Neutral Citation Number: [2009] EWHC 79 (QB)
Case No: IHQ/08/0530 & IHQ/08/0786
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION

Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 26/01/2009

Before :

THE HON. MR JUSTICE HAMBLEN
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Between :

	SHAH & anr	Claimants	
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	HSBC PRIVATE BANK (UK) LTD	Defendant	

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Paul Downes and Simon Goldstone (instructed by Edwards Angell Palmer & Dodge UK LLP) for the Claimants
Richard Lissack QC and Nicholas Medcroft (instructed by DLA Piper UK LLP) for the Defendant

Hearing dates: 15/12/2008 – 17/12/2008
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Judgment

Mr Justice Hamblen : 

Introduction

1	The Claimants (respectively “Mr Shah” and “Mrs Shah”) were account holders with the Defendant bank (“HSBC”).  

2	In these proceedings the Claimants claim substantial damages arising out of delays by HSBC in executing four transfers from the Claimants’ account in 2006/7 and their failure to explain the reasons for such delays.

3	At the time the reason given by HSBC for failing to execute the transfers was that they were complying with their UK statutory obligations.  However, the underlying reason why each transfer was delayed was because HSBC suspected that the funds in the Claimants’ account were criminal property.  Before HSBC could proceed with each transaction, it accordingly had to make an authorised disclosure to the relevant authorities and wait for appropriate consent (under Part 7 of the Proceeds of Crime Act “POCA”).   In each case where the transfer instructions were maintained consent was provided and the transfers made shortly thereafter.  The following table summarises the position:

Date of  payment instruction	Amount to be Transferred	Date of Authorised Disclosure	Date of Consent	Date Transfer Effected	
20 September  06	$28,807,432.88	21 September 06	2 October 06	3 October 06	
26 September 06	$7,282.50	28 September 06	Not applicable
(payment instructions were cancelled on 29 September 06)	Not applicable	
6 February 07	$8,904,910.65	7 February 07	14 February 07	15 February 07	
28 February 07	£457,956.66	28 February 07	2 March 07	5 March 07	

4	The Claimants contend that HSBC’s failure to carry out their payment instructions and to explain the reasons for not doing so have caused them substantial losses.  Their case is that when in September 2006 Mr Shah told a creditor (an ex-employee) that HSBC’s compliance with its UK statutory obligations was the reason he was unable to make a payment due to him, rumours spread in Harare that Mr Shah was suspected of money laundering in the UK.  The effect of this was, the Claimants say, to stigmatise Mr Shah’s reputation in Zimbabwe.  As a result of this, and other actions of HSBC that Mr Shah complains about, Mr Shah says that the Zimbabwean authorities themselves became suspicious and firstly froze and then seized his investments (held through certain private companies) causing him losses of over US$300m.

5	I have to deal with two applications made by HSBC dated 29 February 2008 and 24 June 2008 to strike out and/or seek summary judgment in relation to substantial parts of the pleaded claim, together with an application made by the Claimants to amend their Particulars of Claim dated 5 September 2008. 

The applications

6	HSBC applies to strike out parts of the claim under CPR 3.4 (or the court’s inherent jurisdiction) and for summary judgment under CPR 24. The relevant parts of the claim to which the applications relate are:

6.1	The claim that HSBC failed to comply with the Claimants' instructions in respect of the four transactions on 20 September 2006, 26 September 2006, 6 February 2007, 28 February 2007 (the “POCA Claim”);

6.2	HSBC’s alleged failure to provide information and to forward bank statements with dispatch (the “Instructions Claims”);

6.3	The losses pleaded at paragraphs 26 of the Original Claim and in Further information provided and in particular:

6.3.1	the claim for damages allegedly suffered when the Zimbabwean authorities indicated that companies in which the First Claimant had an interest should invest in certain government securities (the "US$44m Interest Differential Claim" referred to in the Claimants’ second response to the Defendant’s request for information, dated 31 October 2007, at paragraphs 1.2 and 1.9); 

6.3.2	the claim for damages arising from the alleged seizure by the Zimbabwean authorities of the government securities (paragraphs 26(c) and (d) of the Original Claim and paragraphs 1.1 and 1.9 of the second response to the Defendant’s request for information) (the "US$331m Seized Investments  Claim"); 

6.3.3	the claim for damages arising from the alleged unilateral termination of a loan agreement between the BVI Company and the Reserve Bank of Zimbabwe (the "BVI Company Claim" referred to in the Claimants’ second response to the Defendant’s request for information at paragraphs 1.2 and 1.9).

7	The Claimants seek permission to amend their claim as set out in Amended Particulars of Claim (the “Amended Particulars”) first provided under cover of a letter dated 13 May 2008, as reformulated in one respect during the hearing.   HSBC object to the following amendments sought to be made:

7.1	The Claimants’ amended case on causation as set out in paragraphs 26a and 26b whereby it is alleged that it was Mr Shah’s inability to transmit moneys under the second requested transfer that led to an ex-employee, Mr Kabra, going to the Zimbabwean authorities and the substantial losses subsequently suffered at the hands of those authorities. 

7.2	The Claimants’ amended claim founded upon an implied contractual term giving rise to a duty upon the Defendant to take reasonable care in maintaining the Claimant’s accounts and in complying with instructions including the making of disclosures by way of Suspicious Activity Reports (“SARs”) (“Implied Contractual Duty”) as set out in the Amended Particulars paragraph 6b.  It is pleaded that this implied duty was breached in three ways: first, by a failure to make the disclosure as soon as it was practicable to do so; secondly, because there were no rational grounds to suspect the Claimants of money laundering; thirdly, by a failure to refer to criminal property (Amended Particulars para.13A, 14A, 15A and 16A in relation to the four transactions).

7.3	The Claimants’ amended claim of breach of confidence (Amended Particulars para. 6b, 13A, 13B. 14A, 14B, 15A, 15B, 16A, 16B, 23 and 28).

7.4	The Claimants’ amended claim (as reformulated during the hearing) for failure to provide information (Amended Particulars para. 16C to 16E).

7.5	The Claimants’ amended claim that insofar as a breach of the banking contract by the Defendant had a "damaging" effect on the reputation of the Claimants, the Defendant would take such steps as were reasonable to correct such "false" impression (Amended Particulars para. 6h).

7.6	The Claimants’ amended case on loss (Amended Particulars para. 26d and 26e).

7.7	The Claimants’ amended claim for a declaration that they are entitled to details of the authorised disclosures made by the Defendant (prayer for relief).

The relevant principles

8	Where an application is made to amend it is necessary for the applicant to demonstrate that it is appropriate for the court to exercise its discretion to permit the amendment.

9	In considering the exercise of its discretion the court should have regard to the overriding objective in CPR 1 and in particular the prejudice that will be caused to the parties (a) if the amendment is allowed and (b) if it is refused.  

10	As stated by Peter Gibson LJ in Cobbold v Greenwich LBC in a passage cited in the notes to Civil Procedure Volume 1 2008 Edition at 17.3.5:

“The overriding objective [of the CPR ] is that the court should deal with cases justly. That includes, so far as practicable, ensuring that each case is dealt with not only expeditiously but also fairly. Amendments in general ought to be allowed so that the real dispute between the parties can be adjudicated upon provided that any prejudice to the other party or parties caused by the amendment can be compensated for in costs, and the public interest in the efficient administration of justice is not significantly harmed.”

