HSBC Bank Plc v 5th Avenue Partners Ltd & Ors

On an application for permission to appeal, an existing negligence case may be revisited, including additional formulations, where it has a reasonable prospect of success. Questions of amendment, the adequacy of existing findings and fairness to the respondent may be left for the full appeal where appropriate. Permission should be refused for entirely new or abandoned causes that require findings, evidence or legal analysis not undertaken at trial, particularly where the respondent may have conducted the trial differently. A wish to avoid a contributory-negligence defence is not, by itself, sufficient. Toulson LJ also expressed a concurring observation about creating a new negligence sub-species based on circulating dangerous documents.

Two investors transferred $30 million after receiving an HSBC-acknowledged Letter of Instruction and Letter of Reference concerning a supposed segregated account. After a six-week Commercial Court trial, they failed in negligent misrepresentation and dishonest assistance. Walker J did not decide the duty of care, but made adverse obiter findings on reliance and expressed a view on vicarious liability. On an adjourned application for permission to appeal, the investors sought to enlarge the negligence case, revive knowing receipt, and introduce restitution for payment by mistake and a failed-purpose trust. The central question was whether the proposed appellate claims had a real prospect of success and could fairly be advanced after trial.

Disposition

Application granted in part. Rix LJ gave permission to appeal on the whole negligence case, including the proposed complaints that HSBC had put dangerous documents into circulation and had failed to act on the transfer instructions. This did not determine the merits or authorise any amendment automatically.

Negligence

Rix LJ considered there was a reasonable prospect of success. The judge's findings on reliance were reasonably arguable as equivocal. It was open to argue that the investors relied to some material degree on the Letter of Instruction and Letter of Reference, alongside Mr Lopatin's assurances. Whether amendment was required, whether the existing findings supported the expanded case and whether the bank would suffer forensic unfairness were matters for the court hearing the appeal.

New or abandoned claims

Permission was refused for the abandoned knowing receipt claim and the new restitutionary claim based on payment by mistake and equitable claim based on a failed-purpose trust. Knowing receipt involved a distinct issue from negligence and dishonesty, including the relevance of commercially unacceptable conduct and whether receipt was merely ministerial. Those matters, and the findings needed for mistake, purpose and any change-of-position defence, had not been addressed at trial. The bank had conducted a six-week trial on a different basis. Allowing the claims would risk piecemeal use of findings, fresh examination of evidence and trial conduct, further legal argument, and unfairness. That was inconsistent with the principles governing permission to appeal, and the court was not satisfied that amendment could safely be allowed or that the claims had a real prospect of success. The court did not decide the cited tests in Niru Battery Ltd v Milestone Trading [2004] QB 985 or AGIP (Africa) v Jackson [1991] Ch 265.

Concurring observations and directions

Toulson LJ agreed with the order and with Rix LJ's reasoning on the new or resurrected claims. He added that a possible advantage in avoiding contributory negligence was no sufficient reason by itself; the critical considerations were justice in all the circumstances and real prospect of success. He was sceptical, as a concurring observation, of developing a new sub-species of negligence liability for economic loss from circulated misleading information. The analogy with dangerous chattels was unhelpful. He noted that The Odenfeld [1978] 2 Lloyd's Rep 357 was decided before Caparo Industries plc v Dickman & Ors [1990] 2 WLR 358. The appeal was to be heard by three Lords Justices, including at least one Commercial Justice, with a two-to-three-day estimate.

• Court of Appeal (Civil Division): On an adjourned application arising from the Commercial Court proceedings, permission was granted for the negligence appeal but refused for knowing receipt, payment by mistake and failed-purpose trust claims. [2008] EWCA Civ 851.
• High Court of Justice, Commercial Court: After a six-week trial before Walker J, the investors failed in negligence and dishonest assistance. The judgment citation was not stated in the judgment.