Karen Steyn QC :
A. Introduction
- There are two applications before the court.
- First, the Defendant ("the Bank") makes an application for the Claimant's claim (or alternatively each individual cause of action) to be struck out pursuant to CPR 3.4(2)(a) and/or for summary judgment pursuant to CPR 24.2(a)(i) and (b). The Defendant's application is supported by a witness statement dated 27 April 2018 made by Mr Daren Allen, the solicitor with conduct of this matter on its behalf.
- Second, the Claimant ("Mr Lonsdale") makes an application pursuant to CPR 31.14(1)(a) and (b) for inspection of documents referred to in the Defence and Mr Allen's statement; for disclosure of personal information pursuant to the Data Protection Act 1998 ("the DPA 1998"); and for summary judgment pursuant to CPR 24.2(a)(ii) and (b) in respect of the breach of contract claim. The Claimant supports his own application and responds to the Defendant's application with two witness statements, dated 27 April 2018 and 14 June 2018.
- Both applications were issued on 27 April 2018. It is convenient to address the Bank's application first because it encompasses the whole claim.
B. The facts and procedural background
- The basic facts are not controversial. Nevertheless, for the purpose of considering the Bank's application, I take the facts principally from the Particulars of Claim. When considering Mr Lonsdale's application for summary judgment, the position reverses and I assume the facts pleaded by the Bank are true.
- Mr Lonsdale is a barrister, practising mainly in property law. He is also the owner of the Sekforde Arms public house and several properties in London. He is a director of the Magnificent Basement Company and the Sekforde House Trust Ltd and was, until January 2018, a director of Lonsdale Property Developments Ltd.
- Mr Lonsdale was, for many years, a customer of the Bank. At the material time, Mr Lonsdale had a mandate to operate seven accounts held with the Bank, namely:
(1) A sole personal current account.
(2) A joint account with Mr Hadi Sarmadi, a fellow director of the Magnificent Basement Company and the Sekforde House Trust Ltd who, Mr Lonsdale states, manages most of Mr Lonsdale's properties.
(3) A joint account with Mr Mihail Kostov, a director of Lonsdale Property Developments Ltd and the Sekforde House Trust Ltd who, Mr Lonsdale states, manages certain flats at 37 and 39 Great Cumberland Place in London, in respect of which Mr Lonsdale holds a lease.
(4) Four business accounts, two in the name of the Magnificent Basement Company Ltd and one each in the names of Lonsdale Property Development Ltd and the Sekforde House Trust Ltd.
- On 10 March 2017, the Bank froze Mr Lonsdale's joint account with Mr Sarmadi for eight working days. This eight day period appears to reflect the time it would have taken the Bank to seek consent from the National Crime Agency[1] ("the NCA"), following the making of one or more suspicious activity reports ("SARs").
- Mr Lonsdale has exhibited a bank statement in respect of the account that was frozen, showing the transactions in the period from 1 March 2017 until the account was frozen, and showing that the balance on 10 March 2017 was £8,200.26.
- On 27 December 2017, the Bank froze all seven accounts and so Mr Lonsdale was unable to access any funds. Mr Allen acknowledges that in "late 2017, the Defendant made several Suspicious Activity Reports to the National Crime Agency … in relation to activity in the relevant bank accounts and the Defendant froze the bank accounts".
- At about 10.45am on 28 December 2017, Mr Lonsdale applied for, and McGowan J granted, an interim order requiring the Bank to allow him full access to all bank accounts over which he held a mandate by 1pm that day. This urgent application was made at a hearing, on notice, attended only by Mr Lonsdale, who then notified the Bank of the order.
- At about 1pm the same day, the Bank made an application, at a private ex parte hearing, for an extension of time until 3pm. Counsel for the Bank informed McGowan J that the Bank was liaising with the NCA and seeking consent to unfreeze the accounts. In response to McGowan J's query as to whether there might be a compromise, given that one of the accounts was in Mr Lonsdale's sole name, Counsel for the Bank confirmed that "a suspicious activity report has been made in respect of a personal account".
- Two hours later, both parties appeared before McGowan J. On behalf of the Bank, a witness statement made by Mr Stephen Woolf (legal counsel) was adduced, which stated at §4 that for (unspecified) "reasons unconnected with the injunction, the bank has now taken steps to remove the temporary block" on the seven accounts (referred to above), and so an injunction was no longer necessary. Accordingly, the injunction was revoked.
- Mr Lonsdale has submitted a bank statement in respect of his sole personal account showing the transactions in the period from 19 December 2017 until the account was frozen, and showing that the balance on 27 December 2017 was £39.51. A bank statement for his joint account with Mr Kostov shows a nil balance on 27 December 2017, whilst his joint account with Mr Sarmadi had a balance of £1,250 on the same day.
- The following day, 29 December 2017, the Bank gave Mr Lonsdale 60 days' notice that it was closing his accounts. The key passages of the letter stated:
"We, National Westminster Bank Plc, have recently undertaken a review of the banking arrangements that you have with us. We have, with regret, reached the conclusion that we will no longer provide these facilities for you.
Consequently, you will need to make alternative payment arrangements within 60 days of the date of this letter. These arrangements must be made outside of The Royal Bank of Scotland Group plc, which includes National Westminster Bank Plc.
…
We will not be able to provide references for you.
…
We assure you that we have only reached this decision after careful consideration, however, our decision is final and we are not prepared to enter into any discussion in relation to it."
- On 7 January 2018, Mr Lonsdale sent a letter before claim to the Bank, incorporating a subject access request pursuant to s.7 of the DPA 1998 ("DPA request"), on behalf of himself, Mr Sarmadi, Mr Kostov and the three companies of which he was a director. Mr Lonsdale sought "disclosure of all documents including electronic documents relating to the decision to freeze our accounts on two separate occasions and the decisions made to re-open them".
- On 15 February 2018, the Bank provided four pages of extracts of personal information. The accompanying letter stated that "[p]ersonal information exempt from disclosure under the DPA has not been disclosed". The Bank did not specify which exemption (or exemptions) was (or were) relied on. The SARs in respect of Mr Lonsdale's accounts were not disclosed, nor was any information extracted from them provided to him, in response to Mr Lonsdale's DPA request.
- On or about 10 March 2018, the Bank closed all of Mr Lonsdale's accounts, save for his sole personal account which it was unable to close due to there being a debit on the account in the sum of £3,380.34. Mr Lonsdale re-paid that sum to the Bank on 4 April 2018 and that account has also been closed.
- The pleadings were served as follows:
(1) On 27 February 2018, Mr Lonsdale issued and served his claim, together with Particulars of Claim. He relies on three causes of action, namely breach of contract, breach of the DPA 1998 and defamation.
(2) On 27 March 2018, the Bank served its Defence and Counterclaim. (The counterclaim related to the agreed overdraft on Mr Lonsdale's sole current account which, as I have said, has been repaid and the counterclaim has been discontinued.)
(3) On 3 April 2018, Mr Lonsdale served a Reply.
(4) On 26 April 2018, the Bank responded to a Part 18 request for further information that Mr Lonsdale had served on 28 March 2018.
- On receipt of the Defence, on 27 March 2018, Mr Lonsdale sent an email in which, relying on CPR 31.14 and the fact that the SARs had been referred to in the Defence, he asked to be provided with facilities to inspect the SARs. No such access has been provided. The application before me made by Mr Lonsdale includes an application for an order requiring the Bank to provide inspection of the SARs.
C. The statutory framework
Civil Procedure Rules
- The Bank relies on CPR 3.4(2)(a) which provides:
"The court may strike out a statement of case if it appears to the court –
(a) that the statement of case discloses no reasonable grounds for bringing or defending the claim".