11	Where the merits of a proposed amendment are in issue it is necessary to show that it has some prospects of success.  This is likely to turn on whether it has a real prospect of success, the same standard as under Part 24 – see the Notes to CPR 17.3 at 17.3.6 and the cases there referred to.  If the court concludes that an amended claim or defence has no real prospects of success then no purpose would be served in allowing the amendment to be made.

12	In considering the applications under CPR 3.4(2)(a) and CPR 24 the burden is on the Defendants to prove either that the statement of case discloses no reasonable grounds for bringing the claim (CPR 3.4(2)(a)) or that there is no real prospect of succeeding on the claim or issue (CPR 24).

13	CPR 3.4(2)(a) gives rise to an examination of the pleadings on the assumption that the pleaded facts will be established.  CPR 24 allows for a wider enquiry but does not always do so in practice.

14	In considering such applications the Court should not be drawn into a mini-trial of complex cases.  As stated by Lord Justice Brooke in Equitable Life Assurance Society v Ernst & Young [2003] EWCA Civ 1114 at paragraphs 38-41:

“38.	In Three Rivers District Council v Bank of England (No 3) [2001] UKHL 16; [2001] 2 All ER 513 the House of Lords gave useful guidance to courts in their task of deciding whether to grant summary judgment in favour of a defendant in a claim as complex as this.  It endorsed the authority of the earlier judgments in this court in Wenlock v Moloney [1965] 1 WLR 1238 and Swain v Hillman [2001] 1 All ER 91.  Important guidance is contained in the speech of Lord Hope of Craighead at paras 91-96 and 103, supported by Lord Hutton, particularly at paras 111 and 147, and by Lord Steyn’s agreement.  The following general principles can be derived from those speeches and the prior authorities.  The overriding concern is the interests of justice.  So far as facts are concerned, the simpler the case is the easier it is likely for a court to be able to take a view that the basis of a claim is fanciful or contradicted by all the documentary material on which it is founded.  More complex cases are unlikely to be capable of being resolved in that way.  There is a danger of injustice in seeking to try such cases summarily on the documents and thus without disclosure and oral evidence tested by cross-examination.  It should not be done unless the court can be confident that all the relevant facts had already been satisfactorily investigated.  The power of summary disposal is not intended for cases where there are issues which need to be investigated at trial.  
…
40.	As for issues of law, it has been said by this court that it is not appropriate to strike out a claim in an area of developing jurisprudence since decisions as to novel points of law should be based on actual findings of fact (Farah v.  British Airways plc (CAT 6th December 1999)….  If it be the case that the relevant facts require investigation at trial, it may not be possible with safety to form a view on a summary basis as to the application of such principles of law.”
       
15	On the other hand, in an appropriate case the power to strike out or give summary judgment is salutary and works in the interests of the parties and of justice since it avoids unnecessary delay and costs being incurred.  As stated by Lord Woolf M.R. in Swain v Hillman [2001] 1 All ER 91 at p94-5:

‘It is important that a judge in appropriate cases should make use of the powers contained in Part 24. In doing so he or she gives effect to the overriding objectives contained in Part 1. It saves expense; it achieves expedition; it avoids the court's resources being used up on cases where this serves no purpose, and, I would add, generally, that it is in the interests of justice. If a claimant has a case which is bound to fail, then it is in the claimant's interests to know as soon as possible that that is the position. Likewise, if a claim is bound to succeed, a claimant should know this as soon as possible …”

Part 7 POCA 

16	The interpretation and application of Part 7 of POCA is of central importance to many of the issues which arise on the applications.

17	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.

18	“Criminal property” is defined in part in terms of a person’s mens rea.    Under section 340(3) 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. 

19	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 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.
…”

20	Under section 335(1) POCA “appropriate consent” is defined as the consent of a nominated officer to do a prohibited act if an authorised disclosure is made to the nominated officer.  A person who makes an authorised disclosure, but is not given notice of refusal within a 7 working day notice period, or, having received such notice, does not receive before the end of the 31 day moratorium period notice of an order freezing the account, is bound to act in accordance with the customer’s instruction/s (see sections 335(2)-(6) POCA). 

21	Section 333 POCA creates an offence of “tipping off”.  A person commits an offence if he knows or suspects that an authorised or protected disclosure has been made and he makes a disclosure which is likely to prejudice any investigation which might be conducted following the original disclosure to the authorities (section 333 applied at the material time although it has since been repealed and replaced by sections 333A to 333E.)  In addition, section 342 POCA creates an offence of ‘prejudicing an investigation.’  A person commits an offence if he knows or suspects that a money laundering investigation is being, or is about to be conducted and he makes a disclosure which is likely to prejudice the investigation.

22	The effect of Part 7 POCA on banks has been considered by the courts in some detail in two cases at first instance - Squirrell Ltd v National Westminster Bank plc [2005] EWHC 655 (Ch), [2005] 1 All ER (Comm) 749; N2J Limited v Cater Allen (Case No H006X0040 Nelson J 21 February 2006) - and by the Court of Appeal in K Ltd v National Westminster Bank Plc (Revenue and Customs Prosecution Office and Serious Organised Crime Agency intervening) [2007] 1 WLR 311.  The role of the Serious Organised Crime Agency (“SOCA”) in giving consent to execute payment instructions was considered by the Court of Appeal in UMBS Online Ltd v Serious and Organised Crime Agency [2008] 1 All ER 465.  

23	The practical effect of these provisions is to compel a bank to seek appropriate consent under section 335 in any case in which the bank has a suspicion that a money laundering offence may be committed.  As Laddie J pointed out in the Squirrell case at para. 18:

“18 The combined effect of these provisions is to force a party in NatWest's position to report its suspicions to the relevant authorities and not to move suspect funds or property either for seven working days or, if a notice of refusal is sent by the relevant authority, for a maximum of seven working plus 31 calendar days. Furthermore, the anti-tip off provisions of section 333 of the 2002 Act prohibit the party from making any disclosure which is likely to prejudice any investigation which might be conducted following an authorised disclosure under section 338 .

19 The way these provisions work can be illustrated by the facts of this case. Once NatWest suspected that Squirrell's account contained the proceeds of crime it was obliged to report that to the relevant authority, in this case the commissioners. It was also obliged not to carry out any transaction in relation to that account. That remains the position unless and until consent to the transactions is given by the commissioners or, if it is not, the relevant time limits under section 335 have expired. In the meantime, it is not allowed to make any disclosure to Squirrell which could affect any inquiries the commissioners might make. Obviously, telling Squirrell why it had blocked its account would constitute a prohibited disclosure.

20 These provisions could work hardship, as indicated above. But I accept Mr Grodzinski's submission that it must be assumed that the legislature intended section 328(1) to be of wide scope and for the seven- and 31-day time limits to be sufficient protection of parties in the position of Squirrell.”

