Number of Words : 2170
Number of References : 9
This assignment is based on the below given scenario –
Joel is a lawyer who is about to operate a sole legal practice in Melbourne. As a ‘sole trader’ he will operate from premises that he had purchased about a year ago, and will employ two support staff.
A week ago, he met with Omnia Bank Ltd (‘Omnia’), to establish the following banking facilities:
Business overdraft (for $20,000)
Business savings account
Trust account ( for clients)
Personal savings account
Personal credit card account
He had signed various application forms in relation to them, and a few days later, he received several letters from Omnia confirming their opening and operation.
He also received in the mail his credit card, as well as a debit card ( for the personal savings account), and a password for internet banking.
Joel decided that he would also insure his business premises with Omnia, and arranged insurance cover with Omnia. The policy and a receipt were duly sent to him.
At no point did Joel receive from Omnia any further documentation containing comprehensive information about these services apart from the mentioned correspondence, cards, and insurance policy.
Six months later, Joel finds himself in financial difficulties and in a desperate bid to pay some of his personal creditors, he draws a cheque on the trust account for $20,000, payable to himself.
The cheque is duly cleared by Omnia resulting in the trust account being debited by this amount. Joel then uses the funds to pay for those personal debts, with the intention of repaying the trust money as soon as he is able.
However, the business continues to accumulate debts to the point where the overdraft has exceeded its limit. Omnia refuses to agree to increase the overdraft limit and notifies Joel that it must be repaid in full by the end of the week. Joel asks for a longer period of two weeks giving an assurance that by then he would be able to secure the required sum from a relative. However, Omnia refuses his request, and Joel fails to meet the deadline by the end of the week.
As a result, Omnia writes to Joel informing him that it plans to exercise its right of set-off to reduce or eliminate the overdraft. The letter states:
Omnia reserves the right to combine your overdraft account with all accounts
held by you with us, including the trust account.
Joel is in a panic, and notifies Omnia that he will take up this matter with the Financial Ombudsman Service (‘FOS’). He also complains that he did not receive any detailed information from the bank in relation to the services it provided, or sufficient time to settle the overdraft.
In view of this claim, Omnia holds off exercising its set-off ‘right’, but informs Joel that ‘it is unlikely the FOS will be able to help you in these matters and in any case, Omnia does not believe the FOS has any jurisdiction in these matters or regard its decisions as binding’.
Unfortunately, by now, Joel’s business is insolvent. An independent audit uncovers the $20,000 deficit in the trust account.
1. By reference to the above facts, explain the nature and scope of Omnia’s legal obligations to Joel as a customer, and explain whether it has breached, or might breach in the future, any of those obligations to Joel.
Your explanation should include ( but not be limited to)
discussion about the nature of the relationship between the parties and the characteristics of the accounts
analysis of all relevant sources of law
commentary on the accuracy of the statements made by Omnia to Joel
2. Explain whether Joel’s clients would have any legal right of action against Omnia for its part in honouring the cheque Joel had drawn on the trust account resulting in its debit of $20,000
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AKey : LBO - 6416