- The reference to the statement of case in 3.4(2)(a) "includes reference to part of a statement of case": CPR 3.4(1).
- Both parties rely on CPR 24.2 which provides:
"The court may give summary judgment against a claimant or defendant on the whole of a claim or on a particular issue if—
(a) it considers that—
(i) that claimant has no real prospect of succeeding on the claim or issue; or
(ii) that defendant has no real prospect of successfully defending the claim or issue; and
(b) there is no other compelling reason why the case or issue should be disposed of at a trial."
- Mr Lonsdale also relies on CPR 31.14 which provides, so far as relevant:
"(1) A party may inspect a document mentioned in—
(a) a statement of case;
(b) a witness statement;…".
The Proceeds of Crime Act 2002
- The relevant statutory provisions in POCA are summarised in Shah v HSBC Private Bank (UK) Ltd [2010] EWCA Civ 31, [2010] 3 All ER 477 at [12]-[16]:
"12. Section 327 of the 2002 Act creates offences of "concealing, disguising, converting, transferring or removing criminal property from the jurisdiction." Section 328 creates an offence of entering into or becoming concerned in an arrangement which the defendant knows or suspects facilitates by whatever means the acquisition, retention, use or control of criminal property by or on behalf of another person. Section 329 creates an offence of "acquiring, using or possessing criminal property." Together, these three offences are known as the principal money laundering offences.
13. "Criminal property" is defined in part in terms of a person's mens rea . Under section 340(3) of the 2002 Act, property is criminal property if it constitutes a person's benefit from criminal conduct or it represents such a benefit (in whole or in part and whether directly or indirectly) and the alleged offender knows or suspects that it constitutes or represents such a benefit.
14. A person does not commit any offence under the principal money laundering offences if he has made a disclosure to the relevant authorities under section 338 and has appropriate consent. So far as it is relevant, under s.338 of the 2002 Act an "authorised disclosure" is defined as follows:
"(1) For the purposes of this Part a disclosure is authorised if—
(a) it is a disclosure to a constable, a customs officer or a nominated officer by the alleged offender that property is criminal property, and
…
(c) the first, second or third condition set out below is satisfied.
(2) The first condition is that the disclosure is made before the alleged offender does the prohibited act.
…"
15. Under section 335(1) POCA "appropriate consent" is defined as the consent of a nominated officer to do a prohibited act if an authorised disclosure is made to the nominated officer. A person who makes an authorised disclosure, and who is not given notice of refusal within a 7 working day notice period, or, having received such notice, does not receive before the end of the 31 day moratorium period notice of an order freezing the account, is bound to act in accordance with the customer's instructions (see sections 335(2)-(6) of the 2002 Act). Conversely, if notice of refusal is given initially for 7 days and then, if necessary, for another 31 days, the customer's instructions may not be implemented.
16. Section 333 POCA creates an offence of "tipping off". A person commits an offence if he knows or suspects that an authorised or protected disclosure has been made and he makes a disclosure which is likely to prejudice any investigation which might be conducted following the original disclosure to the authorities (section 333 is the section which applied at the material time although it has since been repealed and replaced by sections 333A to 333E.) In addition, section 342 of the 2002 Act creates an offence of 'prejudicing an investigation.' A person commits an offence if he knows or suspects that a money laundering investigation is being, or is about to be conducted and he makes a disclosure which is likely to prejudice the investigation."
- I would add that, in the context of this case, s.333A (rather than s.333) creates the relevant offence of "tipping off". The key subparagraphs of s. 333A provide:
"(1) A person commits an offence if—
(a) the person discloses any matter within subsection (2);
(b) the disclosure is likely to prejudice any investigation that might be conducted following the disclosure referred to in that subsection; and
(c) the information on which the disclosure is based came to the person in the course of a business in the regulated sector.
(2) The matters are that the person or another person has made a disclosure under this Part—
…
(d) to a [National Crime Agency officer] 2 authorised for the purposes of this Part by the Director General of that Agency,
of information that came to that person in the course of a business in the regulated sector."
The Data Protection Act 1998
- The DPA 1998 was repealed on 25 May 2018. Nevertheless, the effect of the transitional provisions in schedule 20 to the Data Protection Act 2018 is that the DPA 1998 remains the relevant Act for the purposes of this claim.
- Section 7(1) of the DPA 1998 entitles an individual, subject to certain other provisions, (a) to be informed whether personal data of which that individual is the data subject are being processed, which includes being held (see s.1(1)), by or on behalf of that data controller; (b) to be given a description of the personal data and various other matters; and (c) "to have communicated to him in intelligible form – (i) the information constituting any personal data of which that individual is the data subject, and (ii) any information available to the data controller as to the source of those data".
- This is an enforceable right of access: see s.7(9) and s.15(1).
- The term "data controller" is broadly defined to include anyone who (either alone or jointly or in common with other persons) determines the purposes for which and the manner in which personal data are, or are to be, processed: s.1(1).
- The term "processing" is also broadly defined, to mean "obtaining, recording or holding the information or data or carrying out any operation or set of operations on the information or data": s.1(1).
- The term "personal data" is defined in s.1(1):
"'personal data' means data which relate to a living individual who can be identified –
(a) from those data, or
(b) from those data and other information which is in the possession of, or is likely to come into the possession of, the data controller,
and includes any expression of opinion about the individual and any indication of the intentions of the data controller or any other person in respect of the individual;"
- "Sensitive personal data" is a subset of personal data. It includes information as to the commission or alleged commission of a criminal offence by the data subject.
- The right of access to personal data is subject to s.7(4) of the DPA 1998, which provides:
"Where a data controller cannot comply with the request without disclosing information relating to another individual who can be identified from that information, he is not obliged to comply with the request unless –
(a) the other individual has consented to the disclosure of the information to the person making the request, or
(b) it is reasonable in all the circumstances to comply with the request without the consent of the other individual."
- Section 7(5) makes two further points clear:
(1) Information identifying an individual as the source of the personal data requested is itself "information relating to another individual" for the purposes of s.7(4); and
(2) Where s.7(4) applies, it only excuses a data controller from complying with a subject access request to the extent necessary to avoid disclosing the identity of the other individual concerned.
- Section 7(6) provides:
"In determining for the purposes of subsection (4)(b) whether it is reasonable in all the circumstances to comply with the request without the consent of the other individual concerned, regard shall be had, in particular, to –
(a) any duty of confidentiality owed to the other individual,
(b) any steps taken by the data controller with a view to seeking the consent of the other individual,
(c) whether the other individual is capable of giving consent, and
(d) any express refusal of consent by the other individual."
- Section 8(7) provides:
"For the purposes of section 7(4) and (5) another individual can be identified from the information being disclosed if he can be identified from that information, or from that and any other information which, in the reasonable belief of the data controller, is likely to be in, or to come into, the possession of the data subject making the request."
- Section 29 provides an exemption to s.7 in any case to the extent to which the application of that provision to the data would be likely to prejudice (a) the prevention or detection of crime; (b) the apprehension or prosecution of offenders; or (c) the assessment or collection of any tax or duty or of any imposition of a similar nature.
The Defamation Act 2013
- Section 1(1) of the Defamation Act 2013 provides: "A statement is not defamatory unless its publication has caused or is likely to cause serious harm to the reputation of the claimant."
D. The breach of contract claim
- Mr Lonsdale alleges that the Bank acted in breach of contract by freezing his accounts on 10 March 2017 and 27 December 2017. The effect of freezing his accounts was that the Bank failed to execute Mr Lonsdale's instructions.
- Mr Lonsdale does not allege that the closure of his accounts with 60 days' notice was in breach of contract. However, he raises this in the context of his DPA claim, on the basis that if his personal data had been accurately processed the Bank would not have closed his accounts.
