THE ECU GROUP PLC v (1) HSBC BANK PLC (2) HSBC UK BANK PLC (3) HSBC BANK USA, N.A. [2021] EWHC 2875 (Comm)

" Before we go into battle we need to be clear on the facts."

“ My approach has always been, and I said it time and again, you know, people are innocent until proven guilty. I wouldn't want to go into a battle, it may not be the nicest term, but I don't want to ruffle feathers unless there was a case to answer .”

“Q. During the period with which we are concerned, 2004 to 2006, you had access to platforms which enabled you to monitor dealings in the foreign exchange markets in real time, didn't you ? A. No, I wouldn't -- the systems I had were charting programmes. During the relevant time I had one system which I used extensively called CQG, which is purely a charting, very sophisticated charting programme, and that is how I made my analysis in forecasting which currencies I ranked more highly over one another. In the same vein at some point during that time I had a Bloomberg machine which also allowed me some fairly sophisticated charting programmes. But I didn't use -- well, CQG didn't have that capacity, or it may do now, I don't even know if it exists. But Bloomberg I did not use for really any other purpose than my proficiency, which is chart analysis. News, yes, but dealing…”

“ As I had been watching that trade myself , the level had been breached, had gone through 1.20. Got as high, I think from the document we reviewed a little earlier, up to 1.2003 or so, and then actually went down by recollection well below 1.20, before then oscillating between varying levels. So I was not satisfied that that rate given at 1.2009 was in accordance with our instructions, and hence I wanted to establish with David Rumsey whether it was or wasn't… Q. You mentioned you had been watching. What was it that you were watching and on what? A… either through CQG, which was my preferred charting system, possibly Bloomberg, I can't see definitively, I can't recall when I would have taken either system. However, either on CQG or Bloomberg these are the bar charts that my systems would show , would be the midpoint between the bid and offer spreads given by multi major banks in the foreign exchange industry. So would be technically indicative but very, very precisely indicative of the majority of the major players transacting foreign exchange”

“ A. I would have been watching on my Bloomberg screen. Q. On your Bloomberg screen? A. Yes, or CQG. I think Bloomberg. By 2006 I was exclusively on Bloomberg.”

“Q. So you were very much alive to the possibility, weren't you, back in 2006, that someone had profited as a result, as you saw it, of abuse of stop loss orders placed by ECU. That is right, isn't it? A. Yes”

“ MP: I was just going to say that I'm sending Andrew Brown at HSBC the evidence of the sort of price movement on these last 3 stops, what I've suggested is that we're making good progress for the future but I expect that he will agree — AJ: These they have been front run as he calls them. MP: That his or their actions , I think he will agree had they not, I've put front run or order book managed the stop position that in all probability those stops wouldn't have been triggered , and as such... AJ: May not have been . I don't think you can... MP: They wouldn't at that time , in each of them, I've gone back and looked and the first thing they did from the price action was to go straight down once we'd been filled, and in case of two of them for some time, before coming back eventually. It's not my point, my point is that in the knowledge that we would never have countenanced such sort of behaviour at all, it was actually expressly 100% diametrically opposed to where, how we wanted things done and our and that sort of philosophy has been embedded in our banking relationships since we started. The price action leads me to believe that HSBC must have profited out of that activity, because if they're buying something low and pushing the price up and then they've dumped the position on us and had an exit strategy they have benefitted by definition, they must have done…”

“…In managing your order book - by buying ahead of the above given stop orders-it seems clear to us that the practice of us placing a stop-loss order with you has, in reality, only served as to create a magnet effect to and through our specified stop-loss level… The rather galling conclusion drawn from all this is that by seeking to protect our clients' position by placing stop-loss orders behind strategic levels of overhead resistance, your subsequent actions have achieved the opposite … With respect to these last three stop-loss orders (above), my colleagues and I are keen to establish the extent to which HSBC benefitted financially from buying ahead of the above stop-loss orders which we believe was in clear contravention (albeit unintentionally) of our stated policy regarding the execution of such orders…”

" I think the price action illustrated is pretty conclusive of our position."

“Q. Well, who else was in your mind at the time if not HSBC? A. Well, it is possible that there are any number of theories as to who could have been directly responsible for it, but my position at the time was to establish definitively whether or not that was HSBC. Q. We are not able to discern in the papers, as far as I can see, from disclosure that you were thinking of anyone else other than HSBC? A. No, I was very much thinking of HSBC at that time. Q. Yes, and not somebody else? A. This -- as at 7 February all my focus was on HSBC, correct .”

“…what we all agreed would be a good way forward is Anthony's gone away with the evidence and he's going to go and see Alan [Ramsey] and just say look I know these guys well, they are very angry and very upset at the way they've been treated and I don' think you want this going public. I think it's going to look very very bad indeed because front running is kind of a hot potato at the moment.… It’s all over the MIFID stuff, Antony’s just going to say you need to revisit this because you know they’re good guys, they’re not asking for any money, it’s their clients who have been disadvantaged but you wouldn’t want these images being banded around because it doesn’t look you know … …And the letter, did you see the letter, the letter doesn’t actually really deny anything and was quite carefully crafted and we said look the one thing we don’t want to do is beat up the guys at the private bank, you know, we don’t want them getting upset, we don’t want them put in the middle but we do want Alan Ramsey to come and look at the evidence and have a conversation you know, and the way we would like it presented back to the private bank is that they’ve further reviewed it and on reflection they do think that an ex gratia payment is due to the clients.”

“…and the way we would like it presented back to the private bank is that they’ve further reviewed it and on reflection they do think that an ex gratia payment is due to the clients.”

“ AR said that the bank was being hard-nosed about the matter and that he would revert to Anthony tomorrow. reimpressed on Anthony the strength of our relationship with the private bank and the impossible position they had been put in by the investment bank and that given the value of our business relationship with the private bank and the weight of evidence against the investment bank, being hard-nosed wasn't going to achieve anything but an ex-gratia goodwill price improvement would .”

“Q. So by this stage, 20 April 2006, it is correct that you had not accepted the explanation given in the letter of 9 March, had you? A. Not formally , no. Q. Well, you hadn't accepted it at all, had you? A. Erm, we were running with Mr Ramsey, or rather Anthony Belchambers and Mr Ramsey with Charles, but, erm, no, I hadn't concluded the matter at this stage. Q. Well, you hadn't concluded the matter. You were still trying to get a payment out of the bank. That is correct, isn't it? A. If they had benefited , yes. Q. Well, you believed very strongly that they had benefited, didn't you? A. We did .”

“ Q. When it says: "Flow of business is from HSBC to ECU and very little the other way". That was right, wasn't it? A. Well, it had already -- always been actually pretty even . Sometimes we were ahead, but I think on balance we had introduced more or less half of our book to them and they had introduced more or less half of their book -- sorry, half of our book was introduced by them. It was a very even partnership, I believe. Q. Whoever prepared this was under some misapprehension about this, were they? A. It may have been just at the time, and dependent on ECU's marketing endeavours, that would sometimes generate waves of new business. So it is possible that at that point in time the flow of business was much larger the other way. ”

“…dismay when one feels that somebody has not behaved perhaps in accordance with the way things should be done… The important thing for us on this issue is for our relationship with you as a private bank. We know and have always known and have never had any doubt on the subject that any misdemeanour or lack of any duty of care or any -- whichever way you might not look at it or any questionable issue that needed investigating was not on your watch… And as such we are not, if you like, prepared on, you know, on this instance to go and hurt, you know, a very formidable ally and friend in order to bring certain people to account.”

“Q… When you referred to dismay where you felt that somebody had not been behaving properly, that reflected your continuing belief that the bank in Canary Wharf or New York had behaved improperly, didn't it? A. It was my -- yes, my consideration that if they hadn't behaved properly, that, you know, that I was accepting if that was the case, that it certainly had nothing to do with the private bank . It wasn't on their watch. Q. Whether you are accepting it had nothing to do with the private bank or not, this, what you said on 2 May, reflected your continuing view that the bank in Canary Wharf or in New York had been front running the stop loss orders , didn't it? A. Well , I had personal reservations about what had happened and I still hadn't any definitive answers one way or the other. Q. So you still adhere to the view that the bank in Canary Wharf or in New York had been front running the orders, didn't you? A. A personal view and concern that that was a possibility, yes. ”

“I believe that maybe both Mr MacKinnon and Mrs Chapman found it, along with, from my recollection, Cormac Naughten, Alexander Jones and Stephen Cooper, our compliance director, and if I recall correctly even one of our non-executive directors, took the view that it was fanciful and unrealistic for me to believe that the independent checking and verification that was put in black and white that had been conducted by legal and compliance would have -- would have knowingly lied .”

“MC: There’s a dispute on - going on about the - they’ve actually proved that they’re - they’re sort of - that - front-running, if you like, the stop orders and stuff so that, basically, whenever we seem to put a stop order in, miraculously, it hits that level and then bounces bloody back again. The thing is: Mark said that about a year and a half ago. Patricia Negre: Yeah. Maria Chapman: And he said, ‘Yes but it’s difficult. We need proof and we’ve got proof now .’ And of course, HSBC at first were sort of - apparently - I haven’t really been involved, I don’t even read the emails, but I – they admitted liability and now they’ve completely done a backtrack. Patricia Negre: Ah, okay. So I don’t know about that one, anyway. Maria Chapman: No, I wouldn’t worry about it. I think – Patricia Negre: Yeah. Maria Chapman: - we’re agreeing because of the amount of business that we do but Mickey has this sort of one-man-band crusades on, you know, what’s right and wrong, basically…”

“Q. What it seems to be in the course of this conversation is that it was recognised within ECU that pursuing a complaint was likely to be damaging to business, wasn't it? A. … I would say that there are two different points of view here. Obviously myself and Cormac were more on generating the business, looking at the business, growing it, getting new mortgages in, that was our focus. Mr Petley's focus was different, it was on the trading side. So I think you can't sort of say when it is two different viewpoints because of the work that we did was different fundamentally.”

“ Of course the performance was important but ultimately you and Mr Naughten here are expressing the view, you would agree, that it would be commercially very damaging to pursue this, isn't that right?”

“ From our perspective .”

“…Apart from front running, which was my personal view, there were other views that say perhaps our market information was leaked or shared, in which case some other party than HSBC, some other market participant could have used that information. So we had a wide array of beliefs and suspicions that we were discussing and debating amongst each other . I personally didn't really work at a trading desk from a bank so I might have had different views than say someone like Mike Hughes, who had a different expertise and experience level… …We certainly -- or I certainly considered quite a few things. I considered whether the bank were viewing our orders as so large they are starting to buy as soon as we gave the order, but then I would have expected them to give that benefit to the clients maybe. I thought maybe it is possible that someone like a bank or perhaps even in our office could have leaked some information. I thought it could be entirely possible that we need to consider all these things and that is probably -- well, that is definitely why we at ECU, and specifically Mr Michael Petley, requested the banks to enable us to verify not just the price action but what was underneath the price action, who traded with whom and in which sizes. That would have probably helped us in quashing some of these hypotheses and actually coming to a more believable answer.”

“Q. But you didn't see, as far as you are aware, any agreement between ECU and HBPB, is that correct? A. In my role as switching the client from one currency to another, I would not do so unless I were informed by our back office and compliance people, Sharon Onciu and Patricia, that I had the right to go ahead with this, and I know for a fact that those departments would have looked at the client documentation and they would have had some sort of agreement from HSBC that gives us the authority and the power of attorney to switch that currency, that client's debt from one currency to another. So I did not go and inspect each and every one because we had a back office and a compliance function who did that. They would not have given me the right to include or exclude that particular client from the programme, and in doing so trade and switch his debt from one currency to another, unless they were not satisfied. Q. Right – A. So, yes, there would have been some authorisation or signed piece of paper from HSBC saying that they have received the client's power of attorney and accepted that, and therefore now I am free to switch.”

“ Q. When you say "I believe the term 'front running' was also used more loosely or to simply describe trading ahead", is it your evidence that that is something you thought, you actually thought at the time, that is a belief you had back in 2006? A. Yes. Back in 2006 we discussed this in the office and we discussed various hypotheses and what could potentially happen and there were -- I was one of the ones that believed that perhaps the bank is using our information and then trading upon that. There were also other hypotheses thrown around, but that was one of them. Q. Yes. It is your evidence, is it, that in 2006 the question as to whether front running meant something other than market manipulation was present to your mind, is that right? A. Yes. Erm, it could have been -- it could have been the case. Yes. Q. But as far as we can tell, there is no written material which would guide us to believe that that is a view you held at the time? As far as you are aware there isn’t, is there? A. No.”

“Q. So you would have taken the issues raised sufficiently seriously to hope that colleagues better informed than you in say treasury or some other department would investigate it and then discuss it with you presumably? A. Yes, but I can't remember any discussions. Q. No, no, I am just talking generally. Of course you can't remember from what you say about all this and, as my Lady pointed out, you mustn't speculate and I am not asking you to, I stress that. As a matter of generality, if you received an email from one of your customers making a complaint, with a capital C or small C, it doesn't matter. A. Very much a small C. Q. Yes, I would agree with you on that. Small C. You would read it, you would note it, you would expect your colleagues in treasury, for example in this instance Mr Rumsey, to investigate it, and you would then keep an eye on it. Correct? A. Correct.”

“ whilst Mr Petley and his team had not been satisfied by my response to ECU’s complaint, they had decided that the value of ECU’s relationship with HBPB was commercially more important than pursuing a claim. The relationship was important to ECU not least because of all the relationships ECU had, HBPB was by far the largest introducer of business to ECU .”

“A. … whilst I agree with most of it, it is not factually correct throughout, as I have detailed in my witness statement. Q. Yes. If I was to put it this way, it is very largely correct but you take issue with a couple of phrases as you set out in your witness statement? A. I think in fairness there is more than one phrase, or two phrases. Well, I am sure we will come on to that. Q. I am not sure that we will, not for my part in any event because we have seen what you say in your witness statement. But the position is that I suggest to you that the record, this document, is entirely accurate of how the conversation went. A. Well, I would have to disagree. Because it is not --you only need to refer to my witness statement. Q. Yes, I have. A. With all due respect, it is not okay to gloss over this and say it is factually correct, we need to go through my witness statement because it clearly states that it is not correct. Q. We have your evidence on the point. We know that you say it is not correct. We know exactly paragraph by paragraph – A. Okay, so the note then -- the note sitting alongside my own views is factually correct, my own statement. Q. I suggest to you that the record is accurate. It is one or the other. A. My comments are accurate.”

“[Mr Petley] had two incompatible objectives. He didn't want any dollars bought before his stop loss level but he wanted them all at where only $3 million were offered. So he couldn't have, dare I say it, his cake and eat it.”

“ While I am familiar with foreign exchange (“FX”) trading and stop loss orders, I am not, and was not at the time, a specialist in such products. Similarly, I was aware of matters such as front running but I was not an expert in such matters and so I would have relied on the compliance team at HBEU for their specialised knowledge .”

“ It's one possible thing that he could have been doing .”

“ I have no personal experience not having worked in an organisation that would tolerate that kind of behaviour . ”

" In my opinion and experience, expressing an interest to purchase a currency pair could not form part of a strategy to trigger a stop loss sell order for a currency pair ."

"It should be noted that Robert Barnet again buys before the likely ECU order execution begins and sells at the end of the likely execution... I am of the opinion that he is taking proprietary positions using the confidential information of ECU order-buying at the start of the execution of their order and selling after the execution has moved the price higher ."

