Babco Chemicals Inc v HSBC UK Bank Plc [2025] EWHC 1749 (Comm)

[2025] EWHC 1749 (Comm)IN THE HIGH COURT OF JUSTICE Claim No.: CC-2024-MAN-000023Venue BUSINESS AND PROPERTY COURTS IN MANCHESTERCIRCUIT COMMERCIAL COURT (KBD)Before His Honour Judge Pearce sitting as a Judge of the High Court on 9 July 2025
Between
BABCO CHEMICALS INCClaimantHSBC UK BANK PLCDefendantJUDGMENTThis judgment, following determination of the Claimant’s application without a hearing, has been handed down by email to the parties and being sent to the National Archive at 11am on 9 July 2025Date 2025-07-09
[1]This is my judgment on the Claimant’s application made by notice issued by the court on 7 July 2025 for an order discharging the Claimant’s undertaking given to this Court on 22 May 2024 not to use documents or information obtained from the Defendant Throughout this judgment, I use 'Claimant' to mean Babco Chemicals Inc and 'Defendant' to mean HSBC UK Bank PLC. In the Commercial Court proceedings referred to below, their roles are reversed. save in the limited circumstances permitted by the order for disclosure made on 22 May 2024.[2]It is the Claimant’s case that it has been subject to a so-called push payment fraud, as a result of which monies were transferred into a bank account held with the Defendant. The order of 22 May 2024 against the Defendant was brought primarily under the jurisdiction contained in the Bankers Book Evidence Act 1879 and/or under the Norwich Pharmacal jurisdiction. The order was made without active opposition from the Defendant. It included an undertaking that the Claimant would not, “without the permission of the court, use any documents or information obtained as a result of this order, except for the purposes of(a) commencing or progressing extant proceedings against the fraudster concerning the fraud as described in the evidence and materials placed before the Court or(b) tracing the proceeds of the fraud.”[3]The Claimant now seeks to be discharged from at undertaking since it contends that it is entitled to relief against the Defendant which, at least arguably, goes beyond simply tracing the proceeds of the alleged fraud. The application is supported by witness statement from Mr Michael Ozon dated 7 July 2025.[4]I deal first with the issue of urgency. The Claimant is under order within stakeholder proceedings commenced by the Defendant to this action in the Commercial Court under claim number CL–2024–000619 to file and serve points of claim relating to its entitlement to the sum of just over $390,000 held by the Defendant in respect of which the stakeholder proceedings are brought but also to particularise any claim arising from the associated events against either the Defendant or RYZA Trade Ltd, the putative fraudster. Such points of claim must be served by 14 July 2025.[5]I note the Defendant’s argument that this application should have been made very much earlier. I deal with that argument below. However for the purpose of considering the order now being sought, I am satisfied that the need to comply with the order made in the Commercial Court renders this application urgent.[6]The second issue is as to whether I should deal with this application without a hearing. Whilst the Defendant has relevant submissions to make (and defends itself against any allegation of impropriety), it is essentially neutral on the central issue so long as no adverse costs order is made, as is apparent from the letter from its solicitors dated 4 July 2025 at page 90 in the bundle filed in support of this application by the Claimant.[7]Having considered the Defendant’s letter, it appears unlikely that the filing of further evidence and/or submissions from the Defendant will materially assist the court in determining the current application. Accordingly I am satisfied that the application should be dealt with without a hearing.[8]The third issue is whether this application is necessary at all (and if so, the associated question as to whether it should have been made a considerable period of time ago). The Claimant makes clear through paragraphs 25 and 26 of Mr Ozon’s witness statement that the application is made out of an abundance of caution and its primary case is that its intended use of the information obtained pursuant to the order of 22 May 2024 is not a breach of that undertaking.[9]The nature of the argument being advanced against the Defendant within the Stakeholder proceedings can be seen from draft Particulars of Claim provided by the Claimant to the Defendant in a letter dated 23 October 2024. In that draft, the Claimant seeks a variety of forms of relief of a declaratory and/or restitution (which, at least in part, can be categorised as being part of a tracing claim) but also damages, including for conspiracy, fraud and/or breach of duty. Within Mr Ozon’s witness statement it is contended that, since the allegations relate in part to a tracing claim and since the further allegations flow from facts that are related to the tracing claim, the use of material disclosed pursuant to the order of 22 May 2024 in support of such a claim is not a breach of the undertaking..[10]If I were satisfied that the Claimant had breached the undertaking by using the material to draft Particulars of Claim which were then served in draft on the Defendant, that would clearly be a relevant factor to the exercise of my discretion as to whether to discharge the current undertaking. However I do not consider it necessary to determine that issue at this stage (or perhaps ever). On the face of it, I can see merit in the Defendant’s argument that the use of the material to advance any claim other than a tracing claim (even if the alternative claim were based on the same facts as the tracing claim) would amount to a breach of the undertaking. However, since any breach is somewhat technical in nature (in that it appears to have involved disclosure of information only to the Defendant, the very party from whom the information was obtained and the court) and since, for reasons identified below, it is probable that I would have discharged the Claimant from the undertaking in order to permit it to draft the Particulars of Claimant to write such a letter, I do not consider that any breach that may have occurred is material to the exercise of my discretion on this application.