The Defendant's application – breach of contract
- The Bank contends that Mr Lonsdale has no real prospect of succeeding on his claim for breach of contract and/or his statement of case discloses no reasonable grounds for bringing the claim. The steps on which the Bank relies to reach this conclusion are as follows.
- First, Mr Lonsdale admits the express contractual terms pleaded by the Defendant at §16 of the Defence and Counterclaim: see the Reply and Defence to Counterclaim at §6. This is clearly correct and not in dispute.
- Secondly, the contractual terms in respect of each of the seven accounts included a clause to this effect (quoting, by way of example, clause 2.2 of the contract applicable to Mr Lonsdale's personal current account):
"We'll always follow your instructions, unless:
…
• it's necessary to reject your instruction to protect you or us from a crime;
…
• following your instruction would mean that we breach a law or regulation that we must comply with;
…
• you've broken any term of our agreement in a serious way.
If we don't follow one of your instructions we'll usually tell you.
If you'd like to know why we didn't follow your instruction you can call us … If we can, we'll explain why we didn't follow your instruction unless there's a legal or security reason which means we can't tell you." (Original emphasis)
- Again, this is correct and not disputed by Mr Lonsdale. I note that Clause 2.2 of the Current Account Terms (quoted above) is replicated in the terms applicable to Mr Lonsdale's savings and business accounts, which are attached to the Defence and Counterclaim.
- Thirdly, in any event, Mr Tannock relies on Shah v HSBC Private Bank (UK) Ltd [2012] EWHC 1283 (QB), [2013] 1 All ER (Comm) 72 at [37]-[45] in support of the proposition that a term permitting the Bank to refuse to follow Mr Lonsdale's instructions would be implied. In Shah, Supperstone J observed:
"39. It is the defendant's case that it has a good defence to the failure to execute payment instructions if it can show it had a suspicion that the transaction involved criminal property. The reason for this, on the defendant's pleaded case, is that the existence of an obvious and/or necessary implied term permitted the bank to refuse to execute the payment instructions in the absence of 'appropriate consent' under s.335 of POCA where it suspected the transaction constituted money laundering…
45. …I am led to the conclusion that the term for which the defendant contends is to be implied by reason of the statutory provisions. In my judgment the 'precise and workable balance of conflicting interests' in POCA that Longmore LJ noted in K Ltd v National Westminster Bank plc Parliament has struck …, requires the implication of this term in the contract between a banker and his customer.
…
236. 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."
- This submission finds reflection in §20 of the Defence and Counterclaim, where the Bank has pleaded:
"there were terms implied into all contracts between the parties, necessary for the business efficacy of the contracts, that in the event of the Defendant knowing or suspecting or having reasonable grounds for knowing or suspecting that funds in any of the Claimant's bank accounts with the Defendant were the proceeds of crime, the Defendant would be entitled to:
20.1 Make a report or reports to the relevant authorities, in this case including the National Crime Agency; and
20.2 freeze the Claimant's bank accounts."
- In his Reply and Defence to Counterclaim, at §8, Mr Lonsdale has responded:
"Paragraph 20 is admitted. If the Defendant genuine[ly] suspected that money in each of the Claimant's accounts at the time the reports were made and the accounts frozen was criminal property within the meaning of section 340(3) of the Proceeds of Crime Act 2002 then it was entitled to freeze the account in question."
- At the hearing, Mr Lonsdale submitted that the implication of such a term is unnecessary in circumstances where there is (as the parties agree) an express term which covers the matter.
- In my judgment, a refusal to execute a customer's instructions would be necessary to protect the Bank from a crime (and so would be within the express term) if the Bank suspected a transaction constituted money laundering and it did not have "appropriate consent" pursuant to POCA. I can see the force of Mr Lonsdale's argument that it is unnecessary to imply a term to the same effect as that which is express in the contract. But the agreed position on the pleadings is that there is such an implied term here and, in any event, it makes no difference because the content of the terms (irrespective of whether they are express or implied) is agreed.
- Fourthly, the Bank also relies on Supperstone J's judgment in Shah at [178] to [192] and [238] as demonstrating the existence of an implied term permitting the Bank to refuse to explain why it refused to execute Mr Lonsdale's instructions. Supperstone J held at [238]:
"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 s.333 and/or s.342 of POCA."
- On the basis that there is an express term enabling the Bank to decline to give reasons for refusing to execute Mr Lonsdale's instructions, where there is a "legal or security reason" for not doing so, he contends it is unnecessary to imply such a term.
- I am of the view that it is unnecessary to imply the proposed term given the existence of the express term which covers the matter. I also note that Mr Lonsdale has not alleged that the refusal to give reasons for freezing his accounts was itself a breach of contract.
- Fifthly, the Bank contends "it was necessary to reject any and all instructions from the Claimant … to (i) protect the Defendant from a crime and (ii) avoid the Defendant breaching a law or regulation that the Defendant was obliged to comply with" (Defendant's skeleton argument §21).[2]
- The Bank characterises this cause of action as a claim by Mr Lonsdale that the Bank did not hold a "genuine suspicion" that the money in the accounts was the proceeds of crime or, to put it another way, that the transactions blocked by the refusal to execute his instructions constituted money laundering.
- I accept, as was common ground, that suspicion under POCA is a purely subjective matter. It does not matter whether or not there are reasonable grounds for that suspicion, provided that it is a genuinely held suspicion. The defendant must think that there is a possibility, which is more than fanciful, that the relevant facts exist. A vague feeling of unease would not suffice. But the statute does not require the suspicion to be "clear" or "firmly grounded and targeted on specific facts", or based upon "reasonable grounds". See the guidance to this effect in Shah v HSBC Private Bank (UK) Ltd [2010] 3 All ER 477, per Longmore LJ at [17]; Shah v HSBC Private Bank (UK) Ltd [2009] 1 Lloyds Rep 328, per Hamblen J at [45][3]; K Ltd v National Westminster Bank plc [2006] EWCA Civ 1039, [2007] 1 WLR 311, per Longmore LJ at [21]; and R v Da Silva [2006] EWCA Crim 1654, [2007] 1 WLR 303, per Longmore LJ (giving the judgment of the court) at [16].
- Mr Tannock submits that there is clear evidence that the Bank held a suspicion and no evidence that its suspicion was other than genuine. He also relies on the fact that Mr Lonsdale has made no allegation of malice. In these circumstances, the Bank contends the breach of contract claim should be struck out and/or the court should give summary judgment dismissing the claim.
- In my judgment, the fifth and final step in the Bank's submissions under this head is flawed. For the reasons which follow, I dismiss the Bank's application to strike out, and/or for summary judgment in respect of, the breach of contract claim.
- In Shah v HSBC Private Bank (UK) Ltd [2009] EWHC 79 (QB), [2009] 1 Lloyds Rep 328, Hamblen J gave summary judgment in favour of the defendant bank in respect of a contractual claim of breach by reason of failing to execute the customer's instructions. The nature of the contractual claim was very similar to that in issue here, albeit the sums involved in Shah (over $28 million) were far great than in this case. At [53] Hamblen J held:
"In order to impugn the decision to make an authorised disclosure under POCA and the consequent failure immediately to execute the claimants' payment instructions the claimants must challenge the good faith of the suspicion which HSBC states that its employees held. They cannot and do not seek to do so. In such circumstances I conclude that there is no real prospect of the claimants establishing that the failure to execute their payment instructions was a breach of duty and that this claim should accordingly be dismissed."
- On appeal, the Court of Appeal overturned this aspect of Hamblen J's judgment (whilst dismissing the appeal in respect of irrationality, negligently self-induced suspicion and mistake): see Shah v HSBC Private Bank (UK) Ltd [2010] EWCA Civ 313, [2010] 3 All ER 477.
