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||Neutral Citation Number:  EWCA Civ 1154
||Case No: A2/2011/1842
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Mr Justice Coulson
||Royal Courts of Justice
Strand, London, WC2A 2LL
||13 October 2011
B e f o r e :
LORD JUSTICE PILL
LORD JUSTICE MUNBY
LORD JUSTICE LEWISON
||(1) JAYESH SHAH
||- and -
||HSBC PRIVATE BANK (UK) LIMITED
MR MICHAEL BRINDLE QC & MR SIMON GOLDSTONE (instructed by Zaiwalla & Co, London) for the Appellants
MR RICHARD LISSACK QC & MR NICHOLAS MEDCROFT (instructed by Berwin Leighton Paisner LLP,London ) for the Respondent
Hearing date : 20 September 2011
HTML VERSION OF JUDGMENT
Crown Copyright ©
LORD JUSTICE LEWISON:
- The claimants (Mr Jayesh Shah and his wife) claim damages of over $300 million against the defendant bank, arising from the defendant's delay in executing four transactions between September 2006 and February 2007. The defendant says that it (through its nominated officer) suspected that the proposed transactions concerned criminal property; and that, in those circumstances, it was not required to comply with the payment instructions. Instead, under the Proceeds of Crime Act 2002 ("POCA"), it says that it was obliged to make a number of authorised disclosures to the Serious Organised Crime Agency ("SOCA"); and did so through that same nominated officer.
- Before embarking on the detailed arguments, it is necessary to describe Part 7 of POCA a little more fully. POCA was described both by Hamblen J and Longmore LJ in the earlier round of this litigation (to which I refer below) and I repeat their summaries, with little change. Section 327 of POCA creates offences of "concealing, disguising, converting, transferring or removing criminal property from the jurisdiction." Section 328 creates an offence of entering into or becoming concerned in an arrangement which the defendant "knows or suspects" facilitates by whatever means the acquisition, retention, use of control of criminal property by or on behalf of another person. Section 329 creates an offence of "acquiring, using or possessing criminal property." Together, these three offences are known as the principal money laundering offences. "Criminal property" is defined in part in terms of a person's mens rea. Under section 340(3) of POCA, property is criminal property if it constitutes a person's benefit from criminal conduct or it represents such a benefit (in whole or in part and whether directly or indirectly) and the alleged offender "knows or suspects" that it constitutes or represents such a benefit.
- It is common ground that for a person to "suspect" for the purposes of POCA he or she must think that there is a possibility, which is more than fanciful, that the relevant facts exist. This is subject, in an appropriate case, to the further requirement that the suspicion so formed should be of a settled nature: K v National Westminster Bank plc  EWCA Civ 1039  1 WLR 311 (§ 16). There is no requirement that the suspicion be a reasonable one.
- A person does not commit any offence under the principal money laundering offences if he has made a disclosure to the relevant authorities under section 338 and has appropriate consent. So far as it is relevant, under s. 338 of POCA an "authorised disclosure" is defined as follows:
"(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."
- A "nominated officer" is (in effect) a person nominated and employed by the bank to receive disclosures under POCA (s.335 (9); s. 336 (11); s. 337 (5); s. 338 (5)). In practice this means the bank's Money Laundering Reporting Officer. Thus POCA envisages that a bank employee will not commit a money laundering offence if he or she discloses his or her suspicions internally within the bank.
- Sections 330 and 331 of POCA create two offences that apply to persons employed in "the regulated sector" (which includes banking). Section 330 applies to all bank employees. If, as a result of information which comes to him in the course of business a person knows or suspects that another person is engaged in money laundering, he commits an offence if he does not make the required disclosure. The required disclosure is disclosure either to the bank's own nominated officer, or to SOCA. Section 331 applies to nominated officers only. If, in consequence of a disclosure made to him under section 330 (i.e. by a bank employee) a nominated officer knows or suspects that another person is engaged in money laundering, he commits an offence if he does not make the required disclosure. This time the required disclosure is to SOCA. It is plain therefore that POCA envisages that bank employees will report their suspicions internally to the nominated officer; and that, based on what he has been told, the nominated officer may or may not form his own suspicion. If he does, it is he who will disclose his suspicion to SOCA.
- The two principal questions raised by this appeal are:
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.
- Coulson J answered both those questions in the affirmative. On the particular facts of the case he also decided that the employees concerned should be identified by function, although not by name. He thought that that method of identification would preserve the anonymity of the individuals concerned; although it is now common ground that it would not. Mr Shah appeals against the judge's refusal to require the bank to reveal the names of the employees in question. The bank cross-appeals against the judge's decision that its obligation to make standard disclosure required the names to be revealed in the first place.
