Shah and another v HSBC Private Bank (UK) Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Longmore,Lord Justice Lloyd,Lord Justice Ward |
| Judgment Date | 04 February 2010 |
| Neutral Citation | [2010] EWCA Civ 31 |
| Docket Number | Case No: A3/2009/0461 |
| Court | Court of Appeal (Civil Division) |
| Date | 04 February 2010 |
[2010] EWCA Civ 31
[2009] EWHC 79 (QB)
The Honourable Mr Justice Hamblen
Before: The Right Honourable Lord Justice Ward
The Right Honourable Lord Justice Longmore
and
The Right Honourable Lord Justice Lloyd
Case No: A3/2009/0461
IN THE HIGH COURT OF JUSTICE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Mr Michael Brindle QC & Mr Paul Downes (instructed by Zaiwalla & Co) for the Appellants
Mr Richard Lissack QC & Mr Nicholas Medcroft (instructed by DLA Piper) for the Respondent
Hearing dates: 9 th & 10 th December 2009
Crown copyright©
Lord Justice Longmore:
Introduction
In this case Mr Shah (together with his wife) claims damages against his bank for failure to comply with his instructions and for other breaches of duty but Hamblen J has given summary judgment against him and for the bank; on appeal this court has once again been concerned with the provisions of the Proceeds of Crime Act 2002 (“the 2002 Act”) and the obligations of a bank to notify the authorities if they suspect a customer of money-laundering. Most of this court's previous decisions have dealt with complaints about the conduct of either banks or the Serious Organised Crime Agency (“SOCA”) during the period within which authorisation can be refused (7 days in the first instance and a further 31 days if notified) before the authorities have either to authorise a transaction or apply to the court for a restraint order, (see in particular K Ltd v National Westminster Bank and R (UMBS Online Ltd) v SOCA [2007] Bus L.R. 1317). The present case raises (apparently for the first time) the question whether the same considerations, as apply during that early period, also apply to the more leisurely process of an action for damages for breach of contract or duty which falls to be resolved well after the time within which authorisation must be allowed or a restraint order applied for.
The Facts
Mr Shah, a businessman with interests in (among other places) Zimbabwe, has had an account with the defendant bank in London (“HSBC” or “the bank”) for some years since 200He has also had an account with them in Geneva. In July 2006 he transferred a sum of about $28 million to the bank from another account he held with Crédit Agricole. He explained that he needed to do this because there was a risk of his being impersonated by an unidentified person and that it would only be a short time before he would wish to transfer the sum back to Crédit Agricole. He agreed with his account manager (Ms Shah – no relation) that the money was to be held for a month and, subsequently on a monthly rolling deposit. The first deposit matured on 21 st August 2006 and was rolled over for a further month until 21 st September. In late August Mr Shah indicated that he wanted to return the money to Crédit Agricole and inquired when he would be able to do that. On 20 th September 2006 Ms Shah asked him to leave the money with HSBC but Mr Shah replied that that would not be possible and asked that it be transmitted back to Crédit Agricole with the interest which had accrued apart from a sum of $850. The bank accepted his instructions in relation to the small sum but on 21 st September told Mr Shah that it could not effect the larger transaction because it was “complying with its UK statutory obligations”.
Not unnaturally Mr Shah was extremely concerned. It seems that the Bank made a Suspicious Activity Report (sometimes called an “SAR”) disclosing to some statutory authority (probably SOCA) that they suspected the money was criminal property and asking for permission to perform the transaction. Consent was given on 2 nd October and the transaction was carried out on 3 rd October.
