Shah & Anor v HSBC Private Bank (UK) Ltd

The Application

In this case, the claimants seek over $300 million by way of damages against the defendant bank, arising from the defendant’s delay in executing four transactions between September 2006 and February 2007. It is the defendant’s case that it suspected that the proposed transactions concerned criminal property and that, in those circumstances, they were not required to comply with the payment instructions. Instead, under the Proceeds of Crime Act, they maintain that they were obliged to make a number of authorised disclosures to the Serious Organised Crime Agency (“SOCA”).

The four transactions were dated 20 September 06, 26 September 06, 6 February 07 and 28 February 07. In respect of transaction 1 ($28.8 million), transaction 3 ($8.9 million), and transaction 4 (£458,000 odd), the transactions were effected, albeit later than the claimants had instructed. Transaction 2, in the sum of $7,282.50 was never effected because the claimants’ payment instructions were cancelled on 29 September 2006. Ironically, even though this was the most modest of the four transactions with which this case is concerned, it had, on the claimants’ case, the greatest impact. This sum was to be paid to an ex-employee, and it is said that its non-payment led that ex-employee to notify the Zimbabwean police that the first claimant was suspected of money-laundering. It is the claimants’ case that these difficulties led to problems with the Zimbabwean authorities and the freezing and seizure of large investments, causing them the significant losses which are now claimed against the defendant by way of damages.

By a judgment and order dated 26 January 2009, Hamblen J gave summary judgment for the defendant and dismissed the claimants’ claims. He arrived at that conclusion by rejecting the four ways in which the claimants put their case (irrationality, negligent self-induced suspicion, mistake and automatic mechanically-induced suspicion) and concluded that, in the light of the defendant’s evidence of suspicion and the absence of any allegation of bad faith by the claimants, the claims must fail.

The Court of Appeal ([2010] EWCA Civ 31) agreed with the judge’s dismissal of the four ways in which the positive claim had been put on behalf of the claimants. Despite that, they concluded that the judge had been wrong to say that, because there was evidence of suspicion on the part of the defendant, that was, of itself, enough to defeat the claim. Longmore LJ said at paragraph 22:

“I do, however, part company with the judge when he reasons that, once he has rejected those contentions, Mr Shah can logically only be left with the bad faith assertion which he disavows. 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.”

Longmore LJ made plain that it was for the defendant to prove that, as a matter of fact, it suspected the claimants of being involved in money laundering, and that it would be unusual to grant summary judgment in favour of a party who had the burden of proving a primary fact which was in issue. He went on to say, at paragraph 25:

“…any claim by a customer that a 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 Mr Lissack’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 and relevant witnesses. As Brooke LJ said, albeit in the context of complex cases, there is a danger of injustice in deciding cases without appropriate disclosure and cross-examination.”

The defendant’s second submission, to which Longmore LJ referred in the passage above, was to the effect that a court would never expect or require any bank employee to give evidence that it had entertained a relevant suspicion. It was also suggested that no court would order disclosure of any relevant documents, particularly the documents reporting the bank’s suspicions to SOCA. Longmore LJ refuted these arguments, saying at paragraph 31 that it amounted “to saying that the dispute is completely unjusticiable and that, therefore, the bank must win. It may be that the bank will win in the end but, as far as any dispute about discovery of documents is concerned, I am content to wait and see.”

Longmore LJ also anticipated the kind of interlocutory disputes that may arise in cases of this kind. As to the potential danger in which the bank’s employees might be in if required to give evidence (Footnote: ¹), he said at paragraph 30 that if, at the time of the pre-trial review, the bank genuinely took the view that it would be dangerous for a witness to give evidence, then the court could be informed and steps taken to protect the witness or to ensure that the gist of the evidence was available, while still ensuring a fair trial. And as to the disclosure of documents, he said at paragraph 31:

“Once again if the bank has good grounds for concealing parts of any relevant document or (more doubtfully) declining to disclose the whole of the document, those grounds can be laid before the judge in chambers and he can make a decision on appropriate evidence. What would be inappropriate is to decide now that the bank must win its case, whatever the facts may ultimately turn out to be.”