- I take the remaining narrative from the judge's clear judgment. The funds from which the proposed transactions were to be made had been transferred by Mr Shah to the bank on 20 July 2006, having previously been held in an account at Credit Agricole. The four proposed transactions were dated 20 September 2006, 26 September 2006, 6 February 2007 and 28 February 2007. 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, according to the claimants it had 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 Mr Shah was suspected of money-laundering. The claimants say 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 as damages against the defendant.
- On 26 January 2009 Hamblen J gave summary judgment for the bank and dismissed the claimants' claims. He arrived at that conclusion by rejecting the four positive ways in which the claimants then put their case (irrationality, negligent self-induced suspicion, mistake and automatic mechanically-induced suspicion) and concluded that, in the light of the bank's evidence of suspicion (given exclusively by the bank's solicitor) and the absence of any allegation of bad faith by the claimants, the claims must fail. The Court of Appeal ( EWCA Civ 31  Bus LR 1514) agreed with the judge on all four positive ways in which the claimants put their case. However, the Court of Appeal held that since the bank was, on the face of it, in breach of contract, it was for the bank to prove that it held the suspicion that it alleged. Longmore LJ said (§ 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."
- If the bank proved that it had the suspicion alleged, then it would have a defence to the claim. Mr Lissack's second submission before the Court of Appeal on that occasion was that a court would never expect or require any bank employee to give evidence that he or she 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 rejected that submission. However, he said (§ 30):
"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."
- He added (§ 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."
- At that stage in the proceedings Mr Allen, the bank's solicitor, described its reporting system where suspicions of money laundering arose:
"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."
- His was the only evidence before the court on the bank's behalf. Subsequently, Mr Ramsay, the bank's Global Head of Compliance, expanded on the role of the Money Laundering Reporting Office ("MLRO"). He said:
"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.'"
- Mr Michael ("Mick") Wigley is a manager in the MLRO and was responsible for supplying the suspicious activity reports ("SARs") to SOCA. In his first witness statement he says that the MLRO is responsible for analysing reports of suspicious activities. He says (§ 5):
"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."
- He continues (§ 7):
"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."
- He concludes (§ 8):
"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."
- The bank has disclosed a series of memos, internal reports and similar documents. With the exception of the references to Mr Wigley, the identities of the writers and recipients of those documents, and the employees referred to in the texts of those documents, have been redacted. Instead, the bank has simply indicated which of the three departments (Client Relationship, Compliance, MLRO) the anonymous individual worked for. Beyond that, it is not possible for the claimants to know who originated the report, who read it, who actioned it, and who passed it up or down the line. However the disclosed documents do reveal the objective information that was considered at all levels of the bank's reporting structure; and contain the raw material on the basis of which Mr Wigley says that he formed his suspicion.
- The bank's position is that the names of the individual employees further down the reporting chain are not required to be disclosed in fulfilment of its obligation to make standard disclosure; but that even if they would otherwise be required to be disclosed the bank is entitled to withhold their names on the ground of public interest immunity.
- Before the judge it was common ground that the correct approach was to answer the following questions in the following order:
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 judge approached the question of relevance by quoting from the pre-CPR judgment of Sir Thomas Bingham MR in Taylor v Anderton  1 WLR 447:
"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."
- At the time when Taylor v Anderton was decided the test of relevance was the Peruvian Guano test (see Companie Financiere et Commerciale du Pacifique v Peruvian Guano Co (1882) 11 QBD 55). The Peruvian Guano test is encapsulated in the judgment of Brett LJ in that case, as follows:
"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."
- Although the judge correctly pointed out that it was important to remember that Taylor v Anderton dealt with the pre-CPR test (i.e. the Peruvian Guano test) he nevertheless considered that the test of "litigious advantage/disadvantage" that Sir Thomas Bingham MR applied was "akin to" the test now enshrined in CPR 31.6. However, one of the avowed intentions of the framers of the CPR was to reduce the scope of discovery in civil actions. It is, in my judgment, dangerous to apply pre-CPR statements of the test of relevance under the old rules to the obligation to make standard disclosure under the CPR; particularly when such tests are used in substitution for the words of the relevant rule. Whether a disadvantage in not having a document produced for inspection is to be characterised as "unfair" must be decided by reference to the words of the rule itself.
- The bank's obligation to disclose documents is an obligation to make standard disclosure. This is described by CPR Pt 31.6 as follows:
"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."