" 3.1 No trading deal records have been disclosed which show any trading by the defendants so we cannot know by how much, if at all, they may have influenced the currency pair . However the contemporaneous price data is consistent with someone trading ahead of the order, with an intention to influence the EUR/GBP price so as to trigger that order. As stated above, I consider that this order was executed by the FX desk of HBHK. 3.2 At this time of day it would have been very easy to influence the currency pair given the prevailing liquidity and the size of ECU’s order ."

“ Why can't you simply say in answer to the question, "did the trading ahead materially influence the currency pair?" that "I do not have sufficient information to answer that question"? Mr Gladwin’s response was: “ I've simply added some more colour about the market trading at that time .”

"Mr Davies makes his first purchase in the period prior to the trigger of 14.44.57. This is exactly the same time when James Courtney begins buying. Mr Davies switches from buying to selling at 15.46.21, 11 seconds after the trigger of the order and 38 seconds after his last purchase. During the whole day the average time between switching the direction of his trading by Mr Davies is 4.48 and the median time is 3 . It therefore seems unusual to me that he would have switched from buying to selling so quickly, especially at the time frame straddles the trigger time quite tightly. After Mr Davies sale of 1 million at 15.46.45, he does not trade again until 15.53.29, 6 minutes and 44 seconds later."

“It suggests that he switches here far more quickly than he usually does during the day.”

“ The analysis of each individual Trade is set out in detail in the individual reports at Section C of this Report. As summarised below, I identify repeated systematic misconduct by a range of foreign exchange traders and other FX personnel at HBEU and HBUS …”

“ My analysis [of the individual trades] at Section C demonstrates widespread misconduct by HSBC’s FX traders. The picture that emerges from the trading data is of the routine and systematic abuse of ECU's stop loss orders . This includes a significant number of traders albeit with certain individuals particularly prominent and points to a wider cultural problem at the trading desks.”

“ A pattern of consistent front running emerges from HSBC's trading activity. Across ECU's 32 trades, 16 were front run and three more bear the hallmarks of front running although the data is too incomplete to reach a firm conclusion (at least on the basis of the data alone)...”

“ That front run really should have said traded ahead .”

“ Across the 32 stop-loss orders placed with HSBC, I have concluded that the bank’s traders traded ahead of 27 trades, and that in respect of 15 trades this was done in a manner deliberately intended to trigger the order . The distinction is a significant one in the context of this Report. In my analysis of Issue 2 for each Trade I analyse whether HSBC’s traders traded ahead of the stop-loss order, and in my analysis of Issue 3 I assess whether this was deliberate.”

“In 12 cases, from the data made available (which in many cases I accept does not represent the full picture), I consider that HSBC’s traders did not seek to move the market despite trading ahead of the stop-loss order. Subject to my comments above, I do not comment further as to whether such trading ahead was permissible under the terms of the orders placed by ECU with the bank. However, in 15 cases I have determined that HSBC’s traders traded ahead with the intention of targeting ECU’s stop-loss orders , and there is also circumstantial evidence pointing to similar activity in respect of two further orders. Trading ahead of this type means that the bank’s traders deliberately set out to manipulate the prevailing spot FX rate to trigger the relevant stop-loss orders. In this Report, I use the term ‘front-running’ to describe trading ahead of this sort, which requires deliberate, intentional conduct…”

“In short, apart from the period up to 26 October 2004 (prior to which ECU’s stop-loss orders were generally somewhat smaller in size) and the period after ECU’s complaint in February 2006, I have identified a consistent pattern of front-running of ECU’s stop-loss orders. This amounted to the systematic exploitation of ECU and its clients for HSBC’s benefit.”

“ Q. …when we look at the trading data which we have, if there was trading ahead for a "nefarious purpose", if there was trading ahead for a benign purpose, if there was trading ahead to fill a customer order, and if there was trading for the purposes of altering the position, these are likely to look identical in terms of the raw data which is available to you? A. That's correct. Other than, of course, we have some extra data, which is we know that they executed ECU's order and we know the size of that, and we can therefore fairly match that part of their activity, probably, against ECU… “Q. … when you look at the data itself that you have been presented with, the actual cause or reason for the trading is not apparent on the face of the data, is it? A. That's correct. Q. You simply see a stream of figures which is uninformative as to precisely why the trader was doing what he was doing – A. Yes. Q. -- from the figures itself, correct? A. No, it is clearly not uninformative, because it is what he was actually doing. So it tells you what he was doing, it is very informative from that perspective. Q. Okay, fair enough. But not why he was doing it ? A. No .”

“As Mr Moore refers to in his own report, a trader needs to be extremely careful, when adjusting his own position, not to interfere with the client order. It is almost impossible to determine from the data that we have whether it is carried out for legitimate purposes or a nefarious one, "nefarious" being his choice of words. But it is entirely permissible, of course, for them to carry out other client business, according to strict rules which should have been communicated to all people who left order with them…”

“…[Mr Gladwin’s approach] presupposes there is one prevailing market rate on which people can make a determination on an order trigger. …, we see in Trade 18, in a one second time slice we see the market trade at 1.1987 and 1.2005 in EBS. Now in that trade, Mr Gladwin takes the earlier time but my judgment in that trade is that the dealers in HBEU had not mentally decided to trigger the order and as a trader it would be routine to see things trade on an EBS screen or a Reuters screen and not mentally trigger the order because you would be trying to keep the customer in.”

“…I think Mr Gladwin uses in his methodology EBS trading at a rate at or above the stop loss order level and my evidence is that the decision to exercise a stop loss is a judgment that would certainly include that but isn't confined to that…”

“…I think this illustrates the methodology difference quite nicely because in the same -- in Mr Gladwin's trigger time selected, the market trades at 1.19.87 and 1.20.05, 1.20.05 being above the stop loss order level. That Mr Gladwin's methodology is the trigger time. I think that HBEU traders didn't select - believe that they were executing the order until my trigger time, partly because that is when we see activity in the market but also in the intervening 20 seconds you see some sales in the opposite direction to the order at a time when if they were executing the order I wouldn't expect to see those sales .”

“The evidence …betrayed Mr Moore’s inclination to treat traders with the greatest possible indulgence ”

“ A… We are attributing, in less time than it took you to ask me the question, we are attributing these motives to traders who aren't here to defend themselves and I think it is unreasonable and unfair. I mean, in that environment the market would have been moving up incredibly sharply. He would have had a stop loss, he would have been somewhat panicked by that, and if that line continued up another 50 points instead of stopping, which we know it did, he would have been looking at a very bad fill for the client. So those are -- the facts you present to me, Mr Lissack, are accurate. The negative connotation on the trader might be unfair. ”

“A. And I tended to manage spot dealers and defended them in my career because it is easy to condemn a dealer. I think the other factors that I refer to at the time, the Canada was strengthening, the impact was in dollar/Canada rather than dollar/yen, the size of dollar/yen movement at the time was -- the volume of dollar/yen was significant around that time, so it wasn't just the ECU order. So I can't rule out what Mr Gladwin says but I think it is not certain. Q. No, it may not be certain. All I am asking you is he is probably correct, isn't he? A. He is correct that that trading moved the market in the direction of the order and contributed to the order being triggered. In that he is correct. It could be that the motivation he ascribes to that trading is also correct. I would accept that .”

“…he is not a friend of mine. I didn't particularly get on with him when we worked together…”

“ (1) … where in the case of any action for which a period of limitation is prescribed by this Act, either – (a) the action is based upon the fraud of the defendant; or (b) any fact relevant to the plaintiff's right of action has been deliberately concealed from him by the defendant; (c) the action is for relief from the consequences of a mistake; the period of limitation shall not begin to run until the plaintiff has discovered the fraud, concealment or mistake (as the case may be) or could with reasonable diligence have discovered it. References in this subsection to the defendant include references to the defendant's agent and to any person through whom the defendant claims and his agent. (2) For the purposes of subsection (1) above, deliberate commission of a breach of duty in circumstances in which it is unlikely to be discovered for some time amounts to deliberate concealment of the facts involved in that breach of duty.”

‘228. ... First, section 32(1)(c), like the equitable rule which preceded it, necessarily qualifies the certainty otherwise provided by limitation periods. It means that the 1980 Act does not pursue an unqualified goal of barring stale claims: its pursuit of that objective is tempered by an acceptance that it would be unfair for time to run against a claimant before he could reasonably be aware of the circumstances giving rise to his right of action .’

“…Counsel is bound to exercise an objective professional judgment whether it is in all the circumstances proper to lend his name to the allegation. As the rule recognises, counsel could not properly judge it proper to make such an allegation unless he had material before him which he judged to be reasonably credible and which appeared to justify the allegation .... at the preparatory stage the requirement is not that counsel should necessarily have before him evidence in admissible form but that he should have material of such a character as to lead responsible counsel to conclude that serious allegations could properly be based upon it .”

“28. Reflecting the generally pragmatic and purposive approach to the interpretation of s.32(1)(b), therefore, the authorities establish that a claimant can be said to have discovered a fact when the claimant is aware of sufficient material to be able properly to plead that fact. This conclusion avoids the improbable interpretation of s.32(1)(b) by which a claimant who has in fact pleaded a particular fact might be said not yet to have discovered that fact for s.32(1)(b) purposes. 29. In order to be able to properly plead a claim: i) any professional obligations which attach to making allegations of a particular kind must be satisfied; ii) the pleaded case must be one which would not be struck out on the basis that it has no sufficient evidential basis or was not sufficiently arguable; and iii) the pleading must be one capable of being supported by a Statement of Truth…”

“…the availability of such procedural protections [including the professional obligations on counsel that a claim in fraud can only be pleaded where there is sufficient material available to the pleader to justify the plea] for a defendant to ensure that a claim is fully and properly explained in good time before trial (as against the possible loss to a claimant of an entire, potentially meritorious claim), indicates that in resolving the tension referred to above and determining whether a cause of action has been sufficiently pleaded in a statement of case (particularly in the claim form and/or the particulars of claim when an action is commenced), the balance is to be struck by allowing a measure of generosity in favour of a claimant . Such an approach is appropriate and in the overall interests of justice and the overriding objective set out in CPR Part 1.1…”

“Johnson, the Mirror Group Newspaper case and The Kriti Palm are clear authority, binding on this court, for the following principles applicable to section 32(1)(b)of the 1980 Act: (1) a “fact relevant to the plaintiff's right of action” within section 32(1)(b)is a fact without which the cause of action is incomplete ; (2) facts which merely improve prospects of success are not facts relevant to the claimant's right of action ; (3) facts bearing on a matter which is not a necessary ingredient of the cause of action but which may provide a defence are not facts relevant to the claimant's right of action.” [46] … The law, as set out above, requires that for the purposes of limitation the claimant should not wait to have discovered each and every fact which it wishes to rely .”

“Therefore, the court must “look for the gist of the cause of action that is asserted, to see if that was available to the claimant without knowledge of the concealed material” (AIC Ltd v ITS Testing Services (UK) Ltd (The Kriti Palm)[2007] 1 All ER (Comm) 667 per Buxton LJ at [453], quoted in Arcadia at [48]). At the point at which the claimant can plead the complete cause of action, however weak or strong, time starts to run. Not every detail needs to be known and a realistic view must be taken by the court.”

“ As regards the front running of the January 2006 Orders, there are a number of documents that HSBC may allege show that persons within ECU suspected or even believed that HSBC had engaged in such conduct. However, the relevant question is not whether ECU suspected or believed that such misconduct had occurred, but rather is whether ECU could have properly pleaded the fraud in 2006. ”

“ that the belief has to be reasonable, so it has to be underpinned by some facts. But the fact that they lack evidence in order to substantiate their belief and the fact that they lack evidence to substantiate the case at trial doesn't stop the limitation period from running .”

“…in this case we are miles away from this because we have the admission that they had sufficient evidence. Substantial evidence as they put it.”

“186. What is more important for present purposes, however, is that the approach adopted in these cases of fraud, like that proposed by Lord Brown for cases of mistake , treats the relevant date, for the purposes of the commencement of the limitation period , not as the date when the claimant knows or can establish the truth, but as the date when he can recognise that a worthwhile claim arises, in Lord Brown’s formulation, or can plead a statement of claim , in the formulation preferred in the fraud cases.”

“It is to be inferred from the intense trading activity in which HBUS’ FX traders engaged before the price of ECU’s stipulated ‘stop-loss’ level in EUR/CAD was reached in the inter-bank market that: (i) such trading was intended to manipulate the EUR/CAD inter-bank spot FX rate, by moving that rate closer to (and eventually through) ECU’s order’s trigger-level, and (ii) the trading did in fact manipulate the EUR/CAD inter-bank spot FX rate, moving it closer to and through the order’s trigger-level .”

“ I think there is so much frigging about on stops at the moment that I would sooner just have a feel for it and see, you know, see it there and... It doesn’t matter where I put a stop or whenever, I think, the market likes to have a crack at these, these levels and we’re getting, really quite a lot of slippage on them as well.”

“ MP:..I can’t understand what’s going wrong with these things at all... I was wondering whether we’re actually going to have to stop placing orders full stop. It’s just, somebody is fucking about with these things . Ok, half a billion might not be very much but I can’t believe you can trade even half a billion at 54, which was the trigger... NM: Yep. MP: And to see only a two tick move. NM: Yep, no, absolutely. MP: That, I don’t believe is possible. Which means either somebody’s. ... HSBC or somebody is thinking you know, we’ll trade it earlier... …It wasn’t a fast moving market it peeped it’s head over the entry level and that was it, if it had been off to the races fair enough but there’s just no excuse really…. It just doesn’t seem to matter, so I’m saying, I can’t be. . .and it’s almost, it, it just doesn’t make any sense really I mean we could, wherever we put anything . I understand, yeah. You know, it’s not just unlucky, it just seems slightly more, I mean ‘you win some you lose some’... But this, I don’t know, I’ve got a bad feel... It just makes me think you know someone... And if big banks are sharing information, just saying if...”

“ TS: You have a problem? MP: I'll tell you what it is, then - don't take this the wrong way in any respect. But it's something that we've monitored and been a little fussed about it. It's one of those little grey areas that I've wanted to leave until Thursday but without embarrassing David or Ian, just want to sort of talk around. We had the same situation in the early 90s with one of the banking groups as well . And what it is, is slight indiscretion, if I can put it that way, when it comes to letting other institutions or traders stroke hedge funds be aware of where they are working stops on behalf of their clients. TS: Confidentiality you are referring to, by the sound of it'? MP: Yeah. TS: Go on. MP: Well, to my way of thinking, standards have, you know, it's not something against HSBC in Canary Wharf, it's certainly not in your domain, but it is something that it seems that standards for quite the number are slightly [s]lipping, if you like… … MP: Because, we find that maybe the size or something is acting as a bit of a lure or magnet. I mean, David will be aware of this because it has seemed uncanny, you know. In the last few times we have placed this stop there's been bugger all going on in the market ... TS: And all of a sudden... MP: We work a stop and give it 10 minutes after David's done it or Ian's done it through Canary Wharf, all hell is breaking loose …”

“ MP: …I think, for everybody here, they’re just - they just don’t understand what is going wrong with our execution process. And, I mean, you get the - a pattern in something which just seems to happen. And it may have - like, you know, one loves to feel that it had nothing to do with anybody, it was all coincidence elements. But there’s something that doesn’t smell quite right on this – … – and it does sort of rather imply that someone is dealing in size in the run-up to these stops and front-running. …. Well, I know you’ve been worried in the past that - you’ve felt that there’s been front-running on our positions. I remember you telling me. And of course it may have nothing to do - I mean, you may have satisfied yourself that it’s not within, obviously, HSBC, but that doesn’t mean to say that it’s not happening, so we need to work together to find out, you know, what is happening , because some - some sizeable activity happened prior to those stops being hit, and then virtually no activity afterwards . That’s - that’s the - so we need - you know, we’ll obviously need to have your help and assistance in trying to find out what is going on, because – I don’t believe any of us, with our collective experience in foreign exchange, could find it odd that these things are happening with such pinpoint sort of accuracy or coincidence .”

