Bank of Credit and Commerce International SA ((in Liquidation)) v Ali (No. 3)
| Jurisdiction | England & Wales |
| Judgment Date | 25 June 1999 |
| Judgment citation (vLex) | [1999] EWHC J0625-11 |
| Docket Number | CH 1997 B No 3700 |
| Court | Queen's Bench Division (Administrative Court) |
| Date | 25 June 1999 |
[1999] EWHC J0625-11
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
The Honourable Mr Justice Lightman
In The Matter of Bank of Credit and Commerce International Sa (In Compulsory Liquidation) and Its Former Employees
Mr Richard Sheldon QC, Mr Christopher Jeans QC, Ms Annie Hockaday and Mr Daniel Stilitz instructed byLovell White Durrant for the Liquidators
Ms Cherie Booth QC, Mr Ajmalul Hossain QC, Mr Isaac Jacob, Mr Andrew Stafford and
Mr Andrew Sharland instructed by Beale & Co, Manches & Co and Lucas Baron Jacobs for the Employees
Hearing 8th February�29th March 1999 & 7th May�19th May 1999
This is the official judgment of the Court and I direct that no further note or transcript be made
CONTENTS
CHAPTER ONE
INTRODUCTION
The rise and fall of the Bank of Credit and Commerce International SA ("the Bank") was the greatest scandal in the history of banking. The Bank had a short but eventful life. It was hopelessly insolvent from at least 1986. If this had become known outside the Bank, the Bank would have been closed down immediately. The paramount concern of the Bank thereafter was to survive, whatever the price to be paid, and the price was recourse to fraud and wrongdoing on a massive scale. The Bank was at least in part sustained by its successful policy of pressurising its employees to procure friends, family and associates to place deposits with the Bank. The house of cards (as was inevitable) collapsed with the direst consequences not merely for depositors with the Bank, but equally for the innocent and loyal employees of the Bank. This is one of a series of actions brought by a group of former employees led by the BCCI Staff Campaign Committee to obtain redress. The particular concern of this action is with the trust and confidence term ("the T&C Term") implied into the employees' contracts of employment. The House of Lords in Malik and Mahmud v. BCCI[1998] AC 240 ("Malik") opened the door to a possible claim by former employees that the wrongdoing of the Bank constituted a breach of the T&C Term and (if it does) for damages if they can establish that the publicity given to the wrongdoing blighted their prospects of obtaining fresh employment. I have to decide (in turn) whether the wrongdoing did constitute a breach of the T&C Term; (if so) whether the breach occasioned such damage; and (if so) what (if any) damages are recoverable. It is not possible to approach a case such as the present without a degree of sympathy for the former employees of the Bank who have lost in the collapse of the Bank what they were led to believe were jobs for life and who have failed to find or have experienced difficulty in finding fresh employment. A job is much more than a source of income. As Broussard J said in Foley v. Interactive Data (1988) Cal Rptr 211:
"a man or woman usually does not enter into employment solely for the money: a job is status, reputation, a way of defining one's self-worth, and worth in the community. It is also essential to financial security, offering assurance of future income needed to repay present debts and meet future obligations � in short, 'in a modern industrialised economy, employment is central to one's existence and dignity' (Gould [1986] BYUL Rev 885, 892) ."
But I have to decide this case on the basis not of sympathy, but whether the claimants' have satisfied the necessary legal requirements for an award in their favour.
