Tayeb v HSBC Bank Plc & Anor

A CHAPS transfer which has been authenticated and credited to a customer’s account ordinarily creates an immediately enforceable debt owed by the receiving bank. The bank cannot reverse the credit merely because it suspects fraud or money laundering, unless the CHAPS Rules, the account contract, or illegality provides a proper basis. Money-laundering legislation does not itself require the bank to return the funds. The bank should use reporting, freezing, and, where necessary, court procedures to protect its position. A marker may restrict withdrawals, but it does not cancel the debt or reverse the credit. Any alleged overriding banking practice permitting re-transfer must be established by cogent evidence.

The claimant maintained an instant savings account with HSBC. A CHAPS transfer of £944,114.23 was made for the credit of that account as the price for a database sale. HSBC authenticated the transfer, sent a logical acknowledgement, and credited the claimant’s account. It then froze the account because an assistant manager suspected fraud or money laundering and, without the claimant’s authority, re-transferred the funds to Barclays.

The claimant claimed the sum as a debt and alternatively alleged breach of the banker-customer contract. HSBC relied on banking practice, the CHAPS Rules, money-laundering legislation, and the risk of constructive-trustee liability. The central issue was whether the credit had created a subsisting debt which HSBC was entitled to reverse.

1. CHAPS credit and debt. By opening an account capable of receiving CHAPS transfers, HSBC undertook to accept transfers complying with the account terms and the CHAPS Rules. Once the transfer had been authenticated, the logical acknowledgement sent, and the account credited at 14.03 on 21 September 2000, HSBC became indebted to the claimant in the sum credited. The CHAPS Rules were intended to achieve real-time settlement and finality of value.
2. Effect of the Rules. The Rules provided for the return of unapplied, wrongly delivered, wrongly transmitted, and unauthenticated payments. They did not confer a general power to reverse an applied payment because the receiving bank had suspicions. Rule 8(b), which contemplated obtaining the account holder’s authority in appropriate cases, was inconsistent with HSBC’s contention that it remained agent for Barclays.
3. Money laundering. The Criminal Justice Act 1988, including section 93A, did not make acceptance of a suspicious transfer unlawful without more. The bank could report to NCIS, withhold authentication, freeze the account temporarily, and seek appropriate declaratory relief. The statutory regime did not impose a duty to return the funds to the transferor.
4. Authorities and marker. Royal Products Ltd v Midland Bank supported the conclusion that no further acceptance by the receiving bank was required. The Chikuma concerned immediate availability for payment in cash, not whether a bank owed a debt. Momm v Barclays Bank International did not govern CHAPS transfers and did not permit reversal after crediting. The account marker merely postponed payment instructions; it did not cancel the debt.
5. Disposition. HSBC had no established overriding discretion to reverse the transfer. Judgment was entered for the claimant in debt for £944,114.23, with interest from 21 September 2000. The alternative contractual claim therefore did not require determination. The alleged failure to mitigate and possible double recovery did not defeat the debt claim.