Shah v HSBC Private Bank (UK) Ltd

JurisdictionEngland & Wales
JudgeMr Justice Coulson
Judgment Date04 July 2011
Neutral Citation[2011] EWHC 1713 (QB)
CourtQueen's Bench Division
Date04 July 2011
Docket NumberCase No: HQ07X03152

[2011] EWHC 1713 (QB)

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

Royal Courts of Justice

Strand, London, WC2A 2LL

Before:

The Hon. Mr Justice Coulson

Case No: HQ07X03152

Between:
(1) Jayesh Shah
(2) Shaleetha Mahabeer
Claimant/Respondents
and
Hsbc Private Bank (Uk) Limited
Defendant/applicant

Mr Michael Brindle QC & Mr Simon Goldstone (instructed by Zaiwalla & Co) for the Claimants/Respondents

Mr Nicholas Medcroft (instructed by Berwin Leighton Paisner) for the Defendant/Applicant

Hearing Date: 24 th June 2011

Mr Justice Coulson
1

In this case, the claimants seek over 300 million by way of damages against the defendant bank, arising from the defendant's delay in executing four transactions between September 2006 and February 2007. It is the defendant's case that it suspected that the proposed transactions concerned criminal property and that, in those circumstances, they were not required to comply with the payment instructions. Instead, under the Proceeds of Crime Act, they maintain that they were obliged to make a number of authorised disclosures to the Serious Organised Crime Agency ("SOCA").

2

The four transactions were dated 20 September 06, 26 September 06, 6 February 07 and 28 February 07. 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, it had, on the claimants' case, 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 the first claimant was suspected of money-laundering. It is the claimants' case 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 against the defendant by way of damages.

3

By a judgment and order dated 26 January 2009, Hamblen J gave summary judgment for the defendant and dismissed the claimants' claims. He arrived at that conclusion by rejecting the four ways in which the claimants put their case (irrationality, negligent self-induced suspicion, mistake and automatic mechanically-induced suspicion) and concluded that, in the light of the defendant's evidence of suspicion and the absence of any allegation of bad faith by the claimants, the claims must fail.

4

The Court of Appeal ( [2010] EWCA Civ 31) agreed with the judge's dismissal of the four ways in which the positive claim had been put on behalf of the claimants. Despite that, they concluded that the judge had been wrong to say that, because there was evidence of suspicion on the part of the defendant, that was, of itself, enough to defeat the claim. Longmore LJ said at paragraph 22:

"I do, however, part company with the judge when he reasons that, once he has rejected those contentions, Mr Shah can logically only be left with the bad faith assertion which he disavows. For my part, I cannot see why, rather than submit to summary judgment dismissing the claim, Mr Shah cannot require the bank to prove its case that it had the relevant suspicion and be entitled to pursue the case to trial so that the bank can make good its contention in this respect."

Longmore LJ made plain that it was for the defendant to prove that, as a matter of fact, it suspected the claimants of being involved in money laundering, and that it would be unusual to grant summary judgment in favour of a party who had the burden of proving a primary fact which was in issue. He went on to say, at paragraph 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."

5

The defendant's second submission, to which Longmore LJ referred in the passage above, was to the effect that a court would never expect or require any bank employee to give evidence that it had entertained a relevant suspicion. It was also suggested that no court would order disclosure of any relevant documents, particularly the documents reporting the bank's suspicions to SOCA. Longmore LJ refuted these arguments, saying at paragraph 31 that it amounted "to saying that the dispute is completely unjusticiable and that, therefore, the bank must win. It may be that the bank will win in the end but, as far as any dispute about discovery of documents is concerned, I am content to wait and see."

6

Longmore LJ also anticipated the kind of interlocutory disputes that may arise in cases of this kind. As to the potential danger in which the bank's employees might be in if required to give evidence 1, he said at paragraph 30 that if, at the time of the pre-trial review, the bank genuinely took the view that it would be dangerous for a witness to give evidence, then the court could be informed and steps taken to protect the witness or to ensure that the gist of the evidence was available, while still ensuring a fair trial. And as to the disclosure of documents, he said at paragraph 31:

"Once again if the bank has good grounds for concealing parts of any relevant document or (more doubtfully) declining to disclose the whole of the document, those grounds can be laid before the judge in chambers and he can make a decision on appropriate evidence. What would be inappropriate is to decide now that the bank must win its case, whatever the facts may ultimately turn out to be."