This last passage predicted precisely the dispute that has now arisen. The defendant has disclosed both its internal reports and its reports (“SARs”) to SOCA. However, save for the identification of their employee, Mr Michael John Wigley, the man in charge of their Money Laundering Reporting Office (“MLRO”), all of the names of those involved in the process, from first suspicions to finalisation of reports, have been redacted. The defendant’s stance is crystal clear: they say that they are quite happy to call Mr Wigley to give evidence as to the genuine suspicions that the defendant had at the time, but that the identities of any other employees are both irrelevant and/or should not be disclosed for reasons of public interest immunity. By an application dated 1 April 2011, the defendant seeks an order, pursuant to CPR 31.19, permitting those redactions. The claimants dispute that application.

The Agreed Approach

In the course of their concise and clear submissions, leading counsel on both sides agreed that I should approach this application in three stages. First, I must decide whether or not the identities of the relevant employees are relevant to the issues between the parties. If I conclude that the identities are not relevant, the defendant is entitled to the order sought without further ado. If, however, I conclude that the identities of the employees are relevant, then I have to go on to consider the question of public interest immunity. As to that, I must first ask whether or not the documents in question fall into a class which, prima facie, attracts public interest immunity. Mr Medcroft accepted that, in relation to that issue, the burden was on the defendant. It was also agreed that, if the defendant failed to discharge that burden then, provided of course that the relevance test had been made out, the redactions should not be permitted.

If, however, the defendant established that the documents did prima facie attract public interest immunity, then the final question is whether the redactions should be permitted. That requires the necessary balancing exercise between, on the one hand, the public interest which demands that the source of sensitive evidence be withheld to permit the proper protection of the defendant’s employees and to avoid inhibition, against the public interest in the open administration of justice and the right of a litigant to meet his accusers face-to-face in court. In my view, this three stage approach accords with the approach set out by Sir Thomas Bingham MR (as he then was) in Taylor v Anderton [1995] 1 WLR 447, and I adopt it.

Relevance

The Principal Issue In This Case

What is the issue in this case to which the identities of the defendant’s employees may be relevant? In the light of the Court of Appeal’s rejection of the various ways in which the claimants’ claims were originally put, it seems to me that the remaining issue in this case is a narrow one. The claimants are putting the defendant to proof that, at the relevant time, the defendant had a genuine suspicion that the claimants were involved in money laundering. The necessary test for suspicion is that set out in the Court of Appeal decisions of R v Da Silva [2007] 1 WLR 303 and K Ltd v National Westminster Bank [2007] 1 WLR 311. (Footnote: ²)Although the claimants have never alleged bad faith (and, as I understand it, do not have the necessary material that would allow them to plead such a case in any event), the judgment of the Court of Appeal referred to above means that the question of good faith/bad faith is not wholly irrelevant: since the defendant has to show that any suspicion that it did have at the time was genuine, it must demonstrate that the suspicion was held in good faith (Footnote: ³). As was observed during the hearing in the Court of Appeal, a suspicion held in bad faith is no suspicion at all.

It seems clear that there was a stated suspicion in the contemporaneous documents; it is that which forms the basis of the SARs to SOCA. So, when stripped to its essentials, the principal issue in this case may be whether that stated suspicion was genuine or not. Notwithstanding the complexities of causation and quantum, it seems to me that this essential issue on liability ought to be relatively straightforward to determine.

The Redactions

To understand precisely what has been redacted, it is necessary to understand the reporting system operated by the defendant. That is set out in the fourth witness statement of Daren Allen, the defendant’s solicitor, dated 4 December 2008. This was the information that was available at the time of the hearing in the Court of Appeal. In addition, there is also a witness statement of 1 April 2011 of Alan Stuart Ramsay, the Global Head of Compliance at the defendant bank.