24	As the Courts have pointed out, the operation of the legislation may have very serious consequences for the customer.  In the Squirrell case Laddie J observed as follows at para. 7:

“I should say that I have some sympathy for parties in Squirrell's position. It is not proved or indeed alleged that it or any of its associates has committed any offence. It, like me, has been shown no evidence raising even a prima facie case that it or any of its associates has done anything wrong. For all I know it may be entirely innocent of any wrongdoing. Yet, if the 2002 Act has the effect contended for by NatWest and the commissioners, the former was obliged to close down the account, with possible severe economic damage to Squirrell. Furthermore, it cannot be suggested that either NatWest or the commissioners are required to give a cross-undertaking in damages. In the result, if Squirrell is entirely innocent it may suffer severe damage for which it will not be compensated. Further, the blocking of its account is said to have deprived it of the resources with which to pay lawyers to fight on its behalf. Whether or not that is so in this case, it could well be so in other, similar cases. Whatever one might feel, were Squirrell guilty of wrongdoing, if, as it says, it is innocent of any wrongdoing, this can be viewed as a grave injustice. I do not understand Mr Grodzinski to dispute this analysis. He says that the 2002 Act must be regarded as the legislature's determination of what provisions are necessary to curtail criminals' ability to profit from crimes. Furthermore, the legislation contains some, albeit restricted, provisions intended to limit harm that these provisions can inflict on innocent parties. It is not for the courts to substitute their judgment for that of the legislature as to where the balance should be drawn. If, as he says is the case here, the legislation is clear, the courts cannot require a party to contravene it.”

25	As Ward LJ stated in the UMBS case at paras. 8-9:

“8 In the appellant's view this is a raft of legislation of which Dracon, the Athenian legislator, would have been proud. Mr Downes, for UMBS, endorses Longmore L.J.'s comment in K Limited v National Westminster Bank & ors [2006] EWCA Civ. 1039 at paragraph 23 that the terms of the Act have, “not surprisingly, given rise to concern”. The operation of the Act certainly has given us a great deal of concern. UMBS complain, and there is force in the complaints, that, for example: 
•	(1) the blocking of an account is triggered by no more than suspicion, not even reasonable suspicion; 
•	(2) the cardinal freedom of the individual to be presumed innocent until proved guilty is blown away; 
•	(3) incalculable harm may be done to the person under investigation as the account can be frozen for 40 days in all (non-working days being excluded from the initial period); 
•	(4) there is consequently prejudice to clients and customers of the person under suspicion: they too can face ruin; 
•	(5) SOCA may be amenable to judicial review but the difficulties of proving an abuse of its power are huge and more often than not the theoretical remedy is in reality worthless. To add to the difficulties, recovery of damages for any loss suffered may not be straightforward in a case like this. 
9 In the respondent's view, on the other hand, POCA is a sharp but essential modern weapon in the fight against organised crime which gives SOCA and other law enforcement bodies the ability to counter-attack, and then pursue and recover the proceeds of the criminal activity.”

26	Despite these concerns the Courts have recognised that they represent a price Parliament has deemed worth paying in the fight against crime.  As Longmore LJ observed in the K Ltd case:

“The truth is that Parliament has struck a precise and workable balance of conflicting interests in the 2002 Act. It is, of course, true that to intervene between a banker and his customer in the performance of the contract of mandate is a serious interference with the free flow of trade. But Parliament has considered that a limited interference is to be tolerated in preference to allowing the undoubted evil of money-laundering to run rife in the commercial community. The fact that the interference lasts only for 7 working days in what we were told were the majority of cases and a further 31 days only, unless the relevant authority goes to the length of applying to the court for a restraint order when all cards will have to be on the table in any event, shows that the interference with freedom of trade is limited. Many people would think a reasonable balance has been struck.”

The Issues

27	I propose to consider the issues which arise on the applications under the following headings:
27.1	The claim for failure to execute payment instructions. 
27.2	The claim for failing to take reasonable care.
27.3	The new claim for breach of confidence.
27.4	The claim for failing to comply with other instructions.
27.5	Whether the losses claimed are recoverable.
27.6	Other claims.

(1)	The claim for failure to execute payment instructions. 

28	HSBC’s case is that they had a suspicion that the requested transfers involved funds which were criminal property.  In the light of that suspicion they were compelled under POCA to make an authorised disclosure under section 338 and seek appropriate consent under section 335.  Until such consent was forthcoming or the relevant time limits expired they could not carry out the Claimants’ instructions and cannot be liable in law for failing to do so.  Provided that HSBC had a relevant suspicion their conduct was unimpeachable.  Suspicion is a matter of subjective fact.  HSBC’s evidence is that they had such a suspicion and there is no allegation of bad faith.  In such circumstances the claim for breach of duty must fail.

29	HSBC place considerable reliance on the K Ltd decision.  That case involved an appeal from an application (refused at first instance) of the claimant (the customer) for an injunction to restrain the defendant (the bank) from acting in breach of its contractual duty to honour the customer’s instructions. 

30	The customer had instructed the bank to pay £235,000 to a third party. The bank wrote to the customer stating that it could not currently comply with the instruction and further could not enter into any discussions about the matter. The customer applied for an injunction. 

31	The bank’s solicitor wrote to the customer stating that it had made a disclosure to Revenue and Customs (that is, for the purposes of Part 7 POCA (under s.328 POCA)).

32	The customer made submissions to the court to the effect that if the bank relied upon a suspicion that the money in the customer’s account was criminal property it should give admissible evidence to the court of any suspicion.  The solicitor’s letter baldly stating the fact of the disclosure was, it was submitted, insufficient. In particular, the bank’s official/s responsible for the suspicion should be available for cross examination on, first, the fact of the suspicion and, secondly, whether there were any grounds for the suspicion. This was so because, “otherwise a customer’s account could be effectively frozen even if a suspicion had not been entertained” (see Longmore LJ at para.6).

33	The Court of Appeal held that (Longmore LJ at para.10):

“If the law of the land makes it a criminal offence to honour the customer’s mandate in these circumstances there can, in my judgment, be no breach of contract for the bank to refuse to honour its mandate and there can, equally, be no invasion (or threat of invasion) of a legal right on the part of the bank such as is required before a claimant can apply for an injunction.”

34	Further, in relation to the effect upon the banking contract Longmore LJ stated at para.11:

“The conventional view is that, if a statute renders the performance of a contract illegal, the contract is frustrated and both sides are discharged from further performance. In a case, however, where a statute makes it temporarily illegal to perform the contract, the contract will only be suspended until the illegality is removed. That still means that, during the suspension, no legal rights exist on which any claim to an injunction must depend.”

35	As to the bank’s suspicion triggering the suspension of the banking contract Longmore LJ held at para.21:

“[The customer] submitted that…it would be all too easy for banks to assert a suspicion which was in fact groundless…the answer to this submission is twofold: (1) the existence of suspicion is a subjective fact. There is no legal requirement that there should be reasonable grounds for the suspicion. The relevant bank employee either suspects or he does not. If he does suspect he must (either himself or through the bank’s nominated officer) inform the authorities. (2) The provisions of the statute permitting only the bank’s professional legal adviser to make a disclosure on its behalf, and then only for the purposes of court proceedings, cannot be sidestepped.” 

36	As the K Ltd case illustrates, POCA seeks to put pressure on banks to disclose (ordinarily confidential) information to enable the relevant authorities to obtain information about criminal activity and to increase the prospects of being able to detect crime and freeze criminal property.  Ordinarily, the bank would not disclose this information to the authorities since (1) it is not in the bank’s interest to delay or cancel the transaction and (2) to do so would place the bank in breach of contract.

37	POCA places the requisite pressure on the bank by exposing it to the risk of criminal liability for carrying out a prohibited act.
 
38	A bank can only raise a defence to doing a prohibited act under s.327, 328 or 329 POCA by, prima facie, breaching the banking contract. First, by breaching the duty to maintain secrecy by making an authorised disclosure. Secondly, by failing to carry out the customer’s instruction (or mandate) until it has received appropriate consent or the notice and moratorium provisions are exhausted (see s.335 POCA). 

