Discovery - Claim of misrepresentation
[2025]JRC072
Royal Court
(Samedi)
17 March 2025
Before :
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Advocate David Michael Cadin, Master of the
Royal Court
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Between
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HSBC Bank Plc
|
Plaintiff
|
And
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David Hick Antiques Limited
|
First Defendant
|
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The Directors, les Six Rues Limited
|
Second Defendant
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And
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The Directors, Le Jardin de la Chapelle
Limited
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Third Defendant
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Mr David Hick
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Fourth Defendant
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Advocate N. H. MacDonald for the Plaintiff.
Advocate W. A. F. Redgrave for the Defendants.
judgment
the MASTER:
Introduction
1.
This is my
judgment in relation to an application dated 29 January 2025, by the First
Defendant, David Hick Antiques Limited (“DHAL”), for
specific discovery against HSBC of three classes of documents:
(i)
all
material it holds, whether held within personnel files or elsewhere, in respect
of complaints of mis-selling Interest Rate Hedging Products (“IRHP”),
when the person selling the product was Debbie Parker;
(ii) all material it holds in respect of the
complaint by Client D, against the Plaintiff, to the Channel Islands Financial
Ombudsman of mis-selling of an IRHP; and
(iii) a copy of the final document produced in 2013
by HSBC following an internal review into the sale of the IRHP to DHAL in 2007.
Background
2.
In January
2021, HSBC brought proceedings against DHAL, Mr Hick and two other companies in
respect of a loan and associated guarantees. Those proceedings were defended, and an
Answer and Counterclaim was filed on 16 April 2021, and subsequently amended in
April 2022.
3.
The
Defendants accepted that monies were due to HSBC under the terms of the loan
and the guarantees but alleged that they had a counterclaim for set off arising
out of the mis-selling of an IRHP by HSBC in relation to the loan. That claim
for “mis-selling” is particularised in the Amended Answer and
Counterclaim on the basis of specific misrepresentations by Debbie Parker of
HSBC which DHAL now alleges were false or misleading. As a result of that IRHP, DHAL alleges
that its businesses suffered losses amounting to some £10m.
4.
In September
2021, Master Thompson granted summary judgment (reported at HSBC Bank Plc v
David Hick Antiques Limited and Ors [2021] JRC 227) in favour of HSBC on
the basis that the Defendants’ Counterclaim was prescribed. The Defendants appealed and in March
2022, Bailhache JA, for the reasons set out in a judgment reported at David
Hick Antiques Limited and Ors v HSBC Bank Plc [2022] JRC 072, allowed
additional evidence to be adduced and adjourned the appeal to a full
hearing. By a consent order dated
22 April 2022, the parties agreed that the Master’s decision in relation
to DHAL’s Counterclaim alone would be set aside, and judgment against the
Defendants on the claim would be stayed pending determination of the
Counterclaim. Subsequently, the
matter has proceeded in respect of DHAL’s Counterclaim alone.
5.
By an Act
of Court dated 28 September 2022, Master Thompson gave directions ordering,
amongst other things, the provision of discovery protocols. HSBC’s protocol was dated 5
October 2022 and provided that it would search emails, document management
systems, and hard copy documents by date range, custodian and search
terms. It also stated that:
“6.10 In addition to
applying the HSBC Search Terms, as set out above, HSBC confirms that it will
also conduct ad hoc searches for:
- policies, procedures,
marketing, pricing and training materials relating to swap and cap products
sold in 2007 in both the UK and Jersey;
- customer suitability
assessment materials for Global Markets products sold out of Jersey in 2007;
- any internal analysis
conducted by HSBC in respect of the selling of the same or broadly the same
Swap Product that was sold to DHI in 2007;
- any commission, incentive
and/or bonus arrangements, applying to Debbie Parker, in force in 2007;
and
- details of any complaints
or disciplinary proceedings against Debbie Parker.
6.11 The searches set out at
6.10 above will be conducted in isolation and not as part of the searches set
out more generally at paragraphs 2 to 7 of this discovery protocol. As regards
these ad hoc searches, HSBC proposes to conduct targeted searches in
repositories where it considers such material would most likely be retained
(however, in view of HSBC's data retention policy of 10 years (with limited
exceptions), HSBC expects that all legacy product material (including material
relating to interest rate hedging products) will have been destroyed).
Additionally, Ms Parker has not been employed by HSBC for some time and,
therefore, it is not certain whether HSBC will hold any information responsive
to the searches envisaged by the final two bullet points in paragraph 6.10
above. The details of those targeted searches will be set out in HSBC's
discovery affidavit in due course...” (emphasis added)
6.
An
affidavit of discovery was sworn by Mr Gradidge on behalf of HSBC on 3 June
2024. It contained the requisite
endorsement from Advocate MacDonald as the Advocate with overall responsibility
for the conduct of the case. In it,
Mr Gradidge stated that searches had been carried out across the human
resources’ repositories, and beyond Ms Parker’s basic personnel
information, there was nothing relevant and in particular, there were no
grievances or disciplinaries listed against her.
7.
Correspondence
took place between the parties, and on 24 September 2024, I gave further
directions clarifying that “the reference to "complaints against
Debbie Parker" shall include complaints of mis-selling IRHPs, when the
person selling the product was Debbie Parker” and requiring, amongst
other things, HSBC to confirm whether documents relating to complaints against
Ms Parker had been found and withheld, or whether no such documents had been
located.
