Mark Wolfe & Anor v HSBC UK Bank Plc

For limitation purposes, time begins when the claimant discovers fraud, or could with reasonable diligence have discovered it, under Limitation Act 1980, section 32. Dishonesty may be inferred from primary facts where an inference of fraud is more likely than innocence or negligence. The facts need not be uniquely consistent with dishonesty. An unauthorised account opened in the claimant’s name, unauthorised transfers from associated accounts and fictitious repayment records may suffice to make fraud pleadable. A court need not re-open an earlier judgment under the AIC jurisdiction where an alleged mistake would not affect the result. The appeal was dismissed.

Former bank customers alleged that HSBC had fraudulently opened a loan account in Mrs James’s name, transferred money from their joint accounts, made repayment demands and reported her to credit reference agencies. The High Court struck out the claim and refused an application to amend the Particulars of Claim. It held that the pleaded fraud claims could not succeed and that the claim was time-barred because the claimants could have pleaded fraud by 2013.

The claimants appealed on the agreed issue whether the judge should have re-opened his first judgment under the AIC jurisdiction, including whether he had misread a 31 July 2013 letter and whether his limitation conclusion was open to him.

1. Appeal dismissed. The Court of Appeal held that the judge was entitled to conclude that the claimants knew enough by 2013 to plead fraud, and was right not to re-open his first judgment under the AIC jurisdiction.
2. Even assuming that the judge may have misunderstood the 31 July 2013 letter by treating a fictitious repayment arrangement as relating to the loan account, the mistake would not have affected the result. The letter disclosed a record of repayment arrangements made in Mrs James’s name which, on her case, had never existed. That remained significant whether the arrangement concerned the loan account or a joint account.
3. Under section 32(1)(a) of the Limitation Act 1980, an action based on the defendant’s fraud means an action in which fraud is necessary to establish the cause of action. Section 32(1)(b) concerns a fact without which the cause of action is incomplete. The contractual claims were not dependent on fraud, and alleged concealment of matters demonstrating fraud did not appear relevant to them.
4. The pleading test was whether the primary facts made dishonesty more likely than innocence or negligence. The unauthorised opening of the account, the drawing down of £49,000, the unauthorised transfer of £25,000 and smaller sums, and the fictitious repayment record together entitled the judge to infer that fraud was the more likely explanation. The primary facts did not have to be consistent only with dishonesty.
5. The court expressed real doubt whether a constructive trust or proprietary restitutionary claim could attach to money transferred between bank accounts. The ordinary bank-customer relationship is one of debtor and creditor, and a credit balance is a chose in action rather than identifiable property. However, that issue had been conceded to be arguable below and was not argued on appeal, so the court proceeded on the assumption that those claims had a real prospect of success.
6. The pleaded fraud and deceit claims had already been struck out and were not under appeal. The court observed that fraud is not itself a cause of action, while deceit ordinarily requires reliance on a representation and resulting damage. Lords Justice Singh and Newey agreed with Lord Justice Nugee.

• Court of Appeal (Civil Division): The appeal from the High Court was dismissed. The court upheld the refusal to re-open the first judgment and the order striking out the claim.
• High Court of Justice, King’s Bench Division, Bristol District Registry: HHJ Blohm KC struck out the claim, declined to re-open his first judgment and dismissed the application to amend by an order dated 23 July 2024.