Mr Allen said at paragraph 12 of his statement:

“The defendant’s process of reporting a suspicion is the three-stage process in which at least three individual employees of the defendant have a role. Staff suspicion is reported first to the Compliance department before, in common with other banks, it is report internally to the Money Laundering Reporting Office who will consider whether the relevant suspicion merits disclosure to the authorities.”

Mr Ramsay’s later statement focuses more on the MLRO. He said:

“14 If the MLRO considers that it needs further information and/or needs to look at the payment request in respect of a ‘before the event’ suspicious transaction, it will ask the employee to fax through an internal report and to provide appropriate details. The employee would be asked to fax an internal SAR which would identify the customer, reasons for suspicions, the activity causing concern and details of the payment to be made.

15 The Nominated Officer for SOCA will then consider the report and make a decision, based on the contents of that report and any other knowledge that it has, on whether to submit a SAR to SOCA seeking consent to proceed with the transaction, in accordance with the Proceeds of Crime Act. This is known as a ‘consent SAR.’ ”

The defendant has disclosed a series of memos, internal reports and similar documents. With the exception of the references to Mr Wigley, the identities of the writers and recipients of those documents, and the employees referred to in the texts of those documents, have been redacted. Instead, the defendant has simply indicated which of the three departments (Client Relationship, Compliance, MLRO) the anonymous individual worked for. Beyond that, it is not possible for the claimants to know who originated the report, who read it, who actioned it, and who passed it up or down the line.

As to the actual suspicions on which the defendant relies in these proceedings, the best evidence remains that of Mr Allen. At paragraph 12 of his statement, he said that:

“12.1

The relevant people employed by the defendant at all three levels of the reporting process suspected that each of the first to fourth transactions constituted money laundering. That is to say at least three different people were suspicious in respect of each transaction.

12.2

In respect of each transaction at least one member of the defendant’s MLRO held a suspicion and independently approved the making of the authorised disclosures, which the defendant was required to make in order to comply with the claimant’s instructions in respect of the first to fourth transactions.”

The redactions which the defendant has now made mean that, at present, it is not easy for the defendant to make good these averments. Save for the identity of Mr Wigley, the Money Laundering Reporting Officer, no other identities have been provided. It is not therefore possible to show that, for example, three different people within the defendant’s organisation had the alleged suspicion. In essence, the defendant is saying: ‘We have chosen Mr Wigley to deal with all of your questions about the genuineness or otherwise of the suspicion that we held which led us not to comply with your instructions. You must put all your questions to him.’

In the witness statement provided by the claimants’ solicitor, opposing the redactions, there was a suggestion that Mr Wigley merely acted as a conduit, passing on the suspicions of others to SOCA. The probative value of his evidence was therefore questioned. Mr Brindle very properly accepted that he could not sustain this suggestion and accepted that, on the evidence, it was clear that Mr Wigley formed his own views (and therefore his own suspicions), based on his evaluation of the material before him. He is obviously an important witness for that reason alone. But it seems to me that the underlying point made by the claimants remains valid, namely that Mr Wigley may well not be the only person who can provide helpful evidence, because he only became involved at all as a result of the suspicions (and the memos and reports noting those suspicions) of others. He originated nothing; he simply acted on what he was sent.

The Test Of Relevance

The defendant’s application is made pursuant to CPR 31.19. The relevant parts of that rule are as follows:

“(1)

A person may apply, without notice, for an order permitting him to withhold disclosure of a document on the ground that disclosure would damage the public interest…

(3)

A person who wishes to claim that he has a right or a duty to withhold inspection of a document, or part of a document, must state in writing -

(a)

that he has such a right or duty; and

(b)

the grounds on which he claims that right or duty.”

