Shah & Anor v HSBC Private Bank (UK) Ltd.

A bank which genuinely suspects that a customer’s funds are criminal property must make an authorised disclosure and seek appropriate consent under Part 7 of the Proceeds of Crime Act 2002. The suspicion is subjective. Reasonable or rational grounds are not required, although a genuine suspicion, rather than a mere feeling of unease, is necessary. The bank’s contractual and tortious duties are correspondingly restricted while the statutory regime operates. A customer may nevertheless have an arguable claim where the bank unreasonably delays making a disclosure or carrying out a transfer after consent. Disclosure of information likely to prejudice a money-laundering investigation may constitute tipping off, so refusal to provide that information cannot ordinarily be a breach of duty. Fact-sensitive remoteness and causation issues may survive summary disposal.

The claim arose from HSBC’s delay in executing four transfers from the claimants’ accounts. HSBC had suspected that the funds involved criminal property, made authorised disclosures, and awaited consent under Part 7 of the Proceeds of Crime Act 2002. The claimants alleged breach of contract, breach of confidence, breach of the bank’s duty of care, failure to provide information, and consequential losses exceeding US$300 million.

HSBC applied to strike out parts of the claim and for summary judgment. The claimants sought permission to amend their particulars of claim. The central issues were whether the statutory regime justified the payment delays and non-disclosure, whether the proposed amended claims had a real prospect of success, and whether the pleaded losses raised fact-sensitive issues requiring a trial.

1. Applications generally. Amendments should ordinarily be permitted where they allow the real dispute to be determined, subject to prejudice, the overriding objective and the efficient administration of justice. A proposed amendment must have a real prospect of success. Under CPR 3.4 and CPR 24 the court must not conduct a mini-trial in a complex case where factual issues require investigation, although summary disposal remains appropriate for claims bound to fail.
2. Payment instructions and suspicion. Under Part 7 of the Proceeds of Crime Act 2002, suspicion that a transaction involves criminal property triggers the obligation to make an authorised disclosure and seek appropriate consent. Following K Ltd v National Westminster Bank Plc [2006] EWCA Civ 1039, the relevant suspicion is a subjective fact. It must amount to a possibility which is more than fanciful, but there is no requirement for reasonable or rational grounds. Unless good faith is challenged, the customer cannot investigate the sufficiency of the grounds for suspicion. HSBC therefore had no real prospect of being liable for failing to execute the transfers.
3. Duty of care. The ordinary banking duty to exercise reasonable skill and care continues to exist, but is restricted or qualified by POCA. A bank may be liable for unreasonable delay after consent is obtained, or possibly for unreasonable delay in making a disclosure. The pleaded challenges to the rationality or assembly of HSBC’s suspicion had no real prospect of success. The alleged delay of up to two days in making the disclosures was not unreasonable on the evidence. Permission to add this claim was refused.
4. Confidence and information. The authorised disclosures were protected by POCA and could not found a breach of confidence. Information identifying the reports or explaining why they were made could prejudice an investigation and expose HSBC to liability for tipping off under section 333. Refusal to provide it therefore had no real prospect of constituting a breach of duty. The claim concerning a three-week delay in forwarding bank statements was, however, sufficiently arguable to proceed.
5. Loss and remaining issues. Remoteness and causation concerning the major losses were fact-sensitive and survived summary judgment. The bank-statement delay could not have caused losses already suffered or the earlier seizure of investments, so that claim failed on causation. The court reserved the final claim concerning correction of reputational impressions, the declaration sought, and the appropriate order.