Shah v HSBC ends in total legal victory [Part 11]

Jayesh Shah and his wife’s epic struggle to win US$300m damages from HSBC Private Bank (UK) Ltd for blocking transactions in late 2006 and early 2007, without, he claimed, justified suspicion of money laundering, ended in failure on 16 May. Following a 27-day trial that concluded four and a half years of litigation, Mr Justice Supperstone found for the bank on all counts.

Report by Timon Molloy (timon.molloy@informa.com)

Implied interference

The judge confirmed existence of an implied term in the contract between the bank and its customer, which entitled it to refuse to execute instructions without consent under the Proceeds of Crime Act (POCA) section 335: “It is plain that POCA has intervened in the contractual relationship between banker and customer in a way which may cause the customer prejudice.” Supperstone J continued, “However the courts also recognise that it is a price Parliament has deemed worth paying in the fight against money laundering.” He referred to Longmore LJ’s comments in K Ltd v National Westminster Bank plc [2007] WLR 311: “The truth is that Parliament has struck a precise and workable balance of conflicting interests in the 2002 Act.” Although Paul Downes QC, counsel for Mr Shah, said there was no precedent for the implied term, the judge was persuaded by Hamblen J’s observation in this case that the bank would most likely not know if the property was criminal or not and had no option, if it harboured suspicion, but to make a disclosure and seek consent from the Serious Organised Crime Agency (SOCA) to avoid potential liability under POCA; as Hamblen J said, “Analytically this may be legally permissible as the result of an obvious and/or necessarily implied restriction on or qualification of the bank’s duties rather than on ground of illegality, but the end result is the same.” The judge accepted Richard Lissack QC, counsel for the bank’s submission that the implied term would mirror the statutory duty under the regime and concluded that it should be implied by “reason of statutory provision”; the “precise and workable balance of conflicting interests” in POCA necessitates implication, he said.