It obviously follows that, on an application under r 31.19, the applicant has the burden of demonstrating that he is entitled to withhold disclosure, or in this case, the right to redact the identities of its employees. But Mr Medcroft, on behalf of the defendant, maintained a threshold position, namely that the identities are not relevant at all, and that it was for the claimants to demonstrate that the identities should be disclosed pursuant to the test in r.31.6. That rule provides:

“Standard disclosure requires a party to disclose only –

(a)

the documents on which he relies; and

(b)

the documents which –

(i)

adversely affect his own case;

(ii)

adversely affect another party’s case; or

(iii)

support another party’s case; and

(c)

the documents which he is required to disclose by a relevant practice direction.”

Mr Medcroft submitted that the claimants could not demonstrate that the disclosure of the actual identities supported their case or adversely affected the defendant’s case. Therefore, he said, the identities which have been redacted are not relevant to the issues in the case, and that is the end of the matter. In my view, although it was attractively put, there are a number of difficulties with this approach.

First, this argument appeared to stem from Mr Medcroft’s original position, which was that, although the defendant’s memos and reports have been disclosed, that disclosure was in the nature of a favour by the defendant to the claimants, because it could not fairly be said that the memos and reports themselves were relevant. I am bound to say that I profoundly disagree with that submission and, to be fair to Mr Medcroft, he did not maintain it with any vigour. In my judgment, it has the same hallmarks of the argument which Longmore LJ doubted in the Court of Appeal. In any event, given that the principal issue in this case is whether or not the defendant had a genuine suspicion of the claimants’ financial dealings, the reports and memos which allegedly reveal that suspicion were plainly and obviously relevant pursuant to the test under r 31.6.

If the document itself is relevant, what is the court’s approach to those parts which the defendant has chosen to redact? Plainly, the mere fact that parts of the document are relevant does not give the other side the prima facie right to see the whole: see GE Corporate Finance Group Limited v Bankers Trust Co and Others [1995] 1 WLR 172. Indeed in that case, the judgment of Hoffmann LJ (as he then was) suggests that the party disclosing the document in question can go through each paragraph, indeed each sentence, redacting those parts which he considers to be irrelevant. Whilst logically that may be correct, that does not seem to me something which ought to be encouraged under the CPR. It would immediately make disclosure in a complex case even more of a burden – and more of a potential battleground - than it is already.

Mr Brindle relied on GE Capital in support of the proposition that, on analysis, the Court of Appeal there held that the party responsible for the redactions had to show that the parts being redacted were irrelevant. He therefore maintained that, in this case, the onus was on the defendant to make good the alleged irrelevance of the redacted identities, rather than on the claimants to go through the r 31.6 test in respect of each redaction.

That submission has a number of attractions. First, it means that the party who has taken the decision to redact has to justify his or her own decision, which seems logical. Secondly, since the point has arisen as part of the redactor’s application, it would also seem sensible to keep the burden on the applicant. And thirdly, requiring the redactor to show irrelevance, if that is the stated basis for the redaction, might discourage an over-zealous approach to wholesale redactions.

As to relevance itself, in many ways the clearest exposition of the correct approach is set out in the judgment of Sir Thomas Bingham MR (as he then was) in Taylor v Anderton at pages 460-462, although it is important to remember that this was dealing with the old, pre-CPR test as to whether a document was relevant to disposing fairly of the cause or matter. The Master of the Rolls said:

“The purpose of the rule is to ensure that one party does not enjoy an unfair advantage or suffer an unfair disadvantage in the litigation as a result of a document not being produced for inspection. It is, I think, of no importance that a party is curious about the contents of a document would like to know the contents of it if he suffers no litigious disadvantage by not seeing it and will gain no litigious advantage by seeing it. That, in my judgment, is the test.”

In my judgment, the ‘litigious advantage/disadvantage’ concept is akin to the test now enshrined in CPR 31.6.

