Lonsdale v National Westminster Bank Plc

At summary-judgment stage, a bank cannot defeat a customer’s contractual claim merely by asserting that it genuinely suspected money laundering. The bank must prove that primary fact, ordinarily at trial, unless the evidence makes the issue suitable for summary disposal. Suspicion is subjective, but it must be genuine and more than fanciful.

Information concerning a customer’s accounts, transactions, suspected criminal property and decisions affecting the customer may constitute personal data under the Data Protection Act 1998. Mixed data requires a fact-sensitive balancing exercise. A suspicious activity report to the National Crime Agency attracts qualified privilege, but not absolute privilege. Where such reports are mentioned in statements of case or witness statements, inspection will ordinarily be available, subject to confidentiality and other appropriate safeguards.

The claimant, a long-standing bank customer, alleged that the defendant bank had breached contract by freezing his accounts, breached the Data Protection Act 1998 by withholding or mishandling personal data, and defamed him through communications concerning suspected money laundering.

The bank applied to strike out the claim or obtain summary judgment. The claimant applied for summary judgment on the contract claim and data-protection claim, and for inspection under CPR 31.14 of suspicious activity reports referred to in the Defence and witness evidence. The issues included whether the bank had a genuine suspicion sufficient to justify refusing instructions, whether the requested information was personal data or mixed data, whether statutory exemptions applied, whether the publications were privileged, and whether inspection was necessary for a fair disposal of the proceedings.

1. Contract claim. The bank’s contractual terms permitted it to refuse instructions where necessary to protect it from crime or to avoid breach of law or regulation. The parties also agreed that an equivalent implied term existed. The relevant question was whether bank employees genuinely suspected that the money was criminal property or that the relevant persons were engaged in money laundering. Suspicion is subjective and need only involve a possibility that is more than fanciful; a vague feeling of unease is insufficient. Reasonableness is not a statutory requirement.
2. Following Shah v HSBC Private Bank (UK) Ltd [2010] EWCA Civ 31, the existence of the bank’s relevant suspicion was a primary fact for the bank to prove. The claimant was entitled to require the bank to prove it at trial. The bank’s strike-out and summary-judgment application on the contract claim was dismissed. The claimant’s cross-application was also dismissed because the bank retained a reasonable prospect of establishing the defence at trial.
3. Data protection. The information sought could not be excluded at the pleading stage merely because it concerned internal decisions or legal analysis. Personal data has both an identifiability limb and a “relates to” limb. Information about transactions, suspicions, meetings, decision-making and action taken concerning a customer may satisfy those limbs. The question whether information was mixed data required balancing the requester’s and other data subjects’ interests under sections 7(4)–(6) of the Data Protection Act 1998. The section 29 exemption and allegations of inaccuracy, unfair processing, lateness and unintelligibility also required evidence. The bank’s application was dismissed, while the claimant’s summary-judgment application was refused.
4. Defamation. The pleaded communications were capable of bearing a defamatory meaning and publication was adequately pleaded. Serious harm could be inferred from the seriousness of the imputation, but the issue was for trial. Absolute privilege should not be extended to suspicious activity reports because that would fail to strike a proportionate balance with reputation rights under article 8 of the European Convention on Human Rights. A bank reporting suspicious activity to the National Crime Agency would ordinarily have qualified privilege. Whether the privilege applied to each communication, and whether it was defeated, required factual investigation. The bank’s application was dismissed.
5. Inspection. CPR 31.14 conferred a prima facie right to inspect the suspicious activity reports, subject to the court’s discretion and confidentiality safeguards. The bank provided no evidence that inspection would cause the statutory prejudice relied upon or that confidentiality remained necessary. Inspection was relevant and necessary for the fair disposal of the claims. An order for inspection was made, but provision of the documents was stayed for 14 days to allow the National Crime Agency to consider its position and apply for variation if appropriate. The claimant’s inspection application was granted in that respect; otherwise it was dismissed.

First-instance decision. No earlier judgment or appeal is stated in the judgment.