On 1 November 2021, Mrs Justice Moulder handed down judgment in the case of The ECU Group Plc v HSBC Bank UK Plc [2021] EWHC 2875 (Comm). Mrs Justice Moulder found in favour of the HSBC parties on all issues and dismissed the claims. Kenneth MacLean QC, Sandy Phipps and Joshua Crow, instructed by Cleary Gottlieb Steen & Hamilton, represented the successful HSBC defendants.
ECU provided specialist multi-currency debt management services to clients who had borrowed under multi-currency loan facilities provided by a range of banks including by the Second Defendant, HSBC’s UK private bank, HBPB. ECU had alleged wrongdoing against the HSBC parties in connection with the foreign exchange (FX) markets over a period of three years between 2004 and 2006. ECU alleged that certain HSBC entities had been responsible for manipulating the interbank spot FX rate in order to trigger stop loss orders which had been placed in connection with ECU’s management of its clients’ mortgage debts under their multi-currency mortgages with HBPB. In particular, ECU asserted that the HSBC parties’ FX traders engaged in widespread and systematic misconduct by ‘front-running’ client orders.
In its defence, the HSBC parties argued that the claims were limitation barred; that any alleged wrongdoing did not cause ECU or ECU’s clients any loss; and that no wrongdoing took place in any event.
Following a seven-week trial, Mrs Justice Moulder dismissed all the claims on the ground of limitation, holding that, contrary to its case, ECU was in a position to plead the majority of its claims in 2006, when it had made a formal complaint to the HSBC parties in connection with three FX transactions. Accordingly, ECU had sufficient knowledge then to start time running. As regards the remaining claims, ECU could with reasonable diligence have discovered sufficient material to plead at around the same time. In reaching her conclusions, Mrs Justice Moulder considered that, amongst other things, cross-examination of ECU’s principal witness exposed his evidence as being both evasive and unreliable.
Mrs Justice Moulder also held that any alleged wrongdoing had caused no loss, because the majority of the stop loss orders would have been triggered at around the same time in any event as a result of ordinary market movements.
Finally, in relation to five transactions where the evidence suggested that it was possible that activity by the defendants might have affected the date on which the stop loss order was triggered, the Judge held that no deliberate wrongdoing had in fact taken place. In this respect, the Judge preferred the evidence of the HSBC parties’ expert over that of the claimant. In particular, she considered that cross-examination of ECU’s own expert gave rise to considerable misgivings about the reliability of the opinions he expressed in his reports and concern that he had not sought to present the court with a balanced view of the conclusions that the available data might suggest. The Judge also rejected ECU’s attempt to accuse the HSBC parties of widespread misconduct as being both unpleaded and lacking any real evidential basis.
The decision represents an important application of the law of limitation (and in particular s.32 of the Limitation Act 1980) and the law of causation, in the context of the FX markets. The case is the first in a series of claims launched by ECU against a number of banks to come to trial in which it makes allegations of misconduct involving alleged front-running of FX orders and it examines the distinction between legitimate activity such as pre-hedging and order book management and illegitimate front-running.
You can view the full Judgment here.