8.
Appleby,
on behalf of HSBC, wrote to Baker & Partners, acting for DHAL, on 20
October 2024 noting that they, and their predecessors, understood that searches
in relation to complaints against Ms Parker would be focussed on Ms
Parker’s human resources file rather than the bank’s global
database and that:
“62(a)…HSBC does
not believe that there were ever any disciplinary proceedings against Ms
Parker, with respect to any complaints received from customers or
otherwise.
Complaints were made to and
against HSBC by its customers in connection with transactions facilitated via
Ms Parker, but there is nothing to suggest any such
complaints were ever retained in any human resources records, or other file
relating to her.
b) HSBC has withheld
confidential material concerning third parties who raised complaints and claims
against HSBC with respect to transactions which involved Ms Parker on the basis
that such material is not relevant. HSBC also notes that such material is
confidential, with respect to persons unconnected to these proceedings; and
HSBC believes that any further documentation concerning such complaints would
be predominantly privileged, save possibly for limited exceptions such as
possibly correspondence initiating a complaint.” (emphasis added)
9.
Baker
& Partners did not regard this explanation as sufficient and issued a summons
for specific discovery seeking an order requiring HSBC to search for all and/or
any complaints about Ms Parker relating to IRHPs which they submit are relevant
on the grounds that:
“ii. If there was a
proper process at HSBC for selling IRHPs, but one that Debbie Parker did not
follow, then that would be indicative of her having acted improperly, and thus
support DHAL's claim that she misrepresented matters to him.
iii. If Debbie Parker was
responsible for any other IRHP sales that led to complaints then that would
plainly be relevant. If a number of customers complained that she had misled
them about swap products within her brief time in Jersey then that makes it
more likely, where there is a conflict of evidence, that she misled
DHAL.”
“Client D”
10. As part of the discovery provided, HSBC
disclosed two documents in which Client D’s full name was given:
(i)
a note to
HSBC’s Management Committee dated 12 December 2013 regarding historic
IRHP sales which referred to Client D who was said to intend making a claim for
consequential loss;
(ii) an internal email dated 8 December 2017 which
states that:
“At the end of 2016
provisions were raised to cover potential costs in respect of the Hick and
[Client D] swap complaints”
11. DHAL seeks disclosure of all material relating
to that complaint. HSBC’s
position is that disclosure of documents referencing the Client D Complaint was
inadvertent and the name of Client D should have been redacted.
The 2013 Review
12. According to a letter from Baker & Partners
dated 4 October 2024, HSBC prepared an internal review of Mr Hick’s swap
in 2013, and the bank had, according to Mr Hick, agreed to share that review
with him but had not done so. Baker
& Partners therefore asked for a copy of the finalised review, noting that
several previous drafts had apparently been disclosed.
13. By a letter dated 29 November 2024, Appleby
stated that:
“19. The review to which
you refer is an internal document used for purposes of considering the bona
fide settlement of the dispute between HSBC and DHI. As such, it is (and
remains) confidential and subject to "without prejudice"
privilege.”
DHAL’s Application
14. Although DHAL’s summons was originally
drafted to include all material held by HSBC relating to complaints of
mis-selling IRHPs where the person selling the product was Debbie Parker, by
the time of the hearing, DHAL had reflected on the matters advanced by HSBC
(including the decision in Claverton Holdings Limited v Barclays Bank PLC
[2015] EWHC 3603, referred to below) and had refined its application to seek in
relation to the first and second categories set out in its summons:
“1…a search for any
complaint of mis-selling of an IRHP made against HSBC in the Channel Islands
and Isle of Man where the following features are present:
a. Debbie Parker was involved
in selling the IRHP;
b. A swap product had been sold
when a cap product was an available alternative; and
c. The customer was considered
by the bank to be non-sophisticated.
2. In respect of any complaint which the
Plaintiff identifies pursuant to paragraph 1 of this order, the Plaintiff
shall…give discovery and inspection of:
a. The documents necessary to
evidence the nature of the complaint, including (if applicable) any complaint
that the swap product was applied to a larger proportion of the loan than had
been agreed;
b. Any evidence of what the
customer was told at the time of the selling of the product;
c. The name and address of the
customer.”
15. This refined approach now brings the
application made in respect of Client D within its parameters.
16. In support of that refined application, DHAL
noted that as part of its discovery, HSBC disclosed document HSBC-001593
entitled “Interest Rate Protection Review”. This document referred to a review of
IRHP’s carried out by the UK’s Financial Services Authority (“FSA”)
and the procedure that HSBC had consequently adopted in the UK to deal with the
issues presented. It noted that the
Channel Islands and the Isle of Man were outside the remit of the FSA but that
reviews of sales undertaken in the islands would be carried out. The document includes the name of DHAL
in an appendix and recorded that:
“Reviews are undertaken
only for customers considered “non-sophisticated” in line with the
FSA guidelines. In very general
terms a sophisticated client is one where annual turnover exceeds GBP6.5m,
assets of GBP3.26m and 50+ employees…
To date we have received 14
complaints (re 16 deals) across all islands…There are a further 10 live
swap deals (GBP6.25m), for customers considered non-sophisticated where
complaints have not been received, plus 15 expired deals (GBP10.6m) that could
be subject to complaint in future…
In all cases, the reviews
concluded that the lack of indicative breakage costs to exit the swap, requires
remediation to be made. In all
cases the customers were advised that there would be costs to exit if the swap
was cancelled at any time, and that such cost could only be assessed at the
time of breakage, however this in itself was not sufficient to allow the
customer to make a reasoned choice between other products.”