“It appeared as though other banks were operating on a different basis to us, in order to achieve a close fill, rather than protecting the price level, although there was no way that we could evidence this. MP was not prepared to accept this premise and would repeatedly ask for disclosure of HSBC fx contracts to justify the price given. Needless to say, we were unable to oblige. Given these concerns, orders were subsequently managed to produce a 'tight' fill for the client. Because of the large bid/offer spread on a sizeable trade, this would have required some dealing ahead of the price trigger to protect HSBC from significant loss. ”

“… what I took from the meeting was that they seemed to consider, or Mr Brown seemed to consider that it was fair game or legitimate to, at his discretion to engage in order book management . He didn't use the words "pre-hedging" but he did say "order book management", was what I recollect. I think they are all interchangeable. It is trading ahead in any event .”

“ On being advised of the fill on Tuesday MP expressed concern that HSBC had been active in Cad/Jpy in the lead up to 19.45 and had thereby triggered the price by 'front-running'. This, he felt, amounted to market abuse and improper action. The fact that the price had subsequently retreated to lower levels, reinforced this view. MP said that he was able to show documentary evidence of HSBC NY trading activity through Bloomberg 'Market depth 'analysis or Reuters' data integrity'. After offering to show us this proof he later withdrew the offer on advice from ECU compliance/legal dept. Our enquiries to Reuters and Bloomberg were unable to discover a service that provided volume or trade details on forex deals by banks . MP expressed a mistrust and suspicion of HSBC motives in executing the order, and again a request for sight of the HSBC deal blotter was made. He added that the suspicion also applied to the previous two stop-loss orders . The strength of the dissatisfaction required referral to compliance at PB and Group, although at this stage fell short of a written formal complaint .”

“ AB refuted any charges of malpractice or front running .”

“… therefore there was just the element on the last three, the last three, I've not really been satisfied that… there's any follow through from the stop level, … and therefore… it seemed to me fairly clear that…there was advanced trading into that and it, it makes me think that could therefore at that time that action have, have caused the price action itself to, to fulfil the… prophecy .”

“… So you considered at that time that they were pushing up the price deliberately in order to profit, as you saw it, at the expense of ECU, is that correct? A. Whether deliberately or not, if the effect was to push it up and they were disposing of their positions at a higher level, then yes, mathematically they would have to have benefited. Q. Yes. At the time, back in 2006, you thought they were doing this deliberately in order to profit deliberately from your stops, didn't you? A. It is certainly a consideration that I was most concerned about , yes .”

“…In managing your order book - by buying ahead of the above given stop orders-it seems clear to us that the practice of us placing a stop-loss order with you has, in reality, only served as to create a magnet effect to and through our specified stop-loss level… The rather galling conclusion drawn from all this is that by seeking to protect our clients' position by placing stop-loss orders behind strategic levels of overhead resistance, your subsequent actions have achieved the opposite… With respect to these last three stop-loss orders (above), my colleagues and I are keen to establish the extent to which HSBC benefitted financially from buying ahead of the above stop-loss orders which we believe was in clear contravention (albeit unintentionally) of our stated policy regarding the execution of such orders . We accept your position that HSBC did not engage in this front running / order book management in any underhand or improper way so as to act intentionally against our best interests and those of our mutual clients. None-the-less, upon close analysis of the price action surrounding these three orders, it would appear that in doing what you did, HSBC would have benefited financially. …”

“Q. ECU's position at the time, wasn't it, was that HSBC had front run the stops, causing them to be triggered when they would otherwise not have been triggered. That is what the position was, wasn't it? A. I think the position was very much that somebody had front run these and all fingers were pointing at HSBC. Q. Well, who else was in your mind at the time if not HSBC? A. Well, it is possible that there are any number of theories as to who could have been directly responsible for it, but my position at the time was to establish definitively whether or not that was HSBC. Q. We are not able to discern in the papers, as far as I can see, from disclosure that you were thinking of anyone else other than HSBC? A. No, I was very much thinking of HSBC at that time . Q. Yes, and not somebody else? A. This -- as at 7 February all my focus was on HSBC, correct .”

“ In the end, despite all, we had a good year last year (performance up 8.30%...) but the markets seem all over the place this month — due, in part no doubt, to some shocking behaviour by some of the banks who have been caught front running our stops big time !”

“ Banks in managing their order books are front running client stop loss orders. Which again is meaning that the stops are getting hit more regularly and they’re not having any material follow through so it’s seriously irritating…as soon as we seem to put a stop in the market, the market price action just vacuums straight up to the stop. Thank you very much. It's happened three times in a row… what’s been happening is that somebody with deep pockets, which we have identified but that's another story 'cause it's being dealt with at the moment, but what has been happening is that the most ... the position is being bought prior to the stop .”

“…what matters is that at the time the stop is hit, it was clear to us that there's no way that I mean, the other day at 8:00pm or 10 to 8, you know, CAD/Yen, you know, that got hit for over half a billion Dollars. Now, I’m telling you, there's no way that where we had our stop the market then went another 2, 2 or 3 ticks higher and that was it. Now, I just know that you can't hit the market with half a billion Dollars in CAD/ Yen and only see that, you should have seen a 30, 50, 60 pip move . And the reason why it hadn’t happened was that when we gave the order, 70 pips lower than the stop level …you know, the buying of our stop order up to the stop level was what it was all about and, I suppose, running around telling everybody, oh, we know that there’s a big order up at that level, several eggs on and follows one another and then on these sort of squawk boxes and chat rooms and you can easily get traded to sort of all follow through so there's no point getting completely bent out of shape on it.”

“ I apologise for the delay in responding to your original enquiry, but I am sure that you will appreciate that the issues raised in your e-mail dated 8 February 2006 have required a full and thorough investigation, both in London and New York. I am now in a position to respond fully to the issues raised in your communication. To summarise, your e-mail asked me to address the following areas: 1. You asked me to fully investigate the circumstances leading up to the execution of three stop-loss orders placed with HSBC 2. You have alleged that the FX Execution Desk of the Bank may have been responsible for the price movements observed in the market prior to ECU's stop-loss orders being triggered, by engaging in some form of order book management. In particular you state that you observed a 'swift and violent move towards the stop-loss levels soon after the orders were placed' and that the FX Desk was directly responsible for this market movement 3. You are keen to establish the extent to which the Bank benefited financially in the event that it carried out any actions under point two above. One of the reasons for the delay in responding to you is that the findings of the two Foreign Exchange Desks have been independently checked and verified by the Compliance Departments of both the London and New York offices. Our detailed enquiries have revealed no evidence of inappropriate execution of the orders in question. We are fully satisfied that the FX Desks were not responsible for price manipulation or front-running of the company's orders. We are also satisfied that there was no evidence that the FX Desk failed to comply with any aspect of the specific client instructions…”

“ Having completed our extensive enquiries, we can find no reason to support any of your claims and therefore refute the allegations you have made. This concludes our internal complaints process and our investigation into this matter …”

“ Well, here's the official response I will send a short "holding" response whilst we decide what we want to do. In essence, I believe Andrew Brown (who had already openly admitted front running our orders) has been silenced and now prevented from dealing with us direct in this matter. Someone, somewhere, has decided that bringing down the shutters and denying any wrongdoing (and lying if necessary) on the basis that we would not have the balls to take it further is preferable to doing what is right, fair and appropriate. It's bullshit, we know it & they know it. What we do now, however, should be considered very carefully. I'll arrange with Lizzie to get us all together by phone as soon as possible.”

“MP: …my reading of it is, officially – officially, they cannot possibly have come out saying anything different than that which they’ve done, because the - the implications of them admitting …that they’ve knowingly done something. So, the - basically, we have to acknowledge that official position and we let them sit and stew in their own juice for a while. I’ll get Manduca involved; he’s the best litigation lawyer there is in banking , I reckon. And he has had - I mean we couldn’t afford anybody else on that basis. It’s part of the - part and parcel, with the relationship that he and I have, that he - he does the opening salvo on this sort of thing. And we’ll probably end up, like we did with Singer & Friedlander, like we did with Kleinwort Benson, you know, without having to go formally and spend any money on it to get the - that which we - we want… They made money on those trades, there is no doubt. And in fact, if you really read carefully what they’re saying, they’re not denying that. They haven’t said anything that - they’ve tried to sort of, in wishy-washy, subtle terms, say that they don’t think that they’ve done anything wrong or improper, or don’t consider what they’ve done - but they have not denied front running, explicitly. … And they have not denied making money out of those transactions, so they have … avoided the question .”

“Now I know more about this situation I have changed my opinion and would like to make the following points although they may be unpopular. Whilst it is clear to me that the bank was driving/front running the price towards our stop orders and it is clear that a stop order only becomes a market order when the stop is touched, when dealing with illiquid FOREX pairs is it realistic to use stops at all and is it good practice to complain about slippage i.e. the distance that market executions take place away from the stop? If we attack the bank, will part of their defence be that ECU knows its onions and should know the dangers of stops in illiquid markets? And in the same way cast aspersions about our duties to our customers. This is an unregulated market and they can do as they please unless they are filling our stop orders before the stop has been hit, if they are only positioning themselves it’s difficult to see where that have done wrong (sic) even if they are also making a great deal of money in the knowledge that the stop is in place. In equity markets Lazards were fined £200,000 for conducting this type of exercise ahead of a program trade which they guessed correctly was about to take place. But this is not the equity market and attacking their systems and controls as I suggested earlier seems much more like a longshot. I think the fact that their compliance has got involved and no doubt considered the positioning/front running/driving the price issues and come up with its verdict means we should consider our actions carefully. I do not believe that a compliance department of a bank this size could take the risk of unfair "home win" verdict. I also believe that they were not more gracious in their letter because they may have felt that any gesture might be interpreted as an admission of guilt and given them a liability.”

“ Whilst it is clear to me that the bank were driving/front running the price towards our stop orders…”

" In the days and weeks that followed, the sentiment expressed by Mr Cooper, that ECU should not pursue anything further, came to be shared by the rest of ECU's board. I see that this issue does not appear to have been discussed at the board meetings that took place on 8 February, 21 March and 27 April 2006. However, some internal discussions did take place and I remember people inside and outside ECU telling me that the idea that HSBC would perform an investigation and conceal the truth was far-fetched. For example, I seem to recall conversations I had with each of Alexander Jones and Albemarle Cator (directors of ECU) telling me that there was no point in pursuing the matter. This was all at a time before the financial crisis when international investment banks were held in particularly high regard, and when the idea that a bank would engage in certain conduct and then lie about it was unthinkable to many people. I also believe that I was told by Mr Whiting in this period (although I am not sure whether this was by telephone or in person) that the bank had investigated the matter, had found no wrongdoing at all, would not re-open the issue or investigate any further, and if ECU continued to pursue the matter then this could lead to serious consequences for our relationship. In that context, the board was conscious that challenging the bank further would destroy a valuable long-term commercial relationship with what was (at that time) the largest bank in the world, all in circumstances where the bank had already performed a full internal investigation and confirmed that everything was in order ."

“CR:…Well basically what Mickey has done is he’s printed out charts and he’s pointed out … GZ: Yeah I saw all of that. CR: And it’s an absolute disgrace …I think it’s going to look very very bad indeed because front running is kind of a hot potato at the moment . … CR: It’s all over the MIFID stuff, Antony’s just going to say you need to revisit this because you know they’re good guys, they’re not asking for any money, it’s their clients who have been disadvantaged but you wouldn’t want these images being banded around because it doesn’t look you know. … CR: Yeah. It’s a guaranteed profit and the ridiculous thing is that that was a huge order, it was a billion dollar order late in the London day, in fact arguably after the London day was over and once the stop was hit it went one or two ticks higher and then came all the way back down again. In other words all you conferred is had they not been buying that stop loss order would never have been hit. So all they’ve done is take money off their clients. And the letter, did you see the letter, the letter doesn’t actually really deny anything and was quite carefully crafted and we said look the one thing we don’t want to do is beat up the guys at the private bank, you know, we don’t want them getting upset, we don’t want them put in the middle but we do want Alan Ramsey to come and look at the evidence and have a conversation you know, and the way we would like it presented back to the private bank is that they’ve further reviewed it and on reflection they do think that an ex gratia payment is due to the clients…”

“ MC: ...There’s a dispute on - going on about the - they’ve actually proved that they’re - they’re sort of - that - front-running, if you like, the stop orders and stuff so that, basically, whenever we seem to put a stop order in, miraculously, it hits that level and then bounces bloody back again … …HSBC at first were sort of - apparently - I haven’t really been involved, I don’t even read the emails, but I – they admitted liability and now they’ve completely done a backtrack. … MC:- we’re agreeing because of the amount of business that we do but Mickey has this sort of one-man-band crusades on, you know, what’s right and wrong, basically. And yes, the principle might be there but you know – PN: Okay. MC: - you just have to move on, occasionally .”

“On 31 January 2006, I was on a telephone call with Mr Petley discussing a CAD/JPY order that had just been placed, when he learned that almost immediately after the placing of the HBPB order it had been filled by HSBC New York's FX desk. From the information Mr Petley gave me on the phone, I commented that it sounded like a clear abuse of an order and HBPB needed to explain themselves. As the order was filled in the evening when the market was not particularly liquid, to me the most likely explanation seemed to be that HSBC had taken us out in full knowledge of where the stop-loss was, and had acted improperly and at our expense . ”

“ Michael Petley: …I jest you not, we have been taken out of CAD-yen. Neil MacKinnon: Oh you’re joking. Michael Petley: No. Now, you know, that’s bloody HSBC again because of the stop thing. I’m not joking you. This was – Neil MacKinnon: Where was the stop? 103.50? Michael Petley: 05. Neil MacKinnon: 05, yeah. Michael Petley: But - but - and there’s a big ‘but’ here, I - literally, as I was picking up the phone to you, we were at 102.70. I’ve got the time and sales here, because I’ve had it up on the screen, tick by tick, by tick and that is absolutely extraordinary. As soon as they’ve got that order, it has gone – Neil MacKinnon: [Inaudible]. Michael Petley: - from 72 – Neil MacKinnon: It’s outrageous. Michael Petley: And it’s gone straight and I can see it’s HSFX New York. Neil MacKinnon: That’s outrageous. It really is. I mean that’s - that’s - you know, given what - the conversation you had with them, they’ve just ignored you completely. … Michael Petley: …how annoying is that? MacKinnon: That is very annoying. I mean that’s - you know, they [inaudible] running this, completely run it. Michael Petley: It has gone - you’ll see it - from 1.0275 up straight through our level. Neil MacKinnon: Unbelievable ….”