7

This last passage predicted precisely the dispute that has now arisen. The defendant has disclosed both its internal reports and its reports ("SARs") to SOCA. However, save for the identification of their employee, Mr Michael John Wigley, the man in charge of their Money Laundering Reporting Office ("MLRO"), all of the names of those involved in the process, from first suspicions to finalisation of reports, have been redacted. The defendant's stance is crystal clear: they say that they are quite happy to call Mr Wigley to give evidence as to the genuine suspicions that the defendant had at the time, but that the identities of any other employees are both irrelevant and/or should not be disclosed for reasons of public interest immunity. By an application dated 1 April 2011, the defendant seeks an order, pursuant to CPR 31.19, permitting those redactions. The claimants dispute that application.

2

The Agreed Approach

8

In the course of their concise and clear submissions, leading counsel on both sides agreed that I should approach this application in three stages. First, I must decide whether or not the identities of the relevant employees are relevant to the issues between the parties. If I conclude that the identities are not relevant, the defendant is entitled to the order sought without further ado. If, however, I conclude that the identities of the employees are relevant, then I have to go on to consider the question of public interest immunity. As to that, I must first ask whether or not the documents in question fall into a class which, prima facie, attracts public interest immunity. Mr Medcroft accepted that, in relation to that issue, the burden was on the defendant. It was also agreed that, if the defendant failed to discharge that burden then, provided of course that the relevance test had been made out, the redactions should not be permitted.

9

If, however, the defendant established that the documents did prima facie attract public interest immunity, then the final question is whether the redactions should be permitted. That requires the necessary balancing exercise between, on the one hand, the public interest which demands that the source of sensitive evidence be withheld to permit the proper protection of the defendant's employees and to avoid inhibition, against the public interest in the open administration of justice and the right of a litigant to meet his accusers face-to-face in court. In my view, this three stage approach accords with the approach set out by Sir Thomas Bingham MR (as he then was) in Taylor v Anderton [1995] 1 WLR 447, and I adopt it.

3

Relevance

3.1

The Principal Issue In This Case

10

What is the issue in this case to which the identities of the defendant's employees may be relevant? In the light of the Court of Appeal's rejection of the various ways in which the claimants' claims were originally put, it seems to me that the remaining issue in this case is a narrow one. The claimants are putting the defendant to proof that, at the relevant time, the defendant had a genuine suspicion that the claimants were involved in money laundering. The necessary test for suspicion is that set out in the Court of Appeal decisions of R v Da Silva [2007] 1 WLR 303 and K Ltd v National Westminster Bank [2007] 1 WLR 311. 2 Although the claimants have never alleged bad faith (and, as I understand it, do not have the necessary material that would allow them to plead such a case in any...

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2 firm's commentaries
  • Anti-Money Laundering (AML) Legislation: A Bank's Liability in Complying
    • Singapore
    • Mondaq Singapore
    • 20 March 2012
    ...the recent related English cases of Shah v HSBC (UK) Ltd [2009] EWHC 79; Shah v HSBC (UK) Ltd [2010] EWHC Civ 31; Shah v HSBC (UK) Ltd [2011] EWHC 1713; Shah v HSBC (UK) Ltd [2011] EWCA Civ 1154; Shah v HSBC (UK) Ltd [2011] EWHC Civ 1669, the English Courts were faced with the question of w......
  • Redaction Of Bank Employees' Names Preserved In Shah v HSBC
    • United Kingdom
    • Mondaq United Kingdom
    • 8 November 2011
    ...1154 Please click here on this link to read the June 2011 judgment in the High Court: Shah & Anor v HSBC Private Bank (UK) Ltd [2011] EWHC 1713 (QB) This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to Law-Now......

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