(1) Jayesh Shah (2) Shaleetha Mahabeer v HSBC Private Bank (UK) Ltd
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE LEWISON,Lord Justice Munby,Lord Justice Pill |
| Judgment Date | 13 October 2011 |
| Neutral Citation | [2011] EWCA Civ 1154 |
| Docket Number | Case No: A2/2011/1842 |
| Court | Court of Appeal (Civil Division) |
| Date | 13 October 2011 |
[2011] EWCA Civ 1154
Lord Justice Pill
Lord Justice Munby
and
Lord Justice Lewison
Case No: A2/2011/1842
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Mr Justice Coulson
HQ07X3152
Royal Courts of Justice
Strand, London, WC2A 2LL
MR MICHAEL BRINDLE QC & MR SIMON GOLDSTONE (instructed by Zaiwalla & Co, London) for the Appellants
MR RICHARD LISSACK QC & MR NICHOLAS MEDCROFT (instructed by Berwin Leighton Paisner LLP,London) for the Respondent
Hearing date : 20 September 2011
The claimants (Mr Jayesh Shah and his wife) claim damages of over $300 million against the defendant bank, arising from the defendant's delay in executing four transactions between September 2006 and February 2007. The defendant says that it (through its nominated officer) suspected that the proposed transactions concerned criminal property; and that, in those circumstances, it was not required to comply with the payment instructions. Instead, under the Proceeds of Crime Act 2002 (" POCA"), it says that it was obliged to make a number of authorised disclosures to the Serious Organised Crime Agency ("SOCA"); and did so through that same nominated officer.
Before embarking on the detailed arguments, it is necessary to describe Part 7 of POCA a little more fully. POCA was described both by Hamblen J and Longmore LJ in the earlier round of this litigation (to which I refer below) and I repeat their summaries, with little change. Section 327 of POCA creates offences of "concealing, disguising, converting, transferring or removing criminal property from the jurisdiction." Section 328 creates an offence of entering into or becoming concerned in an arrangement which the defendant "knows or suspects" facilitates by whatever means the acquisition, retention, use of control of criminal property by or on behalf of another person. Section 329 creates an offence of "acquiring, using or possessing criminal property." Together, these three offences are known as the principal money laundering offences. "Criminal property" is defined in part in terms of a person's mens rea. Under section 340(3) of POCA, property is criminal property if it constitutes a person's benefit from criminal conduct or it represents such a benefit (in whole or in part and whether directly or indirectly) and the alleged offender "knows or suspects" that it constitutes or represents such a benefit.
It is common ground that for a person to "suspect" for the purposes of POCA he or she must think that there is a possibility, which is more than fanciful, that the relevant facts exist. This is subject, in an appropriate case, to the further requirement that the suspicion so formed should be of a settled nature: K v National Westminster Bank plc [2006] EWCA Civ 1039 [2007] 1 WLR 311 (§ 16). There is no requirement that the suspicion be a reasonable one.
A person does not commit any offence under the principal money laundering offences if he has made a disclosure to the relevant authorities under section 338 and has appropriate consent. So far as it is relevant, under s. 338 of POCA an "authorised disclosure" is defined as follows:
"(1) For the purposes of this Part a disclosure is authorised if—
(a) it is a disclosure to a constable, a customs officer or a nominated officer by the alleged offender that property is criminal property, and
…
(c) the first, second or third condition set out below is satisfied.
(2) The first condition is that the disclosure is made before the alleged offender does the prohibited act."
A "nominated officer" is (in effect) a person nominated and employed by the bank to receive disclosures under POCA (s.335 (9); s. 336 (11); s. 337 (5); s. 338 (5)). In practice this means the bank's Money Laundering Reporting Officer. Thus POCA envisages that a bank employee will not commit a money laundering offence if he or she discloses his or her suspicions internally within the bank.
