Jayesh Shah and Another v HSBC Private Bank (UK) Ltd
| Jurisdiction | England & Wales |
| Judge | THE HON. MR JUSTICE SUPPERSTONE,Mr Justice Supperstone |
| Judgment Date | 16 May 2012 |
| Neutral Citation | [2012] EWHC 1283 (QB) |
| Docket Number | Case No: HQ07X03152 |
| Court | Queen's Bench Division |
| Date | 16 May 2012 |
The Hon. Mr Justice Supperstone
Case No: HQ07X03152
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Paul Downes QC and Joseph Sullivan (instructed by Messrs Edwards Wildman Palmer UK LLP) for the Claimants
Richard Lissack QC and Nicholas Medcroft (instructed by Messrs Berwin Leighton Paisner) for the Defendant
Hearing dates: 29 November-21 December 2011, 9–20 January, 6 & 7 February, 1 & 2 March 2012
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Introduction
Mr and Mrs Shah, the Claimants, were account holders with the Defendant bank in London since 2002. The Defendant is the UK private banking arm of the HSBC Group. In these proceedings the Claimants claim damages in a sum in excess of US$300,000,000 arising out of delays by the Defendant in executing four transfers from the Claimants' account during the period September 2006 to March 2007 and the Defendant's failure to explain the reasons for such delays.
Mr Shah conducts business in various countries mainly in central Africa. Since 1992 this has included doing business in Zimbabwe, the country in which he has been based for the duration of the events to which this claim relates. He owns two entities known as "Private Business Corporations" in Zimbabwe: Al Shams and Al Shams Global LLC. He also owns a BVI company called Al Shams Global Limited. He was the sole owner of all these entities.
In July 2006 Mr Shah transferred a sum of about US$28,000,000 to the Defendant from an account he held with Crèdit Agricole Indosuez (Suisse) SA ("Crèdit Agricole"/"CAI") in Geneva. He explained to his account manager at the Defendant bank, Ms Shah (no relation), that he needed to do this because somebody was attempting to gain access to his correspondence from Crèdit Agricole, probably with a view to accessing his account and making unauthorised withdrawals from it. He told her there would only be a short time before he would wish to transfer the sum back to Crèdit Agricole. He agreed with Ms Shah that the money was to be held by the Defendant for a month and subsequently on a monthly rolling deposit. The first deposit matured on 21 August 2006 and was rolled over for a further month until 21 September 2006. In late August Mr Shah indicated that he wanted to return the money to Crèdit Agricole and enquired when he would be able to do so. On 20 September Ms Shah asked him to leave the money with the bank but Mr Shah replied that that would not be possible. He instructed the Defendant bank to remit the deposit back to Crèdit Agricole (together with the interest which had accrued) and he gave a further instruction to the Defendant to make a payment of US$850 from the same account. The Defendant accepted his instructions in relation to the smaller sum but on 21 September 2006 the Defendant bank informed Mr Shah that it could not effect the larger transaction because it was "complying with its UK statutory obligations".
In fact the reason why the transfer was not made was because the Defendant suspected that the funds in Mr Shah's account were criminal property. The Defendant made a Suspicious Activity Report (sometimes called a "SAR") disclosing to the Serious Organised Crime Agency ("SOCA") that it suspected the money was criminal property and asking for permission to perform the transaction. Consent was given on 2 October 2006 and the transaction was carried out on 3 October 2006.
Before that happened on 26 September 2006 Mr Shah gave another instruction to the Defendant to transfer the sum of US$7,282.50 to Mr Kabra, a former employee of his in Zimbabwe, to whom he owed that amount. The Defendant again declined to comply with his instructions, informing him that it was "complying with its statutory obligations". The Defendant had in fact made a further disclosure to SOCA and asked for consent to comply with Mr Shah's instructions. When Mr Shah failed to pay him the money he was owed Mr Kabra threatened to sell some of Mr Shah's goods of which he had custody. Mr Kabra also reported Mr Shah to the Zimbabwean police and told them that Mr Shah was suspected of money laundering. On 29 September 2006 Mr Shah cancelled his instruction to the Defendant with regard to this second sum, before any permission to perform it had been granted.
On 5 October 2006 the Zimbabwean police served Mr Shah with a search warrant and conducted searches at his office and home.