“I was aware of ECU's subsequent discussions arising out of its concerns with HBPB following the end of January 2006, and I was copied into most emails on the issue by virtue of my senior position at ECU. Due to the passage of time I do not have a clear recollection of those discussions and communications. I was seriously suspicious about HBPB and HSBC's conduct , and about the potential impact on ECU's performance and reputation. However, HBPB had denied any wrongdoing after an internal investigation and I did not know what could be done without evidence in support of ECU's suspicions . These concerns were discussed by the executive management team and generally within ECU. However, I did not have any direct input into the decision as to how to respond to the events of January 2006 and given the scope of my position I do not consider that to be surprising. The decisions about how ECU should deal with HSBC's conduct was a matter for those more directly involved in the trading process and relationship with HBPB, and I would have deferred to their decision about how to proceed .”

“…HBPB had denied any wrongdoing after an internal investigation and I did not know what could be done without evidence in support of ECU's suspicions .”

“ For your assistance and in support of the above comments, I attach three 1-minute bar charts covering the time periods that encompass our giving HSBC of each of the above stop-loss orders through to (and beyond) their subsequent execution. The teal-coloured vertical lines represent when we gave you the above stop-loss orders, the light blue horizontal lines illustrate the level of each stop-loss order and the yellow coloured vertical lines show when the said stop-loss level was surpassed . I think the price action, as illustrated, is pretty conclusive of our position!”

“ MP: I was just going to say that I'm sending Andrew Brown at HSBC the evidence of the sort of price movement on these last 3 stops, what I've suggested is that we're making good progress for the future but I expect that he will agree — AJ: These they have been front run as he calls them . MP: That his or their actions, I think he will agree had they not, I've put front run or order book managed the stop position that in all probability those stops wouldn't have been triggered , and as such... AJ: May not have been. I don't think you can... MP: They wouldn't at that time, in each of them, I've gone back and looked and the first thing they did from the price action was to go straight down once we'd been filled, and in case of two of them for some time, before coming back eventually. It's not my point, my point is that in the knowledge that we would never have countenanced such sort of behaviour at all, it was actually expressly 100% diametrically opposed to where, how we wanted things done and our and that sort of philosophy has been embedded in our banking relationships since we started. The price action leads me to believe that HSBC must have profited out of that activity, because if they're buying something low and pushing the price up and then they've dumped the position on us and had an exit strategy they have benefitted by definition, they must have done . AJ Yes, I agree .”

“CN: So hopefully the sort of HSBC thing is kind of under control. MC: It’s not stopping them doing business at the moment , is it? CN: No, it’s not. I think it’s making sure that it sort of doesn’t ever get to that stage . MC: Yeah. CN: So I think it’s sort of been made – I think Steve was in to see Mickey today. I think it was made clear that kind of pushing it would just fracture everything . MC: I thought we’d decided not to push it. CN: Well, that’s exactly what I assumed was the state of play as well . MC: Well, that was certainly - I know Mickey wasn’t in that last banking review but certainly my notes from it, from Charles, were we weren’t and Alexander CN: Yeah, well I think it was kind of – it was a sort of – pretty much the consensus it was a no-brainer, really, in many ways because it’s - there is nothing that could be done. And they have too big a kind of hold over us to be ever kind of rock the boat now. The biggest introducer and we sort of mess with that at our peril . MC: I agree. CN: So I think that’s kind of - Mickey’s aware of that now. MC: Good. CN: I think he sort of discussed it with Steve but I think he’s clinging to the hopes that they’ll do something. MC: He’s just - it’s always the principle with Mickey, isn’t it? CN: Yeah. MC: He just can’t let go. CN: Yeah. I think – yeah, I think that – I think it’s just one of those ones where it’s a poker situation and – MC: Yeah. CN: - while initially you may have thought your two kings were going to be enough, it’s - when the other bloke’s turned over the two aces, you’ve just got to concede that, yeah, we’ve got a really good hand but it’s just not good enough in this particular case . MC: Well, particularly if we - you know, if we can get - I mean Charles is working through - has been doing a lot to get this new arrangement set up, so I mean, you know. CN: [Inaudible] – MC: Put it down to a bit of bad experience but – CN: Yeah, I think that’s the only thing we can do and to - sort of to say to ourselves, ‘Well, what we’ve had from them more than outweighs the fact we got clipped on a few trades,’ and just leave it at that …”

" In January 2006 I and my colleagues at ECU developed concerns regarding unusual price movements in the market in respect of three orders placed with HBPB on 5, 6 and 31 January 2006 ."

“Q…Now, what was the nature of the concerns that you recollect having yourself? A. …, so the concerns that I had were some of the market movements leading up to the order being executed. It seemed to me a coincidence at least that very soon after placing said orders, markets started to move quickly in that direction. We were subsequently taken out. That was my first concern. My concerns were raised even more when I saw confirmation of the levels at which they had filled us…. A., Which is probably what, was concerning me as much if not more than the market movement itself. Q. Yes. Did you personally suspect that the banks had been engaged in front running the orders which had been made ? Did you have that suspicion? A. Are you asking me to speculate or give you an opinion? Q. No, I am asking to you say what you recollect. If you don't recollect say "I don't recollect". A. I know exactly what I thought and I am afraid, my Lady, I did think the worst of the banks .”

“…I seem to recall conversations I had with each of Alexander Jones and Albemarle Cator (directors of ECU) telling me that there was no point in pursuing the matter. This was all at a time before the financial crisis when international investment banks were held in particularly high regard, and when the idea that a bank would engage in certain conduct and then lie about it was unthinkable to many people…”

“ MP: [Mr Brown] keeps saying he hasn't investigated, which means he has and he can see that there's big profit there 'cause otherwise he would say I've investigated it and there's nothing there, you know... AJ: No, they're not going to speak with unforked tongue .”

“…We have considered the matter carefully and have decided not to pursue the matter further. Please, therefore, take this letter as our confirmation that we now consider the matter closed”

“At the time when we wrote the letter, in May 2006, ECU's position was that we had accepted that explanation and I personally had come to the conclusion that there was no other formal basis or evidence to suggest that the explanation given by the private bank, whom I trusted immensely, was wrong. Q. Let me re-pose the question. Did you accept the explanation which was given? A. Not initially, in my own mind. But by May 2006 when I signed that letter, the answer is yes .”

“MP: The board’s view is that - or shall I just say we concluded that it’s time to draw a line under this. There are all sorts of pros and cons , and - SW: Well, look, I - yeah. I mean, I think, between you and I, the - the major reason for both of us drawing a line under this is that, you know, it is - it’s probably a very profitable business for both of us and is not something that either of us would - would probably benefit from in the short term if we couldn’t sort the problem out and – MP: No, I - I agree with that. But equally, sometimes there’s a dismay where one feels that somebody has not behaved, perhaps, in accordance with the way things should have been done . SW: Yeah, yeah. No, I - I - and as I said to you, we’ll all - MP: And we - we appreciated - SW: We’ll always have a - MP: Yeah. SW: - difference of opinion there. But I mean that’s something that we have to get on with, and - well, shall I - I tell you what, shall I - MP: But the - the important thing is - the important thing for us on this issue is our relationship with you - SW: Exactly. MP: - the private bank. SW: Yeah. MP: And we know and have always known and never had any doubt on the subject, that any misdemeanour or lack of duty of care or any - whichever way you might look at it, or any questionable issue that needed investigating - SW: Yeah. MP: - was - was not on your watch. SW: No, no. Sure, sure. MP: And as such, we are not, if you like, prepared on - you know, on this - in this instance to go and hurt, you know, a very formidable ally - SW: Yeah. MP: - and a friend - SW: Yeah. MP: - in order to bring certain people to account …”

“ the important thing for us on this issue is our relationship with you ”

“Yeah, well I think it was kind of – it was a sort of – pretty much the consensus it was a no-brainer , really, in many ways because it’s - there is nothing that could be done. And they have too big a kind of hold over us to be ever kind of rock the boat now. The biggest introducer and we sort of mess with that at our peril. ”

“we’re agreeing because of the amount of business that we do”

“ Mr Alexander Jones and a number of my other colleagues felt it completely implausible that a number of senior legal and compliance people on both sides of the Atlantic would somehow get involved in some conspiracy to, you know, perjure themselves, if that is the right word, but in any way lie to cover up … what may have been some either an innocent or negligent miscommunication between the private bank and the investment bank or some sort of chancy behaviour by some cocky traders, perhaps .”

“ By May [2006] I had reconciled in my own mind that I had nowhere to go. I had no evidence .”

“Anthony spoke to Alan Ramsay yesterday. AR said the bank was being "hard-nosed" about the matter and that he would revert to Anthony tomorrow. I re-impressed on Anthony the strength of our relationship with the Private Bank and the impossible position they had been put in by the Investment Bank and that given the value of our business relationship with the Private Bank and the weight of evidence against the Investment Bank , being "hard-nosed" wasn't going to achieve anything, but an ex-gratia goodwill price improvement would .”

“Q. We can see that at this time, from looking at that paragraph, that Mr Romilly considered that these charts were evidence of front running? A. Yes, that seems to be his opinion. Q. You shared that opinion at the time, did you not? A. I did. Q. Indeed as we have seen from the correspondence you had with the bank, thought they were pretty conclusive of front running, didn't you? A. I thought that somebody somewhere had front run those trades, yes Q. Somebody somewhere at HSBC Canary Wharf or somebody at HSBC New York. That is what you thought at the time, isn't it? A. I thought that was the greater likelihood but I didn't completely divorce perhaps the possibility of somebody else having done it either with or without a tip-off from the bank.”

“…as at 7 February all my focus was on HSBC, correct.”

“ Q . “ for example, if you want to examine the proprietary of a particular trade to see if had been front run or whether there had been margin added or something of that sort, you need to see the blotters and P&L, don't you ?” 1. Well, yes, I guess you would in those ... yes. Q. Without that information, which obviously is confidential or may be confidential, then an outside party can't know the circumstances of a particular given trade? A. Correct”

“ The only party that knew with any confidence as to how HSBC had executed the stop loss orders was HSBC itself ? Mr Brown responded: “Inasmuch as they had access to the information of the trade data, yes. Q. Yes. And without that, there was no way of knowing how the trades had been executed, correct? A. Erm, that is correct .”

“ Mr Gladwin and Mr Moore agree that there are limitations to the HSBC trading data (including the Dealhub (HBEU) and TREATS (HBUS) data), and it is likely the HSBC data is incomplete and excludes the trade record resulting from the ECU order and the trade records for other customer orders. This means that it is not possible to be certain on the conclusions related to this data .”

“ No Hong Kong and Shanghai Bank ("HBHK") trading data has been disclosed by the Defendants so I cannot use HBHK's recorded trades to estimate prevailing market prices. No Reuters trading or price data available .”

“… Whilst I do not have access to the trading data showing the specific activity of HBHK’s traders, I conclude that HBHK must have traded ahead of the trigger . This inference is based on (i) the confirmation in the contemporaneous audio recording that HBHK executed the order overnight, (ii) the EBS data showing that most trading activity in both USD/CHF and EUR/CHF happened ahead of the trigger, (iii) the substantial size of ECU’s order compared to the prevailing liquidity conditions, and (iv) the highly suspicious contemporaneous price action in the relevant currency pairs, resulting in the increase in GBP/CHF in the short period before the trigger followed by its fall swiftly after the trigger .”

“As explained in paragraph 6, there are limitations to the data disclosed by HSBC that prevent a full reconstruction of the trader position . It is also not possible to know with certainty , at this distance in time , precisely what other factors (such as economic releases, world events, etc.) were affecting the trajectory of the FX market at the time of every ECU order execution . In some instances, it is possible to identify economic releases or world events based on communications and other records .”

“ As I recall, it was because the HSBC order was for one single bank, pretty well half of the entirety of our book, and we wanted to ensure that a very large order at a thinner part in time, advancing perhaps our concern that large orders were becoming a magnet, that that would not be triggered until a good half an hour after a known event that was a news event was coming out at 7.15, I recall, pm . So sometimes volatility in the market in the immediate aftermath of any announcement, which I believe was regarding US interest rates, would not trigger prior to or be active until 7.45 pm, thus half an hour later ”

“ The claimant does not have to plead primary facts which are only consistent with dishonesty. The correct test is whether or not, on the basis of the primary facts pleaded, an inference of dishonesty is more likely than one of innocence or negligence. As Lord Millett put it, there must be some fact “which tilts the balance and justifies an inference of dishonesty”

“ Our detailed enquiries have revealed no evidence of inappropriate execution of the orders in question. We are fully satisfied that the FX Desks were not responsible for price manipulation or front-running of the company's orders. We are also satisfied that there was no evidence that the FX Desk failed to comply with any aspect of the specific client instructions …”

“Both the HSBC activity chart and the Market Activity chart show a significant leap in EUR/USD activity after 13:00 on the date in question. Further to this, external issues on the US non-farm payroll data had a direct impact on the market.”

“Significant price volatility was observed in the market as a whole on January 31st as a result of the FOMC announcement at 19:13, which affected liquidity in the late afternoon.”

“ You are probably aware that when, in the last 3 stop orders given over to you, within a matter of minutes even though those distances were some way away, it was a matter of minutes rather than any hours or even half hours, or quarter of an hour, those, those levels had been hit .”

“… The canny, uncanny thing about the last three stops is not so much that, that the velocity to which, having given the order, it’s got up there, but the fact that it has taken the stops out and that has been the high. Three times in a row .”

“ I can’t believe you can trade even half a billion at 54, which was the trigger... And to see only a two tick move…That, I don’t believe is possible. Which means either somebody’s. .. HSBC or somebody is thinking you know, we’ll trade it earlier....” 319.3. Thirdly, the level at which the stop loss order was to be triggered in relation to the 31 January 2006 order was not at a level which in the view of Mr Petley would naturally attract dealers in the market who were trying to anticipate or “hunt” stop loss orders: “… the level that I had chosen on CAD/ Swiss was not, not a big technical level by, by any means at all. This time round it was just not a key, key level, it wasn’t an anything, so it wasn’t as if, to me, that I would have thought there should have a been a lot of market participants looking at that and thinking oh, you know, we should be buying CAD/Yen through here…” 319.4. Fourthly, in relation to the order on 31 January 2006, Mr Petley considered it significant that the other banks had not been given a stop loss order by ECU which only became effective at 19:45, only HSBC had such an order and it was only after 19:45 that the market reacted: “…we were sitting there quite happily minding our own business and then, you know, this magical time of, of, of, you know, 19:45 looms and all of a sudden there’s an almighty move in something that was, you know hitherto that was quietly minding its own business and it just looks so illogical , the thing goes up one percent, stops dead in its tracks and then comes straight back down again .”

“…on each of the last market order transactions due to the size of the position that we might be looking to put through, in, in very much, sort of, prime time, London dealing hours, how it is that we can be taking, you know, the best part of an hour or an hour and a half to clear through something to ensure that we don’t make a market impact and even then, you, know, one is making a bit of a market impact and yet, on the one hand, and yet we can do on the stop basis, there can be something which is, sort of, three times the amount all travelling through at once, at a single price, and in a, in a sort of known or volatile pair and yet that is the extent of it is the level of the stop, give or take a few ticks .”

"…but I have to say that unless there are an awful lot of coincidences , sort of, come about as of late, it does appear, on the face of it, that a, you know, a good degree of front running is occurring on these stops… But the, the interesting thing is that within 2 minutes, only, of, on the time stamps of, of your guys being given the transaction, we have seen three extraordinary spikes, that have gone straight, straight, to the stop level . They have all been half a percent, or more, half to one percent away from the market price when, when issued and yet we have seen a market price that has gone straight up to the stop, a smidge through it, but nothing to write home about and then straight back in the range and it, it just, something is going wrong, it can't be such a coincidence. Three in a row? I mean, I think to myself, what are the odds of that? I have been running stops for 15 years and it is a new phenomenon and I just, I don't know how to explain it away ."