- Longmore LJ, with whom Lloyd and Ward LJJ agreed, held:
"22. … For my part, I cannot see why, rather than submit to summary judgment dismissing the claim, Mr Shah cannot require the bank to prove its case that it had the relevant suspicion and be entitled to pursue the case to trial so that the bank can make good its contention in this respect.
…
24. It must be remembered that it is for the bank to prove that it suspected Mr Shah to be involved in money laundering. It is, to say the least, unusual to grant summary judgment in favour of a party who has the burden of proving a primary fact which is in issue. Normally one expects evidence to be adduced at trial. …
25. …any claim by a customer that his bank has not executed his instructions is, on the face of it, a strong claim if the instructions have not, in fact, been executed. It will seldom, if ever, be contradicted by the documentary evidence on which it is founded. It is only when the bank says that it suspects the customer was money laundering that any defence to the claim begins to emerge. That may not, of itself, make the claim a complex claim but there is, subject to [Counsel for the bank's] second submission, no reason why the bank should not be required to prove the important fact of suspicion in the ordinary way at trial by first making relevant disclosure and then calling either primary or secondary evidence from relevant witnesses.
…
28. …It does not at all follow that, if the customer institutes ordinary (non-summary) proceedings against the bank, the bank should be able to obtain (reverse) summary relief against the customer merely be authorising its solicitor to make a witness statement that various unidentified people in the bank entertained a suspicion. By the time of any trial the dust will have settled and it is most unlikely that the tipping-off provision will continue to be relevant. It will almost certainly be known whether any investigation is or might be taking place which any disclosure by admissible evidence in court proceedings would be likely to prejudice within s.333(1). If any such investigation is occurring (or is likely to occur) the court can be informed of that matter in an admissible manner. But it is, in my judgment, too strong for the court to say now that the bank would be bound to win any trial and should, therefore, now be entitled to summary judgment." (emphasis added)
- The "second submission" on behalf of the defendant bank in Shah, to which Longmore LJ's observations were subject (see [25] in the passage quoted above) was that "a court would, in any event, never expect or require any bank employee to give evidence that it had entertained a relevant suspicion" (Shah, per Longmore LJ at [29]). This submission was based a passage in the judgment of Longmore LJ in K Ltd v National Westminster Bank plc [2006] EWCA Civ 1039, [2007] 1 WLR 311, at [20]. In Shah, the Court of Appeal rejected the defendant bank's "second submission", drawing attention to the fact that K Ltd concerned summary proceedings brought by the claimant. Longmore LJ held that accepting the defendant bank's submission "at this summary stage would, in effect, be giving carte blanche to every bank to decline to execute their customer's instructions without any court investigation".
- Longmore LJ continued at [32]:
"One appreciates, of course, that the 2002 Act has put banks in a most unenviable position. They are at risk of criminal prosecution if they entertain suspicions but do not report them or, if they report them, and then nevertheless carry out their customer's instructions without authorisation. If they do not act as instructed, their customers are likely to become incensed and some of those so incensed may begin litigation. But it cannot be right that proper litigation should be summarily dismissed without any appropriate inquiry of any kind. The normal procedures of the court are not to be side-stepped merely because Parliament has enacted stringent measures to inhibit the notorious evil of money laundering, unless there is express statutory provision to that effect."
- Applying the Court of Appeal's judgment in Shah to the fifth step in the Bank's submissions, the following points are clear:
(1) The Bank's characterisation of this cause of action as a claim by Mr Lonsdale that the Bank did not hold a genuine suspicion is inaccurate. His claim is that the Bank failed to execute his instructions. It is the Bank which alleges, as a defence to that claim, that it held a genuine suspicion that Mr Lonsdale (or perhaps, in relation to the joint accounts, Mr Sarmadi and/or Mr Kostov) was engaged in money laundering.
(2) Whether or not the Bank had such a genuine suspicion is a primary fact, which Mr Lonsdale has put in issue, that requires to be proved by evidence that will be tested at trial.
(3) It is no answer to this cause of action that Mr Lonsdale has not pleaded malice. He has, in fact, denied that the Bank had the required genuine suspicion: Reply and Defence to Counterclaim §14. And in any event, Mr Lonsdale is entitled to require the bank to make good its contention that it had the relevant suspicions.
- Mr Tannock sought to distinguish Shah on the ground that there was some evidence that the bank may not have held the relevant suspicion at all relevant times. In support of this submission he referred to Longmore LJ's judgment at [38] where the judge recorded Mr Shah's contention that he had been told orally by an employee of the bank on 2 November 2006 that he had been the subject of an investigation, but had been cleared. However, it was apparent to Mr Shah at the time that the investigation might have been on-going. Longmore LJ noted that it appeared that by 2 December 2008 any investigation must have ceased.
- In my judgment, this provides no basis for distinguishing Shah. Longmore LJ addressed the appeal against Hamblen J's summary dismissal of the breach of contract claim at [22] to [33]. The clear ratio of his judgment on this issue was that the question whether the bank had a genuine suspicion that the money in the account was criminal property was a primary fact for the bank to prove at trial. In reaching his conclusion on this issue, Longmore LJ did not rely on indications that the bank might not have had a genuine suspicion at certain times. The simple point was that Mr Shah was entitled to put the bank to proof. The reference in [38] of the judgment on which Mr Tannock relies does not appear in the context of the breach of contract claim, but under the heading "other grounds of appeal" and the sub-heading "breach of agency duty".
- This is sufficient to dispose of the Bank's application for the contractual claim to be struck out or summarily dismissed. Nevertheless, I would add that I do not accept the Bank's contention that there is clear evidence before me that the Bank held any relevant genuine suspicion.
- First, the Bank has not expressly pleaded in its Defence and Counterclaim that it had a genuine suspicion that the money in the accounts was criminal property or a genuine suspicion that Mr Lonsdale (and/or those holding joint accounts with him) was engaged in money laundering. The closest that it comes to (perhaps) implicitly pleading a genuine suspicion in the Defence and Counterclaim is at §25 where the Bank avers that "it was entitled to undertake the actions complained of" by virtue of the express and implied terms pleaded at §§16-17.
- Secondly, in response to Mr Lonsdale's request for further information as to the "transaction if any, it is alleged gave rise to any genuine suspicion that the Claimant, Mr Sarmadi or Mr Kostov was engaged in any form of crime or money laundering", the Bank has pleaded at §5.5 that the request is misconceived because the Bank "was under no obligation to have a 'genuine suspicion' that the money in the Claimant's accounts was derived from crime prior to making a Suspicious Activity Report to the National Crime Agency".
- It appears that the Bank is here drawing a distinction between a suspicion that a person is engaged in money laundering and a suspicion that specific property represents the proceeds of crime. Mr Lonsdale acknowledges that a SAR could be made on the basis of a suspicion that a person has been engaged in money laundering, but he contends that a decision to freeze an account can only be taken if there is a genuine suspicion that the money in the account is criminal property as defined in POCA. He submits that if there is no genuine suspicion that the money in the account is criminal property, it cannot be necessary to protect the Bank from crime for it to refuse to execute the customer's instructions in respect of that money.
- In my view, the question what the Bank had, genuinely, to suspect to have a defence to the breach of contract claim is better left for determination at trial, when it can be considered in the context of the actual facts rather than in abstract.
- Thirdly, the Bank reiterated at §8 that it was under no obligation to have a genuine suspicion that the money in Mr Lonsdale's accounts was derived from crime prior to sending a SAR to the NCA, in response to Mr Lonsdale's request for further information as to whether it is the Bank's case that "it sent Reports to the National Crime Agency because on the dates it sent those reports it genuinely suspected that money in each of the Claimant's bank accounts on those dates was derived from crime?"