By the end of October Mr Shah was becoming increasingly concerned that the suspicions that had been aroused by the Defendant's actions in London would cause him permanent harm in Zimbabwe. On 1 November 2006 the Reserve Bank of Zimbabwe ("RBZ") asked him to explain what investigations into his affairs were being conducted. On the next day he met Ms Shah and Mr Roger Johnson, the head of the Defendant's Africa department. Mr Shah said that Mr Johnson told him that there had been investigations into his affairs but they were now at an end and that he would provide details of them on receipt of a request by a firm of UK solicitors (see B8/3008–3017 and para 204 below). Mr Shah was permitted to withdraw £680 in cash.
On 4 November 2006 Mr Shah expressed his dissatisfaction with the Defendant bank and in particular with Mr Johnson personally. He stated:
"I am now of the firm view that it would be very difficult for me to deal with you henceforth whereas I have no complaints against Matt Stockwell or Kalpana Shah. Hope you will finally refer my account and my matter to somebody else now at your bank… Seeing that I have only expressed my displeasure to deal with you individually and having no confidence in your ability to answer my queries I am of the firm hope that you will now hand my account to somebody at your level or higher to deal with my account."
The Claimants suggest that this e-mail appears to have triggered a decision to close Mr Shah's account. Mr Johnson responded to Mr Shah by e-mail dated 10 November 2006 giving Mr Shah notice that his accounts with the Defendant would be closed when his fixed deposit matured on 26 December 2006. This date was later extended to 28 February 2007.
Meanwhile the Metropolitan Police had become interested in Mr Shah's affairs and on 7 December 2006 had obtained an order requiring HSBC to produce information about Mr Shah's account.
On 31 January 2007 Zimbabwe's anti-money laundering authority asked Mr Shah to explain why his account at the Defendant's bank had been frozen but he says he was unable to give any satisfactory answer.
On 2 February 2007 Mr Shah asked the Defendant to transfer the sum of US$1,440 from his account in Geneva to another person to whom he owed money and the bank did so.
When however on 6 February 2007 Mr Shah instructed the Defendant to transfer on the following day the sum of US$8,904,910.65 to his account with Crèdit Agricole in Geneva, the Defendant declined to do so, made another disclosure to SOCA and told Mr Shah that "statutory obligations" prevented compliance with his instructions. On 14 February 2007 SOCA gave permission for this transfer to Crèdit Agricole and it was effected on 15 February 2007.
On 28 February 2007 Mr Shah instructed the Defendant to transfer the amount remaining in his account of £457,956.66 to Crèdit Agricole. The bank declined to do so, making a fourth disclosure to SOCA on that day. SOCA gave permission on 2 March 2007 and the transaction was effected on 5 March 2007.
The overall position in relation to the four transactions which the Defendant bank had declined to effect until consent had been obtained is agreed to be as follows:
| Date of payment instruction | Amount to be transferred | Date of authorised disclosure (SAR) | Date of consent | Date transfer effected |
| 20 th September 06 | $28,807,432.88 | 21 st September 06 | 2 nd October 06 | 3 rd October 06 |
| 26 th September 06 | $7,282.50 | 28 th September 06 | Not applicable (payment instructions were cancelled on 29 th September 06) | Not applicable |
| 6 th February 07 | $8,904,910.65 | 7 th February 07 | 14 th February 07 | 15 th February 07 |
| 28 th February 07 | £457,956.66 | 28 th February 07 | 2 nd March 07 | 5 th March 07 |
On 19 March 2007 Mr Shah's solicitors asked the Defendant for an explanation of the investigations that had taken place but the Defendant declined to provide any information.
On 12 June 2007 SOCA informed Mr Shah's solicitors that "SOCA has not been, and is not now, conducting a criminal investigation into your clients" (C5/1666, see para 190 below). Although his solicitors had asked the Defendant bank on 25 May 2007 to disclose details of the communications with SOCA, the Defendant still declined to reveal any details to Mr Shah; apparently, however, the bank did send to RBZ certain documents relating to Mr Shah's account.
Mr Shah alleges that as a result of what Mr Kabra, his ex-employee, told the Zimbabwean authorities they themselves became suspicious. Because he was unable to give an explanation of the investigations that had been made into his affairs, the Zimbabwean authorities unilaterally moved his investments from their then current high-yield to low-yielding treasury bonds. First, they froze and then seized his investments (held through certain private companies) causing him losses of over US$300,000,000.
Mr Shah denies any involvement in money laundering. He said, "I wish to state at the outset that I have not been, am not, and will never be involved in money laundering. I am not under...
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