39	In K Ltd the Court of Appeal stated that where POCA has made it temporarily illegal to perform the contract, no legal rights exist upon which the parties may rely.   However, as pointed out by the Claimants, if the property in question is not in fact “criminal property” then no offence is committed.  For the purpose of the present applications it should be assumed that it was not criminal property, as the Claimants aver and HSBC does not seek to dispute.  On that basis it would not therefore have been illegal for HSBC to execute the payment instructions and the rights under the contract cannot have been suspended by illegality.  On the other hand, the Claimants rightly recognise that where the bank has a relevant suspicion that the property is criminal property it has no alternative but to seek appropriate consent under POCA.  The bank is most unlikely to be in a position to know whether or not the property is criminal property, but, if it suspects that it is, then in order to avoid potential criminal liability under POCA it must make a disclosure and seek appropriate consent.  Analytically this may be legally permissible as the result of an obvious and/or necessarily implied restriction on or qualification of the bank’s duties rather than on grounds of illegality, but the end result is the same.

40	HSBC submits that the key question is whether they had a suspicion that the requested payments related to criminal property. They aver that they did and no challenge is made to their honesty.  The Claimants have not pleaded bad faith and they made it clear in their oral submissions that they do not contend that any suspicion was held dishonestly or in bad faith.  
41	HSBC contends that the authorities make it clear that the existence of suspicion is a subjective fact. There is no legal requirement that there should be reasonable grounds for the suspicion.  The meaning of “suspicion” was considered by the Court of Appeal in R v Da Silva [2006] 4 All ER 900 at para 16 (and applied in K Ltd):
“It seems to us that the essential element in the word ‘suspect’ and its affiliates, in this context, is that the defendant must think that there is a possibility, which is more than fanciful, that the relevant facts exist.  A vague feeling of unease would not suffice.  But the statute does not require the suspicion to be ‘clear’ or ‘firmly grounded and targeted on specific facts’ or based on ‘reasonable grounds’”

42	In the present case, evidence of suspicion has been adduced at paragraphs 16(c), 17(b), 18(b) and 19(b) of the Defence which is verified by a statement of truth by the Banking Director of HSBC, Mr Johnson.  In addition, there are the second and fourth witness statements of Daren Allen of HSBC’s solicitors, DLA Piper, the effect of which can be summarised as follows:
42.1	HSBC’s process of reporting suspicion has three stages in which at least three individual employees play a part.  Staff suspicion is reported first to the Compliance department before, in common with other banks, it is reported internally to a Reporting Officer (who is a nominated officer for the purposes of Part 7 POCA) who will then consider whether the relevant suspicion merits disclosure to the authorities;
42.2	HSBC suspected that the funds in the Claimants’ bank account constituted criminal property (namely benefit from criminal conduct or represented such benefit in whole or in part (whether directly or indirectly));
42.3	The relevant people employed by HSBC at all three levels of the reporting process held a suspicion in respect of each transaction; 
42.4	At least three different people were suspicious in respect of each transaction;
42.5	In respect of each transaction, at least one member of HSBC’s Money Laundering Reporting Office held a suspicion and independently approved the making of the authorised disclosures, which HSBC was required to make in order to comply with the Claimants’ instructions in respect of the First to Fourth Transactions; 
43	The Claimants contend that to be a relevant suspicion under POCA it must be a rational suspicion and/or that any implied restriction on HSBC’s duty to follow their instructions by executing the transfers must be so circumscribed.  In addition, they contend that the suspicion could not be a self-induced suspicion or a mechanical suspicion.

44	In relation to the alleged requirement of rational suspicion under POCA, the Claimants stress that the definition of suspicion applied in the Da Silva and K Ltd cases referred to the fact that “that the defendant must think that there is a possibility, which is more than fanciful, that the relevant facts exist”.  This, they submit, means that to be a suspicion at all it must be rational rather than fanciful.  They further submit that to be a rational suspicion it must not be unreasonable in the Wednesbury sense.

45	In my judgment this is an unwarranted gloss on POCA and the K Ltd decision.  The K Ltd case clearly establishes that suspicion under POCA is a purely subjective matter.  It does not matter whether or not there are reasonable grounds for that suspicion, provided that it is a genuinely held suspicion.  To be a suspicion rather than a mere feeling of unease it must be thought to be based on possible facts, but the sufficiency of those possible facts as a grounding for the suspicion is irrelevant, unless good faith is in issue.

46	In relation to the alleged limitation of any restriction on HSBC’s duty to follow instructions, in their Reply the Claimants admitted that if in fact HSBC considered that the four transactions constituted money laundering it would not be able to carry them out without the “appropriate consent” under section 335 of POCA.  In their written skeleton they refined this concession by submitting that it was intended to indicate that where a banker genuinely and reasonably suspects money laundering he will be entitled to refuse to make a payment unless he receives consent, it being recognised that at the time that the banker must decide whether or not to act he will not know whether there has in fact been money laundering.   They accordingly submit that any implied restriction on the banker’s duty in such circumstances was limited to where the suspicion was both genuinely and reasonably held.

47	The Claimants’ revised argument runs contrary to the scheme of POCA and the pragmatic premise underlying their original concession.  In circumstances where a banker is effectively compelled to make an authorised disclosure under POCA he cannot be in breach of contract in so doing.  He is doing what the law forces him to do.  Under POCA the mere fact of suspicion is the trigger for an authorised disclosure to be made.  If so, the implied restriction on the banker’s duty must equally be triggered by the mere fact of suspicion.  To impose a superadded requirement of reasonableness would put a banker in an impossible position and mean that he could be in breach of duty even though he was acting as the law compelled him to.  That would be neither sensible nor principled.

48	As to self induced suspicion, the Claimants contend that if the suspicion was induced by negligence then it would not be a relevant suspicion.  However, that is to introduce a requirement of reasonableness by another means.  All that is required is that there is a suspicion.  If there is, then POCA is triggered regardless of the reasonableness of that suspicion.

49	In support of their argument on self induced suspicion the Claimants relied on an example given whereby a suspicion was formed about person A but as a result of clerical error it was reported to the authorities as relating to person B.  However, in such a case it could be said that in fact there never was a genuinely held suspicion about person B.  In any event that is not this case.

50	As to mechanical suspicion, the Claimants contend that if a suspicion was generated automatically by, for example, a computer programme, then it would not be a relevant suspicion.  If there was no human held suspicion then that may well be correct.  However, again that is not this case, nor is it realistically ever likely to be the case.  Human intervention and decision making is going to be an inevitable part of the disclosure process.

51	The Claimants also stress that unless the rationality of the suspicion held can be questioned then innocent customers, such as the Claimants in this case, will never be able to question or investigate the bank’s actions, despite the seriousness of the consequences which may be suffered.  They will be met with an impenetrable wall of silence.

52	This is in essence the customer’s argument which was considered and rejected in K Ltd at paras. 21-2 of the judgment.  In particular, the mens rea of suspicion alone is central to the purpose behind the legislative scheme.  Suspicion is something less than proof.   It is also straightforward.  In the context of a bank, the relevant employee either suspects or he does not.  If he does, he must inform the authorities.  Parliament intended suspicion as a subjective fact to be sufficient (1) to expose a person to criminal liability for money laundering and (2) to trigger disclosures to the authorities.  Parliament did not require, in addition, that the suspicion be based upon “reasonable” or “rational” grounds.  There are good practical reasons for this. Unlike law enforcement agencies, banks have neither the responsibility nor the expertise to investigate criminal activity to satisfy themselves that the grounds for their suspicion are well founded, reasonable or “rational”.