“ My role as Head of Trading was to provide short term 'colour' on the currency markets based on my background as an FX trader and through my daily contact with bank traders and marketers. Mr Petley and Mr MacKinnon could then build a complete market picture, before deciding what orders should be placed, by combining my short-term analysis, Mr Petley's short-, medium-and long-term technical indicators and Mr MacKinnon's comprehensive economic analysis.”

“I know exactly what I thought and I am afraid, my Lady, I did think the worst of the banks .”

“ Q…So when you say there were a range of possibilities, and you didn't know for certain what was happening, as far as you were concerned you thought the worst of the banks and you thought that they were engaged in market manipulation , is that correct? A. Yes. I think that is probably fair. I didn't have too many other explanations for what I saw within the markets and then when I saw the rates at which we were filled, that did nothing to dispel my suspicions. Q. Yes. A. In fact, it only helped to make them worse, really .”

“ While I had my suspicions about the January 2006 Orders, we had no evidence of any wrongdoing .”

“…it is clear to me, if you start from the basis that HSBC had the biggest orders, by far and away the biggest orders, two times, three times, ten times, multiples of the next order, …, and if the hypothesis is that nobody should trade ahead, HSBC will always be providing the worst fill because they have a significant multiple of most at least two times all the other providers. What you see [from the table] is that their fills, I think four or five of the best, I think four of the worst although I think we discount, three are the worst and then some are in the middle. The fact that they are not the worst is the benefit of the pre-hedging because there is no way across the whole they could be providing the best fill if everybody has waited and HSBC has to buy multiples of the next or multiples of the smallest ones.”

“ Although the MCDMP methodology and the terms of the orders were determined by Mr Petley and Mr MacKinnon, I worked closely with the Investment Committee and had a good understanding of the strategy of the MCDMP and the individual orders placed .”

“ At ECU I had a Bloomberg screen, on which I followed the markets. This information was used to monitor the movement of the markets when we had placed orders. Part of my role was to make sure that the execution of orders was done properly by the Lenders' trading desks. If I had a concern I would raise it with Mr Petley and Mr MacKinnon, although they also had Bloomberg screens and monitored the markets themselves, so they would generally also be aware of any issues .”

“46. Around this time, I was aware of concerns and suspicions within ECU that HBPB might have engaged in 'front running' of ECU's orders. I was monitoring the orders and I was suspicious as to what had happened with HBPB because of how quickly the January 2006 Orders were executed after being placed . By ‘front running', I meant that I suspected they could be buying currencies ahead to trigger the orders at a certain level and sell them back to us; however I believe the term 'front running' was also used more loosely or to simply describe trading ahead. 47. I was party to some internal discussions about these suspicions, including with Mr Petley and Mike Hughes, although due to the passage of time I am unable to remember specific conversations and dates. My role in these discussions was to present the data from the HBPB orders and fills, and based on the limited evidence available, and the experience of others within ECU, we would try to work out what might have happened with the execution of the HBPB orders. Without evidence as to the actual trading HSBC had undertaken, I felt it was difficult to form any concrete opinion . ”

“ A. That seemed entirely possible to me. Q. Yes, and it seemed entirely possible to all your other colleagues, didn't it? A. Yes.”

“Andrew Belchambers, CEO of the FOA, is coming for lunch next week. He's a good friend and would I'm sure be happy to read HSBC's response and give us some informal guidance.”

“ It occurs to me that Alan Ramsay, Head of Compliance for Investment Banking & Markets, at HSBC, is on the board of the FOA… Alan was formerly at the FSA where I always found him to be straightforward and helpful. I'm going to be out tomorrow morning and wondered if it might be a good idea for the three of us to meet this afternoon to discuss tactics and what, if anything, we want to say about this to Charles and Anthony?...”

“CR: Well basically what Mickey has done is he’s printed out charts and he’s pointed out… GZ: Yeah I saw all of that. CR: And it’s an absolute disgrace and the key to it is that whenever I was getting trouble from the FSA generally because they sent round somebody who simply didn’t understand our business and then started writing rude and threatening letters, I’d pick up the phone to a guy called Alan Ramsey who was a sort of director of FSA simply because I liked him and I found him reasonable and straightforward. Anyway Alan is now, he’s a director of HSBC and he’s Head of Compliance at the Investment Bank and he also sits on Antony’s board at the FOA so I kind of put two and two together and what we all agreed would be a good way forward is Antony’s gone away with the evidence and he’s going to go and see Alan and just say look I know these guys well, they are very angry and very upset at the way they’ve been treated and I don’t think you want this going public . I think it’s going to look very very bad indeed because front running is kind of a hot potato at the moment. … It’s all over the MIFID stuff, Antony’s just going to say you need to revisit this because you know they’re good guys, they’re not asking for any money, it’s their clients who have been disadvantaged but you wouldn’t want these images being banded around because it doesn’t look you know . … …And the letter, did you see the letter, the letter doesn’t actually really deny anything and was quite carefully crafted and we said look the one thing we don’t want to do is beat up the guys at the private bank, you know, we don’t want them getting upset, we don’t want them put in the middle but we do want Alan Ramsey to come and look at the evidence and have a conversation you know, and the way we would like it presented back to the private bank is that they’ve further reviewed it and on reflection they do think that an ex gratia payment is due to the clients…”

“ I saw Anthony on Saturday. He has spoken to Alan Ramsay. Alan knew all about our dispute and said their investigation was ongoing. When Anthony described what he had seen Alan said he would ask for the complete file...”

“Anthony spoke to Alan Ramsay yesterday. AR said the bank was being "hard-nosed" about the matter and that he would revert to Anthony tomorrow. I re-impressed on Anthony the strength of our relationship with the Private Bank and the impossible position they had been put in by the Investment Bank and that given the value of our business relationship with the Private Bank and the weight of evidence against the Investment Bank, being "hard-nosed" wasn't going to achieve anything, but an ex-gratia goodwill price improvement would.”

“ In essence, I believe Andrew Brown (who had already openly admitted front running our orders) has been silenced and now prevented from dealing with us direct in this matter …”

“ You're absolutely right about Andrew Brown. In the meeting he clearly stated that they started buying into the stop loss level rather than waiting for the market to trade there .”

“…whilst Mr Brown was clear that he could only speak in generalities, the ECU team and I left the meeting with the shared impression that Mr Brown had suggested that HSBC had traded ahead of ECU’s January 2006 Orders for what he considered to be legitimate order management purposes.”

“…consistent with the meeting note prepared on the day (which does not refer to any admission ...), I think this may have overstated the position as I do recall Mr Brown being clear he had not yet seen any trading data relating to the January 2006 orders ." In cross examination in an attempt to explain this statement Mr Petley said: “ I don't think it is based on the content of that document, it was an overstatement from my recollection where I was pretty clear that they -- or Mr Brown had not referred directly to the three trades themselves .”

“There is a history of dissatisfaction on the part of ECU with HSBC deal execution, resulting in a number of meetings between MP and ourselves. At first we found that HSBC were executing stop loss orders at levels that compared unfavourably with fills elsewhere. On several occasions MP would demonstrate that his other counter-parties filled orders very close to the stop loss trigger, whereas we were consistently higher (lower). It appeared as though other banks were operating on a different basis to us, in order to achieve a close fill, rather than protecting the price level, although there was no way that we could evidence this. MP was not prepared to accept this premise and would repeatedly ask for disclosure of HSBC fx contracts to justify the price given. Needless to say, we were unable to oblige. Given these concerns, orders were subsequently managed to produce a 'tight' fill for the client. Because of the large bid/offer spread on a sizeable trade, this would have required some dealing ahead of the price trigger to protect HSBC from significant loss .”

“ I don't recall the exact details of the conversation…”

“ something I need to talk to you about tomorrow… Because things have been said…this evening… it's nothing new. It's just…a rehash of what we've had before .”

“I think I was simply pointing out how a large stop loss would be transacted …in the market. To effect a fair and reasonable fill or a … tight and reasonable fill for the client.”

“But I could make a comment about generally how large transactions, large stop losses would be executed.”

“…orders were subsequently managed to produce a 'tight' fill for the client. Because of the large bid/offer spread on a sizeable trade, this would have required some dealing ahead of the price trigger to protect HSBC from significant loss.”

“ As I recall, it was because the HSBC order was for one single bank, pretty well half of the entirety of our book, and we wanted to ensure that a very large order at a thinner part in time, advancing perhaps our concern that large orders were becoming a magnet, that that would not be triggered until a good half an hour after a known event that was a news event was coming out at 7.15, I recall, pm. So sometimes volatility in the market in the immediate aftermath of any announcement, which I believe was regarding US interest rates, would not trigger prior to or be active until 7.45 pm, thus half an hour later ”

“… I pulled the time limit off when we went, when cable went up as far as it did and CAD/Yen was down at 1.02, the figure, so that we were so far away from and, and Dollar/ Swiss was, you know, on the lows of the day, I took the time limit off the other two but obviously weren’t able to do so with you. ”

“ Because I think they, basically they’re a bit sneaky — they set a trap by how they gave the orders out ... DM: Is that right? CN: ...so there was only one set of dealers who had that order at the time it happened, and it was the third time on the trot, so it was, at that stage, as far as they were concerned, it was, well, you’ve fallen for it three times and you’ve done it and we kind of know it couldn’t have been the others because they didn’t have the order when you had it, so it’s...”

“ basically [Mr Petley is] saying that he has evidence … - which suggests to him that the -- that New York are ramping up Canada-yen in advance of the trigger last night. And we're basically sort of frontrunning the order. In the lead up to becoming live…he suggests that, you know, it really was -- it was doing very little until a few minutes before that order came into being. He's pinning it -- he's suggesting this is a result of our action rather than any other banks. As later after we left, he went to his other banks and removed the trigger time, so in other words they were watching the order up until the rate announcement, unlike us, because he couldn't contact us …”

“ changed his mind, but, you know, wasn't able to sort of change the criteria for us because he couldn't contact us ”

“ It went down, I mean, as I said, at, at quarter past, after the Fed’s announcement we were in the range between 1.0225 and 1.0245 and so and then, in the, sort of, immediate aftermath and then as the, it just, it just went ballistic in the… minutes around 19:45 .”

“ But it was bobbing along, it was bobbing along quite nicely, in fact moving in the other direction up until when that order became valid and then it just… I mean, as I said, at, at quarter past, after the Fed’s announcement we were in the range between 1.0225 and 1.0245 and so and then, in the, sort of, immediate aftermath and then as the, it just, it just went ballistic in the, sort of, the, the minutes around 19:45 ”

“ … was bobbing along, it was bobbing along quite nicely, in fact moving in the other direction up until when that order became valid and then it just… went ballistic in the, sort of, the, the minutes around 19:45 ” 394.6. The size of the stop loss order in the relevant currency pair and the market movement which was not as great as Mr Petley would have expected in order to fill the order once the trigger had been hit. 394.7. Mr Hughes, an experienced professional employed by ECU to advise on market movements, regarded the movements as explicable only on the basis that HSBC had engaged in market manipulation; his evidence was that he did not have “ too many other explanations for what [he] saw within the markets ”. 394.8. Mr de Klerk, another experienced professional in the market, was of the view that there had been front running. 394.9. Mr Belchambers, a senior industry figure, independent of ECU was prepared to get involved and intercede on behalf of ECU at a senior level within HSBC. I infer from the evidence that Mr Belchambers did so having formed his own view on the basis of the evidence presented to him at the time by ECU. He cannot be regarded as anything other than objective and, I infer from his role in the industry, well placed to form a view as to whether the evidence was sufficient to support allegations of front running against HSBC being pursued by him on behalf of ECU with Mr Ramsay, a director of HSBC. 394.10. This was not a single incident which was being alleged but three occasions in January 2006. ECU submitted on several occasions that the court should not consider the trades in "silos" criticising Mr Moore in particular because " what he doesn't do is to add up the conduct when looking at motive, he silos and he looks at things on a very narrow basis ". In considering the knowledge of ECU in 2006 and the inferences as to motive that can be drawn from the data, it is clear that the " coincidence " of the 3 stop orders being hit a “ matter of minutes ” after the 3 stop loss orders were given to HSBC was a key factor in the mind of Mr Petley and it supports the inference which can be drawn from the market data on the individual trades. 394.11. Further in addition to the “ coincidence ” of the January Trades being hit in a matter of minutes there is the evidence (referred to above) of the earlier concerns which Mr Petley had throughout 2005 as to its stop loss orders. As Mr Petley said in cross examination the background to his concerns (as early as February 2005) were the frequency with which stops were being hit measured against ECU’s track record: “… the frequency at which wherever I am putting the stops they are getting done anyway, which is an unusual development for me; you will have seen our track record over the previous years, which was very, very good and that is as a result of having very well, if I may say so, identified correct levels to hide behind which have been borne out then, in terms of risk management anyway, then allowed us to remain in that trade and allow us not to have too much frequency of switching .”

“201 Hence the situation which may seem paradoxical, but sometimes arises in practice (as, for example, in Law Society v Sephton & Co [2004] PNLR27), where in a trial on limitation the defendant disputes the claimant’s assertion that he could not have known or discovered a fact which, in relation to the merits of the claim, the defendant denies is a fact at all. There is in reality no paradox, because at the stage of an inquiry into limitation the existence of the cause of action, and therefore the truth of the facts relied on by the claimant to establish it, is not the relevant issue . Put in general terms, the question is not whether the claimant could have established his cause of action more than six years (or whatever other limitation period might be relevant) before he issued his claim, but whether he could have commenced proceedings more than six years before he issued his claim . The existence of the constituents of the cause of action-such as fraud or mistake-as verified facts is not the issue .”

“ Section 32(1)(a) applies where “the action is based upon the fraud of the defendant ” ... If the action runs its full course, it may transpire that there was no fraud …, indeed no cause of action at all. But where, at the stage of an inquiry into the defendant’s plea that the action is time-barred, the claimant relies on section 32(1)(a) …, the question is not whether there was in reality any fraud …: that will not be established unless and until the court issues a judgment on the merits of the case. The question under section 32(1)(a) …of the1980 Act is whether, upon the assumption that there was fraud …, as identified by the claimant in the way in which he pleads his case, it was discovered or could with reasonable diligence have been discovered at such a time as would render the claim time-barred .”

“ 119. In or around July 2016, I learnt of the indictment issued by the US Department of Justice against two senior HSBC FX traders: Mark Johnson, HSBC’s former Global Head of FX, and Stuart Scott, HSBC’s former Head of FX EMEA. The indictment concerned allegations of deliberate and fraudulent front-running of client orders by those HSBC traders in 2011, and the subsequent cover-up of that ‘front-running’ by the bank after an internal investigation had indicated no finding of misconduct. 120.The reported facts of that case reminded me of ECU’s experience 10 years earlier. If HSBC’s trading desk was guilty of front-running and deliberate concealment in 2011, there would be grounds to believe that HSBC had been guilty of misconduct, perhaps even fraudulent or criminal misconduct, in 2006, and that this had been covered-up by reference to an inadequate internal investigation that had cleared the traders involved. 121. I therefore brought this development to the attention of ECU’s board, which decided to seek external legal advice. In due course, ECU issued its application for pre-action disclosure on 23 May 2017.”