The Bank started business in the UK in 1972. In 1980 the Bank became a licensed deposit taker under the Banking Act 1979 and later an authorised institution under the Banking Act 1987 and accordingly regulated by the Bank of England. At the beginning of 1990 it had 2,300 employees. In 1990 the Bank was reorganised and in the course of such restructuring some 900 staff in England were made redundant. The High Court in England on the petition of the Bank of England made orders on the 5th July 1991 for the appointment in England and Wales of Mr Morris, Mr Lyle and Mr Richards as provisional liquidators of the Bank ("the Provisional Liquidators") . The business of the Bank was immediately closed, and the employees were placed on "gardening leave" pending a final decision as to the future of the Bank. The petition was subsequently adjourned on the application of the majority shareholders, the Government of Abu Dhabi, in order to obtain the necessary time to investigate the possibility of a rescue operation. The adjournment was granted on terms that the Government of Abu Dhabi funded payment of �1.2 million each fortnight in respect of the employees' salaries for the period during which this possibility was investigated. The rescue did not materialise and in October 1991 1,200 employees remained on the staff of the Bank in England. Of these, some 900 were made redundant, some 100 were transferred to Abu Dhabi, around 100 resigned and a further 100 or so were retained by the Liquidators. The same month the Provisional Liquidators of the Bank instructed Coutts Careers Consultants Limited ("Coutts") to provide outplacement support services to all redundant Bank employees, and these services remained so available until the 6th March 1992. The help of Coutts was needed because the mass compulsory redundancy took place in the middle of the most severe and durable recession of the post war period. On the 14th January 1992 an order was made for the compulsory winding up of the Bank and for the appointment of the Provisional Liquidators and Mr Akers as liquidators ("the Liquidators") . (Mr Lyle resigned on the 22nd August 1996 and was replaced on the 6th February 1998 by Mr Preece) . The grounds for winding up were that it was just and equitable to make such an Order because the Bank had been the victim of substantial frauds perpetrated by one or more of its officers and because it was insolvent. The Provisional Liquidators in 1992 and the Liquidators in 1993 and 1996 made public statements to the media ("the Liquidators' Statements") that fraud permeated the Bank from top to bottom. These statements were false and hurtful to the former employees of the Bank. It is important to set the record straight, for the Liquidators have never made a public statement withdrawing or correcting this statement. They have however, in answer to a request from me, confirmed that the vast majority of employees were totally innocent of involvement and that only a small body was responsible for the wrongdoing, though they reserved the right to consider on an individual basis the possible involvement of any employee who makes a claim in the liquidation or who brings a counterclaim. Following the winding up order, some 112 staff were re-employed by the Liquidators of whom now only 10 remain in the Liquidators' employment. The Liquidators have the conduct of these proceedings on behalf of the Bank.
The redundancy of the employees and the glare of publicity which has accompanied the liquidation of the Bank have occasioned a variety of claims against the Bank by a large number of its former employees. Some of the former employees have brought proceedings against the Bank; some in proceedings by the Bank against them have brought counterclaims; and some have sought to prove in the liquidation. In an effort to secure the most efficient and economic form of resolution of the disputes between the Bank and its former employees, I have been appointed the assigned judge to determine all such claims. I have given directions for the trial of the various issues between the Bank and its former employees in a series of test actions between selected employees and the Bank, on the basis that the decisions in such actions will be binding in respect of all other claims so far as the issues of law and fact are common.
I directed that four issues should be heard first and that the trial of these issues should begin before me on the 30th November 1998. These issues have been referred to as (1) the ACAS COT 3 issue; (2) the Consumer Credit Act issue; (3) the Construction issue; and (4) the Stigma Claims. Cases were selected as test cases on each of these four issues. The ACAS COT 3 issue concerned the validity of agreements made in 1990 between some 116 redundant employees and the Bank under which the employees gave up all claims against the Bank in return for a payment. On the 18th December 1998 I gave judgment (reported [1999] 2 All ER 1005) upholding the validity of this agreement. The Consumer Credit Act issue concerned the question whether certain loan agreements made between the Bank and a number of its employees constituted regulated agreements under the Consumer Credit Act. In another judgment given on the 18th December 1998 I held that the agreements were not so regulated. The Construction issue related to the construction of certain loan documents entered into between the Bank and certain employees. The employees subsequently submitted to judgment being entered by consent in favour of the Bank. The Stigma Claims are the claims now before me and the subject of this judgment.
The essence of the Stigma Claims is that the highly publicised dishonest conduct of its business by the Bank set forth in an agreed document (which I shall refer to as the "Agreed Misconduct") has placed a cloud over or a stigma on, the Bank's former employees which has been a serious hindrance to their subsequently obtaining further gainful employment; that such conduct on the part of the Bank constituted a breach by the Bank of the T&C Term; and that the breach so far as it occasioned financial loss to the employees has given rise to a claim in damages. Some 369 former employees are currently maintaining such a claim against the Bank....
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