53	For all these reasons I reject the various ways in which the Claimants seek to gloss POCA and the K Ltd decision.  In order to impugn the decision to make an authorised disclosure under POCA and the consequent failure immediately to execute the Claimants’ payment instructions the Claimants must challenge the good faith of the suspicion which HSBC states that its employees held.  They cannot and do not seek to do so.  In such circumstances I conclude that there is no real prospect of the Claimants establishing that the failure to execute their payment instructions was a breach of duty and that this claim should accordingly be dismissed.  

(2)	The claim for failing to take reasonable care.

54	By amendment the Claimants seek to introduce a claim that there was a duty upon HSBC Defendant to take reasonable care in maintaining the Claimants’ accounts and in complying with instructions including the making of disclosures by way of Suspicious Activity Reports (“SARs”) under POCA and in particular in accordance with section 337 and 338. 

55	The Claimants allege that this implied duty was breached in three ways: first, by a failure to make the disclosure “as soon as it was practicable to do so”; secondly, because there were no “rational grounds” to suspect the Claimants of money laundering; thirdly, by a failure to refer to “criminal property” (Amended Particulars para.13A, 14A, 15A and 16A in relation to the four transactions).  

56	There is no doubt that a banker owes a general duty of care to its customer in the way that it executes its customers’ orders.  In the case of Barclays v Quincecare [1992] 4 All ER 363 per Steyn J (as he was) said at p.376:

“In my judgment it is an implied term of the contract between the bank and its customer that the bank will observe reasonable skill and care in and about executing the customer’s orders.  Moreover, notwithstanding what was said in Tai Hing Cotton Mill Ltd v Liu Chong Hing Bank Ltd [1986] AC 80 at 107, a banker may in a case such as the present be sued in tort as well as contract: see Midland Bank v Hett Stubbs & Kemp [1979] Ch 384.  But the duties in tort and contract are coextensive, and in the context of the present case nothing turns on the question whether the case is approached in contract or tort.”

57	That duty extends over the whole range of banking business which the bank has agreed to carry out on the customer’s behalf, including the handling of his accounts and compliance with his lawful instructions.

58	The bank’s duty to comply with POCA may restrict or qualify those duties but I accept that it is well arguable that such duties are not completely excluded by POCA.  So, for example, if a bank sought appropriate consent to make a bank transfer under POCA and, having obtained such consent, unreasonably delayed in carrying out that transfer, it may well act in breach of duty.  Similarly, if, having decided to make an authorised disclosure under POCA in relation to a requested transfer, the bank unreasonably delayed in making that disclosure to the authorities then again a breach of duty may be involved.  

59	However, what matters for present purposes is not whether one can posit examples of a duty of care applying in the POCA context, but whether the Claimants have a real prospect of establishing their alleged breaches of duty of care.

60	The first alleged breach is that HSBC was in breach of duty in failing to make the POCA disclosure “as soon as it was practicable to do so”.  However, even if one assumes a duty in this or like terms, there is no pleaded or evidential basis for alleging breach of such duty.  As one would expect, before making an authorised disclosure in respect of a requested transaction certain steps must be gone through.  In relation to HSBC, as the evidence of Mr Allen shows, the matter is reviewed at staff level, compliance level and by the Money Laundering Reporting Office before a disclosure is made.  That process will never be instantaneous, nor should it be.  In the present case the authorised disclosures were all made within at most two days of the payment instruction.  That is not an unreasonable delay.  

61	The Claimants sought to suggest that HSBC should have got advance consent in relation to future transfers, but it is difficult to see how one can seek and obtain consent to a transaction until the details of the transaction in question are known.  As Mr Allen states, “consent does not extend to any acts not detailed in the initial disclosure or agreed with SOCA”.  As Mr Allen also makes clear, it cannot safely be assumed that no consents were sought prior to the transactions in question.  

62	The second alleged breach was that there were no “rational grounds” to suspect the Claimants of money laundering.  As HSBC pointed out, this is not the suspicion averred by them.  Their pleaded case in relation to each transaction is that they suspected that it constituted money laundering.  It would do so if it involved “criminal property” regardless of whether the Claimants were personally involved in money laundering.  Be that as it may, this is simply yet a further way in which the Claimants seek to challenge the suspicion held by HSBC on grounds other than lack of good faith.  For reasons already given, it is not permissible to do so.  

63	The Claimants seek to draw a distinction between the banker’s duty of care in relation to the way in which the primary facts come into his possession and his duty of care in deciding whether he is suspicious or not.  However, if it is impermissible to go into whether the bank has reasonable grounds for its suspicion it is equally impermissible to go into the reasonableness with which those grounds were assembled.  It is simply a different aspect of the same question - whether there were there reasonable grounds.

64	The third alleged breach was that there was a failure to refer to “criminal property”, it being alleged that HSBC made SARs in respect of property that it did not seem to regard as criminal property.  However, HSBC’s pleaded case and evidence is that it did have a suspicion that the requested transactions involved criminal property and, for reasons already given, the Claimants cannot gainsay that.

65	The Claimants suggest that there was an inconsistency of approach on the part of HSBC in that although the four requested transfers were held up by authorised disclosures, other small transactions were seemingly not so held up.  Why that may have been so is a matter of speculation.  However, unless such inconsistency goes to the issue of good faith, it is irrelevant.

66	The Claimants also argue that because the property was not in fact criminal property there was not in fact any “prohibited act” and therefore the disclosures made cannot have been s.338 disclosures.  However, there can be no doubt that, in accordance with the requirements of POCA, the disclosures were made under s.338.  That is HSBC’s case and evidence and that is how POCA works.  If a bank has a suspicion it must seek appropriate consent and the means of doing so is by making an authorised disclosure under s.338.  At the time of so doing the bank cannot know whether or not criminal property is involved, but that makes no difference to the disclosure/consent regime to be followed.

67	In summary, in so far as the Claimants’ new duty of care arguments give rise to an alleged duty that the bank’s suspicion must be formed on reasonable or rational grounds or reasonably assembled grounds it has no real prospects of success as a matter of law.  In so far as it based on a duty to make a POCA disclosure as soon as practicable it has no real prospects of success as a matter of fact.  In so far as it is based on the need to relate to criminal property, the suspicion did so relate and there is no real prospect of establishing otherwise.  I accordingly conclude that the Claimants’ proposed amendments based on a duty to take reasonable care have no real prospects of success and that leave to amend should accordingly be refused.

(3)	The new claim for breach of confidence

68	At paragraph 28 d of their Amended Claim, the Claimants seek to introduce a new claim for breach of confidence in making the authorised disclosures.  It replaces the earlier claim for breach of confidence brought on the ground that HSBC had communicated a defamatory statement.   The new claim is brought on the basis of the allegations pleaded at paragraphs 13B, 14B, 15B and 16B, namely that the disclosures were not “authorised under section 338 of POCA since [they] did not fulfil the conditions of section 338(1)(a) (disclosures must be that property is criminal property); and/or 337(4) and/or 338(2A)(c); and/or 338(3)(c) (disclosure must be made as soon as it is practicable to do so)”. 