“ ECU’s evidence is that although it was not entirely satisfied by this response it felt that was not in a position to take the allegation further and it did not do so. It makes the point that this was in the pre-2008 crash period where assurances given by banks were more likely to be taken at face value than later. Indeed there was no independent way of ECU checking what had happened before and when the Trades were activated because all of the relevant information and documents were internal to HSBC .”

" A highly speculative claim did not make more credible by the whiff of fraud in the air. "

“ 40. However, HSBC next argues that if the relevant concealed fact was the existence of front-running, then ECU had already discovered it back in 2006. It had observed the spikes in the trading and had found them to be so suspicious that they required a full explanation from HSBC. Indeed, they referred specifically to the possibility of front-running. I see all of that but in truth ECU had not discovered the fact of front-running -it had its suspicions but felt it could not push the matter further after receipt of the letter of 9 March. It had, in effect, been “put off the scent ”; for an analogous case see JD Wetherspoon v Van Den Berg [2007] EWHC 207. And at the end of the day, the question is why the spikes occurred -which ECU did not then know .”

“35. In fact, on 14 March 2006, Mr Petley also requested the details of the compliance and legal professionals who had been involved in preparing the report. However, in response to this request and in a telephone conversation instigated by Mr Whiting from his mobile telephone to Mr Petley’s mobile telephone, Mr Whiting informed Mr Petley that HSBC would not entertain any further requests into this matter and that, as far as the bank was concerned, having completed their extensive enquiries and found no evidence or reason to support any of the claims made by ECU, the matter was now definitively closed. He explained to Mr Petley that HSBC was ultimately no longer prepared to engage with ECU in respect of this matter, upon any basis. Ultimately, and despite what seemed to be strong prima facie evidence supportive of deliberate price manipulation, which entailed front-running, having occurred, Mr Petley and his colleagues at ECU had to accept HSBC’s assurance that it had not been guilty of price manipulation or front-running. 36. Although the close correlation between the placing of the Trades and the sudden price spikes seemed highly unusual, and appeared to ECU to suggest market manipulation (involving front-running), ECU felt it had to accept that HSBC was telling the truth when it stated that the price movements were unrelated to its own activities . I understand that Mr Petley has, in connection with this application, spoken with Mr Whiting. Mr Whiting has confirmed that, so far as he believed at the time, ECU had accepted HSBC’s explanation and moved on. A contemporaneous note of that meeting and the matters discussed was prepared. ”

“ Those 29 ‘stop-loss’ orders (together, the “Further Orders”) and the 20 ‘market’ orders (the “Market Orders”) are set out at Schedule 2 to these Particulars of Claim. As to these orders: (1) In light of the matters set out at paragraphs 85-103 above, it is to be inferred that HBPB and/or HBEU and/or HBUS and/or HBPB’s other agents also handled and executed each of the Further Orders in a manner that was: (i) not in accordance with ECU’s and/or the HBPB Loan Customers’ instructions; and/or (ii) in breach of HSBC’s contractual and/or tortious and/or other duties owed to ECU and to the HBPB Loan Customers. (2) In light of the matters set out at paragraphs 75-76 and 80 above, it is to be inferred that HBPB also misreported to ECU (in its own capacity and on behalf of the HBPB Loan Customers) the execution prices that it received from either HBEU or HBUS or its other agents in respect of each of the Further Orders and the Market Orders .”

"It appeared as though other banks were operating on a different basis to us, in order to achieve a close fill, rather than protecting the price level, although there was no way that we could evidence this. MP was not prepared to accept this premise and would repeatedly ask for disclosure of HSBC fx contracts to justify the price given . Needless to say, we were unable to oblige .” [emphasis added] 418.4.2. Mr Petley discussed with Mr Jones on 7 February 2006 his strategy to reach a settlement on the January Trades which could encompass the other trades: “ MP: …The price action leads me to believe that HSBC must have profited out of that activity, because if they're buying something low and pushing the price up and then they've dumped the position on us and had an exit strategy they have benefitted by definition, they must have done… If you analyse it, of course they have but what I think is fair under the circumstances, is that these 3 transactions are fresh and that best interests of all parties given the relationship overall, there's no reason why they should benefit from those 3 orders. It's not going to be material to their global P&L or anything, it's not causing them any loss, I'm just suggesting that any benefit derived out of those 3 orders should be handed over to us. AJ: I wouldn't mention compliance or anything else yet, just say we reserve the right to take this issue, to take this matter further, if we can't find an acceptable solution we reserve the right to take.... MP: What I'm suggesting to him is if we do find an acceptable one, because the first thing they'll be worried about is the, the, if you like, the, it might open a Pandora's box so they'll resist it heavily so what I'm trying to say is look AJ Make a settlement... MP If we do, (talking over each other) on just these 3, in a full open and transparent way and fair way and we will limit, we will then consider the matter closed. ” [emphasis added] 418.4.3. In his email of 7 February 2006 to Mr Brown, Mr Petley wrote: "… We all appreciate that there may be concerns at your end as to the extent of any liability that this may open HSBC up to but, in both our long term interests and aspirations for our future dealings with one another, I am happy to confirm that, in return for a swift, open and fair handling of our position in respect of these particular three transactions we would consider the matter closed - and any subsequent ex gratia payments that may then be agreed between us in respect of such be in full and final settlement of any and all claims surrounding our past executions …"

“…our growing concerns … that the HSBC'S FX rates have progressively been moving wider and wider from the mark. The pattern is now quite alarming with HSBC having recorded the worst executed rates on each of the last three stop-loss orders in a row out of all our relationship banks …. I am simply not able at this moment in time to be satisfied that the executed rate given was an actual inter-bank market rate executed in line with our instructions …”

“DR: …Now then , you're sort of unhappy with sort of fills which are about 9 points off your stop loss order. MP: We had three in a row that are 9 points off , but given that a lot of ours - and it’s difficult for us, because I don't - I don't consider that, you know, 200 and - well, $0.25 billion dollars isn't - isn't necessarily a big one on these occasions. And with UBS we've got upwards of $200 million going on a trading platform at the same time, and we're getting on the head or one or two pips away from - DR: So you've got orders, then, of a similar size at the same level elsewhere in the market that - MP: Well, you know we have. … MP: -you have a fee, I can only think, to be honest, that Canary Wharf were loading it up, or they were very - that something's going wrong in the - for the methodology of the switch quotes. You've only got to look at the time and sales on these deals to see how - quite how many - there's quite active trade but having come up best part of 100 pips anyway, the 1.2000 sort of handle on dollar-swiss is quite an aggressively fought battleground. And there were just so many hits at and around the figure within a 2-pip up and below range, and then down again, then up and up through it, up to about 1.2004 and so on, all the way through on, you know, four occasions, then coming back down to 1.1989, 90-odd, and then coming back up again, that I just for the life of me can't see how 1.2009 - … I cannot see how, three times in a row, a bank of your size can come out with the worst fill. And the last time it happened, I asked Andre to do an analysis on it, and it actually showed that HSBC were, you know, 10 out of 14 times, either the worst or the second worst - … MP:…my question is very simple: are HSBC in Canary Wharf - are we getting the market rate, or are they loading it?" [emphasis added] Mr Rumsey’s response was to deny this: “ No. I believe that we are protecting your stop loss order…”

“… Neil has the EBS data from Bloomberg, just confirming Bloomberg is in fact EBS [inaudible] that he has. High 1.2006, and that’s at 13:57 for a period of two seconds. That was seven minutes later than when it went through 1.2000. Spot subsequently oscillated above and below the figure on several occasions, but never higher than 1.20006. Spoke to UBS, who themselves had over 200 and – $200 million orders through 120 on the nose. They filled them all first-time spot went through 120 at 1.20003 at 13:50. ” 425.3. Subsequently, on 21 April 2005, Mr de Klerk sent Mr Petley an analysis of the notional switch cost for the last 15 orders and commented that HSBC was now “ back in line ”

“…the precise methodology you adopt in respect of (a) setting your “base cost” of funds in each currency and (b) handling the FX orders within the HSBC Group. This I hope will get us round the “disclosure” issue that is bugging us. Given the FSA's current mission to deal with non-disclosure and fraud with regard to mortgages we feel that a clear and unequivocal statement by you on these two issues that sets out exactly what you do in an open and transparent way will suffice and settle the current compliance concerns we have…”

“ The Bank will charge each client a fee of £125 for every switch transaction undertaken. There will not be any mark up to the rate of the FX transactions undertaken.”

“would repeatedly ask for disclosure of HSBC fx contracts to justify the price given. ”

“…On several occasions MP would demonstrate that his other counter-parties filled orders very close to the stop loss trigger, whereas we were consistently higher (lower)…”

“ The matters at paragraphs 85-86 above amounted to a misuse by HBEU and HBUS of ECU’s and/or the Assignors’ confidential information: see paragraph 44 above. That abuse extended to: (i) the exploitation of that information for the benefit of HBEU and/or HBUS (see paragraphs 85(1)(a)(i) to 85(1)(a)(v) above); and (ECU infers) (ii) the sharing of that confidential information with traders or entities other than those responsible for the orders’ handling and execution and/or other than for the purposes of executing the order (such as, ECU infers, the sharing of information about ECU’s EUR/USD Order with trader ‘P-BOWDENP’ for the benefit of that trader’s own personal proprietary trading book ). For the avoidance of doubt, and in the light of the PAD Disclosure and the terms of the FCA Final Notice, ECU infers that the above confidential information was also provided to other individuals and/or entities within the HSBC Group (and/or to other individuals and/or entities outside the HSBC Group) for the purpose of those individuals and/or entities trading on that information for their own account .”

“ As for the allegations against HBEU and HBUS for collateral proprietary trading, these give rise to causes of action in misuses of confidential information (as to which see paragraph 252.3 above) and breach of fiduciary duty .” 438.3. And at 334: “ In the present case, the collateral proprietary trading amounted to an improper exploitation of the confidential order information of ECU and the HBPB Loan Customers for HBEU’s and HBUS’s own purposes. Moreover, there was a relevant combination for the purposes of ECU’s claims in unlawful means conspiracy by virtue of (i) the proprietary trading being co-ordinated with front-running or trading ahe ad, or (ii) the inference that the disclosure to the trader engaged in proprietary trading was part of a scheme to enable that person to engage in such unlawful proprietary trading to the Bank’s profit : see paragraph 346.1 below.”

“ where front-running or trading ahead was conducted alongside proprietary trading by the same or other traders, it is inferred that such traders traded in light of and with knowledge of ECU’s orders, that the proprietary trading was co-ordinated with the front-running or trading ahead and/or that the disclosure of ECU’s order information to the trader engaged in proprietary trading was part of a scheme to enable that person to engage in such unlawful proprietary trading for the Bank’s benefit ”

“ the traders within HBEU and/or HBUS conspired and did so on a systematic basis. Mr Gladwin’s analysis repeatedly shows traders acting in concert to seek to trigger those orders. As such: (1) Where traders co-ordinated their trading activities (for example, one by front-running and another by conducting parallel proprietary trading), it is clear that there was a relevant combination, and that the traders’ intention was to trigger ECU’s order, contrary to its interests. On the rare occasions where only one trader was involved, he nonetheless conspired together with his employers (i.e. HBEU and HBUS) by using their systems to perpetrate a fraud whose beneficiaries were both HSBC and the trader himself (via a profit on his proprietary trading account, which would in due course materially increase the size of his bonus)…”

"…the allegations of illegitimate secondary trading … find their particularisation for the first time in Mr Gladwin’s report. And if we go back and look at the allegations of breach of confidence which one finds in [paragraph 91 of the Particulars of Claim], one sees that is the extent of the allegation of breach of confidence. And you will look in vain for any of the detailed allegations and assertions that Mr Gladwin has seen fit to make about any of the traders, such as Mr Nettleingham, Mr Barnet, Mr Sarramegna..."

“ where it is intended to advance specific matters of dishonesty based on a particular set of facts, such matters should, as a matter of fairness, be pleaded ”

“…the period of limitation shall not begin to run until the plaintiff has discovered the fraud, concealment or mistake (as the case may be) or could with reasonable diligence have discovered it.”

“ The question is not whether the plaintiffs should have discovered the fraud sooner; but whether they could with reasonable diligence have done so . The burden of proof is on them . They must establish that they could not have discovered the fraud without exceptional measures which they could not reasonably have been expected to take. In this context the length of the applicable period of limitation is irrelevant. In the course of argument May LJ observed that reasonable diligence must be measured against some standard, but that the six-year limitation period did not provide the relevant standard. He suggested that the test was how a person carrying on a business of the relevant kind would act if he had adequate but not unlimited staff and resources and were motivated by a reasonable but not excessive sense of urgency. I respectfully agree.” 32.This passage was cited with approval by Neuberger LJ in Law Society v Sephton, who described it at [110] as “authoritative guidance”

"… something on the facts which objectively puts "the claimant on notice as to the need to investigate, to which the statutory reasonable diligence requirement would then attach"

“.. So far as that file is concerned, if it was appropriate to obtain it, then it seems to me that exercising reasonable diligence the solicitors would have sought to obtain it in February 1991. It can be said that they had not at that stage received the letter of 7th July 1992 containing Mr Froud's false statement which put them on the tracks of dishonesty. But the position is that they were considering a negligence claim. It seems to me that acting with reasonable diligence, solicitors acting for Mr and Mrs Biggs in this situation would have sought to obtain the conveyancing file for the purposes of that claim, even if it was only a negligence claim.”

"…although the question what reasonable diligence requires may have to be asked at two distinct stages,(1) whether there is anything to put the claimant on notice of a need to investigate and (2) what a reasonably diligent investigation would then reveal, there is a single statutory issue, which is whether the claimant could with reasonable diligence have discovered (in this case) the concealment. Although some of the cases have spoken in terms of reasonable diligence only being required once the claimant is on notice that there is something to investigate (the "trigger"), it is more accurate to say that the requirement of reasonable diligence applies throughout . At the first stage the claimant must be reasonably attentive so that he becomes aware (or is treated as becoming aware) of the things which a reasonably attentive person in his position would learn ."

“…The section requires an objective standard (what the claimant could have discovered with the exercise of reasonable diligence) but what assumptions are appropriate in the case of a claimant from whom wrongdoing has been deliberately concealed and the degree to which they reflect the actual situation of that claimant will depend upon why the law imports an objective standard. Here, the purpose of the section is to ensure that the claimant –the actual claimant and not a hypothetical claimant–is not disadvantaged by the concealment. In achieving that purpose it is appropriate to set an objective standard because it is not the purpose of the law to put a claimant which does not exercise reasonable diligence in a more favourable position than other claimants in a similar position who can reasonably be expected to look out for their own interests…”

“ Any consideration of what it could have discovered with the exercise of reasonable diligence would therefore depend upon what could reasonably have been discovered by a company carrying on that business and acquiring the information which such a company could reasonably be expected to acquire from contacts in the business…”

“ Q. Yes. If at any stage, and not just in relation to this particular query, Mr Petley had asked you to get trading data, market trading data, you had an intro to Deutsche Bank and UBS and you could have gone to your contacts to ask them to get you trading data, is that right? A. Yes ”

“…I’ll get Manduca involved; he’s the best litigation lawyer there is in banking , I reckon. And he has had - I mean we couldn’t afford anybody else on that basis. It’s part of the - part and parcel, with the relationship that he and I have, that he - he does the opening salvo on this sort of thing …”

“…I am so sure, with all what I’ve learned and done over the years, I am so sure that if this went to some form of pre-action disclosure, a judge would demand to look at their order books…”

" The putative claim is backed up, now, by evidence of precisely the sort of conduct it seeks to allege against HSBC albeit at different times and in relation to a different client. There can be arguments about how strong any inferential case may be (apparently, for example, Mr Johnson was not at HSBC in 2006) but at least it shows that the intended claim is not fanciful. Nor has it been dreamt up now.” However his conclusions were on the basis of the evidence before him that: “[40] …[ECU] had its suspicions but felt it could not push the matter further after receipt of the letter of 9 March. It had, in effect, been "put off the scent"; for an analogous case see JD Wetherspoon v Van Den Berg [2007] EWHC 207. And at the end of the day, the question is why the spikes occurred -which ECU did not then know."