Sections 330 and 331 of POCA create two offences that apply to persons employed in "the regulated sector" (which includes banking). Section 330 applies to all bank employees. If, as a result of information which comes to him in the course of business a person knows or suspects that another person is engaged in money laundering, he commits an offence if he does not make the required disclosure. The required disclosure is disclosure either to the bank's own nominated officer, or to SOCA. Section 331 applies to nominated officers only. If, in consequence of a disclosure made to him under section 330 (i.e. by a bank employee) a nominated officer knows or suspects that another person is engaged in money laundering, he commits an offence if he does not make the required disclosure. This time the required disclosure is to SOCA. It is plain therefore that POCA envisages that bank employees will report their suspicions internally to the nominated officer; and that, based on what he has been told, the nominated officer may or may not form his own suspicion. If he does, it is he who will disclose his suspicion to SOCA.
The two principal questions raised by this appeal are:
i) Whether the bank's obligation to make standard disclosure requires it to reveal the names of bank employees who reported suspicions of money laundering to the nominated officer within the bank;
ii) If so, whether the bank is prima facie entitled to maintain the anonymity of the individual employees involved in the supply of that information on the ground of public interest immunity.
Coulson J answered both those questions in the affirmative. On the particular facts of the case he also decided that the employees concerned should be identified by function, although not by name. He thought that that method of identification would preserve the anonymity of the individuals concerned; although it is now common ground that it would not. Mr Shah appeals against the judge's refusal to require the bank to reveal the names of the employees in question. The bank cross-appeals against the judge's decision that its obligation to make standard disclosure required the names to be revealed in the first place.
I take the remaining narrative from the judge's clear judgment. The funds from which the proposed transactions were to be made had been transferred by Mr Shah to the bank on 20 July 2006, having previously been held in an account at Credit Agricole. The four proposed transactions were dated 20 September 2006, 26 September 2006, 6 February 2007 and 28 February 2007. In respect of transaction 1 ($28.8 million), transaction 3 ($8.9 million), and transaction 4 (£458,000 odd), the transactions were effected, albeit later than the claimants had instructed. Transaction 2, in the sum of $7,282.50 was never effected because the claimants' payment instructions were cancelled on 29 September 2006. Ironically, even though this was the most modest of the four transactions with which this case is concerned, according to the claimants it had the greatest impact. This sum was to be paid to an ex-employee, and it is said that its non-payment led that ex-employee to notify the Zimbabwean police that Mr Shah was suspected of money-laundering. The claimants say that these difficulties led to problems with the Zimbabwean authorities and the freezing and seizure of large investments, causing them the significant losses which are now claimed as damages against the defendant.
On 26 January 2009 Hamblen J gave summary judgment for the bank and dismissed the claimants' claims. He arrived at that conclusion by rejecting the four positive ways in which the claimants then put their case (irrationality, negligent self-induced suspicion, mistake and automatic mechanically-induced suspicion) and concluded that, in the light of the bank's evidence of suspicion (given exclusively by the bank's solicitor) and the absence of any allegation of bad faith by the claimants, the claims must fail. The Court of Appeal ( [2010] EWCA Civ 31 [2010] Bus LR 1514) agreed with the judge on all four positive ways in which the claimants put their case. However, the Court of Appeal held that since the bank was, on the face of it, in breach of contract, it was for the bank to prove that it held the suspicion that it alleged. Longmore LJ said (§ 25):
"… any claim by a customer that a bank has not executed his instructions is, on the face of it, a strong claim if the instructions have not, in fact, been executed. It will seldom, if ever, be contradicted by the documentary evidence on which it is founded. It is only when the bank says that it suspects the customer was money-laundering that any defence to the claim begins to emerge. That may not, of itself, make the claim a complex claim but there is, subject to Mr Lissack's second submission, no reason why the bank should not be required to prove the important fact of suspicion in the ordinary way at trial by first making relevant disclosure and then calling either primary or secondary evidence and relevant witnesses. As Brooke LJ said, albeit in the context of complex cases, there is a danger of injustice in deciding cases without appropriate disclosure and cross-examination."
If the bank proved that it had the suspicion alleged, then it would have a defence to the claim. Mr Lissack's second submission before the Court of Appeal on that occasion was that a court would never expect or require any bank employee to give evidence that he or she had entertained a relevant suspicion. It was also suggested that no court...
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