Before that happened Mr Shah on 26 th September 2006 gave another instruction to the bank to transfer the sum of $7282.50 to an ex-employee to whom he owed that amount. The bank again declined to comply with his instructions because it was “complying with its statutory obligations”; the bank had apparently made a further disclosure and asked for consent to comply with Mr Shah's instructions. The ex-employee was sufficiently incensed with Mr Shah for failing to pay him the money he was owed that he threatened to sell some of Mr Shah's goods of which he apparently had custody if he was not paid. Mr Shah also believes that the ex-employee then told the Zimbabwean police that Mr Shah was suspected of money–laundering. On 29 th September 2006 Mr Shah cancelled his instructions to the Bank with regard to this second sum, before any permission to perform it had been granted.
On 1 st November 2006 the Reserve Bank of Zimbabwe asked Mr Shah to explain what investigations into his affairs were occurring and on the next day Mr Shah met Ms Shah and Mr Roger Johnson, the head of HSBC's African department. According to Mr Shah, Mr Johnson said that there had been investigations into Mr Shah's 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. Mr Shah was permitted to withdraw £680 in cash. On 10 th November 2006, Mr Johnson asked Mr Shah to close his account and asked for instructions in relation to the transfer of the closing balance by 22 nd December 2006, later extended to 28 th February 2007. Mr Shah alleges that 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. On 31 st January 2007 Zimbabwe's anti-money laundering authority (“ZFIIES”) asked Mr Shah to explain why his HSBC account had been frozen but he says that he was unable to give any satisfactory answer.
Meanwhile the Metropolitan Police had become interested in Mr Shah's affairs and on 7th December 2006 had obtained an order requiring HSBC to produce information about Mr Shah's account.
On 2 nd February 2007 Mr Shah asked the bank to transfer the sum of $1440 from his account in Geneva to another person to whom he owed money and the bank did so. When, however, on 6 th February 2007 he asked for the sum of $8,904,910.65 to be transferred from his Geneva account to Crédit Agricole, the Bank declined to do so, made another disclosure and told Mr Shah that “statutory obligations” prevented compliance with his instructions. At the same time the bank were asking for his instructions in relation to the amounts remaining in his accounts. On 14 th February 2007 SOCA gave permission for the transfer to Crédit Agricole and it was effected on 15 th February 2007. On 22 nd and 27 th February 2007 the Bank repeated its request for instructions about the sum remaining in Mr Shah's account and on 28 th February 2007 he instructed the Bank to transfer £457,956.66 to Crédit Agricole but the Bank declined to do so, apparently making a fourth disclosure to SOCA on that day. SOCA gave permission on 2 nd March 2007 and the transaction was effected on 5 th March 2007, although an instruction given on 2 nd March, to transfer $800,000 from his Geneva account to Crédit Agricole, had apparently been effected without any delay. The judge helpfully set out the overall position in relation to the four transactions which HSBC had declined to effect until consent had been obtained:-
| 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 th March 2007 Mr Shah's solicitors asked HSBC for an explanation of the investigations that had taken place but HSBC declined to provide any information. Mr Shah alleges that RBZ has seized assets of his over which they had control in the sum of $307.5 million. On 12 th June 2007 SOCA informed Mr Shah's solicitors that Mr Shah had not been under criminal investigation but, although those solicitors had asked HSBC on 25 th May 2007 to disclose details of their communications with SOCA, HSBC still declined to reveal any details to Mr Shah; apparently, however, HSBC did send to RBZ certain documents relating to Mr Shah's account. On 2 nd September 2007 Mr Shah issued and served Particulars of Claim against HSBC alleging that, by reason of the bank's failure to execute his instructions and other failures such as the failure to provide information to which he was entitled, he had had his assets seized by RBZ and had lost the equivalent of around $331 million in loss of interest.
On 9 th November 2007 HSBC served its defence. This alleged (inter alia) (1) that it suspected that each of the four transactions, which it had failed immediately to effect, constituted money laundering (2) that it had made an authorised disclosure seeking consent to effect them under section 338 of the Act of 2002 and (3) that it would have been illegal for it to effect them any earlier. The Defence also alleged that it could not comply with Mr Shah's instructions any earlier than it did. A Reply was in due course served which (inter alia) put HSBC to...
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