The extract from the Shah vs HSBC case, with a relevant section on introduction, the issues raised and the conclusion. The link to the detailed order can be found at the end of the post.
Introduction
- The overall position in relation to the four transactions which the Defendant bank had declined to effect until consent had been obtained is agreed to be as follows:
| Date of payment instruction | Amount to be transferred | Date of authorised disclosure (SAR) | Date of consent | Date transfer effected |
| 20th September 06 | $28,807,432.88 | 21st September 06 | 2nd October 06 | 3rd October 06 |
| 26th September 06 | $7,282.50 | 28th September 06 | Not applicable (payment instructions were cancelled on 29th September 06) | Not applicable |
| 6th February 07 | $8,904,910.65 | 7th February 07 | 14th February 07 | 15th February 07 |
| 28th February 07 | £457,956.66 | 28th February 07 | 2nd March 07 | 5th March 07 |
The Issues
21….22
- At the outset of the hearing the parties helpfully submitted a list of agreed issues. They are as follows:
1. Did the bank suspect that the proposed First Transaction constituted money laundering (i.e. that the funds in the Claimants’ account at that time constituted or represented a person’s benefit from criminal conduct (in whole or in part, and whether directly or indirectly)?
2. Did the bank suspect that the proposed Second Transaction constituted money laundering?
3. Did the bank suspect that the proposed Third Transaction constituted money laundering?
4. Did the bank suspect that the proposed Fourth Transaction constituted money laundering?
5. Did the bank’s delay in executing any of the payment instructions cause any loss either:
a) in fact? Or
b) at law?
6. If the answers to 5(a) and 5(b) are both ‘yes’, are the Claimants entitled to recover such losses?
7. Was the bank (absent the POCA regime) under a duty to inform the Claimants of the details of any reports it made to SOCA (or any other authority) and/or the reasons for making the reports?
8. If so:
a) was it obliged/entitled under s.333 and/or s.342 POCA to withhold such information?
b) if so, until when?
c) was it obliged/entitled by some other factor to withhold such information?
d) if so, until when?
9. If the bank’s refusal to provide such information was at any stage in breach of its duty towards the Claimants, did such breach cause any loss either:
a) in fact?
b) in law?
10. If the answers to 9(a) and 9(b) are both ‘yes’, are the Claimants entitled to recover the losses claimed?
….
Conclusions
- In summary my conclusions on the issues to be determined are as follows:
Issues 1-4
- There is an implied term in the contract that permitted the Defendant to refuse to execute payment instructions in the absence of “appropriate consent” under s.335 POCA where it suspected a transaction constituted money laundering. Mr Wigley constituted the Defendant for the purpose of the Defendant having the relevant suspicion. The Defendant did suspect that the proposed four transactions constituted money laundering.
Issue 5
- The Defendant’s delay in executing the payment instructions did not cause any loss. The predominant cause of RBZ’s actions was pre-existing and/or independent concerns held by RBZ about Mr Shah’s activities, for which the Defendant was not responsible. Further the conduct of Mr Kabra and the conduct of RBZ amount to intervening acts which break the chain of causation.
It is strongly arguable that the actions of RBZ, in so far as they relied on the Directive, were unlawful, but I make no finding that the actions of RBZ were unlawful for the reasons set out at para 161 above.
Issue 7
- The Defendant was not under a duty to provide the Claimants with the information sought. Further or alternatively the Defendant was obliged to refuse to provide the information where the Defendant, its servants or agents, in providing that information might contravene duties under ss.333 and/or 342 POCA.
Issue 8
- The Defendant was obliged to withhold the information sought at all material times until July 2007.
Issue 9
- The failure by the Defendant to provide the information requested by the Claimants did not cause the Claimants any loss.
Issues 6 and 10
- The Claimants are not entitled to recover the losses claimed. The exemption clauses are not enforceable. However the losses that occurred were not foreseeable. Further Mr Shah failed to take reasonable steps to mitigate or avoid his loss.
- Accordingly, for the reasons that I have given, this claim fails.
Detailed order link: click here