Bank of Credit and Commerce International SA ((in Liquidation)) v Ali (No. 3)
| Jurisdiction | England & Wales |
| Judge | Lord Justice Pill,Lord Justice Robert Walker |
| Judgment Date | 31 January 2002 |
| Neutral Citation | [2002] EWCA Civ 82 |
| Docket Number | Case No: A3/2001/9016/CHANF |
| Court | Court of Appeal (Civil Division) |
| Date | 31 January 2002 |
[2002] EWCA Civ 82
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT
CHANCERY DIVISION – MR JUSTICE LIGHTMAN
Royal Courts of Justice
Strand,
London, WC2A 2LL
Lord Justice Pill
Lord Justice Robert Walker and
Lord Justice Jonathan Parker
Case No: A3/2001/9016/CHANF
Michael Kent QC and Isaac Jacob (instructed by Messrs Finers Stephens Innocent) for the Appellants
Christopher Jeans QC and Annie Hockaday (instructed by Messrs Lovells) for the Respondents
Robin Allen QC (instructed by Beale & Co) for the other represented Claimants
The appeals
This is an appeal against the judgment of Lightman J given on 25 June 1999 whereby he dismissed claims for damages, known as the stigma claims, against Bank of Credit and Commerce International SA ("BCCI") by former employees. There are over 300 stigma claims. The litigation is managed by Lightman J and on 29 July 1998 he made an order for the trial of five test cases, including those of Mr Syed Badshah Nawab Husain and Mr Iqbal Zafar ("the appellants"). His order provided that any determination or finding as to the law or the facts common to cases not before the court as test cases should be binding on the other employees who were listed in a schedule to the order.
The claims of Mr Husain and Mr Zafar and three others were considered by the judge at a hearing which lasted 9 weeks with hearings on 36 days. The judge rejected their claims. On 4 May 2001, Chadwick LJ and Arden LJ granted a limited permission to appeal to the appellants
Malik and Mahmud v BCCI
The claims arise out of the conclusion of the House of Lords in Malik and Mahmud v BCCI [1998] AC 20 that, in a contract of employment, there is an implied obligation on an employer not to carry on a dishonest or corrupt business. If there is a breach of that obligation as a result of which an employee's future employment prospects are handicapped, damages may be recoverable for financial losses sustained. Further, it makes no difference if the employee only heard of the employer's conduct after leaving the employment. Dealing with an entitlement to damages for financial loss, Lord Steyn, with whom Lord Goff, Lord Mackay and Lord Mustill agreed, stated, at p 52G:
"The principled position is as follows. Provided that a relevant breach of contract can be established, and the requirements of causation, remoteness and mitigation can be satisfied, there is no good reason why in the field of employment law recovery of financial loss in respect of damage to reputation caused by breach of contract is necessarily excluded."
Lord Steyn referred to difficulties of proof and continued at page 53D:
"It is, therefore, improbable that many employees would be able to prove 'Stigma compensation'. The limiting principles of causation, remoteness and mitigation present formidable practical obstacles to such claims succeeding. But difficulties of proof cannot alter the legal principles which permit, in appropriate cases, such claims for financial loss caused by breach of contract being put forward for consideration."
Lord Nicholls of Birkenhead, with whom Lord Goff and Lord Mackay agreed, also referred to the difficulties involved. Among them, at page 42E was:
"Finally, although the implied term that the business will not be conducted dishonestly is a term which avails all employees, proof of consequential handicap in the labour market may well be much more difficult for some classes of employees than others. An employer seeking to employ a messenger, for instance, might be wholly unconcerned by an applicant's former employment in a dishonest business, whereas he might take a different view if he were seeking a senior executive."
The business of BCCI
The present claims are to be approached on the basis that, in the words of Lord Nicholls, the employer "was conducting a dishonest and corrupt business". There was before the judge a statement of "agreed misconduct". In his summary of that misconduct, the judge stated:
"44. It was agreed that the Bank was hopelessly insolvent from at least 1986, and the proper inference must be that it was insolvent (or at least of doubtful solvency) from the mid 1970s, for it is agreed that the wrongdoing during the period from the mid 1970s on was designed to conceal the true financial position of the Group and its insolvency or doubtful solvency.
