N v S & Anor

In an exceptional case, the court may grant an interim declaration protecting a bank from criminal liability while granting mandatory interim relief. The declaration is available in ordinary civil proceedings under CPR 25.1(1)(b), including where the bank faces a genuine money-laundering dilemma. Protection under the Proceeds of Crime Act 2002 requires more than suspicion that funds are criminal property: there must be an arguable case that the funds in fact constitute or represent a benefit from criminal conduct. The court must apply ordinary interlocutory-injunction principles to mandatory relief. Relief should be confined to the transactions justified by the evidence.

The claimant, an authorised payment institution and foreign-exchange business, maintained numerous banking and trading facilities with the defendant bank. After suspicions arose concerning several customer accounts, the bank froze all the claimant’s accounts and purported to terminate the relationship immediately without notice. Hundreds of customer transactions were left unprocessed, threatening serious disruption to the claimant’s business.

The bank had reported matters to the National Crime Agency and obtained consent to return the claimant’s funds, but had not sought consent for the specific transactions in issue. The claimant sought a mandatory injunction and interim declarations that carrying out identified transactions would not expose the bank to criminal liability under the Proceeds of Crime Act 2002. The central issues were whether interim relief was justified, whether an interim declaration could protect the bank, and the proper scope of any order.

1. Interim relief. The claimant had an arguable case that the bank was not entitled to terminate the banking relationship without notice and that it had breached duties of care. The ordinary principles governing interlocutory injunctions applied to the mandatory relief sought: Rover International Ltd v Cannon Film Sales Ltd [1987] 1 WLR 670; National Commercial Bank Jamaica v Olint Corp Ltd [2009] 1 WLR 1405. There was a serious issue to be tried, and the balance of convenience and justice strongly favoured protecting the claimant from imminent and substantial loss.
2. Interim declaration. The jurisdiction under CPR 25.1(1)(b) extended to ordinary civil proceedings and could be used in relation to criminal law. Its exercise was rare but appropriate where a bank faced a genuine dilemma between complying with its customer’s instructions and risking criminal liability. Bank of Scotland v A [2001] 1 WLR 751 established that such a declaration could protect a bank from criminal proceedings.
3. Money-laundering risk. The statutory concept of criminal property under s 340(3) of the Proceeds of Crime Act 2002 required an arguable case both that the money constituted or represented a benefit from criminal conduct and that the alleged offender knew or suspected that fact. Suspicion alone was insufficient: R v Montila [2004] 1 WLR 3141. The bank had obtained the National Crime Agency’s consent to return the claimant’s funds. That consent, together with the absence of evidence that the funds in question were criminal property, justified protection from criminal liability for the identified transactions.
4. Scope and order. The court declined to declare that the bank was protected against civil liability, since that might affect customers’ or other third parties’ rights. An interim declaration was made in relation to instructions given to the bank before 1 pm on 19 October 2015, with liberty to apply. The bank was to comply with the outstanding instructions, subject to the accounts already properly frozen.

First-instance application in the High Court (Commercial Court). Walker J adjourned the claimant’s initial application on 15 October 2015 for determination at the hearing before Burton J. No appellate decision is stated.