Background

You have recently begun work as an intern with Hawthorn Community Legal Service. Your job is to advise (under supervision of the solicitor on duty) clients that come to the Legal Service for free legal advice. Most of the clients are migrants, refugees, and/or are economically disadvantaged ("poor"). Due to their respective backgrounds, the clients mostly need legal assistance with basic legal problems. However, when you arrive at the clinic your supervisor hands you a complex file.

After reading the file you grin. This file is why you studied Finance Law. You rub hands with delight, order an almond milk triple strength decaffeinated soybean cafe latte and begin!!

Facts

Betti, a refugee from the United States of Borat (USB), was recently granted Australian citizenship and chose to reside in Melbourne. Due to her experiences in USB Betti suffers from severe anxiety and depression. As part of her treatment Betti paints still images, and has had some success commercially, with many of colleagues at work purchasing her stylised range of "Cats". Betti has established a savings account with First National Bank Ltd, a large trading bank based in Melbourne, where she deposits her weekly savings of about $350 (This amount is the average, the range is $250- $400.) earned from the sale of paintings and her wages received as a receptionist in a medical clinic where she earns approximately $50,000 gross pa.

Recently she inherited $500,000 and deposited this amount in her savings account. Then Betti approached First National Ltd for a loan so that she could purchase a modest two-bedroom apartment in Hawthorn. Betti plans to convert the spare bedroom into a painting studio so she can store her art as well as produce more paintings for sale. Initially the loans officer at First National told Betti that her loan application should be approved. Reassured and excited Betti attended an auction in Hawthorn and successfully bid for a suitable apartment. However, after purchasing the apartment Betti was told by First National that her loan application was rejected on the basis that her income level was insufficient. Horrified Betti went to speak to her local branch manager, but he told her that it was a "Head Office decision" and he couldn't help her.

This decision caused Betti a lot of stress, because the contract to purchase the apartment did not have a conditional finance clause (Betti did not understand contract law and the need for such a term), and settlement was within 30 days, and she had to provide a deposit within the next 5 working days. Failure to provide the deposit or settle would result in the contract being terminated and Betti sued for any damages the owner may suffer. No other banks or commercial lenders were prepared to lend because Betty did not have a deposit.

After some encouragement from her work colleagues Betti wrote a letter to First National protesting their decision and threatening to complain to the ACFA. Two days later she received an email from First National advising her of the following: (a) her account had been closed; and (b) except for the sum of $10,000 in another account, her funds ($600,000) have been frozen. A day later Betti was contacted by the Federal government investigating how she came to inherit the $500,000.

Time was ticking away and desperate, Betti, approached a private lender, also a migrant from USB, who demanded twice the current market interest rate, and that the loan be repaid within 10 years not twenty, (which meant that Betti would make monthly repayments of $2,000) and that the first two month's repayments be made up front as an "administration charge". Any late payments and the interest rate will increase by 2% (so for example from 12 to 14 %). When Betti claims that the terms are too harsh the private lender states that they are not a bank and are not bound by any laws.

In a panic Betti agreed and paid the lender $4,000 by direct transfer from her second account with National Bank.

The next day Betti receives another visit from the Federal police claiming she had been sending money to the Dead Poet's Society, a group located in the USB and classified as being a terrorist organisation, and consequently she loses her job as a receptionist. Betti denies all allegations.

In tears Betti comes to the Hawthorn Community Legal Service.

Advise Betti regarding the following:

1. Has the First National Bank breached any of its obligations towards her as a customer of the bank? (22 marks)

Additional Information.

1. In the contract with First National Bank, the "Terms & Condition" pamphlet states the following:

"Section 25 Closing Accounts and Memberships; We may, at any time, close any of your Accounts by giving you 20 days written notice. The notice does not have to specify the reasons for the closure."

1. Betti received the following email terminating her Account:

"A recent review was conducted and as a result the bank has concluded that your banking business is not suited to First National Bank and therefore, we will exercise our right to close all of your banking facilities under membership XXXXXXXX, with effect from close of business 20/12/2023. I am not in a position to provide any further information as to why your banking business is not suited to First National Bank."

1. First National had contacted the Federal Police stating they suspected Betti's funds ($500,000) originated in a terrorist country. They justified not explaining their reasons for terminating her account on the grounds it could jeopardise any investigations by the Federal Police or ASIO (Autstralian Security Intelligence Organisation).

1. Betti's account had been hacked. Small amounts were being withdrawn- $10 to $100 weekly since she had opened her account. The amounts were being sent to Russia. The Board of the First National Bank had introduced a policy that in view of the war in Ukraine they would not permit any payments made to Russia and would close any accounts that did so. Betti states she did not even notice these withdrawals and denies knowing anyone in Russia.

1. First National representatives stated in a further email to Betti they regretted having to freeze her finds, but in view of her background had ensured that she had access to "minimal" funds so she would avoid undue hardship.