17. DHAL relies on that document to assert that
there were 39 complaints in the Channel Islands and the Isle of Man, all
relating to non-sophisticated investors, of which DHAL was one, and Client D
another, that all had a common factor in terms of a lack of indicative breakage
costs. If that is correct, it
submits that the complaints made by those customers, and/or the material
relating to those complaints, may be relevant to the claim brought by DHAL and
should, at the very least, be reviewed by HSBC’s legal team for relevance
and disclosed, if appropriate.
18.
HSBC’s
position was that amongst other things, these documents were not relevant for
the purposes of DHAL’s claim and that it would, in any event, be
disproportionate for HSBC to review them for the reasons set out in Mr Gradidge’s affidavit dated 20
February 2025:
“36. In practical terms,
in order to comply with DHI's request, HSBC would have to first identify each
client to whom DP would have sold IRHPs during her 19 year tenure at the bank.
This in and of itself is an onerous task given DP was employed between October
1997 and September 2016, HSBC's systems and data repositories have been subject
to significant changes within and since that period and this data is not held
on one particular system. On the best information available to my client as of
today, I am instructed that DP sold in excess of 300 IRHPs during her time at
the bank. Any complaints prior to December 2020 relating to UK customers are
stored on a system that also serves as a central client file repository for UK
commercial banking clients, with information on that system being stored by
client, as opposed to there being a distinct file or repository for complaints
or particular types of transaction.
From this information, HSBC would then need to take the following
steps:
(a) Manually review each IRHP
to identify the client to whom that product was sold;
(b) Identify what information
it retains in relation to each client, taking into account its retention
periods in each of the UK and Jersey, system changes and the likely historical
nature of these client relationships;
(c) Conduct a further manual
review of each client's file…
37. A separate repository of
files pertaining to certain customers in the Channel Islands and Isle of Man
who were sold IRHPs has been located which contains 39 separate client files.
HSBC does not know precisely how it was compiled, but it is unlikely to be a
comprehensive repository of all files relating to IRHPs sold in the Channel
Islands and Isle of Man as more IRHPs than 39 would have been sold.
(a) I estimate that it may only
take about under an hour to establish which of these customers lodged a
complaint in respect of the sale of their IRHP(s) and determine if DP sold the
relevant IRHP
(b) If it were then found that
DP sold an IRHP, and that the whole client file should be reviewed, then,
without reviewing the files, it is difficult to estimate how long it would take
to review each client file and that would vary as most of the files are more
than 100 pages in volume with some being several hundred pages in volume. Reviewing
at 60 pages an hour would take at least two to six hours.”
19. It is clear from Mr Gradidge’s
explanation of the steps that would have to be undertaken, that HSBC has not
identified the customers to whom Ms Parker sold IRHPs, nor has it identified
the customers referred to in document HSBC-001593, nor has it reviewed the 39
client files relating to Channel Islands and Isle of Man customers. Similarly, in relation to Client D, Mr
Gradidge deposes in his affidavit sworn on 20 February 2025 that the complaint
was made orally at a meeting and that:
“42…HSBC has not
assessed whether the Client D Complaint is in any way even remotely comparable
to the situation that gives rise to [DHAL’s] claim, because such exercise
is irrelevant and unworkable for the reasons outlined above...” (emphasis added)
20. In my judgment, what flows from these
paragraphs is that HSBC’s objections to disclosure are based on theory
rather than fact in that none of the documents have been reviewed. In such circumstances, the Court is entitled
to scrutinise assertions of irrelevance.
Specific Discovery
21. The test to be applied in relation to specific
discovery was set out by Commissioner Thompson in Macleod v The Channel
Islands Cooperative Society Limited [2024] JRC 109 where he adopted the
following summary of the applicable principles, albeit noting that in
exceptional circumstances, an affidavit might not be required:
“a. The existence of an
affidavit of discovery in proper form ought to be conclusive as to whether or
not a party has complied with its discovery obligations.
b. That presumption can only be
displaced by the production of evidence, by sworn affidavit, which establishes
a prima facie case that the party has documents which have not been disclosed
but that those documents will be relevant to a matter in issue.
c. Even where an applicant is able
to establish the existence and relevance of documents not discovered the Court
must be satisfied that making an order for specific discovery is necessary for
the just disposal of the action.”
22. In this case, two detailed affidavits of
discovery have been sworn by Mr Gradidge on behalf of HSBC, and both contain
the requisite advocate’s endorsement such that there is a presumption
that HSBC has complied with its discovery obligations.
23. That presumption is strengthened by the fact
that the parties appear to agree that the Plaintiff has complied with the terms
of its discovery protocol. HSBC has
carried out the structured searches required, and insofar as the ad hoc
searches listed in paragraph 6.10 are concerned, according to Mr Gradidge’s affidavits, it has carried out “targeted
searches in repositories where it considers such material would most likely be
retained”. Insofar as
those searches did not provide any further documents relating to “complaints
or disciplinary proceedings against Debbie Parker”, Mr Gradidge has
not simply relied upon the search but according to his affidavit of 20 February
2025:
“(d) I have since
consulted with [Debbie Parker] and she informed me, consistent with the absence
of documentary evidence retrieved in connection with these matters, that no
disciplinary proceedings were ever instituted against her; nor has she been the
subject of any complaint to the Jersey Financial Services Commission or any
other regulator.”