69	This claim overlaps with the claim for failing to execute payment instructions.  As the Claimants accept, if HSBC had a relevant suspicion for the purposes of section 328, then it had to make an authorised disclosure and seek appropriate consent.  Doing so involves no breach of duty, quite apart from the statutory protection provided by section 338(4).  For reasons already given, HSBC did have a relevant suspicion and the Claimants have no real prospect of establishing otherwise.  It must equally follow that they have no real prospect of establishing that there was any breach of confidence involved in making the authorised disclosure.  Further:

69.1	It is not averred in the Defence that the disclosures were made under section 337 POCA. In accordance with the scheme of POCA, HSBC’s disclosures were authorised disclosures made under section 338, as stated at paragraph 16(c), 17(b), 18(b) and 19(b) of the Defence, verified by a statement of truth;
69.2	The evidence of Mr Allen is that the disclosures were authorised disclosures and that HSBC suspected that the funds in the Claimants’ account were criminal property;
69.3	Since the authorised disclosures were made before the prohibited act (i.e. before each transaction) was carried out, there was no requirement under the terms of section 338(2) POCA for them to have been made “as soon as it was practicable to do so”, but, in any event, they were so made;
69.4	The disclosures are covered by section 338(4) and therefore are not to be taken to breach any restriction on the disclosure of information (however imposed);  
69.5	A reporter who makes a disclosure otherwise than in accordance with section 338 is exposed to the risk of criminal liability for committing one of the principal money laundering offences.  He does not lose the protection offered by section 338 (4) POCA.   (It is a defence to the offences in POCA ss 327 to 332 for a defendant to show that he had a reasonable excuse for not making an authorised disclosure and, it follows, for not making an authorised disclosure in the proper terms);
69.6	In any event, making a disclosure which does not fulfil the conditions of section 338 POCA (or is made otherwise than in accordance with the prescribed form or manner) does not negate the protection provided by section 338(4).  
70	I accordingly conclude that the Claimants’ proposed amendment to allege a new breach of confidence has no real prospects of success and that leave to amend should accordingly be refused.

(4) 	The claim for failing to comply with other instructions.

71	There are two aspects to this head of the claim.
72	First, it is alleged that HSBC failed to comply with the Claimants' instructions to provide information as to HSBC's alleged communications with SOCA.   Second, it is alleged that the Claimant failed to send bank statements concerning the Accounts to the Zimbabwean Financial Intelligence Inspectorate Evaluation and Security Authority (“ZFIIS”) “with dispatch” in response to a request by 2nd May 2007 (paragraphs 19, 21 and 29 of the Particulars of Claim).  
73	In relation to the first aspect of the claim, the Claimants relied on requests made on 19 March 2007, 27 April 2007, 2 May 2007, 25 May 2007 and 14 June 2007 (paragraph 17 – 22 of the Particulars of Claim).  The information requested included SOCA reference numbers, the date of the report, the name of the Authority or Agency to whom the disclosure/report was made and the date of consent.  The stated purpose of the requests was to enable Mr Shah or the Reserve Bank of Zimbabwe (“RBZ”) to contact SOCA directly and pass on relevant details to the Zimbabwean authorities.
74	During the course of the hearing the Claimants expanded their case so as to embrace requests for information made at a meeting with representatives of HSBC on 2 November 2006 as follows in new paragraph 16D:
“a.	that the Defendant disclose the information sought by RBZ; namely the facts that had caused the Defendant to fail to effect the first and second transactions and documentary evidence of the same;

b.	that the Defendant disclose the name of the authority to which the Second Claimant had been reported, with any reference numbers and the date of the report or reports”.

75	Whilst initially, for the purpose of the applications, HSBC had challenged this aspect of the claim solely on the grounds of causation, in the light of the further amended case they also sought to challenge it on the grounds that the disclosure of such information would or might have put the bank in breach of the tipping off provisions of POCA (section 333) and therefore cannot have involved any breach of duty.
76	Section 333 provides that: 
	“333 Tipping off

	(1) A person commits an offence if— 

(a) he knows or suspects that a disclosure falling within section 337 or 338 has been made, and 

(b) he makes a disclosure which is likely to prejudice any investigation which might be conducted following the disclosure referred to in paragraph (a)
	…”. 

77	HSBC clearly knew that a disclosure falling within section 338 had been made since they had made it.  In the light of their disclosure(s) there was clearly a possibility that an investigation would be conducted.  Any disclosure made which might prejudice any such investigation exposed the bank to the risk of criminal liability.  That is no doubt why they stuck rigidly to the formula that the Claimants’ payment instructions could not be effected because they were “complying with statutory obligations”.  They did not reveal what those obligations were since to do so would reveal that there was a potential money laundering investigation, which disclosure might in itself prejudice any such investigation.
78	There can be little doubt that the information identified under paragraph 16D(a) of the new pleading would be likely to prejudice any investigation.  This is asking HSBC to state why they had decided that they had to make an authorised disclosure and to provide documentary evidence of the same.  As Laddie J. observed in the Squirrell case at para. 19:  “Obviously telling Squirrell why it had blocked its account would constitute a prohibited disclosure”.
79	Disclosure of the date of the report, the reference number of the report and the authority to which the report was made is less obviously prohibited, but it is still disclosing the possibility of an investigation.  HSBC put in evidence a statement of Detective Inspector Gary Walters of the Economic and Specialist Crime Operational Command Unit of the Metropolitan Police.  He explains that “the confidentiality of an investigation, including the confidentiality of any persons providing information and those conducting an investigation, is of great importance.”   He points out that “ a person who is informed they are subject to a money laundering investigation has an opportunity to destroy incriminating evidence, create false audit trails and further launder assets that may in due course be subject to Restraint Orders before any overt operational activity takes place that is intended to secure evidence”.  
80	This evidence is borne out by SOCA’s own practice.  As they stated in a letter to the Claimants’ solicitors dated 23 May 2007, “save for in exceptional circumstances SOCA will neither confirm nor deny that any SARs have been made”.
81	It is further borne out by the evidence of Mr Walters that on 8 June 2007 he asked HSBC not to disclose such information in the light of the ongoing Metropolitan Police investigation into Mr Shah’s affairs.
82	In my judgment, disclosure of the information sought by the Claimants would have involved an offence under section 333.  At the very least it would have involved a serious risk of such an offence being committed.  The Claimants accept that HSBC could not be in breach of duty in making an authorised disclosure if it would otherwise be at risk of criminal liability under section 328.  The same applies to section 333, as they had to acknowledge.  HSBC could not be in breach of duty in refusing to make the requested disclosure if it would be at risk of criminal liability under section 333 if such disclosure was made.  If so, then the Claimants’ claim for breach of such duty has no real prospects of success.
83	In relation to the second aspect of the claim, the failure to forward bank statements with despatch, the chronology is as follows.  On 3 April 2007 the Claimants’ accounts with HSBC were closed.  Under the terms of the banking contract HSBC was authorised to retain mail (which would include bank statements) pursuant to a retain mail mandate.  On 11 April 2007 HSBC wrote to Mr Shah asking where he wished any retained mail to be sent.  On 2 May 2007, Kendall Freeman wrote on Mr Shah’s behalf and requested that any retained mail be couriered to ZFIIS.  No urgency was stated.  HSBC couriered the documents on 22 May 2007, three weeks later.