- The Bank continued at §8 of its response:
"Nonetheless, the Defendant confirms that it had a suspicion that money in the Claimant's bank account was the proceeds of crime prior to the sending of the Reports to the NCA."
- This is the only pleading of any suspicion by the Bank. The suspicion is expressed to relate to a single (unspecified) bank account and to have been held "prior" to the sending of the SARs to the NCA.
- Fourthly, in response to Mr Lonsdale's request for information regarding "the grounds of the alleged suspicion", the Bank responded at §8 that it was "not prepared to disclose the reasons for its suspicion as this information is confidential and is not reasonably necessary and proportionate for the Claimant to prepare his own case". That remains the position: Mr Lonsdale has not been given any explanation of what, if anything, gave rise to any suspicion of money laundering in March or December 2017.
- Fifthly, the only evidence adduced by the Bank in support of its application is the statement made by the Bank's solicitor, Mr Allen. Mr Allen does not give any evidence that any employee of the Bank held a relevant genuine suspicion.
- By contrast, in Shah, Mr Allen gave evidence (quoted by Longmore LJ at [19]):
"42.2 HSBC suspected that the funds in the claimants' bank account constituted criminal property (namely benefit from criminal conduct or represented such benefit in whole or in part (whether directly or indirectly)).
42.3 The relevant people employed by HSBC at all three levels of the reporting process held a suspicion in respect of each transaction.
42.4 At least three different people were suspicious in respect of each transaction.
42.5 In respect of each transaction, at least one member of HSBC's Money Laundering Reporting Office held a suspicion and independently approved the making of the authorised disclosures, which HSBC was required to make in order to comply with the claimants' instructions in respect of the First to Fourth Transactions."
- Shah demonstrates that, if such evidence had been given in this case, it would not have provided a sound basis for summary judgment to be given on the contractual claim. Nevertheless, it is clear that the Bank's application for this cause of action to be struck out or summarily dismissed is considerably weaker than the (unsuccessful) application in Shah as the Bank has adduced no evidence that any employee genuinely held a relevant suspicion.
- Accordingly, I dismiss the Bank's application for the breach of contract claim to be struck out or summarily dismissed.
The Claimant's application – breach of contract
- Mr Lonsdale seeks summary judgment in respect of the contract claim on the grounds that:
(1) The Bank accepts that it prevented him having access to his bank accounts on two separate occasions;
(2) The Bank seeks to justify refusing to execute his instructions on the grounds that it had a genuine suspicion that money in his account was criminal property, but the Bank has refused to provide any information at all as to what its suspicions were or why it entertained them;
(3) Mr Lonsdale has given evidence in his first statement as to why he contends that the Bank did not and could not have had the required suspicion. The Bank has not adduced evidence to challenge Mr Lonsdale's evidence and so, he contends, there is no issue that ought to go to trial.
- In my judgment, the test for granting summary judgment to Mr Lonsdale is not met. I cannot say on the material before me that the Bank has no reasonable prospect of defending the breach of contract claim.
- Mr Lonsdale accepts that if, at the relevant times, the Bank (through its employees) had a relevant genuine suspicion then it did not act in breach of contract when it froze his accounts.
- Although the Bank has not adduced any evidence to establish that its refusal to execute Mr Lonsdale's instructions was justified by reason of a relevant genuine suspicion, it is apparent that the Bank has not done so, at this preliminary stage, because it considers the information to be confidential. The Bank has pleaded that its refusal to execute Mr Lonsdale's instructions was for permissible reasons in accordance with the agreed express and implied terms and it should have the opportunity to make good its case at trial.
- An alternative point raised by Mr Lonsdale is that the Bank would not, even if it had a genuine suspicion that the money in his account was criminal property, have been justified in refusing to execute his instructions, insofar as he was seeking to make withdrawals of less than £250, because this is below the threshold amount specified in s.339A of POCA. In my judgment, if the Bank establishes that it froze Mr Lonsdale's accounts because Bank employees genuinely suspected that he (and/or Mr Sarmadi or Mr Kostov) were engaged in money laundering, the Bank would clearly have a reasonable prospect of successfully defending the claim. Mr Lonsdale's contrary argument is plainly a matter for argument at trial.
- Accordingly, I dismiss Mr Lonsdale's application for summary judgment on the breach of contract claim.
E. The DPA claim
- As outlined above, Mr Lonsdale made a DPA request on 7 January 2018 to which the Bank responded by providing extracts of his personal data to him on 16 February 2018. In the Particulars of Claim (§§50-55), Mr Lonsdale alleges that the Bank has breached the DPA 1998 in the following ways:
(1) The Bank failed to provide Mr Lonsdale with his personal data within 40 days of receipt of his DPA request;
(2) The personal data provided to Mr Lonsdale is not in a properly intelligible form;
(3) The Bank has unjustifiably withheld personal data; and
(4) The personal data provided to Mr Lonsdale by the Bank includes information which is inaccurate and has not been fairly processed.
- In response, the Bank has pleaded in the Defence and Counterclaim (§§21-22 and 31):
(1) The Bank has complied with the data protection principles requiring it to process Mr Lonsdale's data fairly and lawfully, and to ensure his personal data is accurate and kept up to date;
(2) The information requested by Mr Lonsdale "including decisions to freeze the Claimant's bank accounts and decisions to re-open the Claimant's bank accounts are not 'personal data' as defined by the Data Protection Act 1998";
(3) The Bank "is not obliged to provide the Claimant with information in relation to the Defendant's internal decision making processes or the reasons for its commercial decisions or the identity of the Defendant's decision makers";
(4) The data sought by Mr Lonsdale includes the personal data of other individuals. The Bank asserted that it is "not reasonable in the circumstances for the Defendant to provide personal data to the Claimant without the consent of these other individuals, which consent the Defendant does not have and, in any event, is under no obligation to obtain or attempt to obtain in the circumstances of this matter".
The Bank's application – DPA claim
- The Bank applies for the DPA claim to be struck out or summarily dismissed on the grounds that:
(1) Insofar as Mr Lonsdale claims that the information provided to him is incomplete, the Bank contends that the further information he seeks is not his personal data;
(2) If any of the further information sought is Mr Lonsdale's personal data, it is "mixed data" (i.e. it is also the personal data of other persons), the other persons whose data it is have not consented to it being provided to Mr Lonsdale and it would not be reasonable in the circumstances for the Bank to provide it to him;
(3) In any event, the further information sought by Mr Lonsdale is exempt from disclosure pursuant to s.29 of the DPA 1998.
- In my judgment, the Bank's application for summary dismissal or strike out of Mr Lonsdale's DPA claim clearly falls to be rejected.
- First, the Bank's contentions as to what can and cannot be Mr Lonsdale's personal data, far from showing that Mr Lonsdale's claim has no realistic prospect of success, demonstrate a flawed understanding of the scope of that concept on the part of the Bank.
- As the Court of Appeal accepted in Ittihadieh v 5-11 Cheyne Gardens RTM Co Ltd [2017] EWCA Civ 121, [2018] QB 256, "the definition of 'personal data' consists of two limbs: (i) whether the data in question 'relate to' a living individual and (ii) whether the individual is identifiable from those data": per Lewison LJ at [61].
- Cases such as YS v Minister voor Immigratie, Integratie en Asiel [2015] 1 WLR 609, on which the Bank placed reliance - and in which the Court of Justice of the European Union found that legal analysis was not the claimant's personal data – "are concerned with the 'identifiability' limb of the definition". The test in respect of identifiability is whether a living individual can be identified from the data, or from the data and other information in the possession of, or likely to come into the possession of, the data controller.
- On the face of it, and without having had sight of the information sought, it is hard to see how any of the information sought by Mr Lonsdale in §54(i) to (viii) could fail the identifiability limb, given that the data sought relates to his conversations and his bank accounts.