I have concluded that the right approach to this issue is this. Whilst the mere fact that a document is relevant does not mean that the entirety of that document is relevant, and it is therefore open to the party disclosing the document in question to redact parts of it if he considers that those parts are not relevant (see GE Capital), there is an onus on that party to demonstrate, if challenged, the justification for that redaction. After all, the party doing the redacting is going to know much better than the other party what the material says and how and why it is said to be irrelevant. Although the test for relevance is that set out in r31.6, it is both logical and convenient to require the redactor to show why the redacted part does not meet the test of relevance.

Has The Defendant Demonstrated That The Redactions Are Irrelevant?

In my judgment, the defendant has not made good the proposition that the redactions are irrelevant. The Court of Appeal has said in this case that the claimants are entitled to put the defendant to proof as to whether or not they had a genuine suspicion of the claimants’ financial dealings. Understanding how, when and from whom those suspicions emanated is, at least potentially, an important element of the case. It therefore seems to me that the claimants suffer a litigious disadvantage by not knowing more about the precise identity of the individuals who were involved in the reporting process. There is also a powerful case for saying that the genuineness of the suspicion cannot properly be determined without that information.

Two very different scenarios may emerge in this case. The first (and, as Longmore LJ appeared to accept, the most likely) is that, on the evidence, Mr Wigley carefully went through all the internal reports, formed his own views, and made his own disclosure reports to SOCA. In those circumstances, the suspicion may well be shown to be genuine, and the defendant’s decision to rely on Mr Wigley will be vindicated.

But there is another scenario which, even if less likely, cannot be dismissed as fanciful. This postulates that one of the defendant’s employees further down the chain, motivated by other concerns, produced memos and reports in bad faith, which purported to identify suspicion, and those reports were acted upon, either without being properly checked, or by being assumed to be accurate and genuine by Mr Wigley. That is not as far-fetched as it might first appear: merely by way of example, I am bound to note that, in the present case, one bank employee apparently asked to borrow $1.5 million from the first claimant, which loan was refused. With such large sums of money involved, bad faith cannot automatically be ruled out. In those circumstances, of course, the identity of the individuals further down the chain of responsibility is important.

Moreover, I consider that the claimants are entitled to explore the detail of the case as set out in Mr Allen’s statement (which, after all, formed the basic evidential material for the original striking-out, and was the evidence before the Court of Appeal), namely that suspicion existed at each of the three tiers of reporting. As I have already indicated, for such a case to be made out, the defendant would have to identify the ‘at least three individuals’ who allegedly formed that suspicion. That again makes the identities of employees other than Mr Wigley, or at least some of them, relevant. The defendant’s new stance, which now suggests that stages 1 and 2 of the reporting process are irrelevant, is unjustified. On a related topic, it would appear that at least one other individual in the MLRO had a relevant suspicion of the claimants, in respect of a transaction in which Mr Wigley had no involvement. Whether or not the suspicion was genuine in that case may not have anything to do with Mr Wigley at all and it is no answer to say, as Mr Medcroft did, that the transaction was done ‘with Mr Wigley’s authority’; indeed, it was not even clear what that meant in this context.

For all these reasons, I have concluded that the defendant has not made good its threshold submission that the redacted identities are irrelevant to the issues in the case. Indeed, if I was wrong as to the approach, and if it was for the claimants to show relevance under r.31.6, I consider that, for the same reasons, they had made out their case. Accordingly, on the ground solely of relevance, I would order the removal of the redactions. That then brings us on to the public interest immunity arguments.

Do The Documents Fall Within A Class Prima Facie To Be Withheld From Disclosure and Inspection On The Grounds Of Public Interest Immunity?

The Principles

As Sir Thomas Bingham MR put it in Taylor v Anderton at 462H:

“If the judge considers that production is not necessary, that is, unless he alters his view at any later stage of the proceedings, the end of the matter. If he decides that production is necessary, then it will be incumbent upon him to decide whether these documents fall within a class prima facie entitled to be withheld from disclosure and inspection on the grounds of public interest immunity.”