84	The Claimants contend that HSBC had an implied duty to comply with their instructions with despatch and that taking three weeks to comply with a request is not due or reasonable despatch.  That is essentially a factual issue and on the limited factual material available I cannot conclude that that claim has no real prospects of success. Nor do I consider that the terms of the retain mail mandate provide a complete answer to this claim.  It is at least arguable that the failure to forward bank statements with dispatch was not an action that fell within the terms of the retain mail mandate and so cannot be affected by the exclusion which deals with “loss or error arising as a consequence of this arrangement”.  Further, HSBC has not pleaded any case on reasonableness and so the Claimants can arguably contend that the clause will be void under the Unfair Contract Terms Act 1977.

(5)	Whether the losses claimed are recoverable.

85	The losses claimed fall under 3 principal heads: “US$44m Interest Differential Claim”, the “BVI Company Claim” and the “US$331m “Seized Investment Claim”.
  
86	The Claimants’ case in outline is that HSBC’s failure to carry out their payment instructions and to explain the reasons for not doing so have caused these losses.  They contend that as a result of HSBC’s failure to execute the Claimants’ payment instructions in relation to the Second Transaction in favour of a Mr Kabra, an ex-employee of Mr Shah, Mr Kabra became dissatisfied and when he was told by Mr Shah that this was due to HSBC’s compliance with its UK statutory obligations he communicated this to the authorities who then decided to investigate Mr Shah’s financial affairs.  In the light of HSBC’s non compliance with Mr Shah’s instructions due to “statutory obligations” the authorities believed that Mr Shah was under investigation in the UK for money laundering.    Faced with HSBC’s wall of silence Mr Shah was unable to refute this or provide any details relating to reports or investigations.  In consequence the Zimbabwean authorities themselves became suspicious and firstly froze and then seized his investments (held through certain private companies) causing him losses of over $300m.  This is made up of three heads of loss, as summarised below.

US$44m Interest Differential Claim

87	The Claimants’ case set out in paragraphs 1.1, 1.2 and 1.9 of the Second Part 18 Response dated 31 October 2007 and paragraph 26 (d)(i) of the Amended Particulars is as follows:

87.1	The ZFIIS is a department of the RBZ which monitors and investigates money laundering activities in Zimbabwe.  The Claimants allege that  “In November 2006, as a result of ZFIIS’s understanding, caused by the matters complained of, that the First Claimant was under investigation in the UK for money laundering, ZFIIS indicated that RBZ would seize the First Claimant’s dollar holdings (held in the name of the Zimbabwean LLC and ALSHAMS) unless the First Claimant invested in certain government securities”;

87.2	in response to that "indication", the First Claimant (through the companies Zimbabwe LLC and ALSHAMS) purchased government securities, on 6 December 2006 and in January 2007 for a combined value of Zim $37,538,558,338; and

87.3	the Claimants contend that these sums, had they been invested on the open market, would have accrued interest at a minimum rate of 450%, and that the government securities paid only 300% and 350% per annum. The Claimants claim the difference in interest from the date of purchase until 20 April 2007, namely Zim$11,083,397,005 (or, applying the Claimants' exchange rate, which is based on the Zimbabwean government’s uncommercial fixed exchange rate of US$1 = ZIM $250, over US$44 million).
BVI Company Claim

88	In a claim introduced at paragraph 1.2 of the Second Part 18 Response and paragraph 26 (e) of the Amended Particulars, it is alleged that:

88.1	on 1 February 2007, Al Shams Global Limited, a company incorporated in the BVI of which the First Claimant is the sole shareholder and director (the "BVI Company") loaned US$ 22 million to RBZ under the terms of a loan agreement; and

88.2	on 28 February 2007, "as a result of the ZFIIS’s understanding, caused by the matters complained of, that the First Claimant was under investigation in the UK for money laundering", RBZ is alleged to have terminated the loan agreement and only to have returned to the BVI Company the sum of US$17,820,000, being the initial loan sum less US$ 4,180,000 "by way of fees".

88.3	The Claimants claim US$4,180,000 in their claim for damages.

US$331m Seized Investment Claim

89	As set out in paragraphs 26 (c) and (d) of the Particulars of Claim as supplemented by paragraph 1.9 (b) of the Second Part 18 Response and the Amended Particulars, the Claimants contends as follows:

89.1	on 20 April 2007, RBZ unilaterally seized the government securities which the First Claimant had been required to purchase in December 2006 and January 2007;

89.2	the government securities were returned, without any interest, on 22 June 2007; 

89.3	the Claimants claim the seized interest for the period 20 April to 22 June 2007, at a rate of 450% (until 26 April 2007) and 550% (from 26 April until 22 June 2007);

89.4	the claim is for Zim $82,803,630,670, or, applying the Claimants' rate of exchange (which is based on the Zimbabwean government's entirely uncommercial fixed exchange rate of 1US$ = Zim $ 250) over US$331 million.

Remoteness

90	In relation to the reasonable contemplation of the parties and foreseeability, Mr Shah’s unchallenged evidence is that Ms Shah (his relationship manager at HSBC) knew that he was extensively engaged in currency market trading in Zimbabwe and “that in order to trade on the currency markets in Zimbabwe it is essential to have the blessing of the relevant government agencies”.  It is also his evidence that HSBC was aware that he “had substantial assets in Zimbabwe and it must have been obvious that the value of those assets would or could be substantially affected if my accounts in the UK were frozen by reason of irrational suspicions of money laundering”.

91	The Claimants submit that in the light of that evidence it is well arguable that if HSBC breached its contract with the Claimants and if that breach was not unlikely to stigmatise him in Zimbabwe, then it was within the contemplation of the parties that he would suffer pecuniary losses of the type claimed.  The precise chain of events that actually causes the losses claimed and the extent of the losses caused does not have to be foreseeable.   As stated in the case of Christopher Hill v Ashington Piggeries [1969] 3 All ER 1496 at p.1524F by Davies LJ:
“…the party who has suffered damage does not have to show that the contract breaker ought to have contemplated as being not unlikely, the precise detail of the damage or the precise manner of its happening.  It is enough if he should have contemplated damage of that kind is not unlikely.”

92	The Claimants further submit that for various reasons each of the various stages was foreseeable:

92.1	It was foreseeable that Mr Shah would be honest and open with Mr Kabra as to what HSBC were saying.

92.2	It was foreseeable that Mr Kabra would conclude that HSBC suspected Mr Shah of money laundering.

92.3	It is foreseeable that anybody, armed with this belief, would tell others including the authorities.  As Lord Sumner said in Weld-Blundell v Stephens [1920] 1 AC 956 at p.991: “more than half of human kind are tale-bearers by nature”.

92.4	It was foreseeable that these rumours would spread to the authorities either directly or indirectly and in any event it was foreseeable that Mr Kabra’s actions would cause Mr Shah to be stigmatised in Harare.

92.5	It was foreseeable and within the actual contemplation of the parties that these actions would lead to actions being taken against Mr Shah by RBZ.

92.6	Further and in any event, it is obviously foreseeable that the actions of banks and the authorities under POCA can have very serious adverse financial consequences for customers.  

93	HSBC asserted that the losses claimed were too remote but did not engage with the Claimants’ submissions in any detail.  In my judgment the remoteness issues which arise in this case are fact sensitive and for the reasons submitted by the Claimants, as outlined above, I do not consider that it can be concluded at this stage that they have no real prospects of success on this issue.

