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You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Shah & Anor v HSBC Private Bank (UK) Ltd [2011] EWCA Civ 1154 (13 October 2011) URL: https://www.bailii.org/ew/cases/EWCA/Civ/2011/1154.html Cite as: [2012] Lloyd's Rep FC 105, [2011] EWCA Civ 1154 |
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ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Mr Justice Coulson
HQ07X3152
Strand, London, WC2A 2LL |
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B e f o r e :
LORD JUSTICE MUNBY
and
LORD JUSTICE LEWISON
____________________
(1) JAYESH SHAH (2)SHALEETHA MAHABEER |
Appellants |
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- and - |
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HSBC PRIVATE BANK (UK) LIMITED |
Respondent |
____________________
MR RICHARD LISSACK QC & MR NICHOLAS MEDCROFT (instructed by Berwin Leighton Paisner LLP,London ) for the Respondent
Hearing date : 20 September 2011
____________________
Crown Copyright ©
LORD JUSTICE LEWISON:
"(1) For the purposes of this Part a disclosure is authorised if--
(a) it is a disclosure to a constable, a customs officer or a nominated officer by the alleged offender that property is criminal property, and
…
(c) the first, second or third condition set out below is satisfied.
(2) The first condition is that the disclosure is made before the alleged offender does the prohibited act."
i) Whether the bank's obligation to make standard disclosure requires it to reveal the names of bank employees who reported suspicions of money laundering to the nominated officer within the bank;
ii) If so, whether the bank is prima facie entitled to maintain the anonymity of the individual employees involved in the supply of that information on the ground of public interest immunity.
"… 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."
"If the bank at the time of the pre-trial review genuinely takes the view that it will be dangerous for a witness to give evidence (whether orally or by written statement) the court can be so informed and take steps to protect the witness or otherwise ensure that the gist of the evidence is available, while still ensuring a fair trial."
"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."
"The defendant's process of reporting a suspicion is the three-stage process in which at least three individual employees of the defendant have a role. Staff suspicion is reported first to the Compliance department before, in common with other banks, it is reported internally to the Money Laundering Reporting Office who will consider whether the relevant suspicion merits disclosure to the authorities."
"14 If the MLRO considers that it needs further information and/or needs to look at the payment request in respect of a 'before the event' suspicious transaction, it will ask the employee to fax through an internal report and to provide appropriate details. The employee would be asked to fax an internal SAR which would identify the customer, reasons for suspicions, the activity causing concern and details of the payment to be made.
15 The Nominated Officer for SOCA will then consider the report and make a decision, based on the contents of that report and any other knowledge that it has, on whether to submit a SAR to SOCA seeking consent to proceed with the transaction, in accordance with the Proceeds of Crime Act. This is known as a 'consent SAR.'"
"The [MLRO] will consider each report and make a decision based on the contents of that report and all other knowledge that we have, as to whether we have a suspicion about the underlying activity."
"My team will always critically review every internal report in order to decide whether or not we have our own independent suspicion about the activity (and, if so, we will submit a SAR to SOCA). The suspicions which are held at Relationship Manager and Compliance level are evaluated independently by my team based on the facts known to them. If we consider that further information is needed, we will ask the relevant individual at Relationship Manager and Compliance level."
"Crucially, we would never submit a SAR to SOCA solely on the basis of a suspicion at Relationship Manager or Compliance level. Although the suspicion at those levels would trigger our involvement and be a factor to consider, it would never on its own be sufficient. We would need to have our own independent suspicion based on the factual information know to us before submitting a SAR to SOCA. Therefore on many occasions my team have decided not to submit a SAR to SOCA because we did not have our own independent suspicion, despite a suspicion having been held at Relationship Manager or Compliance levels."
i) Are the names of the employees relevant?
ii) If so, does the public interest prima facie require or entitle the bank to refuse to disclose those names?
iii) If so, is that public interest outweighed by countervailing considerations of public interest?
"The purpose of the rule is to ensure that one party does not enjoy an unfair advantage or suffer an unfair disadvantage in the litigation as a result of a document not being produced for inspection. It is, I think, of no importance that a party is curious about the contents of a document would like to know the contents of it if he suffers no litigious disadvantage by not seeing it and will gain no litigious advantage by seeing it. That, in my judgment, is the test."
"It seems to me that every document relates to the matters in question in the action, which not only would be evidence upon any issue, but also which, it is reasonable to suppose, contains information which may—not which must—either directly or indirectly enable the party requiring the affidavit either to advance his own case or to damage the case of his adversary. I have put in the words "either directly or indirectly," because, as it seems to me, a document can properly be said to contain information which may enable the party requiring the affidavit either to advance his own case or to damage the case of his adversary, if it is a document which may fairly lead him to a train of inquiry, which may have either of these two consequences."
"Standard disclosure requires a party to disclose only –
(a) the documents on which he relies; and
(b) the documents which –
(i) adversely affect his own case;
(ii) adversely affect another party's case; or
(iii) support another party's case; and
(c) the documents which he is required to disclose by a relevant practice direction."
"Can one in this case see from the documents produced that the affidavit must be wrong in claiming that the blanked-out passages do not relate "to any matter in question," in accordance with the Peruvian Guano test?"
"The Peruvian Guano test must be applied to the information contained in the covered-up part of the document, regardless of its physical or grammatical relationship to the rest. Relevant and irrelevant information may, as in this case, be contained in the same sentence. Provided that the irrelevant part can be covered without destroying the sense of the rest or making it misleading, a party is permitted to do so."