A little later in his judgment, the Master of the Rolls noted that there was a “heavy burden on persons claiming to establish the existence of a class immunity”. In the earlier case of R v Chief Constable of West Midlands Police, ex parte Wiley [1995] 1 AC 274 at 305, Lord Woolf had made a similar observation:

“The recognition of a new class-based public interest immunity requires clear and compelling evidence that it is necessary.”

Police Informers and Similar

It is settled law that the identity of police informers may not be disclosed in a civil action, whether by the process of discovery or by oral evidence at the trial: Marks v Beyfus [1890] 25 QBD 494. In D v NSPCC [1978] AC 171, the House of Lords ruled that a similar immunity, from disclosure of their identity in civil proceedings, should be extended to those who gave information about neglect or ill-treatment of children to a local authority or the NSPCC. In his speech, Lord Diplock said at page 219:

“…I would extend to those who give information about neglect or ill-treatment of children to a local authority or the NSPCC a similar immunity from disclosure of their identity in legal proceedings to that which the law accords to police informers. The public interests served by preserving the anonymity of both classes of informants are analogous; they are of no less weight in the case of the former than in that of the latter class, and in my judgment are of greater weight than in the case of informers of the Gaming Board to whom immunity of disclosure of their identity has recently been extended by this House [in R v Lewis Justices, ex parte Secretary of State for the Home Department [1973] AC 388.]”

In Wiley, the House of Lords ruled that statements made for the purposes of police complaints investigations did not attract public interest immunity. On the other hand, in Taylor v Anderton, the Court of Appeal held that the reports of investigating officers produced for the purposes of independent investigations under the Police and Criminal Evidence Act 1984 formed a class which did attract public interest immunity.

There is one decision of the Court of Appeal which is of relevance to the present issue, namely whether bank employees who report their suspicions under the Proceeds of Crime legislation fall within a class which attracts public interest immunity. That is the decision of the Court of Appeal, Criminal Division, in R v H, P, S and T [2004] EWCA Crim 3325. That was an appeal in an ongoing trial in which reports of the type in issue in the present case had been disclosed. The issues related to what could properly form the subject matter of cross-examination. Although the question of class immunity does not appear to have been fully argued, Waller LJ said at paragraph 31:

“The suspicious transaction reports [now SARs] would seem prime facie to be documents which would be covered by public interest immunity. These reports are in the same category, as it seems to us, as information coming from informants in other aspects of the detection of crime. One can see that it might rightly, and very rightly, be of concern to banks if reports which divulge the identity of employees got out into the public domain. It might well be extremely unfortunate if it became a matter of general procedure that these types of reports had to be disclosed in every case. There would appear to be a serious risk of damage being done to the machinery which at present leads to these reports being made.”

Are Bank Employees Who Report Their Suspicions In A Class Covered By Public Interest Immunity?

For a variety of reasons set out in more detail below, I have concluded that, notwithstanding the heavy burden referred to above, the defendant has made out the proposition that its employees fall within a class to which public interest immunity attaches.

First, that was the clear conclusion of the Court of Appeal in R v H, P, S and T. Whilst I accept that it does not appear that the matter was fully argued out, and there does not seem to have been any citation of authority, the passage in the judgment of Waller LJ noted above is, I think, binding on me.

Secondly, to the extent that it is a matter for me at all, I consider the passage to be entirely correct. It seems to me that the position of bank employees reporting their suspicions internally or to SOCA is directly analogous to the position of police informers, and directly analogous to the position of those reporting possible child abuse, who were covered by the immunity in the NSPCC case.

In the course of his measured submissions, Mr Brindle contended that the bank employees were in a different position to police informers since police informers provided their information voluntarily, whilst bank employees were under a duty, imposed by statute, to report their suspicions. Whilst that is a difference, it seems to me that, on analysis, it actually operates in favour of the bank employees. After all, police informers can choose whether or not to pass on their information; they are not bound to do so. Under the Proceeds of Crime legislation bank employees have no such choice; they are obliged to pass on their suspicions, and their employers face the risk of prosecution if they do not. If those volunteering information to the police, often for financial gain, are covered by public interest immunity, then in my view it would be illogical for those who are obliged by law to provide that information free of charge, and who face proceedings if they do not, were not also covered by the same immunity.