- As regards the "relates to" limb, in Edem v Information Commissioner [2014] EWCA Civ 92, Moses LJ approved the following statement in the Information Commissioner's data protection technical guidance Determining what is personal data (2012), p.16:
"It is important to remember that it is not always necessary to consider 'biographical significance' to determine whether data is personal data. In many cases data may be personal data simply because its content is such that it is 'obviously about' an individual. Alternatively, data may be personal data because it is clearly 'linked to' an individual because it is about his activities and is processed for the purpose of determining or influencing the way in which that person is treated. You need to consider 'biographical significance' only where information is not 'obviously about' an individual or 'clearly linked to' him."
- The Bank contends that its "suspicions about money in Mr Lonsdale's bank accounts and the reasons for such suspicions" are not his personal data. Such information may be in the "obviously about" Mr Lonsdale category, but that cannot be determined without sight of it. Nevertheless, even if it is not "obviously about" him, it may "clearly be personal data". The Information Commissioner's guidance gives as an example of data in this category (at p.10) "personal bank statements" which "will be personal data about the individual operating the account". Information consisting of suspicions regarding transactions made on a person's bank account, and the reasons for such suspicions, would (a fortiori compared to bland entries on bank statements) be the personal data of the person holding the bank account.
- The Information Commissioner's guidance also advises that if the data is used, or is to be used, to inform or influence actions or decisions affecting an identifiable individual it is personal data. The SARs plainly fall into this category.
- The Bank contends that the "[d]ates of contact between the parties cannot be Mr Lonsdale's personal data (and, in any event, should be known to Mr Lonsdale already)". Similarly, the Bank contends that places where meetings took place, sources of the personal data provided to Mr Lonsdale, and names of the Bank's personnel, cannot be his personal data.
- As Lewison LJ observed in Ittihadieh at [67]-[68], a person's whereabouts on a particular day or at a particular time may amount to that person's personal data. It is necessary to consider whether the interpretation of "personal data" in any given case would serve the purpose of the Directive. Lewison LJ continued:
"82. The underlying purpose of the right of access to personal data is for the data subject to check the accuracy of the data and to see that they are being processed lawfully. The first place where this point is made is in recital (41)…
90 In some cases, it has been said that the supply of information does not tell the data subject anything he or she did not already know. In many cases that would miss the point. To take a simple example: everyone knows their own name and date of birth. A data subject may well make a SAR[4], not for the purpose of discovering his name or date of birth, but for the purpose of checking whether the data controller has correctly recorded them. … Likewise a data subject may ask for information about a particular meeting that he or she attended, not for the purpose of finding out what happened at the meeting (which is already known), but for the purpose of checking the accuracy of any personal data recorded in a note of the meeting."
- The Information Commissioner's guidance also states at p.19:
"If the whole of a meeting is about a particular individual then, assuming the minutes are held as data, they will be personal data about that individual. The meeting may concern the behaviour and actions or the condition of an individual. The personal data will include not only those facts about the condition or behaviour of the individual discussed at the meeting, but also any third parties' opinions about the individual in question and any indication of the intentions of any person in respect of that individual. These expressions of opinion or intention are personal data of the individual being discussed."
- Mr Lonsdale seeks details (such as the dates, places and attendees) of meetings referred to in the extracts of personal data provided to him in order to check the accuracy of the Bank's records, an object that falls squarely within the purpose for which the subject access rights have been conferred on data subjects. Moreover, as he was the customer, any meetings between Mr Lonsdale and employees of the Bank would be likely to have had him and his accounts as their focus.
- Further, the contention that "the Defendant's decisions cannot be Mr Lonsdale's personal data: the Defendant's business decisions are the Defendant's information" is simply wrong. The Information Commissioner's guidance gives the following example at p.13:
"Data used in deliberations or decisions about an individual may include data about unauthorised alterations to a house in breach of planning law where that data is processed to determine whether to prosecute the individual house owner. The data about the unauthorised alterations may be processed by reference to the house address but the data clearly relates to the individual who carried out the alterations in that the data is being processed to determine whether to take action against that person."
- Data which was processed to determine whether to make a report to the NCA regarding transactions on Mr Lonsdale's accounts, or whether to freeze or re-open his accounts, or whether to close his accounts, all falls into the category of data "processed to determine whether to take action against" Mr Lonsdale.
- I reject the Bank's contention that Mr Lonsdale has no realistic prospect of establishing that the information he seeks falls within the definition of personal data. On the contrary, for the reasons I have given, on the face of the descriptions of the data sought (and without at this stage having seen the information) he has a strong claim that the information he seeks is his personal data.
- Secondly, the Bank resists providing further data to Mr Lonsdale, and seeks summary judgment, on the basis that the further information is the personal information of other people.
- In Dr B v General Medical Council [2018] EWCA Civ 1497, Sales LJ (with whom Arden LJ agreed) addressed what he referred to as a "mixed data" case, that is "a case involving personal data of the person making the subject access request … which also comprise personal data of another person" (§59). Sales LJ observed:
"69. The disclosure regime under section 7(4)-(6) of the DPA seeks to strike a balance between competing interests of the requester and the objector, both of which are anchored in the right to respect for private life in Article 8 of the European Convention on Human Rights … As part of the rights or interests of data subjects which the Directive is intended to protect, data subjects are accorded a right under certain conditions to have access to their personal data held by a data controller to check that those data are accurate: Article 12. A data subject's right to respect for his private life may be infringed if things are done by a data controller on the basis of personal data about him which are materially wrong or inaccurate in some way.
70. …I do not think that the balancing regime in section 7(4)-(6) of the DPA includes any presumptive starting point or hurdle which either the requestor or the objector has to overcome. … Both sets of rights and interests are important and there is no simple or obvious priority as between them which emerges from consideration of their nature or their place in the legislative regime."
- It is highly likely, as the Bank contends, that some at least of the information sought by Mr Lonsdale is mixed data. But that is only the beginning of the analysis. The careful balancing of the competing interests of the requester and other data subjects is a matter for trial, taking into account, for example, any evidence of objections to disclosure, any evidence of consent (e.g. from Mr Sarmadi and Mr Kostov, on behalf of whom the DPA request was sent) or any evidence of an unjustified failure to seek consent.
- It cannot be said at this stage that Mr Lonsdale has no realistic prospect of success in challenging the reasonableness of the Bank's decision to withhold mixed personal data.
- Thirdly, the Bank's reliance on the s.29 exemption is also a matter for trial. There is no evidence before me regarding the likelihood of the provision of further personal data to Mr Lonsdale prejudicing the prevention and detection of crime. In the absence of such evidence, it cannot sensibly be said that Mr Lonsdale has no realistic prospect of success on this cause of action.
- Fourthly, the Defence and Counterclaim does not address Mr Lonsdale's allegation that his personal data was provided late, or that it is in an unintelligible form. However, I note the allegation of lateness, at least as regards the personal data that was provided, is minor. As Mr Lonsdale's request was made on a Sunday, it may be that it was not received until the following day, in which case the personal data would appear to have been provided in time (save to the extent that it has not yet been provided at all).
- Fifthly, Mr Lonsdale's contention that his personal data is inaccurate and has been processed unfairly is a factual matter that can only be determined on the basis of evidence.
- Accordingly, I dismiss the Bank's application for the DPA claim to be struck out or summarily dismissed.
Mr Lonsdale's application – DPA claim
- Mr Lonsdale makes an application for disclosure of his personal data. This application has not been made expressly on the basis that it is an application for summary judgment in respect of the DPA claim, but as Mr Lonsdale is seeking summary relief that appears to be the basis of the application.
