declining to have Merciful as a client and closing the account. The combination of two or more of them gets to approach the overwhelming. Self-evidently, providing designated services to Merciful can rationally be viewed as entailing real risks, including that of material financial detriment (whether those risks ultimately come home or not).
Added to these considerations is that Mr Chamma had been disqualified from the NDIS. This came to the Bank’s attention after its decision to close the account but in accordance with established authority it is entitled to rely on it: Shepherd v Felt and Textiles of Australia Ltd (1931) 45 CLR 359 at 370-1; [1931] HCA 21.
Not only was the Bank under no obligation to engage with Merciful, it was not then and is not now required to believe what Merciful says or to accept its explanations. The Conditions neither expressly nor impliedly require the Bank to make any definitive findings of fact or embark on some cooperative process with Merciful. The Bank’s reliance on open-source searches was unexceptional, particularly with respect to a registered charity. The fact that it may have known for some time about things which ultimately fed into its decision is of no moment. No estoppel or waiver is asserted.
The Bank is under no obligation to take some different step to that which the contract permits it to take. Under cl 1.3 the Bank “… may exercise [its] rights, powers and discretions in any manner that protects [its] Legitimate Interests…”
It was not put to Mr Gardner that he did not hold the views he says he held, that he acted for an improper purpose, dishonestly, not in good faith or unreasonably. It was not put that the material available to the Bank and upon which the decision was made did not on its face give rise to the concerns which the Bank took it to give rise or that the requirements of the Program did not warrant closure of the account.
The Bank had every basis to conclude that there was an unacceptable risk of it assisting money laundering/terrorist financing and that closing the account was the appropriate response. The Bank was not required to make any finding that money laundering/terrorist financing had actually happened.
The submission that the Bank’s lack of risk appetite for doing business with Merciful or the Bank’s reputation are not legitimate business interests or prudential requirements is without substance. Legislative or quasi-legislative instruments require the Bank to maintain a risk appetite statement. Section 36 imposes an obligation on the Bank to monitor Merciful with a view to identifying, mitigating and managing the risk of being involved in or facilitating money laundering or the financing of terrorism. “Subjective discomfort” can be put to one side.
the banker customer relationship is based on contract but is founded on trust and good faith in a commercial sense and the Bank plainly does not trust the customer: see ASIC v Australia and New Zealand Banking Group Ltd (No 3) [2020] FCA 1421 at [13];
if their relationship were to continue, I regard it as almost inevitable that issues of the kind which have been the subject of this dispute will arise again and will continue to arise so that an injunction is inutile;
Merciful has found another bank willing to do business with it, so that a significant element of the harm Merciful says it will suffer by not having a bank has been assuaged.