Further, I accept Mr Medcroft’s submission that, on the evidence before me, SARs provide a rich seam of information for law enforcement agencies around the world. They are utilised not just by SOCA, but all other prosecuting authorities in the UK. The banking sector provides over 78% of all SARs. Eight of the ten largest reporters of SARs are banks. That flow of information would be adversely affected if confidentiality was not the norm; whilst the statutory duty to report may remain, it is easy to see how, in any borderline case, the bank employee who knows that he or she will not be given anonymity may err on the side of inaction.

For these reasons, I consider that the prima facie need for anonymity is the same for police informers, as it is for those reporting on child abuse, as it is for bank employees raising and reporting suspicions under the Proceeds of Crime Act. There is no significant difference between any of those three categories, and in my judgment, public interest immunity must apply. The remaining question is whether, on the facts of this case, the identities of the employees in this particular case should be disclosed. That, of course, depends on the outcome of the balancing exercise that I must undertake.

The Balancing Exercise

The Public Interest In Open Justice

There is a strong need for the administration of open justice, so as to ensure that, wherever possible, all relevant available information is available to the court and an individual can challenge his accusers in public, in open court, face to face. In Taylor v Anderton, Sir Thomas Bingham MR said at 465E-F:

“I am fully alive to the existence of a current of opinion strongly flowing in favour of openness and disclosure.”

That current of opinion is, if anything, flowing even more strongly 16 years later. As Ward LJ put it during the argument in the Court of Appeal (Footnote: ⁴), albeit by reference to the defendant’s wider suggestion that, if they asserted suspicion, the claimants had no redress at all, “it offends every notion of open justice that one can imagine”.

Furthermore, there are also the particular interests of the claimants. On their case, they have suffered extensive financial damage as a result of the defendant’s failure to comply with their instructions. That failure is said to be justified by reference to a suspicion (now accepted as wrong) that the claimants were money launderers. At the very least, therefore, it seems to me that, prima facie, open justice requires that the claimants are entitled to know the basis on which these suspicions were formed, by whom, when and how.

The Public Interest In Anonymity

On the other hand, there is a powerful public interest in ensuring that those individuals with important and non-delegable obligations under the Proceeds of Crime legislation are free to report, often on their own clients, without the apprehension that their opinions may become known. There is a real risk of inhibition if it was thought that their identities would be revealed (see, in another context, Taylor v Anderton at page 465G). There would also be, in many cases, the very real risk of physical intimidation, retaliation or worse, if their opinions become known.

There is a good deal of material in the bundles before me advocating the vital importance of confidentiality. Since I accept that general argument, it is unnecessary for me to set out that evidence in detail. But I note in particular the statement from Sally Scutt, the Deputy Chief Executive of the British Bankers’ Association who argues in favour of confidentiality and states that “the disclosure of the identity of employees who initially form the suspicion will strike at the very foundation of the POCA regime and expose firms and those reporting suspicions to the risk that they will be targeted by criminals”. There is Home Office Circular 53/2005, dealing with money laundering, which acknowledges that “there is a great need to protect the identity of those making SARs in these circumstances” and it contains guidance as to the circumstances in which disclosure might occur. Confidentiality is also emphasised in Sir Stephen Lander’s review of the SAR regime, published in March 2006 which, whilst recommending against a statutory code of practice enforcing the confidentiality of SARs, emphasises the general importance of confidentiality. And, although they have not intervened in this application, there is other material, some of it available on the internet, which demonstrates that SOCA themselves are keenly aware of the importance of SARs, particularly those provided by banks, and the need for confidentiality.