- I am not prepared to give summary judgment in favour of the claim on the material before me. As I have said in addressing the Bank's application, the Bank's approach to determining whether information is Mr Lonsdale's personal data is clearly flawed. Nevertheless, that is not the end of the matter.
- First, Mr Lonsdale's entitlement is to information constituting his personal data rather than documents: see Dr B v General Medical Council [2018] EWCA Civ 1497. In some cases, such as Dr B v GMC, the distinction between documents and information constituting personal data may be immaterial, but in others it is important. Without evidence or sight of the withheld documents, it is not possible to judge at this stage whether information which appears, on the face of the description of documents in which it is contained, likely to be personal data, falls outside the scope of the definition.
- Secondly, in any event, the Bank has raised objections to providing Mr Lonsdale with the further information he seeks based on (a) the rights of other individuals whose personal data is mixed with Mr Lonsdale's and (b) the exemption in s.29 of the DPA 1998. These important objections cannot be summarily dismissed.
F. The defamation claim
- The Particulars of Claim allege at §56 that the Bank has defamed Mr Lonsdale, repeatedly, "by suggesting that money in his accounts may have been derived from crime and/or that it genuinely suspected the money to be derived from crime and that it had reasonable grounds for so suspecting".
- The publications relied on are:
(1) The SARs sent to the NCA in March and December 2017;
(2) The communications made to Bank employees, when Mr Lonsdale's accounts were frozen and he sought access to them, informing those individuals from whom he sought assistance that Mr Lonsdale had conducted his account in such a way as to give rise to a suspicion that he held money in his accounts which was the proceeds of crime;
(3) Sending to some Bank employees the Bank's letter of 29 December 2017 closing his accounts, prohibiting him from holding any account within the Royal Bank of Scotland Group plc, and informing him that the Bank would not be able to provide him with a reference; and
(4) The statement contained within the extracts of personal data provided to Mr Lonsdale that "there is a reasonable suspicion that the funds are potentially the proceeds of crime".
- The Bank applies for the defamation claim to be struck out or summarily dismissed on the grounds that, as Mr Allen succinctly put it, "[t]he statements complained of were a) not defamatory; and/or b) not published; and/or c) each made on an occasion of privilege; and/or d) did not cause the Claimant serious harm to his reputation".
- In my judgment, this aspect of the Bank's application must also fail.
- First, Mr Lonsdale clearly has reasonable grounds for his contention that a suggestion by the Bank that it held a genuine suspicion that money in Mr Lonsdale's accounts represented the proceeds of crime was defamatory. Mr Lonsdale has not seen the terms of the SARs or the terms of communications to Bank employees regarding the freezing of his accounts. Nevertheless, the prima facie position is that the communications are clearly defamatory. As Mr Lonsdale submits, depending on the content of the communications, the defamatory meaning is either Level 2 (reasonable grounds to suspect that the claimant is involved) or Level 3 (there are grounds to investigate what the claimant has done): see Gatley on Libel and Slander (12th ed., 2013) at §3.28.
- Mr Tannock submits that Mr Lonsdale has failed to comply with the obligation to specify the defamatory meaning. In the opening of §56 Mr Lonsdale has specified the defamatory meaning on which he relies in respect of each of the communications. In doing so, he is of course hindered in relation to the publications referred to in paragraph 117(1) and 117(2) above, as he has not seen them.
- Nevertheless, Mr Lonsdale acknowledges that he could have done more to specify the defamatory meaning of the letter of 29 December 2017. This can easily be rectified. I reject Mr Tannock's submission that there is no reasonable prospect of this letter (the key passages of which I have set out in paragraph 15 above) being found to be defamatory.
- Secondly, the contention that the communications were not published is misconceived. (i) The SARs were obviously published by being sent to the NCA and also, insofar as they were sent to any Bank employees. (ii) When Mr Lonsdale sought to access his frozen accounts, he spoke to Bank employees who were then informed that his accounts were frozen and who were instructed to provide him with no explanation. The information and instructions given to Bank employees constitute the publication of information to them. (iii) Mr Allen has confirmed that the letter of 29 December 2017 was seen by a "small number of personnel" and so it is clear that it was published to them. (iv) The statement contained in the extracted personal data appears to be part of a report that would have been seen by at least some other employees and, in any event, has been seen by those dealing with the DPA request.
- Thirdly, as Davis LJ (with whom Sharp and McFarlane LJJ agreed) held in Lachaux v Independent Print Ltd [[2017] EWCA Civ 1334, [2018]QB 594, the Defamation Act 2013 did not abolish the presumption of damage which "fits with the notion that what ordinarily causes the reputational harm is precisely the fact of the publication to others" (at [59]). There is a presumption of damage, but no presumption, at law, of serious damage in a libel case. Nevertheless, as Davis LJ observed at [72] "serious reputational harm is capable of being proved by a process of inference from the seriousness of the defamatory meaning".
- At [81] Davis LJ said, "I thus consider that where a claimant has advanced a sufficient case on serious reputational harm, by reference to the seriousness of the imputation conveyed by the words used, then ordinarily the case should be left to go to trial".
- The question whether Mr Lonsdale has suffered serious harm as a result of the publications cannot be summarily disposed of, given the seriousness of the imputation conveyed by the words used.
- Fourthly, the most substantial ground on which the Bank relies in support of its application for summary disposal of the defamation claim is the contention that the publications were privileged. The Bank contends that:
(1) Qualified privilege applies and, as Mr Lonsdale has not pleaded malice, the defamation claim should be struck out; alternatively
(2) Absolute privilege applies and so the claim should be struck out on that ground.
- Although Mr Tannock primarily focused on his contention that qualified privilege applies, logically the question whether the communications benefited from absolute privilege falls to be considered first.
- In Reynolds v Times Newspapers Ltd [2001] 2 AC 127 Lord Nicholls observed at 194A-C:
"There are occasions when the person to whom a statement is made has a special interest in learning the honestly held views of another person, even if those views are defamatory of someone else and cannot be proved to be true. When the interest is of sufficient importance to outweigh the need to protect reputation, the occasion is regarded as privileged.
Sometimes the need for uninhibited expression is of such a high order that the occasion attracts absolute privilege, as with statements made by judges or advocates or witnesses in the course of judicial proceedings. More usually, the privilege is qualified in that it can be defeated if the plaintiff proves the defendant was actuated by malice." (emphasis added)
- The circumstances in which the public interest in uninhibited expression is so high as to preclude a claim for defamation even subject to proof that the defendant was actuated by malice are rare indeed. No case has determined that such privilege applies in respect of SARs submitted to the NCA (or its predecessor SOCA) and nor was any analogous case drawn to my attention.
- In my judgment, absolute privilege should not be extended to cover reports to the NCA. The importance of the protection of reputation, not least having regard to Article 8 of the European Convention on Human Rights, is such that to preclude a defamation claim even where the publication was made maliciously would not strike a proportionate balance between the public interest in suspicions of money laundering being reported to the NCA and the individual's right to reputation.
- On the other hand, I consider that a bank which reports suspicious activity to the NCA would have the benefit of qualified privilege.
- In Reynolds, Lord Nicholls observed at p194F-195C:
"Over the years the courts have held that many common form situations are privileged. Classic instances are employment references, and complaints made or information given to the police or appropriate authorities regarding suspected crimes. The courts have always emphasised that the categories established by the authorities are not exhaustive. The list is not closed. The established categories are no more than applications, in particular circumstances, of the underlying principle of public policy. The underlying principle is conventionally stated in words to the effect that there must exist between the maker of the statement and the recipient some duty or interest in the making of the communication. …
The requirement that both the maker of the statement and the recipient must have an interest or duty draws attention to the need to have regard to the position of both parties when deciding whether an occasion is privileged. But this should not be allowed to obscure the rationale of the underlying public interest on which the privilege is founded. The essence of this defence lies in the law's recognition of the need, in the public interest, for a particular recipient to receive frank and uninhibited communication of particular information from a particular source. That is the end the law is concerned to attain. The protection afforded to the maker of the statement is the means by which the law seeks to achieve that end. Thus the court has to assess whether, in the public interest, the publication should be protected in the absence of malice." (emphasis added)
- In my judgment, the sending by a bank of a suspicious activity report to the NCA falls squarely within the classic instances in which qualified privilege has been held to apply. It is clear that there exists a duty on banks to report such activity and the NCA has an obvious interest in receiving frank and uninhibited communications from banks regarding suspected money laundering.