24. Discovery protocols are frequently used in
complex cases and set out how parties intend to meet their discovery
obligations in accordance with Practice Directions 17/07 and 17/08. If protocols are agreed by the parties
and/ or ordered by the Court, they provide a benchmark for what constitutes a
reasonable search, in line with the Overriding Objective and in the context of
the particular litigation. That
reasonable search should produce the documents necessary for the purposes of
the litigation, albeit that as anticipated in paragraph 17(a) of Practice
Direction RC 17/08, it may not produce all of the relevant electronic
documents. If the document
landscape does not alter, compliance with a discovery protocol gives rise to a
presumption that any undiscovered, relevant documents are not necessary for the
just disposal of the action, as otherwise they would, and should, have been
identified in the protocol.
However, if the document landscape changes, parties should work together
to apply their protocol to the new repositories (Rassmal
v Investments LLC v Al Suwaiket and Sons [2024]
JRC 104).
25. In my judgment, the document landscape has
changed in that in the course of discovery, HSBC has unexpectedly identified
HSBC-001593 referring to 39 complaints about IRHPs in the Channel Islands and
the Isle of Man, and has also located a repository of 39 customer files
relating to IRHPs. Given that the
subject matter is IRHPs, there is a possibility that these files might contain
information relating to “complaints against Ms Parker”,
which is accepted to be a relevant area for search according to HSBC’s
discovery protocol. The issues are
therefore whether:
(i)
these
files contain material relevant to a matter in issue, albeit that they have not
been reviewed; and
(ii) if they do, whether an order for specific
discovery is necessary for the just disposal of the action.
Relevance
26. Without having reviewed these documents,
HSBC’s submission is that they are irrelevant. Relevance has to be determined by
reference to the pleadings. In this
case, DHAL alleges that on 7 June 2007, Mr Hick attended a meeting with Ms
Parker at the offices of his accountant and that she informed him that there
was no fee for the IRHP and 50% of the loan had to be covered by it. Thereafter there was a call between Mr
Hick and Ms Parker in which she referred to 100% of the loan being covered, and
there is a transcript of that call.
DHAL alleges that HSBC represented that:
(i)
the IRHP
was a suitable product for DHAL and the most suitable product for DHAL;
(ii) there was no product that would protect DHAL
against interest rate rises that was more suitable; and
(iii) if the IRHP were not accepted, the loan could
not be made.
27. HSBC denies that these representations were
made and pleads extensively (in paragraphs 18 to 28 of its Reply and Answer to
Counterclaim) as to what did, or did not, take place in the meetings between
the bank and Mr Hick. In
particular, HSBC pleads that it was “under no duty to, and did not,
provide Mr Hick with any advice relating to the suitability of interest rate
hedging products more generally” (paragraph 18(c) of the Reply and
Answer to Counterclaim).
28. In O’Brien v Chief Constable of South
Wales [2005] 2 AC 534, the House of Lords considered similar fact evidence
in the context of civil proceedings.
Bingham LJ held that:
“3. Any evidence, to be admissible, must be
relevant…Relevance must, and can only, be judged by reference to the
issue which the court (whether judge or jury) is called upon to decide. As Lord
Simon of Glaisdale observed in Director of Public
Prosecutions v Kilbourne [1973] AC 729, 756, "Evidence is relevant if it
is logically probative or disprobative of some matter
which requires proof ... relevant (ie. logically
probative or disprobative) evidence is evidence which
makes the matter which requires proof more or less probable".
4. That evidence of what happened on an
earlier occasion may make the occurrence of what happened on the occasion in
question more or less probable can scarcely be denied…If an accident
investigator, an insurance assessor, a doctor or a consulting engineer were
called in to ascertain the cause of a disputed recent event, any of them would,
as a matter of course, enquire into the background history so far as it
appeared to be relevant. And if those engaged in the recent event had in the
past been involved in events of an apparently similar character, attention
would be paid to those earlier events as perhaps throwing light on and helping
to explain the event which is the subject of the current enquiry. To regard
evidence of such earlier events as potentially probative is a process of
thought which an entirely rational, objective and fair-minded person might,
depending on the facts, follow. If such a person would, or might, attach
importance to evidence such as this, it would require good reasons to deny a
judicial decision-maker the opportunity to consider it. For while there is a
need for some special rules to protect the integrity of judicial
decision-making on matters of fact, such as the burden and standard of proof,
it is on the whole undesirable that the process of judicial decision-making on
issues of fact should diverge more than it need from the process followed by
rational, objective and fair-minded people called upon to decide questions of
fact in other contexts where reaching the right answer matters. Thus in a civil
case such as this the question of admissibility turns, and turns only on
whether the evidence which it is sought to adduce, assuming it (provisionally)
to be true, is in Lord Simon's sense probative. If so, the evidence is legally
admissible. That is the first stage of the enquiry.