“ I should make clear that a trader positioning ahead of an order being triggered was different from front-running or unreasonably forcing the stop to be executed. By front-running I refer to trading behaviour that was deliberately intended to trigger the stop-loss to the detriment of the client….”

“ the distinction between trading ahead and front-running is that the effect of the latter was to manipulate the prevailing spot FX rate to trigger a client order .”

“ Assuming it was related to the ECU Order ”

“… If I think of trading as a trader, leave aside the terms of this order, as a stop loss order approached when I was trading, if I reached a judgment, for whatever reason, this is going to go through, I would begin to trade to restrict slippage on the order and my act of trading would be profitable to me .”

“…orders were subsequently managed to produce a 'tight' fill for the client. Because of the large bid/offer spread on a sizeable trade, this would have required some dealing ahead of the price trigger to protect HSBC from significant loss .”

“…you know, when [Mr Petley] started to complain about the level of the fill, we said, "Okay, well, we'll see what we can do", and then we sort of basically reverted to the way that we felt other banks were executing, by sort of, you know, placing -- getting some of it done before the level was reached…”

“…the reason why you didn't want to talk about pre-positioning in the forthcoming meeting was because you knew that that would be activity directly contrary to the instructions as to how the trades were to be executed?”

“… we as a market maker, were entitled to execute the trades as we thought appropriate, given the risk in the market. And to achieve the -- to achieve the fills he wanted, that is the only way they could be achieved. Q. The only way to achieve what he wanted by way of fill, you say, was to disobey the instructions as to the way in which the trades should be executed ? A. You could look at it that way. Q. Yes. Which other way would you look at it? A. Well, if we filled the trades the way he wanted them filled, we would have filled them 15 points away because that is the only way we could have done it. Then we would have had even stronger complaint that he wasn't happy with the fills and the slippage. So he didn't want us to buy but he didn't want a fill there. We couldn't -- the two don't match . That was the problem and that was the ongoing problem throughout the whole period.”

“[62] There are arguments to be made both ways, as the continuing debate among scholars has shown, but absent fraud, which might give rise to other public policy considerations that are not present in this case, it would not in my opinion be right to impose or maintain a rule that gives redress to a beneficiary for loss which would have been suffered if the trustee had properly performed its duties .”

“ The measure of compensation should therefore normally be assessed at the date of trial, with the benefit of hindsight. The foreseeability of loss is generally irrelevant, but the loss must be caused by the breach of trust, in the sense that it must flow directly from it. Losses resulting from unreasonable behaviour on the part of the claimant will be adjudged to flow from that behaviour, and not from the breach. The requirement that the loss should flow directly from the breach is also the key to determining whether causation has been interrupted by the acts of third parties. The point is illustrated by the contrast between Caffrey v Darby, where the trustee's neglect enabled a third party to default on payments due to the trust, and Canson Enterprises, where the wrongful conduct by the third parties occurred after the plaintiff had taken control of the property and was unrelated to the defendants' earlier breach of fiduciary duty .”

“ Equitable compensation for breach of trust is designed to achieve exactly what the word compensation suggests; to make good a loss in fact suffered by the beneficiaries and which, using hindsight and common sense, can be seen to have been caused by the breach ”

“A breach of confidentiality does not give to the claimant an automatic right to an account of profits in preference to compensatory damages. The question is one for the court’s discretion, as was held in Vercoe v Rutland Fund Management Ltd … The question was whether the claimant’s interest in the performance of the obligation (whether contractual or equitable) made it just and equitable that the defendant should receive no benefit from his conduct. The law of confidentiality covered a wide range of different relationships and the strength of the argument in favour of a particular remedy might vary across the range. In some cases the nature of the relationship would be very close to a fiduciary relationship, where the appropriate remedy might be the same as for a breach of trust; in some it would be a commercial relationship at arm’s length, in which the appropriate remedy might be similar to the ordinary remedies for breach of contract ; and in some cases, where the law of confidentiality was used to protect private information obtained by a stranger, the most appropriate analogy might be with the law of tort.”

“In my view, Lord Nicholls’ speech in Blake has opened the way to a more principled examination of the circumstances in which an account of profits will be ordered by the courts and where it will not. His reasoning at p. 285C-E, comparing remedies available in contract and for breach of confidence in relation to the same underlying facts, flows in both directions. It both opens up the possibility of an award of an account of profits in relation to breach of contract relating to confidential information and also opens up the possibility for a more principled debate about when an account of profits should be refused in relation to a breach of confidence, and a damages award (typically assessed by reference to a notional reasonable price to buy release from the claimant’s rights, similar to the award made in Wrotham Park and Seager v Copydex) made instead. Both in cases of breach of contract and in cases of breach of confidence, the question (at a high level of generality) is, what is the just response to the wrong in question (cf Lord Nicholls at p. 284H, set out above)? In both cases, to adapt Lord Nicholls’ formulation at p. 285A, the test is whether the claimant’s interest in performance of the obligation in question (whether regarded as an equitable obligation or a contractual obligation) makes it just and equitable that the defendant should retain no benefit from his breach of that obligation . Again, I think that there is a broad parallel with the way in which the courts will, as in Ruxley Electronics and Construction Ltd v Forsyth [1996] AC 344, control the amount of damages to be awarded in a contract case by reference to the strength of the claimant’s interest in performance of a contractual obligation, judged on an objective basis and weighing that against countervailing legitimate interests of the defendant, to ensure that the remedy awarded is not oppressive and is properly proportionate to the wrong done to the claimant. 340.Although in a certain sense the courts’ decisions about these matters might be described as discretionary, in truth I think the courts are now seeking to articulate underlying principles which will govern the choices to be made as to the remedy or remedies available in any given case. In some situations, where the rights of the claimant are of a particularly powerful kind and his interest in full performance is recognised as being particularly strong, there may well be a tendency to recognise that the claimant should be entitled to a choice of remedy (both as between damages and an account of profits, and also possibly as between different bases of calculation of damages, such as by reference to loss actually suffered or by reference to a notional reasonable agreement to buy release from his rights). There are indications in the authorities that this may more readily be found to be appropriate in cases involving infringement of property rights (see, for an historic example, Siddell v Vickers, and also Blake at 278D-280F and Devenish Nutrition Ltd v Sanofi-Aventis SA [2008] EWCA Civ 1086; [2009] Ch 390, at [75] and [155], cf [144]). This may reflect the particular importance usually attached to property rights and the extent of protection they are to be afforded in law - although one might think that in relation to ordinary rights in relation to property of a kind which is regularly bought and sold in a market, damages assessed by reference to a notional buy-out fee may often represent an appropriate and fair remedy, and it is possible that the law may develop in that way. By contrast, it may be more appropriate to award an account of profits where the right in question is of a kind where it would never be reasonable to expect that it could be bought out for some reasonable fee , so that it is accordingly deserving of a particularly high level of protection (such as the promise to keep state secrets which was in issue in Blake, which was classified as an exceptional case meriting such an award, and rights to protection under established fiduciary relationships, where trust between the parties rather than a purely commercial relationship is regarded as central to the obligations in question)”

“To seek to denominate the Loan in the currency …which, in the opinion of ECU and at ECU’s absolute discretion, are considered to be practical and provide the greatest perceived benefit to the Client by way of interest rate saving and /or debt reduction potential. ”

“ECU is proceeding on the basis that the Client is seeking to derive benefit from reductions in the capital value of his Loan arising from beneficial foreign exchange rate movements and of interest rate savings and the Client both understands and accepts the risks associated with pursuing these objectives.”

“The Client also warrants to ECU that the Client has taken independent advice regarding his financial suitability for borrowing in foreign currencies and the high degree of risks associated therein and the Client understands and accepts such risks and understands that capital losses may arise from Currency movements which may be greater than interest rate savings available from borrowing in foreign currencies. The Client also warrants that he considers himself to be financially suitable for borrowing in foreign currencies .”

“ With regard to all FX transactions, and in particular orders of a 'stoploss' nature, orders will be executed on the best terms we can secure given the prevailing market conditions… We, and/or our agent will at all times work to safeguard the best interests of the client”

“ In summary then, the most common instances where a person will have a legitimate interest to prevent a defendant’s profit-making activity is where there is an express or implied contractual undertaking that: (i) the defendant will not profit from the conduct which constitutes the breach; (ii) the defendant will not put themselves in a position of conflict by that conduct; or (iii) the defendant will act in the best interests of the claimant. It is strictly unnecessary that the defendant be characterised as a “fiduciary” which is a label that can sometimes raise more questions than it answers. But the underlying idea behind the “fiduciary” label points to the effective agreement by a defendant to give up part of their ability to act in their own self-interest and therefore the legitimacy in depriving the defendant of profits made… ”

“114. Where the traders of HBEU and/or HBUS traded ahead of the January 2006 Orders or the Further Orders, the effect of that trading was materially to influence the inter-bank spot FX rate, resulting in the relevant ‘stop-loss’ order being triggered. Without that influence, the orders would not have been triggered or executed at the time at which they were in fact reported to have been triggered and executed. … 118. Accordingly, ECU measures the execution losses to its MCDMP as the difference between the prevailing level of the inter-bank spot FX rate at the time that each relevant order was placed by ECU and the level at which it was reported to have been executed (alternatively, between the rate which would have existed at the time of execution but for HSBC’s manipulation and/or the rate at which the stop-loss orders were executed).”

“ in circumstances where those traders are alleged to have deliberately concealed numerous instances of misconduct, it is highly unattractive for the bank now to rely on an alleged lack of data in respect of other instances of related misconduct - where the evidence points firmly to the conclusion that ECU was defrauded, the Court should feel, ECU submits, no hesitation in reaching that view.”

“30. Mr Gladwin and Mr Moore agree that the role of the spot dealer involves continuous engagement with the FX market and maintaining either a long or short position; rarely will the spot dealer not have a position. When a spot dealer receives a customer Stop Loss order this does not extinguish their right to trade or adjust the position even as the order level approaches. 31. Mr Gladwin and Mr Moore agree that care must be taken to ensure that the management of the trader position does not cause a Stop Loss order to be triggered in circumstances where it otherwise would not.”

“… limitations of the data disclosed referred to in paragraph 6 above limit their ability to reliably reconstruct the HSBC trader position as the ECU Stop Loss order was executed and identify what, if any, other customer business was occurring at or around the same time as the ECU order was executed . The confidence in the conclusions reached by Mr Gladwin and Mr Moore are by necessity reduced by these limitations. Where the market activity by HBEU or HBUS is a good match for the ECU order it is possible to have a higher degree of confidence in the conclusions.”

“…there are limitations to the HSBC trading data (including the Dealhub (HBEU) and TREATS (HBUS) data), and it is likely the HSBC data is incomplete and excludes the trade record resulting from the ECU order and the trade records for other customer orders. This means that it is not possible to be certain on the conclusions related to this data.”

“Mr Moore’s opinion is that within the trading ahead of the ECU order identified, there are examples where the likely explanation for the trading ahead observed is that the HSBC trading was exclusively related to the ECU order, for example Trade 29. There are also examples of trading ahead that are likely to be related to the management of the spot dealer position and therefore is not related to the ECU order, for example, Trades 6, 12, 22, 25, 31, and 32. Mr Gladwin’s opinion is that even for orders where the trader does not cause the triggering of the order it is still possible that their trading was in relation to execution of ECU’s order.”

"4. The handling of customer orders requires standards that strive for best execution for the customer in accordance with such orders subject to market conditions. In particular caution should be taken so that customers' interests are not exploited when financial intermediaries trade for their own accounts."

“ dealing in currencies to one ten thousandth of a fraction, in one second time slices with currency pairs that trade in multiple venues, depicts a level of precision in the FX market that isn't available to us looking at the data that we have, because FX is trading in multiple venues throughout the time and even the venues that we have, particularly EBS, is only showing us highest paid/lowest given and is not the full volume at the time . Therefore, there is a judgment required as to what was happening in the market that is broader than a simple interpretation of one system's data .”

“ Well, you would need to know in those circumstances what the spot dealer at the time took into account in making a judgment that the order had triggered. That may not even be a trade. He may see a colleague quote a different currency pair to a big customer, shade the price in a different direction, clearly illustrating that that customer is going to buy dollars and he may make a judgment that that is going to affect the market and trade. We won't ever have the full data set because we won't know what other banks have done, what was trading in Currenex, what was trading in Reuters, what was trading in FXAll and so on and so forth. So inevitably there is a judgment that is required .”

" Mr Moore has applied a materiality threshold to this judgment [which is the judgment set out above under paragraph 43] such that where the potential impact of HBEU pre trigger trading is restricted to a matter of seconds or a few minutes , Mr Moore considers that this trading did not have a material impact on the currency rate and/or time that the trigger rate traded. Mr Moore therefore only concludes that trading materially influenced the currency pair where the trigger time was affected by more than a few minutes."

“ Which I standardised at five minutes. But in certain circumstances that was shortened where relevant. We have an example of a trade where what was happening five minutes earlier was irrelevant because there were figures released, the market moved and I considered a period that I think was as short as ten seconds. And then I think on trade 29, because it was in a less liquid time zone and I am looking at a less frequently traded currency, I took a view that the trading over the previous 20 minutes was relevant. But I started that process with a five-minute time clock and then looked at the data for context .” “… [five minutes] was my best estimate of where a trader might start looking at an order level based on a combination of where the market was, how close the market was to the order level and that typically would happen in five minutes but it could be shorter or could be longer…[five minutes] is when I as a trader would be thinking in, all other things being equal, is when I would expect a trader to be looking at the market .”

“FX is trading in multiple venues throughout the time and even the venues that we have, particularly EBS, is only showing us highest paid/lowest given and is not the full volume at the time…”

“What I would imagine the circumstance was, is the announcement came out, the news hit the headlines, there was an instant reaction…And the foreign exchange market doesn't work, although the instant reaction is in the seconds, candidly, after it comes out, that doesn't mean it has fully processed all the information and -- -- there will be presumably other news stories, subsequently one that denied that it was a missile strike. So it is tough to say. What it would have done is to create volatility and uncertainty and concern in the market … …I think it is wrong to think you can just pick, here is ten seconds and here is this trading or that news item and one caused the other. I think you can create the environment that that would have created, which would have been, you know, highly worrying for anyone with an exposure in financial markets and foreign exchange and other markets ”

“(1) In certain circumstances a court may be entitled to draw adverse inferences from the absence or silence of a witness who might be expected to have material evidence to give on an issue in an action. (2) If a court is willing to draw such inferences, they may go to strengthen the evidence adduced on that issue by the other party or to weaken the evidence, if any, adduced by the party who might reasonably have been expected to call the witness. (3) There must, however, have been some evidence, however weak, adduced by the former on the matter in question before the court is entitled to draw the desired inference: in other words, there must be a case to answer on that issue. (4) If the reason for the witness's absence or silence satisfies the court then no such adverse inference may be drawn. If, on the other hand, there is some credible explanation given, even if it is not wholly satisfactory, the potentially detrimental effect of his/her absence or silence may be reduced or nullified.”