Causation

94	The issues of causation need to be considered in respect of each of the main breaches of duty alleged.

95	In relation to the failure to execute payment instructions and associated alleged breaches of the duty of care HSBC made the following principal points:

95.1	First, in respect of each transaction, the transfer was delayed by no more than 7 working days (and in the case of the second transaction, the transfer was cancelled by the Claimants just 3 calendar days after the payment instructions had been issued). The mere fact that there were modest delays in executing payments instructions cannot properly be said to give rise to the inference that Mr Shah was being investigated for money laundering.  However, the fact of delay combined with the inevitable accompanying explanation that it was due to compliance with statutory obligations could well do so.
 
95.2	Secondly, the delays in respect of the third and fourth transaction post date 5 October 2006, when the search warrant was executed and cannot therefore be said to have caused the alleged ‘stigma’.  However, it could contribute to the Claimants’ inability to remove that stigma.  

95.3	Thirdly, on the Claimants own case, Mr Kabra’s conduct is the “dominant” cause of the loss.  This intervening conduct was neither foreseeable nor reasonable and broke the chain of causation.  However, as to foreseeability, it could be said that the inability of a man of Mr Shah’s evident wealth to make even a small payment is particularly striking and therefore likely to cause ructions.  As to reasonableness, Mr Kabra may well have done no more than relay the truth, namely that the reason for non-payment was compliance with HSBC’s UK statutory obligations.

95.4	Fourthly there is evidence that the Zimbabwean authorities already had concerns about Mr Shah’s activities and that their actions were based not on any delays on the part of HSBC in executing Mr Shah’s payment instructions but on other information or intelligence (for which it cannot be said HSBC was responsible).  However, the evidence is equivocal and there seems little doubt that the stated need for compliance with UK statutory obligations was a matter of concern for the authorities.

95.5	Fifthly, according to Mr Shah’s statement, RBZ’s concerns flowed from material seized during the course of the search of his premises: “RBZ’s information and concerns all arose from the documents obtained from me by the police in executing their search warrant, which in turn was caused by HSBC’s freezing of my accounts.” The actions of the police, and the recovery of incriminating material, it is submitted, breaks the chain of causation.  However, the evidence is again equivocal and it is clear that the frozen payments under the First and Second Transactions were a matter of concern for the authorities.

95.6	Sixthly, there is evidence that RBZ seized Mr Shah’s assets for their own personal reasons and not because of any genuinely held concerns that Mr Shah was under investigation for money laundering.  In this connection HSBC relied upon Mr Shah’s e-mail to the investigating officer Mr Chiremba, on 20 April 2007 (the day it is alleged the funds were seized) which suggested that RBZ had seized the funds for its own gain: “I know your efforts are aimed at frustrating me to leave Zimbabwe and then you can seize all our ZWD – but this will not happen – I will remain in Zimbabwe and will promise to fight you.”  However, this in itself is potentially a major factual issue.

96	In summary, whilst the causal chain alleged is long and intricate, none of the causation points taken by HSBC can be said to be decisive.  Moreover, these are fact sensitive questions and cannot be determined on the limited material put before the Court. I therefore conclude that it cannot be said that the Claimants have no real prospects of success on this issue.

97	In relation to the failure to provide information, HSBC’s causation points were more clearcut.

98	Mr Shah summarised RBZ’s attitude in the following terms in his evidence relating to a meeting on 31st January 2007 at RBZ’s offices:

“However the investigating officers were more interested in knowing why HSBC had frozen my bank account in September 2006.  It was absolutely clear to me that this was the cause of their concerns and that the other matters were considered very minor by comparison.  I had ready answers with documentary evidence for all their questions except those that related to HSBC’s suspicion.  I felt that but for this difficulty they would definitely not have directed that I cease trading currencies on the money markets in Zimbabwe.  They all appeared to be convinced that HSBC would not freeze a bank account unless they had substantial grounds to suspect money laundering and despite my repeated protests and claims to be innocent they made clear that until they were convinced that I had been cleared of any wrongdoing in the investigations in the UK they would not allow me to trade freely in Zimbabwe.”

99	His evidence is therefore that the authorities wanted to be satisfied that Mr Shah had been cleared of any wrongdoing in the UK.  The provision of the information set out in para. 16D of the Amended Particulars of Claim would not have achieved this.

100	The only way that the Zimbabwean authorities could have discovered whether there had been investigations into Mr Shah and, if so, their outcome was by communication with the UK authorities.  This indeed was what HSBC advised Mr Shah that RBZ should do at the meeting of 2 November 2006.  Further, it was inter-authorities communications that eventually led to Mr Shah’s seized government securities being released.  This occurred once SOCA had informed RBZ in June 2007 that Mr Shah was not and had not been under investigation by SOCA.

101	Yet further, the evidence of Mr Walters was that from at least 1 December 2006 to 30 June 2007 there was an ongoing Metropolitan Police investigation into, amongst other things, Mr Shah’s affairs.  If further information had been provided, as requested and this had been revealed it would have made matters considerably worse for the Claimants.  

102	For all these reasons I am therefore sceptical of the Claimants’ case on causation in relation to the provision of information.  However, due to its fact sensitive nature I nevertheless consider that it is sufficiently arguable on the facts to survive the strike out/dismissal applications.  I also consider that if causation is to be considered in the context of the transaction breaches it would be artificial and potentially problematical to exclude from consideration this aspect of the causation issue.

103	The final breach which needs to be considered is the failure to provide bank statements.  If there was such a breach it consisted of a few days delay in providing bank statements in May 2007.  Prior to May 2007 the Interest Differential Loss and the BVI Company Loss had been suffered and so this breach cannot have been causative of those losses.  Further, RBZ had already seized the investments which are the subject of the Seized Investment Claim and so the breach cannot have been causative of that seizure.  In so far as it is being suggested that the failure to provide these statements for a few days in May caused or contributed to the authorities’ decision not to pay interest when the seized investments were returned in June it is not explained in the pleadings or the evidence how it could have done so.  That is not surprising as it is difficult to see how this short delay could have had any impact on this decision by the authorities.  I accordingly conclude that the Claimants have no real prospect of success in relation to this claim since no arguable case on causation has been made out.  

(6)	Other claims

104	There remain three further claims to be considered.  

105	First, there is a claim for general damages for breach of confidence.  If the Claimants have a claim for breach of confidence it is not disputed that they would have an arguable claim for general damages by analogy with cases such as Wilson v United Counties Bank [1920] 1 AC 102 and Kpohraror v Woolwich Building Society [1996] 4 All ER 119.  However, since I have concluded that there is no real prospect of the claim for breach of confidence succeeding, this claim falls with it.

106	Secondly, there is the Claimants’ amended claim that insofar as a breach of the banking contract by the Defendant had a "damaging" effect on the reputation of the Claimants, the Defendant would take such steps as were reasonable to correct such "false" impression (Amended Particulars para 6h).  This was not specifically addressed in argument.  It may be that it is simply a further way of putting the alleged breach in failing to provide further information, in which case it would share the same fate at that claim.  However, I shall allow the parties to address this further.

107	Thirdly, there is a claim for a declaration that the Claimants are entitled to receive information in relation to the SARs.  I shall invite the parties to address me on the appropriateness of such a claim in the light of my conclusions in relation to the other claims made. 

Conclusion

108	I will hear counsel on the outstanding issues and the appropriate order to be made in the light of the conclusions reached above.