5. The second stage of the enquiry
requires the case management judge or the trial judge to make what will often
be a very difficult and sometimes a finely balanced judgment: whether evidence
or some of it (and if so which parts of it), which ex hypothesi
is legally admissible, should be admitted. For the party seeking admission, the
argument will always be that justice requires the evidence to be admitted; if
it is excluded, a wrong result may be reached. In some cases, as in the
present, the argument will be fortified by reference to wider considerations:
the public interest in exposing official misfeasance and protecting the
integrity of the criminal trial process; vindication of reputation; the public
righting of public wrongs. These are important considerations to which weight
must be given. But even without them, the importance of doing justice in the
particular case is a factor the judge will always respect. The strength of the
argument for admitting the evidence will always depend primarily on the judge's
assessment of the potential significance of the evidence, assuming it to be
true, in the context of the case as a whole.
6. While the argument against admitting
evidence found to be legally admissible will necessarily depend on the
particular case, some objections are likely to recur. First, it is likely to be
said that admission of the evidence will distort the trial and distract the
attention of the decision-maker by focusing attention on issues collateral to
the issue to be decided. This is an argument which has long exercised the
courts (see Metropolitan Asylum District Managers v Hill (1882) 47 LT 29, 31
per Lord O'Hagan) and it is often a potent argument, particularly where trial
is by jury. Secondly, and again particularly when the trial is by jury, it will
be necessary to weigh the potential probative value of the evidence against its
potential for causing unfair prejudice: unless the former is judged to outweigh
the latter by a considerable margin, the evidence is likely to be excluded. Thirdly,
stress will be laid on the burden which admission would lay on the resisting
party: the burden in time, cost and personnel resources, very considerable in a
case such as this, of giving disclosure; the lengthening of the trial, with the
increased cost and stress inevitably involved; the potential prejudice to
witnesses called upon to recall matters long closed, or thought to be closed;
the loss of documentation; the fading of recollections. It is, I think,
recognition of these problems which has prompted courts in the past to resist
the admission of such evidence, sometimes (as, perhaps, in R v Boardman [1975]
AC 421 ) propounding somewhat unprincipled tests for its admission. But the
present case vividly illustrates how real these burdens may be. In deciding
whether evidence in a given case should be admitted the judge's overriding
purpose will be to promote the ends of justice. But the judge must always bear
in mind that justice requires not only that the right answer be given but also
that it be achieved by a trial process which is fair to all parties.”
29. As to how those competing arguments are to be
balanced, in JP Morgan Chase Bank v Springwell Navigation Corporation
[2005] EWHC 383 (Comm) the English High Court struck out allegations in a
pleading that a bank official, engaged in selling a financial product to the
defendant, had made similar statements to other shipping customers at the bank
in a similar position, on the basis that they were not logically probative of
any of the following matters:
"34...(a) that the
contractual relationship was in any case the same as in the case of Springwell
and Chase; (b) that each had the same investment objectives or attitude to
risk, or that each had the same views on emerging markets; (c) that each had
the same level of sophistication; or (d) that each dealt with Chase in the same
way."
30. In Claverton Holdings Limited v Barclays
Bank PLC [2015] EWHC 3603, the claimant brought proceedings for negligence
in relation to the provision of an interest rate swap, and specifically named
two employees at Barclays, Messrs Bulloch and Challis, as the individuals who
gave the advice and recommendations about which the complaint was made. It sought an order for specific
discovery of other allegations of complaints of mis-selling swaps by these
employees initially on the basis that “evidence of other complaints
and allegations against Messrs Bulloch and Challis would clearly and obviously
be probative of matters alleged in the present case”, albeit that it
subsequently accepted that “The only potential relevance was if other
cases contained allegations that similar oral representations or statements
were made by the relevant persons, supporting the likelihood that they had been
made in this case.” In
the course of the hearing, it appears that the claimant’s counsel made
numerous attempts to refine the application, eventually alighting on “limiting
it to complaints and allegations which had resulted in an admission by Barclays
or a finding by the Financial Ombudsman Service against Barclays.” The Court held that:
“16. [Counsel for Claverton] was therefore
attempting to avoid both the criticism that Claverton wishes to adduce no more
than unsubstantiated allegations on the one hand and a charge that Claverton
intends to engage in satellite litigation on the other. In my judgment her
solution fails on both counts.
17. First, it is highly likely that
any settlements entered by Barclays with customers who have purchased swaps
will have been made without admission of liability, let alone an admission of
specific factual allegations underlying any claim. Further, any determination
by the Financial Ombudsman Service will be as to the Ombudsman's view of
Barclays' responsibility to compensate the customer, not a finding of legal
liability and certainly not one which would bind Barclays in these proceedings
in relation to any particular allegation of fact. Findings of a court, on the
other hand, if there are any, would be readily accessible in any event.
18. Second, to the extent that Claverton
was permitted to adduce evidence of admissions or findings of the Financial
Services Ombudsman, it would remain open to Barclays to adduce its own evidence
to explain the admissions or findings, to re-open and contradict any admission
and to seek to distinguish the facts of the case in which any admission or
findings were made. The possibility
of satellite issues derailing the trial remains very real to the extent that
Claverton were to be permitted to rely on allegations in other cases.
19. The application has, at this
point, in my judgment, become a fishing expedition, hoping to find an admission
by Barclays or a finding of similar facts where there is no reason to believe
that such exists. It would involve the bank in an extensive and expensive search
and analysis of a large number of cases to determine what specific allegations
were made and to what extent those allegations were "similar" to the
allegations in this case, and, further, the extent to which they have been
admitted or are the subject of a "finding". In my judgment such an
exercise is wholly disproportionate in the context of this claim.