Analysis

In an ordinary civil case, I would venture to suggest that the public interest in confidentiality will usually outweigh the interests of open justice. The principal reasons for that must be the real risks of inhibition and of harm to the employees if their names were disclosed. Whilst I acknowledge that Sir Richard Scott VC said in the Arms to Iraq Inquiry (Footnote: ⁵) that, in a criminal trial, the opposite would be the usual result, with the interests of justice outweighing the public interest in withholding documents, he was careful to say that that was “unlike in civil litigation”. Moreover the issue before me is not about disclosure of the document as such, but the narrower point as to the identities of certain employees.

That said, in the present case, there are three particular factors which are also relevant to the balancing exercise. The first is that it is not suggested that the claimants are, or were at the relevant time, involved in money laundering. And the second is that it is not suggested that the defendant’s employees are at any risk of reprisals or physical harm from the claimants. Thirdly, given the lengthy relationship between the claimants and the defendant, and the disclosure of other names in other documents (to which reference has been made in the evidence), I cannot ignore the reality that the claimants must already have a good idea of the identity at least some of the individuals involved in the relevant events in 2006.

These particular factors lead me to conclude that, in the specific circumstances of this case, the balancing exercise entitles the claimants to a level of further disclosure. However, for the same reasons that lead me to conclude that, in an ordinary case, the public interest in confidentiality and protection would outweigh the public interest in open justice, I would be most reluctant to order the unqualified removal of all the redactions at this stage. Is there an interim measure? I believe that there is.

I can well see that, if the various internal memos and reports that were being passed on up to Mr Wigley emanated from, and referred to, a wide variety of different individuals, then it might be difficult to say that, even if one employee was acting out of bad faith, it would or could ultimately make any difference to the outcome. If suspicion was widespread, and was in any event being considered afresh by Mr Wigley at the MLRO, the risk that there was a ‘contaminated’ suspicion, or that, even if there was, it had any ultimate effect on Mr Wigley, would be likely to be non-existent.

If, however, it was one or two individuals, at whatever level, who were repeatedly responsible for all of the critical memos and reports, then a different picture may emerge. The motivations of that handful of employees would then become more important, and the effect of their reports would be consequently more significant. It might be less straightforward for the defendant to make out its case through Mr Wigley alone, in circumstances where the documents show that there was another individual who was, on the face of the documents, principally responsible for the suspicions getting to Mr Wigley in the first place, but who provided no assistance by way of evidence to the court.

Result

For the reasons set out above, I consider that the defendant’s decision unilaterally to redact all identities except for that of Mr Wigley, without more, was unjustified. On the other hand, I find that, certainly at this stage, the defendant’s desire to protect the identities of their employees was entirely appropriate. The right course is one that I floated with Mr Medcroft during his oral submissions.

In my view, the defendant should produce a schedule of each employee, identifying the department where they work and giving each of them a letter. Thus each employee will be known as, say, C(lient) R(elationship) 1, or C(ompliance) 7, or MLRO 12. In that way, whilst their identities will continue to be protected for the moment, it will become apparent to the claimants what the spread was of those employees involved in the formulation of the important memos and reports that went up the line to Mr Wigley. As a result, it will quickly become apparent whether any one or two individuals was repeatedly and closely involved in the writing or receipt of those relevant memos reports.

If that exercise were done, it would then be open to the claimants to make a further application, if they were so advised, seeking the identity of any such employee who could be demonstrated to have been closely involved in the detail. In those circumstances, any such application would allow the claimants to start from a position of much greater knowledge. Furthermore, if the identities of those involved were more widely spread out then, whilst of course I could not rule out the claimants making a further application, it would seem to me, for the reasons that I have given, that it would be much more difficult to sustain.

For these reasons, I consider that the redaction exercise needs to be re-done by the defendant in accordance with the process that I have outlined. In my judgment, that is, at this stage, a proper reflection of the necessary balancing exercise which I have undertaken. I order accordingly.