The recent decision in Merciful Group Incorporated v Norfina Limited t/as Suncorp Bank¹ considered Suncorp Bank’s right to terminate its banking relationship with its customer Merciful Group (Customer). The case highlights the importance of clear terms and conditions where a bank relies on its express terms to cease its banking services.

We focus on a bank’s ability to rely on its express terms and conditions and the takeaways from the disposition of Hammerschlag CJ (in Eq)² .

Short background

The Customer is a registered charity established to provide aid to various countries including, Lebanon, Yemen and the Syrian Arab Republic.

After a series of internal reviews, the Bank decided the Customer should be exited because the provision of services to the Customer posed an unacceptable money laundering/terrorism financing risk to the Bank that could not be appropriately mitigated.

On 16 April 2025, the Bank formally notified the Customer that the Bank would close the account in accordance with its right under the account terms and conditions and the account was closed on 8 May 2025.

The Court dismissed the Customer’s claim that the Bank had wrongfully closed the Customer’s account.

The relevant clause in the account terms and conditions

In the terms and conditions for the Customer’s account, the Bank had an express right to close the account “to protect our Legitimate Interests“.

Further, “Legitimate Interests” was defined in the account terms as including “our legitimate business needs, prudential requirements……. and any requirements that are reasonably necessary to protect us against a material risk of… our financial detriment“.

In short, the Bank had a contractual right to close the account to protect its legitimate business needs, its prudential requirements and any requirement reasonably necessary to protect the Bank from financial detriment.

There was no requirement for reasons to be given by the Bank and unless exceptional circumstances applied, the terms and conditions required the Bank to give at least 14 days’ notice of account closure.

Takeaways from the disposition of Hammerschlag CJ (in Eq)

Justice Hammerschlag expressed the following in relation to the elements to be satisfied by the Bank:

• In the context of the Bank’s business, the legitimate business needs must be factors to which rational regard may be had as requiring protection. This imports an element of objective assessment.
• 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.

The disposition noted that two questions arise:

1. did the Bank have a legitimate business need or prudential requirement to protect or a material risk of financial detriment to protect against; and
2. 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 [the relevant clause in the account terms and conditions]?

In his disposition, Justice Hammerschlag expressed that:

• 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; and
• whether the Bank should, in response, close the account [the relevant account terms and conditions] require 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.

It was found that:

• not only was the Bank under no obligation to engage with the Customer, the Bank was not then and is not now required to believe what the Customer says or to accept its explanations;
• the [relevant account terms and conditions] neither expressly nor impliedly require the Bank to make any definitive findings of fact or embark on some cooperative process with the Customer; and
• the Bank is under no obligation to take some different step to that which the contract permits it to take.

The Court held that the Bank, once forming the view that the continued provision of services by the Bank to the Customer posed an unacceptable money laundering/terrorism financing risk that could not be appropriately mitigated and managed, was justified in declining to have the Customer as a client and closing the account.

Other observations

Injunction

Hammerschlag CJ also noted that even if the Customer had established breach, the injunction sought would not have been granted, based on one or more of the following:

• It would be inappropriate to force a bank to take risks beyond its appetite in the context of where a relationship has broken down, especially in a highly regulated AML/CTF environment.
• 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 Customer³.
• Continuing the relationship likely would have led to further disputes so that an injunction is inutile.
• The significant element of harm the Customer said it would suffer has been assuaged as the Customer had found another bank willing to do business.

Protection from liability – section 235

Of note, if the Customer was successful in its claim, Hammerschlag CJ expressed significant doubt that s235 of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) (Act) would have given the Bank protection against this claim. His Honour expressed that the claim is for breach of contract and that closing the account was the exercise of an independent contractual right conferred on the Bank under the [relevant account terms and conditions] not something done in compliance, or purported compliance with the Act, the regulations or the AML/CTF Rules, in the sense contemplated by the section.

So, are the steps and risk associated with debanking any clearer?

The decision does provide some further acknowledgement of a Bank’s rights to debank a customer, which is helpful following the earlier decision in Human Appeal International Australia v Beyond Bank Australia Ltd (No 2) [2023] NSWSC 1161.

However, it should be noted on the facts of this case, the Bank acted on clear indicators of high risk exposure to the Bank directly relevant to a highly regulated AML/CTF environment. Where such indicators are less clear or the risk to the Bank can be challenged, care must still be taken when making a decision to cease a banking relationship for such reasons.

The decision does support the benefit of having express and clear terms and conditions, which is in line with the aims of the unfair contract terms laws. The Bank’s use of “Legitimate Interests” as a defined term in the relevant account terms and conditions (and in contrast to a broad legitimate interest provision) no doubt assisted with the transparency aspects of unfair contract terms but also with articulating the reasons for protecting the Bank’s interests in closing the account.

This article was written by Michael Anastas, Partner.

¹ Merciful Group Incorporated v Norfina Limited t/as Suncorp Bank [2025] NSWSC 841,

²  Justice David Hammerschlag is Chief Judge in Equity,

³   ASIC v Australia and New Zealand Banking Group Ltd (No 3) [2020] FCA 1421 at [13] cited.