“ The right values and culture were not sufficiently embedded in HSBC’s G10 spot FX trading business, which resulted in it acting in HSBC’s own interests as described in this Notice without proper regard for the interests of its clients, other market participants or the wider UK financial system. The lack of proper control by HSBC over the activities of its G10 spot FX traders in London undermined market integrity and meant that misconduct went undetected for a number of years.” “4.31.HSBC’s failure to identify, assess and manage appropriately the risks in its G10 spot FX trading business allowed the following behaviours to occur in that business: (1) Attempts to manipulate the WMR fix rate, alone or in collusion with traders at other firms, for HSBC’s own benefit and to the potential detriment of certain of its clients and/or other market participants; (2) Attempts to trigger clients’ stop loss orders for HSBC’s own benefit and to the potential detriment of those clients and/or other market participants ; and(3) Inappropriate sharing of confidential information with traders at other firms, including specific client identities and, as part of (1) and (2) above, information about clients’ orders.”

“ 39. The London Spot FX Head, having learned that HSBC would likely be selling a large amount of cable, and despite knowing that this information was confidential, perpetrated a scheme to defraud Victim Company by misappropriating this confidential information for his own benefit and that of the bank in violation of the duty of trust and confidence that HSBC owed to Victim Company 2. Specifically, HSBC's London Spot FX Head, based on the confidential information of Victim Company 2 (that is, based on the fact that Victim Company 2 was to sell cable in the immediate future): (a) traded ahead of, or "front ran, "Victim Company 2 by placing proprietary trades in advance of the client with the expectation that HSBC's trading for Victim Company 2 would depress the price of cable in a manner that benefitted any "short" positions taken by HSBC; and (b) executed the Victim Company 2 FX Transaction in a manner designed to cause the price of Sterling to fall, thereby causing Victim Company 2 to transact at less favorable prices and allowing HSBC's London Spot FX Head to cover his short positions and to make money .”

“A. If I accept that there is illegitimate proprietary trading, does that inform my judgment? Q. As to the motive behind the trading ahead. A. Yes. Q. Right. Does it make the trading ahead in those instances more likely to be front running than pre-hedging? A. … I think it is not pre-hedging…because it is secondary trading and they are not necessarily involved in executing the order. If we use the definition that I provide that says it is trading if it is front running with an intention to trigger the order, I think that is not necessarily the case either. It is proprietary trading with a motive to profit. But it doesn't fall naturally into those two categories.”

“likely to have influenced the prevailing FX rate such that the identified pre-hedge caused the order to be triggered...”

“The uncertainty [that] the trading could be unrelated to ECU's order”

“…whether in your judgment it is more probable than not that when Mr Courtney conducted the $22 million of trading that ultimately triggered the trade, he did so knowing that that would be the consequence ?”

“ So I am looking at an environment where all of those providing liquidity and the main market-makers are likely to be buying dollar/Swiss or selling dollar/euro, reacting to this Federal Reserve interest rate announcement and if I am Mr O'Sullivan in that seat, and that market is moving up that quickly, what I am panicked by is that that move continues on through and I would think that most spot dealers with that order with that speed of move would not wait -- would start to trade at some point thinking that the order was about to trigger. So I don't necessarily think you can conclude that $50 million in some way was the cause of 15 points of the move. I think that is a degree of precision that is not possible.”

“Because we -- the EBS is not the sole venue or sole place for dollar/Swiss trading . We don't know what was happening -- I would accept and it is in fact the main inter-bank venue, we have no idea what is happening in futures, foreign exchange trading in futures, we have no idea what is happening in Currenex, we have no idea what is happening FXAll, we have no idea what is happening between bank to bank , no idea what is happening between bank and any customer, no idea what is happening between bank and any other customer system. All of which would have been visible to the trader doing this trading and it may be that if he hadn't bought the dollars somebody else would have bought them, almost certainly somebody else would have bought them.”

“ We know that that is the trading that they had done. We know the rates at which they had done it. I just don't -- I don't agree with the tone of pushing the market when I have to imagine what the environment was that that dealer was living with at that time, in that environment. We are attributing, in less time than it took you to ask me the question, we are attributing these motives to traders who aren't here to defend themselves and I think it is unreasonable and unfair. I mean, in that environment the market would have been moving up incredibly sharply . He would have had a stop loss, he would have been somewhat panicked by that, and if that line continued up another 50 points instead of stopping, which we know it did, he would have been looking at a very bad fill for the client. So those are -- the facts you present to me, Mr Lissack, are accurate. The negative connotation on the trader might be unfair.”

“I think that question presupposes there is always a rational explanation for every movement you see on an FX chart and that isn't the case. There may be but there is not -- every day somebody pays the high at the top on a spike and probably somebody hits the low at the bottom .”

“…The picture is consistent with this: HBUS, Mr O'Sullivan, trading ahead of the order which pushes the rate to the trigger. The order is triggered in what is a low liquidity session and then a second wave of buying arrives as ECU's other orders are in turn triggered.”

“ I don't think that is impossible but it is probably not likely …”

“ Following the execution of the ECU Stop Loss order, the USD/CHF rate then moved below the order level briefly, before again moving upwards and trading at a high of 1.1920. The rate then retraced and finished the New York trading day (22:00:00) around 1.1880.”

“…the things that I also noted is this order was passed to ten banks according to -- so we don't know what nine of those banks were doing. One of those banks was Kleinwort Benson and I think they had an order for 114 million euros. We don't know where that order was and who was managing it. The hypothesis that HBUS traded ahead, their trading ahead moved the market is not an implausible hypothesis but not one that you can reach from the data that we have got .”

“trading ahead moved the market is not an implausible hypothesis but not one that you can reach from the data that we have got .”

“1302. At 13:30:00 there was then a period of extreme market volatility commencing with a sharp move higher to 1.2141 followed by an equally rapid move lower to 1.2088. ECU state that the Stop Loss order was placed at13:35:00 when EBS records the EUR/USD rate was around 1.2122. 1303 . In the following 17 minutes there was a significant move higher to a high of 1.2185 at 13:52:12 . It was this EUR/USD rate movement to 1.2185 which caused the ECU Stop Loss order at 1.2176 to be triggered. 1304.In my opinion, HBEU or HBUS trading activity related to the ECU Stop Loss order would not be responsible for or explain this movement, as I would not expect this level of market volatility to be caused by the HBEU and HBUS trading volumes discussed above . Economic data is often released at 1.30pm, and as further detailed later in my report, in my opinion this market movement was related to the release of important US non-farm payroll data. Further, ECU appear to have placed the order during a period of significant market volatility following this announcement. 1305.Having reached a high of 1.2185 as indicated in Figure 56, the EUR/USD rate moved lower and for the remainder of the London trading day, traded in a range between 1.2125 and 1.2168 .”

“I believe Mr Scott deliberately drove the market higher with his buying from 13:52:03 and wrongfully triggered ECU’s order, in order to make a profit from the triggering of the order.”

“ Q. So the basis for your belief that it was a deliberate attempt by Mr Scott to trigger the ECU order is in fact, you will accept now, based on information which was not available and visible to Mr Scott according to the Data Mine data. Correct? A. Well, it's not based entirely on that, because he also trades ahead of the trigger .”

“ 740. Mr Gladwin’s position is that SS reviewed the depth of the market on EBS at 13:51:29 and decided that he could not trigger the order, but then roughly 30 seconds later at 13:52:03 or 13:52:07, he reviewed it again and decided that he could trigger the ECU order. In my opinion, SS would not have had visibility of market depth as described by Mr Gladwin. 741. In my opinion, following the release of important economic data and during a sharp movement in the EUR/USD rate, I would not expect SS to be focussed on assessing the market depth. SS would have had his own position to manage, as well as other customer orders and price requests to manage. At this time, the ECU order would not be the exclusive focus of SS. 742.To illustrate this point, and assuming that the data existed as suggested by Mr Gladwin, at 13:52:06 there appeared to be an offer totalling EUR60m at 1.2175 which disappears 1 second later. If Mr Gladwin is correct and SS was monitoring the EBS representation of market depth closely, this would have been the catalyst for SS to purchase EUR/USD with the intention to trigger the ECU order . This implies that, within a second, SS decided he could push the rate up since there was suddenly no longer a large amount available at a lower rate. In my experience a spot dealer would not have the time to work like this in a fast-moving busy market, with multiple calls on their attention and his own risk to manage .”

“I do not know how Mr Scott’s trading systems were configured so I do not know exactly how much information Mr Scott could see about the amounts available at different offer prices. It should be noted however that the total amount offered at a price of less than or equal to 1.2177 (yellow column Table 1) drops to only EUR69m at the end of the 13:52:06 time-slice. This would have been a clear sign that the size of ECU’s order would have been sufficient to move the market through the trigger level . Mr Scott starts a large purchase in the next time-slice. I believe that this is a deliberate attempt by Mr Scott to trigger the ECU order .”

“In my experience, I have not heard of a bank executing the trade that triggered a customer Stop Loss order described as a “clear red flag”

“ So Trade 20 is a day when, looking on EBS only, considering high paid/low given 43.6 billion traded, in the hour around the market place, around the trigger time high paid/low given 13.2 billion traded. So more than 13.2 billion euros traded on EBS. The euro was trading in multiple other venues bilaterally between banks and banks, bilaterally between banks and their customers, on FXAll or any other bank system such as Currenex in futures format. Therefore the proposition that Mr Scott sold 70 million euros or whatever the number is, is not an opinion that I agree with. His trading in my judgment could not influence where the euro/dollar market was.”

“… it is possible that the HBUS USD/CAD pre-hedge sale of US$154m contributed to the decline in USD/CAD (from 1.1426 to 1.1389) in the period 19:29:29 to 19:49:58, proceeding the Stop Loss order trigger. However, it is unlikely that a sale of US$154m USD/CAD, conducted over a 20 minute and 30 second period, would be exclusively responsible for the 37-point decline in the USD/CAD rate . As described in paragraphs 1360 and also evident in Figure 58 above, the CAD currency was independently strengthening in the period leading up to the order. ”

“ Based on an assumption that HBUS coordinated the sale of USD/CAD and the purchase of USD/JPY, US$154m of the US$306m USD/JPY purchase identified would be related to the ECU order. On this basis, HBUS bought CAD176m CAD/JPY at 102.87 in the period leading to the order trigger (19:29:29 to 19:49:58). In my view, this can be considered a pre-hedge of the ECU Stop Loss order .”

“…, it is likely that the HBUS pre-hedge contributed to the CAD/JPY rate movement upwards, and the ECU Stop Loss order being triggered. It is also my opinion that this pre-hedge could not be solely responsible for the decline in the USD/CAD rate which caused the CAD/JPY order to be triggered… ”

“Q. …Do you agree Mr Gladwin is correct when he says the 78 million of [$/CAD] trading in 41 seconds caused the 22 pip move? Mr Moore responded: A. One hundred per cent of it? Probably not. A significant contributor? I would say yes .”

“I believe that both Mr Mehani in USD/CAD and Mr Babich in USD/JPY trade ahead of the trigger working together with the intention to trigger the order and I believe they cause the trigger with their trading as they intended. As the price of CAD/JPY depends on the levels of both USD/JPY and USD/CAD, it is likely that they coordinated their actions. Clearly, this is wrong for the type of order left by ECU and contrary to ECU’s instructions .”

“ Okay, the first sentence that Mr Mehani traded ahead of the trigger, I agree with. Working together, I don't get necessarily to the intention to trigger the order. There was a pre-hedge there, that could be, I am not saying that it is wrong, I just don't reach that final conclusion. ” “… I think the other factors that I refer to at the time, the Canada was strengthening, the impact was in dollar/Canada rather than dollar/yen, the size of dollar/yen movement at the time was -- the volume of dollar/yen was significant around that time, so it wasn't just the ECU order. So I can't rule out what Mr Gladwin says but I think it is not certain ” “ He is correct that that trading moved the market in the direction of the order and contributed to the order being triggered. In that he is correct. It could be that the motivation he ascribes to that trading is also correct. I would accept that .”

“… (a) It is admitted that HBPB reported that the EUR/USD Order had been booked with the HBPB Loan Customers’ account at a price of 1.2179 and did not inform ECU that HBEU had booked the EUR/USD Order with HBPB at a price of 1.2178; and (b) In consequence of the aforesaid facts and matters, and only to the extent of such facts and matters, it is admitted that HBPB breached special condition 2 of the HBPB Multi-Currency Facility.”

“ As an agent, the bank will purchase GBP30m GBP/USD in the market and provide the customer with the rate achieved. The term “riskless principal” is sometimes used to describe this, i.e., where the bank executes the order in the market and does not assume market risk.”

“ As a principal, the bank may elect to purchase GBP30m GBP/USD in the market but also has the option to sell the customer GBP30m GBP/USD from its own inventory i.e., the bank does not purchase GBP30m GBP/USD contemporaneously in the market .”

“Q . If the private bank role in this case was as pleaded [that HBPB was to handle and execute (or procure the execution of) ECU’s FX trading orders as agent, upon a best execution basis and not as “market maker” or “principal at risk”] … and if HBEU was executing those trades for the private bank, would you regard that as constituting an example of a riskless principal arrangement? … A. [HBEU] would be a principal to HBPB. Q. Why do you say that? A. That is how I would imagine it would work, unless it had been varied between the parties. I can't imagine -- I mean HBPB gave an order to -- well somebody gave, HBPB is just providing an order to HBEU or another bank .”

“If HBPB constructed an arrangement with HBEU that HBEU were to execute the orders taking no market risk on the same basis, then that would be true. But I think that would be a surprising arrangement. … A. Surprising because I have never seen it in at Citigroup or more recently at Lloyds. At Citi we would be too busy and -- to mandate a trader that says if this one customer comes in and wants to buy 100 you drop everything else you are doing, you forget your position and you go and buy 100 and hand it over, it would simply be impractical in a busy dealing room. Not impossible but impractical and I never saw it .”

“We, and/or our agent will at all times work to safeguard the best interests of the client”

“ In spot foreign exchange, which has multiple prevailing rates in any one time second , it wasn't a term that I was familiar with. Certainly in the UK the regulation talked about treating customers fairly and managing conflicts. It didn't as frequently, at least in my memory today, refer to the concept of best execution.”

“ I don't think that is quite right…Even in those circumstances a bank may still fill the order from within its own inventory at or around the rate it could otherwise have achieved in the market. So there may not -- as we don't see throughout, we don’t see an order for 100 matched with a purchase of 100, because inevitably some combination of other orders and the bank inventory is filling the orders in this instance .”

“ There wasn't science to that on a per deal basis ”

“Q. I don't mean this in a pejorative sense but would it be fair to say that the trader can add within some parameter really whatever he thinks he can get away with in a given circumstance? A. That is not how I would phrase it but I don't take issue with how you put it.”

“The Bank will charge each client a fee of £125 for every switch transaction undertaken. There will not be any mark up to the rate of the FX transactions undertaken .”

“ It would not be economic for a bank to provide a full-scale FX service, assuming all the attendant costs and risks, without generating revenue from the addition of a margin to customer flows, retention of bid-offer spread and a return from the bank’s proprietary risk positions .”