20. In conclusion, I am not
satisfied that the application, even as refined, is for documents which would
be relevant and therefore admissible as similar fact evidence. I further doubt
that, even if they crossed the threshold of admissibility would be admitted as
a matter of discretion. That would be sufficient to refuse to make an order for
specific disclosure of documents relating to transactions not directly in issue
in these proceedings. But in any event, I am further satisfied that to require
Barclays to undertake the search and disclosure exercise proposed would be
disproportionate and oppressive. Claverton's applications are therefore
dismissed.”
31. Advocate Redgrave submits that:
(i)
on the
basis of HSBC-001593 (referred to in paragraph 16 above) there were 39
non-sophisticated IRHP customers in the Channel Islands and the Isle of Man,
including DHAL and all of those cases had the common factor of breakage costs
not being sufficiently disclosed;
(ii) details of those 39 customers must exist and
HSBC has identified a repository of 39 files (referred to in paragraph 17
above) which it could review against the list to ensure that it has all of the
relevant client files;
(iii) those customer files could then be reviewed to
ascertain whether Ms Parker had any involvement and if she did, then the review
could focus on whether there were additional similarities with DHAL’s
case in terms of the amount of the loan covered and the representations made;
(iv) if sufficient similarities were to be found,
Advocate Redgrave would wish to contact the customer with a view to calling
them to give similar fact evidence at trial.
32. This refined approach limits the number of
additional files to be reviewed by HSBC to 39, readily-identifiable, files as
opposed to the 300 or so customer files scattered across HSBC’s systems
dealing with all of the IRHPs sold by Ms Parker whilst working for the bank. Whilst this is a more manageable task,
it is still likely to be a significant task for the reasons set out by Mr
Gradidge and referred to in paragraph 18
above.
33. In my judgment, the difficulty with Advocate
Redgrave’s approach is that each customer is an individual, with their
own peculiar characteristics, and their own specific transactions. Representations made about the
suitability of an IRHP, or the alternatives to a particular IRHP, made to a
customer in relation to that customer’s transaction have limited
relevance, if any, to representations about suitability made to DHAL in
relation to its transaction. Each
customer, and each transaction, is unique, even if there might be superficial
similarities. In my judgment,
representations made to other customers are not logically probative of anything
in relation to DHAL.
34. Nor is the fact that representations might have
been made to another customer logically probative of anything in relation to
DHAL. For example, even were there
to be evidence that Ms Parker gave advice on swaps to another customer, that
would not be probative of the fact that she gave such advice to Mr Hick. Nor would it undermine HSBC’s
denial that it gave such advice to Mr Hick.
35. Nor does the fact that Ms Parker might have
been a common denominator change that.
Each complaint is still the unique product of an action, by an employee
of HSBC, to a customer, in the lights of the applicable circumstances. Ms Parker’s common involvement
only addresses one factor.
Even if Ms Parker were to have had a particular way of working which was
reflected in her interactions with other customers, such that the fact rather
than the substance, of her interaction with another customer might be
conceivably probative of her actions, it could have no more than tangential
relevance to DHAL’s claim given the specific representations pleaded.
36. Moreover, even to assume that any material
relating to one client might have relevance at all to DHAL as it alleges in
paragraph 9
above
requires a significant amount of speculation and an unjustified leap of logic:
(i)
If
established, the fact that Ms Parker may not have followed HSBC’s proper
process for another customer is not probative of an allegation that she
misrepresented matters to Mr Hick; at best it might support an allegation that
she did not follow proper process in relation to Mr Hick, but no such
allegation is pleaded.
(ii) If established, the fact that other customers
complained that Ms Parker had misled them about IRHPs is not probative of an
allegation that she misled DHAL.
(iii) Even to get to a position of such complaints
being potentially probative, the stars would have to align such that the
complaints would have to be similar, in relation to customers with similar
circumstances and characteristics, and arise in similar circumstances. There is no evidence of such serial
misbehaviour on the part of Ms Parker and indeed, the absence of any complaints
or disciplinary proceedings recorded against, or notified to, Ms Parker
strongly suggests the contrary.
37. Accordingly, I find that the material in the
files relating to Channel Islands and Isle of Man customers who complained
about IRHPs is not relevant to DHAL’s proceedings.
Necessary for the Just Disposal of the Action
38. Even were I to be wrong about relevance, and
the representations made to one customer to have some probative value about the
representations made to DHAL, I think that that probative value would be very
limited, and it is far from plain and obvious to me that the trial judge would
even allow such evidence to be adduced.
39. However, if such issues are to be raised and
explored fairly at trial, it would require the Court to examine in detail all
of the circumstances relating to those other complaints, including the
characteristics of the customer, the nature of their interactions, and any
documentary evidence relating to those complaints, which may not necessarily
all be in the possession of HSBC.
As with Claverton, the risk of satellite issues derailing the
trial becomes very real.
40. That risk is compounded by the fact that unlike
in Claverton, Advocate Redgrave wishes to contact the customers with a
view to calling them to give evidence.