"The court will not ordinarily disregard the oath of the party that the parts concealed do not relate to the matters in question. In the disputed documents the plaintiffs had blanked out the name, amount or other confidential details of transactions unrelated to the Magnet management buy-out, with which the plaintiffs were concerned. The judge made several references to these details as being "at least potentially relevant." That is not the test. The test is whether it is not unreasonable to suppose that the passages blanked out do contain information which may, either directly or indirectly, enable Arthur Andersen either to advance their own case or to damage the plaintiffs' case."
"My recommended solution involved the identification of four categories of documents which at present have to be disclosed. These are:
(1) the parties' own documents, which they rely upon in support of their contentions in the proceedings;
(2) adverse documents of which a party is aware and which to a material extent adversely affect his own case or support another party's case;
(3) documents which do not fall within categories (1) or (2) but are part of the "story" or background, including documents which, though relevant, may not be necessary for the fair disposal of the case;
(4) train of inquiry documents: these are documents which may lead to a train of inquiry enabling a party to advance his own case or damage that of his opponent."
"The redactions which the defendant has now made mean that, at present, it is not easy for the defendant to make good these averments. Save for the identity of Mr Wigley, the Money Laundering Reporting Officer, no other identities have been provided. It is not therefore possible to show that, for example, three different people within the defendant's organisation had the alleged suspicion. In essence, the defendant is saying: 'We have chosen Mr Wigley to deal with all of your questions about the genuineness or otherwise of the suspicion that we held which led us not to comply with your instructions. You must put all your questions to him.'"
"The Court of Appeal has said in this case that the claimants are entitled to put the defendant to proof as to whether or not they had a genuine suspicion of the claimants' financial dealings. Understanding how, when and from whom those suspicions emanated is, at least potentially, an important element of the case. It therefore seems to me that the claimants suffer a litigious disadvantage by not knowing more about the precise identity of the individuals who were involved in the reporting process. There is also a powerful case for saying that the genuineness of the suspicion cannot properly be determined without that information."
"26 Two very different scenarios may emerge in this case. The first (and, as Longmore LJ appeared to accept, the most likely) is that, on the evidence, Mr Wigley carefully went through all the internal reports, formed his own views, and made his own disclosure reports to SOCA. In those circumstances, the suspicion may well be shown to be genuine, and the defendant's decision to rely on Mr Wigley will be vindicated.
27 But there is another scenario which, even if less likely, cannot be dismissed as fanciful. This postulates that one of the defendant's employees further down the chain, motivated by other concerns, produced memos and reports in bad faith, which purported to identify suspicion, and those reports were acted upon, either without being properly checked, or by being assumed to be accurate and genuine by Mr Wigley. That is not as far-fetched as it might first appear: merely by way of example, I am bound to note that, in the present case, one bank employee apparently asked to borrow $1.5 million from the first claimant, which loan was refused. With such large sums of money involved, bad faith cannot automatically be ruled out. In those circumstances, of course, the identity of the individuals further down the chain of responsibility is important."
"One … cannot rule out the possibility that Ms Kalpana Shah initiated internally the procedure for making a report as a punishment for Mr Shah for not acceding to her request."
"I have been asked by the Defendant's solicitors to clarify whether Ms Kalpana Shah ever reported a suspicion to me about the Claimants' activities. I can confirm that Ms Shah never reported such a suspicion to me (whether orally or by submission of an internal SAR). Each of the internal SARs relating to the Claimants was prepared by someone in the Relationship Team other than Ms Shah."
"Why should you be required to shelter behind the bank's solicitor when it is implicit and express part of the operation of this Act that you have a compliance officer? He is the man who makes the report to SOCA. It is the result of that reporting that puts you in the difficulty in dealing with the transaction. Why cannot Joe Bloggs in the bank stand up and say "Information given to me, which I am not prepared to disclose and I am not obliged to disclose, led me, Joe Bloggs, to be suspicious that this was money laundering. You cross-examine me up hill and down dale as to whether that was good faith or bad faith, but I am not going to tell you my sources. You judge, take it or leave it. I am genuine or I am not." What is wrong with that?"
i) Revelation of the names might enable an application for further disclosure to be made;
ii) If the name turned out to be either that of Ms Shah or Mr Johnson, the claimants might be able to allege bad faith;
iii) At the end of the trial, if neither Ms Shah nor Mr Johnson had been called to give evidence, the judge might be persuaded to draw adverse inferences against the bank.
Lord Justice Munby :
Lord Justice Pill :
". . . 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."
"To the extent that this is a simple case, I cannot take the view that the [claimants'] claim is 'fanciful or contradicted by the documentary material on which it is founded'. . ."
It is not surprising that the claimants are pressing for all the disclosure to which they are entitled.
"Standard disclosure requires a party to disclose only –
(a) the documents on which he relies; and
(b) the documents which –
(i) adversely affect his own case;
(ii) adversely affect another party's case; or
(iii) support another party's case; and
(c) the documents which he is required to disclose by a relevant practice direction."
The obligation is of course more limited that under the former Peruvian Guano test but the rationale for a rule as to disclosure, including the present rule, remains that stated by Sir Thomas Bingham MR in Taylor v Anderton [1995] 1 WLR 447, at page 462. It is whether the party "suffers no litigious disadvantage by not seeing [the document] and will gain no litigious advantage by seeing it." Curiosity about the contents of a document, as Sir Thomas Bingham added, was of no importance. The expressions "adversely affects his own case" and "support another party's case" in the rule can be applied in the light of that.