High Court Allows BBS Client’s Claim Against HSBC to Proceed

High Court rules BBS’s client’s claim against HSBC should continue as an application for Summary Judgment and Strike Out by HSBC fails. 

David Bondt led the litigation team at BBS Law, who acted for the successful claimant in the recent interim application hearing in A.F. Kopp Limited v HSBC UK Bank Plc, [2024] EWHC 1004 (Ch):  AF Kopp Ltd v HSBC UK Bank PLC (Re Banking – Security for Costs) [2024] EWHC 1004 (Ch) (03 May 2024) (bailii.org)

The High Court heard an application for Summary Judgment, Strike Out and Security for Costs on behalf of the defendant, specifically regarding whether an exclusion of indirect and consequential loss “including” loss of profit excluded liability for the claimant’s liability to its third-party clients for their loss of profits. The Court ruled against the defendant on Summary Judgement and Strike Out, and the case is to proceed to trial. 

Background

In June 2017, the claimant applied online to open a business current account with the defendant. The next year, the claimant opened a foreign currency business account with the defendant. Their relationship was governed by the defendant’s “Business Banking Terms and Conditions”. The defendant then conducted a “safeguard review,” which ultimately led to the suspension of both the claimant’s domestic and foreign accounts in December 2018. 

The claimant alleged that the conduct of the safeguarding review and the suspension of their account, amounted to a breach of the terms of the banking contract as well as the duty of care owed by them to the claimant, resulting in their loss of $1.68 million. 

The defendant applied for Summary Judgment or strike out in the alternative, arguing that the claim was excluded by clause 32 of the Banking Terms and Conditions which excluded liability for “indirect or consequential loss (including lost business, data, profits, or losses resulting from third-party claims) even if it was foreseeable”. 

The issues for determination in the application were: 

1. Whether the exclusion clause in clause 32 of the Banking Terms and Conditions applied to the claimant’s losses. 
2. Whether the claimant’s losses fall within the second limb of the rule in Hadley v Baxendale. 
3. Whether the Defendant can discharge the burden of demonstrating that clause 32 is a reasonable contract term. 
4. The consequential application for Summary Judgement under CPR Part 24. 
5. The consequential application for Strike Out under CPR 3. 
6. A separate Security for Costs application under CPR Part 25. 

The Court’s ruling 

The Court ruled against the defendant, refusing to grant Summary Judgment. It was determined that the reasonableness of clause 32 under UCTA required a consideration of factual matters, which would have to be undertaken at trial. 

The Court did offer some guidance on how the case would have been decided if the reasonableness of clause 32 was not a matter in issue, by applying the test in Hadley v Baxendale on the remoteness of damages for breach of contract. 

It is not unusual that the Judge believed the loss of profits to third parties was not recoverable as a direct loss, as they could not reasonably and fairly be considered as arising naturally from, or as a probable consequence of the breach, even if the losses were caused by the defendant’s actions in suspending the accounts. 

The Court ultimately ruled against the Summary Judgment Application, and the strike out and expressed disapproval of the way the strike out application was brought, encouraging legal representatives to refrain from employing the “scattergun” approach to cases where it is inappropriate to incorporate strike out applications. 

The Court also ordered the Claimant to provide security for costs. 

Discussion from BBS Law 

The ongoing case provides some limited insight and clarification into how the court will treat consequential losses. Further clarity will be found at trial. 

The interesting points to note are the clear direction to those advising clients on interim applications not to apply a “scattergun” approach and “throw in” Strike Out applications as an automatic alternative to Summary Judgment. The court found this approach incorrect. 

In relation to Security for Costs, interestingly, the Court in Tonstate Group Ltd v Wojakovski [2020] EWHC 1091 (Ch) confirmed that any order for security should not be made on “unless terms,” as that would be “unduly draconian”. 

In essence, if security is ordered, the claimant should be given a reasonable and proportionate amount of time to obtain the funds to meet the security order. 

The case continues.