- It is notable that the word "relevant" does not appear in the rule. Moreover the obligation to make standard disclosure is confined "only" to the listed categories of document. While it may be convenient to use "relevant" as a shorthand for documents that must be disclosed, in cases of dispute it is important to stick with the carefully chosen wording of the rule. Thus in my judgment the first of the questions ventilated before the judge was not quite the right question.
- The issue in the present case has a slight tweak. The bank has disclosed the documents in question, but has redacted the names of the employees concerned. In other words the bank is asserting that it is justified in refusing to disclose part of the document, rather than the document as a whole. In GE Capital Corporate Finance Group Ltd v Bankers Trust Co  1 WLR 172 this court considered the correct approach to a case in which part of the document had been redacted. This was also a case decided before the introduction of the CPR; and hence also decided at a time when the Peruvian Guano test applied.
- In GE Capital Hoffmann LJ pointed out that it had long been the practice that a party is entitled to seal up or cover up parts of a document which he claims to be irrelevant. Part of a document may be sealed or concealed under the same conditions as a whole document may be withheld from production. The party's oath on the question of relevance is conclusive unless the court can be satisfied, not on a conflict of affidavits, but either from the documents produced or from anything in the affidavit made by the defendant, or by any admission by him in the pleadings, or necessarily from the circumstances of the case, that the affidavit does not truly state that which it ought to state. The ultimate question was:
"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 question then is not whether the affidavit "may" be wrong; but whether it "must" be wrong. He added:
"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."
- In my judgment the same approach to the sealing or concealing of parts of documents applies in the changed landscape of the CPR.
- Leggatt LJ said:
"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."
- The test that Leggat LJ applied was, of course, the Peruvian Guano test with its reference to "directly or indirectly".
- However, the Peruvian Guano test has been superseded by CPR Pt 31.6. In order to be caught by the obligation to disclose documents, the document in question must fall within one of the categories stated in CPR Pt 31.6. In his final report on Access to Justice Lord Woolf said (Chapter 12 § 38):
"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."
- His recommendation was that standard disclosure should be limited to documents falling within categories (1) and (2) only, supplemented in exceptional cases by applications for specific disclosure. This recommendation is reproduced (although without revealing its source) in paragraph 31.6.3 of the White Book.
- Plainly, the redacted material is not material on which the bank relies otherwise it would have revealed it. The judge commented (§ 15):
"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.'"
- But that, in my judgment, is the bank's forensic choice. If the bank has made it more difficult for itself to prove its own case, it must live with the consequences.
- No one suggests that the information is required to be disclosed by a practice direction. So the question is: is this material either material which adversely affects the bank's case or material which supports the claimants' case?
- At this stage it is important to recall the narrow scope of the issue remaining after the earlier decision of this court. All the positive ways in which the claimants put their case were rejected. What, therefore, remains is that the bank is put to proof of its genuine suspicion. There is, therefore no "case" put forward by the claimants which the redacted information might support. Accordingly, in my judgment the only possible category into which the information falls is information which adversely affects the bank's case. And in deciding whether it does, the Peruvian Guano test is inapplicable. In other words, it is not enough that the material may lead to a train of inquiry which may adversely affect the bank's case.
- On the question of relevance the judge concluded:
"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."
- The phrase "at least potentially" is very close to the test applied at first instance in GE Capital which, even on the Peruvian Guano test, Leggatt LJ said unequivocally was wrong. The inherent vagueness of the "litigious disadvantage" test does not identify the category of document specified in CPR Pt 31.6 into which the redacted information comes. The judge went on to consider two possible scenarios one of which would support the bank's case and the other of which could undermine it. He said:
"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."
- The bank employee to whom the judge referred was Ms Kalpana Shah (no relation to Mr Shah). In his witness statement Mr Zaiwalla, the claimants' then solicitor, said that on 25 May 2006 Ms Shah had asked Mr Shah by e-mail if she could borrow £1.5 million for one week. He said that Ms Shah had sent this e-mail from her HSBC computer and "it would therefore be reasonable for the Claimants to assume that she had made this request on behalf of [the bank]." The e-mail in question is timed at 3.20 p.m. At 14.54 (the timing is due to a time difference) Mr Shah replied that he was at temple and "can do it on 31/5 when I reach Harare". At 6 p.m. on the same day Ms Shah responded "Thank u. I may not need it anymore but if I do will let u know." In my judgment this episode is quite inadequate to provide any foundation for an allegation of bad faith. In the first place it happened on 25 May 2006, whereas Mr Shah did not transfer his money to the bank until 20 July 2006, nearly two months later; and the first of the impugned transactions did not take place until a further two months after that. Second, contrary to the judge's impression, Mr Shah did not refuse the loan. On the contrary he said he could make the loan when he was back in Harare. Third, within less than three hours Ms Shah had said that she did not need the money anyway. With respect to the judge I regard the suggestion that this caused Ms Shah to nurse a grudge against Mr Shah before he transferred any money to the bank, and to act on that grudge after four months as fanciful.
