Shah v HSBC Private Bank (UK) Limited
Freezing suspicious bank accounts: On 4th February the Court of Appeal Civil Division handed down judgment in Shah v HSBC Private Bank (UK) Limited. This was an appeal by the Claimant, Mr Shah, against the decision of Hamblen J giving summary judgment against him and for the bank. Richard Lissack QC and Nicholas Medcroft appeared for the Respondent bank.
This is the first time the Court of Appeal has considered to what extent the anti-money laundering provisions in Part 7 of POCA exclude a banker's liability for damages arising from a breach of its contractual duty to (i) execute payment instructions (ii) take reasonable care and (iii) provide information to its customer.
The Court of Appeal (Longmore LJ, Ward LJ and Lloyd LJ):
- Rejected the Appellant's arguments that suspicion had to be based on rational grounds. The test for suspicion under POCA and under any implied restriction on a bank's contractual duties is a purely subjective matter. It does not matter whether or not there are rational grounds for the suspicion nor whether the suspicion is induced by the bank's negligence.
- Rejected the Respondent's argument that, in the absence of an allegation of bad faith, in order to prove suspicion a bank simply had to adduce credible evidence of the fact that it suspected money laundering. A bank is required to prove suspicion by first making relevant disclosure and then calling either primary or secondary evidence from relevant witnesses.
- Agreed with Hamblen J that a banker's duty of care is not completely excluded by POCA and that, in principle, delay in making a relevant disclosure might be a breach of that duty.
- Rejected the Appellants' argument that the bank should have sought advance consent in respect of future payment instructions.
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