Whilst that avoids the risk of adducing unsubstantiated complaints
(which was one of the criticisms in Claverton), it will require other
customers to be identified, and contacted, which may not be straightforward
given issues of confidentiality and the time that has elapsed since the
complaints were made. Once
contacted, those customers will be invited to engage in a process relating to
events which occurred many years ago.
There is no guarantee that they can do so, will do so, or will do so
expeditiously. Even with active
case management, there is the risk of significant further disruption to the
current proceedings which have already been extant for 4 years and which relate
to events occurring nearly 18 years ago.
41. Further, given the limited potential relevance,
if any, of the material, I accept that, for the reasons set out in Mr Gradidge’s affidavit, that it would be
disproportionate for HSBC to identify, extract and review all of the 39
complaint files relating to Channel Islands and Isle of Man customers.
42. In my judgment, even were the material to be
relevant, I would not regard discovery of that material necessary for the just
disposal of the action. I therefore
decline to make any order for specific discovery under paragraph 1 of
DHAL’s summons.
Without Prejudice Privilege
43. HSBC submits that the 2013 Review is subject to
without prejudice privilege and is therefore protected from disclosure. In support of these submissions, HSBC
relies upon the decision of the English Competition Appeal Tribunal in Sportradar AG v Football Dataco
Ltd [2022] CAT 29, where the tribunal noted that the authorities were
uncontroversial and included the principles that:
“(1) Without prejudice
privilege is founded on the public policy of encouraging litigants to settle
their differences. It is a rule about admissibility, excluding all negotiations
genuinely aimed at settlement from being given in evidence. The privilege applies
to oral or written communications in such negotiations. See Rush & Tompkins
Ltd v Greater London Council [1989] 1 AC 1280…
(3) The rule does not just apply to
protect negotiations aimed at resolving legal issues. Provided the criterion of
"genuinely aimed at settlement" is met, the nature of the proposals
put forward or the character of the arguments to support them is irrelevant.
See Forster v Friedland (Unreported, CA, 10 November 1992)…”
44. These principles relate to admissibility rather
than discovery, and this point is commented on in Matthews and Malek on
Disclosure, 6th edition 2024, at 14.01:
14-01 Most forms of privilege depend on the
fact that certain information is known to one side in litigation but not to the
other. But “without prejudice” privilege is different, in that it
largely concerns information known to opposing parties. It is also unusual in
that the “privilege” in the law of disclosure is based on a
separate rule of the law of evidence governing admissibility, notwithstanding
that…admissibility and disclosability are
concepts generally independent of each other. Not all that is admissible is
disclosable; not all that is disclosable is admissible.”
45. Mr Gradidge deposes in his affidavit of 20
February 2025 that:
“46. In any event, the 2013 Review is an
internal document used for purposes of considering the bona fide settlement of
the dispute between HSBC and DHI. The 2013 Review is clearly marked in red
capital letters "WITHOUT PREJUDICE SAVE AS TO COSTS" and, while such
a label is not determinative in itself, the document is indeed confidential and
subject to without prejudice privilege.
47. The 2013 Review was
prepared in the context of, and for considering, settlement negotiations with
DHI. Before then DHI had submitted its complaint to HSBC on 10 March
2010…”
46. I have not been provided with a chronology of
the discussions or negotiations between the parties. However, on the pleadings the parties
agree that:
(i)
in August
2012, HSBC admitted that some of the underlying principles behind the UK
Financial Services Authority's review into swaps mis-selling could be relevant
to DHAL (paragraph 20 of the Amended Answer and Counterclaim and paragraph 30
of the Reply and Answer to Counterclaim); and
(ii) Mr Hick reached a settlement with HSBC in February
2014 (paragraph 21 of the Amended Answer and Counterclaim and paragraph 31 of
the Reply and Answer to Counterclaim).
47. Accordingly, given the timing of events and the
labelling of the document, I accept that this document was prepared for the
purposes of without prejudice negotiations with a view to settling the issues
between DHAL and HSBC.
48. The list of documents exhibited to Mr Gradidge’s affidavit refers to two separate excel
documents (which have not been provided me) and, in Schedule 3, it claims
privilege for:
“Correspondence between
the Plaintiff and the First Defendant in a genuine attempt to settle the
dispute between the Plaintiff and the Defendant”
49. Given that Mr Hick has not seen a copy of the
2013 Review, it does not appear to have been sent and is therefore not covered
by the claim for privilege in the List of Documents as it is not “correspondence”. According to Mr Harris’ affidavit
of 12 February 2025, HSBC did not disclose the 2013 Review in its discovery,
but it did disclose what appeared to be working documents for that review.
50. In my judgment, the 2013 Review should have
been disclosed in the sense of being listed in HSBC’s list of documents,
and any claims for privilege in relation to that document should have been
properly particularised:
(i)
As
Griffiths LJ held in Rush & Tompkins Ltd v Greater London Council
[1989] 1 AC 1280 at 1303:
“The general rule is that a
party is entitled to discovery of all documents that relate to the matters in
issue irrespective of admissibility.”
(ii) RCR 6/17(3) provides that:
“(3) If it is desired to
claim that any documents are privileged from production, the claim must be made
in the list of documents with a sufficient statement of the grounds of the
privilege.”
51. The real issue between the parties is as to
whether the 2013 Review can be inspected, notwithstanding that it was not
covered by the claim for privilege in the list of documents.