- Mr Zaiwalla also says that Ms Shah had tried to persuade Mr Shah not to enter into transaction 1 (which was a retransfer of Mr Shah's funds to Credit Agricole). He says that:
"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."
- This suggestion does not seem to have impressed the judge, because he does not mention it. It is entirely speculative. There is no evidence to support it; and no positive allegation to that effect made in the pleadings. Moreover an inability to rule out a possibility is not the appropriate test to decide whether a document adversely affects a party's case.
- In addition, unlike the judge, we have had the benefit of Mr Wigley's second witness statement (exchanged in preparation for trial). In that statement (§100) he says:
"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."
- Mr Brindle was driven to say that although Ms Shah might not have reported any suspicion to the compliance department or to Mr Wigley she might have put up someone else to do it. This is even more speculative than the original theory.
- The final suggestion is that Mr Roger Johnson, who was head of Africa at the bank, had received abusive emails from Mr Shah on 29 September 2006; and that he might have been motivated by ill-will. Abusive e-mails on 29 September can hardly provide a motive for a SAR on 20 or 28 September. The second of the two e-mails referred to does accuse Mr Johnson of being rude and behaving like a street vendor; but he would have had to have had an extraordinarily thin skin to have acted maliciously towards Mr Shah on the strength of this insult. This suggestion does not seem to have been canvassed before the judge. It is also entirely speculative, and in any event it cannot possibly apply to the first two (and most important) transactions. There is no evidence to support it; and no positive allegation to that effect made in the pleadings.
- Mr Brindle argued that to reveal the names of the bank's employees was the only way of giving effect to observations that had been made in the course of the earlier round of litigation in the Court of Appeal. He relied in particular on a passage in the transcript of argument. At that stage the bank's position was that it was entitled to summary judgment on the basis of evidence given by its own solicitor and was not required to call any witness from the bank itself. Ward LJ said:
"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?"
- Despite Mr Brindle's attempt to argue the contrary, it is clear to me that what Ward LJ envisaged was that the bank would call its nominated officer only, since he is the person who makes the report to SOCA. The nominated officer would be able to take the position of refusing to disclose his sources, or even the information that led him to form the suspicion. The court would then have to decide whether the nominated officer's suspicion was or was not genuine. Ward LJ was not, in my judgment, envisaging that the bank would call employees further down the reporting chain. By disclosing a witness statement made by Mr Wigley the bank has done exactly what Ward LJ suggested it should do. In fact it has gone further. Ward LJ envisaged that the nominated officer might refuse to disclose the information on which he relied in forming his suspicion. But the bank has disclosed that information: all that it has withheld is the name of the informant(s).
- Mr Brindle was pressed to explain what use (if any) the claimants might make of the names of the employees if they were revealed. His answer was:
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.
- The more I listened to the explanation of why the claimants wanted the names, the more convinced I became that, to use the familiar cliché, this was a fishing expedition. There is no evidential basis for a positive assertion that either Ms Shah or Mr Johnson was motivated by ill-will, as Mr Brindle recognised. Moreover, Mr Brindle did not say that even if Ms Shah's name was revealed as one of the sources the claimants would be able to assert bad faith: merely that they might be able to do so. Even that possibility was only tentatively advanced. It is all speculation and surmise. The proposition that Ms Shah's name would be revealed by undoing the redactions is, in any event, unequivocally contradicted by Mr Wigley.
- In my judgment the identification of the individual employees of the bank is at best something that might lead to a train of inquiry that might adversely affect the bank's case. Disclosure of the information might have been appropriate under the Peruvian Guano test (although I am not saying that it would have been), but in my judgment it does not meet the more stringent requirements of Pt 31.6 of the CPR.
- Accordingly, I would allow the bank's cross-appeal. The consequence of so doing is that the interesting and difficult questions of public interest immunity; and the outcome of the balancing exercise if such immunity prima facie exists do not arise. They are best left to a case in which they matter.
Lord Justice Munby :
- I agree with my Lords that the appeal should be dismissed and the cross-appeal allowed, just as I agree that it is neither necessary nor appropriate for us to consider the important and difficult questions of public interest immunity that were canvassed before us.