[11]Associated with the argument that the Claimant is already in breach of the undertaking is the argument that this application should have been made a considerable period of time and go, before the draft Particulars of Claim was sent to the Defendant. Again, whilst this may be arguable, I do not consider it relevant to the exercise of the dig discretion today – no doubt the failure to apply earlier flows from the belief asserted by Mr Osan that this use of the material was not a breach of the undertaking. But in any event, for reasons identified below, I would have discouraged the undertaking at an earlier point had the Claimant applied to do so and in my judgment it is wrong to penalise the Claimant by preventing it from making this application simply because it took a view of the effect of its undertaking which in the event is not accepted by the court.[12]I turn to the fourth and most substantive issue in this case, namely whether I should in fact discharge the Claimant from the undertaking. I have borne in mind the judgment of the Supreme Court in Birch v Birch [2017] UKSC 53. That was a case involving issues relating to financial remedies following divorce which raises substantially different issues than those before the court here. However the judgment of the Supreme Court is of assistance in identifying the broad nature of the court’s discretion to vary an undertaking as well as the need to focus in particular on whether there has been a change in circumstances that might justify such a variation.[13]At this stage, I do not have the material to judge the strength of the Claimant’s allegations against the Defendant and I note the Defendants vehement defence of its conduct. Nevertheless, if the Claimant is able to make out the matters alleged in the draft Particulars of Claim, it would in my judgment be contrary to the interests of justice to prevent it doing so simply because of the existence of this undertaking. As the Claimant points out, if it were able to make out an arguable case of impropriety on behalf of the Defendant without using this material, it would almost certainly be entitled disclosure of the material in any event. That cannot justify a party in the position of the Claimant using the jurisdiction created by the 1879 Act and/or the decision in Norwich Pharmacal as the basis for a fishing expedition against a financial institution such as the Defendant. But I see no basis for concluding that the Claimant acted improperly in seeking the order of 22 May 2024 in the first place and, if in fact that order has brought to light material that supports the claim, the Claimant ought in my judgment to be entitled to rely on that material to pursue the claim.[14]It follows that I am minded to discharge the current undertaking given by the Claimant to the court and equally would have been minded to discharge it if the application had been brought earlier.[15]I will require a more limited undertaking from the Claimant in order to ensure that the material disclosed pursuant to the order of 22 May 2024 is not used for other extraneous purposes. I note the draft of the undertaking that the Claimant is willing to give. Regrettably I consider it to have been drafted in a slightly ambiguous fashion. A better draft would read:
“UPON the Claimant undertaking that it will not, without the permission of the court, use any documents or information obtained as a result of this order, except for the purposes of (a) commencing or progressing extant proceedings against the Defendant; (b) commencing or progressing extant proceedings against the fraudster concerning the fraud as described in the evidence and materials placed before the Court; and/or (c) tracing the proceeds of the fraud”
[16]I have little doubt that the Claimant will be willing to give an undertaking in these terms as the price of obtaining the variation sought, but I cannot impose an undertaking on a party and therefore cannot accept an undertaking in these terms about confirmation from the Claimant that it is willing to do so.[17]Accordingly, I invite the Claimant to confirm as soon as possible that it is willing to give an undertaking in the terms of the draft at paragraph 15 above (or if not, whether it is willing to give an undertaking on any other terms). Following receipt of that confirmation, I anticipate the court discharging the current undertaking as a matter of urgency in order to permit the Claimant to comply with the order of the Commercial Court.[18]The final matter before me is as to costs. The Claimant seeks an order that the costs of this application be costs in the substantive proceedings between the Claimant and the Defendant. The Defendant resists that order, contending that the order sought would reward the claimant for the alleged breach of the undertaking and there should therefore be no order as to costs. The Claimant has responded to this by suggesting that costs be reserved.[19]It is certainly the case that, by reserving costs, the court might at a later date have before it information relevant to the conduct of the parties which arguably could be taken into account in considering the exercise of the discretion as to costs. However the reality of the situation is that the Claimant has, through invoking the jurisdiction of the 1879 Act and/or the Norwich Pharmacal jurisdiction, obtained a windfall in receiving documents that it says allow it to plead a claim against the Defendant that was not envisaged when the documents were originally sought. In those circumstances, I do not see that the Defendant should later on be at risk of meeting the costs of this application (even if the Claimant makes out its substantive case), since the incurring of the costs are the result of the Claimant’s desire to regularise the situation that arises from its windfall. I do not consider it appropriate to reserve costs where the ultimate order can be predicted with some certainty now. To do so simply leaves outstanding an element of uncertainty as to the ultimate order which is not justified. I therefore agree with the Defendant that no order for costs ought to be made