- Mr Tannock submitted that in circumstances where qualified privilege applies, and there is no pleading of malice, the claim should be struck out. It is true that Mr Lonsdale has, sensibly, refrained from making any allegation of malice in circumstances where he has not seen the key communications which he alleges are defamatory, namely, the SARs. Nevertheless, I do not consider that the Bank is entitled to have the defamation claim summarily disposed of.
- It is for the Bank, which relies on the defence of qualified privilege, to prove the facts and circumstances necessary for the existence of the privilege: Gatley at §33.23. At present the Bank has not given any details regarding its reports to the NCA, other than through Mr Allen's statement that "several" SARs were made "in late 2017", and so the fact that communications were sent in accordance with POCA has not yet been proved.
- Moreover, the question whether other allegedly defamatory communications have the benefit of qualified privilege will depend on an assessment of all the factual circumstances, such as, the degree to which those communications can be said to be ancillary to the sending of SARs and necessary to ensure the accounts were frozen.
- In any event, I am of the view that it would be premature to strike out Mr Lonsdale's claim, on the basis that he has not pleaded malice, in circumstances where the Bank has not yet disclosed to him the communications which are at the heart of his claim.
- Accordingly, the Defendant's application is dismissed.
G. Mr Lonsdale's application for inspection pursuant to CPR 31.14
- I turn then to consider the final aspect of Mr Lonsdale's application, namely his request for an order requiring the Bank to permit him to inspect "all documents including electronic documents in complete and unredacted form comprising all the Suspicious Activity Reports sent by the Defendant to the National Crime Agency and referred to in paragraph 32 of the Defence".
- In National Crime Agency v Abacha [2016] 1 WLR 4375 the Court of Appeal considered the effect of CPR 31.14, in the context of a case concerning the confidentiality of executive state-to-state communications, in respect of a mutual legal assistance request. In summary, Gross LJ (with whom Hamblen LJ and Sir Colin Rymer agreed) held:
(1) The mere fact that a document is mentioned in one of the documents specified in CPR r 31.14(1) does not automatically and without more entitle the other party to inspect it. The court retains a discretionary jurisdiction to refuse inspection.
(2) The general rule is clear. Ordinarily, if a document is mentioned in a statement of case or a witness statement (as is the case here in respect of both the Defence and Counterclaim and Mr Allen's statement), the other party has a right to inspect.
(3) The right to inspect under CPR r.31.14 is not unqualified: it is subject to CPR rules-based limitations and, in particular, should be read subject to CPR r 31.19.
(4) The question whether inspection is necessary for the fair disposal of the claim is not a free-standing hurdle that must be met in every case, but it may be a relevant factor in striking the just balance when considering whether, for example, inspection would be disproportionate or should be refused on grounds of confidentiality.
- The key points on which Mr Lonsdale relies in support of his contention that the court should order inspection are these:
(1) He has a prima facie entitlement to inspect the SARs, having regard to the fact that they have been mentioned in the Defence and Counterclaim and in Mr Allen's witness statement.
(2) The only evidence before the court as to the Bank's reasons for refusing inspection is a sentence in Mr Allen's statement that:
"Permission to inspect these documents has not been provided, largely because the Defendant is concerned that they are confidential and, in any event, they are not required to dispose of the Claim." (my emphasis)
(3) The documents are required for the fair disposal of the claim. In particular, the SARs will reveal whether the Bank's employees had a relevant, genuine suspicion such as to provide a defence to the breach of contract claim. The terms of the defamatory statement in the SARs are also relevant to the quantum of damages in respect of the defamation claim. And Mr Lonsdale contends that he needs to see the SARs to determine whether to plead malice. He submits that "[t]he more ludicrous outrageous and inaccurate the claims made to the National Crime Agency, the easier it will be for the Claimant to establish that the Defendant was acting with malice".
(4) If a claim to confidentiality is made, it should have been supported by proper evidence to show why an obligation of confidentiality has arisen and to whom it is owed.
(5) An obligation of confidentiality is not, in any event, a complete answer to an application for inspection. The court has to determine where the just balance lies. Mr Lonsdale submits there is no evidence to enable the court to carry out this balancing exercise.
(6) In the leading case of Shah the SARs were disclosed.
- In response, the Bank submits:
(1) The SARs are confidential, having been disclosed to the NCA in circumstances of strictest confidence, and the Bank has a right and duty to withhold inspection.
(2) The court may, by ordering the Bank to permit inspection be ordering it to commit the offence of "tipping off" contrary to s.333A of POCA.
(3) Alternatively, such an order may be an order requiring the Bank to commit an offence contrary to s.342 of POCA of knowing or suspecting that a money laundering investigation is being or is about to be conducted and making a "disclosure which is likely to prejudice the investigation".
(4) In any event, inspection is not necessary for the fair disposal of the proceedings.
- During the hearing, Mr Tannock handed up a letter dated 27 June 2018 from the NCA. The NCA explained that it considered it inappropriate and premature for the NCA to attend the hearing. And then continued:
"We would, however, ask that the Court be informed of the NCA's interest in the issue of disclosure … and that any order for disclosure provide that no documents are to be given up for a period of seven days from the date of the order. That would provide the NCA with an opportunity to consider its position in the light of any disclosure that is actually ordered."
- In my judgment, on the evidence before me, it is appropriate to make an order requiring the Bank to permit inspection of each of the SARs sent to the NCA in respect of any of the seven accounts in respect of which Mr Lonsdale held a bank mandate. However, I will allow a period of 14 days from the date of the order before the documents are provided to Mr Lonsdale, to enable the NCA to consider the position and, if it considers it necessary and appropriate to do so, to seek a variation of the order.
- In short, I consider that Mr Lonsdale's application should be granted because:
(1) CPR 31.14 applies and the ordinary position is that he should be given inspection of the documents that have been mentioned;
(2) The Bank's submissions that any such order may have the effect of requiring it to commit an offence under s.333A or 342 of POCA are unsupported by any evidence. In any event, if inspection would be likely to prejudice any investigation, the order that I have proposed, consistent with the NCA's request, allows them time to consider the matter and make any application they see fit. I have given a period of 14 days, rather than the seven days requested, to take account of the possibility that any objection to inspection may relate to parts rather than the SARs as a whole (and the process of redaction can be a time-consuming exercise).
(3) There is no evidence before me that the SARs, which must have been submitted around 16 months ago and around seven months ago, are currently required to be kept confidential. Mr Allen's statement expresses no more than a concern regarding confidentiality.
(4) I am of the view that inspection is necessary for the fair disposal of the claim. The content of the SARs are plainly relevant to the assessment of whether the Bank's employees had a relevant genuine suspicion, which is the key issue in the contract claim. The SARs are also the primary communications which are alleged to be defamatory. Without sight of them, Mr Lonsdale cannot tell, for example, whether the defamatory statements were Level 2 or Level 3.
H. Conclusion
- For the reasons given above, the Claimant's application for an order requiring the Defendant to permit inspection of the SARs is granted. The Claimant's application is otherwise dismissed and the Defendant's application is dismissed. I will hear the parties on the appropriate form of order, including directions to trial.