52. Internal settlement documents are often
prepared by or for lawyers and fall within the ambit of legal professional
privilege. HSBC has not claimed legal professional privilege in relation to the
2013 Review and when pressed in submissions, Advocate MacDonald was unable to
say that the 2013 Review had been prepared with or for lawyers, either internal
or external. Nor did he submit that
the dominant purpose of the document would have been the obtaining of legal
advice. In such circumstances,
legal professional privilege cannot apply (Waugh v British Railways Board
[1980] A.C.521) and HSBC relies upon “without prejudice” privilege.
53. In Rabin v Mendoza [1954] 1 W.L.R. 271,
Denning LJ held that:
“Nevertheless, if documents
come into being under an express, or, I would add, a tacit, agreement that they
should not be used to the prejudice of either party, an order for production
will not be made.”
54. Romer LJ went further and in that case held
that:
“It seems to me that it would
be monstrous to allow the plaintiff to make use — as he certainly would
make use — for his own purposes as against the defendants of a document
which is entitled to the protection of “without prejudice” status.
In those circumstances I agree with
what my Lord has said, and this appeal fails.”
55. Rabin v Mendoza was
approved by Griffiths LJ in Rush & Tompkins at 1304A as authority
for the proposition that in a two-party case involving just the plaintiff and
defendant, neither is entitled to discovery against the other of without
prejudice documents, with discovery in this context being production of the
listed document. There is a
jurisprudential debate as to whether this is founded on implied contract or
public policy, or both, but in my judgment that debate does not assist in the
determination of the issue before me:
(i)
HSBC
submits that this was prepared as a working document in the course of a period
of negotiations between it and DHAL, and as such, is privileged;
(ii) whereas from DHAL’s perspective, the 2013
Review was not sent to it by HSBC and it cannot be subject to without prejudice
privilege. It submits that it is
supported in this conclusion given that DHAL believes that drafts of this
document have been disclosed and inspected, albeit that in the absence of
inspecting the 2013 Review, it cannot say so definitively.
56. In my judgment, the position is accurately set
out by the learned editors of Passmore on Privilege, 5th edition, at
10-006:
“As Lord Hope put it in Ofulue v
Bossert:
“…the rule is
generous in its application. It recognises that unseen dangers may lurk behind
things said or written during this [negotiation] period, and it removes the
inhibiting effect that this may have in the interests of promoting attempts to
achieve a settlement.”
As
will be seen, that generosity is apparent from the fact that the without
prejudice rule is now very much wider in scope than it was historically, with
the result that it is not limited merely to the making of specific admissions
against interest or offers made in the course of settlement negotiations:
rather it extends to encompass the full content of the negotiations undertaken
to seek a settlement.”
57. That last sentence in Passmore is founded on
the speech of Clarke LJ in Oceanbulk
Shipping & Trading SA v TMT Asia Ltd [2010] UKSC 44 where he held that:
27. The without
prejudice rule is thus now very much wider than it was historically. Moreover,
its importance has been judicially stressed on many occasions, most recently
perhaps in Ofulue, where the House of Lords identified
the two bases of the rule and held that communications in the course of
negotiations should not be admissible in evidence. It held that the rule
extended to negotiations concerning earlier proceedings involving an issue that
was still not resolved and refused, on the ground of legal and practical
certainty, to extend the exceptions to the rule so as to limit the protection
to identifiable admissions.”
58. In my judgment, the “full content of
the negotiations” referred to by the editors of Passmore includes
drafts and internal discussions about offers and approaches to settlement. The fact that a draft offer did not
materialise into an actual offer is irrelevant if it were prepared for the
purposes of negotiations. To hold otherwise would undermine the whole purpose
of the privilege, and require a contextual analysis of the offers made and any
drafts rejected to determine whether the claim for privilege was made out.
59. Whilst according to Mr Hick, HSBC offered to
share the 2013 Review with him, it never in fact did so. Had it been shared on a without
prejudice basis, he would have known the contents but still been unable to
inspect it on discovery. There is
no evidence that it would have been shared on an open basis. In the absence of an express waiver, there
is no basis for ordering inspection.
60. Accordingly, I find that the 2013 Review is
privileged and cannot be inspected by DHAL.
Authorities
HSBC
Bank Plc v David Hick Antiques Limited and Ors [2021] JRC 227
David
Hick Antiques Limited and Ors v HSBC Bank Plc [2022] JRC 072
Claverton
Holdings Limited v Barclays Bank PLC [2015] EWHC 3603.
Macleod
v The Channel Islands Cooperative Society Limited [2024] JRC 109.
Practice Directions 17/07
Practice Directions 17/08
Rassmal v Investments LLC v Al Suwaiket
and Sons [2024] JRC 104.
O’Brien
v Chief Constable of South Wales [2005] 2 AC 534.
JP Morgan Chase
Bank v Springwell Navigation Corporation [2005] EWHC 383 (Comm).
Sportradar
AG v Football Dataco Ltd [2022] CAT 29.
Matthews and Malek on Disclosure, 6th
edition 2024
Rush & Tompkins Ltd
v Greater London Council [1989] 1 AC 1280.
Waugh v British
Railways Board [1980] A.C.521.
Rabin v Mendoza [1954] 1 W.L.R. 271.
Passmore on Privilege, 5th
edition
Oceanbulk
Shipping & Trading SA v TMT Asia Ltd [2010] UKSC 44.