45. The fraudulent activities were not isolated, but systematic over a very long period of years. They took on a life of their own. They formed, or related to, part of the Bank's banking activities. The wrongdoing included payments of bribes and kickbacks (to employees of the Bank, officers of other banks and public officials), the preparation of false records (including the recording of sham and fictitious transactions) and the creation of fictitious (i.e. forged) documentation; the unlawful purchase of its own shares; money laundering (including the laundering of drug money); defalcations; and the preparation and filing of false annual accounts vastly overstating assets and understating liabilities. Even today the Liquidators cannot say what is the full extent of the frauds. The sums involved in the frauds were massive running into billions of dollars. Such was the Bank's wrongdoing that, when the house of cards collapsed, the insolvency of the Bank ran into billions of pounds causing huge losses to customers. The fraudulent activities were recorded principally in the Cayman Islands and in other off-shore locations, but were orchestrated, and sometimes conducted, from London.
48. The wrongdoing and consequent collapse were likely to be (as they were) the greatest banking scandal ever and to cast a cloud (in the eyes of the public) on those employees of the Bank who were perceived to be involved in or party to the wrongdoing; …."
It was in July 1991 that the scandal broke and BCCI entered into provisional liquidation. In January 1992 the company was ordered to be wound-up compulsorily. Mr Husain was a payroll officer in the personnel department and was dismissed on the liquidation of BCCI. Mr Zafar had a more senior and expert position. He was Regional Manager for Southern Africa and a relatively senior officer. He had been dismissed by BCCI in 1990. He obtained a job in June 1991 with Albaraka International Bank Limited ("AIBL") but was dismissed from it in August 1991. Both men were in their 40's. Neither of them has since been employed. They seek damages on the basis that it has been the breach by BCCI of the trust and confidence clause which has caused their failure to obtain employment.
The issues
In making their submissions, the parties agree that in deciding the test to be applied, nothing turns on whether the claim is in contract or in tort. The underlying rule of the common law is that "where a party sustains a loss by reason of a breach of contract, he is, so far as money can do it, to be placed in the same situation with respect to damages as if the contract had been performed", (Parke B in Robinson v Harman [1848] 1 Exch Rep 850 at 855), a statement since frequently cited with approval. The judge considered in great detail the events between the appellants' dismissal and the trial. He concluded that their failure to find work was not caused by BCCI's breach of the trust and confidence term.
It will be necessary to consider the evidence in more detail but the appellants' basic complaint about the judge's approach can be put simply. The appellants challenge the judge's treatment of the evidence and his failure to draw inferences. They also submit that the judge was wrong to conduct a "job-specific exercise". He should have adopted a "broad brush" approach by which he evaluated the diminished chance of work and put a value on it. Loss should necessarily have been inferred from the evidence of corruption and the widespread publicity given to it. Failing that, loss should in the circumstances have been inferred from the evidence of the appellants' failed job applications. It was not a necessary requirement (and was unrealistic) to have to call prospective employers to give evidence as to why they did not offer employment to the appellants.
An issue arises as to whether the judge wrongly excluded evidence known as the "anecdotal" evidence. Subject to that, two issues on which permission to appeal has been granted arise. The first is whether the judge selected the correct legal test to be satisfied by the appellants in order to establish financial loss consequent on breach of the trust and confidence term. The second is whether, whichever legal test is applied, the judge was wrong in failing to draw inferences of financial loss in the case of each appellant from the evidence as a whole. It included evidence of the publicity given to wrongdoing at BCCI, evidence of the appellants' previous employment histories and their efforts to obtain employment since the relevant dismissals, statistical evidence and the evidence of experts and witnesses from Coutts' Career Consultants Ltd ("Coutts"). Mr Zafar also challenges the judge's finding of primary fact that his dismissal from AIBL was not, wholly or even in part, caused by the breach by BCCI of the trust and confidence term.
In his approach to the issues in the case, the judge did not minimise the scandalous way in which BCCI had been operated. He set out the statement of agreed misconduct. The judge referred in some detail to the publicity given to the misconduct. Mr Kent QC, for the appellants, relies on that...
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