- I add a few words only because of the slightly differing views my Lords have expressed about the continuing relevance of what Sir Thomas Bingham MR said in Taylor v Anderton  1 WLR 447, 462. I agree with Lewison LJ about the dangers, generally speaking, of applying cases decided on the old Rules of the Supreme Court to the very different circumstances now obtaining under the Civil Procedure Rules. But I agree with Pill LJ that on this particular point the judge is not to be criticised for citing what Sir Thomas Bingham MR had said. It is as much the purpose of CPR 31.6 as of the different rule the Master of the Rolls was considering to ensure that there is no unfair advantage or unfair disadvantage, no litigious disadvantage and no litigious advantage. The difference, as Pill LJ has emphasised, is simply, though importantly, that the advantage and disadvantage to which the Master of the Rolls referred, are now to be assessed and evaluated not by reference to the previous Peruvian Guano test but by reference to the requirements of CPR 31.6.
Lord Justice Pill :
- Lewison LJ has stated the nature of the claim in paragraph 1 of his judgment. The bank declined to comply with the claimants' payment instructions with respect to very large sums of money on the ground that they had a genuine and settled suspicion that the proposed transactions concerned criminal property. In the event, it was established that the transactions did not concern criminal property and the instructions were executed. A claim for damages is made because of the delay in executing instructions and is in a very large sum.
- The bank has a defence if it proves that it had the suspicion alleged. When the case was previously before this court ( EWCA Civ 31), Longmore LJ stated, 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."
- The claimants had been clients of the defendant bank for a considerable time before the controversial transactions occurred. Active in the management of their accounts had been Ms Kalpana Shah. On 25 May 2006, Ms Shah asked the claimant Mr Shah by email if she could borrow £1.5 million for one week. Nothing came of it but, as Mr Lissack QC for the bank readily accepted, that is an extremely unusual way for a bank official to behave towards a client of the bank. Lewison LJ's description of events at paragraph 40 of his judgment does little to mitigate the extraordinary nature of Ms Shah's conduct on 25 May. Moreover, there is also evidence that, in Early September 2006, Ms Shah sought from Mr Shah a guarantee for $20 million for a month for a close friend in Kenya.
- The above evidence would have contributed to Longmore LJ's conclusion, also at paragraph 25, citing Brooke LJ in Equitable Life Assurance Society v Ernst & Young  EWCA Civ 1114:
"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 is defined in CPR Pt 31.6:
"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  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.
- I would not criticise the judge for citing that passage from Taylor. An unfair advantage, and an unfair disadvantage, in the litigation are created if a document that adversely affects a party's case, or supports another party's case, is not disclosed. In this case, considerable disclosure was made by the bank on 4 February and 18 February 2011. A claim for specific disclosure was initiated but abandoned.
- Mr Brindle QC, for the claimants, was not able to point to anything in the mass of documentation disclosed that throws doubt on the genuineness of the suspicion claimed to have been held by bank officials. Mr Lissack took the court through the contemporaneous documents and these justified the submission he made that they provide no support for an argument that the suspicion was not genuinely formed.
- Mr Brindle gave three reasons for disclosure. First, disclosure of the redacted names might lead to the need for further disclosure, and, secondly may lead to an allegation of bad faith against Ms Shah or Mr Johnson, another official. Having regard to the nature and extent of documentation disclosed, I do not consider that these submissions have substance.
- Thirdly, submitted Mr Brindle, disclosure of the names would enable the claimants, in their closing submissions at trial, to draw attention to the failure (if that should be the case) of the bank to call the named people in evidence. In the absence of any suggestion in the documentation disclosed of anything to suggest a contrived or false suspicion by any bank official, the supposed forensic advantage of knowing identities does not justify disclosure under any of the sub-paragraphs in the rule. The point can still be made that other officials have not been called; there is no reason to believe the point would have greater force if the redaction of names was not permitted.
- I agree that the bank should not be required to disclose the names. Unpromising though the background may be from the point of view of the bank in that the suspicions were not in the event justified and in that Ms Shah behaved in such an unusual way, analysis under CPR Pt 31.6 does not require disclosure. The judge's finding, at paragraph 26, that "the genuineness of the suspicion cannot properly be determined without that information" was not, in the circumstances, in my view justified. Mr Wigley, if called, may be cross-examined, "up hill and down dale", as earlier envisaged by this court, if he seeks to establish the genuineness of the suspicions but there is no reason to conclude that the challenge will be strengthened by the disclosure of the identify of particular employees.
- I agree that the appeal should be dismissed and the cross-appeal allowed. I also agree that it is not appropriate to decide questions of public interest immunity which would, on a different conclusion, have arisen.
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