Shah & Anor v HSBC Private Bank (UK) Ltd

Permission to amend a pleading so as to allege dishonesty or bad faith should be refused where the proposed allegation is speculative and the available material provides no evidential basis from which the absence of a genuine suspicion can properly be inferred. Such an amendment has no real prospect of success.

An appellate court will be reluctant to interfere with a case-management decision made by the judge responsible for managing the litigation. A judge may also strike out proposed amendments to a reply where they merely replicate allegations which the judge has properly refused to permit in the particulars of claim.

The claim concerned a bank customer’s allegation that the bank had failed to comply with instructions for 13 days. The bank relied on a genuine suspicion that the instructions concerned criminal property and were prohibited by section 328 of the Proceeds of Crime Act 2002.

Shortly before trial, the claimants sought permission to re-re-amend their particulars of claim to allege bad faith and dishonesty by two unidentified bank employees. They relied on transcripts of telephone conversations disclosed in response to an earlier, abandoned allegation against another employee. Popplewell J refused permission and struck out corresponding parts of the re-re-amended reply. The claimants appealed.

The central issue was whether the transcripts provided an arguable evidential basis for the proposed allegations and whether the related reply amendments should stand.

1. Appeal dismissed unanimously. Longmore LJ held, with Moses and Black LJJ agreeing, that the proposed amendments were properly refused because the transcripts provided no evidential basis for alleging that either employee acted without a genuine suspicion, dishonestly, or in bad faith.

2. The relevant suspicion concerned possibilities rather than probabilities. An employee who believed that there might be grounds on which others could form a suspicion would not act dishonestly or in bad faith by reporting the matter for a decision at a higher level. The material did not support the pleaded allegation that the two employees had conspired to create a false suspicious transaction report. The allegations were speculative and had no real prospect of success.

3. Longmore LJ therefore rested his decision on agreement with Popplewell J’s assessment of the evidence. It was unnecessary to decide the further objections that the amendment was late or that it would introduce a major new issue shortly before trial.

4. The court also upheld the striking out of paragraphs 8(a) and 9(a) of the re-re-amended reply. They merely mirrored the allegations which had been refused in the particulars of claim. Their removal was within the case-management discretion of the judge, and did not strike out all the proposed reply amendments.

5. Moses LJ additionally stressed the appellate court’s reluctance to interfere with case-management decisions made by a judge who had intimate knowledge of the litigation. Black LJ agreed with both judgments.

• Court of Appeal (Civil Division): Dismissed the appeal from the refusal of permission to re-re-amend the pleadings and upheld the striking out of limited parts of the reply: [2011] EWCA Civ 1669 .
• High Court of Justice (Queen’s Bench Division): Popplewell J refused permission to make the proposed bad-faith amendments on 15 November 2011 and struck out corresponding paragraphs of the reply.