In the recent case of Uzbekov v Revolut, the English High Court struck out a breach of contract claim brought by Mr Uzbekov following Revolut’s closure of his account based on media reports indicating he was involved in money laundering. Mr Uzbekov suffered no financial loss but sought nominal damages and declarations in order to vindicate his reputation. Mr Uzbekov also asserted that there was a public interest in his case in the context of the importance of upholding the integrity and propriety of the banking industry, as demonstrated by the widespread media coverage of ‘de-banking’ cases recently. However, the Court found that there was no real prospect that he would be granted the declarations he sought. Further, the costs to Revolut and the use of Court time would be disproportionate to the marginal benefit that any successful claim would confer on Mr Uzbekov. This decision will be of particular interest to financial institutions given the very limited case law on ‘de-banking’ and the increased public interest in this issue.
Background
In April 2020, Revolut closed Mr Uzbekov’s account because it had formed the view, based primarily on media reporting, that Mr Uzbekov may have been involved in money laundering. Revolut relied on their standard terms entitling them to close or suspend accounts in exceptional circumstances, including where Revolut has suspicions of fraudulent activity or had reason to believe that continued use of the account could damage their reputation or goodwill. Prior to closing the account, Revolut filed a Suspicious Activity Report and sought a Defence Against Money Laundering from the National Crime Agency.
On closure of his account, Revolut returned approximately £11,000 to Mr Uzbekov’s car dealer. Mr Uzbekov ultimately received the money that was returned and suffered no financial loss. However, he alleged that Revolut had breached their contract with him because the media reporting relied upon was incorrect and part of a “smear campaign” against him, so they had no good reason to suspect that he had behaved fraudulently, provided incorrect information, or that his continued use of the account would damage their reputation and goodwill. As such, Mr Uzbekov sought nominal damages (as compensation for the distress and embarrassment suffered by him) and declarations to the effect that Revolut had breached their contract with him and had no good reason to close his account.
Revolut accepted that Mr Uzbekov’s allegations against them raised triable factual issues. However, they sought reverse summary judgment and strike out of the claim. Revolut argued that even if the factual issues were resolved against them, because Revolut had no on-going relationship with Mr Uzbekov the declarations were historic and would serve no useful purpose. As such, there was no real prospect that the Court would grant the declarations even if the Court found that the alleged breach had occurred. Furthermore, they argued that the proceedings were wasteful and disproportionate so should be struck out as an abuse of process.
High Court Judgment
The High Court agreed with Revolut and struck out the claim. In doing so, the Court considered the law on both declaratory relief and abuse of process.
Regarding abuse of process, the Court asserted its right to question whether a case is worth the cost for the litigants and whether it is an appropriate use of Court resources. Following the decision in Jameel v Dow Jones & Co Inc. [2005] QB 946 the Court found that the costs of the proceedings, and in particular Mr Uzbekov’s costs of more than £147,000 at this stage were disproportionate to any benefit Mr Uzbekov could derive from the proceedings.
Regarding the declaratory relief, the High Court focused on the issue of whether any objectively useful purpose would be served by granting the declarations sought. The Court ultimately felt that the declarations would serve no useful purpose.
In making both of these findings, the High Court focused on the following key features of the claim:
- The claim was entirely backward-looking. Mr Uzbekov had suffered no financial loss, had no ongoing relationship with Revolut and his business relationship with the car dealer had continued.
- Neither the nominal damages nor the declaration would have established that the allegations made against Mr Uzbekov in the media were false (only whether or not Revolut had complied with its standard terms).
- While Mr Uzbekov would derive subjective satisfaction from the declarations, they did not serve an objectively useful purpose. Any finding would be restricted to the specific circumstances and would set no precedential value.
- There are other ways to vindicate a reputation. English law provides a framework for defamation proceedings which has safeguards for defendants. As such, the Court should be cautious about allowing proceedings that seek to circumvent those safeguards.
- To the extent there is a public interest in ‘de-banking’, it is regulators who are the best placed to consider such systemic issues. The Court noted the Financial Conduct Authority’s work on ‘de-banking’ and its report from September 2023. Further, Mr Uzbekov could have complained to the Financial Ombudsman Service, but no such complaint was made.
Comment
Although there have rightly been concerns expressed in the media in recent months about individuals’ bank accounts being closed without justification, this case demonstrates that the English courts will not allow their resources to be used for ‘de-banking’ claims merely to prove a point where no objectively useful (i.e. practical) purpose will be served. It likely helped the judge make his decision that Revolut appeared to be acting in good faith in seeking to comply with anti-money laundering legislation and closing the account, whether or not Revolut had actually complied with its terms of business here (which was not determined). In any event, the Court indicated that the appropriate way to challenge defamatory statements and vindicate a reputation is via defamation proceedings. In terms of the wider issues raised by ‘de-banking’ cases, the Court sent a clear message that regulators are better placed to investigate than the Court, and for individual complaints, that the Financial Ombudsman Service provides a more appropriate and proportional procedure. However, the fact that this case was even brought reflects the increased desire of customers to litigate if their accounts are closed unexpectedly, which in turn means that financial institutions should continue to make careful decisions about closures which are well-documented in case of litigation at a later date, as explained in more detail here.
